ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 07 November 1972 vol 336 cc233-334

2.47 p.m.

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

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

THE LORD PRIVY SEAL (EARL JELLICOE)

My Lords, when we listened, a week ago to-day, to the Motion on the Address, so eloquently moved by my noble friend Lord Blake and so ably seconded by my noble friend Lord Dudley, I think we all had very much in mind the fact that the tripartite talks under the chairmanship of my right honourable friend, the Prime Minister between the Government, the T.U.C. and the C.B.I. were moving towards a decisive phase. But last Thursday, as we all know and as almost all of us regret, those talks broke down and the breakdown was confirmed at the meeting of the T.U.C. yesterday morning. Yesterday the Prime Minister made his important Statement in another place, and a draft Bill and the White Paper—Cmnd. 5125: A Programme for Controlling Inflation: the First Stage—were published. All these important develop- ments of course, occurred after the Amendment standing in the name of the noble Lord, the Leader of the Opposition, had been put down.

When I learned of the breakdown of the discussions and that it was the intention of my right honourable friend the Prime Minister to make a Statement to Parliament on Monday—that is yesterday—it occurred to me that there might he a case for suggesting that your Lordships might meet a day earlier this week in order to have the Prime Minister's Statement repeated in the House. However, after discussions through the usual channels, it was felt, especially since we were to debate these matters to-day—and, as it turns out, to-morrow—that this would not be a course that would commend itself to the House. I am sure, my Lords, that this was a correct judgment. Nevertheless it means the House has not had the opportunity of hearing the Prime Minister's Statement repeated and of learning, first hand, more of the background to the Bill. In these circumstances, the noble Lord. Lord Shackleton, agreed that I should be open our debate to-day. My noble friend Lord Polwarth will be winding up for the Government to-day; my noble friend Lord Drumalbyn will be opening for the Government side to-morrow and my noble and learned friend the Lord Chancellor will be winding up the debate to-morrow evening. I have no doubt that my noble friends will deal effectively with the Amendment to be moved from the Benches opposite, and the questions that will be put to them, but at the outset I propose to concentrate more on exposition than on controversy.

My Lords, I recall very well our debate on the economic situation it early July. It was a rather sombre debate. The theme running through it was summarised in the concluding words of an arresting article by Mr. Maudling which appeared in The Times two months later. I quote Mr. Maudling's concluding words: One thing is certain; we cannot just go on as we are. And this, I am convinced, virtually the whole country realises. It was not that many of the more significant economic indicators were all that bad in July. And it is not that those indicators are bad now.

Take growth. In his Budget this year my right honourable friend, the Chancellor, set the economy on a course of 5 per cent. growth over the 18 months into the middle of 1973. In the first half of this year growth was in line with the Budget forecast. Taking all the straws in the wind together, it looks as if the economy will come close to that 5 per cent. forecast. And we are determined, as my right honourable friend, the Prime Minister, reaffirmed in another place yesterday, to hold to that course for two years. If we do so we shall he achieving, with all that it means for our people, a growth rate twice that to which we have become accustomed in the past eight years or so.

Or take unemployment—one of the indicators mentioned in the noble Lord's Amendment. Noble Lords opposite do not need to tell me that the present level of unemployment is still intolerable. But, my Lords, the latest figures are very encouraging. The hard core to unemployment, seasonally adjusted, fell by 39.000 in October, and it is now more than 100,000 below the sinister peak which it reached in the spring.

Or take another significant indicator—business confidence and the prospects for investment. The latest D.T.I. survey of investment intentions suggests that the fall in manufacturing investment has come to an end and will be followed by an increase next year. And last week's C.B.I. Industrial Trend Survey showed a revival of business confidence and suggested further increase in output and employment in the months ahead.

Or take the balance of payments—the problem that almost mesmerised us four or five years ago. The latest period for which we have a full balance of payments figure is the first six months of this year. In this period the current account was in surplus by £135 million. With net invisible earnings running at over £50 million a month on the right side, and with the improvement in our exports which should follow the expected upturn in world trade, the prospects are for a renewed surplus on current account as the effects of the dock strike—which has distorted the third quarter's figures—wear off.

My Lords, all these important economic indicators were set reasonably fair three months ago. To-day they remain favourable, or indeed more favourable. And added to them is that we now know as a certainty that we shall be entering the expanded Community in two months' time, and we have lately seen demonstrated at the Summit the sense of common purpose which inspires the Community at its best.

But, my Lords. I agree with noble Lords who assert, whether or not they like our membership of the Community, that of itself it provides no panacea for the solution of our problems. They can only be solved in essence by ourselves. And they cannot be solved unless, through our own efforts, we manage to master what is on any account the greatest internal challenge which our country faces today: cost-push inflation, which is both the cause and the symptom of so many of our other problems. My Lords, if nothing else has been achieved these past three months, one thing I think has been gained, and that is the increasing recognition right through our society of the menace of inflation. Some noble Lords have been crying it from the roof-tops for some time, but perhaps their message has not been really heeded. But it is my belief that the country as a whole now more clearly sees the danger of inflation for what it is. In economic terms what it means is an erosion of our international competitiveness, in its clear threat to both growth and employment.

But I also believe, my Lords, that today the country recognises far more clearly than it did even as short a time ago as last July what can be the social consequences of continued inflation at the levels which obtain to-day. The big, battalions—the very rich or the very powerful—can look after themselves in the teeth of the inflationary gale. Indeed, they can run before the storm and perhaps profit from it. But this is not the case with the poor, the pensioners, the weak and the less well organised. They go under, with all that this means in social tension and social disruption. I think that the House as a whole was deeply impressed last July by the speech which the noble Lord, Lord Robbins, made from the Cross Benches when he expressed the fear that inflation at its present rate could sap the very foundations of our free and liberal society. My Lords. it was against the background of this threat that the Prime Minister invited the T.U.C. and the C.B.I. to sit down together with him last July in order to intensify the dialogue between the three parties—Government, trade unions and employers—which had been taking place in the "Neddy" context over the past year.

I know that there are those who are now inclined to write off these talks as so much wasted effort. That is not my view. It is not unimportant that, almost at the outset, the three parties agreed on three common objectives: the objective of faster growth in national output and real incomes, an objective to which the Government are firmly pledged; the objective of the improvement in the relative position of the lower paid worker in this country, an objective to which, with my responsibilities in the public sector, I firmly subscribe; the objective of moderating the rate of cost/price inflation.

But more important than agreement of these objectives, more important possibly even than the eventual failure to agree on the means to achieve these objectives, has been the nature of these discussions. I do not refer only to their duration. There are those who feel that they were possibly unduly protracted. I refer more, my Lords, to the testimony of neutral observers who have made it clear to me that never in their experience have they seen these three parties—Government, trade unions and employers—so deeply, intensively and seriously engaged on the attempt to hammer out a joint policy. Our disappointment at the result must not blind us to the real efforts made both by the C.B.I. and the T.U.C. But, my Lords, I should like to pay a tribute to the official team, the high priests who played so large a part in these discussions—one of whom happens to occupy the next door office to mine. And I cannot forbear from paying my tribute to the Prime Minister for the infinite patience, coupled with determination, which he has shown in these protracted discussions. Whatever else one may say, I think no one would deny the fact that the Prime Minister did not spare himself anything in trying to bring these discussions to a successful conclusion.

I recognise that in some quarters the tripartite discussions have been viewed with a certain suspicion as a type of pre- cursor of the corporate state. My own view is that this amounts to a complete misconception of the nature of the discussions. I have never concealed from your Lordships my view that a voluntary prices and incomes policy was in every way preferable, if it could be secured, to a statutory One. It seems to me that in a free, modern, democratic society this is the way to go about things. In the last resort, whatever respite we may gain by the statutory approach, consent is ultimately essential. But consent implies fairness, and that fairness must he manifest.

It is by that test of fairness t hat I ask your Lordships to judge the proposals which the Prime Minister put into the common pool during these discussions. First, there was the September 26 package. And this, like the three agreed objectives, rested on three legs. The first leg of the tripod was of course the commitment on the part of the Government to a 5 per cent. growth at least over the next two years. The second leg was the proposals that wage increases should be across the board and thus designed to favour the lower paid, with a ceiling of £2 on the basic rate—£2.60 to take account of wage drift. This meant that within an overall limit of some 8 per cent. the lower paid would achieve something over 13 per cent.—no negligible increase.

The third leg was that the combination of this growth and the across-the board ceiling made possible a steadying in the rise of prices. As your Lordships will recall, it was the intention that the prices of manufacturers should the under these arrangements by not more than 4 per cent. per annum and that this price rise would also specifically attach to the nationalised industries just as much as to the private sector. But there was also the safety net of the threshold agreement under which for every percentage point above a 6 per cent. rise in the retail price index an extra 20 pence would be added to the basic £2. I hold it true to say that the broad structure of these proposals was deemed to be fair—fair for all concerned; workers, employers, the community as a whole—by a very wide spectrum of opinion.

Since September 26 there have been, of course, further arduous and protracted discussions. The trade union representa- tives at first argued, and argued strongly, for a rigid statutory control of prices, on the one hand, with, on the other hand, a voluntary control over wages. I cannot see that such a proposal would have been accepted by the public in general or Parliament as a whole. It would have been like depressing one end of the scale while hoping that the other end would not rise. The argument then turned on whether the agreed joint objectives could be reached entirely by the voluntary route or with some form of statutory backing for both wages and prices. I do not wish to go over all this again, but what I would say to your Lordships is that the final resting position of the T.U.C., as I understood it—a request for an unqualified guarantee on the part of the Government that retail prices in general and food prices in particular would not rise by more than 5 per cent. in the year ahead—was clearly unrealistic. With the best will in the world, I cannot see how any Government could possibly undertake—nay, more, guarantee—to hold the retail price index, irrespective of what happens to wages or world prices, to a predetermined figure for as long a period as twelve months. Whatever else this Government may be able to do, they cannot control a drought in Australia or a failure of the maize crop in the United States of America.

I have seen it said that the Government adopted an inflexible attitude in these discussions. I cannot see how this argument can be sustained, given the way in which the proposals put forward by the Prime Minister at the last meeting on November 2 added to or developed the Government's original package. I would remind your Lordships of those additional proposals. First, food prices. There were the new joint monitoring arrangements. There were the firm undertakings given on behalf of the food retailers and there was the Government's commitment of their best endeavours to moderate the upward trend in prices. Second, rent rebates. There was the proposal for the increase in the allowances for rent rebates. And there was the promise of consultation by the Government with local authorities with a view to moderating increases in rates.

Next, the poverty trap. Here there was the Government proposal to extend the periods for which the family income supplement, free school meals and free school milk are awarded. Fourth, pensions. There was the offer of a special lump-sum payment.

Next, indirect taxation. Here there was the reiteration of the Chancellor's assurance to consider, when he comes to frame his Budget, the proposals made in resepect of indirect taxation—V.A.T. and so on—during the tripartite discussions. Then, added to this, there were the proposals from the employers' side for dividend limitation and the reiteration of the Government undertaking to consider within the framework of the Industrial Relations Act such defects in its operations as either side might wish to submit to the Government.

My Lords, in these circumstances I find it hard to see how the Government's, I believe, fair proposals can be justly stigmatised as representing a harsh, inflexible position. Indeed, I have seen the criticism voiced that, in our desire for a voluntary agreement, the Government may have gone too far. It is true as the commentators have observed, that the original Chequers flat rate—£2–£2.60—was not changed. The reason for this was a simple one, although it may not have been fully understood, possibly, on the trade union side. Put simply, there seems little point in constructing, after laborious discussion. an anti-inflationary package—and that is after all what we have been trying to do—if by trimming here and adding there the package itself becomes inflationary. And the best economic advice available to the Government, based on the economic model constructed for the tripartite talks, was that, given 5 per cent. growth and given 4 per cent. estimate for price rises, raising the £2–£2.60 floor to any significant degree would have made the package itself inflationary and therefore self-defeating. Any Government would resist committing themselves to a package whose whole purpose was to arrest inflation but which in effect merely sanctified, entrenched and institutionalised that evil deity. It was in these circumstances, and with regret, that the Government came to the conclusion last week that it was time the talking had to stop and the action had to begin.

The immediate action is contained in the Bill now before Parliament. The reasoning behind this Bill and its implications are spelled out in the White Paper. I shall not weary your Lordships at the outset of this long discussion by going through them in detail. I should like to make only these comments. In the first place, I should like to make it crystal clear that the Government would have infinitely preferred to walk the voluntary path. We all know that a statutory standstill, however necessary it may be—and I am convinced that this standstill is essential—can, whatever the broad justice, be harsh and arbitrary in its particulars. Some wage earners fall one side of the line; some, equally deserving, may fall the other. Nevertheless, there come moments when a hard decision must be made in the general interest. And this moment, my Lords, has come.

Secondly, because of the arbitrary nature of a statutory standstill, it is all the more necessary that the immediate measures which we have been compelled to take should be, and he seen to be, fair. In this context I draw your Lordships' attention to the fact that the standstill will catch not only prices and wages but also dividends and rents. Moreover, as the Prime Minister explained yesterday, the Government have decided, despite the breakdown of the talks, to bring into effect a number of the additional proposals included in the November 2 package, to which I have already referred. I also hope that your Lordships will agree, if you have had time to scrutinise the explanatory White Paper, that the Government have bent over backwards in explaining their intentions on a number of difficult issues—and some of these issues are extremely difficult; staged increases, arbitration, incremental scales and so on—to be as fair as possible to as many as possible.

The third point I wish to make to your Lordships is that the simplistic phrase "a freeze", however graphic, is an inadequate shorthand for the proposals now before Parliament. True if they succeed in their objective, be it over 90 or he it over 150 days, they will themselves help to curb inflation; but in essence these proposals are designed to give us all time to consider and to work out carefully the second stage measures: how best, in the longer term, all the parties concerned can achieve the agreed Chequers objectives, and achieve them in the light of the tripartite discussions.

In saying this I again emphasise the Government hope that in this interim standstill period, whatever straits may be placed upon the relationships between the three, there will be cooperation between the Government, un ions and management—co-operation not only in working out a programme for the second stage but also on how best to operate it. I hope that the fact that there has been so remarkably little mutual recrimination between the three parties after the breakdown of the talks is a good a augury for the renewal of this essential dialogue in the future.

That brings me to the final point that I wish to make about the immediate proposals, and indeed about stage 2. They differ in one essential regard from the 1966 package (I am making no aspersions here; I am just stating a simple fact). The fact is that the 1966 package was conceived in the context of deflation. What we are now striving to do, be it in stage 1, the standstill stage, or be it in stage 2, stands within the context of expansion: that 5 per cent. gross rate for a minimum of two years to which the Government are pledged.

May I say by way of conclusion that in the coming days, weeks and months we may possibly hear a lot of slanging of one section of society by another and many rather loud voices may be raised? At times the voice of reason, the voice of moderation, the voice even, perhaps, of law, may be difficult to hear, but I would hope, especially in the calmer atmosphere of this House, that we may remember certain things. Governments are not perfect, and even this Government are not perfect. No Opposition is perfect; even the present Opposition is imperfect, as indeed was the last Government. There may be a blemish or two on the trade union movement, and it is even possible that management may sometimes fall a little below perfection. But, my Lords, warts and all, we do happen to live in what is still, by any standards, one of the most civilised, one of the most liberal, one of the most reasonable societies on this particular troubled planet, and I think it behoves us all, wherever our Party allegiance may lie, to remember, as we grapple with this great and perplexing problem of inflation, that somehow those values are precious and must be preserved.

I must confess that at times during these past months and years I have been rather fearful about the future of the country—perhaps as fearful as I was in rather different circumstances in the early stages of the war. Because the danger of slow decline and the slow erosion of values is now more concealed, the danger facing us is perhaps more insidious and equally potent; but I believe that within this Chamber and within this Parliament, and again within the nation, there is a far wider consensus of responsible and rational opinion than sometimes we give ourselves credit for. I believe that once that opinion is convinced that what the Government of the day are proposing is not only vitally necessary but also fair, the response will he forthcoming. I believe that the approach of the Government is necessary, that it is reasonable and that it is fair. I also believe that it will be judged to be so by the country as a whole.

3.15 p.m.

LORD BESWICK: My Lords, I beg to move, as an Amendment to the Motion for an humble Address, to add the words standing on the Order Paper in the name of my noble Leader: but, noting the continuing rise in the cost of living and the present massive unemployment, humbly regret that the mistaken policies of Your Majesty's Government, particularly in the fields of prices, housing, taxation and industrial relations, have added to the difficulties of evolving a national policy to deal with inflation and have gravely weakened the country's economic prospects. My Lords, the noble Earl, Lord Jellicoe, said that we have heard a lot of slanging in recent weeks of one section by another, and perhaps I may say that in the period that T have recently had for reflection at the beginning of a Parliamentary new year I have made a good resolution. I propose to go out of my way to give credit, where it is due, to political opponents. I would say this seriously to the noble Earl: it may well be that Parliament, as an institution, would gain in credibility if we all tried harder to give the benefit of possible doubt to those with whom, politically, we disagree. So I readily give credit and support to Her Majesty's Government wherever I can. I pay tribute to the reasonableness of the manner in which the noble Earl opened this debate this afternoon, although I am bound to say that when I listened to his interpretation of some of the indices I really wondered what sort of a problem we were confronted with—because he seemed to suggest that everything was going well. But I do give credit to Her Majesty's Government, for example, for their generosity to the Uganda Asians and their courageous suspension of the Stormont; and there are other items. But with the best will in the world, with the utmost charity, giving the benefit of all possible doubt, it is quite impossible to avoid the economic facts of life, and the facts show that their stewardship has been an unmitigated disaster. Every index we can read, every test we can apply, save one significant statistic, shows failure.

The noble Earl made much, as has his right honourable friend, about the alleged 5 per cent. growth. I must say that I am not quite certain what is meant by this: it is certainly not 5 per cent. over a year, and even taking the comments of the Financial Times I notice that they say: There are important reservations to be made. First, the improvement is from a low level; secondly, inflation. particularly in the wages field, is seen by manufacturers as a cause for concern ". Then finally they say: There is an underlying conviction that investment must be increased dramatically if further growth is to be matched by industrial capacity. It is true, however, that even in this area of economic affairs Ministers have displayed an almost comic capacity for eating old crow and pretending that it is conventional Conservative grouse. Yet for all their U-turns—on the Clyde, with Rolls Royce, the Industry Act and the rest—the fact remains that unemployment under their stewardship has been higher than since before the war; industrial disputes have lost more working days a year than since the year of the General Strike; our currency has touched an all-time low on the peace-time exchanges and on the Government's own showing inflation has now reached crisis point.

What has gone wrong? Or more correctly, where have the Government gone wrong, for whatever blame we may put upon one faction or another it is of course Her Majesty's Government who are in control, and indeed they never cease to boast that we have never had a Government more firmly in control. I am reminded of a journey I once made across some Australian sheep country, in the outback—back o' Bourke, as they say. I was told how, for years, things had gone wrong and efforts to raise sheep on that land had failed. They had tried this and that but the animals would not put on weight and the wool clip was a loss. Then it was established that the land lacked certain essential trace elements. Even now I can see the farmer rubbing his finger and thumb together as he indicated the tiny quantity of these essential vital elements which had made all the difference.

There is an essential trace element missing in Britain's economic affairs. Until we accept that, until we identify that missing element, until we get agreement on making good what is missing, then neither a voluntary nor a statutory incomes policy will work. I thought we had a clue to what was wrong when I heard the Chancellor of the Exchequer speaking on the radio the other day—it was a Sunday—before another session of the Downing Street talks. Mr. Barber said, quite properly, that it would be inappropriate to comment on what were matters for negotiation but then went on to say—I do not quote him verbatim but these are the words, incredibly, which he used—that the T.U.C. were "humbugs" and their proposals for price control were "administrative nonsense". Possibly the noble Earl had that comment in mind when he spoke about one section slanging another.

My Lords, here indeed is a clue. I compare that attitude, which ended in failure, with the approach of my noble friend Lord George-Brown, and the agreement he secured between the T.U.C. and the C.B.I. Of course, we all know that my noble friend's declaration of intent never went through to success, it was done to death by the Treasury: the same Treasury which has since permitted the printing presses to pour out paper money was able to use my noble friend's achievement as an instrument of deflation rather than as part of an expansionist policy of production and purchasing power—which I believe he intended it to be.

But if we examine further what the present Chancellor has done, as well as what he has said, we come to the inevitable conclusion that the missing element in his economic policy is precisely that fairness, or social justice, to which the noble Earl referred. That is a theme upon which we have insisted in every economic debate since the present Government assumed office. Some noble Lords well versed in economic theory, if a little less familiar with opinion as on the shop floor and in the works canteen, have tended towards impatience when we have returned to this need for social justice, yet all that his happened, right up to the failure of the Downing Street talks, has shown that we were right.

It is significant now that almost every commentator (including the noble Earn or journal makes at least a genuflexion towards this objective, but much more serious than some of the superficial gestures was the report in the Guardian of a research project headed by Professor H. A. Turner. The study itself, I understand, will be published this week by the Cambridge University Press under the title Do Trade Unions cause Inflation? In it Professor Turner and his colleagues say: It should by now be very clear, rot merely that unions are far from being the only significant factor in the inflationary situation but that they are not generally an independent factor in it. Our studies emphasise the reaction of social organisations to their economic context …". Again, later, they say: Perhaps the most general and important conclusion from these studies is that, in any pluralistic society at any rate, an effective policy to control inflation needs to pay a great deal of attention to social equity. I give just one more quotation, and that from a respected and undoubted y objective American, the London Bureau Chief of the Christian Science Monitor. He says: I would suggest that to be successful an anti-inflationary policy in Britain's present serious situation would need to attack all the roots of inflation: incomes, prices, uneconomic profits, deficit spending by the Government and excessive supplies of devalued money. But he goes on to say: Even then, in my opinion, the policy would not have a hope unless it was seen to do justice as between all classes in the Kingdom. My Lords, do the Government's proposals meet the criteria of fairness, as the noble Earl put it, or social justice, as we have put it? The Times made the most extraordinary claim in its leader of November 3. After swallowing hard and saying that the Chancellor's initial policy, suggested to many a divisiveness "—

I like that phrase "suggested to many a divisiveness" particularly when I remember that the T.U.C. were called "humbugs"—the leader went on: … all traces of the harsh philosophy of Selsdon Park have now been erased by the egalitarian drift of Mr. Heath's proposed flat-rate norm and Mr. Barber's tax credit scheme.

Has it really'? Do any of us really believe that that "harsh philosophy" as The Times put it, "of Selsdon Park" has been erased? If they really believe that. then they are out of touch with public opinion. Mr. Barber's Budgets are just taking full effect: their effect is the most significant shift of wealth in favour of the better-off that this country has seen—though probably "seen" is the wrong word. Mr. Barber is the only professional tax lawyer to go to the Treasury and his skill has to be believed without being seen.

But if we take the increase in earned income relief; the disaggregation of children's investment income; the option of separate taxation; cuts in corporation tax; abolition of capital gains tax on disposals at death; the straightforward tax cut which of course benefits most those who have most; the abolition of the extra tax on unearned income up to £2,000 a year; and the reintroduction of share options as a tax avoidance device, then we see that something upwards of £1,890 million has gone to those earning £5,000 a year and upwards. On the other hand, to keep the balance straight, we have had the abolition of cheap welfare milk and free school milk for the over-seven's; the increased dental and prescription charges; the raised school meal charges; and, of course, the Housing Finance Act. In the face of all this, was it really the T.U.C. against whom the charge of "humbug lay? Is that what The Times calls" an egalitarian drift"?

The other piece of evidence adduced by The Times was the tax credit scheme. The Chancellor has put forward a superbly simplified scheme which does his professionalism immense credit. But does it necessarily mean an egalitarian drift? It will involve, I gather, a net loss of revenue of the order of £1,300 million. If that is to be made up, not by progressive income tax but by the regressive V.A.T., will this not mean further net re-distribution in favour of the wealthy? The V.A.T. is part of the Brussels gospel of harmonisation. There is no other reason for its adoption here. It is more expensive to collect, a paradise for both snoopers and tax avoiders, and it has none of the social purpose which successive Governments had invested in the purchase tax. Essentials will be taxed for the first time; essential goods, equally with non-essential goods will have prices put up. Can we seriously talk of an egalitarian drift if this basically regressive tax is introduced? The noble Lord opposite may talk of an increase in the family income supplement, but to the extent that it is increased, the poverty trap is dug deeper, and real social justice does not rest upon those essentially ambulance measures: it is not this supplement, not a gift (or donation as the Foreign Secretary once put it) to the pensioners, but a fundamental shift of opportunity and income, as of right, which is now needed.

My Lords, there is one other aspect of this socio-economic scene to which the noble Earl did not refer and which will not be put right by a statutory wage freeze—the capital gains which go to those who own property. The noble Lord, Lord Balfour of Inchrye, had a most interesting letter in The Times the other day in which he told of the terrible plight of a man faced with a wealth tax who owned a work of art worth £200,000. What a terribly complex problem he posed, as compared with the task of keeping the dustmen or postmen down to another £2 or £3 a week! I am advised that this symbolic work of art would probably have changed hands five years ago at about £1000,000—£100,000 capital gain in five years, more than a postman would earn in eighty years of useful work. But that is not all. If the noble Lord wishes now to realise his capital gain on that work of art the buyer will probably pay through a bank loan, and the interest on that loan, thanks to the egalitarian drift of the present Chancellor, will be able be set against his tax liability. If there is one piece of reactionary prejudice more contemptible than any other in the present circumstances it is the reintroduction of tax relief on loan interest—not, of course, on the small loans which some of us may take up, but on the large loans. It is not of itself of overwhelming financial significance, but the charge of humbug "ought never to pass the lips of any Government Minister, let alone the Chancellor, while that provision remains upon the Statute Book.

I must say something more about the speculation which that tax relief on loan interest facilitates. Apart from the works of art which gave the noble Lord, Lord Balfour of Inchrye, so much cause for concern, there is this gangrene of land speculation, as offensive, I gather, to the C.B.I. as to the T.U.C. What are the Government going to do about that? I suppose we all have examples. One was given in a B.B.C. documentary last week: a hotel at Ramsgate, out of fashion, closed down after the war and was sold for £21,000. A few years later—I suppose the building had dilapidated—it sold for £25,000. In 1970 it changed hands at £200,000. A year later at £250,000. And some property company now offer it at £350,000. Is there any economic policy complete or remotely approaching fairness if we fail to do something about land?

If I am asked whether we will support legislation to control prices and incomes, I will say that I and my colleagues have consistently said from this Bench that an overall prices and incomes policy was an essential ingredient in a properly and fairly planned economy. But if I were asked whether I am now prepared to go to that objective, I think that I would recall that old story of a motorist who stopped on a country road and asked a local the way to some place; and the local replied "Ah, if I was going there, I shouldn't start from here." My Lords, a prices and incomes policy must be the objective, but we would not start from the position of the most reactionary budgetary redistribution of wealth this century. We would not have abolished the Prices and Incomes Board and the Consumer Council. We would not have scrapped an efficient and fair purchase tax for the regressive and wasteful value added tax. We would not have planned to pay more to an organisation in Brussels for pushing up the price of food than we were paying in subsidies to keep prices down. We should have encouraged growth by more selective assistance to the genuinely constructive real wealth-producing elements in our society, instead of facilitating the operations of the speculator and the asset stripper.

The White Paper, which the noble Earl has explained, and the Bill which eventually we may get, do not, of course, constitute a policy. They are a stop-gap. The Government will be judged by the policy which they put together in the next 90 days. To get national support for that policy—and truly national support will be indispensable—we shall want to see not an egalitarian drift, as The Timesis pleased to put it, but a deliberate and wholehearted move towards social justice. Such a move could mean the stimulating challenge to which I believe our British people will respond. But, meanwhile, we can go only on the record, and that record abundantly justifies the Amendment which I now move.

Moved, as an Amendment to the Motion for an humble Address to add:

"but, noting the continuing rise in the cost of living and the present massive unemployment, humbly regret that the mistaken policies of Your Majesty's Government, particularly in the fields of prices, housing, taxation am industrial relations, have added to the difficulties of evolving a national policy to deal with inflation and have gravely weakened the country's economic prospects."—(Lord Beswick.)

3.36 p.m.

VISCOUNT SIMON

My Lords, I am sure that on all sides of the Home, not only the Benches surrounding him there will be delight that the noble Lord. Lord Beswick, is back with us in such good heart and such good voice. I found myself in agreement with a great deal of what he said, but with his permission I do not propose to follow him on his Amendment, because my noble Leader is going to speak to-morrow and it would be better for him to put the point of view on these Benches.

I want, however, to speak for a few minutes, I hope not too long, about what the noble Earl, the Leader of the House, rightly described as the great problem which faces us to-day; that is, the problem of inflation. As he reminded your Lordships. a week has passed since the noble Lord, Lord Blake. in his very delightful speech, moved the humble Address, and in this week the battle against inflation has taken a new shape. But I think we might do well to go back just for a minute to the Queen's Speech which we are in fact debating, and I hope your Lordships will forgive me if I read the short paragraph from the Queen's Speech which deals with this matter. Her Majesty said: At home, My Government's overriding concern…will be to promote the high and sustained rate of economic growth which is essential for the achievement of their policies of providing increased employment and rising living standards, as well as for the provision of better houses, schools, and social services. To that end "— —and I think "to that end" means for the purpose of promoting this necessary high and sustained economic growth— they will continue their efforts to establish effective means of enabling a faster growth of national output and real incomes to be maintained consistently with a reduction in the rate of inflation. I think any Government in power at the present time could well advise Her Majesty to use words of that kind. Obviously they represent a concept which we all willingly accept.

But the real question is, how is it proposed to do this? I do not criticise the Government for not attempting to spell that out, because, of course. at the time the Queen's Speech was delivered the discussions with the T.U.C. and the C.B.I. were still going on. But now that they have come to an end it is right that the Government should tell us how they propose to fulfil these aims, and they have, as the noble Earl, the Leader of the House, has reminded us, produced a White Paper and a draft Bill.

Before we come to that, I should like to call your Lordships' attention to something that the Prime Minister said in another place immediately before the Queen's Speech. I want to repeat this because it has puzzled me very much, and it may be that the noble Lord who is to reply at the end of the day will be able to explain to us what it means. It will be found at col. 45 of the Commons Hansard of October 31 last. He said: The Government have set themselves to achieve and sustain a rate of economic growth of 5 per cent. a year. In passing, because I am extremely ignorant on economics, I wonder whether the noble Lord can tell us whether that is 5 per cent. in money terms or 5 per cent. in real terms. Then he goes on: We have achieved that rate; but we shall not be able to sustain it "— observe these words— unles we can not merely stop but reverse the undue pace of increase in prices and incomes. I have been really puzzled as to what that sentence means, "reverse the undue pace of increase in prices and incomes." in the ordinary sense it means reducing prices and incomes. I think that the words are perhaps not wholly apt. In another context I ventured to suggest to your Lordships that concepts of this kind were sometimes more easily understood when they were expressed as mathematical formulae. I think that we should understand better what the Prime Minister meant if he had not used in this way words which are, I imagine, open to several interpretations. Certainly, I have not been able to find out what the particular meaning is.

Shortly after that, as we all know, these talks collapsed. I am sure that it was right for the Government to under-lake those talks, as the noble Earl the Leader of the House has said, but I must question why, if it was right to undertake those talks, they were not undertaken very much earlier. The seriousness of the position was surely clear. I was surprised to hear the noble Earl the Leader of the House speak as though it was about in July last that people began to realise that inflation was going on. It seems to me that this has been clear since very nearly the start of this Government's term of office, when they adopted a certain policy—and here I must follow the noble Lord, Lord Beswick—which I am sure they were absolutely genuine and sincere in believing was going to lead to better things, but unfortunately it was miscalculated. I should have thought that very soon after that it was quite clear that something had to be done.

What has disturbed me as much as anything was hearing the Chancellor of the Exchequer speaking on the radio on Sunday—at least I understood it was he, although I do not know his voice as well as all that—saying that the talks had not been a waste of time, "because we have been able to understand better what other people's views were". Surely in Government one has to try to understand other people's views before one enters on any line of policy at all. Instead of that, we have had nearly 2½ years of confrontation, and I am bound to say that the damage done by it cannot he quickly repaired—or repaired "at a stroke", if I may use those words. Hearing the Chancellor of the Exchequer reminded me of some wise words of the noble Lord, Lord Blake. He was speaking really about the true nature of democracy. I think that this is a message which should he remembered not only by this Government but by any future Government, including indeed the Liberal Government, when that comes into power.

What he said was this: But One nation' does imply that there arc certain legal, practical and accepted limits within which the political and Party battle is fought and that in the end the opinion of the majority will, after all due and proper consideration of minority views, prevail and be obeyed."—[OFFICIAL REPORT, 31/10/72, col. 10.] It surely is the very essence of Parliamentary democracy that the minority view must he properly considered, and I do not see how it can be properly considered unless people understand what it is. As I see it, Parliamentary democracy is really government by consent and not government by the ballot box. The ballot box is a means—and in the view of my noble friends and I not a very successful means—of electing a Parliament, but the duty of the Government is to govern by consent. I believe that this is one of the reasons why we are perhaps rather allergic to referenda, which is government by the ballot box. We believe that the Government of the country, entrusted with the responsibility and provided with a majority in another place which enables them to have a measure of stability, nevertheless have a duty to consider carefully the views of minorities.

Now the Government propose a temporary statutory freeze, if I may use that shorthand. I do not criticise them at all. as some people have done, for making what was described as a "U-turn". I believe that in the circumstances this was inevitable. Strangely enough—and here I probably stand quite alone in your Lordships' House—I think that a statutory freeze may perhaps be better than a voluntary one. There are two reasons for this. As the noble Earl said, any freeze will produce its harsh and difficult cases. But whereas in a statutory freeze the harsh and difficult cases fall rather haphazardly, and one may express regret but accept them as the "rub of the green" in a move which is made in the national interest, in the case of a voluntary freeze there is a real danger that the "rub of the green" falls on those who play the game and not on those who do not. That I think is a much lesss desirable outcome.

However that may be, the Government are introducing a temporary freeze and, as the noble Lord, Lord Beswick, said, what is most important is what they are going to do with this 90 days, and what they are going to produce for us to I consider after that. The White Paper and the draft Bill have only just been made available, and since I was brought up in business, where one does not like to express a view about anything that one has seen for only about ten minutes I will simply indicate, very briefly, one or two considerations which I ought to be taken into account and by which we should judge this measure These considerations, I can say in advance. are very much in agreement with those mentioned by the noble Lord, Lord Beswick.

Any legislation must he fair, and must he seen to be fair, as between different groups in the community. I would emphasise that "fair" does not mean equal. Those who are best able to bear the burden should carry the brunt, and those who are least able to bear the burden should be relieved. I further believe that it is quite essential that prices must be firmly held. It has always seemed to me that any hope of a prices and incomes policy must begin with prices. I know how difficult it is to control prices, but I am sure that, even if the control is not 100 per cent. effective, a genuine effort must be made to see that prices arc held, and that those who breach the undertaking are dropped on heavily.

A great deal is made of food prices and the influence upon them of the world prices of commodities; but surely changes in world prices take quite a long time to have an effect: there are quite large buffer stocks. The world price of sugar may go up to-morrow, but there is no reason for the price of sugar in the shops to go up to-morrow. In any event, I should have thought that the traders would be quite prepared, in circumstances such as these, when the country needs stability of prices, to carry a loss for a time on a particular commodity. They are quite keen to do that in the form of loss leaders when they want to gain custom, and I do not see why they should not be able to carry quite a considerable amount in that way.

Then, my Lords, I think it is shocking that the control of prices is not to extend to the prices of land and houses. This is a very difficult problem, but it is not so difficult that it could not be overcome if people really set their minds to it. My right honourable friend and Leader in another place has put forward a means of solving it which I suggest ought to be examined very seriously: the application of site value taxation accompanied by time limits on planning permission. Then, again, there are rents. It is a great pity that the recent increase in council house rents under the Housing Finance Act has apparently escaped the net, and I wonder whether, even at this stage, the Government could do something to postpone, at least during the period of the freeze, the coming into effect of that measure.

As regards dividends, I understand that what has been proposed has been accepted by the C.B.I. A great deal is always made of the fact that an unpaid dividend merely goes to swell the coffers of a company and thereafter reverts to the shareholders. Of course, as the noble Lord, Lord Beswick, said, a good deal of money is required for further investment in industry; but, provided that an adequate allowance was made for that necessity, I should have thought it was quite possible to cream off any excess profits by a once-and-for-all excess profits tax during the period of the freeze. On taxation we must, I suppose, await the next Budget; but, as the noble Lord, Lord Beswick, has said, there are many ways in which the burden could be more evenly distributed. The noble Lord particularly mentioned relief on bank interest, as well as the imposition of V.A.T. which, as he so rightly said, favours luxuries instead of comparative necessities.

Finally, my Lords, may I say a very brief word about wages? The Government's original package included provision for a £2 increase across the board. Would it not be possible for the Government to agree to £2 for lower-paid workers during the freeze? This again would help to rectify the very uncomfortable balance between the well-to-do and the less well-to-do. The Government's legislation on this subject should be judged, and will be judged in the country, by the extent to which the poor and weak groups in the community are helped and the rich and strong groups, whether they be trade unionists, land speculators or surtax payers, are asked to bear the brunt of the bill.

3.55 p.m.

VISCOUNT AMORY

My Lords, it is very pleasant to find myself following the noble Viscount, Lord Simon. I have not quite become accustomed to observing him full face across the gangway—I must say that he looks very impressive from here but I used to enjoy even more viewing his noble profile sideways on the same Benches. May I say, to start with—and perhaps noble Lords opposite will not be surprised to find that I do so—that I found the speech of my noble friend the Leader of the House a very able and fair-minded review of the current situation. In particular, I agreed with him when he said that he believed that, perhaps for the first time, the public at large are really beginning to recognise inflation for the deadly disease that it is. The noble Lord, Lord Beswick, moved the Amendment in terms critical of the Government. To such an agreeable and fair-minded person, anything that goes even a little way towards even genial political vituperation does not come naturally, but we recognise that it is a ritual that must be carried out. Casting around for something about which I did not want to argue with the noble Lord—though perhaps this will not please some of my noble friends—I chose V.A.T., which I personally do not think is an attractive tax in itself, though I imagine that we must have it for international reasons.

But when we discuss these problems of inflation and trade union relations, anyone from the Labour side who attacks the Government starts with the appalling handicap that his Party's policies failed dismally and they were driven in humiliation from the stricken field. When the present Government assumed office, they tried different policies and, in view of the failure of the policies of their immediate predecessors, I think it is difficult to assert that they were wrong to do so. They faced a plethora of unofficial disputes which called for an up-to-date legal framework within which normal industrial relations could be carried on. They recognised, as indeed the Labour Government recognised, that wage and salary increases which went beyond increases in productivity were the main cause of inflation. They did not welcome the idea of greater Government intervention; they believed that, in general, competition was the best assurance of fair value to the consumer that has yet been devised, and they were resolved that as employers it was their duty to resist excessive demands which went beyond the safe national level. They had no wish for a confrontation with the unions for its own sake, and it is quite unrealistic to try to pretend that they did. They were determined, so far as they could, to resist all pressures, from whatever quarters, which were responsible for continuing inflation. These were not ignoble or unworthy objectives.

Some of the objectives proved in the result to be unattainable by the methods that were relied upon. Some of the problems have indeed become more serious, but some of them have diminished. It is as well, when we are feeling critical about some of the objectives that have not been attained, to remember that to-day national productivity is rising faster than we have known since the war; total production is now rising again; taxation has been tremendously reduced; the social services continue to be developed and the most hardly hit have been assisted. One simply cannot get away from those facts, even if one wants to do so. So I cannot accept that the Government's policies have been unfair. Whenever measures have to be taken which will hit people at large, the Government are scrupulously careful to take some steps at the same time to protect those who are likely to be most severely hit.

My Lords, I think it is a tribute to the courage and the realism of the present Government that they have been prepared to modify some of their policies in the light of experience. This, after all, is a course of action which is followed, I think, by prudent people in business or in the professions: that when one method of tackling a problem has proved unsuccessful another one is tried—and I think it requires no apology. It seems to me rather a pity that for some reason it should be held that this procedure is so difficult in politics. The talks which have recently taken place seem to me to have been a model of the right way to discover what common ground exists. For the present they have failed, but we must hope that when the immediate steps which have become necessary have been taken the talks will be taken up again. The extremists on both sides, as I suppose, have been glad that the talks failed, but the rest of the nation is sorry. The Government have now had to take actions, or propose actions, which, in the Prime Minister's words, sensible people now see to be necessary and the nation at large, I have no doubt, feel that the time has come for action to halt this disease of inflation, which makes poor people poorer though many rich people richer.

The fact, therefore, that agreement has not proved to be possible is sad, but perhaps, when one comes to think of it, not surprising. The trades unions find themselves immensely powerful at the present time, with great monopoly power in their hands. They have seen off one Government, and are holding another one at bay. They want (in the interests, as they see it, of their members) broadly to maintain the status quo They are willing to surrender any part of their present monopoly power only in return for cast-iron guarantees which, my Lords, no Government can give to any one section of the nation because it is impossible to give the same guarantees to the nation at large. But at the present time, when it is so important for the whole nation to rally behind the kind of action which has now become necessary and which, I repeat, I a m certain the nation feels to be necessary, then recriminations are harmful.

Let us have no doubt that the only alternative to the measures proposed is a violent credit restriction, which would lead to a lower level of activity and more unemployment. Unreasonable capital profits and the spate of take-over bids which we have lately been reading about are in my opinion psychologically deplorable, and have seriously aggravated the general problem. I shall have one more word to say about that later on. The recent weakness of sterling is a symptom of our failure (which is greater, relatively, than that of almost all other nations at the present time) to grapple successfully with this problem of inflation; and this weakness, in turn, underlines the urgency of the present situation.

Now, my Lords, what of the future? The measures announced by the Prime Minister appear to me to be absolutely necessary. A total freeze is not in itself a good thing or an effective thing. If it lasts long, it leads to lethargy and stagnation. But it is an essential preliminary, as my noble friend the Leader of the House said, to longer-term policies. These longer-term policies will be far more difficult and far more important than this temporary freeze. These longer-term policies must be planned to cover a period, not of a few months but of a few years at least, and in them I would guess that some kind of threshold agreements will need a part to play. So, my Lords, I hope that the tripartite talks will soon be reconvened. There must be a continuing discussion about ways and means. The post-freeze policies must surely be based on as wide a measure of voluntary agreement as possible, buttressed and underpinned by statutory sanctions in cases of non-compliance or abuse, because the country as a whole will not accept the flagrant abuse of policies such as we are talking about now.

As regards the matter of capital profits to which I referred earlier, and which I think at the present time really amount to a serious social and economic problem in themselves, this seems to me to be something which is probably best dealt with by taxation, although one would listen to any other proposals which are made; again one has to avoid stagnation in that sector of the field. But in the longer-term, in my own opinion, and in view of the dangers arising from irresponsible financial mani- pulation which occurs in some quarters, the whole question of the responsibilities, in the case of big concerns, of the management absolutely at the top requires fresh consideration, and one day, I hope, will result in acceptable policies which will ensure that that top management exercises its responsibilities, as in most companies it does now, in a wide sense going beyond the field of mere finance and financial manipulation.

LORD DIAMOND

My Lords, I wonder whether I may interrupt the noble Viscount. I am very grateful to him for giving way. We are of course following with immense interest what he is saying about capital profits, and I notice that he has said what his views might be with regard to a later stage. Would he be kind enough to tell us what his views are as to the omission of any reference to this vital topic from the freeze? Does he think they should have been frozen, or could have been frozen?

VISCOUNT AMORY

No, I do not think I am prepared to go into that in detail now, my Lords, because as the noble Lord knows, this is an extremely difficult field in which to produce the right measures. I have said that I think it is a field which cannot be ignored, and that carries with it the impression I should like to convey: that I think it is a sector which, with others, will require urgent consideration. I certainly would not come out to-day with snap measures which will deal with this situation. It is possible, in that difficult field, to produce measures which aggravate the very problem we are trying to solve.

My Lords, it may be that continuing intervention of some kind by the Government will, in view of our complicated and interdependent society, prove to be a necessity for a very long time ahead, and perhaps permanently. That makes it even more important that the measures chosen for the longer term should be those which are considered to be just and reasonable, and likely to serve the purpose we are all out to achieve without damaging the economy in any unpredictable way. So in the case of the longer-term phase, as in the case of the freeze, the measures must be such as can be felt by public opinion to be reasonable.

So, my Lords, to sum up, if I may, I think the actions proposed will stand or fall by whether they receive the positive support of public opinion. I personally believe they will. To ensure that that is so, as noble Lords have said, they must be as fair as can possibly be ensured. All this will be immensely difficult, and will call for deep understanding and patience. But when the British people have at last recognised the need for action in the national interest, then they generally react to a kind of self-discipline which has often been the object of the admiration of the world. It must be the heartfelt hope of every Member of this House that that will be the attitude of the nation in this crisis of our fortunes.

4.10 p.m.

THE EARL OF PERTH

My Lords, I am not going to follow previous speakers on the very important subject of inflation, the history of the tripartite talks, the Motion or the Amendment. I recognise their great importance, but there are many others who will speak to-day and tomorrow—some twenty noble Lords propose to speak to-day—and they will be able to talk with all the wisdom and clarity necessary at such a time. Rather do I want to touch on a narrower but equally important matter; namely, the economic and industrial affairs of Scotland. I will be brief. In the gracious Speech Scotland was mentioned once. It was mentioned in relation to local Government and I, and I think many others, were very disappointed that there was no mention of any Scottish General Assembly. Your Lordships will remember that Sir Alec Douglas-Home did great work in this connection and though it was not in the Conservative Manifesto we all had the impression that something to this effect would be introduced in this Parliament. We are still waiting for it. I believe that that is of particular importance in that such a Scottish Assembly would help to form Scottish opinion constructively and subsequently enable it to be heard throughout the country. Putting it at its lowest, it would be of great value in enabling us in Scotland to let off steam; and believe me, my Lords, there is plenty of cause for our letting off steam. It it those things which I want briefly to enumerate.

Let us remember that in Scotland we have over us the shadow of unemployment amounting to near 7 per cent. In the South and the South-East there is worry about unemployment of 1½ per cent. or 2 per cent. but in Scotland we have something very different. l suppose that one starts by recalling what happened on the Clyde, where there was very near tragedy. The situation was saved by the action of the Clydesiders and the conscience of Scotland was awakened. As we know, a reprieve has beer, granted and money found for the industry on Clydeside to go on. There is another angle to this matter of the Clyde; namely, the deep waters of the Clyde which are unique in this country. Milford Haven had such deep waters but they have been otherwise used up, by the provision of refineries and so forth. But:he deep waters of the Clyde remain unused except for the promise of a terminal for iron ore and that, my Lords, so far as one knows from what one hears, is something which could go to another part of the country.

Logically, one would expect that something would remain in the form of a new steel works or steel works development for Scotland. For the present situation I blame the British Steel Corporation—and also the Government, in so far as they are going to follow the lead of the Corporation—for being so pessimistic about what may he our industrial power. They talk of a steel production figure of somewhere between 28 million and 36 million tons. My Lords, great industrial nations, even to-day, are judged by the size of their steel industry. If we are to follow that lead, if we set our target for steel production as low as 28 million tons, we may as well give up any hope of continuing in the role of a great industrial nation. If we get to a higher figure, I think there may be hope, and surely Scotland with a new ore terminal must be the place for an expansion of the steel industry.

What else do we find? We find that secret report about railways which, thank goodness! somebody "leaked". I think it was one of the newspapers. The Government may say that it is not their responsibility, but it is one of the most shocking documents that I could ever imagine drawn up by any responsible corporation. In effect, it means that great towns like Inverness or Dumfries and the whole of the North of Scotland will have no railways at all. Can you visualise what that means, my Lords? It may result in the saving of a few million pounds, but when it comes to saving a few million pounds at the expense of people in London the Government take quite a different attitude. London may have a new airport at Maplin and hundreds of millions of pounds are provided for that. Londoners must have better transport, so let us construct another line, the Fleet line, and provide money for that. But when it comes to provision for Scotland, it is not only a question of the railway report. Look at other suggestions which have been made; for example, that the fares on our ferries—which are essential to the Western and the Northern Isles—should be increased. Imagine what this will mean to the livelihood of many people. So, my Lords, you get the contrast. I think it was the noble Lord, Lord Beswick, who spoke about fairness, and one thing that it is clear to me is that we are not being fair to Scotland.

I hope your Lordships will see what I am driving at in listing some of these things. Let us consider forestry, something natural to Scotland and one of the industries which should be encouraged in every way. But what happens? A White Paper is issued by the Government—its contents undoubtedly emanated from the Treasury—in which it is calculated that the monetary return on the Forestry Commission is not adequate and therefore expenditure on it should be checked at its present level. That may be the view of the Treasury, but think of the importance of this matter to Scotland. Many of your Lordships, and many people in Scotland, will have to devote effort and incur expense in trying to refute these arguments and to put things right, when they should be more constructively employed in developing what is natural for Scotland.

My Lords, I have not touched on the question of oil, but that is to be the subject of a debate in your Lordships' House before too long. Noble Lords will recall that already some £40 million has gone into the maw of the Treasury, as a result of the exploitation and exploration of areas of Scotland which have been allotted to various oil companies. But great opportunities have been missed. Nothing is said, for example, about these companies having an oblige- tion to put up a refinery. Indeed, the British Petroleum Company, having said originally that it would do just that, has said now that the enlargement of the refinery at Grangemouth will be indefinitely delayed. I think it was at some time this summer that the Prime Minister said that now we will be able to turn our attention to this sort of thing and ensure that Scotland and Scottish industry got their share of the benefits from the oil. I have two feelings about that. One is that if we are not careful it is going to be too little and too late; the other is again this question of fairness. I do not think the country as a whole is being fair to Scotland in relation to this.

I hope that I have given your Lordships enough examples of what is worrying me. These are subjects which want airing; they want wide debate and they are not things that we can constantly talk about in your Lordships' House and even if we were willing to do so, the Whips would not give us the time. So I come back to my plea. The noble Earl the Leader of the House earlier to-day, in relation to the tripartite talks, said that the talking had to stop. My plea is quite a different one. My plea is that the Government should let the talking begin in Scotland; that we should be allowed an Assembly where we can air these subjects which are of immense importance to us; and if they are of importance to us and help us to become strong and gain a new spirit, that strength and that new spirit will be of benefit to the United Kingdom as a whole.

4.22 p.m.

LORD BALOGH

My Lords, it is a pleasure to follow the noble Earl, Lord Perth, with whom I worked before the war and afterwards; on the last occasion in Malta, in the most unfavourable circumstances but always urbanely. I am rising to support the Amendment to the Motion for an humble Address in reply to the gracious Speech and I wish to congratulate my noble friend Lord Beswick both on his speech and on his happy return to the House. I should also like to congratulate the noble Lord, Lord Blake, whom I do not see in his place this afternoon, on the urbane wit which we all know so well from Oxford and which he has extended to us here. In this context I also must thank that other very urbane speaker, the noble Earl the Leader of the House, who, in what I take to be a compliment to my sagacity, suggested that I do not deplore members of my university being in this House. I agree. Nor would I regard Oxford as a very backward place, despite the great efforts of the noble Lord, Lord Franks, to reduce it to the professorial oligarchy which is thought so modern in the other university and in the Provinces. Perhaps the best proof that Oxford is a forward-looking university is the fact that there has been conferred upon me the title of Reader—probably in the hope that I would read rather than write. May I also say that the noble Earl has discharged his task, his very distasteful task, in an admirable and, if I may say so, a distinguished way? I hope that my praise will not count against him in high places.

As I look at the Front Benches opposite—but much more so when I look over the balcony in another place—I am reminded, doubtless as a result of Lord Blake's speech, of Disraeli's description of the Cabinet at the time of the Crimean War as a "row of extinct volcanoes". No such picturesque simile comes to my mind—particularly in regard to the Lower House. They look to me like hencoops rotting with the corpses of the chickens that have come home to roost. I am sorry that I must take exception to the epithets of the noble Viscount, Lord Amory. If he uses epithets, I must say that the Conservatives have come to a pretty pass. He calls us "vulgarly vituperative". I presume that his epithets are urbane objectivity.

VISCOUNT AMORY

My Lords, I did not use the word "vulgarly". I used the words "genially vituperative".

LORD BALOGH

I beg the noble Viscount's pardon. I thought I heard it distinctly—not in connection with my noble friend Lord Beswick, but in connection with the Party as such.

I must say that I cannot recall a Government since that of Peel who have reversed themselves so often, on so many issues, so blatantly. The noble Viscount, Lord Amory, may call that objective realism. But what did he call Mr. Wilson when he, for instance, changed his view—if he changed his view—on Europe?

VISCOUNT AMORY

My Lords, in general I welcomed changes of view by Mr. Wilson when he was Prime Minister. I always hoped that they might be a change for the better. But sometimes one heard that, on the contrary, they were changes for the worse.

LORD BALOGH

My lords, the noble Viscount is again showing his objectivity in judging the two Parties. I must recall that we have time and again debated this issue and that time and again, in the end boring myself, particularly, by saying over and over again that a consensus is needed. Now we are told that a consensus is needed from the other side. But have we had any sign that the nature of the consensus, the sources of the consensus, have been investigated by the other side and have been acted upon? I submit that nothing of the sort has happened.

I think it would be a good idea to hark back a little—not very far; I do not wish to devote myself too much to the past—to the point at which this Government took over. It is not true that at that time the country was in a deplorable state. We had an increasing balance-of-payments surplus and a decreasing unemployment problem; and while I disagreed with the last Budget of Mr. Jenkins and I advised him at that point to be much more expansive than he actually was, nevertheless, it was an expansionary Budget and one could assume that more expansionary Budgets were to follow. In this context I must deal with the "5 per cent." which is thrown around by the Government. It can mean two things. One meaning is that it is a 5 per cent. increase in the standard of life since the inception of this Government. But it is very difficult to say exactly what the "5 per cent. means. If it means that some of the rich had got very much richer and that the poor got poorer, that, too, is "5 per cent." I and Mr. Rockefeller, on the average, have become more of millionaires lately; but I did not benefit by the process. Secondly, we can mean by the 5 per cent." that at the moment there is an increase in the national income of 5 per cent. per annum. I do not know whether the noble Earl has used it in this particular sense; and, supposing that he has so used it, perhaps the noble and learned Lord who sits on the Woolsack (and who is so adept at handling statistics and past events) will give us an answer when the time comes for him to be vituperative about us poor chaps on this side.

If a per annum increase of 5 per cent. is to be the rate, then that is a very different matter indeed, because it simply means that because of the Government's original deflationary policy we were operating with a 15 per cent. unemployed capacity in this country. Of course we can expect an increased per annum rate of 5 per cent. if we are operating with an unemployment rate of 15 per cent., taking labour and capital together. However, can that expansion rate be sustained? The answer is, of course, "No", and the clearest indication of that can be derived from the fact that investment is still falling. In other words, we are not expanding our capacities in any way which is appropriate.

In a very uncharacteristic show of naïvete, the noble Earl said that he had received his information from on high viaa model. Perhaps it was some new electronic type of model. I have become a little tired of these models, especially if they come from the Treasury, because they are usually wrong.

LORD DIAMOND

My Lords, may I remind my noble friend that in the Treasury we have the most delightful models?

LORD BALOGH

Female ones? I do not find the male models so delightful. I suppose it all depend's on one's taste. We have at this time a deficit which is unparalleled. It is of course easy to reduce taxation in the Budget and retain expenditure if one is running a deficit, but in the long run—I am far from being a mathematical economist; I do not know sufficient mathematics to enable me to be one—it can only result in difficulty. I do not attribute any exact parallelisms to increases in expenditure or deficits, and inflationary pressure, except to record that at the moment we are in a situation which cannot be sustained for long.

Throughout the brave struggle of the Labour Government to sustain themselves and cure the deficit in the foreign balance—I am not at present talking about the home balance—we had to free resources for non-consumption purposes, and we succeeded in so doing. Through- out that painful process of readjustment the Tories continually encouraged the trade unions to make greater wage demands. Indeed, they encouraged everyone not to obey but to do the very opposite. What would they say if we did the same? Consider the Tories' Manifesto. I am not talking about the sort of unofficial statements that were made by one of my fellow economists about doing something at a stroke, and endorsed by the Prime Minister. Their Manifesto said: …reject the detailed intervention of Socialism which usurps the functions of management and seeks to dictate prices and earnings in industry. We much prefer a system of general pressures, creating an economic climate which favours, and rewards, enterprise and efficiency. Our aim is to identify and remove obstacles that prevent effective competition and restrict initiative. This is presumably why we have had the biggest batch of mergers.

At the General Election voters were given to understand that decisions about wages would no longer come from the Government. Accordingly, a general deflationery monetary policy was instituted together with fiscal provisions benefiting mainly the upper classes. The poorer sections were penalised by, for example, loss of social services and increased costs for school meals, Health Service charges, railways and virtually all public sector prices. Because of increased indirect taxes, the poorest sections of the community were hit the hardest and once more we had a little taste of the 19th century. When unemployment rose, that was the complete reverse of what had been promised. Despite their failures, the Tory Government were twice helped by appreciations of the mark, which we did not have, and then they floated the pound. However, this gave a further turn to the inflationary spiral. In exact imitation of the American Government, we first had a conference to try to agree to a voluntary package, but now we are about to have a freeze.

My Lords, I do not know what the Government have in mind—the noble Earl did not give us any such details—for the second phase, for how long it is to run and how it will be linked to the first phase. Certain of the interim measures, as explained in the White Paper and the provisional draft of the Bill, are very ominous, because a freeze is rarely taken to be a suspension of previous collective bargaining. In other words, e will go back to the pre-freeze situation in the second stage and begin from there. The one thing we should have learned is that the problem of inflation is not a temporary aberration of a normal working system. It is due to a profound structural change in the economic system which, no matter what we say, will not go away. It may go away in Germany and Japan, but they have a social and political system which is very different from ours. On the whole, I prefer our political system, even to the extent of having this problem of inflation, because our system is good, and to that extent I absolutely agree with the noble Earl. It is a good system so long as we do not try to imitate others.

It is the rise of giant firms and very strong unions, with the giant firms dominating the market, which has caused this situation, for competition will not be reintroduced or again enforced on to the economy by any measure which we can contemplate. It is impossible to re-start competition. The Americans have been at it for more than sixty years. Indeed, one can go back to the Cleveland legislation of 1888 and say that they have been at it for nearly a century. Have they been successful? Not at all. On the other hand, have they been successful in creating an effectively working economic and industrial system? The answer is, "Yes, supremely so." Thus, this whole first-year student talk from the Prime Minister about re-starting competition—that competition is in some way the biggest guarantee of our prosperity and so on—should be swallowed as all the others have been swallowed, and very quickly at that. I think that we must begin to envisage some sort of mechanism by which increases in productivity of the national economy, and increases in incomes are linked together. This must be done institutionally; it must be done for the long run, and it cannot be done by juggling with the market. I am sure that the noble Baroness, Lady Seear, will not agree with me, but she is in one of the institutions which have gone wrong, having been founded by the Webbs.

In this context, I must ask the noble Earl whether it is sensible in the present circumstances, and before we have settled this issue, to go into the Common Market. The Prime Minister yesterday, in a very brusque statement, said that lie is not going to repeal the European Communities Act; and after what it has cost him to get it through, I can quite see his point. But is it sensible? Is it sensible to match British amateurs against the heavyweights of the French Civil Service? Is it sensible to undertake binding arrangements for monetary unification at a time when we could not face a much looser understanding with the Common Market countries?

No doubt the practical pack age that we have been given is a much better policy than there has been before; but in the present situation, can the consensus which is necessary to this be found? I submit to the noble Earl and to your Lordships that it cannot. What has happened is that we have had the conscious redistribution of the income away from the middle and lower income classes towards the higher income classes. When this was insufficient, we had a number of monetary and fiscal measures that encouraged speculation and created the amounts of money which were necessary for speculation. Hence, we had this enormous boom in houses and land and the enormous boom, which has at last collapsed, in the price of securities.

I venture to submit that the fiat, the dictat, of the Prime Minister, who excludes certain important questions which could determine the distribution of the national income between the various classes—taxation and social services, for instance—from the discusion between the trade unions and the Government is unjustified and unjustifiable. I very much hope that when the time comes that this Government have further represented, or another and better Government has replaced this Government (as I sincerely hope it will), we shall get an incomes policy. I hope that when a real consensus has been established we shall have heard the last of the inane suggestion by some of my friends in the other place that wages have nothing to do with prices. I am not one of those people who do not want to have an incomes policy. I have been in favour of an incomes policy since 1943 when it first dawned on me that free collective bargaining full employment are incompatible. I very much hope that the trade unions will see that unless they agree, and name the price of the basis on which they agree, they will suffer from the revulsion of the British electorate, just as they suffered in 1970. But only a broadly balanced programme, including tax and social services reform, can have a chance of success. We need a return to the policies of moderation, conciliation, compassion and understanding which made this country much the most attractive largish community in the industrialised world. Despite the noble Earl's assurances—and I take him to be as sincere as I am—I cannot accept that Mr. Heath's policy package meets that criterion of compassion and decency.

4.46 p.m.

LORD MOLSON

My Lords, there was a sentence in the speech of my noble friend Lord Colville of Culross when he opened the debate last Thursday which I hope indicates that an omission from the Queen's Speech does not necessarily mean a serious omission from the Government's programme of legislation. He said that picketing is much in the minds of the Government and the law here is under review, though it seems to us that the problem is largely one of enforcement and the effective deployment of the police."—(OFFICIAL REPORT, 2 /11 /72; col. 158.) I think that that sentence sets out the position more clearly than was done by Mr. Maurice Macmillan in his speech at Blackpool last month. Peaceful picketing is legal, and of course must remain legal. But what is essential is that there should be a much clearer and more easily enforceable definition of what in fact is peaceful picketing.

The Industrial Relations Act 1971 made no change in the definition of peaceful picketing. It virtually re-enacted the law as it then was: …Where one or more persons in contemplation or furtherance of an industrial dispute attend at or near—

1. (a) a place where a person works or carries on business, or
2. (b) any other place where a person happens to be …and do so only for the purpose of peacefully obtaining information from him or peacefully communicating information to him or peacefully persuading him to work or not to work."

That, I think, is an admirable definition of what is and ought to be the law.

Of course, what is very difficult, and what is extremely unsatisfactory at the present time, is the definition of the intimidation which makes the picketing cease to be peaceful. If I may quote from the Act of 1927, it is to cause in the mind of a person reasonable apprehension of injury to him. That is a subjective test: it depends upon what is in the mind of an individual. It is immensely difficult for the police to know when a situation arises which is going to create apprehension in the mind of an individual; and it is more difficult to reconstruct the position in court weeks or months afterwards. It may be that no menacing words were used by the picket; it may be that no words were used at all. But if the picket consisted of a large number of men scowling and looking threatening, that undoubtedly would be a form of intimidation.

Surely, my Lords, what is needed is a perfectly simple test of numbers that would exclude the defence that it was peaceful picketing. It would be sufficient for three men to carry out the task of peacefully obtaining information or peacefully communicating information or peacefully persuading another to work or not to work. In the Trade Disputes and Trade Unions Act, 1927. "intimidation" was defined in this way in Section 3(1): …it is unlawful for one or more persons …to attend …if they so attend in such numbers or otherwise in such manner as to be calculated to intimidate any person in that house or place, or to obstruct the approach thereto or egress therefrom ". When I see my noble and learned friend on the Woolsack, I produce an argumentum ad Dominum.That Act was very largely drafted under the influence of his distinguished and learned father and predecessor upon the Woolsack.

My proposal that no picket exceeding three in number could be deemed peaceful would have the great merit of simplicity. Instead of the test being what is supposed to happen in the mind of some individual, it would be established by the fact of numbers—numbers which could be proved by two or three truthful witnesses and of which evidence could be obtained by a camera. It was undoubtedly unlawful for coachloads of miners and dockers to drive about the country during the recent strikes and to obstruct workers at electrical power stations or docks which were not on strike. That in fact is a modern version of the marauding bands wandering over the countryside which the mediaeval chroniclers describe to us as characteristic of the state of the country during the reign of Stephen and other weak rulers. I am not proposing any change in the substantive law as it is at the present time, but I do say it is essential that there should be a simplification of proof.

I am sure it is also desirable that the Government should alter the existing law and practice so that strikers' families cannot in future receive such lavish payments from the Department of Health and Social Security that the father of the family when on strike can live at home in comfort. And these allowances, it seems, are not confined to the family. Apparently a striker can himself obtain supplementary benefit if he can prove severe hardship. It appears that the Social Security Act 1971, which was intended to curb subsidies to strikers, has failed in its purpose. Some trade unions are now not paying strike pay at all, because the effect is to reduce by almost an equal amount social security payments that are being made. The whole of this situation was analysed in an article in the Economist on June 3 this year, and my noble friend Lord Orr-Ewing obtained some extremely revealing facts on this matter when he asked a Parliamentary Question here the month before last.

We hear much talk about avoiding confrontation. I certainly agree with my noble friend Lord Amory in that I do not think the Government can fairly be accused of having for its own sake sought confrontation with the trade unions. But if avoiding confrontation means the time-dishonoured practice of all Governments since the war, of giving way to wage demands rather than ever facing a strike, then I think the time has come when it is essential for that policy to be stopped. Lord Aldington's agreement to keep unemployed dockers on the books and to pay them £4,000 to retire, right up to the eve of their retirement and up to February 4, 1973, is in fact the worst retreat of all. In fact it was surrender to a protection racket.

It is essential to decide the question: who is to govern the country—the democratically elected Government or the trade unions? Throughout history there have been sectional interests who for a time dominated the Government, and each in turn was fought and defeated. There were the feudal barons; then there was a despotic monarchy; there were the great landowners in the 18th century and the industrialists of the 19th century. To-day our freedom is menaced by the great trade unions, and this challenge will have to be faced. I know that the Government have tried to stand, and have been defeated in several battles. But in the long run they will have to win the campaign. They can do that only if public opinion is behind them. I agree with my noble friend Lord Amory that the effect of the discussions and the package deal offered during the Downing Street talks will have had the effect of rallying public opinion in this country behind the Government. People are beginning to realise how seriously this country has fallen behind in its standard of living. We are now one of the poorest countries in Europe—poorer in gross product per head than any country of the Six, except Italy. We have a gross national product per head of £887, as compared with Germany's £1,467. Britain has long been "the sick man of Europe" and if that situation continues much longer it will result in financial, economic and ultimately social disaster.

4.58 p.m.

LORD BALFOUR OF INCHRYE

My Lords, we are debating this afternoon the Amendment by the noble Lord, the Leader of the Opposition, which is in fact a general condemnation of the policies of Her Majesty's Government over a wide field. Personally, I prefer the approach of the noble Lord, Lord Beswick. The noble Lord said that he had started a new Parliamentary year with a good resolution: the resolution was that he was going to give his political opponents credit for what they have done. The Amendment of the noble Lord, the Leader of the Opposition, deals with what he calls "mistaken policies of…housing". So total is his condemnation that I presume he is condemning steps which have been taken to relieve many council householders under the Housing Finance Act of a great proportion of their rents. I presume that in his condemnation of the "mistaken policy of taxation": he condemns also Her Majesty's Government's measures of talking millions of small tax- payers out of the zone of income tax. I suppose the noble Lord the Leader of the Opposition, in his general condemnation of industrial policy, condemns the rights of an individual against employers which have been given to him under the industrial disputes Act. I think the Leader of the Opposition, on reflection, would have done better to have referred to sections of the "mistaken policies of your Majesty's Government", and not been so wholesale in his general condemnation.

LORD SHACKLETON

My Lords, if I may interrupt the noble Lord since he keeps referring to me, may I say that if he listens to my speech in due course he will know exactly what I mean. If we made the following change to my Amendment in order to make it acceptable, putting in "those mistaken policies" instead of "the mistaken policies", then I hope he will vote with us to-morrow night.

LORD BALFOUR OF INCHRYE

No, not at all. If the noble Lord the Leader of the Opposition had referred to his dislike of certain sections of Her Majesty's Government's policy he would have been more effective, rather than making this wholesale condemnation. But that is to be accepted in a political Amendment, and the Amendment is really of little importance.

My Lords, we face a 90 or 160-day freeze. As other noble Lords have said in this debate, and as my noble friend the Leader of the House said, it is in effect a crude and coarse necessity, following the failure of the three-party talks between the trade unions, the C.B.I. and Her Majesty's Government, and it has been introduced, rightly, by the Government in the need for urgent action. Of course it is open to receive detailed criticism; but surely its purpose is to give time for a more permanent system for economic control in a growth era to be worked out between Her Majesty's Government, the trade unions and the C.B.I. I hope that more will be accomplished in the next 90 days than Mr. Wilson accomplished in his celebrated 100 days.

It seems to me that what is of importance is what comes next and how we use our breathing space. Who was responsible for the breakdown of the talks is of secondary importance compared to what comes next for the three parties. It is my hope—and I believe it is shared by millions in the country—that responsible men of every section will think and act with the ever-present thought that in the final event we all have to live together. With this in mind, surely the task of all concerned is to avoid any situation building up to a confrontation between the State and any one section of the community. My noble friend Lord Molson spoke of the possible necessity for a confrontation if the country were, as it were, held to ransom by any one section. There are those on the Right and those on the Left, extremists, who wish to provoke such a situation, or who feel that such a situation is inevitable. My noble friend Lord Molson used the expression that the issue is who governs the country, the elected Government or the trade unionists? I believe that situation must not be allowed to develop. Of course the country must be governed by the Government elected with a Parliamentary majority, and one cannot help regretting that some trade union leaders are playing the game of the destructive militant minority by saying that they will select which laws passed by Parliament they wish to obey.

Equal danger lies in some elements of the Right crying out for a trial of strength and an appeal to the country. There are whispers in and out of Parliament, in the Press and in public, of such a wish. If this happened I believe that Mr. Heath would be returned by a big majority; but to me it would be a very sad result. Such a situation would divide the country right down the middle; it would force good, honest, fine, loyal trade union members to take up positions in opposition to their real views. Both Front Benches know (and some of us who have had something to do with Government in the past know) that the worst thing in any negotiations is to make a situation where people have to take up positions. Very often it is the death knell of any negotiation. In supporting the unions, if there were such a confrontation, the members would be forced to go against all their instincts as law-abiding citizens; or, alternatively, they would be forced to betray their union beliefs and loyalties. Either way, the result would be gravely to injure the hopes of comradely progress in this country which I believe is absolutely essential for the future.

I have only one more point on which to touch. If we are to succeed in the battle against inflation, it is essential, as we know, that prices are kept down; and I believe that in the public utilities section which undertakes commercial trading we should do some heavy re-thinking, and do it early. If we can keep down the prices of the public services, it will go a good way towards wage restraint which at present is hindered by the constantly rising prices of existing public services. I suggest that we should admit now that some of these trading services which we pretend will one day be self balancing will never in fact be economic entities: the railways, the coal industry and London Transport.

We continue the farce—I say advisedly "the farce"—of trying to adhere to the Act which says that the accounts must be balanced taking one year with another. What happens? Each of these enterprises, having forced its prices to the consumers about as high as it can, builds up big deficits which periodically Parliament has to write off. These services are social requirements, and if prices to the public are put up too far, it only pushes up wage claims and again builds up deficits. I would advocate surrender of the self-balancing delusion for a grant—a subsidy. To some people "subsidy" is a dirty word; but we do this all the time in many directions. We call a particular railway line a social necessity, and we give it money. I believe that giving a subsidy is better than building up these deficits and then writing them off in a circularly expressive way, saying, "We have never given a subsidy, but, nevertheless, we will give them this grant of money."

Our present system carries with it constant industrial disputes. I am not in any way admitting a surrender to the public trading sector in the face of inflationary wage demands. Wage levels in the public sector must be kept in check and in line with the general wage levels in competitive industry by which this country gets its daily bread. Surely some trade union/C.B.I./Government permanent body might recommend to Parliament what grants-in-aid are appropriate to keep these socially needed services going, and the public section could then be accepted, including railways, coal, the Post Office, as social services; and this at no greater cost than to-day's system. Thus we might smooth out the public sector wage war. Finally, I believe that by such a means we might be taking a step towards the industrial peace for which we all so much wish.

5.10 p.m.

LORD DAVIES OF LEEK

My Lords, I have listened with interest to the winding up of the noble Lord and may I say that I heartily endorse this conversion on the other side of the House to the necessity to keep healthy and strong certain social services such as railways, steel and coal. Some of us were taught this at our grandfather's knee 40 or 50-odd years ago. I heartily endorse that. But I am not going to accept that our Amendment is in any way exaggerated. There is a purpose in it. All we are saying is that there are mistaken policies in housing, taxation and industrial relations. And we are not doing it bitterly. We can stand up and argue it and point to facts.

I do not know how many "red minutes" I am going to take—I am delighted that noble Lords are putting our minutes in red—but I hope, without boring the House, to speak for about 10 minutes to put across some points. Let me balance the debate so far. The noble Lord who has just sat down made a delightful little speech, but in it he eulogised the Government for what they had done by way of taxation for the workers. Let us have ten of the commandments of taxation. Mr. Barber's first two Budgets made a big redistribution of income—in favour of whom? When the Finance Act 1972 becomes a workable proposition next April we shall find that the structure of the tax, and the tax background in the Heath package, could be summarised thus: one, the standard rate of income tax has been reduced 2½p. in the £, which benefits high incomes more than others; two, earned income relief for high income has been increased; three, existing income tax and surtax is to be replaced next April by a new unified income tax which sweeps away the distinction between earned and unearned income for the first £2,000 of unearned income and will save surtax payers £300 million a year. It might help some of my noble friends on this side of the House who are earning a little more money than when they were cutting coal—some of them.

The children's investment programme is no longer taxed as if it were parents' income—that is a lovely little bit; I do not mind that—reversing one of the Labour Government's tax avoidance measures of 1969. I think my noble friend on the Front Bench will remember that. I believe he had a hand in thinking this out. Now tax relief for loan interest, abolished by Labour Government in 1969, has been restored. Now we have that marvellous manipulation of the Stock Exchange, share option schemes for company executives, stopped by the Labour Government in 1966, and again free of income tax. That is quite nice and fair because our Government and Mr. Heath's Government were hoping that they would invest their money in Britain. In a moment or two I will explain what has gone wrong with investments. Then death duty has been cut in both Budgets. Capital gains tax is no longer charged on death; it has been halved on unit trusts and investment trusts. The new corporation tax will be introduced next year and that will help some firms and companies. I hope—I will justify that one—that they will use it to build up their companies and make them strong. They will need to be strong because we are going very "wobbly" into the Common Market.

As to the profits tax, the 45 per cent. rate for luxury goods has been cut to 30 per cent. Now I am buying only one mink coat this year, but I will be delighted with this 15 per cent. drop in the tax from last year. As to value added tax, I hope that we shall have a debate on that. The French are raising 40 per cent. of their taxation by V.A.T. Value added tax will need 6,000 more civil servants to implement it. Value added tax will need nearly 2 million points of collection, as compared with the 65,000 points of collection for purchase tax. That is why we say that there are some mistaken policies. That criticism is very gentle.

When my mother sent me to church and chapel on Sundays she used to say to me very sweetly when I arrived home (once or twice I went birds-nesting instead of to Sunday school), "What was the text?" I have picked my text for to-day. It is from the great head of the country: The plain fact with which this country and the House are faced is that we are securing today "— and mark these words— the same production—in fact, slightly more—as two years ago, using 400,000 men fewer to do it. That is the axiom of modern technological society. That is a fact.

LORD ORR-EWING

And capital investment.

LORD DAVIES OF LEEK

I thought I heard somebody say, sotto voce, "Thank you". I do not know whether it was said to me.

LORD ORR-EWING

And capital investment, I added, my Lords; which has produced the extra productivity.

LORD DAVIES OF LEEK

My Lords, this is one of the factors that we have to learn to understand. I should be a pompous ass if I pretended that I knew all the answers to this problem. But on both sides of the House and throughout the country the C.B.I., the trade union movement and all of us must face the factor that we are no longer living in the barrel organ age despite the tunes the Tory Government are trying to sing. I will take the Wilsonian expression—this white-hot technological age. And it is moving more rapidly than men's ideas.

I want to bring out this point. I deprecate very much the impression that is created by newspapers, magazines and the oratorical arpeggios hurled at us by these television trivialities when they have debates on television. Some people with bow ties and others appear as though they are God come down from above to tell 50 million people how to govern themselves. We hear these trivialities as though strikes are something new. Let me give a fact. We lost 38 million days in strikes in 1912, when the average working week was 54 hours and the average wage was 12s. 0d. a week. At present we are told a new wench is travelling the streets of the world, including America: "Laura Norder," they call her. Everybody is harping about, "We must have law and order." You will not get law and order by increasing the number of prisons or increasing the num- ber of policemen. There has to be a change in human beings themselves. You cannot get a change in society unless you get a change in human beings. I am Marxian enough to know, despite my Celtic solidarity and religious fervour, that one of the ways by which you can change people's ideas is by getting them to believe in something creative. There must be something spiritual there. But man does not live merely on the spiritual things, either. He wants comfort and he needs succour and security. Of the seven corporal works of mercy, according to St. Matthew, one was to tend the sick—we mucked up the Health Service; the second was to feed the hungry—and there are probably 50,000 people in London with nowhere proper to sleep at the present moment; and the third was to give drink to the thirsty—some I know drink too much, but we will qualify that; the fourth to clothe the naked; the fifth to house the homeless—and our housing policy is hopeless: I will not say that it is the fault of any one Government because we have never tackled it properly since the war, and it is a vital problem; to visit the fatherless and afflicted and to bury the dead. The insurance one gets now for burying the dead pays only about a third of the price of the coffin. In other words, our ideas of subsidising and our ideas of progress in society are still back in the 1920s. We forget completely that humanity today is perhaps a little more arrogant but certainly more affluent. We had "yobboes" in my day. When we played rugby in Llanelli or went down to Cardiff my mother used to say, "Don't come home on the rugby train". We had "yobboes" then; but the difference between the "yobboes" of yesterday and the "yobboes" of to-day is that now they are affluent "yobboes". We were not affluent.

What do we do in this society? The trade union movement has the right to defend in this battle against the strong. There is a hidden thing going on. I have no time to develop the theory of mergers, but we see millions of pounds involved in mergers—and I could give facts and figures of the hundreds of mergers that have taken place; there were about 700 last year. People talk about the "oneness" and the drabness of a socialist society where everybody would have the same kind of beer and the same kind of car; but that is exactly what is happening under affluent, acquisitive capitalism. We now have multinational firms. "Ichabod, Ichabod!" somebody cried a moment ago. Where has the power of the House of Commons gone? Who govern us?—read your Bernard Shaw; Undershaft and company: he told you—the armament manufacturers. Who governs us to-day? International mergers. The 10,000 bureaucrats at Brussels will have a big say in the days to come. In other words, power in an economic society does not lie as completely in its political edifice called Parliament as it did in days past.

Our universities and such places had better start re-studying. The trouble with our Members of Parliament to-day is that they all look so damned alike. The universities are turning them out like test tubes and it is impossible to tell the difference between a Labour man and a Conservative. There is no originality. I mean it—there is no individuality of thought. Some of us who had to struggle for some kind of tinpot university education managed it, one way or another, in the days when £25 was considered to be a grant. We are losing much of the originality, the charisma. The charisma of Britain is being lost; the charisma of the British people is being lost because of this apotheosis of internationalism in the wrong way.

I remember the old days, and the Salvation Army—and, bless their hearts! they did a good job. But one can see the pathetic dilemma we get into if we get too spiritual. We lose all sense of practicality. I recall some words of dear old Catherine Booth, a relative of the famous Booth who has done such a lot for the Army and for everybody. The Salvation Army always picked the poorer parts of Wales in which to beat their drums and blow their trumpets; anyway, they got more money there than they did up with the pit managers. This is what Catherine Booth wrote in the War Cry on July 7, 1881, and I have heard speeches in this Chamber to-day that were nearly the same. Listen to Catherine speaking: Oh, how I see the emptiness and vanity of everything! Compared with the satisfaction of the soul what does it matter if a man dies in the workhouse? If he dies on the doorstep covered with wounds, like Lazarus, what does it matter if his soul is saved? This appeal to get an aetiolated trade union movement—this appeal to make the hands of the people lilywhite and soft—cannot succeed. We are living in a rugged society and we have to adjust our sights to the world in which we are living and not the world we are dreaming about. Therefore it has been proved that productivity can be achieved without an increase in employment. The lesson of 1931 was that unless we get the purchasing power we increase unemployment and increase misery.

Referring to the speech of the noble Lord who has just spoken, I am with him because I wonder whether somebody one day will make an economic analysis of how many thousands of millions of pounds of man's raw materials are wasted through traffic blocks in our cities? How many millions of gallons of petrol a year? It is time that something seriously was done throughout the cities of Britain to increase the efficiency of our transport. I would bring hack the electric trams. I am sure they would operate more economically in London than any other type of transport at the moment. It is tempting to make this speech longer, but that is a temptation I must resist. Consequently, I heartily endorse the Amendment to the gracious Speech moved by my noble friend on the Front Bench, and I hope that the Cross-Benchers and others will rally their souls and come into the Lobby with us, because we need them.

5.27 p.m.

LORD HAWKE

My Lords, I must first apologise for not having been here at the beginning of the debate, but there was an important debate and a vote on matters of Church and State at the Church Assembly which I felt bound to attend. I wish I could recognise the paradise for the better-off that the noble Lord has painted, but I have got to the stage of being rather like the oldest oyster: I can only wink my eye at Chancellors; and the only benefit I have received out of the various promises that have been forthcoming in the last few years is to pay surtax twice in one year and the redress of a small anomaly, which was most iniquitous, perpetrated by a Conservative Chancellor and his Financial Secretary, who both told me that they did not know they had done any such thing.

I do not often agree with the noble Lord, Lord Balogh, but I believe (from what I could hear of his words) that I agree with one or two of the sentiments that he expressed at the end of his speech. I personally never hoped for an agreement out of the last discussions. I felt that the extreme elements were bound to ask the impossible; they want to have their cake and to eat it. They really want a closed economy, with fixed prices for food and everything else, which would mean the Government's buying overseas, Government distribution, rationing and subsidies. They call it Socialism, but it is actually what we are in the habit of calling Communism in Russia. At the same time they are unwilling to face the other side of the coin, which is the concomitant of that; that is, the direction of labour and the prohibition of strikes, and, of course, concentration camps for black marketeers, speculators and strikers. What hope would there be of getting a Conservative Government—or even a Labour Government which depended on votes of the middle spectrum of the electorate—to adopt such a policy? Therefore I believe that the talks were doomed to failure, and I do not believe that the participants expected anything else.

So we move to the only alternative, which is a temporary freeze. This will provide time for the Government to get something better and to do some hard thinking. I personally have always been of the opinion that this country can be governed only on the principle of the middle way. This was rather derided at one time under the name of Butskellism, but on the whole it has worked better than extremes of the other kind. The other day I was reading the book written by the noble Lord, Lord Butler, entitled The Art of the Possible, and it would not be a bad idea if Governments of both complexions retained him to lecture at times on the art of the possible to up-and-coming politicians. To my mind the freeze is inevitable and fair; but it only gives a breathing space, and so far I have not heard anything put forward by the Government which deals with some of the anomalies and abuses which have grown up in our economic life, particularly encouraged by the increase in the money supply and the ease of obtaining credit—something which I personally deplore. Instead of having the indiscriminate pumping of money into the economy in order to lower unemployment, I would much sooner have had heavy Government expenditure in those areas of the country where unemployment is rife, and the purchase of heavy goods by Government for the Armed Forces and for some of our developing countries overseas, to provide direct aid where it is really wanted, in the North-East, in Scotland, and so on.

It is rather sad that the most paying business in Britain to-day is moneylending. It started as hire-purchase, with people borrowing at about 7 per cent. or 8 per cent. and lending at 15 per cent. The banks have now come in on the game, not with the old-fashioned overdraft which a benign, or perhaps rather severe, bank manager allowed people to have at perhaps 2 per cent. over the bank rate; but with new "go-go" ideas—"buy what you want and repay when you can"; by borrowing very cheaply, presumably, the money I have in my credit account, and lending it out at rates which, if my arithmetic is right, would appear to be 15 per cent. per annum; and by encouraging people to live beyond their means, thus exciting envy in all their neighbours who do not have access to those particular forms of credit.

All the astute and wideawake young men in the country have been buying houses and other assets as fast as they can on borrowed money, the interest on which they charge against their tax, and in many cases they are able to sell in a very short time at a substantial profit. The disposal of land is a particularly scandalous affair in the eyes of many good Conservatives. In my part of the world there are a number of people who have been able to sell small pieces of land, small farms, for anything between a quarter of a million pounds and £2 million at, roughly speaking, 100 times their agricultural value. I am told that if they buy other farming land they can escape any tax on the gain. But, of course, the houses that are to be built on that land will be very expensive indeed and will be millstones round the necks of the people who will eventually buy them.

The noble Lord, Lord Nunburnholme, in an earlier debate drew attention to the anachronism connected with estate duties on agricultural land. At the moment there is a great land hunger in this country. Land hunger in other countries throughout the world has been the mainspring of almost every revolution that has taken place. I do not say that we are going as far as that, but where you get an increasing and more prosperous population, people who want to buy land do not see why it should be treated for estate duty purposes and so on in any other way than perhaps the businesses that they themselves have formed and built up.

One noble Lord mentioned the point that we cannot take up the paper nowadays without reading of takeovers and mergers, very often by asset strippers who propose to sell off bits and pieces of businesses, thus throwing out of work many old servants who are perhaps not of an age which makes it easy to obtain any other employment. In fact, a financial correspondent in one of the respectable Sunday papers last Sunday rather shocked me by seeking to justify dealings in company shares by directors and employees who had inside information. All that is new in the last twenty years. It is most unedifying in the eyes of those people who are dependent on salaries and wages for their daily bread. If they are to be curbed they feel that such things should also be done with restraint or else be restrained. I believe that the Government can do something about these things in the two or three months' breathing space which they have. It is much easier to do these things than it is, for instance, to control food prices, which in the end must entail rationing. For years and years we have had a general wail about food prices, but we must face up to the fact that the more prosperous people are, the better quality of food they are going to eat, and that applies all over Europe and America.

I wonder how far two misconceptions are prevalent. First, does the Treasury really know of, and take into account, the fact that 30 per cent. of every wage or salary increase goes straight into their pocket, together with some small modicum towards national insurance? Secondly, I wonder to what extent wives are being kept in ignorance by their husbands of their wage and salary rises. This unsocial habit by males against females was, I know, very prevalent after the war. We cannot do much to interfere between husband and wife. But I think that the Chancellor should revert to the old system whereby the full rate of income tax did not start in one lump, but went up in steps. That would mitigate the anomalies that arise when a man gets an increase in pay. Of course, when we talk about pay, et cetera, we should publicise the average earnings. To talk about basis rates is absolutely meaningless and does nothing except to provide a basis for escalating earnings and sob stuff for stories.

I find unemployment very difficult to understand, because in a great many parts of England at any rate it seems to be absolutely impossible to get anything done by any man with any skill at all. I read in the paper to-day that people are having to pay bricklayers £125 a week in Yorkshire because there are no bricklayers, and yet we hear those figures of 800,000 or so unemployed. I freely admit, of course, that there are parts of England which are particularly dependant on the heavy industries and where perhaps the products have been oversupplied, for instance in the heavy electrical industry where the Generating Board rather over-ordered a number of years ago, and in some industries like ball-bearings and motorcycles which foreign competition has put out of work; but in the Home Counties there still seems to be a shortage of people who can do a decent job.

Are we doing enough about training? Last time I heard anything in this House about training it seemed to me that the number of places available was woefully small compared with what I should imagine would have been the number of potential candidates. Then again, if one studies the police court news one finds that so much crime is committed by defendants who are youths and unemployed. Why is there no method of popping these youths into some sort of training, so that they can learn a trade instead of hanging about and becoming criminals? There is no question that there are grave shortages of many categories. I instance only one or two that I know about: drivers of heavy goods vehicles, for instance; building operatives, garage mechanics, and service mechanics for all this machinery that people are installing in their houses nowadays. We simply cannot afford unskilled unemployment if we can obviate it by training. It seems to me that in some cases, among youths particularly, unemployment could be an opportunity to learn a trade.

I hope sincerely that there will be no confrontation between the Government and organised labour; and there ought not to be. But we must not forget that in the background there are men in the Kremlin who are terrified of a united Europe, and to them the best chance of frustrating a united Europe would be to make Britain ungovernable before January 1. They have much influence in some quarters, so we must be on our guard.

5.42 p.m.

BARONESS SEEAR

My Lords, over the past twenty years the official formal industrial relations system in this country has seemed increasingly a ritual dance. Honourable men on both sides of the negotiating table have, year after year, intoned and genuflected their way through a piece of play acting increasingly drained of any real meaning. Most of the speakers this afternoon have been, rightly no doubt, lamenting many aspects of our present situation, but I wish to suggest that in fact we are now presented with a very considerable and long overdue opportunity. There may not be any consensus about the precise policy that we ought to adopt, but I believe there is a consensus that the machinery which we have been using for many a year now for dealing with our problems of industrial relations, the settlement of problems of pay and the many issues related to pay, will not do. We have now, as I see it, an opportunity to break the old idols, to burn the dogmas and to build new institutions, institutions better matched to the facts, to the need, to the values of the 1970s; and institutions which will, perhaps above all else, see that there is a proper balance between power and responsibility. For, my Lords, one of our basic problems to-day is that there is power in plenty without responsibility and responsibility in plenty without power.

Let us look for a moment at some of the dogmas which need to be destroyed. There is the dogma that the problems of pay can be settled at the centre, either by Governments or by industry-wide negotiations handled by the employers and by the trade unions at the centre. Now I agree that in this situation of last resort in which we find ourselves it is essential that the Government should decide what is to be done, and very reluctantly I agree that for a period we need to have a freeze. But let us not mislead ourselves. As we move away from the situation of last resort and as the country becomes more dynamic, as it must and will, control in detail from the centre, be it by the Government or by the employers and the trade unions on an industry-wide basis, will increasingly become less and less effective. It has happened in the past with every attempt at central control of the details of the working of the pay system, and it will surely happen again.

The second dogma is the belief that it is only the employers and the trade unions who are concerned with the settlement of pay disputes. It has surely by now become totally apparent that there are other vital issues which need to be heard when the settlement of industrial relations questions is being entered into. There are indeed the ill-organised and low paid; there are the consumers; there are the taxpayers. All these are vitally concerned with pay questions which, in our tradition, are exclusively the affair of the employers and the trade unions.

Then there is the third dogma, dearly beloved perhaps of some Members of this House, that the problem of pay is a battle between the profit seeking employer and the wage increase seeking employee. In fact, of course, to-day the problem of the sharing out of the surplus is a twofold one; it is the problem of designing how much should go to investment and how much should go to consumption on the one hand, and, on the other, the problem of deciding the differentials between different groups of employees. It is a fact that if all the distributed profits after tax to-day were transferred to pay, the result would be a 15 per cent. increase in pay once for all; after that had been done, in ensuing years all there would be to share out would be the product of extra production and extra productivity. That is the measure of the extent to which the pay dispute has become a dispute between different groups of employees, and the sooner this fact is absorbed and appreciated in our discussions on pay the nearer shall we be to the control of inflation and industrial peace.

Then there is the dogma that pay is primarily a matter of maintaining differentials. Pay should surely be determined, at any rate to some extent, by equating what we put into the common pot with what we take out. That cannot be the only consideration, but at the end of the day if it is not a major consideration there is nothing left to take out. If we applied that principle we should find some surprising results at both ends of the pay scale and all along the line; some would get more and some would get less, from top to bottom and from bottom to top.

Then there is the dogma of the right to work. In a modern society the right to work, be it for employers, be it for professionals, be it for wage earners, cannot mean the right to go on doing the job or producing the commodity that we have always done or produced, simply because we have always done it. It can only mean—and this is a far more adventurous and, indeed, in the short run a far more expensive interpretation—the right to be trained, to be given the opportunity to contribute to the work that needs to be done. However, that is a doctrine of mobility, and an expensive doctrine.

I believe that these are the dogmas that we must destroy and the propositions that we must put in their place. If we are to do this, then indeed we need new institutions. I have said that I do not believe that pay can indefinitely be settled from the centre, but I believe profoundly that pay can only be settled in the long run, and in the not-so-long run, on a basis of consent. What we surely need is not to abandon this belated attempt at a tripartite settlement, or to turn away from the Prime Minister's recognition at last that it is wise to go to the people who have the power to make the decisions. We need a tripartite national council of unions, employers, and Government, representing all the likely interests; a permanent standing council, though not of course in permanent session. We need an extension larger in scale and wider in range than the "Neddy" which has served us in its own way not too badly over the last decade. We need a body in which matters of not only pay but fringe benefits and social policies—which, as many noble Lords on this side of the House have mentioned to-day, are all related—can be discussed and threshed out, and the arguments that have to be gone through take place between these vitally interested groups. The task would be a task of confrontation with the facts, of communication and of commendation, both to the Government as to what policy should be, and down the line to the many people at many levels who will in fact make the decisive decisions about what goes at the end of the day, at the end of the week, into people's pay packets.

I do not believe—and, speaking from the Liberal Benches, how could I?—that such a tripartite council is the beginning of the corporate State. Of course Parliament will retain the ultimate responsibility, as it must; but these are matters on which the three groups must be in continuous contact, must be seen to be in continuous contact, and where those who have so much power must be forced, by the strength of argument, to face the consequences of the recommendations that they make. One of the things which I should like to see such a council consider is how wealth can be spread more widely, how the ownership of capital can be spread more widely. There are many items on the agenda for such a body.

The next institution is one with which we are familiar: it is the accustomed industry-wide bargaining table. This must be kept, though I think it must to some extent be contained within new bounds. There is a monopoly in wage bargaining, and it would be desirable that this should be examined, and the way in which it can be checked considered. But there are things which still must be settled on the basis of the industry as a whole and which can only be settled at that level.

The third institution is the need, long overdue, to recognise the power that exists both in the boards of companies and on the factory floor at the level of the plant. Our future European partners are far ahead of us in institutionalising the realities of power at the level of the company and the plant. We have said it before and we shall say it again: we need now a Works Council Act which will give real authority to the representatives of labour at the level of the plant in determining what happens in that plant. Of course this is not the only group that must have a voice, but at present one of the roots of our troubles is that there is power there but no responsibility. There is no institution through which that power can be expressed in an organised way. Germany has given us an example, Norway has given us an example, and indeed throughout Europe there are exciting and interesting experiments and experiences on which we can draw. I beg the Government in the 90 days that lie ahead to use this time to forge these new and long needed institutions.

5.56 p.m.

LORD ORR-EWING

My Lords, I must add my apologies to my noble friend in that I was not here for the opening speeches. I think that it is the first time that I have ever shown that discourtesy in this House, but I had a pressing industrial commitment which I was obliged to keep. I wanted to cover three points on the Motion which the Opposition have put down where they censure the Government on tax, and I should like to deal with that first. I was not intending to cover this until the noble Lord, Lord Davies of Leek, with his Celtic rush of expression, stimulated me into dealing with it. I only wish that the Welsh forwards had shown the same approach to the All Blacks last Saturday, and there would not have been a defeat of the size that they suffered.

Of course if you reduce tax by as much as £3,000 million in two years you necessarily help those who pay tax. To make it up, the Government have, in the last two years—and I have the figures—benefited the single pensioner by 34 per cent. That is the way it is corrected. But the Government were elected to reduce tax, and even to-day, after these very substantial reductions, other industrial countries with whom we have to compete still treat their pace-setters, the leaders of their industries and their nationalised industries, more generously in respect of taxation than we do here. We hit the top tax rate with the limit now of about 75 per cent., but that is reached at a relatively low level compared with what happens in Sweden, Germany, France and many other countries. So necessarily those who pay tax benefit. We recognise that.

The Economist of October 18 published what I thought was a most interesting article when it listed just who had benefited most from pay increases in the last two years. It pointed out that it was the strikers who had done immeasurably best. The electricity supply workers, even before the most recent award, which they scraped in under the wire, had had a 40 per cent. increase in earnings out of pay awards in the last two years. The next best were the Ford workers, but the motor industry is really exceptional in that they have a negotiating strength which I think is unique, and they have had something like 38 per cent. in two years. Then we come to the miners with 30 per cent., the council workers with 28 per cent., the dockers with 26 per cent., and the train drivers with 22 per cent. Noble Lords will know that all those save the Ford workers are in the nationalised industries. Therefore the accusation which is sometimes made that the Government have, during their period, kept down the rewards in the nationalised industries and allowed private industry to pay larger increases, does not make very much sense. It is not justified by the figures I have quoted. The closer you look at it, the more you will see that many industrial firms have not been able to pay wage increases of this sort.

If one looks down the list one finds that the non-strikers have not done nearly so well, but it is pleasurable to see that the single pensioners and other pensioners have been compensated and have had increases. The other point one can make is that a firm—I think it is called Consolidated Industrial Consultants—has done an analysis of comparable rises in salaries in the same period of two years, and these come to something like 20 per cent. So a salaried person, in real terms, is only 3 per cent. better off today than he was at the start of this Government.

I want now to deal not only with taxation, but with industrial relations, prices and the freeze. The White Paper, A Programme for Controlling Inflation: The First Stage, was laid before both Houses yesterday. I am not perhaps Mr. Wilson's greatest admirer, nor do I quote him very often, but I have always felt that his remark, "One man's wage rise is another man's price rise" is very apt and should be written over every workshop and every counter to-day. I thought that the Government were right in giving priority to three pieces of legislation. First, they carried on with the E.E.C. measures which noble Lords opposite started in their period of Government. This was natural and this was our whole concept. Just a year ago, your Lordships' House gave very substantial support to it, when I believe the vote was 559 in favour and about 50 against. The Government also introduced the Industrial Relations Act, and I want to say something about that, as well as about the Housing Finance Bill, which again was in our Manifesto. I cannot believe that it is not true justice so to apportion subsidies that those who can afford it pay a reasonable rent for their houses, and those who cannot afford it receive more subsidy grants and aids. That is my measure of fairness and, whatever propaganda is put out about it, the Act to bring about fair rents is, to my mind, a reasonable approach to the subject.

The Industrial Relations Act was, in my view, a correct, if difficult measure. Every industrial country with which we have to compete has some sort of industrial relations legislation. Understandably, this Government tried to get the best ideas from abroad as well as the best ideas from within this country. It is unfortunate that the official Labour Opposition in the Commons did not feel able to co-operate in making that legislation better, because if we had had constructive criticism from that side it might have been better. For I concede, a; I think do most people, that there are amendments which need to be made. But I do not think it is generally realised how the Industrial Relations Act bites on the recognition of trade unions in small firms, and how it gives extra power to the trade unions. It is unfortunate that this aspect of the Act has not received more publicity and more accord. Certainly there, are very large numbers of firms which have not previously recognised trade unions but which under the Act have to recognise them and I am associated with one or two of them. As I said, every industrialised country has some industrial relations legislation on its books and we were right to up-date our own legislation. I am only sorry that we did not on that occasion have support from the official Opposition.

As my noble friend Lord Hawke said, we should have had more co-operation if the Left Wing within the Labour Party, and in the country at large, had not tried to disrupt and black this Act. One of the objects of the Industrial Relations Act was to give more power to the union leadership over its militant minority, but that result has certainly not come about. I believe that in a democratic society, as in the E.T.U., it may be necessary to have some law which makes it impossible for people who are avowedly anti-democratic, such as the Communists, to stand for high office. At one point some members of the E.T.U. were taken to court for rigging a ballot and for adjusting funds. If we had introduced an Industrial Relations Act at that moment we should have had more of the country behind us. I have also to point out that it is surely not haphazard that in many cases our industrial relations are difficult at a time when our two biggest and most powerful unions, the Transport and General Workers, and the Engineers, are led respectively by Mr. Jack Jones, who has been a Communist, and by Mr. Scanlon, who is an avowed Communist. I am sure that this is not just coincidental. I also believe that the militants have come to power, both in local and in national union affairs, as an indirect result of the stagnation and deflation which this country experienced in the years from 1966 to 1969. I hope very much that if we can get back to orderly growth—and "growth" is the dominant word—the more moderate elements in the trade unions will come back into the leadership, as is indeed already happening in some unions.

I now come to the question of prices. There was much criticism in the Commons because the Prime Minister had changed his mind about prices. I reflect that when I sat in that House, as noble Lords opposite will remember, Sir Winston Churchill used a lovely phrase when that accusation was thrown at him. He said: The processes of my mind constantly adjust themselves to the movement of outside events. That was a delightful way of explaining why he changed his mind. But I should have been much more worried if to-day's Prime Minister had not changed his mind as a result of the raging inflation and the quite outlandish pay claims which are now being put forward. But even if we had had an agreement it is very doubtful whether the T.U.C. would have been able to honour it. This is where I share doubts with other noble Lords. At a board meeting which I attended this morning it was reported that one element of hourly-paid workers in an engineering firm with which I am concerned signed a very solemn agreement in May of this year, that they would take a pay rise of something exceeding £2 a week, with extra fringe benefits, but that now, six months later, they have asked for an increase of £8 a week, although the agreement was to last for one year. So although an agreement might have been signed, the T.U.C. might have been unable to bring home the bacon.

I happen to believe, like the noble Baroness, Lady Seear, that these tripartite talks should go on. But, unlike her, I do not see anything unconstitutional in them, because if the T.U.C., the C.B.I., and the Government continue discussions, any proposals will come before Parliament if legislation is needed. If any major measures are agreed, they will come to be discussed in both Houses. So why not continue these discussions and, perhaps, do away with some of the suspicions which still exist on the two sides? It may be found by talking that there is some common ground, and if there is some common ground it can be only to the benefit of our country as a whole.

Any Government, irrespective of colour, has three very big responsibilities. The first is to protect the economy and the value of the pound; the second is to expand production so that from expanded production wealth can be spread throughout the nation; and the third is to represent not only the 9 million trade unionists, but the 45 million other people who live in our country and who may not be so well represented by their associations or professions. One has to remember that there are 23 million working people in this country, 9 million of whom are trade unionists, but at the last count 14 million were not tied to any trade union. So we are talking about a minority of the total population. Finally, I believe that in this House and in another place we have a duty to bring about a lowering of the temperature, and I was pleased to note that the noble Lord, Lord Beswick, was fairly moderate in his speech, except towards the end. I am sure that we need to inform the public with temperate discussions, although, for reasons which we all understand, the Commons may be less temperate in their discussions. The communications media have a tremendous obligation to the nation because, in the end, if we do not bring some orderly conduct into our negotiations, into the administration of our trade unions and into our economic life, we as a country shall sink below our competitors and our standard of living will go down and down.

6.10 p.m.

LORD MILFORD

My Lords, I think this Government are giving a false picture when, within all their speeches and through the mass media, they push that the cause of our inflation springs from the workers and high wages. They endeavour to put their difficulties and mistakes on to the shoulders of the workers. It is understandable; it is logical for the Tories. This Government came into power obsessed with the view that the trade unions were the great obstacle and the enemy in our midst.

Now I think one should examine lots of other causes of inflation. Could we not consider the following points. First of all, we must notice that inflation is rampant throughout the whole capitalist world, and that that has been so for over a quarter of a century. It is not only a British disease due to British mismanagement. It was also taking place here in Britain at the time of a wage freeze and during a period of full employment. Is not the high militarisation of the economy of the nations of the world causing a demand for commodities which do not exist in sufficient quantities? Is that not a cause of inflation, too? Are we not spending more on arms than a healthy economy can carry? Has not the Vietnam war, leading to the devaluation of the dollar, caused the export of inflation to that part of the capitalist world connected to the dollar? Have not high interest rates charged by banks and money-lending institutions led to capital being very expensive to come by, so preventing expansion and causing a shortage of commodities?

LORD ORR-EWING

My Lords, would the noble Lord allow me to interrupt him? On the point of defence, how does he square his argument, which I found very interesting, that the capitalist countries were spending too much on defence, when our percentage of the gross national product spent on defence is 5.4 and Russia's expenditure on their massive defence programme is 10.9 per cent.?

LORD MILFORD

My Lords, I am talking about the Western world and its problem of inflation. Has not the result been stagnation of the economy, which has led to under-capacity and therefore raised unit costs? Has not devaluation and the floating of the pound rocketed the cost of production through raising the price of imports, we being an importing country? Are not these considerations to be taken into account in seeking the true causes of inflation? By completely ignoring them I feel that we shall never get on top of our inflation. No, I do tic t accept that wages are the fundamental issue. But because of Government policies for higher rents, higher insurance contributions, higher fares; because of their agricultural policy to get into line with Europe; because of the threat of VAT on the horizon, of course wages have been trying to keep up with such jumps in the cost of living. The Government seem surprised and hurt that the T.U.C. turned down the Prime Minister's package deal. My Lords, recently it has become fashionable in some quarters to say that society was no longer divided into classes: instead, some were luckier, some more successful and so had more money than others. This Government have at least succeeded in one thing by tax and alienation of the working class organisations. They have highlighted the class struggle afresh for all to see.

The further attempt to lay the blame on the trade unions comes from The Times. Two or three days ago The Times carried an astonishing article, three full columns in length, called "Labour Monopoly". It never mentioned that there were nearly a million unemployed in this country, and that thousands of students, on leaving schools and universities, have to go on the dole. I think that a certain amount of insensitivity and arrogance is being shown by the Government towards the working class and the trade unions. Last night on television there was a moment which illustrated this, when Robin Day asked the Prime Minister something about Jack Jones. The Prime Minister replied, "Oh! He talks absolute rubbish"; and Robin Day had to remind him, quite quietly, that Jack Jones is the head of a very important union.

After two and a half years of vicious confrontation the Government expected the T.U.C. to swallow the confidence trick that, if wages are voluntarily curbed, the C.B.I. would attempt to hold down prices. The Bill to raise rents is in the pipeline; fares are about to go up; insurance contributions are about to be raised; and this vicious tax, VAT, is coming along. And what about all the foods and goods over which the C.B.I. has no control? The C.B.I., according to the Financial Times on October 13, openly maintained that a sustained increase in the state of growth of the economy will not be achieved without an increase in the share of the national income being taken by profits. What an atmosphere in which to sit down and talk to trade unionists! Mr. Heath made the same point in September, when he stated that higher profits are essential to increase capital investment, to raise the growth of the economy. The whole campaign of this Tory Government against the trade unions has been fought to get higher profits at the expense of wages. Higher productivity from the workers' efforts is hardly ever mentioned. But is it not a fact that again and again an increase in wages is absorbed by higher productivity, and because of this profits to-day are managing to rise quite steeply? How could the T.U.C. go back to its members and tell them to do the work of a Government which, during their term of office, have done all they can to alienate them? How would these trade unionists have faced the despair of their wives, who do the shopping and budget for their home consumption?

Now we have the proposals of the White Paper—a hard, rigid freeze of wages and a mild attempt to control some prices. We heard the Prime Minister, on television, agree that there were gaping holes in the control of prices of, for example, main basic foods, such as meat, fish, vegetables, and of some rents. Mr. Heath often tries to give the image that he is representing the consumers. To prove how fair the Government are to the consumers, if the housewife thinks she is being overcharged she can go to the Ministry of Agriculture, or some other Department of the Government, and complain. My Lords, what a very deep understanding that shows of the psychology of the average housewife! Then, there can be no convictions without the consent of the Attorney General. How long is that going to take?

This freeze is for 90 days, and then perhaps for another 60 days. And then what? The Prime Minister hopes that by then the T.U.C. will have become amenable, and that collective bargaining will probably be a thing of the past. Mr. Heath may change his tactics, but lie and his Tory Party will never fundamentally change their ultimate objective: to smash the powers of the trade unions. By putting the blame for inflation firmly on to the trade unions, who are fighting for their members, they think they have the ultimate lethal weapon. But the rank-and-file of the working classes have learned their lesson and will not be taken in by any more confidence tricks. If the Government again go in for open confrontation (and it lurks behind the scenes even now) the result will be disastrous for the whole of Britain.

6.20 p.m.

LORD HARVEY OF PRESTBURY

My Lords, listening to the noble Lord's speech I found that he had very few, if any, constructive remarks to make about the situation in which we find ourselves. He put up some sort of defence for the trade unions; but I must say to him that nothing constructive came out of it. Looking at the Opposition Amendment it seems to me (and I do not take much account of it really, because it is a political weapon) that it is a frontal attack on the Government. The Amendment refers to "the present massive unemployment". The Opposition are ignoring the amount that unemployment figures dropped last month. That was only one month, it is true; but the indications are that the situation may go on improving.

Then the Amendment talks about the country's "weakened economic prospects". My Lords, I would say that, if we keep our heads, the economic prospects of this country now are far better than they were two and a half years ago. At least there is growth in production, and the country is well poised to go ahead. But there is no doubt that the country is in grave difficulties. I do not think that because we in this House do not have constituents to whom we must explain what we say, we should minimise the difficulties. It is easy to apportion blame; but it is perhaps worth while to look at what has happened in the last two or three years. The Labour Administration, in their last year, dropped In Place of Strife, to which my noble friend, Lord Orr-Ewing, referred. The then Prime Minister said that it was necessary for the nation and for the Labour Party; but as soon as he had opposition from the Left Wing and the trade unions he dropped it like a hot brick. This was one of the most deplorable manoeuvres that I have seen in the other place. What happened? As soon as opposition built up in Parliament, not only on that but on other issues, he went the other way.

Towards the end of 1969, the floodgates were open for wage awards, and practically every wage claim made was met and agreed by the Government. This situation continued right up to the Election in June, 1970. I often ask myself why the then Prime Minister had the Election 11 months ahead of time. The answer is that he saw what Mr. Jenkins was doing as Chancellor, agreeing to all these wage claims. He saw that the wage claims were going to snowball; and so he ran for it, and the Conservative Administration took over. When the present Government took over they made a firm stand on the Industrial Relations Act (as it now is), which was fully explained in their Manifesto and, in fact, was not so very different from the Labour Government proposals in In Place of Strife. As my noble friend said earlier, this Act protects the workers far more than most people realise. I do not think that the Government have got over to the nation as a whole the details of this Act. There is a great deal in it for the workers.

We have now arrived at a situation where inflation is going front bad to worse. At the end of the day, who suffers? As my noble friend said, it is not those who go on strike but the pensioners and those who live on fixed incomes who foot the bill—and they always have done so. Added to this, I am concerned about the so-called mergers and take-overs which occur right up to the present time. Many of the companies concerned have no relation to the other company in the take-over. It is a conglomeration brought about for tax reasons. It does not do the shareholders any good, certainly not the workers and probably not the public at large. I believe that the Government must give urgent attention to this matter. In the case of one company which is in the spotlight at the moment—the scheme has yet to be settled—it will cost the shareholders half a million, pounds. And even if they win their case there is no redress for them. This matter should be looked at by the Government. Another point is the build-up of credit cards. I know that America has them. American businessmen go around with a wallet of 20 cards or so and live on them. This sort of thing is now taking place here. We have seen the most recent card, Access, being sent to millions of people and households. I think this is against the interests of the country. It is irresponsible of the large banks to be involved in something like this and so cheapening the whole system of credit. The tragedy of all this is that Britain has never been better poised to expand its economy and to become the large Switzerland of the world—it could be so—and in doing so to improve the standard of living of our people.

Liquidating an empire is a very expensive business, and it has been going on for 10 or 15 years. Taking over the Uganda refugees, something we obviously had to do, has cost the taxpayers of this country a great deal of money. But when we are clear of financing this liquidation, we shall be poised to go right ahead. This country has coal and natural gas. It will probably have half its oil supplies in a matter of three or four years. We have deep harbours and a technology second to none in the world. Yet here we are telling ourselves that we are on the verge of bankruptcy and in very serious trouble.

A week or two ago I was in two of the Trucial States, in the Persian Gulf. I saw one of the rulers there. He is still very pro-British, in spite of what Mr. Healey did over defence, having agreed to keep a British presence there in November and in February doing a "somersault" and saying that there was nothing doing although they were prepared to pay for it. But they are still pro-British. They buy British equipment; they have British advisers. They have a thriving economy; there is no nationalisation, the fittest survive, and they have schools and hospitals. They think we need to have our heads attended to. They do not understand what we are up to in this country. I hear the same in Europe. This country has a great opportunity: I would ask all responsible people, industrialists and politicians, to try to do the right thing. We shall never bury Party differences, of course; they will go on.

My experience in industry is that the ordinary workers, the men and the management, are doing a decent day's work; they are working hard for what they are getting. Frequently there are faults on the part of management. I think that management has been too slack and does not always set the example that we see set in Continental companies. I have been privileged to be connected with two Continental companies, one for 30 years and one for 20 years. The workers get in at 7.30 a.m. and the bosses get in at the same time. There is no question of the white-collar worker coming in an hour later or arriving at 9.45 a.m. In these Continental companies there is a great deal of personal relationship with the workers. Personnel relations are an integral part of the company and are represented at the highest level. There are no ex-majors or ex-squadron leaders tagged on for the sake of appearance. A great deal of management in this country must look at this side of the running of their businesses. If they do so, they will have fewer strikes.

My Lords, the Government have the support of the vast majority of people at the present time. The British people are long-suffering; they take a great deal, and when it comes to it they want firm- ness, fairness and action. And among these millions who support the Government, according to the polls and general opinion, there must be millions of rank-and-file trade unionists. We see that at Elections. I should not have won my seat at Macclesfield on eight occasions without the support of a great many thousands of trade unionists—decent people, who work and believe in what we try to do. But they do not always say what are their political views. Many of them dare not do so: they fear what may happen.

May I now refer to the Government's action over prices. Certainly in the last two years we have seen enormous cuts in taxation. S.E.T. has been halved, purchase tax was cut again this year and income tax has been slashed this year by £1,000 million, which represents £1 a week to 21 million taxpayers. But the worrying thing for most people is the cost of food, which is not an easy thing to control unless you go back to wartime conditions, with controls and supervisors. Food prices are not so directly determined by labour and material costs, though the award to farmworkers, which, if they get it, will, I think, be well justified, will seep through to the price of food. Food prices are brought about by world commodity prices. Two or three years ago there were mountains of butter in Europe—in Denmark, Holland and elsewhere—and in New Zealand. To-day it has all disappeared and butter is a scarce commodity. The British housewife does not know why the price of butter has increased as it has. It is because the standard of living of people all over the world has been going up. This is so in Japan and in parts of Africa where people are living better and earning wages which enable them to buy more food. But there is, I suggest, little evidence that the profit margin in food shops has anything to do with the rise in food prices. A few weeks ago on a Saturday I went to see West Ham play at home, and when coming from the football ground I bought some fruit from a stall. The price of that fruit was about 40 per cent. lower than the prices in Chelsea. I believe that if the housewife is able to shop around she can get better prices. In fact, the competition between shops to-day is very severe. So I do not see how food prices can be controlled.

The Government will have one weapon in the early months of next year in the value added tax, and possibly they will lower the rate of that tax. I do not think that the tax can be abolished—that would be unthinkable in the present state of affairs—but I think that the rate could be lower. The more militant T.U.C. leaders frankly state their aim, which is to squeeze still further the return On capital and, in fact, to bring down the Government—they have said so. This will bring about less investment, which in turn will result in an increase in unemployment. But we know that production is up by 5 per cent. and we have a large pool of labour and workers to expand that production still further; so it is really quite a healthy situation. Of course, industries vary enormously and it will take time for many of our industries to rectify the way they are running their affairs. It will not be done overnight.

The motor-car industry is going through a very difficult time. Recently I bought the first foreign car that I have ever possessed. I did so because I had had so much trouble with a small, home-produced runabout car; and there is no comparison. The British motor-car industry takes a long time to adjust its ideas in order to compete, and they must compete. That is why 25 per cent. of the cars sold in this country to-day are foreign built, and that figure will probably increase. But the remedy is entirely in our own hands. No doubt our entry into Europe will assist us in the long run, because we cannot go on as we are. If we are even to maintain our standard of living both sides of industry must grasp the nettle. In spite of the legislation which is to be introduced, I hope that the talks between the Government and both sides in industry will continue, otherwise our economic situation will go from bad to worse.

I think it has been made abundantly clear that the electorate will not be governed by the unions. We have a system of democracy (that is a word much abused in many parts of the world) which is still probably the best in the world. We have an elected Government, and if the Government have not much to boast about over the Rochdale by-election last week I think that the Labour Opposition have far less to boast about. The Opposition must pull up their socks and become an effective Opposition during these difficult times. Listening to Mr. Harold Wilson leading the Opposition in another place, and from what I read, I get the impression that he is far more concerned about getting to power than about the state of the country. I came to Parliament on the same day as Mr. Wilson 27 years ago, and I ought to know him fairly well. I do not think he is a very far-sighted man; but that is the affair of the Labour Party. It is a "bonus" for the Government, but it is not a very helpful situation. 'Vie want a man who will approach these affairs energetically and do what is best for the State. But, having said that, may I say also that I think the Government have to improve their system of communication with the people. Sir Keith Joseph has done a great deal in his Department for the sick and needy and those who want help, but how many people know about it? This Government have been quite inept in their endeavours to put over a case to the electorate and there is a great deal of room for improvement in that respect. I think that your Lordships will agree that our country has immense opportunities and I hope that all who can will act in the interests of our country.

6.35 p.m.

LORD BROWN

My Lords, I hesitated to interrupt the noble Lord, Lora Harvey of Prestbury, as I was due to speak next and I thought I would reserve my comment. So before I start my speech may I point out to the noble Lord, regarding his remarks about the motor industry, that the British motor industry still manages to export to Europe rather more cars than we import from Europe. I think it as well to state the facts as they are. I rise to support the Amendment. The main arguments in support of it have already been put extremely cogently by my noble friend Lord Beswick. Incidentally, as an aside, may I say that the noble Viscount, Lord Amory, a man who is experienced, wise, kind and sincere, lost his record a little with me because, having described the speech of the noble Earl, Lord Jellicoe, as highly objective, he then turned to the speech of my noble friend, Lord Beswick, whom he accused of making the usual ritual speech—which was another way of saying that the noble Lord was insincere.

LORD SHACKLETON

Very unfair!

LORD BROWN

I do not believe that the noble Viscount, Lord Amory, meant that, and I give him the opportunity to deny it if he chooses.

My Lords, like other speakers I am going to focus on this question of wage inflation and the freeze which is coming, because I think that is the central theme for us all to-day. It seems to me that if one has to accuse the Government of any one fault it would be an incredible lack of what I would refer to as a "social antenna", a lack of ability to feel what is going on. It really is incredible. Let me take a single example, and not the most important that I could cite. They opened the door to the granting of share options to managers and directors in companies. Many noble Lords opposite have industrial experience and they must know very well what it looks like to the people working on the factory floor when senior people who are running the show, instead of sharing the difficulties caused by rising inflation, have the door opened to enable them to secure substantial capital gains which have been generated only by the continuing existence of inflation. One knows what shop stewards and others are saying about these moves. For the Chancellor of the Exchequer to reintroduce this practice at a time when we are all so desperately worried about inflation is one instance, perhaps a rather small instance, of their total failure to realise what people around them are thinking.

My Lords, I am not going to cite any more examples because my noble friend Lord Beswick has done that already, and I want to go on to say that if it gives any comfort to the Government in their misery, the Bill which will come before us presently to initiate the wage freeze will make at least one member of the Opposition very unhappy. It will put him in a difficult position. I cannot speak for others, but if I vote for the Bill, it might appear that I am condoning the acts of the Government which got us into the position which made a freeze a necessity. If I vote against the Bill it will not be because I do not think that a freeze has become necessary—I do think it necessary. A vote against the Bill on my part will be a protest against the acts which have got us into a position where a freeze became necessary. I say, with all the sincerity that I can muster, that had the Government weighted the scales properly in the recent talks; if they had said in a forthright way, "We will deal with these property boys; we will stop them from making their millions out of other people's misery", and so on, they might have got a voluntary agreement.

My Lords, I wish to-night particularly to speak about the danger of spending all our emotions in the next three of four months on how to work the freeze when in fact the 90 days' reprieve which the freeze will create should be spent on working out long-term solutions to the problem. So far as I know, there are none in sight at the moment. I want to speak about the long-term solutions and not about the freeze. It seems to me that there are three aspects of this problem which must be brought into focus. First, there is the whole question of the division of the gross national product between the people of this country. It is clear from the way in which Mr. Scanlon, who is a sincere man, speaks that he is after a shift in the way in which the G.N.P. is split between those who earn wages and those who get their share by other means. I think his aim is correct and that it is time that a shift came about, because I am informed that there has been very little change in this split in the last 100 years. However, the way in which he is tackling it is what the civil servants would call counter-productive because a rapid inflation brought about, to some extent at least, by wage inflation, and of course many other causes, is a means of worsening the position of those who own no hedge against inflation in the form of property or shares and so on, and of bettering the position of those who own substantial amounts of capital invested in the right way. My view, therefore, is that we must face up to a shift in this split of the G.N.P. and devise ways of doing it in a democratic manner without all the confusion that Mr. Scanlon's methods would create in the country.

The second facet of this problem which must be tackled is wage differentials. One of the major causes of the use of power by various occupations to win wage increases is the feeling of those who work in particular occupations that they are falling behind others in the race—the growing belief on the part of millions that if one happens to be concerned in a reasonable occupation, with a union which does not press claims too hard, one suffers because not only does one not keep up one's place in the pecking order of wages but one must also pay the extra prices for all the things one must buy for one's family, brought about, at any rate partially, by the successful claims of those who have not been so reasonable. We must therefore seek a solution to this problem of wage differentials, and I have seen nothing in the plans of any Government since the war which would tackle this problem.

The present Government might claim that by proposing a money increase in their negotiations in recent weeks with the T.U.C. and the C.B.I. they were doing something about this difficulty, but they were not. A money increase to everyone would merely leave the whole pattern of differentials as it was. We must therefore have a mechanism for adjusting differentials so that instead of drifting steadily towards a situation in which the strong grow richer—I am referring not only to wage earners—and the weak poorer, we move back to what I would call equitable differentials: that is, a situation in which the earnings and the wealth of people bear some reasonable relationship to the importance of the contribution they make to society.

The third facet which will have to be integrated into the pattern I am discussing is the business of power. So long as in society one has groups with great power which is uncountervailed in any form, we shall gradually approach chaos. If one looks at the history of the 19th century and reads the lives of, for example, Pitt and Melbourne one sees how power groups arose in society and how, after great misgivings, the franchise was gradually extended. On each occasion the franchise was extended to the latest emerging power group. That seemed to solve the problem but only for a while. Occupational power groups are the power groups in modern society. Every occupation has to form its own particular brand of power group in the form of a trade union in order to survive in the race for incomes; so that we are creating a situation in which power is at a premium and reasonableness is at a discount.

This problem has been looked at for a long time almost entirely in economic terms. The monetarists will not follow the logic of their own proposals. They want to reduce the flow of money; yet we know that if we withdrew credit and reduced the flow of money to-day we would give a massive increase to unemployment. Then there are those who cling to the idea that free bargaining in society must go on. I do not think there has ever been free bargaining over wages. A bargain is something that one tries to enter into with someone else, hit if one cannot agree then one parts company. That is a bargain. When an employer meets a trade union the two sides must come to an agreement. The one with the most power will win. The employers had the most power 100 years ago and they treated labour appallingly. To-day the boot is on the other foot. The fact that I belong to a Party which is joined to the trade unions does not relieve me of the responsibility of pointing out the sociological problem with which the existence of this uncountervailed power in society faces us.

In my view, we need a new institution. The noble Baroness, Lady Seear, who is not at present in her place, talked of the need for new institutions within industry. I agree, but we are faced with the need for a new national institution in society. It is an institution which will have to deal with the problem of differentials because there is no other institution which can deal with it. Certainly Parliament dare not touch the subject, as we all know. The only people with power to settle the pattern of differentials are the trade unions. Employers have never touched the subject of national differentials. They have dealt with the problem of internal differentials within the companies they manage; but they have never had a role for the settlement of national differentials, and they cannot ever have that role. The problem of differentials should be placed in the hands of representatives of all the unions.

I have talked about this subject in this House before and I have written about it. I cannot go into detail to-night but if, indeed, we had the guts to face the fact that this problem which is with us in the long-term has constitutional implications, I think we might begin to approach a solution. The last time I spoke in this vein the noble and learned Lord who sits on the Woolsack delivered one of the most sneering responses to any speech I have ever made. In the course of his remarks the noble and learned Lord said: But we do claim that our proposals"— he was referring to the then coming Industrial Relations Bill— will help to put an end to industrial anarchy; we believe that they will help to put an end to non-recognition disputes: we hope that they will help to put an end to demarcation disputes, to disputes over unjust dismissals, to wildcat and unconstitutional strikes, to secondary strikes …"—[OFFICIAL REPORT, 4/11/70; col. 446.] I hope that the noble and learned Lord is not quite so optimistic, because on that occasion and subsequently he and other members of the Government were warned that the Industrial Relations Act would not bring about the results they hoped for. They were proceeding on a basis of some sort of forced logic which led them to the belief that one could impose something unwanted by the best part of 25 million people in commerce and industry and get away with it.

The noble and learned Lord sneered at the proposals that I am now discussing, and the suggestion that we needed constitutional change to deal with power. Of course if we did institute constitutional change we should at the same time have to introduce some measures to abolish the degrees of social unfairness which still exist in this country. But this is the necessity we have to face up to, and if we do not begin to think in this way I do not see a long-term solution to the whole problem of inflation. I do not believe that a voluntary agreement on prices and incomes will work, because I do not believe that trade union leaders, with the best will in the world, can maintain the necessary control over their own members. There are millions of people who see money being made in large quantities by a minority in society, and they are going to have a share of what they regard as ill-gotten gains. It is because of this that we have to create a new pattern of fairness, a new pattern of wage differentials and a new institution to deal with the sort of power that will continue to be used until we see the constitutional implications of the situation in which we stand to-day.

6.51 p.m.

LORD VERNON

My Lords, I am participating in this debate on economic affairs with some diffidence, and only because I want to say something about what is happening to our land and about the effect of existing capital taxation upon it. Most people, I think, are agreed that in our agricultural land we have a rich heritage and a very beautiful one. No one who travels at any time in the English countryside can fail to be moved by its varied contrasts and its very special, if not unique, quality. Yet what is happening to this heritage of ours?

On the one hand, the amount of agricultural land is shrinking every year to make way for our ever-increasing population. Land is needed not only for more houses, but for the factories, for power stations, for motorways, for reservoirs and for all the trappings of 20th century Western man. On the other hand, we see the price of farm land rising in its own right from £200 to £300, as it was a few years ago, to perhaps £700 or £800 an acre in some areas, and even, in one case recently quoted in the Press, to £1,200 an acre. And if the land happens to qualify for planning permission, the value rises astronomically to £20,000 per acre, or sometimes far more and the person owning such property finds himself overnight and by chance rich beyond the dreams of avarice. Not only is such a system blatantly unfair, and contrary to the national interest, but it opens up local authorities who have to consider applications for planning permission to pressures of a very undesirable kind. I must express my regret that there is no mention in the gracious Speech of measures being taken to cure this evil. It is the psychological effect of these prices which I believe is so disastrous, and to this extent I go along with what was said by the noble Lord, Lord Beswick.

However, I do not want to dwell on the subject of building land other than to express this regret. What I want to say concerns agricultural land which is being used for farming. The rise in agricultural values is no doubt largely due to the endemic inflation which we all hope will be cured, or at any rate lessened. But it is also trite that agricultural values were previously rather low. I read the other day that in Jane Austen's day it was not uncommon for agricultural land to change hands at £100 an acre; so that a value of £200 or £300 an acre a year or two back would mean that it had fallen considerably in value in the previous 150 years, and it is only now beginning to catch up. However that may be, the result of higher land prices is that an increasing number of farms and private estates are going to be split up and exploited commercially to meet estate duty; and that notwithstanding the 45 per cent. abatement on agricultural land—an abatement which is, unfortunately, being abused in certain instances. Here again, my Lords, I think there is a case for Government intervention. For example, the abatement should apply only if a testator had owned the land for the previous seven years.

Here I should like to say something about private estates. There are still a substantial number of them, some bigger than others, and although some can no doubt be found which are badly administered, I think there is fairly wide agreement that many, and probably the large majority, are highly efficient. They enable farmers who have insufficient capital to buy their own farms to rent farms at rents which they can afford; and, what is perhaps more important, in some cases they provide local employment for estate workers, and to some extent form a focus for community life in the countryside.

Furthermore, I think it is true to say (and my noble friend Lord Leicester made a similar point in a maiden speech this year) that the landowner often has a genuine love for the land, especially if he has inherited it. He tends to regard himself as a trustee, not only for his children, which is perhaps a selfish motive, but also, and increasingly today I think, for the nation as a whole, whose people now have much more leisure and greater facilities for access to enjoy the countryside. I believe that in many instances it is this affection of individual landowners for their land, and their decision often to resist the temptations of the huge commercial profits, that is responsible for the fact that large areas of what remains of the English countryside are still largely unspoilt.

But, my Lords, what of the future? If one accepts, as I do, that in the last part of this century there will have to be much greater fairness in society and much greater equality of wealth, then it seems inevitable that the days of the private landowner, who is sitting on a huge capital sum, even if it often brings in virtually no income, are numbered. And because of the rise in land prices, the days of the owner-occupier are probably also numbered. The question is: What is going to take their place? Do we want to see these estates and farms, which have been built up over the years into efficient economic units, fragmented or destroyed?—which would be bad for farming, bad for the local community and bad for the nation—or do we want to make some more sensible arrangements? Apart from other considerations, it would surely be folly to allow our system of capital taxation to undermine our structural lead in farming at the very time when we are entering the E.E.C. and when it is so important to maintain our competitive position.

I should like to end my speech by making a proposal to the Government. After the last war the late Lord Dalton, who was a great lover of the English countryside, conceived a scheme whereby the Exchequer provided money to form the National Land Fund, which could be used for purchasing, in part or full payment of estate duty, historic houses and their contents, together with the surrounding land—houses which would otherwise have been demolished or destroyed. This was a very imaginative scheme, and I often wonder whether Dr. Dalton (as he then was) received for it the credit which he deserved. But certainly it has resulted in a large number of our architectural and artistic treasures being saved for posterity.

What I should like to suggest to the Government is that they should provide a further fund for the purchase of agricultural land from landowners t rid from owner-occupiers in part or full payment of estate duty, and that such land should then be vested in a new body or authority set up to own and administer it. The authority might perhaps also be empowered, in special circumstances, to purchase land on the open market. In the case of owner-occupiers, the land could be leased back to the child or children of the farmer, if they had been farming in partnership with him, so that the farm would not be broken up. In the case of landowners, the existing tenancies might normally remain undisturbed. An incentive could perhaps also be offered to landowners to hand over their land in this way. I do not want to be dogmatic about the new body or about what form it should take; but I believe it would be preferable that it should be at least semi-independent of the Government—perhaps something akin to the National Trust. But however such a body is constituted, it would be cardinal to the success of the scheme that the land should be administered primarily in the interests of good farming, in the interests of the local community and of the environment generally. This does not mean that the new authority would not be financially viable—indeed, it is obviously desirable that it should be; but it should ensure that the land was not exploited for huge profits.

My Lords, I hope that the Government will at least take a look at this proposal, and if they do not like it perhaps something similar to it can be adopted. I myself feel that something along these lines would be welcome to both farmers and landowners, as well as to many other sections of responsible opinion in this country who view only with dismay the increasing destruction and fragmentation of our once green and pleasant land.

7.5 p.m.

THE EARL OF LYTTON

My Lords, I must concede that I have heard with a sense of shock the proposal of the noble Lord, Lord Vernon, to turn our tenant farmers into tenants of what would in fact be the Treasury. I am going to lead a "peasants' revolt" to resist any such threats. Perhaps the noble Lord was not thinking so much of the individual owner-occupier of a farm as of the larger estates. I speak for the single owner-occupier, who farms his own land and regards its ownership as the best thing he has.

To turn now to the subject of this debate, it is a little difficult to determine what it is. On the side of the Government we are asked to attend and show interest in a freeze in the immediate future. On the side of the Opposition, in connection with an Amendment by the noble Lord, Lord Shackleton, we are asked to support a Motion to "hot up" the immediate past. Between the freeze and the hotting up there is a great deal of difference. I must say I was caught by surprise and by the fact that the freeze was brought to our notice to-day. I went out and obtained the necessary documents: a programme for controlling inflation, and the draft Bill; and as we were invited by the noble Earl the Leader of the House to attend to these matters, I read them in the Chamber for the first time. I understand from the speech of the noble Earl, Lord Jellicoe, that this is something like an operation of war which is being undertaken by the Government in order to deal with inflation.

In these circumstances one attends to what is the dominating factor to be dealt with—and it is, I think, nowhere mentioned in so many words. The words "wage push" do not appear anywhere. Are they not the key to the problem? Did not Mr. Wilson say—I am paraphrasing his words—that one man's wage rise was another man's price rise? And did not Mr. Heath use similar words, to the effect that one man's wage rise is another man's redundancy? Surely it is this control, this resistance of undue wage rises, which is the key to the difficulty. The militants in the trade union movement—have they not said they will take part in no discussions which involve wage restraint? In other words, this means they will not participate in what is the essence of their part in inflation, which is so harmful. I am supposing that this is the case, and I am also supposing, the more that I read all the various reports, that the militants are still not under full control, either by the responsible trade unions, the Labour Party, or the Conservative Party, and that nobody wishes to dishonour or damage the standing of the trade unions in the process of controlling this militant threat to our whole wellbeing.

I have attended to the Bill, then, and I should like to say that if my vote is necessary it will be available to support this Bill. I should like to ask two questions under paragraph 5, for instance, at this stage—though I could ask them later. First, with regard to the operations of foreign tycoons, such as Chrysler and Ford, who started the rot in Mr. Heath's attempt to control prices by giving way when they should not have done—will there be any means to prevent that from happening again? I am referring to those people who have managers abroad. Will they be able to come in and ruin our schemes in the way they did?

Secondly, with regard to the organisations of workers (again in paragraph 5), is it not possible that they may stage a strike against the freeze? Are there any penalties? May we take it that refunds of tax under P.A.Y.E. will not be made? May we take it that supplementary benefits to dependants will not be made at the expense of the taxpayer during this period? Are there no penalties if there is a possibility of organisations of workers, or any other organisations, taking steps to thwart the purposes of the Government, such as a strike directed against the freeze itself? I hope that there are penalties in such a case.

I should like briefly to refer to the Amendment. I found it very uncongenial to have to consider, on an humble Address to the gracious Sovereign, anything which involves so much of a sneer as the Amendment does, but I was impressed, as I always am, by the speech of the noble Lord. Lord Beswick. His manner of speaking compels attention—one listens to all that he says—and I will try to make a few observations. First, he referred to three newspapers in a manner which is becoming increasingly common. When we are referred to Papers, draft Bills and so forth, we can go to the Printed Paper Office, obtain them and read them in the Chamber, but it is more difficult when we are referred to The Times, Financial Times or Guardian. There are copies in the Library, filed away with other newspapers, and it is more difficult to bring them into the Chamber and study them in order to know whether the article is worthy of debate or not, and also read the article in its context.

I noticed the extreme anger of the noble Lord, Lord Beswick, at an expression which had been used in The Times (I think it was) referring to the égalitarian drift of the Chancellor of the Exchequer. I cannot comment; I do not know. I do not take my opinions from the newspapers, although I read them regularly for news. I try to avoid reading their opinions, because all of them irritate me. The noble Lord, Lord Beswick, raised, as he does on these matters, the two great words, "equality" and "justice". Which is he for? Is he for equality? If so, I must repeat what I said in the last ease: he is crying for the moon under present conditions and it is utterly irrelevant to the present situation. If it is social justice, he enumerated a great variety of things, and I heartily agree with the noble Viscount, Lord Amory, who described it as "the ritual", because in part it was; it was a tirade of grievances which have been ventilated ad nauseam in this House on other occassions. I should like to know what he means by this "justice" which must arrive before we can control inflation.

I have been watching the growth of greater justice for working men almost all my adult life and have made some small contribution to alleviating some of their minor hardships. It seems to me that this is a continuing and unending process. Many working men—for instance, my own agricultural workers—are enormously better off than when I came to deal with them directly in 1946. The movement started by the Labour Party, and continued by the Conservative Party, had lifted all these people to a greater degree of correspondence with the growth of prosperity which is happening everywhere else.

I never resent the increase of wages so long as we can manage elsewhere. I have been through the problems of trying to revive difficult farms, and so I have no resentment against rises in wages as such. I should like to know whether we have to wait until all the sharks in the sea have been harpooned and every element of injustice eliminated before we can expect any co-operation on the matter of wage-push inflation. If so, we have no hope. This is an operation of war against a particular evil which is proving extremely intractable. As the noble Earl, Lord Jellicoe, said, the freeze will mean not greater justice, but, for the time being, greater injustice, because one cannot attend by legislation to all the rubs that it will cause. The sooner it is possible to bring it to an end, the better; but meanwhile I will vote for it.

7.17 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, first of all I must apologise to my noble Leader, because I did not hear him speak, owing to some fuel injection trouble in my car. Of course it is an ill wind that blows no good: as this car happens to be a foreign one I hope that it will give British motor manufacturers some cheer.

I am last man in to bat, apart from the Minister, so I will try to be brief. I have spoken on many gracious Speeches, and there is something common to almost all of them. When the gracious Speech comes to refer to economic growth, and the economy of the country, it nearly always uses the same words. I should like to quote them: … to establish effective means of enabling a faster growth of national output and real incomes to be maintained consistently with a reduction in the rate of inflation. No Government since the war (and this is no fault of those Governments) has been able to secure this 100 per cent. In our full democracy it is almost impossible for a democratic Government to do this. It would have to be an autocratic Government—and God forbid that we should have that! Therefore I think some speakers have been rather hard on the present Government.

As the years go by, success becomes harder to achieve because the voter (how shall I describe it?) gets more bread and circuses, or, if you like, gets more and more for doing less and less. Unfortunately some voters now think the world owes them a living. This attitude induces Governments to look desperately round for a means of curing inflation that is not painful. If inflation is going to be cured the process has to be painful. But it is very difficult in a democracy to be painful because the Government are obviously dependent on the popular vote, and if the Government are too painful then they go out of office. We should bear this in mind.

The situation has been further complicated (this is a great tragedy) during the past few years, perhaps for the past twenty years, by the number of Communists who have infiltrated into the trade union movement. This is a great tragedy because the trade union movement is a great movement. It is a tragedy that we are now having these extreme militants who appear to have great power in the movement. I know the enormous power that some shop stewards have in factories. These men are highly trained to brainwash British workers. They come out with the usual Communist claptrap about the solidarity of the workers and all that; but presumably they do this—of course they will not succeed—in order to destroy our economy and in the ensuing chaos to have a Communist dictatorship. I was interested to hear my noble friend Lord Molson say that it would be an excellent idea if in all picketing only three men were allowed to picket; because a few months ago we had some disgraceful episodes regarding picketing.

I suppose that an economic purist would say that if you really want to prevent inflation you should curb the money supply. Here again, in a democracy it is a difficult thing to do because it would cause more unemployment; it would therefore be painful. When I was a schoolboy I was taught (apparently some Chancellors of the Exchequer were not taught this but I was) that the supply of money should be increased only at the same rate as the economy expands. I understand that our economy is now expanding at the rate of 5 per cent. per annum. So from the point of view of the economic purist we should print money at a rate of only 5 per cent. increase, yet I understand that we are now increasing at the rate of 25 per cent. A noble Lord says, "More". Surely not! Good Heavens! The noble Lord leaves me speechless. I thought I might be exaggerating. We appear to have thrown overboard all the well-tried economic theories and economic laws.

We have the absurdity of the unions now demanding guaranteed jobs whether there is any work or not. This results in firms being kept going by subsidy to pay wages which are unrealistic in relation to the goods or services produced. I understand that we now have B.S.A. asking for £6 million. It seems a madhouse. How can the Government be expected to cure inflation if one has to produce money to bolster up firms which cannot pay? You cannot cure inflation. You can try to control it, but you certainly cannot cure it without autocratic measures. I used to know, as a small employer, that if credit was easy one did not resist wage demands. One did not want trouble and therefore gave in. But of course if there is nothing in the bank one has no option but to resist such demands. I believe it was my noble friend Lord Harvey of Prestbury who was deploring credit cards. The banks have behaved in a rather irresponsible fashion over this matter.

However, the Government were perfectly right to try a voluntary policy on wages, prices and incomes; and of course they are perfectly right to go on trying again after this temporary freeze—and I sincerely hope that it will be only temporary. With the best will in the world, however, I personally did not think the negotiations would succeed. Ever since I came into this House I have been talking about the Communist infiltration into the trade unions. Now the chickens are really coming home to roost. I only hope that this exercise of the Government for voluntary restraint—and nobody could have tried harder or been more patient or charming about it than the Prime Minister—has opened the eyes of the public.

In reading the Press I see that some trade union leaders have said they are not going to abide by the freeze and are threatening strikes. No doubt some would like to have a General Strike. But the public would not stand for it the public. I have no doubt at all, would be behind the Government. If we had a General Strike just as we were entering the Common Market it would be deplorable. The tragedy is that there is no doubt that the general public in the country do not yet comprehend either the great benefits that can come our way economically by joining the E.E.C. or, conversely, if we do not enter with a fairly healthy economy and do not pull our weight, the danger of failure. I suppose I am right in saying that the majority of the union membership are opposed to entry because they fear the competition; and no doubt some of the Communists in the union leadership realise that if we become members of a larger economic unit it will not be so easy to have a Communist takeover. If only the moderates in the unions, who after all are the great majority, exerted their influence the situation would be different. I understand that Mr. Scanlon was elected head of his union by only 5 per cent. of the members. It seems a deplorable situation. I do not know why the other members do not vote; it is surely irresponsible of them.

One or two noble Lords, including again my noble friend Lord Harvey of Prestbury, mentioned (and this is the only sphere where I would slightly criticise Her Majesty's Government) the field of public relations. We have a highly organised economy to-day. We have heard to-day that some unions have vast powers, monopoly powers, and can hold the nation to ransom. This is the antithesis of democracy. It is the Government's duty to curb this power in the interests of the nation, but they cannot do so unless they have wholehearted public opinion behind them. They can obtain this support only through good public relations. The Government have perhaps rather failed here. Why cannot the Prime Minister do the same as Mr. Roosevelt used to do? He used to speak to the nation every week, in a Fireside Chat, on television and radio. I have often said that the average working man and woman does not understand the basic facts of economics and if only these could be explained to them in simple language it would pay big dividends.

For instance, the Industrial Relations Act, as I think some other noble Lords have said, is in the interests of the working man and also in the interests of responsible unions, but it has never really been explained to the people. The average members of a trade union are as perfectly sound as they have ever been, but they are of course bullied and victimised by the militants. I wish the Government could get this message over to them, so that they were able to understand the difference between the standard of living in this country and that behind the Iron Curtain. I think it is a great pity that some of them cannot go behind the Iron Curtain to see things for themselves, as I have done. There very few working men have refrigerators, cars and colour television sets.

I should like to take up something that was said by the noble Lord, Lord Molson, and which he has said before in this House. The trade unions have vast funds and are now among the biggest operators on the Stock Exchange; therefore I do not think it is necessary to pay supplementary benefit to any striker or to pay National Assistance to his family. Surely it is the duty of the unions to look after their members. The present position is a complete nonsense. We must be the only country in the world to pay out in this manner. I quite agree that if the unions had no funds it would be right to pay because we cannot have hardship for the children, but where unions have tens of millions of pounds the payment of National Assistance to the families of strikers should be stopped.

Unfortunately, I shall be unable to be here to-morrow to vote. I heard only this morning that the arrangements had been altered, and I have an engagement to-morrow that I cannot break. However, my Lords, while I cannot be here in person to vote, I shall certainly be here in spirit.

7.33 p.m.

THE MINISTER OF STATE, SCOTTISH OFFICE (LORD POLWARTH)

My Lords, at the end of the fairly lengthy first day of this stage of the debate I am quite sure that your Lordships would not expect me to attempt to cover every one of the far-ranging and varied aspects of this problem which have been raised in the course of the afternoon and evening. For one thing your Lordships would be detained until a very late hour; and for another, a number of noble Lords who are unable to stay to-night but who will be present tomorrow would be deprived of a much more lucid explanation of the major issues surrounding the economic situation in general—the tripartite talks, the standstill and the long term problem facing us—which I suggest would come from another place. If I may, I will give a brief half-term report, leaving it to the headmaster, if I may so refer to my noble and learned friend on the Woolsack and to my very able senior colleague on my left, to deal with the end of term report on the more major issues raised to-day. However, I will endeavour to deal with some of the specific points raised by noble Lords in the course of the afternoon, and if I do not deal with them all I must ask to be excused. I hope it will be possible for them to receive answers tomorrow or in some other way.

I think it is fair to say that this has been a highly responsible debate. Of course there has been an element of the ritual dance: without that it would never be complete, nor would it be as lively as it should be; but I think we have had a great contribution of a most constructive kind from all sides of the House. I sense also a genuine desire to see the problems with which we are faced solved as speedily as may be and as fairly and effectively as may be.

May I say first how glad we were to see back with us the noble Lord, Lord Beswick. I am sorry that he is not here at the moment but it is good to know that he is, so far as we can see, and judging by the vigour with which he lambasted us in his lively contribution earlier in the afternoon, fully restored to health. I do not pretend that I agree with all, or, indeed, with a great deal of what he said on the subject, though I sense that he, along with other noble Lords opposite, had the interests of the country greatly at heart. I think the main theme of the noble Lord's speech was the question of fairness in the measures with which we are now facing the country. With the greatest respect I think he was perhaps a little selective in the measures relating to taxation and otherwise with which he chose to illustrate his theme. I submit that there have been a considerable number of actions of this Government which have been directed to the benefit of the lower paid and those less well able to look after themselves. Looking over the period since we came into office one can cite only a few, such as the introduction of the family income supplement; the raising of the threshold for those entering tax in the last Budget, under which everyone paying tax had their tax payment reduced by £1 a week; and the annual uprating of pensions, something that has never been introduced before and which is of enormous assistance to those most in need and about whom we are most concerned.

Turning to the future, the measures offered at the time of the package offer, and now promised, now that the offer has been turned down, were set out by my noble friend the Leader of the House in his opening speech. I would remind your Lordships of the increase in the needs allowance in assessing rent rebates and allowances, extending from six to 12 months the period of the family income supplement, and the lump sum to pensioners, as well as the arrangement for the monitoring of food prices. I submit that all these are of great benefit to those most in need.

There was some talk from a number of speakers of confrontation. I agree that most of them deplored the idea of confrontation, and I am quite sure that all of us in our hearts do so. I suggest that this is just what we have succeeded in avoiding. We sought, and would have preferred, a voluntary agreement in this field. Unfortunately, although agreement was reached on the aims to be achieved it was not possible to reach agreement on the means. Therefore we have been forced to abandon the voluntary approach and to adopt a standstill. I think it is a sign of the avoidance of confrontation that we were able to get agreement on the aims, and I am grateful to noble Lords from all sides of the House who recognised this and who pointed out that it leaves the way open to continue the dialogue with both sides in industry. Whether we do it more or less constitutionally I do not think matters so much: the main point is that the door is still open, and that is an encouraging thing. We must keep it open.

A fair amount was also said about another word that is rather fashionable at the moment, namely "consensus". Of course we all want to see consensus in reaching solutions to these problems but it must be a consensus on solutions that are fair to all concerned. You cannot have consensus if force brings about an unduly favourable position to the strong and an unduly weak position to the weak. In talking of consensus, therefore, we have to be extremely careful. What we need to achieve, as so many people have said, is fairness to the parties concerned.

With regard to the main theme of the speech of the noble Lord, Lord Beswick, much of what he said was answered extremely effectively, I thought, by my noble friend Lord Amory. We all respect his immense experience, not only in politics but in industry. I had the pleasure and honour of sitting for a short time on the same board as him and my respect was greatly enhanced by that experience. I felt that he gave us a most responsible and helpful contribution to our debate.

The noble Viscount, Lord Simon, asked one or two questions which I will endeavour to clarify. He asked first whether the 5 per cent. growth meant a growth in real terms or in money terms, and I would confirm that it means growth in real terms. He asked also about the meaning of a reversal in price and income increases. I do not personally like the exact form of wording, but what it is intended to mean is what in fact has happened to prices since mid-1971; namely, that in mid-1971 prices were rising by over 10 per cent. per annum, whereas in September, 1972, that figure had been reduced to 7 per cent. per annum. Perhaps it is not the best way of expressing the matter, but that is what it is intended to mean. He asked also why the lower paid workers were not given a £2 increase during the standstill. That would not be in keeping with the purpose of the standstill, which is to ensure that nothing shall be done which might prejudice the longer-term measures which we are all so anxious to reach. However, the treatment of wages council proposals in the pipeline, to allow awards where the previous awards were at least 12 months ago, is, I would submit, a sign of Government concern for the lower paid—and perhaps I should remind your Lordships that in the 1966 freeze wages council and board proposals were in fact deferred.

The noble Lord, Lord Balogh, is no longer in his seat, and while I was greatly intrigued and much enjoyed hi; excursions into the higher realms of economics and finance I hope that your Lordships will not think I am shirking my duty if I do not attempt to follow them up in detail. Far be it for me a mere Cambridge man—albeit one who sat at the feet of the noble Lord, Lord Kaldor, for a brief time, much to his despair—to enter into the lists with such a distinguished Oxford economist. I would far rather leave that contribution to my two Oxford colleagues who are to speak tomorrow. I must apologise to the noble Lord, Lord Molson (I am not necessarily picking in order), for not being in my place during his contribution, but I am told that lie raised the question of the need to reform the law on peaceful picketing. The law in that respect is at present being reviewed by the Secretary of State for Employment, and a Question on this subject is being raised in another place and answered there to-day. My right honourable friend is not yet ready to make a statement, but hopes to be able to do so before too long.

The noble Lord, Lord Balfour of Inchrye, made the point that public utilities should hold down prices even if they make losses and need deficit grants. The White Paper makes it clear that the principles of the prices standstill apply to nationalised industries just as they do to the private sector. The strain on managements and the cost to the Government are, however, substantial. The Prime Minister has estimated the loss of revenue to the industries concerned of holding prices within a 4 per cent. limit as £280 million per annum, and that burden will fall to be made up from the Exchequer. May I say how I appreciated his words—wise words, I thought—on the need for avoiding deepening divisions in our society, something with which I am quite sure we shall all agree?

As always, we enjoyed the contribution by the noble Lord, Lord Davies of Leek—or was it of Catherine Booth?

LORD DAVIES OF LEEK

Yes; Catherine Booth.

LORD POLWARTH

His Celtic sodality and religious fervour are always a tonic for your Lordships, usually at an hour when we are beginning to flag a little; and this was no exception. It was good rumbustious stuff and we all appreciate enormously the sincerity of the noble Lord's remarks, even if we may not accept all the details of his proposals. He spoke about our no longer having any individuality, about losing our individuality, and he said that our charisma is being lost. That is an interesting thought. If indeed we are, there are many causes that we could blame: improved communications, a desire to conform to patterns of which we are much more aware world-wide, and so on. On the other hand, I get the feeling that many people who are now a great deal better off than they were in the past have a greater freedom to exploit their own individual talents. One sees this particularly among the younger generation.

The noble Lord, Lord Hawke, raised several questions. He is always well up in the monetary field, and I hope he will forgive me if I do not follow him in these to-day. There may be an opportunity to reply to him to-morrow. He did raise, of course, the puzzling position, of which we are all aware, that while we have this unacceptably high rate of unemployment it is still almost impossible to get people to carry out certain tasks—many of them not particularly unpleasant ones, either. I agree here that there is obviously a need for still more to be done in the field of training and retraining. But I should point out to your Lordships the substantial increase that has already been made by the present Government in places in training establishments. I personally hope that we shall be in a position to develop this still further.

LORD HAWKE

My Lords, may I ask the noble Lord, before he leaves that theme, whether he can give us any news on the exact position (or perhaps his colleagues will give that later) of retraining for these unemployed youths who have never learnt any trade at all. It is not retraining but plain simple training?

LORD POLWARTH

My Lords, I do not think I am ill a position to do so. However, I will make inquiries and see if an answer can be given to the noble Lord to-morrow. I do not want him to get off the mark too quickly. The problem of unemployed youth is a very real one and one which I hope we can do more about. It is not only a question of the facilities for retraining; there is also a great need for education and the changing of attitudes to make people more ready to accept changes of jobs, quite apart from the facilities that are now available. I may say that we did introduce in the Industry Act increased facilities to make it easier for people to move jobs and to move from one part of the country to another.

LORD DIAMOND

My Lords, before the noble Lord goes on, and as I gather that he is now leaving the question which his noble friend Lord Hawke put to him, may I ask whether or not we are to have a statement from a responsible Minister on the omission from the White Paper and from the Bill of all capital gains and capital items? This matter has been raised several times in the debate. The noble Lord, Lord Hawke, drew attention to the increase, and I believe he said that agricultural land was now being sold at something like 100 times its earlier value when it was sold for building land.

LORD HAWKE

My Lords, it would be wrong to put it on record as 100 times for agricultural purposes; it is 100 times its value for housing purposes.

LORD DIAMOND

My Lords, that is exactly what I understood the noble Lord to say: that agricultural land was being sold for housing development purposes at one hundred times its agricultural value. The noble Viscount, Lord Amory, raised this matter. I questioned him, and so gave the Front Bench ample opportunity to realise that this is a matter which interests us intensely. I hope, therefore, that we are going to get a full reply.

LORD POLWARTH

My Lords, I fully appreciate the noble Lord's desire for a full reply, but I will, with his permission, leave this to my noble and learned friend who is to speak tomorrow, or your Lordships will be here all night.

LORD DIAMOND

My Lords, may I say, with great respect to the noble Lord—I am sure he is not dodging the issue—that his noble and learned friend, as I understand it, is going to wind up the debate. This gives us no opportunity whatsoever of discussing the matter as I am sure your Lordships' House would wish. Moreover, I think I have the privilege, possibly, if your Lordships extend their usual leniency to me, of opening the debate to-morrow in advance of his noble friend sitting on his immediate left. So I hope he is not going to "come that one", either.

LORD POLWARTH

My Lords, the fact is, as I explained earlier, it is clearly quite impossible for me to deal with every subject raised to-day, or indeed to have a complete brief in advance on every subject which was liable to be raised to-day.

LORD PLATT

My Lords, surely this is one of the most important subjects that has been raised during the whole of this afternoon.

LORD DIAMOND

It has been raised time and time again.

LORD POLWARTH

My Lords, there is still another day of this debate. I appreciate the point raised about my noble and learned friend's reply at the end of the debate, and all I can offer is that my noble friend on my left will, I am quite sure, deal with this to-morrow. This may not satisfy the noble Lord, Lord Diamond, but he has other colleagues who will be speaking after him and who will be only too ready to pursue any aspects that emerge from what I hope my noble friend will say.

Coming to the speech of the noble Baroness, Lady Seear, in which she brought out the fact that we have not only problems but opportunities, I thought it most fascinating. I was delighted that she and a number of other speakers pointed out that we are at a moment of opportunity as well as of problems. I think that what she said about the need for balance between power and responsibility, the methods of reaching wage settlements, and the continuing contact between all the parties was of considerable value and will be of great help during the thinking leading to the second more permanent stage of the measures.

The noble Lord, Lord Orr-Ewing, has apologised that he has had to leave. He spoke from great industrial experience and reminded us, as did the noble Earl, Lord Lytton, that one man's wage rise is another man's price rise; and I think we must always bear this very closely in mind. He also helped to put into perspective some of the aspects of the Industrial Relations Act which are of positive help to workers in industry. And if I could add to that, I feel that we need to do all we can to encourage the strengthening of responsible union leadership, the provision of resources to them to enable them to do their jobs properly and play the same role as they are able to do in some other countries where they are better provided.

I will not pursue the remarks of the noble Lord, Lord Milford. I am bound to say that it appeared to me to be something of a looking-glass world that he was showing to us, and personally I would not opt for the side of the world where 10 per cent. of the gross national product is devoted to armaments. May I also point out to him, in relation to prices and incomes, that in the last year earnings have risen considerably faster than has the cost of living? I will not weary him with the actual figures because they are easily available.

My noble friend, Lord Harvey of Prestbury, I am glad to say, was one of those who struck a note of hope. This is something for which I think there is good reason. Then I would mention the speech of the noble Lord, Lord Brown, whose industrial experience, some of it in Scotland I am glad to say, is well known to us. He spoke of the division of the gross national product of this country. We all, I am sure, want to see an equitable distribution. He recognised in his speech where the power lies. The trouble is that the gains for the members of the strongest unions on the labour front tend to be at the expense of the position of the lower paid, and this is one of the great problems. He seemed to say that he agreed that the share of the national income going to labour in wages and salaries should be increased. I think what we all want is to see an increase in the total available, because one thing above all I am sure he would agree with is that there must be an increased amount available within industry for investment. This is something that is outstandingly necessary at the present time.

LORD BALOGH

My Lords, does the Minister want to say that the real conflict is between the lower paid and higher paid wages and not between wages, as such, and profits? And does he, secondly, want to say that the amount of investment depends on profits and not merely on savings, and that not all profits are saved, nor that all savings come from profit? It seems to me that there is some confusion in the Minister's mind.

LORD POLWARTH

Not at all, my Lords. I suspect that the noble Lord is trying to lead me into a pit. I shall try to dodge it. I did not say that there was a conflict between the wages of the higher paid and the lower paid, but that the pressures that can be exerted by the larger unions secure for them gains which are not automatically shared by the lower paid.

LORD BALOGH

My Lords, the Minister ought to read Hansard tomorrow morning; then we might discuss it.

LORD POLWARTH

My Lords, I will willingly accept that suggestion.

Before concluding, I must refer—and I have left this deliberately to the last —to the contribution of my noble friend Lord Perth, because he is the only person who has mentioned Scotland and the problems of the regions which are going to benefit—and of this I am firmly convinced—from the Industry Act. We must not overlook them at this present time, not only because of their problems but because I believe they represent a very large part of the opportunities lying before us. The noble Earl complained that Scotland was mentioned only once in the gracious Speech, and that was in connection with the Local Government Bill for Scotland which will be introduced during this Session. I hope that what is being done for Scotland will not be judged in terms of legislation alone. A great deal is being done for Scotland without legislation, and I will say something of that in a moment.

The noble Earl asked me specifically about the question of the proposed Scottish Convention. I would remind him that I was a member of the Committee which investigated this matter, and I do not think I can add anything more to the reply given to your Lordships earlier this year by my noble friend and predecessor in office Lady Tweedsmuir of Belhelvie. She repeated then that the Government intend during the life of this Parliament to put forward proposals based on the Douglas-Home Committee's Report, and Ministers have made clear on a number of occasions that the proposals on devolution in Scotland are, as recommended in that Report, to be put forward after the reorganisation of local government, which to me seems the logical sequence. As your Lordships know, the intention is to introduce this legislation on local government reform as soon as possible. The noble Earl mentioned forestry. I would only say hero that the proposals he referred to are of a consultative nature at this stage. Discussions are going on with the many interests concerned. The importance of forestry is very much in the Government's mind, and, whatever the ultimate outcome, there is no question but that the total area planted will continue to increase, and so will the output of timber. I do not think that we should go into any further detail on that subject to-night.

I think that the main point to make concerning Scotland is that, thanks to very considerable expenditure on the infrastructure (beyond Scotland's normal share on a population basis), on roads, harbours and other developments connected with North Sea oil and now with the introduction of the Industry Act, Scotland's future is brighter at present than it has been for many years past. There are welcome signs that at last there appears to be a downward trend in unemployment; certainly an increase in vacancies is being notified, and there are indications of intentions of increased capital expenditure on investment. The Act has not yet had time to have its effect, but I am in no doubt that it will, and that, with the administration in the regions that we are now establishing in a large part of them, the needs of the regions will be fully taken into account.

LORD SHACKLETON

My Lords, which Act is the noble Lord talking about?

LORD POLWARTH

My Lords, the Industry Act. I will not go into the various measures included in it, but it is a comprehensive package of assistance and encouragement to industry.

If I think it is a moment of opportunity for Scotland, I think by analogy one can say that it is very greatly an opportunity for the country as a whole, if only we can slay this dragon of inflation, about which we have been so concerned this afternoon. Subject to that, I think that the opportunity is very great. We have been taunted, occasionally laughed at, for having changed direction in our policies. I think that other noble Lords have dealt fairly adequately with that subject. Certainly from my experience in business, I would always respect more a man who was prepared to change his policies to meet changing circumstances than one who was not.

LORD BROWN

My Lords, I do not think that on this side of the House we are criticising the Government for changing your policies; we are criticising them for having done so without admitting it.

LORD POLWARTH

My Lords, so far as I am concerned I am only too ready to admit it. Various people have been quoted in aid of that. Another person quoted was the noble Lord, Lord Blake. His name has been mentioned to-day. He made, if I may say so, a stimulating opening speech in moving the humble Address. He has said that we are a pragmatic Party, not an idealistc one. That is the nature of our approach: changed circumstances demand changed policies. I believe that there is widespread support, net only in this House but in the country as a whole, for the fact that the Government have grasped the nettle and, failing a voluntary agreement on policies, have imposed the standstill to give time for the working out of further long-term policies.

The debate continues to-morrow, and I hope that by the end of the second day's contributions your Lordships will be convinced that the Amendment (moved, I am sure, in the best of faith and with the best of motives by noble Lords on the other side), will not in fact contribute to the solution of our problems, but is more likely to be a divisive influence on the unity which it needed to solve these problems, a unity which I believe we are on our way to achieving.

LORD DIAMOND

My Lords, in a typically short speech, I beg to move that the debate be now adjourned until to-morrow.

Moved, That the debate be adjourned until to-morrow.—(Lord Diamord.)

On Question, Motion agreed to, and debate adjourned until to-morrow accordingly.