COUNTER-INFLATION BILL

HL Deb 19 March 1973 vol 340 cc548-90

3.57 p.m.

Report stage resumed.

Clause 2 [Code for guidance of Agencies]:

LORD BESWICK moved Amendment No. 2: Page 2, line 34, after ("consult") insert ("the Agencies and").

The noble Lord said: I wonder whether it might be convenient to discuss this Amendment and Amendments Nos. 3 and 4 together. If that is acceptable to noble Lords opposite—and I gather it is—then it will enable me to say that I think their Amendments amount to a superior arrangement to that which I put forward myself. In fairness to myself, however, I should say that at the Committee stage I too suggested that the inclusion of the Agency should be at the end of the list and it was the noble Earl who suggested that he would be attracted by an Amendment if I put it at the beginning of the list. Now I put it at the beginning of the list, he wants to have it at the end. So reasonable a person am I that I wholeheartedly accept what the noble Earl suggests. I am sure that it will be a good thing for these Agencies to have the statutory right to be consulted and I am happy to think that noble Lords, and I suspect the noble Earl particularly, are able to see some little change—the only change in the entire Bill—that has arisen from the arguments of this House. I am happy to think that that might be the case.

EARL JELLICOE

I am grateful to the noble Lord, Lord Beswick. This Amendment in the name of the noble Lord came rather late after supper a week ago. I thought that there was a case against it, and when I heard the case deployed in favour of it I thought that it was right to take the matter back, which I did. I am most grateful to the noble Lord for feeling that the minor Amendment (which in substance is what it is) which we intend to make to his Amendment in fact is the more acceptable. There is a good reason for it, namely, that the whole purpose of having the Agencies consulted is that we should gain by their experience, and in the nature of things it will not be possible for us to gain by their experience of the first Code. That is all that our Amendment is designed to recognise, and I am most grateful for the indication given by the noble Lord that it is acceptable to him and to his friends.

Amendment, by leave, withdrawn.

EARL JELLICOE

My Lords. I beg to move Amendment No. 3.

Amendment moved—

Page 2, line 34, after ("consult") insert ("(a)").—(Earl Jellicoe.)

EARL JELLICOE

My Lords, I beg to move Amendment No. 4.

Amendment moved—

Page 2, line 36, at end insert— ("and (b) except in the case of the first order made under this section, the Agencies.")—(Earl Jellicoe.)

Clause 13 [Power to modify subordinate legislation about prices and charges]:

LORD DRUMALBYN moved Amendment No. 4A:

Page 10, line 10, after ("be") insert ("contained in a statutory instrument").

The noble Lord said: My Lords, this Amendment puts right a minor drafting error. Clause 13(4) says: An Order under this section shall be subject to annulment in pursuance of a resolution of either House of Parliament".

The Amendment provides for it to be a Statutory Instrument as is the case with the other Orders, subject to Negative Resolution Procedure control, for example as laid down in Schedule 3, Part 1, paragraph 1, sub-paragraph (8). I beg to move.

Clause 14 [Protected tenancies]:

4.12 p.m.

LORD JANNER moved Amendment No. 5: Page 10, line 13, after ("tenancies)") insert ("and for paragraph (a) of section 1(1) of the Leasehold Reform Act 1967 (Tenants entitled to enfranchisement or extension) except for the words his tenancy is a long tenancy at a low rent and'").

The noble Lord said: My Lords, this is an Amendment which perhaps will be more readily understood if I read out the words in the Leasehold Reform Act of 1967. Section 1(1) says: … his tenancy is a long tenancy at a low rent and the rateable value of the house and premises on the appropriate day is not (or was not) more than £200 or, if it is in Greater London, than £400.

The purpose of this Amendment is to bring into line the rateable values under which the provisions of the Leasehold Reform Act prevail with those which will now prevail in respect of the Rent Act. I am not going into the long story of leasehold reform. At the time when leasehold reform was being pressed, some of us marched through the streets singing, under the leadership of Lloyd George, "God gave the land to the people". I am sure everyone in the House will realise that there was a long struggle to get leasehold reform passed. Eventually, both Houses agreed that if a person occupied a leasehold property for a very long period it became his home in the true sense of the word and it was entirely wrong to deprive him of the occupation of that home. The result was that after much debate the Leasehold Reform Act was passed.

I myself, and I am sure many of your Lordships, will have anticipated dealing with this particular subject. We now know—and I will try to cut my remarks as short as I possibly can—that if a person had a long leasehold of that nature, the fact that he or his predecessors had built the house and would have to keep it in repair, should mean that he ought not to be turned out of that house because the value of the site itself was really the only value which the original landowner or subsequent landowners were entitled to have in place of the ground rent which he had been paying previously.

To-day, a leaseholder is protected if the rateable value of the house which he occupies is £400 or below in London and £200 or below in the Provinces. Precisely the same position prevailed in so far as rateable values are concerned in respect of the Rent Act. Under that Act a tenant was protected and this clause, as it stands at present, intends to continue to provide similar protection for people the rateable value of whose premises is above £200 or £400 and are limited to the new rateable values. Your Lordships have passed that, and I think I am entitled to say, on behalf of those who hold long leases, that they should receive similar consideration. The principle obviously is the same for any house which is held under a long leasehold tenancy; I do not see how it matters whether the house has a rateable value of £50 or whether it will have, when the new rateable values come in, a value similar to that which would be given protection or which will relate to rented houses in so far as they are concerned.

It is counter-inflationary for this reason. Under the Leasehold Reform Act a person is entitled either to have the freehold or to apply for a lease for 50 years commencing from the time when his or her present lease expires. The amount that would be payable by way of ground rent in so far as that £50 is concerned would be very much less than the amount that would be payable if the tenant had not the protection of the Leasehold Reform Act. We have accepted the principle that a person who owns a leasehold of that description is entitled to protection in consequence of the fact that he has held the tenancy for all that time and has performed the various obligations which were placed upon him at the time when the lease was granted. If a person holds a tenancy of that description. the rateable value of which is above £400, in principle undoubtedly there is no distinction between the principle that is involved with the one and with the other.

One might very well say that since the time when the Rent Acts were introduced, starting from 1915—there was a big struggle about that, too—things have altered. To-day a person has to pay the value which a rent officer or tribunal would place upon the premises. But the fact of the matter is that in the case of long leases the individual whose lease comes to an end will be placed in a much more difficult position if he has to pay the kind of rent that would be imposed if he came within the terms of the Rent Act, as compared with what he would have to pay if he had applied for a lease of 50 years under the Act which protected him. The same thing applies, naturally, to the value of the freehold. As your Lordships will know, the principle in the Leasehold Reform Act is that the value of the site alone is the amount that a leaseholder has to pay if he applies for enfranchisement of the leasehold. That is a very different sum indeed from the sum he would have to pay if he had to buy the house when his lease terminated.

I drafted this Amendment rather rapidly and it may very well be that the drafting will have to be improved, and perhaps some ancillary provisions will have to be inserted in order to make the drafting fit the occasion to which I am referring, but I cannot see that there can be any argument at all against putting into a Bill which provides for protecting people against inflation a similar provision enabling the long leaseholder to have the same rights under the extended rateable values as he had before. It would be quite illogical not to do this, in so far as the Leasehold Reform Act is concerned, and at the same time to increase the rateable values in so far as the Rent Acts are concerned. If any noble Lord requires further explanation I shall be happy to give it. It is a long subject and one which has taken up a considerable amount of time in Parliament for very many years. Perhaps with the explanation I have given your Lordships may find it agreeable to concede the point which I am making in the Amendment. I beg to move.

4.12 p.m.

BARONESS YOUNG

My Lords, at the Committee stage of this Bill the noble Lord, Lord Janner, asked me a question about the Leasehold Reform Act. I did not at that stage suggest that the Government had any proposals for amending that Act. The purpose of the Amendments the Government have moved on the Counter-Inflation Bill concerned with the Rent Acts is to give the protection of the Rent Acts to tenants who would not otherwise have had this protection. The Amendments are more complicated because of rating revaluation, which takes place on April 1 this year; the Amendments must, therefore, take account of these changes of valuation. But the arguments for raising the rateable value limits in the Rent Acts have been based on the particular situation relating to the scarcity of flats at these rateable values.

The purpose of the Leasehold Reform Act 1967 is quite different. The Act was designed to enable a limited group of people to acquire the freehold of their own homes, and the purpose of this Amendment would be that owners of long leases, over 21 years, of houses of rateable values below £1,500 in London and £750 elsewhere would be able to acquire the freehold of their homes compulsorily at a price either agreed or settled by the Lands Tribunal in disputed cases. The Government have announced their intention, in due course, to raise the limits for dwellings which enter the valuation lists for the first time on or after April 1, 1973, to £1,000 in London and £500 elsewhere; that is, on the same formula of 2½ times the present rateable value limits; but this change is designed simply to ensure that a home which would have been within the scope of the Act if valued before April 1, 1973, will also be within its scope if valued after that date. Such a change is, therefore, designed to maintain the status quo.

However, the extension of the rateable value limits do offer some further protection to long leaseholders. The purpose of these measures has been to protect tenants. The present position is that at the end of a tenancy at a low rent—that is to say, a long leasehold tenancy of the sort that Lord Janner has described—the tenant, under Part I of the Landlord and Tenant Act 1954, may stay on as a protected tenant with the same rights as a Rent Act tenant. The effect of raising the Rent Act limits is to enable long leaseholders in the new rating bands proposed by the Government for Rent Act purposes also to have this increased protection; that is to say, at the end of their leases within the higher rateable value limits they will become protected tenants and able to agree upon a fair rent. It does not, however, give a right of enfranchisement, which is another issue. I hope that the Government have gone at least part way to meet the kind of point the noble Lord. Lord Janner, has raised, and that he will feel able to withdraw his Amendment.

LORD JANNER

My Lords, I should be very ungracious if I were not to agree that a good concession has been made in the direction in which I am aiming. With the greatest respect to the noble Baroness. I do not think it is logical to say that the positions are not comparable. If she will think again, I believe she will realise that, having accepted the principle that a person is entitled to his home, there is a resemblance between the two cases of the Rent Acts and the Leasehold Reform Act, and that logically the position should be extended to the owners of long leaseholds.

I appreciate, of course, that the Land lord and Tenant Act gives similar protection, security of tenure, but it does depend on the rent officer—this is the difference—and ultimately on the rent tribunal as to what kind of rents they fix. It is a very different thing from the provisions contained in the Leasehold Reform Act. That is where there is inflation so far as the owner of a long leasehold is concerned. But, be that as it may, I should like the noble Baroness to let me know whether this provision will be brought in fairly soon. If it is not brought in fairly soon, the tenant will have an assessed rental which is different from the one he would have if the Leasehold Reform Act were extended to a higher rateable value. I hone that I have made myself clear. If the noble Baroness will be good enough to say that the Government will consider bringing this in fairly speedily, so that there is no inflationary effect upon tenants with long leaseholds, I shall be grateful to her and to the Government. But I should like to have an assurance on that point, because it strikes at the heart of the point I have raised.

4.21 p.m.

LORD HALE

My Lords, I was reluctant to intervene in this discussion because, first, I have a direct personal interest in leaseholds in that I occupy a long leasehold house. But, secondly, my rateable value is already within the prescribed limits, so that I have no personal advantage to derive and therefore no possible real interest. Thirdly, I was a member of both of the Leasehold Committees, the first under Lord Justice Uthwart and the second under Lord Justice Jenkins, which produced the Act of 1954, and I was a signatory, with the late Mr. Justice Ungoed-Thomas, whose recent death I personally—with I am sure everyone here—greatly deplore. He was of course a very valued colleague in another place. Fourthly, when the debate on the Act of 1967 took place I rose and said that I would take no part in it, because I had a direct personal interest in those revisions. Fifthly, I bitterly regretted that rather priggish decision, because I think that the Act of 1967 finished in a most unsatisfactory state. I ask members of the Government to realise, whatever their views about this matter, that, in the main, what has been given to tenants is an opportunity for extremely expensive litigation, sometimes against extensive landlords who have a tremendous interest and who, quite rightly, are almost certain to take a case to the House of Lords—because, as the noble Baroness knows, what is done does not entirely depend upon rent officers or indeed upon the special tribunal. There are cases pending at the moment, and quite a long time will elapse before a decision is given and until that longterm litigation is terminated tenants' interests, such as they are, are limited and in abeyance.

I am very grateful to the noble Lord, Lord Janner, for having moved this Amendment. The difficulty I am in is that I arrived to-day and tried to understand the debate with a copy of the Counter-Inflation Bill which is out-of-date, because—as I ought to have known—the Bill has been reprinted since the Committee stage. Then, while I was out getting an up-to-date copy of the Bill, somebody "pinched" my Marshalled List of Amendments—I am sure without malice aforethought, and I do not make any imputation against any noble Lord or noble Baroness. So that I have been in some difficulty in finding out precisely what this Amendment means. Also, I hope I may say without offence to my old friend the noble Lord, Lord Janner, that even his very clear exposition left me still not quite sure. I understand that the noble Baroness now has a little more to say than she said in Committee. In Committee, she said that the Government had no intention of legislating on this subject, but I think she now says that there is a possibility. Indeed, I have read in the Press, from which I get most of my information, that that is the intention. If that be the intention, then I would say that the noble Lord, Lord Janner, having received the explanation for which he asked, might well think that that is a valuable promise which we should accept and that we should then venture to make further representations, though not in the course of this debate. That is the course that I propose to take if I have correctly heard and correctly apprehended what the noble Baroness said.

BARONESS STOCKS

My Lords, may I confess that I think I "pinched" the noble Lord's Marshalled List of Amendments? I thought that the noble Lord had left the House.

LORD JANNER

My Lords, may I ask whether I can have a reply to the question that I put as to time?

LORD SHINWELL

My Lords, I am not sure whether one can do this in your Lordships' House, but may I raise a point of Order? Are we not on the Report stage and, in those circumstances, does the noble Baroness not require to ask leave of the House?

BARONESS YOUNG

My Lords, I hoped to ask for leave of the House in order to answer the question of the noble Lord, Lord Janner. I hope, therefore, that I am in order. I should not want there to be any misunderstanding on this point. I said that the Government have no proposals for legislating on the question of the Leasehold Reform Act, but what they have announced is their intention to raise the limits for leasehold enfranshisement on the valuation lists, to take account of the new rating values. But I am sorry that I am not in a position to give the noble Lord, Lord Janner, an indication of when that might be. I think the important point is that we believe that this subject is really outside the scope of what we are trying to do by these Amendments, and that the purpose of the Leasehold Reform Act is different from that of the Rent Act, although it just so happens that the scope of the two Acts in terms of rateable values is the same. What I have said is that, on the raising of the rateable values, a ten-ant will have the same protection at the end of his lease, and he will become a protected tenant at a higher rateable value. The Government feel that an agreed fair rent is not an inflationary measure.

LORD JANNER

My Lords, in view of the fact that I am partially satisfied with what the noble Baroness has said. and in the hope that eventually, she will "go the whole hog", I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.28 p.m.

BARONESS YOUNG moved Amendment No. 6:

Page 10, leave out lines 24 to 30 and insert— ("£300, and (iii) the dwelling-house on 1st April 1973 has a rateable value exceeding, if it is in Greater London, £1,500 or, if it is elsewhere, £750, or (aa) where the appropriate day in relation to the dwelling-house falls on or after the date of the passing of the said Act of 1973, but before 1st April 1973—

1. (i) the dwelling-house on the said appropriate day had a rateable value exceeding, if it is in Greater London, £600, or, if it is elsewhere, £300, and
2. (ii) the dwelling-house on 1st April 1973 has a rateable value exceeding, if it is in Greater London, £1,500, or, if it is elsewhere, £750, or")

The noble Baroness said: My Lords, in moving this Amendment, it may be for the convenience of the House if I take with it Amendment No. 7 and the further Amendments to Schedule 5. When moving new Clause 14 and Schedule 5 in Committee last week, raising the rateable value limits attracting the protection of the Rent Act from £400 in Greater London and £200 elsewhere to new levels of £600 and £300, I said that the Government would be coming forward with further Amendments on Report to do two things. First, I said that the Government were considering the possibilities for consolidating the protection of the Rent Act on rateable values that reflect rating revaluation on April 1, 1973. Secondly, I apologised to the Committee for the fact that the lengthy consequential and transitional provisions required to integrate these newly created regulated tenancies with existing Rent Act legislation had meant that we had been unable to get the provisions exactly right first time round.

These Amendments which we are now bringing forward are designed to achieve both these effects. I do not propose to take more of your Lordships' time than I need, and I will therefore not go over again the ground we discussed in Committee, or the reasons why the Government have included this provision in the Bill at this stage. I think we are all agreed that such a provision is now both just and necessary. Let me therefore turn immediately to these new Amendments.

The only new point of substance in these Amendments is that relating to subsection (1) of the new clause. It is here that we have been able to provide greater protection for tenants by consolidating on the new rating valuation lists. Under the clause as at present drafted, a tenancy would be a protected tenancy—and perhaps your Lordships will forgive me if, for simplicity, I use the figures for London only, and not those for the rest of the country as well—if either it had a rateable value not exceeding £400 prior to the date of enactment of this provision or, on that date of enactment, it had a rateable value not exceeding £600; or, if the appropriate date for the dwelling (the date it is first entered in the valuation list) fell between the date of enactment and March 31, 1973, the rateable value did not exceed £600 or, if the appropriate day fell on or after April 1, 1973, when the new valuation lists apply, the dwelling did not have a rateable value exceeding £1,500.

This Amendment now provides that a tenancy in a dwelling with a rateable value not exceeding £1,500 on April 1 will become a protected tenancy, notwithstanding that the current rateable value is over £600.

As I explained to your Lordships, the effect of rating revaluation has been broadly to raise rateable values by a multiplier of 2.5, but this is very much a broad average. In some cases, rateable values have increased little: in others, they may have increased threefold or more. It follows that to build the protection of the Rent Act on the current rating valuation lists would become increasingly anomalous and out-of-date after April 1, 1973. Indeed, the noble Lord, Lord Royle, drew our attention in Committee last week to people of his acquaintance who were currently in flats in Hove of a rateable value of £326 on the current valuation list, and so would still be outside the protection of the higher rateable value limit of £300 applicable to dwellings outside London which is brought in by Clause 14.

But the noble Lord, if I understood him aright. pointed out that after revaluation the rateable value of these properties would be less than the £750 limit proposed by the Government as the rateable value limit outside London for tenancies in dwellings attracting the protection of the Rent Act, if entered in the valuation list for the first time after April 1, 1973. These tenants will, if the facts are as I have just stated, therefore become protected on April 1, 1973.

Because in general one of the effects of rating revaluation has been to re-rate flats less highly than houses, there may be other cases similar to that related by the noble Lord where dwellings which are just outside the rateable value limits in Clause 14 prior to rating revaluation would fall well inside the new values and protection proposed from April 1 onwards.

I should also like to draw the attention of the House to one particular point in this new provision. If we had simply consolidated on the new valuation list by saying that protection was simply attracted by whether the dwelling-house had a rateable value on April 1, 1973, of £1,500 or less if it were London, then some tenants who would have been protected by Clause 14—for example, with a rateable value of £590—might have lost that protection again if, after the revaluation, their new valuation was, say, £1,600. The Government do not regard it as acceptable that anyone who would have expected to be protected on the basis of the current valuation list, or indeed has been protected so far, should lose that protection as a result of rating revaluation. The effect of the Amendment will therefore be to add a few more protected tenancies, but to ensure that no tenant loses his existing rights.

When we discussed Clause 14 in Committee it was urged upon the Government by several noble Lords that the new limits should be raised further, or even abolished completely. As I then said, there will always be some cases of apparent hardship wherever there is a border line, because those people immediately above the border line will feel that they do not have the benefits enjoyed by those immediately below it.

We have looked at this again; but I must tell the House that the Government are convinced that it would not he right to extend protection further up the rateable value scale thereby bringing in the most expensive and luxurious rented acommodation in the country. We believe that with very few exceptions tenants who can afford to rent accommodation at the sort of rents which are being charged at those levels are not in need of further protection from the Government.

The Amendment which we are bringing forward to-day will, we think, remove a significant anomaly from the clause as it now stands. and will bring within the Rent Act tenancies in the circumstances I have described. I hope your Lordships will agree that this will remove one possible major source of grievance which could have been caused by the conjunction of the raising of the rateable value limits and rating revaluation at about the same time.

In effect, it means that from April 1, 1973, all tenancies at a rateable value not exceeding £1,500 in London and £750 elsewhere will be protected tenancies. This, in the Government's view, is an indication of their desire to extend protection to those tenants who, as we have heard, are in genuine need. But for the reasons I have given the Government still believe that a line must he drawn somewhere, and, with the benefit of this additional protection which I have just outlined, that that line should be £1,500 in London or £750 elsewhere except in the case of tenants whose rateable value is at present below the existing limits and, after revaluation, will he over the new limits.

These figures correspond with those advocated by Members in another place. They represent something of a natural breakpoint among the distribution of properties at various rateable values; and. significantly, it is only above this level of rateable value that we have any evidence that there is any new building for renting going on. The Government believe that they have gone as far as it reasonable to do in the direction of extending the protection of the Rent Act. We accept that there may be a few tenants who will still be outside the new limits on April 1 and who would believe themselves hard done by. But that is, in a sense, unavoidable, and I hope the House will agree that it is what we have done here that is much more important. We are giving protection to about 16,000 new tenancies.

The rest of the Amendments now proposed all relate to Schedule 5, which sets out the consequential and, transitional provisions resulting from the need to integrate these new regulated tenancies with the existing body of rent law. I hope your Lordships will accept my assurance that these are all entirely technical points designed to avoid ambiguity in what inevitably is a complex and technical piece of drafting. There are no new points of substance here whatever. While I will therefore do my best to help should your Lordships seek clarification, I would not propose to weary your Lordships with the long explanation that would be required if I were to take your Lordships through the new Amendments line by line.

I hope that these Amendments will meet the fears voiced by the noble Lord, Lord Royle, at Committee stage. Perhaps I might also take the opportunity to confirm that the protection of the Rent Act is not lost by any tenant as a result of these new measures. At Committee stage, the noble Earl, Lord Kinnoull, asked what would happen in the case of a tenant who, for example, on rating revaluation found himself in a property with a rateable value in excess of £1,500 even though he would have been under £600 on the current valuation list. The answer is quite clear: he would retain his protection. My Lords, I beg to move Amendment No. 6.

LORD BESWICK

My Lords, we are grateful to the noble Baroness for explaining these Amendments so clearly and so fully. As she says, they extend the margin of protection, and to that extent we welcome them. I am not certain that they will cover the particular cases that my noble friend Lord Royle had in mind, especially if we use the multiplying factor of 2.5 on the rateable values that he quoted; but, nevertheless, it is possible that they may provide protection.

I gather that the arrangements now mean that 80 per cent. of all tenancies will be protected. I do not myself see why we should not have gone the whole hog. The noble Baroness said that she must draw the line somewhere. Why should the noble Baroness have this passion for drawing lines? Why should we not go the whole hog? What is to be lost if we go the whole hog mid extend the protection to all tenants? I find it strange that the noble Baroness, a Conservative Party supporter of such impeccable qualifications, should say that if we go any further we should be protecting those with expensive tenancies. What a curious revelation.

I am not so concerned about expensive tenancies; but I think there is an argument for extending protection to cover all because such protection would have some effect on the price of land. It is only because it is possible to quote and secure exorbitant rentals that the price of land goes up exorbitantly. If there were a limit to rentals, there would be something of a curb on land prices. To that extent I think there would be value in extending protection even further. Nevertheless the noble Baroness has gone some way to meet the case put by my noble friends, and I am sure that the Amendment will be generally acceptable.

BARONESS YOUNG

My Lords, I beg to move Amendment No. 7 formally.

Amendment moved—

Page 10, line 35, at end insert— ("(2) In section 1(3) of the Rent Act 1968 (questions on limits of rateable value) for the words subsection (1)(a)' there shall be substituted the words 'subsection (1)'").—(Baroness Young.)

Schedule 5 [Rent restriction]:

BARONESS YOUNG

My Lords, I beg to move Amendments Nos. 8 to 18 inclusive. They are all consequential Amendments.

Amendments moved—

Page 34, line 28, leave out sub-paragraph (3).

Page 34, leave out line 33.

Page 34, line 41, leave out sub-paragraph (5) and insert— ("(4A) Sub-paragraphs (2) and (4) above shall cease to apply if the landlord and the tenant so provide by an agreement conforming with the requirements of section 43(3) of the Housing Finance Act 1972 (agreement to explain the nature of the tenant's security of tenure). (5) Sub-paragraph (2) above shall not apply where a rent for the dwelling-house is registered under Part IV of the Rent Act 1968 which is not less than the limit specified in paragraph 2 below.")

Page 35, line 6, leave out ("at that date") and insert ("as limited by the said Article 10 immediately before that date").

Page 35, line 8, leave out from ("applies)") to end of line 11 and insert ("at the passing of this Act.")

Page 35, line 15, leave out subparagraph (2) and insert— ("(2) In this paragraph "the previous terms" means the terms of the tenancy (to which paragraph 1 applies) as at the passing of this Act]").

Page 36, line 35, at end insert— ("(6) In this and the next following para- graph "grant" includes continuance and renewal.").

Page 36, line 37, after ("tenancy") insert ("and a premium had been lawfully required and paid on the grant, or an assignment, of the previous tenancy").

Page 37, line 23, leave out ("then been in force") and insert ("come into force before the tenancy came to an end").

Page 37, line 35, at end insert— ("(4A) Where Article 10 of the Counter-Inflation (Rents) (England and Wales) Order 1972 applied to the rent under the tenancy, the rent under the tenancy imposed by subparagraph (4) above shall be the rent as limited by the said Article 10. (4B) Paragraphs 1 to 4 of this Schedule shall not apply to a statutory tenancy arising under sub-paragraph (4) above.").

Page 37, line 41, leave out sub-paragraph (6) and insert— ("(6) If at the passing of this Act the dwelling-house is occupied by a person who would, if the tenancy had been a regulated tenancy, have been the "first successor" within the meaning of paragraph 4 of Schedule I to the Rent Act 1968—

1. (a) an application under sub-paragraph (3) above may be made by that person, and
2. (b) sub-paragraphs (4), (4A) and (4B) above shall apply where that person retains possession as they apply where the tenant retains possession.").—(Baroness Young.)

4.42 p.m.

LORD DRUMALBYN

My Lords, I beg to move that the Bill be now read a third time. It may be convenient if I say a few words on this Motion. It is a very important Bill albeit a short one. I think that we are all agreed that our future prosperity as a nation, and all our efforts to improve standards of living and the equality of life, depend on our ability not just to remain competitive but to become more competitive and to resume our place among the leading nations of the world in innovation and technology. We have so to increase the pace of growth as at least to bring it into line with that of other industrialised nations if we are to afford to the British people the same tempo of social progress as is taking place elsewhere. At present we have a greater pace of growth. The question is whether we can keep it up. The one thing that can retard or even block progress is a resumption of the intolerable rate of inflation which we were experiencing in the second half of last year. I believe that we all recognise this.

We on this Bench are sincerely grateful for the willingness of your Lordships to deal with this Bill expeditiously so that we can bring to an end the present standstill and get the normal process of negotiation and settlement moving again. But not only must the process be normal; the level of settlements must also be brought down, or brought to a more normal level, or we shall cease to be competitive. We shall cease to be competitive if our levels of increase in wages and wage settlements are higher than those in other countries. We should all be thankful that the standstill has been so widely accepted and observed. That fact shows that as a nation we have recognised the need for it and are still capable of pulling together, even though the water is choppy and the cross-winds often gusty, if I may use the terms of the sport topical at this time of the year.

The main thing is that undoubtedly there is a considerable degree of agreement. The noble Lord, Lord Robbins, in his usual moderate way, put it like this: I cannot believe that there is a great difference of opinion between both sides of the Committee on the matter of introducing as much reason, as much conciliation, as possible into the discussion of the frightful mess we find ourselves in at the present time. He certainly did not exaggerate. The noble Lord, Lord Wigg—and I am sorry to see he is not in his place—was characteristically more emphatic. He said: I believe again that through the length and breadth of these islands there is agreement that there ought to be a prices and incomes policy. I do not want to minimise the points of disagreement. There are those who feel that the policy will fail unless we allow special cases to be dealt with more generously than all other cases, right now. Equally there are those who feel that the policy will fail if we do so. The question is this: on what principles should we deal with the special cases? The noble Lord, Lord Garnsworthy, moved an Amendment in Committee dealing with the allowance payable to employees in the London area, with the London teachers particularly in mind. In responding to my noble friend the Duke of Atholl the noble Lord, Lord Beswick, said this: If this Amendment is accepted, as I hope it will be, then certainly we should also want to extend it to include special consideration of the hospital workers and the farm workers. The question that arises is what principles would be applied in the special consideration that is to be given? This is precisely what has to be determined. It is precisely what is in the terms of reference which have been prepared for the Pay Board. They will be asked to study relativities and anomalies and to report not later than September 15. In particular, they will be asked to assess the scale of the problem, to indicate the factors to be taken into account in deciding whether a particular case qualifies to be treated as an anomaly, to suggest clear principles on which progress might be made in Stage 3, and to make recommendations in regard to priorities which seem to them right. Those are the principles which have to be determined.

The one principle—if I can dignify it with the word "principle"—on which it would be neither fair nor sensible to determine what were special cases, would be the amount of fuss and commotion that particular groups may make. These matters cannot be determined on the basis of decibels and disruption. Of course, groups feel strongly on their own case; but we are convinced that it is only by looking at cases put forward as special both side by side with and in relation to the general level and spread of remuneration, the cost of living and other factors, that they can be dealt with in a way that is fair to those involved and to the public at large.

This brings me to the question whether there should be two agencies, or one agency divided into two divisions, which is another matter on which there is a difference of opinion. I was glad that the noble Lord, Lord Beswick, made it clear that he was not getting this out of proportion. No one can pretend that if only we conceded this we should be assured of complete co-operation and harmony on all sides. It is simply a point of difference of the kind one naturally meets in Bills of this sort.

My Lords, let me summarise the Government's aims in this Bill and their policy to reduce price levels. What the Government are doing is to mount a coherent and thorough-going attack on the scourge of inflation. Previous experience has shown that there is no use in taking half measures which are quickly allowed to lapse, with the result that the canker re-emerges with redoubled virulence. That is why the Bill provides powers for three years. This time we shall not let up until we see that inflation is really under control.

The Government made determined efforts to get voluntary arrangements and the Bill is in a form which still allows these to continue, but when it became clear last autumn that voluntary agreement was not possible at that time, the Government introduced a standstill on wages and prices. Shock treatment of this sort was unavoidable. No country could tolerate a continuing acceleration in the rate of increase of wages far in excess of that of price increases; and as your Lordships know, the rate of wage increase had reached 17 per cent., well above that of our major competitors. The nation as a whole has responded magnificently to the standstill despite the difficulties it undoubtedly caused both for some wage earners and also for manufacturing industry. As a result of this response the rate of price inflation slowed down dramatically. But a standstill cannot deal with the fundamental problem of inflation; it can afford only a breathing space in which to introduce long-term policies. That is what we are doing in this Bill.

In Phase 2 of the policy we are devising a controlled relaxation of the restraints on wages and prices. This will help to alleviate the difficulties of those who have suffered on both sides of industry in the standstill, but it will, at the same time, consolidate the advantage of that standstill and its process of deceleration. In Phase 2 people will be able to obtain higher wages under a process of free bargaining within a ceiling rate which represents the most that the country can afford; and at the same time manufacturing industry will be free to pass on certain of its unavoidable costs, but will be prevented from expanding its profit margins. That, of course, will allow it to increase its profit if it also expands its turnover.

My Lords, I shall not pretend that this stage of the policy will be painless. Of course it will not. But I believe that the country as a whole recognises that this continued restraint is necessary if we are not to slip back into the old dis- heartening succession of wage demands, extravagant settlements and continuous price increases, with their accompaniment of distress and disruption. Just as the standstill was not in itself a sufficient policy to beat inflation, neither will Phase 2 be. During the period of Phase 2 we shall be thinking about subsequent stages of the policy and consulting and discussing with others. We earnestly hope that these stages can be operated voluntarily. If they cannot, there are powers in the Bill to prevent the advantages we have hitherto gained from being dissipated, and in that case the powers would be used. The hallmark of the policy must be flexibility and adaptability. The situation may change and the priorities and the needs may change in consequence. The machinery must therefore be capable of constant adaptation. My Lords, I believe that the country as a whole will continue to support these further stages of policy as they see the seeds of steady progress that we are now sowing beginning to fructify. I hope that this policy will receive the support of noble Lords on both sides of the House, and I beg to move.

4.53 p.m.

LORD CHAMPION

My Lords, although we on this side of the House are critical of some aspects of this Bill. and certainly of much of the Government's economic policy, the Opposition has facilitated the passage of the Bill because we want to see Phase 2 in operation as soon as possible for the sake of those whose wages are at present frozen. With the noble Lord. Lord Drumalbyn, I regard this as one of the most important Bills to pass through this House during the life of this Parliament. It is certainly deserving of a few comments on how it ought to be operated and perhaps on its effect on existing organisations and institutions; because it is bound to have an effect on those if it is to do what the Government hope, and what indeed the country hopes, that it will do. This Bill will be on the Statute Book in a few days' time. Phase 1, with its freeze on wages and partial freeze on prices, will be over. Phase 2 will be started, with its code-imposed control of prices and its limits on wages and dividend increases. That stage, we understand, is expected to last until about November of this year, which means that there will be about six months during which the Government and the Agencies have to prepare for the crucial Phase 3. The period of Phase 2 will be the testing time of the Government's and the Pay Board's ability to conceive and to get accepted a system of industrial relations which will mark a departure from the past, in which each union used its separate power—often in the spirit of "I'm all right, Jack"—to achieve the maximum advantage possible for its members, regardless of the consequences to others.

At the same time the Government and the Price Commission must demonstrate their readiness to control prices and profits in such a way as to open the road to a general acceptance of the counter-inflation policy. That is what is wanted—a general acceptance. It looks to me as though, by their failure seriously to tackle the sensitive area of food prices, the Government have made a very bad start. I do not believe that a subsidy on selected foods would have created the difficulties the Government fear, As I said in my Second Reading speech, I certainly would not press for an open-ended subsidy, but I believe that something could have been done in that regard which would have had some effect. But, so far as I can see, there is nothing in the Bill to prevent the Government from looking again at that aspect of an incomes and prices policy in order to use it as a bargaining counter in the negotiations with the T.U.C. For if a workable incomes policy is to become part of the economic future, somehow the T.U.C., the trade unions, have to be brought back into consultation, with the hope that we all have of an agreement.

My Lords, I am a firm believer in some form of incomes control for I am by no means satisfied that we can hope to secure much industrial peace in modern conditions without some such control. Looking at this matter in relation to the somewhat narrow field in which my little competence might lie—that is, the trade union area—I should like to see developed an acceptance of trade union responsibility for helping the nation to improve its economic health. That could be done without in any way losing the defensive role of the unions, but it would mean the acceptance of new functions in keeping with the powers of the unions which have been greatly enhanced in the years since the end of the last war. They have of course been tremendously enhanced by events. It would mean the acceptance by the unions of a challenge to represent the community in the councils of the nation. The trade unions have secured vast improvements in the standard of living of workers; but as I look around I am conscious of the extent to which it would be possible to increase the size of the national cake if we all got down to it. The folly of strikes, the stupidity of restrictive practices, is part of the wastefulness which prevents us from realising our full economic potential as a nation; but there is no need to enlarge on that.

It is not only the trade unions which must think of this. It must be thought of by management, and management must he expected to co-operate with the unions in endeavouring to secure that economic future that we all hope will come. The future health of our industrial relations cannot be achieved under a system in which decisions are taken industry by industry. There must be an incomes policy. But no incomes policy should be a policy for the preservation of the status quo There is undoubtedly a need for a radical reform of the institutions and practices by which our incomes are settled. The Donovan Commission pointed to the fact that there are about 500 separate industry-wide negotiating arrangements in Britain for manual workers alone; and it is impossible to reckon the number of shop floor agreements which supplement, and in some cases distort, national agreements. The difficulties that all that brings in its train are obvious to us all. Taking decisions industry by industry results in a distortion of incomes, so often having little or no relevance to the standard of the scales involved or of the responsibilities carried.

A new factor is increasingly showing itself, and it is that of the growing assertion of power by workers who for so long felt that they were powerless chiefly because they were in the service industries. Real power seemed to reside in the ability of groups of workers to stop the boss from making profits, which still is the case, for example, in companies like Fords. But there is the growing realisation of power to hurt the community at large by groups which used to drag along far behind the workers who could exert the pressure and power that they felt they lacked. An element of this realisation showed itself in the strikes of dustmen, hospital workers, gas workers, civil servants and railwaymen. All of this, in my opinion, makes it necessary to achieve something of an incomes policy, not only to control inflation, but to achieve something like fairness over the whole field of the division of the national product. The whole structure of differentials and relativities in incomes is in urgent need of reform.

My Lords, what I am saying in this context means that I am not one who is prepared to bend the knee before the sacred cow of free collective bargaining, if free collective bargaining means the continuance of the inequalities and injustices which exist in our division of incomes. This is something of the nature of the task awaiting the Government and the Agencies: and, my Lords, it is a monumental one.

Of course, this is not only a job for the Government and the Agencies created by this Bill. It is a job for the trade union movement, too, which means that it must reform its structure. In my opinion, this means adding to the T.U.C.'s authority as the representative of the unions in dealing with the Government by giving that body executive power, which is certainly something that it does not have at this moment. To achieve that is something of a long-term task, but the preparations have to begin now, and as a part of that preparation the T.U.C. has to be brought to the conference table. To get the co-operation of that body a greater element of fairness has to be injected into the Government's policies and actions. The failure to do anything realistic and demonstrably fair about food prices while wages are frozen rankles immediately. And the Government's tenderness towards the rich, as evidenced in the Budgets of 1971 and 1972, is a factor, and a continuing one.

If these are only excuses advanced by the T.U.C. to avoid the responsibilities of the conference table, I say to the Government: remove the excuses and expose their failure to the public (I believe that if these were removed the T.U.C. would come to the conference table), a public which I am convinced wants to see infla- tion controlled and the national income more fairly divided.

The first priority under Stage 2 is to prepare to meet the existing threat from what we have come to consider as the special cases. The noble Lord, Lord Drumalbyn, in his speech asked: what principles? Then he answered his own question, rightly, by saying that this must be a matter for the Pay Board. You place this on to their plate.

LORD DRUMALBYN

Perhaps I might clarify this. This is a matter which is being remitted to the Pay Board to study and report on.

LORD CHAMPION

That is what it is all about, is it not? The Government are asking the Pay Board to advise them on the principles to be followed. Surely this is what I was trying to say. In this connection I think that perhaps the solution to this problem—and it is a very big problem—would be aided if, for certain special cases which the Pay Board might consider, we could bring the operation of Stage 3 a little nearer than November of this year. This is a point that is perhaps worthy of consideration, because it is a factor which is causing much difficulty. My Lords, much of what I have been suggesting is essential if an incomes policy is to succeed. I am firmly of the opinion that a successful incomes policy is vital to the future of this nation, and if it is a just one, I do not care who puts it into operation, whether it is a Labour Government or a Tory one.

5.7 p.m.

BARONESS SEEAR

My Lords, I should like to apologise to the House before I make the few brief remarks I intend to make from these Benches, and particularly to the noble Lord, Lord Drumalbyn, because. unfortunately, due to a previous engagement entered into many weeks ago, I shall have to leave before the winding-up speech. It may be recalled that on the Committee stage from these Benches we gave genuine but reluctant support to this legislation: genuine because we recognised the need for some policy of this kind at the present time; reluctant because we believe, as we think the Government also believe, that it would be a great deal better if we could get a tripartite voluntary scheme; and in order to keep this before the eyes of all concerned, we consider it highly desirable that this Bill, when it becomes an Act, should be renewed at least every year, not run for a three-year period. But it is quite obvious that we shall not get to a voluntary scheme until there is a widespread and genuine acceptance of the need for a rational incomes policy. Until this is accepted on all sides, by the T.U.C., the C.B.I., the rank and file of both employers and employees, and by the general public, then alas! we suppose that the statutory policy must remain.

What is it, then, that will ease the way towards a voluntary scheme and bring about the attitude of mind in all parties that will make this solution possible? It is surely evident that it should he seen that the Government care about the hardship that is involved in these proposals, and that they are striving always for equity in the proposals put forward. On the question of hardship, it is apparent, as the noble Lord, Lord Champion, was pointing out, that the most serious issue is that of rising food prices as they affect those less able to pay them. But, my Lords, we from these Benches did not support the Amendment for the subsidisation of prices and we are quite unrepentant in this regard, because we believe that the general subsidisation of food prices, even if only on a limited list of selected foods, means that that assistance goes indiscriminately to rich and poor alike and that it subsidises the food eaten by Members of your Lordships' House as well as the food eaten by the lowest paid workers in this country. Moreover, a subsidy allows no possibility of "claw-back".

Instead of this we believe that support should be given by concentrating on those two groups most patently affected by rising food prices: on the one hand the pensioners, and on the other hand families with young children. Therefore we wish that the Government would bring forward an additional payment to be made to pensioners and that they would once again consider the possibility of paying a family allowance for the first child. That would do more than any other single change to ensure that no hardship arose from rising food prices. I repeat that it is not the low paid who suffer most from rising prices: it is the low paid with family responsibilities. Moreover, if this additional payment was made there would then be a "claw-back" from those families who are most able to pay for the increased cost of food.

I should like to take up a point which was made at Committee stage by the noble Lord, Lord Wigg. He pointed out—and it is absolutely true—that restraint on pay means that extra pay is lost for ever, while restraint on dividends inevitably means, if the business prospers, that the capital value of that business increases and therefore the advantage to those who own the equity is merely delayed. However, I should have liked to point out to the noble Lord, Lord Wigg, if he had been here, that if the Government had not said they were going to restrain dividends, the noble Lord would have been even more indignant. But surely there is a third way, my Lords—a way that would not merely restrain or not restrain, but a way which was foreshadowed in the Budget proposals. It is clear that to some extent the Government is at long last about to adopt the Liberal proposals—I was about to say the "age-old Liberal proposals"—on employee share-ownership.

Here surely we have a first-class opportunity to get widespread development of employee share-ownership off the ground. The dividends which are held back by the company could in some way surely be turned into a fund which would form the basis of the development of employee share-ownership. An agreed distribution between the existing equity owners and the prospective employee share-owners is one way in which the noble Lord, Lord Wigg, could be assured that money which had been held back as a result of dividend restraint would not, at the end of the day, or at the end of the year or whenever the end does come—it is difficult to say when it will be—go into the pockets of the existing owners of the business. Surely at this moment of time we have an opportunity to synchronise the policy of dividends and the policy of the development of employee share-ownership on a really substantial scale. I would very seriously submit that proposal. The last thing I wish to say before sitting down is that if these two moves are to be made then it could be demonstrated that the Government are working to prevent real hardship in the most effective and economical way and are using this situation to launch a really creative and new development in the ownership of industry.

VISCOUNT MASSEREENE AND FERRARD

My Lords, before the noble Baroness sits down, may I just point out to her that for many years now a number of companies have attempted schemes for employee share ownership, but the trouble has been that the average employee goes and sells his shares instantly. The employees do not want the responsibility. This scheme has been tried by some companies for many years, and I have had some slight experience of it. It is very difficult to make so many employees keep their shares.

LORD CAMOYS

My Lords, I have only a very few words to say. First of all, management must manage: and I know of several public companies where the members of the board have never been on the shop-floor. Secondly, I would suggest that all important companies should ask their local T.U.C. leader to become a member of the board, or appoint a representative to go on the board. We have done this in a company with which I have been connected, with great success. Thirdly, I believe that there should be a review every three months and that wages, and so on, should automatically go up by the same amount as the increase in the cost of living—7 per cent., 7½ per cent., whatever it is—because that would be the only fair thing. There are certain special cases which might be instanced, but I realise the Government do not want to discuss that at the moment. Last of all, of course, the workers must work: otherwise we have "had it".

5.17 p.m.

LORD BROWN

My Lords, I have spoken in the past about certain ideas which are dear to my own heart—for example, on the question of wage differentials—and in this case I am not going to make a long speech. I would only say that one of the things that distresses me about the Government's plans as envisaged in this Bill, necessary as they may be in the light of the situation into which as a nation we have got ourselves, is the fact that there is no clear mechanism contained in the Bill for adjusting dynamically over the years to come the differentials between various types of employment. Admittedly the Pay Board will be assailed by people who claim that they are lower paid than they ought to be, but the great need in this country is to get to a situation where pay in the different employment groups is better related to the importance of what they do—and who is to judge that except those who are involved, namely the trade unions themselves?

I believe we are up against a constitutional problem of considerable magnitude. It is not solely an economic problem. Until this is recognised and the necessary institutions are built—and these institutions cannot be represented by a body appointed by the Government to decide what differential payments should be—these decisions must be taken by the people involved, namely the trade unions, because they have the power to enforce decisions that arise out of their deliberations. It seems to me that something like this is essential. We should never have fallen into this position, but we shall remain in it so long as we fail to recognise a constitutional problem when we see it. I say it is a constitutional problem, because we are concerned with the emergence of great power groups in our society who are in fact taking part in government without being involved in the Constitution. I am not referring only to trade unions. Until we recognise this and do what this country did in the 19th century and gradually adjust our franchise and take various other measures to take account of the emerging power groups, we shall find no permanent solution to this problem. The fact that it is a constitutional issue is clearly very much in the forefront of the minds of the Government, even though they intend to get this Bill through.

LORD ROBERTHALL

My Lords, I rise to associate myself with the good wishes for the future of this Bill which have been expressed from all parts of the House. I was glad to hear the noble Lord, Lord Drumalbyn, say that it was necessary that there should be a continuous policy for prices and incomes. I have believed for many years that the kind of inflation from which we have been suffering—essentially a cost inflation—has been a by-product of full employment. Full employment has brought enormous benfits to the community. Anybody who remembers the position of the downtrodden and poor before 1939 and after 1945 will realise what a transformation has come over this country because of full employment. But, unfortunately, it has brought with it the problem of cost inflation, which is a pointless affair for most people: their incomes go up and prices go up. The people who benefit are either the rich or the strong unions; the people who suffer are the weak.

Two previous attempts have been made to deal with this problem—the first under Mr. Selwyn Lloyd and the second under the last Government—and both had the right ideas. What was wrong in each case was that the attempts were abandoned. I believe that if we can only stick to this idea now as a permanent feature of our policy people will realise how much better off they are just keeping to the steady rate of growth and not complicating it by inflation.

I agree with a great deal that the noble Lord, Lord Champion, said towards the end of his speech. As I said on Second Reading, we are suffering from the fundamental difficulty that we do not know what type of society we want to make. It may well be that some further redistribution of wealth and income will make us happier and more contented. I am absolutely sure that the way to do that is through the tax system, and not through this self-frusrating way of trying to do it by inflation. I do not think that we shall ever be able to get on to the problems which the noble Lord raised until we have disposed of this inflation problem. I hope therefore that the noble Lord, Lord Drumalbyn, is right when he envisages this as a permanent feature, whether you have to use it or not in a particular year. The speeches on both sides of the House show that it would be accepted, even if we all think it would be best if it were a reserve policy. But whether it is a reserve policy or not, let us keep it.

5.23 p.m.

LORD DAVIES OF LEEK

My Lords, I am glad that I gave way to the noble Lord; I agree entirely with his opening remarks. I am glad that the clock is working because I assure the House that I shall be brief. There are certain fundamental features worth mentioning before those on this side of the House and in the trade union movement recognise that "management-bashing" is not enough. It is undoubtedly true today—and any of us who read the papers dealing with industry and finance know this—that within the best of management there is a struggle to understand what is taking place in society to-day. The best of the trade union movement, and its leadership, realise that.

We know that without the three-legged stool of the C.B.I., the trade union movement and the Government taking part, we cannot get a stable system of society. Let us face the fact that the old laissez-faire of Adam Smith is as dead as the dodo. I do not want to go into detail about the international system of monopolies and mergers, although I could do so with ease, because everybody in this House understands what I am saying without my giving such illustrations. In a good many cases there is a system of standard prices throughout the world which have nothing to do with honest to God competition. "Powellism" (as it is spoken sometimes with clipped logic) will not work in the present world. The Conservative Government says—and I know they mean it—that they also look at the human side of life; that you cannot allow humanity to be subject to the wild forces of competition. It is interesting for somebody in my age group to tell the House in passing—and I notice that I have been speaking for only a minute—what people of my age group considered to he a crisis. Those of us who managed to struggle and get something of a decent education, and who lived in the bad old Thirties, considered it a crisis when there was no money whatsoever in the house; when we had to pawn things to live, and when we saw the misery of abject, vicious, evil poverty.

If one mixes in the pubs and clubs anywhere in Britain—for instance, after a rugger match in South Wales—during the most critical monetary crisis one finds money galore. This is no denigration of the intelligence quotient of the man in the street, but he finds it difficult to understand when a crisis is in existence. Consequently, inflation is the centre of a successful civilisation. I believe, therefore, that inflation is the price of civilisation. Any of us who have studied economics or industrial history—and I remember going through these things years ago—can see that the price of civilisation is inflation.

But how do you deal with inflation when there is full employment, as the noble Lord pointed out? First, compared with before the war there has been a remarkable growth in output and productivity in all the main industrial countries of the world. But Britain lags conspicuously, and we can understand this. We were bled to death in the Great War. For a while, despite America and Russia, we stood alone, and we have paid the price for that. I sometimes wish that international bankers, and others, who like to give us a few lessons, would remember that much of their banking would not have existed had it not been for Britain in the 12 months that she stood alone. Secondly, I believe that there has been even more rapid growth of trade in manufactured goods between the industrialised countries, together with a continuous growth in the number and size of multinational companies. This has greatly increased internationalisation of economic life and has made every country in the world more sensitive to price and wage rises.

Thirdly—and, as I said the other day, these words were first used by Eisenhower—a revolution of awakening expectation has hit the workers, too, and their living standards have naturally gone up. That is how it should be. I should have liked to see some limit on Government expenditure in the military field. Do not get me wrong: we need to be fairly secure, but we seem to be in search of an enemy at the present moment. Military expenditure is necessary. If we are going to have a highly expensive nuclear system—and I put it interrogatively and not didactically—is it not going to have another inflationary effect? To quote Sir Frederick Catherwood, who was Director General of the National Economic Development Office from 1966 to 1971, he said: The importance of currency payments on defence account can be seen by contrasting the position of West Germany with the United Kingdom. In the 1960s, West Germany received from the stationing of British and American troops foreign currency which, after agreed 'offset' purchases, amounted to at least £1,500 million. The United Kingdom, by con- trast, paid out £2,500 million, less negligible offset benefits, for its troops around the world; the difference between the two countries over ten years on this one item alone is a staggering £4,000 million"— and the core of that is part of our inflation.

Finally, overseas investment has delivered high profitability to the big multinational companies, and in the decade from 1961 to 1971 company profits rose 158 per cent. in overseas multinational companies, whereas those at home rose only 58 per cent. There is the key to some of our problem: too much investment overseas at a time when money should be ploughed into new tools, new machinery, here, to get the productivity. Consequently, what I want to say is, yes, the three traditional priorities—military spending overseas, investment and international banking—have for too long been gods with feet of clay. There is a great need—and I am not pretending, to understand it all at the present moment—for a re-study of the economics of the modern world. Before I sit down, my Lords. without being a dog in a manger, may I say that whatever Government try to solve this inflation problem must be wished success.

5.31 p.m.

LORD WIGG

My Lords, my apologies for not taking part in all the proceedings to-day, but I have discovered that not only railway trains are late but sometimes aeroplanes are late, too. I always try to take part in the whole of a debate when I think I have something to say, and I want to start by expressing my regret at not having had an opportunity of listening to what has been said before me. But, equally, I want to put on record what I think about this Bill, because I believe it is the duty of all who take part in politics, whether they do so at the national or at the local level—where I began with my noble friend Lord Davies of Leek, now almost half a century ago— to contribute so that one can be judged by what one says against the progress of events. Indeed, I am one of those who believe that the essential process of history is that it sorts out what men say as against what they do.

This Bill is full of noble intentions. It is a counter-inflation Bill. But is is put forward by an Administration which has done more to inflate our economy and to worsen the situation than any Administration in this century. I well remember in this House, when it was not the House of Lords but the House of Commons, listening to the noble efforts of Sir Stafford Cripps to grapple, on behalf of a Labour Administration, with problems which were not of their creation; problems left over from the war, and the problem of the misguided disarmament policies (as some of my noble friends think them) that followed on the Korean War. But this Administration started off absolutely true to form. I was glad that when I was speaking the other evening the noble Viscount, Lord Eccles, was present. That noble man was the author of the phrase: Treat 'em mean and make 'em keen. There is no doubt, whatever this Adminisstration may now say, that what they tried to do was to solve the problem of inflation by "treating 'em mean" in the hope of "making 'em keen". And of course the result was a rapid rise in unemployment.

Then the facts were too strong for the ideologies, even if the ideologies were born at a weekend in Selsdon. And so the Government reversed their policy and went into a roaring, raging inflationary policy, which now continues. There never was a country whose economy was more unsoundly based than our country at the present time. What have they done? They have gone headlong into the Common Market, wholly for doctrinaire reasons, because they know of no other policy. At the same time, they have started off a consumer-induced boom in this country, which of course is causing a rapid rise in productivity most of it expressed in terms of hire-purchase. At the same time, the Chancellor, faced with a massive deficit, then intends to solve that problem by borrowing at ever-increasing interest rates. I saw in The Times this morning—and who am I to dispute what The Times says; I nearly fell out of the plane, applied for a parachute—that interest rates, it was thought, if the Government were realistic, should go to 17 per cent., interest rates should rise because the economic facts demand that that should happen if in fact eventually the economy is to be placed on a sound basis.

So we have a counter-inflation Bill put in by an Administration—never mind what they say—who are inflating, and are being forced to inflate by the policies which they have laid down, at an ever-increasing rate. So we shall come to the autumn. The Government, who mistake stubbornness and obstinacy for strength, are going to carry this policy through regardless of consequences; whereas, the one thing which is essential if the problem of inflation in this country is to be solved—like the problems when we faced Hitler and faced the Kaiser—is national unity. That is the genius of the British people. Whether it is cause or effect, I do not know, but we have been free from invasion for a thousand years. Whenever the chips have been down, always provided that they have been told the truth, the people have never failed. Whether it was Philip of Spain or whether it was Louis XVI—it did not matter whom—when the chips have been down, the British people have faced the facts.

The chips are down now, but the people are not being told the truth. We have a Government which is as divisive as ever a Government could be. It is no accident, but symbolic—I do not want to make too much of it—that they take away the children's milk. It is no accident; that is part of their philosophy. When they were free at one time to right those things, I remember reading that eminent Conservative, Lord Hugh Cecil one class born to rule, and the rest of us to serve. That is the doctrine. As I have grown older and have accumulated experience, first of all as a Regular soldier, of course in the ranks, I had a chance to weigh those superior beings, my officers. I did not find one—that is untrue; I could not find five—whom I would have made unpaid lance-corporals. Stupid is not the word for it. What the Government are doing now is absolutely in accordance with the best Conservative traditions. They start on one policy; overnight they change their policy round until they are like a spinning top, giddy with the gyrations which they themselves have impelled. So in six months' time it will be a country as divided as ever a country could be divided, and will be more divided. I tell your Lordships that, if the barricades ever come, I knew a long time ago which side I should be on.

I have always, all my political life, tried to work for the opposite—I have always believed in building bridges in politics, in our public affairs. That is why I said what I did in a Second Reading speech about the noble Lord, Lord Butler of Saffron Walden and another noble Lord from the opposite side of the House. Both were born in a social class different from my own, but they realised, not by what they said but by what they did, that the British people are impotent if they are divided; there is no hope of solving the problem of inflation while there is a division between "we" and "them", when different classes speak different languages, with their different income levels, which of course are tending not to converge but to diverge. This is the terrible thing; the gaps between the classes in this country, the divergence, the splitting, the splintering of our society are worse now than in June, 1970.

Therefore, my Lords, I join with my old friend Lord Davies of Leek—and when using that term of him it is meant in a very real sense. I hope with him that I am wrong, but I do not believe that I am wrong; and I believe I shall turn up next autumn, not to say, "I told you so", but in order, I hope, to put forward a policy, which I tried to put forward last week in a constructive way to indicate to the Government a way out; a way of solving their present difficulties with the hospital workers, the civil servants, the teachers, and all those sections of society who have had a raw deal. It has not happened and it will not happen, for the reason I have already mentioned. This Administration is the weakest of Administrations and, if I may say so, the most badly led. Could you ever find an Administration like this? My knowledge of politics goes back to before the First World War and I cannot remember any Administration which was weaker in talent than the present Administration. One cannot imagine this lot leading the country out of the mess we are in. I hope they will succeed; I hope that by some inspiration or act of luck they may get the country out of the mess, but I do not believe they will. This Counter-Inflation Bill is brought in to deal with the mess which this present Government themselves created and which I believe by their present actions they will only intensify.

5.40 p.m.

LORD DRUMALBYN

My Lords, with the leave of the House I should like to say a few words to end this debate. I think we have had an illustration of the House at its best to-day. Not everyone agrees with the steps that are being taken; not everyone agrees with the capacity of the Government to take steps at all, as the noble Lord, Lord Wigg, has made clear. Nevertheless, there has been an underlying goodwill for the purposes of this Bill, which the Government very much welcome. The noble Lord, Lord Wigg, said he always believed in building bridges. I was surprised when he arrived at that point, but we very much welcome the idea of building bridges. I think that by the process of putting before the country what the Government believe, and by the process of having put before the country what others believe, when the chips are down, when we come to a crisis, we do come to a satisfactory judgment in the end. I believe that we have come very near it to-day.

I was tremendously impressed with the speech made by the noble Lord, Lord Champion, who speaks with such great experience in these matters. One or two things slightly surprised me as they revealed a rather curious view: for instance, he spoke about the Trades Union Congress being "brought into consultation". What we are looking for is the T.U.C. to "come" into consultation, and we very much hope they will do so. We are absolutely convinced, as is the noble Lord, that the next phase will only work if we can bring our consultations to a satisfactory conclusion.

LORD CHAMPION

My Lords, I thought that was what I said.

LORD DRUMALBYN

My Lords, I am agreeing with the noble Lord entirely on this. All I was saying was that I only wished that the T.U.C. would feel the same as he does, and that they would be willing to come forward without any reservation to discuss with us the next phase.

The noble Lord laid considerable stress on the need for some concessions on the part of the Government. I should like to make it quite clear to him that no options are closed on this. Where we are speaking about subsidies the position surely is this: he agreed fully that we cannot have across the board subsidies, and the other day the noble Lord, Lord Wigg, said the same thing. He has been asking for selective subsidies. If we had across the board subsidies there is no knowing where that course would end. It would be extremely expensive, and for one thing it would ignore the fact that we should be taking on a commitment that other countries are not taking on. At the present time the increases in prices are world increases and other countries are facing this same problem. It is important that we should realise that the upward movement in prices is a worldwide phenomenon from which no country can insulate itself, not even the United States of America. What we disagree about at the moment is the usefulness of food subsidies.

As I understood it, the noble Lord was comparing the failure to hold prices while wages were being held. That is the state from which we are about to emerge. Wages are now going to be allowed to rise and we want to see this country moving forward to the position where there is an increase in real incomes. We cannot guarantee that it will be done this month, next month, or the month after; but if only we can get to a stable position then I think we shall attain that goal. This must be the objective that we all seek. The noble Lord spoke a good deal about the need for radical reform of institutions. It would not be appropriate for me to go into that. He has heard me speak about that subject when I was on the other side of the House; and I agree with the noble Lord, Lord Brown, also that one has to recognise the fundamental nature of the problems in front of us. They have got to be solved and they can only be solved by agreement, because no policy for prices and incomes can possibly work without there being a much better agreement. I am sure the noble Lord, Lord Roberthall, will agree with that. This is why I welcome very much the attitude of the House to-day which found expression in your Lordships' will for an agreement, a moving together and, as the noble Lord, Lord Wigg said, a building of bridges.

I do not want to say anything to-day that will irritate anybody, but I am bound to say that there is some indication from the Gallup Poll that the public support the Government's policy and have indicated that they wish the T.U.C. would do so as well. The majority of the public have also indicated that they thought the Budget was fair. I am sorry that the noble Baroness, Lady Seear, is not in her place at the moment because she put forward an interesting point of view on the "save as you earn" proposals in the Budget. The one thing that she did not quite make clear when she was suggesting that dividends which are not paid should be used as a fund for shareholding, was how one determines what the dividends would have been in other circumstances. Unfortunately, this is a hypothetical case, and in any case, of course, it is not true that retained dividends serve only to boost company profits and share prices. The retained dividends will be of the greatest value in promoting investment at a time when we greatly need it. Moreover we must of course remember all the time that dividends will not be all that easy to earn; profits will not be all that easy to earn, considering that the profit margins are going to be very closely controlled in this coming stage.

I should like to say one word to the noble Lord, Lord Davies of Leek. I think he was denigrating overseas investment a little too much from our point of view because the returns on our investment each year have more than offset our annual outflow, and were it not for our overseas investment assets we should be economically far weaker than we are at present. Does the noble Lord wish to intervene?

LORD DAVIES OF LEEK

Yes, my Lords; but I will not detain the House for long. I know quite well what the noble Lord says; but my point is how much of the returns were ploughed back into new tools and new machinery and new capital development. I will not argue the point now, but that was what I meant by saying that more should have been ploughed into our domestic market.

LORD DRUMALBYN

My Lords, I know of companies which make more profits from overseas than they do in this country, and doubtless they, too, plough back part of their profits where it is best to plough them back, including investment at home. I do not want to say more now, except to thank noble Lords for the attitude that they have adopted to-day and, in particular, for the good wishes that they have expressed for the success of this Bill. The noble Lord, Lord Wigg, extends his good wishes, at the same time expressing his fears that we shall not succeed. If we all believe that we shall succeed, we shall succeed.

LORD BESWICK

My Lords, I had not intended to speak again until the noble Lord, Lord Drumalbyn, said one or two things. I feel that they ought not to go unanswered. The noble Lord in quoting public opinion polls would appear to be saying that the country was on the side of what is being done and that it was the Trades Union Congress and the Labour Party, presumably, who were being unreasonable. I beg of the noble Lord and Government Ministers—as many as are there assembled—to think that it is just possible that they are not doing everything that is the best of all possible worlds. Rather than public opinion polls, I would go to an individual who is very well qualified to pass an opinion on these matters and who is objective and fair-minded; namely, the Labour correspondent of The Times whom I quoted earlier. In the same article I see that he says: Nothing is likely to work until we have a Government genuinely prepared to give as well as take in bargains with industry. The present Government merely irritated the unions by offering consultation on their proposals for the Industrial Relations Bill—so long as the most important proposals were excluded—and by the parade of consultation on voluntary prices and incomes policy last autumn when it was prepared to concede practically nothing. He then goes on to say: But most of our immediate labour troubles are due to a lack of flexibility resulting from a failure to understand … I believe that is so. The noble Lord does not seem to understand industrial relations in this country.

My impression of this policy is that some very wise and liberal persons advising the Government have handed them a Bill and a policy, which I confess I find has the makings of something reasonable, but which is being operated and explained by inflexible, hostile men, men whose spirit in this matter seems to be at fault. Nothing better illustrates what I am trying to say than the answer that was given to the Question on Thursday about the National Health Service workers. The Government were asked whether they were prepared to respond to the sug- gestion made by the T.U.C. that an inquiry should be held into the dispute of the National Health Service workers, and the reply was: "No, we have already said they can go to the Pay Board. "As I said at the time, that was both highhanded and inaccurate. It was impossible to go to the Pay Board. The Pay Board is not yet established. Certainly with the support the Government mobilised in the Division Lobbies, the Bill will leave here and go to another place. But it is not yet the law of the land and even if it is passed to-day, to-morrow, or the next day, we shall have to wait until the end of the month before there is a Pay Board properly appointed by law in this country.

If the Government really have the sense of things within them they would have said: "Yes, we are prepared to look at this proposal by the T.U.C. We can set up an inquiry. Certainly it will have to take account of the Code, but nevertheless we invite the union concerned to start presenting its case. "And it is possible that they could have reached some finding slightly earlier than that envisaged for Phase 3, which I am told by my noble friend Lord Champion is November, although so far the Government have not given a date. It would have been useful to have an inquiry. Certainly there is a Code laid down. It was supposed to be an advisory document but it will come out, I imagine, very much as it has already been printed. But even within that Code there is some room for manoeuvre. We are finding that already with the gas workers. It has been found that one can keep to the 4 per cent. and yet give more than 4 per cent. by fiddling about with words and provisions. That was an element of flexibility. But instead of doing it in that "back-door" way, why are not the Government honest? Why do they not say to the Health Service workers: "Certainly let us discuss your case. Let us see if we can improve your position". And with the kind of flexibility already being shown to the gas workers and an undertaking to do more, it is conceivable that we might have got some settlement for the Health Service workers. But that is not the way the Government do these things. I feel that the policy is less likely to be successful because of the absence of flexibility to which Mr. Wigham called attention in The Times.

There are just one or two other matters. The noble Lord, Lord Drumalbyn, said, "Why should we burden ourselves with subsidies on food when we should be the only country so to do?" What a ridiculous statement to make! We are possibly the only country to operate an Act like the Tom Williams Act. Why have we been doing so well in the markets of the world up to now? The answer is, because we have had cheap food. Far from being a burden, to have had some form of subsidies would have been one of the best assets available to our exporters. Only by finding some way to bring down the cost of living to our people will you get them to keep within the £1 plus 4 per cent. You will not do it otherwise. In this country you will not have wage rates lower than those on the Continent if you foist on this country the cost of living they enjoy, or otherwise, on the Continent.

The other thing which is lacking and to which some reference is needed in the Bill if it is to be successful is the question of land prices and land control. That matter is fundamental to everything else. The cost of land goes into everything. I should have thought that it would have been feasible to have done something. I gather that Chancellor Brandt is going to do something in Germany. Why could we not have gone as far as Chancellor Brandt intends to go in Germany? It is possible, even without going as far as the Labour Party intends to go with the nationalisation of land, to do something. But no! stubbornness and rigidity prevented the Government from making the sort of advance there which would have made all the difference to the political, social and economic policy of the Government. Nevertheless, they have got the Bill. I promised at the beginning that I would not impede this piece of legislation. We on this side of the House have not done that. We have tried to improve it. We have one tiny concession, and another which goes a little further in the shape of the protection involved. As to the better-off tenants, despite the noble Baroness's concern about this sort of action, we have got that far; and as I said in my Second Reading speech, as for the rest I hope that I am mistaken: I hope that the Bill does work.

On Question, Bill read 3ª, with the Amendments, and passed, and returned to the Commons.

House adjourned at one minute before six o'clock.