Lords Sitting of 16 May 1973

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Rochester.
The Lord Ashcombe—Took the Oath.

MOTORWAY FENCING PAYMENT DISPUTE
LORD INGLEWOOD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why they are holding up payments due to the Home Grown Timber Marketing Corporation for fencing material supplied in 1969 for the Hawley/Basingstoke section of the M.3 motorway and whether they will make a Statement.
LORD MOWBRAY AND STOURTON: My Lords, I understand that all payments to which the contractor is entitled have been made.
LORD INGLEWOOD: My Lords, is my noble friend aware that his information differs somewhat from mine, and that there is still owing a sum of something over £1,000, without calculating interest on the money, which has been outstanding so long on account of the curious and uncommercial ways of the Department.
LORD MOWBRAY AND STOURTON: My Lords, I am aware that the corporation concerned claims that it has not been paid in full. The fact remains that the Department has made every effort to get a meeting with the corporation, which has refused to meet any officials from the Department until its letters are answered (what it calls) "satisfactorily".
LORD INGLEWOOD: My Lords, is my noble friend also aware that that last reply he has given me is extremely unfair; that when the Department queried
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some of the accounts the Home Grown Timber Marketing Corporation, which is a highly respectable body, said that if the Department gave it reasons why it queried the accounts there would then be some purpose in having a conference, but that there was no purpose as long as the Department maintained silence about its opinion? Will he in fact reply to this correspondence which has been outstanding so long?—and then perhaps if a conference could be called some satisfactory result might emerge.
LORD MOWBRAY AND STOURTON: My Lords, the reasons are perfectly well known. I could, if it was required, bore the House with them, but as it might turn into a matter of law I should prefer not to. We in the Department are still hoping that our officials will have a chance of meeting the corporation and discussing the matter in a reasonable manner.
LORD HUGHES: My Lords, the noble Lord, Lord Inglewood, said "without taking account of interest". Do the Government in fact pay interest on these outstanding balances when they are settled?
LORD MOWBRAY AND STOURTON: My Lords, my advice is that that matter is dealt with in accordance with the conditions of contract.
LORD SLATER: My Lords, would the Minister inform the House why it is necessary for Ministers to stand at that Box and say that "the officials of the Department would be prepared to meet them"? What is the matter with the Minister? Why cannot be meet them? Here is a major company in dispute and surely someone must be arbiter or able to finalise the position. It is not something new for Ministers to be brought in to deal with an unsatisfactory situation when their agents have been working on behalf of the Ministry. Surely the Minister ought to give this matter further consideration.
LORD MOWBRAY AND STOURTON: My Lords, this is a perfectly ordinary mercantile agreement. We have paid what we think we should have paid. This firm is saying that we should have paid more. We say we have not paid the very, very small balance outstanding

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because certain obligations in the contract were not observed; in other words, the other side were in default regarding certain amounts of money which have therefore been withheld. We cannot bring Ministers into such small, petty matters.

NAMIBIA: LABOUR CONDITIONS AND WAGES
2.40 p.m.
LORD BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will (a) propose to the United Nations Security Council that a minimum living wage and humane accommodation for African workers be required in Namibia (South-West Africa), and (b) bring pressure on British companies to end the sub-human conditions under which their Ovambo workers are employed.
THE MINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (BARONESS TWEEDSMUIR OF BELHELVIE): My Lords, labour conditions in South-West Africa and the practices of foreign firms operating in the Territory were the subject of two of the operative paragraphs of Resolution No. 310 adopted by the Security Council on February 4, 1972. As we have often said, the Government hope that British firms will recognise their long-term interest in establishing a reputation as good employers.
LORD BROCKWAY: But, my Lords, is it enough just to express a hope? Has the noble Baroness read the article by Adam Raphael in the Guardian of May 5, in which he said that British companies in Namibia are paying lower wages and operating under worse conditions than exist even in the Republic of South Africa which he recently exposed? Is she aware that he said that British companies in Winhoek are compelled to send their African employees to a compound—wire fences around it, concrete bunkers, 20 crowded into a room, food prepared with spades and pitchforks, and the smell
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of urine everywhere? Is it not necessary for the Government to make some protest for the reputation of Britain in Namibia?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, yes, I did read the article. I cannot comment on the specific allegations, but I can say that the conditions of employment are in the first place a matter for individual firms. It is for that reason that the Department of Trade and Industry, as the noble Lord will know, circulated a pamphlet which pointed out that it was perfectly open for British firms to give wages which were above the minimum.
LORD BROCKWAY: My Lords, is the noble Baroness aware that Mr. Raphael gave a list of British companies which are paying less than the minimum level which was decided by the Winhoek Non-European Affairs Department? Is she aware that among these is the British Steel Corporation, which has a minority of shares in one of these companies? As this is a national company, surely it is the duty of Her Majesty's Government to bring pressure to bear upon it to see that living wages are paid to the employees of its subsidiary in Namibia?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, the number of British firms engaged mainly in mining, banking and insurance is only about 25, and the publicity given to this question will no doubt make British firms consider their employment conditions.

RAILWAYS: POLICY REVIEW
THE EARL OF KINNOULL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they can now make a Statement on the proposals made by British Railways for further electrification; and whether they will name the lines proposed for closure as part of the same overall plan.
LORD MOWBRAY AND STOURTON: My Lords, I do not know what projects the noble Lord has in mind. The question of electrification, and the separate question of the future size of the rail

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system, are at present under consideration as part of the rail policy review. My right honourable friend the Minister for Transport Industries will report to Parliament as soon as the review is complete.
THE EARL OF KINNOULL: My Lords, I am grateful to my noble friend for that Answer. I admit that I do not know exactly what the Railways Board had in mind, except that they made proposals in January for electrification. Is my noble friend aware that many enthusiasts of railways hold the view that further electrification of railways is quite vital to their competitiveness in the future? Can the noble Lord also say whether in future local authorities will be consulted before, rather than after, the publication of the line closure proposal, in view of the damaging effect it often has in a locality?
LORD MOWBRAY AND STOURTON: My Lords, I thank my noble friend Lord Kinnoull for his remarks. I accept—and I think it is generally accepted—that electrification is more efficient, but equally it bears a heavy capital cost and before undertaking further electrification one has to be certain that the demand will be sufficient to justify it. That is what the policy review will consider. With regard to local authorities being consulted, I will report what my noble friend has said to my right honourable friend and I will endeavour to ensure that his wishes are met.
LORD POPPLEWELL: My Lords, will the Minister be a little more forthright as to when he expects to report to the House upon the proposals that have been under consideration by the Ministry for very many months? Would he not agree that the electrification already undertaken in the North-West Region has increased traffic by 150 per cent.? Will he also agree that the proposal of the Railways Board for further electrification in the G.N. section of rails coming into London will provide an estimated saving of £19 million? Is it not a matter of urgency that the nation should know the reaction of the Government to that proposal? Furthermore, is not the noble Lord also aware that electric locomotives cost only two-thirds in maintenance charges compared with diesel locomotion? Are these not matters with which the Government
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should deal with great urgency in the interests of the nation?
LORD MOWBRAY AND STOURTON: My Lords, I appreciate the anxiety expressed by the noble Lord, Lord Popplewell, and I know his interest in this subject and his great concern for the welfare of the men employed on the railways. For over two years the Department has been considering intensive studies on this subject and I am certain that the noble Lord will be the first to wish that when this policy review is submitted to Parliament the answer will be right. There have been too many policies of "Stop-Go" on the railways. I accept what the noble Lord has said about electrification being more efficient and cheaper than diesel locomotion in regard to maintenance costs, but the initial cost is very high. However, these points are being looked at.
BARONESS STOCKS: My Lords, are Her Majesty's Government cognisant of the general policy outlined by Mr. Rippon, and reported in The Times to-day, in favour of a traffic policy which aims at reducing car use and encouraging the use of public transport? If the Government are cognisant of that policy is it not foolish to spend large sums of money on electrifying an inter-city service, such as London to Bristol or London to Manchester, and at the same time building extremely expensive motorways to encourage the use of cars?
LORD MOWBRAY AND STOURTON: My Lords, the noble Baroness, Lady Stocks, makes the case for the reason for the Department of the Environment. It is a Department to co-ordinate various Ministries and various interests in the general interests of the nation.
THE EARL OF KINNOULL: My Lords, I sense that my noble friend is friendly to this Question, perhaps unlike the first Question, so may I ask what is the latest estimated date for the publication of the review?
LORD MOWBRAY AND STOURTON: My Lords, I am sorry, but I cannot give any date at this moment.
LORD HURCOMB: My Lords, May I ask the noble Lord whether he realises that if the old railway companies in the early 1930s had only spent the capital sum necessary to electrify the railways then,

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the whole future of the railways would have been different and the capital costs would just have been forgotten.
LORD MOWERAY AND STOURTON: My Lords, I accept that: and if all Governments could govern with hindsight they would all be very clever.

TECHNICAL EDUCATION COUNCIL: MEMBERSHIP
2.50 p.m.
LORD WELLS-PESTELL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why no member of the trade union movement was appointed to the Technical Education Council.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF EDUCATION AND SCIENCE (LORD BELSTEAD): My Lords, my right honourable friend, in establishing the Technician Education Council on the advice of the Committee on Technician Courses and Examinations, accepted the Committee's recommendation that members of the Council should be appointed in a personal capacity. Therefore no member was appointed as representative of a particular interest. The intention was that, collectively, members should contribute as wide a range of experience as possible from the relevant fields and among the members is one who holds office within a trade union. There will therefore be practical experience available to the Council from this important field.
LORD WELLS-PESTELL: My Lords, I am obliged to the noble Lord the Minister for his reply, but may I ask him whether, in setting out the terms of reference of this Council, which are:
"will be concerned in the development of policies for a scheme of technical education for persons of all levels, of technician operations in industry and elsewhere,"
it would not have been advisable to have somebody from one of the trade unions in which there has been considerable study, undertaken over a number of
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years, particularly in the field of technical education? The member to whom the noble Lord the Minister refers may well be a member of a trade union, although I should have thought that it was much more of a professional association than a trade union. The trade union movement has a great amount of expertise and knowledge to offer in this particular field. May I ask the noble Lord whether, having regard to the fact that matters like wage structures will eventually arise, it would not have been advisable to have somebody officially representing the appropriate trade union?
LORD BELSTEAD: My Lords, I accept what the noble Lord says about the expertise which the trade unions can bring to this work. My right honourable friend consulted very widely, and among the bodies whom she consulted was in fact the Trades Union Congress. As regards the future, it would be fair to say that the Council will proceed with the close involvement and co-operation of industry, professional bodies and the education service, both centrally and at local and regional level, and it will be for the discretion of the Council as to what contacts it has with the trade unions from now on.
LORD PARGITER: My Lords, would the noble Lord not agree, in the circumstances, that having regard to the importance of the trade union movement and their particular interest in this problem of technical education—many unions are interested in this question, both directly and indirectly—although the appointment may well have been a personal one, is it not often the practice for the Minister to consult various organisations before making appointments, and to appoint people who will easily fill the Bill from the Minister's point of view and also from the trade union point of view?
LORD BELSTEAD: My Lords, yes, that is what my right honourable friend did, and I expanded on that aspect a moment or two ago in my reply to the noble Lord, Lords Wells-Pestell.
BARONESS BACON: My Lords, while appreciating what the noble Lord said about choosing people as individuals rather than as representatives, is he aware that the Trades Union Congress has a very strong sub-committee dealing with

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the whole question of further and technical education, and that when the previous Government were considering all these matters this sub-committee gave me the greatest help? It seems a pity that nobody who has had experience on that sub-committee is on this Council.
LORD BELSTEAD: My Lords, my right honourable friend made the appointments in a personal capacity because that was the recommendation of the Haslegrave Report. That is why it was done in that way. But may I repeat that my right honourable friend indulged in the very widest consultations, and these included the T.U.C. It was in the light of those consultations that my right honourable friend finally made her appointments.
BARONESS BACON: My Lords, I think that the noble Lord has misunderstood my question. I said that I appreciated the point he made about the appointments being made in an individual capacity and not as representatives. But is it not also rather curious that in their individual capacity nobody connected with the T.U.C. and their very important subcommittee has been chosen in an individual capacity to sit on this Council?
LORD BELSTEAD: My Lords, my right honourable friend accepted the main recommendations of the Haslegrave Report. It would have been strange if my right honourable friend had extracted that one particular recommendation, that appointments should be made in a personal capacity, and said that she did not agree with that. As regards a representative of the trade union movement, in my original reply I made it clear that there is such a representative although not sitting in a representative capacity on the new Council.
LORD WYNNE-JONES: My Lords, does not the noble Lord find it very strange that when this Council was set up, with I think some twenty members, they could find only one suitable trade unionist; that that trade unionist—I believe I am right in saying—represents the electronics and radio side, and that the whole of the rest of the technical field has been ignored? And is the noble Lord aware that throughout the technicians' unions there is now an elaborate grading system, in which the
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positions that technicians attain, and the salaries they are paid, depend upon the qualifications they have? And does he think it right and suitable that such people are ignored in a Council which is concerned with laying down the conditions for these technical qualifications?
LORD BELSTEAD: My Lords, there is no question of ignoring anybody; and for the Record may I say that the noble Lord was not correct when he suggested that there was a representative of a particular trade. If I may remind the noble Lord, the recommendation in the Report was that probably two-thirds would be representatives of educational interests and one-third of the Council probably should be representatives of what the Report calls "other interests". In fact, if noble Lords look at the list of representatives who are now on the Council it will be found that the balance is rather more evenly divided than that.

ICELANDIC FISHERIES DISPUTE
2.56 p.m.
LORD HOY: My Lords, I beg leave to ask the Question of which I have given Private Notice—namely:
Whether Her Majesty's Government will make a Statement regarding the latest incidents in the Icelandic fisheries dispute when the Icelandic gunboat "Tyr" fired three live shells at the Hull trawler "Macbeth", and made a boarding attempt upon the trawler "Lord Alexander".
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, the incidents to which the noble Lord refers occurred between 2100 and 2200 G.M.T. on Monday, May 14. According to the information we have received, two Icelandic coastguard vessels, the "Thor" and the "Tyr", approached a group of 24 British trawlers off the North East coast of Iceland. The "Thor's" guns were manned before reaching the trawlers. Her cutting gear was streamed. The "Tyr" ordered the trawler "Lord Alexander" to stop or she would fire: and said sho intended to board. The trawler "Macbeth" then interposed herself between the "Tyr" and the "Lord Alexander", thereby frustrating "Tyr's"

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attempts to board the latter. At this point "Tyr" fired a shot which fell close to the "Macbeth". Later, "Tyr" fired another shot in the general direction of the main group of British trawlers. At no time did any British vessel attempt to ram any Icelandic vessel.
On May 7 my right honourable friend the Foreign and Commonwealth Secretary said in another place that if there were an armed attack on a trawler which could not be repelled by the means we have there now, there would be no alternative but to send in the Navy. In this case, an Icelandic attempt to arrest a British trawler has been successfully repelled: and the two shots fired seem to have been warning shots, not an armed attack. It was therefore not necessary to use the Royal Navy and the fishing industry as a whole has not yet requested naval protection. If the Icelandic Government continue such actions on the fishing ground, they will damage, perhaps irrevocably, the prospects of reaching an interim agreement. Her Majesty's Government's policy remains that of reaching a solution that is fair and satisfactory to both countries.
LORD HOY: My Lords, we are grateful to the noble Baroness for her Answer, although in certain parts I find it a little difficult to understand. If in fact the "Thor's" guns were manned, as the Statement says, before reaching the trawlers, and two shots were fired—and the noble Baroness admits that one was very near—what would have been the position supposing it had hit the trawler? Would that have been regarded as an attack, or would it have been excused from being an attack simply because it was only a near-miss? If all these things happened, what is going to constitute the protection for the fleet; or what is going to be regarded as provocation? The noble Baroness said that,
"It was therefore not necessary to use the Royal Navy as the fishing industry as a whole has not yet requested naval protection."
I should like her to explain what she means by "as a whole". Does she mean the fishing industry as represented by the trawler owners? Is the position that those who sail in the trawlers have in fact asked for protection while it is the remaining part of the industry that has not asked for protection? Secondly, I am
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grateful to the noble Baroness for saying how the fleet has behaved in such a considerate manner in face of this latest provocation from the Icelandic Government.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I understand that many of the Icelandic gunboats do have their guns manned. It is not at all clear, from the reports we have had, that the two shots which were fired were more than warning shots. So far as the request for naval protection is concerned, as I understand it the skippers would like naval protection; the owners and the deckhands, those who sail in the trawlers, do not at present want such protection. It is therefore not the considered view of the industry as a whole that they would like naval protection now. I can only say that when we left them, the Icelandic Government said that they would consider our proposals carefully. We do not think that these actions are in any way a good prelude to further negotiations.
LORD HOY: My Lords, may I ask the noble Baroness one further question? If in fact protection is required by the British, fishing fleet, in the event of Icelandic gunboats shelling our fishing Peet, is the Navy in a position to be called upon to act very quickly indeed?
BARONESS TWEEDSMUIR OF BELHELVIE: Yes, my Lords.
LORD SHINWELL: My Lords, may I ask the noble Baroness whether she is aware that from some quarters has come a suggestion that the reason for the Government's reluctance to take drastic action is because we have not got a spare frigate to send? Is there any truth in those allegations?
BARONESS TWEEDSMUIR OF BELHELVIE: No, my Lords.
LORD SHINWELL: My Lords, if the noble Baroness says No, would she be kind enough to explain this negative reply? Is there a frigate available to send?
BARONESS TWEEDSMUIR OF BELHELVIE: Yes, my Lords more than one frigate.
LORD BLYTON: My Lords, is the Minister aware that we all appreciate the tolerance with which she has conducted negotiations with the Icelandic

821
Government? Is she further aware that those of us who live among the trawler people who go to Iceland to fish know that they are far from happy about the hazardous way in which they have to earn their living in the Icelandic waters? As we have the International Court behind us, is it not time that we said to Iceland: "We have been kicked around long enough. It has now got to stop."?
BARONESS TWEEDSMUIR or BELHELVIE: My Lords, this is what we have said, both before and during negotiations, and now. We think that it is extraordinary that two old allies, two members of NATO, cannot reach agreement. We believe that we have leaned over backwards in putting forward proposals which could be acceptable to the Icelanders; and the Icelanders, I regret to say, have not moved an inch.
LORD BLYTON: My Lords, would not the noble Baroness think that in the present circumstances, after months and months of tolerance, if we put two frigates there—forget the tugs; they are not much use—we could negotiate far better from strength than from weakness?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I would not say that the tugs are of no use. I understand that the trawlermen themselves, and all concerned, have paid tribute to the very good seamanship and support and protection of the tugs. But, as I said, if there is an armed attack, the Navy is ready.
LORD SHEPHERD: My Lords, the noble Baroness's Statement does not refer to any official protest by Her Majesty's Government to the Government of Iceland as a consequence of the incident yesterday. Can she say whether official representations are being made? Does the noble Baroness also appreciate, taking the warning made by the Foreign Secretary and also the noble Baroness's Statements here, that if an incident of this sort occurs which could, if a shot had been accurate, cause damage and possible loss of life, and one does not react forcefully or introduce a more clear presence of British naval forces, the Government of Iceland may well feel that Her Majesty's Government do not intend to fulfil their pledge to the fishing fleet?
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Can the noble Baroness make clear that she has made official representations to the Government of Iceland, and also make it quite clear that we are not prepared to stomach this state of affairs any longer, and that if another incident of this nature should arise then the British Navy will be put in?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, it always takes time to find out the exact facts, which, of course, are disputed in some respects by the Icelandic Government. Our Ambassador in Iceland has been instructed to register a very firm protest on this matter. I think the difficulty in all these incidents is to find out whether it is a warning shot or a real shot. I think I should like to leave it in the way it was described by my right honourable friend the Secretary of State in another place?
LORD PARGITER: My Lords, apart from the reference to the International Court, would it not be advisable to ask the United Nations to get a mediation team to act in this matter between the two countries?
BARONESS TWEEDSMUIR or BELHELVIE: My Lords, I do not think so. We are still, happily, in consultation with each other.
LORD PARGITER: Happily?
THE EARL OF BALFOUR: My Lords, may I ask my noble friend one question? Is it true that our trawlers were fishing in a conservation area?
BARONESS TWEEDSMUIR OF BELHELVIE: No, my Lords, it is not so. This particular area was designated by Iceland, when she purported to increase to 50 miles her conservation area. But the North-East Atlantic Fisheries Commission has twice refused Icelandic requests to declare this area a conservation area, and its refusal has been on scientific advice. Therefore, our trawlers have an absolue right to fish there.
LORD SEGAL: My Lords, since both the Icelandic gunboats and the British trawlers now appear to be acting in groups, would it not be advisable for some shadowing presence, short of active intervention, to be exercised in the background by the British Navy?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, we have frigates outside the 50-mile limit. They have an absolute right to sail within the 50-mile limit, but in order to try to reduce tension in the area they have not yet done so. We have in fact got three tugs, which are very successful, on the grounds; and another one, a more powerful one, is to join the fleet in the middle of June.

BRITISH TRANSPORT DOCKS BILL
Read 2a;, and committed to the Committee on Unopposed Bills.
LONDON TRANSPORT BILL
Read 2a;, and committed to the Committee on Unopposed Bills.

GOLD PRICES AND THE MONETARY SYSTEM
3.8 p.m.
LORD BOOTHBY LORD BOOTHBY rose to call attention to the increasing disparity between the official price of monetary gold, and the price of gold bullion on the free market; and to move for Papers. The noble Lord said; My Lords, I rise to move the Motion standing in my name on the Order Paper. I am going to be very brief, and as simple as I can, in the circumstances, because it is not altogether a simple subject. As I read to my horror this morning, I have already inflicted upon your Lordships half a dozen speeches on the subject of gold, and everything I have said in those speeches has now come true. I am on the record. I should like to say, to begin with, that as a very young Member of another place I was opposed to our return to the Gold Standard in 1925, at the pre-war parity of exchange. I entirely agree with what the noble Lord, Lord Citrine, said the other day: that that return to the Gold Standard at the wrong parity was responsible primarily for the General Strike of 1926, and then for massive unemployment for a period of very nearly 15 years.
The return to the gold standard at the pre-war parity of exchange was recommended, I regret to say, by an uncle of mine, the late Lord Cunliffe. He was
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an irascible old man and I was a very impertinent young one. I remember dining alone with him one night, and we had the usual argument about the fatality of our going back to the gold standard in 1925 at the wrong parity of exchange. Then he suddenly turned round to me and said, "I have a problem on my hands". I asked, "What is that?", and he replied, "During the war"—this was immediately after the war—when I was Governor of the Bank, I had as a director of the Bank a brilliant man with a commanding personality and his name was Montagu Norman. He had a nervous breakdown and he went to Switzerland to consult a psychiatrist whose name, I think, was Jung. I do not believe in psychiatrists, and I did not believe that that was the answer to Montagu Norman's career, which could be a brilliant one; so I ordered him to come back from Switzerland and become assistant to the Deputy Governor of the Bank of England. But my problem remains". I asked, "What is that?", and he replied, "If he ever does become Governor of the Bank of England—and he must do in this situation—he will never give it up; and that must lead to the nationalisation, inevitably, of the Bank of England, of which I should strongly disapprove". That, of course, is exactly what happened.
I opposed in another place Norman's policy of deflation during the 'twenties and 'thirties which led to the massive unemployment, and which was originally caused by our return to the gold standard at the wrong parity. But then, in 1934, President Roosevelt raised the price of gold to 34 dollars an ounce, and that began the haul out of the deflationary process and led to an increase in employment, both in the United States and in this country. The only other point I want to make about the background is that I moved the rejection of the Bretton Woods Agreement in another place in 1945, on the ground that it fixed the price of gold at a ludicrously low level—the 1934 level, in fact and also exchange rates in a world of chaos. The Bretton Woods agreement is now in ashes.
The truth is that two-thirds of the world believe in gold and no one believes in anything else, least of all in the dollar. People do not believe in S.D.R.s either, which they think are phoney gold—which is what they are. The fact is that we

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have at present no working international monetary system. At intervals, the central bankers go to Basle like agitated hens and come back with nothing. Why? Because of the insensate refusal of the Americans to raise the price of monetary gold, and their persistent attempts to demonetise gold altogether.
I suggest to your Lordships that it is time, and high time, that we told the United States where they get off. They are not in very good shape now, and it might be a convenient moment to do so. We should certainly have strong European support. Mr. Rueff has never changed his view that gold must be the basis of our monetary system, and he was supported throughout by General de Gaulle. At this moment, the monetary price of gold is fixed by the United States at about 40 dollars an ounce. The price of gold bullion on the free market is well over 100 dollars. I submit to your Lordships that this is a ludicrous situation. Gold will go on from strength to strength, and will come back to form a key part of the international monetary system; and the sooner the better, it is argued by the anti-gold lobby in the Congress of the United States that this would be of great benefit to South Africa and to the Soviet Union. It would be of some benefit, but not so much as we think. Costs and wages are rising in both of those countries, industrial demand for gold is increasing, and they can always sell it on the free market. So I do not think that raising the price of monetary gold will be of very much benefit, either to South Africa or to the Soviet Union. And if so, why not? The South African Government would mellow under the influence of prosperity. And the Soviet Union would find it easier to buy American corn.
What am I asking for? I am asking that the price of monetary gold should be raised to a realistic level; and that the leading currencies of the world should be made convertible, with more flexible exchange rates—wider margins. This would bring us two great advantages: first of all, an automatic curb on the raging inflation which at present affects us all; and, secondly, adequate liquid reserves, if wisely handled by the central banks, to finance the increasing volume of world production and trade which undoubtedly confronts us during the next
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decade. In short, my assertion is that the amount of liquid reserves in the free world is totally inadequate for our requirements over the next ten years.
Some years ago I made a speech, either in this House or in another place, on the subject of goods versus gold. I came down in favour of goods. because the true measure of a country's wealth is the gross national product, much of which in our case has to be exported. But I went on to say, as Keynes did, that there must be a stable measuring rod of value, at the right price. Gold, my Lords, is that measuring rod. It is the one and only firm point of reference so far as value is concerned, and there is no other. Therefore, I say that we must face up to the realities of the present situation, recognise the true value of gold, and make it the true measuring rod of value. Until we do that, we shall go on and on in the chaos in which we now find ourselves. My Lords, I beg to move for Papers.
3.20 p.m.
THE EARL OF DUNDEE: My Lords, I merely wish briefly to inquire from my noble friend the Leader of the House, who is to reply to this debate, whether the Government are hoping for, or trying to bring about, a substantial or significant increase in the total amount of international currencies which can be used for settling trade balances as between one country and another; and I strongly agree with the noble Lord, Lord Boothby, when he says, as he did just now, that the total of our liquid reserves is quite inadequate. That is at the bottom of many of the greatest world economic problems. Of course, there are many ways in which you can achieve the object of increasing your liquid reserves. One of them, as the noble Lord, Lord Boothby, has just argued in his most interesting speech, would be by raising the monetary price of gold to a level equal to its price as an ordinary commercial commodity. I would gladly welcome that, if I thought we were likely to get enough international agreement, but I doubt whether raising the price of gold would do enough in itself to solve the problem. My noble friend Lord Jellicoe will correct me if I am wrong, but I think that he told us not long ago, in reply to a Parliamentary Question from Lord

827
Boothby, that the Treasury did not consider this was a good thing to do in present circumstances.
Of course, this has not always been so. I remember that in 1960–61, when I was a member of the then Conservative Government, some of our Treasury advisers were strongly in favour of raising the price of gold, but they were stymied by a public declaration by President Kennedy in the United States, who solemnly promised that the monetary value of gold would never be raised in relation to the dollar, which I think was a very great pity. The noble Lord, Lord Boothby, has referred to this, and he suggested that, in spite of American opposition, we should go ahead. I do not want to make any comment of my own about that, but I should be interested to hear from my noble friend how much international agreement he thinks would be necessary if we were to proceed on those lines.
But, of course, there are other ways of reforming the basis of our international currency and of increasing its quantity. I do not think the noble Lord, Lord Boothby, has ever been accustomed to express loud admiration of Her Majesty's Treasury—
LORD BOOTHBY: Terrible !
THE EARL OF DUNDEE:—but he will remember that during the war Sir Richard Hopkins, who was then the Permanent Head of the Treasury, acquired a great admiration for the late Lord Keynes, and Lord Keynes was sent as the chief British representative to Bretton Woods, with the full hacking of Sir Winston Churchill's Coalition Government and of the British Treasury for his proposal to create, I think it was, 25,000 million dollars' worth of new international money, created out of nothing, in units to which he proposed to give the rather unlyrical name of Bancor.
LORD BOOTHBY: My Lords, may I interrupt the noble Earl for just one moment to say that Lord Keynes was hopelessly defeated at Bretton Woods by Mr. Vinson and Mr. Harry Dexter White.
THE EARL OF DUNDEE: That I know only too well, my Lords. I think it is worth first saying that in my own view,
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and I think very likely in that of Lord Boothby, if this proposal, sponsored by the British Government at Bretton Woods and conceived by Lord Keynes, had been agreed to by our Allies at Bretton Woods, then the economic progress of the free world since the war, and particularly of the undeveloped countries, would have been very much faster than it has been. But, of course, our proposals were not agreed to. Lord Keynes was, I think, prevailed upon to accept a very poor compromise, which I think he persuaded him, self might be just good enough to work. It is a thing we all often do when we find that nearly everybody else is against us and when we are very anxious to find some kind of working compromise. Anyhow, he agreed to the substitution for his proposed "Clearing Union" of the present International Monetary Fund which subsequently turned out to be much tighter in the supp;y of money than Keynes thought it was going to be. Lord Boothby was one of the few people who, when this proposal was presented to Parliament, opposed it, and I am bound to say that I think the noble Lord was right. As for Lord Keynes, in the opinion of at least one of his biographers Keyne's bitter disappointment after the war, when he found that this compromise which he had been prevailed upon to agree with was not going to work as he had hoped it would, was one of the causes which led to his untimely death in 1946.
My Lords, since that time there has been very considerable economic progress in the Free World, particularly among the more highly developed countries; but that progress has been continually retarded and sometimes frustrated by balance-of-payments difficulties which, in my submission, have been entirely unnecessary. These balance-of-payments difficulties were not caused, in the main, either by incompetence or by extravagance, or even by industrial strife, although industrial strife sometimes did aggravate them a little. The inconvenience and the damage was caused simply by this continuing severe shortage of international currency, which had the effect of making what should have been a small, almost a negligible, temporary deficit in the balance-of-payments, which must happen every now and then, into a really serious matter. That was entirely due to the tightness of the monetary

829
organisation under which we had been living.
There have been two attempts to ameliorate it, both of which were fairly trivial. When Reggie Maudling was Chancellor we had the general agreement to borrow; and then, a few years later, when the Labour Party was in office, after the discussions at Rio and Stockholm, we had the special drawing rights, which I think, and probably the Government would agree, are upon much too small a scale. They do a little good, but not nearly enough. But, my Lords, having got the principle of these special drawing rights established, I wonder whether that might not be the best line to work on. In discussing these matters with our friends in the Common Market or in the O.E.E.C., we should no longer have to argue with them about the principle of special drawing rights, because that has been established. All we should need to do is to say, "You have agreed to this in principle; let us do it on a very much bigger scale". I may be quite wrong, but that would seem to me perhaps the most hopeful way of getting the international agreement which we shall need.
There is one other consideration which I would mention to my noble friend. We in Britain are now entering upon what appears to be both a trade boom and an industrial production boom—the signs are apparent. But, my Lords, supposing that, let us say, the United States, who for the last 25 years have been doing far more than their share in the defence of the Free World and in giving aid to under-developed countries, were to have a really serious balance-of payments crisis which, in their view, compelled them to adopt drastic measures to protect their currency, might not this have the effect of putting our British industrial boom, on which we have set so many hopes, into reverse and spoiling its progress? That is one more reason why the Government should treat with urgency the objective of reforming and increasing the quantity of our international currency.
3.31 p.m.
LORD FRASER OF LONSDALE: My Lords, I congratulate my noble friend Lord Boothby on his good luck in winning the ballot and his good judgment in choosing the subject, and also upon his speech. I agree with almost all of
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it. I do not intend to look backwards or to discuss what should have been done by X, Y or Z, but shall rather affirm what in my opinion should be done now: to-day and tomorrow are important; yesterday can take care of itself. It is my opinion, and I submit it for what it is worth, that international currencies should all be free to buy and sell, should all be floated and should remain floated. I will give one or two very brief reasons.
It is my opinion that gold should be free to buy and sell at the market price. I affirm that currencies and gold are commodities in the sense that men buy and sell them for their private purposes or for their business purposes, and that the most reliable price in the long run for currencies and for gold is the market price rather than any other fixed price or adventitious price. And now my right honourable friend the Prime Minister, in a speech in the country only a day or two ago, said that he thought a settlement must be reached or will be reached in Europe amongst the bankers and financiers whereby currencies would be fixed but would be movable over wider limits than hitherto. Perhaps that is the only thing he can do with general agreement. I am sure he knows better than I do and I may have to submit to his judgment, but it is my belief that if possible Britain should try to persuade the other nations of the world to float all currencies, to expect to continue to float them, and to float gold and let it rise to whatever price the market thinks is the right price. That will probably be the market price rather than the monetary price, but whatever it is let there be one price.
My Lords, I have often told the House that I am interested in South Africa, and I want to deal with two prejudices which my noble friend Lord Boothby touched upon: one, the American prejudice that if you recognise gold you diminish the status of the dollar—"the dollar is as good as gold", and all that. Well, history has answered them; they were wrong and history has proved them wrong. The dollar is not as good as gold, but that prejudice held the world back from a sensible arrangement for ten or twenty years. I mention these prejudices because I think in this matter we must try to rid ourselves of prejudice—difficult as I know that to be. Then it is said by the Americans and by some

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of us that if we raise the price of gold we benefit the Russians. Why on earth should not we benefit the Russians if thereby we can benefit the world? The idea that you must withhold a benefit from somebody lest it should offend your susceptibilities to your predilection or the bee in your bonnet is too ridiculous for words. We want to trade as freely as we can, wherever we can and to make as much money as we can for Britain; and all the good that Britain can do in the world will be enhanced if she herself does well in the world. The idea that we must hesitate to do anything, to raise the price of gold, for example, because it will benefit the Russians, to my mind is quite ridiculous. There might be some sense in stopping trading with the Russians, as is advocated with South Africa, in order to teach them, like Rhodesia is being taught, how to behave but there is no sense, if we are going to recognise Russia and trade with them, in saying that we will not raise the price of gold lest we benefit them. If to do so is going to benefit us and the world, we should do it.
Turning to South Africa, there might be some sense—although I do not say it—in ostracising South Africa, putting it "in Coventry", shutting it up like Rhodesia and saying that we will not trade with South Africa or do anything because of this or that. There is no sense in that, not even from the point of view of helping the black men. There is no sense that I can see in refusing to do a thing that should be done for the world's benefit simply because it may benefit South Africa. All the better if it does—it will benefit all of us as well. So can we try to get rid of these prejudices, because they are stultifying reason?
My Lords, another prejudice which has been believed for a long time and which was probably stated at Bretton Woods, and by Keynes before that, is that stability in currencies would arise out of fixed currencies. This is the only observation about the past that I am going to allow myself—history has proved that to be wrong. I think four or five times since Bretton Woods we have had currency crises, and every time Ministers, including Sir Stafford Cripps whom I greatly admired, have had to come down to the
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House and indulge in terminological inexactitudes to try to mislead the Front Bench on both sides of the House, and the country and especially foreign people and speculators. Of course he failed. They always fail, and in the end they devalue under great pressure with an enormous upset to everybody. That is the main argument for floating because the thing moves up and down gently, a cent at a time or whatever it may be, and you do not get the crisis, the tension, the pressure. So the prejudice in favour of fixed exchanges because of the stability that they will bring to the subject has proved to be a broken reed. In a sense my right honourable friend the Prime Minister is going back to a kind of Bretton Woods with just a little bit of easement—Bretton Woods, plus the movement up and down. I hope he will find that that is not necessary or that he and the Chancellor of the Exchequer will be able to prevail and do what I recommended earlier in my speech.
My Lords, my last comment is this. Of all the unreliable people in the world, I think that the politicians are probably the most unreliable. The reason is that they are subject to the pressures of the electors, the voters, the great British public which is very ignorant indeed of many matters—naturally—and is swayed by sensational stories in the media which are often devoted to sensation and circulation rather than to a sincere judgment and appraisal of the facts and the consequences. In so far as we can take control of the world currencies out of the hands of the politicians, and in so far as we can avoid them being tempted to use the currency rate as a political lever, or as a political tool in their own Parliamentary situations or their own electoral situations, so much the better. That is perhaps the main reason for establishing a float of both the currencies and also of gold—and I would repeat that—so that these things take care of themselves and are to the largest possible extent not subject to the whims and fancies and political gambits of the politicians.
3.41 p.m.
LORD BARNBY: My Lords, amidst all the arguments about the cause and cure of inflation there seems to be little realisation that in a world of universal

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paper money issued by monetary authorities we should be wise to assume that continuous inflation seems to be here to stay. I would suggest that inflation means an economic situation when the prices of everything in daily demand—food, consumer goods, property, land, et cetera—rise proportionately. But controls of any kind do not dispose of or cure inflationary conditions; they produce only a temporary appearance of stability. Those are the introductory thoughts which generate the few remarks I wish to make. I am grateful to the noble Lord, Lord Boothby, for bringing up this very timely subject for discussion. The noble Lord, as I know, has consistently advocated that gold should hold a proper price in the monetary arrangments of the world. I share that view. I recall that he and I sat in another place together, and I remember now his consistency. Well, my Lords, we have had recent crises, as the noble Lord said. The Bretton Woods Agreement has broken down. Inflation is with us, whether the money supply is adequate or inadequate. Some may think it was inadequate before, but it certainly appears to be adequate now. But there are widespread doubts about whether an incomes policy, which would mean and does mean bureaucratic direction, properly replaces independent, individual initiative.
The I.M.F. procedure at the Smithsonian discussions urged strongly the case for S.D.R.s. My noble friend Lord Dundee expressed his strong support for them. Undoubtedly there is a useful place for them. At that time, at the Smithsonian discussions, there was an appearance that gold was to be removed from its former position, but of course the absurdity of the suggestion is apparent. As my noble friend pointed out, to have two prices, so wide apart is in itself ridiculous. To try to hold down the price of gold when every other commodity in the world is rising and has risen, likewise the purchasing power and standard of living of the world, establishes a greater demand for the manufactured products of gold.
The dollar, a previous anchor for comparison of values, is now made inconvertible. There has been historical opposition in the United States to devaluation of the dollar; likewise opposition to an increase in the price of gold. Then came the devaluation of the dollar in 1973.
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Well, my Lords, in having doubts about supplementary things like S.D.R.s, I am going to presume to follow the example of my noble friend Lord Boothby and, with the indulgence of the House, give a personal experience of danger of impolitic change. In 1925, the year to which the noble Lord referred, it happened that I was President of the then Federation of British Industries. That was the time when we went back on to gold at its pre-World War I values, raising the value of our currency by some 13 per cent. There was a vehement denunciation of it by the F.B.I.
I remember being sent for to the Treasury by Sir Winston Churchill, who was then Chancellor of the Exchequer. He had with him Sir Philip Cunliffe-Lister then President of the Board of Trade. We were given a very severe dressing-down for presuming to differ from the then official view that we should return to the gold standard, which crucified the main exporting industries, coal, steel, iron, textiles and shipbuilding. How could you raise the value of the currency by 13 per cent. at one stroke and expect not to have unemployment? My noble friend Lord Fraser of Lonsdale inferred two things. He rather believed in a general float of all currencies. That may be all right if there exists adequate exchange rate cover. But he also referred to South Africa. There the South African Minister of Finance, Mr. Diederichs, has consistently opposed the Smithsonian Agreement and all other Agreements which disregard the dominant place that gold ought to have. I sometimes wonder whether it was not owing to the general slant of disapproval of South Africa that the world failed to realise the stupidity of disregarding the appeal he rightly made. Surely, in view of the commercial demand this was a false assessment of gold.
In all this situation the influence of Britain must be great. At present many people have misgivings about the high expenditure in the public sector. Certainly it has involved "printing money"; that is, putting more money into circulation. That must necessarily lift the price of all commodities in relationship to money, and therefore inflation follows. There can be no surprise that inflation is with us. This high expenditure in the public sector is, I believe, expected to

835
reach £4,000 million more than the taxation intake. That, of course contributes to our inflation. It all means more Treasury Bills, and that in turn puts more money into circulation. That brings with it high interest rates. The Chancellor hopes to fund these by selling this debt to the public sector. I congratulate him on the success of his first tranche. Some £400 million worth was readily taken up by the public. Let us hope that the next offer of £600 million worth will be as readily accepted. But high interest rates puts a heavy burden on posterity. I would urge in this connection—and I hope that my noble friend the Leader of the House will again give thought to this point—the procedure that public bodies will finance by direct application to the market and not by relying upon the Consolidated Fund.
Naturally the terms of trade must move against us. The era of cheap food is past. Our adverse balance of payments rises, as it must. In spite of what my noble friend Lord Fraser said of the hope of a universal floating of currencies, historically there has been a misgiving that it might well contribute to high interest rates. Government credit of over 10 per cent. seems alarming. How is it possible for long to have buoyant trade in these circumstances unless it is contemplated that progressive inflation will cause such erosion that by the time the debt matures the actual rate will have been appreciably reduced.
I am going to make a suggestion which I hope my noble friend who is to reply will consider. It is to draw attention to the suggestion of the eminent banker, Sir George Bolton, that, somewhat on the lines of what the French Government did some time ago when they tried to issue a gold clause, we should now consider tying national obligations to some flexible and moving formula such as "the wholesale price level" or "the cost of living index".
My Lords, may I turn again to the U.S.A.? The 80 million Eurodollars which are reported in circulation must be having a demoralising effect among overseas owners of movable balances. But I recollect that when, 18 months ago, there was strong pressure on the dollar, there was a demand from the world that they should do something to correct their balance of payments and they threatened to
836
put on a surcharge. How unfair is this criticism of the U.S.A.! Their balance of payments position was so bad largely because of their defence posts all over the world, securing the free world and their vast expenditure on troop maintenance together with a gigantic outpouring of overseas aid (a lot of it squandered) but I feel the United States was unfairly criticised for what produced this adverse balance of payments.
My Lords, I want to conclude with one thought. Recently we have read much about the energy crisis in the world. We realise that the Arab countries of the world are sitting on vast reserves of oil. I am told that Germany, for instance, draws over 50 per cent. of her total oil requirements from Tripoli and that in the case of Japan the proportion is perhaps even greater. We know that oil supply from the Middle East plays an important part in our world political strategy. But whatever may be the thinking as to the extent by which the consumer countries should increase payment for oil to the oil-producing countries, one thing is certain: that all energy demands for the world are going to continue to expand and demand for oil likewise. The wealth of those Arab countries will progressively accumulate. We recently had an example where the swing in one direction to the deutschmark of vast free funds in the world added intensely to the currency crisis in which we ourselves were sufferers. Your Lordships will have read of the tremendous sums which, by the end of the 1980s, it is considered will have been accumulated by these oil rich countries. So however these sums are used S.D.R.s will not be freely accepted and their demand will in addition to other tangibles be for gold.
4.1 p.m.
LORD WIGG: My Lords, I had not intended to put my name down to speak to-day, but I was astonished to find that there were so few speakers. When I saw the list, I surmised some of the things that would be said and I thought the House would bear with me for a few moments if I expressed my views on this subject. I was most interested to hear Lord Boothby's opening speech and, like other noble Lords, I express my gratitude to him for putting down the Motion. He drew on his memory: he reminded your Lordships that all the years he has been

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in politics he has been an opponent of the return to the gold standard and an opponent of Bretton Woods, and that his position to-day is a logical outcome of that situation. I was not a Member of the House of Commons at that time; I was not in public life. I was, however, a victim of the return to the gold standard, and a victim, as were millions of others, of the policy of the Conservative Party. I find it slightly hypocritical (I wish the noble Lord, Lord Boothby, were present to hear my words) for him to make a meal of his opposition to a return to the gold standard without facing up to what was involved.
The return to the gold standard in the early 'twenties was a political decision by a reactionary Conservative Government to return to the conditions—and they believed that they could succeed—that appertained in 1913. They wanted another world of friendly country houses. They did, but I did not: because for me the world of my youth was a world of poverty, of stunted opportunity; a world of war, which had not been fought in my interests or the interests of those for whom my strength was drawn. I am glad that I delayed what I wanted to say to the noble Lord, Lord Boothby. He was a supporter of the Conservative Party. Therefore the fact that he opposed a return to the gold standard in the 'twenties and in 1931 does not absolve him from the responsibility of the logical outcome of Mr. Churchill's decision—a political decision by the Conservative Party for which they must take full responsibility.
For the noble Lord, Lord Boothby, it was a very pleasant decision: it was a world of country houses, a world of plenty. But in 1931, when a National Government were formed, in order, your Lordships should note, to save gold, to keep us on the gold standard, they were forced off by the actions of some sailors in Invergordon, and would have found themselves, as would the present Administration, out on their backsides but for an involuntary act which they could not escape. They came off the gold standard in 1931, and this Government a year ago was forced to devalue. But what did it mean to me? It did not mean dinner with the Governor of the Bank of England. I was a sergeant, and my pay was 9s. a day. I had 10 per cent. Knocked
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off immediately. My marriage allowance was 7s. a week: I had 10 per cent. of that knocked off. The noble Lord, Lord Boothby, stayed in the Conservative Party; all the years he sat in the House of Commons—and when the war was over I helped to get rid of them.
LORD BARNBY: My Lords, I should like to remind the noble Lord that Sir Winston Churchill often publicly said that the return to the gold standard at that moment was one of the greatest political mistakes of his life.
LORD WIGG: My Lords, I admit that it was a political mistake of the first magnitude. I agree with what the noble Lord, Lord Boothby, said. It forced the General Strike; it led to the shade of events which brought Hitler; it may have been one of the causes of the Second World War.
LORD BOOTHBY: My Lords, perhaps I might interrupt the noble Lord for a moment. I was a Member of Parliament in the other place for 34 years. I was a Conservative. I attacked the Conservative Party for 34 years without a moment's pause or hesitation: and that is why I held my constituency.
LORD WIGG: My Lords, it is not enough to have done that. The noble Lord was a Member of the Conservative Party. He must therefore, by his membership, accept responsibility for it.
LORD BOOTHBY: No.
LORD WIGG: I am sorry, but there is no escape from it.
LORD BOOTHBY: I had no responsibility.
LORD WIGG: My Lords, I will read out where it led. This is a fact that is constantly overlooked. This is what Sir Winston Churchill says in his volume on the Second World War; and he is writing of events in November, 1940:
"The President sent a warship to Cape Town to carry away all the gold we had gathered there. The great British business of Courtaulds in Amercia was sold by us at the request of the United States Government at a comparatively low figure and then resold through the markets at a much higher price from which we did not benefit. I had a feeling that these steps were taken to emphasise the hardship of our position…".
Those are the facts. What is the good of noble Lords coming down to the

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House to-day and saying that we have a position of great influence in the world? What piffling nonsense! We have no influence in the world—none whatever. What is happening about the dollar at the present time is a decision for the United States, and our views do not matter. They were whittled away by a Conservative Government before the war, which led to our gold reserves being taken away in an American cruiser, and our great assets being sold at a lower price than they should have been, and then subsequently taken on the market and some American making a profit.
LORD SHINWELL: My Lords, if I may interrupt my noble friend, I am afraid he is not following the noble Lord, Lord Boothby, very closely, because, as I understood Lord Boothby's speech, put shortly, it was this. What he is suggesting to your Lordships' House is that the monetary price of gold should be related to the bullion price of gold. Quite frankly, although that means that we might be on the gold standard, we are not necessarily on the gold standard for the purposes of trade and commerce. Nevertheless, I cannot see anything radically wrong with relating the monetary price of gold to the bullion price of gold.
LORD WIGG: My Lords, my noble friend, in the truest sense of the word, must join one of my seminars on economics and I will explain to him privately why he has been misled by this propaganda—because propaganda it is. It would have justification only if some one was a bull in the gold market, because it has no basis in fact at all.
At the present moment, the Americans have what gold they have buried away in the Fort: they are not going to release it, and they are not going to alter its price. At the present moment—and the noble Lord, Lord Boothby, is fortunate in having this debate at this time, when the price of gold is going roaring up—
LORD BOOTHBY: It is all going my way.
LORD WIGG: I think it is. This is the difference between us. I think the price will go to 150 dollars.
LORD BOOTHBY: So do I.
LORD WIGG: The Americans do not mind it going to that price. The interesting thing is why? It could be the result of pure speculation. That I do not believe. It could be the result of the action of the Americans in South Africa. I do not believe that. I believe that this is due to the oil sheikhs, who no longer trust America. They cannot get into deutschmarks; they cannot get into yen. What can they do with their money? They are buying gold and they are buying it as fast as they can go. It is equal nonsense to imagine that there is any possibility of getting a parity with gold. We cannot do that, because every currency in the world (and not least our own) is bogged down with debt. We talk about inflation as if it is something in a bottle or something that, if we pray hard enough for the workers to accept a 10 per cent. cut in their standard of living or accept Phase 3, will go away. But of course it will not. We have got a rip-roaring consumer purchasing spree in this country, and it expresses itself not only in terms of increased wages but also in terms of increased credit facilities. Your Barclaycard, your Access card, your extended credit—every single one of these is a way of increasing purchasing power. The Government, with all their might and main, back their Press friends and campaigns on TV. The cry is, "Buy, buy, buy!" This stokes up the fires of inflation.
We are in a very bad position, but the Americans are in a much worse one—or better, according to the point of view. What has happened in America? I spent some time there this year, not in the plushy hotels but getting around among ordinary people, and there the inducement to buy is present during all one's waking hours. The young man and woman who get married start off by buying a house. They have a couple of cars, a refrigerator, a deep-freeze, power machines to clean their teeth and to mow the lawn; they have holidays abroad—and all this is done on credit. The man has to work and the woman has to work; he has to get a second job and so has she. There are only 168 hours in the week, and so inflation gets to the point when it starts to express itself nationally, and there is a water shortage and a fuel shortage. There is pollution to an indescribable degree, with millions of cars choking up thousands of miles

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of road. This is what has happened in the United States. They have hit on a noble operation. It is a logical extension of what Roosevelt did in 1940. They are exporting their inflation. Now you can get all the dollars you want. The Japs have all the dollars they want—
LORD BOOTHBY: More!
LORD WIGG: They have more than they want. They have more than enough, and so have the Germans. So have we—if we had any sense. But we have a deficit of £4,400 million which we are going to finance with Eurodollars. I say in passing that I was a pioneer in this field, because when I was Chairman of the Levy Board I am pleased to say that I managed to build up Sandown Park and I did it with deutschmarks. I borrowed the deutschmarks, and then I got out of them before it was too late. But in fact industry in this country and all over Europe—and indeed all over the world—is being mopped up now by dollars exported from the United States. The United States is in a dominant position. I had thought, following the President's re-election with a mammoth majority, that the market would break in June of this year because I thought he was bound to deflate. Now the President's political position is so appallingly weak that he cannot deflate. So I am frightened about the future. I see it like an avalanche hanging over a village: some time it is going to come down. It may happen because somebody speaks with more than a soft voice, or it may be set off artificially. But the world stands poised; and this country, not wholly but very largely due to the mistaken policies of Conservative Administrations and their City friends, is in an overwhelmingly weak position. This is because the Americans will not alter the price of gold. They want to demonetise the price of gold. They will leave it where it stands because as long as it stays where it is they can come in here, they can smash Rolls-Royce or they can buy it for a song.
The only people standing out against this situation are the French, and the French have adopted an exactly opposite policy. My French is not very good but I read an article in the issue of Paris-Match for April 21 which I would commend to the French scholars in this
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House. The magazine produced an abridged version of the Hudson Institute Survey for the Common Market. Its forecast for Britain was extremely pleasant, because they forecast Britain's position in the late '80's as being—and I quote—"the red lamp area" of the Common Market. That is a very pleasant prospect! In my judgment we are moving to the position where we need the good will and understanding of all elements of our society, because the danger is very great. There is an overall danger in the international field.
I think that the Kaiser—and later Hitler—misread the situation so far as we were concerned. They misread the strength of a democracy when it faces a challenge. It may be that the Russians could be induced, by looking at the economic and political disarray in the West, to undertake adventurous policies which they would not undertake were it not for these fundamental weaknesses. There can be only one answer for a democracy, and that is what saved us in 1940. The great mass of our countrymen do not understand what it is all about. They need to be told the truth, by the Government and by the Opposition. Let me say at once—I have to say this—I am not in favour of Coalitions. They do not work; or, if they do, they work only for a limited period. I do not believe in Coalitions but I do believe in Governments taking responsibility for their actions and that it is the duty both of the Government and of the Opposition to tell their fellow countrymen the truth about this country's economic position in international affairs, so that in due time out of political discussion can come sound policies which are understood and can be applied.
I do not believe, as some other speakers do, that the dollar, has been (in the phrase which I believe was used) "bested by gold". Nothing of the kind. At the present time the American dollar stands absolutely supreme.
LORD BOOTHBY: Nonsense!
LORD WIGG: It stands absolutely supreme, not in terms of prestige but in its ability to lap up all the major assets the Americans want. The industries of all the countries in the West have been penetrated by American money. When the truth is understood, as it was in

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Australia, the position is reversed; but generally it is too late. By the time the Americans want their repayment and the interest on the capital they have invested, there is talk about the influx of capital into that country. This has been talked about in France. Here, I regret to say, the Government seem to think it a welcome sign of strength that the dollar has come here. The dollar has come here because the Americans go wherever they can go, and surely it is far better for the dollar to come in and get a slice of one of our major industries than for the dollar to try to enter Germany or Japan, or even to stay deposited in a bank in New York.
I am grateful to the noble Lord, Lord Boothby, for raising this debate because he has quite rightly put on the Record the things that he has said in the past. I want to put on the Record the things I believe in, and have believed in all my life; and I believe in them still more at the present time. The days of uncontrolled capitalism, the days of laissez faire as it was once supposed to exist, have gone for ever. We are not going to put things right, or even attempt to put them right, unless there is an effective diagnosis and an understanding of what it is all about.
4.20 p.m.
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, on the last occasion we debated this matter in your Lordships' House it happened to be on a Motion tabled by Lord Boothby. The noble Lord concluded his speech with these prophetic words:
"…and one day, my Lords, you will listen to me on the subject of the price of gold.".
This great day has dawned, and the noble Lord told us that it was for the fifth time during his membership of your Lordships' House. We have all listened with great interest to his golden words. Perhaps there was, a certain familiar ring about them. My noble friend Lord Barnby referred to Lord Boothby's consistency in this matter. Not only is his eloquence undiminished, but his convictions—powerfully held, pungently expressed—are unaltered. My Lords, we all know the great causes which the noble Lord so persistently advocates. Europe, the herring and gold. His championship of the cause of European unity is well
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known. And the outcome is emerging for all of us to see. His advocacy of raising the monetary price of gold is equally well known. I must say I have reason to doubt—but let the noble Lord have his opinion—whether his glittering vision will in this area see the light of day; but we shall see.
I should like to make it clear in any event that the underlying objectives which I discern the noble Lord has in mind in making his proposals are ones which we can all endorse. He wishes to see an expansion of trade. He wishes to see a rational monetary system, an end to monetary crises and a curb to world inflation. He looks for a system that will promote the flow of resources from developed to developing countries. These are the objectives the Committee of Twenty has also set itself in tackling the task of reform. They are the objectives of the European Community. They are likewise the objectives of Her Majesty's Government.
But, my Lords, the basis for reform must be equitable if it is to endure. It must be concerned not only with the provision of liquidity but with the control of liquidity. It must be concerned not only with the convertibility of currencies but with the means to sustain that convertibility. Above all, the working of an orderly and stable system must ultimately rest upon the continuing co-operation of the international community—on a real consensus of international opinion if this can be obtained.
I am not sure that I detect all those elements in the noble Lord's prescription. It is bold, simple and direct—like the noble Lord. I grant therefore that it has a certain appeal. I will explain in a moment why I personally do not favour it. Before I do so however it might be helpful if, briefly, I were to recall the background to the reform of the monetary system to which the Committee of Twenty has set its hand. The noble Lord, with other noble Lords, has suggested that the Bretton Woods system has broken down. Well, so be it. I think that it is important to remember that the arrangements and institutions established at Bretton Woods, for all their imperfections, did not serve us too badly until recent years. The post-war period has witnessed an unprecedented expansion in the history of world trade. Between 1950 and 1970

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world exports increased five-fold in value from 60 billion dollars to roughly 300 billion dollars. During the past 12 years they have been growing at an average annual rate of 10 per cent. Indeed it is this same expansion, the growth and the increase in prosperity that has in large part led to the pressures on the system to which we are subject at the present time. For these years have seen profound changes in the structure of international relationships and shifts of balance of economic strength within the free world.
Like my noble friend Lord Fraser of Lonsdale, I do not wish to job back unduly. I shall not seek to express an opinion as between my noble friend Lord Boothby and the noble Lord, Lord Wigg, as to the precise question of the noble Lord's political accountability over the 34 years in which he was a Member of another place. But the facts of the matter are plain to all of us. The United States economy is no longer overwhelmingly pre-eminent in the world today. Within the Free World we have seen the emergence of the European Economic Community and of an immensely powerful Japan. All this, and much else, has created a situation for which Bretton Woods has not adequately provided. It did not answer in sufficiently clear terms the criteria by which balance-of-payments adjustments should take place, or to what extent these should be a matter of domestic fiscal and monetary policies or exchange rate change. And assuming equilibrium could be achieved, the system did not satisfactorily provide the liquidity to finance the growth in world trade which we have witnessed since the war. We all know that the pressures have become intolerable. There was the monetary crisis on August 15, 1971. I remember it vividly; I happened to be on holiday in Bermuda at the time. I suppose that island is as sensitive a barometer of the international monetary climate as one can find anywhere in the world.
The Smithsonian Agreement of December, 1971, represented a move towards more realistic exchange rates. But pressures built up again in the exchange markets, and the further adjustments which we saw in the early months of this year proved necessary. These pressures did not derive primarily from a shortage of liquidity—and here I part somewhat from the point of view taken by my noble
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friend Lord Dundee. If anything, the reverse happens to be the case. The extent of the movement of funds, this swilling around of funds in the monetary system, reflected, if anything, an excess of reserves, but reserves held in a currency that had come under fire. The events earlier this year therefore emphasise what has been evident for some time: that we are facing not a single problem, a liquidity problem, but also an adjustment problem. Each problem has a number of aspects, and the two are closely interrelated.
Let me now turn to the recipe proposed by the noble Lord, Lord Boothby, a recipe which was attractively packaged; namely, a substantial increase in the official price of gold. He referred to the vast increase in international liquidity that such an increase in the official gold price would create. This would indeed be the case. At the present official price, there is some 43 billion dollars worth of gold in international reserves. If the official price were to be increased to the 100 dollars per fine ounce (I use "100 dollars"; I know that it has gone past that at the present time, but it is an easy calculation) reached in the free market for the first time this week (and I am not quite sure what the market price might be a year from now on; I notice the bet which the noble Lord, Lord Wigg, has placed with himself), this would increase the value of gold in world reserves by about 60 billion dollars. If the value of Special Drawing Rights and Reserve Positions in the Fund were also to be increased in line with the increase in the gold price, this would add another 25 billion dollars to international liquidity. The question we must ask ourselves in considering the proposition of the noble Lord, Lord Boothby, is whether an increase in international liquidity of 85 billion dollars at one stroke (to use the immortal phrase) would be helpful, or whether it might not be damaging.
The noble Lord has argued that the post-war period has been characterised (I think this underlay his argument) by a real shortage of international liquidity and this has restricted the growth of world trade and world incomes. I am not absolutely certain whether I accept this proposition, at least as stated baldly. In the last few years—and this underlay the remarks of the noble Lord, Lord

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Wigg—the United States' deficit has added 40 billion dollars to world reserves. The ratio between world trade and world monetary reserves is also becoming more stabilised. It is a matter which I noticed, in preparing myself for this intricate subject, my noble friend Lord Dundee referred to in his speech in your Lordships' House in 1969. In 1967 world reserves stood at something near 74·3 billion dollars and world exports at 190 billion dollars. Since then world reserves have increased to over 150 billion dollars—156·7 billion dollars—and this has more than kept pace with the growth of world trade. Indeed, I think there are many who would argue that the increase of world liquidity during this period has contributed to the pressures of world demand, to the pressures on available productive capacity, and to the world inflation which we are now experiencing. In fact, it is usually those who see grave danger in this expansion of international liquidity who call for a return to the gold standard (to use shorthand).
The noble Lord, Lord Boothby, almost in the same breath has referred to the discipline a gold standard would impose. I would suggest it is a little difficult to have it both ways. Is he saying that our problem is one of excesive international liquidity which has led to too high a level of world demand and contributed to the inflation which he deplores, as we all deplore it, or has there been a shortage of liquidity which has restricted the growth of world trade and, as he might say, forced us to deny much needed aid to lesser developed countries? In any event, my Lords, Her Majesty's Government believe that the answer lies neither in the massive increase in liquidity—the really massive increase in liquidity—at one stroke, that the increase in the gold price that the noble Lord proposes would create, nor in the severe and, we believe, unnecessarily disruptive discipline of a return to a commodity standard.
We learned I think from Lord Keynes (we always speak of Lord Keynes when we debate these matters) how to manage the domestic economy when we are on form so as to match the demand for goods and services to our capacity to produce them. Now we must seek to match the growth of international
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liquidity more closely to the needs of world trade. Lord Keynes gave us the benefit of his wisdom on this. I should like to quote, if I may, the words which the noble Earl, Lord Dundee, quoted four years ago to your Lordships, because I think they are worth requoting. In his plan for a Clearing Union which provided part of the foundation of the present I.M.F., Lord Keynes said:
"We need a quantum of international currency, which is neither determined in an unpredictable and irrelevant manner, as, for example, by the technical progress of the gold industry, nor subject to large variations depending on the gold reserve policies of individual currencies, but which is governed by the actual current requirements of world commerce and is also capable of deliberate expansion and contraction to off-set deflationary and inflationary tendencies in effective world demand."
My Lords, I believe that that is the basic task confronting us and confronting the world to-day; and I am glad that we are moving towards a new and truly international reserve asset, the Special Drawing Right, which the noble Lord, Lord Boothby, does not like. I think we can look forward to this developing into the world currency which Lord Keynes has in mind—here I am absolutely at one with my noble friend Lord Dundee—and the International Monetary Fund developing into a sort of World Central Bank, of which the noble Lord has in the past been a champion. I am very glad that we as a nation under successive Governments, successive Chancellors of successive Governments, have played a very large part in getting this system into operation.
There are other technical difficulties which the adoption of the proposition of the noble Lord, Lord Boothby, would entail. I will touch on them briefly. For example, what price would the noble Lord choose which would prevent us again from being faced with a new disparity between the official and the free market price? This is a very fickle market, as events this week—and I congratulate the noble Lord, Lord Boothby, on his skill in the ballot, his timing—are demonstrating. I believe that the behaviour of the market this week has shown how impossible the task would be to set an official price that would remain for any length of time in line with the market price. Four years ago the noble Lord proposed 70 dollars an

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ounce. If the official price had been increased then, would the noble Lord again be calling our attention to the increasing disparity between the two prices to-day?
LORD BOOTHBY: Yes, my Lords, I should.
LORD FRASER OF LONSDALE: My Lords, would my noble friend forgive me if I asked him to comment upon my suggestion that the price of gold be the market price—one price, not two, and it takes care of itself?
EARL JELLICOE: Yes, my Lords, I think I should. I think this is an ingenious suggestion. Again, it has the merit of outward simplicity, but to me—and I speak here very much as an amateur in these deep professional monetary waters—it seems to have two basic disadvantages. First, it has the disadvantage, which I have already touched on, that it would create a vast increase in international liquidity with the implications for inflation which that would carry with it at one stroke—the same disadvantage as the proposition of the noble Lord, Lord Boothby, would carry with it. Also, I believe that, as it were, pegging the official price to the market price would import an inherent instability, as I see it, into the whole system. I think the technical inconveniences of this—and I speak here with all diffidence and subject to every form of reserve and qualification of my personal inadequacy in these deep seas—would be very great indeed.
My Lords, this brings me to a further disadvantage which I see in the approach suggested by the noble Lord. This is the uneven and inequitable distribution of the benefits that would result from an increase in the gold price. I am not going to point fingers across the "Iron Curtain" (or whatever we now call it: the Soviet Union) or southwards to South Africa in this matter. I would only say that of the official reserves of gold in the world to-day, 91 per cent. of the total are held by 25 developed countries, and 90 developing countries hold the remaining 9 per cent. I should have thought it would hardly be consistent with the noble Lord's desire, which I share, to improve the position of the poorer countries for the benefit of any increase in international liquidity to fall so largely into the lap of the developed world. Also
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I do not think we can rely on being able to redistribute these benefits, as it were, after the event. I believe it is much easier and much better to attempt to do this in a way in which the creation of new reserves is firmly under international control.
Finally, an increase in the price of gold on the lines suggested by the noble Lord would appear (at least to me) to jeopardise the opportunity, which I believe could be within our grasp, of moving fairly quickly towards a more rational monetary system. It is to the objectives of those discussions which are now in train that I should like to turn in my concluding remarks. The basis for a solution was first conceived, I think, by the I.M.F. as long ago as 1967, at the Rio Conference, and this alternative mechanism for increasing international liquidity was instituted formally by the creation of S.D.R.s in 1969. The Committee of Twenty, representing all members of the I.M.F., has been considering all aspects of the international monetary system, and I should like to refer briefly to the communiqué which the Ministers issued at the end of March, after their meeting on March 26 and 27, setting out the position which they had then reached and the further work which they were putting in hand.
In brief, a general consensus was reached that we must strive towards a better working of the adjustment process, in which adequate methods to assure timely and effective balance of payments adjustment by both surplus and deficit countries would be assisted by much improved procedures for international consultation within the orbit of the fund. It was also agreed that the exchange rate régime should remain based on stable but adjustable par values, but that floating rates could provide a useful technique in particular situations. In addition it was agreed that there should be a better international management of global liquidity, that the role of reserve currencies should be reduced and the S.D.R. should become the principal reserve asset of the reformed system.
In addition, the Deputies were asked to study further the conditions for a resumption of general convertibility, including questions relating to the consolidation of existing reserve currency balances and

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to methods of settlement. They were also asked to study the means of dealing with the problems of speculative capital flows—problems which are not inconsiderable at the present time.
Finally, the Committee recognised the interests of the developing countries, and affirmed the desirability on the occasion of the reform of promoting economic development and the flow of real resources from developed to developing countries. The Deputies are meeting in Washington next week to carry forward what I think, even in the bald terms in which I have stated this, your Lordships will agree is a very wide-ranging programme, and their objective will be to submit a report to the Ministers of the Twenty later in the summer.
This is not the occasion—indeed, it would be quite wrong—for me to try to develop the detailed issues that remain for consideration in the forum of the Twenty and which are now being considered within this framework. But I am myself clear—and I say this with conviction—that it would be neither wise nor desirable to jeopardise progress towards a lasting and equitable arrangement for the conduct of international monetary affairs by reverting to a system based on gold.
I have thought it right to-day to recall some of the background to the requirement for reform of the monetary system and to say something, however cursorily, of the objectives and work of the Committee of Twenty. I do not for one second underestimate the technical complexity of the task the Committee is undertaking or the political determination that its resolution will require. But I believe that an important degree of consensus on the approach to these questions has already been achieved.
I have tried to make clear why the solution advocated so eloquently and so consistently by my noble friend Lord Boothby would not, in my view, be satisfactory. As I see it, the technical objections are overwhelming. Somehow, I very much doubt whether I have convinced the noble Lord of this. But I am clear that his solution would be quite inconsistent with the approach taken by
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my right honourable friend the Chancellor of the Exchequer to these questions, and the approach which in general has been endorsed by the Committee of Twenty. Perhaps I might refer to the speech which Mr. Schultz, the Secretary to the American Treasury, made to the I.M.F. last September. I will quote part of that speech:
"The rigidities of a gold-based system, subject to the uncertainties of gold production, speculation and demand for industrial uses, cannot meet the needs of today."
The noble Lord, Lord Boothby, disagrees. He may, just conceivably, be right—sometimes he is. I believe, and the Government believe, that he is wrong. And I have adduced a number of technical reasons to support that belief. Even granted that he were right, and granted that he could convince Her Majesty's Government that he was right, it is clear to me, looking at this matter as one of practical politics, that the view which he advocates would have no chance of prevailing in the counsels of the Twenty. In sum, I do not believe that the noble Lord's proposals, advocated though they be with all his skill and consistency and humour, are those which I can commend to your Lordships' House.
4.48 p.m.
LORD BOOTHBY: My Lords, I should like to thank my noble friend the Leader of the House for his extremely interesting and courteous reply. This has been a useful debate. I think I am right, and Mr. Shultz is wrong, and the Treasury is wrong. I have believed them to be wrong for the last fifty years. They have never done anything right yet that I am aware of, and I do not think they are doing anything right now. The noble Earl has not dented my conviction that gold is the essential basis of a satisfactory working international monetary system; that gold will come into its own; that it will go on from strength to strength, as it is doing now, and that one day (I hope before I die) I shall be able to say to the noble Earl, "I was right and you were wrong". My Lords, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

INVISIBLE EXPORTS
4.49 p.m.
LORD SELSDON LORD SELSDON rose to call attention to the significance of invisible exports to the United Kingdom, particularly within the enlarged European Economic Community; and to move for Papers. The noble Lord said: My Lords, I beg leave to move the Motion for Papers standing in my name on the Order Paper. It was rather a bit of luck to-day for the noble Lord, Lord Boothby, that gold should have gone soaring through the roof; it is also a bit of luck for me that to-day at 12 o'clock, when the trade figures came out, it was demonstrated that invisibles have taken us into the black. I should have liked to speak on the Motion moved by the noble Lord, Lord Boothby, but all I can do is to quote Kipling:
"Gold is for the mistress,
Silver for the maid?
Copper for the craftsman,
Cunning in his trade.
'Good', said the Baron,
Sitting in his hall
'But iron, cold iron,
Is master of them all'."
My Lords, I dare to hope that this debate will not in any way be classed as political. It raises, I feel, at a most appropriate time in the history of our economy, a matter which is of some significance: the significance to this country of invisible exports. But before attempting to ramble for the next 20 minutes over this wide-ranging subject, I feel that I have to declare an interest. When I first put this Motion down on the Order Paper I did not have an interest but now I work for the British Merchant Bank, Singer and Friedlander, which is part of the Bowring Group, and we are one of the largest invisible exporters in the country. I hope that your Lordships will recognise that I speak to-day as an individual and I shall seek to ignore Party politics and to be both critical and, I hope, constructive.
It is an economic axiom as old as the hills that goods and services can be paid for only with goods and services. So said Albert Jay Nock. But even he would have have been surprised, some 25 years after his death, that this country should continue to fail to balance—with the odd exception—the cost of goods imported with the revenue from goods exported. Goods are classed as visible trade, and
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only twice since 1957 has the United Kingdom managed to show a visible trade surplus. Over the past 18 years the combined deficit on visible trade has been over £3,600 million, an average deficit of some £200 million a year. I submit that, despite the encouraging visible trade figures to-day, we have very little hope of improving our visible balance position in the short term, though I submit, and many noble Lords will agree with me, that over the next few years, for a number of reasons, our deficit on visibles will show a steady and perhaps even dramatic increase. It would not be beyond the bounds of possibility to have a visible deficit of £1,000 million. But within a period of two or three years one hopes that the position on visible trade will improve.
The reasons why one forecasts a deficit are connected first, with the E.E.C. entry. We have an increasing demand in this country, and very dramatically increasing exports; but we also have a very sharp rise in commodity prices: the prices of the raw materials that must be imported to feed our industry and to fund our exports. We also have the fact that British companies are expanding abroad at a remarkable rate, and establishing themselves overseas, and that this may not be offset in the current year by foreign industry setting up over here and so becoming an indigenous manufacturer rather than an exporter to the United Kingdom. I do not want to paint an over-gloomy picture; I hope that it is only a short-term position. But I have commented on visible trade because it is only against that background that I believe one can recognise the true significance of our invisibles. It would not be an overstatement to point out that it is our invisibles which have saved us, and I believe will continue to save us, from balance-of-payments disaster.
I am afraid that here again I must mention a few figures. Over the same 18-year period our invisibles—excluding Government expenditure abroad, and I will touch on this peculiar form of camouflage in a moment—have shown a combined surplus of over £14,600 million against the deficit on visible trade of £3,600 million.
LORD JACQUES: My Lords, would not the noble Lord agree that one can take any part of our exports and say, "This has saved us"?
LORD SELSDON: It is difficult when one is commenting on trade figures. I only wish that God had not declared that there were 12 months in a year. I have taken these 18 years since it was from the moment I left school and hoped in some modest way that I should be contributing to the economy. I take the noble Lord's point. It is difficult and one can play with figures; but I am using these figures to demonstrate a point. I have taken an 18-year period, which covers all Governments, so it can be said that one is taking into account the advantages and disadvantages of each. Invisibles may take credit for the way in which they have saved the Government of the day—whichever Government it may have been—from disaster, and the Government of that day may take credit for having encouraged and not killed invisibles. As an invisible earner we rank second in the world with an 11 per cent. share of all invisibles. That is about half that of the United States. But if our invisible earnings were to fall to the level of those of that economic wonder, West Germany, they would have to halve to do so, and we would then have a severe economic crisis on our hands and almost certainly a major devaluation. I have been trying to use figures to demonstrate the importance of invisibles and their significance to our balance of payments. But what are they? Here again, my Lords, there is much misunderstanding. Only last week, according to Punch, a professional man had actually sighted an invisible. He said:
"… it passed at tremendous speed through the sky heading out over the Channel to the French and German markets. It was shaped like a hotel chain and smelled vaguely of boiled potatoes. I am convinced it was an invisible export, it wasn't in the least like the normal shipment of machine tools."
My Lords, so that there is no misunderstanding, I should point out that invisible earnings are essentially the earnings of our service industries and our professions plus the interest, profits and dividends on our overseas investments. In this sector one includes our banks, merchant banks, insurance brokers, insurance companies, stockbrokers, the commodity exchange, shipping, travel and tourism, civil aviation, the film industry, lawyers, accountants, civil engineers, management consultants, advertising, the Arts, and numerous other service industries. I submit that in most of those sectors the
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United Kingdom leads Europe and perhaps the world. I submit, too, that perhaps for the first time since the war, despite our previous economic record, we are one of the most respected and trusted nations upon earth. That is not only because of the success of our recent foreign policy—and one must pay tribute to my right honourable friend the Foreign Secretary—but also because of the worldwide influence of our service industries and professions who together make up "invisibles". We must not forget the inestimable value of this reputation, based perhaps on the past. It would be wrong to throw it away in the same way as we destroyed our reputation as a manufacturing nation and are now struggling to rebuild it.
I and others are concerned. We are concerned first lest the Government should unwittingly discourage our invisible sector. Secondly, we are concerned that without a few positive steps of encouragement this sector may show a decline at a time when its contribution to the country will be most needed. It is reasonable to point out that in 1972 our invisibles showed a slight fall, the first decline since 1964. Perhaps we can look on this as a warning. Thus in covering different areas I shall put forward certain proposals and I know, too, that other noble Lords who are speaking today will also have their own constructive ideas. We are all extremely happy that it is my noble friend Lord Limerick who is to reply for the Government because of the steadfast support he has always shown for the invisible sector.
Before taking a brief look at some of the sectors, I must return to an area of general concern which has a direct bearing on the future of our invisible earnings and upon the future of our economy as a whole, and that is the question of confidence. Despite the optimistic noises which come from the wizards of Whitehall and Westminster, confidence in the economy and future success following the current boom is confined only to an informed few. Perhaps commerce is misinformed, or perhaps the communication gap between Government and commerce is wider than it has ever been. A recent stockbroker's report began with the observation:
"If you can keep your head when all about you are losing theirs then perhaps you just do not understand the situation."

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It went on, as others have done, to talk about the Government's gamble for growth and pointed out that 1973 would be the most inflationary year on record.
My Lords, Phase 1 and Phase 2 have given us a pause and I think most of your Lordships will agree—some perhaps reluctantly—that the Government's policy has been much more successful than they dared to hope. But Phase 3 must be rigorous and tough if any form of on-going confidence is to be restored to sterling and to our economy. If it is not tough and if it fails, as has Phase 3 in the United States, then our economy will take a real bashing and our invisible earnings will suffer. It is right, too, to stress the damage which the continuous erosion of the pound has done to our reputation and consequently to our potential for invisible earnings.
But our economic policy has a chance to succeed. It is the kind of chance that has some appeal to the British. It is a chance that confidence can turn into a reality. May I urge the Government to speak out and discuss their problems with honesty, candour and frankness. At a time when politicians are being discredited throughout the world that could do them and our country nothing but good.
As your Lordships might expect, I now move to where I came from this morning, the City of London, which has a right to claim its place as one of the major financial centres of the world and as a major invisible earner, achieving, net, well over £500 million a year. The City has succeeded because of the expertise, freedom, flexibility and speed with which it operates. It will continue to succeed provided that it is not subjected to bureaucracy and restrictions arising from our entry into the E.E.C. Too rigid restriction in the interests of harmonisation could handicap us, and since the hulk of the City's invisible earnings comes from outside Europe any serious restrictions could be against the interests of the European economy as a whole. In seeking freedom from restriction, might I suggest that the Government pay heed to Tennyson:
"And statesmen at her council met Who knew the seasons when to take Occasion by the hand and make The bounds of freedom wider yet."
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My Lords, insurance is the major invisible earner of the City, and its foreign earnings exceeded £330 million in 1971. The industry comprises Lloyd's, which contributes about 50 per cent. of this amount, our insurance companies, contributing some 36 per cent., and our brokers the rest. Naturally they are concerned lest restrictions should be introduced as a result of our entry into the E.E.C. that might handicap their future potential to earn foreign earnings. I think it would be fair to point out that the industry is in general most encouraged by the degree of Government co-operation it has received at a national and at a European level.
Next I turn to banking. The net invisible earnings for banking have shown a decline in the past year or so, but, hopefully, as we offer banking services in competitive terms to foreign industry expanding both nationally and internationally, these foreign earnings will show a marked increase. We have to consider the importance of the foreign banks in London. More and more have been coining over here in the past few years; these certainly contribute to our economy, and it would give cause for concern if restrictions, taxation, high cost and lack of efficient communication made London overall less attractive than other financial centres. I know that the noble Lord, Lord Mais, will comment on some aspects of this, and may I say how happy we all are that he should make history this year by being the first Lord Mayor from your Lordships' House, and how happy, too, I am that he should have chosen this occasion to make his first speech while in office.
My Lords, when looking at the importance of London as a capital market, obviously we must look at the importance of the Stock Exchange. It is naturally important that the Stock Exchange should expand its European role. It has the size and the respect. Its market capitalisation is more than the rest of the stock exchanges of Europe put together. Its turnover is more than twice. It has twice the number of listed companies. But it has one major disadvantage: it is more expensive to deal upon. If it is to develop a truly international role it must no longer be burdened with stamp duty. Equally, it must encourage the listing of foreign companies and create

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a market in England for their shares. It must not be restricted by the investment dollar premium. I suggest the Government give consideration to all these areas, particularly to removing the premium on foreign companies which have a listing in London. There are other aspects of the dollar premium, in particular the pernicious 25 per cent. surrender requirement, and I know that the noble Lord, Lord Terrington, will go into this matter in some detail.
I do not want to get bogged down with the subject of tax, but there are two taxation areas which could have an adverse effect upon our invisible earnings. The first is the withholding tax. This is a peculiar anomaly. Where withholding tax is deducted from loan interest received abroad, relief from United Kingdom taxation is not obtained until the inspector has agreed to the tax computation for the relevant year. Because of the delay, the quoted rate of interest on loans made by United Kingdom banks needs to be approximately¼ per cent. higher than the required net rate of return. There is no doubt that our competitive position would be improved if future tax treaties provided for gross payment, or if the United Kingdom authorities would give early repayment, for instance, by offsetting against advance corporation tax.
Secondly, I move to another major area, the question of the United Kingdom imputation system of corporation tax. That is a complicated subject, and it has a direct bearing on profit and dividends on foreign investments, which is one of the major sectors of invisible earnings. The total net invisible earnings of this sector are £580 million a year, and part of these are derived from multi-national companies, both service and manufacturing, which are located in England. Those which are foreign in particular suffer a double disadvantage under the imputation system. I will not go into details here—I have written to my noble friend Lord Limerick—but suffice it to say that the disadvantages of the system are such that it could well encourage some of those companies to move elsewhere, with consequential detrimental effect on our invisible earnings.
My Lords, the field broadens even further. I will not cover every sector in
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detail but just take one or two points to try to illustrate to your Lordships the breadth of the field of invisibles. First there is shipping, which we would not dispute makes a major contribution to our economy. But it is spread across the board, and when one looks at invisible earnings one sees a net deficit against shipping. That is, of course, a slightly false picture, but it is a difficult one to correct, because shipping is carried across the whole field and its contribution appears in other people's earnings. Civil aviation is the next area, and here there are a couple of points I should like to make. The first is the way in which imports of new aircraft are shown as a debit of a lump sum when nine times out of ten they are paid for in borrowed currency and these payments are spread over time. Another point under this heading is the current civil aviation policy, which could adversely affect our invisible earnings in civil aviation this year. For example, foreign airlines will take away from United Kingdom airlines this year a large part of the charter business, and this will have an adverse effect upon invisibles.
The film industry, at present enjoying itself at Cannes, is another major invisible earner, and some of our companies earn substantial amounts of money. But the future of this sector will depend upon the level of production of British films the rights of which are sold abroad, whether they are produced by British companies or by American companies located here. Our commodity exchange, too, particularly this year with the high rate of growth in commodities, plays a vital European role, and I think it is important that we should encourage it to increase its European activities. Perhaps this year it could earn as much as £100 million in invisibles and develop, as it ought to, to being the major commodity centre of Europe. Export houses are another sector which bring in £40 million to £50 million in invisible earnings. But the creation of invisible earnings is hampered by the lack of facilities for credit insurance through E.C.G.D. I know the Government will look into this point, but there is another area connected with this which they should also look into; that is, the effect of existing high rates of interest for short-term export finance in sterling. This is very inhibiting when the

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customer looks to the United Kingdom for finance and finds that the rates are far higher than he could obtain in other countries of Europe.
There is so much that one could say about the professions. I think it is not so much their net earnings, which may not be substantial in relation to the whole invisible sector; it is more their international influence and reputation, which is second to none, and they have the highest standards and codes of practice. It is impossible to estimate the value of our professions in building the prestige of this country.
My Lords, I said I should be just over twenty minutes, and I have tried to keep within that time. I apologise if I have rambled a little too broadly over this field. I have tried to give your Lordships a feeling of its breadth and the opportunities which exist, and to point to a few problems which are there whose removal could make the opportunities even greater. What I have sought to do is to give a feeling of the potential of our service industries. We have in this country an asset which is perhaps invisible: it is the skill, determination, flexibility and entrepreneurial drive of our British people. This is magnificently harnessed in our service industries and our professions. If we bear in mind the size of their earnings in relation to our G.N.P. we can claim to be the most advanced country in the world in this sector. Our invisibles to-day are even more critical to our economy than they have been in the past. They will help us over the next few years as far as the visible side in concerned. But they have a right and the opportunity to show further dramatic growth themselves.
I end on the question of confidence. It needs so little to tip the scales and to get commerce and industry totally behind, instead of partially behind, the Government. It is their wholehearted support and understanding which will give our economic policy a real chance of success. Let the Government go out and obtain that confidence. My Lords, I beg to move for Papers.
5.10 p.m.
LORD TERRINGTON: My Lords, I should like to express my thanks to the noble Lord, Lord Selsdon, for introducing this short debate to-day. At the
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same time, I ought to declare my special interest as a partner in a City firm with a growing overseas operation. It is now over four years since we discussed invisible exports on a Motion of the noble Lord, Lord Aldington, and on that occasion I raised a number of points concerning overseas portfolio management. I hope, therefore, that I may be forgiven if I return to some of these points briefly this afternoon.
First of all, I should like to refer to the continued existence of what is commonly called the 25 per cent. surrender rule. This is a rule which requires a seller of foreign currency securities to sell investment currency equivalent to 25 per cent. of the net proceeds to an authorised dealer. I specialise in overseas portfolios, and my experience tells me that this temporary measure, which was introduced in 1965, definitely inhibits efficient management. I said so during our debate in 1968, and I still say so, because of the artificial restraint it places on the changing of investments. I must, of course, acknowledge that the present level of the dollar premium reduces this restraint, and I realise that many of the major institutions now invest overseas through hard currency loans. But I am really concerned with the position of privately owned portfolios which do not have the advantage of these hard currency loans; and, as we all know, the dollar premium can be subject to very wide fluctuations. In my view, all these overseas portfolios are a national asset to be managed to the country's best advantage, and it makes no difference whether they are in the hands of institutions or in the hands of private individuals. On these grounds, therefore, I believe that there is a very strong case for total abolition of the 25 per cent. surrender rule, to which the noble Lord, Lord Selsdon, has already made reference. Furthermore, I believe that eight years is quite long enough for a temporary expedient.
May I now turn briefly to a different matter which concerns foreign investment in United Kingdom securities? This is something to which I also referred during our 1968 debate, and it relates to the 1 per cent. stamp duty payable on registered securities. From the information available to me, I am fully satisfied that this is a significant deterrent to

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foreign buyers of United Kingdom securities, more particularly as there is no comparable duty in other European countries, except possibly in France where the rate is minimal. I would also mention here the 3 per cent. stamp duty which is payable on bearer securities issued in the United Kingdom. I fear that this levy may also prove a deterrent to overseas companies raising capital in this country. May I therefore suggest that, in both instances, the present position is now reconsidered?
So far as cost is concerned, I do not think that a concession to foreign investors would prove a very serious matter. From available statistics, it would appear that the total yield from stamp duties in the fiscal year 1970–71 amounted to only about £117·4 million, and of this modest total it would seem from an examination of Stock Exchange turnover, which has been carried out during the same period, that a figure of only about £47 million emerges. I suggest that this figure is not really important, compared with the potential benefit which could accrue to invisible exports. I have probably spoken long enough on these two points, and perhaps I may conclude by saying this. I have an idea that the noble Earl who is to reply for the Government is not unsympathetic to my views on the surrender rule, and I think I may say that I am hoping to have some words of encouragement later on this evening.
5.15 p.m.
VISCOUNT DE L'ISLE: My Lords, I should like to support the noble Lord, Lord Terrington, in his complimentary remarks to the noble Lord, Lord Selsdon, on having put down this Motion for debate tonight. I think we are all grateful to him for having done so. The most striking fact about our trade figures and our balance of payments figures is that in only eight of the years between 1805 and 1971 have we had a positive surplus on our physical trade; that is, we managed to export in value more goods than we imported. It is a truism that bad news makes the headlines, so that in 158 out of those 166 years the organs of publicity for the time being have had useful material for making their headlines, and they are still making them. It seldom occurs to anyone to
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ask how the people in these crowded islands have managed to live, and to live quite well, during the last century and three quarters. Of course, the simple answer is that we have made up our trade deficit by our overall surplus on invisible exports, and we have done so rather consistently for a very long time. It is, of course, true that we have had overall balance of payments deficits, but taking one year with another we have over the years managed to achieve so effective a surplus that we have been able to invest overseas.
It is most important to see these matters in historical perspective, because a great deal of what has been written and spoken has been uttered under a mistaken fact. I think the significant year is 1853. Economists have long noticed that in that year we appeared to change from a nation with a steady positive balance of trade to a nation with a continuing deficit. Various reasons were advanced for this supposed decline in our economic strength, but only in 1958 was the true reason revealed by an American professor, Professor Imlah. His researches led him to the discovery that, in 1853, the basis on which the statistics of our foreign trade was recorded by the Board of Trade was changed. On reworking the figures, he revealed that in fact our trade had been in deficit certainly since the beginning of the 19th century. Our trade records were maintained on an entirely artificial basis. Imports and re-exports were valued at "official values" which were recorded in a set of Government estimates based on the prices of goods in trade, for the most part dating back to 1694. The result was an underestimation of imports by something like one-half. The results Of the professor's researches were confirmed three or four years later by two English economists, Messrs. Dean and Cole. The 19th century was indeed the hey-day of British economic power. We were able to export capital to many underdeveloped parts of the world not, as is now clear, out of our positive balance of trade, but out of our surplus in the balance of payments, which depended in turn upon a surplus of invisible exports.
It may well be asked: what is the relevance of all this to our present situation? After all, we are dealing with current problems; we are not longer an Imperial

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Power; we are now part of the European Community. What does it matter if the Board of Trade kept inaccurate figures 120 years ago? I think the significance is that, despite the discoveries which I have described, we still live mentally with the results of these miscalculations. Memtally and morally we are attuned to pursuing what is, I believe, a hopeless quest, the achievement of a steady and permanent trade surplus—and this at the expense of a number of very desirable goals. We overestimate the part which the export of goods plays in our international trade and underestimate the value of our whole invisible exports complex. Instead of taking a pride in the fact that, by means of a large invisible export surplus, we are able to retain within the economy for the benefit of our whole population a greater proportion of our imports than would otherwise be possible, we constantly reproach ourselves on this account. We feel that there is something almost impure about our apparent inability to compete with Germany and Japan in the export markets of the world.
I agree that we should, and I believe that we could, improve our export performance. But I also believe that our main object must be to improve the general standard of living in this country and our economic power as a nation. It should not be our aim to reduce the proportion of retained imports in pursuit of a positive balance of trade when we could benefit our population and offer them a wider and more plentiful choice by paying for a higher proportion of real imports through an increase in our invisible exports. On the whole, I take the view that an economy such as ours, which is capable of providing in the field of international trade and commerce both goods and services, is a more sophisticated and better mix than those which are totally dependent on a positive balance of trade.
Necessity, my Lords, is proverbially the mother of invention. I am sure that the fact that in our whole economic, history we have had only five basic raw materials to dispose of has quickened our wits and heightened our abilities in the field of financial services—banking, insurance, foreign exchange and commodity markets. We have had only wool, iron ore, coal and natural gas; and now there is the prospect of North Sea
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oil. For many decades we have been a net importer of food as well as of raw materials. On the other hand, the United States is one of the world's biggest producers of grain, meat, oil, timber, coal and textiles. She produces a surplus of food, and she is the leading producer of 24 out of the 51 basic metals in the world; and she has the advantages of space and population. But we, out of veritably slight means, have created over the centuries a powerful and resilient economy; and we ought not to apologise for it: we ought to be proud of it. But it is vital for our future that we should not mis-read the past.
I believe that the role of our invisible exports is going to be of increasing importance now that we have become a part of Europe. We ought to urge upon the Government that they give full recognition to the value which we offer to the world, to Europe and to our own domestic economy through our highly sophisticated system of financial and other services. I do not accuse this or any preceding Government of being deliberately obstructive, but I doubt whether our fiscal policies are sufficiently directed towards maximising our surplus on invisible account. The noble Lord, Lord Terrington, has given an example of the 25 per cent. tax, as it were, on overseas portfolios; and I. like him, must declare my interest, because I am chairman of a composite insurance company. I believe this is a mistake and, like him, I think that "temporary" ought to mean temporary. Moreover, the new corporation tax system makes the earning of overseas profits less attractive than earning profits in the United Kingdom. Surely, in our situation, this must be a mistake.
One way to tilt the balance in favour of overseas profits, which are so vital to our economy, would be by enlarging the scope of double taxation relief under the imputation system. I believe that, gradually, our systems of taxation and our monetary policies, as well as the legal systems which control and guide trade and commerce, must be assimilated to those of our European partners. If we are to play a successful role in Europe and deploy there our full economic potential, we must contribute to the European economy out of a positive balance of payments. It is therefore of the highest

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importance that we should see that our own house is in order, and re-emphasise by our domestic policies the advantages which our economy and our people derive from the skill, efficiency and enterprise of our financial and trading community. These, my Lords, are qualities which contribute so disproportionately to the success of Britain's overseas trade, and I ask Her Majesty's Government to see that they are encouraged.
5.26 p.m.
LORD HARVEY OF PRESTBURY: My Lords, like noble Lords who have preceded me, I should like to thank my noble friend Lord Selsdon, and I think the firm of Singer & Friedlander are to be congratulated on getting his services into their firm. Personally, I have never been more optimistic about the future of our country than I am at the present time. I have lived in different parts of the world. I spent five years in China before the war trying to sell aeroplanes to Chinese Governments during the slump period. I sold something like a hundred, and they were not all that expensive in those days. Nevertheless, we sold a great deal of equipment with them and set up a mission. But in this country to-day, having paid off the Empire—it is still expensive in some respects, liquidating an Empire, but that burden has almost gone, though not entirely—we now see great developments, such as North Sea oil and gas, and great technology. My business interests over the years have been mainly with Switzerland, a country whose every bag of coal has to come up the Rhine on a barge. They have no materials whatever except what they achieve by hard work. If we can settle our labour problems—and I am hopeful that we cart—and get this country on its feet, I believe we can be a leading nation of the world; and raising the standard of living of all our people is something which we want to see. I am more than hopeful that we can go in that direction.
My Lords, during the last few days we have been reading headlines in the Press about one company, and some rather tainted, unsavoury news. I hope this will not be exaggerated or taken out of proportion so far as the City of London is concerned, because in my travels and in my dealings I have found that the
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reputation of the City of London throughout Europe and the world is second to none; and its success is because of its integrity and its honesty. Of course, in every walk of life there will be the odd black sheep who will put up a bad show in some direction. It is bound to happen; but I ask that we do not exaggerate our own problems, because every nation has them and ours are really very small.
Britain's balance of payments is assisted enormously by invisible exports. This fact is not generally appreciated by the public at large. I am sure it is not. I have noticed over the years that even some politicians in another place belittle the efforts of the City of London, and I regret that very much. Because we can obtain foreign currency by brains instead of materials, that is not a thing to be belittled. After all, the days are now gone when industry and commerce was run by the so-called upper classes. Today, there is the opportunity for every man, from the grammar school to the university, to go into industry, banking or whatever it may and get to the top. There is nothing to stop him. When one reads to-day—and the figures at lunch-time were really magnificent—that the invisible exports left a favourable balance last month of £56 million in one month, they really are to be congratulated on this achievement. As I said, my Lords, the more the country can live by its brains the better. This saves the import of materials and utilises the minimum of labour. But these earnings have become of crucial importance to Britain's balance of payments.
Now we are in the Common Market, what is the future? Noble Lords have referred to it generally with some optimism, I think. I personally think Britain will benefit by our entry provided that the policies do not lead to discrimination by third countries and that the United Kingdom entry promotes growth in the United Kingdom and in world trade. That is why I admire the policy of the Government to-day in expanding trade in all directions. Even the boom at home is good; it is far better than having a million unemployed. People want to know what they are to do.
Britain's insurance business has been referred to. Perhaps I may give notice that I was some years ago on the London Board of the Royal Insurance. That has

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now been dissolved so I have no connection. But in California to-day the name of the Royal Insurance really means something. It is highly respected because, in 1906, after the earthquake in California only, I think, two insurance companies met the claims. One of them was the Royal. That fact is remembered to-day, and if you travel around California you will be told that. That is a great reputation to have. But the insurance business has already encountered difficulties in negotiating with the European sector which is more nationally orientated and subject to closer official control. Nevertheless, I believe that the know-how in our insurance business is capable of dealing with the rest of the world and is more than capable of holding its own.
British banks were successful in obtaining an important part of the Euro dollar business while the United Kingdom was outside the E.E.C. The net earnings have expanded from £32 million to £97 million between 1965 and 1969. Therefore in the immediate future our entry into Europe is unlikely to improve our position so far as banking is concerned because British banks were already in quite a strong position. Regarding invisibles, it is important that restrictions and national preferences should not hold back development. In that matter the role of our leaders in Brussels is to try to get flexibility and the minimum of controls in an area where resistence to a powerful United Kingdom sector is all too possible and where an important part of United Kingdom invisible trade is carried on outside the Six.
Now we are in the E.E.C. The United Kingdom should gain by our entry, for tourism, which I do not think has been referred to in detail to-day, undoubtedly is expanding. Those of us who live in London see tourists right through the twelve months of the year. They used to be here from about Easter onwards, but now they come throughout the year. I only wish some of the buses blocking the roads in the vicinity of Westminster throughout the busy hours of traffic could be put to a more convenient parking place than on the way up to Constitution Hill. Tourism is expanding. We have many good hotels in London and Greater London. I hope we are not going to out-price ourselves by building grand hotels
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for which the average tourist is not able to pay. I should like to be told what arrangements are being made for the young people coming to Britain from other parts of the world. It is important that they are able to come here and have access to reasonable amenities at a reasonable price. I do not think we have sufficient suitable accommodation for the younger people, who now come to this country in increasing numbers.
My travels around Europe indicate that although we have had a bad period of inflation it has certainly been held in recents months. Cur prices compare very favourably with those in most of the European countries. We do not want to talk of Britain being one of the most expensive places in the world in which to live, because I do not think it is. I meet a number of women in Switzerland, the wives of co-directors there who come over here to buy clothes from—if I may name one firm—Marks and Spencer, where the quality is so excellent that there is nothing to touch it in Europe. I am sure that that should be a favourable attraction to tourists coming to Britain.
Shipping has been referred to. Here, of course, the situation is improving. The charter rates have been low in recent times, particularly in the tanker earnings: but the situation in that respect should improve. Of course, so far as oil is concerned the increased cost of production has brought about higher rates to the producer. We have to pay more for oil; but this situation should improve in time as we develop our own supplies from the North Sea and around our coastline. But what I find very frightening is that the Sheiks, or some of them, may well hold other nations to ransom. This is a rather frightening picture and one which should be brought into the open and discussed more freely.
Air transport has been referred to. Perhaps I ought here to declare a very small interest—I am a director of an air freight company. We do not carry passengers—Tradewinds Aviation at Gatwick have five large aeroplanes which carry 26 tons of freight in one fuselage. We fly all over the world, as far as Hong Kong, Japan, South America. We are a relatively small company earning foreign currency for the United Kingdom. I should like to see, I do not say direct assistance, but perhaps some consideration

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given to competition with some of the European firms who are cutting the freight cost with direct and indirect subsidies from their own Governments. After all, the air freighter to-day is only what the coaster or the small cargo boat trading between the ports was a few years ago. From 1964 to 1968 Britain's share of global invisible receipts fell from 14·6 to 12 per cent. The major fall took place in investment income where Britain's proportion dropped from 20 to 15 per cent. Fortunately, freedom for investment has now improved this situation.
I should like to congratulate the Committee on Invisible Exports; they put in a tremendous amount of work and were very far-sighted in their views on what they advised and what they have done. They did a magnificent job of work. The Committee is generally optimistic for the future but has some reservations. One of the long-standing restrictions is exchange control. Last year the Budget improved this but there is still much to be done to liberalise capital movements. My Lords, for 200 years there has been a surplus on Britain's private invisible account. During the last five years that surplus increased by 65 per cent., accounting for 37 per cent. of our export earnings in 1971.
When my noble friend replies I should like to be told the position regarding royalties, because royalties can again earn a great deal for this country by the use of the brains of our scientists and others. I should like to know where the Italians stand in this respect, because I understand they have very little respect for royalties and patents, and in fact at present they take very little notice of them. Perhaps we could be told, now that we are in the Common Market, what the form is. My Lords, I am confident for the future, and I believe that the Government are looking at our economic problems in the right way, and provided we keep our heads and we all work hard and give the right lead our country can go on from success to success.
5.38 p.m.
LORD GORE-BOOTH: My Lords, I should like to congratulate and thank the noble Lord, Lord Selsdon, in a rather special way. It seems to me that apart from the merit of having introduced this
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discussion, he succeeded in introducing a very technical and what could be a very dry subject not only with expertise but also with charm and even poetry. I cannot cap any of his quotations, but perhaps if I may scandalously bowdlerise my towering namesake, St. Paul, I would say that after his speech many of the invisible things are now become visible. I should perhaps at this point declare an interest in this debate as I am a director of a bank which is operating in international affairs.
A NOBLE LORD: Is it in the Cayman Islands?
LORD GORE-BOOTH: Not yet. I should like at this point to explain that I took a risk on this subject, in this sense: that when I knew that the noble Lord was going to introduce this short debate I decided to take a risk on his explaining the matter with great clarity and in great detail and to try myself, as coming much later in the debate, to refer to one or two of the more human, psychological and historic points which go into making up our invisible exports. The noble Lord was probably wise to say that he was going to leave out politics altogether, but I think we must remember that, while we debate this subject with great reasonableness in this Chamber, we are overhung in a sense by a cloud of politics and that the business of invisible trade, like the rest of trade, must necessarily be carried on within the political atmosphere of the country at the time. I shall come back to that point in a moment.
Before getting on to these aspects I should like to start with one figure. As I understand it the gross annual earnings from invisible exports during the last two years have been very near £1,400 million. During that time Government expenditure abroad has run at about £700 million. This gives the arresting figure that in these two years invisible exports have paid twice for the total of Government expenditure abroad. That, perhaps more than tables of figures, gives an impression of the volume and value of these invisible exports. It may be said that in a country whose visible trade goes in the direction of (shall we say?) £20 billion, £1·4 billion is not very great. None the less, this kind of illustration shows how crucial it can be. I have no

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doubt that with the development of Government policy—and I am neither praising nor criticising it—we are going to need substantial earnings in the years immediately to come, and we shall be grateful for every pound that we get out of invisible exports.
I am not going to deal specifically with Europe, although it is referred to in the words of the Motion, but one thing I would say. I hope that in the Government negotiations with Europe in this whole field they may feel that they are speaking from real strength. After all, other countries, others of our partners, have spoken from positions of industrial strength like Germany; or from agricultural strength, or agricultural interests, like France. We stand high in the world in most of the things which go to make up our invisible exports. I think that we should speak as from that reputation and be asking for things with a certain authority, since they are the things that we ourselves do well.
May I for a moment go back to the psychological or historical side of invisible exports? We enjoyed a century, or rather more, of Imperial, relative tranquility. During that period the talents of the people who live in this country could carry this country along with its weaknesses, and we could make ends meet. Even when that period drew to a close we could live in some degree on capital. But this is no longer the case. As a country we now, rather belatedly, find that we must use our talents to the full where it is appropriate while we try to jack up with great speed the whole standard of our performance. That is a very tough task to undertake; but it means that those who have the talent for earning money for this country should be given every facility and every encouragement to do so. It is a very peculiar talent, in the sense that many of the operations which earn us the greatest amount are operations carried out by people who have training, perhaps training on the job; who have information. But on top of that they must exercise two very special things. One is instinct; the other is speed. It is that combination, it is people who have this particular talent, that we need to encourage to persist in well-doing as far as the national balance of payments is concerned.
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To my mind—and here I get on to the politics of the matter—the exercise in relative freedom of this talent imposes a double and interdependent obligation. I want to stress the word "double" because though I present one obligation first it is indissolubly linked with the other. I have tried to find a phrase that would describe the points raised by the noble Lord, Lord Selsdon, and the noble Lord, Lord Torrington, who referred to the way in which the exercise of invisible exports may be impeded by fiscal or other Governmental action. There is an obligation on the Government, I would say, to see that people engaged in this trade (without their being made into different people) should be so far as possible free from fiscal harassment. I realise, as does anybody who has dealt with Revenue matters, that it is the duty of Revenue to harass us and especially so in the years to come, when the Government are going to need a great deal of money. None the less, there is a margin where drawing a simple conclusion or hacking away at harassing details are alternatives and where the latter can cause an infinite amount of labour and anguish to people who ought to be contributing to the prosperity of the country. It should be the policy of Governments to avoid fiscal harassment when people are engaged in fortifying our balance of payments in this way.
An obligation on Government like this, of whichever Party, which is responsible to public opinion carries with it an obligation on the other side. A number of speakers mentioned the confidence held in British dealings in matters financial, banking, commercial and so on. This is a fact. However—and I am not going to mention names or particular events—things which are vulnerable to criticism are going on, and they fill a great many newspapers. I have no doubt that people engaged in what I will call, for economy's sake, "the City" have an obligation to demonstrate that there is in existence, and in practice, the faculty of self-discipline. I am sure that in the present state of public opinion this is extremely important. I have no doubt that it exists but it is most important that it be shown to exist. If I might go a little further, if there is any relaxation of this faculty then there will be ruthless onslaughts on the whole performance by

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people who believe that all business is bad business and that all profits are gained for evil purposes. This is nonsense; because in the world of invisible exports if there are no profits there would be no accretion to the strength of our balance of payments. None the less, there is a great deal of talk of this kind behind all the personality cults and adjectives indulged in by the media. I should like to emphasise that this feature of self-discipline is an immensely important ingredient in what we can do in invisible exports. It is particularly important because the alternative to the present method of operation would inevitably involve the loss of precisely those qualities which I have sought to define.
I have said that successful operation in many of these fields, notably insurance, depends on instinct and speed. I am a great admirer of the Government machine, which I have seen at very close hand; but that is not its method, it cannot be and should not be. It is a different kind of method of operation and it is important in the interests of this country's earnings that it should be preserved.
I personally have learned a great deal from this debate and I should like to express in small detail support for some of the particular items mentioned by noble Lords, notably the 25 per cent. return of premium currency, the return rule; also I would hope that at some early stage the Government would have another look at the defects in the imputation system of corporation tax. But I prefer to keep my conclusion to the general one, upon which I am sure that your Lordships are all agreed, that invisible exports are a crucial element in the successful conduct of our economic affairs and it should be the duty of any Government in power to cherish that economic weapon and see that it flourishes.
5.50 p.m.
LORD BRABAZON OF TARA: My Lords, when I saw that my noble friend Lord Selsdon had put down this Motion for discussion I thought to myself, "This is just where you can contribute something" Unfortunately, practically everything I was going to contribute has already been contributed. Nevertheless,
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I think I must start, as other noble Lords have, by declaring my personal interest. Most of my working life has been spent as a Member of the London Stock Exchange—I am sorry, my Lords, it is now "The Stock Exchange" because we are amalgamated, and it is no longer the London Stock Exchange.
The question of overseas investment has been mentioned by several speakers and I thought it might be worth while to trace the history of our overseas investments and to consider how useful they have been to us in times of crisis. Before the First World War we had huge overseas investments. During that war we still had very considerable investments, but some of them were not readily realisable. I do not think that I am the only Member of your Lordships' House who, from time to time, although having something in the background, has been short of "the ready": and of course we had to realise a number of securities during the First World War to help pay the bills. Nevertheless, after the war we still had reduced, but substantial, overseas investments and no currency regulations were required. One could invest anywhere one liked between the two wars. During the Second World War it was much more difficult. It was more expensive, I imagine, and we had not so many investments to sell. We had to realise a sizeable number, mostly United States Securities. Do not forget, my Lords, that if you want to realise securities you can sell them only where there is a market, and there was a market in America. So many of our securities had to go. Later we sold the Argentine railways—frankly, to pay the butcher's bill that was inevitable.
After the Second World War it was inevitable that a restriction on overseas investments, capital movement, had to be imposed. And this mysterious dollar premium which arose was owing largely to the fact that there were certain securities which were widely held in the United Kingdom but where the market was in London—International Nickel, American Celanese and Canadian banks. After the war we could exchange these shares, as it were, between ourselves. We could not buy new ones from America or from Canada but we could make exchanges among ourselves. If somebody took a very favourable view of the prospects of

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a particular company he would be prepared to say to a fellow citizen, "I will pay you 25 per cent. above the actual price in Canada"—or America or wherever it was. That is how the dollar premium started up. You could sell one security and buy another one, provided it was from a fellow citizen, so to speak, without attracting, as it were, an individual premium. It became a general premium on overseas securities. That is how the dollar pool built up.
Some very skilful investment went on in this country, particularly among the Scottish investment trusts. They gradually rebuilt their dollar portfolios and did very well for their shareholders. But, and more important I think, they did very well for their country, in that they increased our overseas assets. It may be—I hope that it will not be for the same reason—that these assets will be required some time in the future. Therefore it is particularly important, in my opinion, not to impede the activities of investors in this country, either private investors or companies. I should like to support what was said about this by the noble Lord, Lord Terrington. You can not ask a person to invest successfully and then tie his hands. If it is wrong to hold overseas investments, all right; take them away. But do not put people half in irons when they are doing the best they can with their investments.
The dollar premium varies from nil to nearly 50 per cent. If you take 25 per cent. as the average (it is lower than that now) and invest £125, you have lost £6¼ instantly, not counting commission. The surrender of a quarter of the premium was an emergency measure. I think it was wrong of the previous Government to do it, and it was equally wrong of the present Government not to undo it. Perhaps that will be dealt with in due course. What seems to me so particularly stupid is that now we have a pool in, for instance, Australian and South African securities, where one may have to pay a premium but does not have to surrender any of it on selling the particular share. My Lords, everything else I wanted to say has been covered by other speakers. All I would ask the Government to do is to remove the surrender part of the premium on selling foreign securities.
5.58 p.m.
LORD MAIS: My Lords, may I commence by offering an apology to your Lordships for not being the most active Member of your Lordships' House for the past few months. I am, in fact, absenting myself from official duties this evening in order to be here and to speak in what I consider to be one of the most vital debates, albeit a short one, which your Lordships' House has conducted for a very long time. I would thank the noble Lord, Lord Selsdon, first for making it possible for us to debate this matter, and, secondly, for managing to extricate me from another place to be here this evening. I am not sure whether I have to declare an interest. I have no banking interests in the Cayman Islands; I do have banking interests in Scotland, but I do not think they fall within the category of "invisibles". Previous speakers have dealt with our invisibles in considerable detail, but I would invite your Lordships to look at this problem from a rather different angle. Only twice since the Battle of Waterloo, so far as I can find out, has this country had a surplus of visible exports over visible imports. The whole of our financial stability, the whole of the growth of this country and the standard of living which we have achieved, has virtually come about because of the very considerable surplus we have achieved in invisibles. Therefore it does not need me to remind your Lordships that nothing should be allowed to interfere with the continuation and expansion of those vital invisible earnings.
To my mind, my Lords, we are at the moment facing a problem which could have very serious effects upon the future of invisibles. For many years now it has been the policy to move companies out of London into the Provinces, and every encouragement has been given to achieve this. I am all in favour of that. There are scores of companies, in particular lines of business, that can operate just as well from provincial cities as they can from London. But there are many which cannot. Those which operate in London in connection with invisible earnings could not possibly afford to operate, nor could they operate efficiently, outside the City or in the close peripheral areas of the City. Other speakers have said that invisibles largely come from banking,

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insurance and shipping. For those engaged in these activities it is necessary not only that they should be reasonably near each other, but also that they should be near the great institutions with which they deal; namely, the Stock Exchange, Lloyd's, the Baltic, and the Chamber of Shipping. It is becoming increasingly difficult to achieve this.
My Lords, there has over the past years been a resistance to providing accommodation within the City. When I speak of "the City", before anyone jumps up let me say that I am not pushing an area with which I have a particular interest for a short time, because when I talk about the City I talk about the peripheral boroughs of Tower Hamlets, Southwark and Hackney, which really are still within the area in which those engaged in invisibles can operate, and where there are sites available. It has always been a yardstick, or was until about 15 years ago, that for successful operation in the invisible market, you needed to be within four or five minutes' walk of one of those major institutions with which you were dealing. Whether people have decided that they can walk farther or faster, or just cannot afford to pay, I do not know, but now it is generally accepted that ten or twelve minutes' walk is reasonable. Again, that brings in the peripheral areas of the boroughs just on the boundary of the City. But we have one great stumbling block, and that is that the present policy with regard to the issuing of office development permits is to have as a prerequisite a ready-made tenant. That means that it is far easier to get an office development permit for possibly 250,000 square feet of offices for one occupant—which, frankly, is not what we need in the City—than it is to get a permit to put up a block of offices for letting in smaller tenancies. Let us be clear on this point. By far the greater majority of those employed in what contributes to our invisible earnings do not require vast areas of office space. I put it at probably an average of 20,000 square feet: at lunch to-day I was told that it could even be less.
It is essential, to my mind, that for survival, let alone expansion, we require a cushion of office accommodation to which companies wishing to come into London—and they are wishing to come
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in at the moment in considerable numbers—or companies wishing to expand, can do so fairly rapidly, and not have to wait five to seven years while they go through the motions of permits, planning and building: because time is running out. We are facing to-day a very different proposition from that which we faced probably three, four or five years ago. We tried to move firms out then, and it did not work. It never will work so far as companies principally involved in the invisible contribution to our earnings are concerned.
The French are at this moment preparing a considerable area of boroughs to which they are already referring as the financial centre of Europe. Undoubtedly there will be attractive propositions put forward for people to go there. Brussels has a very large spare capacity for offices. I know of two firms which have already moved their headquarters, one to Brussels and one to Frankfurt. We must have a market place that is available. You cannot sell groceries without a counter to serve them over. You cannot sell your invisibles without offices to work from. It is therefore necessary that we should look into this question, and look into it as a matter of considerable urgency. For it is no longer a choice between London and Manchester, if there ever was one; it is, I believe, a choice between London and the Continent. Every firm, every company, that moves out to the Continent or fails to come here is a nasty cut into our invisible earnings.
A few months ago I went to the opening of one of the largest German banks. They had not been here since 1914, when we dispossessed them and closed their doors. I suggested that perhaps it was as well because we might have done it again 25 years later. I asked them why they had come back after sixty years. The answer I received was that they had had a special team studying where the financial centre of Europe, and possibly of the world, was likely to be. It had been a strong team, and they had taken nearly six years. They had decided that undoubtedly the financial centre for Europe was London; that it was a fair bet that London could be the financial centre of the world, and therefore they have come here. They were somewhat appalled at the difficulty of finding suitable accommodation, and equally appalled at what they had to pay for it.

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My Lords, this is not a problem that can be solved overnight. We ought to have started solving it about five years ago. We are going to be hard put to it, I think, to provide the facilities in the City which other cities are already providing elsewhere. I am going to be very provocative now. In my view, it will be four years before there can be provided a cushion of the type that we want; that is, adequate accommodation for the smaller units engaged in invisible trade.
VISCOUNT AMORY: My Lords, perhaps I may interrupt the noble Lord for a moment. I think he is making a powerful case, but if the course of action that he advocates were followed, would it not have one more advantage; that is, to ensure that the rents of existing accommodation in the City are kept at reasonable levels?
LORD MAIS: My Lords, I thank the noble Lord for raising that point. I was going to raise it myself, in any event. The reason why the rents are so high is because of the question of supply and demand. I am not particularly worried about Centre Point, because it is too far away (this is the provocative point) but there is a large building standing at London Bridge. It is within walking distance of all the institutions that I have mentioned. It has lain empty for, I believe, five years. That could easily be acquired. It could be made available, or made conditionally available, for small lettings not exceeding, say, 20,000 to 25,000 square feet. There is a lot of space there and it would provide a bridge, at any rate for a short time, while we do what the noble Viscount has mentioned: get some more office accommodation up, which will inevitably bring the rents down. Mind you, my Lords, rents are not going to come down too easily, because the recent revaluation of property in the City will involve us in an increase of at least 50 per cent. to 55 per cent. in rates alone. That, on top of the rent, is not going to encourage a reduction. But I appreciate the noble Viscount's point that rents are far too high—and they are too high because there is not enough space available.
I believe that at the moment we are at the crossroads. I believe that our invisible exports will tend to slow down: indeed, there is every evidence that their
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growth is now slowing down. I should like to quote from that excellent document produced by the Committee on Invisible Exports. First, it says this:
"In the long run, we have the strong impression that British invisible earnings will benefit from entry to Europe. Among the sectors which would gain are shipping, insurance and banking."
That we know, my Lords. They certainly will, provided that we give the City the facilities with which to operate. Secondly, the Report goes on to say:
"All the indications are that invisible earnings may not grow as fast in the future while our invisible payments will almost certainly continue to rise, and so it is obvious we cannot lean too heavily upon our invisibles in the year ahead or the immediate years ahead."
Lastly, and most importantly, in the Chairman's statement is the following comment:
"If, therefore, this glimpse at the possible future of invisible earnings is correct, it makes a strong case for the utmost official encouragement of British invisible exports."
That encouragement is something which I do not think has been given in the past as much as it should have been. In fact only a few weeks ago, as I said, we were faced with this revaluation in the City properties. I do not doubt for a moment that we shall get over it. Like other speakers, I am very optimistic about the future. I believe that this country is poised on the edge of probably one of the biggest surges forward in prosperity and trade that we have ever known. But I would issue a word of warning: if you are poised on the edge of something you need to be careful that you do not either overbalance or lose your nerve. I do not think this country will do either, but I believe that we must take a very urgent look at the services and facilities required by the invisible exports of this country. It is no good leaving them entirely to their own devices. There is a limit to what they can do, and there is a place where they can trade—and literally there is nowhere else they can trade.
My Lords, I thank you for listening to me with patience, and I hope that before long I shall be able to return and be a little more active. May I once again thank the noble Lord, Lord Selsdon, for his kindly references to my presence—and perhaps it is of some slight historical interest. I should also like to thank your Lordships for the very generous letter

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which you so kindly sent to me on my election. It was much appreciated and, may I say, also typical of your Lordships' House.
6.14 p.m.
LORD CULLEN OF ASHBOURNE: My Lords, I consider myself very fortunate to be the first to congratulate the noble Lord, Lord Mais, on his extremely interesting and authoritative speech. I hope he will frequently be able to escape from his other duties and that we shall be able to hear from him again soon. I greatly welcome the fact that my noble friend Lord Selsdon has initiated this debate to-day on a subject that is very important to the financial health of this country. At the risk of repeating figures with which some of your Lordships will already be familiar, I should like to try very briefly to put into perspective the significance of our invisible earnings. These amount to the remarkable figure of nearly 40 per cent. of our total foreign income from all sources, and they cover more than half the total cost of our imports. They have produced an annual surplus for 180 years, during which time our visible transactions have nearly always been in deficit. The invisible surplus in 1971 was over £500 million.
It always seems to me, considering the part which is being and has been played by our invisible earnings for so long, that remarkably little attention is paid to them in Parliament. It seems to me that these surpluses are more or less taken for granted. Now that we are members of the E.E.C., it is vital that the Government should ensure that the service industries, which provide our invisible earnings are, first, not hampered by any unnecessary obstacles of our own making and, secondly, that they receive every encouragement and support.
Some of us in the City—and here should declare a personal interest as a member of the Stock Exchange—feel that Governments include few people with more than a limited understanding of the City's problems. This feeling was strengthened by the ban on City building eight years ago, from which have stemmed the colossal increases in property values referred to by the noble Lord, Lord Mais. The City is at times criticised for being gloomy about the economy when the
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Government take a highly optimistic view; but the City is always looking, and must always look, quite a long time ahead. It is accustomed to "Go" being followed by "Stop". I do not need to remind your Lordships of the 1964 or the 1967–68 "Stops". 'What the City would like to hear from the Minister is why the present situation of "Go" (in capital letters) will not be followed by a "Stop" of equal proportions. In recent years on each occasion that our annual growth rate has exceeded 3 per cent. we have had to impose a stop. Everybody in the City hopes against hope—or hopes against experience—that things will be different this time. But until they are convinced, confidence will not be established. The greatly improved trade figures announced to-day are, of course, very encouraging, and I sincerely hope that the Minister, when he comes to reply, will be able to dispel any fears that these will prove to be "one month's figures".
I do not propose to deal with the obstacles of our own making to which I have referred—stamp duty, the dollar premium, and so on—which have been extremely fully covered. However, there is one point I should like to mention and that is telecommunications, When dialling Continental centres direct during business hours, it is very usual to find that all the lines are engaged. When operators are asked to make the connection, though they do their utmost to help, considerable delays frequently occur. Paris is especially difficult, and I know of a delay of four hours having been experienced. This is obviously hopelessly damaging to international financial business, so much of which is transacted on the telephone.
If there was insufficient shipping for exporting visible goods I am sure the Government would leave no stone unturned to see the matter was rectified. Not all of us are sure of the wisdom of spending many hundreds of millions of pounds on the Channel Tunnel; but the expenditure of a fraction of that sum in increasing telephone links with the Continent would surely be worth while. It is of the greatest importance to the City that speedy and effective action is taken. There will be many problems with which to grapple together with our partners in the E.E.C., but I urge the Government to do everything in their power to foster our invisible earnings.
6.20 p.m.
LORD WINTERBOTTOM: My Lords, I am certain that your Lordships will wish to congratulate the noble Lord, Lord Selsdon, on his initiative in sponsoring this important debate, and on the distinguished list of speakers who have responded to his invitation and have taken part in your Lordships' discussion. The noble Lord, Lord Selsdon, at the beginning of his speech, touched upon a point which I intend to raise later: he expressed a fear that the Government might by inadvertence damage the important volume of invisible exports that we are now achieving. I believe they might damage it by indecision.
The noble Lord, like other speakers, underlined the great importance of our invisible exports to our balance-of-payments position. The interesting fact is that if one looks at the visible trade of this country one can only be filled with gloom, since it seems to have been in balance for only about two years in 150. The interesting fact is that we are still the second largest trader in the invisible field after the United States, with 11½ per cent. of the world trade in invisibles taking place from this small country. If we take the more limited field of consultancies, I learned to-day that we have come second to France in the area of the United Nations development programme in providing consultancy for the developing world. Last year we were the front runner.
One of the reasons why Britain plays such an important role in this area—and I will touch on this briefly and not, I hope, priggishly—is in the main because of the integrity of the various individuals concerned with our invisible trade. The honesty of the individual in dealing in this area, and his firm, is of the first importance, as the noble Lord, Lord Harvey of Prestbury, pointed out in mentioning the Royal Insurance dealings in California after the great earthquake of 1906.
One of the reasons why the importance of this area of our commercial activities is undervalued is due to the fact that the statistics are presented to the public in such a peculiar way. The noble Viscount, Lord de L'Isle, mentioned the obfuscation of facts by statistics. Noble Lords will have noticed that when we
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present statistics on our balance of payments each month, the exact figures of imports and exports are given to the public, but only the balance of the invisibles is given which makes us think that the figure is only in the region of something like £50 million. I suggest to your Lordships, and to the Government, that the actual statistics should be presented in another way. Let us take the United Kingdom balance of payments publication from the Government Statistical Service. Take the year 1971. We see that our exports were £8,790 million. The same figure of invisibles in the same year was, if we take what they call "credits", £5,430,000. This is a figure of the same order as our visible exports, but this hard fact is obscured by the fact that we only hear each month about the balance and not about the absolute sum of money that is moving over the Exchanges. I suggest to the Government that a better presentation of the statistics of invisible exports would help the British public to understand the importance of this area of our commerce.
Now may I come to the point which I mentioned at the beginning of my speech about the danger of indecision. We are all indebted to the Committee on Invisible Exports which so far as I can see is about the only true window into what is happening. I should like to quote from the Chairman's introduction to the annual report for 1971–72. This was written by the Chairman, Sir Cyril Kleinwort. Under the heading "New Appeal", he says:
"In conclusion, I should like to refer to the matter of the Committee's finances. Since it came into being in 1968, the Committee has financed its activities through an appeal to firms and other institutions in the private sector. This appeal has hitherto been conducted jointly with the British National Export Council—the present Committee having grown out of an earlier organisation set up principally to raise funds in the City for B.N.E.C. Now that the export promotion work of the B.N.E.C. has been assumed by the new British Overseas Trade Board, the former has decided to terminate its activities and it is no longer appropriate for the Committee to raise funds on its behalf."
Then he says that the Committee are setting out to raise more money and he continues:
"We hope that all companies will be prepared to give generously so that we may continue our work of encouraging the development of invisible exports and representing the interests of invisible exporters."

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It strikes me as very peculiar indeed that the Government should not be strongly supporting this Committee. I should like to ask the noble Earl, Lord Limerick, whether it is the intention that the Committee on Invisible Exports should continue to stand on its own feet by providing its own finances, or whether it can expect help from the Government for its most important work.
May I now turn to the work of the British Consultants Bureau which became known to me in the days when I was Parliamentary Secretary at the Ministry of Public Building and Works? We used to have, I think, half-yearly conferences on various forms of consultancy to see how they could help the British export industry and the construction field. May I touch upon how consultants work—or perhaps I should say how British consultants work? The British consultant provides a professional service to his client. His role is to make certain that the client obtains the best advice on the technical feasibility of the project he has in mind, the best advice regarding the contractors who carry out that work, and the best advice on the equipment that should be installed in the project. This advice is given on a purely impartial basis. If (shall we say?) a British consultancy firm is advising the Libyan Government on a port, it may well be that they advise the Libyan Government that a Yugoslav contractor is the best, or that a British crane or a German crane is the best. It is the British consultant's function and role to give the client the best professional advice available.
But since this country is not totally incompetent, as some people would have us think, on many occasions a British contractor or piece of equipment is specified as being in the consultant's view the most suitable. It is perhaps significant that the last year appearing in the statistical return shows that the British construction industry sold exports to the value of £87 million overseas. I am afraid this is where we go back to integrity; other Governments—I will not name them—work very differently. The role of many foreign consultants is to sell the products of the country from which they come. For this reason the British consultant is not able to compete on equal terms. The foreign Govern-
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ment in fact very often provides concealed incentives to the consultant of its own nationality, paying some of the fees, subsidising the tenders, and so on. It is this particular aspect of the problem facing British consultants that must not be forgotten. The fact that their integrity is seldom questioned is an advantage and they are able to hold their own to a remarkable degree. Nevertheless, their role should not be forgotten by the Government.
So far as the British Consultants' Bureau is concerned, if my recollection is right the period of review of its role is now coming up. I was in contact with it approximately six years ago. I believe it is a general principle of the Government that a 50 per cent. support of costs is provided for seven years and at the end of that time a decision is reached as to whether or not the Government will continue to support an organisation such as the B.C.B. with funds. May I say that I believe that the Government should continue to support the B.C.B. in this area and, what is most important, they should be seen to be supporting it, because when one is dealing with overseas Governments and countries the fact that the organisation is recognised by the British Government is an important factor in the negotiations. Again, I should like to ask the noble Earl, Lord Limerick, what the Government are proposing to do in this area.
Reverting for one moment more to the Committee on Invisible Exports, I commend to your Lordships (it has already been quoted from) this excellent publication, How Entry Into the Common Market may affect Britain's Invisible Earnings. I do not intend boring your Lordships by reading large chunks of it; many of you, I am certain, have read it already. The actual message we get is encouraging. Other things being equal, the Committee believe that our entry into Europe can be only beneficial; but what is also clear is that it is not automatically beneficial and the Government could in fact damage our prospects, our very good prospects, by clumsy handling; and they strike a note of warning. What I believe is an important point which they make is that the dynamic effect, in which I believe, of our entry into Europe must spill over into the whole area of invisibles—tourism, shipping, insurance, banking,

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everything. Some people question the dynamic effect, but I believe in it. I believe that, although it has not been said, British Leyland would not have started on this massive reinvestment programme if in fact we were outside Europe. What I know is that on the day Norway opted out of entering Europe one of the major aluminium smelters was closed as a deliberate act of policy because Norway could not see her way forward in this area.
There is one other point on which I would touch and that is the question of monetary union. The noble Lord, Lord Gore-Booth, mentioned the heavy apparent bleeding of funds brought about by British Government investments overseas and expenditure overseas. I do not criticise the need for it; the defence of Europe in my view is of prime importance; but it in fact produces a heavy debit in our invisible picture. When of course we get monetary union the effect of having troops in Germany or troops in Britain is the same, and this again is going to be of benefit to the picture presented statistically because it will no longer affect sterling but will be part of the inner European economy and will make life that much easier for us. The figures we spend in Germany are very surprising in terms of absolute sums.
My Lords, that is the only contribution that I have to make to-day. Once again, may I express my personal gratitude to the noble Lord, Lord Selsdon, for initiating this debate. I hope that the Government will pay note to the points made by other speakers and in particular to the two points I have raised about removing uncertainty from the Committee on Invisible Exports and the British Consultants' Bureau.
LORD GORE-BOOTH: My Lords, before he sits down, would the noble Lord permit me one comment, even if it is unusual? It is that I have had a great deal of experience of the British Consultants and I would endorse everything that the noble Lord said.
6.35 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK): My Lords, I feel I face a daunting task. I start by adding to the congratulations already
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offered to the noble Lord, Lord Selsdon, for initiating this timely debate on a subject of great current interest. I believe it shows the House of Lords at its best. We have a number of Members with great expertise, great experience, in fields which they come to share with us on occasions of this kind. This adds to my own trepidation, because I remember only too clearly the occasion in December, 1968, when I made my own maiden speech on the subject of invisible exports. This was on the Motion of my noble friend Lord Aldington. My trepidation is increased—if I may be allowed to refer to one sentence—when I see that I referred to some advice from my father, that those with no special knowledge of a subject, whether or not they be seen, were better not heard. And I added:
"For as long as I may have the privilege of a voice in your Lordships' House, I propose to adhere to this precept. Consequently I shall not often, or for long, detain your Lordships."—[OFFICIAL REPORT, 11/12/68; col. 542.]
I never thought when I uttered those words that I should find myself answering the next debate on this subject from this Box. I feel almost that I am entitled to some indulgence.
We have had some extremely interesting contributions. I shall return and refer to them later in my remarks, but on the subject of speakers I cannot refrain from commenting on the precedent that we have: the privilege of being addressed for the first time in history by a Lord Mayor of London while he is the Lord Mayor of London. We feel a sense of occasion, particularly when the present Lord Mayor is so eminently well qualified to speak to us on this cause which he has made peculiarly his own during his year of office. The Lord Mayor is something of a man for making precedents. As recently as 12 days ago he and I, in company with some other distinguished people, were metaphorically holding hands at 50,000 feet, close to the coast of Spain, travelling at twice the speed of sound. I am convinced that, whatever other barriers he may break, he is the first Lord Mayor in history to fly at twice the speed of sound.
In a debate of this kind a number of detailed points are raised which would very properly be, and will be, attended to with the attention they deserve. I hope that the noble Lords who have

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raised them will forgive me if I do not always follow them in detail. It is often preferable to study what has been said and to give a reasoned answer later on. What I should like to do is to share in the recognition this afternoon that we are dealing with a subject of considerable, indeed of vital, importance to our continuing national prosperity. I should like to give you my own analysis, not I hope at too great length, and make one or two modest predictions, and then return to the subject matter of the other speeches.
We have heard a number of variations on the theme of how many times we have had a visible surplus. By my own calculation, this has occurred on four occasions since the war and on only nine occasions since the 18th century. This difference in calculation may have something to do with the change in statistics to which my noble friend Lord de L'Isle referred earlier. It is also interesting to comment that we have heard a lot about our trade with Japan recently, and our visible trade with Japan has recently moved into deficit, but this is more than balanced by our surplus on invisible trading with Japan. So, given the importance of the external balance of payments in our macro-economic policies and the depressing frequency with which it has been the balance of payments which has placed a constraint on our growth, the importance of invisibles can hardly be over-emphasised. Since we last debated this matter—and a number of us made this point—it has been in one way recognised by including invisible exporters among those available for the Queen's Award, and the Award has been made to a number of them.
Looking ahead, I think there can be little doubt that invisibles will play an even greater role in the pattern of our international exchanges, also that the pattern of invisibles will itself be subject to change. As trade increasingly follows investment and as the developing nations demand a greater domestic stake in industry and commerce and in the provision of associated ancillary services, such as transport and insurance, so must we rely on seeking out new opportunities for selling our know-how and expertise in all their infinite variety. This in turn demands a constant effort to keep a step
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ahead of our customers, and at least alongside our competitors, just in order to maintain our place in the world stakes, let alone to improve it. I make this point, not merely to repeat a truism but because this is actually happening.
I do not believe it was a coincidence that the first major deal which marked our come-back in the Brazilian market some three years ago (to give one example) related to the sale of some £20 million worth of components and know-how for the local building of ships. The second deal concerned the building of the £30 million bridge seven miles across Guanabara Bay—not, I regret to say, to a British design, but Britain is providing the steel for the centre spans and helping to finance the Brazilian work on the rest of the bridge, both by direct financing of local costs and by generating counterpart funds in Brazil through the sale of a variety of British capital equipment. Altogether this is one of the most ingenious export packages of its type ever put together within the City.
I do not want to weary your Lordships with a recital of statistics. These have been much quoted this afternoon and those of your Lordships who are interested in detailed figures may find it worth looking at an article in the issue of Trade and Industry dated March 22 this year. However, in order to put the invisible account into perspective, I think it is worth drawing your attention to these main points which emerge from a study of trends over the ten years from 1962 to 1972. Between 1962 and 1966 the invisible surplus declined by about £70 million but between 1966 and 1971 it increased by nearly £600 million. Receipts outstripped payments and the surplus increased nearly fivefold, decisively reversing the previous decline. The improvement was particularly marked until 1969; growth then began to slow down, and last year, for the first time since 1966, the surplus fell.
Comparing the main categories of transactions in the middle period of rapid growth, it is clear that, while most of them moved in the United Kingdom's favour, by far the greater part of the turn round was accounted for by the surplus earned on private services. The improvement of nearly £550 million between 1966 and 1971 was unprecedented. This is greatly to the credit of

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everyone concerned with the private sector side of the account, but I should like to draw to your Lordships' attention the very significant role of the public sector which, as far as the published figures go, appear simply to be a drag on our performance. Of course this is just one of the ways in which statistics may mislead. A substantial part of the public sector outflow is accounted for by two headings. The first is defence, which creates stability for our trade; the second is aid of one kind or another to the tune of well over £100 million in those years on the current account and larger amounts of capital transfers. A great deal of the private sector exporting, both visible and invisible, is linked to these payments, either directly or indirectly, while the activities of our Posts abroad—which cost a further £75 million across the exchanges—are of course vital to the whole business of export intelligence and to the servicing of British businessmen abroad.
The private sector improvement was concentrated in the travel account, which went up by about £130 million, and in "other private services", which improved by as much as £450 million. Almost two-thirds of the increase for "other private services" was accounted for by financial and allied services. This radical improvement is sometimes attributed almost exclusively to the devaluation of sterling in November, 1967. Devaluation, however, although undoubtedly important, was responsible for only perhaps one quarter of the total movement. Private services were already improving at that time, and some forms of invisible earnings which are believed to be fairly insensitive to price changes, notably insurance, grew rapidly, not only immediately afterwards but also for several more years. The main reasons for the transformation of the private services account within so short a space of time were the growing popularity of the United Kingdom with foreign visitors at a time when the expenditure of British travellers abroad was constrained; a dramatic change in the fortunes of the insurance industry; the faster development of London as an international banking centre; and the development of new, or comparatively new, sources of earnings such as consultancy, management and agency services, and telecommnications services.
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Quite a large part of the invisible account cannot be analysed by country or area in very great detail, but it is still possible to get a broad idea and to draw some tentative conclusions about the future. It is clear that the growing share of the non-sterling countries is mainly accounted for by travel and "other private services". The decline in the sterling area share of the invisible trade is linked with a decline in the developing countries' share which seems more likely to speed up than to slow down. To compensate for this, however, opportunities will arise of increasing invisible exports to, and investments in, commercially more stable areas such as the European Community. There is certainly room for improvement, in that transactions with the original members of the Community have been growing relatively slowly in recent years and in absolute terms do not amount to more than a fairly small part of the total. But although these opportunities clearly exist there will be no easy pickings, and I know that will be something that is clearly understood in the City. The Government will play their part in ensuring that the Community ground rules provide fair opportunities, but even so there will be tough competition from the well-established institutions, not only on their home ground but also, no doubt, endeavouring to get into our market. Looking a few years ahead, therefore, I believe the growth of the United Kingdom's invisible earnings may well be stimulated if the shift in the territorial pattern towards the industrialised countries becomes more pronounced.
This country, as has been remarked, is second only to the United States of America in the size of its invisible earnings, and it is some way ahead of its nearest European rival. Moreover, again as we have noted, invisible earnings are more important for the United Kingdom than for most other countries, because the maintenance of a sizeable invisible surplus has enabled the country to sustain deficits which are a normal feature, rather than an abnormal one, of its external trade in goods. So it is a matter of some concern that, despite the rapid growth in invisible earnings over the last 10 years, our share of world invisible receipts has fallen rather faster than our share of world trade in manufactured goods. In 1960,

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our share of invisibles was just over 17½ per cent.; by 1969, the last year for which completed figures are available, this had fallen to little more than 11½ per cent. The comparable figures for our shares of the trade in manufactured goods by the main industrial countries were 16½ per cent. and 11½ per cent?
Last year, for the first time since 1966, this surplus fell. But looking a year or two ahead we see some grounds for optimism, but the pointers are mixed. We can see almost as many grounds for pessimism. Government expenditure will go on rising, because the effects of the depreciation of sterling since June 1972, and of recent world inflation, will continue to be apparent. The profits of foreign-owned companies in this country are also likely to continue to rise, which in another sense must be good news. Moreover, interest payments in total to overseas holders of sterling are bound to reflect current high interest rates.
But when we study the other side of the coin, it shows that world economic activity is forecast to increase. That should improve the picture for the oil companies; it will boost income from other direct investment abroad, and it will benefit the shipping account. Meanwhile, and this is one of the quick effects of a change in parities, it automatically increases the sterling value of foreign currency receipts; earnings from financial services are likely to continue growing, though perhaps more modestly, and some of the newer, faster-growing categories, notably earnings from construction work carried out overseas, should remain buoyant.
So what should be the balance? The favourable factors—and this is the point, I believe—are, in the aggregate, probably stronger, so the invisible surplus should pick up a little over the next year or two, even though the exceptional rate of growth experienced after 1966 seems unlikely to be regained. It would be quite wrong to be euphoric; it will mean hard work and searching for opportunities, but overall I see no reason for pessimism. Thus, if the optimism can be no more than modest, if only because we have been losing our share of world invisible trade at a faster rate than our share of visible trade, nevertheless it remains there.
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That brings me to the special role of the City of London. In 1971 the estimated total net earnings of the City through insurance, banking, merchanting, trust funds, the Baltic, Lloyd's Register, the Stock Exchange, and other avenues known to your Lordships, totalled £580 million. That places the City at the top of the list of export earners. Of course invisible exporters are not the only exporters, but we can here make a direct comparison with cars and chassis which, for example, earned £369 million, finished steel was £350 million; and whisky and other spirits were £240 million. Then, if we allow for the import content of industrial exports, the City's lead must be even greater. In fact the rate of increase in the City's earnings is greater than the rate of increase of total invisibles, which in turn is greater than the rate of increase of visible exports.
Insurance forms by far the biggest single item in the City's overseas earnings. In making the massive contribution which it does to our invisible earnings, the great advantage enjoyed by our insurance industry is the flexibility of the service which it offers its customers because of its long years of experience and the high quality of its management. Over 50 per cent. of the industry's premium income comes from overseas. There are three larger insurance industries in the world. That of the United States of America is bigger than all the rest combined, and in terms of premium income the Japanese and German markets are both bigger than ours; but none of them approaches our percentage of income derived from exports.
On the financial side also we must seek an environment which will enable our institutions to maximise the benefits from their pre-eminent skills as capital becomes increasingly mobile, both within the European Community and to compete more widely with other international centres. Serving the needs of multi-national investors and manufacturers will be an increasingly important aspect of future developments in this sector. London succeeded in attracting more than 40 per cent. of the Eurodollar market, but the City needs to be on its toes to retain that market or whatever variation may replace it. This business will not be handed to us on a plate. There will be strong competition for it.

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The multi-national theme brings me on to the question of consultancy services. This is one aspect that has been mentioned by two speakers this afternoon. Invisible earnings from contracts overseas, including the fees of consulting engineers, architects and quantity surveyors, have been increasing steadily, and in 1972 British firms were carrying out work in 108 different countries. In all of that work the international reputation of our consultants of all kinds for impartiality and probity is a vital factor. Here I should like to endorse the tribute that was paid by the noble Lord, Lord Winter-bottom, to the work of the British Consultants' Bureau, which is indeed appreciated and valued. He referred to its grant. I cannot give him a detailed answer on that point, but I can say that its work is acknowledged and valued and I will of course find out what the situation there may be.
On the financial side, in addition to financing the costs of the initial studies for consultancy, packages of finance are required to provide the credit for the hardware, possibly in the various countries of origin in a variety of currencies, to meet the down-payments and to look after expenses during construction, including local costs in the host country, and eventually possibly running through to financing the working capital for output sales. The mobilisation of the necessary financial security for payment at all stages of the deal is also a professional subject in its own right. The City is ideally placed to put together financial packages for this kind of business, and I know that many of the merchant banks are very active in this field. I may have spent rather a long time, almost too long, on the multinational aspect of our future invisible earnings. But I make no apology for that because it is my firm belief that these multi-national considerations will be having a profound impact on the organisation of our own institutions and on their ability to compete effectively in those areas of activity which are likely to show considerable expansion.
I should like to turn now to a number of the points that have been raised. Many of these points deal with taxation and, lest I may seem to appear, from the Record or otherwise, in the role of a poacher turned gamekeeper, I should hasten to say that these are not matters
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for which I have any direct Departmental responsibility. If some of the replies I shall be giving have a familiar ring I should like to assure noble Lords who have contributed to-day that whatever they have said will certainly not go unremarked but will be taken seriously into consideration as these subjects are again discussed.
My noble friend Lord Selsdon, apart from the precise thought that went into his speech and the literary gems which enlivened it, made a number of points in his most valuable contribution. He asked the Government to speak out with candour. I was under the impression that we have been using a good deal of candour recently. I am always personally ready for a dialogue on such subjects as we have been discussing. I have developed a dialogue with many of my old acquaintances in the City of London, and in the process have made many new friends there. If we are thought to be lacking in candour or in readiness to engage in dialogue, I hope this will be brought to my attention.
Then we came to what seems to me to be the burden of the complaint of many of our speakers, which concerns the rules governing investment, particularly the dollar premium and the 25 per cent. surrender. I am not sure that I shall be able to respond quite as the noble Lord, Lord Terrington, would wish, or as others might wish, but if I cannot do more I can remind the House of the time-scale which governs our transitional arrangements. It is this, in accordance with our treaty undertakings: that by the end of 1974 there will be an end to the premium on direct investment; by the middle of 1975 there will be an end to it as regards personal capital movements; and by the end of 1977 there will be an end to it in regard to portfolio investment. These dates are final dates; it does not follow that they cannot be anticipated. The question was also raised as to why this temporary measure introduced in 1965 is still with us. I can only say, in the words of my right honourable friend the Chancellor of the Exchequer:
"I know that other relaxations have also been suggested, but I cannot go further this year. These particular changes have been selected with due regard both to prudence and a right sense of priorities."
It will, I am sure, be evident that the requirement of the 25 per cent. surrender

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will disappear to the same time scale as the dollar premium in those areas to which I referred. Although these measures were not taken this year, there were other measures taken, including the abolition of the voluntary programme in relation to Australia, New Zealand, South Africa and Ireland, the admissibility of official exchange for direct investment in the E.E.C. up to £1 million per project per year, and allowing sterling borrowing for direct investment from the E.E.C. So steps are being taken. I appreciate that they are not being taken as fast as speakers this afternoon would wish, but their words certainly are noted.
My noble friend Lord Selsdon referred also to the question of films. I refer to this particularly because there seems to be a little misunderstanding about what is happening. There is a great deal of activity in this field. The number of films has increased, and the contribution made to production of cinema films has been maintained at a high level over the years. In 1971 our receipts on that account were £22·8 million against expenditure of £5·1 million. There is a pointer perhaps here: for instance, in France more than 12 British films were advertised recently as forthcoming attractions in a French film journal, and by contrast there were only seven British films licensed for exhibition in France in the whole of the last quarter of 1972.
My noble friend referred also to the position of the finance houses, and I acknowledge the valuable contribution which they make. This matter of admissibility checks, which I think he had in mind, is under discussion with the body concerned as a result of the recommendations made in the Scholey Report. He referred also to the role of the professions, and here I would echo his words. I think that we have in this country professions which are second to none. As a member of one of them myself, as a chartered accountant, and having spent fifteen years in banking, I yield to no one in my admiration for the standards of our professions; and I would add that in considering the harmonisation which is called for under the various draft Directives in the European scene we have established a close working relationship with the professions, the professional associations, as may be appropriate. To
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my knowledge, there is not one of them we are not on close terms with, to exchange information and to work together to achieve what we see to be in the best interests of the country as we approach the question of harmonisation with Europe. My noble friend raised many other points which I should like an opportunity to talk to him about in the near future.
The noble Lord, Lord Terrington, also made a strong case on the 25 per cent. surrender to which I have already referred, and he mentioned stamp duty. The point is well made. Our stamp duty ad valorem is higher than anywhere in Europe. We have also to consider the fact that we work with registered securities whereas bearer stocks are in use in many countries. Here I can only say that the revenue from this tax is very substantial, and there would certainly at this stage be difficulty in finding it from elsewhere. This, I appreciate, is not a conclusive argument or one that will stand for all time, but I know that this matter is very much in the minds of my friends in the Treasury.
The noble Viscount, Lord de L'Isle, gave us a most interesting analysis of our trading account over a period of time and drew attention to an historical anachronism in our method of reporting. He referred also to enlarging the scope for double taxation agreements and to using our fiscal policies so as to maximise the return which may be derived from the invisible sector. These are points which are very much in mind, and I should like to study further what he said and what other noble Lords have said in contributing to this debate, notably the noble Lord, Lord Gore-Booth, who made a plea that those engaged in this trade should be free from fiscal harassment. I do not think we are indulging in any fiscal harassment. If we are, it will be quickly brought to our attention and we shall react. It is indeed our policy to use these fiscal weapons in a way to encourage and not discourage, and if there are points further to consider here I should be very glad to do so.
The noble Lord, Lord Harvey of Prestbury, referred to two matters which were close to my heart, a plea for some optimism, and a statement of the reputation of those who engage in our invisible

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exporting. From my own experience I would endorse what he said, and I think that the City looked at from outside gives the same impression. But such admiration and friendship does not have to be uncritical. It is this sort of benign but critical examination which we should apply to some of our practices, and this will be helped by the debate that we have had.
My noble friend also referred to the question of tourism and to the need for hotels for young people. I am sure that what he said will be noted in the appropriate quarter. I would make one small comment; that there has been some pressure for loan finance for small hotels, and the Government have recently increased the funds available to the English, Scottish and Welsh Tourist Boards to enable them to give financial assistance to tourist projects in the development areas. The total available for this purpose in the current financial year is £2·3 million, and hotels are not precluded from seeking assistance under this scheme, which is also open to other types of tourist project. This may be of some help. My noble friend also referred to the question of royalties. These contribute substantially. I have no particular knowledge of the situation in Italy, where he suggested there is a certain disregard for the rules, but on that point I should like to write to him.
The noble Lord, Lord Gore-Booth, gave us a most interesting analysis and, as I have already said, in our approach to harmonisation we shall have great regard to the needs and the strength of our professions. Then, the noble Lord, Lord Brabazon of Tara, again made a strong plea for the abolition of the 25 per cent. premium to which I have referred. I take his point about 1965, but I cannot believe that he really means that if it is wrong to hold these securities then they should be taken away, because the managers of those securities have done very well for us all. I have already referred to the speech of the noble Lord, Lord Mais, but I should like to add that we have an enormous admiration for what he is achieving during his year of office. Who better to speak for the City? The question of office development permits is one which we have at the front of our minds, and my right honourable friend the Secretary of State for the
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Environment has undertaken to consider the findings of the Committee which recently recommended their abolition. He mentioned the time scale, which again is extremely important. I would only add that he, as the first citizen of the City of London, will recognise that it must be a tolerable place in which to work. There is a balance to be found. But he has raised some most valuable and serious points which my right honourable friend will be looking at. I have referred to the points made by my noble friend Lord Cullen, with the exception of his point about telephone equipment. That will be looked at by my honourable friend Sir John Eden.
The noble Lord, Lord Winterbottom, made a number of good points. In order to leave two minutes for my noble friend Lord Selsdon, I should like to get in touch with him on his points about statistics and about finance for the Committee on Invisible Exports. Their work is highly valued, and of course I echo most warmly the tributes which have been paid to my former chairman, Sir Cyril Kleinwort. To my knowledge, at the present time we have had no request from them for finance, but if it is required I am certain that he will not be slow in letting us know. I have already taken as much time as I am entitled to, and it is right that I should leave a moment or two to my noble friend Lord Selsdon, whom I once again thank. I also thank all those other noble Lords who have taken part in this debate for their most interesting contributions.
7.15 p.m.
LORD SELSDON: My Lords, it goes without saying that I am extremely grateful to all those who have taken part in this debate to-day. There is a lot more underneath the surface than would appear from these two hours spent on "invisibles", and I hope your Lordships will not feel that that has been too much time. I have undertaken to write to my noble friend Lord Limerick with a wodge of papers and recommendations, which I think he, as a poacher turned gamekeeper, will find very hard to resist. He will learn something of the gentle Continental art in Latin-blooded countries of arm-twisting in the national interest. His argument that we must wait, that everything has a plan and a time, cut no ice at all. He pointed out that our share

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of world invisibles has declined. I should not like this debate to end on a pessimistic note. It may have declined, but during the time span he mentioned it more than doubled. If we go on declining and doubling, I myself shall be quite happy.
My noble friend has spoken about different people's speeches. I am extremely grateful to the noble Lord, Lord Mais—or should one call him the noble Lord, the Lord Mayor?—for speaking to-day. He is the busiest man in the United Kingdom, and probably in Europe. That he himself should have taken time to prepare for this debate, to speak here to-day and to stay throughout it all indicates the seriousness of this matter. He made some telling points, and I would ask: if you cannot believe the Lord Mayor, whom can you believe? I come to my final point. We have a reputation in this country. We are probably the yardstick for the world of integrity in our service businesses. There is one point that one would like to force through: we should like people to want to do business with the British, because they are British. My Lords, I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

LAND COMPENSATION BILL
Returned from the Commons with certain of the Amendments agreed to with Amendments; with certain other Amendments disagreed to and an Amendment proposed in lieu thereof; and with the remaining Amendments agreed to: the said Commons Amendments and the said Amendment in lieu to be printed.