ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 06 November 1973 vol 346 cc250-347

3.7 p.m.

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

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

LORD WINDLESHAM

My Lords, I do not think that—

LORD SHACKLETON

My Lords, may I interrupt the noble Lord? I may be wrong, but it is my recollection that on the last day of the debate on the Motion the Amendment is moved straightaway by the Opposition. It seems to me that this is advantageous particularly from the point of view of the Government. I am sorry to raise this point, but I had actually asked my noble friend Lord Beswick whether he would be opening, as is customary. We may already be caught here by the Motion for the Adjournment last Thursday. My recollection is—certainly it is so in another place—that when the debate concerns a single day the Opposition begin by moving the Amendment, and this, after all, gives the Government two opportunities to reply.

EARL ST. ALDWYN

My Lords, I think that it is open to this House to do whichever it wishes. My noble friend the Leader of the House was put down to move the Adjournment, and as there was no comment from noble Lords opposite I assumed that they were happy about it. It is a little difficult to change the order now. The Amendment would be moved by the first speaker on the other side. If one had known that noble Lords felt otherwise about this one could have had the Adjournment moved last week in the name of the noble Lord, Lord Beswick.

LORD BESWICK

My Lords, the reason why the matter has not been raised before is because it had always been the custom for the Amendment to be moved on the last day by the Opposition.

EARL ST. ALDWYN

My Lords, the noble Lord said "always". I do not think that that is quite true. I admit that very often it has been so, but not always.

LORD WINDLESHAM

My Lords, at a second attempt, perhaps I might open the debate to-day. When we last debated the state of the economy, in July just before the Summer Recess, as I recall it the noble Lord, Lord Beswick, spoke first from the Opposition Front Bench and I followed him. I was happy to do so. I did not know that he had a point to raise to-day, otherwise I should certainly have wanted to consider it. As it happens, we are in the reverse order from that in which we were last time we debated the economy.

I do not think that there will be any disagreement that one of the key passages in the Queen's Speech is the one that reads: At home, My Government's continuing aim will be to secure a prosperous, fair and orderly society; to maintain their policies for promoting employment and for raising standards of living; and to improve the health, welfare, educational and other social services. They will have particular regard to the requirements of the old, the sick and the needy. As a condition of securing these objectives one of my Government's primary concerns will be to sustain the expansion of the economy while achieving the necessary improvement in the balance of payments. They will so contain public expenditure that the rise in productive investment and in exports is not put at risk. My Government will continue their efforts to counter inflation. My Lords, this has been the central theme of the Government's economic policy since we succeeded the Party opposite in Office in 1970. There has been a wide general acceptance of the underlying aims of this policy, but there have been differences, of course, sometimes strongly expressed, as to how these aims can best be realised. For each of the last three years in the course of the debate on the Address, we have had a long and well-informed debate on the subject of economic policy. In each of the last two years noble Lords opposite have put down an Amendment and pressed it to a Division. This year, once again, there is an Amendment on the Order Paper in the name of the Leader of the Opposition, but this year it has one difference: There is no reference to unemployment.

This is significant—and it seems to me that noble Lords on the Front Bench accept this—and must not be overlooked, because in the past noble Lords in all parts of the House have emphasized, and quite rightly so, that there is the human tragedy of unemployment to be considered. Now, as a result of the Government's determination to expand the economy and to increase industrial production, unemployment over the country as a whole has been reduced to a figure of 2.2 per cent. of the registered work force. This compares with the figure of 2.3 per cent. in June, 1970, and of course represents a very substantial improvement over the unacceptably high levels that were reached in 1971 and in 1972. In all the arguments about economic indices and what we make of them, we must not lose sight of the fact that it is this statistic that I have just given your Lordships that has the most profound significance in human terms. By October of this year unemployment had fallen by one-third over the previous 12 months; this means that there were over a quarter of a million fewer people out of work than at the same time last year. All the regions, my Lords, have shared in this rapid improvement. In 12 months, from October last year to October 1973, the number of unemployed has fallen as follows in the regions: by 35 per cent. in Scotland, by 30 per cent. in Wales, by 27 per cent. in Yorkshire and Humberside, by 33 per cent. in the North-West and by 29 per cent. in the Northern region. Vacancies meanwhile have increased rapidly and there are now more than 50 per cent. more jobs available in the assisted regions than there were in June 1970.

My Lords, one consequence of the falling rate of unemployment has been a shortage of labour in certain areas. Because of staff shortages in London, for example, serious concern has been expressed recently about the ability of London Transport and others responsible for public services in Greater London to maintain the level of service that the public have come to expect, and the Starred Question of the noble Lord, Lord Chorley, which was discussed a few moments ago, reflected that that concern existed in your Lordships' House also. In some parts of the Civil Service, too. I know from personal experience how difficult it has been to recruit staff.

A shortage of labour inevitably provides an impetus towards higher levels of pay to attract staff in an increasingly competitive labour market. We must remember, of course, that despite the welcome improvement in unemployment to which I have just referred there are, taken over the country as a whole, still a substantial number of people without work. Consequently, it would be misleading to regard the labour pressures of the South-East as being typical. Nevertheless, here once again we can see the pattern of the inflationary cycle making itself apparent. It is with this cycle, the most difficult and I suppose the most intractable of all problems of domestic politics in the postwar era, that successive Governments have had to contend. On many occasions since June, 1970, members of the Government speaking from this Dispatch Box have explained the essential elements of our economic strategy. I make no apology for doing so again to-day, for it is against this background that the more detailed proposals contained in the Queen's Speech have to be seen and are to be judged.

The keynote of this policy is the expansion of the economy, and here it is worth summarising briefly the record so far. Between 1964 and 1970 the gross domestic product rose in real terms by approximately 2¼ per cent. per annum; over the last two years this rate has been doubled. Between the last half of 1972 and the first half of this year the annual rate has been about 7 per cent., which is compatible with the 5 per cent. growth forecast given by the Chancellor of the Exchequer for the 18 months' period between the second half of 1972 and the first half of 1974. Thus the general picture is of growth coming through; of unemployment moving downwards and of industrial productivity increasing over the past year. The Government's aim now is to sustain this expansion, and to do so at an even tempo and at as high a rate as the growth in real productive potential in the economy allows. This means that growth is likely to continue in 1974 at a rate of about 3½per cent. We are therefore completing the transition at the moment, and it is a transition which must be handled with the greatest care.

My Lords, the rate of growth to aim for in the next phase is, in the end a matter of judgment. Thus, it is not surprising that opinions differ as to what the most realistic target should be. Some people, for example, argue that while 3½ per cent. growth in capacity may be about right, nevertheless the economy is nearer to the full utilisation of resources than the Government believe. Thus, the Chancellor has been urged to take further steps to damp down on the growth in demand. But the fact is that consumption is growing significantly less quickly, while public expenditure is being restrained to a level that, if we are frank, we must admit prevents us from doing many of the things that we should like to do, as it prevented the Party opposite from fulfilling many of their cherished aims. The noble Lord, Lord Diamond, spoke on this theme in the debate we had last July. There are, it is true, what are referred to as "production bottlenecks"—although not, I hope, in the presence of the noble Lord, Lord Conesford, who had, I thought, by ridicule, successfully eradicated the word "bottleneck" from current jargon. These shortages are in practice limited to some particular sectors of the economy—construction, chemicals, steel—and seem to reflect the sudden quickening of demand at home and abroad rather than the existence of too high a level of demand as such.

I shall listen with great interest to what noble Lords have to say in the debate, because while some voices have been urging measures of greater restraint on the Government others (their numbers have been diminishing, I think, of late, but there are still others) have been pressing for faster growth almost at any price. The Chancellor believes that now that the economy is nearing full utilisation of its resources, it is crucially important to make a realistic judgment of what can be sustained without overheating. If we aimed too high there would be a risk of attracting more imports, pulling back goods from export markets and adding additional inflationary pressures to those which already exist.

LORD ROBBINS

My Lords, may I ask the noble Lord a question? He has predicted a growth during the next few months at the rate of 3½ per cent. per annum. Could he furnish your Lordships' House with a prediction of what rate of growth of aggregate demand is necessary to sustain that?

LORD WINDLESHAM

My Lords, I should like to do that. My noble friend on the Woolsack will be winding up the debate, and if he is able to include that figure he will do so. With great respect, my Lords, I have learnt that to give replies "off the cuff" to an economist as well versed in these matters as the noble Lord, Lord Robbins, is a rash and unwise thing to do.

My Lords, these are matters of judgment, and it is in debates of this sort and in the opinions expressed by informed commentators, as well as by organised interests, that the climate of opinion is formed. This, in turn, relates not only to the limits within which Government decisions have to be contained if they are to be accepted as reasonable, but also to that most elusive of all elements in the economic mix: confidence. Confidence, as we all know only too well, affects the value of the pound and is crucial to productive investment in this country. Investors want an end to "Stop-Go", and this is what is needed to revitalise their expectations. Since the end of last year, manufacturing investment has grown by 7 per cent., and the latest D.T.I. intentions survey shows a further increase expected over the next year. Furthermore, the C.B.I. industrial trends survey, published only last week, shows the same conclusion. It is, of course, always important not to read too much into forecasts—the noble Lord, Lord Robbins, as an ex-forecaster, will agree with that, I am sure—but if we look for actual achievement it is interesting to note that what are called "total net new orders" in the engineering industry have risen at the equivalent of an annual rate of 30 per cent. between the first and second quarters of this year. We want to ensure that this movement is protected by special arrangements in Stage 3 of the prices and incomes policy and by the allowances and grants which now exist to help industry.

My Lords, the Queen's Speech also refers to the need to secure an improvement in the balance of payments, and this was one of the themes, I think the noble Lord, Lord Beswick, would agree, of the debate that we had in July, before the Recess. In September of this year—the last month for which figures are available—there was an estimated current account deficit of about £113 million. In no way do we underestimate the significance of this aspect. Nor is there any room whatsoever for complacency in the way in which it is regarded, whether by the Government or by anybody else. There is no doubt that as the economy moves on to the anticipated growth path of 3½ per cent. this year and next, domestic claims on the nation's resources will need to be managed to make room for improvement in the external accounts. The Chancellor of the Exchequer stated in a debate in another place yesterday that public expenditure will be restrained and that he was aiming to limit the increase in public expenditure in each of the next three years to not more than 2 per cent. per annum; that is, to a mach smaller increase than the sustainable rate of growth of the national income. Meanwhile, the Government have made arrangements to cover the existing current deficit by allowing nationalised industries and local authorities to obtain finance through borrowings of foreign currency abroad. So far these amount to some £850 million this year—borrowings which cover the gap, steady the currency and preserve our reserves intact.

The question that many people ask is: why do we have a current account deficit at all? There are those who find in a deficit evidence of a present overheating in the economy. But here the facts speak for themselves. It is not the case that import volumes are rising significantly faster than export volumes; indeed, recent figures point in the other direction. The Government do not believe the deficit is the result of setting too fast a pace, although of course these are, as I said earlier, matters of judgment. The principal reason is the virtually unprecedented upsurge in world commodity prices and in the prices of imports generally. Basic material import prices have risen by 38 per cent. in the last year, and food import prices by 36 per cent. In a year, import prices have risen at a rate eight times faster than the average for the preceding five years. My Lords, had it not been for this quite exceptional increase in import costs, the problem would not be what it is to-day. It is, of course, true that import prices have been correspondingly higher as a result of the depreciation of sterling, but the effect of depreciation is quite small when compared to the enormous shift in world prices themselves. Although it is foolish to be dogmatic about these things, the Government would argue that the main cause—and I say the main cause, my Lords, not the only cause—of the balance-of-payments deficit is not the growth of the British economy, nor the depreciation of the pound, but the sharp increase in world prices, aggravated by supply disruptions and by an unusual synchronisation of fast growth in nearly all of the world's major economies.

My Lords, if it is factors of the sort I have been describing so far that are in the back of all of our minds, it is undoubtedly inflation that is in the front of our minds. I spoke earlier about the element of confidence, and as a Government we recognise the corrosive effects of inflation on the confidence of the people. Moreover, we recognise that inflation bears viciously upon the poor and upon the old, and upon all those sections of society which stand in need of special protection. The Government want to maintain that protection, so far as possible, while inflation persists, and are determined to combat inflation head on, and at every turn. There are, in this connection, three broad objectives: (i) to improve real incomes through a high rate of growth; (ii) to improve the position of the low-paid and pensioners; and (iii) to moderate the rate of cost and price inflation. These objectives were agreed by the C.B.I., the T.U.C. and other organisations, with whom the Government had discussions in the summer about the development of Stage 3. But it became clear in those discussions that while there was considerable general agreement it would not prove possible to achieve an effective and purely voluntary policy based on the three objectives.

It was against this background, my Lords, that the Government published the Consultative Document for Stage 3. Since then there have been intensive consultations with a wide range of organisations, and a number of changes were incorporated in the final version of the revised Prices and Pay Code, which was laid before the House on October 30 and which your Lordships will in due course be asked to debate and to confirm. I do not intend to deal with the Code to-day since we shall have an opportunity to consider its provisions in some detail in the near future.

Instead, my Lords, perhaps I could turn back to the Queen's Speech and the remaining proposals concerning economic and industrial affairs—the subject of today's debate. Behind almost all of them, I believe, runs a theme: The relationship between the individual and the way in which society—industrial society as well as political society—is organised. It seems to me both right and appropriate that the present Government, who firmly believe in free enterprise as the creator of prosperity, should turn their hand to ensuring that the free enterprise system serves both the interests of the nation as a whole and the individuals involved.

It is a matter of some satisfaction to my right honourable friend the Minister for Trade and Consumer Affairs, that the word "consumer" is becoming an essential part of the vocabulary of politics. Through the Fair Trading Act and the appointment of the Director General of Fair Trading, the consumer has acquired new rights and new power to express his rights. The Act was a first step, and this Session legislation will follow to provide the consumer with a new deal across the whole spectrum of credit transactions. It will require truth in lending, give the courts power to reopen extortionate agreements, provide a cooling-off period where a second mortgage on his house is required, and so on.

The proposals for the reform of Company Law will be designed to preserve and improve fair dealing by those in charge of the direction of companies, partly by making individual abuses, such as insider dealing, a criminal offence; and partly by ensuring that a much wider range of activities, both by directors and companies, are open and above board. The companies will have to disclose sufficient facts to allow all those involved—whether shareholders, employees, consumers or the public generally—to judge how they have implemented their responsibilities. Companies also have a duty to safeguard the health and safety of individual employees at work. The Queen's Speech proposes legislation that will also provide better protection for the public from damages arising from the activities of industry on the lines of the Report of the Committee chaired by the noble Lord, Lord Robens of Woldingham. These safeguards will extend to 5 million people who are not now presently covered by health and safety legislation. A Green Paper is also forecast on the subject of how greater employee participation can be promoted in industry.

The measure concerning environmental protection will also be of importance to companies because the free enterprise system has a responsibility not only to the individuals directly involved with it, but also to those living in the countryside and urban communities who may be indirectly affected by its activities.,

I might perhaps at this point, my Lords, say with what regret we heard of the illness of the noble Lord, Lord Byers. He is a most noted industrialist in his own right outside this House, and we always listen with great respect to his views on economic and industrial affairs. I would express our sympathy and good wishes to him, and we hope to see him back in his place before long.

LORD GLADWYN

My Lords, I shall be glad to pass on to my noble friend the hopes expressed for a speedy recovery.

LORD WINDLESHAM

My Lords, these policies, particularly in the latter part of my speech, add up to a programme for a new capitalism. We on this side of the House are not socialists and we do not believe that, in practice, the advantages of public ownership are anything like so great as they are often made out to be in debate. But for heaven's sake! let us not be dogmatic. Where Government intervention is called for, let the Government intervene. Where private enterprise can do the job, let us help them to get on with it. In the right environment which only Government can provide, by their management of the economy, and the provisions of an appropriate legal framework, we believe that a system of free enterprise—partnered by a sense of social responsibility—is the best way of utilising the talents and energies of individuals to create a greater prosperity for all. As my right honourable friend the Secretary of State for Trade and Industry has pointed out recently, The object of the new capitalism is not just the object of economic growth; it is the harnessing of economic growth to the creation of a civilised society; it is for economic growth to be used to eradicate the worry and the ugliness that still exists; it is the creation of a society in which all people have a share of happiness and dignity of life itself. My Lords, I cannot improve on those words.

3.37 p.m.

LORD BESWICK rose to move, as an Amendment, to add at the end of the proposed Address: "but, whilst agreeing that continued efforts to contain inflation are essential, ask that in future such efforts be designed to reduce prices, maintain the value of our currency, and do less to exacerbate industrial unrest and significantly more to achieve the declared aim of a prosperous, fair and orderly society."). The noble Lord said: My Lords, this is the final day of the consideration of the Motion for an humble Address, and I at once refer to the first day and offer my congratulations to the Mover and the Seconder of the Motion before us. Both the style and the substance of what they said established a standard which I envy. We listened with interest to the noble Lord, Lord Windlesham, continuing the debate; and his style, too, I envy, if a little less his substance, and probably a little less the way he answered the very cogent question put to him by the noble Lord, Lord Robbins.

The phrases which the noble Lord, Lord Windlesham, quoted from the gracious Speech I would describe as being impressive, especially for their cool cheek. Her Majesty's Government, we are told, will sustain the expansion of the economy; and they will achieve the necessary improvement in the balance of payments. What an exquisite touch of English understatement that is! They will not put at risk, the noble Lord said, either productive investment or exports; and then supremely, in a separate sentence, Her Majesty's Government will continue their efforts to combat inflation. I trust it is cheek which inspired those phrases, for if, on the part of Her Majesty's advisers, it was quiet complacency, denied by the Lord but inherent in all he said, then the outlook for us is even more bleak than, according to the polls, the bulk of the British people now fear.

The facts behind those phrases are fairly clear. Since last we discussed an humble Address, the Government had done much, as the noble Lord said, to redress the unemployment situation; they took up much of the Selsdon slack in the economy and achieved an expansion of just over 5 per cent.—an expansion which is stumbling back to something like 3.5 per cent., and I say "stumbling" because it was not a planned expansion (a planned transition, as the noble Lord referred to it) but one caused by wasteful restrictions due to shortage of materials and labour. Since that last Speech they have turned a balance-of-payments surplus of more than £1,000 million to an estimated deficit of £1,200 million—though it may be even more this year, and certainly the highest ever in peace time. As to the efforts which they promised, or threatened, to continue to counter inflation, in the six months to April this year they have resulted in a rise in the retail index of 7.1 per cent.; in the six months to June, 8.4 per cent.; in the six months to August, 9.1 per cent.; and, to September, of 10.1 per cent. This is the index excluding food, and the September food price rise was twice that of August and the highest for 2½ years.

My Lords, the Phase 3 policy appears to be based on an inflation of 10 per cent.; but once we reach double figures in inflation, holding it will be like holding a handful of water. Evidence elsewhere indicates that 10 per cent, is a barrier beyond which inflation surges at an increased rate—as can be seen in the Latin American countries. Can anyone, in these circumstances, be less than anxious? I acknowledge that positive achievement of the Government, the reduction in the number of unemployed; but if we cannot do more to reduce inflation, and the distortion, corruption and demoralisation that goes with it, then not only will unemployment rise again but of those employed more and more will be making money by less productive, less honest but more profitable occupations. That is an inescapable feature of an inflationary society.

Last week, in his exchanges with my noble friend Lord Leatherland, the noble Earl, Lord Ferrers, said in a striking phrase that the Government had already had "a modicum of success" in curbing inflation. I have listened, therefore, to what the noble Lord had to say and I have read the speeches made in another place to see whether I can identify this "modicum of success" to which he referred. We heard again that retail prices have risen by a smaller percentage than import prices. Of course they have; but estimates suggest that 30 per cent. to 50 per cent. of the rise in imported raw material prices is due to buying those imports with devalued sterling. In any case—

LORD WINDLESHAM

My Lords, what was the basis of that estimate? Did the noble Lord say 30 per cent.? Was that the figure. What was the source?

LORD BESWICK

My Lords, the price rise of between 30 per cent. and 50 per cent. is due to buying with devalued currency. I get my figure of 50 per cent. from a statement which was not challenged in another place. I can give the noble Lord the Hansard column. As to the 30 per cent., my noble friend Lord Shackleton will be putting further arguments on this point later in the debate. The other point I would ask the noble Lord to bear in mind—and this is one of the unhappy features—is that much of the costs of these inflated import prices have not as yet worked through to the retail prices. I hope, therefore, that he will not base too much on that argument.

I was glad, too, that the noble Lord did not repeat in this House the illustration of success given in another place by one Minister who said that now a widow no longer has to pay death duties on a £15,000 house. I hope that that is not going to be pressed again from the opposite Benches; for it only calls attention to the fact that a house in London now valued at £15,000 would have been valued at £8,000 only a year ago and, in the time of the Labour Government, very much less. There is another alibi or diversion which we have seen featured in Conservative apologies elsewhere but which ought not to be paraded here; namely, that this Administration have reduced taxation. If we are told again of the £300 million of tax cuts to those in the higher income brackets, then we shall have to emphasise the point that those, probably not from the same high income bracket, who have put money in National Savings, have, in effect been taxed £1,000 million in the same period. If one puts National Savings and building society investment together, then this taxation by deceit—for that is what it is—takes something like £2,500 million from that capital in the one year. It is, in part, directly because the Government have refused to raise money by straightforward taxation to pay their bills that those citizens who have put their money in National Savings have suffered this loss of capital.

This brings me to another claimed sucsess: the working of the pay and prices code. I am sure that it is true—I would agree here with the noble Lord—that in some areas and to some extent price rises have been moderated by the efforts of the Pay Board and Price Commission. In the short run this is so, but in the medium and longer term, in Phase 3 and onwards, no code can hold back the pressure of demand (which the noble Lord refused to quantify) created by the Government's other policies. There is a case for and a case against a statutory price and pay code; but there is no case at all for a code which is compelled to operate in conditions which make success impossible. It cannot hold hack the pressures. Why try to dam the stream if we can stop the source?

It is the Government's policy which has allowed the money supply to rise another 20 per cent. to 30 per cent. this year; and the evil does not end with the M.1. and M.3. statistics. There is the phenomenon of the Euro-Dollar. The German Federal Finance Minister, in a recent refreshingly frank interview with United States newspapers, said: Billions of dollars, devoid of a cenuine backing, have been shifted to Europe. This more and more undermines the fair and just system of economic give and take. From their economic strength, the Federal Government have been able to take appropriate measures in their own economic defence. In our own case our Government are actually encouraging, almost compelling, public authorities to go to Europe and borrow this "phoney" money—thus superimposing additional demands on top of their own creation. How much of our present reserves are composed of "hot money" from EuroDollar sources? How we should love to have Lord Cromer sitting again on those Cross Benches explaining to us how much he approves of the financial prudence of the Government which he helped to elect by his 1970 financial scaremongering!

My Lords, I hope I may be permitted to turn from this to what the noble Lord said and to what is put as a basic justification for the recent financial policies—This need for growth. Here, indeed, we get down to a basic issue. It is true—and the noble Lord was right—that not only the Government but also the Labour Party, the Liberal Party and the T.U.C. have denounced stagnation. But are we not all beginning to realise that we can place too high a sacrifice on the altar of this great god, growth? As the noble Lord said, growth is not necessarily good. What counts is the kind of growth. I recall an earlier debate in which the noble Lord, Lord Windlesham, took part. He then said—he was spelling out, I suppose, his attitude to growth—that what is needed so urgently is the creation of wealth. He went on to say that arguments about sharing wealth must surely be secondary. In the light of what he has lust said, I wonder whether the noble Lord really meant that. Because it does misunderstand, apparently, the facts about growth and the G.N.P.

As a nation, we do not create a spendable commodity called wealth and then decide how to spend it. It is current work, activity and effort which determines the G.N.P. The income generated by porn shops, strip-tease shows, betting shops, unoccupied office blocks—activities of the "unacceptable face of capitalism"—all help to make up the G.N.P.; equally with the running of schools, the building of hospitals and all the constructive work in the public and private sectors. An increase in the national product is needed, I agree, but it is the kind of product that counts if, as the gracious Speech says, we are seeking "a prosperous, fair and orderly society." It is in the same month, my Lords, that the Minister responsible for our hospitals confessed that he is the biggest slum landlord in the country, that the Phase 3 proposals take price controls off the property speculators, which led The Economist to say: Of all the undeserving rich, property has been given exactly what it wanted… And to rub it in, the writer adds: Mr. Heath appeared to be under the illusion that property companies pay a fair whack of taxation. They do not. One could give a whole list of similar examples. Since the noble Lord spoke about the urgent priority of increasing national wealth the G.N.P. undoubtedly has risen. But it is precisely after it has risen that we now read that school-children have been denied education since the summer holidays because there are no school places to be found for them, while others get only part-time education. And probably, and worse still, as an indication of our progress to a fair and orderly society, thousands more are not attending school at all or getting an attendance mark and then slipping away.

The gracious Speech rightly emphasises the importance of the environment (I was very pleased; and I expected the noble Lord himself to emphasise its importance), but it is more than a matter of building an airport on a site to which no one can go. We cannot have a civilised environment if our economic policy leaves us short of people such as teachers, postmen, bus and train drivers, miners, speech therapists and nurses—not to mention a shortage of food and shelter. If the noble Lord really thinks that economic growth and the creation of wealth is the overriding necessity, or if anyone is still persuaded that this is so, let him look across the Atlantic at the wealthiest country on our globe, the United States of America, with industrial productivity three times that of our own. A prosperous society? Possibly. But just and orderly? I doubt it. Not as the noble Lord and I would define those terms.

My Lords, it is against that background that the Labour Party has been researching, arguing and agreeing the outlines of a policy which they recently published. Related as it is to our current problems it inevitably goes down to these basic matters of our economic affairs. Twice incoming Conservative Governments have dismantled the machinery we created for dealing with land prices. Next time we shall end speculation by bringing under public ownership all land needed for development and for redevelopment. To help ensure more selective economic growth, and to retain for the nation more of the fruits of proper growth we shall bring more of industry under public ownership. We shall see—

LORD ORR-EWING

My Lords, I wonder whether the right honourable gentleman—the noble Lord can tell us whether it is an additional cost on the extra thousand million pounds of taxation forecast by Mr. Denis Healey—the cost of taking all this into public ownership? Is this an additional levy?

LORD BESWICK

My Lords, is the noble Lord. Lord Orr-Ewing, trying to tell me that it is an extra cost if we transfer the ownership from one lot of English people to the nation as a whole? Is he trying to tell me that? I hope not. I was saying that land and industry will be transferred into public ownership—with proper payment, certainly, as we have done before. If the noble Lord wishes for economic enlightenment in these matters I will explain to him how the electricity industry, the mining industry, the Bank of England and all the rest have been taken into public ownership without the kind of inflation which he is trying to suggest that we shall be causing.

Let me take the noble Lord on to another area where probably even larger sums of money are involved, the banking institutions, those still privately-owned, which are permitted by their privileged position to make such large profits. I read—I cannot see why the noble Lord does not get excited about this, too—that one of the clearing banks, Barclays, this year will nearly equal the total profits of all the clearing banks in 1969; and 1969 was a year in which they made double the profits of the early 1960s. My Lords, it cannot be right that so much money is generated and used by private owners when they make it only by virtue of the privileges which society confers on them. The Stock Exchange has been treated as one of the sacred cows of the City, and we believe it is time to examine more critically the part that that institution plays in channelling investment. From the Economist I learn that the stock market raised one billion pounds for borrowers other than the Government; and two-thirds of that says the Economist, was for the financial groups. As a proportion of the £4.2 billion that industry spent in Britain last year the stock market can claim to have financed 5 per cent., at most.

My Lords, I am as interested as the noble Lord in seeing constructive industry get proper finance at proper rates. The question is: have we reached the right kind of solution for finding capital of this kind for those purposes? With the financial machinery that we now have are we getting the right kind of balance as between constructive industry, on the one hand, and these financial institutions, on the other? If the noble Lord would get himself a little interested in that, I am sure he would be getting down to some of the real difficulties that face us at the present time. To ensure useful growth, the kind of wealth with which I am sure most of us would agree, we can, I think, find a better means of channelling proper investments to where it can most usefully be used. I put it to the noble Lord that if we can evolve such a machinery then we shall be rendering a service to political democracy which will go beyond the boundaries of our own country.

I believe that the people of our country have the ability to fulfil the sort of policy that is needed. At the outset of the debate on the gracious Speech my noble friend Lord Shackleton rightly paid a tribute to the quality of our younger generation, and I agree with him. I would say that maybe the older ones are not so bad either. After all, they helped to put down Hitler and all he stood for. And when I look behind and see my noble friend Lord Brockway, who published a book on his 85th birthday and who is regarded as only an apprentice by the noble Lord, Lord Shinwell, who published a book on his 89th birth-clay, we can realise what a great storehouse of energy and experience there is in this country.

My Lords, on this personal note, may I be allowed to say how much I value what the Leader of the House and the Leader of the Liberal Party (who, I am sorry to hear, is in hospital), as well as my noble friend the Leader of the Opposition, found it possible to say about me. And as this is my last speech in my capacity as Opposition Chief Whip, may I be allowed to put on record my appreciation of my opposite number? I do not agree with his list of speakers for to-day's debate; I think he boobed: and if he had consulted me, I would have seen to it that he did not boob in that way. But we have faced each other for six years, each of us having three of those years on either side of the House. He has always sought, mostly successfully, to beat me in the Division Lobbies. We have had confrontations on occasions, but I have never known a bitter word to pass between us, and the more that I have learned about him, the more I have come to respect him. This capacity of respect for political opponents is not a unique attribute between us, for tolerance is surely the essence of our Parliamentary institutions and I believe is one of Britain's greatest contributions to human affairs. But I recall again the words used by the noble and learned Lord who sits upon theWoolsack when he was fresh from Oxford nearly forty years ago, when he said: Tolerance must never be confused with indifference. And it is because we cannot be indifferent to the unpleasant facts of our economic position—that the right kind of growth cannot come from an unbalanced Budget; that prosperity for some cannot be permanent if it is based upon public indebtedness, and cannot lead to a fair and orderly society—that I ask the House to support the Amendment which I now move.

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

("but, whilst agreeing that continued efforts to contain inflation are essential, ask that in future such efforts be designed to reduce prices, maintain the value of our currency, and do less to exacerbate industrial unrest and significantly more to achieve the declared aim of a prosperous, fair and orderly society".).—(Lord Beswick.)

4.4 p.m.

BARONESS SEEAR

My Lords, I should like first to thank the noble Lord, Lord Beswick, for the tribute that he paid to the Leader of the Liberal Party in your Lordships' House, whose absence from this House owing to illness we greatly regret. The noble Lord, Lord Beswick, has just given us a speech which I am sure he hopes and intends will be widely reported in Berwick, in Hove, in North Edinburgh and in Govan. I can only say that I, too, hope it will be widely reported, because as a prescription for the cure of our country's ills it seems to me curiously old-fashioned and inappropriate. That is not to say, however, that we on these Benches are happy with the propositions which have been put forward by the Government. There are, of course, in the gracious Speech many paragraphs which we would welcome with two cheers. We will stifle the third cheer until we can see the contents of the Bills which will give expression to the intentions in the gracious Speech.

We are glad to see that there is an intention to reform company law; we are glad that there is an intention of at least a Green Paper on employee participation; we are glad that there is to be further development of the tax credit system—although we hope that it will be a far more radical document, far more redistributive than the proposals for tax credit so far put forward by the Government; and we are glad to see that there is to be some attention paid to reform of local authority finance. What is, I think, sometimes overlooked is what a large part of our national resources is devoted to local finance and how important is the efficiency with which that sector of economic activity is handled.

Having welcomed all these propositions, however, I am bound to say—and I feel this still more strongly having listened to the speeches of the noble Lord, Lord Windlesham, and the noble Lord, Lord Beswick—that the proposals put forward by the Government, so far as we have them at present, seem to me to be inadequate and complacent. They are inadequate because I, for one, at any rate, do not see how a 3½ per cent. growth rate is going to be adequate to meet the promises contained eleswhere in the gracious Speech and in the proposals put forward by the noble Lord. Of course I agree with the noble Lord, Lord Beswick, that there is growth and growth; that what is important is the quality of growth. But even if we eliminated those undesirable elements which the noble Lord listed for us, I find it hard to believe that from a 3½ per cent. growth rate we are going to be able to raise the level of the standard of living in this country; to be able to correct our balance-of-payments position; to be able to meet the reasonable expectations for personal advancement of the people of this country—the promises which are contained in the gracious Speech.

I find it hard to believe that the Government can really be satisfied with a retreat to the 3½ per cent. as the level of aspirations. I agree that from the previous record of this country under both previous Governments 3½ per cent. is as much as we seem capable of achieving; indeed, that is a good deal more than we have been able to achieve on many occasions. But what should be concerning us is our total failure to reach and sustain the kind of growth rates which our competitors and partners in Europe have been able consistently to achieve. To sit here and simply say that 3½ per cent. is all we can manage, when other countries have demonstrated again and again that it is possible to do much better than that, is something which calls for far more concern and a far more vigorous attack than I find either in the paragraphs of the gracious Speech or in the speech to which we have listened from the noble Lord, Lord Windlesham.

My Lords, in addition to the danger that we are aiming to avert, we have heard nothing so far to-day about a second danger: that our position may become very much more serious as a result of the oil crisis. It is surely hypocritical to be discussing the economic state of the country and to be omitting any reference to what we propose to do in the immediate future, and in the middle future no doubt, in regard to oil. Of course, we have not the information to know the real position of our oil supplies at the present time. I do not believe that the Government have held back from telling us for fear of the effect on by-election results, but I will only say this to them: that the country will not forgive them if jobs, income and prosperity are jeopardised in the future because they have done too little, and done it too late, regarding the control of oil supplies.

It has been said that we are not able to have further growth because we are reaching the full use of our resources. I deny that, and I specifically deny that we are anywhere near reaching the full use of our manpower resources. In the first place, although it is true—and we pay tribute to the Government for it—that the unemployment rate has fallen, there are still many areas in this country in which the unemployment rate is unacceptably high. It is ridiculous that we should have great shortages of labour in some parts of the country and are unable to get a higher growth rate when we still have not been able to reinvigorate large areas in Scotland and in the North-East and the North-West. Why do we not find in the gracious Speech and in the speeches of noble Lords opposite a far greater determination to do more in these regions, in collaboration with our European partners, to see that the present great waste of manpower in the regions is stopped? We on these Benches have advocated a pay-roll tax which is differentiated as between regions, so as to give greater positive encouragement to employers to go into the areas of under-employment. We have also advocated that far more strenuous action should be taken to ensure further development in the South-East, where overcrowding is apparent for all to see and unemployment has now reached the level where it is difficult to get skilled, let alone unskilled, labour. We must see that labour is used effectively, and that it is used soon. If this were done it would alleviate the consequences of unemployment in other regions.

It is not only in the areas of unemployment that we have gross wastage of labour. It is still true, as anybody who is in close contact with industry knows, that in real terms we are still faced with overmanning in many parts of our economy. We have overmanning because all Parties in this country have failed to come to grips with the representatives of labour and to thresh out what can be done in order to get a realistic level of manning and not a traditional, conventional level of manning. The American consultant, William Allen, who died a year or two ago, used to say that we were not short of skill in this country but that we were grossly under-using the skill that we had. I have again and again put that point to groups of managers with whom I have been professionally connected. I have asked them whether they thought this was true, and they have said they agree that it is so. If only we could get an industrial relations system in this country which enabled us to tackle this fundamental question, then the overmanning which bedevils us, the waste of labour, the lack of progress and the low growth rate could indeed be tackled.

It is a measure of the Government's failure to create the proper climate in which these questions could be tackled that they are now cutting back to a 3½ per cent. growth rate because, among other things, we are short of labour. My Lords, we are not short of labour. There is a climate of opinion growing up in this country, supported and encouraged by certain sectors of the population who should know better—in both Parties: indeed I might almost say in all Parties (this is a matter which was referred to by the noble Lord, Lord Diamond, during the course of a debate in the summer—which has led people to believe that not only is there a right to work—a view to which we would all subscribe—but that a man has a right to do a particular job for the duration of his life. I contend that our task is to change that attitude to one in which people realise that men have a right to be trained and to be given the opportunity to move to jobs which need to be done and to move away from jobs which in reality are no longer required. We should try to get a spirit in this country in which the trade unions themselves, their leaders and the Labour Party would say to their members, "This is the way ahead: not to cling on to the old way of doing things and not to cling on to a particular job which has to be yours for all time, but to demand far greater opportunities for learning new skills which we so badly need."

Last year and the year before, my noble friends and I urged the Government, when they put forward their programmes for retraining, to take a far more ambitious view of what they needed to do. At that time some of us said that the days of unemployment are the times in which to launch ambitious training programmes. It should then have been possible for the Government to say where the shortages of labour were going to be. I would ask the Government now to tell us where the greatest shortages of skill are and how many people are in training under the training programmes envisaged under the new legislation to meet the shortages which are there for all of us to see and which, with any foresight, we could have anticipated twelve months ago. The Government boast that they are aiming for 60,000 places in the Government training centres. For a country with 25 million people in employment, this is ridiculous if we are to make real use of manpower and if we are not to be content with the waste of manpower that exists among people who are employed, let alone among those who are not employed.

Then again, it is not enough to have retraining and to move a man to another job, perhaps within the same plant or the same neighbourhood. We need a certain amount of geographical mobility as well as job mobility. In this connection, we all know that the greatest obstacle to such mobility is the lack of housing. When will the Government realise that the task of getting houses built where they are required needs something like a military operation to achieve? It could be done. It is useless talking about real mobility so long as there is no housing for people to go to in other areas. I cannot believe that, with modern technical methods of house building—not conventional methods, but brand new ones—it would be impossible to get housing built in areas where there is a shortage of skilled people. It is no good asking people to change their jobs and to go to another locality when there are no houses there for them to live in.

There are other wastes of manpower in our economy that we urgently need to tackle. In welcoming clauses in the gracious Speech of which we greatly approve, I did not mention—and perhaps it was churlish of me in the circumstances—the legislation against sex discrimination which the Government have promised. If we had acted in the spirit of that proposed legislation years ago (and why should we not have done?) a great many of the shortages from which we are suffering to-day would not exist. Earlier to-day, Members of your Lordships' House were talking about the appalling state of London transport. I, unlike most Members of your Lordships' House, do not run a car. This is not because of abstinence or virtue, but because I am extremely bad at it. This means that I spend a great deal of time on London transport, and I can assure your Lordships that it is not merely inconvenient but becoming positively dangerous. The pressure on London transport in the rush hour is such that, sooner or later, there will be a tragedy. We cannot ignore this. The other day, a friend of mine, an ex-guardsman, was unable to fight his way to the door of a Tube train in order to get out. Sooner or later ex-Guardsmen, and others, will lose their tempers when it comes to trying to get out of a Tube train. But why on earth do we never see any women doing anything on the Tube trains except sweep the floors? I cannot believe that women who drove ambulances during the blitz and who can pilot aeroplanes, are incapable of driving Tube trains. If your Lordships travelled in the rush hour, as I do, you would be queuing up to push the women ahead so that they may do just that—indeed, I shall do it myself if things continue as they are to-day.

The absence of skilled workers, the shortage of labour, and the failure to train people—which could be done quickly—who are capable of taking on these jobs is a scandal. We cannot rest content with the argument that we have no further resources of labour while we are so woefully misusing these categories of labour. While I am talking about the misuse of categories of people, may I also make the point that we are misusing the immigrants in our midst? My Lords, how many immigrants do you find in the skilled grades? This real source of skill is one that we badly need. This is not to be done on behalf of immigrants as a kindly act of racial nondiscrimination, just as we do not want women to be given opportunities as a kindly gesture of non-discrimination. We need these people badly. It is time that we fought fiercely against the forces that are preventing them from taking the senior jobs.

These are just some of the ways in which we protest that there is far too little sense of urgency, far too little imagination and drive, in getting the economy moving and using our resources far more effectively. Behind the criticisms that I have been making there lies a deeper and more serious criticism, that of complacency. If I may be forgiven for saying so, it is also perhaps some degree of cowardice, and (although I do not care for the word) a failure of leadership. People have not been roused to feel that we need to make fundamental changes. We have not been roused to believe that we are capable of making these changes. All the propositions which are being put forward are skimming about on the surface; it is for the Government, if only they could find the spirit and the courage to do it, to awaken people to the need to change and to give them the confidence of which they are capable.

4.23 p.m.

LORD ORR-EWING

My Lords, I cannot help feeling, after that masterly speech covering a very wide field, that it may be fortunate that the noble Baroness does not drive a tube train or a car because she might drive it as fast as she speaks, and that would certainly put the fear of God into the travelling public. The noble Baroness is always listened to with a great deal of attention, and what I have said is not meant to be discourteous. If I could speak half as fast as the noble Baroness did then your Lordships would be bored for only half the time; I regret that I cannot do so. I agreed particularly not only about employment, over-manning and the need to make more use of our women's abilities, but also concerning our oil supplies. Ministers keep telling us that within a few years two-thirds of our oil will he coming from the North Sea. Has it occurred to them that most of the consortia in the North Sea are dominated by American oil companies? So far as I understand, under the present licences there is no assurance that that oil will come to Britain; it could just as well be sold to America. It may well be that America will be shorter of oil than this country. and that these American companies will steer the oil in that direction. I hope that my noble friend on the Front Bench will look into this point most carefully when it comes to the reallocation of the North Sea plots.

I should like to add my feelings of warmth towards the noble Lord, Lord Beswick, on the last speech that he has just made from the Front Bench. I faced him for 20 years across the Floor of the House of Commons, and perhaps that is why I referred to him as the right honourable gentleman. I apologise if in the 2½ years that I have been here I have not converted to the new terms and called him a noble Lord. I am sure that everyone in your Lordships' House will agree that the noble Lord makes constructive and effective speeches. It is very sad that he should find that he now has to retire from the Front Bench. I hope that we shall hear him many times from the Back Benches being just as effective as he has as Chief Whip for the Opposition Party.

I was glad to hear the noble Lord pay accord to the effective measures which have been taken and which have made a substantial reduction in unemployment since last year. The terms of the Amendment to which he was speaking also agree that there would be considerable dangers if there was continued inflation in this country. I do not think he paid enough accord to the causes of this inflation. It was brought out most forcefully in an Economist article on September 18. It made it clear there that during the period of the freeze, from October 1972 to March 1973 (which was before devaluation of the pound) two-thirds of the percentage increase, two-thirds of the inflationary increase, was due to the increase in import costs. Out of a total of 7.3 per cent., 5.1 per cent. came from increased import costs. Nor did the noble Lord give credit for a factor which emerged in a debate in another place yesterday concerning the expenditure which we are making now, and have been making for some months, in the importation of machinery and raw materials.

I believed—possibly from personal experience—that much of these huge imports into this country were of consumer goods, but the Secretary of State for the Department of Trade and Industry revealed yesterday in another place (col. 621) that in the past three months, although the visible adverse balance was£330 million, in that same period we imported in raw materials and machinery£992 million—three times as much. Of course I would not expect him to point out that if we had not been forced to purchase so many foreign cars because we are not able to get them in the United Kingdom, partly because of a shortage of steel, that balance of payments would he better. The sum of£300 million has been spent in bringing foreign cars into this country so far this year. This is an immense load on our economy. I do not think that the Government can be blamed for this. You might blame the nationalised steel industry; and, to some extent, you might blame the militants in our motor car assembly plants who lave caused such disruption and disorganisation. But the Government cannot be blamed.

LORD BESWICK

My Lords, I should just like to try to get right the figure that the noble Lord, Lord Windlesham, asked me about. When the noble Lord, Lord Orr-Ewing, says that according to the Economist two-thirds of the price rise is attributable to imported raw materials, does he mean two-thirds of the rise in price of all goods, or two-thirds of the rise in price of some of the goods which happen to use imported raw materials?

LORD ORR-EWING

My Lords, I will give the noble Lord a copy of the article from the Economist of September 18. It clearly deals with the whole field and not a selective field.

One point the noble Lord did not deal with in his Amendment, and which was I think almost the only point to which we on this side object, was when it says that Government actions have exacerbated industrial unrest. There was no reference to this, and perhaps noble Lords on the Front Bench are going to develop this because it is a very condemning phrase in this Amendment. It is a little unfair, because if anything is going to exacerbate industrial unrest it is the threat by the Shadow Chancellor of the Exchequer to increase taxation by£1,000 million. This was made at Blackpool and has been endorsed since.

He recognised that the great part of this taxation would have to come from skilled workers—people earning over£50 or £60 a week. This accounts for a large number of skilled workers, particularly in skilled jobs in the engineering and motor industries. I should have thought also that the point he made to-day (and perhaps I may enlarge on this a little) means this. If you are going to give compensating paper to large numbers of people when you nationalise the land—development land or the housing land—or to the shareholders in the 500 companies which are now threatened with nationalisation, surely you are creating paper which those concerned will be able to sell for money and thus giving a twist to inflation. Even if they hold the paper, you then have to pay them the going interest rate percentage, which may be very much higher than the rate their shares are currently paying in the industrial concerns. That will be another twist to inflation.

LORD BESWICK

My Lords, would the noble Lord explain why it is that the paper which people hold from the Government is more inflationary than the paper they now hold from the private company?

LORD ORR-EWING

No; I am saying, my Lords, that if you issue people with paper carrying a higher coupon rate—as happened with "Daltons" when there was an issue at 2½ per cent.—many of them do not want to hold Government paper and they get rid of it and get cash instead. That gives an extra twist to inflation. And the Government would have to pay, probably, as I said, a higher percentage on the paper they are creating than the shares now held are currently yielding. Very few shares are currently yielding 10, 11 or 12 per cent.; 3 per cent. is much more usual.

I think we are united on the issue of trying to contain inflation, and it is only right that one should make some reference to Phase 3. Your Lordships will know, if I may summarise the recommendations of a very long White Paper, that the recommendations are to make a pay limit of £2.25 per week, or limit an individual's increase to £350 a year. That is to be the maximum; there is a flexibility margin of 1 per cent.; one extra paid bank holiday, which will be New Year's Day, is to be given every year. This is an effort to be fair and reasonable. It has been criticised by the T.U.C. and discussed by the T.U.C.; it will be criticised and discussed by the C.B.I.

It is rather interesting to see what our biggest and most important unions are claiming in the face of this situation. I have the claim of the Confederation of Shipbuilding and Engineering Unions. They are asking that the minimum rate of pay should go up, not by a few pounds a week but by £10 a week. My Lords, the average industrial earnings over the whole field in the engineering industry now are over £40 a week. So this would be a 25 per cent. increase in the basic pay. At the same time, they are asking for an immediate reduction of the working week to 35 hours without loss of pay. As the average weekly overtime hours worked for all engineering workers is now five, if this claim is made effective it will mean that we shall have to pay 10 hours at overtime rates. The Government have suggested in their Paper that every one hour reduction is equivalent to 1½ per cent. pay increase, and so a reduction of five hours in basic time will mean another pay increase of 7½per cent. Therefore, so far we have claims worth 32½per cent. That is not the end. The union are asking for another three days' annual holiday and another six days statutory holiday. These are to be taken at their choice and their timing. This is three days on to the existing three weeks and two days (an extra two days was granted in 1972), and it will mean an effective statutory holiday of four weeks. The claim for six statutory days on top of the present seven statutory days will mean a total of 13 statutory days.

This cannot be considered a very reasonable claim if one looks at the practice in the E.E.C. In the past, on the whole, they have had three more bank holidays or more Saints' Days than we have had in this country, but this claim would take our paid holidays very much above the average for the E.E.C. countries. I wonder whether we can afford to meet this claim and still compete in the price of our goods. The unions are also, incidentally, saying that holiday pay should be paid at the average earnings, which again of course would put a further burden on industry and therefore on the price of our goods.

The Engineering Employers' Federation, facing this claim, has said that if it were granted it would amount to an increase of 40 per cent. on present pay. My Lords, if the present pay is £40–and many people's pay is very considerably higher than that—it means that the £40 man would henceforward be paid £56. This would be the biggest inflationary twist to the spiral that has probably ever been given and I should think it is totally unrealistic.

In the face of this unrealistic and highly provocative claim it is worth considering just what industry itself has had to suffer during the period of the pause. Sometimes it is forgotten that the 500 largest firms, many of whom contribute very considerably to our export achievements, had half a year of voluntary price freeze before the Government price freeze started. We then had one year of freeze on prices and dividends, and now we have a second year of price and dividend control.

Perhaps it is not appreciated that the people who are being hit hardest—and so often they are blamed—are the junior managers, skilled and junior executives and the supervisory workers—the tool-setters and people of that importance. One has not been allowed to give them a pay rise of more than £250 a year, and now it is to be £350 a year. There is no question that the living standards of junior executives, middle managers and these highly skilled workers have suffered in respect of the rest of the population; and they are vital to the prosperity of our country and the success of our export drive. Moreover, a continuation of this process has inevitably led—and I see this very much in my industrial life—to job-swapping. This encourages wastefulness and inefficiency. A person takes a new job; he does not know his way about the firm, how to deal with the paper work or the materials as he did of old, and he has to learn it all over again. I would ask my noble friends on the Front Bench to consider where encouragement should be given in the next phase. First, surely, it should be to anything which will improve the efficiency of British industry; secondly. to shift working, and thirdly, to more investment.

The manner in which we now account in industry is disturbing in a period when inflation is very real and very serious, and this has totally distorted the profits position and the investment position which we read of in our company accounts. The engineering industries' "Little Neddy" analysed firms which were responsible for one-third of the total engineering industries' output and they found the following facts. They found that in the period 1966–71, which was a business cycle, not £124 million but only £10 million, if the figures are adjusted to 1971 consumer prices, was in fact retained. Over the same five years they found that the profits, pre-tax and pre-interest, increased not by 57 per cent., as all of us would think if we looked at the figures, but in fact by 13 per cent. They found that the return on capital was 9½per cent. and not 12½per cent. to 14 per cent. which had previously been thought to be the figure. They found that taxation had accounted, not for 41 per cent. but for 53 per cent. of taxable company profits. This is one of the financial reasons why companies in this country have not invested as much as we would all have desired in recent years. I hope that these recommendations which arise out of the Institute of Chartered Accountants will be taken seriously, and that consideration will be given to the question whether in an inflationary world we ought not to go over to inflationary accounting and get a more realistic attitude to profits and investment in British industry.

Secondly, I should like to see in Phase 3 very strong encouragement to shift working. I have just returned from an industrial visit to the United States, and it really is astonishing to see the way in which, for a premium of between 8 and 10 per cent. of normal wages, people there are perfectly happy to work the second shift. In this country one has to pay 25 per cent., 33 per cent., or an even higher percentage, to persuade people to work a second shift. As our new machine tools become more and more expensive, at a time when £50,000 is frequently spent on a single automatic moulding tool, at a time when these tools are being worked too few hours a day, it is totally unrealistic to invest new capital from your company if those tools cannot be used on a two- or even a three-shift basis.

Here I agree very much with what the noble Baroness said earlier. We are overmanned in many of our industries and we are not working enough shifts in most of our industries, compared with our competitors in all parts of the world. I hope that in any pay code which is finally introduced there will be a strong incentive and encouragement to pay a premium for the unsocial hours to which my noble friend referred. I rather hoped that the noble Lord, Lord Beswick, was going to suggest that one of the provocations was the Industrial Relations Act. I had a long passage prepared to justify the Industrial Relations Act and what it has achieved, but as he has not attacked on this score I will not deal with it to-day.

There are many disturbing features about our economy, but what is satisfactory is that although retail prices from August to August of the last year have risen by 9.3 per cent., earnings have risen by 14.8 per cent. and we have been able to more than compensate our pensioners. The figures (which I always carry in my mind) are as follows: since June, 1970–a significant date—prices have risen by 29 per cent., earnings have risen by 45 per cent. and pensions have risen by 55 per cent. My Lords, I think we now have the opportunities to go ahead in this country. We are investing very considerable money, as we have been doing over recent months, in bringing in machine tools, in modernising equipment and in increasing productivity in industry. I congratulate the Government on continuing their essential idea of a growth economy. Unless we continue with growth we cannot possibly afford any of the other services which are so essential to our country.

4.43 p.m.

LORD KAHN

My Lords, the noble Lord the Leader of the House told your Lordships that the keynote of the Government's policy was to secure the expansion of the economy, and to secure a higher rate of growth. In his Budget Statement made in another place oil March 6 of this year, the Chancellor of the Exchequer said that the first condition to be fulfilled "was a higher level of industrial investment."I agree with the noble Baroness, Lady Seear, that we are far too ready to take it for granted that our productive investment, and hence our rate of underlying growth, must necessarily be low compared with those of nearly all other advanced industrial countries. There is no reason at all why this should be so.

The Government, like previous Governments, have provided a wide range of incentives for productive investment. But such incentives are really effective only when industrialists expect to be short of productive capacity. The remedy for the "English diseases "is to run the economy at as high a rate as the available labour force and physical equipment will permit. The Government have accepted a great challenge. The challenge is to do away with "stop-go". If they succeed they will, in a most dramatic sense, have changed the trend of this country's economic future. The task which they have set themselves is formidable. It has baffled Governments in all capitalist countries. At the moment, the problem is how to secure a release of resources from other forms of production for greater production of exports and of import substitutes without, at least temporarily, causing serious unemployment and under-capacity operation of plant, undermining confidence and thus causing a relapse in the rate of productive investment.

The task is not quite so formidable as it may appear. To quite a considerable extent it is a matter of changing the destination of firms' products rather than of transferring labour from one establishment to another. For example, if, as a result of measures which the Government might introduce, and to which I intend to refer, domestic purchases of new motor cars were reduced, fewer cars would be imported and more of the available production of British cars would he exported. I hope that when I come to mention a specific measure I shall have some support from the noble Lord, Lord Orr-Ewing, who touched on this subject in the course of his interesting speech.

The noble Lord the Leader of the House is fully entitled to claim credit for the Government for bringing down unemployment very heavily indeed. I need not dwell on what that improvement means in terms of human misery. But this reduction in unemployment also means much less waste of productive potential. And, above all, a low level of unemployment goes hand in hand with full capacity operation of plant and provides the encouragement to productive investment which is so overwhelmingly important.

The Government are also entitled to claim—if I may again quote from the last Budget Statement—that it is particularly important to bear in mind that the exceptionally high current [balance of trade] surpluses in 1970 and 1971 reflected low domestic demand and high unemployment."—[OFFICIAL REPORT, Commons; 6/3/73, col. 246.] However, it is quite clear that the balance of trade has been suffering for some months because shortages of labour, and of particular types of labour, and bottlenecks presented by full capacity operation of physical capacity have prevented firms from producing exports and import substitutes which they could have sold had they been able to produce them in the face of competition from overseas producers, both in overseas markets and in the domestic market.

The competitive position is favourable, in spite of our comparatively low rate of growth of productivity and the increase in money earnings. Money earnings in competing countries have risen so fast as to keep us, by and large, in a favourable competitive position. This is partly due to changes in exchange rates. No further hack than last June the value of sterling in terms of the Smithsonian parities was 8 per cent. higher than it is to-day. The importance in terms of maintaining our competitive position of an 8 per cent. fall of sterling in five months becomes clear when it is recalled that the 14 per cent. devaluation of sterling in November, 1967, represented for exports, as opposed to imports, an effective devaluation of only 9 per cent. because of the withdrawal of two export subsidies.

I beg leave of your Lordships to read out one final quotation from the last Budget Statement: Since we came to office, we have reduced taxation on a scale unprecedented in our history. Taxation as a proportion of gross domestic product has been cut from 35 per cent. to 30 per cent."—[OFFICIAL REPORT, Commons; 6/3/73, col. 240.] This has given rise naturally to a great deal of hostile criticism. For my own part, I am certainly critical of the pattern of the tax concessions. I feel that a marvellous opportunity has been missed of securing a more equitable distribution of income. But as to the actual reduction of taxation, as opposed to the character of individual tax concessions, I find myself in disagreement with many of my economist colleagues. It has been vitally important to raise the level of demand so as to reduce the misery entailed by heavy unemployment, and to reactivate the economy. I emphasise again that the Government have succeeded in creating a spirit of optimistic confidence on the part of industrialists, thus very materially raising the rate of productive investment. This is of overwhelming importance.

I accept the statement made by the noble Lord the Leader of the House about the slowing down of the rate of growth of personal consumption. Nevertheless, I agree here with my economist colleagues that the level of overall demand is now too high: and, as I have said, the production of exports and import substitutes is being held back by scarcity of labour and lack of physical capacity. The Government have already placed a curb on the growth of Government expenditure, and relief will also now be provided by restrictions placed on the execution of orders for the public sector by the construction industries.

But I believe that that is not nearly enough. There should have been an Autumn Budget. To wait for the normal Budget in March or April is to wait too long. Also, as the normal Budget date approaches, the economy is bound to suffer from the usual pre-Budget buyers' spree. My proposal would be to introduce a mini-Budget with the least possible warning and at the earliest possible date—say, early in February. Among the measures which I would have in mind to be announced in such a mini-Budget Statement would be, first of all, the reimposition of hire purchase controls. Secondly, raising the special tax on motor cars which motor cars attract in addition to V.A.T., and imposing similar special taxes on other consumer durable goods and on certain other less essential goods. It is quite crazy, in my opinion, to introduce V.A.T. on the basis of a uniform rate of 10 per cent. (with some zero ratings and some exemptions) when our partners in the E.E.C., with whom the Government are so anxious to harmonise, have lower rates for some essentials and higher rates for some luxuries. My third proposal would be a rise in the standard rate of income tax.

It is my belief that productive resources, labour and plant, released by such measures would be fairly rapidly absorbed into the production of more exports and more import substitutes. But I do not wish to appear to be too sanguine about the state of the balance of payments. The explanation in terms of the rise in world prices given to your Lordships' House by the noble Lord the Leader of the House suffers from the simple fact, I venture to suggest, that other countries whose economic pattern is similar to that of this country are not suffering to the same extent on their balances of trade from the rise in world prices. I feel, however, that the current account balance is suffering from the adverse price effects of the fall since last June of 8 per cent. in the value of sterling in terms of other currencies. The favourable volume effects will as usual take time to develop.

It seems to me very reasonable to finance the adverse balance of payments by allowing nationalised industries and local authorities, encouraged by Government exchange guarantees, to issue medium-term Euro-currency bonds, provided that the total rate of borrowing is limited (I am not frightened by the amount of borrowing that has occurred since last April) and that it does not continue for more than about two years. The rate of interest that has to be paid on such bonds of about 9 per cent. per annum is not very onerous if allowance is made for the prospective further fall in the value of money in real terms, even though, as we hope, at a lower rate than it is falling at the present time.

On the other hand, the rise in the sterling balances of Sterling Area central banks of about £800 million in the last three years, from about £2,300 million to about £3,100 million, I do find disturbing, because of the additional vulnerability to which they subject the economy. It is true that the monetary reserves have risen even more. But it would seem sensible to reduce rates of interest so as to render less attractive the holding of such sterling balances, an increase in which we can easily dispense with.

My Lords, I now turn in a more general sense to the problem of recruiting labour for the important essential industries and services. It is maintained in some quarters that the Government's counter-inflation policy prevents these industries from raising wages sufficiently to attract enough labour. My submission to your Lordships' House is that it would be catastrophic to allow a competitive struggle on the part of these industries and services to bid up wages. These essential industries and services employ a fairly high proportion of the total labour force and to rely on unrestrained wage bargaining would mean the end of the Government's counter-inflation policy.

The noble Lord the Leader of the House and the noble Baroness, Lady Seear, referred to the particular problem of recruitment of labour by London Transport and other services. In passing, I would mention that a partial remedy would seem to be to admit more Commonwealth immigrants into the country. I imagine the noble Baroness would agree.

This leads me, with some hesitation, to come back to the proposal that I made in the course of my maiden speech to your Lordships' House on July 28. 1966. I then advocated the adoption of a measure similar to the war-time Control of Engagement Orders. I am not advocating positive direction of labour. The control I am advocating is a negative one. I am simply advocating that establishments whose products are less essential should be prevented to a limited extent by the labour exchanges from fully replacing the wastage of their labour force, so their labour force would gradually decline. Of course, it would be necessary to make it illegal to recruit labour except through labour exchanges. Such a provision seems to me to be even more strongly justified today than it was when I first put it forward to your Lordships' House in July, 1966. I regard it as a fairly modest proposal fully justified by the state of the economy.

I fear that I am exhausting your Lordships' patience. I have time only to make two short remarks in support of the Government's counter-inflation policy. I make these remarks in spite of having listened carefully to what the noble Lord, Lord Beswick, said on this subject. First, the Government's policy is highly realistic. The previous Government annually anounced objectives, such as reasonable stability of price levels, which quite obviously could not possibly be attained. The result was that their prices and incomes policy became completely discredited. I venture in passing to make the same criticism of the wording of the Amendment before your Lordships' House. References to price reductions and to the maintenance of the value of the currency seem to me entirely unrealistic under the conditions that are bound to continue to prevail in the immediate future. On the other hand, there is a reasonably good prospect of hitting the Government's targets, which are highly realistic, expressed in terms of rates of increase of average money earnings and of price levels.

My second point on the counter-inflation policy is that the Government are to be complimented on being prepared to carry statutory controls right into Stage 3. Any Member of your Lordships' House who has tried to read the various Orders laid before Parliament on October 30 is bound to feel that the Government are taking very seriously indeed the need for a statutory basis for their policy.

I have time to make only one remark about the international monetary system. The overwhelming problem was the United States balance of payments deficit and the Japanese balance of payments surplus. Now that position has been reversed. That indicates quite remarkable success.

I trust that my speech may be deemed to have been reasonably optimistic, but I should like to conclude on a really optimistic note. I am often anxiously asked by laymen about the "terrible crisis", meaning either the national economic crisis or the international monetary crisis. My reply always is this, Never in the history of the world have standards of living, fairly generally throughout the world, been as high as they are to-day, and never in the history of the world have those standards, fairly generally, grown at rates as high as those that prevail to-day.

BARONESS GAITSKELL

My Lords, before the noble Lord sits down, may I ask him, as a distinguished economist, whether he is suggesting that the rate of inflation under the Labour Government was anything like the rate of inflation to-day?

LORD KAHN

My Lords, I rather wished to avoid being drawn into political controversy. Although I sit on these Cross-Benches, I am a member of the Labour Party, and bearing in mind the unfortunate fate of Lord Russell I have been very careful to secure my card for the current year. But my reply to the noble Baroness is not one that she will really welcome. The trouble started in two ways. First of all, it did not start in this country. It started abroad, and as we are a fairly open economy it is fairly natural for the wage behaviour in this country to follow the wage behaviour, after allowing for differences of rates of growth of productivity, in competing countries But the other trouble, I regret to have to say, in my opinion, was that in the last years of the Labour Government they bartered away their prices and incomes policy in the hope, which in the end they were disappointed over, of getting in exchange an industrial relations policy; and it was in the last year or two of the Labour Government that we began to get double figures for annual rates of increase of earnings. But I agree with the noble Baroness that the rates of increase in the last year or two of the Labour Government were not so high as those that prevail now.

LORD SEGAL

My Lords, would the noble Lord, before he sits down, also enlighten the House on another subject, on which he touched all too briefly? Would he advocate the recruitment on a temporary basis of Commonwealth and even foreign labour for those service industries where the labour force is at the moment inadequate, a policy followed at the moment in many continental countries?

LORD KAHN

My Lords, certainly, if I had time to make that advocacy, I would have advocated adopting the example of Western Germany and Switzerland of temporary recruitment of the actual worker himself, who leaves his family behind, so that when he is no longer needed he goes home. Of course, difficulties will in due course be presented by the Treaty of Rome, in so far as such labour is recruited from other members of the Community, and I think from associated territories. But in principle I agree with the noble Lord.

5.8 p.m.

LORD ARDWICK

My Lords, I was not able to take part in the debate last July but I have spoken in several economic debates since 1970. My plea to the Government was always that they should go for reflation, for economic expansion and the absorption of the unemployed, and that they should at the same time pursue a prices and incomes policy to restrain the consequent inflation. Of course, I was not alone in this plea. People on all sides of this House, including some ex-Chancellors and some academic economists made similar, if not identical pleas. The Government in their economic strategy are now following this good advice, and I am not sufficiently cynical as a politician to blame them for all the consequences of this strategy; only for some of them. Indeed, I am glad that the Amendment which I am supporting to-day is written in such a modest style. It is demure, wistful and almost winsome in its wording.

I think that during the past year or two we have all learned that there are no certain remedies for economic problems that we can put forward with any confidence; we can approach them only in a spirit of humility and of hope. Perhaps the difficulty of giving wise advice has caused the professional or academic economists to refrain from taking part in this debate, apart, of course, from the noble Lord who preceded me, and who I thought gave a most constructive analysis which we shall all want to study at leisure. I felt extremely sympathetic towards much of what he said, though my fears were aroused the moment he spoke about negative direction of labour. I personally should not like to be negatively directed.

Indeed, there is a case for encouraging the Government to persevere on their present course rather than castigating them for their current difficulties. It is no secret that many members of the Conservative Party are opposed to the Government's current economic policies, or are bewildered by them and want to put them into reverse. Never did they think that a Tory Government would put economic growth before the balance of payments and the value of the pound, except, of course, in an Election year, when a kind of excursion from orthodoxy has to be permitted in the interest of the vote. Indeed, those of us who were privileged to watch the Tory Party Conference last month will remember that it was not the members of my Party who suffered from the lash of the oratory: it was the dissident members of the Conservative Party who had to be dealt with rather than the Opposition: members of the Monday Club, admirers of Mr. Powell, and some unattached, simple old Conservatives who are extreme adherents of the private enterprise side of traditional Conservative policy.

If one abstains, out of reason and decent charity, from criticising the Government's strategy, what can be said that is both valid and useful about their tactics? One of their main problems at this moment is the character of the Government itself, or the appearance of the character of the Government. This character-picture was formed not during the past twelve months but in the run-up to the Election and the year after it. In the country the image still remains of a deliberately abrasive Government who were going to get Britain moving by curbing the trade unions, cutting the taxation of the better off, and encouraging the new competitors to stand on their own feet and not to care very much about anybody else. The consequences of the Government's policy were disastrous unemployment which went over the one million, and the tax reductions did not prove to be the shot in the arm which the Government believed they would be and which I myself hoped they would be. Indeed, they are one of the ingredients of the current inflation. As noble Lords have said, there is a stronger case for increasing taxation than there is for cutting public Government expenditure, which to-day is almost entirely essential.

There is this dark image of the Government which does not quite correspond with the Government as they are to-day; but because that image prevails the Government are facing perhaps a "black Friday" this week when the election results come in. The Government of course made their famous "U" turn, and one of their problems is this past. It is not so much a recollection of what they were and what they did, as the fact that the past influences the present. Union officials cannot forget the Industrial Relations Act, even though it is not activated at its maximum strength, or anything like it, to-day. Nor can the housewife forget the Government's failure to keep the impossible promise it made about prices, or the council tenant forget the rent increases.

Of course the tax cuts were welcomed by many people, and they helped the better-off worker as well as the professional and the monied classes. Of course the lowest paid workers were given help too, but the lower paid workers have had very little assistance. I was glad to hear the noble Lord the Leader of the House mention their plight in his opening speech. He talked about improving their position. It is splendid if anybody is thinking about improving their position, but there are two ways of doing it; one is to improve it absolutely, so that they are getting more, and the other is to improve it relatively. At one time I was against the relativists and entirely on the side of the absolutists. I thought that what really mattered was not how people compared with other members of the community but what their actual level was, but I have come to believe that what is wrong is that the lower paid workers do not belong to the society of to-day; they are not participating in that society. They may be warmly dressed and adequately fed in nutritional terms, but they are outside the club that they know exists; the club that goes to the Costa Brava, the club whose members have at least an old "banger" at their disposal to get them about, who have a telephone, and perhaps have, or can aspire to, a colour television. Our affluent life passes them by. Although their standards get absolutely better, it does seem that they get relatively worse. They are people who are not in want, but they are deprived. They are deprived of the joys of participation in the kind of society that we have to-day.

There is also an economic reason for raising the level of the lower paid, which my noble friend has mentioned. That is that the centres of our cities are running down because some essential workers cannot live on the money that they are offered, or cannot find a place to live in at a rent that they can afford. What we have to fear as a result of these influences is not the old Galbraithian equation about private affluence and public squalor, but a contrast between public squalor and public ostentation. As the Concordes fly out of Maplin, able to take the mail at doubled speed, across the Atlantic, unfortunately the collections will be six hours slow because there are not many postmen.

The lower paid workers I know most about are the young school-teachers. The older school-teachers are not badly off by to-day's standards at all, but the younger school-teachers are in a difficult position once they marry and have to create a home and want to found a family. May I give just two examples which arise out of the experience in my own family? A relation of mine, a contemporary, was able, as a young man in the 'thirties, to buy a house for roughly two and a half times his annual salary. Last year another member of the family, his niece, was obliged to pay ten times her annual salary for a home of roughly the same kind, and of course it means being saddled with a heavy mortgage for many years to come.

I think to-day that the need of the underpaid is so obvious that it ought really to be almost above politics. If there is need for a consensus about anything, I think that there is need for a consensus about this. We have to find a way of improving their relative position, which means eroding some of the differentials between them and the higher paid workers, just as the differentials between the higher paid workers and the professional classes have been eroded in recent years.

The Government suffer from two difficulties to-day: first, that because of this past they lack the moral authority to make their case as convincing as it rationally could be made. The second is that whatever their efficiency at their Whitehall desk may be, I have never known a Government less able to communicate with ordinary people than this one is. Politics is the art of persuasion: I can say perhaps nothing more critical of this defect in the Government than that the Foreign Secretary, a man who has many high and excellent qualities but who has never been regarded as the Rupert of debate, is now regarded as the most persuasive platform orator in the Conservative Party. The Conservative Party has had its misfortunes. Of its three evangelists it lost one by death, another by defection, and the third was lost to the Woolsack, where the work is too arduous and the traditions are opposed to his stumping the country with a rousing Conservative Government campaign.

THE LORD CHANCELLOR

With a bell.

LORD ARDWICK

With a bell, too, yes. Looking towards the Woolsack I have lost the place where I was, but I am coming to my conclusion. As I was saying, the need of the underpaid is so obvious that it ought to be above politics, and what we want is to be able to return somehow to the politics of persuasion. It may sound rather odd coming from this side of the House, but nevertheless there are some vital aspects of British life concerned with the pursuit of growth and with prices and incomes policies, still not understood by the public, which in the interests of the nation and of all political Parties need to be preached with vigour and persuasive authority.

5.21 p.m.

LORD HYLTON

My Lords, maybe I owe the House an apology for venturing to speak about housing on a day consecrated to economics and industry. However, I hope I shall be forgiven if only because I shall refer briefly to the building industry, and because to-day's Question Time in this House and the recent correspondence columns of The Times have made it abundantly clear that bad housing and housing shortage are imposing an enormous handicap on London, not only as the Capital City but also as a manufacturing centre; and to my mind this applies in varying degrees of force to a number of other cities up and down Britain.

I should like to welcome very warmly indeed the passage in the gracious Speech which referred to giving high priority to … improving living conditions in the worst housing areas … Another phrase further on referred to, the problem of those suffering special disadvantages from the conditions of life in urban areas". That is very encouraging. I was therefore a little surprised that there was no specific reference to an impending Housing Bill, which must surely be needed if the recent White Paper, Better Homes The Next Priorities, is to be given effect, as I hope it will .be. I welcome strongly the White Paper. I think it would be unfair to describe it as a "U-turn", but perhaps one should use the phrase of religious men and say it is an interesting development of doctrine or, as a Marxist might put it, it is a good example of revisionism. At any rate I am very pleased with it and I like very much the emphasis on rehabilitation of houses rather than demolition and rebuilding. I welcome very much the analysis in paragraph 17 of the White Paper of three different types of areas of houses all needing completely different and distinct treatment. I welcome also the emphasis on repairs, and most of all the emphasis that within a housing action area the paramount item of concern must be the interests of the residents in that area. This I think is a great step forward on improvement policy up to now.

I should like now to make one or two slightly more critical remarks about the White Paper, and in doing so I shall speak from a London point of view. It may be—I do not know—that what I have to say will apply, with modifications, to other cities; but it stems from London experience. First of all, there are the criteria for housing action areas set out in paragraph 20 of the White Paper. I would like to ask the Government whether it is possible for these areas to be identified from the Census data. We now have the 1971 Census figures more or less hot from the printer. Surely a great deal of time and trouble would be saved if areas for housing action could be identified in advance from the census figures.

Again, if I may put another question to the Government, would they consider making it compulsory to declare housing action areas in those known places, for example, in London, where there are housing stress areas which have been mapped and defined since 1967; again, in London and other cities where there are "educational priority areas" which have been defined for quite a period now. Another type of area that could be compulsorily declared for housing action might surely be those areas which qualify for urban aid under the Home Office Urban Aid Programme. If we can plot housing action areas in advance and designate them compulsorily, I believe that we shall do a great preventive work. We shall be stopping housing and social conditions from getting even worse in those places than they are now. We shall be acting in a preventive and pre-emptive way, and this may be necessary owing to the considerable delays that are always involved in carrying out physical improvements to houses.

May I now move on to the extent of the work that will become necessary under this White Paper? It has been calculated that housing action areas will be needed in no fewer than 40 wards of Greater London which contain some 400,000 people, a population equivalent, roughly speaking, to that of the City of Bristol; and those wards are scattered over some 13 boroughs. These are not my figures but those of the London Council of Social Service and they apply to the worst housing areas, those where the stress has been present longest and is most intense.

Another point that will need very careful consideration arising out of this White Paper is that of "decanting". It is a horrible word, I know, implying that one can pour people from one container to another; but it is perhaps expressive. I believe that this problem can be minimised if a very much expanded amount of temporary accommodation can be provided not only in London but also throughout most parts of Britain—and this I attempted to argue in a letter to The Times in January of this year. Another way of diminishing the difficulties of moving people out, so that improvements can take place, will be through the new and expanding towns where it is of note, I think, that the Layfield Report on the Greater London Development Plan called for a 50 per cent. increase in the planned movement of Londoners out to new and expanding towns. Another important point, I think, is that the housing action areas should be sufficiently large, and I suggest this to make it possible to balance, on the one hand, overcrowding and?, on the other, under-occupation, too few people in one building. The size of area which the White Paper talks about is 400 or 500 houses in one block. I feel that this may well be too small an area if we are to balance the overcrowding with the under-occupation.

The White Paper mentioned the problem of furnished tenants, and I feel that there is a very grave danger that there may be widespread eviction while the While Paper is under consideration, while any Bill is going through Parliament and while housing action areas are being designated. I wonder whether the Government are quite aware of the weight of informed opinion which is asking for greater security for furnished tenants. One can go back to Miss Lindall Evans, who wrote the Minority Report of the Francis Committee. Since then there has been a plea from the London Boroughs' Association; the London Council of Social Services has made the same argument, as have the housing aid centres and the National and Local Government Officers; and, most recent of all, the Bow Group have come round to advocating greater security of tenure for furnished tenants. All these people are not asking for blanket security across the whole country for every furnished tenant; they are asking for it in those places where there is housing stress and, in particular, for families and for old people within the stress areas. I hope that the Government will look at this point very seriously indeed.

I should like to welcome the package of new powers which is set out in paragraph 27 of the White Paper. Broadly speaking, I feel it is on the right lines. Nevertheless, I should like to see very much more stress placed on the control of lettings and the control of sales. These were two points brought out as long ago as 1965 in the Milner Holland Report, and nothing has yet been done to give force to that. I should like to see a recognition of the fact that compulsory improvement of houses under the Housing Acts of 1961 and 1964 has, by and large, failed. It is a process which absorbs a tremendous amount of skilled time and energy, of committee work and local authority work, and by and large it does not produce results. There is evidence for that from Islington and many other places. I should like to see more emphasis placed—more emphasis than the White Paper gives—on the compulsory purchase of houses to be improved, and I should like to see the process of compulsory purchase very much streamlined and made less lengthy.

My Lords, if I may now turn to the question of the resources needed for implementing the White Paper, there are, first of all, the administrative resources. Here again, I feel that I must point to a series of major Reports, from Milner Holland through Cullingworth and on to Greve and Layfield, all of which have called for a strategic housing authority for London. Layfield makes this point most clearly of all. Then, under the heading of "Resources", there are acknowledged to be great shortages of personnel—people such as valuers, housing managers, public health inspectors, as well as building workers and craftsmen. This matter, I think, needs more thought than it has had yet. I promised that I would make a mention of the building industry, and here my fear is that the big firms are too absorbed with big new building projects and the little firms are, inevitably, too much tied down with repairs and maintenance, leaving not very much between them to do the painstaking, labour-consuming work of improving, modernising and converting. To get over this problem, it may be that some brake will be needed, at least so far as London is concerned, on the construction of offices and hotels. Then, under "Resources" we must inevitably consider money. I take it that the funds for this great programme of improvement and urban renewal will take the shape of larger improvement grants and "rising cost subsidy" for local authorities, but I should like to know whether the necessary scale of expenditure can be found within the Government's recently announced ceiling of a 2 per cent. total rise for each of the next three years.

In conclusion, my Lords, I find myself in agreement not only with the recent Conservative Party Conference but also with the expert working party of NALGO, who have published a thick pamphlet on housing. Both seem to approve, in general, the urban renewal strategy, but both doubt whether the total of the Government's policies in this field is really adequate. I hope that the Government will listen very carefully to what the local authorities in the housing stress areas are saying to them at this very moment. Earlier in this year I heard the Minister for Housing and Construction say that the Government intended to take the inner city areas by the scruff of the neck and drag them into improvement. If that is really to be done, a great deal more thinking-through seems to be needed. If only one housing action area per borough—just 400 or 500 houses—is all that is going to be done, it will be a mere token, a mere scratching of the surface. Nevertheless, I believe that the White Paper programme is on the right lines, but it needs to be given real teeth. It will require very great political energy and willpower to put it into practice, but I believe that these qualities will be forthcoming.

5.38 p.m.

LORD RHODES

My Lords, my economic adviser was not trained at the L.S.E. or at any university that I know of. He is a very humble man who acts as a gamekeeper on the moors above the house where I live. He watches the road between Saddleworth and Marsden to two small towns. He always used to say that he could tell long before Selwyn Lloyd when there was going to be a credit squeeze, because when the employers in Marsden were going over into Saddleworth to poach the labour and to take them back in a coach, and when the employers in Saddleworth were going over into Marsden and doing the same thing and offering them more inducement to go to Saddleworth with the additional expense and overheads of running buses and scarce materials like oil and petrol, then, he said, "That is the time you are going to have a credit squeeze", and in those days he used to be right. I went up to see him the other day and he said, "Hey, what's happening down in London? It's worse now than ever I remember it since the war. Why isn't there a credit squeeze? I'm all wrong with my assumptions." I said, "Having a credit squeeze is out of fashion. "The Government tried it as soon as they came into power, but they soon dispensed with it as a disciplinary method because they were scared stiff of creating unemployment, because elections are won and lost on employment." Now the first words the Lord Privy Seal said this afternoon were, "Look what we have done about unemployment. "The last time there were 100,000 or more vacancies advertised than there were people to fill them; the number of unemployed on the books of the unemployment register were 365,000. This time we have never got this figure below 450,000 unemployed, and yet the demand is absolutely staggering. Why? Because you have added to that register about 100,000 people who either cannot or will not work; mainly people who, either through mental or physical disability, are unable to do so. I say that this bogey of unemployment figures can be partially removed if there were a Royal Commission set up to examine this problem so that we would know who were truly unemployed, and who were not. Until this is done, I do not see how we are going to get any sense out of them. If we are to get a true picture of the unemployment position we need to know more about those on the register.

It has been said this afternoon, as has been said so often in the country, that in later months external prices have been more responsible than anything else for the inflationary situation in which we find ourselves. There is a certain amount of truth in that. But there it is true to say that much of to-day's inflation has been made in Britain. It might have escaped your Lordships' notice that when the Japanese went into the Australian market for wool, and started jacking up the prices 18 months ago, the price of wool rose to a height that has never been exceeded since the Korean war. As a result, prices for ladies' coats in the shops in London to-day are 100 per cent. up on what they were at the beginning of the season.

But the Government have to be held responsible, for too much inflation they have manufactured themselves. One is the jacking up of the interest rates. I think they have been jacked up with a vain hope that we can live off hot money until this economic miracle can be worked out and so break the pattern of nearly a hundred years and emerge with a sustained high growth rate. I think that the criticism that has been levelled at Government this afternoon, that they are gambling with the future of this country—which was suggested by Lord Beswick—has foundation in fact. The choice of "grow and be damned" is a deliberate one, and look at the mess it is making: bricklayers at £150 a week and firms outbidding each other for supplies. You really want to go round the country to see what is happening. Lorry drivers are bribed to divert supplies elsewhere—bricks for one thing; bus drivers leaving London to work in Halifax; train drivers who, because of housing shortages, cannot get accommodation near the depots are going to jobs elsewhere. But the biggest damage that has been perpetrated on the British people is psychological. The British people, long accustomed to low prices and low rents, are now getting used to inflation; they are expecting it! Every euphoric sort of utterance by Government speakers, like that from the Chancellor of the Exchequer the other day, is increasing the damage, and the diminishing prospect of this country ever making a reasonable recovery. Decimal currency was slavishly followed because it was thought it was needed to justify our entry into the Common Market.

It is the same with V.A.T. Everything is distorted. We all know it is, and yet we are trying to put a kind of silly face on it. Companies are borrowing money to lend it again, and they are hoarding stocks rather than getting down to the harder earned profits of manufacturing. I went to the 100th anniversary of a bank in the City of London a few months ago, and I saw one of our big entrepreneurs who used to be engaged in manufacturing. I went to ask him what he thought about the situation, and about the manufacturing side of his industry. "Oh", he said, "I relinquished them. Nobody but a fool manufactures to-day."Well, I spent my life manufacturing. It was an honourable occupation and it was hard work. They were the days when it was the case of putting one pound upon another to create some capital so that I could reinvest it. We knew then what it was and how valuable it was to do it. But the incentive is not there to-day. It is easier to make money, as the noble Lord, Lord Beswick, said, "elsewhere".

Now, let me point out the sort of thing that is exacerbating labour. Aneurin Bevan, when he was Minister of Housing, aimed at building 300,000 houses a year. That was in 1949. In this day and age, when houses are so desperately needed, we are this year not even going to accomplish 300.000 houses, with all the aids, mechanical aids and otherwise and with all the money available to do it. And no wonder, if the case I quote is common. It is a report of the half-yearly meeting of a firm of builders in Birmingham who build private houses. If the House will bear with me I will read it. This was in May, and it reads: Massive increases in house prices have been the main factor behind the 300 per cent. first-half profit rise reported yesterday by Bryant Holdings, the Birmingham-based builders and civil engineers. Pre-tax profit for the six months to November 30, rose from £460,000 to £1,850,000, even though turnover fell £100,000 to £16.4 millions. That is the answer to a lot of the trouble in this country. It goes on: The chairman, Mr. Chris. Bryant, is anticipating a second half profit of around £2 millions. This would give the group a full-year profit in the order of £3.85 millions—258 per cent. higher than the previous year's total of £1,074,404. Last night Mr. Bryant said that the greater part of the profit improvement came from the group's private house-building activities. He said that the selling price for the bulk of the group's houses had risen from roughly £8,000 last year to £12,000 this year. During the first half Bryant's built only slightly more houses than during the first half of 1971–72. But turnover for the period rose from about £4 million to around £7 million, Mr. Bryant said. The company is expecting to build 1,600 houses this year and about 2,000 next year. Mr. Bryant, in reply to questions, said that he had been advised by his employers' federation that his company would not be affected by the Government's restrictions on margins under Stage Two. That is going on all of a piece; it matches your £7,000 a year bricklayer—and you have done nothing to stop it; nothing at all.

I have kept the House long enough but there is just one point more until I wind up, and it is this. If the Government, or any Government to-day, do not recognise that this is no ordinary phase of economic history they are failing in their duty. To-day we are experiencing all over the world a social revolution on a scale that we have not seen for a hundred years here in this country. We are seeing examples of the wrong methods. Sometimes it is brutally done, but the aim is the redistribution of wealth. Now everybody in the developed world is conscious that this is a need, and the more you gamble with people's livelihoods in the hope that somehow or other this growth rate is going to be sustained the sooner this revolution will come. Without any question it must be put to the unions to give them an opportunity to produce a plan which will help to sustain the growth you are trying to get. But until you can get that co-operation you can whistle.

I will tell you what we in the North of England do not want. We do not want any Maplins; we do not want any Channel tunnels; we are not a bit interested in Concordes and we do not want the huge concentration of earth moving and civil engineering resources anywhere at all until the true market comes into operation and you are building 500,000 houses per annum. What we do want is increased income supplements in the shape of family allowances; more threshold agreements to compensate for unusual price rises; higher than average wage increases for the poorly paid; amendment of the Housing Finance Act to hold down rents; selective subsidies on fresh food—something I advocated in this House two years ago, and if that had been followed up you would not now be having so much of this chaos and trouble to-day.

The redistribution of wealth should be done by elected Governments and not by any elements who are imposing their wills upon the body politic otherwise. I am with Lord Beswick when he says that the incidence of taxation to achieve all this should be shifted. I believe it can only be done if the taxation is direct. That will be the only way in which we can achieve a reasonable distribution of wealth. We know that equality is not possible; we know there are differences, differentiations and all the rest of it; but until a Government who are in control are working towards equality and are patently observed to be doing it from the right motives, I do not think government in this country can succeed.

5.58 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, it is a pleasure to follow the noble Lord, Lord Rhodes. I agree with many of the things he said. The noble Lord talked about the unemployment figures. I have been saying for a long time that the unemployment figures are not correct. I quoted in this House an instance of an official of the Ministry of Labour who went down to Southend and discovered at the Labour Exchange there that 74 men who had no right to it at all had been drawing unemployment pay for a year. I agree with the noble Lord that Governments ought not to look upon unemployment as a complete bogey: they ought not to be terrified if it is impossible to get the unemployment figures below 400,000. As the noble Lord said, there are many who are ill and unemployable, but I will not pursue that matter.

The other thing which amused me was when the noble Lord, Lord Rhodes, referred to the gamekeeper who could tell when a credit squeeze was coming. I have employed plenty of gamekeepers but they were never able to tell me that. The noble Lord struck another chord of sympathy with me when he said that to he a manufacturer—I was a small manufacturer for a time—was to find that there was nothing in it; that the boss had all the headaches and took all the risks and at the end found he was worrying to keep other people employed. That I consider a worthy cause; but I know from experience that the boss now gets nothing out of it, and so I contracted out.

To return to the gracious Speech, my Lords, I see that we have a spate of legislation to come. I consider that we have too much legislation, but there it is. We need not fear redundancies in the Civil Service, wherever else redundancy may occur. We have this Pandora's Box of "goodies" in which there is something for everyone. My noble Leader said something to the effect that in future in this country we would have, under a Conservative Government, a partnership between the State and private enterprise. So the fairy godmother that provides the "goodies" is different from the one that we had three years ago. She is rather akin to the wolf in the tale of Little Red Riding Hood. Now we have a state wolf-like godmother disguised in Conservative clothing. No matter what guise the fairy godmother adopts the mass of legislation promised in the gracious Speech is trivial when we compare it with the great issue which has been debated to-day; namely, whether Her Majesty's Government have the courage—and it needs tremendous courage—and the ability to defeat inflation.

That brings me to the Opposition Amendment. The surprising thing about the Amendment is that it says nothing about wages. Noble Lords opposite harp on about prices. This, in their minds, appears to be the scapegoat. To-day we have heard that wages have increased a great deal over prices. Over the period that was mentioned I think the figures were over 40 per cent. increase in wages and 29 per cent. increase in prices. It is surprising that the Opposition do not say anything about that in their Amendment, or anything about how they would control wages. Perhaps we may hear something about that in the speech that the noble Lord, Lord Shackleton, is to make later. It is true that the Government have been inflating the economy at the rate of 10 per cent. which is a very worrying factor, but had we not had the Government's prices and incomes policy—and we are now going into Phase 3 of it—I do not doubt that the rate of inflation would have been doubled.

I suppose that one has to take seriously what was said at the Labour Party conference at Blackpool and conclude that it was not just a great charade. But if the Labour Party were in power we would apparently have a free-for-all for wages, but control of prices, and the nationalisation of most of industry. Probably we should have direction of labour—it would have to come to that—and we should have a controlled economy. Then, my Lords, where is democracy? Mr. Micawber said something about this when referring to banking. I cannot remember quite what he said, but I am sure that if the policy of a Labour Government were put into practice, according to what was said at the Labour Party conference (it might have been all bark and not much bite) it would result in chaos and lead us into bankruptcy. I cannot believe that the Party of noble Lords opposite was serious.

One wonders whether any democratic Government in a full democracy such as ours is capable of stopping inflation. It is all very well to blame the Government, but to stop inflation is very difficult in our form of democracy. In the last 15 or 20 years people have been so protected against the harsh realities of economic life, by means of subsidies, that they have been prepared blindly to follow—like the rats followed the Pied Piper of Hamelin—any politically motivated militant trade union leader. But by following him, they would be led to destruction and the loss of their freedom.

My Lords, the words in the gracious Speech which bring me most cheer—they have been mentioned to-day, and they give us a lot of hope—are that Her Majesty's Government will so contain public expenditure that the rise in productive investment and in exports is not put at risk. Yesterday we heard the Chancellor of the Exchequer say that the aim of the Government was not to increase public expenditure by over 2 per cent. He said he would keep it below 2 per cent. during the next three years. If he can do that, many of our economic troubles will be over. I should like to have seen in the gracious Speech a reference to a steady reduction in the supply of money. I do not agree with Mr. Enoch Powell, that the Government can cut off the money supply, just like that. But if the Government were steadily to decrease the supply of money, it would solve many of our problems; and if the Chancellor can contain public expenditure, that will help him to stop the increase in the money supply. If you have an expansion in the economy of 3½per cent., and if you are inflating by 30 per cent., you are depreciating the pound by 26½per cent. I think it was Lenin who said that if you want to destroy a free economy you must first devalue the currency—you must debauch the currency. I should not like a Conservative Government to follow Lenin's advice.

But all these things are easier said than done. No Government would want to embark on an unpopular policy, especially when there is bound to be a General Election within 18 months. I beg the Government to contain public expenditure and to cut down on the money supply. We cannot create money to employ a lot of people on unproductive work, such as building schools, swimming baths, public buildings, or whatever it may be, for which the material has to be imported. These buildings and works do not create any real wealth. It is all right doing this work if our balance of payments position is satisfactory and if our economy is booming.

My Lords, I agree that unemployment is to be deplored; but, as the noble Lord, Lord Rhodes said, it should not be looked upon as a bogey: the financial hardship involved now is not anything like what it was 20 or 30 years ago. If we allow galloping inflation to go on, the results will be far worse than having a small amount of unemployment. This point arose at Question Time to-day, when I intervened. We have heard a lot lately about the shortage of labour in public transport and in the low-paid occupations. As I think I said earlier to-day, if only we can cure inflation that shortage will go, because when people can get jobs on building sites at £100 a week or, as the noble Lord, Lord Rhodes, said, £150 a week, they are not going to apply for a job as an attendant in a public lavatory or to work on the underground railway. The cause of this shortage of labour in our lower paid services is inflation. Inflation is the curse of everything. I suppose that as a landowner I ought to be pleased, since the value of my land is going up and up, although I do not propose to sell it. In any case, to me this is an immoral way of making money. I could sell land and make a great deal of money, but that is not something of which I approve. Inflation is a curse and we must stop it.

The gracious Speech mentions that the Government are going to publish a Green Paper on employee participation in industry. Ever since industry began certain employees have risen up to be the bosses. The cream comes to the top. Many firms hand out free share bonuses to employees and thereby give them an interest; but the trouble with the average employee is that if you hand him a free share bonus he usually sells it the next day. In my experience, average employees do not seem to be very keen on participating in industry from the point of view of the boss. They probably want the boss's pay, but they are not prepared to take on the boss's responsibilities or risks. I would ask that when the Government are compiling this Green Paper they be careful not to saddle private industry—private industry has enough burdens to carry anyway—with any statutory controls that will make firms bring in people in some form of shareholding or managerial capacity when they have no wish to be brought in, and will be of no use to the firms concerned in that capacity. By all means let us encourage the ambitious, the thrifty and the brainy, but that cannot be done throughout the whole range of employees. However, that perhaps is not in the mind of the Government anyway.

My Lords, to conclude, I wish to say that I will certainly vote against the Amendment. The reason I say that is that, although I am not 100 per cent. pleased with the performance of the Government—after all, nobody can be 100 per cent. perfect—I am quite convinced that a Labour Government would certainly do no better; according to their performance at Blackpool, they would probably do a great deal worse. Having said that, I think I have taken up my allotted time and I will sit down.

6.17 p.m.

BARONESS BIRK

My Lords, I think it is absolutely true and recognised that we are going through a period of great unrest and entering into a winter of discontent. A great deal of this debate this afternoon, as was perhaps to be expected, has centred on the severe economic situation, but it seems to me—and this point has been raised by other noble Lords—that our economic policy can be justified only as a means of achieving the social objectives that we want to see in our society. This means that really we are, or should be, talking about people, and not just about theories or economic jargon. When the noble Lord the Leader of the House talked about the relationship between the individual and the way society is organised, and then went on to talk about the creation of a society with dignity, he seemed to my ears to speak with more warmth and enthusiasm than when he was speaking on the rest of the economic theme.

How can we expect to dispel the unrest and discontent in our society to-day when we have a series of situations which are almost self-explanatory? The worker is told to work harder; but how is it possible for many workers to improve their position by hard work and ambition when they are working in the context of mass production and assembly lines? Workers find that the jobs they are in are sold over their heads when the firms for which they are working are taken over or as a result of mergers. This makes it more difficult, as the noble Baroness, Lady Seear said, for individuals to come in and work together in society.

There is a great deal of concentration on productivity, which is certainly important, but we are more and more in our society having to recognise the social value of a person's employment. How on earth does one measure the productivity of a hospital worker or a nurse? We have seen only recently the battle over the firemen in Glasgow. who represent a very special case in point, because, unless people are lighting more fires to be put out it is quite impossible for the firemen to be recompensed on grounds of increased productivity. Their work is not only highly dangerous but of tremendous social value. Then there is the housewife. To-day, she has to be an economic planner of the highest order. She has to be able miraculously to "shop around", though she may have neither time nor transport; and she has to be a nutritional expert in order to feed her family healthily, at a time when she can I afford so little meat or other expensive proteins.

We still have, too, in what is largely an affluent society, great numbers of people living in what the Child Poverty Action Group call the "poverty trap". We still have to-day the situation in which one in five are living at or below the poverty level, and within that figure there are people (including semi-skilled workers) who, after deductions, take home subsistence-level earnings. If this were not so, there would he no need for the wage "stop" which I personally should like to see abolished immediately. We are also asking people to join together to improve what is going on in society in the context of an Act concerning industrial relations which has been condemned on all sides and which is mentioned in to-day's Business section in The Times—under, incidentally, the very misleading headline, "How real is union opposition to the Industrial Relations Act?" when in fact what the article is dealing with is how real is the question of registration.

Here a distinguished past labour correspondent of The Times, Eric Wigham, says: Since the Act is hardly achieving its objectives at all, except in regard to unfair dismissals, it may be asked how all this matters. He is there referring to registration. It seems impossible to be able to get a lack of industrial strife unless one has a consensus. I am also worried, as someone who believes passionately in the rule of law, that we should pass laws and keep them on the Statute Book without any whisper of amendment, though we know that on all sides (and certainly among employers as well as employees) there are numbers of people who know that this Act will not work and that it is a bad Act. I do not myself subscribe to the breaking of the law, but it seems to me very dangerous, in our sort of democracy, to stand by Acts of Parliament which, once they are enacted, stay on the Statute Book until they are repealed or amended, when it is stretching our social and legal fabric so tightly for people to keep the law. I do not think the confrontation between the Prime Minister and, recently, the miners is something that is right in the context of what needs to be done to-day. It is worth remembering that in 1972, during the confrontation then, the miners were proved to be right and the country supported them.

There is something else, which one might argue—looking at this as part of the whole spectrum—is in itself just one small thing, and that is the recent high salary rise for the Chairman of the F.M.C. He has said that most of the money will go to the Inland Revenue, but I would ask: where does he consider that most of other people's income goes? In the lower income groups a higher proportion goes to the Inland Revenue. Even though one dismisses that as an isolated case—and it is not entirely so—and even if one says, "This is going to he made good in Phase 3 and cannot happen again", it certainly does not create the atmosphere in which one can go down to talk to people in the workshops and factories and not expect them to draw a natural and human conclusion—a conclusion that sacrifices in this country are unequal, that our distribution of wealth is unequal, and that there is great disparity of incomes.

I must agree that the frontiers of selfishness do not stop with the rich, but I would suggest that those people who hammer at the trade unions for demanding higher wages for their workers might give a thought to the fact that it is generations of Conservative Governments and generations of capitalism which have been stressing all the time the need for people to grab things and take them for themselves and their dependants which have promoted this area of selfishness. Yet they are the first to criticise the workers when they try to do the same thing for themselves. Further, a good deal of the "clobbering" that goes on, the responsibility for which is laid firmly on the workers, should be put at the door of management; because we have to accept that a great deal of management in this country is extremely bad. Some of it is getting better now, but much is extremely bad, and when the question of workers is discussed management must also be discussed. The Selsdon man, as my noble friend Lord Beswick said, has almost been whittled away, and it is ironic to see the Government having to take the accessories to the basic costumes of the Labour Party (and not matching them up very well) in order to try to get back to a policy which needs much more planning than the free-for-all of free enterprise.

So what are we left with of the Government's first great principles on coming into Office? There are the museum charges—and anything more uneconomic, antisocial and irrelevant to our society it would be hard to imagine. The noble Lord who preceded me raised the fact that wages were not mentioned in the Amendment which was moved by my noble friend and which I am supporting. I am quite sure that the noble Lord the Leader of the Opposition is quite able to reply to that himself, but I should like to point out that any incomes policy (and wages are part of an incomes policy) should be seen not as an isolated policy but one that must be based on a much broader social contract and forming part of a whole policy, including taxation—that is, a form of taxation improving the distribution of wealth to all those who need it and not the form of taxation which we have seen imposed by this Government. The policy should also take in the whole question of industrial relations.

Finally, I do not think it is possible to leave this subject without mentioning social policies, because this is really what our debate, in its widest terms, is concerned with. The selectivity which has been brought in by this Government cannot work: it perhaps could work in a less lopsided society, but not in a society where there are such grave inequalities that what has been happening is that what was once a Welfare State has been turned into a means-test State. The words "means-test" need not have the rather horrifying aura that they have if the means-test were used in a society which had a greater equality and a far better distribution of wealth. While we do not have these things it seems to me that we cannot go on in this way, in which we have a family incomes supplement and all these other things, when all the evidence shows more and more that the take-up is very small. It is not going to the people who really need it. Family allowances, which are evidently going to disappear under tax credits, is the one payment that goes direct to the housewife and the mother of the family and which she has within her own grasp to spend for her family. I should like to ask the Government why it should not be possible to increase family allowances to an amount equivalent to the tax credits so that almost immediately £2 would be paid for each child, including the first child. Then when the tax credit scheme comes in—and I hope it will be a much more radical scheme than appears likely—the allowance can be integrated with it.

Finally, my Lords, the gracious Speech refers to a prosperous, fair and orderly society. A society cannot be prosperous in its widest terms, it cannot be fair and it cannot even be orderly unless it is a society where everybody feels that he counts, where he believes that he is somebody in the society and that it has not been structured for other people, for the "haves", when lie feels himself to be one of the "have-nots".

6.31 p.m.

LORD HANKEY

My Lords, I have listened with great interest to the debate, and it is striking what a wide variety of subjects seems to be essential for the prosperity of this country. It is noticeable how they are all closely interrelated. It must be exceedingly difficult to sort them all out.

I was delighted and greatly honoured in September to be invited by the Swedish Government to visit Sweden with a party of other Parliamentarians to watch the run-up to their general election. As a former Ambassador in Stockholm, I of course already knew Sweden well, but I had always felt it necessary to keep my feet out of Party politics and I was most careful about this. It was fascinating to see from the inside the run-up to their general election. Our hosts were extremely kind and hospitable to us. It was an interesting and fascinating visit in every way. We were most kindly received by members of the Swedish Riksdag, who showed us their new, ultra-modern building. We envied their offices, which were a striking contrast to what we have in this building. There is only one chamber now in the Swedish Parliament and, incidentally, it has electrical voting.

It would not be relevant in this economic debate to mention all the interesting things that we saw, but I was forcefully struck by the monumental good sense and discipline of Swedish labour relations. When in due course we visited the various Party headquarters, I was particularly interested to find out how the various Party proposals for devolution or decentralisation were likely to affect the most efficient but somewhat centralised system of wage negotiation and agreements in Sweden. The primary guidance to the industrial negotiators on both sides is negotiated centrally, and when agreements in the individual industries are finally concluded they are registered with the appropriate Ministry and become legally enforceable. I do not want to exaggerate, but the Swedish system seems to me rather like a swan proceeding over the surface of a lake—you see this beautiful creature moving smoothly and staidly along, but if you look under the water there is a mighty lot of paddling and hard work going on. In actual fact these negotiations are conducted with tremendous determination and hard work over a considerable part of the year. They are remarkably successful in avoiding unnecessary disputes and strikes.

I inquired whether this system would endure if there was any serious measure of devolution as the result of the election. It was interesting that all the Parties except the Communists were categorical that the system would not in any circumstances be disturbed, especially as it rests fundamentally on a basic agreement between the trade unions and the employers dating from 1938. "Why!", they said, "this is the system which has so greatly raised Swedish productivity and made the country rich". One or two humorously said that without this system they would never avoid catching the "English disease", which is the name by which our wild-cat and other strikes are universally known on the Continent. When I asked the Communists the same question they were categoric that the system had to go; they said it represented a loss of freedom in the provinces to the advantage of capitalists in Stockholm. By way of probing this I said that the Swedish Social Democrat Government, which they supported in Parliament, and also the Swedish T.U.C., known as L.O., did not see matters quite that way and were certainly hardly to be dubbed as capitalists. But the Communists were categoric that there must be completely free collective bargaining—a phrase with which we are familiar in this country.

I reflected about this for a day or two until I realised the real answer: the Communists, according to their own fundamental literature, aim to exploit the disputes inside nations and, for that matter, between nations in order to promote their own political advantage. The Swedish system of legally enforceable agreements, applied and interpreted where necessary by the Labour courts, practically excludes damaging strikes and dis- putes, except when an agreement reaches its natural termination and has to be renewed. Even then there is compulsory mediation before a strike takes place. Even with current rates of inflation—and it is a humbling thought that as one travels across Europe one realises that everybody has inflation at about our rate—the Swedes have, by our standards, hardly any strikes.

Coming back to the United Kingdom, it seems easy to see that the militants in our own trade unions—I am not accusing any large proportion of them of being Communists, although some are—may well have a similar motive. They do not like any attempt by any Government, Socialist or Conservative, to restrict free collective bargaining, whether by prices and incomes policies, phases one, two and three, anti-inflation policies, or anything else. The law of the jungle suits them. The powerful unions get economically dangerous advantages. The poor, unfortunate, devoted teachers, hospital nurses and others get left miles behind. But the militants do not care, and they also organise strikes in those fields and broaden the sphere of trouble. I am quite sure that this is why so many of our militants are so much against the Industrial Relations Act. I do not share the view of the noble Baroness, Lady Birk, about this matter, though I thought her speech extremely interesting, if I may say so.

The Industrial Relations Act would enable a great number of disputes to be settled on their merits instead of by sheer brute force. Look at the recent Ford dispute, my Lords, about the man who was alleged to have threatened a foreman with an iron bar. The Industrial Relations Act, under Sections 22, 106, and other related sections, provides complete protection for an employee who considers that he has been unfairly dismissed. But the militant leaders prefer to create a most damaging strike, with a loss of over £7 million of production. What is the clever motive of these people who prefer wrecking the industry in which they work although it is manifestly not holding its own in international competition?

BARONESS BIRK

My Lords, I wonder whether I might interrupt the noble Lord. In order to cut down my speech a little I may not have made it clear that I was not against the role of law in industrial relations—far from it! But would not the noble Lord agree that the examples he gave just now could certainly have shown that there are other means of enforcing or settling such problems, rather than in the context of an Act much of which has caused a great deal of trouble?

LORD HANKEY

My Lords, of course I would agree with the noble Baroness. The distinction between the Industrial Relations Act and the Swedish system is that the Swedish system was based on a basic agreement between the employers and the trade unions way back in 1938. I personally do not mind how the essential state of order is produced in industry. If anybody can produce it without that Act. I personally should be quite happy and contented, but so far nobody has found any means of doing that. This is a matter about which I was so struck when I returned from Sweden.

I think that our own workers are very fed up with all the lay-offs that occur owing to strikes in industries which make components; or, for that matter, in power production, or in industries concerned with materials that are necessary for industry. The situation is extremely annoying for them. Workers are laid off and waste their time. A great many unfair things are said about the British working man. In actual fact, he likes working; he works longer hours than do most Continental workers, and he likes to earn overtime. But when these layoffs occur what can the poor chap do? I believe he is always paid by his company, but it is a very bad show. It reduces the efficiency of our industry enormously, and this is something we really have to cure. We are never going to take advantage of the great opportunities offered to us in the Common Market unless we can bring a better state of order into our industry. The very poor turn-out in the A.U.E.W. strike yesterday confirms what I have been saying about the fact that our workers are themselves fed up with the present situation.

I asked in Sweden how L.O. (the Swedish "T.U.C.") manages to maintain discipline among its militants—because there are many militants in Sweden; and also how S.A.F., the employers' confederation, manages to keep employers in order. In the last resort, a union or a section of a union, or for that matter a recalcitrant employer, would be expelled and would lose the great protection and advantages of the system. I could not help reflecting sourly that the C.B.I. really has no hold over its members and that the T.U.C. nowadays seems to prefer expelling the unions which find it necessary or desirable to comply with the law by registering—like the poor Seamen's Union or the unfortunate Equity, and others. I am sure that this makes it harder for the monumental common sense of the British worker to find its usual expression through the T.U.C.

I mention this subject because I see no specific mention in the Queen's Speech of industrial relations, beyond the general objective of "a prosperous, fair and orderly society,"to which so many of your Lordships have drawn attention. We seem to me to be heading for a winter of real discomfort and dangerous industrial discontent and inefficiency. It would, quite frankly, be intolerable if a dispute in the mines again led to the miners' pickets preventing the power stations from using their own coal supplies. Surely there should be a Bill to prevent gangs of thugs, for example from Manchester or Liverpool, going round in coaches, like those who wrecked the building site in Shropshire. I believe that that case is before the courts. Personally, I believe that the right to picket should be restricted by the Industrial Relations Act to those who work in the factory concerned, although I know that the police would not like such a solution. I made a number of suggestions about these issues in my speech of April 18, and I do not want to repeat them to-day.

Of course, we cannot have good industrial relations so long as we have inflation. I am extremely glad that the Government are in touch with the T.U.C. and the C.B.I. about ways of meeting the situation in Phase 3, and I wish them every luck in this. I look forward also with great interest to seeing their proposals on employees' participation in industry. I am quite sure, and have often said in your Lordships' House, that much better communications in industry are an essential key to better industrial relations. But the difficulty of an employer in this country is that he cannot have cosy, confidential and confident relations with a half a dozen—or, as I think it is in shipbuilding, 46–trade unions; it is virtually impossible. Here again the Swedes have scored because they have reduced their industrial unions to only 27. I cannot see what more we can do about this in our own country, but we should all bear this objective in mind as an essential if really good industrial relations are to be obtained in the end.

So, my Lords, in conclusion, I want to urge the Government to recognise their duty to protect the community and our economy against the rather damaging situation which we now have, and against political and other strikes which could perfectly well be settled by peaceful means on their merits instead of by sheer naked brute force. A number of other countries, including Sweden, have shown that this situation is nowadays a total anachronism.

6.48 p.m.

LORD POPPLEWELL

My Lords, I am sure we are indebted to the noble Lord, Lord Hankey, for his report about industrial relations in Sweden. It is interesting that he has been over there quite recently and now returns with a first-class report. He will of course know that the T.U.C. and the unions and the Labour Party have for quite a considerable period of time been studying the Swedish line of approach. The question is one of lessons to be learnt from both sides, bearing in mind particularly the historical background of both countries, and of finding out how the two systems can be interwoven. I am sure we are interested in the noble Lord's observations, but there are practical difficulties. As I say, the people, the trade unions and the employers engaged in industry, know that there are lessons to be learnt from abroad, but there are also these difficulties which we have at home because our industrial expansion has just "growed and growed", like Topsy. This presents a tremendous difficulty.

I would draw your Lordships' attention back again to the speech of the noble Baroness, Lady Birk, and to her phrase when she reminded us that this debate is about people, and not theories. At least, that is her line of approach as it is my line of approach. We have had quite a number of theoretical discussions in connection with these problems. We all accept that an inflationary situation is upon us, not only here but abroad and throughout the world; and in spite of Government measures which have already been taken—and I welcome the reference to this in the gracious Speech—we find that there has been little or no effect at all in stopping the inflationary tendency. Therefore, surely the question we have to ask ourselves is this: Is it inevitable that this inflationary situation will continue to grow in the way that it has been doing recently? If so, what is the ultimate outlook? What is the ultimate position? Are we going to be simply printing money in the way we have been doing previously? Are we simply going to continue to allow the lid to be taken off prices and for them to continue to escalate?

A little time ago we heard the story that the price rises were due to trade union influence and the workers' demands for more wages; but now it is interesting that that argument has shifted somewhat and that the increase in prices is now said to be due to world prices. It is interesting to ardent trade unionists like some of us on these Benches to hear this switch in argument. But while we hear so much talk about the increase in world prices the Government do not at the same time remind the nation that since they devalued, since they came into Office in June 1970, the value at home of the pound has gone down from 100p in June 1970 to 77p to-day. In other words, for every commodity we try to purchase from abroad there is an extra 23p to be paid. This fact should be looked at alongside the talk about increased prices in order to make the situation realistic.

I am sure we all read with great interest the speech made by Lord Rothschild, the head of the "think tank" appointed by this Government. He publicly warned the nation that the present Tory policy will make this country the poorest in Europe by the mid-1980s. He is someone who was deliberately appointed to analyse policy, to see exactly the trends, to see where they are leading, and that is the report which he gives to the nation. Where do we find in the gracious Speech the attention that surely should be paid to that advice that has been given by this responsible head of the "think tank"?

On the other hand, what is this Tory policy that is leading us towards being the poorest nation in Europe by the 1980s? Is it land prices? They have just rocketed sky-high. What control is attempted to resist this upward increase in land values? While people may now pay these enhanced values it is only natural that they will try to stick to this type of price; otherwise, if they had to sell they would lose heavily. I do not want to repeat the facts about individual cases; they are all quite well-known. Some of the values are astronomical. The noble Viscount, Lord Massereene and Ferrard, expressed the view that what was happening in regard to land prices was highly immoral. As to the effect of these land prices upon our economy as a whole, one would think that the Government would attempt to analyse the situation and see what adjustments can be made, because the effect of these prices reverberates throughout the whole of the economy of the nation. House building costs are increased to a high degree. We all know that during the last three years our house building costs have simply rocketed.

The building societies are in great difficulty to-day because of the high interest charges that have been imposed by the Government in an attempt to stem inflation, but they are having no effect at all except to increase that inflationary tendency. People who desire homes are in great difficulty because of the high prices they are having to pay. We all know of houses which only a few years ago cost below £1,000 and which, depending upon the part of the country, will cost £8,000, £10,000, £20,000 or £25,000 to-day. These are figures to which an elderly person such as myself cannot really adjust, and I think the same can be said of many other people.

Then there is the question of rents. We have the Government talking about inflation; then they insist that rents must be increased by £1 per week under the Housing Act. Is that not an inflationary tendency? So long as these prices continue what will happen to the individual worker? He will demand a certain recompense in order that he may adjust himself to these prices. Yet when these developments are taking place we have the Government measures: Phase 1, Phase 2 and Phase 3, and the Industrial Relations Act—that political Act; and, with all due deference to the noble and learned Lord on the Woolsack, it is a political Act. We argued this out during the passing of the Bill in this House, and he and I do not agree on this subject. Nevertheless, the organised workers still look upon it as a political Act, and there is the latest fine that has been inflicted upon the A.U.E.W. I do not know what will be done in that connection, but the fact remains that in that £75,000 fine monies are being taken from the political section instead of from the industrial section, and this is a marked contrast in behaviour. Then we might take the question of the increased rateable values of houses. Rateable values are increasing by 200 or 300 per cent. Surely this is inflationary in itself. If we take mortgages, or prescription charges, we find that all these have been steeply increased, yet profits have been allowed to soar.

The nation seeks some answers to all these questions. Organised workers today are not quite so complacent as they were in days gone by. They see that an easement can take place in income tax and surtax that particularly benefits the higher paid people. Following on that we see the advent of V.A.T., much of it on commodities that were never subjected at all to purchase tax. Yet V.A.T. is interpreted as being a reflection of the easement that has been given to the wealthier section by means of the reduction in the standard rate of income tax and surtax. These are not things that can be brushed lightly to one side. Undoubtedly two nations are being created by this particular Conservative line of approach over recent years. There are the workers and the employers, and this is where the conflict is taking place. The conflict between the worker and the employer is leading to industrial dispute because of the advent of the Industrial Relations Act. The noble Lord, Lord Hankey said that the Industrial Relations Act is having an effect. It certainly is. In 1972, 23,500,000 hours were lost through industrial dispute—a greater number of days than were lost during the General Strike of 1926. There is increased bitterness between work people and employers, whereas if there were free bargaining the situation would over a period of time adjust itself.

My Lords, in another respect there are two nations in this country—the tenant and the landlord. The Housing Act is forcing councils and other people to put up rents, which leads to a conflict between the tenant and the landlord. There is the example of Clay Cross, but one does not support this. We are as a whole a law-abiding nation and realise that once an Act is put on the Statute Book it must be obeyed. But from time to time, and it is understandable, a group of individuals feel so bitter about something that they kick over the traces. There has been an upsurge of this kind in many council areas. These are the people who defy the law. Because there is an unjust Act on the Statute Book, and because the law says that this must be obeyed, we have two nations in this country.

A little while ago the Prime Minister referred to the evils of capitalism. We can see the example of the evils of capitalism as they are developing at present. What is going to be the outcome of all this, if there is no completely new thinking? I do not want to speak too long, but may I refer to something in which, as noble Lords will know, I have always been interested—transport and oil? As we all know, this country is in difficulty with regard to the oil supplies coming from the Middle East. If the Arabs are saying to Britain, "We will not ration you although we will ration the rest of the Western World, and we will put up the price", our honour is being sullied because we have allowed the question of oil to influence too much our decisions with regard to the Middle East.

What is the position? Successive Governments, including my own Labour Government, instead of planning the energy resources of the nation according to our ability to pay, have completely neglected them. In June, 1962, it was said that the modernisation proposals for the railways were estimated to cost £1,200 million. The basis of those particular plans was electrification of main lines and dieselisation of branch lines; but these plans were scrapped. A system for using coal to produce electricity, and the electricity to give us cheaper running power was turned down. It was said at the time that we were pinning our economy to oil, and the question was raised as to what would happen if there were to be a war or another crisis? But did we take any notice of these lessons? What has happened since? We have seen our economy pinned to imported oil from the Middle East, and liable at any time to be subject to the sort of situation we are experiencing throughout the world.

We have seen industry encouraged to send its goods by road. We have seen railway sidings taken away from industry and, instead of commodities travelling on a cheaper electrified route (and I am using these words after the first capital expenditure on the overhead electric service), we have cast the whole lot on to the roads. We have seen our railways having to import diesel oil in order to generate the electricity for each diesel locomotive, instead of being allowed to produce electricity from the coal which is our own indigenous fuel. Alternatively we have nuclear power, and the know-how to produce it. We can get the isotopes from Canada which help to produce boundless energy, but no Government has taken these things into consideration. There is a big oil lobby; there are big profits to be got from oil. Had we adopted our own energy resources this nation would have been in a vastly different position and would have been able to face up to the inflationary tendencies which are so upsetting us today. We shall have to face up to them. We must remember Lord Rothschild's observation, that we shall be the poorest nation in Europe in the mid-'eighties unless we plan our housekeeping and cut our cloth according to the material available. In these circumstances I think that my noble friend's Amendment exactly typifies the line of thought that the nation ought to follow, and I shall have no hesitation in going into the Lobby to-night in support of the Amendment.

7.9 p.m.

LORD TEVIOT

My Lords, the noble Lord, Lord Popplewell, is always a pleasure to follow because he always manages to be a good springboard from which to dive off, but I hope he will not mind if I do not follow him in what I hope will be a brief intervention in this debate on the gracious Speech. I want to dwell on only one aspect of industrial affairs; namely, the increasing staff shortage of shift workers in service industries. From listening to some speeches and reading the reports in the Press, one might think these shortages were something quite new and a tie-up with the Government's economic policy. The panacea that is offered is simply more pay. Two or three years ago the same people were blaming and cursing the Government for causing the high unemployment and doing little about it. Now we hear very much happier news on that front, and the Government can feel justly proud of their untiring efforts in solving that great problem.

For all that, the fact is that this situation of staff shortage is not at all new. It is something that has been getting worse for years. Admittedly, the present position is acute, and that for a variety of reasons. I do not think that it is worth while being too specific and detailed, but it will be for the Government either to set up a Royal Commission or to hold a full inquiry as to why there are so many chronic staff shortages. Until this is done the full reasons will never be known, nor will the correct solution be found.

Increased pay alone is only a very temporary cure, but I should like to make it quite clear that I am not against the idea of increases. What must be ascertained is the whole story of each of the industries, nursing services, postal services, electricity and gas services, transport and catering services, to name some. We must find out which are the ones which are most affected. A study should be made into the work schedules, the amount of overtime worked and the allocation of same, as well as many other aspects, including management and staff relations. Transport services have been traditionally the worst hit, and I am sure that most of the companies have tried very hard indeed to alleviate the situation. For example, the company which I worked for in Brighton and Hove for six years introduced a five-day working week for established crews working regular turns, thus giving them weekends off. Weekends are now being worked by overtime and new staff. When I heard this I thought it was a bold step forward and one that was likely to attract more people. The very reverse has happened; the company have suffered worse staff shortages this summer than ever before. A great number of scheduled services in the timetable were not able to be manned, and I gather that the open-top buses ran only once in the summer, which was a very beautiful hot summer, along the sea front.

What, therefore, are the reasons? Is it that shift work disrupts family life? Is it that because of increased higher education people are going to more highly skilled and technical jobs? Is it because there is a decline in the number of immigrants coming into the country? Is it because those who joined before the war in the 'twenties and 'thirties, when work was scarce and the prestige of the job was high, are now retiring in greater numbers? These are all possibles, and your Lordships could possibly suggest many more. Please let us find out.

Up to fairly recently there was not a shortage of postmen. It was almost unheard of for duties to be uncovered. This story is changing rapidly. For instance, where I live now in a semi-rural community eight miles from Brighton one would have thought there would be few staff problems—a place with no industry and few jobs except in shops and one or two offices. After all, one would think postal work is quite congenial, being out in the open air and not locked away in some factory; with less evening and night turns; with less weekend work; and with a uniform and also a good pension scheme provided. Apart from some very early starts, admittedly with some early finishes, there appear on the surface to be few drawbacks. Recently, due to shortages, holidays and sickness, some first deliveries were not made until lunch time.

I have named just two industries, quite unakin to each other, to give a contrast. I shall not go over the arguments that we had on the rather ragged Question on London Transport, but I should like to make one point. I went on to the Eastbound platform at Victoria Station at 8.35 o'clock this morning. An announcement was made that trains were being cancelled, and the platform was overloaded almost to the point of being unsafe. We know London Transport have been trying very hard with advertising campaigns, but until something is done overall we shall never find an answer.

I was most interested to listen to the speech of my noble friend Lord Orr-Ewing, wherein he talked about working a second shift in industry. This should do something to span out the peak periods of service industries and alter social life. When I was a shift worker there were definitely some advantages as well as disadvantages, the main one being that one always had part of the cutlet of the day off, and for some reason it seemed less tiring than just working a 9 to 5 o'clock day. Night working on the whole is pernicious, and the evenings are unsocial. Perhaps leisure facilities could be extended. If a regular monthly pattern were worked out it would be desirable. Often if one has a regular weekday off one can pursue other interests which are not possible to follow at weekends. There is another very important advantage, which has been mentioned by the noble Lord, Lord Popplewell, and the noble Baroness, Lady Birk, who said that this debate is about people. It is that a father can see more of his small children instead of there being only a tired figure appearing at weekends. I urge the Government to look at this problem most carefully and regard it as a high priority. We definitely need a strong policy in this field, if we continue on the present wave of prosperity; otherwise, we can look forward to a state of total chaos in the service industries in ten, if not five, years' time.

7.17 p.m.

BARONESS GAITSKELL

My Lords, I think the noble Lord, Lord Teviot, has drawn our attention to a very important aspect of industry in our country to-day. I shall be brief in supporting our Amendment. It was the Queen's beautiful voice which held my attention during the gracious Speech, not the bland phrase about a "prosperous, fair and orderly society". For me the most glaring omission from the gracious Speech was any reference to industrial relations to-day. A series of amendments to the Industrial Relations Act would ease some of the difficulties of dealing with inflation. In fact, I think I would go further and say that all efforts to put a brake on inflation will be undermined so long as this Act remains on the Statute Book. This Act must be the most unpopular Act of the century. No one likes it: not the T.U.C., or the C.B.I.; not the chambers of commerce or the managers; nor the employers or the employees.

This Act, plus the Housing Finance Act, as my noble friend Lord Popplewell said, has done more to divide the nation than any other measure. Together with the continuing rise in prices, they drain all confidence in the Government. The Government's brand of incomes policy will pay no dividends so long as the Government continue to maintain interference with collective bargaining, which is the cornerstone of the trade union movement. The ordinary housewife is alarmed enough about the continuing rise in prices and does not find explanations about world food prices, wrapped in percentage statistics, at all convincing. She continues to wonder why good English Cheddar cheese is now almost double the price it was under a Labour Government.

We are going through difficult times, and the oil threat from the Arab countries will make them harder. We had a Question to-day on London Transport. If Ministers travelled by Tube they would understand what we were talking about. Sir Reginald Goodwin, the Labour Leader of the G.L.C., spent 70 minutes with Mr. Maurice Macmillan, after which he predicted an outbreak of strikes by workers. Workers in transport, education and the social services, are drifting out of these services. Is it not time for the "new capitalism" to make a move and do something more than depress the nationalised industries as it has done over the years? Or are the Conservative Party waiting to take over London Transport into private enterprise?

At this time the Government should be concentrating and strengthening all the conciliation machinery at their disposal in industrial relations, instead of repeating that there can be no special cases for the firemen or for the electricity engineers, who refrained from striking during the coal strike and were promised a rise under Phase 2, now cut down in Phase 3. It is true that Mr. Hugh Scanlon, General Secretary of the Engineering Union, continues his withdrawal into a silent order, and will not accept the law. He and Sir John Donaldson, of the National Industrial Relations Court, are both obstinate men, but Mr. Hugh Scanlon could be fighting so much better if he accepted the law instead of bankrupting the union. I will wager that if he applied himself about amending the Industrial Relations Act we should soon see some changes. I find his behaviour very perplexing, but since we have acquired a resident psychiatrist in the Commons, Mr. Leo Abse, perhaps he can analyse Mr. Scanlon.

All efforts to contain inflation will be nullified so long as the Industrial Relations Act remains on the Statute Book in its present form, and it is the Government who present a hard face, not the employers and managers, who hate the Act. Rather late in the day the Government have glimpsed the "unacceptable face of capitalism", and are going to look into company law, among other things. It is Conservative philosophy that has prevented them from realising that in a technological, scientific age growth and progress have an ugly side, and the environment, social and physical, reveals it to-day. Particularly at this time in South American countries we have examples of what happens if there is a very high growth rate without redistribution between the people in the country. The gap between rich and poor widens, and we have a very distressing state of affairs. We ourselves have increasing problems of job satisfaction, with mounting monotony of work.

I was touched by Lord Windlesham's defence of the "new capitalism". Perhaps Professor Kaldor will embrace him as he welcomed what he called the "Prime Minister's socialism" in the early days of the Government. The noble Lord, Lord Windlesham, has answered a rallying cry which began with Mr. Peter Walker, and was followed in a speech by Mr. Eldon Griffiths in which he said: It is the duty of the Conservative Party to rally to the defence of capitalism. Capitalism must be made more civilised and responsive to national needs. The Conservative Party can respond to national needs, or begin to respond to them, by amending the Industrial Relations Act. If the "new capitalism" is now the fashion among Conservatives, will they throw off some of the "old capitalism"—if not a striptease, perhaps a trendy décolletage. My Lords, I support the Amendment.

7.25 p.m.

LORD SHACKLETON

My Lords, I always think that between 7 and 8 o'clock is the moment of the day in your Lordships' House when vitality is at its lowest ebb. Noble Lords will not have eaten or may just have had time to get a little refreshment, and it is not an easy time at which to wind up a debate. On the other hand, I have a duty as "curtain raiser" for that most entertaining of speakers, the noble and learned Lord, who I do not doubt will radiate enough energy for us all in the course of his speech, despite the extremely moderate, statesmanlike and self-controlled speech he made on this same occasion last year.

My noble friend Lord Beswick, in moving the Amendment standing in my name, has shown once again the high quality of his contribution to your Lordships' House. At least we can, I hope, take comfort—despite his resignation from the post of Opposition Chief Whip, to which I have already referred with regret—from the fact that the House will continue to receive the benefit of his statesmanlike speeches, which are forceful but at the same time have a rather disarming quality which I think we all find most attractive. I hope that he will continue to take part in these discussions.

May I also take this opportunity to express my sympathy, and that of all noble Lords throughout the House, both to Lady Byers and to the Liberal Party over Lord Byers's illness. It seems to me rather untraditional not to have him speaking in this debate, shooting with his usual accuracy at both Government and Opposition. We hope that it will not be long—indeed, we all pray it will not be long—before he is back with us. Although I am sure that many noble Lords will be in touch with Lady Byers, I hope that the noble Lord the Leader of the House will officially send our good wishes for his recovery and return.

There is a certain repetitive quality about this debate on the Queen's Speech. Indeed, to use a phrase from an earlier and perhaps more contentious exchange with the Lord Chancellor, there is almost a ritual quality about it. Let me set at rest the minds of any noble Lords opposite who may not think that we are in earnest in our criticisms of the Government and in our atitude to their policy. We have noted that there are some good things in the Queen's Speech, such as Bills to deal with the environment and traffic, and others, and we shall do our best to improve the legislation in a constructive way, the way in which I believe your Lordships' House best operates. No doubt there will be issues on which we shall vote against the Government and, judging by the series of defeats that the Government sustained in the last Session, we shall hope, on more than one occasion, to defeat the Government. In doing this we cannot rely on our numbers on this side, but we take some comfort in the independent-mindedness of both Cross-Benchers and a number of Peers on the Government side. We even know that such defeat causes joy in the heart of the Captain of the Yeoman of the Guard, who then feels that the House of Lords is doing its duty. The Amendment that we have before us tonight is couched in such reasonable terms that I find it difficult to see how it is that noble Lords opposite cannot vote for it. If it would comfort the noble Lord, Lord Orr-Ewing, for us to remove the word "exacerbate"—although this, in my opinion, would make it an entirely inaccurate description of the Government's action on industrial unrest—we would agree to do this.

My Lords, I think I should first say that this debate takes place against a background of deep anxiety—and several noble Lords have referred to this. We cannot fail to be deeply anxious about the Middle East, not merely about the consequences of oil for us but about the effect on the lives and happiness of so many people in that part of the world. But, my Lords, we have to attend also to our own affairs, and tonight we have moved an Amendment which we intend, unless the Government accept it, to press to a Division. I am not one of those who wish the House to spend its time voting when there is nothing particularly to be achieved, but there are occasions, such as to-day, when we must make clear that despite the many common interests we have, lubricated, if I may say so, by the good manners and friendliness of your Lordships' House, there are still fundamental differences of philosophy and purpose. Moreover, we can look at the situation that confronts us both in the long term and in the short term. To-day we are mainly concerned with present-day policies, but inevitably there is a difference—despite the developments of the new capitalism which is advancing more in our direction—in the respective philosophies about the society in which we live. I detected from some of the very interesting speeches from noble Lords opposite a deep anxiety about the condition of our people in particular areas—the concern of the noble Lord, Lord Hylton over housing and the interesting and relevant comments of the noble Lord, Lord Teviot, on transport.

During our debate last year we had a number of optimistic expressions by the Government, notably the statement by the noble Earl, Lord Jellicoe, that the prospects were for a renewed surplus on current account. I can only say that to-day at least we have had none of those wild optimistic statements. We had a truer statement from the Lord Chancellor when he spoke of the corrupting consequences of failure to maintain the value of society in the presence of inflation. He further said that the position of the Opposition was rather like that of the Irishman who, when asked the way to Monaghan, said he would not start from here. My Lords, I think this is really the position of the Opposition, because the Government have in fact got themselves so bogged down and have erected so many obstacles on the way to progress out of their difficulties and into their Promised Land as set out in the Queen's Speech that they cannot succeed in their policies unless they retrace their steps and start again from another position. This should not worry them very much; their U-turns are now a normal and happy state of affairs—and indeed there is no need for us to tease them any further by referring to the contrast between what they said before the Election and what they are now struggling to carry through.

Struggling they are—I give them full credit. It is a hard working Government. They have competent Ministers—needless to say that applies to all the Ministers in the Lords—but as a Government they are most incompetent and, if I may say so, fairly despairing. They speak only of "containing inflation"—we adopted the words for our Amendment—they do not speak about reducing it. That is why we express anxiety about their intention to persevere with their policies, for without a reversal of their earlier action and the adoption of a different type of policy they cannot succeed. I should like to examine as objectively as I can—because we do not in this House, for the most part anyway, indulge in Party political insult, and we do examine, I hope as fairly as we can (and none of us can be completely fair because we all start from positions and views and prejudices)—some of the obstacles which the Government have to remove or circumvent by going a different way.

I fully grant that they have had some successes in their policies. It is true that the rate of unemployment has been brought down much more than I think many of us believed was possible. Let me also hasten to add that in my view the figure is still an unacceptable one, and that the Government's belated conversion to more forthright regional policies has still failed to solve the problem of the endemic unemployment in certain areas. My Lords, we have this picture of imbalance in our employment, and I was very interested in what the noble Baroness, Lady Seear, said in, as usual, an interesting speech—and the noble Lord, Lord Teviot, also referred to it—about the imbalance in certain industries, and the desperate need for more training. The noble Lord, Lord Hankey, interestingly spoke about Sweden, which of course, under its Labour Government, has led the world in training in industry, and we in this country have to do a great deal more in this.

But, my Lords, the fact still remains that inflation is our fundamental problem—and how little progress has been made in regard to that! A figure of 10 per cent. has been quoted as a possible rate of inflation for this year. I took heed of the remark by my noble friend Lord Rhodes, in his usual very forthright style (and nobody knows more about industry than he does), that we ought not to talk ourselves into believing inflation to be a normal state of affairs. Even if we agree—and I give this again to the Government—that inflation might have been worse had the Government not followed certain courses, the situation is, none the less, intolerable. I do not need to dwell—because other noble Lords who have spoken have spelt out the consequences—on the effect of rising prices on ordinary people, and particularly the rising price of food which is of course at a far higher rates than the general rate of inflation. Again it is worth reminding noble Lords that the poorer members of the community spend a much higher proportion—up to 40 per cent.—of their income on food. One thing is clear—and the Government have not attempted to argue this to-day: that this is not due simply to wage increases. It never was, my Lords. It was only a proportion of the problem; and this is more true than ever to-day.

I think that most of us on this side of the House accept that some form of incomes policy is necessary, but this can come only from a recognition by everyone that it is fair, and I shall shortly attempt to show why, despite what I believe to be the well-meant efforts of the Government, the effects are still very unfair. Until that obstacle, that feeling of unfairness in the community, is removed, the Government will be stuck on this and we shall have agitation, we shall have protests and we shall not get co-operation in industry. Here again one cannot fail to refer to the really (may I again use the word?) exacerbating consequences of the Industrial Relations Act. Of course there are useful aspects to the Act, but the total effect has been to sour relations and to put in the hands not just of the Government but of the courts of the land a pretty explosive object which can at any time explode in the face of the community and do us tremendous damage.

I should like to ask (though I do not necessarily expect that the Government will be able to answer this question because the talks at No. 10 were confidential) how far the Government offered to repeal, or to make major amendments to, the Industrial Relations Act. As has been pointed out by several noble Lords, nearly every employer, except just a few mavericks, seeks to avoid invoking the Industrial Relations Act, and the sooner it is scrapped the better. The Government could have done this, and they could have earned good will. Until they learn to deal with the trade unions, until they realise that they must get this cooperation—and it is not going to be easy—there will always be a breakdown of negotiations.

My Lords, when we come to inflation, we are now confronted with Stage 3 and the Order which we shall shortly be debating. As someone who has the job in industry of administering Stage 3, I can only say that not only is it highly complicated but that it is highly unjust in its effect. There are certain parts of industry where the discretions allowed within the Pay Code are enough to provide for all the pay increases that anyone wants to make. Other people are completely trapped by it; and, even worse—and I would ask the noble and learned Lord the Lord Chancellor to note this—it is compelling employers to break contracts which have been freely entered into with people in their employ. I wonder whether the Government realise that paragraph 159–this is the Stratton amendment, inserted hastily to deal with the case of Sir John Stratton—will affect a number of people (not a very large number, but a certain number of people), not necessarily highly paid, who are contractually entitled to part of their remuneration being related to the profits of their undertaking. Their employers will not be able to honour their contracts. This is parallel to the breach of agreement that the Government committed with the Civil Service, and I can only say that I am glad that the new Code allows the Civil Service and the Government to deal with this. I congratulate the noble Lord the Lord Privy Seal, who carries a heavy responsibility, that he should now be able to operate the policy agreed for so long with the Civil Service; but, of course, in certain respects the Civil Service will never get back the money that they have lost.

Let me also refer, again briefly, to another aspect of Stage 3, just to point out once more the difficulties that the Government are in, and that is the so-called efficiency payments. We have heard a great deal of talk about the importance of productivity in industry, but those in industry who have looked at this will be doubtful, as I am, as to whether the so-called efficiency payments will ever be paid, because the rules and conditions are so restrictive. Quite apart from the disproportionate amount of management time which has to be spent in establishing and monitoring the claims, I doubt whether industry and the trade unions will agree to it because they have to take it on chance for three months and then they are liable, even when they have entered into the scheme in good faith, to have it disallowed by the Pay Board. I do not want to say anything more about the counter-inflation Order now, because we shall have more opportunity to talk about it later, but no wonder Mr. Enoch Powell and his friends are somewhat disenchanted with the Government.

My Lords, we have also had some interesting comments on other aspects of industry and some noble Lords, including the noble Lord, Lord Orr-Ewing, referred to investment. Here again, I would say that we have seen the anticipation and the alleged intentions of industry as to further investment boasted about in the past and not fulfilled, and we cannot be certain that investment will be fulfilled at all.

My Lords, I do not want to dwell on perhaps the most acute of the obstacles that faces the Government, the one that causes perhaps the greatest sense of unfairness, and that is the situation with regard to housing. Here again, one of the obstacles the Government can remove is the Housing Finance Act. We have advised them of the consequences of that Act, and we know that this year some rents may go up three times. We know that fewer houses are being built than at anv time since Mr. Macmillan hit the 300.000 target. We know that prices in the London area for owner-occupied houses have rocketed, and that throughout the country they have gone up by 100 per cent. in the last three years. Furthermore, the price of land continues to rise. The noble Viscount, Lord Massereene and Ferrard, actually said that what was happening was dishonest, and then he amended it, very fairly, to say that it was immoral. I think we all feel that the profits which are being made out of land continue to be immoral, and noble Lords opposite will not be surprised if we press on with the policies of the Labour Party to bring into public ownership land for development and houses for rent.

One could dwell on this at great length, but the fact is that this is not a fair society and it is becoming less fair. Other noble Lords have referred to the decline in services; and my noble friend Lord Beswick mentioned that growth is not enough; that it has to be the right growth. We have also heard excellent speeches from my noble friends Lord Ardwick and Lady Birk, who have pointed out the extent to which there is a decline in certain standards of life. My Lords, the Government have made much of their selective efforts to benefit the less well off, but how can noble Lords tolerate the poverty trap (and I hope noble Lords understand it) under which certain people, even when they earn more, are worse off? The Government have boasted about their tax credit scheme. There are all sorts of attractions in the idea of a tax credit scheme; and the noble Baroness, Lady Seear, referred to this. But we have grave doubts about the proposals as we know them so far, and we do not know where the figure of perhaps £1,500 million is coming from to finance it.

Perhaps the most depressing of all at the moment is the calm way in which the Government have accepted the decline in the value of the pound externally as a result of the change in parities. A few years ago devaluation, especially when practised by a Labour Government, was a sin against the Holy Ghost. Now, when this Government float and devalue, it is a sign of grace. The Government's explanation for a great deal of the inflation to-day is the increase in world prices. This is perfectly true, but none the less, they fail to recognise (and I think all Parties are slightly to blame in this respect) that the consequences of devaluation are a great deal more serious and important than getting us out of a hole in regard to our balance of payments problems at the moment—and that position is not looking too happy. I should like to quote the noble Lord some figures, because I do not believe that this has been appreciated enough. In the last two and a half years the pound, relative to the Deutschmark, has declined by 25 per cent. It is the same in relation to the Australian dollar and the same in relation to the Malasian dollar. I pick these at random. The result is that when the Government claim that our exports have increased in volume by one figure and our imports by a lesser figure, we are in fact not gaining ground; we may well be losing it. And when we look at the effect on our own internal prices as a result of devaluation—and there was some exchange with the Lord Privy Seal on this—it is, in my view, a great deal more serious than is appreciated.

I should like to give some examples of mineral prices, of which I have some knowledge, which reveal at what a disadvantage we are, both from a production point of view and from a cost of living point of view, as compared with our com- petitors. The price of copper to this country has gone up by 76 per cent. since March, 1971. It has increased by only 36 per cent. in France, and by only 19 per cent. in Germany. The same is true of lead and zinc. Tin is up by 50 per cent. in the United Kingdom, and by only 1 per cent. in Germany. The proportion of the increase attributable to devaluation is 39 per cent. in the case of tin, 34 per cent. for lead, 19 per cent. for copper; and the price of imported iron ore which has gone up in this country (and there is no world price for iron ore) is in fact lower in Germany than it was before.

My Lords, this situation does not necessarily create difficulty for the companies involved, but one only has to see that changes in parity of this kind are more serious than one realises. The only element of the mythology of the free market, to which other noble Lords attach such significance, is the floating exchange rate for sterling, land speculation, and the Government's refusal to do anything about food prices. As they anticipate, reasonably, that food prices will drop if we do not devalue more in the next year or two, why do not they face the possibility of giving some temporary subsidies on certain foodstuffs? I know the arguments against subsidies; I know that it is a dangerous path to take. But, with inflation running as it is now, could they not have used the £300 million they gave away on investment income last April? My Lords, there were weapons they could have used.

Do they appreciate what the effect of their policies and wage controls is on productivity? The Government will never, if they do not depart from the position they are in, and if they do not stop just battering along their present path, reach their objective; and, most hopefully, they will only reach defeat in a General Election. My Lords, no-one underestimates the difficulties confronting this Government, or any Government, and I concede that the noble Lords opposite are sincere in the statements made in the Queen's Speech about a prosperous, fair and orderly society. In the long run, we may need, and I agree that we shall need, more radical policies in this country and throughout the world. These radical policies do not help us in the short run to solve our problems, but I only hope that, even at this late stage, the courage and determination that the Prime Minister has shown will be taken a bit further and that there will be a greater willingness to tackle the most scandalous aspects of present-day injustice and give meaning to the phrase in the White Paper that the Government do believe in "a prosperous, fair and orderly society".

7.55 p.m.

THE LORD CHANCELLOR

My Lords, the noble Lord who has just sat down referred earlier in his remarks to the repetitive character of these debates, of which we are now hearing the fourth in this Parliament. I think this has been the quietest debate on the Queen's Speech since the Queen's Speech of 1970. I think it has also attracted fewer speakers than on other analogous occasions. Although we have had some very interesting speeches, on which I must comment briefly, I think that this reflects a certain unreality about the polemics inherent in an Amendment directed against the Government, and a certain feeling that the real problems with which this nation is faced, and in particular the problem of any nation in the light of the present world situation, do not really lend themselves very easily to Party polemics. Indeed, there were moments at which I felt that the Leader of the Opposition was labouring under that sensation himself, without being able, candidly, to admit it. I do not agree with the noble Baroness, Lady Seear, that among the other interests we have been discussing we ought to have discussed oil. This is not because I do not attach importance to it, but precisely because I do. For that reason, I think it should be given separate treatment, possibly at a later stage.

The debate was opened by the noble Lord, Lord Beswick, in what I must sadly refer to as his swansong as Chief Whip of the Labour Party. I should like to say how sorry I am. My noble friend Lord Orr-Ewing said that he had known Lord Beswick for some twenty years. Lord Beswick knows that I have known him over twice as long. It shows something for the absence of effectiveness of our respective political advocacy that neither has succeeded in persuading the other during that entire period to change one iota from the positions we had established when we were about 21.

I also cannot deal in detail with the speech of the noble Baroness, Lady Seear, which interested me very much, and I think interested the whole House. I agreed with a great deal of it, but I hope that she will not carry out her terrible threat to drive trains on the Underground. I do not think it will be a form of redeployment of labour which commends itself either to the passengers or the House.

May I say also that two noble Lords gave me notes of the points they were going to make—the noble Lords, Lord Kahn and Lord Hylton. I will have to write to them about their more technical points because I really must, at this late hour, speak rather more strictly to the Amendment than to the Queen's Speech in general, although I hope, in the course of my remarks, to pick up some of the general threads. I propose to examine the terms of the Amendment in the light of the advertised programmes of the political Parties represented in this House.

The Amendment—working from the back towards the beginning—asks us to do significantly more to achieve the declared aim of a prosperous, fair and orderly society. My Lords, to my mind that would have been more convincing had not this been a Queen's Speech which did precisely that to a degree far more significant than any recent Queen's Speech of any political colour or, in particular, more than any Labour Queen's Speech than at the moment I can recollect. I need not repeat the phraseology used by my noble friend the Leader of the House when he opened the debate this afternoon. At this stage I need only mention cursorily the Consumer Credit Bill, coming on top of the Fair Trading Act (not exactly implementing the Crowther Report; I think the noble Baroness, Lady Seear, greeted that with at least two of the maximum of three cheers permitted on these occasions); the Companies Bill—a great deal of which would have been rendered unnecessary had the Labour Government done its duty and implemented the Jenkins Report during its six years of office; the Bill predicted in the field of industrial health and safety on the lines of the Robens Report; the forthcoming Green Paper on worker participation; and, perhaps the most imaginative and constructive of all, particularly in the light of the suggestions that we have heard from several quarters during this debate for redistribution of wealth, the tax credit scheme which, in my opinion, is perhaps the most promising and imaginative of all proposals for tax reform put forward by any Government since the war and which owes everything to the reforming zeal of this Government in general and of my right honourable friend the Chancellor of the Exchequer in particular. I was glad that my noble kinsman Lord Hylton referred to the White Paper on housing action areas and priorities. In brief, my submission to the House is that that criticism falls flat. While I say that, I would ask, if we are going to talk about a "fair and orderly society", what price Mr. Hattersley's speech about private education, what price the howls of anguish demanded gleefully in Mr. Denis Healey's address to the faithful at Blackpool? These are marks of political sadism which do not come well from a Party which is asking for a "just and orderly society".

But, my Lords, continuing to work backwards over the Amendment, I come to the next clause which reads as demanding that we do less to exacerbate industrial unrest. This, as my noble friend Lord Orr-Ewing pointed out, was not mentioned once in the opening speech and it was, in fact, dealt with very faithfully by my honourable friend Mr. Robin Chichester-Clark in another place. But I should like briefly to summarise the case, perhaps because it needs publicity. As the noble Lord, Lord Beswick, very properly reminded the House last year in this very debate, Parliament, as an institution, would benefit if credit and support were given by each Party to its political opponents where it was due. May I again respectfully agree and point to a few examples of merit for which credit might have been given in the speeches to which we have been treated.

In the first place, I doubt whether any Government of any complexion has consulted the T.U.C. and the unions more constantly on major items of wages and income policies as we have since the beginning of Phase 1. We have at least succeeded in obtaining a tripartite agreement for the three main objectives we ought to be seeking together; namely, to improve real incomes through a high rate of growth—and may I say in passing that I was distinctly disturbed to hear the noble Lord, Lord Beswick, as I thought at the time, challenge the whole concept of growth and I had much more sympathy with the noble Baroness, Lady Seear, when she thought that our growth rate in the long run was not high enough—second, to improve the position of the low paid and pensioners (and, again may I say in passing, if we are going to improve the position of the low paid and pensioners it is not much good talking, as did the noble Baroness, Lady Birk, about a means test society, because in the modern context you must be able to identify to aid what I have again and again referred to in this House as the vulnerable classes); and third, to moderate the rate of cost and price inflation. I should have thought that this measure of agreement was something for which credit should have been given.

Meantime, I must say that I look for a little more positive response from the other side, the other party to these discussions, the trade unions. My noble friend Lord Orr-Ewing gave one startling example of inflationary wage demands. Consultation is not merely a one-sided process; it is a question of giving and taking on both sides. It means a lot more constructive thinking (if you are going to agree to these suggestions) as to how best to obtain agreed objectives and perhaps fewer demands at best irrelevant to the purpose in hand and at worst positively counter-productive like that to which my noble friend referred.

Secondly, I have also mentioned in another context the Green Paper on worker participation. I know that the Liberal Party have been advocating this for years. I think they have underestimated the very real difficulties; but I should have thought that here too was evidence that, so far from exacerbating relations, there was, on the contrary, determination in the intention on the part of the Government to improve them. Thirdly, there is the question, to which several noble Lords referred, of unemployment. This is now down to the figure given by my noble friend, but I think noble Lords opposite should have given more credit to the fact that this was the direct result of Government policies, as was pointed out, I think, from the Cross-Benches by the noble Lord, Lord Kahn, and undertaken by the Government at a good deal of risk in the last three years.

The Government themselves attach the greatest importance to this. I would have thought, in considering whether it was the Government's intention to exacerbate relations, that this was a subject for which in all candour the Opposition might have given more credit, especially since the high rate of unemployment to which they were continuing to draw attention in previous Queen's speeches was I believe (although I know they would deny it) a hangover from the effect of Mr. Jenkins's savagely deflationary policies when they were in office. I also want to mention, again in this connection, the projected measure to implement the Report of the Robens Committee on Safety at Work. This is another measure inspired by our positive determination not merely not to exacerbate but positively to improve the atmosphere in which industrial relations should take place.

Up to about 6 o'clock not a single speech mentioned the Industrial Relations Act; but at about 6 o'clock the noble Baroness, Lady Birk, did so. This surprised me, as it surprised my noble friend Lord Orr-Ewing, although I thought up to that moment they had been prudent in their omission. But I wonder how much longer we shall have to listen to the misleading stuff about it that we heard after the hour of six. Of course it is true that, as I think the noble Lord, Lord Popplewell, said, 1971 and 1972 were particularly bad years from the point of view of industrial disputes. This year, 1973, has so far been a much better year. I hope it will continue to be so, and I am sure noble Lords opposite will not merely hope but will use their very considerable powers of persuasion to make it so.

Neither the bad of 1971 and 1972 nor the good, so far, of 1973 have had much to do with the Industrial Relations Act except in the minds of those who are misled by their own misleading propaganda about it. The disputes of 1971 and 1972 were, and the disputes of 1973 (if they take place, which I hope they will not) will be, disputes about pay and conditions—with which the 1971 Act neither has much to do nor was intended to have much to do—and in particular since July, 1972, with the pay freeze and Phases 2 and 3 of the prices and incomes policy, which no-one regrets more than Her Majesty's Government but which nobody has so far succeeded in improving upon or finding a viable alternative.

It seems to me that in their anxiety to denigrate the work of the 1971 Act noble Lords have failed to notice two very important factors. The first is the amount of positive and largely unpublicicised good that has been done by the Act and the courts set up under it; and the second is the extent to which the troubles from which some unions suffered, which they attribute to the Act, are not due to the Act at all, but to their obscurantist attitude, which at the best fails to take advantage of its procedures and at the worst deliberately flouts the court and the law as declared by Parliament. My Lords, an example of the first is the very fundamental alteration of the law of dismissal effected by the Act, the industrial tribunals and the Industrial Relations Court. This has not merely secured the award or agreed payment of compensation in cases of unfair dismissal. More important, in the long run, is the effect of making the broad mass of employers alter their dismissal procedures; and that, after all, is precisely the purpose of the Act. It is not to make employers go to court or to make unions go to court; it is to create a change in procedures which will give a greater degree of justice.

An example of the second is the extraordinary attitude of the Amalgamated Union of Engineering Workers towards orders of the court and I can best illustrate that by drawing a parallel between the case of Con Mech, where the A.U.E.W. were concerned, and the Davenport Brewery case, in which the defendants were the Transport and General Workers' Union. They were almost identical cases. They were heard by the same Court at roughly the same time. Incidentally, the provisions of the Act were largely identical with the Labour Government's Bill. Both cases were recognition disputes; both were referred to the C.I.R.; both cases, in the result, ended favourably to recognition; that is, favourably to the unions. In both cases the union was asked to give an undertaking not to continue industrial action while the references were going on. The difference was that the Transport and General Workers' Union appeared in Court, argued its case and complied, while the Amalgamated Union of Engineering Workers ignored the Court, were injuncted and fined. The result cost them £75,000 for contempt, but it was the fault of their policy and not the fault of the Act. They could have won their case for nothing, and in effect the union deliberately fined itself. I had a great deal more that I wished to say about this topic, but in view of the late hour I will not say it now. But I hope that we may have an opportunity to debate these subjects at a later date.

My Lords, I am quite aware that I have not, so far, said a word about what I believe to be the key to the economic situation; that is, how to combat inflation, how to reconcile counter-inflation with a high rate of growth. I am glad (at least I was going to say that I was glad, until I heard the noble Lord, Lord Beswick, as I thought, denigrating growth) that at least in the formulation of the problem and the priority to be given to the problem the House has been largely agreed.

LORD BESWICK

My Lords, I wonder whether the noble and learned Lord will allow me to interrupt him? I did not denigrate growth. I pointed out that the methods employed by the present Government of influencing growth, encouraging growth, encouraged the wrong kind of growth.

THE LORD CHANCELLOR

Well, my Lords, that was not the impression left upon me by the noble Lord's speech. But I must say that it only adds to my satisfaction that what I had thought was an almost agreed formulation of the problem can now he said to be a totally agreed formulation of the problem.

LORD BESWICK

My Lords, would the noble and learned Lord allow me to intervene once more? Would he not agree with me that the sort of growth which leads to there being no places for school-children in schools, and which leads to a reduction of hospital building, is the wrong kind of growth?

THE LORD CHANCELLOR

My Lords, what I was saying—and I do not think it is the wrong kind of growth—was that I believe it can be shown, and shown quite conclusively (the noble Lord, Lord Popplewell, referred to a speech by Lord Rothschild outside this House, but I believe that it can be shown quite conclusively) that if we do not invest, and if we do not increase the quantity of wealth available in this country, we shall in fact not be able to pay either for our housing problem or for our school projects or for our increased pensions. I believe that the need for growth is due to the fact to which the noble Lord, Lord Popplewell, drew attention—though he wrongly, in my opinion, ascribed it to what he called Tory policies, because it is something which has continually been going on for the last 25 years—that this country has not such a good performance as some of its rivals in the industrial world, most of whom started in 1945 from a less advantageous place than we did ourselves. And if we do not increase growth as a matter of the quantity of wealth, we shall fall still further behind and lose our standard of life instead of improving it.

I think, furthermore, that if we do not invest and if we do not carry on growth, even perhaps to the extent suggested by the noble Baroness, Lady Seear—though I do not think it could be done in the context of the present situation—we shall find that all over the world there will be countries not yet industrialised, but where the peoples of the world have more money to buy the necessities of life, who will bid up the prices so that there will be less for the people of this country instead of more. I do not accept the criticism which the noble Lord, Lord Beswick, directed at what he called the wrong kind of growth. On the contrary. I think he was really denigrating the whole concept, although I accept of course that he was perfectly sincere in what he said.

My Lords, at the end of the debate last year I was saying that I did not know what alternative the Labour Party would produce for the purpose of containing inflation; and so far as Phase 3 is concerned, although I take note of the particular criticism levelled by the noble Lord the Leader of the Opposition at the end of the debate, I cannot say that I am any brighter about any rational alternative to Phase 3 presented by the Labour Party at the present time. But at least we know what their policy is for containing inflation. They propose to spend, to cast into the current expenditure, another £5,000 million to £6,000 million a year. That, my Lords, is not my figure; that is Mr. Healey's figure. They propose to raise taxation by £1,000 million. That again is not my figure; it is Mr. Healey's figure. To that must be added whatever it would cost—say £1,000 million in a year—to subsidise food. To that must be added the cost of their educational programme, which would have to find, I suppose, about 350,000 new places which at the moment are being financed by members of the middle class out of taxed income. To that must be added another £10,000 million or so for

the purpose of carrying out their various nationalisation projects. And I agree entirely with my noble friend Lord Orr-Ewing that this substitution of paper assets convertible into cash for tangible assets is directly inflationary in its result. That is what the country has to expect in the way of containing inflation from the Labour Party; and, my Lords, that is what leads me to say that this Amendment is humbug.

8.20 p.m.

On Question, Whether the said Amendment shall be agreed to?

Their Lordships divided: Contents, 57; Not-Contents, 95.

CONTENTS
Ardwick, L.	Geddes of Epsom, L.	Popplewell, L.
Arwyn, L.	Hale, L.	Rhodes, L.
Bacon, B.	Hall, V.	Royle, L.
Beswick, L. [Teller.]	Hamnett, L.	Rusholme, L.
Birk, B.	Henderson, L.	Sainsbury, L.
Blyton, L.	Hoy, L.	Segal, L.
Brayley, L.	Hughes, L.	Shackleton. L.
Brockway, L.	Jacques, L.	Shepherd, L.
Burton of Coventry, B.	Janner, L.	Shinwell, L.
Champion, L.	Leatherland, L.	Slater, L.
Cooper of Stockton Heath, L.	Lee of Asheridge, B.	Snow, L.
Davies of Leek, L.	Llewelyn-Davies of Hastoe, B. [Teller.]	Stow Hill, L.
Diamond, L.		Strabolgi, L.
Donaldson of Kingsbridge, L.	Longford, E.	Taylor of Mansfield, L.
Douglass of Cleveland, L.	McLeavy, L.	Tayside, L.
Evans of Hungershall, L.	Maelor, L.	Wells-Pestell, L.
Fiske, L.	Melchett, L.	Wright of Ashton under Lyne, L.
Gaitskell, B.	Pargiter, L.
Gardiner, L.	Peddie, L.	Wynne-Jones, L.
Garnsworthy, L.	Phillips, B.
NOT-CONTENTS
Aberdare, L.	Elgin and Kincardine, E.	McFadzean, L.
Alexander of Tunis, E.	Elliot of Harwood, B.	Macleod of Borve, B.
Allan of Kilmahew, L.	Erskine, of Rerrick, L.	Mansfield, E.
Allerton, L.	Exeter, M.	Massereene and Ferrard, V.
Amory, V.	Falkland, V.	Merrivale, L.
Balerno, L.	Ferrers, E.	Mersey, V.
Balfour, E.	Ferrier, L.	Milverton, L.
Belhaven and Stenton, L.	Fraser of Lonsdale, L.	Monck, V.
Belstead, L.	Gage, V.	Mountevans, L.
Berkeley, B.	Gowrie, E.	Mowbray and Stourton, L.
Bethell, L.	Grenfell, L.	Northchurch, B.
Brabazon of Tara, L.	Grimston of Westbury, L.	Nugent of Guildford, L.
Bridgeman, V.	Hailes, L.	Oakshott, L.
Brooke of Ystradfellte, B.	Hailsham of Saint Marylebone, L. (L. Chancellor.)	Onslow, E.
Brougham and Vaux, L.		Orr-Ewing, L.
Colville of Culross, V.	Hankey, L.	Pender, L.
Colyton, L.	Harvey of Tasburgh, L.	Rankeillour, L.
Cork and Orrery, E.	Headfort, M.	Rochdale, V.
Courtown, E.	Hewlett, L.	St. Aldwyn, E. [Teller.]
Cranbrook, E.	Hood, V.	Sandford, L.
Crathorne, L.	Hylton, L.	Sandys, L.
Crawshaw, L.	Hylton-Foster, B.	Savile, L.
Croft, L.	Inglewood, L.	Selkirk, E.
Daventry, V.	Kemsley, V.	Somers, L.
Davidson, V.	Keyes, L.	Strange, L.
de Clifford, L.	Kinnaird, L.	Strathclyde, L.
Denham, L. [Teller.]	Kinnoull, E.	Strathcona and Mount Royal, L.
Drumalbyn, L.	Limerick, E.
Eccles, V.	Long, V.	Sudeley, L.
Swansea, L.	Tweedsmuir of Belhelvie, B.	Windlesham, L. (L. Privy Seal.)
Teviot, L.	Vivian, L.	Wolverton, L.
Trefgarne, L.	Wakefield of Kendal, L.	Young, B.
Tweedsmuir, L.

Resolved in the negative, and Amendment disagreed to accordingly.

On Question, Motion agreed to: the said Address to be presented to Her Majesty by the Lords with White Staves.