§ 3.2 p.m.
§ Debate resumed on the Motion moved on Tuesday, March 12, by Lord Taylor 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 ABERDARE
My Lords, this is the first occasion on which I have spoken from this Dispatch Box, and I would wish to offer my congratulations to noble Lords and noble Baronesses opposite and to wish them well in the comparatively short time that I expect them to be occupying that position. In particular, I should like to congratulate the noble Lord, Lord Beswick, who is to wind up this debate. He has succeeded me as Deputy Leader of your Lordships' House—a job which I cannot say I found particularly onerous, as I served under two very fit and active Leaders: I am sure the noble Lord, Lord Shepherd, is equally fit and active. The noble Lord knows very well in what respect he is held in this House because we delivered some "obituary notices" about him when he gave up being Opposition Chief Whip. If I may refer to one thing that I view with sorrow, naturally I looked with very great interest at the appointments to the Department of Health and Social Security, and I was sorry to see that, although there are in fact five Ministers now in that Department, whereas we started with four but ended with three, none of those is in your Lordships' House. We were accustomed in the last Government to having a very able Minister on the Benches opposite in charge of the affairs of the Department of Health and Social Security, and I think we shall miss having a Minister in that Department in this House.
245 My Lords, the subject of the debate this afternoon covers a very wide spectrum—the economy, industry and energy—and I do not think I shall be able to do justice to such wide-ranging subjects in a fairly short speech, but your Lordships who are speaking later I am sure will fill in many of the gaps. We face the difficulty that the gracious Speech is only half the picture, and the rest is still to come in the Budget next week. In fact, we have now seen the goods in the shop window—and many of them are very attractive goods—but we have not yet seen the account books. It is very difficult in many instances to judge Government policies, especially those which entail considerable expenditure, without details of the Budget and without knowing how the Government are going to set about raising the necessary revenue. The Government's actions will undoubtedly be judged against the background of inflation. This is surely the common enemy of us all, and must be their first task. Yet we are fearful that their proposals for stricter control of prices and voluntary restrain in wages will end in worse inflation. After all, the last Labour Government were forced into a system of statutory wage control against their will. We too were forced into such a situation, very much against our will and very much against our traditions. Can we really be sure that the present Government can afford to abandon it? However, for the moment the Pay Board is to remain in being and in action, and that is a great relief. In my view, it is of great importance that the Stage 3 controls should remain until such time as other proposals are ready, be they for voluntary or statutory restraint.
The noble Lord, Lord Hughes, who wound up our debate last week, stated that our incomes policy—and he included that of the last Labour Government—failed because it created a dam, and once the dam was broken the results were disastrous. My Lords, this was indeed true of the statutory incomes policy of the last Labour Government, and I fear it will be true of the incomes policy of the present Labour Government; but it was not true, and certainly need not have been true, of the last Conservative Government. This was the one lesson that surely we had learned, that you should not break down a dam; and (to continue the 246 metaphor) we had in fact introduced sluice gates in the form of Stage 2, Stage 3 and the Relativities Board. These could be opened and shut to accord with the requirements of the national economy. But the present Government intend to sweep away the lot—dams, sluice gates and all—and we fear a flood of inflationary wage demands.
My Lords, during our time in Office we set ourselves an objective of economic growth in order to create the resources that we needed to develop our social policies, to which we attach just as much importance as noble Lords opposite. In doing so we were supported by both the T.U.C. and the C.B.I., and indeed we achieved a growth rate of 5 per cent. It is now common knowledge that our plans were disrupted by the adverse terms of trade and by the increase in the cost of the food and raw materials that we had to import from overseas, particularly of course by the vast increase in the price of oil. Faced with this critical economic situation, the reaction of the then Chancellor of the Exchequer was to make massive cuts in Government expenditure—£1,200 million in 1974–75. For those of us who were at the time working in Departments concerned with social policies, that meant we had to face severe cuts in our projected programmes. In the case of the Department of Health and Social Security, which I knew best, we had indeed made considerable extra resources available, thanks to our economic growth policy, both to the National Health Service and to the social services; and in the field of social security we had introduced a number of new benefits—attendance allowance, invalidity allowance and family income supplement. At the same time we had fully protected the interests of the pensioner. Over the period until the end of last year the pension had risen even higher than average earnings, and considerably higher than prices. We had introduced, for the first time, a regular annual review of pensions, and we committed ourselves at the General Election to a six-monthly review. We had our own plans in mind but we realised that the economic situation was very difficult.
My Lords, what has happened now? Certainly there has been no change in our external economic situation. We still face a very serious balance of payments problem and the Government have rapidly 247 acknowledged that world prices have risen enormously. They have seen that cheap Commonwealth markets no longer exist, and indeed when they publish the answer to the question raised by the noble Lord, Lord Diamond, this afternoon, it will also become evident that certain commodities are being bought more cheaply due to the fact that we are members of the E.E.C. than if we were not. We would have expected in these circumstances a pretty cautious approach to Government spending, yet the gracious Speech shows no such thing. It promises vastly increased Government spending. There are to be food subsidies; increased pensions and other benefits; the needs of the disabled are to be specially taken into account; rents are to be frozen and museum charges abolished. These are specific increases in Government spending but in the background lies potential extra Government expenditure on overseas aid, industrial investment, health, education and social services.
My Lords, this is all admirable in itself, but how is it to be paid for in the present economic conditions of the country? By soaking the rich? There are very few rich left to soak, and I should think that after the cataclysmic fall in Stock Exchange values there are even fewer. By cutting the Defence Budget? We discussed this last week and it would in my view, and I think in the view of most of your Lordships, be extremely dangerous to find a substantial amount from that budget. By increased taxation? Probably. But if the spending that is forecast in the gracious Speech is to be paid for out of taxation the burden will undoubtedly fall on many average wage-earners.
There is one specific question which I should like to ask, although I know in advance that it will not be possible for the noble Lord, Lord Beswick, to reply. I presume that I shall have to wait for the Budget, but I should like to know, in regard to the rise in pensions and other social security benefits, whether it is proposed that the Exchequer proportion of the financing of these social security benefits will remain at the present figure of about 18 per cent., and whether the insurance stamp will go up to meet the rest of the cost. If it does I think that without doubt this will lead to even more increased wage claims and a further twist to the inflationary spiral. These are questions 248 which are raised by the gracious Speech and will be answered only by the Budget. We certainly support increases in social benefits. We increased them ourselves, and we were seeking to do more but we want to know how they will be paid for in the present economic circumstances.
To my mind the right priority is first to achieve growth in the economy, and then spend on the social services. I am suspicious of a policy of, "Spend first, pay later". I recall what happened to the pensioner under the last Labour Government when he got a large increase in 1964 but very little indeed later on. We need an expanding economy. We need profits, above all, and I am glad that industry has been making profits. We need profits to provide better salaries and wages; to provide the investment necessary for future expansion; to provide the taxation on which our social services largely depend. But an expanding economy is impossible under inflationary conditions, and in my view the first priority must be to control inflation and then to make social progress.
My Lords, the noble Lord, Lord Balogh, is to follow me and I should like to say a word or two if I may about the energy situation and to congratulate him on his appointment. Though we have not in this House a Minister for the Department of Health and Social Security we are very pleased to have one for the Department of Energy. There can be no doubt of the vital importance to this country of the earliest possible exploitation of North Sea oil. I find myself in full agreement with what was said last week by the noble Lord, Lord Byers, that we need to find the right balance so that there is an incentive to private enterprise to undertake the difficult and dangerous task of drilling for oil in deep and rough waters, while at the same time not handing them excessive profits on a plate as a result of the change in the oil situation. From their Manifesto it seems likely that the Labour Party would err in the latter direction and tend to discourage enterprise. The absence from the gracious Speech of any proposals for nationalisation encourages me to think that the Government have had second thoughts. It has been suggested that the Government will establish a National Hydrocarbons Corporation to be a 249 monopoly buyer of offshore oil, just as the Gas Board is of offshore gas. In fact the Prime Minister has taken a favourable view of having more than one corporation, no doubt as a sop to Scottish and Welsh Nationalists; but I believe that there are many serious disadvantages in this.
In the first place, enormous development costs will undoubtedly require much heavy borrowing on an international scale, and I believe there is a real danger that funds which are so vital to us may not be so readily available if the ultimate price of the oil is to be in the hands of a State monopoly. Moreover, companies can raise development finance and obtain expensive equipment by selling their crude oil forward, but any such enterprise would be impossible with a monopoly buyer. Companies are also able to exchange products with companies operating in other parts of the world, to their own benefit and to the benefit of the balance of payments. North Sea oil is a light crude oil not always ideal for the British market and some such exchange system will be needed.
I hope that the noble Lord, Lord Balogh, will study (he probably has already done so) the effect of the Australian Labour Party's policies on oil exploration. I will quote one sentence from a feature in the Oilman for the week ending March 16, 1974. It reads:Since the Australian Labour Party took over in December. 1972, there has been a sharp decline in exploration activity and growing uncertainty among national as well as international oil companies about the future of the industry.My Lords, it is our belief that a National Hydrocarbons Corporation, or even three or four corporations, is an unnecessary bureaucratic monster. We believe that the interests of this country can perfectly well be safeguarded by appropriate fiscal measures leaving the oil companies to get on with their own jobs.
If the full potential of North Sea oil is to be realised, it is essential to provide proper back-up facilities in the way of roads, ports, housing, and so on, and I should like to pay a tribute to my right honourable friend Mr. Gordon Campbell, the former Secretary of State for Scotland, and to my noble friend Lord Polwarth. Between them they put in hand a massive investment programme: in Scottish roads 250 some £22 million; a new runway at Inverness; a new terminal building at Aberdeen; a multi-million pound port development for Aberdeen, Peterhead, Montrose and Lerwick; and a £40 million house building programme in areas of oil development—all in an effort to speed the flow of North Sea oil, and, may I point out to Scottish Nationalists, all provided by funds from the United Kingdom as a whole.
There is one particular point on which I hope that the noble Lord, Lord Balogh, may say something. In an effort to avoid any possible delay in bringing North Sea oil to shore, we introduced a Bill providing for an accelerated procedure to acquire land urgently needed for certain projects. That Bill was particularly intended to permit an early start on the construction of deep water concrete platforms in the Loch Carron area. Given the powers under that Bill we reckoned that by 1977–78 we could be receiving £100 million-worth of oil to the immense benefit of our balance of payments. Without the Bill, we saw a delay of at least one year. I understand that the Government have dropped the Bill and I should like to ask the noble Lord, if he is in a position to help me: does that mean that it will now be 1978–79 before we see the benefit of those deep sea concrete platforms?
My Lords, this Government will be judged on its results, as all Governments are. They will be judged on the success of their policies to counter inflation, to exploit our natural energy resources as quickly as possible, to restore our balance of payments position, and to promote the interests of the British people as a whole.
§ 3.23 p.m.
§ THE MINISTER OF STATE, DEPARTMENT OF ENERGY (LORD BALOGH)
My Lords, I crave your indulgence, in the first place as a sort of "demi-maiden", because this is the first time I address your Lordships from this place, and secondly because my voice is still affected by the 'flu I had last week, and I apologise to noble Lords who perhaps will not hear me as well as they should. Your Lordships will understand that being where I am I shall not indulge in personal controversy and will address your Lordships in rather more muted tones than is my custom.
251 We on this side of the House, then on the other side of the House, had been warning the then Government for months—indeed years—that a unique combination of Budget deficit, inflation and stubborn unemployment would haunt us consecutively and simultaneously; a situation which is unparalleled even in the crisis-torn history of the British economy since 1914. I did not hear in the speech made by the noble Lord, Lord Aberdare, the sort of humility that I would have expected from a member of a Government which did not do particularly well, which did not bequeath prosperity to us but rather bequeathed a situation as critical as any this country has faced.
The signs of accumulating economic difficulties were patent before the energy crisis or the Arab oil crisis burst on the country. They were there already and the much vaunted expansion of the economy to which the noble Lord, Lord Aberdare, has referred, in fact disappeared in the revision of figures which were put out under his own Government. The then Government's decision to introduce a three-day week only completed the destruction of the solid basis of expansion which the first Wilson Government had created by 1970 with an enormous surplus bequeathed to the Tories.
I shall be brief about the economic situation, because my right honourable friend the Chancellor of the Exchequer will be introducing his Budget within a week. This will not be an enviable task. Your Lordships will be well aware of the many severe and deep-rooted economic difficulties which we now face. Not many Governments have assumed office at a time when output was declining, the balance of payments deficit was at a record level and worsening, and inflation was at a record level and accelerating.
On output, the Government have already taken major steps. They have settled the miners' dispute. The cost in terms of the industrial output which has been lost was probably of the order of £2,000 million. The loss of earnings was over £600 million. I am happy to say that coal output was back to 75 per cent. of the October levels in the first five days of normal working. We hope to get the economy quickly on its feet and on the 252 move again. The struggle for output and investment recovery is well under way. The current account deficit averaged nearly £250 million a month in the last quarter of 1973 and the January deficit stood at £312 million. Of course, our balance of payments problems are twofold: there is the oil-related part, which obviously must be dealt with on an international level, and then there is the non-oil deficit which must also be running at well over £1,000 million and which will have to be dealt with in such a manner as not to start a general deflationary crisis in the world economy. That will not be easy, but I think that with some common sense on the part of both oil producers and industrialised countries it can be done.
Another of our tasks will be to get to grips with inflation. Again I must say that I did not feel from the speech of the noble Lord, Lord Aberdare, that he was aware of the fact that last year in this country we had a record inflationary rate. We have already announced that we shall introduce subsidies on key foods so as to ease the burden of inflation on the housewives. We shall do the same for pensioners and for rented housing.
§ LORD ORR-EWING
My Lords, would the noble Lord give way? He said that we had a record rate of inflation in this country. Would it not have been equally accurate to say that among the 23 O.E.C.D. countries we were exactly halfway up the averages, and that many other countries had a worse rate of inflation than we did here?
§ LORD BALOGH
My Lords, I do not think that comparison is really relevant. Each country should compare its own record with the previous record. If the noble Lord, Lord Aberdare, had said that it was a very sad thing and had attributed it to X, Y or Z, I might have asked whether X, Y and Z in his analysis and in my analysis would be the same. But at any rate that ought to be mentioned. The Government recognise that the containment of inflation requires some means to ensure an orderly growth of incomes. The T.U.C. recognised this and offered the previous Government a good many concessions unheard of in their history. But both the T.U.C. and the Government believe that the method must be a voluntary one, and following discussions with both sides of industry we hope, as 253 occasion arises, to introduce legislation to abolish the machinery for statutory control of wages, including the Pay Board. However, as my right honourable friend the Secretary of State for Employment said in another place on Monday, until that is done the Pay Board will continue in existence and we shall continue to enforce recommendations made by the Pay Board. It is not our desire that settlements already made under Stage 3 should be reopened.
In the last fortnight we have seen the end of one set of difficulties in the energy sector. These began with the loss of production in the electricity industry, gathered strength with a State of Emergency and three-day working, and culminated in a miners' strike. We have very little breathing space now. These matters are of fundamental significance for industry and the economy, and they must be rightly understood. I propose to begin by giving your Lordships a picture of the energy situation as we see it and of the prospects.
In 1973 consumption amounted to the equivalent of 342 million tons of coal. The largest component was oil, followed by coal, gas and nuclear and hydro-electricity. A high level of consumption was necessary to maintain growing production, growing G.D.P. and growing standards of living. The rate of increase in energy use has been fairly steady in recent years at about 1.7 per cent. per annum. An extra 1 per cent. on the G.D.P. has meant an additional energy consumption equivalent to about 2 million tons of coal. Of course, with the change in the energy situation, that situation will also change. Until last October we could live comfortably with these elementary facts of life. We were able to get the fuels we needed in the quantities needed at very favourable terms indeed. Some of us, indeed (and I include myself), were misled into thinking that on the basis of an oil economy we could afford a shrinkage in the coal industry, especially in the non-productive pits. I certainly would not deny that most economists suffered from the same delusion.
Our pattern of consumption, as it developed year after year, reflected ready access to cheap and plentiful supplies of energy which were essential, and of course these were cheap and plentiful also to our competitors who had access to the 254 same sources of energy. With the action of the Arab oil producers over the last six months, the atmosphere has changed completely. The oil producers have shown themselves unwilling to produce all the oil which the consumers might have wanted; and the situation has created major problems on the energy side, and also in the international money and financial markets. The burden, in particular on the balance of payments in this country, has been very great at a time when we are not at all well placed to bear it. At the latest prices for oil, the oil imports will cost about £3,800 million in 1974. This has been estimated to represent an additional burden of £2,600 million per annum imposed virtually overnight, compared with the pre-October 1973 level of prices. I do not need to emphasise the seriousness of the situation. Fortunately, we have significant energy resources of our own to a degree which makes us better off than most other industrial countries, except perhaps America—and even that is doubtful.
On the whole, developments in the international energy situation have greatly enhanced the importance of our domestic resources. First, there is North Sea oil. As in the case of most, if not all, major fields in the world, it is difficult to give a secure estimate for the future of the significance of these finds. In most cases, current estimates in other fields have always been under-estimates rather than over-estimates. Noble Lords may like to know that the second report on the North Sea to be published soon will show revised forecasts, based on company information reinforced by the Department's experts. North Sea oil production from existing finds may well by 1980 equal total U.K. demand: indeed it might even be higher.
There there is North Sea gas. The total consumption of gas is nearly four times what it was a decade ago. Ninety per cent. of it comes from the North Sea. The prospect is that by 1980 gas consumption will again have increased very substantially. If we include in our forecasts the gas from the Brent field, for which the British Gas Corporation are at present negotiating, and from the Norwegian part of the Frigg field, which is subject to Norwegian parliamentary consent, the rate of delivery from our North 255 Sea sources of gas will be about 90 per cent. higher in 1980 than the total gas production in 1973. We have enormous resources of coal, too, and reserves are estimated at 100,000 million tons.
Finally, we have our nuclear industry and a technological base for further expansion. Nuclear power already meets 3 per cent. of the country's total energy needs and supplies about 10 per cent. of total electricity consumption. This proportion will rise as the five advanced gas-cooled reactor stations now under construction come into operation. These should add 6,000 megawatts to existing capacity by 1976. Looking further ahead, we can expect nuclear power to contribute a growing proportion of our electricity supplies in the 1980s and beyond. We shall have to be extremely cautious to avoid pollution through accidents and in the disposal of waste—a problem which will be growing very much in importance as time goes on. These resources of course represent our potential and not our achievement. It will be one of this Government's major tasks to make sure that this potential is realised to the full and that we make the best use of our indigenous resources—and to do so in a way which confers maximum benefit on the community. There are many important and very complex decisions to be taken, and I do not think that your Lordships will expect me to expatiate in detail at this moment when we have been in Office for barely two weeks.
I should like to use the rest of my speech to outline some further factors in our strategy together with some of the particular problems which face us. What should be our objectives? There is no doubt that the development of our indigenous resources in the North Sea can make a substantial contribution to the balance of payments and thereby give the basis for a thorough industrial reorganisation which is necessary in order to secure a balanced and well-working economy. Another consideration is the sheer size of the resources which are at stake. Many of the decisions which have to be taken involve judgments about the allocation of national resources on a very large scale indeed. The question here is whether some of those resources ought not to be conserved rather than others. We need to be sure that the 256 use we make of indigenous resources is the best use: our resources cannot sensibly be preferred to imported fuel regardless of cost. Security and flexibility are the main factors to which we need to give full weight. It is a familiar thought that no fuel, whatever its source, is wholly secure, but some are more secure than others.
No Government, whatever their complexion, can guarantee continued supplies, but they can minimise the risks of interruption from domestic to foreign causes. A key element in the strategy over the past decade has therefore been the diversification of our oil supplies into more than one fuel. We have now the beginnings of a four fuel economy with oil, gas, coal and nuclear power, all playing a part and helping to spread the risk. We would expect this element of the strategy to be continued over the next decade with the major additional element of diversification, and hence security and flexibility being provided by the North Sea gas and oil, and with the rate of other components slowly falling as nuclear power plays a growing role. It is our intention to set up a full-scale examination of the contribution which the coal industry can make to our future energy requirements, and to see how best to set about securing that contribution. Complicated assessments are involved, but I would emphasise that we shall not make the mistake of trying to pre-empt uncertainty by thinking that we know what the future holds.
Turning now to the particular problems and decisions, the Labour Party Manifesto has made it clear that the new Government will act to ensure that the national interest will be fully protected in the vital activity of the North Sea, and the Address from the Throne reflects this intention. Noble Lords will understand that I cannot disclose detailed proposals at this stage because no decisions have been taken, but I can assure the House that the examination of the means whereby the nation will receive benefits fully commensurate with the enormous profitability of exploitation of national resources is a matter of the highest priority. The value of the finds which have already been ascertained, about two billion tons of oil, must be in the neigh-bourhood of 70 billion or 80 billion dollars. We shall not hesitate to take 257 whatever action is necessary to achieve this, and the effective and right degree of Government control over offshore activities, both physical and financial.
During the Election campaign much was heard about the disastrous disincentive effect—I think the noble Lord, Lord Aberdare, also reflected on that—which the implementation of the Labour programme in relation to North Sea gas and oil would have. Since the oil companies committed themselves to the development of existing oil fields—that is to say, the basis on which they took the investment decisions—the price of oil in the Gulf has increased from 2 dollars 40 cents to 11 dollars 65 cents. This is an unexpected, unforeseen, uncal-culated complete windfall profit. If noble Lords opposite think that one could leave the profit—unexpected, uncalculated, not taken into account in the investment decision—in the pockets of companies more than half foreign owned, I should like to see them stand up and defend the case.
§ LORD ABERDARE
My Lords, if I may interrupt the noble Lord, I said that we thought this matter could be looked after perfectly well by fiscal measures.
§ THE EARL OF LAUDERDALE
My Lords, before the noble Lord answers that point, would he make one thing clear? Did we on these Benches—and we may have misheard him—hear the noble Lord say that these were uncovenanted, unexpected windfall profits, and at the same time say that they had been taken into consideration by the oil companies in their investment decisions before they were known?
§ LORD BALOGH
No, my Lords. I am sorry, but I had hoped that the noble Earl would have had enough confidence in me not to say such stupid things.
§ THE EARL OF LAUDERDALE
My Lords, I am delighted that we are back on the old level. I merely wanted to get clear what the noble Lord had said, because it was not absolutely clear. It gave the impression that these windfall profits, which came as a surprise, had none the less, in some miraculous way, been taken into consideration by the oil companies when they made their investment decisions. That was not clear.
§ LORD BALOGH
My Lords, apologise for reverting to my previous sinful self. The noble Earl must have misheard me; I said exactly the opposite. As I said, since the oil companies committed themselves to the development of the North Sea, the value added to the finds—and I am not talking about the potential finds but the finds actually proven, even approved by the noble Lord, Lord Drumalbyn, in his previous capacity—would represent something like a 90,000 million dollar increase. So we shall not be beastly to them if we share in that.
At present prices, and the present production forecasts, the companies stand to make windfall profits of many tens of thousands of millions of pounds. I hope that there is no one among noble Lords who thinks that a windfall of this proportion should accrue as it would now, and that there is no reason for a thorough revision undertaken voluntarily and with consent. But at the same time I must point out that the Sheikh of Abu Dhabi, the Emir of Dubai and the Sheikh of Kuwait have succeeded in getting the companies agreeably and in a friendly way to agree first to a 61 per cent. and lately a 90 and 100 per cent. take-over, or nationalisation—whatever we want to call it—of their holdings in those companies. I do not believe that there could be any doubt that this can and should be done.
§ LORD WINDLESHAM
My Lords, can the noble Lord elaborate on that? He says that this can and should be done. He was speaking of up to 100 per cent. takeovers in the Gulf.
§ LORD BALOGH
My Lords, I want to have some renegotiation in a friendly manner, and not violent action and confrontation which sometimes the noble Lord's Government seemed to prefer to negotiation and conciliation. Such action, as the Prime Minister said in his Edinburgh speech which laid down the Labour Party's policy on this matter, is by no means incompatible with a fair return to the companies themselves. I would observe that the monopoly buying powers of the Gas Corporation do not seem to have hindered the success of the gas story.
Noble Lords may have noted that the Prime Minister, sneaking in a debate in 259 another place last week, gave a tour d'horizon of the options open to us in order to achieve our objectives of full national benefit and essential State control. The Norwegian system of carried interest, or optional participation in success, is very attractive, since it gives the Government a share in control proportional to their share of costs and profits—and the Government revenue from profits would be substantial. The Government's interest could be, but need not be, exercised by a National Hydrocarbons Corporation. Another course is that of a State buying agency. The Government have an open mind on all these and other possibilities. We want to announce the course we shall take as soon as possible, but we shall not be hurried into the wrong decision.
Turning now to the coal industry—
§ LORD ABERDARE
My Lords, may I interrupt the noble Lord? Would he be in a position to answer my question about Loch Carron and the Bill which I gather has been dropped by the Government to expedite the building of the deep-sea rigs in Scotland?
§ LORD BALOGH
Yes. The Secretary of State for Scotland and my right honourable friend the Secretary of State for Energy have reviewed the situation. The conclusion is that the present public inquiry in relation to the Drumbuie site must be carried to conclusion. My right honourable friend will give the decision about the planning permission in the normal way.
§ LORD WINDLESHAM
I do not want to pursue the noble Lord in the middle of his speech too much on this point, but is it not a fact that that will lead to very considerable delay in the exploitation of North Sea oil?
§ LORD BALOGH
My Lords, surely other factors must be taken into account if we are to have the co-operation we need and avoid extremism in the North of England.
My Lords, turning now to the coal industry, I shall resist the temptation to go over once again the unhappy events but we must recognise that certain lessons have to be learnt. Policies on such sensitive issues such as pay must command support. Proper account must be taken 260 of the very special position of the coal industry, including the difficulties of working conditions and their associated accident and health hazards. The public regard for these factors, no less than the cohesion and determination of the mining community, cannot be ignored or brushed aside or ridden over roughshod; neither can Drumbuie. We must now seek to put the situation right through consultation with all sides of the industry and on all aspects of the industry. We believe that our own coal should form one of our surest sources of energy supply. We know that the coal is there, in substantial quantities, and we have fully developed the techniques for its exploitation. But an essential condition of gaining access to it is that the workers and the management in the industry should know that they face a secure future while they produce competitively. We are aware of the proposals made by the N.C.B. for increased investment in the industry and, in particular, the development of a new pit at Selby. We welcome these ideas but, given our determination to maximise competitive coal output, it may be possible to go further than these N.C.B. plans. Hence our intention to set up the inquiry to which I have already referred.
These are only some of the major areas for decision. Another one which I must mention is the question of reactor choice for our nuclear power programme. The precise size and time-scale of the ordering programme has still to be decided. The first decision we have to make is what reactors we should build. The time lags involved between ordering and commissioning of power stations means that we need to place the first orders very soon. The issues involved are complex, and a great deal of difference of opinion exists, even in expert quarters. Our aim is to reach firm conclusions in the near future, but careful consideration must be given to all aspects of the question. This is not easy. In reaching their decisions the Government will certainly take into account the timely report which the Select Committeee on Science and Technology published in February, as well as the advice being prepared by the Nuclear Power Advisory Board.
My Lords, I have tried to give the House an outline of how we see energy policy, how we shall approach it, and some of the particular points to which 261 we shall be directing our attention. It has not been a comprehensive account. I do not think that at this point in time your Lordships would expect me to do so. I am particularly aware that I have not discussed at all the very important subject of energy conservation and the encouragement of the efficient use of fuel. We recognise that in the new energy situation, with prices rising, the balance of payments in heavy deficit, and supplies less certain than in the past, economy in the use of energy has assumed a new importance and dimension. In the past, it may not have mattered too much that it was used inefficiently or unnecessarily. This situation should, and must, now change; and the Government regard this as an important part of energy policy, too.
We may well stand—though I do not believe it—at the very beginning of a new era in world energy supplies. Though the actions of oil producers have affected other industrial countries no less than ourselves, we in this country have managed to make sure that the first few months were particularly turbulent and unpleasant for us all. That state of affairs must now end. We must get down to the job of making the best of the substantial resources that we have, and not fight over them. The job is difficult and complex, and it will be many years before anyone can say how well we have done. But we are determined to make sure that everything we possibly can do shall be done.
§ 3.56 p.m.
§ BARONESS SEEAR
My Lords, the gracious Speech raises a number of important economic and industrial issues, but as the noble Lord, Lord Aberdare, has already said, we do not know, and cannot fully know until after the Budget speech next week, at least not in any detail, what line of policy the Government intend to pursue. Nor is it possible, therefore, for the Opposition to comment in detail on the Government's proposals. However, it is certainly plain that the major economic objectives of the Government are shared by both sides of your Lordships' House, and indeed widely supported throughout the country. There can be no doubt, surely, 'that the problems that we face primarily are the problems of solving, or at least reducing, our balance-of-payments deficit, the problems of controlling inflation, and doing both 262 of these things in such a way that unbearable hardships does not fall on the people least able to sustain those hardships.
These three overall aims would, I think, be common ground between us all. I should indeed be very surprised if it were otherwise. But, my Lords, if I may use an extremely overworked phrase, while all of us agree on willing the ends, there will be considerable differences about the means. It is essential that we should clarify what the means are towards those ends. We should realise what has to be done, and that difficult and unpleasant decisions must be taken, if those ends are to be attained. So far as we have already been able to see in the gracious Speech, a seemingly insignificant amount of attention is being paid to the problem of "the means", and this raises a considerable amount of doubt in one's mind as to the nature and soundness of the Government's policies.
On the question of the balance of payments, as the noble Lord, Lord Balogh, has pointed out, there are two aspects of the problem. There is the balance-of-payments issue which arises in connection with oil. This has to be dealt with in a particular way because this is a balance-of-payments issue of an unusual kind with special characteristics of its own. There are, of course, certain ways of easing the problems which arise in connection with the increased price of oil. The very serious balance-of-payments position we were in, even before the oil situation arose, was not disguised from us. A certain optimism in dealing with oil is leading us to underrate the difficulties confronting us in dealing with the general balance-of-payments problem, which has been an extremely unhealthy one (with certain minor periods of better fortune or good management) over a considerable period of time. This must mean that a prime purpose of policy is a most intensive and vigorous determination to improve our export position. This is going to be extremely difficult at the present time, and will mean changes and sacrifices in this country which a great many people, including supporters on both sides of this House, will not be willing to make unless the leadership given to them in doing it is a great deal better than it has been for both sides of the House over a considerable time.
263 We are facing the need to get a greater share of contracting overseas trade. Nearly all other countries are in difficulties in this way, and the chance of an expansion in overall world trade is not high in the immediate future. It may be that in the long distance this will not be true—there is no reason why it should be—but our problem at the moment is essentially an urgent and painful problem of the short term and the middle distance. That is what we must concentrate on, if we are not to inflict such serious wounds upon ourselves in the short period that we are then going to find it extremely difficult to take advantage of the opportunities of the middle and far distance. There are going to be great difficulties in even maintaining our share of this contracting world trade, but to improve our balance of payments of course we have to enlarge our share of contracting world trade. We all know, but we need to remind ourselves, that, except for that brief and ill-fated flutter into a 5 per cent. growth rate, our growth rates over a decade have been lamentable. We had been at the bottom of the poll of the E.E.C. countries and the O.E.C.D. countries, bumping along at an average of 2.6 per cent., with many or all our competitors ahead of us. Many have had double the growth rate we have sustained, and indeed more than double the rate we have sustained—it is true that some of them had rather special and particular circumstances.
Therefore, we need to give the greatest possible attention to strengthening our export industries. This means, above all, that we must encourage a level of investment which we have not touched for a long period of time. With all our other problems, one of our major underlying difficulties is the fact that the share of the G.N.P. in this country being devoted to investment is inadequate in comparison with our competitors and totally inadequate in comparison with our needs. Only ten days ago I was speaking to the production director of one of our leading tractor companies. He had been visiting a sister company in the E.E.C., in fact in France. He said that they were stocked with the most magnificent machine tools while our machine tools are nearly falling apart.
264 And, my Lords, the sale of machine tools in this country is contracting at the present time. The position of the machine tool industry is a very good indicator of the health of industry, and a very good indicator of our need for improved investment. So we need to encourage investment in every way we can.
In order to do this, particularly and predominantly in the export industries, there must be a reasonable prospect of profit. I very much hope that we shall hear less nonsense spoken about profits than we have heard over past months. For my part, I am extremely glad that some of our banks have made adequate profits to save a number of small companies from going broke over the last six weeks and indeed the last six months; because, as is well known, the banks have been supporting many companies which would have gone to the wall if the banks had not had surplus resources with which to do it. If the Government educate some of their supporters—and the education is needed on both sides of the House—in the importance of profits, properly earned, they will have done a great deal towards assisting in the export drive that we very badly need to have.
With the need to have the confidence in industry to invest, and the expectation of profit, we have this extremely delicate situation on the domestic side, because to encourage the home market we must control to some extent demand on the home front. Here I think the whole House will give the greatest sympathy to Her Majesty's Government, because there is a balancing and acrobatic act to be done of the greatest difficulty in ensuring that demand on the home front is restrained sufficiently to give the fullest possible encouragement to the export drive; but, at the same time, we need to maintain an adequately buoyant home demand to enable industrialists to feel that they are not going to be in serious difficulty in selling on the home front. As we all know, it is necessary to have some adequate place in the home market if we are going to have a really vigorous export campaign built on top of it. This extremely difficult balance is one which the Government can achieve only with the greatest skill, and I think the greatest luck.
Above all, in controlling the domestic demand we have to bear in mind all the 265 time that we do not want to contribute to a world-wide deflationary situation. For my part, I would rather risk inflation continuing—not at the present excessive rate, but a degree of inflation, or, rather, a slower progress in controlling inflation—than risk plunging ourselves into a deflationary situation at home. That would create unemployment with all its social and economic costs, and I fear also that if we have the kind of unemployment that a world-wide deflation could bring it would have political consequences of a very serious order. So it seems to me that the balance of risk is on the side of moderate control of the home market, rather than on the side of running the serious risks that could flow from too great a degree of deflation in purchasing power at home.
The problem of purchasing power at home is linked closely with the problem of control of inflation and purchasing power. Here, we on these Benches are bound to say that we cannot go along with the optimism of the Government which asserts that one can control prices but can leave the control of incomes to voluntary agreements. We wish it were so. We are, after all, Liberals—we hate restraints. But there is no evidence that this can be done. We, on the other hand, have said again and again from these Benches that we do not hold with the kind of detailed controls which the last Government imposed through the detailed, and quite unreal, clauses and complications of Stage 3. In any case—and let this be said aloud in the country—Stage 3 is far too inflationary in itself for the situation in which we find ourselves. It is no secret, surely, that one major reason why people are beginning to settle under Stage 3 is that intelligent trade unionists know perfectly well that Stage 3 is so inflationary that if they do not settle now they will get a very much worse deal in a very short time. I, for one, have heard them say that, and of course they are right.
Some control there needs to be. The kind of control needed, as we have said so often, is that the Government should determine, on a rational estimate of what growth rates are going to be—and of course they will get it wrong to some degree but not so wrong that it is disastrous; I have never seen an estimate of this kind that was not wrong 266 in the event, but in this matter it is better to travel happily than to arrive—how much additional money can be paid out in terms of additional pay. This is where the power and the authority of the trade unions and the T.U.C. and the C.B.I. come in. Control of that global amount of money is the Government's proper business in looking after the interests of the public and controlling inflation. That amount of money should then be handed over to the bargaining partners to do the job which is essentially theirs; that is, to decide how that amount of money is to be distributed between the different claimants. That is not the Government's job, in our view; but it is most emphatically the Government's job to ensure that the total amount paid out is not exceeded in the public interest. If the Government can move in this direction towards an orderly and voluntary policy—that kind of voluntary policy within the framework of control but which leaves a vast range of important decisions for the trade unions and the employers to make—then they will have our support.
In attempting to control inflation we have to look at the problem of saving. I want to suggest that it is going to be extremely important, and also extremely difficult, to restore confidence of ordinary people in the idea of saving and investment. It would be an extremely good thing if additional money paid out could find its way into investment and savings. But why, after the experience of the last few years, any individual should seriously save is very difficult to see. I entirely understand the viewpoint of young women who say to me, "If I have a few pounds I buy some consumer goods. By the time I am married their cost will be a great deal higher so I am getting them now". They are not saving—and why should they?
May we ask the Government to give the most urgent attention to ways of restoring faith in the idea of saving. We need a follow-up, an implementation—perhaps on a different scale—of the ideas which existed in the previous Administration for the encouragement of the wider ownership of the equity in industry, for the encouragement of sharing in profits, for any other ways in which Government can restore the idea that it is a good thing to save. We need to defeat the 267 idea which has been upon us, understandably but disastrously over the last two or three years in the face of increasing inflation, that we want the money now and having got it we will spend the lot because it will not be worth anything if we keep any of it.
The third point of the greatest importance, though of a different order, is ensuring that hardship does not hit those least able to bear it. Let us be frank with people. Surely the last Election showed us that people are clamouring for facts, honestly told them. They know the situation is difficult; they do not want to be fooled with fairy stories. Tell them that there is no increase in the standard of living coming to the people of this country for quite a time. It will come again when we have earned it. The fact of the matter is that nearly all of us, from top to bottom and from bottom to top, have been paying ourselves a great deal more than we have been earning; to say this, and to say it clearly, and to spell out the implications is one of the first tasks of Government.
So we have to ask ourselves, who are the people who cannot take the hardship that is involved? It is not a difficult question to answer. There are two clearly defined groups: there are the old and there are families—people with children. Those are the groups who cannot stand rising prices; those are the people who are faced with real hardship, and those are the people who should be saved from that hardship. Therefore we welcome the determination of the Government to raise old age pensions, retirement pensions. This is assuredly right. We would welcome also a much clearer undertaking from the Government that they intend to do something really substantial about family allowances. Why not family allowances for the first child? This would do more to alleviate real hardship than any other single act. May I say that it is not a had idea to see how much of that additional payment can be made from alterations in social security payments related to people's earning power and in the employers' employment of individuals. It can be done much more quickly, apart from anything else, and it can make a transfer direct from those who have earned additional money to those who are 268 in need. It will operate much more quickly than the tax system, which always operates with a time lag. It can be altered much more speedily as the economic climate changes than can alterations in the tax system which always tend to come too late, by which time the situation has changed and a new policy is needed.
Because we believe in this so strongly we deplore the Government's intention to waste £500 million on food subsidies. In this country 45 per cent. of people run a private car; we spend £6,000 million on drink and tobacco. I drink and I smoke—a little of both—but that figure represents nearly £120 for every man, woman and baby in this country. I defy the Government to say that people who can spend £120 on drink and tobacco need to have their bread subsidised. It is far better to take that money and pay it out in family allowances. I know the weakness of averages, but that figure of £120, I should have thought, was the limit and that it would be difficult to consume drink costing much more than that amount in the course of the year.
§ BARONESS SEEAR
I said I was a moderate drinker, my Lords. But this is very widely spread and people who are spending that amount of money can subsidise their own food and leave the money that is available to be given to those who really need it. In this country we have curious ideas of poverty at the present time. We are bemused by theories of relativity in poverty. It is all right up to a point, but I absolutely repudiate the statement once made by a colleague of mine that in a country in which somebody has a Jaguar it is poverty to have an Austin 7. Poverty in an Austin 7 is not poverty. To say so is nonsense. There are far too many people in the Government Party who have been bemused by nonsense of that kind. Why are the Government doing it? They know it is nonsense, and they are doing it because their masters, the trade unions, tell them to do it. We have been told that there is a social contract. Of course there should be detailed consultations between the Government and the T.U.C. and the C.B.I., but it has to be said, and it will be said repeatedly from these Benches, that expenditure of the taxpayers' money on 269 food subsidies or anything else is the business of Parliament; it is not the business of the T.U.C.
§ 4.16 p.m.
§ LORD ROBERTHALL
My Lords, I should like to join in the thanks which have been given to the outgoing tenants of the Front Bench and the welcome and good wishes to the incoming ones which have been expressed by a number of noble Lords—not to mention the dilapidations. But in particular, as an economist, I should like to congratulate a fellow economist, the noble Lord, Lord Balogh, on achieving Ministerial rank. As the noble Lord knows, he and I disagree on some things but he has done the country a good service in compelling us to think about the problems of payment for North Sea oil, and I wish him well in the difficult times which I am sure are ahead of him. I was delighted to hear him adumbrating the hopes for the future if we get through these difficult times and I think he stood up to his baptism of fire very creditably.
I do not suppose anyone would deny that the country is now in a most hazardous economic situation, partly of our own making and partly due to external events. We all welcome the statement in the gracious Speech that the Governmentwill give the highest priority to overcoming the economic difficulties created by rising prices, the balance of payments deficit and the recent dislocation of production.But I agree with all the noble Lords and the noble Baroness who have spoken so far this afternoon, that as the Chancellor of the Exchequer is going to deal with this next week no useful purpose would be served by attempting to discuss these problems in detail now. I will confine myself to the hope that he will leave enough room in the economy for the increase in exports that we need so urgently. I agree with a good deal of what the noble Baroness, Lady Seear, said on that problem, though I do not think there is much risk at present of a home deflation. But here again we shall not know about that until we have heard the Budget speech.
In my view, the most important part of the gracious Speech was in the two paragraphs which referred to the need for "national unity at this difficult time", and the proposed discussions with the T.U.C., the C.B.I. and the others concerned 270 about "methods of securing the orderly growth of incomes on a voluntary basis". In effect, this is part of the new social contract which was a feature of the Election Manifesto of the Labour Party. This question has already been mentioned in a number of speeches in another place and in the debate in your Lordships' House a week ago, and I have been much helped in clearing my own mind by having heard and read those debates.
I agree with the noble Lord, Lord Platt, that we are in a crisis of our national affairs and that we have to think of something new if we are to arrest, and I hope reverse, the continual deterioration in our relative economic and political standing in the world, which has now been going on for so long. The miners' strike demonstrated finally what had seemed very probable up to that time: that any one of a number of trade unions, if it has the support of the trade union movement, can bring the country to a standstill. It is a sad commentary on the demand of the Labour Party that the Government should occupy the commanding heights of the economy when, having secured most of them by nationalising our vital industries, they are now in the position that the trade unions can use the strategic positions to enforce their own demands at the expense of everyone else, whether the Government agree with them or not. As the noble Earl, Lord Gowrie, said last week, this is the third time in recent years when the Administration has been defeated by powerful groups.
There has been a good deal of debate about the meaning of the result of the Election. Whatever else it means, it clearly means that the large majority of the country is not prepared to support the policy of fighting it out with the unions. I think we should be glad about this; it is a last-resort policy and one which, if pursued, would leave the country even more damaged and divided than it is to-day. In any case, it is good to know what the country thinks on that important issue. I have always been in favour of a statutory wages policy, and am still in favour of it. My thinking has always been based on the assumption that the trade union movement as a whole could be brought to support it. We can now take it as a fact it is no good having a statutory wages policy when it is within the power 271 of any one of a number of groups to make it unworkable.
In the debates, both here and in another place, two points have often been made about the anxieties which are now felt. There was scepticism about the way a voluntary agreement could be made to stick, and whether the Trades Union Congress have the power to make anything constructive stick. A number of noble Lords raised the question. The noble Lord, Lord Greenwood of Rossendale, said that he had doubts about it but at least a voluntary policy had more chance than a statutory policy. I am not quite so pessimistic as that. The noble Lord, Lord Hughes, said that, whether we thought it would work or not, it was hopeless to embark on negotiations by questioning the good faith of the other party. With all deference to the noble Lord, Lord Hughes, I do not think that is the point. We have had a number of agreements which could be made to stick for only a short time. It is only prudent to ask whether another agreement is likely to be more successful.
Let me say at once that I do not think this is the fault of the T.U.C. Trade unionists are just like the rest of us; most of us still like to think that our word is our bond. The reason why these doubts are felt is that at present the T.U.C. have no power to carry out any agreement, and to my mind it is a mark of the honesty of the T.U.C. that they insist on voluntary agreements, not so much because they do not like statutory agreements—if there is a statutory agreement to enforce something on the employers they are in favour of it—but because they know that they cannot enforce a contractual, let alone a statutory, agreement which places obligations on the workers.
It seems to me, therefore, that the direction in which we should now move is to try to develop some sort of institution which will recognise the fact that in the sphere of industrial relations the trade union movement has become the strongest power in the land—stronger than Parliament. But at the same time we must seek to persuade the movement that power should be exercised with responsibility. At present, it is mainly a destructive power. Any one of half a dozen unions can stop the economy, if 272 it is in a key position, and because it can count on the support of other union members in doing this. I was taught to sing "Solidarity for ever!" in the first job I ever had. Along with the rest of the country, other trade unions are damaged by this sort of thing, but it would mean a revolution in their ideas to expect them to get the economy started instead of stopped.
Solidarity is the highest virtue; scabbing is the worst crime. A small group, if strategically placed, in a big plant, could stop the plant, and if the plant was a main supplier of materials or components, that group could stop a great many other plants. But those who are damaged by this action cannot do anything—not within the present codes of morality—to prevent or alleviate the damage. The whole country suffers from interruptions in production or delays in growth, and the people who have caused the stoppage feel they have won a victory. The damage is so widespread that it is not noticed—leap-frogging, for instance. It is a victory for one group and the benefits are gradually eroded as the sufferers try to catch up; those who gained originally have in their turn to pay higher prices because of the catching up. This situation is commonplace. It is easier to point to what is wrong than to see how to put it right.
I think the first person to see this danger was Sir Stafford Cripps, under whom I had the privilege of serving when I first went to the Economic Section. He felt that in the new society to which planning for full employment was taking us a Government would have to have the co-operation of both sides of industry. To try to get such co-operation he established the Economic Planning Board, a place for joint discussions between representatives of the Government, the F.B.I. (as it was then) and the T.U.C.
I was a member of this Board throughout its life, and it was a complete failure. It was not the fault of the F.B.I. or the T.U.C., but of the Government. Its representatives were senior civil servants, not allowed to discuss the Government's plans, except in vague terms, and certainly not allowed to make any bargains. It was the idea of Sir Stafford Cripps, but he had not thought it through. The Government were offering voluntary co-operation in such vague terms that it meant 273 nothing, and one could not expect to get anything in return. After the 1951 Election, when "planning" was a dirty word in the Conservative Party for some years, that Board had even less to do. No wonder it died!
The next experiment was made by Mr. Selwyn Lloyd when he was Chancellor. He understood the problems of a mixed economy and made "planning" a respectable word again to the Conservative Party. He set up the National Economic Development Council, "Neddy", which is still with us. That is a great improvement on the old planning board, because at least Ministers go to it. But successive Governments have been too old-fashioned in their ideas to make "Neddy" into the kind of instrument the country needs. There is still the feeling on the part of the Government that as they are the source of real power, it would be condescending to say anything too definite at "Neddy", to get down to solutions and to make bargains. The feeling is that to do that would derogate from Parliamentary sovereignty. But everyone knows that Parliament is quite incapable of negotiating bargains.
What, then, can be done? We must recognise that any solution of our difficulties has to carry the workers with it if it is to have any chance of success. Then we have to face the difficulty, already discussed, that the T.U.C. is not thought to have the power to commit its members. It is unlike the Government. The Government, if they have a Parliamentary majority, can make and can carry out commitments. It is often said that the C.B.I. is like the T.U.C., because it cannot commit its members, but that is much less of a problem. The number of employers is comparatively small so it is possible to enforce the law against them if necessary, and to get public opinion against recalitrants. If we had a strike by employers to support a small group of their members, I think it would get very short shrift. So it appears that the T.U.C. is the only one of the three not in a position to deliver the goods. It is my belief that they could do so if approached in the right spirit, but that spirit has to be the spirit of hard bargaining.
I think, therefore, that the last Administration missed a great opportunity when they were approached by 274 the T.U.C. about a settlement of the miners' dispute. They should have said, "snap". Whether what the T.U.C. offered was a watertight offer or not did not matter in the context. The whole country would have seen that a bargain had been made, that the Government were carrying through their undertakings 100 per cent. The T.U.C. would not have been able to deliver 100 per cent., but they would have had to start thinking about the problem. I was very sorry that that offer was not taken up.
§ THE EARL OF LIMERICK
My Lords, will the noble Lord forgive me. I hesitate to interrupt. I have been following his argument with great interest. He said earlier that he thought it was a mark of the honesty of the unions that they preferred a voluntary policy to a statutory one because they were in doubt about their ability to deliver. Would be not agree that if there is that doubt there is a better chance of getting acceptance of a statutory policy than a voluntary policy?
§ LORD ROBERTHALL
My Lords, I am trying to say that you must have a statutory policy in the end, but that it will not work unless you can get the trade unions to accept it, and that that is the way in which we have to move. I am saying that if the last Government had accepted the T.U.C. offer it would, to my mind, have been a step in the direction in which I think we ought to go.
I hope that when the present Government get down to the details of the new social contract they will not give away too much in advance. I am afraid they have gone too far already in this direction. For instance, I do not think they should have offered to change the law on picketing without some hard undertaking about the circumstances in which picketing will be used. It is no good going to the negotiating table when you have made all the concessions you are going to make publicly in advance, and that is what I think the Government are in danger of doing. I am all for a social contract, because I think that is the only way that we can gradually get the trade unions, who can stop the country at any moment, to co-operate. I am saying you should not tell them all the lovely things you will do and then say, "All right, you go out and be good boys". You should say, "This is what I will do. What are 275 you going to do? What can you deliver?".
My Lords, I apologise for the length of my speech, although it is far too short to do justice to the subject. There are all sorts of difficulties which can be brought forward. Everyone who has thought about this agrees that if we are to get our industrial relations right it will take a long time, a lot of education, and a great deal of trial and error. We have tried all the other things that we can think of. What has happened? Inflation is worse today than it has ever been in peace time. The prospects are that it will accelerate. Our industrial production falls more and more behind that of other developed countries. Our exports are fully competitive on price grounds, but we have a very bad reputation all over the world in regard to our ability to meet delivery dates and so on. If we have to think about a new approach, as I believe firmly we must do, let us start by admitting that the old ones have been anything but successful.
§ LORD RAGLAN
My Lords, may I ask the noble Lord a question before he sits down? He said that he is in favour of a statutory incomes policy, but to many of us it appeared that the last statutory incomes policy worked unfairly. It seemed to us to be effective only against Government employees and employees of nationalised industries and the like, and that private industry could get around the rules by various ruses.
§ LORD ROBERTHALL
My Lords, I agree that it is extremely difficult. I have thought about incomes policies for a very long time, and my own view is that none of them have been properly thought out or properly handled. Of course, it is easy to shoot it full of holes, but where have we got by not doing it? We must not give up hope. We must not say, "You will never get anywhere with the T.U.C.". Let us have another go. That is what I am saying.
§ 4.35 p.m.
My Lords, at fourth wicket down, one might be tempted to make a tour of the horizon at considerable length, but in the presence of a Bishop I must remember that I should love my neighbour as myself and I shall endeavour to confine myself to my usual more modest length. I was sorry to have 276 to rise on the somewhat gloomy note of Lord Roberthall's speech, which I am afraid one cannot disagree with, but it certainly was a very gloomy performance just at the end. So far I have listened with great interest to all the speeches. I wonder which of the economists five years ago would have said that in the winter and spring we are passing through we would be paying the prices we are for commodities. I doubt whether even Lord Balogh would have done that. It applies to oil, cotton, cocoa, copper, the lot. Why is this? I believe there are two main factors. For the first time we are now competing against the newly industrialised countries, particularly in the Far East; and, of course, there are 75 million more people in the world than there were last year, and I do not quite know how many more than there were five years ago. That is a very important factor, one I have mentioned before.
I think the most important factor of all now is that there has been a flight from currency into commodities. In the case of Japan the economic miracle has led to accumulations of huge overseas favourable balances, which have been invested in cotton, wool and other commodities that I do not know of, and this has led to the forcing up of prices, particularly of wool. We cannot do a great deal about the increased demand arising from the extra mouths in the world and the extra industrialisation and higher standards of living, but we could do at least as much as we can, nationally and internationally, to discourage the private flight from currency into commodities. Well, of course, people would say, "Stop inflation", but that is not a very easy thing to do. Normally the speculator in the commodity markets fulfils a very useful purpose. He irons out the bumps and the hollows. But when the movement is all one way, out of currency into commodities, he then becomes an absolute menace to the world in general by forcing up the prices of commodities and thus forcing up the cost of living of everybody, ourselves and everybody else. This has happened particularly in America but also in this country.
I think that we should do more to make the buying of commodities by outsiders more difficult. I am told that if you put up a 10 per cent. margin, which some people are prepared to lend to you, 277 you can then indulge to your heart's content. It means in effect that to invest money in the commodities market is a good deal easier and cheaper than it is to invest in the more traditional methods of the Stock Exchange. This does seem to be a great pity when one considers that the rise in commodities has these deleterious effects on the whole community; whereas money flowing into the Stock Exchange, into gilt edged and equities, means that the Government and industry can borrow cheaper, and thus one might expect it to have a lowering effect on the cost of living.
There is a further point. There are enormous oil balances and various other international balances of money floating about in the world to-day. The Arab oil producers have set an example. They have, one might say "made a corner" in oil, and we are paying very dearly for that. I suppose other people think the same about other commodities. In fact, reading The Times this morning, I see that people are already beginning to discuss whether they cannot "take us for a ride" on commodities in the same way as has occurred with oil. The whole question of this flight from currencies into commodities is not a creature of my brain, because I notice that to-day The Times has a very long article on the subject with a table showing how commodities have gone up as the figures of the Stock Exchanges of the world have gone down. I think the conclusion is pretty clear, that that is where the money has gone, but that is not where we want it.
The other great outlet in the flight from currencies is land and property. That seems to me to have a remarkable ill-effect on the community. Land prices go up, farmers' overheads go up, the rents of business premises go up, and anybody contemplating death and owning land gets more and more apprehensive. Many useful services to the community vanish because people cannot afford the rents which the higher prices of land warrant. The effect on housing is quite devastating. From the way that the Left-Wing politicians always talk, one would imagine that the rise in land and property prices is the result of the efforts of some evil speculators. That is not so. Once again, the biggest factor is this flight from currency into something tangible, and the people responsible for 278 the largest proportion of this operation are the guardians and the saviours of the people: the insurance companies, pension funds, unit trust managers, and so on. It is the managers of these firms who have lost confidence in money and the stock markets, and have moved into pastures which, if not new, are rather less traditional than stock markets.
Precisely the same comment applies as in the case of the flight from currency into commodities; it pushes up the cost of living and redounds to the detriment of the whole community. I only hope the Labour Government can do something about taking the profit out of investment in land and property by outsiders, without going to the lengths that they always threaten. For instance, it is absurd for builders to bid up land prices for development in the way they have been doing in the South—£3,000, £4,000, £5,000 a plot—thus landing themselves with houses built at prices which nobody can afford. And yet to expect to take existing farmland at existing use prices is equally absurd. To me a price of, say, £1,000 a plot for a house is reasonable. This would do away with the ridiculous situation whereby if a Conservative Government are in power and your land is taken it becomes an El Dorado, whereas if a Labour Government are in power and it is taken it is a disaster which has to be fought over tooth and nail. We want the happy mean between the two.
One must not forget that the overpricing of houses is not all due to paying too much for land. The cost of building labour in the South is immensely expensive. At the moment in my part of the country you pay a shilling for a bricklayer to lay a brick, and carpenters get rather more in proportion. This is probably due to the overloading of the construction industry by the last Government. I hope that the Labour Government will benefit from their mistakes. Mean while there are houses which cannot be sold, because the prices are too high. The builders and the building societies are all crying out to the Government for help; but surely the right answer is to force the developers to recognise their folly in paying too much for their land and their labour, and to cut their losses and start again, sadder and wiser men. But that situation can only be brought about through financial pressure.
279 My digressions into housing and land are part of the general theme of inflation. I would not expect an answer to-day because I suspect that the Government expect that housing will be dealt with perhaps to-morrow, or at any rate on another day. I shall turn for a moment to energy, which is such a large subject that I should have liked to have a separate debate on it. On coal, I do not share the euphoria which has been sometimes expressed. It is a valuable raw material, but it is an extremely inconvenient type of fuel except when burned in power stations. I do not see the Generating Board being all that keen on increasing their proportion of coal generating stations—a case of twice bitten always shy. If I were in their place I should like to see a bigger proportion of their capacity nuclear and hydro, and particularly hydro because that is the ideal method of generating electricity if you can possibly manage it, because you cannot use it for anything else. You can dig out and turn coal into chemicals and goodness knows what else, and the same with oil, and they are really too valuable to be burned as steam raisers.
The French appear to be getting on with ordering nuclear capacity power stations. We do a great deal of talking, and it looks to me as though our natural philosophy is going to come into play—always searching for the most sophisticated and best. In engineering, as in everything else, the old proverb of the best being the enemy of the good very much applies. I think that the present generation of incompleted nuclear stations having fallen far behind is an instance of that philosophy. In any case, you can "bet your bottom dollar" that any proposed new nuclear station, or hydro scheme of any sort, will be opposed tooth and nail by every amenity society in the country. That is another matter that always incommodes Britain moving ahead.
What is important for the energy consumers of this country is to know as quickly as possible what are going to be the comparative prices of these various alternative fuels, because we have moved into a new era. It is not very easy to change from one fuel to another. I do not see much of industry moving back from oil to coal, for instance. However, 280 when starting from scratch one can then choose the most suitable and cheap fuel, and one wants to know how oil, off-peak electricity and gas are going to compare in price.
This is the season of the year when all and sundry, qualified and unqualified—I am unqualified—give the Chancellor the benefit of their advice. I shall mention only one fact of which he ought to be aware but which he might have omitted; that is, that the better off are extremely heavily taxed already, and that most of them, through their taxation levels, are quite unable, whatever they do, to improve their income in such a way as to keep pace with inflation. The burden of taxation on them is really quite enough to satisfy the most sadistic of Chancellors and, rather than devising new taxes, he would be much better employed to see that the existing ones are paid.
Finally, there are one or two general points which I should like to make. The pound is much too low. Compared with the price levels in practically every country in the world the pound is at a ridiculous rate. The noble Baroness, Lady Seear, talked about growth rates, but I am extremely suspicious of them. When people talk about the marvellous growth rate on the Continent, I always wonder whether they take into account the enormous increase in the price of a cup of coffee or a bottle of beer across the Channel. The noble Baroness also spoke about our negative balance of payments over the years. It is a deep mystery to me, which I have never been able to understand—no doubt the noble Lord, Lord Roherthall, could enlighten me—why there are only very rare periods when our balance of trade is favourable, yet we appear to own enormous properties all over the world, far bigger than the foreigners own here. I suspect that the figures are "bunk".
As I said, the price of land and property is much too high, and the price has been kept up by the proliferation of credit which has been much too easy to get, and which has been invested in property of all sorts. I hope that the Labour Government will descend upon the markets and see that the amount of credit is reduced very heavily or confined to its proper purpose, which is the finance of industry and commerce. If the present Government can get us out 281 of any of these difficulties, they will deserve well from the people.
§ 4.52 p.m.
§ LORD DAVIES OF LEEK
My Lords, I have listened with interest to every speech that has been made and, in particular, to that of the noble Lord, Lord Aberdare, who opened in his usual crisp but courteous way. I want to congratulate my noble friend Lord Balogh on his speech, towards the end of which he made some constructive suggestions. But in view of the remarks made by the noble Lord, Lord Hawke, and my noble friend Lord Balogh about nuclear energy, may I say that I hope the Government do not expect to be able to rush right away into the use of nuclear reactors, because under the previous Government we have entirely turned those over to the General Electric Company. The noble Lord, Lord Hawke, said that he would bet his bottom dollar that there would be protests by those who want to protect the environment against nuclear reactors. My God!, my Lords, I should hope that they would protest, because to those who know what the cracking of the Windscale reactor was like, or to those who know about the reactor in Yugoslavia or the one in Russia, this is not a matter to pass by lightly.
I would rather mankind used coal perpetually than took a risk with water-cooled reactors, without knowing what to do with the radioactive effluent which we are now throwing into the sea willy-nilly. The consequences of the cracking of the radioactive reactor at Windscale, which damaged film in the Kodak factory at Watford, should be known, as should the fact that the Astronomer Royal was told to stop counting the radioactive fallout in London and was informed that his job was to be an astronomer and not a measurer of radioactivity. This conspiracy of silence about the production of radioactive energy must be looked into in depth and thoroughly thought out, before we plunge into the possible destruction of our environment. I listened with interest to the contribution of the noble Lord, Lord Roberthall, but may I say that the risk which we are running in trying to evolve a voluntary system is much better than trying to use a sledgehammer to produce a system of society which is querulous and which, ultimately, will not work.
282 The noble Baroness, Lady Seear, made her usual cogent speech and I nodded agreement with much of it. It has been said that the bête noir, the naughty boy of the economy is the trade union movement, and during the General Election the question was asked: Who governs Britain? It was a rhetorical question, the implication of which was that the previous Prime Minister with all his armour of honesty on his back—and I think he is an honest man—went to the country because he believed that the trade union movement was getting too powerful. But I want to ask a question. The man who pays the piper calls the tune, and who paid £3 million into the Tory Party's funds between 1968 and 1973? The answer is that big business paid it. I should like people to know that power is not always overt, and it is often in places about which the man in the street does not know. Therefore let us stop hacking away at soap-box points and tackle—
§ LORD DAVIES OF LEEK
My Lords, it will be a pity if the noble Earl stops me, because I want to keep my speech short. However, I shall give way.
§ THE EARL OF LAUDERDALE
My Lords, the noble Lord has given a figure for the sums of money paid by big business to the Tory Party. I wonder whether he has a comparable figure for the sums given by the trade unions to the Labour Party.
§ LORD DAVIES OF LEEK
Yes, my Lords. Of course I should not get up and make a statement like that unless I knew the answer. All the noble Earl has to do is to open the report of the Labour Party's annual conference. All the contributions are there for the world to see. The contributions to the Labour Party over the last year amounted to £610,000—
§ LORD DAVIES OF LEEK
My Lords, the noble Earl and I will go into the Library and add it all up, if he likes. Whoever were the hawks or the doves in 283 the Conservative Party before the Election, the bald fact is that the lamentable record of the Conservative Party is probably the worst since the 1930s. I have here a copy of the Snowden Budget. The country was nearly ruined in 1929 when Snowden was Chancellor—and I see an ex-Chancellor sitting opposite. In those days, the poor boy had to raise by taxation another £47¼ million and that was thought to be a critical state of affairs. The country was on the verge of destruction. When will the British people stop denigrating themselves? All over the world we are running down our own country, and part of the propaganda abroad is due to some of our own remarks about this country. Our engineering and machine tool industry—and I happen to know a little about it—is still as good as anyone else's, and if we work together we can still get the markets.
I shall try to point out why the Conservative Government were getting tired of themselves. Power is a moving feast and noble Lords opposite should not be depressed. I have been in the Palace of Westminster for about 30 years, and I know that the pendulum swings from side to side. The duty of noble Lords opposite is to gird up their loins and work towards the success of the Labour Government's policy in this transitional period. The last time he took office, the Prime Minister managed to break us out of the red and into the black and with support he can do it again, although noble Lords opposite will probably help to defeat him. But I do not want to see the Party opposite growing too small to sit in the seats of the mighty; I do not want to see them standing unsteadily upon them, turning them into soap boxes, and begin praising an acquisitive system society.
By the changes of entry to the Common Market, never mind the pros and cons of cheaper or dearer food, the regional pattern of trade has definitely altered, to the detriment of the British businessman. I can give facts and figures to illustrate it. We must give up playing shops with the Common Market. We have thrown away access to some of the world's richest raw materials and I ask the Government, in their negotiations with the Common Market, if they are not satisfied with the terms to ensure that there is no more rushing through Acts of Parliament, and 284 that instead they will appeal to the British people and let them decide.
§ LORD GLADWYN
My Lords, what raw materials is the noble Lord referring to, and how are we prevented by our membership of the Common Market from having access to raw materials, provided that we pay the price for them? We can buy them anywhere we like.
§ LORD DAVIES OF LEEK
That is an absolutely fair question. Of course we are not prevented, but there is not the same ease of access and there is not the same willingness of co-operation. There are others of us who have been around. I am thinking particularly of the sugar problems of Fiji and, thinking off the cuff, of access to Australia. I will conclude in a moment on the subject of multinational firms, but I ask noble Lords not to interrupt me too much as I wish to speak for only about 15 minutes.
To-day, Britain is only beginning to accept and realise that our commitments are beyond our resources. The next thing I would ask the Labour Government to do is to get rid of its folie de grandeur and not to think that we are still an Imperial Power. We have had questions to-day about Simonstown and bases in the Indian Ocean. It is complete tommyrot. We cannot even hold down Northern Ireland. That does not mean that we should not have a conventional force, or a conventional Army; but for God's sake do not mislead the public! Vested interests are pushing rearmament at a pace into the nuclear phase, but is that realistic? We need good conventional forces and we need to realise the limits of our commitments. We can no longer strut the world stage as a great independent Power, but that should not deter our people from an increase in work, wealth and happiness.
Nevertheless, when we did have a vast Empire its alleged benefits never seemed to seep down to the underprivileged, the aged and the poor. In the 1900s, one-third of London's population was slung into a workhouse coffin—I repeat, one-third—and we had the greatest Empire in the world. If people do not believe me I can tell them where to find out. By examining the L.C.C.'s statistical abstract of deaths for any year from 1900 up to 1930, it will be seen that one-third of London's population died in the 285 workhouse—and we were the richest Empire in the world. So let us get rid of these illusions of grandeur and get down to the work of making our people happy, and also worthy of living decently together in a neighbourly way in our society.
British Imperialism, which at its peak embraced one-quarter of the globe, reflected the conditions of its creation and growth, which have generated the revolution of awakening and expectation. British and European man has created this revolution of awakening and expectation. It was rightly said by the noble Lord, Lord Hawke, that the Far East and other underprivileged areas want a share of the world's goods, so the trading and financial profits of imperialism, flowing back to the base, in the past made for a parasitical system of reliance on easy money and easy goods. The result was that domestic British industry was, and still is, subordinated to speculation and money spinning.
From 1870 to the First World War—Blue Books galore in our Library illustrate the fear we had of competition—the City of London, while not being too remote or openly opposed to industry, intensified financial imperialism. It believed more in the prestige and status of sterling than in investment in home industry. Only the other day the magazine, Director, reported the speech of the Governor of the Bank of England at Mansion House which confirmed my statement. He was worried about the tendency of the City to think less of industry.
The noble Lord, Lord Stokes, has illustrated the problems of British Leyland. I hold no brief for all that he had to say at one time about the Common Market, but we have a firm like the British Leyland Motor Corporation which, because of the topsy-turvy, vain and glorious world in which we live, can be said to be a case in point if we study its statistics for 1971, 1972 and 1973. In the first of those years the firm sold £1,177 million worth of goods at home and overseas. It had huge exports, and in 1973 increased those to£744 million. Its total sales were£1,564 million, and it employed 204,000 men and women. Now that firm is quoted on the Stock Exchange as worth £89 million. 286 That is all. I think it was the noble Lord, Lord Hawke, who referred to the fact that a block of flats and offices around the City were quoted higher than the entire Leyland outfit. This is idiocy. This is money-spinning, and as a result the true entrepreneur is not getting the position he deserves in society.
One of the jobs of this Government in their period of power will be to encourage honest profit-making. I hope that the entrepreneur will do it. What was the cri de coeur of Mr. Heath (I have his speech) when he spoke to the Institute of Directors at a luncheon? I had better paraphrase it, because I have already spoken for 15 minutes. I should love to quote it in full, but I think the House will accept my rough précis of the speech. "A frank talk to the bosses"—that is my heading. What did Mr. Heath think? He was frank at that meeting with the Institute of Directors in June, 1973, which was reported in the Director. Listen to Mr. Heath:The curse of British industry is that it has never anticipated demand. When we came in we were told there were not sufficient inducements to invest. So we provided inducements. Then we were told the people were scared of the balance of payments difficulties leading to stop-go. So we floated the pound. Then we were told of the fears of inflation and now we are dealing with that and still you are not investing enough. Industry must come clean with its own employees. All through our tripartite talks last autumn the employers' side never explained what had happened to the 8 per cent. productivity last year, yet the T.U.C. knew that this had happened and understandably they asked where has it gone.I should like to go on, but it would be imposing on the House. In other words Mr. Heath was let down by the speculators and not by the industrialists in Britain. It underlined the fact that whatever Government are in power, speculation can ruin it. If we want to be draconic, then it should be with speculation—and here I agree with the noble Lord, Lord Hawke—in land et cetera and we should encourage the industrialists to the full.
My Lords, I should like the Record to be kept straight. I said that the major factor was not the speculators. I said that these were the guardians of the savings of the people, who were going out of currency into real things.
§ LORD DAVIES OF LEEK
My Lords, I am sorry for the noble Lord; if he says that he is wrong, and he is radically wrong—Conservatively wrong. But do not get me on to this subject, because I am finishing on the multi-nationals. The multi-nationals, which are now encouraged (and at another time I will find the opportunity to develop this point), now have an income equal to that of 80 countries in the world; the gross national product of 80 countries in the world is no longer equal to the income of the multi-national companies now functioning. That is where power lies. Roche and other firms can dictate to Governments—to Tory Governments and to Labour Governments. That is one of the things the Labour Government should be looking at. Having said that—and I have tried to be fair—I think that Britain must re-assess the position and remember that the world is for human beings to live in, and not just speculators.
§ 5.11 p.m.
THE EARL OF BESSBOROUGH
My Lords, the noble Lord, Lord Davies of Leek, has given us one of his inimitably lively speeches, which we have all enjoyed. I am not going to cover the same ground as he has covered except perhaps so far as Europe is concerned. I rise to make only a few remarks in connection with the gracious Speech on certain economic, industrial and energy matters within the E.E.C.—subjects with which I have been very closely involved during the 15 months that I have spent as a member of the European Parliament. But before doing so, I would say how much I regret having been unable to speak in the debate on foreign and European affairs on Thursday. Unfortunately, this clashed with an important debate in Strasbourg on measures necessary to alleviate the energy crisis in the Community. As your Lordships are rather thin on the ground at Strasbourg, I felt that on that occasion I ought to give that debate priority over the debate in your Lordships' House. At this point I should like to endorse very much what the noble Lord, Lord Gladwyn, said on Thursday about renegotiating our entry into Europe.
To what the noble Lord said, I should like to add that if the Government are to re-negotiate certain E.E.C. policies within the various Councils of Ministers 288 —and I gather from the Foreign Secretary's speech yesterday that this is what they intend to do—then it seems to me essential that the Labour Party should have their delegation in the European Parliament. This Parliament, as your Lordships know, meets not merely for a week once or sometimes twice a month in Strasbourg or Luxembourg (for eleven months of the year, I may say) but also in committees nearly every other week in Brussels—for some of us, therefore, virtually a whole-time job. At these committees—and this is the point I want to emphasise—and indeed sometimes in plenary sessions and in the lobby, members of the Parliament meet the Commissioners on an almost day-to-day basis. At these meetings members often get an early idea of the kind of proposals which the Commission is likely to put to the Council, whether on economic, energy or industrial matters such as we are discussing to-day.
A Labour Government without a delegation in the European Parliament might get to know of such proposals only when they have already been put in their final draft form by the Commission to the Council—unless, of course, a Conservative or a Liberal member of the Parliament informs them. I dare say this could be clone on questions which are obviously of national interest in Britain and not Party political. Indeed, many of the questions which we discuss in the European Parliament are non-Party political, and if a Labour delegation was also present I believe that during the greater part of the time Conservative, Labour and Liberal members might well be taking similar lines in defending British interests. However, Conservative members (I do not know about the Liberal Party, but Conservative members) cannot reasonably be expected to deputise for Labour members at these meetings. At all events, in this respect the Parliament plays an essential role. Members can return home and report back to a committee of their national Parliament—and, incidentally, I hope that the two Select Committees on European Instruments will soon be set up; I imagine it is in the interests of the Government that they should do this—and the members can also report back to Ministers or officials in the Departments concerned with the particular problem at stake. The 289 European Parliament is also necessary to check the Community's expenditure from its own resources. This cannot very well be done effectively by national Parliaments even if they are able to obtain the draft budgets of the various institutions in advance.
The European Parliament is indeed a useful institution. Flying back from Brussels yesterday evening, perhaps the most senior and experienced British official, who is uniquely qualified to judge the activities of all the Community institutions, was sitting next to me in the aeroplane, and he repeated what he had told some of us before: that he thought the value of the Parliament was greatly underestimated by some who did not watch its activities as closely as he and his staff had done. It is indeed quite often members of the Parliament who are able to warn national officials of their own country what is in the pipeline in the dozen or so Parliamentary committees, whose meetings are almost always attended by the Commissioners themselves and/or their officials.
Now just a word on energy matters. I should take this opportunity, although he is not with us at the moment, to congratulate the noble Lord, Lord Balogh, on his appointment and on his maiden speech. I think it may be of interest to your Lordships to know that at that debate in Strasbourg last Thursday, when I could not be here, we had a useful discussion on appropriate medium and long-term measures to alleviate further the energy supply crisis in the Community. I recommend those noble Lords who may be interested to study this resolution, and perhaps the debate itself, with care, for it contains a useful catalogue of suggestions which I think should be of interest to all Member States. Certainly the Commissioner, M. Simonet, said it was most valuable and came at a very appropriate time, when the Commission was working on similar proposals. I am sorry the noble Lord, Lord Balogh, is not here because most of these remarks are directed towards him, but I hope the noble Lord, Lord Beswick, will tell him what I have said. That resolution contains some twenty proposals concerning alternative sources of energy and measures to conserve energy, and that document has now been transmitted by the President of the Parliament both to the 290 Council and to the Commission of the E.E.C.
Another interesting achievement last week—and I have not much more to say—was the success of the Conservative delegation in the Parliament in obtaining the decision that zero rating in value added tax, especially for food, can be an integral part of the V.A.T. system in each Member State. It has taken some of my honourable friends in another place some weeks to get zero rating duly recognised in other E.E.C. countries; and I feel sure now that, as a result of the British members' efforts, a similar decision will also be taken in the Council. There is, therefore, no chance now of taxes on food. This is a good example of negotiating from inside, and I hope the Government remain inside the Community.
§ LORD BERNSTEIN
My Lords, will the noble Earl kindly tell your Lordships which countries of the E.E.C. have not imposed the V.A.T.?
THE EARL OF BESSBOROUGH
My Lords, I think all the countries have now imposed the tax, but of course the rates vary in each, and none of the other eight countries has in the past had the system of zero rating, which we believe, and I imagine the Government believe, is in fact desirable in so far as goods like food and even children's clothing and other items are concerned. We have the principle of zero rating in V.A.T. properly established and this is an example where Parliament played the main role in getting the decision.
My Lords, may I say one brief word on industrial co-operation. I had a meeting yesterday in Brussels with the officials concerned with the formation of the proposed Federation of European Industrial Co-operative Research Organisations, a move to my mind which will help the establishment of the kind of single industrial base which my colleagues in the previous Government advocated frequently. In connection with the establishment of that Federation, since he is in the Chamber I should like to pay a tribute to the energy and foresight of the noble Earl, Lord Shannon. This Federation, established by British initiative, I believe has an important role to play in increasing co-operation, particularly in research and development in various 291 sectors of industry. Whatever the difficulties we may be having over the Common Agricultural Policy, regional aid policy or the attainment of economic and monetary union, things certainly are progressing within the Community in the less controversial areas—and there are many of them. I have cited only a small handful out of hundreds or thousands of questions which we have discussed in recent months. I only hope that one Government among the nine—that is to say our own—will not put the brakes on too hard. It will be sad indeed if all the work that the noble Lord, Lord Gladwyn, and I have been doing in the last 15 months in promoting the kind of co-operation which I have been describing and aiming towards, this single industrial base for the Community, were nullified. I hope, from the Foreign Secretary's speech yesterday, that this will not be the case and that the present Government will not turn out to be ostriches with their heads in the sand.
§ 5.22 p.m.
§ LORD KINGS NORTON
My Lords, may I say what a pleasure it is to see the noble Earl, Lord Bessborough, here and to hear him speak so pleasantly and informatively about his work in the European Parliament. By the gracious Speech the Government are committed to urgent action to improve energy supplies, to secure their efficient use and to ensure that oil and gas from the Continental Shelf are exploited in ways and in terms which will confer maximum benefit on the Community. This, I think we all agree, is not only an urgent task but a task of great importance and great magnitude and one which involves a whole spectrum of scientific, technological and economic investigation. I think it is most important that it should be a continuous task and I cannot feel that at the present time the Departments of State provide quite the best machinery for the sort of continuity which I think the task should have. These are days in which Departments change in shape, in which Departments are integrated and later are dismembered, and I think it would be much better if there were, in certain areas of high technology, agencies just outside the periphery of Government which could concentrate on the scientific, technological 292 and economic aspects of the national problems which it is so urgent for us to solve.
That is why I come back to what some noble Lords, including myself, were talking about last autumn, the desirability of an Energy Commission. I think we have learned from our recent troubles. The first of the obvious lessons was the inadvisability of being critically dependent on imported oil. The second was the obvious danger of being too critically dependent on a single indigenous source of energy. I think it is most desirable that as early as possible we should concentrate not only on the proper balance between the four elements which the noble Lord, Lord Balogh, mentioned—coal, oil, gas and nuclear energy—but bring into the account all the other possibilities as well.
The noble Lord, Lord Hawke, mentioned hydro-power. Hydro-power for us is inevitably limited. It is in no sense a substitute for coal, which he seemed possibly to be suggesting, but various forms of water power—tidal power, wave power as well as the waterfall, wind power, geothermal power which was mentioned by the noble Lord, Lord Richie Calder, in this House last Thursday—all together can make significant contributions to the provision of energy. We have been told on the best possible authority that it will not be terribly long before our offshore oil is in such supply that we shall have not only enough for ourselves but be able to export, and we all hope that this is true. But from the viewpoint of our balance of payments, to maximise our exports we shall have to minimise our home consumption. That is why it is most important to see how much we can get from all the other sources available to us.
In the short term we expect a lot from coal; in the longer term from gas and from nuclear energy. But I should like to come back to what I said a few weeks ago, which has been referred to by the noble Lord, Lord Davies of Leek, this afternoon. I have grave doubts about the proliferation of nuclear power until we have found how to control nuclear fusion. That is why I feel that there is an urgent need to consider in the long term—and nuclear energy on the grand scale belongs to the long term—the development of solar energy as our long-term major 293 source. The natural way of delivering energy from all the sources I have mentioned is as electrical energy and that can either be used directly or it can be used to produce fuels such as methanol or hydrogen. But methanol, and indeed ethanol and methane, can all be produced to-day in a variety of ways, not only from coal and gas but from industrial waste, and this is something to which I think we should be devoting very serious short-term thought and experiment. I do not want to go into detail today, but if noble Lords are interested I could show them an engine which is running on a mixture of 80 per cent. petrol and 20 per cent. methanol, and I believe the economics of this kind of mixture, which would certainly save hydrocarbon fuels, should be under urgent investigation.
I believe it is vital that the best combination of energy sources for this country, the best pattern of utilisation of this energy, should be under constant review. I want to emphasise the idea, which I have already mentioned, of setting up an Energy Commission whose job would be the investigation of all energy sources possibly of value to this country, planning their development, showing how they could be employed to maximise our independence from sources outside our control, maximise our exports of hydrocarbon fuels to others and provide the variety of home sources of energy in which lies safety for this country; and advising the Government of the day appropriately. This body, which would employ first-class scientific and technological talent, would have to have funds available for its work. It would of course be subject to budgetary control and major proposals could be implemented only by Government decision, but it could go steadily on with its work gathering all the essential data undeflected by Ministerial and Departmental changes. In fact, I believe as a matter of administrative principle that it would be worth while considering, in areas of technological advance, whether Government should not hand over as much as possible to agencies outside the Departments, agencies capable of more searching and balanced investigation than current Departments can mount.
Another such area besides that of energy is the area of transport. The possibilities 294 of high-speed transport, by land sea and air, are immense. The potential of road transport as we know it is clearly limited. Great changes will have to be made if we are to move quickly and punctually without impediment and without pollution. I believe that a Transport Commission, parallel to an Energy Commission, could make a great contribution to progress. Had such a Commission been in existence a few months ago advising the Government, Professor Laithwaite's magnetic river, the linear motor vehicle with electro-magnetic suspension—that is the hovertrain in its latest form—would have been handled with much more dispatch than it has been. In this connection, I should be grateful if, when the noble Lord, Lord Beswick, comes to reply this evening, he would tell us the latest position. We have indeed heard nothing since last October when the noble Lord, Lord Drumalbyn, told us all he was able to tell us, which was unfortunately not very much. What some of us would like to know is whether the track at Earith has been reprieved. At one stage it was going to be dismantled. Is experimental work to be financed by Government? In other words, are we, after months of disappointment and delay, going to exploit this great British invention?
I should like to feel that out of our present uncertainties an era of decision will come, including a decision to invest in the future rather than in the perpetuation of the past. To make myself clearer, I should like to see more creative work commissioned: the planning and development of our future energy resources, the development of the magnetic river, the development of high speed over-water craft, the development of vertical takeoff for civil aircraft—one could go on thinking of great projects which some of us feel are rather neglected. All these are objective, creative and thrilling things which, like the exploitation of supersonic air travel—in other words, Concorde—inspire the people who work on them and enthuse all imaginative and forward-looking people.
I should like to say just a few more words on Concorde. Once more gloom is gathering around it and I hope that it will be dispelled after Mr. Wedgwood Benn and M. Guichard have conferred. Of course the project is expensive, my 295 Lords, but when the frontiers of technological achievement are being thrust forward in such a dramatic way, the cost is bound to be high in terms of sheer pounds, shillings and pence or pounds, pence—whatever we call it now—and there are big entries to be made on the credit side of the account.
When the Americans set out on their infinitely more expensive space programme, the benefit to the American taxpayer was obscure, but from that costly programme the benefit to the United States has been immense. The United States is established as the technological leader. Less sophisticated nations, not unnaturally, see them as the solvers of complex technological problems. If they can reach the moon, what can they not do? Not only is their technological prestige vastly enhanced, but the spin-off from the programme into the more obviously useful channels of technology—into solar energy, fuel cells, electronics, radio and visual communication—is incalculably valuable.
So it is with Concorde. The immediate benefit of high-speed travel is clear, but the spin-off—the development of cognate technologies—is, as in the case of the space programme, of immense value. We shall never be able to say quantitatively what in consequence should be put on the credit side of the profit and loss account, but it would be a bold man who would say that in a decade the accounts will still be in the red. Concorde is the aeroplane of the next two decades. We are talking to-day in terms of five of them for British Airways, of four for Air France, in all possibly 16, or perhaps it is 19. My Lords, there will be 100 and whether or not—and from the purely monetary point of view—we see at the end of twenty years a total credit depends entirely on how much people have paid for them. Britain and France were absolutely right to embark on this wonderful project. It is they who can get the invaluable experience which everyone else will envy, of running supersonic scheduled operations. It may be right to vary the pace of progress according to circumstances. But if the pace has to change, the direction must still be the same. For one thing is sure, supersonic air travel is with us, it will develop, and in the end it will be world-wide. Britain and 296 France are way out in front in a classic partnership. There is not a competitor in sight. The dividends, direct and indirect, will in the end come to them. To falter in these days when technological initiative and engineering excellence are at the roots of economic success, would be to imperil their futures among the nations of the world. While I know it is too soon to ask the noble Lord, Lord Beswick, to be definitive on this vital matter, I hope that when he speaks later to-night he will be able to tell us something of how the Government are thinking.
§ 5.37 p.m.
§ VISCOUNT AMORY
My Lords, I wish I had the expertise to follow the noble Lord, Lord Kings Norton, in the interesting speech he has made to us. How very fortunate we are to have among our number men of the experience and special knowledge of the noble Lord, Lord Kings Norton! I should like to apologise to the opening speakers for the fact that, owing to another engagement, I unfortunately missed their three speeches, which I have no doubt were up to the usual high standard to which we have become accustomed. I should like to congratulate the noble Lord, Lord Balogh, on becoming a Minister, and may I at the same time take the opportunity of congratulating the noble Lord, Lord Beswick, for whom we have tremendous admiration and affection, on his appointment as Minister of State. May I say that I do so in rather a fraternal way because it came to my mind, when I was thinking of this, that I believe I was the first Minister of State who had ever been created—at any rate in this century. I was appointed Minister of State at the Board of Trade and I remember very well that when Mr. Churchill sent for me and said, "Will you accept the appointment of Minister of State at the Board of Trade?", I said, "Prime Minister, of course I will accept that, or any other appointment that is going; but can you tell me what a Minister of State is?". He paused for a bit and then said, "It is a position of the greatest dignity and importance."
I wanted to refer to the noble Lord, Lord Davies of Leek, and as I told him that I should be referring to him very shortly I do not think he will mind reading in Hansard to-morrow what I have to say. We all enjoyed very much the noble Lord's speech. He was in what I 297 call his "evangelical" mood this afternoon, and though I do not always go the whole way in agreeing with everything he says, he usually reminds us of a few things that it is good for our souls to be reminded of. I thought he did that this afternoon. It seems that he is also in the process of becoming a great European, because we had "folic de grandeur" and "cri de emir". That is promising, if I may say so, and I am sure that the noble Lord, Lord Gladwyn, would have approved.
My Lords, we are meeting in circumstances which call for a degree of restraint even greater than usual among all Parties. I realise that it is not unusual for members of a Party which has fought an unsuccessful Election to call on the new Government to put aside Party conflicts in the interests of national unity. Sometimes that rings a little hollow, so I hasten to add that if I do this I mean it to apply just as much to my own Party as to that of noble Lords opposite. I believe that our attitude, in the circumstances that have evolved, is that we on this side of the House should seek to ensure that the present Government have a fair chance of showing what they can do to get our national affairs on to a better basis.
Personally, I am one of those who are of the opinion that the Election, so far as one can generalise, showed a disenchantment with Party controversies and indicated that many people would have welcomed some kind of National Government; but I think the sort of Government they had in mind was a Coalition which would include both the main Parties and not a Coalition of one Party plus some small minorities. A Coalition to include the two main Parties, I think, is the only one worth thinking about at all. But we must recognise that a Coalition of that kind is just not "on" in present circumstances—though if neither of the two main Parties can grapple successfully with our problems it may become necessary at some point for an agreed period.
Perhaps I might say here how much I enjoyed the thoughtful speech of my noble friend Lord Eccles in our debate last Wednesday. He made a number of points with which I agreed, and he put them far better than I could. He referred in what I thought was a happy analogy to "a missing trace element" 298 in our national attitudes which for our survival we must identify. I wish that such a catalyst could be found, because I believe we are all conscious that we are capable of putting up a far better national performance than we are giving at present. Like my noble friend Lord Eccles, I found it a little disappointing that an absolutely clear recognition of our real current national enemy, inflation, did not seem to emerge satisfactorily from the Election. Therefore my own view of the Queen's Speech is that it must be examined first and foremost to see whether it measures up to that priority; and from my perusal of it I must confess that I am not altogether happy.
There are two or three paragraphs which I think are excellent as regards general intentions; for exampleMy Government will give the highest priority to overcoming the economic difficulties created by rising prices, the balance of payments deficit and the recent dislocation of production.Certainly, my Lords, that is excellent; but even there I think it is a pity that rising costs were not mentioned as well as rising prices, because the latter so often follow from the former. The aim of securing orderly growth in incomes and expanding home food production, again, is first-class but the problem is how are these things going to be realised. I see that the noble Lord, Lord Davies, has come back, so I will just say that I hope he will not be wounded when he reads what I had to say about him and about his speech, which we enjoyed so much just now.
Most of the other proposals in the Queen's Speech seem to me to point rather ominously to increased public expenditure and, unless balanced by higher taxation on a fairly broad front, are themselves bound to be inflationary. One must recognise, for example, however much one regrets having to do so, that increased pensions in real terms, because they are, or will be, almost 'wholly reflected in higher consumer expenditure, will be inflationary unless immediately covered by higher contributions. The same observation applies to subsidies to consumers, unless these again are balanced by higher taxation. It is against that background of the Queen's Speech, and without knowing what the Budget will be like, that one is bound to 299 fear still that 1974 is likely to witness even higher levels of cost-inflation.
What should the Budget be like? We all recognise that the Chancellor of the Exchequer has an extremely difficult task. He can claim that he has not been responsible for the immediate economic background, and it is obvious that he has had only a very short time to make up his mind what to do. I do not know what the most up-to-date economic statistics will tell him. Some experts, I read, favour a Budget which would be neutral in its effects overall. The rise in oil prices and the continuing increase in internal price levels will siphon off a great deal of consumer purchasing power. On the other hand, the threshold agreement in Phase 3, if it becomes operable, will increase it and further push up our costs. However, lectures from those who have already had a go in that Department are intolerable, and therefore I am going to be very short in any suggestions I make to Mr. Healey.
There are about half a dozen points that one would hope he would keep in his mind. One I have already referred to—namely, that the rise in our internal costs, notably in incomes, which are under our own national control must categorically be slowed down. Secondly, I should have thought the volume of money supply should be kept at a level which is lower than that required to finance the current rate of inflation. Thirdly, a large Budget deficit is a terrible handicap to a Chancellor of the Exchequer, and the deficit budgeted for last year—for which of course he was not responsible—turned out, at any rate with hindsight, to be far too big. I am sure the Chancellor of the Exchequer will agree that our current balance-of-payments deficit is really alarming and must be reduced as a matter of urgency. This must be a paramount object of economic policy.
Then there is a point which was referred to by the noble Lord, Lord Roberthall, that room must be found in our economy for a much higher volume of exports, and home demand, if necessary, held in check to provide the necessary capacity. We have at the moment very favourably low export prices and it would be tragic if we could not exploit our opportunity because we had not the productive capacity to do so. I 300 will not develop that point, because I am sure it is common ground. Lastly, I believe that any increases in taxation should be quickly reversible should the economic situation change dramatically in the next six months, or else that provision should be made for a further Budget. You simply cannot fix your ideas in these changing times and make them firm for a year. These requirements, I realise, in a spirit of fraternal sympathy, if I may put it that way, with the Chancellor of the Exchequer, add up to a formidable assignment.
I should like to refer for just a few moments to the matter of an incomes policy and to say that, like the noble Lord, Lord Roberthall, I believe that some form of incomes policy rather than unrestrained free bargaining is an absolute necessity in present circumstances, and not only in this country. If the present Government can make a voluntary policy stick, good luck to them! I hope they will be more successful than they were last time. Past experience, unfortunately, makes one hesitant about this, and Mr. Gormley's recently reported utterance was not encouraging. But in general, I would only say that it is not the good faith of the T.U.C. that we doubt in any way it is their capacity to deliver the goods. I agree with the noble Lord, Lord Roberthall, regarding members of the T.U.C. who have hesitated to give assurances which they knew within their constitution were incapable of being carried out by them. I will leave that matter because I am not up to date enough to be dogmatic or doctrinaire about it. It would be a disaster if the new Government were to end up having no workable voluntary policy and no statutory policy either, because then wages settlements would have to be allowed to rip.
§ BARONESS GAITSKELL
My Lords, may I interrupt for a moment? Is the noble Viscount saying that there could be a workable statutory incomes policy? What makes him say that?
§ VISCOUNT AMORY
My Lords, I believe that it may still be possible to design a statutory framework with guidelines within which normal free bargaining would take place. The noble Baroness may say that it has not happened yet. I agree; but we must keep trying. I believe that some framework within 301 which there is free bargaining is the only answer in the long run, and I believe that we shall get to it. But whether it will be this time, next time or the time after, I should not like to say. The Opposition were quite right to tackle the Secretary of State for Employment sternly in another place on this matter, but I am glad that they did not find it necessary to press their Amendment to a Division.
I should like to mention very briefly the need for new arbitration and conciliation procedures, which have been referred to by one or two noble Lords opposite in our debate. I strongly agree with this necessity if we can work out something. We must recognise, however, lest we get into a muddle that arbitration and conciliation are two different things. They both have a part to play, but they must not be confused. It would be a very fine thing if the time-honoured principle of arbitration, under which both sides agree in advance to accept the award, could be brought back and generally agreed. The most difficult aspect is that arbitration and conciliation cannot really work except against some agreed background of what in the aggregate can be afforded nationally. The arbitrators require some guidelines on what is feasible. The problem is, by whom should that judgment be made. If it is by the Government of the day will that be accepted? That is the kernel of the problem behind making arbitration and conciliation — particularly arbitration — work. If that problem could be settled, I believe that it would be most useful to get the practice of arbitration once again respected and back into use.
So in the end we bring ourselves back to the two most urgent economic problems, cost-inflation and the balance of payments. I would guess that whatever happens to the level of demand over the next year that problem of cost-inflation will remain with us. I think that the noble Lord, Lord Roberthall, who knows much more about economics than I do, will agree with that. We are still poised on the brink of disaster and badly need that trace element to which the noble Viscount, Lord Eccles, referred, or a catalyst, to overcome that short-sighted selfishness which I suppose is innate in all of us. Let us have just as much fairness and social justice as we can 302 possibly get: that is the desire in the hearts of all Parties.
But in seeking that end we must not, as we have so often done before, distribute benefits which we have not yet earned. If we are honest with ourselves we must admit that both Parties who have been responsible for the Government in the past 30 years, have been guilty of just that. With the best wills in the world they have promised more than they could carry out. That, I believe, is one of the reasons for the current disenchantment with Governments and with Parliament itself. So let us, in this grave situation, make sure that we do not repeat past mistakes. When our national survival has been safeguarded, and our balance of payments restored, then will be the time to promise the nation pleasant and agreeable things.
§ 5.55 p.m.
§ LORD LEATHERLAND
My Lords, I sometimes wish that I had been born a woman. I should then have had a closer appreciation than I have now of the way prices have been rising during the past few years. Shopping prices are a very important aspect of our national economic problem. I am not going to make a slashing attack on the shopkeepers; there are a few black sheep among them, but our big groups, whether co-operative or private commercial concerns, are highly efficient organisations—competition forces them to be so. They are very skilful in purchasing in the markets of every part of the world. Their profits on each individual item they sell are very small indeed; they render a valuable public service.
We cannot discuss the economy of the nation without taking into account rising prices. Rising prices lead to wage demands; wage demands have an influence on production prices; production prices affect our exports; our exports affect the value of the pound, and the value of the pound is something of great importance when we bear in mind that we have to buy from abroad over a half of our food and a very great deal of the raw materials for our industries. So things keep going round and round.
Our future prosperity depends on reducing very drastically the very desperate trade balance which has been handed 303 on to us. For that purpose we shall need to increase our exports, and I sincerely hope that a way will be found also of reducing some of the unnecessary imports that are pouring into this country from Japan and the Common Market countries. In order to boost our exports and stabilise our home economy, I think at some stage we have to hammer a peg into the mechanism of the price spiral. I think the best point at which to do this is just before the housewife stands at the shop counter counting out her pounds and pennies for the food with which she has to feed her family during the week. If a peg were hammered in there it would reflect itself up the scale.
Once again I say that I want to be fair. Rising prices do not start with the shopkeeper; they do not start with the manufacturer, though I do not think either would be averse to giving the spiral a tap from time to time. These rising prices start thousands of miles away; they sometimes start with black-faced labourers who are emerging from serfdom and are now getting better wages than they have had before; sometimes on the prairies and pastures of countries which themselves are suffering from inflation, where the cowboy finds that it costs him three or four times more than it used to cost him to have a night out at Kate's Saloon.
But what then happens? We find wholesale gambling in "futures". We find cocoa beans used like roulette chips; we find cargoes of wheat changing hands half a dozen times as they travel across the Atlantic, with prices boosted by bogus stories about crop failure in various parts of the world—stories which are subsequently corrected after the speculators have made their killing. Market operators will say that we cannot do anything about this. I do not agree. The United States Government do not agree, either, because, staggered by the fact that speculation sent up their wheat price by 49 per cent. recently, they decided this week to introduce a Bill to curb many of these speculative activities. If that can be done in the United States, I think it can be done in this country. I want to see a British Government, through an expert purchasing commission, entering into hulk contracts with 304 some of our Commonwealth countries and other food producing countries so that we take a guaranteed part of their crop at a guaranteed price thereby assisting our stability at home and assuring them of a guaranteed market in advance.
My Lords, when the gamblers have passed on, enter the Common Market. The Common Market at this moment, at a time when beef prices are falling, is posting its peaceful pickets and preventing meat from entering the butcher's shop. It is being put into freezers instead, to be brought out of the freezers in a few months' time when the artificially-created shortage has sent up the price of meat. We even pay the Common Market a fee for rendering us this valuable service. The Common Market, too, has instructed us to impose taxes on some of the foodstuffs that we import and is now, at this moment, considering the question of instucting us to increase those taxes. My Lords, I think the E.E.C. have got to be told that the British people are not to be exploited so that wine-guzzling French farmers can grow fat while their wives are toiling in the fields.
My Lords, I said that it was necessary at some point to insert a peg. That peg obviously must be subsidies. I am sorry to disagree with the noble Baroness, Lady Seear. There is nothing sinful about a subsidy. We pay subsidies to lame duck industrialists, we pay subsidies to country gentlemen's landed estates. So what is wrong about paying subsidies to ensure that the ordinary mother shall be able to fill her children's plates every day of the week? My Lords, I should like to see early subsidies on bread. I am delighted that my right honourable friend Shirley Williams made a start along that line to-day. I should like to see subsidies on butter, margarine, cheese, cooking fat and potatoes; and if a scheme were possible, on some of the processed meats, also, like sausages, which are often a staple food in ordinary homes. I am also prepared to see farm subsidies designed to increase the proportion of our food that can be grown at home. I shall be told that this all costs money. But I defy the people who wasted £2,000 million of our money on the three-day week to criticise me for saying that money is needed for subsidies. If that £2,000 million could have been spent on food subsidies instead of a three-day week, look how much happier we would have 305 been to-day. But £2,000 million is not the figure that I have in mind for food subsidies.
Let us pass from the ships that bring the food to our shores and look at the manufacturing and processing factories in the food industry. I should get a terrific rhetorical kick if I could describe these food manufacturers and processers as "scoundrelly profiteers." But, my Lords, most of them are not. They often bear very historic and renowned names, and they are jealous of their reputations. What is more they shortly have to face increased costs for coal, oil, transport, electricity, and also for local council rates. So I would say that the Prices Commission should undertake a very drastic inquiry into the costs and profits associated with a dozen or so of our staple foods, and then should issue official maximum price lists so far as those foodstuffs are concerned. I say, "costs and profits" because I am sure—I can speak as an old costing accountant—that there is scope in some of these undertakings for a reduction in the manufacturing and transportation costs.
Now, my Lords, I should like fish to be included particularly in this investigation. Not a word is going to come from me about the heroic trawlermen who defy the winds of the North Sea. But I have here what was issued a week or two ago, the annual report of Associated Fisheries, Limited. Again I shall say nothing about the fish-catching part of their activities. They say this:In food processing and distribution, trading profit has doubled with turnover up by 13 per centTurnover up by 13 per cent., profits up by 100 per cent. There is something wrong there, my Lords. They go on to say:Profit from cold storage and transport companies has almost trebled with turnover up about one-third.Turnover up by one-third, profits trebled. That is not good enough. They go on to say, with regard to the coming year:There is scope for a further increase in profits from our fish processing and distribution enterprises.I hope we shall all remember those words when we come to eat our fish fingers.
§ THE EARL OF LIMERICK
I wonder whether the noble Lord would forgive me for one moment but he quoted some percentages. Is he able to tell us how the 306 return would look calculated on turnover?
§ LORD LEATHERLAND
Well, the turnover has gone up by 13 per cent. and the profits have doubled and trebled. You cannot have it plainer than that. If you want to know how much the earnings per ordinary share have gone up, something which they understand in the City, then it has gone up from the previous year from under 6½ pence to over 15 pence. If I am to be further cross-examined on the Associated Fisheries, I am prepared to give any information that is at my disposal.
My Lords, I pass on from the processing factories to the retailers. My Lords, I have already paid tribute to their efficiency. I have already said that their profits on each individual item they sell is almost minute, but, of course, their balance sheets show handsome profits as a result of the magnitude of their operations. Now here again they have to face dearer coal, dearer electricity, higher local rates, dearer transport, and they recently had to face a not insubstantial wage award. So here again I feel the Price Corn-mission should take a dozen or so of the main staple items of the working class food budget, examine the costs and the profits and issue official price lists which should then be exhibited in every store. Of course if any store exceeded the charge laid down in that official price list, it would lay itself open to prosecution. I feel that this would be a better scheme than the one which the Price Commission itself is now considering.
The Price Commission, as your Lordships know, is suggesting that there should be a 10 per cent. cut in gross margins. I feel there may be some difficulties about that. First of all, at what intervals are the gross margins to be calculated? Are we to wait six months until the half-yearly accounts of the company are prepared, audited and passed on to the Price Commission? If so, then cuts in prices will be considerably delayed. What is to happen if the store decides to make slashing reductions in the price of its champagne and caviare, while trebling the price of the scrag ends of bacon which would be all right so long as the overall gross profit margin had not been exceeded?
I feel, my Lords, that this idea of having two standard price lists officially 307 sanctioned, one for the foods as they leave the factory to go to the retailers, one for the stage at which it leaves the retailers and goes to the housewife, would be much simpler and much more easily understood by both the shopper and the shopkeeper. What is more, it would be capable of being brought into operation almost immediately. I do not know the attitude of the trade to this idea; I have not discussed it with anybody. It may well be that their view is different from mine. But I hope that when the Price Commission make their investigations they will examine the processers and the retailers concurrently, because the interests and the activities of both interlock at nearly every point.
There is another sphere in which something can be done to protect housewives and the consumer. During the Election, the Government Party advocated the establishment of a National Consumers' Authority. I hope, despite the fact that it is not specifically mentioned in the Queen's Speech, that its introduction will not be too long delayed. There is still a great deal to be done in that sphere. I remember that many years ago, just after I was appointed assistant editor of one of our daily national newspapers, I undertook the task of establishing what we called a fair shopping bureau, to which we invited our readers to send their complaints. We dealt with thousands of complaints, some of them about scandalously inferior goods; some of them about very excessive overcharging. I am delighted to say that in many cases we were able to obtain satisfaction for the consumer. Of course, we do not want vanloads of shoddy goods rolling up to Mrs. Shirley Williams's office as they used to roll up to mine, but the local weights and measures inspectors could be elevated into consumer protection officers—as they already have been in a few towns—and entrusted with the task of sifting out the complaints of consumers. Weights and measures inspectors are very able and level-headed men and could be entrusted with that task.
There is something else the Consumers' Authority could do, which is to tackle this question of excess packing and wrapping that we see on all the shelves in all the supermarkets. We see goods with two or three thicknesses of cellophane or 308 tinfoil. We see cardboard boxes far too deceptively large for the contents, at a time when cardboard is a very dear commodity and its price is increasing all the while. We even see sardine tins, safely and hermetically sealed, yet packed into carboard boxes printed in two colours. We see three-colour printing on the packages of many of the goods exhibited in shops, and multi-colour printing is a very expensive process. I know that much of this packing is necessary for hygienic purposes, and naturally there is an element of salesmanship in making packages look attractive. But at this particular time, could we not do with something a little simpler and plainer?— because all we are doing now is to spend millions of the nation's money on filling up our dustbins. Not long ago there was a report that on a particular item the cost of the packing represented 20 per cent. of the price the housewife had to pay. If we could knock off just three-quarters of that 20 per cent. we should make a considerable reduction in the price of the product.
There is only one more point I would ask the Consumers' Authority to look at, and that is this fascinating mathematical formula of "3p off". Three pence off what? We do not know. It is so very confusing. Two months ago I bought something which was marked, "19½p—4p off". I paid 19½p. A few weeks later I bought the same thing marked "3p off", and paid 22p. On another occasion I bought something marked 9p—it was plainly marked 9p, with no 3p off—and three weeks later I bought the same item for 13p, but I noticed on the label of the 13p tin that if I returned two of the tin lids I could get a pair of tights free. Now, I have never worn tights. I do not intend to wear tights. It would be very embarrassing. But look how additionally embarrassing it would be if I went out with the tights over my arm and proffered them to the most attractive young lady I happened to meet; I should be even more embarrassed. I might have the police called in or I might even be faced with a fate worse than death.
At this exciting moment, I think I had better make the final point I have in mind. There is one reason for our increasing prices which I have not yet mentioned. It is the fact that during the last 18 months one half of the increase in our prices has been due to the fact that the 309 value of the pound sterling has dropped by 20 per cent. My Lords, we cannot afford to have a £2,000 million deficit on our balance of trade. We cannot afford to balance our Budget by printing £2,000 million worth of paper money, as the ex-Chancellor did. We must enter upon an era of honest finance, and I hope that the Chancellor of the Exchequer, when he introduces his Budget next week, will take a few steps along that path, even if some of us get hurt in the process.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, if I heard the noble Lord aright he said that all retailers should be made to charge the same prices for their goods.
§ LORD LEATHERLAND
Maximum price, my Lords. If they want to do any competitive price cutting within that band, that is up to them; and I think they will do it.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, some retailers have to pay far higher rates on their property than do others, and some pay high rents.
§ 6.17 p.m.
§ LORD BALFOUR OF INCHRYE
My Lords, I hope that the noble Lord who has just spoken will forgive me if I do not follow the line of his fascinating speech, because I wish to speak on one matter only appropriate to this debate, which is of major importance and topical. That is the Concorde position, present and future. It is particularly important in relation to the words of the noble Viscount, Lord Amory, who said that we are still poised on the brink of disaster. Therefore, one is frightened by the sorry tale of the Concorde costs revealed in another place on Monday by Mr. Benn. I have been a supporter of the Concorde programme, and I still believe in the Concorde, but I consider that the revelations by Mr. Benn make a reappraisal of the whole project very necessary.
I regret—and I should be less than frank if I did not say this as a member of my Party—that escalating costs information was suppressed by the last Minister, even though it was known to him and his Department; that some of the figures were made available to the Public Accounts Committee, but other figures were omitted from the Public Accounts Committee Report and replaced by 310 asterisks at the request of the Minister responsible. Only now has the truth become available to Parliament and to the public. Now, if one uses modern words, the naked truth is out; and if Concorde is to streak through the skies, operated by British Airways, we must add another £350 million to our share of the development costs of £535 million, which makes a total of development costs of £585 million, not one penny of which is going to be recovered. Even when that is done, I regret to say the future operational ability of the aircraft is in doubt, since owing to its noise New York, Sydney and Tokyo have all declined hitherto to clear the Concorde for use.
My Lords, consider the order position. We were proud to say that there were 76 options on Concorde, but those have melted away and to-day, out of 16 being built, the only orders are for nine aircraft for British Airways and the French. Quite apart from the staggering figure I gave the House of £5,385 million, assuming a sale price of just over £20 million per aircraft (if any airline will pay that amount) the manufacture of the 16 can involve us in a further loss of £200 million to £225 million. If we look at the figures given by Mr. Benn we see a position that the more Concordes we make the more money we lose, and, with respect to Mr. Benn, it does not matter whether the aircraft industry is nationalised or in private enterprise, broadly speaking those loss figures will remain.
Success in the world's airlines and therefore a demand for the aircraft will mean ever-increasing losses in manufacture. One begins to wonder whether, in this year of 1974, we can afford to consider taking human beings from A to B in the stratosphere if the cost is going to be quite uneconomic and out of proportion to the general costs of our standards of life.
My Lords, if one looks at the operational costs the picture presented by Concorde is that it can never operate at anything but a huge loss, and British Airways have forecast that the use of five Concordes on an airline will involve them in an annual loss of £36 million.
§ LORD BESWICK
My Lords, the noble Lord is getting some of his figures wrong. The figure was not £36 million but £26 million, and even that figure is open to suspicion.
§ LORD BALFOUR OF INCHRYE
My Lords, I am not going to argue about the figure, but the loss will be such that it will turn the proud efforts and the past successes of our nationalised airline corporation into permanent losses for the future, which would be wrong for the taxpayer and depressing for all those involved. To me, and I believe to the country as a whole, it is socially unacceptable that a very limited number of human travellers shall traverse the world, each one heavily subsidised by the general body of taxpayers.
Having painted that rather gloomy picture, I ask, what is to be done? Mr. Benn has said—and this rather frightens me—that Concorde is ceasing to be an economic problem and is becoming a political problem. When problems cease to be economic and become political one usually finds that money is thrown out of the window, and I had a slight feeling that my noble friend Lord Kings Norton was throwing money out of the window in his glorious faith that we should proceed fully with the Concorde programme.
Let us look for a moment at the other side of the balance sheet. We know that Russia and the United States of America are going forward with supersonic flights. We know that the Concorde is a wonderful technical achievement. We know that 9,000 men directly and approximately 16,000 men indirectly are employed in Concorde development and manufacture and that the close down of the Concorde project would cost £80 million or more. I hesitate in any way to advocate stemming the advance of the new frontiers of technological progress; but having said that. I do not believe that the difficulties of redeployment of skilled men in other directions than on Concorde manufacture can outweigh the economics of the loss of such vast sums as I have put before the House this evening. I fail to see how, on the figures disclosed, we can complete the sixteen aircraft at a loss of £200 to £250 million. Equally, I cannot see how we can afford even to complete the nine at a further loss of maybe £150 to £200 million, always remembering that if five of them were operated by British Airways they would have a stupendous annual loss added to that manufacturing loss.
I do not want to see Concorde abandoned altogether. I wonder whether 312 there is some hope in not completing further aircraft at this enormous loss cost, but retaining the two prototypes and the two in production. I think we ought not to try to fly Concordes on a scheduled airline at these enormous losses, but should maintain on a low expenditure basis an experimental and development cadre, using what we have and not going forward with further aircraft that will cost so much. I have already told the Minister that I do not expect any answer from him to-night, but I think it is right that Parliament should look at this project from all angles. The decision is not for me but for the Government. I appreciate that the Government, confronted with the need to make early and practical decisions, have a very serious decision to make. I only hope that the Government will welcome the views of the noble Lord, Lord Kings Norton, myself and other noble Lords who may take part in the debate to-day or at other times, because all the wisdom of all noble Lords, and all the wisdom of another place and much of the wisdom of the public will be required to come to the right solution on Concorde.
§ BARONESS GAITSKELL
My Lords, before the noble Lord sits down I should like to ask him a question, because he has expressed a view with which I happen to agree but which differs from the speech made by the noble Lord, Lord Kings Norton. Referring to Concorde the noble Lord, Lord Kings Norton, said that he considered the rate of progress was important—which indeed it is. But it is just on the rate of progress that we have to judge whether a certain project is necessary, as with Concorde or even space travel, when after all we could take some of the money that is used in space travel and give it to the developing countries.
§ LORD BALFOUR OF INCHRYE
My Lords, the noble Baroness has asked me a question which is essentially one for Her Majesty's Government to answer as soon as they are able to.
§ 6.29 p.m.
§ LORD AVEBURY
My Lords, unfortunately it is not quite so simple as the noble Baroness, Lady Gaitskell, has put it to your Lordships, that one can divert money from a project like Concorde and immediately provide funds for 313 developing countries, because it is a completely different class of expenditure, as I am sure she will realise. If we wanted to give the developing countries the kind of advanced technology which is involved in the manufacture of Concorde I think we should be doing them a disservice. I personally prefer the approach of Dr. Schumacher and his intermediate technology, on which I think we spend far too little thought and money. It would take years to divert the resources of manpower and capital now employed on Concorde into doing anything which would be of benefit to the people of, say, Sri Lanka.
Turning to the very interesting speech which has just been made by the noble Lord, Lord Balfour of Inchrye, I think it connects with the general theme of conservation of energy and the disturbing situation in which this country finds itself when we realise that Concorde is far more fuel-intensive than subsonic jets and is affected to a greater extent by the steep rise in price of aviation fuel experienced over the last six months. It has been calculated by the British Aircraft Corporation that if the price of aviation fuel trebled since the beginning of the oil crisis last autumn it would put the direct operating costs of Concorde up by 50 per cent., whereas it would increase those of a Boeing 747 by only 23 per cent. So one would either have to add a much higher surcharge to the first-class fare already payable, or which would be payable by passengers on Concorde, to British Airways or Air France, or one would have to accept the kind of losses the noble Lord has postulated. Whether the figure would be £36 million or £26 million is not very important, as the noble Lord, Lord Beswick says, because so much depends on the amount of surcharge which the traffic is able to bear.
British Airways did a very thorough survey of the market among American businessmen, and found that at that time is was not extremely price sensitive, and that if it were necessary to charge Concorde passengers 15 per cent. over the normal first-class subsonic fare, this would make little difference to the number of people who wanted to travel by Concorde. But in the present climate since the fuel crisis—and everything is going up in price—we may find that companies in the United States are not quite so prepared 314 to pay large increases in travelling costs for their executives as might have been the case in the middle of 1973.
Unfortunately, the gracious Speech does not say very much about energy. It makes passing reference to it, and the noble Lord, Lord Balogh, in his speech earlier, also made only a passing reference. As we have said on many occasions from this Bench before, the energy policy does not consist simply of juggling between the four available fuels to meet a demand which is predetermined by the level of economic activities in the country, and outside the control of the State. I say bluntly that the State has an interest in controlling and adjusting the size of the total demand for energy in the light of several extremely important considerations, and I would mention these very briefly.
First of all, there is the approaching exhaustion of the cheapest and most easily exploited supplies of crude oil. I know all about the further discoveries which I am told will occur. I know all about shale oil and the tar sands. No one has exploited those yet. Pilot plants have been developed which are, I may say, immensely expensive and damaging to the environment in which they are located. It is doubtful whether the citizens of Middle Western America will like the idea of vast tracts of their country being torn up in order to supply the energy needs of the rest of the United States, and perhaps other countries as well. So the approaching exhaustion of supplies of crude oil—and when I say "approaching" I mean a 30 or 40 years' time scale—is a matter of some importance. Then there is the immense additional burden on the balance of payments of the increase in price of oil which has occurred over the last six months. That matter has already been dealt with by several noble Lords. Then there is the need to set the pace of exploiting our own supplies of oil and natural gas to give British industry the maximum opportunity to contribute its resources to this immense project. I will come back to that in a few minutes. Finally, if we go ahead with the increases in the demand for energy which would be projected on a pure extrapolation basis, there is a risk of embarking on nuclear technologies which are not fully proven, but I will come back to that also in a few moments.
315 Obviously, when all these matters are taken into consideration—and this is an important point that I should like the Government to consider—we do not want to reduce the cost of energy artificially. The Government have rightly allowed the coal industry to pass on, in the form of a substantial price increase, the whole of the cost of the recent settlement with the miners. It was possible to do that without affecting the size of the market for coal because even with that increase coal is still cheaper than the main alternative in electricity generation, which accounts for the largest share of the market for coal. But, so far, the main users of coal, the electricity industry and the British Steel Corporation, have not been allowed to pass on their additional costs to the final consumers. I read that the Electricity Council addressed a pressing appeal to the Government on March 11 for an immediate decision on tariff increases, to which so far there has been no response. I hope that the noble Lord who is to reply this evening may be able to tell us whether the Government have yet been able to consider that appeal from the Electricity Council. It is important, because the industry's loss for the year just about to end has been estimated to be £160 million; the coal price increase will add £170 million to their fuel bill, and oil costs incurred by the electricity industry have already risen over the last six months at the rate of £350 million per annum.
If one takes the British Steel Corporation, they have to find in the coming year another £40 million for coal and £65 million for oil; and even before the miners' settlement they were asking for a 20 per cent. increase in steel prices—which, incidentally, would still, if granted, have left their prices lower than the prices being charged by the industry in the rest of Europe. Obviously, if these increases are permitted—and I say they should be—in an era of scarcity of energy, the cost of living is affected and it will be necessary to accompany them by measures to protect pensioners and others on low and fixed incomes. But, if, as a result, demand is reduced, then the capital expenditure necessary to both the electricity and the steel industries could be scaled down correspondingly. The 316 borrowing necessary by these industries from the Treasury would then be lower in future years.
I think the long-term aim should be to make these industries entirely self-financing, because that would be counter-inflationary. It would give the industries a great boost in their morale. The noble Lord opposite does not think that, for instance, people in the electricity industry like to be in the position of having to go cap in hand to the Treasury to ask for money. They would sooner be self-sufficient and make a reasonable profit that would enable them to deal with their capital expenditure programmes from their own internal resources of their profits and depreciation which they provide. As a corollary to this reasoning, the price of gas also would have to be increased so that it would be only marginally cheaper than alternative fuels. Otherwise, in markets where there is free consumer choice, such as domestic and industrial heating, there would be an unduly rapid increase in demand for natural gas which could not be met until supplies came from Frigg in 1976.
This leads us to a consideration of the alternatives open to us in the exploitation of both oil and natural gas on our Continental Shelf, about which there was some discussion during the General Election campaign. I had hoped to hear from the noble Lord, Lord Balogh, this afternoon some clarification of the ideas put forward by the Labour Party during that campaign, but unfortunately the noble Lord was not yet in a position to spell out all the details. We can all agree, I think, that if nothing changed the revenues and profits from oil exploitation around the coast of Britain would be very large indeed by the early 1980's, and would amount to something of the order of several thousand million pounds a year.
During the Election, the Conservatives said, "Trust us; we shall ensure that the companies get a fair deal"—not the British taxpayer, although it was never explained how this would be achieved, or what they meant by "fair"; but judging from the Conservative application of the word to rents in the Housing Finance Bill, one might say that in the Tory vocabulary "fair" means "unfair". That might well apply to any settlement they urge with the companies 317 in the North Sea. On the other hand, the Labour Party during the Election threw away their chance of making any sensible contribution to the debate with talk of nationalisation, a policy calculated to stop exploration in its tracks, and to place immense burdens on the shoulders of the taxpayers in the short term, whatever the benefits might prove to be in the much longer term.
One gathers, from the speech of the noble Lord, Lord Balogh, and from various things he has written in the last few weeks, that he does not agree with the policy of nationalisation and that he personally is disposed to favour a National Hydrocarbons Corporation, an idea which was put forward some years ago, I think as far back as 1967, in a Fabian pamphlet, Oil, the Commanding Heights, written by Professor Peter Odell, a friend and former constituent of mine in Orpington. I think this is an idea well worth exploring, that a National Hydrocarbons Corporation should be set up as a monopoly buyer to purchase all the oil produced in the North Sea, and in other sectors of the Continental Shelf, if it is subsequently discovered—for example, in the Celtic Sea.
As has been pointed out, this would be following the pattern which has been adopted for natural gas, where the companies do not object in the slightest to the fact that the Gas Corporation is a monopoly buyer, unless of course they want to use the gas they have discovered for their own internal operations. Perhaps I am exaggerating when I say that 'they do not object in the slightest, because there was some anxiety in the initial stages that the Gas Corporation would force the prices to be set at such a low level that exploration would be discouraged. I can remember Mrs. Margaret Thatcher, when she was the Conservative spokesman on energy, speaking in the debates on the increased borrowing powers of the Gas Council in 1966, predicting that all the rigs which were operating in the North Sea would co over to the Dutch sector, or might be taken even further afield, because of the inadequate prices offered by the Gas Council, as it was then, for the supplies from Hewitt and Indefatigable. As we know, this did not happen. Exploration has been sustained, and at such a rate that we shall be able to meet the targets 318 that were projected in the 1967 Fuel White Paper, and we can foresee an additional increase in the supplies of another 50 per cent. arising from the Frigg field if we reach a satisfactory agreement there. So the monopoly power of the Gas Corporation in buying all the gas which has been produced in the North Sea has not inhibited development, and I do not think there is any reason to assume that if a National Hydrocarbons Corporation were formed for the purchase of oil it would have that effect either.
But I would suggest to the Government that before they reach any firm conclusions on this they might consider that we do not need two companies, one to buy the oil and the other to buy natural gas, and that the National Hydrocarbons Corporation should take over the functions of the Gas Corporation as well. I think that probably it would be sensible, if that scheme commended itself to the Government, for the N.H.C. to take over the participation of various other public bodies in exploration activities, because not only the Gas Council but, as noble Lords will be aware, the National Coal Board also has an interest in another partnership which is exploring the North Sea. It seems to me logical and sensible for all these investments to be concentrated in one operation.
The other alternative, which has its own attractions, is that of a barrelage tax, which is well understood by the oil industry and has been adopted by many other nations with which they are used to dealing. It seems to me that the barrelage tax would have the advantage of simplicity. The noble Lord who spoke from the Conservative Front Bench was talking in his description of the N.H.C. about a bureaucratic monster. Well, if it is going to please people to have the same amount of money siphoned out of the industry by means of a barrelage tax, which does not necessitate the creation of new public enterprise, then it is certainly an alternative that should be considered.
One warning I would address to the Government is on the pace of exploration of the North Sea. It is fashionable to say that we must develop these resources as quickly as we possibly can, 319 so that we can solve the balance-of-payments problem and we shall not be in the pockets of the oil sheikhs. But I would suggest another argument; that is, whether it is wise to use up these resources as quickly as possible, thereby making no provision for the supply of oil and gas beyond the end of the century, when overseas supplies may not be merely scarce but actually unobtainable. The other reason for not proceeding too fast is that it does not give our own industry the best possible opportunity to take part in the drilling and exploration programme, and in the supply of equipment, generators, drilling tools and so on, which are required by the energy contracting industry. So we find that much of this equipment has to be manufactured overseas, imported from the United States, instead of being manufactured by, for example, Scottish industry, particularly on the West Coast, where the work would be extremely welcome. If, as a result of maximising the pace of development we are denying opportunities to British industry, I would say that it is time to consider slowing down. I would ask the Government to take a very close look at what has been done by their predecessors on the IMEG Report which made a long series of recommendations on how British industry could more fully participate in these ventures.
Equally, it is not a sensible policy for us to embark on a massive programme of nuclear reactors without regard to environmental or safety considerations, and, even worse, to place ourselves entirely at the mercy of a foreign technology which is not yet adequately proven. When I say that I say it with certainty, because before the last Election I put down a Question to the Secretary of State for Energy asking about the American pressurised water reactors which are already in operation; about their load factors; about the delays in construction, the amount of their capital cost and how it had escalated during the course of construction. I was told that this information could not be provided in the time available. If we had known all about pressurised water reactors, we should have had that information in the Department of Energy, and it would have been simply a matter of looking it up in 320 the files in order to answer the Question. I am very disturbed to think that we were about to make a decision to go for these reactors when we knew nothing at all about them. For example, when a team was sent to the United States to discuss the pressurised water reactors they did not even bother to visit the Idaho safety facility of the Atomic Energy Commission. They have not discussed the emergency core cooling systems or the massive hearings that were held by the A.E.C. on the subject, and one cannot get even in this country a copy of the Report of the E.C.C.S. hearings. I have asked for a copy to be placed in the Library, but it is not yet available, and therefore nobody can study the information which is on the record in the United States.
I think one ought to consider whether the Nuclear Power Advisory Board is the right organisation to give the Secretary of State for Energy the sort of advice he needs on making these major decisions. It seems to me a very anomalous situation that the Nuclear Power Advisory Board is chaired by the Secretary of State himself. Mr. Peter Walker, when he was Secretary of State, was saying." I shall be chairing the meeting, and then I shall be giving myself advice which I will report to the House." Surely the people who give advice to Government Departments ought to be entirely independent.
I agree wholeheartedly with the points made by the noble Lord, Lord Kings Norton, about the need for an Energy Commission, and with this I will finish, because I have been speaking far too long already. He said that we should examine not only the four main fuels but also the other possibilities, such as hydro, tidal, solar, geo-thermal, methane from industrial waste and so on. The Royal Commission on Energy, which we have proposed, would also be able to examine the sort of savings in energy which are, or should be, a vital component of our policy—for example, whether he should retain the 50 m.p.h. speed limit. I am sorry to read in the Evening News that there is a possibility that that will go. Not only does it save a considerable amount of fuel but it also has a most valuable side-effect in that it reduces the carnage on our roads. We could envisage much better insulation standards in our homes. 321 We could insulate the cavity walls of 4 million dwellings for the price of one advance gas-cooled reactor. We could put more money into public transport. I know that the previous Government diverted a certain amount from the roads programme back to rail, but it was nothing like enough.
I believe that the Government should set up the Royal Commission on Energy that we have advocated; that it should be armed with the best scientific and technological advice, as the noble Lord, Lord Kings Norton, has suggested, and that the idea should be "sold" to the Civil Service, who may be the principal objectors to it, on the grounds that one is not undermining their responsibility but is assisting them in the formulation of policies that they present to Ministers. I do not believe that it would be a cumbersome device, or that it would be, as the Prime Minister once described Royal Commissions, "a body which takes minutes and wastes years", if one wrote into the terms of reference a fixed time-scale for reporting to both Houses of Parliament and if, above all, one were to make sure that the Reports of the Royal Commission on Energy received a place for debate in the Parliamentary timetable, in much the same way as the Agricultural Price Review or the Defence Estimates do at the moment. I apologise for speaking so long and for having had to leave out so much of what I wanted to say, but I hope that the suggestions I have made will commend themselves to the Government.
§ 6.51 p.m.
§ THE EARL OF LAUDERDALE
My Lords, I shall return to the points raised by the noble Lord, Lord Avebury, in a moment. I should like to join with others in offering my sincere congratulations to the noble Lord, Lord Beswick, on his return to the Front Bench, although I, with others, regret that it happens to be on that side of the House instead of this. We are happy to see him there. He heard his own obituaries only a few weeks ago, and perhaps he might be embarrassed if one sought to add to them. I should like also to congratulate the noble Lord, Lord Balogh, whom I count as a personal friend, on his elevation to the Front Bench. He was good enough to let me know that he could 322 not be here during the latter part of this debate, but none the less I feel sure that he will read my good wishes in the morning. Since he is not here I am omitting one or two little jokes that I had planned to exchange with him. I apologise to the noble Lord, Lord Beswick, and to the House for the fact that unfortunately I cannot be here for the winding up owing to a previous engagement of which the noble Lord, Lord Beswick, is aware. I hope that the House will accept that apology.
However we read it, and from whichever side of the House, this is a temporary and caretaker minority Government, and it reminds one of the 17th century Count Zamoyski who said, "The king reigns but he does not govern". At an exceedingly delicate moment in the affairs of Western civilisation, I beg noble Lords opposite, with all their sense of responsibility, to remember that all empire is no more than power in trust. One appreciates the apparent moderation of the gracious Speech, but in the old Scottish proverb, "Good words without deeds are rushes and reeds".
First, I should like to revert to the speech made by the noble Lord, Lord Kings Norton, and also the speech of the noble Lord, Lord Avebury, on the Energy Commission. I do not propose to speak at length about this, but once again I support their plea for an Energy Commission, and even, since it is intimately related, a Transport Commission, as a non-Departmental agency advising successive Governments, from whatever quarter of the House they may come. I was particularly attracted just now to hear the noble Lord, Lord Avebury, use the analogy of the Annual Farm Price Review because, although the analogy cannot be close, I think that we require an annual survey, an annual budget if you will, on the energy front. It is something which I, and I know the noble Lord, Lord Davies of Leek, have pressed in this House in the past. One has to go on pressing, pressing, pressing, like water dripping, dripping, dripping, and eventually the idea will get through.
Addressing myself primarily to the energy aspects of this debate, may I suggest that there are three foreign policy aspects not as yet referred to. We shall need Arab oil for some years yet. Somehow or other we have to persuade the 323 Arabs to sell it, even against payment in drawing rights on the International Monetary Fund. We must somehow persuade them that those drawing rights are just as valuable to them as oil left to appreciate in the meantime underground. Therefore, it should be an urgent object of our foreign policy in the energy field to get the OPEC countries on to the Council of the International Monetary Fund.
There is a second foreign policy aspect. One has waited in vain—and with some surprise—for this Government to confirm the emphatic declaration of my noble friend Lord Carrington from the Front Bench opposite only a few weeks ago that the hydrocarbons in the British Sector of the North Sea are ours, and that is that. We pressed our own Government on the other Benches for some months to give such a declaration. We squeezed it out with some difficulty in a sort of undertone; it only came out finally and frankly when my noble friend Lord Carrington became Secretary of State. We look for a confirmation from the Benches opposite that that remains the view and the intention of the present Government.
A third aspect of foreign policy is urgent: to get agreed the lines which will delimit areas for licensing beyond those already agreed, beyond the 62nd Parallel out in the North-Western Approaches and down in the South-Western Approaches. It is critical to get these lines of demarcation agreed before there is any very strong or (shall I say?) much stronger geophysical evidence that there are good things below. The minute that either party to a negotiation thinks that by twisting the tail of the other he can get the line altered ten or twenty miles and immense riches will accrue, then agreement becomes exceedingly difficult. Negotiations have proceeded with France for some time, and I would only say with regard to the French that we may be able to live without our friends but we cannot live without our neighbours. I should like to ask the Government, if not now then shortly, to tell us what is the position of negotiations with France on the median line. Can we not now, and should we not, insist on it within the terms of the Geneva Convention? When shall we start negotiations with Denmark, Norway, Iceland and Eire to make similar 324 delimitations where our and their interests meet?
When the noble Lord, Lord Avebury, suggested one purpose of our policy should be to make the fuel industry self-financing, and that this in turn would be counter-inflationary, I agreed with him. But what alarms me is the word earlier from the noble Lord, Lord Balogh, that there is to be both physical and financial control of offshore operations. I beg the Government not to allow their consultations with the oil industry to become a mere dialogue of the deaf. We must take the greatest care not to drive foreign investment away. In 1973, according to Bank of England figures, the net inflow of investment funds gave us an actual invisible balance of more than £1,260 million, as against a loss of £750 million the previous year. Less than half of this benefit was due to foreign borrowing by the nationalised industries, but well over half of it was due to foreign oil investment in Britain to the tune of something like £1,365 million. So that foreign investment in our oil operation is exceedingly important to our balance of payments, quite apart from its importance towards getting the oil out of the ground.
Then, my Lords, we must beware of the futile economics of envy. It is recorded in the Commons Hansard of March 12, at col. 82, that in his speech in another place the Prime Minister talked not only of a Hydrocarbons Corporation but of its participation in what he called "distribution"—the downstream operations. There is very little fat to have there. I took the trouble yesterday to ascertain the only figures that I could get hold of, which were from Esso. Apparently, last year there was less than £22 million net profit after tax on something like £800 million gross turnover on inland sales. That is a profit of less than 3 per cent.—not much for the Hydrocarbons Corporation of to-morrow to get out of the downstream operations. Much better—and again the noble Lord, Lord Avebury, said very much the same—would be to go for a special tailor-made excess profits tax to deal with the windfall profits.
This is fully expected in the industry. The chairman of Shell, Mr. McFadzean, made a speech last November fully expecting it. The oil kings know, as indeed 325 the medieval kings knew, that the "King's cheese goes half away in parings". The fact is that they do not expect to hang on to a great deal of these windfall profits arising from the OPEC rise in prices. What is interesting is to see what is involved. The stockbrokers, Wood Mackenzie, who have given some attention to this matter, have estimated that if production rises steadily from the end of this year towards about 4 million barrels a day around 1980, at 11 dollars a barrel, the Exchequer could very well expect to start next year drawing something like £400 million in revenue and by 1980 something like £4,500 million, a very fair sum compared to the total intake by the Exchequer from indirect taxation at the present time. I ask: what more could, or would, a sensible Government want?
Here, again, we must surely beware of any kind of physical control of the operation of, first of all, finding and then of getting oil. How on earth is any Government Department or any Hydrocarbons Corporation to find the men to do it? At the present time, the Department of Trade and Industry, as we have been accustomed to call it, is desperately short of men even to supervise the operation of licences already issued. The Institute of Geographical Sciences is at this moment desperately trying to recruit twenty geophysicists and all they have to offer is Civil Service scales. The oil companies are willing to pay anything for these people because they just cannot get them. One thing quite certain is that the Hydrocarbon Corporation would be no more successful in buying the brains than the oil companies. Far better of oil investment to say, "Here it is", than to say, "Here it was".
Then there has been an overtone in speeches from the other side of this House and from elsewhere that the next round of licensing should impose yet tougher terms on the exploration companies. But what I notice is that much attention has been given—given with approval—by the Prime Minister, by the noble Lord, Lord Balogh, and by others to the Report last year by the Public Accounts Committee. That Report stated at paragraph 87 that the "most promising areas have already been allocated". Of the 1,500 or so blocks so far unallocated, the oil industry seems to think that about 500 might be worth 326 having a go at. But if the best ones have gone, the only way to get the others explored eventually is surely to offer more attractive terms, not less attractive ones.
Noble Lords will not accuse me of being in any way the plaything, the Whip's toy, of the European Economic Community. But I have more than once in this House cited words of some interest that have come from the highly intelligent officials of the Brussels Commission. I notice that M. Georges Blondel, the hydrocarbons director in the Community's Directorate-General for Energy, told the last London conference on offshore oil run by the Financial Times that he thought, in view of the shortage of fuel in Western Europe as a whole, that the terms for future licensing should be made more attractive, that there should be tax allowances, not barrelage taxes, on the exploration companies by way of depletion allowances. He thought that efforts should be made to make downstream operations more rewarding, not less so, and he said that on the Continent of Europe the operating companies get a take of about 15 per cent. as against the 3 per cent. which I quoted from Esso in this country just now. In this field, I hope that the Government will not rush headlong into some precipitate decision about toughening up the next round of licensing. There is a proper value and proportion to be observed in every act.
Some of us who have been following the offshore oil developments of the last few years have been distressed to note serious, if not alarming, production delays directly attributable to the delay in providing platforms from which multi-well production can be carried out. These production platforms would normally drill and operate something like 40 wells from one centre. The delays are due partly to delays in steel supplies and partly to delays in steel fabrication, which in turn are due partly to the lack of skills in the right place and partly to labour difficulties. It is therefore most important, if we are to get this oil ashore, to facilitate building other platform types, of which the concrete gravity structures are much in the news. I have here an interest to declare in that I have an association with one of the companies in this field. But what I shall now say 327 does not represent their policy, which I think is somewhat against it.
So I was interested to notice some ambiguity and obscurity in the answer of the noble Lord, Lord Balogh, to the question put to him across the Floor from the Front Bench by my noble friend Lord Windlesham, about whether or not the Government intend to drop for good and all—or alternatively when they propose to bring forward—the Bill forecast by the outgoing Government to provide powers for the speedy compulsory purchase of costal sites needed for construction. Everybody knows that the sites are very few and far between. If you need something like 17 fathoms of water close inshore beside a site of 40 acres of flat land and something like 60 or 70 fathoms not too far away, there are not many of those. Without wearying, the House at this hour, I would say only that there appears already to be a discrepancy, to judge by the reports in the Scotsman of March 13 and March 16, between the view expressed on this matter by the new Secretary of State for Scotland and that expressed by Dr. Gavin Strang, the new Scottish Oil Minister at the Department of Energy. Surely, without impinging on the Drumbuie inquiry, it would still be possible to bring that Bill forward quickly to get the powers so that they can be used soon without prejudice to Drumbuie at all. The other point relating to getting the oil ashore rapidly is the urgent need of finance for research and development of other production platform and exploration gear.
I will quote the words of Dr. Robin Smith, principal of Heriot-Watt University, Edinburgh, where a remote-controlled seabed vehicle named ANGUS for exploring the seabed has been tested to a depth of 900 feet. A prototype has been constructed by the university at a cost of £2,000, whereas similar prototypes in America have cost £50,000. Dr. Smith had this to say:If only more financial support had been available earlier the vehicle could now be operating in the North Sea.He went on:But it has taken a tremendous effort to get the university's Institute of Offshore Engineering off the ground. This was helped initially by the Wolfson Foundation and then by a second charitable trust and the Royal 328 Bank of Scotland, but no substantial funds have yet been contributed by industry.He says nothing about any funds from Government sources, but goes on:On the academic side, after a great struggle and lobby, we have got just enough money to finance a chair of offshore engineering for three years and have the beginnings of an academic programme to train some of the large number of highly skilled engineers who will be needed in the next few years. To us the urgency of the problem sticks out a mile—but to sell it and get it financed, that's tough going.My Lords, only yesterday my attention was drawn to another production unit that is in the design stage. The well-established firm of engineering consultants, Alan Grant and Partners, of Cobham, have designed something called CASUB, the ugly word chosen to describe a cable-stayed submerged buoyant. This is a substitute floating platform and storage tank with a multi-well production facility. They have found two things: first, that this design, if satisfactory, would save the need for these large and difficult coastal sites being requisitioned. They have also found that finance for design work is very difficult to obtain when there is no hardware at the end. They have applied to the N.R.D.C. for a grant but they confess sadly, that the "mills of God grind exceeding slow".
I beg the Government, in their caretaker station, to avoid the dynamism of ill-considered decision and in energy matters to build on the excellent preparatory work of their predecessors, whether in the D.T.I. or in Lord Carrington's new Department of Energy where he was able to put in just a few weeks of very valuable work.
§ 7.13 p.m.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, I begin by apologising to the House that because of a breakdown in my transport I unfortunately was unable to hear the first three speeches. But I heard from the noble Lord, Lord Boothby, that the noble Lord, Lord Balogh, had made a very good speech, and I therefore congratulate the noble Lord on that speech and will read it with interest. I am also pleased to see the noble Lord, Lord Beswick back in the Government, although of course I am not pleased that his Party won the Election.
While the central theme of this debate is inflation, at the end of my speech I 329 shall say something about how I think it can be cured in this country. I have looked carefully at the gracious Speech. To do so is rather like walking through an old-fashioned London fog: I can see little anti-inflationary sunlight, for we have in the gracious Speech much promise about controlling prices. However, as we all know, unless wages are controlled there must be a vast increase in the subsidies paid to our nationalised industries. Of course I agree that the Government did a turnabout last Monday night in another place and now appear to agree that to a certain extent until a voluntary policy can be devised, a statutory wages policy is necessary. But when that will be is anybody's guess.
Let us consider the National Coal Board. I am told that its deficit for last year will amount to £500 million. I understand that the turnover for that year is only £1,000 million. Such figures give great cause for alarm. The cost of subsidising nationalised industries will be enormous; it cannot be anything else. The money supply will have to be increased. The printing presses will get to work again. So I view the immediate future with some misgivings. In his speech the noble Lord, Lord Leathcrland, appeared to express a liking for subsidies. Perhaps for social reasons subsidies are all right in certain cases but I have always been taught and have understood, that they are bad economics.
May I say a few words about the rent freeze. No doubt tenants will be very pleased, but here again it may involve more public expenditure. The Government will have further to subsidise local authorities, and that will involve more inflation. A rent freeze will lead ultimately to a shortage of accommodation. Price control by itself must always lead to excess demand and consequently to shortages. A rent freeze will be unfair since the cost of repairs will continue to rise. The former Labour Government's Housing Act of 1969 will, so far as I remember, be infringed by any rent freeze, because landlords were told that if they improved their property certain rent increases would be allowed under that Act. To have a rent freeze will surely let those landlords down. It is a bad move because it will be quite indiscriminate. Some landlords are rich, some are poor. Some tenants are rich, others are poor. Such a measure would 330 be completely indiscriminate. The last Conservative Government's Housing Finance Act, as explained in Fair Rents for All, was far more fair and would have been more satisfactory.
I turn to food subsidies. Here again, if we have these, as I understand the Government propose, they will be indiscriminate because they will apply to everybody, rich and poor. Food subsidies will amount, I imagine, to about £300 million a year. While I am just guessing and although I understand that the figure is exaggerated, even a penny on a loaf of bread has been quoted as Costing £38 million annually. About three or four weeks ago, I think it was, The Times newspaper printed a table showing our food prices compared with those of the rest of the world. We still have the cheapest food, so I really wonder whether it is strictly necessary to have food subsidies. I have no doubt that there are poor people who, with the increased cost of food, find things difficult, but I would far prefer that these people had extra supplementary benefit, that they had a cash bonus, or something like that. I think that would be a better way of dealing with prices.
May I quote just two lines of the gracious Speech? It says:My Ministers will work for a greater measure of social justice as a prerequisite of national unity at this difficult time".In socialist eyes, does this not really mean hamstringing the more able, hard-working and responsible members of the community to give to the less efficient and less responsible? In my experience it does. Such ways can only impoverish a nation. I have two or three friends who have worked very hard all their lives, who have built up businesses and have made money, and who are now domiciled abroad. They have been very reluctant to do this. As I say, they worked hard and they are very able. Those people are a great loss to this country. If the taxation laws had been different, they would still be here and would be a help to the economy.
My Lords, the gracious Speech speaks of the development and re-equipment of industry, as I have just said. If we do not have an equitable taxation policy, where is the capital to come from? We are in fact threatened by additional taxation and soaring wage costs, and it may be that before long there will be some more 331 industrial unrest. We have the highest bank rate that this country has ever known. No wonder people are reluctant to invest in British industry! We really must try to make it attractive to foreign investors, certainly, because State aid is no real substitute. If you give more State aid, that again is a means of increasing the money supply. I should like to see the Government beware of pouring too much money into uneconomic areas. I quite agree that if it is required for social reasons then perhaps that may be different; but if it is required for social reasons it would be far better, I think, to have a simulated price mechanism in fact like the regional employment premium that has been operating. If the Chancellor is to do everything that is proposed in the gracious Speech, such as pay for the losses of the nationalised industries, food subsidies, extra old age pensions and curb inflation, he will really require a magic wand because the taxation necessary will be immense. Where is he going to get the money? He cannot get it from the rich, because that is the law of diminishing return. The rich are taxed to death. He can get it only from the mass of the people, from the people who put this Government into power. We have the phrase in the gracious Speech "the redistribution of wealth", but we have already had that. To-day a manual worker can earn more money than a professor, or than somebody with qualifications, such as a bank manager. We have had the redistribution of wealth; I do not think you can redistribute it any more.
§ LORD BALOGH
My Lords, has the noble Viscount looked at the car park in front of our House? One does not feel, looking at that, that the wealth has been very redistributed.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, the only thing I can say to the noble Lord in reply to that is that if he will drive out at two or three o'clock in the morning and go round any council housing estate he will find a lot of just as grand cars, and some grander. I remember the late Deputy Master of the Mint, with whom I had lunch, saying to me, "Come along; I will show you something interesting. I arrive up here every day in an eight-year-old 332 Rover. Come and see the car park of my employees". I did, and there were Mercedes, Rolls-Bentleys, Jaguars. So, with due respect, I do not think the noble Lord's point is really valid.
There is one other thing I should like to say (the first time I spoke about this subject in this House was in 1957) and that concerns worker participation, now that the workers are earning such big wages. I have always been keen on worker participation, but the trouble is that if we do this we must really beware that we have clarification of the objectives, because if we try to do it politically it will only hinder industry. It must be done with complete clarification; it must be economic.
Before I end, my Lords, I should also like to say this. I cannot of course speak about oil because I did not hear the noble Lord's speech and I really know nothing about it, but it is obvious that we shall have to borrow several thousand millions of pounds from abroad to finance the gap until our oil comes rolling in. Presumably the Government are going to borrow this money from the I.M.F. or the so-called "Gnomes of Zurich", whatever that means—presumably from international bankers. We shall obviously have to pay quite a high interest, and I should like the Government, rather than mortgaging our oil prospects, to try to find some other way to raise this money.
I quite understand that the Treasury are always very loth to take up any suggestion from outside their magic circle, but I was wondering whether it would not be possible for the Government to issue a paper bond index-linked to gold, which would move up and down with gold. It would be the same as buying gold, and be guaranteed by the Government, with of course our oil behind us. It would be virtually interest-free at, say, 1 or 2 per cent. Then, supposing any investors made any money out of this, as presumably they would, their capital gain would be tax-free. I am quite sure that if the Government issued such a bond there would be a tremendous rush of investors throughout the Continent and the world generally to invest in it. It would be freely redeemable, immediately redeemable on demand, after, say, 1976, which is when our oil will be coming in. It would also have the advantage of taking a lot of the surplus money out of circulation, of taking heat out of the economy.
333 The noble Lord, Lord Hawke, was complaining, quite rightly, about the high price of property, mostly commercial property. I am quite sure that the institutions would invest in this bond rather than invest in property. It would be a better inflation hedge; it would be more liquid. I quite agree that it is a novel suggestion, but the Press have said very unkind things about National Savings, and Government stocks generally are so depressed. This is a bond that would move up with gold.
I put this suggestion forward in all humility. I am not a professional economist, but it seems to me something that the Treasury might look at. I understand that the idea was tried in France, but you can buy gold in France anyway, so it would not have the same appeal. I should like to ask Her Majesty's Government to look into this. After all, when we floated the pound we had considerable advantage to start with, though we have not gained as much as we might have done. I am quite sure that if we issue an index-linked bond other countries might follow suit, although many other countries do not have the oil as security. It would give us a breathing space and we should not have to borrow money at a high rate of interest. I realise that the Treasury is the Department of Government nearest to God and I apologise if I have rather shocked them, but it is quite a sound idea and I shall be interested to hear whether, when the noble Lord, Lord Beswick, winds up, he has any ideas on my suggestion.
§ 7.32 p.m.
§ LORD GRANTCHESTER
My Lords, the noble Lord who has just spoken said that he has probably shocked the House, and I may do so still more. In this debate on the economy, industry and energy I should like to raise one topic only, but one which is relevant to all the subjects under debate. I shall be very brief. My Lords, unless we are to revert to the primitive and clumsy method of barter all these subjects involve the use of currencies and their reliability as a medium to facilitate exchanges between individuals or groups of individuals. Currencies, as all noble Lords know, are the money with which to trade issued to its citizens by Governments. To-day this means in most countries paper notes or nickel coins of no intrinsic value. Experience has shown 334 that unless paper notes are backed by something substantial, that is guaranteed to be convertible into something commonly regarded as intrinsically valuable, confidence in them diminishes and ultimately is lost. The result is that no one knows the real cost of anything.
The noble Lord, Lord Leatherland, referred to the need for some honest money. Many suggestions have been made by economists and bankers to ensure security without the use of gold against the general mistrust of unbacked paper money, but none of these suggestions has won popular support. Though not ideal, through the ages many persecuted people and many refugees have saved something in times of disaster by holding a little transportable gold, and in a great part of the world to-day many small savers are turning to gold as a store of value. Some Governments are asking for gold in return for their raw materials because of the changing values of the currencies in which they are offered payment.
At the moment I believe a committee of the European Economic Community is considering the revaluation of the gold reserves held by European central banks so that these reserves could be used between each other to settle balances. May I ask whether British officials, as I hope, are co-operating in this work? If successful, this operation would mean a new official fixed price for gold and there are ample reserves available in European central banks to sustain a sensible price if it is established. Care will, of course, have to be taken that this increase in value of reserves of the central banks does not increase the money supply. That would be highly inflationary. One great advantage would be that European Governments could then issue loans, as the noble Viscount, Lord Massereene and Ferrard, suggested, with a backing of gold to attract savings at a low rate of interest which would be acceptable because the capital would be secured. A fall in the level of commercial interest rates generally in the world is in my view essential to develop. This is a first move.
So far as I am aware, only the French Government has offered to its citizens such bonds and the rate of interest has varied from 3 per cent. to 4½ per cent. Confidence would return to a paper currency backed within the country by 335 some fixed or stable standard. It would set at rest many of the fears, for at least the medium-term future, which to-day harass every wage earner and thrifty saver. It would confirm the Constitution of the International Monetary Fund which seems to have lost its way and enable the Fund to regulate the overall liquidity necessary for the expansion of world trade by the issue of S.R.D.s redeemable in gold as gold production increases with the higher price. It would give us again reserve assets which are non-interest bearing and distinguish between reserves and commercial transactions in national currencies.
My Lords, for many years successive British Governments have sat on the fence and have avoided taking any decision on this matter, but already we see not far off the precipice over which we may be pushed—what someone recently described as "sensing a subtle ill-defined danger approaching". May I hope that the new Government and their advisers will face up to this danger as a matter of great urgency?
§ 7.39 p.m.
§ LORD TREFGARNE
My Lords, I rise to speak only briefly, first to welcome the noble Lord, Lord Beswick, on the Front Bench opposite me. I shall no doubt put down Questions in the future and he and I will swop pleasantries across the Floor of the House as in the past. I also, of course, welcome the noble Lord, Lord Balogh, who has not sat on the Front Bench before.
Before embarking on a few brief comments on energy in particular, I should like to comment shortly on the observations of the noble Lord, Lord Balfour of Inchrye, who I am sorry is not in his place, about the future of Concorde. I suspect that a project like that is bound to have a low point in its financial fortunes: and it must surely be about now, when we have spent almost the maximum amount on development and have not yet seen any return. I confess that the failure of the airlines to convert many options into firm orders is somewhat disappointing at this stage, but I still believe that the Concorde project should go ahead and I hope that the Government will do just that.
My Lords, may I now speak for just a moment on the question of fuel supplies 336 for the airlines in the United Kingdom. Hitherto, since the advent of the crisis in the autumn of last year, the allocation of fuel to the airlines operating larger aircraft has been, by and large, satisfactory; but the allocation of fuel to the operators of smaller aircraft has given some cause for concern. We recognise that some of the users of smaller aircraft could be classed as less than wholly essential and so it was perhaps right that some of those aircraft should be denied all the fuel they wanted. But there are other categories of business aircraft which are much more essential and which have, I know, suffered a great deal of difficulty in obtaining the fuel they require. It was not so much that the allocation of fuel they were granted was insufficient as that the fuel was never available at the right place at the right time, and there were many cases of aircraft arriving at airfields hoping for, and having been promised, fuel which in the event was not available. That has caused a great deal of difficulty.
The other question on which I should like briefly to touch is the question of new operators who have to apply for fuel on a rather special basis, because they have no past record against which their requirements can be assessed. Most of the allocation schemes at present in force are based upon the consumption of an operator in the preceding 12 months and if an operator was not in business at that time, obviously there is no basis upon which to make the calculation. In such a case, as I understand it, he has to make a special application for a new allocation. This is a time-consuming process and one that in one or two cases, to my knowledge, has caused some difficulty. I hope that the Government will take an opportunity to look at that matter again.
Another point is the question of fuel being issued to foreign airlines. This has caused particular difficulties with the Italians, as noble Lords opposite may know. One particular small Italian airline seemed apparently to think it was entitled to unlimited fuel at United Kingdom airports, and when this was eventually refused the Italian Government retaliated. Fuel is now virtually unobtainable in Italy for United Kingdom airlines. Indeed, technical landings—that is to say, landings for the purpose of 337 uplifting fuel only—are now prohibited in Italy to United Kingdom airlines, though I gather that there is in fact plenty of fuel in Italy and the Italian Government is simply being very difficult. The Italians, unlike most other European countries, are not signatories to the Multilateral Agreement and are therefore under no special Treaty obligation to allow British aircraft to land. This is a matter which is causing some difficulty, particularly among the lower echelons of the independent air transport industry in this country, and I hope that the Government will be able to look into it.
§ 7.44 p.m.
§ LORD STRANGE
My Lords, I shall not keep your Lordships long and will try my best not to bore you more than necessary. I have two things I want to say; one is an observation about the Concorde aircraft. The second, which I shall deal with first and which I thought might interest noble Lords, is the subject of reaction to the Election in the Isle of Man where I was throughout the Election. I talk to a lot of people, and tourists nowadays are usually people coming to buy a house and who seem mostly to be Tories at heart and in practice.
I did not know that anything exciting was happening at the time because I was busy with other things. Then I heard everybody shouting against Mr. Heath, and I thought that I had better find out what had happened. I looked in the papers to see what had happened and I found that Mr. Heath was going to ask for an Election and was to stand in the Election. They somehow thought that they had been cheated. When one talks to customers in a pub or bar, they are always right. You listen and say, "How clever you are", but you never give your own views. I do not know what my own views then were, but the news was a shock to me. Then they said, "Why didn't he go on?" They got the idea that he was keeping a secret from everybody. What they said about the miners' trouble was that the miners had guilds, et cetera, and that in Elizabethan times they were always on strike. They missed all the subtle points we have discussed here. I am just telling you what was going on outside because it amused and interested me. They thought that Heath had let the Tory side down and that he 338 should have gone on. He had quite a large majority and they thought that he was keeping a secret. One man said something that struck me as interesting and showed how feelings were progressing at that time. He said that if Mr. Heath had been the captain of the "Titanic" and the passengers had asked him why the ship had stopped, he would have said, "We are going to make a record run to-morrow and we have stopped it because we're going to give a large party and we are getting ice for the drinks." That was the view that he held.
§ LORD STRABOLGI
My Lords, I am sorry to interrupt the noble Lord but this is a debate about the Queen's Speech and I suggest, in accordance with Standing Orders, that he keeps to the subject.
§ LORD STRANGE
Thank you very much. That will make the speech much shorter. The next thing I want to say, which is my concluding remark, is about Concorde—and I thought that the noble Lord was brilliant about it. First of all, the staff, the men who are working very hard on it, cannot stop because the whole thing has gone so far; but as they say, "We will lose a lot of money on it". I am sure, however, that they are excellent workmen and are conscientious people and that they would agree to use the wages we pay them while it is not paying its way, always to buy British stock—to buy British materials, British motor cars, British goods, everything British. So that in point of fact there will not be a loss of all those millions, but always the money would be moving backwards and forwards on the table. That is all that would happen.
The other remark I wish to make about Concorde is that if we have to break our faith with the French we shall not only have to pay out the most fantastic sum of money but it is doubtful whether other nations will ever trust us again. It is a terrifying thing to do. Britain will get a name—and perhaps it is getting a name—as one of the "bad pair", and we do not want that at the moment. I personally think that we should certainly go on with Concorde and finish it. I think that for several reasons. As has been said in this debate, and as I believe to be the truth, America is working on a speedster craft, and so are the Russians. Some people say that the Japanese are too. I do not know whether there is any 339 truth in that. But the point is that they are all behind while we are ahead. If we have the first in the air that works, then it is possible that they will buy from us and not go on with their own projects, because these are very expensive projects. So the loss may not be such as is now supposed.
In conclusion—and I have not been speaking for very long, as I have been cut out of my story—I must say this: there may be something deeper in all this. I never trust surface values at all. It is quite possible that in the background of people's minds may be the thought of a supersonic plane that can carry ammunition. Instead of 200 passengers such a plane could carry quite a number of bombs. It may well be that some people believe it can be converted into something like that. Therefore I think we should do best by going on with Concorde and being first in the field.
§ 7.50 p.m.
§ LORD WYNNE-JONES
My Lords, I hope your Lordships will forgive me for having been absent for a good part of this debate. Unfortunately I had an engagement which was fixed some weeks ago and could not be cancelled. In consequence, I have failed to hear many of the speeches that have been made.
My Lords, the subject which I believe to be of paramount importance at the present time is that of energy, and since this is included in today's debate I wish to urge upon the Government that they should pay attention to what many of your Lordships have previously advanced. As your Lordships will recollect, we have had a large number of debates on the subject of energy—in fact over the last four months we have had almost a surfeit of them—and it is important for us to realise that some of the suggestions put forward from all parts of the House are suggestions to which any Government ought to pay very serious attention.
The point I particularly wish to emphasise is that there was very considerable support for the idea of an Energy Commission. This has nothing to do with displacing the responsibility of a Minister or Government for dealing with the problems of an energy policy. Day-to-day energy policy is one thing: it is clear that any Government, and the appropriate Minister, 340 have complete responsibility for the day-to-day conduct of our affairs on this matter. But it has been clear over the last 20 or 30 years that the country as a whole requires a continuing survey of energy policy. It is impossible to turn to any single expert and say, "Please tell us what we are to do." No expert can do this. It is impossible to expect any body that is set up ad hoc at a particular moment to produce a magic answer. It may produce something which is suitable for the moment, but one has only to look back over the last 25 years at the whole history of energy policy, going back to the Ridley Committee (which I believe was set up about 1950) to notice how every single body, when asked to give a single decision, reached one which was applicable for only a few years.
This is something which those of us who are interested in science and technology appreciate. We know perfectly well that there is no final answer and that it is useless to turn to someone, as to a magician, and ask for an answer which will be valid for all time. Because of this, it is important that there should be a continuing body, an Energy Commission, which would have the responsibility of reporting all the time on the continuous changes occurring with regard to energy. Any one of us who thinks he has some proficiency in this matter may think he is capable at any one time of saying, "Yes, you ought to put your money on nuclear energy"—or on coal, on oil or on solar energy, as the case may be. But this is the sort of inspired guesswork which is valueless when determining the policy of a country. Consequently, I believe very strongly that there ought to be a permanent Energy Commission—not one which has executive powers or which decides what has to be done immediately, but one which is continuously informing the Government and the country of changes in the current situation.
Turning to the coal situation, I am glad to see that the noble Lord, Lord Hawke, is present. I believe he is somewhat sceptical about the coal situation, and he mentioned earlier this evening what he called "the euphoria of coal". Of course he is right if we think that coal is magically going to come back and run our railways, except in the form of electrical energy. But looking at the 341 subject of coal, we have an absolute necessity for about 30 million tons of coal each year; that is, for coking coal. We cannot run the steel industry of this country, for example, unless 30 million tons of coking coal are produced. We shall have a need for many years to come to produce enough coal for our power stations, but these are two totally different types of coal. Coking coal cannot be used for power stations: the coal used for power stations is largely rubbish, from the point of view of the coking industry, and it would also be rubbish from the point of view of the domestic consumer. It is coal which can be used in that particular form, and it will still be competitive for many years to come. So, although I appreciate the point made by the noble Lord, Lord Hawke, I believe he is wrong in suggesting that there is not a great future for coal.
The noble Lord himself mentioned the use of coal for the chemical industry. This is a matter of very grave importance, and we have to realise how significant it is. About 25 years ago, the chemical industry of this country was run entirely on coal, and not on oil. To-day it runs entirely on oil, and not on coal. This is due to certain material technical factors. I believe—and I know that the Coal Board hold this view—that if sufficient research is done into the methods of using coal, and if sufficient effort is put into developing means of hydrogenating coal, and so on, we can use coal in the chemical industry where to-day we are using oil. Indeed, this is going to be absolutely vital in the long term because, whatever you may say about the next fifty years, when you can get oil at a price, in another hundred years there will not be the oil available. The oil will have been used up: we shall be making oil from coal; and we shall be needing coal for many purposes. If we allow the coal industry to run down to-day, there will be nothing for us to use in a hundred years' time. So this is not something which concerns a Government who are in office for five years—as this one will be—but it concerns the country as a whole. Therefore it is vital that we should ensure that there is a continuing body, not dependent upon the vagaries of electoral decisions, which is looking all the time at the position with regard to energy.
342 Therefore I would urge the noble Lords who are responsible for Government policy to look at this position and realise that in the interests of the country it is vital that they should set up an energy commission which looks at the whole problem of coal, oil, gas, nuclear energy, solar energy and all the other things we can talk about, because they are all absolutely essential. But it is not for any one of us to reach a decision, and if such a body were set up so that the Government appointed a number of people to serve for a definite term of years, three, five or whatever period, they could draw on the most expert advice in the country. They would be certain they would be getting people gladly contributing their ideas all the time in order to ensure that the future of the energy supplies of this country are maintained.
I hope that the Government—whom I support most strongly—will pay attention to this request which comes not from me personally but from all round the House, and outside this House as well. This is a feeling among those who know anything about fuel which is regarded as vital and essential. If the Government will do this they will have taken a splendid step forward in ensuring that our attitude, our whole conception, about fuel will be properly realised. I do not press the matter any further because I am sure my noble friend sitting on the Front Bench will appreciate the point that I am trying to make.
Moving away from this field of fuel, I come to a point which is essential in the long term for this country, and that is a proper realisation of the significance of fundamental research. I know that over the past few years there has been a certain disenchantment about scientific research. I know people have said, "Look at all the horrors that are created by technology, look at the abominations that we have." Some have even said, "Look at the absurdity of Concorde." It is important to realise that without fundamental research there is not only no progress, but there is no cure for the ailments with which we are faced. If we have pollution in the atmosphere, if we have pollution in our rivers, if we have Pollution in the oceans, is this cured by some magical enchantment? Surely it can only he dealt with by people who are prepared to study the problem; 343 in other words, it is only by the application of scientific research that you can hope to cure the evils that are created by the technological developments which may improve scientific research. You cannot hope that there is some magic there.
This is what is so pathetic about much of the present day opposition to all forms of technology. People want the advantages of technology but they do not want to have any of the disadvantages. They do not realise that you can only cope with the disadvantages of technology by applying a higher technology in order to examine those difficulties which have arisen. It is the most dangerous phenomenon in our whole civilisation to-day that we are finding that in consequence of all the talk that is being put round, young people are not turning towards the serious study of these problems. They think it is more important to go on the streets with a placard and say, "Down with this" or "Out with that", rather than to say, "Our job is to understand things deeply and better; and my God! this is hard work." They think that there is an easy solution. I spent 45 years in university education and there is no easy solution for anything. If we think that by neglecting serious investigation and study we solve problems, we are really betraying everything that Western civilisation, and all civilisation, has ever stood for. It is absolutely vital that this Government should realise that we are back now at the point where we have got to take the fundamentals of all that we are doing and think them out clearly. If we say that this means that we must spend more effort on research, then I say, "Of course". I do not mean research in a trivial sense, but research in the sense of trying to understand the whole meaning of everything that we are doing. Research is the vital core for everything that society stands for. I hope that this Government will realise they have an opportunity of doing this. If they do that, I am confident that the country will respond. The country has gone into this drifting state because it has seen no clear vision. Let us have that clear vision of what we are trying to do. We are trying to create a new society. Forgive me for being trite, my 344 Lords, but we are trying to create something in which all of us wish to live.
May I end with these words? I do not want to be in the least acrimonious, but I think it is time we realised that you do not arrive at the correct answer by taking two extremes and choosing the mid-point between them. I believe that there is an extremism of the centre which is more dangerous than any other extreme. It is essential that we realise that we have ideas, and that we have confidence in ideas. I do not disrespect the ideas of the Opposition, but what I say is that if they have one point of view and if the Government have another point of view, the right point of view is not midway between the two. This is something that we have to appreciate, and I believe it is nonsense to say that the country voted at the last Election for nothing.
§ 8.11 p.m.
§ THE EARL OF LIMERICK
My Lords, I thought that the extremely interesting speech to which we have just listened from the noble Lord, Lord Wynne-Jones, was in the very best traditions of this type of debate in this House in the careful and thoughtful way in which it was delivered and received. I listened with interest and admiration. If I do not follow the noble Lord, it is only because I feel that he has said everything that I conceive could usefully have been said on that subject.
At this stage in the Parliament we are still in the era of firsts. I should first congratulate the noble Lords, Lord Balogh and Lord Beswick, on their respective appointments, as my noble friend Lord Amory said, "to positions of great dignity and importance" as Ministers of State for their respective Departments. I most sincerely wish them well in their difficult tasks. This was, I believe, in each case their first appearance in a major debate at the Dispatch Box. In my own case, it is the first speech that I have made from the Conservative Bench other than from the Government Box. I should also like to congratulate the Lords in Waiting who have been appointed since the House last met. I note in passing, after a little research, that their average age is 61½ years. I checked on our own Lords in Waiting and I found that their average age was 41½ years, whereas the three who 345 were appointed in January of this year had an average age of 32 years. I should like, in particular, to congratulate the noble Lord, Lord Jacques, on becoming the father of the Front Bench. I am sure that he will not take it amiss if I point out that if he sat on this side of the House he might, without straining credulity, win quick promotion as the grandfather, at least to my noble friends Lord Alexander of Tunis and Lord Cowley. I look forward to future exchanges with him on the subject of trade. I will seek in Opposition to emulate him, invariably courteous and constructive without departing one jot from his principles.
My Lords, as an ex-Minister of the late lamented Department of Trade and Industry, I cannot forebear to conduct a brief act of remembrance for the D.T.I. In the 40 months of its existence, for 23 of which I served it, it acquired a distinct and healthy personality. We had a useful confidential news sheet entitled D.T.I. This Week, and I am told that, perhaps with a touch of nostalgia, the post-Election issue was headed D.T.I. Last Week. Really, the dismemberment was carried out with unseemly haste, by contrast with the formation of the Department which was preceded in October, 1970, by a White Paper. I re-read these arguments in the light of experience and working within the system, and I believe that in general they retain their validity.
Three points in particular concern me. The first is the future of what were becoming highly efficient regional offices, spanning the functions of what are now three Departments of State; that is, Industry, Energy and Trade with their emphasis on the vital target of export promotion. Second, I fear for staff morale and efficiency as a result of this major and unheralded upheaval. Third, and perhaps most serious, is the loss of the close and everyday contacts between Ministers and senior civil servants which worked very well and saved incalculable time compared with the interface problems with other Departments. It is remarkable that whereas the D.T.I. from 1970 to 1973 had a complement of nine Ministers, first one and then two being in the Cabinet, the same functions are now answered for by no fewer than four Cabinet Ministers assisted by 11 others, a total of 15. Within the field that I 346 know best, the functions carried last month by my right honourable friend Sir Geoffrey Howe and myself are now discharged, with only minor changes in function as far as I can ascertain, by two Cabinet Ministers and four others. Carefully resisting, as I do, the temptation to claim that we were much more efficient or that we worked harder, I fear that much of the time of these 15 Ministers and their official counterparts will be taken in inter-Departmental debates of subjects which previously we settled quickly, informally, and often without the delay imposed by official papers.
§ THE EARL OF LIMERICK
It was real team work, my Lords. I should like to pay warm tribute to the quality, the loyalty, and the unfailing diligence of our D.T.I. officials. It was a pleasure as well as a privilege to work with them and I personally owe them much.
§ LORD BESWICK
My Lords, so that I can properly appreciate these tremendous criticisms that the noble Lord is making, in the total that he gave of the D.T.I. Ministers, was he including the Post Office Ministers? In the previous D.T.I. total, was he including an element of the Post Office and the Energy Department?
§ THE EARL OF LIMERICK
Only one. Of course there are problems in running large Departments. But I believe that in particular the divorce of Trade from Industry is a particularly grave error at a time when the maximisation of production for export is a top priority. In many ways—in export or import substitution potentials, manufacturing capacity, overseas investment opportunities, operation of the Industry Act, the Trade side informed the Industry side, and vice versa, in a way that will no longer be so simple. Doubtless it is unreal to expect immediate reversal of this decision, but I do hope that these points will be well considered against the day, which I believe to be inevitable, when the Trade and Industry Ministries at least are again 347 united. Meanwhile, I sympathise with the noble Lord, Lord Beswick, who I believe has responsibility for aircraft procurement but finds that civil aviation is the business of the Trade Ministry, and ask him as a practical assistance to those of us who now find ourselves as babes in a rather unfamiliar wood, to arrange for the early publication in Trade and Industry—I sincerely hope that that admirable organ of official journalism is not to be separated in line with its sponsoring Departments—of an up-to-date "Who's Who in What was the D.T.I.". I think this would be very helpful.
On reading speeches made on the loyal Address in another place, it appears to me that the inability to command an actual majority, and constant doubt about the ability to negotiate an unnatural majority, does wonders for the standard of argument. A spell of de facto consensus politics may indeed be an uncoveted bonus from the present stalemate. Despite the valiant efforts of successive Gentleman-at-Arms, your Lordships' House, still being virtually unwhippable, needs no such stimulus to its level of argument; and I believe that to-day we have provided an excellent example of this. It is almost invidious to single out particular speeches, but I thought that the contributions we had in the middle batting order which were particularly notable were from my noble friends Lord Bessborough, Lord Amory and Lord Lauderdale, from the noble Baroness, Lady Seear, and also the noble Lords, Kings Norton, Avebury and Wynne-Jones who spoke last. Perhaps at this point I should declare a contingent interest. I was invited to rejoin the board of the merchant bank I served for 14 years before joining the last Government, and I accepted the invitation, although I have not yet taken up my duties.
I turn now to the gracious Speech. Much of it is to be welcomed, and I approach it in a spirit not unduly critical but inquisitive. I congratulate the Government first on having breathed new life into the Consumer Credit Bill and predict that, provided it is substantially the Bill that we knew before the Dissolution, its passage through this House should not be a stormy one. I should next like to ask about the fate of the Companies Bill, which I knew particularly well and loved 348 almost without qualification. It contained some extremely useful measures to bring the commercial law up to date in a particularly important area. The Jenkins Committee reported 12 years ago now. We found most of their recommendations to be still highly relevant, but they will not remain so for ever. Company legislation lodges with Cinderella and I should greatly welcome some assurance that the latent merits of these proposals are recognised.
Especially welcome, so far as I am concerned, was the reference to the establishment of "a more liberal pattern of world trade". The same sentence foresees an increasing provision of aid. I strongly approve of aid and have seen examples of magnificent results achieved in many countries, by technical aid especially. But what is debatable is the extent to which countries such as Britain, with substantial balance-of-payments problems, should increase their capital aid, whether bilateral or through the international Agencies. I personally would look in certain areas, especially the Middle East and Africa, to a triangulation of what have hitherto been bilateral deals. It would remain the function of the developing country to provide the basic resources of materials and labour, and of developed countries such as Britain to provide the know-how and industrial exports. But the provision of finance would become at least partially the function of the oil-producing countries which are now accumulating exportable capital surpluses vastly in excess of their own capacity to industrialise. Some of the oil-producing countries, notably Saudi Arabia and Kuwait, I know to be ready for this role. They want proposals from us and expertise of many kinds. This type of arrangement suits all parties, but it needs positive promotion if we are to benefit industrially as we could and we should. This was one of my main preoccupations in Office and I greatly hope that it will remain a preoccupation of Ministers in the new Government.
Those of us who most strongly believe that excessive Government spending, both nationally and locally, is the principal, if not the main, cause of inflation round the world are indeed fearful of the terrible forces which will be unleashed if the handle of the monetary printing press is turned faster. Last December Mr. Barber 349 took some weight off the handle by making unprecedented cuts of £1,200 million a year in public expenditure. Most of us thought he was right to do so. Does the noble Lord wish to intervene?
§ LORD BALOGH
My Lords, does the noble Earl think that, as a member of the Government which achieved in peace time a record deficit, a record borrowing requirement, he can animadvert in the way he did?—because if he does so, I cannot agree.
§ THE EARL OF LIMERICK
My Lords, the reasons for the trade deficit are well known. They have been well discussed in the Election campaign.
§ THE EARL OF LIMERICK
I am speaking now about the future and not about the past, and I am endeavouring to do so in a constructive way, my Lords. What I fear—I say this with deference, but I feel it is relevant—is that the lesson of 1964 may not have been learnt and that the Government may shortly be driven to a massive bout of deflation, with high unemployment, wasted resources and such spending power as remains left in the wrong hands for the essential purpose of increasing industrial production. We have for a few weeks a chance to achieve a really significant improvement in our relative export performance. Production and investment have been increasing, albeit not as fast as one would wish; export profitability has become a major incentive—and any system of profit restraint must take account of that fact; and exporters are rapidly getting the message of taking advantage of the flexibility given by the floating pound to maximise their foreign earnings by raising prices wherever they can without becoming uncompetitive. Valuable lessons for productivity have been learnt from industry's magnificent response to emergency working conditions. If the impetus of this export drive is lost it may take many years to recover and the outlook will be very bleak.
To turn to industrial topics, it was just a week ago that in debating the Address Mr. Wedgwood Benn referred in a general way to themeasures to encourage the development and re-equipment of industry";350 and he went on to refer to the stimulation of regional development. These twin themes, first of increasing production in new factories, sited where both housing and labour are available, and, second, of increasing our still lamentably low national productivity, have laid at the heart of our economic struggle since the war. I should like to ask the noble Lord, Lord Beswick, when he replies, to be more specific, if he is able, about the nature of the new investment incentives proposed. I would ask him also for an assurance that there will be no change in the policy of welcoming inward investments, especially as a basis for Common Market operations from overseas, and, further, that there should be freedom in the sphere of outward investment—and here there is really no conflict: this brings substantial stimulus to our exports.
Mr. Wedgwood Benn went on to foreshadow a new Industry Bill and referred to foreign takeovers. What, for example, will be the test of national interest by which foreign takeovers may be prevented, as he foresaw? Will these powers extend beyond those already embodied in the exchange control regulatory mechanism? Will the criteria of national interest be public? I think it most undesirable that a definition should be attempted, but if not, how does the policy of the new Government differ from that of their predecessor? Presumably there was some significance in the words that were used.
It is impossible in this debate not to refer to public ownership. I will treat the subject quite generally since the new Secretary of State for Industry said in the debate last week:As the Prime Minister made clear, the House of Commons will have the opportunity not only of debating and voting upon the Industry Bill but also upon any extensions of public ownership that will be submitted to Parliament for decision through the full parliamentary legislative process."—[OFFICIAL REPORT, Commons, 13/3/74; col. 202.]No doubt the noble Lord, Lord Beswick, will gently point out to his Secretary of State that he really meant Parliament, not just the House of Commons, and will remind him that several Members of this House will scrutinise any specific proposals with rigour. With that caveat, the assurance is of course welcome.
However, to-day we are talking about the principle of nationalisation, upon 351 which the gracious Speech itself is significantly silent. The deep divisions in the Labour Party over recent months, so publicly paraded at Blackpool, and then so unconvincingly papered over in the Manifesto, find a curious echo in Mr. Wedgwood Benn's words. He said (col. 202):Even the proposals for the extension of public ownership, supposedly so controversial "—I like that word "supposedly"—emerge from those who work in industries where the present structure either condemns them to disorganised decline or hampers their prospects of long-term expansion and development.Even supposing it to be generally true that the proposals do stem from those who work in industry, rather than from those who seek to control it for political rather than economic ends, this statement depends for its validity upon two startling assumptions: first, that a declining industry will decline less fast if the decline is organised under public ownership; and, second, that public ownership could remove structural obstacles to growth with which private ownership cannot cope in otherwise expansionist industries. History, I suggest, teaches us the reverse.
§ LORD WYNNE-JONES
My Lords, will the noble Earl forgive me? Is he saying that the Party for which he is speaking is now wishing to undo all those acts of nationalisation which it committed?
§ THE EARL OF LIMERICK
My Lords, we are speaking about the Queen's Speech and about proposals for the future.
§ LORD WYNNE-JONES
My Lords, forgive me, but I think the noble Earl was speaking about the principles of nationalisation and not about the Queen's Speech.
§ THE EARL OF LIMERICK
My Lords, that is very true, but we are talking about them as they extend to the future policy of Her Majesty's Government.
I want to end with two positive points. First, I believe that too little of the country's educated and professionally trained talent enters production industry whereas the service sector has more than its share. This is a complex question: it is compounded of people's attitudes and the 352 skills that are fashionable, on financial rewards and on the location of industrial plants. I believe that until this tendency is reversed our industry will continue to be inadequately managed, either dispensing with outside advice or sometimes relying on advice given on purely financial rather than on broad industrial criteria.
I have become increasingly concerned about the lack of general understanding quadrilaterally between Westminster, Whitehall, industry and the City. In the D.T.I. we were much concerned to break this down and I believe we had some success, but it is a long and continuing process to which all parties must contribute. My own experience was that they were very ready to do so once the way had been pointed, but busy people tend to overlook this type of initiative in their everyday lives. Once it becomes everyone's concern to build up a small network of contacts to the appropriate level the problem will largely be solved. I for one will continue my efforts in this way unabated and I urge that course on others.
We shall be watching the development of Government policy at this critical time with the closest attention. They have a formidable task and I hope our function in Opposition will be to facilitate sound measures rather than mutual frustration in contentious ones. But our national future lies even more in the daily actions of all the people in the country. If sensibly led, I believe we shall all respond.
§ 8.33 p.m.
§ LORD BESWICK
My Lords, if I may, I should first like to say a genuine "thank you" to all those noble Lords who felt able to make friendly references to me. I value what was said.
I have listened carefully to almost all that has been said in the debate and I hope it will not sound patronising if I say that it was always enjoyable and never a burden. I also ruminated on curious similarities and equally striking differences between the outlook to-day from this Box and that of yesterday from the Opposition side of this Table. Agreeably enough, the faces I see are almost identical. I am not so certain that noble Lords opposite can say the same. The noble Earl, Lord Limerick, has apparently done a good deal of homework about the average ages of his young 353 Whips: I wonder whether he has worked out their average length of service? That, too, would be interesting.
I am also impressed by the similarity in the circumstances of our takeover of this Box this time as compared with last time. Last time, as this, we took over in conditions of economic crisis; last time, as this, the previous Conservative Administration had built up an aura of prosperity almost entirely founded upon debt. "Strength through debt" was no less the slogan of Mr. Barber than of Mr. Maudling. Again we have the intolerable deficit on our balance of payments, but this time it is writ larger than anything we have known in our lifetime. If I may say so, I thought the reference to the printing press was probably the least delicate comment that has been made in what has otherwise been a highly good-natured discussion.
That is the similarity, but there is an interesting difference. Last time we were accused of being over-gloomy in our description of the economic inheritance. This time it seems to me that we have probably swung too far towards optimism. In this I greatly welcomed what the noble Baroness, Lady Seear, had to say. I can understand the sense of relief that there has been change at the helm, and that we have a lot to be optimistic about, but at the same time it seems to me that it would be a great mistake to underestimate how serious was the set-back suffered under the economic and industrial policy which led almost inevitably to a three-day working week and a complete stoppage in the coalfields. Some of the consequences indicated by my noble friend Lord Balogh stand out clearly enough—the balance of trade figures, the Budget deficit, the sterling exchange rate, the cost of living index. But some of the consequences have still to work through, not least the inescapable price rises in those publicly owned industries where hitherto rising costs have been met by subsidy. That is a situation which clearly cannot continue indefinitely.
I shall return to the general and the longer term, but may I first try to answer some of the more detailed questions that I have been asked. The noble Lord, Lord Aberdare, courteous and constructive as ever, in Opposition no less than in Government, asked how we were 354 going to pay the bill for certain increased social expenditure, and other noble Lords have asked me the same question. Of course it is quite impossible for me to anticipate my right honourable friend's Budget Statement, but to the noble Lord, Lord Aberdare, and to the noble Baroness, Lady Seear, and others who 'have rightly emphasised the threat of inflation, I would say two things. First, me shall no longer as a nation be content to live on "tick". It really is not good enough for the noble Lord, Lord Aberdare, to point to all the advantages of growth and to say what resources were allocated to the social services when it was done almost entirely out of borrowed money. If extra benefits are provided, then as a nation we must endeavour to pay for them. How we pay for them mill be obviously a matter for the Chancellor of the Exchequer.
The second point I would make to the noble Lord, Lord Aberdare, is that there can be no question of apology about increasing certain expenses during this time of financial stringency. It is part of our social contract. "To each according to his needs" must be an objective equally with "from each according to his ability". The noble Earl, Lord Limerick, asked me about a secret compact, as if there was something sinister about it. It was referred to quite openly in the General Election; it is part of our policy. We are deliberately doing things and we are expecting things to be done in return. It is part of the incentive which we hope to inject into the system.
§ THE EARL OF LIMERICK
My Lords, I believe the noble Lord is answering a question which in fact I did not ask.
§ LORD BESWICK
My Lords, I beg the noble Earl's pardon.
The noble Viscount, Lord Amory, in a speech which I found tremendously attractive in tone, appeared to think that what was being given rather outweighed what would be taken out of effective demand and that this of course would 355 increase the inflationary pressure. I respect his judgment but I am sure he will agree that we cannot reach a final conclusion about this matter until we have heard what Mr. Healey has to say on Tuesday. I thank the noble Viscount for his reference to the importance of the rank of Minister of State. I am bound to tell him that I was reminded of the time when a former friend of mine whom he will probably remember—John Dugdale, who was also an early Minister of State—wanted to get in to see Wolverhampton Wanderers play. There was a great crowd outside and he asked a mounted policeman whether he could make way for a Minister of State. The policeman said that he could do no such thing. John Dugdale then said, "I am also a director of Wolverhampton Wanderers' Football Club". "Oh!, said the policeman, "that's different". So rank is not of the utmost importance.
The noble Viscount Lord Amory, the noble Baroness Lady Seear, the noble Lord, Lord Roberthall, and others expressed doubts about organised Labour accepting restraints on wage demands. Certainly when one considers the pressure which price increases already made or to be made will impose on wage claims, it would be foolish to dismiss all doubt. But we have tried rigid statutory control, and it has failed. We have tried a punitive code of industrial relations, and that has failed. Much of what has been said on the Benches opposite—though not by the noble Lord, Lord Roberthall—would lead us to believe that there had been no three-day working week. That was the inevitable consequence of endeavouring to impose a rigid system of wages. I agreed with what was said by the noble Lord, Lord Roberthall, and by the noble Viscount, Lord Amory, that much will depend now on the developing relationship between the Government, the C.B.I. and the T.U.C. Not only the machinery but the spirit in which that machinery is used will be decisive.
I agree with my noble friend Lord Davies of Leek and with what has been said by others, sometimes quite movingly, that what we need now is a new spirit and a new effort together; and I hope that that new spirit will be generated as we go along. The noble Lord, Lord 356 Roberthall, and my noble friend Lord Leatherland took a certain view about food subsidies, as did the noble Viscount, Lord Massereene and Ferrard. The noble Baroness, Lady Seear, took another view. Of course, the Government are in line with what was said in favour of food subsidies. I would suggest to the noble Baroness, Lady Seear, that it is a fact that the price of food enters into the retail price index, and the retail price index is an important factor when one considers wage bargaining.
If I may say so, I thought the noble Lord, Lord Hawke, was motivated by the spirit of wishing to work together. I agreed with what he said about commodities, and made a careful note of what he said, as I did of the comments made by my noble friend Lord Leather-land. I shall consider what has been said. May I say to the noble Lord, Lord Hawke, that I found his whole speech very persuasive. I wish I could think that his radical proposals would be implemented, but whether we can do so in our first term of office I am not entirely sure.
The noble Earl, Lord Bessborough, was most informative, as we expected him to be, about the E.E.C. and its policy on energy. I am sure my noble friend Lord Balogh was sorry that he was not here to listen to the speech of the noble Earl, but he tells me he will reply to what the noble Earl said. The noble Earl, Lord Bessborough, also made a powerful case for our representation at Brussels. I cannot tell him that I am entirely persuaded as yet, but in the meantime we seem to be extremely well represented, and I congratulate the noble Earl on his record so far.
The noble Lord, Lord Kings Norton, as usual made a very informed contribution, and asked me about the present position of the tracked Hovercraft. He was correct in saying that contracts had been negotiated by the former Department of Trade and Industry with three industrial companies, the initial phases of which will be spread over the next two years for the assessment and development of linear induction motors. The Department of the Environment are sponsoring a two-year phased research programme by British Rail on magnetic suspension or levitation systems. I suspect that the noble Earl already knows that Imperial 357 College and other academic institutions have recently submitted to the Science Research Council a Paper outlining their joint proposal for the centre of excellence for electric surface transport research to be formed. This centre would include the Tracked Hovercraft Ltd. test track facilities at Earith. The Science Research Council have set up a panel to review academic requirements for research and testing facilities in the field of advanced propulsion and levitation systems, and the assessment of the Imperial College Consortium scheme will be part of the study. It is too early to say what conclusions will be reached. I would only add to that an invitation to the noble Lord, Lord Kings Norton, to come to my Department to discuss with those who are far more informed than I some of the other details for which he asked.
The noble Lord gave his views about Concorde as did the noble Lord, Lord Balfour of Inchyre and the noble Lord, Lord Trefgarne. The House would be surprised if I did not say I was largely in agreement with what was said by the noble Lords, Lord Kings Norton and Lord Trefgarne. Maybe we should never have started that inevitably expensive project but we did, and the aircraft now flying reach or exceed all the performance requirements laid down. That is a fact. It could also be said with confidence that men and women in the future, no less than in the past, especially if they are flying for essential purposes, will want to fly as quickly and as comfortably as possible. Speed and comfort is what Concorde has to offer. We are ahead of all competition, with the possible exception of the TU-144. It is contrary to all human experience that the increasing speed of travel round this globe will now be halted and that from now on a limit of 700 or 800 miles an hour will be accepted. From the 1980s on there will be a growing market for supersonic aircraft. Psychologically and economically I believe Britain should participate in their production, but we shall see. Discussion is going on, and I think that noble Lords have contributed to that discussion this evening.
There is one further thought for those who may be led to believe that Britain's economic difficulties may be helped by cutting back on aerospace activities. The 358 market for aerospace production in the Western World, less the United States domestic military requirement, will be £5,500 million a year around 1980. So far those responsible in the United Kingdom have contrived to win 10 per cent. to 15 per cent. of this valuable total market. I leave your Lordships to work out what the prizes could be for our country in the future if we really try.
The noble Lord, Lord Grantchester, always gives me pleasure when he deals with currency and economic matters. I am only sorry that it was just at that time, for the first time during the day, that I went out to see whether it was possible to get some refreshments. But I shall read what he had to say. I gather that both he and the noble Viscount, Lord Massereene and Ferrard appeared to have more confidence in gold than I have been able to muster. On the particular point of the gold index bond, I would say only that I will write in some detail to the noble Lord about it. But I would say to him now that such a bond would be attractive only if it were less costly than conventional forms of borrowing which it is not. Gold is no longer a commodity with a stable price representing only an inflation-proof state of value. The speculators have been at it, and the free market price, as the noble Lord will know, has risen by at least 60 dollars an ounce, from 100 dollars an ounce in September. 1973, to 165 dollars in March, 1974. There are dealers operating now who suggest that the price could go to 200 dollars an ounce. This does not strike me as being an entirely stable form of currency.
§ LORD GRANTCHESTER
My Lords, if the noble Lord will excuse me, may I say that my thesis was dependent on an official price being fixed by the European central banks.
§ LORD BESWICK
My Lords, as I said, I missed the noble Lord's speech. I shall read it with the intense interest that I recall I used to have when we had exchanges in earlier years. The noble Lord, Lord Wynne-Jones, with his great authority, spoke about the possibility of an Energy Commission. I can only say to him that this will be carefully considered. It has great merit. But it would be premature to state Government policy at the present time. In due 359 course we shall see how it fits in with the Department of Energy and with the nationalised industries. What he said, I assure him again, will be considered.
The noble Earl, Lord Limerick, asked me a number of questions, and in answer to some of those, I fear, unless I am to bore the House, I shall have to write to him. He spoke about the disadvantages of the division of the old D.T.I. I have no doubt there are disadvantages, but there were disadvantages in that other great organisation. There were many who thought that it was too big. But I will consider what he said about the idea of a "Who's Who" showing who does what in what used to be the old Department. I go on, however, to confess that personally I think he had a point about the severance of air transport from aircraft. Here I am probably getting into trouble with my colleagues. I recall that we had at one time air transport separated from aircraft; then they were joined, and then separated; then I think they came together again, and now they are separated. It may well be that the end of the story is not with us yet.
The noble Earl asked me about the Companies Bill. I agree with him, of course, that that Bill purported to make some useful advances, and I also agree with him that much work was put into that Bill while it was passing through this House, notably by the noble Earl himself. But that Bill was not adequate to modern conditions as we understand them. We shall want to make a thorough study now of the framework within which companies legislation is designed for the fourth quarter of the twentieth century. We shall want to consider in detail how to achieve the right balance between the interests of the shareholders and the employees and the community at large. So far as the securities market is concerned, we shall want to examine the case for going beyond existing methods of regulation, which are largely based on self-policing and which in recent years have proved far from satisfactory.
I was also asked about the powers it is intended to take to prevent takeovers by foreign companies. Here again there was nothing sinister in what was said. Possibly we have sufficient powers, 360 but the matter is still under consideration, and how we shall achieve an objective which I believe possibly the noble Lord will share has not yet been decided. The noble Earl, Lord Limerick, the noble Baroness, Lady Seear, and others asked what was being done to stimulate investment. This is possibly the crucial question. We were falling below the 14 per cent. target set by the previous Administration, and the three-day week has set us even further back. Re-establishing confidence will not be easy, but it is essential.
Several noble Lords spoke of deeper factors and fundamental issues that are involved in our longer-term problem. May I, before I sit down, without taking too much time, be allowed to say something of how the problem of planning seems to me? For over 150 years Britain has been an industrial economy, selling manufactures abroad to pay for imports of raw materials and foodstuffs. Over the past five years the volume of manufactured exports has grown by about 7½ per cent. per year, implying a substantial reduction in our share of world exports, while the volume of manufactured imports has risen by no less than 13 per cent. per year. The immediate effects have been two-fold. The fact that production has grown less rapidly than productivity has caused a long-term problem of redundancy and unemployment; and the fact that imports have grown so much faster than exports has eroded our net foreign exchange earnings to the point that manufactured imports now amount to 90 per cent. of manufactured exports. We can scarcely any longer claim to be a net exporter of industrial products. This is something that has been going on under successive Governments; it has nothing to do with Party politics, up to a point. Here I go further than the noble Baroness, Lady Seear. I say again, if I may, how impressed I was with the whole tenor of her speech, and without, I hope, appearing patronising, I would say that I thought it the best speech I have ever heard her make in this House.
Over the years many alternative strategies have been proposed as a means of breaking out from the vicious circle of industrial stagnation. The recent "dash for growth" foundered on a balance-of-payments crisis and inflation for which external events were only in 361 part to blame. But in any case the stimulus to industry provided by reflation of consumer demand is weak, indirect and non-selective, since a large part of consumption expenditure feeds into service industries and imports. Some would say that it actually distorts our society by encouraging the froth at the expense of the substance. Industrial investment responds with a lag, contributing to the expansion of capacity and productivity only after several years. It was the noble Earl opposite who made the remark that we ought to be giving so much more to industry than to some of the service industries. When investment does pick up there is the danger of over-heating and a balance-of-payments crisis, and consumption is cut back. Then we get the dash for growth, and the Stop-Go cycle, the same as in previous years, except that the "Stop" and the "Go" are to-day magnified.
Devaluation, or floating, which was once seen as a means of securing export-led growth, has also proved something of an illusion. Over the last six years sterling has been devalued or depreciated by 30 per cent. without producing any permanent improvement in our industrial position. When one considers investment incentives, let us remember that the massive programme of loans, grants, subsidies and tax reliefs designed to stimulate investment has achieved no major overall improvement, although I admit that it has been successful in redirecting industry to particular geographical areas; and we are, of course, retaining regional assistance and shall do everything possible for the regions and Scotland and Wales. In the last White Paper total expenditure on trade, industry and employment was shown to be running at nearly £2,000 million per year—roughly 10 per cent. of our net industrial output; yet we are in the present situation.
We do need, therefore, to achieve a reorganisation of industry on a sufficient scale to set in train the "virtuous spiral" of sustained growth of sales and productivity, with significant institutional long-term reforms. Our industry is often forced to operate accordng to short-term financial criteria, all too often staving off losses by closures rather than by re-equipment and expansion. The long view here is necessary, and it is equally in the interests of workers and consumers alike. Certainly 362 the system of planning agreements which the Government hope to develop will involve shareholders, management, employees and the Government in long-term compacts to secure redeployment of all our industrial resources. Neither the Government nor private industry is at present capable of dealing with all the specific industrial problems which emerge. These specific situations, arising both in private and in nationalised industry, will be brought into the full light of public discussion. I was immensely gratified to see how universal was the welcome to this conception of open government given in the Concorde case.
That brings me back again to the speech of the noble Viscount, Lord Eccles, which was rightly applauded by the noble Viscount, Lord Amory. I agree with them both that nothing of the constructive, co-operative planning of our industry of which I have been talking will take root and grow unless the soil is right. I agree profoundly with the noble Viscount, Lord Eccles, that much has to be done by way of education to bring home the truth, that we are all dependent one upon the other. I must add this, and I add it especially after the spirit of what was said by the noble Earl, Lord Limerick, that realisation that we have to learn how much we depend upon each other is a two-way thing; it has to be accepted on all sides.
If the noble Viscount, Lord Eccles—and I have written to him about this—construes our policy of sharing the burden, fairly as, as he put it, "hitting the successful", then there is a lack of understanding somewhere. In my book the man who brings my milk, and the man who brings my mail each morning with impeccable regularity, are eminently successful members of society. But clearly they cannot be called upon to make the same financial sacrifice as we can ask from the man who has made a fortune in the money market. The process of learning the facts of our inter-dependence will take time. But I hope that its truth and its significance will be embodied in everything that this Government do. If that proves to be the story of what happens, then we shall indeed have moved towards a genuine, soundly based industrial progress, and a socially happy community.
§ LORD STRABOLGI
My Lords, on behalf of my noble and learned friend the 363 Lord Chancellor, I beg to move that this debate be adjourned until to-morrow.
§ Moved, That this debate be adjourned until to-morrow.—(Lord Strabolgi.)
§ On Question, Motion agreed to, and debate adjourned accordingly until tomorrow.