ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 30 October 1974 vol 354 cc35-156

2.53 p.m.

Debate resumed on the Motion moved yesterday by Lord Shinwell—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 Parliamnt assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament.

LORD HAILSHAM OF SAINT MARYLEBONE

My Lords, before I begin on the main current of my remarks this afternoon, I should like to thank the noble Lord the Leader of the House for the observations that he made yesterday about my noble friends Lord Windlc-sham, Lord Carrington, and Lord Aberdare. I share the almost universal regret at the partial eclipse of my noble friend Lord Windlesham. He came to us in a very difficult time and won the warm affection of his colleagues and admiration of the whole House. We are very glad indeed that my noble friend Lord Aberdare is here to assist in the leadership of the Opposition. My noble friend Lord Carrington is very much the right man in the right place. The responsibility of the leadership of the Opposition in this House is a very high one, bearing in mind that the political complexion of the majority of Members is not that of the Government, and it is absolutely vital that the person who leads the Opposition should be a person of national stature in the country and also a person who commands authority in this House. My noble friend Lord Carrington fulfils both those requirements. I can only say in my humble way that I offer both my noble friends whatever little support and loyalty I can give.

I should also like to join in the congratulations to the mover and seconder of the Address. The noble Lord, Lord Shinwell, may be surprised to know—I do not actually see him in his place at this moment, but if he were he may be surprised to know—that for many years when young men have asked me about public speaking I have commended him as a model of delivery. He has the secret which very few people have, of speaking at almost exactly the right pace and with a choice of language and a felicity of expression which translates itself, almost without notes, into the pages of Hansard, in English which most of us would be proud to emulate. But it was not only the manner of delivery which commended itself; there was a great deal in the content of both speeches which certainly would meet with a warm echo on this side of the House, although perhaps in a less unconventional and startling manner than the outburst of clapping which was accorded the noble Lord, Lord Shinwell, as he sat down.

Both the noble Lords, Lord Shinwell and Lord Leatherland, referred, in terms which we can only commend, to defence. The noble Lord, Lord Leatherland, certainly awakes an answering chord when he refers to the importance of the family as a foundation of national life. Both the noble Lord, Lord Shinwell, in his peroration, and the noble Lord, Lord Leatherland, certainly would have met with our support in what they said about national unity and the need of putting back a spirit of patriotism and service into the public and private life of Great Britain.

I could not help thinking—and here I come to the main current of what I have to say—that some of these remarks were in startling contrast both to the language and to the content of the gracious Speech, which they were designed to commend, for if I thought that the Speech really had any prospects of improving our defences, or putting the Great" back into Great Britain, or strengthening family ties or national unity, I would be making very different comments about it from those which I feel compelled to offer this afternoon. I am told that to-day's debate is to be about the state of the nation and the course I would be disposed to adopt, with the permission of the House, is to make my own analysis of the situation, and then to discuss how far the gracious Speech really matches up to it.

There has been a tendency on the part of the Government Ministers during the Election campaign to accuse those who take a somewhat gloomy view of the current situation of want of patriotism. and this view was apparently repeated, so I read in the Press, by the Prime Minister yesterday in his speech in another place, and I thought at one moment I detected a slight echo of it in the otherwise uncontroversial speech of the noble Lord, Lord Leatherland. I suppose it depends to some extent what you mean by "patriotism". What I mean by "patriotism" in the statesman is the courage to tell the truth as God gives us to see the truth, whether that truth be pleasant or unpleasant; and if the facts are harsh and unpalatable it is, I believe, one's duty to give utterance to harsh and unpalatable facts. If they are not very flattering either to Government or even to some of our fellow countrymen, it is not part of our duty to flatter; it is our duty to speak what is in our hearts without fear for one's own popularity.

My Lords, there are as it seems to me two concurrent crises affecting this nation at the present time, one of which may possibly not be lasting but could be almost fatal if not adequately dealt with; the other of which is more deep-seated and perhaps in the end more dangerous. Until 25 years ago this country, by which I mean the United Kingdom and in particular Great Britain, has I suppose by common consent been one of the most successful human communities ever seen upon the face of this planet. It is notorious but worth reminding ourselves in the present situation that we almost alone, I think absolutely alone, among the peoples of Europe have been immune from foreign invasion, have been practically secure from civil war, have defended the liberties of Europe against one tyranny after another; that we have excelled in peace no less than war; that we pioneered modern industry, and that we led the advance of modern science; that we largely founded modern commerce, and even, to compare what is perhaps ridiculous with the sublime, invented almost every known human recreation and sport, with the possible exceptions of polo and chess.

I do not think that these things happened by chance. I believe that they happened because the peoples of these islands had learnt to live together in harmony and to treat the interest of each as the interest of the whole. I must in parenthesis almost, but not irrelevantly, observe that before the union of the two Crowns of England and Scotland, before the union of the two Parliaments by the Act of Union, these things were not in fact true. This island was inhabited by relatively poor peoples who played a relatively humble part in the general economy of Europe and the world. But, my Lords, look at us now! There is the break-up gang, the "Break Up Britain" gang, of the "Scot-Nats." and the "Welsh-Nats.", apparently wishing to strip the assets of the United Kingdom as if it were a kind of shell Company and deprive us all of our nation, which is Britain, and perhaps to go back to the days of Flodden or Owen Glendower. There is class divided notoriously against class, and at a time when the average weekly wage is standing, I suppose, at between £40 and £50 and the financial relationship in income after taxation is closer than it has ever been. There is union against management and there is even union against union: interest against interest—town against country; and even individual against individual. Until we can recapture the spirit of service, perhaps the spirit of sacrifice, certainly the spirit of patriotism, this is to my mind the longer-term and perhaps the more dangerous crisis of the two.

I turn now to the more immediate problem because by a paradox, as in the last 25 years the morale and perhaps the performance of this country have sunk, the material standard of life has steadily risen. People now have almost come to regard it as a part of their natural rights that they should dwell in an economic climate of perpetually rising material standards and in a state of full employment. But the ugly truth is that it is not going to be like that. At any rate, it is not going to be like that for a year or two. Apart from North Sea oil, which in my judgment has already been discounted hopelessly several times over by almost everyone who can hope to benefit by it and by some who cannot, there is no reason to believe it will be like that even after a year or two.

The quadrupling of the price of oil in less than a year, the doubling of the price of food and other imported materials in a period of less than two years, ought, I should have thought, to make it plain to us all that, so far from rising or even remaining stable, it is probable that the standard of living will suffer and must at least to some extent fall. There is no real money to be had from the rich. There is little extra taxable capacity among the rest of us. The burden will therefore fall upon the standard of living. But that has not been made plain to the people of this country; least of all does it seem to have been made plain to the leaders of powerful unions who continue from day to day, and almost from hour to hour, to press their demands in an already inflationary situation, and have shown, and are still showing, absolutely no inhibitions about using their monopoly strength and their industrial muscle to gain their demands. The industrial unrest which has accompanied this has shown absolutely not the smallest sign of diminishing since the February Election returned a Government pledged to secure industrial peace by surrender. Since then, and since the repeal of the Industrial Relations Act, the strikes have increased in number by more than 20 per cent. and the days lost through strikes by over 30 per cent.

The effect of this has been to inflate still further. We have it of course on the best authority that one man's wage increase is another man's price rise. But what has not yet been fully understood is that one man's wage increase can be another man's redundancy; in other words, another man's unemployment. Some of the militants, in my opinion, are literally pricing their fellow workers out of jobs. Whether or not that be the cause—and I think it is in part the cause—unemployment is rising and in my opinion is likely to rise still further in the winter months.

In the meantime, shortages are beginning to appear in the shops. This is to some extent due to the March Budget. Firms are no longer able to produce goods at a profit, and the artificial manner in which they are compelled to revalue their stocks after every price rise so as to create a false paper profit means that they can neither replenish their stocks nor find money for investment. The plight of agriculture is exactly parallel for different reasons. The cost of feedingstuffs, coupled with a rise in agricultural wages, a bad hay harvest and a difficult and uneven corn harvest, means that they can no longer rear their beasts. Although therefore, as a result, there is a glut of beasts for slaughter in the slaughterhouses, this can only mean a shortage of milk and meat in years to come.

My Lords, that is, therefore, the immediate crisis. As a shorthand phrase, it is easy to call it inflation, because its most conspicuous symptom is the fall in the value of money. But as the noble Lord, Lord Robbins, reminded us, I remember, two Parliaments ago now, the consequences go far beyond economics. I believe inflation in that sense and on that scale corrupts a country in its moral as well as in its economic life, undermines law and order and threatens our free institutions. So, my Lords, I turn from my own analysis of the situation, which I apologise for making gloomy—because it is, as I see it—to the Queen's Speech, the Speech which we are now discussing.

My first and, I fear, my abiding impression of that Speech is that it is appallingly and totally inadequate, from every point of view, to measure up to the magnitude of that crisis with which this country is confronted. It sounds no real hint or warning of danger. It seeks to warn against no hardship in the months to come. It prescribes, as I shall seek to show, no remedy worthy of the name. It offers no real spirit of leadership. Although I noted with some satisfaction that the two speeches which opened and seconded the debate did so, the Speech itself contains no real call to unity and patriotism and, after making due allowance for the cosmetic measures, like the lending rights to authors and the measure to put an end to sex discrimination, it really presents no solution for any of our major difficulties, and even lacks a clear recognition of the scale upon which these difficulties exist.

My Lords, there are only two specific and explicit references in the Queen's Speech to inflation. The first is in the second paragraph where we learn: My Government will give their full support to international efforts to solve the worldwide problem of inflation and will play a full part in international discussions to solve the problems created by higher oil prices. My Lords, that tells us what we already knew, We all knew that the problem was international. It certainly gives no indication that this country will take anv positive or defined steps to protect this country against the international consequences if an international solution is not found. It accepts that the Government will lend support to international efforts, which is hardly surprising, but it gives us no indication of what they are going to do.

The second explicit reference to inflation is on the second page, at the beginning of the Home Affairs section. At home, My Government, in view of the gravity of the economic situation, will as its most urgent task seek the fulfilment of the social contract as an essential element in its strategy for curbing inflation, reducing the balance of payments deficit, encouraging industrial investment, maintaining employment, particularly in the older industrial areas, and promoting social and economic justice. My Lords, the only thing which the social contract is not advertised to do is to put an end to halitosis and night starvation. But what is it? Is it an instrument which is likely to achieve these spectacular and almost miraculous results? Of course, viewed as an exercise in public relations or political gimickry, the phrase "social contract", purloined illegitimately from the works of Jean-Jacques Rousseau who used it in a totally different sense, was a brilliant piece of public relations. Nothing has been heard like it since the Mustard Club, or perhaps, the advertisement campaign for Kruschen Salts. But what is this miraculous instrument, this social contract? Who are the parties to the social contract? What are the terms of the social contract? What do the terms of the social contract mean? Are the terms enforceable, and to what extent, and by what means? Who intends to be bound by it? It is clear when one asks these questions that, facing a real economic crisis, the social contract is only another name for Government helplessness.

LORD SHACKLETON

My Lords, the noble and learned Lord is asking a lot of questions about the social contract. Presumably he has read it, but since not everybody else has read it he might like to read it to the House.

LORD HAILSHAM OF SAINT MARYLEBONE

My Lords, I do not have a copy by me, but I was assuming that every Member of the House was fully familiar with this document and knew all about it. What is certainly clear is that it does not, like the social con- tract of Jean-Jacques Rousseau, have the whole of society as its party. The self-employed were not parties to it; the professional classes were not consulted; the pensioners were not consulted; the housewife was not consulted; farmers were not consulted; fishermen were not consulted; shopkeepers were not consulted; management were not consulted; and individual unions, I gather, were not consulted, although the Trades Union Congress was.

What are the terms of the social contract? Nobody seems to be quite agreed as to them, although the language would no doubt be read out, greatly to the satisfaction of the House, by the noble Lord, Lord Shackleton. What is certain is that it is apparently consistent with wage demands of 20 per cent. and more, whatever its terms may be. But what seems much more certain is that it can mean anything in terms of wage increases to those who wish to make them, and even to some employers. And not only are they not bound in any enforceable sense by their obligation, but the Government's side of the bargain appears to be that they will force through Parliament any measures that are demanded of them by the unions, however irrelevant to the immediate crisis.

My Lords, the idea that such a bargain—so indefinite, so wholly unenforceable, arrived at without any adequate consultation with many of those who are most intimately affected—will curb inflation, now running at between 15 and 25 per cent. (I take the figures from the Labour Manifesto), reduce the balance of payments deficit, which has already compelled us to borrow £4,000 million in the last 9 months from the Shah of Persia and the Sheikhs of Arabia, encourage industrial investment, maintain employment, particularly in the older industrial areas, and promote social and economic justice would be, if it were not tragic, to carry self-delusion to the extreme point of fantasy. This is the remedy upon which, principally, the Government are relying to deal with a crisis of this magnitude.

My Lords, there is, of course, a great deal of talk in the Queen's Speech about social justice and about the redistribution of incomes and wealth. I wonder whether Ministers realise how hollow and hypocritical such talk must seem to anybody who really reflects about the true situation. What kind of social justice can exist or even continue in the face of the inflation that is going on?

The fact is that those who have industrial muscle are using it to improve their financial position at the expense of their fellow countrymen. Is that social justice? The average weekly male wage is, I suppose, between £40 and £50. On the other hand, those who own shares have during the last year, by this October, lost more than half their fortunes, with the reduction in the share index from 500 to about 200; and as pensions and insurance funds are largely invested in equities and as the failure of holiday firms is largely due to the rapidly increasing inflation, the remedies proposed in the Queen's Speech read rather strangely, even if not simply as a means of closing the stable door after the horse has been stolen.

I make no apology for speaking on behalf of the middle and professional class, to which I belong, crippled as they are by the economic situation as a whole, on which I think the gracious Speech proposes no adequate remedy at all. It offers them equally no hope. At the time when the factory worker is largely recovering in real terms more than the remuneration of many professional men and women the middle class is being squeezed out of existence, and all this talk of social justice comes very ill from a Government which show no adequate appreciation of their continued right to exist at all.

I am sure the Government would be pleased if at this point I were to make a violent attack on the wealth tax and the capital transfer duty. It is somewhat difficult to attack a proposal for a Select Committee, and I wish instead to say this: a wealth tax can perfectly well be a legitimate form of tax, which exists in other countries, but there are conditions which are not fulfilled in the proposals for it which have so far been made here. The first is that there should be a maximum—as I believe in Sweden—to be related to the actual income of the individual. It is not social justice to make a man or a woman sell his or her family treasures in order to pay this tax, and from the point of view of the national heritage it is bound to dissipate and destroy it.

The second condition is that there must be exemptions of certain types of chattel, and a property such as farming land, which forms the indispensable capital of a family business. The third is that it should be an alternative to death duties and not an addition to them. For various reasons I am personally not convinced of its efficacy. I think it is more likely in its economic consequences to be counter-productive, but the conditions I have slated are those without which the social justice of this tax would be a mockery. Given the wealth tax, I see little to commend the capital transfer tax, for capital transfers are basically a distribution of wealth and I can see nothing to justify the extent to which the widow is shown preference over children. There is nothing immoral in making provision for your children, and given a wealth tax there seems to be no social justification for penalising transfers.

We fought the Election on the gravity of the crisis and the need to return to national unity. We lost the Election. We lost it to a Government which in our view have greatly underestimated the seriousness of the crisis and are, we believe, committed to a policy which will in practice prove divisive. But to be beaten is not the same thing as to be proved wrong. From the contest of the hustings, my Lords, there is an appeal to the impartial arbitrament of events, and we believe that by that arbitrament we are likely to be proved right. It may indeed be the case that events will be so dominant in the not too distant future that they will make this Queen's Speech obsolete before this Session of Parliament is over.

But, my Lords, if we are proved right, it is right for me to assert that the essential condition of national unity is the principle for which we argued at the Election. The principle is that only that which is necessary to deal with our national crisis should be undertaken, and that that which is simply desirable to satisfy Party political ideology should be postponed until the crisis is over. We on this side of the House remain as committed to that principle as ever we were in the Election, but there can be no unity about inflationary policies designed to placate the Left Wing. There can be no national unity about nationalisation; there can be no national unity about the abolition of private education or private medicine. So far as I am concerned, there can be no national unity about a universal system of comprehensive schools, and although I acknowledge gratefully and thankfully that it forms no part of the Queen's Speech or of the present Government's policy, I must say to some Left Wing elements that there could be no national unity from us about a withdrawal from Ulster or for breaking up Britain into England, Wales and Scotland.

I hope the Government will forgive me if, albeit addressing the whole House, I add a word to my own Party at the present time. If my words should echo down the corridor to another end of the building I should not altogether be sorry, and I should not altogether be sorry if they reached other parts of the country as well. The Conservative Party has a job to do, so let us stop moaning and belly-aching; let us pick ourselves up and dust our trousers and try to begin doing that job. Problems of leadership are not to be solved in the silly season between the announcement of the results of a poll and the opening of a Parliament. Power in this country (thank God!) does not grow out of the barrel of a gun, nor yet does it (thank God!) grow out of the image on a television box. Power in this country grows out of the Floor of the House of Commons, and the people who will lead us, as we believe, to victory at the next Election, whether that be soon or late, will be those who make their reputation in the harsh conflicts of Parliamentary life and in no other fashion. So my advice to my friends is to buckle to and do the work of a constitutional Opposition which the result of the Election imposes upon them, confident that if we do it and if the march of events (as we believe) proves us right, our judgment will inexorably be confirmed.

3.28 p.m.

LORD BYERS

My Lords, the House will not expect me to follow the noble and learned Lord, Lord Hailsham of Saint Marylebone, in much of the private grief which he has just expressed, but there are many parts of his speech with which I agree. I must agree at the outset that what really worries me is the way in which the present Government underestimate the gravity of the crisis which the nation is experiencing at the present time. During the Election we were heavily criticised for being prophets of gloom and doom. I believe that we are going to be proved right as the months unfold before us. I realise that the gracious Speech is only half the story and the rest of it will presumably be unfolded in the Budget on November 12, but whatever the combined results of the Budget and the legislative programme for this Session I do not believe that they will produce the answer to our industrial and economic problems. I say this not to make a Party point, because I believe that matters are far too critical for something of that kind, but because the famous solutions which have been put forward in the Election, and now in the gracious Speech, rest on false premises about private enterprise and a mixed economy.

I say this also because I do not think that the Labour Government's analysis of our problems is a correct one, and from that incorrect analysis their solutions may well make matters worse. As I see it the truth is that British industry has not enough confidence either in the future or in this Government to embark on the major new investment programmes that are needed to keep our economy competitive. This lack of confidence has not been properly recognised and as vast investment programmes are completed new ones are now being shelved. This is worrying me because the consequent unemployment will show up in serious proportions in the months to come. Confidence is further undermined by the obvious flouting of the social contract on an increasing scale.

We are at a grave disadvantage, and it cannot be laughed off, because we do not really know what is within and what is without the social contract. On occasion we are told that a 40 per cent. wage settlement may well be within the social contract, a settlement such as I believe has been made in Scotland in only the last 24 or 48 hours. At other times a 35 per cent. settlement is condemned as being quite without the social contract and not at all what was intended. I think that we are entitled to know in much more detail exactly what the social contract really means. If it is as good as the Government assert it is, and if it is clear and enforceable, I do not think anybody would withhold support from such a system. It would be a magnificent achievement, but at the present moment I cannot understand exactly what it means and I think that we are in an Alice in Wonderland situation in which we are standing stability on its head.

Confidence is further undermined by the insistence of the Labour Party on going forward with its plans for nationalisation. Although the gracious Speech mentioned specifically only the shipbuilding and aircraft industries, the Labour Manifesto promised that the Government would take over wholly or in part profitable sections of the manufacturing industry of the country and the National Enterprises Board is the instrument which they have chosen. Is it any wonder that such uncertainty, hanging over the private sector, results in the undermining of confidence in the future? Add to this the savage blows which have been aimed at industry by the Government and one can see how difficulties become magnified into impossible situations. Industry has been permitted profit margins under existing price controls which have been totally insufficient to generate the cash needed for investment or the building up of reserves. Wage increases have further decreased cash availability, and the Chancellor's demand for advance corporation tax has made things even worse.

If you add to this the fact which the noble and learned Lord, Lord Hailsham of Saint Marylebone, mentioned, the question of the valuation of company stocks and the lack of proper inflation accounting, you get a situation inhibited also by very high interest rates in which industry is finding itself stifled at every turn. What we have been doing recently, I believe, is breaking all the classic rules which allowed industry to be competitive and profitable—and I do mean competitive; I am not a believer in capitalism which is monopolistic and not competitive. I believe we have to be competitive to maintain our position in the world, but that we have, as a result of these various actions, practically all of them man-made, caused uncertainty and a lack of confidence.

My Lords, what also worries me is the attitude of the quasi-Marxists in the Cabinet and the Government. They do not accept this argument that we ought to try to restore the classic rules under which private enterprise can operate.

They welcome the cash shortage and the potential breakdown in British industry as a Heaven-sent opportunity of bringing in further public ownership either wholly or in part. It is quite clear from the letters they write to the newspapers and the speeches that they make, that they want to see the lame ducks which they have helped to create coming to the chopping block. I do not think that the social democrats in the Labour Party would see this as desirable or necessary, and we on these Benches do not see it as necessary or desirable. Cash injections into industry should not be necessary if adequate profits are permitted, if advance corporation tax payments are deferred and if corporation tax were levied more realistically.

Furthermore, I would ask your Lordships what possible justification there can be for further public ownership at a time like this when one looks at the deficits which are already built up in the nationalised industries. What justification can there be, in common sense, for using good taxpayers' money to acquire what the Labour Manifesto calls profitable parts of the private sector, when on past experience these profitable enterprises will be turned into loss-makers? The reason for the losses is a simple one, and it can be verified by talking to any chairman of a nationalised industry. It is due to three main factors: first, continuous interference by civil servants and Ministers in the policy-making activities of the organisation concerned; secondly, the delay which that creates in the decision-making processes. Delay means extra cost, and in times of inflation delayed decisions can cost millions of pounds. The third factor is the temptation of politicians of any Party—and we are all to blame for this—to play politics with the prices of publicly owned institutions. That distorts the whole economy eventually for the sake of an ephemeral popularity or because one does not want to do something just before an Election.

I believe that the case for further public ownership outlined in the gracious Speech is totally disproved by past experience. The quasi-Marxists will go for public ownership on ideological grounds, but the danger is that the social democrats in the Labour Party may be tempted to pour public money into nonviable organisations with the sole object of preserving employment. When I say "non-viable", I mean non-viable in normal operating conditions, not those which are made non-viable by Treasury misjudgment or by Left-Wing academics. If money has to be found for industry, let it be done through something like the Lever bank where short-term funds can be made available on a revolving cost basis at low rates of interest and where public accountability can be maintained while the money is being borrowed. What worries me even more is the pleasure expressed by the Left Wing of the Labour Party to-day at the apparent dropping of the Lever plan in favour of the National Enterprise Board and in planning agreements and all the rest of it. This to my mind is a very big red flag and a danger signal. It stems from the hostility of the Left Wing of the Labour Party to private enterprise as a whole.

To go further than the idea of a bank or a revolving fund is to reduce the size of the private sector on which we depend for national viability in favour of enlarging the public sector which is a growing burden on our resources.

I think the arguments of Professor Merret and Mr. Allen Sykes (Mr. Sykes for whom I worked for many years and for whose judgment I have much respect) are far more persuasive than those of the Tribune group. They make the point that if British industry is given the conditions in which it can get a reasonable return on its capital we can restore the position. It will take time, and in the meantime we have to face up to the fact that our standard of living should and indeed must decline for a short time before things get better. At the moment the British economy is not being given a fair chance. This is why it is running at a loss and I see little or nothing in the gracious Speech which is going to help to solve that problem.

My Lords, that is all I want to say about the economy. I leave other aspects of the gracious Speech to my colleagues. But before I conclude I should like to say something briefly on the Government's proposals to introduce their new pension scheme because, as the House knows, this is an area in which I have a special interest and a responsibility; and if this is a debate on the state of the nation we should realise that practically all of us one day with any luck are going to become pensioners and therefore have a real interest in the matter.

My Lords, over the past year there has been a rapidly growing feeling in industry generally, and in the pensions industry particularly, that the time is long overdue to introduce long-term stability into our pensions arrangements. We must break away from the intolerable practice of one Government destroying the work of their predecessors while they introduce their own form of Utopia. The motives of Governments and Ministers are not in dispute—I am sure that all of them believe, when putting forward their own ideas, that their solution would be to the great advantage of the future pensioner. But the result is that one and a half generations of pensioners have paid the price of inter-Party politics. I believe that there is now enough good will to bring this state of uncertainty to an end, and I hope we will have the chance.

My Lords, this can be achieved through a good deal of give and take, and a determined effort to set up a pensions structure with which all Parties can generally live in the foreseeable future. If we go on searching for perfection, we shall never start the journey. I do not think that the compromises which will be necessary to provide long-term stability are as great as many think. I believe that we should all recognise the very real contribution to the development of better retirement pensions which has stemmed from the thinking and research of all Parties in the last few years. It has been a remarkable development and a tremendous improvement.

My Lords, the 1973 Act introduced by the right honourable Member Sir Keith Joseph injected into the drive for better pensions (and particularly higher standards of occupational pensions) an impetus for which many future pensioners will be grateful. On the other hand, I doubt whether the standards of the State Reserve Scheme, with their low build-up, could have survived without substantial improvement in the very near future. Instead of that State Reserve Scheme, we now have the scheme of the honourable Member Mrs. Castle for an earnings-related pension on a pay-as-you-go basis, working in partnership with good occupational schemes. This is neither the time nor the place (and I do not intend to do it) to venture into the technical details of the areas of contention. But I am convinced that with good will, a proper balance can be struck between the State Scheme and the company schemes as we have them to-day.

My Lords, there is a very real and natural fear that a pay-as-you-go State scheme will place an intolerable open-ended burden on the working generations which have to provide the retirement pensions of their predecessors. This is a natural fear, and one which experts tell me is probably not justified. But these matters can and should be resolved in the coming weeks by frank discussion on all sides. As in all things British, I believe a balance is what has to be achieved. We have to ensure that as many people as possible go into the funded occupation schemes so that the burden on the pay-as-you-go element is neither too great nor too heavy on the working generations in respect of their predecessors. I think this can be done. I hope and believe that this spirit of compromise will be forthcoming. This is not the only field in which, over the coming months, we should try to seek consensus rather than confrontation. This is what national unity is about; trying to get the maximum agreement within the guidelines which we know are best for this country. The greater our national unity on major issues, the greater are our chances of early recovery.

3.49 p.m.

THE LORD PRIVY SEAL (LORD SHEPHERD)

My Lords, in the course of his speech, the noble and learned Lord, Lord Hailsham, made one constructive suggestion which came at the very end of his speech. It was a suggestion not for the benefit of the Government or for this side of your Lordships' House, but was directed, as he said, down the corridor to another place. Whether that suggestion will be taken up I do not know, but I have no doubt at all that the media will seize upon this and will ensure that the Members in another place will be well aware of the views that have been expressed this afternoon by the noble and learned Lord. But this was just one suggestion; the rest of the speech of the noble and learned Lord was a savage, humorous attack upon the Government. In one respect, when he got on to the social contract, I wondered whether he was speaking for the noble and learned.

Lord, Lord Hailsham, or whether he was speaking for the Front Bench of the Party to which he belongs. It seems to me in the course of his speech that he really should be sitting with the noble Lord, Lord Byers, because it seemed that the noble and learned Lord was advocating a statutory incomes policy, as all the time he was speaking about enforcement. Yet having read and listened to the Shadow Minister for Employment, Mr. Carr, only 10 days ago on behalf of the Conservative Opposition, he rejected any question of a statutory policy and recognised that the only way in which we can make progress is by voluntary co-operation. I may have a few more words to say about that later if I find time.

My Lords, I hope that in the next 4¾ years we will remove the fear of the noble Lord, Lord Byers, of Reds either in the bed or under the table. I have yet to see a Marxist, as he would put one forward, in the British Government. Yesterday, the noble Lord, Lord Carrington, referred to the massive programme of education outlined in the gracious Speech. I recognised at the outset the severe strains likely to be placed upon your Lordships' House later in the Session. No doubt there are some who will say that some parts of the gracious Speech—particularly, taking it from the noble Lord, Lord Byers. the question of public ownership—should not be included in any circumstances. It may be that some will advocate delay, suggesting that some of these matters should be put into a later Session. I want to make it very clear at the outset that it is our firm intention to proceed with the proposals in our Election Manifesto. We fought the campaign in the belief that our proposals were realistic and necessary to the national good, and it is our intention so to proceed.

My Lords, in regard to timing, recognising the difficulties always encountered in a Second Chamber, I came to the view that my colleagues were right, and that in some cases more harm would be done and great uncertainty would be created if we were not to proceed with a balanced programme embracing legislation of social and industrial reform. Since we shall need the co-operation of your Lordships' House, it would be my intention in my speech to-day to seek your support for the general approach of the Government.

It would be understandable if the debate to-day were dominated by the economic problems which face us, both internally and externally. The noble and learned Lord, Lord Hailsham, was right when he went further than the straight economic problems. If we are going to achieve the unity of the country about which he spoke we need to ensure social development alongside our economic purpose. If I may say so, to call for unity of purpose is not the sole prerogative of the Party opposite. I would ask noble Lords opposite to refresh their memories of the many debates in your Lordships' House during 1970, 1971 and 1972 when we called upon noble Lords opposite, when they were in Government, to adopt a consensus approach to industrial matters. Unity is more than words; it requires deeds. Social reform must proceed alongside economic measures, and at as fast a rate as economic resources allow. Unity can be achieved only by clear policies which create a fair and more just society.

The economic situation is grave. We on this side of the House have never sought to hide that fact. As the Prime Minister said during the Election, before the Election and since, it is the gravest since the War. Its characteristics and continuing trends were there when this Government took Office in March. Some were deeply entrenched; some, we know, of recognised long standing. But many were created by noble Lords' friends in another place during their period of Office.

My noble friend Lord Beswick, who will be winding up, and I speak with some difficulty to-day on economic matters, because on November 12 my right honourable friend the Chancellor of the Exchequer will be presenting his long promised autumn Budget. But I should like to draw your Lordships' attention particularly to the passage in the gracious Speech to which the noble and learned Lord, Lord Hailsham, referred, in which we recognise the gravity of the economic situation and the urgency of the task of seeking the fulfilment of the social contract as an essential element in our strategy for curbing inflation, reducing the balance of payments deficit, encouraging industrial investment, and maintaining employment.

The nation has to understand the true facts about inflation, and although much has been said and written I recognise that many do not appreciate the causes and the possible consequences. In 1972, food, feed and beverage imports cost this country £2,440 million and they are expected to reach about £4,090 million in 1974, a rise of £1,650 million. As the volume of imports is down by about 4 per cent. and the effect of membership of the EEC is not great, higher world prices are mainly responsible for the figure of this import bill and the consequent rise in retail prices. It is well to recognise that the latest statistics show that retail prices, excluding seasonal goods, rose by some 17 per cent. in the year to September. Over the same period, wage rates rose by 20.7 per cent. It is impossible to be complacent about such figures.

But equally we should note that under the impact of easing import prices and the Government's July measures, retail prices rose in the last four months at an annual rate which was down to about 11 per cent. as opposed to the 17 per cent. which I have just mentioned. This means that last year's holocaust of imported inflation may be burning itself out. That makes our problems in the period ahead not easy but more susceptible to policies at home. It is clear for all to see that in the months ahead wages and salaries will exert the greatest pressure on prices. We have made it clear many times that the basic principles of the TUC guidelines are the best way to achieve a deceleration of the rate of price increases. If we stick to them we can expect to see a deceleration in the rate of increase. Such an achievement requires the full-hearted participation of all our people, no one excepted. That is the unity to which the Government are dedicated.

I do not believe that what the noble and learned Lord, Lord Hailsham, said of trade union leaders in general was either accurate or helpful. In fact, the record is that the trade union leaders, those members of the TUC, have exerted, both publicly and privately, great pressures upon their members to abide by the TUC guidelines. They require all our support and encouragement in their task.

We cannot ignore the very large current account deficit on the balance of payments which we inherited from noble Lords opposite. In the latest three months this was running a deficit at an annual rate of £3.4 billion, a sum roughly equivalent to about 7 per cent. of consumer expenditure and worth nearly 5 per cent. of gross domestic product. This is a mammoth figure compared with the figures that we inherited from noble Lords opposite in 1964. Yet very significant progress has been made. The non-oil deficit—that is the deficit in visible trade other than petroleum products—is down in the third quarter to just 37 per cent. of what it was in the fourth quarter of last year. The first six months of this year saw resources moving strongly into exports and imports were cut back quite hard. As the world trade prospects have grown less optimistic, it will become more difficult to maintain such a strong improvement in the trade volume picture, but in value terms we are beginning to feel the beneficial effects of a dramatic reversal of the decline in our terms of trade.

Furthermore, the problem of financing our deficit has been tackled with considerable success so far. Only now, and for largely technical reasons, is a first drawing being made against the 2½ billion dollar loan announced by the Chancellor in in his spring Budget. The reserves rose 694 million dollars in the first nine months of the year as money continued to flow into sterling, and public sector borrowing continued under the exchange cover system to a value of 2¼ billion dollars in the year to September.

We, like all other oil-consuming countries, must clearly live for a time with the problem of how to recycle the surpluses of the oil producers. This must be tackled on a wide front and the Chancellor recently made an important proposal for developing a new recycling mechanism at the IMF. Direct borrowing by the EEC will also help with the process. It cannot be questioned that a major effort is required to reduce and eventually remove the non-oil deficit and redoubled efforts in the export field are essential.

In the longer term, of course, the prospects for even the oil deficit are very bright. As a manufacturing and trading nation, stemming from an industrial revolution based on coal and iron, I think we find it very difficult to think of ourselves as potentially a major oil-producing nation. But the fact is that the latest production estimates of 100 to 150 million tons a year, or even more, in the 1980s make it likely that we shall be producing as much oil as we consume by the end of the decade. This gives us a tremendous opportunity to stimulate our economy, and the Government are determined to regulate this new industry to the nation's best advantage and to participate directly in this development through the establishment of a British National Oil Corporation.

Apart from the problems of inflation and trade, the economy is still drawing breath after the blows of the energy crisis and the three-day week. The latest figures show gross domestic product in the first six months of this year as being 1.4 per cent. down on the same period a year earlier. The monthly figures of industrial production show a slow continuing recovery in the third quarter, and manufacturing output is now just about back to the level of last autumn before the crisis began. Order books are large, noticeably in the heavy end of industry; and labour shortages, particularly of skilled manpower, are reported in a number of important sectors of the economy. We must, however, face the fact that Britain, in line with most major other industrial economies, is facing a difficult period where spare capacity is more likely to increase than diminish if action, international as well as domestic, is not taken.

The Government have said many times that policies which precipitate a descent into heavy unemployment cannot be contemplated, not just because of the damage which it would do to the social contract, but for the basic reasons of waste, fear, and regional distress. We intend to stand by that. The July measures were an earnest indication of our intent; there is more to do both at home and abroad. Significantly, deflationist theories once strongly canvassed in many capitals are showing sizeable dents. If so, the British Government and their Chancellor of the Exchequer can take a good deal of credit for it.

The prospects for unemployment next year on present trends are serious but not inevitable. Certainly we should not be panicked by them. Even now the latest monthly figures show that the steep rise in registered unemployment in midsummer has not been maintained; indeed the latest monthly figures actually show a drop of 34,000. There are as yet few signs that liquidity problems in industry are producing a shake-out.

The complex economic situation has produced in its train serious liquidity problems for industry. The root cause is, of course, inflation. The Government accept that cash problems of this kind can have most damaging effects—the creation of significant additional unemployment and loss of output, and a severe cutback in industry's investment programme. We also accept that action needs to be taken soon to head off further deterioration. We know that companies have had to find cash to finance the roll-over of stocks at vastly higher prices, to maintain investment in fixed assets and to cover tax obligations. They have had to absorb a large proportion of labour costs under the terms of the Prices Code.

My Lords, it is right that they should play their part in the fight against inflation, and in contributing to the Exchequer. It is also right for the Government to consider ways of easing a situation which for all these reasons has become serious enough to threaten jobs and real investments in the period ahead. Action, consistent with proper public accountability, is needed quickly—but this is for the Budget.

My Lords, the social contract requires, as we put forward in our Manifesto, certain obligations by the Government, These we will see through in our proposals for pension schemes to which the noble Lord, Lord Byers, referred, and certainly it would be our wish to have full consultation on the Government's White Paper. Last February we inherited a housing programme which had completely collapsed. It is absolutely right that at the forefront of our policy steps should be taken to improve the housing product and also to ensure that mortgages are held if possible at their present level.

My Lords, there are many other aspects in the gracious Speech which are on the Government side of the social contract.

I would certainly view the proposed legislation on sex discrimination as falling within that. On planning agreements and public ownership my noble friend Lord Beswick, Minister of State at the Department of Industry, will be able to speak with first-hand knowledge. I should like to say this to the noble Lord, Lord Byers: I do not see the National Enterprise Board as a threat or a "rogue elephant" in the private sector. I see it much more as a partner seeking to make the private sector profitable and export-minded.

LORD BYERS

My Lords, before the noble Lord leaves that subject—I do not want to interupt him—may I ask how he explains this statement which I take from the Manifesto: We shall set up a National Enterprise Board to extend public ownership into profitable manufacturing industry by acquisitions partly or wholly of individual firms.

LORD SHEPHERD

My Lords, yes, partly by public acquisition. If the noble Lord will read the White Paper—I hope that he has, but if he has not—he will see that the proposals on acquisition mean that the National Enterprise Board will have no power compulsorily to acquire shares or compositions in companies. Where there is public ownership of that kind—the Prime Minister is on Record to this effect and I think it is in the White Paper—it would be subject to Parliamentary control.

LORD BYERS

This is a very important point. Which takes precedence, the Manifesto or the White Paper?

LORD SHEPHERD

My Lords, I am sorry that the noble Lord is trying to cover his own shortage of knowledge. I suggest to the noble Lord that what I have said is not new; it has been repeated on a number of occasions and it is certainly in the White Paper. I commend for once to the noble Lord that he should do his homework. We will have legislation on trade union and labour relations and we shall certainly seek to repair some of the damage which the noble and learned Lord, Lord Hailsham of Saint Marylebone, and his friends on the Liberal Benches did in the last Session.

My Lords, I do not wish to speak for too long. I wish to say just one last word in regard to the speech made yesterday by the noble Lord, Lord Carrington. He spoke of the uncertain decision of the British electorate, in that no Party had obtained a clear majority of votes over the other Parties. This has been true of many recent Elections. I personally believe that what the British people desire more than anything to-day is a Government that will lead them out of economic and financial difficulties and will create this fairer society. The British people expect a tough period ahead. I believe they will respond only if they have confidence in their Government. They can have confidence only if they see the Government which was elected standing firmly on the proposals that they put to the electorate. To accept any other advice to the contrary I believe would only weaken the Parliamentary democratic system, especially at a time when full confidence in our institutions is essential.

My Lords, my noble friend Lord Shinwell spoke yesterday on the reform of your Lordships' House. Personally, I regret that the opportunity for reform was not taken some years ago. We were close to reform because the atmosphere, at least in this House, was right for considering radical proposals. Another opportunity may come; but it would be unrealistic to expect it for some years. I have no doubt that we shall not create a conflict between the two Houses, so that reform, when it comes, can evolve to an agreed solution between the Parties.

But that does not mean that we cannot look at our own procedures for considering legislation. Like the House of Commons, some Bills ought to be taken in Committee on the Floor of the House. But some Bills that are very complex and technical might be better dealt with—and by that I do not mean for the purpose of expedition but for a better result, a better Act—off the Floor. This course is open to us now, but it is very rarely used for a number of reasons. I certainly would be happy to have consultations on this matter, or any other proposal, with the Leaders of the Parties, or for that matter with any Member of your Lordships' House, to see how these procedures might be adapted.

My Lords, I conclude on a sombre but optimistic note. As I have said, we have a grave economic situation before us. I would not wish to disguise this or to pretend that there are any easy answers available. But I do not believe that the problems are insoluble, nor do I believe that the will of the nation will be absent. I reject utterly the prophesies of the modern-day Jeremiahs which suggest that there can be no answer to the situation that confronts us. The problems can and must be overcome. This can be achieved through a unity of purpose, the good will and co-operation of all concerned. I would assure your Lordships' House that so far as the Government are concerned we are determined to play a full part. I am confident that we can look forward to your Lordships responding in a similar manner.

LORD ROBBINS

My Lords, before the noble Lord sits down, may I ask him a non-Party question? The noble Lord has adduced a variety of statistical information, most of it extremely grave, and conveying to me at any rate that it is impossible to hope in the next year or two for an advance in the standard of living. If this diagnosis is correct, does it not call, as the noble Lord, Lord Byers, suggested in his observations, for some quantification of the guidelines as regards income settlements, so that those of us who are involved, or those of us who are on the sidelines, may judge whether particular settlements are, or are not, in accordance with what the Government have at heart?

LORD SHEPHERD

My Lords, certainly what the noble Lord has said in terms of improvement of the standard of living for the next two years at least is perfectly true, and has been said on a number of occasions, and I think is recognised by all who have had any knowledge of public finance. In regard to the guidelines in the social contract, this is a voluntary undertaking between the Trades Union Congress and the Government. What we are now seeking is a voluntary agreement. The guidelines are known. The two basic issues are that claims should not be made more than to recover the increased cost of living, and that no claim should be made within 12 months of the previous settlement. That is an understanding. Clearly this has to be accepted by all our workpeople in this country. That will take time. The choice is of a statutory policy or a voluntary policy. The statutory policy in the past has failed, and we must try the voluntary policy again.

I have no doubt that statistics, which is really the point that the noble Lord was making, could be obtained; but here you are dealing with a vast area of wages and incomes, and relativity is very difficult to ascertain. If you were to set one figure down as being acceptable, it might well be unacceptable in terms of one particular group. Therefore, what we must do is to seek to keep within the guidelines and not to try to tie the figure to some norm or some percentage. I believe that this is the only way of dealing with a very sensitive area.

4.15 p.m.

LORD MOLSON

My Lords, because I care more for the country than I do for the Conservative Party I regret the outcome of the last General Election. If I cared more for the Conservative Party than for the country, I should rejoice that the Party opposite are responsible for holding office at the present time. If one may use cricket parlance, I think that this is an occasion when it is useful to put the other side in to bat, because the wicket is so bad that I do not think any team, however experienced and energetic, would be likely to make runs. The Leaders of the Parties are, at any rate in theory, agreed upon the gravity of the national crisis, and that despite natural Party recriminations. It is not due to capitalism, and it is not likely to be solved by socialism.

I was glad that the noble Lord the Lord Privy Seal referred to the terms of trade. Over several decades past this country has been fortunate in enjoying the terms of trade that it has had. On the whole, the manufactured goods that we export have brought in good prices, and what we have paid for food and raw materials has been comparatively little. In the last four years since 1970 the terms of trade have deteriorated from 100 to 80. Of course they may move in the other direction—I hope that they will—but I can see no indication at the present time that the terms of trade are going to improve very substantially. And I am quite sure that if we, as a nation, are to be realistic we must expect that we shall have to go on exporting something like 20 or 25 per cent. more of our products in order to import the same amount of raw materials and foodstuffs.

Oil is not the only commodity which has risen in price, although of course it is much the most serious as it has gone up fourfold in a single year. But the Organisation of Petroleum Exporting Countries has set an example to the world, and especially to those who produce large quantities of raw materials and foodstuffs. They have set the example of an international price ring, and men as relatively reasonable as the Shah of Persia and M. Boumedienne seek to justify a change in the terms of trade between the industrial countries of Europe and the United States of America, and the producers of raw materials. On sugar, Mr. Peart himself said the other day, and rightly, that we cannot expect black people and brown people to go on producing large quantities of sugar at low prices for our benefit. Copper and other metals have soared in price, and corn has doubled in price.

We must seek to look at the position in a fair way. It is not wholly bad that these terms of trade should have changed if it is to have the permanent effect of reducing the gap between the rich and the poor nations of the world. We have heard a great deal about the way in which one American citizen consumes as much of the planet's resources as 20, 30, 40 or 50 Indians, and I think we all recognise that there is urgent need for a change in the relative wealth of the rich and the poor. But this has happened with great suddenness, which is inclined to dislocate the whole of international trade. This great change in the terms of trade is very harmful to Europe, and almost disastrous to the United Kingdom.

We in this country face two declines at the same time. The first is the one to which I have referred: in common with Europe, we must pay more to the Third World for the raw materials that we import. Secondly, so far as the United Kingdom is concerned vis-á-vis Europe, we are no longer a rich nation but a poor one. The people of Britain are so insular in their outlook that they have scarcely noticed that we are no longer a rich country. We are now the poorest country in the European Community, except for Italy and Ireland.

Our standard up to this year has been rising slowly, but other countries have raised their standards so much faster than we have that they have overtaken us. To-day—this is even more significant than our humble position in Europe—we are now only the fourteenth country in the world as regards gross national product. So long as our standard of living was improving, however slowly, the people of this country scarcely noticed it. But in 1974, for the first time, our standard of living showed signs of actually falling. I read a most illuminating article in a French newspaper, headed"England, the country which is committing suicide". It is time all Parties said that it is almost inevitable that there should be a decline in our standard of living. I say "almost", because it will happen unless there is a complete change in our conduct, of which I see no sign at the present time.

I am sorry that the Lord Privy Seal has just left the Chamber. He was indignant at any mention of the shortcomings of the social compact, but we have to face the facts. It is no good saying—although it is quite true and I accept it—that leading members of the Trades Union Congress are doing their best to see that it is observed, when they are unsuccessful in persuading the trade unions, and, still more, the members of the trade unions, to comply.

The very fact that the European Economic Commission has shown some preliminary willingness to renegotiate our contribution to the Community budget is in itself a sinister sign. It is a recognition on their part that our national output and our gross national product per head is now, and in the future is likely to be, much less than expected when the agreement was negotiated. I did not support our entry into the EEC because I looked for a great increase in our prosperity; I supported it to avoid the melancholy fate of being an offshore island. The prospect before Britain at the present time is bleak, and I hope the Government will not reproach me and say that I am selling Britain short if I state facts which can be ascertained and checked from the figures.

Fifty-five million people in these islands came into existence because of the Industrial Revolution, especially cotton, iron and coal. The great industrial community in this country was able to continue after the decline of those three industries, because of the tremendous amount of cheap oil that was available. Britain now has neither cheap and plentiful coal nor cheap oil. The terms of trade as they are today—80 as compared with 100 only four years ago—mean that we shall have to work far harder and produce more competitively if we are to maintain our imports and so our standard of living.

My Lords, I sincerely hope that Labour's social compact may succeed, but I am bound to say that the present outlook is not promising. It has not done very well at Fords. It has done even worse in the case of the lorry drivers in Scotland, where the wages have gone up by 25 per cent. The second success that the strikers have had is that they have even managed to prevent there being any agreement about increased productivity. So, once again, we are paying ourselves more for producing no more, and this at a time when already the haulage industry has suffered a severe decline, which in itself is a mark of the decline in the amount of internal trade.

I recognise that the Trades Union Congress is doing its best, but it is not supported by some union leaders. The Lord Privy Seal knows that well enough. He referred to those who are doing their best and we pay tribute to them. But the moderate leaders in some trade unions are not being supported by their rank and file. It is one of the troubles afflicting the country at present that there is so little discipline anywhere—in the unions, in the universities and in the schools. In any case, as stated by my noble and learned friend Lord Hailsham of Saint Marylebone, what lies before us is likely to be a deterioration in our standard of living. The social compact will not be satisfactory if it does only the two things to which the Lord Privy Seal referred, one of which was not to ask for wages to be increased beyond the point at which the present standard of living can be maintained. We have to face the fact that unless there is a great increase in this country's production, and in our competitive powers in the world, we shall have to accept a lower standard of living. That is one of the points with which the social compact will have to try to deal.

LORD SHEPHERD

My Lords, this is an important point. If the noble Lord, Lord Molson, is demanding sacrifices, presumably by the workers, will he enjoin the noble and learned Lord, Lord Hailsham of Saint Marylebone, in that there needs to be an equal sacrifice by the privileged who hold the wealth?

LORD MOLSON

Certainly, my Lords, and that was made perfectly clear all through the General Election by Mr. Heath, speaking on behalf of the Conservative Party, when he called for unity in the nation. Unity in the nation also requires sacrifices on the part of the possessing people as well. But the Lord Privy Seal belongs to a Party which prides itself on representing a class interest. That is why it calls itself the Labour Party. We belong to the Party which we always say is of no value at all unless it is a national Party representing every class in. the community.

My Lords, we now stand in need of something like Crippsian austerity. I should not be surprised if we saw some kind of rationing introduced in the next year or two. But whereas the austerity of Crippsian times was due to war and peace brought us recovery from that austerity, our troubles now indicate a permanent economic change. In the spirit of what the Lord Privy Seal asked me about our domestic affairs, I have indicated that it is not wholly a bad thing if the poor countries producing raw materials are able to obtain a better return for what they produce than they have obtained in the past. But this will impose burdens upon Europe, upon the United States of America and, more than anywhere else, upon this country, with its large industrial population producing very little raw material. So we are dependent for our standard of living on the terms of trade and the exchange of manufactures for raw material and food. I hope that the Labour Government will recognise these facts. There was a passage in the speech of the Lord Privy Seal which I noticed included that point, but I am bound to say that I did not notice any emphasis on it in the gracious Speech from the Throne.

4.30 p.m.

LORD SHACKLETON

My Lords, although I have retired from the more active role of the Front Bench I must say that, hearing the noble and learned Lord, Lord Hailsham, and indeed, in a rather excited passage towards the end of his speech, the noble Lord, Lord Molson, the whiff of grapeshot stimulated me into a desire to make a highly political speech. So often in the past, when I spoke from where the noble Lord, Lord Hailsham, now sits, he spoke after me, except on one occasion when he very properly shouted "Foul!". I am very tempted to enter into this exchange of Party political pleasantries, but my noble friend Lord Shepherd, who in my opinion has made an outstanding speech, has compelled me back to my brief, and I regret to say 'to your Lordship that I am about to deliver probably the dullest speech your Lordships will hear in the course of this long debate. I may say that I am somewhat inhibited in speaking from my present position because find I am standing much closer to the noble Lord, Lord Robbins, whose knowledge of economics, from his sometimes innocently non-Party position, is so much greater than mine; and if I commit myself into the problems of inflation accounting and such matters I hope he will not follow the example which he set with my noble friend Lord Shepherd and, as I sit down, get up and by way of a question, "Before the noble Lord sits down", make a small speech, and thereby puncture me. Perhaps he might join in the debate himself later.

I should also like to say how noble it is of the noble Lord, Lord Carrington, once again to take the role of Leader of the Opposition. He never possessed the calm unctiousness that I and the noble Earl, Lord Jellicoe, had. If anything, the noble Lord, Lord Carrington, suffers from impatience. But he is a brilliant debater, and I think he has made an enormous self-sacrifice in taking on the leadership again; but I may say that it will probably be a little calmer than if the noble and learned Lord, Lord Hailsham, had been leading the Opposition.

My Lords, as a country we have been very busy blaming one another, whether it be trade unionists, our political opponents or anybody else. In fact everybody blames politicians; and I am reminded of an event——

LORD BOOTHBY

Rightly, my Lords.

LORD SHACKLETON

The noble Lord, Lord Boothby, says, "Rightly". The noble Lord is of course the greatest and most brilliant politician of us all, and no doubt he takes the blame to himself. I am reminded that during the summer (being unable, under a Labour Government, to afford to go abroad, following the excesses of the previous Government) I was sitting on the beach near Poole when a man came along picking up litter. As he approached he saw that I was about to speak and he said, "Don't say it". I said, "Don't say what?", and he replied, "You know what you are going to say. You are going to say, ' Who are the people who leave this litter around? ' It is every one of us". I think it is high time that the country shared some of the responsibilities for the situation we are in rather than blaming it on to particular sections of the community, and I include politicians of all Parties in this respect because I believe that politicians in fact do what they conceive to be their duty even if at times their language rather conceals the fact.

LORD COLERAINE

My Lords, will the noble Lord allow me to put this to him? Is not the reason why politicians are blamed because they have claimed the right to manage the economy of the country? If they did not claim that right they would not be blamed.

LORD SHACKLETON

My Lords, I do not know whether I claimed the right to anything when I was in the Cabinet. I just tried to cope as best I could, being slightly surprised to find myself there at all. But, my Lords, the fact is that really this blaming of everybody is a form of escapism, and I hope we will stop blaming one another or blaming the opposite side and saying, "Either you have accused me of a lack of patriotism or, if you have not, you are just about to do so". I have heard this so often in this House. The truth of the matter is that the course of action which any Government should follow, and the policies that they should follow, are anything but clear. Indeed, successive Governments have tried one policy or another, and very frequently it has been the same policy whatever the Government.

Without querying the reasons for Mr. Heath's sudden change of policy—I give him all credit for it—when he found that his voluntary policy did not work he tried a statutory policy. We have tried a statutory policy; it has not worked and now we are going to try a voluntary policy—and I shall say a little about the social contract at the end of my speech. That was intended for the noble Lord, Lord Hailsham, but unfortunately he is not here, and perhaps he will now look up what the social contract says. I am bound to say, in the presence of my noble friend Lord George-Brown, that the person who laid the foundation for the contract, and who indeed made the most constructive attempt at it, was himself with his original Declaration of Intent; and, if I may say so, one of the things that led to us moving in the wrong direction sometimes was his departure from the Department of Economic Affairs.

My Lords, as I say I do not want to fight the Election all over again, tempting though it is to criticise one another. Nor do I think we need argue about who said the most loudly that the country is in difficulties. It seems to me that a competition in Cassandra-like statements does not help us very much. But we are all agreed that the country is confronted with very serious difficulties, and it is certainly arguable that it is reflected in the, Queen's Speech. Incidentally, I should have said to the noble Lord, Lord Hailsham, that the Queen's Speech does not normally carry appeals for patriotism and national unity. In fact, it is always the dullest document that is ever published—and let me make it clear that I say that without any sense of disloyalty to Her Majesty or blame to this Government or any other. The Queen's Speech makes it clear that the problems are very much international, and it is a fact that I would have criticised the previous Conservative Government (Governments come and go so fast that it may be one ought to number them; but perhaps we are going to break that pattern now) for their failure to approach the oil crisis in genuinely international terms. We saw the rather unattractive spectacle of different countries, particularly those in the Community—and as a supporter of the Community I would have expected better—chasing madly off to secure their portion, just like the housewife who is accused of hoarding. I hope that this Government will show a steadier approach and a stronger approach in international affairs; and I have great confidence in the Foreign Secretary in this respect. But, my Lords, even if the problems which confront us are not capable of being solved by this country alone, we can at least refrain from adding to our own difficulties.

Here I should like to mention a few facts which I hope will be agreed by everyone, because part of the battle of statistics—and we had some pretty odd statistics in the course of the General Election campaign—is that it is, as we know, possible to select a statistic to suit an argument. However, there are certain statistics which I believe are beyond doubt. It is a fact that since 1968 average earnings have consistently risen more than retail prices, but last year and in the earlier part of this year retail prices began to rise more sharply than earnings. In the last few months, earnings have reacted even more violently. Since 1970, average earnings have gone up by 90 per cent., but what, alas!, has happened to production? Without blaming one another, because we are probably all to blame, we may as well recognise that the increase in the gross domestic product has been only 9 per cent. These are simple facts which are really intensely worrying. How do we get over this situation?

My Lords, it is too simple to relate average earnings directly to GDP in explaining inflation. I am watching the noble Lord, Lord Robbins, at this point. The essential link is productivity per man and, in general, an attempt to raise earnings by more than the growth in output will boost prices. At least 60 per cent.—not the whole lot—of a rise in national wage levels tends eventually to be reflected in prices. Of course, there are time lags in the process and prices react on wage demands, and so on. There has, furthermore, been a marked slowdown in economic activity partly, but not solely, because of the energy crisis and the three-day week, despite a temporary boost to productivity under the stimulus of abnormal circumstances in early 1974. It is interesting how in a three-day week people can get through four days' work, while in a five-day week they can only just get through five days' work. It is quite remarkable how people react to a challenge.

A substantial part of recent wage rises is bound to feed through to prices under free market conditions. The table shows—and I am referring now to the official statistics which I have, though I shall not read them out—that inflation is generally highest when earnings most exceed output per man, with due allowance being made for the impact of import prices. The fact is that over the last few years output per man has never increased as much as labour costs per unit of output, and it is very depressing to look at the tables for the last six or seven years and see the increase in labour costs per unit of output and the output per man.

My Lords, it is of course a fact that the greater part of the most recent price rises has resulted from increased import costs and the devaluation of sterling but, now, the awful fact is that wages claims are rapidly becoming the main source of inflation. I am stating this factually and I am not trying to blame one side or the other: this is how the economic situation changes.

When we look at the position of companies, it is very serious indeed. I turn to the White Paper on The Regeneration of British Industry, which I commend to noble Lords, particularly those who have read only the Labour Party Manifesto. There was one colleague of mine—I think it was Geordie Buchanan—who in the 1945 Election refused to circulate the Labour Manifesto in his constituency. I make no comment on manifestos beyond saying that. But I suggest that the noble Lord, Lord Byers, should look—I am sure he has looked—again at the White Paper. Perhaps I may suggest to my noble friend Lord Shepherd that he was a little unfair in saying that for once the noble Lord should do his homework: I think that he normally does it, but that he had not done it on this one occasion. There is a very important statement at the beginning of that White Paper. It says: We need both efficient publicly owned industries and a vigorous, alert, responsible and profitable private sector, working together with the Government in a framework which brings together the interests of all concerned: those who work in industry, whether in management or on the shop floor, those who own its assets …. and so on. My Lords, I believe that the Government are quite sincere about this.

LORD BYERS

My Lords, is the noble Lord leaving that point?

LORD SHACKLETON

My Lords, I am not quite sure.

LORD BYERS

My Lords, may I ask a question which I put to the noble Lord, Lord Shepherd? The White Paper was produced in August and the Manifesto was produced in September: both referred to using the National Enterprise Board as an instrument to acquire share ownership in profitable private manufacturing industry. How can he select little bits to try to tone it down? The Manifesto must surely take precedence over the White Paper. It was produced later.

LORD SHACKLETON

My Lords, I simply do not know what takes precedence. On the whole, I am inclined to think that official Government Statements do so, but I hope that the noble Lord will forgive me—I was trying to be nice to him and not to start a debate with him. My point is that the Government have committed themselves to a mixed economy. We all believe in a mixed economy and the noble Lord, Lord Byers, made a very important point—and I echo his remarks about Allen Sykes and Professor Merret—when he said that the situation to-day for companies is much more serious than most people realise. These remarks may or may not be acceptable to everybody: I can only state what I believe to be the facts. I referred a little earlier to free market conditions, but, since 1972, there have not been free market conditions. There have, for understandable reasons which Governments of all kinds have supported, been constraints on the passing-on of higher costs. Not only have some costs not been allowable, but there has also been a productivity offset and absolute controls on profit margins.

Taking into account the rather overdue restrictions which I am happy to say this Government introduced in March on the money supply growth and the accelerated corporation tax payment, the result has been a squeeze on company liquidity which is threatening very seriously the working of that section of British industry—the private sector—which the Government and indeed all Parties wish to work. Although published company profits appear to have increased much more rapidly in 1973 and 1974 than incomes from employment, this has been mainly the result of inflation, and the contribution of changing inventory values to paper profits has been the most striking example of all. Whereas the gross trading profits of companies rose 76 per cent. between the first quarters of 1972 and 1974, their stock appreciation rose nearly eight times, and the gross profits net of stock appreciation dropped substantially in the first quarter of 1974.

In fact, the profit and liquidity position of large sections of British industry is to-day very serious indeed. The simple fact is that in the first quarter of 1972 the gross trading profits were £1,500 million and the total stock appreciation was about £200 million. In the first quarter of 1974, when gross trading profits of companies were £2,655 million, their stock appreciation was over £1,500 million, or nearly 60 per cent. It is not in fact possible to make a straight deduction in those cases, although I believe this is what the CBI have tried to do. The true trading profits are very much lower and the problem now is not merely a shortage of funds. Many companies are desperately short of funds but others have in fact sizeable funds or reserve borrowing powers, and the main problem is that the taxation system, which is related to a time when money did represent certain values, is now hopelessly out of date. It was in this connection that the noble Lord, Lord Byers, referred to the work of Allen Sykes and Professor Merret.

I would say that investment intentions in industry are very depressing at the moment, and the complexities of our present accounting and taxation systems are so numerous that it is almost impossible for most of us to understand them: yet this is a matter of desperate urgency in the present situation. The noble Lord, Lord Bowden, made a notable speech on inflation accounting some while ago. We have had the extraordinary position that an individual has earned more by living in his own house than he has been able to earn in taxed income. Whether I should or should not attempt to embark on a discussion of the whole issue of indexation at this moment I am a bit doubtful, but I am sure your Lordships would prefer that I should not do so in any detail. It is a controversial question. It is worth pointing out that Government pensions are already indexed and there are examples of comprehensive indexation elsewhere, particularly in Brazil. However, a full system of indexation would have to cover tax thresholds, stocks, property and also debt—and including debt (which would seem perfectly logical to me) raises all sorts of other problems, including the whole question of the market in equities. The only other point I would mention—and again I would always look to the noble Lord, Lord Robbins, for confirmation; and indeed, I had already checked the fact with him before this speech—is that it was of course Marshall who, nearly 100 years ago, was writing on the subject of indexation.

The question then is: What course do we take at this moment? I believe it is critically important that we should not even wait for the report of the Sandilands Committee. There is a great controversy going on between accountants who want to relate indexation to standard price measurements, whereas most business economists would prefer to relate it to replacement costs. We have a situation which has to be dealt with very quickly, and I am making these remarks now because I do not believe we have yet sufficiently recognised this. In this respect I think one can blame the business community as much as Governments. They have been so busy coping with problems. I have always believed that some businesses thought they were trading quite happily when they were actually losing money; but the awful fact is that to-day many of them are still quite unaware of the fact that they are losing money, and unless there is a rapid change in outlook on this subject of replacement costs, industry will be in very great trouble indeed. There was an interesting article written by one of the Government statisticians in, I believe, July, in Economic Trends, which set out one set of proposals. I wondered what the Inland Revenue thought of it, because of course these would mean major taxation changes.

I do not want to go on at any great length and I must apologise for having spoken for so long on this particular technical matter, but I believe it to be one of importance and also the sort of thing which we can usefully discuss in your Lordships' House when we are not exchanging Party political arguments. Is the noble Viscount trying to intervene?

VISCOUNT AMORY

My Lords, I am sure that all noble Lords would find very relevant indeed what the noble Lord, Lord Shackleton, has just said about paper profits due to inflation and the need for some form of inflation accounting. I do so much agree with him, and I should just like to ask him to confirm what he seemed to me to be saying: that at present corporation tax being levied on what are in many cases bogus profits means that we have not the time to wait for inflation accounting to be generally adopted before some remedial measure is needed. I should have thought that from what the noble Lord said—and I should like to have his confirmation of this—the conclusion is that some action is urgently needed to ensure that in future corporation tax will not be levied on bogus profits.

LORD SHACKLETON

My Lords, I must say the number of noble Lords who succeed in making speeches by way of question is very interesting! I agree with the noble Viscount. Industry itself has been very slow to recognise the situation. Of course, it is arguable that when prices drop—and a number of commodity prices are dropping at the moment—they will get the benefit, so to speak, in the following year. But, in the meantime, the tax collector will have had the benefit of that money, and this could be very painful and very expensive especially at present interest rates. Because the Chancellor is to make a Budget speech in a few days' time I wanted to make these points.

I should like to have dealt with certain other aspects concerned with the National Enterprise Board. I am very glad that my noble friend Lord Beswick, who has a deep knowledge of industry and is very committed, will be speaking later in this debate. I hope noble Lords will not go about—because it does not help—saying that the Government are committted to wholesale nationalisation. This is simply not true. I cannot speak as a Member of the Government any more, but I know it is not true; and what is proposed in the gracious Speech is of the kind that is either marginal in terms of its effect on the economy generally, or is bad for the industries concerned, or is good for the industries concerned. I happen to believe that there is a strong case for these particular proposals in regard to public ownership; and why people, with the example of similar institutions abroad, should object to the National Enterprise Board reminds me of the same sort of objections that were raised in regard to the IRC. As soon as the IRC was abolished the Conservatives then had to nationalise Rolls-Royce because they had killed the one instrument that could have saved it. Everybody has been regretting it, and we have re-created it in, I hope, a more creative form.

May I say just one thing on the social contract. Mr. Jack Jones said the other day: A wonderful wage agreement is of no value if the firm with whom we have negotiated the agreement does not employ people any more. The trade union leaders, under very difficult conditions, knowing that they are not going to achieve total success and that sometimes there will be glaring failures, are doing their utmost. Although noble Lords may be sceptical, I hope they will not mock the efforts of those who are trying to face the problem of this country's inflation in the only way that I believe to be possible. Here are a Government who are trying to do this. I know many of the trade union leaders concerned, and I know that they are doing their best under extremely difficult circumstances. Noble Lords who have had experience in industrial relations will know the problems on the shop floor and the problem of the union official. It is crucial to encourage the conciliation machinery. If the social contract fails we shall see something very much worse in this country. If Lord Hailsham's predictions of disaster are fulfilled, we may well see a situation in government which will be something that none of us will like very much. However much noble Lords may be sceptical, I hope they will do their utmost to support the efforts of the Government in this and other directions.

5.1 p.m.

LORD COLERAINE

My Lords, I am sorry to have to disappoint the noble Lord, Lord Shackleton; he did not make a dull speech—I am not sure that he could. He made a most interesting speech. If he will not think it impertinent on my part, I think that his speeches have much more substance to them when they are made from below the gangway than when they used to be made from above it. The noble Lord said that if the social contract failed it meant the failure of the only possible method of controlling inflation. I hope that he is wrong; but I think that there is a great deal in what he says. I intervened in an early part of his speech to say that really the politician could not absolve himself from blame for our difficulties because, after all, it was the politician who claimed to be omnipotent, who claimed to be able to manage the economy. I was not thinking of any particular Party or any particular Government. I think all Parties and all Governments have failed, not deliberately, but, as the noble Lord, Lord Shackleton, said, each Government have tried conflicting policies and each Party has tried the same policies, until now none of them seems to work.

It seems to me the real problem we have to fear now—and my noble and learned friend Lord Hailsham touched on it, as did the noble Lord, Lord Shackleton—is whether Parliamentary government is capable of dealing with a situation of this kind. I am afraid there is every reason to believe that it is not. Our Parliamentary institutions were admirable when it was a question of deciding between one political policy and another. When it comes to a question of deciding between rival economic policies, something entirely different creeps in. As Mr. William Rees-Mogg said in a most interesting and, I thought, profound article, written some time before the last Election, under our Parliamentary system economic management is subordinated to the need to win elections. That must be so under a Parliamentary system if Parliament decides that it is going to manage the economy. But if it is so, then there is no hope at all of Parliament being able to control the inflation which has accelerated so rapidly in the past three or four years, and which I believe is continuing to accelerate.

My noble and learned friend Lord Hailsham of Saint Marylebone exhorted us to national unity. Then he went on, I thought rather oddly, to tell us that our duty as Conservatives was to get up, dust our trousers and win the next Election.

LORD HAILSHAM OF SAINT MARYLEBONE

No, my Lords. My noble friend misheard me. What I said was to act as a constitutional Opposition.

LORD COLERAINE

My Lords, I thought my noble and learned friend said something about the next Election.

LORD HAILSHAM OF SAINT MARYLEBONE

Not in that connection, my Lords.

LORD COLERAINE

Then I am glad to hear it, my Lords, and I am glad my noble and learned friend agrees with me. I do not think that it is the duty of the Conservative Party to pick itself up and clean its trousers in order to win the next Election. I think it is the duty of the Conservative Party to pick itself up and clear its mind, not as to why it lost the last two Elections, but why economic policies, which were carefully thought out and sincerely pursued in an effort to control inflation, were such an abysmal failure No one can blame my noble and learned friend and his colleagues for lack of foresight; but nobody with hindsight can deny those policies were a very tragic failure. What I think is the duty of Conservatives now is to decide why they were a failure.

There was a lot of talk during the Election by Mr. Heath, my noble friend Lord Carrington and others, about the need for a National Government. I think that before we are through this country will inevitably have a National Government; I do not mean the kind of National Government which was envisaged by Mr. Heath: a kind of getting together of men of good will in all Parties to agree upon some counter-inflationary policy that would work. I do not think a coalition on that basis would have any more success than Party government. It would only have success if you believe that in politics, as I used to be told in arithmetic, two minuses make a plus. If you think that Mr. Wilson having failed and then Mr. Heath have failed, if you join them together you will get success, I do not think that will be so. I do not think there is very much hope in that.

The real reason for a coalition, as indeed is the real reason for the failure of successive Governments' attempts to deal with inflation, is that they have been afraid to speak the unspeakable word, "unemployment". Everybody has pretended that, somehow or other, full employment at its present level by the standards presently used could continue and inflation be kept under control at the same time. I do not believe that that is possible. To say that you cannot control inflation without some fair degree of unemployment is not, as Mr. Wilson has always indicated, and the Party opposite has indicated, to use unemployment as a threat. It is not that at all. The real trouble is that if you are under drugs—and inflation is a drug of a particularly dangerous and addictive quality—you are not cured without some rather painful withdrawal symptoms; and the longer the addiction continues the more pitiful and painful the withdrawal symptoms will be.

I suppose that almost every Member of your Lordships' House, including myself, when he has spoken about inflation and unemployment has always taken the line, "Well, inflation must be cured, but it must be cured without consequences which are unacceptable." I am now an old man and have had a fair experience of life, and I find that I have had to accept much that is totally unacceptable: pain, grief, death, and so on. Really! to try to cover up inflation by saying we are not going to have any unacceptable consequences is deceiving, and cruelly deceiving, the people of this country. My noble and learned friend Lord Hailsham of Saint Marylebone said that it was our duty in this House not to say comforting words but to try to speak the truth as we see it. Certainly the truth as I see it, rightly or wrongly, is that we are not going to get through this situation without some unemployment, and the longer we postpone acceptance of that fact, the more cruel the unemployment will be. That is why I think that in the end a Coalition will be inevitable, not because two heads are better than one, but the Government of this country one day, and probably one day quite soon, whatever may be their complexion, will be faced with decisions to take of so disagreeable a character that they cannot accept the odium of taking them unless other Parties join in and share that odium. That is why I believe that ultimately, and perhaps before very long, a Coalition is likely to be necessary.

My noble friend spoke a great deal about national unity. It is a very pleasant matter to talk about; it is a warming kind of thing. But he knows, as all of us know, and indeed he said, that there is no unity in this country to-day. It is not a question of class against class, as he put it. I think all that is a product of inflation and not the real problem. The real problem is that there are in Parliament and outside a not inconsiderable number of people who are determined to destroy society without having any improvement to make, without having any idea of what they would put in its place. I am sure that when the time of stress really comes the Party opposite will be bound to split. I am sure, too, that the great majority of men in the Party opposite are determined not to destroy society but to rebuild society on the existing foundations; and because of that in the end we will have a Coalition Government. However, as I have said, the real purpose of a Coalition Government would not be to put our heads together to find an answer, but rather to find the courage to take those measures which in our hearts we all know ought to be taken.

5.15 p.m.

BARONESSDELACOURT-SMITH OF ALTERYN

My Lords, because of the circumstances in which I find myself a Member of your Lordships' House, I think that I am among those who may crave more than the usual indulgence in speaking to your Lordships for the first time, otherwise I fear that my maiden speech is likely also to be my swansong. I should like to welcome the reference in the gracious Speech from the Throne to legislation aimed at ending "the abuses of the lump," perhaps more elegantly known as labour-only sub-contracting in the building industry. It is now some six years since the Committee of Inquiry into this matter, under the distinguished chairmanship of Professor Henry Phelps Brown, presented their Report to Parliament. It is indeed gratifying to know that action is at last being taken to end this abuse. I note, however, that it is referred to as a step towards creating a stable workforce in the construction industry. From the very indirect link I had with that Committee of Inquiry I know that there are many other problems that have to be tackled, not the least of which are the lack of continuity of employment, the poor facilities for training and the seriously inadequate working and welfare conditions on the building sites.

I should like, in a suitably uncontroversial way, to link this matter with an- other reference in the Speech from the Throne to the Government's plans for easing the housing shortage. In the way that we now regard with horror the use of child labour in the 19th century, I believe that when the history of the 20th century comes to be written one of the great crimes of our society will be seen to be our inability to deal with this most basic problem of all. I have had the opportunity recently of working with that section of our people most deprived in respect of housing. I am thinking, for instance, of newly married couples forced to live apart for want of even one room which they can share; of immigrant families bewildered and embittered by their experiences in trying to find a home; of young mothers in emergency bed-and-breakfast accommodation for whom only now, and in a very rudimentary way, are day-time facilities being provided.

I know how many totally devoted people are grappling with this problem, many of them young people who are beyond all praise for their dedication. It is my most profound hope, my Lords, that with the legislation ahead of us we shall work together to master the technical problems so as to come to grips with the immensely deep human problems involved in the crisis in our housing situation.

5.19 p.m.

THE DUKE OF DEVONSHIRE

My Lords, it is my pleasant privilege, on behalf of Members of the House on all sides, to congratulate the noble Baroness, Lady Delacourt-Smith of Alteryn, on her maiden speech and to say on behalf of us all how deeply impressed we were with her words of wisdom, and to add how much this House will have its value added to by her constant presence here and similar words of wisdom. It would perhaps be not inappropriate if I were to say to the noble Baroness how greatly loved her late husband was by all Members of this House and how very great in industry he has been. I can only say, "Thank you for your contribution and may this House see you very often here".

My Lords, I had considerable doubts as to whether such remarks as I wished to make should come in today's debate on the gracious Speech, under the heading of "The State of the Nation", or later, under the heading of "Home Affairs". The balance was tipped in favour of my speaking today by the somewhat challenging and slightly unusual phrase for naming the debate "The State of the Nation" because this phrase has slightly trans-Atlantic connotations, in that we have all grown accustomed to the yearly speech by the President of the United States to his fellow countrymen called "The State of the Union". It is to the state of our union that I wish to direct my remarks this afternoon, because by "union" I mean the United Kingdom; and I think it is fair to say that if we look at the state of the United Kingdom it can be described very well as being no better than precarious.

My Lords, in recent months particularly, and in recent years, the tide of Scottish nationalism has been running very strong and the results of that strength have been shown all too clearly in the results of the recent General Election. The tide of Welsh nationalism has in recent years ebbed and flowed. We are now in for a time when that tide will flow, too—carried along, buoyed up, by the strength of the tide of Scottish nationalism. Ulster, also still a part of the United Kingdom, poses such grave and difficult problems of its own that I would not wish to discuss them in the same speech as one referring to the remaining constituent parts of the United Kingdom. However, there is one remaining constituent part of the United Kingdom which I have not yet mentioned and that is England.

It strikes me as curious and puzzling that one hears no mention to-day of English nationalism. I must confess that I find this surprising, particularly when it is realised that State funds are expended, on a per capita basis, to a greater extent on the citizens of Scotland and Wales than they are on those of England. It may well be that those who may like to espouse the cause of English nationalism are deterred from doing so for fear of being tarred by the brush of the National Front. I do not see why this should be so. Scottish Nationalists and Welsh Nationalists may have their opponents, but I do not think anybody has ever suggested that they may be embryo Fascist Parties. However, there is no ground-swell of English nationalism, and English constituencies are more than ready to be represented by Welshmen and by Scotsmen; but this is a state of affairs that I venture to suggest will rapidly cease, should Her Majesty's Government implement the recommendations they put forward in their recent White Paper on Devolution, Cmd. 5732, because it seems to me that the recommendations put forward are a certain receipt for the emergence of English nationalism.

They put forward that there should be directly elected Assemblies for both Scotland and Wales and that those Assemblies should have very considerable legislative and executive powers. At the same time, my Lords, the White Paper specifically states that there shall be no reduction in the number of Scottish or Welsh Members of Parliament sitting here at Westminster. This, I should have thought, was asking for trouble and, indeed, in the Memorandum of Dissent of the Kilbran-don Report the objections to pursuing such a course are very clearly and trenchantly stated. May I quote them to the House. Paragraph 2(g)(ii) says: It would be giving to the people of Scotland and Wales significant additional political rights which would be denied to the people in the different regions of England … (iii) We cannot believe it is right or acceptable that the Westminster Parliament should be precluded from legislating for Scotland and Wales in a wide range of subjects … while at the same time, about 100 Scottish and Welsh MPs at Westminster would have a full share in legislating in these same matters for England alone. Surely that puts the case against what is being put forward in the White Paper very, very clearly. It is giving very special preference to Scotland and Wales and particularly to their Members of Parliament.

Of course, what Her Majesty's Government are trying to do in the proposal set forward in the White Paper is to have it both ways. In order to appease Scottish and Welsh nationalism they are prepared to create directly elected Assemblies with powers of legislation but at the same time, in order that from time to time they may command a majority in another place and thus form the Government of this country, they wish to preserve the existing strength of Scottish and Welsh Members of Parliament as it is now. They wish, to put it bluntly, to have their cake and to eat it. And it is in this desire to have it both ways that there is a fatal weakness in the proposals set forward in the White Paper; it will not satisfy the Scottish or the Welsh Nationalists, for no other reason than that ultimate control of those two territories will remain at Westminster because financial control will still reside here in London.

My Lords, I was distressed to hear my noble and learned friend Lord Hailsham talk of those who pursue Welsh or other nationalist policies as "reckless". Indeed, I wondered very much how often my own forebears had used just such a word when talking of those who advocated Home Rule for Ireland at the end of the last century and in the early part of this century. I do not believe that any advantage can be gained from abusing those who believe in Scottish and Welsh nationalism. Indeed, I believe very much the reverse. There is nothing inherently wrong in Scotsmen or Welshmen wishing to see their countries masters of their own fates. I would go further. I think that all those who wish to see the unity of the United Kingdom preserved—and I should like to make it clear that I am one of those—would do very well not to pursue policies that can be interpreted, and I use the word "interpreted" advisedly, by nationalists as being mere subterfuges for maintaining ultimate control at Westminster; because Westminster is in London and because London is the capital of England, policies pursued by Parliament at Westminster can all too easily be interpreted as English policies.

There is this grave danger that the differences of opinion between those living in Wales and in Scotland and those living in England will be exacerbated by the feeling that we in England—the English—wish to restrain and to hold back the Scots and the Welsh from fulfilling their national identities and their own national significance. I think it is unfair on the English and due very largely to the fact that the United Kingdom Government are based here in London. But at least to me the fact remains that when we hear the Scottish and Welsh nationalists arguing the case they put forward the view that we in England are trying to hold them back, and as I have said, if we wish the United Kingdom to remain as an entity no steps should be taken to prevent those living in Scotland and in Wales from becoming independent provided it can be conclusively shown that the majority of people living in those two territories so wish. Just as in Ulster, at the end of the day the future of Wales and the future of Scotland can be decided only by those who live in those countries. I do not believe that the Scots and the Welsh will really face up to the issue—whether or not they want to become independent; whether or not they want to remain part of the United Kingdom—until they are fully aware that if they really do want their independence it is theirs for the asking. Pursuing policies that appear to be hindering their evolution towards independence can only add fuel to the flames of local nationalism.

It could be said that what I advocate is a policy of calling the bluff of Scottish and Welsh Nationalists; of saying, "All right, if you want it then go ahead and see whether the people you claim to represent really do want it". I think this is just the policy that Her Majesty's Government should pursue. The pros and cons of an independent Wales and an independent Scotland should be explained, debated and discussed as widely, fully and frequently as possible, so that those who live in those territories—and indeed we who live here in England—know the arguments both for and against.

In Scotland there is now the added complication of the potential great benefit to Scotland of Celtic and North Sea oil. This is only one added complication. The whole matter must be threshed out in public and given full debate, but at the end of that debate the people of Scotland and the people of Wales should be given the choice. It is not so long ago that a referendum was held in Ulster for the people of that province to decide whether or not they wished to remain within the United Kingdom or to become joined to the Republic of Ireland. So the precedent has been set. Furthermore, citizens of the whole United Kingdom are to be asked to say, within the next year, whether they wish the United Kingdom to remain part of the European Community, and I can only presume that this consultation with the British people will take the form of a referendum. If it is fair and right that the people of the United Kingdom should be directly asked their views by way of a referendum as to whether they wish to remain a part of the European Community, then surely it is equally right and valid that the people of Scotland and the people of Wales, having been duly apprised of the facts, should be asked whether they wish to go their separate ways or to remain part of the United Kingdom.

In the Majority Report of the Kil-brandon Committee it is stated in the firmest terms that the will for separatism and for an independent Scotland and Wales just does not exist. The Majority in that Report are categorical on this point. Of course, that Report was published more than a year ago now and no doubt feeling towards nationalism has hardened and increased since, but I believe that what the Majority of the Kilbrandon Committee found is still true, that the will for separatism is not there. But people will always say that it is there until the acid test of a referendum is put before them. Once time has been allowed for an explanation of the pros and cons, the longer the referendum is delayed the greater will be the strength of the Scottish Nationalist movement and the Welsh Nationalist movement, because the leaders of these nationalist movements will say again and again, "Look, it is the perfidious English who are holding us back, who wish to retain us as part of the United Kingdom, who wish to retain London as the capital of the United Kingdom—London, which cares little for our local needs and our local problems.

So without in any way advocating the break-up of the United Kingdom I would say, in so far as England. Scotland and Wales are concerned, that the cause of maintaining the close ties of the United Kingdom will best be met by challenging those who wish to see separate States created and by putting the onus on them to prove their case. I am quite sure that when that test comes it will prove ineffective and the overwhelming majority of people in both territories will wish to remain within the United Kingdom. Once that has been clearly shown, then will come the time for discussing what form of evolution it should be—whether it should be executive evolution or legislative evolution—whatever one may wish to have. Only when the main question has been finally asked will those who believe in Scottish nationalism be prepared to settle for what they now consider to be less than the needs of their country.

In speaking about this country's grave economic problems I have strayed far from the theme of the previous speakers, but I believe that in the months and the years that lie ahead, unless it is now faced fairly the problem of the unity of the United Kingdom will prove more lasting and more intransigent than the economic problems we have to face. Frankly, I am haunted by the thought that Home Rule for Scotland and Home Rule for Wales will become as great a bugbear and burden to Britain as Home Rule for Ireland was 50, 60 or 70 years ago. It is for that reason that I beg to draw your Lordships' attention to what I regard as one of the most pressing problems when reviewing the state of the nation.

5.40 p.m.

LORD GEORGE-BROWN

My Lords, while I shall not follow the arguments, or even the currents, which the noble Duke just pursued, it is a very special pleasure for me to follow him. Oddly enough, he keeps dogging my path, and vice versa. Before I was so rudely and roughly ejected by the ungrateful electors of Belper, one of the joys as a Member for the County of Derbyshire was to know the very great part which the noble Duke himself chose to play in the civic affairs of our county, and the very great role which the Chatsworth Estate played and the way it approached its responsibilities. Having thought—since he played no inconsiderable part in having me so rudely ejected from Belper—that I had got rid of the noble Duke, I now find myself living in a small village a few miles from Eastbourne, and every other street is named Chatsworth or Bolsover or what you will, and there is the shadow of the noble Duke still heavy upon us, marinas and all. But, again, I should like to say, since I regard Eastbourne as one of the nicer resorts in the country, that it, too, owes no little debt to the way in which the Chatsworth Estate, or that division of it, takes its civic responsibilities there.

Since I want to be brief, I shall make only two other references to what has been said before me. One must, of course, be to Margaret Smith—if the House will forgive my being familiar—to say how much we all enjoyed hearing her and looked forward to hearing her, and how pleased I was personally, as a trade unionist, that she picked on the two issues which she talked to us about. We miss Charles, obviously, and I am very glad to have her with us in this place.

The noble Lord, Lord Byers, seemed very keen to get an answer, which so far he has failed to get from either the Front Bench above or the Front Bench below the gangway as to which, in the case of a Labour Government, comes first—the Manifesto or the Queen's Speech. Since nobody else will answer him I will. The answer is: Mr. Wilson's latest thoughts. Having said that, may I now return to what I was going to say and express my pleasure to be back in this House after very many months of enforced absence. On the way, I had a long interview—this may interest those on the Bishops' Bench—which I am told lasted for a few days and nights (though I am quite unaware of it) with St. Peter. And with the total irrationality of all frail Catholics like myself, I am not quite sure whether to be pleased that he asked me to come back here, or disappointed that he so clearly rejected me for immediate admission up there. Anyway, here T am and I am grateful for all the kindnesses and inquiries which various Members of this House were good enough to make to me and to members of my family in what was a very worrying time.

I only wish I could proceed in this happy spirit and congratulate the House on the way it has been handling the nation's affairs during my enforced absence. But I regret to say that I cannot quite go so far, which brings me to the first of two main points which I wish to make today. The first is about the economic situation and, especially, the industrial situation. I presume that Ministers and their advisers, being collectively and individually not tremendously disabled as we were in our day, really appreciate the extreme gravity of the situation. I should like to ask the Lord Privy Seal to reconsider the words which somebody advised him to give us this afternoon, because, in fact, the situation is a lot graver than his words would lead people to believe, and because, for the reason which I will come to in a moment, I think that the Labour Party, Socialists, Parliamentarians (I dislike the word politician) do ourselves and our people absolutely no good by trying to smooth it over. Far better that we come absolutely clean.

I am not going to argue any Party points at all. It does not really matter whose fault it is. Somebody before me said, "I suppose it is really all our faults. We have all tried very much the same things in our different ways". If Ministers and their advisers appreciate the gravity of the situation, then I am bound to say that their words', and I think their actions, seem to belie it. We are not choosing our priorities as a very grave situation would dictate; far less are we choosing the words. I believe the result is a growing cynicism and disbelief among our people. I am one of those who believe that people know more than their leaders tend to give them credit for knowing. What they think their leaders are here for is to bring home to them what they themselves instinctively know. They pay us the tribute of believing that we ought to know more than they do. If we say it is so, while they only instinctively feel it is so, then they accept that it probably is so.

To support what I am trying to say, I will quote the inevitable cabman who drove me this morning. In other days, with Lord Shawcross, it was the chap who sat on top of a No. 11 bus on its way to Clapham. The only point was, of course, that there was never a No. 11 bus which went to Clapham, but Lord Shawcross never bothered very much about the exact details. But in my case it was the chap who drove me this morning, and while stuck in a traffic jam we fell to discussing the grim situation. He said things like this. "Is it so grim or do you, George, wish to believe it is so? Look at the prosperity all around us" and he pointed to the shop windows, the ladies and everything. He said "Why stop me when I am at last having it good?"

The point I am trying to explain is that I think each of us, in his different way, should keep on trying to say that we know that what looks like prosperity and having it good is phoney. One cannot deny that the appearance is there; one cannot deny that people are having colour television where they have been happy to have black and white, or having black and white when they would have had none at all. They have cars, washing-up machines and washing machines. The noble Lord, Lord Sainsbury, and various others encourage people to want these things and are ready to provide them, but the fact of the matter is that the situation is phoney because we are not earning it.

It seemed to me, when I was lying in hospital trying to think about everything except what was the matter with me, that the overseas borrowing which this nation is now doing, which is really supporting this evident prosperity, is the most terrifying thing. The figures are staggering, and because they are so staggering we do not take them in. But if we do not take them in, we cannot expect the cab driver or the chap on top of the omnibus to take them in either. We have mortgaged, or are in the process of mortgaging, the whole of the hoped-for oil bonanza before we have got it, and at a time when we do not know what the problems then will be for which we might want the money. We must somehow make this clear to ourselves and must stop playing the fool. The Parliamentary game has to be played in the other place; it does not need to be played up here. In fact, I am not sure it has to be played down there, but that is another matter. I am under the eye of little brother, if not big brother, so I have to be careful what I say about the other place. We do not have to play that game. Let us tell ourselves, and then we will be able to tell them.

Secondly, let us take this theme of unemployment to which various people have referred. At this moment there are about as many people unemployed as we have ever had in my industrial lifetime, but we are kidding everybody because it is fully paid, hidden unemployment. It is better for the person and his family to be fully paid and kept on the books than to be out on the streets—I do not dispute that. Back in my old trade union job I would applaud that. But I am talking to friends and colleagues in this House, and I say that hidden unemployment, though more comfortable, though fully paid, is, none the less, unemployment. It means we are paying people for not doing the things that might earn the wages we are paying them, and, even more, might pay for the credit which they are borrowing. It is therefore all the more serious because we are hiding it from ourselves, and because, therefore, we are encouraging a very great deal of complacency.

My Lords, I heard the noble Lord, Lord Stokes—or was it one of his fellow directors?—say that Leylands, Oxford, is not a skivers' paradise, which I think was the phrase he used the other night on television, but that they did have 1,500 (or whatever the figure was) more people than they needed. What was meant, simply, was that they had 1,500 more people than they wanted, doing nothing. That is no way to success. Again, with the very greatest respect and, as he knows, the friendliest feelings to the Lord Privy Seal, I would tell the advisers to stop putting in the draft speeches for use by Ministers figures which refer only to what is in the Ministry of Labour Gazette, or whatever it is now called. That tells only the part of the story that cannot be hidden, and, indeed, probably deals only with those people whom you cannot employ. In consequence, people are not being drawn to understand that flexibility is necessary in what you can do industrially, that you can both screw a nut and drive a bolt, that you can fit a boiler and you can weld. It is not encouraging people to understand that we need flexibility now so that the fellows and girls can be trained to do the job that needs doing, where it needs doing at any given moment so that we are earning not only what we are paying them, but something over for all the other things we want to do. By not telling them this, and by kidding them that in fact it is all a lot less gloomy than people say, we are leading to the very complacency and cynicism about which I spoke at the beginning.

My Lords, the other thing which I am sure Ministers know but seem unwilling to recognise is something referred to by my noble friend Lord Shackleton, to whom I am very grateful for his reference to my own efforts in this sphere in 1964 and 1965. I refer to the cataclysmic drop in investment and ongoing planning. I have been dealing with industry all my life in one way and another. I now mostly see it from the management side rather than from the managed side; but it is the same industry, with the same problems. It does not differ from which side of the table you receive it. To anybody dealing with industry—and Ministers must confess if they know; and if they do not know, they had better get to know—the drop in investment and ongoing decisions is absolutely terrifying. If one is talking of the construction industry which has to build the facilities and provide the services, they have almost come to a stop. In a year from now they will not be doing anything. I was in Manchester the other day and saw this for myself. The thing has stopped. One of the leading construction companies did me the honour of asking me to open their new complex in the middle of our great commercial centre in the Northwest, Manchester and Salford. I did this, and a great day was had by all. I opened the first block; every other one is stopped because everybody who was going to be a partner in it—quite respectable institutions, with pension funds—does not want to be a partner in it any more because they cannot see ahead, so the funds are not there and the plans have stopped. What one stops to-day one cannot have available in two years' time, never mind next year.

My Lords, this is true also of productive machinery. If we do not know, it is easy to find out, but I am sure Ministers do know, that in all the manufacturing industries with which I have been associated in one way or another, plans are stopping at this point; and one cannot restart them just like that. One can pay the people to stay on the books, but one cannot pick things up again just like that. As my noble friend Lord Walston will no doubt be telling us later this week. the same is true about agriculture. I spent a very constructive week-end with my noble friend on his farm, In the present financial climate, with the present cost of money, and the present uncertainty, it is very hard for anyone to be able to go on ordering the machines they ought to be able to order. If they do not order those machines to-day, they will not be able to do so in three years' time. It is no use talking about how do we eat more and more cheaply if we are not in fact planning in agriculture to-day for at least five years' ahead.

My Lords, I came from Scotland late last night, and I can say that wherever one goes, the story is the same. All right, people are at work; all right, the shops look full, but we have stopped the plans and the commitments. I really do ask Ministers—and this is not talking "doom men" or "gloom men"—to recognise the situation and to tell our people consistently and continuously that it is so. I have no grouse about the Queen's Speech. That may be a little relief for the Lord Privy Seal.

LORD SHEPHERD

My Lords, if I may intervene, I have only one criticism of what the noble Lord, Lord George-Brown, has said so far, and I do not in any way disagree with his analysis of the situation. But I am sure he would agree—and if he would correct this I will no longer criticise him—that all the aspects and characteristics of the economy to which he has referred, quite correctly, are characteristics of very many months, if not years, and they are unfortunately, from our point of view, to be seen in varying degrees in Europe and throughout the world.

LORD GEORGE-BROWN

My Lords, the point about the months and years I thought I had got rid of by saying that I really was not going to argue about who was responsible. Let us say we all have been, all who have been Ministers at any time. I am not arguing about that. As to elsewhere on the Continent, I will come to that in a minute, but I am not sure it is quite as true as my noble friend says. This is another aspect. But if I may, I will come to that in my own time.

My Lords, I have no grouse about the Queen's Speech. The National Enterprise Board and what I believe is called Lever's bank seems to be my own favourite IRC, writ large. The small print will matter more than the proposition, the personalities who are placed in charge, and the way in which they are to perform. That is what will be of concern. I am happy about that, and hope it will stick as near as it can to what we tried to lay down for the IRC in 1965. But again, having no grouse about the Queen's Speech, can I say to Her Majesty's Ministers (not so much in this House, because I know them all so well, but to some in the other place) that loaning money and transferring the ownership of the equity may by itself be right or appropriate, but by itself it does nothing to put right the problems. Whoever owns the equity, whoever receives the loans, has still got the basic problems to put right. All I ask of Her Majesty's Ministers, in the other place as well as here, is to do it that way; I am not against it. But, remember, your ideas about conquering the fundamental causes of the disequilibrium matter so much more than that.

Indeed there is just one danger in doing this which a Socialist has to recognise, especially when you transfer the ownership of the equity from somebody or something that is identifiable to somebody or something which is not, that is, the State. We used to believe that that meant the people. We used to believe when I began as a Socialist that people knew the difference, that Marks and Spencer, Sainsbury, was one matter, working for the people was a different matter, and one would feel grander, happier, more involved and so on. It is not necessarily so, as the song says.

In some cases, unless we change what we want to do with industry when we have transferred the ownership of the equity, we could even enshrine the causes of the disability and impede their correction by the mere fact of transferring into public ownership. One needs only to ask any chairman of a present nationalised industry—at least one of them an honoured Socialist colleague of ours, an honoured member of the Government of which I was a member—about how he is impeded at this moment, how his problems are enshrined just because he is publicly owned. It simply means that, once you own the equity, the industry is more vulnerable to industrial and political pressures than a private enterprise would be.

That does not make me a "non-nationaliser". I have never been a nationaliser en principe; I am a nationaliser where it seems to me you do the job better by owning the equity in the name of the people rather than anybody else and so long as those who do it recognise that there are problems involved and that the mere act of nationalisation, transferring the ownership of the shares, does not necessarily cure them. It only means that it is our problem rather than theirs, and I commend that thought to Mr. Benn.

May I come to what I see as the basic problems, which I wish the Queen's Speech and the speeches so far from Ministers dealt with more clearly. The first absolute unquestioned basic requirement is the cash flow for all industry. The remedies for this are well known; I will not go into them. They are easily avail-abe to Ministers, and the November 12 Budget will justify itself, at any rate in my humble eyes and in those of many others, by how far it is directed at putting right the cash flow. You cannot pay out if it is not coming in; you cannot continue borrowing at 22 per cent. forever; anyway the banks will not lend and even if they would the Bank of England would not allow them. You are producing the non-cash flow in every possible way at the moment. If only that were put right in the next six months it would be such an enormous achievement; many plans would be re-started, many commitments renewed, simply by putting people, farmers, industrialists, service industries, into the position where they can do it.

The second basic problem is a little more difficult but it has to be tackled; it is the relationship between the managers and the managed in industry. It is still far too distant. I went the other day to visit a factory of Bulmers in Herefordshire. I was tremendously impressed with the relationships there, the mechanics, the way they understood each other, the way they all know what is going on and why. I know it to be true of Laings in the construction industry, and Courtaulds, with whom I had the pleasure of working for such a long time. It is true of some, it is not true enough of many, and it is not true at all, I would say, of most. This needs to be done. We need to have joint sharing of responsibility, certainly of understanding but also of responsibility, for decisions at all levels.

I come now to what my noble friend the Lord Privy Seal said just now about the Continent. If we can only drag the TUC, the managers, the individual unions and the individual plant managements, to the point where the Swedes are, for example. I have seen Volvo in Sweden and I have seen the textile industry in Sweden. I know how they do it, and it is so far ahead of the way we do it. So do not let us be too sure that our problems are no worse than the Continent's; they are a hell of a lot worse. I agree entirely with my noble friend Lord Shackleton who was so kind to me; the social contract must work. Let us stop arguing about something else, some other way. This is what we have; it is the best one we have, as Lord Butler once said of a former Prime Minister. Let us make it work; it has to work.

Jack Jones should be told that his speech the other day was most encouraging. To one who has had to disagree with him so often it is still encouraging. I only hope that he finds the fact that I say so equally encouraging. But I did not find his subsequent defence two days later of what was clearly a most glaring breach equally encouraging. I think we should say to them, "O.K., we pat you on the back, gentlemen, because you understand the situation as we do, but please do not then defend something which is so clearly outside it".

We need courage and clear leadership. The Government have their four years. One hears talk about a majority of three, but those of us who are old hands know that it does not apply, and that it is good enough for four years. They therefore can take courage and can give leadership. I do not know whether it is because I am getting old—I do not think I am the old man that the noble Lord described himself unfairly as being, but I am on the way; I suppose we all are in this House, except perhaps Marcia Williams—but I begin to think that it never is to-day as good as yesterday. Nevertheless, I have a feeling that we are in a period of mediocrity of leadership in almost every direction. I should like this Government to be the Government who break out of this, who stand up and say it has to be done and that we are going to do it; who say we cannot pay any more, we cannot give any more. I do not want to read in the papers every morning that there are £5 million for this and £100 million for that, when I know that all it means is that you are printing more paper or borrowing more funds from abroad.

Having said all that, may I turn to my second, and, I promise, my last point. My point is that this new thrusting dynamic Britain which I believe we could have ought to put right its relationship with the rest of the European Continent, at least that part outside COMECON and the Russian bloc. I will not go into the unworthy, as I see it, chit-chat at present going on. I saw that Mr. Peter Shore was speaking the other day about our deficit with the EEC countries, as though that was a criticism of the Common Market or the European idea. Of course it is not so. All he was saying was that if we go on getting less and less competitive and less and less industrially efficient then, of course, they will get more of our markets and we will get less of theirs. All he was making was a criticism of the situation here. He and Benn know the answer to that. If we act along the lines I referred to earlier we can put that right without any trouble.

I should like to finish by restating in the firmest terms I can, but without detailed argument—because we will be doing that once, or twice, or three times later on in this Parliamentary year—the view of many of us that the need for an integrated Western Europe, politically in international affairs as well as economically, is unchallenged, unchallengeable, and will be defended by some of us right the way through. If the Government imagine that they will get their Bill through because some of us will not challenge and fight, they are wrong. One can "fight and fight and fight again" for the Party one loves—not that that is a phrase I have ever enjoyed using—and one can "fight and fight and fight" much more for the nation I love. I believe that this nation needs to be part of Europe, to see itself as such, and someone will be challenging any divisions in this House.

Secondly, there is our growing and, ultimately, absolute need for that larger market which is represented by the Continent and ourselves—instead of just trying to take in our own washing. When it comes to the arguments about Ministers who want to try to go it alone, that is one we shall have to tackle. Thirdly, there is the need, the urgent need to end the argument and the uncertainty is there because while it goes on Britain, not the mainland of Europe, is the loser. Fourthly we have to get into our heads and commit to our mouths what is in our heads. The capacity to lead Europe, to renegotiate the terms of the Common Market, to renew the Common Market, to reform the Common Market, our capacity is all the greater from inside than it could ever be from outside.

I utter this warning to Ministers in this House for conveyance to Ministers elsewhere over the referendum. A referendum, which as the Prime Minister said once when I was Deputy Prime Minister—and we were in total agreement—would be held only over his dead body. He ought to be careful because it might turn out that he was being unnecessarily prophetic.

LORD DAVIES OF LEEK

Some of us have been waiting for 33 minutes.

LORD GEORGE-BROWN

I thought that the noble Lord, Lord Davies of Leek, was enjoying my remarks until the last one minute. This is one of those problems. I simply say about the legislation to authorise a referendum; do not assume that you can get it for you may not. Regarding the campaign in the referendum, if there hapens to be one, do not think that it will be easy or that there will not be grave differences in this Party of ours before the public, and on what the Government do in the light of the result they get in the referendum.

Finally I say to the Government, wishing them well, supporting the Queen's Speech as I do, we can have national co-operation even under a Party Government—even though it is well known that I spoke and urged a different course before the Election, we have this one now. We can have national co-operation, maybe we cannot have national unity, but we can have national co-operation. Let us try to get it under this Party Government. Postpone all the things, however desirable party-wise as Socialists, which are not immediately necessary and which involve more issuing of paper money, and realise, accept and enjoy the fact, as I see it, but perhaps not all my friends do, that Britain's role in the world is and has to be based on Britain's place in Europe.

6.14 p.m.

THE EARL OF MANSFIELD

My Lords, I should like to begin by congratulating the noble Lord, Lord Shinwell, and the noble Lord, Lord Leatherland, on the way in which they moved and seconded the Motion for an Address. Almost a year ago to-day I moved a Motion for a loyal Address and my seconder was Lord Hewlett. If my arithmetic is correct, last year the average age of the mover and seconder of that Motion was 46, and this year the average age of the mover and seconder is 83. I draw no distinction nor even a parallel, but I congratulate the Government on their choice of speakers and their courage: Age shall not wither nor custom stale their infinite variety. My Lords, in view of the time and the number of speakers who are to follow me I shall not detain your Lordships for very long. I merely want briefly to discuss two aspects of the Queen's Speech. There is no doubt that everyone in your Lordships' House and every politician, everyone in every walk of life, and every commentator, believes that the present national situation is one of the utmost gravity. Everyone emphasises the need for national unity in order to overcome the present unpleasant situation. Indeed, the noble Lord, Lord Shinwell, made a most moving plea for the co-operation of every person in the land towards the task confronting the nation in the future. It seems to me that there cannot be unity among the citizens—certainly there cannot be any unity of purpose crowned with success—unless every section of the community feels that the Government are acting in a way which is demonstrably fair, or at any rate is certainly not vindictive and which commands a policy which, while it might not excite affection, at least excites respect.

My Lords, it may be that last year when I moved the motion for a loyal Address large sections of organised labour felt aggrieved. I do not doubt the genuineness of their feeling, but the pendulum has swung a long way in the 12 months since that date and the boot is now on the other foot with a vengeance. Many people feel that now in this country we are two nations and that those who are not under the umbrella of the union movement or who are not, to use a chilling phrase, "useful people", are going to get scant consideration let alone help or encouragement from the Government.

The situation in rural parts of the country is one of despair. The agricultural community has seen the situation develop and then deteriorate seriously in the last 12 months. The livestock industry, which has been removed from intervention, has been bereft of any proper support since the early spring. We now have the astonishing situation, at a time of world protein shortage and with a large proportion of the world population hungry, of beef farmers having to sell their cattle for less than £50 a piece. Since February there has been a great deal of exhortation but no effective action. The passage in the gracious Speech which deals with this matter merely promises continuing discussion.

My Lords, this critical situation applies to all parts of the agricultural community at a time when it is faced with escalating costs and liquidity crises—and this is now to be compounded, if that is the word, by the threat of capital taxation. The capital transfer tax, to mention only one, will have the effect, at a time when national considerations demand larger agricultural units, more efficient agricultural units and more intensively capitalised agriculture, of taking regular chunks or slices out of agriculture which can lead only to fragmentation of farming units and to reduced efficiency. By way of illustration of this proposed tax, one can say that if a working farmer with a 300 acre farm wishes to hand the farm on to his son before he dies, the amount of the duty will exceed the value of the farm. This is an astonishing state of affairs for a social democracy.

Much of what I have said also applies to the forestry industry. Most owners of timber, most people who plant trees, are thinking of the amenity and the benefit to those who follow, probably fifty years later. The effect of this new tax, and of any others which may follow it as a result of the Select Committee, will be that no more trees will be planted in the private sector, and any trees which there are will be culled as soon as they have any value at all merely to reduce the effect of future capital taxation.

The effect of this is only just being understood in the rural areas. The insinuation, if not the accusation, is being made that this Government are deliberately running down a part of the country, and a part of the economy, which they do not like and from which they do not receive traditional support. According to the Economist a week or so back there is now not one Labour MP among the fifty most rural constituencies in the United Kingdom. If that is so, what is the answer? Is it the intention to run down the agricultural community until, like other industries, it is unable to pay its way, and then, by some form of backdoor nationalisation to take over the land in this country? I find it difficult to believe that that is the Government's intention, but I and a lot of other people would like spelled out what are the Government's intentions for the agricultural industry, and in particular for the people who live in the country, in terms that they can understand and accept.

LORD STRABOLGI

My Lords, if the noble Earl will allow me to intervene, I would remind him that there will be an opportunity to debate all the points that he is raising in the debate on agricultural policy which the Opposition are initiating on November 6.

LORD HAILSHAM OF SAINT MARYLEBONE

My Lords, why should not my noble friend be entitled to raise this on the state of the nation? I do not understand.

LORD STRABOLGI

My Lords, I did not say that he was not.

LORD HAILSHAM OF SAINT MARYLEBONE

Then why did the noble Lord intervene?

THE EARL OF MANSFIELD

My Lords, we are faced with demands for unity, and my point is simple: how can there be unity among the citizens of a nation if some of them feel that they are being unfairly discriminated against? This has nothing to do with the debate on agriculture which follows next week, when we will get down to what may be called the nitty-gritty of farm policy.

On the Question of what is described in the Queen's Speech as"fair redistribution of wealth", of course the orderly and fair redistribution of wealth depends on the co-operation of those from whom assets are being removed. For myself, I believe that over the course of the last fifty years it has been part of the British political genius that a great deal of redistribution has gone on with the minimum of fuss and ill-feeling, and with the maximum of law-abiding qualities on all sides.

When these provisions for capital taxation were first mooted, it was said that the capital transfer tax is designed only to remove the loopholes which at present exist over the estate duty legislation. To my mind, that is not the point. What has been achieved is that anybody, for instance, who sufficiently cares about his heirs and has made over his assets to his own detriment and keeping no benefit, has escaped the worst of the estate duty laws. The estates of those who have no heirs, or do not care sufficiently for them, or are too selfish to divest themselves of their assets, have been caught by the estate duty legislation, and the size of the estates has diminished accordingly. This is, in effect, very like what happens on the Continent, especially in France, although the legislation is entirely different.

Your Lordships will perhaps take it from me that in 1920 8 per cent. of farmers in this country were owner-occupiers, and in 1970 this figure had risen to 60 per cent. If those people feel that they are being taxed unfairly and at a penal rate, the result will be a contempt of the law, widespread evasion, and the form of cynicism which those of us who have friends in Italy meet all too often. I cannot believe that the Government really wish this to take place, but I fear that it will. I beg the Government—and they still have time—at least to reconsider the matter until the Royal Commission on Wealth, chaired by the noble Lord, Lord Diamond, has had an opportunity to report and put the whole matter in proper perspective.

Perhaps I may now turn briefly to a different matter that affects us all; that is, the European Community. My noble friend Lord Saint Oswald and I have been members of the European Parliament for very nearly two years. We started with the greatest of enthusiasm and indeed excitement, but there was a certain stagnation in the institutions that led to a certain weariness on our part. But we are told now that renegotiation is to continue apace, and that it will lead to some form of referendum. What I should like to say—and this has not so far been brought home to the people of this country—is that all the time the European Community is progressing in its relations both with the States within the Nine, and also with what are called third countries without it. Trade agreements are in the course of being formulated with what are called the Protocol 18 countries—those are the 43 emerging countries from Africa and the Caribbean. A global approach is being made to a good many of the countries around the Mediterranean, and one imagines that before very long firm trading agreements will be made with all these countries. While renegotiation is taking place, there must be on the part of the Government a great faith as to what is to happen to this country if renegotiation fails and we have to stand alone. For instance, how do we expect to sell our goods and to import in return scarce raw materials? Or shall we, like Lazarus, just have to wait for the crumbs? Will it be possible to negotiate and expect most-favourednation treatment from those countries who will be vital if we are to achieve secured markets? Can we expect, for instance, the Community of Eight (as it will be, because the Irish have said that they will continue even if we drop out) to give us terms anything like as favourable as we get now? Can one expect, for instance, the French to agree on any trading agreement which does not bring in her agricultural products? If we consent to such an agreement, then why should we not do it within the Community?

All these are questions which the British people as a whole, and as individuals, must ask themselves before renegotiation finishes and this referendum takes place, because unless the questions are asked and answered and understood then the referendum will be a hollow sham. It is no use voting to opt out of the European Community if by so doing we metaphorically cut our own economic throats. I could go on, but I will not. In many ways we are now faced with a situation as a nation within the Community which calls for the very clearest thinking and a lead. That lead must come from the Government. I hope that the Government—I use this phrase advisedly—will be big enough to give it.

6.30 p.m.

LORD ALPORT

My Lords, for me it is a very happy opportunity to follow the noble Baroness, Lady Delacourt-Smith, and to congratulate her on her maiden speech. Some twenty-five years ago, her husband was my courteous and able opponent in an Election. During the subsequent period until his death we maintained the friendship which we made at that time. I can say that he would have been very proud of the contribution of the noble Baroness to this debate. I know he would have been proud of the personal experience which she has of social service matters on which her speech was based, because during his lifetime he had at heart very much this work in the field of social service.

I listened with great interest to the speech of my noble and learned friend Lord Hailsham of Saint Marylebone. During the first one-third of his speech, I felt it sad that someone who had such natural ability was no longer available in another place to help with the leadership of the Conservative Party. During the second two-thirds of his speech, I must confess that I felt perhaps it was just as well that he was immured in the relative impotence of your Lordships' House. It is time that Conservative leaders and the Conservative Party generally ceased to denigrate and, apparently, attempt to undermine the conception of the social contract. There is no alternative policy so far as this Party is concerned. Nothing of this kind was put forward by the Party at the last General Election. It is, at any rate, a basis of some hope that we in this country will be able to bring into some sort of control the constant rise in wage levels.

It is to me one of the tragedies of the Conservative Party, and perhaps of this country, that when in November or December of last year, following the initiative of Mr. Len Murray, it might have been possible for the Conservative Government to be the beneficiary of the idea of a social contract within industry, between the Government and trade unions. If that had happened there would not have been the miners' strike; there would not have been the February Election; there would not have been the three-day week; indeed, it would have been an opportunity for my Party to restore the relations with organised labour which in the past we had over many years. That opportunity was missed due to the misjudgment of the leadership at that time.

These are matters of the past, but, although my noble and learned friend Lord Hailsham of Saint Marylebone does not normally do me the courtesy of listening to any speech that I make in this House, I must say to him and to others concerned with this point, that until they get out of their heads the idea that it is in the interests either of the Party or of the country that the conception of a social contract should be denigrated and criticised and perhaps weakened, I do not believe the Conservative Party will be able to provide an effective Government in this country.

My Lords, the great debate on the State of the Nation has been conducted over the last few years around the manifold economic problems with which we are faced. It takes a brave man to suggest that it would be right to try to seek a solution to the problems which confront us as a nation not in the material dimension, but in the moral and even in the spiritual dimension. In his recent speech, my right honourable friend Sir Keith Joseph has tried to analyse these problems in moral and, indeed, in genetic terms. Like my noble and learned friend Lord Hailsham of Saint Marylebone, as a Fellow of All Souls he is entitled to such an intellectual approach. I myself, as a lifelong practitioner of the art of politics, prefer—rightly or wrongly, I do not know—to seek a solution in the character and efficiency of our political institution.

Twice during the last 12 months the British electorate has declared itself against strong divisive Government. We have experienced the consequences of strong Socialist Government intent on creating a social revolution. We have experienced four years of the "silent revolution" of Mr. Heath's Conservative Government. As a consequence, I do not think that public opinion likes either. It is time that the zealots of both Parties listened to what I believe the majority of people in this country are trying to tell them. What they want is not a strong Government, but a strong Parliament representative of them and their aspirations. They do not want the divisive policies of Right or Left, but a Government capable of uniting the nation and mobilising its political will-power along moderate and common-sense lines. They want to see Parliament representative of those who to-day can exercise power, so that their strength is made responsive to the will of the nation.

My Lords, I believe we will never remedy our economic and social problems until we have reformed our Parliamentary institution, and restored to Parliament the power which has been usurped both by the Government and by extra-Parliamentary forces; in particular, the trade union movement. In his speech, my noble friend Lord Coleraine referred to the same point. Yesterday, the noble Lord, Lord Shinwell, made the point in his admirable speech. It is a theme to which, if I may, I should like to devote one or two observations in the next few minutes.

Both the Prime Minister and the Leader of the Opposition recognise that it is only as a united nation under Parliament that the British people can overcome the dangers which confront us. Yet instead of seeking the common ground of policy which could unite the great majority of the people of our nation, each employs the language and the policies of factions. Much of the content of the Queen's Speech is, in my view, irrelevant in the face of what both Party leaderships agree is a major crisis. Much of the speech of my right honourable friend the Leader of the Opposition in another place yesterday seemed to me to be unrealistic, both in relation to the policies pursued by the Conservative Administration from 1970 to 1974, and indeed to the needs of Britain to-day. One gets the impression that, while the nation sinks under the weight of debt and demoralisation, Party leaderships are continuing to carry out some ritual dance which has little relevance to the crisis which we all agree exists.

I will leave it to others to argue the irrelevance of many of the provisions of the gracious Speech in the face of this crisis. My purpose to-day is to invite the Conservative Party to consider the role which it should play during this Parliament. In the first place, it must have a leadership which can give to the Party a sense of unity. A divided Party in Opposition cannot appeal for national unity and carry conviction. Unless we are able to make the changes which are necessary to unite our Party, the Conservative Party will be divided and Parliament as an institution will suffer from the absence of a coherent and effective Opposition. The beneficiaries will not be the great majority of moderate, patriotic folk, but the extremists, both of the Left and of the Right, and the nationalist interests in Ulster, Scotland and Wales.

A strong Parliament requires a strong Opposition which is neither pursuing the policies and tactics of faction, nor is in itself riven by conflicting loyalties to individual leaders. The nation under Parliament is greater than any Party, and a great Party requires from those who are called to lead it from time to time the self-abnegation which, when certain circumstances arise, makes it necessary in the public interest and in the interest of personal integrity to surrender the leadership to someone else. If Parliament cannot be fully effective without a united and responsible Opposition, it cannot be effective unless its methods of working can make the best use of the resources which are available in it.

I am glad that the noble Lord the Leader of the House made reference to the reform of your Lordships' House. We all know that this is long overdue. It must have its place, however, in the wider reform of Parliament; and there are certain measures which seem to me to be necessary at this present time. I have referred to the better use of resources and of the abilities of the Members of another place. It is a matter with which they themselves are concerned and must carry into effect. But quite clearly, in my view, from such experience as I have had, the development of the Committee system is the key to that reform. I would say—and I think that we in this House are entitled to say this—that it is essential for the good health of Parliament that the private Member should be properly rewarded and given the financial independence and security which will not only enable him to carry out his duties, which are manifold and pressing, but will also prevent the constant draining away of able and experienced men who can no longer stand the financial and perhaps, sometimes, the personal pressures which are exerted against them.

My Lords, I think there should also be measures to allow a proportion of the members of the Government to hold office without seats in either House of Parliament. I believe it is important that, from time to time, men with special experience in the complicated fields of civilian activity, and perhaps in other ways as well, should be available to the Government in the Cabinet, or in some lesser office, without their having either to stand for the House of Commons at an Election, for which many of them are entirely unfitted and which many of them are very unwilling to do, or, alternatively to undertake the responsibilities of membership of this House. I think this should apply particularly to the trades union membership.

We have heard many references to-day to the recent speech of Mr. Jack Jones. No doubt it is not for me to make these suggestions, but it seems to me that one of the ways in which the position of the trades union movement at the present time should be recognised, as it has been in the past in the case of the late Mr. Ernest Bevin, for instance, is by bringing men of that calibre directly into a responsible position in government. I believe that this is something which it is in the national interests to bring about. I do not believe that it can be done by making them undertake the responsibilities of an election to the House of Commons; nor do I believe that they can be expected to undertake a role in this House, unreformed as it is, until they have passed through their period of full responsibilities as active members and leaders of their unions and have, in fact, retired, by which time their authority has to some extent been dissipated.

My Lords, I am quite certain that whatever may be our views about the social complexion of this country over the years to come and about our economic problems, one of the most important things of all is to find a constitutional place within Parliament, within our Parliamentary Constitution, for what I call the Fifth Estate—the trades union movement. It will not be an easy thing to do, but until it is done, and done effectively, we will continue to have the anomaly which we are facing at the present time, whereby men with great power and men who have great capacity for leadership—men who are, so to speak, the successors of those other groups within our historic national life who have gradually been brought into constitutional relationship with the Government and with the representative institutions of this country; men who now comprise the leadership of the trades union movement—have power without constitutional status and responsibility.

My Lords, I have perhaps taken the debate away from the general theme which was followed in earlier speeches. Nevertheless, I return once again to my conviction that until we can find within the constitutional fabric of our country, with its Parliamentary basis, a place for the leadership and the existence of organised trade unionism, we will never find a real solution to the economic and social problems which we face.

6.47 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, I can follow my noble friend who has just sat down in so far as he shows concern over the decline of the power of Parliament, but further than that I think I would find it difficult to go, though I agree with him to a certain extent about the social contract. If it will work, of course, it is the obvious solution; but on its record to date it is not working, although we live in hopes. My Lords, I have heard it said to-day that it would be unpatriotic (at least, I think "unpatriotic" was the word used) to cast gloom on the general situation. I ought to be feeling smug, but in fact I am feeling very sad, because your Lordships can read dozens of speeches of mine made in this House in which I prophesied exactly what is now happening. Of course nobody takes any notice (why should they?), but the point is that I have been saying this, though it gives me no satisfaction.

I think it was the noble Lord, Lord Shinwell, in a speech which I so much admired, who said that the economic situation to-day is not nearly so bad as it was in the 1930s. I was a teenager then, and I can remember something about it. My friends in the City—and my son is in the City—tell me that in fact the situation is worse. It is true enough that we do not have the human misery that we had during the slump in 1930, 1931 and 1932; but, of course, as the noble Lord, Lord George-Brown, said, that is because we are living on borrowed money. From other points of view, the economic situation is, I would say, worse, because in the 1930s we were not running a balance of trade deficit with the world of from £300 to £500 million a month.

My noble friend Lord Mansfield was talking about agriculture. In the markets I have seen lambs going through at 2p a pound. I have sold some myself for this price. This is really a phenomenon because, if one has inflation, then commodities and livestock usually go up in price correspondingly. But this has not happened, especially with livestock, and I support everything that my noble friend Lord Mansfield has said regarding agriculture. I will not repeat his words, but it is absolutely certain that if we had not been able to borrow on the oil, which, as I think the noble Lord, Lord George-Brown, said, is now mortgaged for many years ahead, the average worker in this country would, as I have said before, have driven out in his smart car with his £80 or £100 a week—and I know a man who has lost his job on the Stock Exchange and who is earning £30 a day on a demolition site, which he agrees is most monstrously overpaid—would have gone to the shops and would not have been able to spend his money, because the country would not have been able to import the goods which he wanted. Without the money borrowed on oil, we should have had a very unpleasant time and the worker in question would not have realised that it was largely his own fault, though that is neither here nor there.

My Lords, I have a bet with the noble Lord opposite that I shall not speak for more than 15 minutes. I have spoken for only four minutes so far, and I should like to turn just for a short time to the gracious Speech. My words are not directed at noble Lords opposite, but at the Members of the Government in another place, but when one reads the gracious Speech it appears to be contradictory and irrelevant. Whereas it recognises the extreme gravity of the economic situation and refers to inflation as one of the causes, it goes on to suggest measures which, if put into practice, can only increase (inflation. It speaks of measures which will increase the amount of money printed, without any corresponding increase in wealth. We are to give money to all manner of things. I quite agree that every help should be given to disabled people, and that there is probably a very good case for increasing family allowances, provided the money goes to the children and is not spent on beer and cigarettes. But is it really necessary at this extremely dangerous economic time to increase the financial aid for all socal security benefits? I should have thought this was a very bad time to indulge in this.

However, I could have accepted the words, "existing social security benefits" in the gracious Speech, provided the Government had made reference to a very good report which has been pigeon-holed, as so many of these reports are, called, The Abuse of the Social Services. If the Government had added the words, "and to use extra vigilance to ensure that these benefits are not abused", I would have had no complaint. I have known many instances when they have been grossly abused, and I am sure that if we could stop this abuse it would mean many mil- lions of pounds more for deserving cases. I think that it is a greaty pity, though I do not suppose that it would have been a vote-catcher, that we cannot stop these abuses.

My Lords, having said that I should like to turn to the social contract. Of course, as I have already said, it is the obvious solution if it will work, but what is the history to date? We have had the Glasgow lorry drivers receiving a 40 per cent. rise, and that will certainly mean that freight rates will go up by 25 per cent., so there we will have more inflation straight away. I could quote many other instances but there is not time and I do not want to lose my bet. But, as I have said in previous speeches, it is very difficult for any democratic Government to stop this sort of inflation, because it has now become accepted practice—it has become fashionable, if you like—for everybody, irrespective of his ability, to be entitled to a very nice house, a large car, holidays abroad, colour TV, and I suppose that it will be yachts soon. Having planted in people's heads the idea that they are entitled to that—in other words, that the country owes them a living—I do not see how one can now get it out of their heads.

My Lords, may I just repeat that if we cannot pay wages which are related to productivity we are doomed. Several noble Lords have blamed the prices of imported commodities, but that is not the real answer. I quite agree that the extremely high price of oil has been a great drawback, but the real cause is domestic inflation and that stems from the fact that so many of us are getting too much pay for what we are doing. However, how one is to combat that, especially in a democracy such as ours, it is extremely difficult to know.

My Lords, I now turn to the National Enterprise Board. The gracious Speech said that the object is to make profitable public and private sectors. That almost makes one laugh, because for many years—indeed, ever since we have had them—public sectors, which are better known as nationalised industries, have never yet, so far as I am aware, made a profit. They have existed through the taxation extracted from the private sector of industry. I have the highest respect for our Civil Service. I think that it is the finest in the world, but, with due respect, the Civil Service has never been trained to create wealth or to make money; its members are trained to administer and to spend money. How one can train the Civil Service to make money, I really do not know.

I think that entrepreneurs—which is now a fashionable word for businessmen—are either good at their job or they are not, and I do not think that one can train people to be good at it. Therefore, if a National Enterprise Board is to instil vigour into public and private industry, I cannot see it succeeding. The money which the Enterprise Board will be giving back to private industry will be the money taken from private industry in taxation. If we want private industry to succeed then for God's sake, my Lords, leave it alone! Reduce its taxation and leave it alone. You will find that it will do the job admirably.

I am getting near my 15 minutes, but I should like to make a point relating to the industrial bank, or the Enterprise Board. What is the point of the industrial bank lending money to businessmen-employers, when they will be employing people at wages from which they cannot make a profit? In that way you are only going to add to inflation. The wages that the National Enterprise Board will demand to be paid, and which the employer will have to pay, will be such that he will not be able to make a profit. Therefore this, again, will be a waste of the nation's resources. It is extraordinary that no mention of wages has been made in the gracious Speech.

I have just one moment or so left, so I should like to refer to the fair distribution of wealth. This is of great irrelevance—and my noble and learned friend, Lord Hailsham, referred to this fact. Honestly, my Lords, it is the most appalling irrelevance. To whom is it fair?—to the idler, the shirker and the inefficient? When we have men to-day with no training and doing unskilled work, who can earn far more than skilled men and many people in the middle and professional classes, I should like to know to whom you are being fair, because, in fact, you are being very unjust.

Why should the thrifty, the hardworking and the efficient be penalised more and more for the benefit of the inefficient and, perhaps, even the lazy? That is the way to ruin a nation. If you destroy the strong to over-pamper the weak, you will end up with nothing. You will have an impoverished people sunk in decadence. You will have left only some printing presses on which to print phoney money, and this nation will become a burden to the world. However. I must say that I do not believe it will be as bad as that, because we have much too much spirit for that to happen. I only wish we could leave Party dogma out of this subject, but apparently we cannot.

You must start in our schools. The other day I was flying abroad, and happened to sit next to a schoolmaster who had worked in comprehensive schools all his life. He told me he came from a big comprehensive school in North London and said that in his opinion the whole system was breaking down. He said that several times a day teachers and pupils had to be separated because they were fighting, and that many of his pupils played truant and often did not go to school for three or four weeks. He was very dispirited about the whole system of comprehensive education; and now we read in the gracious Speech that this is to be extended. Before it is, I sincerely hope that Her Majesty's Government will try to look at certain defects and endeavour to put them right. As a matter of fact. I suggested to Mr. Heath when he came to address a committee that it would be a good thing for children of 14 who did not have the aptitude to go on to further education to be allowed to go to a technical college, and therefore to opt out of normal school work up to the age of 16. I am told that most of the hooliganism comes from the age groups of 14 to 16. from the children who. having no aptitude for further education, are bored.

I should just like to echo the words of the noble Lord, Lord Shinwell. How pleasant it would be if we could only put the "Great" back into Britain. There are many things which we have to do before that happens, but until wages are related to productivity there is very little hope of becoming Great again.

7.7 p.m.

LORD SAINSBURY

My Lords, in the debate that takes place in reply to the gracious Speech, your Lordships show your accustomed tolerance in permitting a wide range of subjects to be discussed. Therefore I hope I am not straying too far in discussing trends in the international trade in basic foods and their effect on our and the world's economy.

As was to be expected, in the recent Election campaign much mention has been made of the need to curb ever-rising food prices and, in the case of sugar, to cope with our own domestic shortage. Added urgency has been given to some overall consideration of limiting the fluctuations in the price and availability of basic foods by the imminence of the World Food Conference which begins in Rome next Tuesday. Therefore perhaps my choice of subject is not altogether inappropriate, particularly as there is recognition in the gracious Speech of the economic problems confronting developing countries.

In my opinion it is right that, whatever our concern for our own consumers, we should also consider more generally the effects of these fluctuations on developing countries and on the terms of trade. It is always wise to see our own position in perspective. As the Director-General of the Food and Agriculture Organisation said in London six months ago: When we state, perfectly correctly, that for the second year in succession we are facing the threat of a world food shortage, we do not mean that most citizens of the richer countries are likely to go short in any sense but that of minor frustration or inconvenience. … What we really mean is the likelihood of large-scale hunger and, very possibly, starvation in a number of countries. We see the truth of that statement to-day in parts of India and in Bangladesh.

For those of us in this country, apart from temporary gluts, the age of cheap food, in my opinion, has passed because it depended on British buying power as the only large market for surpluses. One of our most basic economic problems is our very vulnerability to external events, and this is nowhere more apparent than in the international trade in basic foods. This increased vulnerability—and with it increased economic inter-dependence—can be dramatised as it was in a recent article in International Affairs, in a plea for policy determination between different nations. I quote: Poor harvests of grain in the Soviet Union or fish in Peru have been rapidly transmitted into shortages of fertilisers, or high food prices in other parts of the globe. Rapid changes in energy or raw material prices have accelerated domestic rates of inflation throughout the world and have reverberated quickly through the negotiations over reform of the international trade and monetary systems. Those hit hardest are the developing countries, whose import bill for cereals alone will have risen from 4,000 million dollars to 10,000 million dollars over the past year, according to the FAO. This means that two-thirds of the yearly total of official foreign aid received by the Third World is swallowed up by these increased costs. While, by contrast, the British consumer pays more for his food, falling prices in the case of fibres, certain metals and rubber, lead to further deterioration of the terms of trade for countries exporting these goods.

The sheer inadequacies in the supplies of basic foods, which are not always apparent to the man in the street, are considerable. As the Guardian pointed out last week, between 1968 and 1970 four major grain-producing countries, the United States, Australia, Canada and Argentina, cut their wheat acreage from 120 million acres to 81 million acres. With American wheat stocks at their lowest for 40 years, and with only three weeks' supply of grain stored away throughout the world, the extent to which we are in the hands of fate, drought or flood, is scarcely appreciated. In the United States' commodity markets for many years price changes in wheat were measured daily in eighths, quarters and, exceptionally, halves of a cent. Recently the daily ranges in some futures contracts have ranged from 30 cents to 40 cents a bushel. The eradication of this chronic price instability by some means of international overseeing of grain supplies should be a major goal of next week's World Food Conference.

Sugar is another example of the changing pattern of trade. Countries like Guyana, Jamaica, Trinidad and Barbados are no longer so dependent on Britain or the Commonwealth Sugar Agreement, which in any case shortly comes to an end. Earlier this year, at the height of the sugar crop, the Commonwealth Sugar Agreement price was £61 a ton, and the world price was just past the £200 a ton mark, although it must be kept in mind that only 10 per cent. of the world's sugar is on the free market. In spite of this, it was little wonder that Commonwealth Governments moved on to non-traditional markets, concluding sales with China. Venezuela and the North African countries and, as a group, taking advantage of an opening on the United States market at three times the Commonwealth price. These countries' poor balance of payments position is made even more acute by the growing cost of imports such as oil and fertilisers. We cannot expect sugar-producing Commonwealth countries, whose leaders are rightly concerned at the appalling poverty at which the greater part of their population live, to continue subsidising the British housewife by arrangements which do not give their own citizens the fair rewards of their labour. We cannot and they should not.

The dilemma of Government in this country will continue to be that they wish to keep down the cost of living, of which food is such an important element, and at the same time believe in the need to help developing countries. For countries like Guyana—and I mention Guyana because I was there in the early part of this year—and countries with limited resources, help cannot simply be a matter of charity or tied aid. The best way to help these countries and raise their per capita incomes, is to pay a price which shows them a profit. How can we expect Guyana to accept £61 a ton for sugar at the end of last year, or £83 a ton earlier this year, when they could get three times this price by exporting to North Africa or to the United States, and when they are paying four times the previous price for their fuels and greatly increased prices for their fertilisers?

There is only one long-term solution: that is, to pay fairer, more just, prices and, in doing so, to bring about some measure of price stability. I would add that if the terms of trade do improve slightly, it is to be profoundly desired that the increased wealth is widely distributed within developing countries and does not become confined to a smallish middle-class: as The Times said recently: Relatively few people at the top doing just a little too well. In the long term only if we have internationally controlled stocks can we prevent shortages and properly assess priorities in time of famine or crisis. With the World Food Conference in Rome less than a week away, and with the prospect of continuing world shortages, repeated fluctuations in price and supply, all of us who are concerned not only with international food trading but with human welfare and human suffering will hope, in the words of Walter Lippmann: That the time has come to come alive and to be alert and not to keep mouthing the same old slogans, and not to dawdle along in the same old ruts. Governments must treat the World Food Conference seriously, and not cynically.

VISCOUNT MASSEREENE AND FERRARD

My Lords, before the noble Lord sits down, may I ask him a rather parochial question? As a great expert on the retail meat trade, can he tell me why, if farmers have been selling stock for 20 or 25 per cent. of what they got last year, the price of meat in the shops has not gone down?

7.23 p.m.

LORD O'NEILL OF THE MAINE

My Lords, it is a great honour to follow in the wake of the noble Lord, Lord Sainsbury, and perhaps it shows the value that this House can confer on the country to have someone such as the noble Lord to take part in this debate. When one is fourteenth on the list of speakers, everything that should have been said has already been said before one speaks, but there is a thread running through most noble Lords' speeches which I believe I can continue to draw upon. When the Palace of Westminster was built London was the centre of the world's largest Empire. It was interesting for me about six or nine months ago when I had a former junior member of my staff here to lunch. I showed him the Royal Gallery and he said, on his first visit to London, "Now I understand why the English are so proud"—something which astonished me but came quite naturally off the lips of this very intelligent young man. Any one from another planet seeing the splendour of the State Opening of Parliament would think we were still the richest, most powerful country in the world.

The Government. I am sure (because I remember Mr. Harold Wilson's speech on a previous occasion some years ago), would like to evoke the Dunkirk spirit. But, my Lords, we cannot evoke that spirit without the Dunkirk atmosphere. We are, I submit, presenting the wrong image not only to the world but also to our own people. Must public buildings, shops, offices, hotels, be kept at American temperatures? If Americans are restricted to 60 miles an hour on their motorways why should we, entirely dependent on imported oil, think it right and proper to travel at 70 miles an hour, as if we were still the dominant Power in the Middle East? Do I hear cries of, "rationing"? Well, sugar and salt are already unofficially rationed, while petrol—I hope the Government will realise this—is rationed by price.

The Labour Party once said—I hope I am not being unfair—and I tend to agree with it:

We reserve the right to extend public ownership in any industry or part of industry which, after thorough inquiry, is found to be seriously failing the nation. That is an extract, I hope not an unfair one in view of the distance of time that has elapsed now, from the Labour Party's Policy on Future Public Ownership in 1957; and I believe there is quite a lot of truth in it. Yet to-day we know from the gracious Speech that the aircraft industry is to be nationalised. Take Hawker-Siddeley. Were they wrong to sell airliners to the Chinese for cash? Were they lacking in vigorous salesmanship when they invaded the American market with their Jump Jets? Finally, when the Conservative Government pulled out of the European Airbus, the company had the courage to stay in. I would venture the suggestion that they are not one of the first candidates for nationalisation.

I should have thought (and I do not mention these figures in any partisan spirit) that it would be salutary for any Government to witness the result of the State-owned industries over the past year: coal, a deficit of £74 million; electricity, a deficit of £176 million in England and Wales and a further £13 million in Scotland; the Post Office, a deficit of £128 million; gas, of £40 million; British Rail, of £52 million; British Airways, of £10 million. Steel alone—and that, I imagine, is a tribute to the father of the newest recruit to the Government Bench—showed a profit. And of course this massive overall deficit of £500 million has to be met by the taxpayer. One further figure and then I will leave figures alone. Nationalised industries paid only £81 million in taxation on income during the ten years between 1962 and 1972, while privately owned companies paid nearly £14,000 million. One is tempted to be reminded of the little gibe that Mr. Churchill hurled across the House some 25 years ago, that he noticed the Government had replaced the profit motive with the loss motive.

Finally, what about the quality of life in this country to-day? It has, I fear, progressively deteriorated. Few of us escaped the miseries of the rail go-slow last autumn. For those of us who use London Transport things are very little better to-day, with the number of trains and buses cancelled sometimes exceeding those still running. Unless we can pull together, unless we can have some kind of national unity, then some kind of British General de Gaulle may emerge—and I, for one, would regret such an eventuality.

7.30 p.m.

LORD AUCKLAND

My Lords, this time last week I was in the Eastern Caribbean—not, I may say, on holiday entirely and not on Parliamentary business, but with the managing director of the small property investment company of which I am the chairman. We spent five days on the island of St. Lucia. I do not think it is a mere coincidence that the noble Lord, Lord Walston, is following me in this debate because I know of his great knowledge of this lovely island. I mention this because, although we are not debating foreign affairs to-day, I thought it right to put on record the kind of reaction that we received from these islands. It was one of intense friendship. Certainly St. Lucia welcomes British investment to the hilt. I was speaking only this morning to the Prime Minister of that island who was one of several distinguished Ministers and other persons whom we met during our visit. His words to me over the telephone were, "We hope very much to welcome your company doing business here".

My Lords, it has been said that we, as a nation, tend to sell ourselves short, and those who have travelled overseas on business (probably most of your Lordships have travelled on business overseas more than I have) will know that this is frequently the case. Certainly I was asked by a number of people, both in St. Lucia and in Barbados, what was happening in this country—indeed, what was happening to this country—and I replied that what was happening in this country and what was happening to this country is what is happening to a great many countries in the world at the present time: the virus of inflation affects us. It may well be said that some countries cope with it better than others. Indeed, some Governments may cope with it better than others. However, I do not think that this is the opportunity to go too deeply into partisanship.

I spoke in those islands to Americans and to Canadians who were staying in the same hotel as I was. One Canadian truck driver asked me about nationalisation. I said that it was not my policy, as one who was not representing the British Government in another country, to comment too far on this subject. He replied, "Certainly my friends and I don't welcome it here". That came from a rather burly Canadian truck driver. No doubt he was not speaking for all his fellow truck drivers or, indeed, for other persons in that kind of employment. Similarly, Americans were very anxious to know what was happening to this country, and my reply was largely the same—that we are suffering to a large extent from at least two ailments from which America is suffering, the problems of leadership and the problems of inflation.

My Lords, having said that, there are one or two things I should like to mention arising from the Queen's Speech. One of these has not been dealt with at this time but it will no doubt be the subject of legislation in due course. It concerns the passage which reads: Legislation will be introduced to provide additional protection for policy-holders of insurance companies, and for people booking overseas holidays and travel who suffer loss as a result of the failure of travel organisers. I myself spent quite a number of years in the insurance industry and I have had some experience of it. There has, of course, been recent legislation to tighten things up there, following the collapse of Vehicle and General. I am not quite sure what the plans of the present Government are for the insurance industry and whether it is part of the plans for the National Enterprise Board. Perhaps in due course we shall hear about this. I mention the travel agency failure because Court Line have caused a great deal of anxiety in the Caribbean, as I found when I discussed this matter with one or two people on the islands which I visited who are directly affected by it.

My Lords, I cannot comment further on this because it is the subject of top level inquiries at the present time. However, I think that what people will want to know is the extent to which the Government intend to bail out (if that is the right phrase) travel firms and others who, for whatever reason, get into the same position as Court Line, because this will have very dangerous connotations. For a long time there has been the suggestion of the registration of travel agencies. This is something which may have to be considered. But the whole age of charter travel, cheap flying and so on has been altered immeasurably by the increased price of oil fuel and petrol. This is something which people will have to face. Tour operators will have to face this. I raise this point now because, although at this late hour it would be wrong to pursue it further, it is a matter of some considerable importance, and no doubt in the near future the noble Lord, Lord Beswick, who, I believe, deals with these matters will give it some consideration.

My Lords, the social contract has been mentioned on a number of occasions during this debate. Certainly to-day's news about Mr. Scanlon—violent criticism of him by some of his own erstwhile supporters—does not hold out overmuch hope. Other instances have also been mentioned. But, of course, for the sake of the country we must all hope that the social contract will work. Much will clearly depend upon top level consultation between the unions and management. I was asked by a Canadian during my recent trip abroad: "Why don't you have far more consultation between unions and management in your country? Indeed, why do you not have international consultation between unions and management?" In these times of the importance of international trade, this might well be the answer, because I believe that the majority of our trade union leaders are men of moderation and of good taste. It is the relatively small number of vicious men—and I think one must use that word—who really get trade unionism a bad name. Consultation is an essential factor in these times.

The headline over the editorial in the Sun to-day, which is not exactly a supporter of these Benches, carried a very stringent attack on the right honourable gentleman the Member for Bristol South-East, describing him as "naive and inept", in relation to the "shopping list", as they called it, of industries to be nationalised. I stress that that came from the Sun, not from some Right-Wing journalist. It went on to say—and I paraphrase—that if this kind of legislation goes through, then literally the 60 per cent. of the people who did not support the Party now in power may well take offence. That, my Lords, is a majorty number. I only mention this because I think we, as a House, want wherever possible to give the Government support.

I believe the last Election was rather like the play, The Reluctant Debutante; three main political leaders were dragged, if not to the altar, elsewhere, to go to the country, and the result we all know. The Government have an overall majority. This is something that must be recognised, and it would be quite wrong for an Opposition to be deliberately partisan. At the same time, if we are going to conquer the evils of inflation and the other problems which are causing the grave situation through which we are passing at the present time, it is necessary that there should be a compromise.

7.45 p.m.

LORD WALSTON

My Lords, I take as my text to-night the words that my noble friend Lord Sainsbury has already used, but they cannot be used too often or said too loudly; namely that the days of cheap food are over. It has been said before, and people are beginning to accept it and to repeat it, but there are precious few people who really take on board the implications of the end of cheap food. What does it really mean to us in this country? It is not simply a question of sugar costing a little more, or perhaps bread costing a little more; it means a fundamental alteration in our pattern of spending and it means that as the years go by every household will have to devote a larger proportion of its income to food than it has done within living memory.

Whether that is good or bad one can argue about for a long time, but it is a fact that we must face.

It has not been brought about simply by a sudden disappearance of food, a smaller production of food, or anything of that kind. It has been brought about by those factors which John Boyd Orr and others like him in the days during and after the war were warning us of, to which some people paid some attention at that time but which most people have by now forgotten. It has been brought about because the population of this world has increased much faster than has the food productive capacity and because a small proportion of the people who formerly lived in dire poverty, hardly able to obtain enough food for reasonable nutrition, are now at least able to obtain what is nutritionally necessary for them, and another small proportion of people who formerly had to eat the simplest of foods—bread, potatoes, maize, millet, whatever it might be—are now able to afford those foods which we take for granted.

We would not even consider them luxury foods but they are foods which require the transformation of grain into livestock products: instead of porridge we eat bacon and eggs; instead of potatoes, roast beef, and so on. In that process there is, if you like to call it that. an inefficient use of grain. One loses perhaps 80 per cent. of the nutritional value of grain in order to obtain a higher quality product. It is this adoption by other parts of the world of feeding habits which formerly were the prerogative of this country and a few others like us—the rich of this country, not everybody in this country—that has led to this apparent food shortage.

Let us not forget that not only before the war but in the years since the war—not only in recent months with the Sahelian tragedy, with the Bangladesh tragedy, and so on, but throughout the years from 1945 until now—there have been famines, there has been starvation and there has, above all, been malnutrition among tens of millions of people. So do not let us look upon this as a sudden phenomenon; a curse of God which has been sent to us. It is something which is inevitable and which those who are wise in these matters and who look with honest eyes at them have warned us about. We must attack the problem on two fronts—on the international front and on the national front. The developing countries of the world have a vast potential for food production. I do not say that it is unlimited, but if that potential were properly used there would be no question of food shortage at the present time. That potential is not being used because they have not the means, and we, the rich countries, have never had the will to make the investment which is necessary in those countries to enable land to be brought into cultivation to grow the quantities of which it is capable.

My Lords, it is a long and vast programme of investment that is needed in order to bring the vast and fertile areas of Brazil into cultivation. It is not simply a question of a little drainage, a little irrigation, shelter belts and a little ploughing; it is a question of an enormous investment of infrastructure—of roads, rails, air fields and methods of transport—to bring into that area all that is needed for modern agriculture and to bring the products out of the area. It is not simply a question of providing some tractors, providing seed and fertilisers; it is a question of being able to service all those things, of being able to ensure that there is a supply of spare parts for all the tractors and machinery needed, that there are people who understand the proper use and application of the seeds and the fertilisers.

If I may digress for a moment on the question of fertilisers, we have heard already of the effect of the high oil prices on the developing countries. It is in the matter of fertilisers that those countries are hurt. The price of fertilisers has more than doubled in the last 12 months. It is hard enough for farmers in Western Europe to pay these higher prices; it is impossible for those countries to pay them, and even if they could pay them it is impossible for them to obtain fertilisers because there is a world shortage. We use—I believe I am right in saying—something like 5 million tons of fertiliser each year. We have been asked by the international agencies whether we could make some of this available to the developing countries and we have offered a derisory 5,000 tons. However, every year we use 100,000 tons of fertiliser for non-agricultural purposes—on our lawns, on our putting greens, possibly on our football fields—not to produce food but to produce pleasure. Surely it is not asking too much for us to give up the use of fertilisers in such a way and make that! small contribution to the problems of the developing countries. Perhaps the Gov-:ernment could take a lead by prohibiting the use of fertilisers for anything but agricultural purposes in this country—not a big gesture but a gesture of good will and a realisation of what the problem is. That is only a digression, a small but not unimportant point.

In addition to those matters which I have mentioned, if we are to open up all the areas of the world, we must make life for the people who live there more attractive than it is at the present time. Any of your Lordships who have travelled in the developing countries know full well that the great aim of everybody living in the country, in villages or in remote huts, is to get away as quickly as they can into the cities and towns, because in the towns they meet other people, they can go to the cinema, they have opportunities for conversation, social intercourse and, most important of all, they have better medical attention and better educational opportunities for their children. That is an inevitable draining away from the country districts of all the most adventurous and the best people, leaving it denuded of those very people who are needed to make use of the new methods of agriculture and to increase the agricultural production that is so essential for the whole of the world.

Therefore, included in the infrastructure which is necessary are not only the things I have already mentioned but the establishment of clinics, hospitals, better schools and places of that kind, and of paying wages, salaries, to the young doctors and the young teachers to make it attractive for them to go out into the country instead of remaining in the cities as they wish to. Certain countries are trying to do this. Cuba, where I shall be next week, is making an effort. Tanzania is trying hard and there is an interesting revolution there. China and Persia are also doing it.

These are the measures which must be taken if we are to make progress in expanding food production in the developing countries. It is a long-term process; we ought to have started it years ago.

We ought to have started it in 1945. Efforts were made then. The ground nuts scheme, so much derided by many people, was a valiant effort made by John Strachey and others. It failed, but the idea was right. Then somehow the urge went out of it all and little has been done since. Now we and the world are paying the penalty for that neglect. That is the first line of approach, the international one, and I support entirely what my noble friend Lord Sainsbury said about the world food conference in Rome next week. We must go and take it seriously and make positive contributions and not just good speeches. There must be action following upon that and there must be action in this country.

My Lords, there is 'to be an agricultural debate here next week, which unfortunately I shall not be able to attend, and for that reason I must not dwell too long on the domestic agricultural scene, but I should like to remind your Lordships of the contribution that British agriculture has made and can make to the national economy, always important but especially so at the present time because of our own economic situation.

My Lords, in the last ten years, roughly speaking, the labour force in agriculture has declined from 439,000 to 253,000 full-time men. At the same time the value of agricultural production has risen from £1.389 million to £1,533 million; that is, it has risen by over 10 per cent. with that very big decline in the labour force of approximately 40 per cent. That is a record for the industry to be proud of but what is more important it is something which has been of enormous benefit to the country and is an indication of the kind of benefit which the country could gain in the future if similar progress were maintained or even, which is perfectly possible, improved upon. During that period there has also been a relative decline in our imports of food. We have become somewhat more self-sufficient, and there is a positive increase in our exports of food which together amounted to an improvement in our balance of payments of something like £800 million. That is the kind of thing which agriculture can do and wants to do. I hope that the debate next week will produce ideas as to how that can be done.

What I hope even more than that, my Lords, is that the Government will now decide that the time for talking is over and the time for action is here. We have waited too long with talks and consultations and attempts at working out different methods of doing this and that, and all to no avail. While those talks and consultations and attempts are being made confidence is ebbing away and the willingness as well as the ability of farmers to carry on with their contribution to the national economy is failing. The first priority is to re-establish confidence among farmers. I believe that one of the best ways of doing this, one of the prerequisites, is, as I said at the beginning, to convince the consumers of this country that the days of cheap food are over. By all means let us have food subsidies in the short term to help us over our present problems of inflation and wage restraint. I am not against them, but it must be made clear that it is only a short-term expedient. In the long term the price of food inevitably will rise, and a large part of that food must come from domestic production.

My Lords, secondly, we must have a five-year plan for agriculture. I would hope that it would be a plan based on the Community and not on this country alone. However much some of us may support Scottish nationalism and Welsh nationalism, Cumbria nationalism or East Anglian nationalism, we all know that by dividing up this country we can never get a reasonable agricultural policy. Wales cannot have an agricultural policy of its own; Scotland cannot, and East Anglia cannot. By the same token, it is not easy to get a really effective agricultural policy for the United Kingdom alone. We are too small; we do not have enough land and our climate is all much of a muchness. But if we take the extended Community from the Mediterranean to the North Sea, with its vast areas of land, its different skills and different climates, there is real scope for formulating a full plan for the Community based on increasing home production, though not to the exclusion of all other foods—I am not a protectionist to that extent. But given the world food situation today and as it will be in years ahead, we must have a clearly formulated plan, clearly expressed, for producing more food at home.

My Lords, this inevitably means that if we are to produce sufficient food within our own boundaries to ensure that we are never short of food—and, remember, there will not be these world food surpluses where we can go out and buy if it seems we shall be short—if we are to have sufficient food at all times, we shall have surplus food at certain times. Without making any bones about it at all, we must be prepared to dispose of that surplus in whatever way seems best, whether by welfare food, or in helping the underdeveloped countries—there is a whole range of methods by which we can do this—or we must be prepared to stockpile. In the case of perishable foods such as meat or dairy products, stockpiling is not the right answer. We do not want to create butter mountains. These products should be disposed of to those who need them most, whether within our own boundaries or outside them. Commodities like sugar and cereals can be stockpiled relatively easily and cheaply, so let us have a policy of having such stockpiles, and saving against a rainy day. That is the second thing we must do very rapidly.

There are one or two small suggestions I would throw out, in no way basic, but which I think may be of some help. There is a feeling among the farming community to-day (whether justified or not I do not know) that their case is not properly appreciated in Whitehall. In the old days, the Minister of Agriculture had his liaison officers. They were not always as well thought of as perhaps they should be; for a period I was one. But I believe that if they were reintroduced to-day, it would go a long way towards showing fanners that there is someone who understands, who is one of them to whom they could talk and who could talk directly to the Minister. This would have a certain psychological and practical value.

The next point is one which the noble Viscount, Lord Massereene and Ferrard, tried to touch on in his question to my noble friend, concerning meat. I will not go into the whole question of meat; it would take far too long, and your Lordships know it quite well already. But I would say this. If we look at the price which the French farmer gets for his livestock and compare it with the price which the British farmer is getting for similar livestock in this country, there is a difference of something like 50 per cent. to 100 per cent. I think it is lower this week. but we can say that the average price of £13 is paid to the British farmer for his fat steer, and a range of £21 to £30, depending on quality, is paid in France. But if one looks at the price the French housewife pays for her meat, there is not a difference of 50 per cent. to 100 per cent. It is difficult to get the figures accurately, I know, but to the best of my belief (and I have made a good many inquiries) the difference is no more than 30 per cent.

These figures may be inaccurate. There may be good reasons for them. But I would urge upon the Government, and particularly upon my right honourable friend Mrs. Williams that she should quickly send two or three qualified people to investigate the meat trade in France to see just what it is that enables the meat to get from the farmer, from the market to the housewife with a smaller margin than appears to be necessary in this country. I am not for a moment saying that our own middlemen of all kinds are making undue profits, or that they are inefficient, or that our system is wrong and ought to be altered. All I am saying is that there is a prima facie case which deserves to be answered. I think an inquiry could be of great value to us at this particular time, and it need not be a long one.

My Lords, I must not speak for much longer. There is so much to be said on this matter, but I will end by repeating that the first priority is to accept that the days of cheap food are over. Secondly, we must accept the implications of the Community and cheap food. Thirdly, we must make a far greater effort, slow though it will be in bearing results, than we have done in the past to help in the development of agricultural production in overseas countries and also in the developing countries. The fourth thing we must do is to promote within the Community a five-year plan for agricultural production based on expansion, and on prices which will make it possible for the farmers, in this inflationary period, to continue with the progress they have made in the past.

8.8 p.m.

LORD FERRIER

My Lords, I wish to begin by adding to the congratulations already made from this side of the House to the mover and seconder of the loyal Address, and also to the noble Baroness, Lady Delacourt-Smith, for her maiden speech which to me was very welcome, as I remember her husband so well. I have listened to nearly every speech to-day, and no reference has been made to the subject which I propose to make the main matter to which I will refer. Like all debates on the Address, this one has ranged quite widely. It has developed sometimes into a debate on economics, and sometimes into a debate on agriculture. But the complexities are very great. Indeed, what worries me is that the promised mass of legislation outlined in the Queen's Speech (which has given rise to the discussions to which I have referred) conceals the basic simplicity of the State of the Nation, which we debate to-day.

It seems to me that the issue is straightforward. The Tories have been endlessly accused of being divisive. In my view, the sheer repetition of the accusation betrays the old trick that if one says a thing often enough people will come to believe it. To my mind, the real division, the real confrontation—horrible word!—comes from those who defy the law and get away with it. There is no reference to this in the gracious Speech. The fact of the matter is, as my noble friend Lord Auckland said, that the mass of Socialists, and the great majority of trade union leaders and the like, are not of this ilk. But the extremists—some of them Marxists and some, alas, when we read of the demonstration on Sunday, declare sympathy with men and women with blood on their hands—have manipulated and are manipulating, I believe, the sincere "do-gooders" and their Fabian bedfellows. As a close friend said to me the other day, the position is that, "The governable are now being governed by the ungovernable." The proposals of the gracious Speech tend only to show that the noble passion for freedom under a democracy can be overlaid by a spirit of covetousness and even of spite. This is my view; of course it is not universally held.

I propose to leave it at that and turn to the very last proposal in the gracious Speech, which is one of the two or three which I sincerely welcome: An early opportunity will be given for you to consider whether your proceedings should be broadcast. No one can deny the influence on public opinion which is now wielded by television, and the great part that it played in the recent Election and in the one in February. If the body politic as we know it is to survive the present crisis, Parliament must and will regain its supremacy. My noble friend Lord Coleraine made my flesh creep when he talked of his fears lest nothing would solve our disarray other than a coalition. At any rate, I hope and believe that we can overcome it without such a solution. But to this end there will have to be a far greater measure of rapport between Parliament and people. I turned last night to the report of our debate on March 20, 1969, in the course of which the noble Viscount, Lord Barrington, said, quoting from the Book of Proverbs: Where there is no vision the people perish. The importance of television in its potential for good is the obvious means to the rapport of which I have spoken.

I welcome the establishment of the Annan Committee, but they cannot be expected to report before 1977. This date I have deduced from an Answer given in the House of Commons on April 11 (col. 267). The gracious Speech refers to the broadcasting of Parliamentary procedures, but we in this House know all too well not only that the proposal is not agreeable to all but that the complexities are very great, apart from the question of cost, which is enormous and is affected by the steady change and improvement in the efficiency of the Plumbicon camera, because television is of no interest to-day unless it is in colour. As I say, the difficulties and complexities are very great, and apart from the question of cost there are the problems of copyright, privilege, defamation and so on, which may require separate and also complex legislation. I will not go on to develop that. It is all in the Reports of your Lordships' Select Committee on the experiment which took place in this Chamber some eight or nine years ago.

What I am suggesting is this: Cannot something be done forthwith to bring the television more sensibly into the area of politics? Cannot the BBC be persuaded—they cannot be compelled—to comply more fully with their obligation under their Charter to report the proceedings of Parliament by doing so on television? Instead, they tuck it away on radio at 11.15 p.m., where it comes after "A Book at Bedtime", and at 8.45 in the morning, when the majority of potential listeners are at work. The ratings are incredibly low. It is small wonder, to my mind, that ignorance of Parliament persists; and of course from ignorance, as your Lordships will agree, stems indifference. One may say that most people will just switch it off. But will they? corner that Parliament may well soon How do we know? There is perhaps such a desperate situation round the be, and should be, uppermost in the mind of every man and woman of good will. I say this because several noble Lords, particularly on the other side of the House, have emphasised the fact that some people do not seem to realise the dangers that lie ahead.

Can we not find out by some experiment if this would work? Something must be done to curb the current practice of sneering at politicians and thus at Parliament itself. Why should we not have a programme like "To-day in Parliament" on the "box" as part of the evening "Nationwide" programme. What should be of greater interest nationwide? Should not some experimenting be done, if only for the sake of experiment to provide practical data for the Annan Committee to work on? What might work? What will work? What obviously does not work? How do the public actually react? Do they react at all?—and so on. Of course mistakes will occur. Your Lordships will recall that yesterday morning we had one of them in this very place where, in the stillness, we could hear the broadcasting interfering really with the dignity of our proceedings. Some of your Lordships may remember the dreadful failure of the BBC's bold attempt at an experiment in a programme which was called "A Matter of Opinion".

There is one final point, and what my noble friend the Duke of Devonshire said has some bearing on it. Is it possible that the unexpected success of the National Parties stems in some measure from the paucity of real communication between Westminster and the outlying areas? I personally feel that the broadcasting organisations are in some measure to blame for this. I have always felt that "Today in Parliament" should be beamed, as it were, with a line on what Welsh or Scottish Members or Peers say on a subject, not just the rather metropolitan overall service which "Today in Parliament" gives. As Sir Keith Joseph said the other day: We live in an age of fragmented communi cation, thanks to television. Can the fragments not be brought together? I mentioned the noble Duke and what he said about Scotland. As a stubborn and devoted Scot I should like to declare that I go a very long way with what he said. I am a unionist, and I think he was fully justified from the English point of view in saying what he said. Of course, there are complexities there which we need not go into, although that affects what was said on devolution in the gracious Speech. But I should hate to have any sort of referendum as to whether Scotland should be independent, because there are far more fervent, devoted Scots like myself outside Scotland than there are in it, and they ought to be consulted.

However, to return to what I have been saying about reporting Parliament on the "box", I think one can face the fact that the Press cannot do it or will not do it. Anyway, the printing unions have Fleet Street by the throat, as they have Parliament itself, and as they may have the broadcasting authorities before we know where we are. My suggestion is a genuine attempt to grasp at a possible opportunity for that "something more" to which the noble Lord, Lord Shinwell, referred in the closing passage of his admirable speech yesterday—"civilised behaviour". The noble Lord, Lord Goodman, said in the debate on broadcasting to which I have referred, when talking about broadcasting the actual proceedings: I think there is a very simple criterion in this matter: and that is whether or not our decision will advance the cause of Parliamentary democracy."—[OFFICIAL REPORT, 20/3/69, col, 1112.1] My Lords, that is what we all seek. That is what I seek. Will Government contemplate the intermediate step which I have suggested?

8.22 p.m.

BARONESS SEEAR

My Lords, I should like first to apologise for the fact that owing to circumstances over which I had no control I was not able to be present at the beginning of this debate. I should like also, although the noble Baroness is not now present, to add my congratulations to the noble Baroness, Lady Delacourt-Smith of Alteryn, on her maiden speech this evening, which I thought both very sincere and sympathetic. It was therefore welcome to hear her both because of our memories of her late husband and for her own sake.

My Lords, the hour is late and you would not want me to hold you by repeating the statements which have already been made very eloquently and effectively by so many noble Lords in this debate. So I shall be as brief as I can be, although there is indeed much to be said arising out of the gracious Speech from the Throne.

It cannot, sadly, be denied that we are to-day a sick country and a divided country, and our sickness, which to a large extent is self-induced, is made the more severe by our divisions. When I speak of our divisions, I am not primarily referring to the traditional divisions which we perhaps talk about too much and by frequently discussing tend to exacerbate—the divisions between different interest groups, different classes, and different sections. That has been with us for a long time and I think it has been more severe in past times without causing economic and social damage that we experience to-day. It has been with us for centuries. The division that I refer to, the most serious division in my view today, which was touched upon by the noble Lord, Lord Ferrier, who has just spoken, is the division between the people who are seen to be in Government (or at least crudely and inaccurately defined as "the Establishment") and the people as a whole in this country—this growing and frightening development of belief that Government is ineffective, not to be relied upon, and that the Parliamentary system is breaking down and nothing is any good anyway. Those of us who have been campaigning in the recent Election must again and again have come across the feeling that it does not really make any difference what you do, whom you elect, because the whole situation is out of hand anyway and you cannot rely on any political Party to put matters right.

This we know to be grossly unfair to Parliamentarians in all Parties, and it is a major task to get rid of this extremely damaging atmosphere in which we are living at present, this division between the people who are trying to get things done and to make the changes which need to be made and the people who feel that the Government are not doing anything really worth while or coping properly with problems that need to be redressed.

If we are going to do the jobs that have to be done there are, I believe, three major tasks at the present time that the Government have to undertake and undertake urgently. The first is getting across to the people in this country—this has been said before this evening but I say it again—just how bad things really are. It is understandable that before the Election there was perhaps a tendency to play it down on one side and even to exaggerate on the other. But we cannot disguise from ourselves that we are on the very brink of an abyss and that this will become more serious the less people understand it. And of course it is true, as the noble Lord, Lord George-Brown, said, that to a great many people in this country it is very difficult to accept that this is in fact the case as wages have kept pace with rising prices; and many people have continued to feel, as they have felt now for a decade, that if this is a crisis, a crisis suits them very well.

The seriousness of the situation cannot be denied. I am not going into an analysis of what makes the situation serious, but the country cannot live on tick and at the mercy of those who can at any time call in their money. The country cannot mortgage its future without being in a situation of deep seriousness. It is essential that this fact should now be got over by Government and indeed by all political Parties. Something can be done by telling people, but I do not believe that telling alone will do it. I beg the Government not so to try to soften the consequences, to muffle the effect of the economic problems we are up against, that people continue not to realise what the true nature of the problem is.

It is of course right that the sections of the community least able to stand hardship should be safeguarded against the worst effects of the economic problems that confront us. But do not try to make it easy for everybody. People must accept that there are real consequences in the real situation we are up against. For example, is it really sensible to go on subsidising the food of all of us? I see that this is promised again in the gracious Speech. You and I, my Lords, do not need our food to be subsidised, It is ridiculous to go on with this policy of making the situation look better than it really is. This belies the truth of the situation in which we find ourselves.

Again, in the gracious Speech I read that tourist companies are to be made to guarantee that when people's holidays are upset by failure of companies, other tourist companies shall pay. For the life of me I cannot see why a single penny of the taxpayer's money should go into safeguarding holidays for people who are well-off enough to book foreign holidays for themselves. This is a dangerous world in which we live, and when people begin to believe that when anything goes against them the Government will step in and bail them out, how can they accept that the situation needs drastic action with uncomfortable consequences if we are to get out of it?

The second major task which the Government must undoubtedly perform is, as everyone has said this evening, to come to grips with the basic facts of the economic situation. This means restoring confidence in industry and giving industry the encouragement and the opportunity to get on with the job which only industry can do. The first thing we must ask the Government to do, however difficult it may be inside their Party, is to give the country a categorical assurance that they do in fact accept the mixed economy and want to see the private sector successful. I know that within the four walls of this Chamber we are told again and again that of course the Government believe in the importance of the private sector, but this is not understood outside. There are grave doubts as to what this Government really mean to do and a further statement, however criticised it may be in certain relatively unimportant sections inside their own Party, would do more than anything else to restore the confidence which so urgently needs to be restored and then to couple with that statement the action that needs to be taken.

The first action which any Government needs to take, if the private sector is to do the job which has to be done, is to do its own job properly in the management of the economy. It is not so much that industry has failed government, as that government has failed industry. How can the private sector, or indeed the public sector, do its job of investing, producing and selling properly, of creating the wealth that the country needs, it the management of the economy is so uncertain—this applies to both Parties, of course—that the money supply vacillates, moves up and down, in a way which makes any sort of intelligent planning impossible? It is not that industry has so failed that government has to come in and rescue it; it is that government has failed industry. The sooner this is accepted, and steps are taken by the Government to give guarantees to industry so that it can rely on a certain consistency of policy year in, year out, about the money supply, about encouragement for the rate of investment, then the sooner industry can start to do its job properly.

Then, again, if we really believe that the private sector and industry is a vital part of the lives of all of us, and that we all depend on it, then let the Government show this in their approach to all the problems that we now have to face on the economic front. We have heard a great deal about the social contract. Of course if the social contract can work—and I sincerely hope that it will—nothing will be better. But it is not really a social contract. If we are to be accurate—and there has been a sad lack of accuracy about the social "compact" between the trade unions and the Government—it is not a social contract. It is no bad thing—it is an extremely good thing—to have a contract between the Government and the trade unions, but it is a misuse of language to call it a social contract.

Can we turn the social contract into the tripartite thing it ought to be—a contract between the unions, employers and the Government? Can we use the institutions which we already have? After all, "Neddy" is there as an obvious base for the development of an effective tripartite, working and thrashing out problems in the sector of the economy affecting all sides of industry. Can this be used as a forum for the kind of discussion on a tripartite basis which urgently needs to take place?

Can we hear less of the scorning of the management side of industry, of which, from some sectors of the Government, and the previous Government, we have heard a good deal too much? It is high time that the managers in this country were given some encouragement, and that the task they have to do was respected by the Government and by political figures in this country, as a vital and essential component as important, in its own way, as the contribution of any other sector in industry or outside. Some real encouragement given to management at this stage would do a great deal in reviving the confidence and effectiveness of industry.

Among those vital management groups, the younger section are already looking overseas for opportunities, and I assure you that they will take them in increasing numbers. This is something that we cannot afford to have happen. People at the age of those who inhabit your Lordships' House are not in a position to do this, but there are many people half our age whom the country cannot afford to lose, but who will not stay here if they feel that the future is bleak and if their contribution is treated with relative contempt, as it is so often treated at (he present time.

LORD SHACKLETON

My Lords, will the noble Baroness allow me to intervene? She keeps talking about treating managers with contempt. What is her basis for saying that? I have heard nobody criticise managers.

LORD BYERS

Benn.

LORD SHACKLETON

Does the noble Baroness also include nationalised industry in this?

BARONESS SEEAR

My Lords, do you want me to quote it? I believe it is not customary to quote the remarks made in another place, though since your Lordships have asked me there was a remark made by the Secretary of State for the Department for Employment, when he was referring to the fact that the TUC had far better brains than the people in the CBI. This is not the sort of remark which is encouraging and I had not intended to quote it, but I was challenged.

At this point I would quote the noble Lord, Lord Shackleton, if he will allow me to do so. I want to underline what he said, and what my noble friend Lord Byers also said, about the importance of taxation in relation to profits. We cannot wait much longer for a more sensible system of taxation and an encouragement of profits. It is perfectly ridiculous to be taxing in the way we are at the present time if we are to get the investment so urgently needed. I had intended to say a good deal about this matter, but as it has been said effectively and eloquently by other people I shall move on to another point.

The third prong of what needs to be done—and so far as I am aware no one else has referred to this matter this evening—is the need to involve people in this country directly in the action which is necessary for recovery. I have great sympathy with the people who are saying up and down the country that they arc being told that the situation is serious but are not being told individually in what way they can help to make matters better. I am not crying out for an equivalent-—as your Lordships will remember—of that lamentable campaign during the war when we all gave up our saucepans at the behest of Lord Beaverbrook, but I am suggesting that there are a number of simple actions which people might be told they could take which would be of help. We know we have to have fuel economies. Give the country a lead in the ways in which we can make effective fuel economies.

That is just one point. We need more investment. Is it not possible to work out some way in which people might be encouraged—perhaps by some system of compulsory savings which could be offset against taxation; the adjustments could be made for the equivalent value—to feel that they were making a direct contribution to improving the situation? It would be a response to the feeling that many people have expressed that they want to help but do not know what to do. It would give a positive lead from the Government as to the way in which they ought to go.

I think that at this stage, now the Government are starting again, that perhaps something can be done in the Budget on November 12, although it is probably too late, if it is not already included, to give a direct opportunity to people to make some definite contribution themselves. In doing this we should be doing something to get rid of this terrible gulf between the people in the country who feel that they are right outside and there is nothing they can offer, and the Government who, as they see it, are giving all too little lead.

In wanting and encouraging people to assist directly in the solution of problems which we face, there are certain measures which the Government can and should take to make it easier for people to contribute to the more effective working of the country as a whole. The noble Baroness, Lady Delacourt-Smith of Alteryn, pointed out what seems to me to be the major and pre-eminently important social problem of the country, which is also linked with our economic inefficiencies; I refer to the problem of housing. We have to-day acute unemployment in some parts of the country, and acute shortages of labour in other parts of the country. This is, in no small part, linked with our inability to solve our housing problem. The housing problem also contributes acutely to many of our social problems.

I suggest that we should make housing our central social issue. I believe it to be more important than any of the other issues which were mentioned on the social side in the gracious Speech. It comes into so many other problems. It affects all sections of the community. If it could be seen that despite our present difficulties the Government are really trying to get this side of the social issue straight, then I think the response from people would be very great. Let us try unconventional methods, treat the matter as one of emergency that we have to solve somehow, by one means or another. It would, I am sure, evoke a great response from people as a whole.

Finally, I will comment on the things that Government can do to help people themselves to be more effective. The noble Lord, Lord George-Brown, referred to the concealed unemployment that still exists in industry to-day, of people who are still in jobs where in fact they are not needed. We know this is true. Reading some of the consultative documents which have been circulating in recent months, we know that this situation may well get worse if certain policies are pursued. When the figure of unemployment is rising, this is the time of all times to start a large scale retraining programme geared to intelligent manpower forecasts as to what will be needed to combat the immediate shortages existing in the country now, and what will be needed as industry begins to recover. Under the Manpower Services Commission we have set up machinery which should enable us to do this. I do not believe it is of a large or ambitious scale in what it is trying to do at the present time. It is now, while unemployment is rising, that we ought to be thinking about ways in which people can be trained for the jobs and provide the skills of which we are short.

Every time we move out of a depression we are conscious that we are short of vital skills. If we could begin here and now to show that there is no future in hanging on in jobs in industries and enterprises which will contract rather than expand, but that there is a future through retraining, if those concerned will seize those opportunities, then I believe we could expect and get a response from people up and down the country who know perfectly well that they are in jobs in which they are not contributing. They should understand what they should be contributing and know where to go and where to put their energies. In this way the Government could give a major lead and involve people in the recovery that everybody wants to occur.

8.43 p.m.

THE EARL OF GOWRIE

My Lords, I wish to begin by paying my tribute to the maiden speech of the noble Baroness, Lady Delacourt-Smith of Alteryn. When I made my debut on the Front Bench her late husband was most kind to me. He used to take me aside and explain Bills I would then have to oppose. I was always very grateful to him. I also congratulate on their appointments the new Lords-in-Waiting. As an ex-Shadow Lord-in-Waiting I have great admiration and affection for them. On this side of the House we are proud of our Lords-in-Waiting. We think they are full of pep and vinegar, but I must say I do not think any of them have yet master-minded a successful General Election, as I understand the noble Lord, Lord Lovell-Davis, has done. I am going to write to Central Office and suggest that my noble friends be put in charge forthwith and we can expect an equally triumphant reversal next time. One of the compensations of Opposition is that my noble and learned friend Lord Hailsham of Saint Marylebone has left the Woolsack and his vox need not be so sotto. We can always hear what he has to say. This evening I shall be brief, because it has been a long day, and underscore some of the remarks which my noble and learned friend made.

We now have a Government with the narrowest of overall majorities in another place, but with a majority of forty or so over the official Opposition. While I regret this outcome of the General Election, I must say that I am not altogether surprised by it. It is not often under our system that a Government can openly and legitimately use an entire Parliament to prepare for a General Election. Nor is it usually so easy for a Government to enjoy the fruits of one of the main policies of their predecessors while hacking away at the tree that bore them.

On the last occasion that I spoke from this Despatch Box I told the Government that their employment strategies were dependent on the threshold agreements of Stage 3 of our counter-inflationary policy. At that time I came in for a bit of Back-Bench barracking, if your Lordships can ever be said to barrack, but I seem to remember a suspicion of a nod from somewhere on the Front Bench opposite. I promise not to reveal the name of the culprit. But this early attempt at indexation no longer exists. We can now say to the Government, "You are on your own." We can also say to the Government, "At least take us with you part of the way."

In his broadcast to the nation the Prime Minister went some considerable way to restate the anxieties and to echo the phrasing of his political opponents. He was rightly teased a little for this, but in my view he was quite right to do so. For the economic crisis is common ground. Our debate this afternoon proves that. The threat to our money from forces we may be able to influence, but certainly cannot control, is also common ground. So why did the gracious Speech seem so much at variance in spirit and in tone with the broadcast? The broadcast sought to heal the inevitable wounds of an Election. The gracious Speech reopens most of them.

Of course the Government, under our winner-take-all system, have a mandate for their programme. Whether the system itself is the best in all possible worlds is another matter. The Liberals do not think much of it. However, no one doubts that the real mandate is to govern, to see us through the worse crisis of the post-war years, and to restore some continuity of value to our money. Let me say as passionately as I can that I believe money to be second only to language as an instrument of communication between men.

If truth is gagged or money destroyed civilised dealings cannot last long and we will be forced to choose between tyranny and anarchy. The Government must understand that they could embark on the defence of our money with great good will. In this House we are naturally less informed by the Party spirit than in another place, though I am happy to say we have seen some signs of it to-day. But all over the country, among Conservatives and Liberals as well as among their own supporters, there is great respect for the present Cabinet. Many of the Cabinet could have gone to the very top in any of the great democracies; they are experienced, tough and can communicate well. The senior ones arc known and respected abroad, and this is an international crisis. Yet at a time when the whole nation, as anyone who has recently campaigned can testify, is anxious for leadership, what are these impressive men proposing? A glut, a surfeit of legislation; an autumn of White Papers, Green Papers; Bills littering the floor of another place, a log jam in this House later on. And what legislation, my Lords, and at what a time!

If I were a Labour MP I should want to be spending a lot of my time at the moment out and about the country explaining to people the nature of the crisis, explaining what my Government were doing and how they, the people, could help. I think the noble Baroness, Lady Seear, made this point. The reality will be a series of pitched Parliamentary battles over public ownership. What could be more important to the future of our country than North Sea oil? Instead of complicated legislative superstructures, national oil corporations, majority shareholdings and the like, all of them bound to create uncertainty and delay, we should encourage all means of getting the stuff out, getting it sold and getting it taxed. I am aware that not all my noble and right honourable friends agree with me in this, but I am glad my noble and learned friend does.

What could be more important to ordinary families than the supply of housing? Few people who have to deal with housing on the ground, and not just in Parliament or in local government, believe that the moves to nationalise development land will make housing cheaper or more plentiful. The housing crisis is once again principally a money crisis. It needs fiscal, economic policies and not scholastic wrangling about forms of tenure. The best fate for a house is for it to belong to a family. That is what people want, and that is what my right honourable and noble friends will try to see they have a chance to get. Nationalisation is our national red herring. It is not even a fresh herring, but old and reeking. In modern industry questions of management are far more important than questions of ownership, and not only to managers but to workers as well. Giant corporations contain fiercely competing divisions. I think it was my noble friend Lord Mansfield who pointed out that governmental departments cannot engage in competition in the same way.

My Lords, we all acknowledge that this economic crisis is primarily international in character. Whatever one thinks of the Chancellor of the Exchequer's style of campaigning or his use of language at Party Conferences, few I think will not admire his efforts to prevent nations from entering their own cycle of deprivation, their own poverty trap, by engaging in competitive deflations. In the context of this valuable work it is all the more depressing to think of the damage being done to an already damaged Europe by superimposing Labour Party internal politics on our membership of the Community. I do not wish to pre-empt Tuesday's debate on foreign affairs, but Mr. Wilson, Mr. Healey and Mr. Lever at home, echoing Dr. Kissinger in America, have all acknowledged that economic warfare has become a more immediate threat than military warfare and that it is impossible to disentangle economic from foreign affairs. We must fight the inflation on an integrated and a multinational basis. On the Prime Minister's principle that the most urgent task is to curb inflation and protect jobs, is renegotiation helpful? On the Prime Minister's principle of the need for national unity, is now quite the time to flirt with referenda? The United Kingdom is to-day less stable politically than at any time since 1920 when there was a partial solution of the Irish question. Now we have the rumblings of a Scottish question as well. I do not believe that one can ever answer questions with question marks. Our affairs are carried through by the Queen's Government in Parliament. A major economic crisis—and no one, I believe, thinks that it will be over within a year—is no time even to contemplate abrogating the responsibilities of government or the duties of a sovereign Parliament.

My Lords, mention of Scotland brings me with melancholy logic to the social contract. I think that both the noble Lord, Lord Shepherd, and the noble Lord, Lord Beswick, will acknowledge that I have never attacked this concept in previous debates with them. I believe very much that a certain continuity in government is essential both to good government and to informed politics. Indeed, it seems to me that a main objection to the gracious Speech is that it contains far too much that my senior colleagues would, I believe, feel bound to repeal when they are returned to Office. But I have always found in the idea of the social contract some continuity with the tripartite talks initiated by my right honourable friend Mr. Heath. These contributed greatly to the partial success of our counter-inflation policy. Please remember, my Lords, that it was successful both in curbing inflation and in reducing the incidence of strikes until the energy crisis weakened the Government's hand just as it strengthened that of the miners. So if, as my noble and learned friend said, the present Prime Minister wishes to call in the late M. Jean Jacques Rousseau as a publicist for his voluntary policy, good luck to him. Rousseau certainly seems to be making something of a comeback these days, because I understand he was also mad about referenda.

But, my Lords, there are a number of critical flaws in the social contract, and though I wish it every success I believe that one or more of them will prove fatal. First, the discussions which led the Government to the formulation of the idea were essentially bi-partite (if that is a word): they occurred between Government and T.U.C. only. Secondly, the exchange of a legislative programme attentive to social justice for a programme of voluntary pay restraint must not include measures which people unrepresented by major unions find unnecessary or threatening or both. My noble friend Lord Auckland made that point eloquently. In short, a rough consensus must be involved, and nationalisation does not even command a rough consensus. Thirdly, Parliament must be involved, and through Parliament the whole electorate. I know that Parliament was not involved in my right honourable friend's tripartite talks but—and this is the important point—the certainty of a statutory pay programme should talks on a voluntary agreement fail, meant that Parliament was there, waiting in the wings, with an alternative policy.

What alternative policy have the present Government should the social contract prove nebulous? None at all. It seems to me that the essence of the social contract should be the Government saying, "Look, we will try to make this work and you must try to make this work, because if it does not work we shall all have to go back to some form of statutory control which no one likes but which we do know can reduce the general incidence of inflationary claims". This has not happened; this has not been said. The Government have boxed themselves in. To introduce a freeze at worst, or some sort of wage queue with statutory backing at best; such measures may become necessary. The Liberals argue that they are necessary now. They may be right. If the Government were to introduce either measure they would have to resign. Does that smack of the leadership that we need?

Finally, a word about prices, the arena in which most of us experience inflation. Fighting inflation is surely not only a matter of telling the truth about it, it is a matter of feeling the truth as well—feeling it where it hurts, that is to say in the pocket. Prices must be allowed to rise. The weaker sections of society must be protected; that is social justice. But the generality of men cannot be shielded: that is retreat into Cloud Cuckoo-land. Unemployment is a great social evil. From the general level of public debate recently you would think that unemployment was something to do with money supply, or at least with my right honourable friend Sir Keith Joseph. It is not. It is to do with the profits of industry. We have been told this from all sides of the House. The Government know this better and in much more detail than I do. But it is clear that a powerful section of the Labour Party either does not know it or, for other reasons, does not care.

What goes on in the Labour Party is of course none of my business. The gracious Speech however is, and it seems to me that its wording has been addressed to the powerful section I mentioned. In my view, the Government must educate us all, not least some of its own members, in the connection between profits and employment. It must do so even as it explains to members of the Tribune group and others that retention of earnings on the one hand, and accounting for inflation in tax proposals on the other, are not all the same thing as massive public subsidies demanding public intervention. The Government cannot protect us all from price rises and at the same time keep most of us in work.

My Lords, there are clear signs that senior Ministers are engaged in telling us the living truth about our economy, the state of our nation. I welcome such signs and wish the Government well. But the gracious Speech contains virtually none of them. A great chance was lost and old partisan wounds reopened. Time is not on our side, and the work of healing must start now.

8.59 p.m.

THE MINISTER OF STATE, DEPARTMENT OF INDUSTRY (LORD BESWICK)

My Lords, may I add my congratulations to the mover and seconder of the Motion which is before the House. They gave us wonderful encouragement, not least because they showed that what we once thought was the allotted span was only the beginning of a new lease of life. From that, I derive a good deal of satisfaction.

I should also like to add my congratulations to those already offered to the noble Baroness, Lady Delacourt-Smith of Alteryn, on her maiden speech.

It seems only a short time since I was acknowledging from that Box on behalf of my Party the sense of loss which we felt at the tragic passing of her late husband. Her presence and her contribution, as instanced to-day, will be some compensation for that loss.

My Lords, I am speaking rather late. I shall not go right through the points which have been made, but I shall undertake to consider them very carefully and in some cases perhaps I could even write. The noble Duke, the Duke of Devonshire, the noble Earl, Lord Gowrie, and the noble Lord, Lord Ferrier, made some remarks about the dangers of Welsh and Scottish nationalism: I confess that I shared the kind of feeling which they were expressing, but I think that it would be appropriate if observations on that matter were left to my noble friend in the debate to-morrow. My noble friend Lord Shackleton, whom I was greatly pleased to see on the other Bench in equally good form to that which he displayed before me on this Bench, made. I thought, an impressive appeal for action on the stock appreciation and accounting problem. There again, he will not be surprised if I tell him that we are aware of the difficulty and I will ensure that the urgency which he stressed will be considered. He had certain remarks to make about the benefits of joint consultation and full information to workers, and about that I shall say something later.

My Lords, I was also pleased to see my noble friend Lord George-Brown back with us looking fit and well after his illness and, although he had some very stringent remarks to make about the difficulties of our economy, I did not disagree with what he said. I say to the noble Baroness, Lady Seear, and to my noble friend that, if I myself do not spend much time in stressing the seriousness of the situation, it will be because I think it has been said already. The noble Earl, Lord Mansfield, dealt a good deal with agriculture and, although I agree with him that it is of course a part of the state of the nation, we shall be discussing these matters in a separate debate and I think that it would be better if I left any answers to that debate, when I shall again be taking part. The noble Earl asked certain questions about the renegotiation of our undertakings under the Treaty of Rome. I cannot give him any answers to those questions, but I agree with him that answers will certainly have to be placed before the people when the issue is put before them in due course. To the noble Earl, Lord Gowrie, who criticised us for undertaking these renegotiations, I say that I should have thought that the benefits already achieved and the degree of agreement which has been reached with our point of view have justified the attitude we have taken in this matter.

THE EARL OF GOWRIE

My Lords, may I comment briefly on that point. I do not and I think did not criticise the principle of renegotiation, which is an on-going matter; what I criticised was the uncertainty cast over the issue of membership.

LORD BESWICK

My Lords, possibly I am attributing to the noble Earl remarks made by the noble Baroness, Lady Seear, but I thought that he said that it was an irrelevant waste of time for us to attempt a renegotiation and that it undermined our——

BARONESS SEEAR

My Lords, it was not said by me. I should have liked to mention the EEC renegotiation but I did not.

LORD BESWICK

My Lords, I am fairly confident that it was said by the noble Earl, but I shall read what he said to-morrow. My noble friend Lord Sainsbury and the noble Lord, Lord Walston, both made mention of the forthcoming conference on world food and I would say to them both most definitely that we are taking that conference seriously and with no degree of cynicism. Perhaps I can indicate the kind of attitude that we shall adopt at Rome next week: We are willing, and we shall say that we are willing, to put a larger part of our development aid into agriculture. To the noble Lord, Lord Walston, who appeared to criticise the offer of 5,000 tons of fertiliser, I would say that we are one of the few developed countries which have offered anything at all and that we shall do what more is necessary, as we see fit, when the pool is depleted. We shall also support what action we can to increase the efficiency of operation of existing fertiliser plant, notablv in the developing countries. As for the proposals of the FAO for an international scheme of national stockholding, we have, with other FAO countries, accepted this in principle, although of course we cannot commit ourselves to its implementation until the practical implications have been worked out. We are sympathetic to the idea that the world food programme should have a reserve of 500,000 tons for immediate use in emergency but would like the practical implications of management to be worked out further before we commit ourselves. I can assure noble Lords that there will be, so far as we are concerned and wherever possible, action and not words.

My Lords, I was sorry that the noble Viscount, Lord Massereene and Ferrard, lost his bet, especially by such a decisive margin, and I am particularly sorry that he should have lost money because his speech was much shorter than many of those who have not had a wager with me. However, I think that, if he was wrong in his estimate of his own brevity, he was equally wrong in his assessment of the character of some of the working people of this country. When he said that they now only expect a house, a garden, a car and colour television, I was reminded of something said to me only yesterday by a London M.P.: he said that in his constituency there are hundreds who, at the present rate of house building, can never expect even to have a house, and there are thousands in his constituency who can never expect in their lifetime to have a bathroom of their own. I sometimes feel that the noble Viscount is living in a world which is different from that of many others, and sometime I hope I may have the opportunity of showing him around a real world. I am sure I should enjoy his company.

The noble Lord, Lord O'Neill of the Maine, read out a list of deficits of certain nationalised industries, to a chorus of approval from the Front Bench opposite. I should have thought the Front Bench opposite would say to the noble Lord that those deficits were part of a deliberate plan by the Government formed by Members opposite. They quite deliberately built up those deficits in order to shield the consumer and the rest of industry from otherwise inevitable price rises.

That brings me to the speech of some of the Front-Benchers. The noble and learned Lord, Lord Hailsham of Saint Marylebone, said that the problem of inflation was international, as we all know; and the noble Earl, Lord Gowrie, qualified that to some extent by saying that it was almost all an international problem. Of course there is this international element and we have to recognise that and try to achieve solutions. But I think the noble Lords should also recognise that the contribution of the Conservative Administration between 1970 and 1973 played a very great part in our present difficulties. They attained Office in 1970 with a strong currency—one of the strongest in Europe—and left it with a weak currency. They came into Office in 1970 with a Budget that was balanced and they left an unbalanced Budget. They came into Office in 1970 with a surplus on our balance of payments account of something over £700 million, and left it with a deficit—the biggest in our history—of over £1,000 million. That achievement in economic management is, to a very large extent, the cause of our special troubles to-day.

I think that too much time, effort and money has been spent, especially in recent months, on a quite arid and unnecessary defence of private enterprise. I say"unnecessary"—and I say it especially to the noble Baroness, Lady Seear—because the Government are well aware, and Members of the Government have always declared, that there is a need for a strong and profitable private sector. It has been said inside Parliament, outside Parliament, to the CBI and to the TUC. The recent argument appears to assume that the public is the enemy of the private sector. The truth is, of course, that both are needed; and no opportunity of saying that should be lost. That is the theme of our White Paper and that is why we need the new institutions indicated in the gracious Speech. We need these new institutions in order to get the private sector on to a new course and to arrest its decline in relative performance compared with its competitors. I will not repeat the figures that I gave in our July debate, but they show beyond a quibble that our competitors invest more in their manufacturing industry, and have invested more in the period of Conservative Administration, than have we—and, what is more, as my noble friend Lord Shackle-ton said, they have achieved more in returns from a given volume of investment than have we.

Successive Governments, as the noble Lord, Lord Coleraine, said, have tried all sorts of economic measures to improve our industrial performance. A variety of inducements has been provided, some of them generous inducements, but they have not achieved the required objectives. The noble Lord, Lord Byers, said that the liquidity troubles in the company areas are seen by the Marxists in the Cabinet as a heaven-sent opportunity for rejoicing——

LORD HAILSHAM OF SAINT MARYLEBONE

Quasi-Marxists!

LORD BESWICK

My Lords, I do not know what he means, nor whom he means, by this description. But what he says is quite untrue. It is something which should not be said. It is not true that any member of the present Government glories in the difficulties we are experiencing. It is absolutely untrue and he should not say anything of that kind at all. What is true is that we have put forward to the electorate certain proposals because we have these difficulties, and because the proposals that have been tried in the past have failed.

The people of this country now believe that we need something different. What we need is a new and closer relationship between Government and all sections of industry, management, shop floor workers and their representatives and owners. The system of planning agreements and the creation of a National Enterprise Board will, we believe, provide the urgently-needed framework for co-operation. The noble Baroness, Lady Seear, talked about the cynicism with which some people regard politicians. If we had fought an Election because we believed these things were right, and if at the end we put into operation not the policies we put forward to the people, but a lowest common denominator of Party policies, then the people of this country would have been right in viewing us with a degree of cynicism.

Let me spell out in more detail our thinking about planning agreements. They aim at a close understanding between Government and companies and, as I have emphasised, workforce as well as management. It is not true to say that we have any special antagonism or hostility towards management. My right honourable friend the Secretary of State for Industry, time and time again in speeches I have heard and in papers which I have read, has emphasised the point that the executive managers are as vital as those on the shop floor. These agreements are intended to provide a new and improved framework for us to work together through discussions, through better understanding and hence improved policies, and through financial assistance from Government where this is appropriate. We intend to bring about a situation in which industry's actions and intentions match national needs.

If I had the time I could give some illustration about talks I have been privileged to hold with the British Steel Corporation management and workers and, of course. Government officials. I have had a most stimulating time there. I have been greatly encouraged by the contribution that has been made by the organisations from the blast furnaces, rolling mills and managerial offices. They have a contribution to make, and I am sure that throughout industry they will be provided with the opportunity of making it. There will be no compulsion on a company to conclude a planning agreement: it will be for the firm to decide whether or not it wishes to do so. We hope that the powers requiring firms to provide information to Governments and to their workers will remain in reserve and that the discussions and exchange of information will proceed on the basis of consent. And there is another forum where we can discuss the part which proper profit should play in the development of industrial concerns.

We have been determined to introduce this system with a minimum of extra administrative cost for the companies concerned and for the Government service. We are seeking flexible arrangements which match so far as possible the internal arrangements of the companies concerned; and we shall be discussing with companies how this may best be achieved. We recognise the need to avoid unnecessary costs and we shall therefore concentrate on important companies in key sectors. This exchange of information will provide, I hope, this degree of continuity which the noble Baroness, Lady Seear, said, quite rightly, is needed in industry to-day.

Planning agreements will be concerned only with a number of strategic issues. These may vary from company to company, but will normally include those issues of strategic importance, such as investment, employment and productivity. The discussions will not be concerned with matters of day-to-day management. They will enable the workers in a company to play an important and constructive part, and the Government hope that plans submitted to them will first have been discussed with the firm's workers represented through their trade unions. There will be a requirement, subject to safeguards for confidentiality, for information to be provided to workers' representatives.

The Government believe that this will do much to promote that identity of interest between workforce and management which is the hall mark of some of our best firms, and which all of us in this House believe should be spread over industry as widely as possible. There is no question of planning agreements being used as a prelude to nationalisation. The White Paper is quite explicit: it explains that information obtained in the context of planning agreements will be used for the purposes of planning agreements only. The sole points of contact between planning agreements and the NEB are, first, that planning agreements will extend to some companies—Rolls-Royce 1971 is an example—held by the NEB.

May I say something about another new institution featured in the gracious Speech, the National Enterprise Board. This is an instrument to secure, where necessary, large-scale sustained investments to offset the short-term pull of market forces. It will build on and enlarge the activities previously discharged by the Industrial Reorganisation Corporation, to which my noble friend Lord George-Brown paid a tribute. It will, in addition, be an industrial holding company with subsidiary companies in manufacturing industry. The Board will be responsible for the efficient management of, and for securing an adequate rate of return on, the companies and assets vested in it. It will have a function akin to that of merchant bankers in the provision of investment capital for manufacturing industry. Priority will be given to the promotion of industrial efficiency, the creation of jobs in assisted areas, increasing exports or reducing undue dependence upon imports, developing the offshore supply industry, and investment to counteract monopolies.

Like its predecessor, it will promote industrial efficiency and profitability by reorganisation or development of an industry, and it will take equity in existing companies or help to establish new enterprises. Unlike the IRC, however, the NEB will retain shareholdings acquired. The Board will, where necessary—and with increasing capital costs of modern projects it may well on occasion be necessary—promote joint ventures with private firms. We have in mind especially some of the problems in the North Sea oil supply industry. We have made it clear that the appropriate functions of the NEB will be carried out in Scotland by the proposed Scottish Development Agency.

The Government's intentions for the extension of public ownership have been somewhat misrepresented. May I restate them. Development land will be brought into community ownership. A British National Oil Corporation will be established. The aircraft and shipbuilding, ship repair and marine engine industries will be nationalised. We have heard a lot of talk about the compulsory acquisition of major companies by the National Enterprise Board, and I think this is what the noble Lord, Lord Byers, had in mind. The Board will have no powers of compulsory acquisition, and the intention is that all its shareholdings should be acquired by agreement. Should there be unforeseen circumstances—the Rolls-Royce case is an example—then rapid action may of course be called for. But such an issue would be brought before Parliament for specific Parliamentary approval. Compulsory acquisitions would be subject to prompt and fair compensation to existing shareholders. May I say, in passing, that in this I agree again with my noble friend Lord George-Brown, who said that the personality of the people concerned and the way they operate the NEB will be quite decisive. Running through all these proposals for the new institutions is the emphasis on employee consultation and participation. This emphasis and the fact that it is now so widely accepted, in principle at any rate, if not in workaday practice, is I believe one of the most hopeful signs in the economic and social scene.

In the lot of the working people much has changed, and changed for the better in my belief, within the lifetime of most of us here. The noble and learned Lord, Lord Hailsham of Saint Marylebone, spoke of the Great Britain of years ago being one of the most successful societies on this planet. I respect his patriotism profoundly. I hope I can claim to share it. But that successful society of some years ago was a society in which the majority of the work force never had a paid holiday; they knew nothing at all about the possibilities of a pension; they had no semblance of job security. Success for some people meant different things to other people. All the gains we have won had to be fought for, and that fight has developed a pattern of struggle which now in current conditions at this point in our historical development must, I believe, be changed. And we can now change it. The opportunity is here for us to change it. The emphasis now must be, not so much on getting, but on giving. The noble and learned Lord, Lord Hailsham of Saint Marylebone, spoke as if class warfare is a phenomenon of the present and was unknown in the past. I wish he had been in my home town during the years 1921 to 1926. There you saw class warfare—really naked class warfare—and I think that to-day the improvements in the position and the agreement that is possible between workforce, management and Government offers us an opportunity which we should not and shall not waste. The answer to the unnecessary strike is not more punitive legislation but more participation in decisionmaking. The remedy for the ugly scenes of the picket lines is not a counter-display of physical force but a more constructive argument around the joint consultation table.

My Lords, this is the context in which the social contract should be seen and it is a context which is all the more credible if we turn for just a moment to the alternatives of the late and unlamented Industrial Relations Act—of confrontation, of the strange device of the Public Trustee to rescue us from the consequences of confrontation. We cannot forget the three-day week from which calamity we needed a General Election to rescue us. It is not good enough for the noble Earl, Lord Gowrie, to say that the energy crisis frustrated their policy. The energy crisis, the three-day week, was an inevitable culmination of that policy.

My Lords, nobody can guarantee the success of our new approach. There are, even now, piles of uncollected litter in some streets to remind us of the difficulties which lie ahead, but that litter is evidence of the failure of the old policy and not of the new. It is the new policy and the new approach upon which we pin our hopes. I think it will take some lime and we should not be unduly impatient.

Much has been said already about the scope of the social contract, but it covers much more than pay claims. It has been made clear that prices, pensions, industrial democracy, job security and enrichment are covered, but if it is to succeed—and I agree in my final sentence with what the noble and learned Lord, Lord Hailsham, said—in operation it will need to go much wider still. It will need a social and a political climate which accepts the moral obligations of which my noble friend Lord Shinwell spoke, and I hope sincerely that in our future debates we shall in this House bear in mind the necessity and our responsibility for creating that climate of social opinion.

LORD STRABOLGI

My Lords, on behalf of my noble friend Lord Harris, I beg to move that the debate be adjourned until to-morrow.

Moved, That the debate be now adjourned.—(Lord Sirabolgi.)

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