Lords Sitting of 8 July 1975

Preamble
The House met at half past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.

EEC AND TRADE WITH CHINA
Lord DAVIES of LEEK: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government, in view of the recognition of the EEC by the Chinese People's Republic and the statement by Commissioner Sir Christopher Soames that the Community has taken over responsibility for commercial policy in relation to China since January 1975 and that therefore individual trade agreements between China and Community countries have expired, what responsibilities they have to settle reciprocal trade agreements with the Chinese People's Republic without first consulting the EEC authorities.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Lord Beswick): None, my Lords.
Lord DAVIES of LEEK: My Lords, in the name of sanity! Is my noble friend telling me that Her Majesty's Government no longer have any responsibility for commercial policy in relation to China? Secondly, is my noble friend aware that only last year an Overseas Project Development Area was developed through the Overseas Board by the then Minister, Mr. Shore, to give advice to consultants, to bankers and people trading in China? Finally, is my noble friend aware that only a few weeks ago there arrived at the Royal Albert Docks from China the first freighter carrying 600 tons of goods to Britain, thereby acknowledging the fact that in three months we had done £6 million worth more trade with China then ever before? Yet now the British people are told
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that they have no responsibility for trade with China.
Lord BESWICK: My Lords, the position is not quite like that. I did not say we had no responsibility for trade; I said we had no responsibility for trade agreements with the Chinese People's Republic. So far as securing or encouraging trade is concerned, we do have responsibility in these matters. I was the leader of a trade mission which went to China within the last few months. So far as trade agreements are concerned the position is that, under Council Decision 69/494 of 1969, on the expiry of Member-States' bilateral commercial agreement with China these responsibilities were terminated on 31st December 1974. In accordance with Article 113 of the EEC Treaty, all responsibility for commercial relations with China now falls to the Community.
Lord BALNIEL: My Lords, is the noble Lord aware that both on the grounds of developing a common commercial policy for Europe, and on the grounds of improving trade between Europe—and Britain included in Europe—and China, the statement of Mr. Christopher Soames is warmly to be welcomed?
Lord BESWICK: My Lords, I was not talking about the warmth with which it should be welcomed, but on the facts.
Lord BLYTON: My Lords, is my noble friend aware that under the Treaty of Rome, now that we are in the Common Market, we have no power to make agreements with third countries unless we get the consent of the Brussels Commission? Has that not taken away our independence as a nation?
Lord BESWICK: My Lords, it certainly takes away our right to conclude an agreement relating to duties, quotas and other measures of regulating trade, but it does not take from us the right to try to secure business from China within the scope of any trade agreement that the Community may conclude.
Lord DAVIES of LEEK: My Lords, my last question, since the whole position is pretty well hopeless, is: Is my noble friend aware that a prototype exhibition—it was given this name by the German Democratic Republic—was held on the 13th June in Cologne? Is he

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aware that it was then put forward by Mr. Ch'ai Shu-Fan, the Vice-Minister of Trade, that this was to be the prototype of the pattern of trade with China in the future? Britain therefore, has given away all the initiative and experience of 100 years of Far Eastern trade.
Lord BESWICK: My Lords, I suggest to my noble friend that he is exaggerating a little. In this country there are in existence, as he possibly knows, the Sino-British Trade Council and the China Council for the Promotion of International Trade, both of which are very active in securing business with China. Trade with China over recent years has shown an increase in both directions, outward and inward; but the answer to the question of my noble friend is as I have stated.

TANZANIA: GOVERNMENT AID
2.45 p.m.
Lord BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government with regard to a reported new loan of £10 million to Tanzania (a) what proportion of it will be untied and how it will be policed; and (b) whether the threatened breakdown of the East African Association does not suggest that the position in Tanzania should be defined before further aid is given.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, the aid to which the noble Lord, Lord Barnby, refers was offered to Tanzania in 1974. The agreement confirming the terms has recently been signed. Most of the money will be used on British goods and services for approved development projects. The future of the common services of the East African Community is a matter for the three partner States to determine, and we see no reason to delay implementation of our aid agreement with Tanzania.
Lord BARNBY: My Lords, is the noble Baroness aware that to many it seems indecorous to lavish such aid as is being given when we ourselves are having difficulty in funding money even
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at 12½ per cent., and Government credit is at 14 per cent. to 15 per cent.? Secondly, can the noble Baroness say what is the total amount of money owed by Tanzania for the requisition of British businesses, and also for the land owned by British nationals? Thirdly, can the noble Baroness say why it would appear unreasonable to ask for the privilege of surveillance when so much of the aid given elsewhere, at least in Africa, has been squandered on prestige projects instead of being confined to rewarding internal projects?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, in answer to the first question of the noble Lord, Lord Barnby, considering that we are talking about one of the poorest countries in the world, I do not think the aid can be described as lavish.
Secondly, I cannot give him any figure for the compensation, because that is in the process of being evaluated. In 1974 my right honourable friend the previous Minister for Overseas Development had a meeting with the Tanzanian Government and they expressed their willingness to negotiate the evaluation of the businesses and farms about which I think the noble Lord is concerned. That is going on. It can even go to arbitration. They are willing to make compensation. On his third point, I do not think there is any question of anything being squandered in Tanzania. I think mention of policing is a rather unfortunate term, especially as many benefits will flow to this country, because they will be buying goods and services from here.
Lord PAGET of NORTHAMPTON: My Lords, may I ask the noble Baroness whether General Amin's permission has been obtained? This is an important question because, in so far as this aid involves defence goods a mistaken impression might be given that they are required for a defensive war against General Amin instead of, as, of course, is the case, for an aggressive war against Rhodesia.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, this is, as always, a complicated matter. So far as I know, there is certainly no question of defence aid involved.
Lord BARNBY: My Lords, I do not want to take issue with the noble Baroness

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as to what is lavish, but it is a fact that £2,500 million has been provided by the taxpayers in the last decade. Also, may I ask her to amplify her original reply? Of the total given in aid, what proportion of that is tied and what proportion is untied, because in the last five years there has been progressive diminution of the tied aid, which brings British trade, in relation to the untied.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, the noble Lord and I have often crossed swords about the principle of aid and I do not think the House would profit by us continuing any further on that matter. As to amplifying my original Answer, I said that most of the money will be used on British goods and services for approved development projects. The only part of the aid which is non-tied will be spent on goods and services in Tanzania. None of the money will be spent outside either Tanzania or the United Kingdom.
Lord BROCKWAY: My Lords, may I ask the Minister, despite her last reply, whether she would agree that the best principle for granting aid is the need for it and the achievement in meeting that need? Would she not agree that in Tanzania both those requirements are met—the poverty of the people and the quite extraordinary reconstruction of the villages by Julius Nyerree—without any of the prestige projects to which the noble Lord, Lord Barnby, has referred?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I entirely agree with what my noble friend said in the last part of his question. Tanzania is the last country to be criticised for prestige projects. As usual I agree with almost all my noble friend says.
Lord BARNBY: My Lords, would the noble Baroness agree that, if aid is to be measured by necessity, words spoken in this House last week by Lord Soper indicate that there is considerable necessity and need in this country first?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, when we are in economic trouble we hope that our friends in Europe and on the other side of the Atlantic will help us. Tanzania is in economic difficulties and we are here to help them.
Lord MERRIVALE: My Lords, the noble Baroness referred to Tanzania as one of the poorest countries in the world and said, very rightly, that this was a reason for granting aid or loans to that country. That is a very reasonable yardstick. Would a similar yardstick be used, as we are now a participant in the Convention of Lomé, if aid or loans were asked for by Upper Volta, for instance, which is in Central West Africa? It is, I would say, one of the poorest countries in the world. Would such aid be similarly considered?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I think the House will agree that that is another question.

ROAD TRAFFIC ACT 1974
The Lord Bishop of LONDON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they propose to issue a regulation to give effect to Section 7 of the Road Traffic Act 1974.
Lord MELCHETT: My Lords, my honourable friend the Minister for Transport intends to make a decision in the near future on the commencement of this section. A major consideration must be the cost to local authorities of implementing and enforcing the section at a time when the Government are asking local authorities to keep their expenditure at current levels.
The Lord Bishop of LONDON: My Lords, I thank the noble Lord for his reply. Is he aware that the Road Traffic Act has now been on the Statute Book for nearly a year, that it is part of the law of the land, and that the dangerous nuisance of parking motor cars on the footway has certainly not abated and is possibly increasing? Therefore, will he ask his honourable friend to regard this as a matter of urgency?
Lord MELCHETT: My Lords, I am aware of how long this law has been on the Statute Book, and I am also aware of the problems with which this section deals. I will certainly see that the right reverend Prelate's views are passed to my

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honourable friend. As I have said, considerations of public cost must be paramount at the moment.
Lord MOWBRAY and STOURTON: My Lords, does this not show that urgency, in the Government's view, is as demonstrated in the supplementary question I asked yesterday? The Ministry was considering the question two years ago, an Act was passed dealing with another matter a year ago, but still nothing is happening.
Lord MELCHETT: My Lords, according to my arithmetic it would not be possible, even with the noble Lord opposite at the Department of the Environment, for the Department to be considering a section of the Road Traffic Act 1974 two years ago.
Lord MOWBRAY and STOURTON: My Lords, I think that the noble Lord is being a little unfair. He heard his noble friend Lady Birk, a Minister in his Department, refer to another matter which I mentioned yesterday. That was being urgently looked into two years ago and she said yesterday that it is still being urgently looked into now. Taking all these factors together, I think one can add up one and one.
Lord GARDINER: My Lords, is there not an increasing tendency by Government to take advantage of a provision that different sections of an Act can be brought into force at different times, and never to bring a section they do not like into force at all? How can this be squared with the authority of Parliament?
Lord MELCHETT: My Lords, the fact is that a great deal of work needs to be done before this section can be brought into force. The section in question deals with parking on footpaths and footways, and it is necessary for local authorities to carry out surveys to see which roads must be exempted from what will be a mandatory order. If it was brought into force immediately, the effect would be that people would be prosecuted for parking in places where it was quite reasonable for them to park.
Lord BARNBY: My Lords, could the Minister give any indication of the extent to which there have been accidents to blind people because of parking on pave-
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ments? There is evidence in the Metropolitan area of a rather rapid increase in the parking of vehicles on footpaths and pathways.
Lord MELCHETT: My Lords, the noble Lord opposite mentioned the Metropolitan area, and that gives me the chance to say that I understand that local authorities in London assign a greater measure of priority to this matter than authorities do elsewhere. The Greater London Council has powers to ban parking on verges and footways under its 1974 General Powers Act, and it is for that Council to implement this section when it sees fit.
Lord POPPLEWELL: My Lords, while accepting that there are difficulties involved in applying this section, may I ask my noble friend whether he can indicate what steps are being taken with a view to having consultations with the appropriate authorities? What machinery is being established? When does he expect measures to come to fruition to deal with this growing evil, which is concentrated not only in London but is all over the country and creating great inconvenience?
Lord MELCHETT: My Lords, consultations have taken place with local authorities all over the country. As I said in my original Answer, the main problem at the moment must be the question of public expenditure.
Lord INGLEWOOD: My Lords, so that we may assess the urgency of this problem, can the noble Lord tell us for what other purposes footpaths may be used besides the parking of cars?
Lord MELCHETT: My Lords, if the noble Lord really wants me to tell him, footpaths are used for people to walk on.
Lord LEATHERLAND: My Lords, is my noble friend aware—
Several Noble Lords: Order, order!
The LORD PRIVY SEAL (Lord Shepherd): My Lords, I believe that the noble Lord, Lord Platt, has been struggling to intervene. Perhaps my noble friend will permit him to do so.
Lord PLATT: My Lords, as one who sympathises with the aims of this section

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but always thought it quite impracticable, am I to understand from the noble Lord that there is a hope that it will never be put into action? If it is, will there be some special arrangements for doctors who, in the course of their work, have to park a car and are not for the time being either saving life or extinguishing fires?
Lord MELCHETT: My Lords, the answer to the first part of the noble Lord's supplementary question is, No. The answer to the second part is that I understand that exemptions will not be made for particular categories of people parking cars—doctors or anyone else. But roads where it is felt to be safe or reasonable for people to park on the verges or footpaths will be exempted.
Lord MOWBRAY and STOURTON: My Lords, is the noble Lord aware that in a previous incarnation the right reverend Prelate the Bishop of Chester carried an Amendment against the Government's Bill in those days, on which I was answering, and I answered against the then Bishop of Chester? When he later carried it, we in the then Government took note of what heavenly bodies were supporting him from all sides of the House, and gave way. It is rather disappointing, we having given way in those days in response to those heavenly bodies—and he has now been translated into even higher spheres in the heavenly bodies of this country—that the Government of today have not taken more note.
Lord MELCHETT: My Lords, I am not responsible for the fact that the noble Lord opposite is no longer responsible for this matter.
Lord LEATHERLAND: My Lords, is my noble friend aware of the fact that there are two sides to this question? Is he aware of the fact that if the cars are removed from the footpath, or from half of the footpath as is usually the case, they will have to be parked in the roadway? And if they are parked in the roadway they form an obstacle to neighbours who are trying to drive their cars out of their own garages. Is he aware that this causes a great number of accidents?
Lord MELCHETT: My Lords, I am not aware of how many accidents that causes. But I am aware that exemptions will be made, as I have said several times,
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on roads where it is felt sensible to make exemptions.
Lord DERWENT: My Lords, is the noble Lord aware that Questions have been going on for 19 minutes and there is another one to come?
Lord SHEPHERD: My Lords, I would entirely agree with the noble Lord. I wonder whether noble Lords will look at Hansard tomorrow to see the length of the supplementary questions, in the light of the criticism yesterday by the noble Lord the Leader of the Opposition of my noble friend on this Bench.

DUNDEE COUNCIL: HOUSING RENTS
2.56 p.m.
Lord CAMPBELL of CROY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what advice they have given to Dundee council about raising their house rents and what action has been decided upon by the council.
Lord STRABOLGI: My Lords, in Scottish Development Department Circular No. 21/1975 of 19th March, my right honourable friend the Secretary of State for Scotland drew the attention of local authorities to the powers and responsibilities which the Housing Rents and Subsidies (Scotland) Act 1975 confers upon them to determine reasonable rents. My right honourable friend takes every possible opportunity to emphasise that authorities should increase rents so that they make a reasonable contribution to rising housing expenditure. He expects to receive shortly, from Dundee and other authorities, information on rents and housing finance which he has requested for 1975–76.
Lord CAMPBELL of CROY: My Lords, I am grateful to the noble Lord for that reply in the absence this week of the Scottish Office Minister, which I entirely understand. Is the noble Lord aware that it has been widely reported that Dundee district council has decided not to increase its rents at all despite the

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Government's public appeal to local authorities in Scotland to make increases? Is he aware that what the Government are now trying to do, unsuccessfully in Dundee and elsewhere, is precisely what the 1972 Housing (Financial Provisions) (Scotland) Act was effectively carrying out? This was the Act which this Government imprudently decided to replace earlier this year, despite the warnings and misgivings expressed in your Lordships' House.
Lord STRABOLGI: My Lords, in regard to the first part of the question, I understand that no decisions have been taken by the district council about the future level of rents, despite Press reports. I think that there was a report in the Scotsman of last Friday. The question is being debated at today's meeting of the housing committee. The report in the Scotsman has been denied by the chairman of the Labour group. With regard to the second part of the question, compulsion was written into the 1972 Act. The 1975 Act is not written in these terms. We expect local authorities to assess their financial positions really strictly as soon as they can, and to make their rent decisions responsibly.

CHILD BENEFIT BILL
Brought from the Commons; read 1a, and to be printed.
BRITISH TRANSPORT DOCKS BILL
Read 3a, and passed.

EUROPEAN PARLIAMENT
3.0 p.m.
Lord SHEPHERD: My Lords, I beg to move the Motion standing in my name on the Order Paper. In our debate last Thursday, I indicated that if any political Party wished to change its membership of the European Parliament, this could be done with great expedition. I understand that a Motion was passed last night in another place that the honour-
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able Member for Inverness, Mr. Russell Johnston, should no longer be a Member of the European Parliament. I am moving this Motion at the request of the Liberal Party that the noble Lord, Lord Gladwyn, should be a designated Member of your Lordships' House at the European Parliament. I feel sure that this will give joy, not only to the Members opposite but to the House as a whole. My Lords, I beg to move.
Moved, That the Lord Gladwyn be designated a member of the European Parliament:
That this Order shall remain in force and effect, notwithstanding the Prorogation or Dissolution of Parliament, until this House otherwise orders.—(Lord Shepherd.)
Lord BYERS: My Lords, I had not intended to make a speech but I hope that the noble Lord the Leader of the House will recognise what an invidious decision my right honourable friend Mr. Thorpe and I, together with the Parliamentary Party in another place, had to make last night as a result of the two major Parties, with just over 11 million votes each, taking 18 and 16 of the 36 seats in the European Parliament and leaving one Liberal representative for 5¼ million British voters. I say no more, but I hope the House will recognise the invidious decision which had to be taken late last night.
Lord PANNELL: My Lords, without wishing to contradict that statement, before the noble Lord quotes the number of votes polled by the Liberals in the country, would he look at the figures of votes cast in the West Woolwich by-election? He will see that the fall in the Liberal vote put the Conservatives in.
Lord SHEPHERD: My Lords, clearly the leadership of the Liberal Party had a difficult task last night. I would only say to the noble Lord, Lord Byers, that I indicated in Thursday's debate that the Parties should enter into early discussions on this matter. I do not feel that the contribution which the noble Lord himself has just launched is one that will help towards finding agreement between the Parties.
On Question, Motion agreed to.

CHURCH COMMISSIONERS (MISCELLANEOUS PROVISIONS) MEASURE
3.2 p.m.
The Lord Bishop of LONDON rose to move, That this House do direct that, in accordance with the Church of England Assembly (Powers) Act 1919, the Church Commissioners (Miscellaneous Provisions) Measure be presented to Her Majesty for the Royal Assent. The right reverend Prelate said: My Lords, I rise to ask your Lordships to give an Affirmative Resolution to the Church Commissioners (Miscellaneous Provisions) Measure. In so doing, I shall not be carrying your Lordships into the empyrean as the noble Lord, Lord Mowbray, suggested might be my function. Rather, I shall be asking your Lordships to consider the much more mundane matter of how the Church Commissioners expend some of their funds.
Those responsible for the preparation of the material that comes before the General Synod are always very conscious of the way in which it can be presented with the least possible inconvenience to your Lordships and to the Members of another place. Sometimes, we have presented a series of small Measures dealing with the minutiae of ecclesiastical administration and, not unnaturally, Members of your Lordships' House have at times become rather restive in consequence. On the other hand, if we try to present these matters in a more manageable size in a miscellaneous provisions Measure, we get a rather strange mix to present to your Lordships. Here, then, is a miscellaneous provisions Measure which deals with two very different aspects of the work of the Church Commissioners. It is necessary that this Measure should be presented to your Lordships because, as I have no doubt many noble Lords are aware, the Church Commissioners can expend their income only in the way in which Parliament directs. Therefore, if there is some way in which they think they ought to be expending their funds which is not provided for by the law, they have to bring a General Synod Measure before Parliament for Affirmative Resolution.
This Measure deals first of all with the stipend of the Bishop of Sodor and Man. The diocese of Sodor and Man is an orthodox diocese of the Church of England, but it is unorthodox in that it is
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subject both to the law of this land and to Manx law. This always complicates anything we want to do for the diocese of Sodor and Man. Under the Ecclesiastical Commissioners' Powers Measure 1936, certain Bishoprics could be paid by the Church Commissioners at the rate of£3,000 a year, which, in those days, was a very reasonable remuneration. In many ways, that Measure was overtaken by the Episcopal Endowments and Stipends Measure 1943, when the Commissioners took over the ownership of all the episcopal residences and a certain number of their endowments and were given in return the responsibility of providing a suitable house and stipend for the Bishop, and also of meeting his reasonable expenses in his secretariat, and his travelling and official expenses.
However, the See of Sodor and Man could not be included in the 1943 Measure because the house of the Bishop belongs, I believe I am in right in saying, to the Manx Parliament, or, if it does not, it belongs to the authorities in the Isle of Man. Therefore, the Church Commissioners could not take it over, so the Bishop continued to be remunerated under the 1936 Measure, which meant that he had to live in a very fine but exceedingly large house in the Isle of Man and that he received a stipend of only £3,000 a year, out of which he had to keep up this very large house, and to provide for his secretariat and travelling and entertainment expenses. There is, I believe, a very small fund available in the Island, but it does not nearly meet these very heavy expenses. Therefore, it is virtually impossible for the Bishop of Sodor and Man to exist on only £3,000 a year.
Unfortunately, there is still the problem of the house, and therefore the Bishop cannot be brought within the provisions of the 1943 Measure. The only way in which the Church Commissioners can help him is to seek powers to augment his stipend so that he can meet the reasonable expenses of his Office and also have a reasonable stipend for himself. It is for that that Clause 1 will provide.
Clause 2 deals with the pensions that may be paid to the First and Third Estates Commissioners. Your Lordships will probably be aware that the chief officers of the Church Commissioners are the three Estates Commissioners. The

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first is appointed by Her Majesty. The second is a political appointment by the Prime Minister and the third is an appointment by the Archbishop of Canterbury. Sir Ronald Harris, Mr. Terry Walker and Dame Betty Ridley are the holders of these three Offices at the present time. The Estates Commissioners are generally people who have attained some distinction elsewhere before they are appointed to one of these Offices, yet they bear very heavy responsibilities and it is only proper that they should be reasonably remunerated and should be provided with a pension if it is desirable.
The powers which the Church Commissioners already have for providing a pension for the First and Third Estates Commissioners are discretionary, for it is possible that a person might be appointed to this Office having served elsewhere and having a very considerable pension so that it would not be necessary substantially to augment that pension. At the moment, when the First and Third Estates Commissioners have served for 15 years, they can receive, at the discretion of the Board of the Church Commissioners, a pension of two-thirds of what they were receiving on retirement or, after 10 years, a pension of half what they were receiving. But this has certain disadvantages because an Estates Commissioner may not want to go on to the full 15 years, yet there is obviously a temptation to go on if the Commissioner is very near to getting the full pension. Indeed, under modern thinking about pensions, it is considered right that people should be able to receive a pension after five years. Therefore, this part of the Measure provides that the pension can be paid after five years, and that it is graded according to the standards which already exist.
The final part of the Measure deals with the rather technical point of what happens to the widow of a First or Third Estates Commissioner, if a Commissioner dies before five years are up. If a Commissioner has to retire within five years on disability he can receive a pension, but there are great difficulties at the present time about his widow receiving any pension. Therefore, this Measure provides for the widows of the First and Third Estates Commissioners. I hope that your Lordships will regard this Measure as
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entirely uncontroversial—for it was very carefully studied in the General Synod and there was no division on any of the matters—and that you will feel able to give an Affirmative Resolution to it. My Lords, I beg to move.
Moved, That this House do direct that, in accordance with the Church of England Assembly (Powers) Act 1919, the Church Commissioners (Miscellaneous Provisions) Measure be presented to Her Majesty for the Royal Assent.—(The Lord Bishop of London.)
Baroness SUMMERSKILL: My Lords, may I ask the right reverend Prelate a question? In view of the fact that he said that one of the Estates Commissioners is a woman, and that the pension is given at the discretion of the Commissioners, would she then be expected to rely on the income of her husband, or would she receive an income in her own right?
The Lord Bishop of LONDON: My Lords, the Third Estates Commissioner is a widow and she receives her full stipend, and she would do so if she were married. As I said, the pension is entirely discretionary, but I have absolutely no doubt that the Commissioners would treat a women who held the office of First or Third Estates Commissioner in exactly the same way as they would a man in that office.
Lord PARGITER: My Lords, is the right reverend Prelate aware that a Member of Parliament, for instance, cannot receive a pension for less than 10 years' service, and as this might be somewhat analogous with the additional disadvantage that a Member of Parliament has to run the risk of not being re-elected, would not five years seem to be a very short period to qualify for any pension at all?
The LORD BISHOP of LONDON: My Lords, I understand that all the thinking about modern social security is that pensions will be granted after five years. Certainly, the Church of England Pensions Board is giving very careful thought to this being available for the clergy in the Church of England, in accordance with what I understand is the most recent thinking on the whole matter of pensions.
The LORD BISHOP of SOUTHWARK: My Lords, is the right

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reverend Prelate aware that the noble Baroness may be greatly comforted by the knowledge that the lady who is the Third Estates Commissioner receives an income and a pension greater than any Bishop in the Church of England, including the Archbishop of Canterbury?
Baroness SUMMERSKILL: My Lords, I should certainly like to know how we arrived at that decision. If this lady is so superior to the Bishops, why is ordination of women not being considered?
The Lord Bishop of SOUTHWARK: The day may come when she is.
The Marquess of HEADFORT: My Lords, as a resident of the Isle of Man I should like to welcome the Measure in relation to the Bishop of Sodor and Man. I know the Bishop's house; it is very big. I believe that the present Bishop is not able to afford to live in it and is living in a vicarage in the neighbouring town of Ramsey. Anything which we can do to help will be very much appreciated by the people of Man.
On Question, Motion agreed to.

LOCAL LAND CHARGES BILL [H.L.]
3.14 p.m.
Report of Amendments received.
Clause 1 [Local land charges]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 1:
Page 1, line 10, after ("local authority") insert ("water authority or new town development corporation")
The noble and learned Lord said: My Lords, this Amendment provides that financial charges acquired by water authorities or New Town Development Corporations through the exercise of their functions under the Public Health Acts are to be local land charges. Clause 1(1)(a) of the Bill reproduces the existing law whereby financial charges acquired by local authorities under the Public Health Acts are local land charges. But certain sewerage functions of local authorities under these Acts have been transferred to water authorities and to New Town Development Corporations. It is plainly desirable that these Public Health Acts charges, which could previously be imposed only by local authorities, and can now be imposed only
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by water authorities or New Town Development Corporations, should remain local land charges so that they are registrable and brought to the notice of intending purchasers. The Amendment achieves this result. My Lords, I beg to move.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 2:
Page 1, line 13, after ("acquired") insert ("by a local authority").
The noble and learned Lord said: My Lords, in relation to this and the other Amendments of a very technical character which I am moving today, I should like to thank the Law Society for its interest. This second Amendment, which is to preserve the substance of the existing law, ensures that financial local land charges acquired under Statutes similar to the Public Health Acts, or the Highways Act 1971, are confined to charges acquired by local authorities and do not extend to a wide variety of charges which are, or may become, capable of being acquired by unspecified bodies or persons. My Lords, I beg to move.
On Question, Amendment agreed to.
Clause 10 [Compensation for non-registration or defective official search certificate]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 3:
Page 7, line 7, after ("shall") insert ("(subject to section 11(1) below)").
The noble and learned Lord said: My Lords, this Amendment, which is for clarification—in so far as clarification is possible in this highly technical field of conveyancing—points out that the right of a purchaser to compensation under Clause 10 is qualified by the special provisions of Clause 11(1), where the interest is mortgaged. Under Clause 10, a purchaser who suffers loss from an undisclosed local land charge is entitled to compensation, but under Clause 11(1) where the purchaser's interest is mortgaged the mortgagee may make the claim in respect of the mortgagor's interest and cannot claim in respect of his own interest. The provision in Clause 10 that a purchaser is entitled to compensation is, therefore, qualified by the special provisions of Clause 11(1). My Lords, I beg to move.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 4:
Page 7, line 26, after ("lessee") insert ("or mortgagee").
The noble and learned Lord said: My Lords, this Amendment ensures that a mortgagee can qualify for the payment of compensation for loss resulting from an unregistered or undisclosed land charge. Clause 10 entitles a purchaser to compensation in these circumstances. The Amendment provides that in this context a purchaser includes a mortgagee. The Amendment is particularly directed to the case where the mortgage is taken out after a purchase and not for the purpose of financing it. In such a case the mortgagee will make his own search, and if a local land charge is undisclosed on that search the mortgagee may subsequently suffer loss as a result of the diminution of his own interest. He will then bring his claim within Clause 10. In the usual case where the mortgage is associated with the purchase, the search is made by the mortgagor and any loss resulting from an undisclosed charge will affect his interest. In these circumstances the mortgagee, although a purchaser, will only be able to make a claim under Clause 11 in right of the mortgagor's interest. My Lords, I beg to move.
On Question, Amendment agreed to.
3.20 p.m.
The Lord Chancellor The Lord Chancellor moved Amendments Nos. 5 and 6:
Page 7, line 31, after ("acquisition,") insert ("other than a qualified liability contract,")
Page 7, line 37, at end insert ("and for the purposes of subparagraph (i) above, a qualified liability contract is a contract containing a term making the liability of the purchaser dependent upon, or avoidable by reference to, the outcome of a search for local land charges affecting the land to be purchased.")
The noble and learned Lord said: My Lords, with the leave of the House I should like to move Amendments Nos. 5 and 6 together. These Amendments enable compensation to be claimed under Clause 10 where a contract is expressed to be conditional upon the outcome of a local search. Clause 10 gives the purchaser the right to compensation for loss resulting from an undisclosed local land charge, provided that he had a search of the register made before contract, or, if there was no contract, before he acquired his interest. But a search
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before contract is an inappropriate requirement where the contract is itself conditional on the result of the search. The first Amendment accordingly excludes these conditional contracts from subsection (3)(b)(i); so that where such a contract is made the relevant time before which the search must be made is the time specified in subsection (3)(b)(ii); that is to say, when the interest was acquired. The second Amendment defines a qualified liability contract in the words which your Lordships will see in the terms of the Amendment. My Lords, I beg to move.
On Question, Amendments agreed to.
Clause 11 [Mortgages, trusts for sale and settled land.]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendments Nos. 7 and 8:
Page 9, line 3, leave out ("an interest") and insert ("there appear to be grounds for a claim under section 10 above in respect of an interest that")
line 4, leave out ("a claim may be made under section 10 above") and insert ("the claim may be made")
The noble and learned Lord said: My Lords, with the leave of the House I should like to move Amendment No. 8 together with Amendment No. 7. These Amendments are purely for clarification. They make it clear that the right of a mortgagee under the clause to claim compensation in respect of the purchaser's interest arises at the time when the loss is discovered; that is to say, when the previously undisclosed charge is revealed by enforcement of the charge or otherwise. My Lords, I beg to move.
On Question, Amendments agreed to.

ADMINISTRATION OF ESTATES (SMALL PAYMENTS) (INCREASE OF LIMIT) ORDER 1975
3.23 p.m.
Lord JACQUES Lord JACQUES rose to move, That the draft Administration of Estates (Small Payments) (Increase of Limit) Order 1975, laid before the House on 12th June, be approved. The noble Lord said: My Lords, the Administration of Estates (Small Payments) Act 1965 specifies a limit of £500 on the amount of property which is allowed under certain statutory provisions to be disposed of on death

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without the necessity for probate or other proof of title, or in pursuance of a nomination made by the deceased. The statutory provisions referred to cover payments made by such institutions as the National Savings Bank, Trustee Savings Banks, building societies, friendly societies and the Departments in central and local government concerned with the payment of pensions. The 1965 Act provided that the limit of £500 could be raised by Statutory Order. This Order increased the limit to £1,500. The Order applies in relation to deaths occurring or nominations effected after the expiration of one month beginning from the date on which the Order comes into operation. It is intended that the Order should come into operation in mid-July. My Lords, there has been considerable pressure for this Order because of inflation, and I would commend it to the House.
Moved, That the draft Administration of Estates (Small Payments) (Increase of Limit) Order 1975, laid before the House on 12th June, be approved.—(Lord Jacques.)
Viscount COLVILLE of CULROSS: My Lords, I happen to know that these exemptions from formalities save a good deal of time and trouble where small estates are concerned. I am very glad to hear that the ceiling has been heightened so that we keep pace with inflation. I just hope that the Government will be able now to contain inflation so that we shall not need another similar Order too soon.
On Question, Motion agreed to.

MOBILE HOMES BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
DIVORCE (SCOTLAND) BILL [H.L.]
Report received.

INDUSTRIAL DEVELOPMENT: PRIVATE SECTOR
3.27 p.m.
Lord ORR-EWING Lord ORR-EWING rose to ask Her Majesty's Government what action they have taken and plan to take to honour the intention expressed in the last gracious Speech to encourage industrial investment, expansion, vigour, and profitability in the private sector of industry. The noble Lord said: My Lords, this particular Unstarred Question has had a rather chequered career. It was originally intended to be discussed—and answered, I hope—on 1st July, which was the first Free Enterprise Day initiated in this country. It is a strange thing that although we have built our prowess and industrial wealth on the output of our industries, we have never before had a Free Enterprise Day, whereas that small but vigorous nation, Finland, started this tradition some 43 years ago and now we are following in her footsteps. I postponed the original debate on Free Enterprise Day because I was informed that the Second Reading of the Industry Bill was due to take place on that day. My Lords, it might have been a desperate anti-climax to have an Unstarred Question after the full-scale debate on the Industry Bill. I reinstated my Question when that proposal fell by the wayside. It has advantages, because whereas originally I might have had half an hour perhaps we could bridge the gap between now and tea in a rather more leisurely fashion, and I am glad to see that other speakers from all parts of the House are now going to join in. Moreover, whereas I felt inhibited to perhaps eight or ten minutes, I hope that your Lordships will understand if I am a little longer now that we have more time.
I think there is a desperate need for the nation to consider where free enterprise is going. The Prime Minister in two recent speeches underlined the part that free enterprise is playing in our nation, although he did not perhaps give full credit to free enterprise in so doing. In his broadcast on Sunday, 11th May, and more recently on 18th June, in a House of Commons Question, he announced the dramatic turnround in the export achievements of our country. When one remembers that something like 95 per cent. of our direct exports come

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from the free enterprise sector, this is a true achievement and I think deserves to be acknowledged.
I regret to say that some of the more Left-Wing members of the Government continue to sneer and somehow pretend that free enterprise has failed the nation. Therefore I was particularly pleased to see in the Queen's Speech—and your Lordships will recognise that the words were taken from halfway down the last page of the gracious Speech—the phrase:
"My Ministers wish to encourage industrial investment and expansion within vigorous and profitable public and private sectors of industry."
This afternoon I am concentrating on the private sector. It is also appropriate since it is eight months since those words were printed and discussed in both Houses of Parliament. We are now here to learn from a Minister just what has been done and what has been achieved to give this encouragement—altogether 16 months of power and eight months since those words were written and debated. My Lords, I should like to hear just what is being done to help promote the wellbeing of our wealth-creating industry.
First listed in this Unstarred Question is industrial investment. This has been the target of much Left-Wing criticism. I cannot help feeling that, for some of the reasons that I shall now give, the Government have, perhaps inadvertently, handicapped British industry partly through very high taxation. British industry pays a higher rate of corporation tax than any of its competitors and, of course, this high taxation reduces the post-tax profits; it is from these that industrial investment must come.
My Lords, secondly, I think that for too long there has been a postponement of action to contain and reduce inflation. This is undermining the wellbeing of British industry. Thirdly, price controls, which reduce the profits from which investment comes, have further aggravated the problem. For all these causes, British industry has suffered very severe cash-flow problems. Many small firms have gone to the wall and many others find themselves in a very parlous position. I will acknowledge that—not for a very
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good reason—the cash-flow problem has not been quite as catastrophic as some of us thought a year ago partly because of the downturn in the activity of British industry. If you produce less then there is less money required for stock and work in progress. We must remember that large parts of British industry are on a four day week or a reduced week, that overtime working is an exception rather than the rule and shift working is all too rare. There is less need for working capital and for money to be spent on stock. That is accident and not design.
The facts are that industrial investment has been down. It was down 4 per cent. in 1975 on the quarterly average for 1974. In the first quarter of 1975 it was down 7 per cent. on the fourth quarter of 1974. Contrary to the Left-Wing myth, the facts are that investment overall in Britain, as a percentage of national output, has not been very different from some of our competitors. Those last words are not from the CBI, they are not from the noble Viscount, Lord Watkinson, but from Mr. Denis Healey in his speech at the Mansion House in March 1975. They were further confirmed in a Parliamentary Question answered on 23rd June by Mr. Gerald Kaufman, the Parliamentary Under-Secretary at the Ministry of Industry. He pointed out then that as a percentage of total manufacturing output, investment in the manufacturing industry in this country compared favourably with some of our main competitors. We were marginally less than France, but considerably ahead of both West Germany and the USA. This is not generally accepted. That, incidentally, is for the period 1953 to 1971—over a period of 18 years. It is not a new phenomenon. Those were facts announced in the House of Commons.
It is absolutely true that British industry, while making investment comparable with some of our competitors, must carry an enormous overhead. Of course, Government borrowings have been a further burden and have stoked up inflation. The Government borrowing programme is a most alarming feature of our economic life today. It was as recently as March 1974, only 15 months ago, that Mr. Denis Healey forecast that the borrowing would be £2,700 million. The current estimate being put around is £12,000 million—over four times as much 15 months later.

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If the Government insist on going ahead with nationalising North Sea oil, with the Land Bill, with nationalising shipbuilding, ship-repairing and aerospace industries, this will mean another £2,500 million borrowing superimposed on a load of £12,000 million.
I turn now to the record on expansion. On the record on industrial investment, I do not think British industry has been at all bad and it would have been better if it had been allowed to make the profits it deserved. Expansion depends very much on how much money one has left from undistributed profits and what money can be raised in the market. I think that the fall in company productivity has not only reduced investment but it has markedly cut back industrial production. In April, industrial production was down 5·7 per cent. on the third quarter of last year. Actually, it was only 2½, per cent. up on five years ago. This is a dreadful reflection on how massively we are underrunning our industry. Here again is a useful quotation from Mr. Denis Healey in the Mansion House speech. He says:
"The fact is that we have unused capacity in our economy today which could increase production in a single year as much as we could hope to achieve from increased investment over a decade."
That again shows that we are desperately underrunning the private sector of industry as a result of our parlous economic position.
My Lords, I turn now to the third part of the Unstarred Question, which is the Government's intention to promote vigour. Here again, I feel the Government, far from helping, have actually acted as a drag chain for the following reasons. First, there was massive Government intervention to control prices to reduce profit margins; it was significant of a new package deal, although it was not announced in this House. Although this deal to control, or at least stay the runaway inflation, was meant to start around mid-July, in fact the control of dividends started on July 1st—the very day that the Chancellor of the Exchequer announced his measures. Secondly, there has been tremendous uncertainty about the future. In this uncertain atmosphere it is very difficult for any board, any company and any group of managers to show the vigour and confidence that they need to show.
Thirdly, we have hanging over our heads—although I must not go into it this afternoon—the Industry Bill with its further threats and its threat of directed investment; not on the decision of those who built up the business and who know the market and the operation, but on the say-so of civil servants, specially recruited. I do not know where they are to come from or how they are to gain the experience in such a short time; but that is what is in the Industry Bill. Further, sections of industry are threatened with nationalisation and, lastly, under threat from the National Enterprise Board. I think also that it is relevant to mention that whereas management is so often abused, one must remember that quite honestly although some management may be poor, some of the management in leading firms is extremely good. ICI and others would not stand in the forefront of world competitive industry if they were not efficiently managed; and it is much more difficult to manage efficiently a firm as large as that.
My Lords, if we look at the way in which we tax our managers, we "clobber them". We tend to tax at rates far exceeding the rates of any of our competitors. This was revealed in a Commons Written Answer in Hansard on 23rd June at column 46. The Question asked about the maximum rates of tax in various countries. The answer was that the United Kingdom maximum rate is 98 per cent.; Italy, 82 per cent.; Belgium, 75.6 per cent.; Netherlands, 71 per cent.; France, 60 per cent.; and Germany 50 per cent. Of course, not only is the maximum rate on individuals in this country higher than anyone else's, but we reach the maximum rate very much earlier and a person may be taxed at 70 per cent. or more of what he is earning during the most vigorous and profitable years of his life. That is not the way to encourage the vigorous, the ambitious, the people who should be leading free enterprise.
Lastly, I come to the question of profitability. Here the CBI have said that the profits of British industry arc dangerously low. They would be lower if there was a general practice of inflation accounting. For some reason or other, the Sandilands Committee, looking into this on behalf of the Government, have been rather slow to report. I was told

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in answer to a Parliamentary Question that they were to report before the end of April. I think the noble Lord, Lord Jacques, gave this reply. We are now told by the Government they reported at the beginning of July. If the Minister could give me his attention for a moment, perhaps he will be able to tell us when the Government are likely to announce action on inflation accounting and the Sandilands Committee. The Bank of England is another source, with the CBI, and they have also refered to a fall in profitability of British industry. They state that gross trading profits of industrial, commercial and financial companies fell by 20 per cent. in 1974. That is alarming by any measurement. Tax relief given on stocks in the Budget, rather belated, in November 1974 were certainly of some help. But the share of profits as a percentage of total domestic income has declined and is declining every year. As long ago as 1950–1959 they averaged 13·5 per cent. In 1975 they were down to 6·6 per cent.—less than half.
So we have a position where, despite the intention to promote and encourage industrial investment and expansion with vigour, and to encourage profitability, unless the Government have a very good story to tell, they will stand condemned. If British industry is not allowed to make its full contribution to the creation of wealth, every one of our public and social services and education, and every facet of British life, will suffer in consequence.
3.44 p.m.
Lord LYELL: My Lords, I should like to begin by thanking my noble friend Lord Orr-Ewing for allowing us this opportunity to ask the Government what they are doing, and what they intend to do, to implement this particular section of the gracious Speech. I was not surprised by the fluency and content of my noble friend's speech, since I have had ample opportunity to observe him and his abilities in other more wintry fields elsewhere. As we have seen, the gracious Speech spelt out in a very clear manner the Government's intention to promote the private sector of industry. We have had several debates recently in this House on industry and on the economy. I can recall at least four in the past four months, and
736
we are to discuss the problem of British exports tomorrow. Nevertheless, I consider that investment by and in the private sector industry will be the biggest and most important step towards solving some of the problems facing this country.
Investment does not just happen, like the weather or the tides. It requires, and will continue to require, a conscious act of will by private industry and the Government. It has been considered, I think rightly, that British industry finds problems in investing an adequate amount so as to keep output competitive in the United Kingdom and world markets. Much has been said about European trading partners and competitors, that they had some advantage in rebuilding their shattered industries after the Second World War. Also, the Hudson Report on the United Kingdom had a considerable amount to say about the British class structure, and how they considered that it was an impediment to efficiency in British industry. I find it hard to accept that either of these points is valid; nor certainly is there any excuse for our performance since the Second World War. I believe many of the problems and obstacles which have affected investment in British industry arise from the unfortunate attitude taken by many people—politicians among us included—to profits and profitability within British industry.
The noble Viscount, Lord Watkinson, mentioned in his admirable speech in our debate in May of this year that private industry provided over 90 per cent. of United Kingdom exports. My noble friend Lord Orr-Ewing mentioned this afternoon a figure of 95 per cent. Both noble Lords know this and appreciate it. But many of us wonder how widely this and other facts are known or appreciated throughout the United Kingdom or Europe. It is never my intention to preach any dogma, but I do not think any of us could deny that the main source of investment which we all want to see made in British industry, public as well as private, arises from the profits earned and retained by those industries and businesses. I hope to have something to say later about the other sources of investment, but those concerned with working in industry are adamant that they can produce all the output the market will accept so long as they are

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allowed to go about their business with the minimum of interference by the Government or any outside agency.
To all industrialists, and those who work in all sorts of positions, the word "profit" means something which can serve as a yardstick of achievement. To them it means that the business has proved its ability and it can continue to grow or even diversify. Any such decisions can be taken by the business, and here I shall add that in most successful concerns the workforce is consulted and given the fullest information. In most cases, too, the workforce has considerable pride in the product and in its profitability. But, within what I shall call my working life, say the past twelve or thirteen years since I left university, I have noticed a perceptible change in attitude to the word "profit". It seems to me that the word has begun to have a slightly immoral ring to it, that there is something unclean connected with a profit, that there might be a hint of sweated labour or something like that involved, and that there is no reasonable or adequate explanation, nor even a defence, of profit and that any profit earned or expressed or declared might or could be misspent or paid away in dividends to shareholders.
As an illustration of this thesis, I believe we should look no farther than the British Leyland Report, where it was stated that of the £74 million earned by the company as distributable profits during the seven years of its life, £70 million were paid out as dividends. Yet the same paragraph in that Report declared that in order to provide a reasonable standard of investment in new plant and research, an extra £100 million per annum would have been needed. In almost all the Press and media comment I found, the first part of this statement was quoted, but not the second part, nor indeed was the whole statement taken overall. To every noble Lord speaking today, the second part of this paragraph is self-evident; yet I wonder how many of the workforce in British Leyland, and in private industry generally throughout the country, know of this and appreciate what the whole paragraph means. This is not just the first and often quoted piece of this paragraph.
Profits are the lifeblood of all industry, private as well as public, yet there has
738
grown up a plethora of agencies and organisations to monitor—whatever that may ultimately mean—to advise, to recommend and, in some cases, to order firms in some course of action with respect to their profits. One of the questions that the noble Lord who is to reply for the Government could answer for us, is this. What do the Government believe they will achieve by fiddling with industry's profits, and by causing a great deal of unnecessary work and preventing private industry from assuring its own future and that of its workforce? There are exceptions to the Price Code, and we shall be hearing much more about them tomorrow when the noble Earl, Lord Limerick, leads the debate on British exports. However, private industry has to restrict its profits here so that some prices can be held at what many of us believe to be a totally illusory level.
In an earlier debate in your Lordships House the noble Lord, Lord Orr-Ewing, produced the alarming fact that within the United Kingdom industrial profits are taxed almost twice as heavily as in the Federal Republic of Germany. I do not insist that such a figure is responsible for the low level of United Kingdom industrial performance or, indeed, investment. The Government here have a multitude of investment incentives. These tend to change from month to month and from place to place, from region to region, often from factory to factory and from industry to industry. I often wonder whether we should instead listen to the weather forecast before taking any decision when and where to invest in new plant or machinery or factories.
These investment incentives have been produced by all kinds of Governments within the last 10 to 15 years, but I believe they add an element of confusion to industrial investment within the United Kingdom. They may be intended to do some good, but I believe that in general in the long term they can be definitely harmul. They provide much confusion; they provide some anger, jealousy and even distortion. But I concede that they help to attract various industries to what are otherwise unattractive regions. Here one can think, certainly of Scotland, Wales, the North-East and the regions which otherwise would not be a prime base for industrial investment, nor indeed expansion.

739
I believe that the greatest, the surest and the swiftest way to ensure further investment in the United Kingdom is to instil confidence in private industry as well as in public industry. I believe that this requires consultation by the Government with the Confederation of British Industry and the Trades Union Congress together. And I believe it needs a Government to do what they say they will do. I do not want to weary the House with this point, but the noble Viscount, Lord Watkinson, pointed out, in his excellent speech in May this year, that businessmen tend to believe that politicians will do what they say they intend to and thus they take decisions concerning their businesses in that light.
Earlier I was mentioning profits and profitability. It is right to stress that industry wants to reinvest those profits in business to make it grow, possibly to finance larger stocks and possibly to finance new equipment and machinery; to seek out new markets, new ideas and new products. In short, business wants to invest in its own future and that of its employees. But, again, in the last 12 to 15 years I have noticed an increasing degree of suspicion among all kinds of employees, among even different degrees of management, as to what further investment will mean to them and to their work, to their prospects and to their future.
It may be the case that new investment has not been thoroughly explained. But often explanations cause more misgiving than a blank wall of silence, so that any such exercise in information can be, although I hope it is not often, worthless. Nevertheless, I consider that successful private industry tries to involve everyone in the decisions and in the results of the business. The Government say they are—and I believe they indeed are—very keen to promote what they call industrial democracy. But there is a danger of misunderstanding here, in that the words can imply too many different meanings to different people. But industry, particularly private industry, sees the need to involve everyone within the industry; while the Government's role should be that of an adviser, not necessarily a leader.
So far I have not mentioned outside sources of finance for investment. These
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are just as vital as the retained profits, and where a business is starting up or growing from a two-man or three-man or perhaps a 12-man concern, they are often the only source of investment. In general, a business will look towards a bank or possibly a finance house, or even to friends or neighbours for the first vital investment to enable it to get off the ground. Naturally nobody will invest in a concern which has few or very limited prospects of becoming profitable within the near future.
It is in this field that businessmen have difficulties in explaining their case, when seeking further investment or financial assistance to cover expanding stocks or their future plant and equipment needs. The only criterion for further help or investment by bank or friends is profitability. Where profits are attacked or inhibited by Government or governmental agencies, then the prospects of attracting investment from outside sources are correspondingly reduced. There are always risks, and industry accepts these risks, but many of us believe that the risks of decreasing profitability are magnified when new investment cannot be fully used.
When profits are inhibited or monitored as at present—for example, under the current Price Code where increases in wage costs are permitted to be passed on to the consumer according to what I regard as some obscure formula, meaning that increases in wages can be recovered to the extent of 50 per cent., 80 per cent., or even 100 per cent.—the whole forward planning in industry takes on the aspect of some witch doctor leading the rain dance to drive out the evil spirits who are scorching the earth or our prospects for the future. Where this attitude of uncertainty is present, it is very difficult indeed for industry to present a good case to its bank or to the City or to other sources of investment for further investment.
We must not forget—we forget at our peril—that pension funds, which account for over 80 per cent. of private investment in the United Kingdom, are under considerable pressure to ensure that their investments are profitable. No amount of exhortation or appeals by the Government or by any public body will assist in the problem of adequate investment in industry. This will take place and be

741
successful only when the Government, the TUC and the CBI will agree together what needs to be done and when each can do its bit to ensure success.
I hope that the Government believe what was said in the gracious Speech; I should like to think so. But there is also the associated monster which is called inflation. Happily, the Chancellor of the Exchequer has recently shown that he is deeply concerned about the rate of inflation in the United Kingdom, and industry is becoming encouraged by the fact that he recognises this. The private industrial sector wants nothing more than to be allowed to get on with the job it knows and can do. The greatest help the Government can give it will be to instil confidence and stability into it. The first step has, I think, been taken. The Government say that they intend to reduce the rate of inflation. But the second and subsequent steps will be that much harder.
Nevertheless, the private sector of industry can invest with increased confidence once it knows how much it is going to to pay for new plant and equipment, or even new factories; whence is going to come the finance for this investment; how the new plant and equipment can make products more acceptable and marketable, both in the United Kingdom and elsewhere in the world; whether or not there will be a market for the production; and also what prices will need to be charged to cover the cost of installation and financing of such plant, of future investment, and of replacing the plant or the factories once they have become, or might become, obsolete.
The answers to all these questions will enable industry to plan ahead in the knowledge that its future is agreed as being vital to the Government's plans and wishes for the future. Industry wants to increase its efficiency and competitiveness; and in so doing it will be able to help the Government pay for all these things which we consider so desirable. Indeed, the socially desirable aims of this or any other Government are totally dependent on the performance of industry. But industry recognises that these aims cannot be achieved nor paid for all at once. It is almost impossible to pay heavy taxes on inflated profits—and we have heard the noble Lord, Lord Orr-Ewing, refer to the Sandilands Committee on in-
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flation accounting; and we look forward to their report being presented. Then at last industry will see where it is going and, at least, there will be some acceptable basis for measuring the rate of inflation, which is likely to be with us for some years yet, even at a reduced rate. Industry recognises also that it must maintain, so far as it can, the present nearly-full employment in present jobs for their workforce. Also, I believe that industry wants to make an adequate return on invested funds, first to pay some interest and, secondly, to plan ahead for the future.
Investment and expansion by private industry become more and more difficult as all those who are concerned with it have to consider so many different factors. They first have to consider the world economy. Also, they have to consider world market trends, national market trends and employment trends within the United Kingdom. They have to consider inflation. Then they have to consider the confusion over the Government's attempting to fulfil their entire Election Manifesto within 10 months of the last Election.
All of us—I think we can accept that we are all politicians here—appreciate that the Government are attempting, and indeed are succeeding, to keep their promises, but some of us are not convinced that these promises are as relevant to the immediate future as are others. One example is that of nationalising various sectors of industry, and also increased Government participation in North Sea oil. However, we should like to ask the Government to continue to reduce the rate of inflation, further to encourage industry by exhortation but not by direction, and also to foster that investment, growth and expansion from industry's own resouces. This is the most effective and efficient method, and I should like to add my support to the noble Lord, Lord Orr-Ewing, in asking the Government whether they can supply us with some of the answers.
4.2 p.m.
Lord RHODES: My Lords, I agree that we are indebted to the noble Lord, Lord Orr-Ewing, for having raised this subject in the House this afternoon. It is a pity that there are only four names on the Order Paper, but that may be due to the way in which the business of the

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House is conducted; my entry into this debate is only at very short notice. It is interesting to look at the sequence of debates this week. We begin today with this debate about what action the Government have taken to honour the intention expressed in the last gracious Speech to encourage industrial investment and so on. It so happens that during the last few weeks I have had produced for me the subjects which have been on the Order Paper more frequently than others in the last six years. The two subjects which have recurred over the last five years have been the European Economic Community and Northern Ireland. We have got the EEC question out of the way, I hope, and we shall now stop all this silly "argy-bargy", and time-wasting and Parliamentary fodder for Members of Parliament and others. It may be that it will not be long before we have got rid of the second problem—at least we all hope so.
After this debate on investment, et cetera, tomorrow we turn our attention to exports. This is the logical follow-on to today's debate. Presumably we shall then go on to the Industry Bill which is, or should be, the logical follow-on to these two debates. It may be that we shall be able to give more and more time to the all-important subjects which harass us in our daily lives and this ought to be good. I welcome it. So we are all indebted to those who have originated this debate today.
If one thinks in terms of the words which have been overworked during the last few years in politics, articles and the the subject of passions which have been aroused, I suppose that "unemployment" is one of them and "profit" the other. You would have no unemployment in the textile industry if you put everybody into two-piece blue suits. But what would you do with the surplus? Would you give them little baskets so that they would run about with a little bit of dirt in them making a big pile somewhere that technology had not taken over in the form of a bulldozer? If you were in China you would deal with this quite easily. At one end of the scale they have the most modern, up-to-date technology—when they say they need it and when they can afford to buy it—and at the other end of the scale they have the
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wooden plough. But that is not and cannot be for us.
To those of us who have experienced unemployment in our youth with our fathers and our uncles, unemployment is a bogey but it need not be in an intelligently operated society. I come now to the question of profits. More humbug has been talked about profits during these last 10 years in politics than anything else. In some people it arouses the reaction that somebody is getting something that they should not have. It so happens that I was the one who discovered the profit motive in Russia. It happened like this. Mr. Zilliacus, Sir Cyril Osborne, and a few others, including me, went to Russia in the Spring of 1962. We visited one of the big hydroelectric establishments which employs nearly 20,000 operatives. It was the company which had dealings with Metropolitan-Vickers before the war—the one where there was all the trouble about spying et cetera. We went through the fitting shop and every manjack raised his cap to the boss, a captain of industry, a Mr. Grouzdev who had visited this country in the Autumn of 1961. When you looked at this spectacle you thought you remembered that you had heard about Jack being as good as his Master. I said to Grouzdev, "Everyone seems to be working very hard. I don't see anyone with a gun behind him. How has it come about?". He said, "It's incentive. We are now scheduled to make a profit. We are expected to make a profit of 22½ per cent". I said, "On what?". He said, "On capital employed". I accepted that because it was an answer which was as good as any other. If the same question were asked of any businessman or accountant in this country he would have the same difficulty in interpreting what it really meant. I said to Grouzdev, "That is not the answer". "No", he said, "there's a little bit more to it than that. If we make a surplus, 84 per cent. of the surplus comes back to this factory in the shape of rewards to me and my management and the workers". I said, "Thank you very much. That is it".
Then we went to lunch and one of the shop stewards or one of the Communists in the place said after lunch, "Ask that man to speak" and that man was me. I had read the Daily Worker that morning which said profits in the United

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Kingdom were wicked. I rose, pulling the paper from my pocket, and said, "Here we are, the profits in the United Kingdom are shocking, but here they are very highly desirable". I asked them all to rise to their feet, which they did, and then I proposed a toast to "high profits", which was universally acclaimed by those who could still stand! That was the position then, and Whitehall did not accept it until two years' later, much to their discredit. When one thinks in terms of the kind of criticisms that individuals and firms have been subject to for many years it makes you feel how unjust a lot of it has been about men who have put their all into businesses, the men who know what is going on; who give information to their work people; who have sacrificed practically all their time to furthering an enterprise. They can grasp the extent of this problem. If you have had it to do you learned much
One lesson I learned was on when to invest. The Government do not know. They cannot advise anyone here as to when they should invest in their business because they do not know. Why does one invest? I will tell you why I invested. If one is engaged in an established business in a manufacturing process, and you buy new machinery you do so to do more work on the same floor space, or on less floor space, with less labour; and that is a golden rule.
Then you come up against the problem of redundancies. So we want to know today what the Government mean when they say, "invest in private industry". Do they mean that it is a kind of old-fashioned, Brazilian dumping of coffee into the Atlantic Ocean, simply by asking people to invest in machines in the engineering industry in order to keep people employed in that industry? If one has the best machines already, then one invests for increased capacity. I heard with interest what the noble Lord, Lord Orr-Ewing, had to say on this point. What is the use of installing equipment if he cannot sell it? Several booms are needed to catch up with the capacity. There is a surplus now. A quarter of floor space is occupied by machines which are not fully utilised at the present time. A major boom will be required before they are fully occupied. People engaged in industry know this situation only too well. They do not need hectoring and
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lecturing on what to do. But so long as we have this attitude that we must not have any unemployed—which cannot be evaded in our consumer choice society—we are in difficulty. But if we are intelligent, as I have said before, with an intelligently-run society, we can obviate the worse consequences of unemployment.
It is fitting to recall an incident a few months ago when I went to the Mansion House to help celebrate a bank's hundredth anniversary. I went around the ante-room searching for somebody to converse with, and I came across an entrepreneur who in his Manchester days was known as a great man in industry, and, more latterly, in merchandising. I approached and asked him how he was getting on. "All right. Very well", he replied. "Are you manufacturing nowadays?" "No", he said, "only a fool manufactures today". If we have today reached the state in this country where only a fool manufactures, who are the clever ones? Are they the people in the property market, or those who have battened on to the Stock Exchanges? Who are they? Why penalise the hard-working chap who has devoted his time to his business?
I come to the last part of what I have to say. We are on the wrong tack with our thinking, and I will tell your Lordships why. We are dealing with the subject of profits and unemployment in the wrong way. Turn the subject over. In the case of profits, think in terms of what a business should be making to do the things which it can reasonably do. Take the chemical industry, for example, my Lords. How much profit does this industry need to make, apart from raising new capital to do new types of processing? It needs to make, by Government analysis, 22 per cent. What has it made up to last year? An average of only 9 per cent.
The textile industry needs to make 15 per cent. What has it made? It has been scratching along at 6 per cent. One cannot run a country like that. The sooner the Government get down to the brass tacks of the problem, the better. I prophesy that the time will come when the Government will say to industry, "Right, are you properly managed?" If the answer is, "Yes, we think we are", the Government will say, "All right, what is your record?", and the company

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will have to produce its record. Some of these matters arise in the Industry Bill, but not in the right way. The company will be hauled over the coals if it cannot make the requisite profit.
I ask the Government to get down to some hard thinking on this matter. We shall have the industry Bill before us later this week. I believe it is very good in places, but poor in others. Information is one of the keynotes throughout, and I ask that there should be new thinking in terms of investment. First, let us decide what is meant by the term "investment" Does it mean that we are finding work for other people in other industries? Does it mean that we need more capacity? If we can approach the problem in this way, we shall have a healthier atmosphere in our relationships and perhaps provide an answer to the question of who gets the surplus when we have made the profit that we need to keep our businesses thriving.
4.20 p.m.
Lord GORE-BOOTH: My Lords, it is a great pleasure to speak after the noble Lord, Lord Rhodes, who has spent his life working in and for industry. He has mentioned many points which I believe many of us have thought deeply about, especially those without axes to grind. When the noble Lord, Lord Orr-Ewing, told me that he was opening the debate, I expressed a desire to take part, although I said that I should be approaching the subject from a somewhat different angle. In fact, I think I may approach it from the angle of "fools rushing in", and of course, that has a great advantage for the other people, because it gives them the privilege of rushing out if they so wish.
I have been thinking of this subject very much in terms of a mixed economy, because so much of what is said in the hotter parts of politics seems to imply a perpetual warfare between the private and public sectors. It is an idea of warfare which you find all over the world, particularly where, as in so many countries, the laws of ideological argument underline the supposed laws of economic progress. I thought that, subject to your Lordships' tolerance, I should like to give voice to certain thoughts that I have had
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on this mutual relationship between the private and public sectors, more particularly as I am one of those who, perhaps a little too thoughtlessly, are prone to advocate a mixed economy. Perhaps also it is the duty of those who advocate it to try to explain a little what they mean, because I doubt whether there is a philosophy of the mixed economy and I some times ask myself whether there ought to be, just as there should be a philosophy of middle-of-the-road policy.
If any noble Lord feels that what I am talking about is irrelevant at the present moment, may I assure him that I was not in collusion with the editor of The Times this morning, who has devoted several columns to this same study of what is the middle and how do you bring the middle about?
If I base myself on this question of the private and the public sectors, I must immediately say that of course it is not really possible in the time that we can allow ourselves, even in a fairly leisurely debate, to cover the whole ground; nor is my economic training or industrial experience anything like capable of doing it. None the less, I think one can provide a little provocation of thought, and I hope that the noble Lord who winds us up this debate will be kind enough at least to commend progress of thought on this subject.
If I may start negatively, I think that if you are advocating the mixed economy, which includes prosperity of the private and public sectors, the first thing you have to do is to take the negative aspect and say that you are against what I would call the men (or women) of 1875, and against those of 1984. The men of 1875, who are perhaps more common than is generally realised, are those who are so frustrated by a mixture of bureaucracy and high and complicated taxation that they quite sincerely believe that one ought, one fine dawn, to throw all these things out and go back to running the country in obedience to market forces. Of course, in a purely mathematical way this has great attractions, but obviously it is not "on" in this day and age. It is a common place to say that the economic progress made under such systems denies the existence of the callousness with which the disadvantaged people were treated in that age.

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But, equally, one is against the men of 1984.
The reason for that is that, whether willingly or whether without quite knowing what they are doing, they tend to lead more and more to a large monopoly of whatever business or activity it is; a monopoly unused to change, tending to produce what it has always produced and, in the end, slowing down social progress because economic progress has been slowed down. The 1984 view, again, sounds an impossible point of view, but it is the implication of much that is expressed in public economic discussion. If you follow it, very well, superficially, you notice in these days an ignoring of the principle of demand.
There must be—and the noble Lord, Lord Rhodes, almost stated it—continued full employment in what you are doing already, and institutions must go on doing what they are doing in the place where they are doing it. This is tantamount to saying that people cannot have what they want: they must have what we say they should have. Perhaps this economic heresay may have arisen from the legitimate claim launched by Professor Galbraith several years ago, that people do not know what they want because they are dazzled by advertising, but I think in time people get used to that. So that would be the negative part of my thesis.
The positive side, I must claim, derives a little from experience, an experience of over 30 years in Government followed by at least five years on the periphery—or perhaps a little further in—of the private sector. If you analyse the private sector and oppose it to the public sector, I think you will find—and, again, I am being very superficial—that the private sector is more quick in response, more adaptable and perhaps more exciting from the point of view of public relations and relations with the client. As opposed to this, the public sector is probably more thorough; it also has, sometimes rightly and sometimes not at all rightly, ultimately at its disposal far greater resources than the private sector. Indeed, the necessities of capital, particularly in small countries, have justified the great growth in this century of the public sector, and many activities would not exist if it were not for the public sector.
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But this suggests the foundation of an argument on which both the public and the private sectors can prosper in a mixed economy. It even suggests—and in this I go one step further than I have gone before—that there is a field (and I will come back to this later) of competition, within the same industry or the same activity, between the public and the private sectors. Therefore, I would state two propositions: that there is room in any well-organised and intelligently organised—to use the phrase used by the noble Lord, Lord Rhodes—economy, for both sectors; that they are not necessarily antagonistic in point of principle, even if they are competitors in point of activity. But if you are successfully to run a State in which there is competition between the public and the private sectors, then you must have rules and somebody must—if not administer—at least supervise those rules.
Perhaps I may give a very vivid example of what I am getting at. At the time when I was in India, there were some newly-established, extremely important and modern public sector steelworks. They were not doing particularly well, but they had ambitious output goals and there was no reason to suppose that in due course they would not achieve them. But despite that, India was suffering from a lack of steel and a large private firm informed the Government that, if the Government would give them permission, they would finance from their own resources a new steelworks which would produce an extra million tons of steel a year. After much argument this offer was turned down, on the ground not that the public sector was doing so well that the steel would not be needed, but on the ground that the public sector was really not doing so well, and an offer of that kind from the private sector would therefore create an unfavourable political atmosphere. This is what I mean by saying that the private and public sectors ought to be able to co-exist. But, of course, if there is political uncertainty imposed on top then, clearly, the competition between the two is meaningless.
That leads one on to good and bad examples of this. There is a very good example of competition, not between Government and private enterprise, but between public corporation and private enterprise in the BBC and the IBA. There

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is also competition between British Airways and British Caledonian Airways. There is a danger there that if certain equitable rules are not obeyed this competition will lapse. My argument is that this is not in the public interest because, as I have already tried to say rather too quickly and superficially, each side has virtues which the other does not possess, and therefore it is in the interests of a mixed economy, such as our country has, that both sides should be given proper encouragement.
My Lords, if this is to be done, and given the Indian case that I have just explained, it would be my feeling that to run this competition equitably and successfully, the Government cannot be the umpire. The reason is that, as we have seen over recent years, while ideology does not play a part in the running of a firm, it does in the running of Government policy. The point is underlined in the leading article of The Times. As Governments seem to have an irresistible urge to abolish each other's institutions and to change each other's policies, for the supervision of the economy and of the public sector you need a fair competition committee, as independent as possible—it is not a matter for a Monopolies Commission—which at least would watch the process, and at least would warn whether the national interest was likely to be damaged by the competition being governed by rules unfair either to the private or the public sector. This covers so many items that one cannot enumerate them, but an obvious one is the availability of money.
If we are to make the best of our economy and of the talents of the people working in it, then the financial rules do not have to be rigid, but have to exist. To put in a point in favour of the public sector, it has to be clear what part of the public sector is expected to be run as a business, and what part of it is demanded as a public service and, therefore, does not come into the business based balance sheet at all. There are many things that have to be straightened out in this way.
If I am advocating anything, it is that I hope the Government will repeat, in answer to the plea of the noble Lord, Lord Orr-Ewing, that they stand by the
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pledge to the private sector, because at the moment political tides tends to run against it despite the best intentions of the Government. This is partly due to reasons of semantics—words like "profit", and, incidentally, words like "workers", when, as most of us well know, often the hardest worker in the company is the chairman. We shall have to change our vocabulary. In order to fulfil the promise of our private sector and of our public sector, we shall have also to look very carefully at the whole question of industrial democracy, dealt with so superficially in the Ryder Report and in other writings. In other words, I believe that what the noble Lord, Lord Orr-Ewing, has done in provoking this debate is to provoke a projection of our economy into, shall we say, the middle future. He has invited us to think what are the ways in which the private and public sectors, while in competition, which keeps them up to form, can best serve the interests of our people as a whole. After all, if we are thinking as this age is thinking in terms of distributive justice to a greater extent than before, then we really cannot let the national income slip because we mismanage the relationships between the different sections of our economic effort.
I may well have made a confused impression, but I think I have a point. I hope it is worth further thought and farther discussion by noble Lords at some later time when we are out of the passionate intricacies of the Industry Bill. But I hope at least that the Minister, in answering this short but important debate, will give blessing to thinking ahead of this kind.
4.35 p.m.
Lord ROBBINS: My Lords, the evening is comparatively young and therefore I feel less inclined to apologise than I otherwise would have been for standing up and uttering a few random reflections on the extremely interesting subject under discussion. We should be extremely indebted to the noble Lord, Lard Orr-Ewing, for posing the very pertinent Question before your Lordships. It is intrinsically important, and has great contemporary significance in view of the momentous discussions of policy which are now going on.
My Lords, I wonder whether it can seriously be questioned that in recent

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times the degree to which the promises made in the gracious Speech, the subject of the debate this afternoon, have been faithfully fulfilled? I wonder whether any reasonable person would question the proposition that at the present time the conduct of private enterprise is more difficult and runs more counter to public sympathy and public policy than at any time in its previous history? The noble Lord, Lord Orr-Ewing, mentioned certain tangible circumstances which have to be kept in mind if one is reflecting on these matters. The noble Lord mentioned inflation. Personally, I have no doubts at all that of all the forces which have made more difficult the conduct of private enterprise in the last few years, inflation is quantitatively the most outstanding. Indeed, when one hears talk of a breakdown of private enterprise and so on, one is inclined to ask oneself: how is it conceivable that private enterprise, which proceeds by taking a view on the future, can possibly be efficiently conducted while the framework of the value of money, which is the responsibility not of private enterprise but of Government, is subject to such uncertainties?
Always when I am on my hind legs, I am in danger of boring your Lordships. I have insisted on the dangers of inflation on many occasions. Therefore, let me pass to two other circumstances mentioned by the noble Lord, Lord Orr-Ewing, which, in different degrees at different times and in different sectors, have militated against the fulfilment of these promises and the prosperous conduct of private enterprise; namely, the burden of taxation in its various forms, and the shape which has been assumed in recent years, not only under this Government but under the last Government in certain of its phases, as regards interventionist controls.
My Lords, taxation is a big subject. One could spend many evenings discussing the way in which taxation may be used either to stimulate or to impede the operation of private enterprise. I would hasten to say that when one is considering small changes in the tax structure, small increases or small diminutions, it is possible for reasonable people to take more than one view. Is it true in the abstract that an increase in taxation will make a man work less or work more? In the abstract I do not know the answer to the
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question. I think, however, that the answer is unequivocal when the man is in one way or another paying 98 per cent. in taxation, or even at much lower levels, considering how he should provide for his future, his wife and his children and so on and so forth.
But leaving that ambiguous subject on one side and coming to the more immediate question of controls, I ask whether it can really be questioned that the bias of public policy, and I would have thought even the assumptions inspiring many of the advisors of public policy, is in favour of measures of control which make successful conduct of private enterprise, successful in the public interest, more difficult? How easy it is for politicians, when considering cures for obvious evils, to fly to the apparently obvious expedient of reduction of profitability, price control and so on. Yet while no reasonable person would deny the necessity of price control in the case of statutory monopolies or enterprises of such a size as to command monopolistic positions in the market, I think that it is extremely difficult to make out a convincing case for the view that allover measures of this kind are not inimical to the conduct of private enterprise, which as various noble Lords have said—the noble Lord, Lord Lyell, for instance—needs profitability, which after all, in some measure is essential to the conduct of this sector.
My Lords, why is it that this has happened? I leave out of account the purely doctrinaire influences. Needless to say, if one believes that the only solution for social troubles, the only method of promoting rapid growth and distributing justice is the overall nationalisation of the means of production, distribution and exchange, then these minor interferences with the way in which the private sector functions are very small beer indeed and one will not have second thoughts about lending them complete approbation. But suppose one takes a less doctrinaire view of these matters, suppose one tries to be more empirical and asks what is it which in the mind of the average reader of the newspapers, the average viewer of television, brings about a favourable reaction to the proposal of measures of this degree of hostility to the successful functioning of private enterprise and the profitability which it needs.

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I can think, improvising at random, so to speak, of two causes at least which stick out for any unbiased observer of the current political opinion in our day. The first is what I call the mythology of the widow's cruse; namely, the belief that there exists a fund of profitability which can be squeezed indefinitely without giving rise to inflation, without giving rise to embarrassment with cash-flow, without giving rise to inefficiency in the conduct of industry. But, my Lords, all reasonable people, whatever their ultimate Utopia as regards the future of society, must agree, must know, if they have examined the statistics of the subject, that that is a delusion; it is a mythology; there is no widow's cruse. Profits have declined in the last few years to an extent which in earlier years one would have thought would have caused the whole system to jam up. If one contemplates any further OT widespread distribution of what profitability there is left in industry, the amount available to distribute to the lower income brackets, the income brackets, la us say, below £3,000 a year, is almost negligible. I have mentioned before in this House a pamphlet by Professor Phelps Brown, whose statistical authority in these matters is absolutely unquestioned, who says that it would be of the order of magnitude, on the 1971 figures, of perhaps 6 per cent.
My Lords, there is a second influence on public opinion over and above the influence of the mythology of the widow's cruse; that is the general belief that in some sense or other management is inefficient. Far be it from me to argue that management is never inefficient. One of the main arguments for the maintenance of a private sector is that the operation of the private sector, the operation of the market, is continually, where you have not got monopolistic blockages, tending to eliminate the inefficiency and reward the efficient by superior profitability. But the general idea is in the air that there is a peculiar disease of this sort which is endemic throughout the whole of British industry.
It is an idea which has been fostered in recent months by the incredibly superficial analysis of the Report of the Hudson Institute. I would hardly mention this matter in your Lordships' House if it
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were not for the publicity which these crude and hasty generalisations have received in quarters where I should have thought they would have been treated with the negligence which they deserve. I seem to remember that, in the last chapter of the Report of the Hudson Institute, the existence of your Lordships' House is invoked as one of the reasons for the slow growth of British industry. Surely, this is not to be taken seriously.
But there is no doubt at all that the thing is in the air. Shelley, the poet, once said that poets are the unacknowledged legislators of the world. There is a lot to be said for that generalisation if you stretch out the period sufficiently. In the short run there is no doubt that poets and literators have very little influence at all, but in the long run they can build up a climate of opinion which is inimical to rational judgment one way or the other on matters of this sort. I do not doubt at all that one of the influences on public opinion in appraising the alleged deficiency or inefficiency of management at the present day is the fashion in literature, which has prevailed since my young days, of making fun of management, of suggesting that its activities are rather trivial. Bernard Shaw built up an image of military operations in terms of the phrase, "a stupid soldier man", and images to the same effect have been built up as regards industry by 101 literators who have never entered industrial or commercial management. This kind of thing unconsciously tells.
I have nearly finished, my Lords, but one of the sad sociological facts of this society at the present day is the time lag with which there comes about a recognition of events which have occurred some time ago. This is particularly significant in regard to this question of management. I do not want to pass sweeping judgments on the management of my young days in the early years of the century, of the family firm, and so on. I guess that like most things in this world it was rather mixed, and that if one looked at the animal horizon at the board level there were a certain number of guinea pigs scurrying about who did not help very much. But the sort of thing which you see on a popular television film, or that you will read in, let us say. seven-tenths of popular literature about the goings-on of management of the

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present day and the composition of boards, is really completely out of date.
A modern board, be it efficient or inefficient, is not composed of a majority of guinea pigs; a majority of people who do not know in some sense or other the expert business of the concerns for which they are responsible to the shareholders. Go to lunch with any of the big companies at the present time and I guarantee that you will have an intellectual conversation as interesting as you get in most university common rooms. If you look round at the social origins of the people there, you will certainly find a number of people who have been—as I did not go—to public schools, and had social advantages of that sort. You will also very often find in predominant positions people who have come up the hard way; the technicians, the accountants, the lawyers, the engineers, and so on.
My Lords, I have indulged your patience too long. I would say only that I think that all this is a great pity, and it leads not only to mistakes about the conduct of policy but also to a frame of mind on the part of your contemporary managers which is not favourable to maximum efficiency or maximum progress. The chaps who compose the typical boards of good industries at the present time do not like being called "exploiters of the poor", do not like being called "parasites" and "enemies of society". They are on the defensive. They are apologetic, and very often apologetic where there is no need for them to be apologetic at all. There is far too much of that atmosphere if you go into industry at the present time.
When I come away from a conversation with very intelligent men of that sort, I sometimes think that it is getting just a little bit like the atmosphere described by Malinowski in his Studies of the Habits of Melanesian Natives, who say, "I am going to die on Thursday" and do. I do not say that the British industry is going to die on Thursday, but I do say that those who are responsible in your Lordships' House and elsewhere for the formation of public opinion should be rather more careful as to the remarks that they make about this important sector of our public life.
4.57 p.m.
Lord HANKEY: My Lords, I want to say just a few words despite the fact
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that it is beginning to get late. We always listen with great interest to the noble Lord, Lord Orr-Ewing, and I thought that he made his case for the private sector with admirable clarity. I also greatly enjoyed the speech of the noble Lord, Lord Rhodes. I was on a delegation to Russia in 1968, and it is quite clear that the Russians do require and need, and recognise the need for, profits. It used to be called "social accumulation", but now they have got that euphemism out of their hair and they recognise the need for profits, and where else will the income for the Russian State come from if it does not come from profits of industry? They are even trying to use the price mechanism to some degree.
Before we conclude this debate, I want to draw attention to the desperate situation in which our economy now is. I do not think that we can afford any more to-ing and fro-ing, with policies being started and stopped by the other Party, and the total frustration of our industry never knowing where they stand. I believe that what we are now watching is the failure of social democracy. This is a terribly serious thing because we have nothing to put in its place.
Why is social democracy failing? It is failing because we have not succeeded in ensuring that there is enough production in our economy to pay for all the benefits we are distributing. So long as we go on distributing benefits for which we do not pay, there will be inflation. It will go on and on. It does not matter which Party is in power, it will go on, it will get worse, and bring this country to its knees. I entirely agree with what the noble Lord, Lord Robbins, said.
Since we cannot have all this to-ing and fro-ing, it is time to recognise that we really have to arrange somehow, and our politicians have to arrange somehow, to have a form of co-operation between all men of good will such as we saw in the referendum. It was remarkable to see those men on the same platform co-operating together, and surely we have a much greater common interest in preventing this country from foundering and sinking into the sea all around, economically speaking, than even we had in the question of the referendum about Europe. How is one to achieve this? I believe it is time to recognise that we have to

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have a generally agreed national programme.
I deliberately avoid the word "plan", because the programme has to be based on data fed in by the intentions of industry, of the trade unions and of all the other organisations, including the Government, and it must be based on the intelligent use of resources. We have to decide what resources are available and we must not spend more, not even on things we like very much, like social democracy, defence, better roads and better education. We must not spend more than the resources available. I urge that an agreement is needed as to what are the available resources. The TUC and the CBI must be in it and—and I say this very solemnly to the Conservatives—the Government must be there because only the Government know what is the national interest. The steel industry knows how to make steel, the bootmakers know how to make boots, and the Government know what the national interest is. They must be in on the act.
This estimate of national resources ought to show what is and is not possible. We have had a tendency to do things for ideological reasons. We have done things and abolished things for ideological reasons, but—and I say this in all solemnity—it is time to become more pragmatic. To hell with the ideologists! If a thing works, it may be good. If it does not, it is no better because it accords with Conservative, Socialist or Communist idealogy. If it works, it is OK by me, and I believe that that is the attitude of many of our countrymen.
I believe that it is essential to provide for profits on an adequate scale and to include the private sector because I do not see that the Government, as they are now, are in a position to make the public sector profitable. If we increase the public sector more and more, we shall never be able to do what the Russians do and insist on the public sector being profitable. The manager of a huge Soviet combine will really have the skids under him if it is not profitable, and the Russians do not hesitate to distribute enormous benefits to people who do a little better than their plan. I do not see why we should let the Russians get away with that and allow our own country
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to sink because we cannot face the practical needs of the times.
I do not believe that either Party can do this alone. At the expense of being objectionable to both major Parties, I shall stick my neck out and say why. The Labour Party depends financially upon the TUC. The TUC is now largely paralysed by a small group of Marxists, a camarilla wielding enormous block votes. They have got themselves into a position in which they can prevent the TUC from doing anything they do not very much like. I recognise that. I am very much in favour of the TUC. I have the utmost admiration for Len Murray and I am sorry for him. It follows that, in order to get the money to conduct a General Election, the Labour Party has to be in with the TUC and, frankly, it has to make sure that the TUC is not too favourable to the other side. On the other hand, when the Conservatives are in power and are faced with the bitter opposition of a TUC wedded to the Labour Party and out to bust everything for political reasons, they never get the co-operation from the other side of industry which is essential to make a go of things. Therefore, without wishing to discourage the Conservatives, I do not think, after the experiences of 1974, that it is reasonable to hope that they can make the grade alone.
What are we to do? Are we to go on to-ing and fro-ing? Are we to allow the country to continue to sink? I do not believe that that makes sense. Private industry is sinking while we watch. It is much too heavily taxed and, as we go on with the enormous measures of nationalisation which are proposed—some of which, like the nationalisation of the ports on which I made a speech the other day, are totally irrelevant to our needs—I do not see that we can do other than slowly decrease the private sector upon which the Government depend for the money to pay for the social benefits and everything else we must have. In this respect, the position of the British Government is no different from that of the Russian Government. There have to be profits and that is where the money comes from.
There are two roads in front of us. One is the road of division. If we follow it, we shall go down into the sort of limbo in which we shall earn the condemnation

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of all future generations. Upon the other road we could go up together. I believe that it leads to a plateau of prosperity at least equal to that of our neighbours, friends and associates. I do not see any reason why we should be the poorest but six in the whole OECD area. The people of this country have common sense and genius running out of their ears and they must have a political system which enables those qualities to operate.
5.6 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, I am greatly daring in intervening in this debate, but I want to support the excellent speech of my noble friend Lord Orr-Ewing. In general, the debate has been most interesting. All sorts of points of view have been put forward. However, every now and again propositions are put up to me which seem to me to be interesting and helpful for the improvement of our economy hut which never really get talked about in this House. I simply want to raise one or two particular points because my knowledge is not connected with the overall problem. I support the point of view of my noble friend Lord Orr-Ewing as I always do, but there are several points which I find extremely interesting, which come forward from time to time but which I very much doubt will ever be raised here. Before I make those points, however, I should like to refer to the success of the Seahorse engine. It is partly controlled by the Government and partly by private enterprise. Private enterprise started it and, in the end, the Government came in with a grant. Now it looks as if it will be a great export success. That rather illustrates the two problems we are discussing; that is, whether a nationalisation policy or a private enterprise policy should be adopted.
On the points to which I referred, I should have been very glad if the debate had been later so that I could have had the facts properly assembled, but I should like to ask whether we shall have the opportunity to discuss in this House the arrangements under which the Crown Agents and some very interesting and well-known private enterprise firms are working together. I understand—I hope rightly—that the Crown Agents received a rather large sum from the Exchequer for developing what they are to develop
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in the commercial field all over the world allied with some absolutely first-class industries. I hope that, one of these days, we shall know what result awarding that money to the Crown Agents has produced for the economy. I believe that it would be of tremendous interest to our people to know what has happened as a result of that award.
The other day, listening to the BBC, I heard a most interesting speech which outlined a fascinating plan by British architects. They put forward certain plans which, if used according to the propositions they laid out, would mean that we should increase our export trade and our ability to gain competitive orders all over the world, which is of course very important. I have not been in your Lordships' House long enough to know whether any British architect is likely to speak on this subject, but it would be fascinating because it seemed to be a first-class plan.
It is quite easy to make a general speech; I could make a long general speech if I wished, but I will not because time is proceeding. But when we are discussing these very important matters, it is equally important to the Government and the Opposition—and to the Conservatives, if I may say so to the noble Lord who has just spoken—that we should know how these imaginative ideas which stem from our people are developed; and whether we should be the better as a nation for the plans which these people put forward.
I have been to Russia on various occasions. Although I am not at all pro-Russian, I like to consider the advantages and disadvantages of that country to enable these to be recorded in Hansard. In the early days, when I was interested in the Consett Iron and Steel Works, there were a number of problems, including that of whether or not we should sell to Russia. We always found that if we had a contract with the Russians they paid; and it is a good thing for any country to know that it will get the cash for the orders it has fulfilled.
The noble Lord, Lord Gore-Booth, was very clever in putting the proposals for nationalisation, for private enterprise and for a mixed economy. The other day, I was with some friends of mine. One of my friends was a very well-known management consultant. I said to him

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that I felt we were to have a mixed economy in this country, probably for ever and ever, as far as I could see. He has been all over the world, to every type of country, working as a management consultant. I asked him whether he could choose which country had the best plan for running a mixed economy. I was absolutely staggered at his reply and I wish to have it recorded in Hansard because I think it will be of interest. His reply was very quick and clear. He said, "Yugoslavia". I found that extremely interesting. I hope that when we are discussing the problems of running a mixed economy in this country we shall get information on how all the other countries have dealt with these problems. I know Yugoslavia very well. I am devoted to it as a country, but I do not know whether or not it runs a good mixed economy. But if we are to run a mixed economy—which, obviously, we are—I am sure that all your Lordships will want the best mixed economy possible. That is very important.
I have had many connections over a number of years with the mining industry. I recall that many years ago a great friend of mine was chairman of the Bolsover Colliery Company. This was at the time of A. J. Cook and the General Strike. The miners were asking, through A. J. Cook, for what were then called pit committees, and my friend said that he would be delighted if they had such committees. He instructed the management to set up pit committees. The management was told that details of the profit and loss of the colliery company and other information should be shown to the men.
This point comes to mind today when we speak about democracy in industry. The pit committees were set up, but after about six months the miners lost interest in them. It is very important that, if we are to run a mixed economy with the aid of social democracy, when the workers are brought in and are kept in touch with the problems of running industry, they do not get bored with it in the way that those miners did many years ago. I was very pleased that the noble Lord, Lord Orr-Ewing, initiated this interesting discussion. I am sorry that I did not know about it earlier; otherwise I would have been able to take a little more trouble
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to learn more about the facts on some of the matters I have mentioned. But I have always found, in political life, that if you do not take your chances when they come you do not get a chance at all.
Lord GORE-BOOTH: My Lords, before the noble Baroness sits down, I should like to thank her for what she said, and to suggest to her that the Yugoslav economy and polity are unique and that is their attraction; and that the economy inclines towards the public sector.
Baroness WARD of NORTH TYNESIDE: My Lords, I am very grateful to the noble Lord. When we are embarking on a new method of running our own economy there is much to learn about what goes on in other parts of the world, and it is very important that we should discuss all the facts that we can obtain.
5.17 p.m.
Lord ERSKINE of RERRICK: My Lords, I had no intention of speaking, but I was stimulated by this most interesting discussion started by the noble Lord, Lord Orr-Ewing. I have had a very long experience of both private enterprise and the public sector. I started in a Scottish bank—the noble Lord, Lord Robbins, talked about the "hard way"; and I came up the hard way—and for 20 years I was chief executive. Coincidentally with that I also took a prominent part in the running of the North of Scotland Hydro-Electric Board, of which latterly I was deputy chairman under my friend the noble Lord, Lord Strathclyde.
The great interest which I received in my banking life was in trying to encourage competent, young technicians to get a start in life. That could be done up to a point, under the normal banking methods of overdrafts. But, as your Lordships will know, the joint stock banks are not set up to give long-term advances. The point would always arise when it was asked what was the future to hold for men who had committed themselves by buying machinery and plant and who required further advances. I have previously referred to a Scotsman for whose memory I have the greatest respect, the right honourable Thomas Johnston, who was Secretary of State for Scotland. He was one of the ablest men I have ever met. He got me to work with him. I had no political affiliations. He

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was identified with the Labour Party, but he never once asked me anything about politics.
He said to me on one occasion: "Erskine, I am stuck with the fact which always seems to come to this: I have got so far but I now know that I require more permanent money to continue this profitable business. What can I do? You think about it, and tell me what we should do". I am not entering into a long dissertation or an historical record, my Lords, but the net result of that conversation was to put in train what is now the Industrial and Commercial Finance Corporation, and that is recorded in a new history of Scottish banking published only a few days ago.
I worked in the public sector with Mr. Johnson who, when Secretary of State, carried through the legislation setting up the North of Scotland Hydro-Electric Board, and in his later years he was Chairman of the Board, followed by the noble Lord, Lord Strathclyde. Unknown to many people even in Scotland, that Board was able out of its profits to connnect to the grid practically every small farm and cottage in the North of Scotland, without one penny of subsidy from the State. From these experiences of the private and public sectors, I am absolutely certain that there is room for both if they are managed with the best end in view for their constituents. I have the greatest respect for what the North of Scotland Hydro-Electric Board did for Scotland.
5.22 p.m.
Lord LOVELL-DAVIS: My Lords, in spite of what several noble Lords and the noble Baroness. Lady Ward of North Tyneside, have said, I could hope that the debate on this subject was not taking place this afternoon, and that noble Lords who have spoken might instead have made their contribution to tomorrow's debate initiated by the noble Earl, Lord Limerick, on improving Britain's export performance or, more specifically, in the debate on the Second Reading of the Industry Bill which takes place the day after tomorrow. Such a multiplicity of debates on similar subjects, even under ordinary circumstances, seems somewhat extravagant. The matter we are discussing arises from that passage in the gracious Speech which announced the
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Government's intention to introduce the Industry Bill. Noble Lords have this afternoon touched on matters affecting that Bill, but I hope I am not expected—
Lord ORR-EWING: My Lords, there was no mention of the Industry Bill. I have taken a passage straight out of the Prime Minister's wish "to encourage". It is not arising out of the Industry Bill; it is the other side of plans from the gracious Speech.
Lord LOVELL-DAVIS: My Lords, if the noble Lord will permit me to say so, this subject obviously has some relevance to the Industry Bill. The whole subject of industry is covered by the Industry Bill. I was saying that noble Lords have touched on matters affecting the Industry Bill and I hope I am not expected in any way to anticipate that debate. It would be discourteous to your Lordships' House were I to do so. The point I was trying to make was that the timing of this debate cannot help but place some constraints on what I can say today.
My Lords, I should like to put our present economic situation into the proper context, particularly in so far as industrial production and employment are concerned. The basic fact is that the background to our difficulties is the recession in production and trade, which to some extent has affected all advanced industrial countries. The noble Lord, Lord Orr-Ewing, said that output is up by only 2½ per cent. on five years ago. We are in the biggest world recession since the war and to compare figures at the top and bottom of the cycle is rather meaningless. The normal cyclical downturn has been accentuated as a consequence of the huge rise in oil prices and by strict counter-inflationary policies. Within this internationally gloomy picture, our rate of inflation is now higher than most of our major competitors. On the other hand, our industrial production, which is 5½ per cent. lower than in the autumn of 1973, has fallen less, for example, than in Germany where industrial production has fallen 12 per cent. during the last year, or in the USA, where it has fallen 9 per cent., or in Japan where the fall is 15 per cent. Equally, unemployment has risen less. While in the United Kingdom this has been 40 per

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cent. up on a year ago, the increase in Germany has been 164 per cent., in the USA 70 per cent. and in France 73 per cent.
On the trade side, we can derive some encouragement from recent trends. Most of the increase in our visible trade deficit during 1974 was accounted for by a worsening in the oil trade deficit. This year so far there has been a considerable improvement in the visible trade belance, due to a large shift of resources into the balance of payments, assisted by a favourable movement in the terms of trade. In the three months, March to May, there was a deficit of £424 million on visible trade, compared with £958 million in the preceding three months and £1,454 million in the fourth quarter of last year. In the three months, March to May, we were actually in surplus by £221 million on non-oil goods.
During his speech, the noble Lord, Lord Orr-Ewing, said that gross trading profits were down 20 per cent. in 1974. But, my Lords, this does not match up with the figures which I have here—the Treasury's economic indicator—which show that far from being 20 per cent. down they are 12 per cent. up. I can supply the noble Lord with the figures if he does not have them. One must make some allowance for inflation in 1974, as compared with 1973. Nevertheless, the noble Lord's figures do not match the situation as it exists. Life will not be easy, but world trade is expected to pick up at the beginning of 1976 unless forecasts are thrown out by factors such as an exceptionally high rise in oil prices. We must be prepared to take advantage of this. This means that industry must be investing now to be ready for the increase in demand which will result when both the overseas and domestic economies pick up.
Clearly, we must reduce the rate of inflation. Noble Lords will be aware of the Chancellor's recent statement of the Government's policy in this respect. Your Lordships would not expect me to say more about this at present.
Lord ROBBINS: Before the noble Lord leaves this subject, might I ask him for a purely factual elucidation? Will he tell your Lordships' House what allowance he makes for inflation when he is
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reaching his figure of the real profitability of industry?
Lord LOVELL-DAVIS: My Lords, I am afraid I cannot provide that information, but if the noble Lord wants me to write to him I will gladly do so. The noble Lord, Lord Lyell, said that the private sector wants to be left alone to get on with the job it knows best. That is far too general an assessment of the situation. In many cases, the private sector is not able to cope with the changing world; and I am not taking the view of management which the noble Lord, Lord Robbins, seems to consider so widespread and dangerous. Incidentally, I should say to the noble Lord, Lord Robbins, that this must be the first time that a moral has been drawn in this House from those islanders.
The noble Lord, Lord Lyell, also referred to the level of United Kingdom company taxation compared with our major competitors. I should like to quote the words of my right honourable friend the Secretary of State for Trade. On 7th May, he said:
"Given the different tax bases involved, it is difficult to compare our rates of corporate taxation with those of our major overseas competitors However, I am satisfied that we are broadly in line."
The noble Lord, Lord Orr-Ewing, also quoted tax levels in industry, and in looking at these levels we must take account of measures which the Government have taken.
I should also like to reply to another point raised by the noble Lord, Lord Lyell, concerning the Sandilands Report. I can only say that the Government will announce their views on this as soon as possible. One of the most important of the measures which the Government have taken is the tax relief on stock appreciation announced last November and continued and extended in April. This, together with an easing of price controls, has had a marked effect on industries' liquidity. In addition, we have significantly extended the role of finance for industry one arm of which, the ICFC, owes so much to the noble Lord, Lord Erskine. It is now able to provide up to £1,000 million in medium term funds for industry. In the eight months or so since the Chancellor announced this increased facility, I understand that it has received applications for loans totalling over £600

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million, of which a significant proportion have already been approved or offered. There is far more capital available for industry to invest today than six months ago and, in most cases, availability of finance is now not a constraint. That alone says much for the Government's policies. The noble Lord, Lord Lyell, said that for the Government the word "profit" has an immoral ring. The noble Lord, Lord Hankey, also implied this. It is not so.
Lord LYELL: My Lords, I did not stress that the Government had ever pointed out that profit was immoral. I said that that trend of feeling was in the country. I did not associate the Government by implication, or in any way, with that trend. I merely said it was there.
Lord LOVELL-DAVIS: Yes, my Lords, but I think there was a definite implication that people on the Government side were much more likely to consider profit immoral. I do not think this is true. We have tried to make it plain that we do not consider profit immoral.
I might also mention briefly some of the other measures we have introduced to encourage investment. We amended the Price Code in November last year, and again in April this year, to increase incentives for new investment, and for exporting. We are making full use of our powers of selective assistance. We allocated a significant amount for this purpose and to finance further industry schemes designed to assist certain industries to modernise and rationalise. For example, a scheme for the ferrous foundry industry is at present under discussion. I am sure that noble Lords opposite will approve of the Government's wholehearted use of legislation passed by the last Conservative Administration in this respect.
Noble Lords opposite may say that this is all very well—there is now neither a shortage of cash for investment, nor of a large range of investment incentives, but instead there is a dearth of profitable investment opportunities. In the current worldwide recession in industrial production and trade there is a reluctance to invest because companies fear that with
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demand at a low level they will be unable to generate the profits to justify that investment. There is, of course, much in this, but I would also say, emphatically, that it is essential for industry to invest now in order to be able to take advantage of the upturn in world trade which is expected next year, and, my Lords, I would suggest that the Government have done a good deal to create a climate in which this will be possible.
When, on Thursday, we come to consider the Industry Bill—and the contribution of the noble Lord, Lord Gore-Booth, to this debate, which was both sensible and moderate, was welcome even though, if he will forgive my saying so, I thought it might have fitted better into the debate on Second Reading—noble Lords will be able to take account of the tremendous and imaginative attempt that Her Majesty's Government are making to harness the resources of skill and ability which we undoubtedly possess to achieve greater industrial efficiency, more and better investment and a higher return on that investment. This is not a matter of "fiddling" with industry, as the noble Lord, Lord Lyell, has said this afternoon. Instead, it is that bringing together of the CBI and all the important bodies concerned that he advocated later in his speech. We aim to lay a foundation on which can be built a more certain and prosperous future for both the public and private sectors of industry.