THE ECONOMIC AND POLITICAL SITUATION

HL Deb 11 June 1975 vol 361 cc341-423

4.23 p.m.

Debate resumed.

The Lord Bishop of WORCESTER

My Lords, in resuming the debate on the Motion of the noble Lord, Lord Byers, I ask your Lordships' indulgence, as I speak in this important debate for the first time. One is bold enough to make only a few general remarks, and with the experience that lies behind this House I am hesitant to enlarge upon them. Much as I understand the feeling of those who have had anxieties about our joining the family of Europe, as a poor relation to a rich brother, much as I understand the anxieties about Government and sovereignty, and much as I recognise that as a nation we have always been most united when most threatened, nevertheless I am truly thankful that our people have committed themselves to real neighbourliness, and for the measure of unity that this has brought to the country. Last week's decision could, in years to come, prove to be more effective in preventing war than any treaty or participation in world organisations.

The Motion, in referring to the referendum, implies a relationship to Europe. As individuals, or indeed as British people, it is true to say that the man next door has never been so welcome to us as our distant friends. In the end the community we are looking for must start with those in the same street, and we have taken long to learn this lesson. I look forward, therefore, to seeing our links with Europe strengthened for their own sake. It is, of course, true that to some extent our motives for joining the European Community have been selfish; let us not delude ourselves about that. We will inevitably be developing this part of the world to the highest degree and we will be trying to make ourselves less dependent on others. But putting aside our immediate benefits, surely we should understand that we can never be fully independent, nor ought we to seek an independent style of living. A state of mutual interdependence reflects a truer evaluation of man.

We are basically a rich nation and have very great potential for wealth. The morality, however, of riches does not lie in their possession, but in how we use them. I hope that we will not now seek to protect our advantages but rather seek to make sure that we can use them for a much wider field. It is this sense of having an ability to share and of mutual usefulness to the world at large which takes away some of the sting we all feel about the loss of sovereignty. To share in the distribution of wealth is a vital part of sovereignty.

Perhaps I may be allowed to remind your Lordships that some 15 years ago the Convocation of Canterbury, one of the predecessors of the General Synod, passed a resolution expressing the hope that … the Government and people of Great Britain would be willing to make such sacrifices of independence of sovereignty as may be necessary to secure justice, peace and mutual respect between the peoples. It is, I believe, still the hope of all the Churches that the European Community will hold such a conviction dear, and not allow itself to become just a power bloc among others.

The European Community is a first step, and a very important one, but it will be a step backwards if we cannot secure its openness to the world. In her classic study Britain and the European Community Miss Miriam Camps wrote: There is no place for a Europe and a Britain united with it in order better to allow ex-colonialists to throw their weight about again. A wider European unity must pursue justice in terms of the East-West and North-South divisions of mankind, or it will come under the divine judgment consistently expressed in the Bible. How then, may we ask, do we expect ourselves within the Community to relate to the wider world? The work of drawing our empire into a community of nations is largely complete. With this achievement, where do we go from here? There are indeed whole categories of openings now before us: service to the world in building up international trust; service to the developing countries in bringing assistance greater in quantity and more acceptable in quality than we could ever have offered on our own. Yes, and this will mean that our cost of living and standards of life must rightly be related to the cost of supplying food to the whole world. Our historic preoccupation with cheap food, or our ready acceptance of private transport, dependent as it is on cheap fuel, may well need to give place to an awareness of others and their more justifiable requirements. Indeed, we must ensure as members of the European Community that the Lomé Convention is fairly implemented not just for ourselves but for those who join it.

I move on, shortly, to our internal situation and would make one or two points only. Since the White Paper of 1944 full employment has been integral to all our attempts at national economic planning. It must still remain so. Indeed, we want people to be creative and productive. We do not want to curb the power of people by unemployment. To maintain full employment is no longer just a matter of employer and employee; it involves us in finding a newly structured partnership between Government, employers, and unions, and this newly structured partnership will need to outline their common goal. As Bishop Wickham has said in his study called Growth and Inflation: It is the mutual interdependence of Government, unions and employers and their common interest that now has to be emphasised. That area of common interest is in fact enormous. This is what the Social Contract should be about. It should be beyond TUC/Labour Party agreement and include all who serve the economic planning of the nation as a whole. There are many noble Lords with a much greater knowledge than I have of the machinery of wage determination. But a solution to the earnings conflict must be found. I use the term "earnings" because professional people are just as keen as anyone else to protect their differentials. A clergyman is not paid an incremental salary: he is paid a stipend which should keep pace with the cost of living. It is the job that matters. We would ask of industry that they look at what a man is able to do, as well as what it has to pay him. In this respect the Industrial Committee of the General Synod, of which I am chairman, is convinced that some kind of national forum for the examination of differentials in the light of national resources is needed. Your Lordships will be aware of the specific proposals which the noble Lord, Lord Brown, has made from time to time. I believe that we should be able to devise machinery which would allow the unions to be responsible and to reconcile full employment with a measure of wage control and price stability.

Closely related to central planning is what is called "participation" in industry itself. The more complicated the issues become the easier we seem to find it—as I can witness in my own areas of industry in Worcestershire—to fall back on old styles of management. The facts, as I see them, are that the more involved manufacture and trading become, the more necessary it is to implicate people in consultation at every level: the more complex the issues, the more essential it is to involve all concerned in decisions. This is as necessary as it is difficult. The kind of European society for which we strive is one which seeks this goal of industrial community rather than overdeveloped management. The twin impersonals—the complexity of modern technology and the distance of modern government—must not be allowed to dominate our economy under the cover of such titles as "the technical revolution" or "rationalising the European decision-making process ". At these points we are indeed required to be vigilant.

Lastly, the noble Lord has drawn attention to the "broadest national support ". In obtaining such it is clear that the demand is certainly growing for a rallying of the Centre. We cannot here debate why the Centre has failed to achieve a viable solution to our economic problems. However, I believe we need to be concerned with the fact that our electoral system broadly favours the extremes. I would refer to The Times leader of last Friday, and express the hope that your Lordships will take every opportunity to consider the case for a reconstruction of our representative system. I speak with gratitude for your forbearance in this my maiden speech.

4.35 p.m.

Lord ARDWICK

My Lords, through the absence of the noble Lord, Lord Greene of Harrow Weald, I have great pleasure in following the right reverend Prelate and in congratulating him upon a most excellent maiden speech. I think that I speak for all of us when I say that we admired not only the strength of his convictions but also the sturdiness of his voice. Indeed, if all noble Lords were similarly gifted and used their vocal organs like this, we should be able to dispense not only with microphones but with our deaf aids as well. I might say that the right reverend Prelate spoke with greater ease and confidence from these Benches, which are difficult places to speak from, than I did on the one occasion when I attempted to speak from the pulpit. During the course of my speech I shall take up some of the remarks he made about the broadening of the Social Contract.

We are all indebted to the noble Lord, Lord Byers, for this debate, although it is only a few weeks since we had a similar debate initiated by the noble Viscount, Lord Watkinson. Of course the problem has not gone away in the meantime; in fact, it has become more acute. However, now that the referendum is over we can think out the problem inside a permanent framework. Previously, we had the tempting but dangerous option of pulling out of Europe and creating a siege economy, an option which has now been written off. Although I am indebted to the noble Lord for introducing this debate, I am less happy about his speech. He began by making a plea for national unity, but he was soon chiding us on our economic programme, going through it item by item almost as though, more in sorrow than in anger, he was going to move a rather gentle Motion of Censure on us. I think that what the noble Lord was saying was that if only we were a Liberal Party what a consensus he could have with us! But we are not a Liberal Party; we are a Labour Party, and although we can find a consensus with the Parties on the main strategy of our economic situation at the moment, it cannot be at the expense of ditching the whole of our economic programme.

I am glad that we are debating this Motion this afternoon, because the most constructive speech a few weeks ago of the noble Viscount, Lord Watkinson, was under-reported and was interpreted in some of the newspapers simply as an attack on my right honourable friend Mr. Benn. I thought that the noble Viscount's strictures on Mr. Benn in the context of the City or of industry were exceptionally mild. Indeed, my right honourable friend the Prime Minister made a rather similar point when he genially said that Mr. Benn is really an Old Testament prophet without a beard who is always thinking of the new Jerusalem. That particular problem has been neatly resolved, and I think the Government have now embarked on a post-referendum course. Mr. Benn's head has not been delivered, as some people feared, on a charger to the Tories. I think that we have to go to the Old Testament to illustrate what has actually happened. The Prime Minister hath anointed his head with oil and perhaps, such is Mr. Benn's enthusiasm, that in his new and immensely rewarding technological task he will quickly get over his disappointment and feel that his cup runneth over.

I should like to look again at the inadequately reported theme of Lord Watkinson's speech. May I recall to noble Lords that he began by speaking of the need for Britain to recover some part of the unity and comradeship with which our nation has faced difficulty in the past. He was generous enough to praise the courage of the Chancellor of the Exchequer, and particularly his attempt to tell the nation the truth, that if the unions go on demanding pay rises of 30 per cent. on top of the existing 20 per cent. inflation, we shall drive ourselves into massive unemployment and bankruptcy. The point of the noble Lord's message was that the Government had yet to mend the error of imagining that one can succeed with a Social Contract without involving the employers, the professional men, the City and everyone else, which I think was the point the right reverend Prelate was making. His practical proposal was that the CBI should collaborate with the unions in a body constituted rather like the Export Council, where unity was achieved for a national purpose, and he concluded by saying that he believed that the Prime Minister alone could create the spirit of collaboration.

It looked as though the seed had fallen on stony ground (the right reverend Prelate will excuse these Biblical allusions; they are not put in for his benefit, they are political cliches) yet some weeks later, on 14th May, the Prime Minister in his broadcast with Mr. Jay made a positive response to Lord Watkinson while administering a routine kick at noble Lords who in the past had failed to condemn property speculation and asset stripping. I was delighted when my right honourable friend proposed that the Government should sit down at the beginning of each financial year, and at intervals thereafter, with the employers, the trade unions and what he called "all other useful people" and say what they thought the product of the country would be the next year; that so much would be committed to the social services and essential Government expenditure. And that then it should be explained that if anybody took more out of the economy than was left by way of wages, salaries, profits, capital gains and so on, the Chancellor of the Exchequer would have to explain that he would have to take it back in taxes, in insurance contributions or in cuts in the social services. Having reached a concensus, these results would need to be monitored every two or three months.

I am afraid that not much more notice was taken of the Prime Minister's important proposals than had been taken of those of the noble Viscount, Lord Watkinson, a month or two before. The idea in the mind of the Prime Minister seems not to have been the replacement of the Social Contract but a method of filling it out, basing it more on prior discussion and consent as to what could be afforded and what good things would have to be sacrificed if too much was taken out of the economy; and the kind of body he had in mind was Neddy-like, not Neddy itself. I took heart because the paths of the noble Viscount, Lord Watkinson, as the deputy chairman of the CBI, and of the Prime Minister, were happily converging. The model of the Export Council which was proposed was certainly a Neddy-like body.

Now a third voice, and also a voice of authority, has been added to the dialogue, that of Mr. Jack Jones, who has spoken in an equally constructive way in recent days. This morning the Economic Committee of the TUC has been meeting, and perhaps I should say that this body is much nearer to this Chamber now than it has ever been, as it includes no fewer than three noble Lords who sit on this side of the House, the noble Lords, Lord Greene of Harrow Weald, Lord Allen of Fallowfield and Lord Briginshaw.

It was Mr. Jones' intention at this meeting to propose that the CBI and the TUC should get around the table for more serious discussions than they have had for some years. It is an important step he is trying to get his colleagues to take and I think he will succeed in getting them to take it, for up to now the TUC has hugged the Social Contract to its bosom as a deal between the Government and itself and now one hopes that the TUC are changing course and bringing in the other people. There are, in fact, two important proposals on the national agenda. One is the CBI plan to bring inflation down to 5 per cent. over the next three years and the other is the TUC plan to hold wage increases below the rise in the cost of living instead of above it, as has been the case in these disastrous last few months. Of course it will not be easy for either body to secure consent to these plans and perhaps even harder to get them totally implemented. But the way men's minds seem to be working in trade union circles is that they should nominate the going rate far settlements in the next pay round, which begins in the autumn, while the Government tighten up price control. Somewhere in all this is Mr. Jones' own idea of an equal pay increase that everyone, from the sweeper on the factory floor to the man in the boardroom can have. In other words, the poorer half of the nation would do better at the expense of the richer half, who would do worse. I like that, but I do not expect that it will be possible to secure the consent either of the CBI or of the craft unions, because both regard the differentials enjoyed by bosses and by skilled workers not only as essential to efficiency but also as sacred. However, I think we are at last getting somewhere; realism is breaking in and a tripartite arrangement is much more realistic than any dream of a political coalition, certainly at this moment.

Mrs. Thatcher has promised Opposition support for what the Opposition regard as wise measures to deal with the economy, and has recalled that the Opposition not only supported the Government but came to their rescue over the European Community and over defence. But such offers from an Opposition, however patriotic, benevolent or well-intentioned in the national interest, are dangerous gifts. They deepen the suspicions and animosities of the dissident groups in the Government Party and they tend also to take the dangers out of Party disloyalty; what begins as a real olive branch is easily transformed into poison ivy. Thus, Governments have to beware that if they come to depend on the Opposition in order to get their programme through they are on the road to a swift General Election which they will lose. I think that even the proposal of the noble Lord, Lord Byers, to have a broad platform is unrealistic. I do not see how one can expect noble Lords on this side of the House to go on a broad platform on condition that we drop the programme on which the Government were elected.

4.57 p.m.

Lord BOOTHBY

My Lords, the whole House will be grateful to the noble Lord, Lord Byers, for initiating this important debate, and will also wish to congratulate the right reverend Prelate the Bishop of Worcester on his excellent maiden speech in a voice which I venture to suggest can be compared only with my own.

We are in Europe but we are only back to square one. Nevertheless, we are once again on the board. We fell off it altogether at one time. Over a quarter of a century ago we turned everything down—the Coal and Steel Community, the EDC, the Strasbourg Plan for Economic Union and the Common Market itself when we refused even to send a delegate to the Messina Conference. The Foreign Office, under Ernest Bevin and Anthony Eden, were implacably opposed to the whole conception of any kind of European unity and those of us who at that time represented this country in the Consultative Assembly, at Strasbourg had a ghastly time. We kept on sending agonised telegrams back to the Prime Minister and the Foreign Secretary, none of which was ever answered.

We are now at the beginning of the task which we should have begun in 1949. We have to build up an effective European Parliament, and the question which arises is whether it should be by direct election. I am inclined to think that it should be elected by both Houses of Parliament because I should not like to see representatives of this country going to a European Parliament and being completely out of touch with this Parliament; and I am sure that suitable arrangements could be made by the Whips of both Parties to enable them to have the necessary leave of absence and pairing arrangements to make this possible. The House of Commons and this House should elect those who are to represent this country in the European Parliament, and then we should have a true democracy. There should, of course, be a strengthened Council of Ministers which should meet regularly. I am not afraid of losing sovereignty, as it is called. Every time we sign a treaty we lose a certain measure of sovereignty.

I want to see what de Gaulle once called "an imposing confederation of Europe" in which we should not surrender sovereignty, but should exercise jointly by consent certain defined sovereign powers. I believe all this will take time. We are only at the beginning, but I believe that we are now embarked upon a process of building Europe as our base which will last for generations to come. I believe that we should be keen and enthusiastic, but that we should not hurry too much but do it carefully and build an edifice that will stand the test of time.

My Lords, I have only two other points to make: the first relates to inflation. Inflation formed a great part of the speech of the noble Lord, Lord Byers, and it has dominated this debate. Our base is in Europe, and it is the only base we have; but the Continent of Europe cannot haul us out of our present crisis. We can do that only by our own efforts. Over the last two or three years, I have felt that this country has been going through what I can describe only as one of its "lousy" moods. My mind went back to the years 1935 to 1939, when we would not face up to the menace of Hitler, when we would not rearm, when we would not confront the realities of the situation. Inflation is almost as great a menace as Hitler was, and it is more insidious because it is less tangible. When Hitler gripped us by the throat, we came to our senses and rose to the occasion. Inflation will sooner or later get us by the throat if we do not rise to the occasion. There is still time to avert the disaster of a galloping inflation, than which almost nothing could be worse. Inflation on this scale is the greatest menace which confronts this country today. It is the greatest menace which has confronted it since 1940.

My Lords, a Department of Industry survey showed the other day that there was a steeply falling trend in manufacturing investment through 1975, at a rate not previously experienced. It predicted a 15 per cent. lower rate this year, in real terms, and no recovery at all in industrial investment next year. If that is correct, should there happen to be—as is widely predicted—a resurgence of world trade, we shall find ourselves unable to be competitive, and we shall play no part in it. The Times, in a leading article the other day, said truly enough: The problem of industrial investment is not just to spend money: it is to build the right plant for the right market in the right place at the right time. And the test of success is profitability. That is not always recognised on the other side of the House, if I may say so. In a mixed economy, the test of success is profitability and that is equally true for the public and the private sectors.

Meanwhile, by underwriting, through inflationary public finance, a continuation of excessive pay settlements we are pricing ourselves out of world markets. That is a terrifying thought. The threatened railway strike which, without being afraid of the accusation of "union-bashing ", I venture to suggest is really inexcusable at this juncture of time when we are facing the crisis we do—because they have had a firm offer of a 27½ per cent. increase—is a typical example of what is going on. When the Secretary of State for the Environment—an able, leading member of the Cabinet—says in a speech in the country that we are now embarked upon a suicidal course, it is time we sat up and took notice. Confidence is necessary for increased productivity in this country; and that is what we need above everything else.

Here, I believe, is where the Prime Minister comes in. The Prime Minister is at the moment in a very strong, position. He has had a great personal triumph. He took a tremendous gamble on the referendum and it came off. I suggest that he should himself take charge of an anti-inflationary policy on a nationwide scale. He now has at his side an old and trusted friend in Mr. Eric Varley. Between them, they can do a great deal. They should take fresh initiatives and call fresh conferences, as suggested today. They should start on a new course altogether, because the Prime Minister is very strong in the country. We want a new and valid social contract. The present one is neither social nor a contract, and it has almost completely failed. We want to relate wages to productivity as well as to the cost of living. That is an important point which the trade union movement is beginning to realise.

The truth is that we are living far beyond our means, and that the spending spree goes on among those who are getting ever-increasing wages and salaries every week. The increases are not confined to the workers in the powerful trade unions. They go to the chairmen of the great corporations, including the public corporations, who have astronomical salaries. The spending spree continues: new refrigerators, new television sets are being replaced every two years instead of every ten. Cars are bought from Sweden and from Japan. Why?—because we will not or cannot make them ourselves, though we could perfectly easily do so. This goes on while the vast majority of the workers—and when I say "workers" I mean workers by hand or white collar workers—do not receive automatic rises in their wages and salaries to match the rise in the cost of living. Together with all those who live on fixed incomes, and the pensioners and retired people, they see their savings steadily eroded by this accursed inflation; and they can do absolutely nothing about it. I repeat, they are in a majority.

I hesitate to detain your Lordships any longer, but before I sit down I want to read a brief quotation from a leading article in The Times newspaper. It summarised all I am trying to say in about 100 words. I shall repeat it for the record and I hope that some of your Lordships will read it in Hansard tomorrow. The European base is only a condition which makes recovery possible. We have suffered a gradual and continuous decline in the competitive efficiency of industry; that must be reversed. We have invested less and usually far less than any of our major competitors; that must be reversed. We suffer from inadequate management, from archaic labour relations and from trade unions which are at once extremely powerful and. in terms of the search for higher productivity, very backward; those weaknesses must be reformed. In particular we inflict on ourselves more inflation than our competitors; that must be ended. In that single paragraph, I feel that our economic position has been better summarised than I have ever seen it done elsewhere. I conclude by mentioning something which I am surprised the noble Lord, Lord Byers, did not mention because I feel sure he will agree with me. I believe that there ought to be electoral reform in this country. I feel it very strongly. I feel that the people of this country proved in the referendum campaign that they have not at the moment precisely the kind of Government they really want. I believe that they proved that they are left of centre. Of one thing I am quite certain: that 5,300,000 votes get 13 seats in the House of Commons, whereas 11,400,000 votes return 319 members. Nobody can tell me that that is not a travesty of democracy[...]because it is!

The people of this country—the referendum has finally proved it—are not truly represented in Parliament today, and that should be rectified. We must have a representative Government. I like the German and Irish models of proportional representation. But the time to talk about which kind of proportional representation we should have has not yet come. I am pleading for a Royal Commission to examine our electoral system, because it is breaking down and we are not getting the Government which the people want or deserve. Therefore, coupled with my appeal to the Prime Minister to take a personal hand in this, while his position in the country is so strong, I would add an appeal that a Royal Commission be set up to examine our electoral system, so that we should get the moderate Government that I believe the mass of people in this country most desire—

Lord BYERS

Before the noble Lord sits down, may I say that I would not wish him to think that I had in any way abandoned the subject of electoral reform. I think that a plea for it comes better from him than from me at the moment. But I plead with him not to invite the country to embark on a Royal Commission. The matter is far more urgent than that. We must take action within the next year—not set up a Royal Commission which would report in 1983.

Lord BOOTHBY

Very well, my Lords, I withdraw my suggestion for a Royal Commission, and say that we must have electoral reform this year.

5.2 p.m.

Baroness SEEAR

My Lords, first I wish to join those who have congratulated the right reverend Prelate on his maiden speech and on the way in which he has stirred us to think about issues connected with this debate, but connected perhaps on a longer time perspective than some of us have been considering them. I also wish to apologise for the fact that when I cease speaking I shall perforce have to leave the Chamber for a little time, because I have to chair a meeting elsewhere. However, I very much hope to be back before the Minister winds up, but if I am not I tender my apologies in advance.

It seems to me that one word in the Motion now before the House has been overlooked. That word is "urgent". This is not yet another economic debate; it is about the urgency of the situation in which we find ourselves. The long-term economic issues have been discussed again and again with the greatest ability in this House. But I do not detect today a recognition that we are heading for the worst recorded crisis we have had so far as economic crises are concerned. I need not go through the analysis again. I do not need to remind your Lordships that yesterday the pound dropped to its lowest recorded level. Many of your Lordships will know that many people in this country—not only the spendthrifts and the short-sighted—are saying: "If I have any money I spend it now, because it is not going to be worth anything ". People in this country are losing confidence in their own currency.

If this happens, being in the Cornmunity—strong supporter of that though I am—will not get us out of our difficulties. If the pound continues to fall, let us take a cool look at what that will mean. We know that this country has to import 80 per cent. of its raw materials and nearly half its food requirements. If it has to buy 80 per cent. of the raw materials and half of the food in greatly devalued, and continually devalued pounds, our prices must rocket. That is not a matter of politics; it is a matter of arithmetic. Perhaps it is arithmetic which far too many people refuse to do. But that is how the sums add up.

We say—and it is all too true—that at the moment we are suffering from acute inflation. But what we are confronting today will be as nothing compared with the kind of inflation and the kind of price rises we shall face if the pound continues to fall at its present rate. It will be real hyper-inflation, and all that that entails in political disturbance, in social upheaval, and in social injustice. I assure your Lordships that I am not exaggerating. It is the urgency of the situation, rather than the situation itself, which we from these Benches wish to debate today.

It is because of that urgency that we are saying not that we need a coalition—and here I greatly agree with my noble friend Lord Byers and the other speakers today. Democratic politics depend on Parties, and on loyalty to Parties, and the integrity of politicians to their genuine beliefs. Coalitions, except in emergency situations when there is one objective overriding all other objectives, involve a surrender of dearly held beliefs which does not go well for any long period of time with the maintenance of the integrity of politicians. We are not asking for a Coalition. A state of real emergency may be upon us, in the terms I have attempted to describe, within a matter of weeks. We may well have one of our recurring August crises, except that it will be a great deal more severe than before. We must view the situation within a matter of weeks.

We are asking: is it not possible to find a basis of minimum agreement on things which absolutely must be done in the short run to deal with this all-too-threatening situation of today? Action must be taken now—not in a year or two from now when we have had the opportunity of new legislation changing one institution or altering another. When one is in a situation of this kind—be it in business, in our personal affairs, or in our national affairs—it is essential to define what the overriding objective really is, and then to state what measures must be taken to achieve that objective. It is essential to get the analysis right. I would say that the objective is not economic recovery; the objective is the maintenance of a civilised and free democracy, and economic recovery as an essential means to that end.

It is very important that it should be put to the country like this. Men are not stirred by economic objectives, but they are stirred by the great political and social objectives. It is the maintenance of those which requires economic recovery, which makes our determination to achieve economic recovery justified. If that is our objective—and I doubt whether anyone in the Chamber would disagree—what must we do to achieve it? There are clearly two requirements. There must be a great deal of inter-Party agreement and agreement among those people committed to no Party. Also, we must conquer inflation, we must get it under control, and we must do it in a way which does not involve the creation of unemployment. I believe that the action needed to achieve our objective is something behind which the country, as a whole, would rally with a minimum of disagreement. That is what we must do.

The next question is: how can we do it? We have discussed this again and again in economic debates. I appreciate that it is perhaps easier for us on these Benches to say this than it is for other Parties, but the first thing we must do is say loud and clear that recovery cannot come without sacrifice or reduction in the existing standard of living. It is absurd to go around saying that pay increases must be enough to maintain the standard of living, because that in the face of a nil growth or a very low growth, or even a negative growth on some occasions, is what is landing us in the situation we are in today. We cannot go on maintaining that everybody is always entitled by some divine law to a continued maintenance of the existing standard of living, let alone its improvement which is implicit in the approach of most people to the matter.

Secondly, we have to tighten price control somewhat. We cannot screw it down completely, for money for investment must be found. Actually, there is rather more money for investment now, thanks to the timely changes made by the Chancellor in the Budget, than there was 12 months ago. What is lacking now is not so much the money as the confidence that there is any point in investing. It is possible, perhaps, to be a little tougher on price control than we were able to be, or could ask to be, nine months ago. But any tightening of price control must depend on restraints on pay; because what we cannot have is any tightening of price controls accompanied by runaway pay settlements.

How are we to do that? In the private sector there is already a sign of some curtailment of the ever-rising price increases. There have been some settlements which are not totally discouraging; but I would not put it much more positively than that. It is in the public centre that the biggest dangers arise. Here surely we can ask that the Government, together with the trade unions—because it is the trade unions and the Government here; there is no CBI directly concerned with pay increases inside the public sector—should agree on what is a reasonable level of pay increases in the public sector, and that the Government should make it clear, which I agree they are beginning to do, that there is a level beyond which they are not prepared to go. One of the troubles with the public sector and the nationalised industries is that they are not subject to the usual disciplines of the market; that they suffer from the burden of immortality and it is impossible to bankrupt them, and therefore there is not the restraint on them which sooner or later, and all too often later, comes from inside the private sector.

May I suggest, in approaching the kind of agreement about pay that the Government could enter into with the trade unions with regard to the public sector—and this can apply also to the private sector—that we should get behind the reason for the astronomical claims that we are getting at the present time and see whether we can meet the demand behind the demand. The demand behind the demand is that people should not be overtaken by price increases, the fear that runaway inflation is going to catch them if they do not anticipate by the larger wage increase. Nobody otherwise can think it makes sense to have 30, 35 or 40 per cent. pay increases. It is not based on productivity; it will not be obtained by getting it out of the higher paid. I would remind the House that two years ago it was a fact that if you took all the incomes above £3,000 a year and redistributed them among those who were paid less you would get for those with less than £3,000 a year a once-and-for-all 5 per cent. increase; and any further increase in real income had to come out of growth. That is a fact. If that were true two years ago, what can the position be today when the average earnings have reached £60 a week for men and £60 for women where that £3,000 two years ago was the line taken for dividing the sum. It is not coming out of these people who are getting the high pay. It may be an irritation. I agree that luxury expenditure is a social sin of the first order at the present time, but it will not be a means whereby we finance the big pay claims.

One of the simplest ways of controlling excessive pay claims is to have a longer time scale. Why not say, "All right, if you are to have 30 per cent., then have 10 per cent. now and another 10 per cent. in six months' time if the cost of living has gone up by X per cent. and another 10 per cent. at a further date "? Let it be spread out over a longer period of time. It is the insurance against rampaging price increases that people are seeking in the high pay claims; it is the only rational explanation of why they are coming. If we can prolong the time-period—and I put a period of months on it; that is a matter for negotiation—but, if we can guarantee it will be there but can prolong the time-period over which additional payment is made, then we have made a beginning on the control of the part of inflation which stems from excessive pay increases.

In addition to an agreement, particularly in the private sector, to phase pay, to spread pay increases over a longer period of time, the next thing is to tackle public expenditure and, particularly, I suggest, in local government. I will turn in a moment to what we might do there. The fourth point of great importance is to change the attitude towards and the practice of retraining and redeployment of labour. There is no question that a great deal of British industry is still very overmanned. I know that when we last debated this subject the noble Lord, Lord Beswick, said that there was, inside the sphere of the training services agency and the training facilities in the country as a whole, an excess of facilities over the demands made upon them. There are opportunities for training people; and those opportunities are not being taken up. But we need urgently now to do this.

Inside the Community, it stands to reason that the structure of industry, the distribution of industry, that we have had in the past is not appropriate to the opportunities and the disadvantages—for there are some disadvantages—of being inside the Community. We need a different distribution of labour. Above all, we need to persuade people not to go on in an industry which does not need them, where their services are not required. What overpayment is greater than the overpayment for doing a job which does not need to be done? There needs to be encouragement by a whole variety of means which could be discussed and for which I am certain that the trade unions would have many suggestions to bring forward; there needs to be financial encouragement to get people to come out of overmanned industries and to go into the industries with a real future; to make this a central and not a peripheral issue is one way to contribute quite quickly—but certainly so over a longer period—to a continuous control and an improving control over inflation.

I would say that what we have been discussing so far are matters that we have discussed again and again in our economic debates. What then is the difference now, beyond the difference in the urgency of the situation we have today? I believe the difference is a discovery, for a variety of reasons, that the country is crying out for an opportunity to do something about the problems. This surged up in the referendum campaign; but there are signs all along the line. There are the speeches which have been made by a number of very courageous trade union leaders; speeches which have come from the Consumers Council; suggestions which certainly would be backed. One of the noble Lords opposite, the noble Lord, Lord Davies of Leek, referred to the problem of housewives. Certainly, housewives would back anything, any changes almost that will lead to a control over rising prices and make our money worth more. The country as a whole, beyond a doubt, wants this problem tackled, and wants to take a part in tackling it. In the last economic debate I urged noble Lords to try to find a way, something perhaps along the lines of the referendum campaign, of getting the problem to the level of the people themselves, getting them involved in the problem. I said then, and I ask your Lordships' pardon for repeating it—I believe it is more relevant today than it was when we had that debate before the Recess—that we need a campaign to get the facts over to the people, to tell them the things which need to be done along the lines I have been suggesting this afternoon, and to tell them what they can do.

My Lords, what can they do? When questions regarding restraint over pay are discussed, it is always said: You will run into confrontation with the trade unions. Confrontation "is one of the words with which we have been mesmerised. How do you stop confrontation with the trade unions? It is not by having an all-out battle, but by saying to the rank and file members, once they understand what is at stake: Go to your branch meetings, vote and write to your M.P.s. Go to your officials and say. "We want to have a more moderate and sensible policy on pay because we know this is the way in which inflation can be tackled ". We must stir people to take a part in this themselves. I believe the time is coming, and coming soon, when they will be willing to do this. On public expenditure people could find out from their local councils how to make some reduction in spending at local authority level. I do not wish to make a Party point, but there was a case in Liverpool where they even managed to reduce the rates. Maybe that is overoptimistic, but is it completely impossible that local authorities should say, as for example the institution for whom I work have said: No replacements when people leave unless the case is proved right up to the hilt that you cannot possibly manage without them. Why cannot the ordinary electors challenge their local authorities to say, with this enormous rate increase, that something has to go? You have to make choices between objectives. You cannot do everything at once; something has to be curtailed. The electors should insist with their local authorities that these reductions be made. Everybody is waiting for everybody else. This is something which has to be dealt with.

There is one other change which is more difficult and more fundamental. We have the attitude that we are victims. Up and down the country there is a tendency to lay the blame on somebody else for the mess we are in. The fact of the matter is we are in the mess because we precipitated it ourselves. We are perfectly capable of taking up our beds and walking once we recognise only we individually can get out of the mess. For far too long far too many people have been encouraged to believe it is the wicked capitalists, it is the boss, the politicians, the civil servants—that it is everybody except themselves. But in a campaign in the country we could get across the idea that, if we individually do something, we can get out of this mess very easily indeed. It is five to 12; we have the strong feeling that we are in a car careering downhill; that the brakes are not working, and that there is precious little sight of anybody in the driving seat. I say to the Government: For God's sake get in and drive!

5.25 p.m.

Lord MAIS

My Lords, may I commence by apologising to your Lordships if I have to leave the Chamber before the end of this debate, for I have a longstanding evening engagement. I hope we shall complete our debate in time, but if not, I hope the House will accept my apologies. May I also associate myself with other noble Lords in thanking the noble Lord, Lord Byers, for givng us the opportunity of debating this very important subject at this particular time.

During the past few months, and certainly during the past few weeks, we have to some extent been able to forget the economic straits that this country is in or at least we have been able to push that into the background; so busy have we been with the Common Market that all else seems to have sunk into insignificance. I fear many have felt that success in the referendum, and the confirmation that we would stay in Europe, will be the be-all and end-all of our economic problems. I was in favour of our staying in, but I never laboured under any delusions that, by staying in, it would necessarily be the answer or panacea to our present problems or ills.

The economic situation of this country has been steadily deteriorating for some time. We are now in the position of a country which has, over a long period, steadily been spending far more than we earn. There was a time—and I remember it; it cannot be all that long ago—when a family, a company or a country when faced with hard times, tightened their belts; they gave up things which they had been used to having. They reduced their expenditure and standard of living. They measured up to that and accepted it. The problem today is that this is not accepted. If anyone's standard of life is affected in any way at all, the answer seems to be that the wage packet must be increased to offset the shortfall. There is no question that first of all, one should endeavour to reduce one's own expenditure. That is not only a matter for individuals, it is a matter for companies. Many companies have had to do it. It is also a matter for the country, the Government and for local government.

I support anyone, whatever his walk in life, and whatever he does, for getting paid as much as he can for the job he does. But there must come a time, whether it be with a company or a country, when neither the company nor the country can afford to pay any more. That is a situation in which we find ourselves today. If we are to come out of our present difficulties, it can only be done by a policy which relates earnings to productivity. I know that in many industries it is difficult to measure productivity, but in that case it should be tied to the profitability of the company or the earning power of the company. If we are to survive we cannot continue with unrestricted, uncontrolled increases in wages and emoluments. I do not wish any of my friends in the trade unions to think that I am pitching this at them. I am not. They are only one factor in the rising rate of wages. Rising wages go right across from the board room to the factory floor.

We are in fact, in addition, one of the most heavily taxed countries, if not the most heavily taxed country, in Europe. If you compare the earnings of top management in this country, and if you go right through the company to the shop floor, to the mechanic and fitter, you will find that the salary at which we all start is not so far distantly removed from the top rates on the Continent. But if you compare what is left after taxation, then the difference is very great indeed. I mention this for only one reason: I believe that this very high rate of taxation at all levels—and as wages rise more and more, people are being hit by it—has a great deal to do with removing the necessary incentives from the workforce of this country at all levels with the exception possibly of the very lowest paid—and you have to be very lowly paid today not to pay tax. If you want production to rise it must be made worth while for people to work harder and longer, if you like, to take more risks and to feel that the whole thing at the end is worth while because there is a considerable increase in their pay packet at the end of the week and they have earned it.

Such has been the increase in wages, together with increased prices which we have to pay for raw materials, that our industry is facing the situation that they are no longer competitive in world markets. This is a canker which can easily spread. A survey has recently been carried out covering quite a large number of international companies—when I say "international companies "I do not want you to think of the vast ones, but of the companies which operate in the export market as well as at home. That survey showed that 6 per cent. of the firms reported greater optimism with regard to the general business situation now than six months ago; 44 per cent. reported no change; 50 per cent. are less optimistic today about the future of their industry than they were six months ago. Broadly, industrial groups show a lower capacity working than they did five or six months ago—overall 71 per cent. of the firms questioned are now working below a satisfactory full rate of operation. This compares precisely with the figures recorded during the period of the three-day week 15 months ago, and also with the deepest point of the recession in 1972. The figure indicates that working below capacity is more widespread now than it was throughout the 1960s. The general feeling in industry is further emphasised with regard to capital investment. Only 12 per cent. of the firms approached expected to authorise more capital expenditure on buildings, plant and equipment in the coming year than they did in the past 12 months; 54 per cent. are going to authorise less. In fact 9 out of 10 of the firms reported an increase in average cost per unit of output over the past six months—you can work out for your-selves what that must mean so far as our exports are concerned.

The increase in prices has now become a potential constraint to exports. Fifty-eight per cent. of the firms who were approached in this survey stated that their export orders were likely to be less or limited during the next 12 months because their prices compared favourably with some of those from other countries, as did delivery dates. There must be much greater encouragement given to those who operate and those who work for the export industry of this country.

My Lords, however unpleasant it may be—and unpleasant it will be for all of us—we must have a period of stabilisation, no matter what action any Government may take to reduce national and local government expenditure. This would help greatly, and I certainly hope that drastic cuts will be made. Nevertheless, we come back to the main factor which is causing inflation; that is, increased production costs. There are others, and no one wishes to place all the blame at the door of pay, but the rate at which wages have increased over the past 12 months has been such that we must accept that it was the main contributory factor to the crisis we are in today.

I qualified as an engineer in the very early 'thirties when there were no jobs at all about, and the unemployment figures in those days would make those we are facing at the moment appear to be very moderate indeed. So I know exactly what it is like to face insecurity; I know exactly what people want, I know what they are fighting for. They are fighting for security which we did not have in the 'twenties and 'thirties but to which we have grown accustomed in recent years. The fact remains that in everybody's interest we must have a more moderate wages policy if we are to stand any chance at all of controlling inflation. If we do not do this a wage increase given today will be overtaken tomorrow. Management have a crucial role to play in this, just as have the trade unions; but neither trade unions nor management can solve this problem unless a clearer lead is given by the Government at national level. Unpalatable decisions will have to be taken. We all know that this country has accepted unpalatable decisions before; we are rather accustomed to doing so. We usually accept them when the chips are down and the necessity for them and exactly what is going to be done are clearly explained to the people.

In my view there must be fuller use of the capital employed in industry—through shift working where technically possible, reduction in unnecessary overtime, greater flexibility in the utilisation of labour and a readiness to review manning levels. I say that having spent most of my life in an industry where we found no difficulty whatsoever in discussing these problems with our trade unions, with the result that we had very few stoppages, certainly so far as my company was concerned. Given proper relationship between management and the unions these are not impossible things to achieve.

Lack of understanding between management and unions is nearly always the root cause of industrial disputes. In my view what has not been made clear to the public is that the whole country's future depends on the steps we take, not on the next two or three years but in the next six or 12 months. Time is not on our side. Quite recently I was in Paris and there I met an old wartime colleague who has just resigned as a Minister of the French Government in order to become the head of a major industry. He was as full of panache today as he was 40 years ago. He asked me whether this country realised that this was a year of destiny for all of Europe, and particularly for Great Britain. When I said, I think you mean a Europe crisis ", he said, "No, I do not; never a crisis, but it is a year of destiny ". I believe that to be very true. This is a year of destiny for us. I can see that it could be for us the road to recovery: a year without serious industrial disputes, a year in which we all accept a moderate wages policy and restrictions in dividends—though, Heaven knows, they are fairly stringent as they are now! If we will accept these things I believe that in 12 months this country would be out of the wood and the clear country would lie ahead.

It is a simple choice but it is a very difficult one to make, and I think probably many will find it impossible to accept. But this country has faced worse before and these problems are in our own hands to solve. They are nobody else's problems: they are ours, and it is for us to solve them. No country is better than we are at talking ourselves into a depression; and, at the risk of using a mixed metaphor, perhaps I may remind your Lordships it is said that the British cannot see the writing on the wall until they have their backs to it! We are, I think, in exactly that position at the moment. Nevertheless, if we can see what is writ clear on the wall, I think we could even surprise ourselves by the rapidity with which this country would recover, provided, as the noble Lord, Lord Boothby, said, we face the fact that we are in a grim situation—a situation not dissimilar to 1934 and 1939–40. There is of course no bombing or fighting, but there is just as dangerous an enemy at the gate: he goes by the name of Inflation, and his two playmates are Misery and Unemployment.

5.41 p.m.

Viscount AMORY

My Lords, I am always pleased when I have the opportunity of following the noble Lord, Lord Mais, because I have an enormous admiration for the experience and knowledge with which he speaks on such questions as this. Chastened by the plea made yesterday by my noble friend and neighbour, Lord Clifford of Chudleigh, for shorter speeches, I am going to see what I can do to help in that direction this evening. It is all the easier to do that because the main thing I want to do is to express my cordial support for the views put forward so cogently by the noble Lord, Lord Byers, in introducing this Motion. Looking at the Liberal Benches, I should like to look at the place where the noble Baroness, Lady Seear, was sitting just now and to say how much I agree with the views that she put forward. I shall now go on to say what a tremendous pleasure it has been to hear the right reverend Prelate the Bishop of Worcester speaking to us. Anybody who knows the Bishop knows the very wide experience and the warm humanity with which he speaks, and we have immensely enjoyed his contribution this afternoon.

I am in an agreeable frame of mind, as your Lordships will have noted, and so I now want to say how much I appreciated the generous remarks made by the noble Lord, Lord Ardwick, about my noble friend Lord Watkinson in the constructive speech that in my view he made in our last debate. He was misreported and misunderstood, and the noble Lord made that so agreeably clear. My last bouquet is offered to my noble friend Lord Boothby. I said I was going to refer to him and he seems to have instantly bolted—I beg his pardon; he is here. What I wanted to say to him is that he and I have not invariably agreed to economic affairs—I think I heard him say, "Thank Heaven for that! "—but I have waited a long time, and it has been well worth waiting for, to hear one of the fine speeches from the noble Lord with which I can say that I entirely agree.

I believe our economic problems are now beyond the capacity of any single political Party to solve alone. That is not an appeal for a Coalition Government at the present time, because I think it is not yet on for a variety of reasons; but inter-Party "scrapping" really can often be a sad handicap in reaching sensible solutions. I believe that is recognised by the majority of the nation at large, perhaps more so than by many politicians themselves. The referendum is not a device with which I am personally enchanted and I am certainly not recommending another, but if the electorate were asked whether they would like to see political Parties laying aside for a term their traditional controversies and concentrating their efforts on curing the disease which is destroying us as a nation, I have little doubt what the answer would be. This, of course, would involve concessions from all Parties. If a combined effort is to be effective I agree with what my noble friend Lord Gowrie said, that it must go beyond an agreement on the general aim of curing inflation and it must involve a substantial measure of agreement on the main practical measures that are required to bring about its elimination.

The vital question is: is some degree of pragmatic agreement obtainable? Our main economic problems are three. The first is the rate of increase in money incomes. Then there is the level of Government expenditure and borrowing, which surely must now have reached the absolute maximum percentage of our gross domestic product which is safe from the point of view of the economy. Then comes the balance of payments, and in this connection we were glad to hear some encouraging references by the noble Lord, Lord Shepherd. I have no doubt myself that the most urgent of all these economic problems is the rate of increase which has taken place in money incomes over recent months, which has escalated far beyond the rise in the cost of living and become almost a constitutional problem. If, as I believe, absolutely unfettered wage settlements must result either in escalating inflation or a catastrophically high level of unemployment and under-use of our resources, then it seems to me absolutely essential that guidelines of some kind as to what increases in money incomes can be implemented without damage to the national economy must be agreed and adhered to.

The Government are said to be working for a tighter Social Contract, and certainly I have no intention ever to sneer at the principle of a Social Contract. The present one has collapsed because many settlements, particularly recently, have gone far beyond its provisions and with an impunity which is not fair on the others which have been within the guidelines. If the trade unions can and will monitor a new contract so as to ensure universal adherence to it, well and good—but have they the power to do that? I fear that any future contract will need some kind of buttressing with some form of statutory sanctions if it is to work.

Personally, I strongly support the idea mentioned by the noble Lord, Lord Byers, of raising the sights of the NEDC and strengthening its authority. I know that any measure of inter-Party co-operation is anathema to many who are engaged in day-to-day political conflict. Such an attitude seems to them to contain an element of appeasement and even of treachery; but I am sure that that is a short-sighted view. In this matter, public opinion is well ahead of many politicians. The Party conflict is not an end in itself but a means to an end, and there are times when the country is in danger when these aims must be subordinated to the wider and greater aim of mobilising the combined strength of the nation. This cannot be done against a background of bitter Party conflict. There is still plenty of patriotism in this country, though sometimes it seems to lie a little below the surface. But the nation's character has not changed over a period of 30 years, and I have no doubt whatever that a genuine call for a combined effort—I agree with the noble Baroness, Lady Seear, over this point—to save our heritage and our way of life would bring forth a massive response, provided that the right example is set by the Government of the day and by the political Parties themselves.

If anyone is still in doubt as to whether the need is there, let him listen to the opinions of our many staunch friends all over the world and the frank observations within the last few days of the Bank of International Settlements. My Lords, the need unquestionably is there. Let us now show that we recognise it and that, as ever, when that stage is reached we are resolved to create the conditions—and perhaps here the first responsibility lies with the Government of the day—in which we can give a good account of ourselves as a united nation.

Lord HARMAR-NICHOLLS

My Lords, before the noble Viscount sits down may I ask him this? Speaking as he does, as an ex-Chancellor of the Exchequer with the special knowledge and responsibility which goes with that office, why does he make an absolutely unanswerable case for a Coalition, yet shy away from saying that it is "on"? Of course it is "on" if the Prime Minister would like to make it.

Viscount AMORY

My Lords, this is mere treachery on the part of my onetime Parliamentary Secretary. His reference to my being Chancellor of the Exchequer is a reference to a bygone age of which I have practically no recollections. I do not think I shied away from the point. After saying that I believed that as wide a measure of practical agreement on measures should be reached, I believe I said—and my remark was intended to be a factual statement—that I do not detect that the appropriate conditions are present at this minute for the formation of a national Coalition Government. I hasten to add that I did not say whether or not I regretted that.

5.52 p.m.

Lord BRUCE of DONINGTON

My Lords, I should like to join in the congratulations that have been offered to the right reverend Prelate the Bishop of Worcester, and say how much I appreciated a good deal of the thoughtful content of what he said, particularly in regard to relations within industry. The House is also indebted to the noble Lord, Lord Byers, for having introduced this Motion this afternoon, which, as he said, gives us an opportunity to examine the country's economic position and prospects following the overwhelming confirmation of this country's membership of the European Economic Community.

However, one thing has terrified me in the course of this debate; that is, the number of times that speaker after speaker—not all speakers, but quite a large number of them—has come to the melancholy conclusion that, provided policies of moderation are pursued by men of moderation everything will be all right. For the past 25 years, maybe even a little longer, this country has been governed by moderate policies, by men who are known on either side of the House as being moderate people. There was perhaps one small aberration at the time of the Prime Ministership of the noble Earl, Lord Avon, when he embarked upon the Suez adventure which, I venture to suggest, apart from raising questions of honour which are sometimes popularly discussed these days, also raised the question of extremism. But with that one incident aside, for 25 years this country has been governed by what are called policies of moderation and, in the main, by men of moderation. Yet we come today to a debate that takes place shortly after the confirmation of our membership of the European Economic Community with one dismal liturgy after another, which has been repeated to my certain knowledge in this House and in another place year after year, decade after decade.

During that entire period the industrial structure of our country has remained virtually unchanged. It has not been tampered with. No wicked Communists have taken it over; no Fascists have made it into a corporation. For those 25 years, with a limited section of the economy under public boards, the free enterprise economy of this country, the free enterprise industrialist—the banker, the financier, the institution, and all the people comprising the financial and industrial establishment—have had completely free sway. And what has happened? It is as well that we examine what has happened within the context of what has happened in Europe.

Income per capita is as good a way as any other of judging the relative prosperity of nations and of the individuals comprised in it. So it is as well, now that we are moving into closer community with France and Germany, that we should be aware that the per capita income in Germany is half as much again as ours, and in France it is over 32 per cent. higher than ours. My Lords, why should this be? We are told that it is all the fault of the lazy workers in the country, their restrictive practices and industrial disputes. We all know that it is nothing of the kind. We all know, from any comparative labour and productivity study carried out in France. Germany, Italy or elsewhere, that the ordinary British operative or worker in this country is certainly not inferior in his resolve, ability or endeavour to his comrades in the other countries of the European Economic Community and elsewhere.

Lord BOOTHBY

My Lords, may I interrupt the noble Lord simply in order to suggest this to him? Could it not possibly be that the French and the Germans work harder than we do?

Lord BRUCE of DONINGTON

My Lords, I will give the noble Lord, Lord Boothby, my reply to that question in the course of the next few minutes when I deal with what I thought was his most constructive part in this debate. There is a correlation, of which the noble Lord, Lord Boothby, will be well aware, between industrial investment in manufacturing industry and the costs and efficiency within that industry. The fact of the matter is that, under the industrial control of these men of moderation in industry, finance, commerce and elsewhere, the manufacturing industries in this country in the 13 years, 1956 to 1968, would have had to invest another £8,000 million to equal the amount of capital investment carried out in Germany, and another £6,400 million if their target was the level of capital investment in manufacturing industry in France. We can bandy about such figures and be right, perhaps, to £50 million or so a year. But the truth has to be faced that manufacturing industry and those who own, control and finance it have produced the situation where ever since the war we have been under-investing. If a comparison is to be made with Germany, we are investing at least £600 million less per annum in manufacturing industry than Germany—and at least £450 million per annum less if a comparison is made with France.

We do not even need to look at the figures. We now have the words of responsible executives and men of industry like Sir Frederick Catherwood who many times, either by correspondence or by his contributions on television, has told British industry that it is obsolete and that much of its plant is far too old. This point is highlighted even further by the report on British Leyland which, when it comes up for detailed discussion in this House, will produce some very interesting comparisons. That company made £74 million net after tax in seven years, and out of that sum distributed £70 million in dividends at a time when its plant was obsolete and a good part of its works were falling into complete uselessness.

If comparisons must be made, let us compare Britain with other countries. We find that in France it is rare for equipment to be used for longer than 10 years. In Japan it is rare for equipment to be used for more than five years. Yet industry in Britain is underequipped, because of deliberate underinvestment by those people whose contribution to their country is supposed to be not the labour of their hands—that is for others—but the labour of their brains and their financial resources. Therefore, when people are sometimes tempted to say that the British people are lazy—usually meaning the ordinary working person in Britain—let them first examine themselves and, when they are considering overmanning, let them consider overmanning at board level. Let them consider how many of these very expert gentlemen who have been busy making decisions all these years are earning their corn on a part-time basis. Were the directors of British Leyland earning their corn when they recommended the distribution of £70 million in dividends out of profits, after tax, of £74 million? Where they doing their duty either by their company or by the community?

Lord HANKEY

My Lords, does the noble Lord recollect that well over a year went by while the liner terminal in Glasgow could not be used, in spite of the utmost efforts by Mrs. Castle? Does the noble Lord recollect that the new dock in the Mersey Docks in Liverpool could not be used for two years, because agreement could not be reached? Does the noble Lord recollect that the Port of Tilbury—a very important port to this country—has been closed for, I think, six weeks this year, owing to the impossibility of reaching agreement upon using it? Does the noble Lord recollect—

Lord BRUCE of DONINGTON

My Lords, perhaps the noble Lord will now permit me to reply.

Lord HANKEY

My Lords, there is one more point that I wish to make.

Lord BRUCE of DONINGTON

My Lords, perhaps the noble Lord will permit me to reply to these points.

Lord HANKEY

My Lords, I shall speak presently. Perhaps the noble Lord will continue with his speech.

Lord BRUCE of DONINGTON

My Lords, I agree with the noble Lord that there are a number of undesirable restrictive practices on the trade union side. However, in case he does not realise it, may I tell him that when ordinary working people hear about people taking £160,000 compensation to the Cayman Islands, when they hear of people who have made capital profits of the order of £5 million—making money as distinct from earning money—and when they see people departing on world cruises, at a time when other people are starving, at a charge of £28,000 a head, one can understand why occasionally they get a bit cussed.

But this is not going to solve the problems of our country. The problems of our country will be solved only if there is a different attitude on the part of capital and management on the one hand, and workers on the other. I have observed this. I was in Germany a short while ago, because I had to see an important executive. When I reached Templehof, I 'phoned him and asked when I could see him. He said, "Come and see me at 8 o'clock in the morning ", and I did. There are very few places in this city and in this country where one can see a managing director or a senior executive at 8 o'clock in the morning. Most of them commute to London on the 10.30 a.m. train and some of them take long lunch hours.

I have considerable personal experience of this. May I take, for example, my experience with a French company in Marseilles which employs quite a large number of people. I find that the relationship between the board of directors and the operatives is extremely pleasant. The directors know the individual people who work for that company. They are on amiable terms with them. They turn up for work at the same time in the morning and they leave either at the same time or later at night. They all eat in the same canteen—the directors, the executives and the operatives. I am well aware that there are many companies in this country which are very well managed. Therefore, when I pass these strictures on the structure of certain British companies, I do not wish to say that they are all of this kind. I will say only this. If the cap fits, it can be worn.

Again, it is my personal experience that we are supposed to have at this time a very good sales effort on behalf of this country. Our salesmen are supposed to be some of the best in the world. I believe that many of them are. All I can say is that in my experience some of them are damned lazy. You have only to go to exhibitions at Cologne and then go to exhibitions in this country to know perfectly well that a good number of them spend less time selling the products they are supposed to be selling than they spend in the bars which are specially provided at the rear of the exhibition stands.

It has been reported in the Press in recent weeks that a sales convention was held in Trinidad and Tobago. No sales representatives of any British company were there, and the comment of the Financial Times was that, "Everybody these days seems to think that Europe is a ' soft sell '." Or we can go to the OPEC countries. We find that, despite the terrific amount of financial resources available to the OPEC countries, Britain's total share of trade with the OPEC countries declined by 11 per cent. in 1974. This does not add up to initiative, either.

I am not asking that we should have moderate policies, because if moderation were to be used in this country all it would do would be to dull the cutting edge of debate. A moderate is a person who asks for decisive action but who runs a mile away from it when decisive action is suggested. It has got to be decisive political action. The last time that we had a politically decisive programme was during the 1945–50 Parliament when we had a policy called Let us Face the Future which was denounced as the most extremist document of its time. However, under the premiership of the late Lord Attlee it initiated a social revolution in this country and could have laid the foundations for its industrial future. Lord Attlee was quite well aware that to have a capital investment programme in this country one had to restrict personal consumption, and that was known by Sir Stafford Cripps too. So they kept on rationing and consumer restrictions, and they called it "Misery Britain ".

When the Election was fought in 1950 it was fought on the slogan "Set the People Free ", and ever since that time free enterprise in this country, free finance backed largely by its own national Press, has had complete control of this country's economic destiny. Now once again, a decisive programme is brought up by another Labour Administration—a programme which among other things legislates for planning agreements and the establishment of a national investment board, and the taking into public ownership of certain industries. This is what sticks in the Tory crop; this is what they want to moderate; this is what they want to get rid of, despite the fact that, as the noble Lord, Lord Boothby, well knows, this is the only way at this time that there can be effective investment channelled into manufacturing industry, which has not only lost confidence in itself but has lost the confidence of the country.

There remains now to manufacturing industry and to the financial institutions the chance offered to them by the Prime Minister of joint consultations with a view to working out the country's economic future, making use of the instruments of the National Enterprise Board and the various planning agreements—things which have been extant in France under the Commissariat des Plans for the last 15 years and are regarded as extremism here. British industry has its chance and British industry should now take it. Indeed, many leading industrialists are already expressing themselves enthusiastic. If British industry will do this, if British industry will stop its miserable and tepid stance in so-called moderation and will co-operate fully in a decisive and well-organised programme, then it will be found that the working people of this country, the executives of this country, the salesmen of this country, and everybody else, will co-operate fully in its implementation. What we want now is not a dull mediocrity—the dull mediocrity of moderate politics—but the courage of decisiveness.

6.13 p.m.

The Earl of LYTTON

My Lords, very likely I shall have to be numbered among the moderates—or goats—which the noble Lord has just denounced. I have listened to many a debate on the economy, to notable speeches by the noble Lord, Lord Robbins; a wonderful speech not long ago by the noble Lord, Lord Thorneycroft; on 7th May a speech by the noble Viscount, Lord Watkinson, and today the speech by the noble Lord, Lord Byers. The latter has chosen a moment which makes his speech, if not the greatest of the four, in my view the most timely.

Before I continue with my speech I want to make my tribute in connection with the referendum, and to offer my congratulations to the British public for the way in which they responded to one of the most difficult things that could have been put to anyone in a referendum. In my experience, those who moved away from a chronic position of coming out and moved to vote to stay in were Conservatives. That is the way in which I think this country was divided—not the extreme Left, but divisions in unexpected quarters. I hope we shall never have to do that again.

The right reverend Prelate the Bishop of Worcester in his admirable maiden speech referred at some length to the desirability of working, when we are fully engaged in the work of Europe, for the Third World. That is a part of the world which touched me early in life and remains with me. I lived with Africans on the frontiers of Ethiopia and Kenya and I have never forgotten them. I have never forgotten the experience of being associated with people living so near the point of death and consuming this world's goods, milk mixed with blood, wearing practically nothing and having almost no chattels; contented, but nevertheless saying to me from time to time, I quote a chief, "Our tribe is divided. Some of us (and I am of that point of view) want your civilisation but you give us so little of it." There were others who said, "It is not for us; get rid of it ". However they have all turned and adopted our way of life more or less, and they aim to have more of it. and I sympathise with what the right reverend Prelate said, that we should attend to these people, many of them formerly our dependants in the Colonies.

The noble Lord, Lord Shepherd, rather shocked me at the outset of his speech but quickly corrected it, when he said there was no need for any drastic change of policy as the referendum recedes behind us. With inflation running at 30 per cent. that expression of view—if he really meant it, and I do not think he did—would fill me with horror. It is a ghastly rate and presages ruin. It is the corruption of the bloodstream of our economy and cannot be allowed to continue. A great and fresh grip must be taken of it.

However, the keynote of my speech is very much that of the noble Lord, Lord Shepherd, himself. Before I came into the House I wrote down seven words—the root of our trouble is, "too much money on the table now ". That implies an incomes policy and I thought that was what the noble Lord indicated he and his Party would support. Income control is too often associated with the much more difficult problem of a prices policy, because of course every housewife wants prices to be kept down. Price control however implies an infinitely graduated and complicated system of subsidy—which becomes more complicated as you continue it and is always expensive: the key to inflation control is the control of incomes. I thoroughly sympathise with—I think it was the noble Lord, Lord Davies of Leek, who said, "Not merely wages and salaries, but rich men's income too ". I have to admit that with the very rich it does not really matter because the State takes away 98 per cent. in any case, and, as the noble Lord, Lord Thorneycroft, said the other day, there is so little left on the carcase afterwards that it is of no particular interest to the Chancellor of the Exchequer or anyone else. Nevertheless, it makes for jealousy, I suppose—people with yachts going abroad. However, my yachting acquaintances are those who work mighty hard day and night, very often in peril of their health—the Onassis type, but on a smaller scale They are very rich, but to me they are not a scandal. I do not mind. I have a small car, but I have never had a yacht. I really think this kind of thing can worry people too much.

The key to the problem is the massive increase in wages. I think the Social Contract had a flaw on both sides. I understood it to be a programme of redistribution of wealth on one side, and on the other, wage restraint—" restraint" was the word used I think—to do no more than keep pace with inflation. That alone is a recipe for perpetual inflation. If wage-packet inflation is running at 20 per cent. and you authorise rises up to 20 per cent., you are underwriting an annual 20 per cent. increase for ever—at least, that is my feeling about it. This conclusion has been questioned before, but obviously it is now being accepted by the right honourable gentleman, the Chancellor of the Exchequer. This is a very beneficial change. For myself, I would hope it was reduced below 12 per cent.; and certainly not by means of a flat rate, which destroys all differentials and makes people very unhappy when they have worked for differentials for years. The percentage seems to be the thing to go for.

My Lords, I would think we should do our utmost to seek a moratorium on industrial action for two years in the light of certain other matters. There should be a penalty if industrial action is taken, the penalty being that those who call the tune should pay the piper, that is to say, the public. People should not have their taxes refunded when they deliberately abstain from work. When they return to work there should be statutory deductions from their pay of the contributions which the public have made to their dependants in supplementary benefits. I do not think we can afford to have strikes, let alone pay for them. I include in the term industrial action that dreadful item "working to rule ", which implies an honest compliance with the law, but at any rate on the railways, in fact, produces chaos and extreme inconvenience to every consumer and every commuter.

I sympathise greatly with much of what was said by the noble Lord, Lord Bruce of Donington, about industrial relations. If the noble Lord will forgive me for saying so, he was exceedingly biased, but I thought properly so, because the bias in many of the speeches we have heard today was always on the other side. I do not think the noble Lord in any way took up and sufficiently acknowledged what I call the Luddite temperament in any introduction of new devices which, for the time being, cause unemployment. There is too great a sensitivity in avoiding redundancy. That is a great impediment, and the noble Lord did not allow sufficiently for that.

Nevertheless, while we are thinking about controlling incomes, for Heaven's sake let us not stop doing other things! There is something considerably wrong with industrial relations. It is often connected with the impersonality of size, as was said in his maiden speech by the noble Lord, Lord Bruce of Donington. I am sure that that is so. The boss does not know people, and he cannot because of their numbers. We should attend to the whole thing. If I were treating this matter as an officer, and I am a professional soldier as well as a professional farmer, I would say there is evidence that the officer corps is faulty. I would go for that first. But we must do that separately. We cannot at this moment let inflation go trundling on because of imperfections in industrial relations.

At the same time there is a much wider field of reform which struck me the other day as having been most vitally touched on by the noble and learned Lord, Lord Hailsham of Saint Marylebone, in a series of four articles in The Times. I thought they were quite remarkable articles, deserving of very great attention, and perhaps a debate at some time. I cannot go into them now, but if any noble Lord would like a copy of them, I have photocopies here today. The articles seem to me to indicate the possibility of a very extensive measure of reform in all directions, including electoral reform, for which the noble Lord, Lord Byers, has some hopes—greater, perhaps, than has the noble and learned Lord, Lord Hailsham.

My Lords, many of us feel that Parliament and the other place has lost its authority partly owing to its being unrepresentative electorally. Therefore, it seems to me that as an essential ingredient we must have electoral reform without hoping to obtain too much from it. However, we must deal with the present. The referendum showed, I think, that if the present Government wish to take a certain line which some people call moderate and others would call merely prudent at the present time, it may be resisted by quite a substantial number in the Party in power. My personal hope is that a Coalition will not be necessary. I associate that hope with the hope that, if it is necessary, the present Government will note that it has been offered again and again by both the other Parties, if it should be necessary in the interests of a result which they consider prudent.

But for the time being, one hopes that they will re-establish the discipline of a Party comprising members with different opinions, the discipline of an ostensibly united Cabinet in the knowledge that can count on outside support if they have to do something temporarily unpopular with part of their own team—and that is what I think they may have to do. I am wondering whether the noble Lord, Lord Byers, is quite right to seek at the present time the highest common factor of agreement in the nation. I believe we must come to grips with our problem making use of the people in Parliament now to do things which may be in part unpopular, but which Parliament as a whole can do. I am not sure whether the Government Party alone can do it, but I would like to see them try. A Coalition tends to be a kiss of death to those we call moderates. I would not wish that to happen. Nevertheless, we may reach such a pass that if we do not have a Coalition, it will be the kiss of death for all of us—and that is the greater evil which we must avoid.

My Lords, in conclusion, one of the satisfying things that one has felt about the referendum result was that Parliament, by roughly two-thirds of its membership, was in favour of a "Yes" vote, and the country as a whole was in favour by the same proportion. Therefore, I do think it is within the grasp of Parliament, as it is composed today with all its imperfections, to carry out unpopular decisions against all opposition, provided the Government realise that if necessary the other two Parties are going to support them in these measures; I prefer to call them prudent measures rather than moderate. I hope the Government will go forward in this knowledge, not fearing if necessary to be very unpopular for a time. I am sure what we have suffered from is the lack of authority of the Commons; as I have said before, I do not repine that our own House of Lords has lost all its former authority but I do deplore the loss of authority by the House of Commons. You cannot govern representing only one-third of the people, because two-thirds will always denounce you and will wait for an opportunity to cancel what you have done. It is a dreadful situation.

With respect to the noble Lord, Lord Bruce of Donington, I would say in conclusion that in the old days of Whigs and Tories, Liberals and Tories, the Party programmes were so closely identifiable that the Parties denounced each other for mismanagement of exactly the same policy that they would have carried out, and it was much of a mock battle. It is very different now when the divisions between the Parties in part, in part only, are absolutely radical and unacceptable one to the other. That is what has corrupted the two-Party system. My Lords, I have spoken too long; I apologise.

6.32 p.m.

Baroness BURTON of COVENTRY

My Lords, in common with everyone else, I, too, should like to thank Lord Byers very much indeed for putting down this Motion and also for the speech that he made in opening it, if I may say so, with a very large part of which I agreed. I decided before the Recess that I should like to take part in this debate. I had no doubt what I wanted to say, but I had considerable difficulty in deciding how to say it, because I think we would all agree that in either House it really is of the essence how things are put, and if it is possible I should like to have some friends left at the end of the debate! When I get to the end of my remarks—which is not just yet—I shall cross swords with my noble friend Lord Bruce of Donington. I am a moderate. I do not think I am indecisive and I do not think I am tepid. We can perhaps look at that matter when we get to it, but I thought I would put it in at the beginning before I started.

My Lords, I think there is very little doubt that the trouble we are in today is of our own making. I think that is absolutely true, and also that only we ourselves really can pull out of it. It involves much more than oil prices. It is, I believe, our own state of mind that has brought us to where we are today. Look around and look at the position today: if you cannot immediately have the money you want, you strike. If you are big enough, if you are strong enough, if you can hold the country to ransom, you win. I want to make it quite clear, as Lord Byers tried to do, and not be misunderstood. You get your earnings—I would ask the House to note that I am saying earnings"—increased by some 10 per cent. or more above the rise in the cost of living, so why should you worry? What have you got to worry about? That is a terrible thing to say; and it is a frightening fact that it is true, and we all know it is true. I believe that up to date we have lost the battle for men's minds and we have lost it ourselves.

It is always some comfort when one is at the end of a debate if what one wants to speak about has not been dealt with before. I want to approach this matter from a different angle. Is there any serious-minded person in this country today who would feel able to deny that that our country is indeed sick at heart? Is there anyone who has not become utterly weary of demonstrations, marches, strikes, from whatever section of the community these come? I want to emphasise once again that I am speaking of earnings, that is wages and salaries, and I am not arguing the rights and wrongs of any pay claims but the methods used to enforce them. These methods are used because they pay. I should like in a few minutes to ask, how have we reached this stage, and why has the general public been so ignored?

My Lords, it is no use harping on the past, but the background is there for us all to see. In January last year, during our debate on the national economy and industrial disputes, I said there was little wonder that the public was in despair and that it was the public I wanted to talk about. I felt then that we had reached a stage when only public opinion could work a miracle. I think we have been there ever since. The House does not want a dissertation on my speeches, I know, but going back to November 1973, and talking about a socially just climate, I said I thought that to be a very long way away, and that so long as present attitudes continued, whatever Party was in power in this country, it would be equally far away. At that time those suffering were the commuters on the railways and the passengers on the buses. In the immediate past it had been the public deprived of light, deprived of heat, deprived of holidays because of industrial action, that at airports affecting holidays. More recently hospitals and the sick have suffered because of action by doctors and medical staff. Education has suffered. We have had strikes by teachers; pupils have been unable to sit examinations. We have even had pupil strikes. If it were not so terrible it would be ludicrous. I believe that what we have been seeing has been vindictive and greedy and selfish.

Only a few weeks ago in this House I tried to put the case for those with small fixed incomes, especially those in retirement. I did not get far. People sympathised in the corridors but I did not get much support from the Floor of the House. What has distressed me on this matter, unless I have misunderstood it, has been the attitude of my own Party. This seems to be that retired people have no right to their savings made carefully after some 40 years of work. "Why should they have it," seems to be the attitude; let us tax it away as unearned income so that all small retired people shall have nothing except the retirement pension ". I asked then, and I ask today, because I think it is important, why are small retired people outside the pale? Why is their problem not at least admitted? The Chancellor has said recently that it is unfair that those with the crumbs should be taxed for those who have taken the plums. I have heard him say it several times recently, and only three days ago. I wonder whether we are now going to see a change.

This brings me to Lord Byers' Motion, what urgent economic and political measures will command the broadest national support. The President of the Transport Salaried Staffs Association, Mr. Tom Bradley, MP, speaking at his union conference, said that recent remarks by some other union leaders were frightening in their implications for society as a whole. He went on to say: The country's grave economic crisis is something we cannot opt out of. To exercise power without responsibility in pursuing self-interest is not only damaging to the national economy but is the very negation of the basic purposes which brought the trade union movement into existence. To demand a larger slice of a smaller cake is to deny many a portion at all. I should have thought that every trade unionist would have agreed with him when he said: If we cherish free collective bargaining we ought not to abuse it to the point of bringing about the collapse of an orderly and compassionate society which the unions themselves did so much to create. I think that my noble friend Lady Wootton of Abinger stated the position succinctly when she said recently: The divine right of collective bargaining is apt to resolve itself into a devilish game of Beggar my Neighbour. As the House knows, I have thought this for some time, and have made myself thoroughly unpopular for saying so. But it is not any use waiting until everyone agrees before speaking up. That has gone on far too long. The General Secretary of the Union of Post Office Workers told his union's annual conference that those who broke the Social Contract were not romantic heroes of the working class. Mr. Jackson went on to say: They are destroyers of our Government. They are more concerned with group self-interest than with society as a whole, more concerned with individual self-interest than with pensioners and those on low pay. To those two speeches I just want to add one other, by Mr. Len Murray, who said: We cannot solve our problems by pretending that we can spend our way out of the crisis. This is the message that we know in our hearts is true. The Social Contract is about more than wages, it is about a fair deal for our society. The growing view is that 30 per cent. is the going rate and there will be more on top of that. But in that direction there lies trouble and there lies danger for our society and for our class of people. What sort of sense is there to go on escalating? What do you solve if we double wages overnight? There will be no real increase, and you know it. How long has the nation to wait before speeches such as these take effect? As we have all been asking today, how long can we wait? The Social Contract, the one factor that could have saved us, has been humiliated in spite of the Government fulfilling their side of the bargain. As one trade union leader said: It does not help to have half a union leadership complaining they have abided by the Contract and the other half boasting they have broken it. But the demands, the threats of industrial action, the financial rewards far above the rate of inflation still go on. It still pays.

In another place on 22nd May the Prime Minister spoke of mindless militants who threaten the very future of their jobs and the jobs of others. But in spite of this, look at the claims in today! Look at those just settled—both wages and salaries. During the last unofficial dock strike in London Mr. Jack Jones appealed to the dockers to return to work. He was ignored, I ask: is it only unemployment that can make people understand? Could we not avoid this misery if earnings were increased by far less? After all, has any one section of the community a right to maintain or improve its standard of living when that of everyone else suffers? I think that there can be only one answer to that. What has worried me additionally is that it is not only a question of financial gain, but one of riding roughshod over democratic practices with terrifying implications of what this can mean.

Perhaps I might illustrate by three examples. It is not enough today to win a democratic majority at meetings where votes are taken. The House will remember that, during final discussions with the National Coal Board, the National Union of Mineworkers reached a decision which the militant members did not like. Mr. McGahey was in the chair. He found himself unable to agree that the vote should be accepted. Mr. Gormley had to be brought from a sick bed to take the chair. More recently the Amalgamated Union of Engineering Workers reached a decision on postal balloting by a majority of two votes. It was then decided that two of those voting in favour of the continuance of postal balloting should be disqualified. I saw on the tape before coming in today that the judge had ruled otherwise.

My third illustration comes from the last unofficial strike at the London docks. Several votes at massed meetings appeared to independent observers to indicate a substantial majority for returning to work, but each time the militants announced that the men had voted to stay out. In the end they had to concede, having kept thousands of men out of work when they wanted to return. On that matter the Prime Minister said: It is true that, for a time, the militants got control dishonestly and deceptively, and of course they gave false tallies of the numbers voting. So in all this background I think we have greed, we have dishonesty and, I am afraid, we have fear. I still do not believe that the ordinary decent person, man or woman in a union, in an association or independent of either, would himself or herself, spoken to individually, condone any of the things I have been talking about. That I do believe. Then, my Lords, why do moderates put up with these tactics and these practices done in their name? It takes a lot of courage to put up your hand against militant opinion at meetings. After all, if the Transport and General Workers' Union will not listen to Jack Jones, who are they going to listen to?

I have ventured to quote trade union leaders such as Tom Bradley, Tom Jackson, Len Murray and Jack Jones. They realise the danger and, I believe, accept that inflation will ruin us all if it is not held in check. Doubtless there are others, but it would be helpful if they could say so before their members had received an increase in earnings of some 30 per cent. or more. Why do they not? Quite recently I attended a meeting where the speaker was an acknowledged authority—if "authority" be the right word—on Labour relations; such was acknowledged by both sides of industry. He said that people did not understand how positions had changed on the trade union side. He said that for some years after the last war union members had been prepared to accept guidance and advice from their General Secretary both as to their actions and wage claims. But nowadays it was no longer so. He said that in the past you had a triangle with the General Secretary at the apex and the union members forming the base. Today that triangle has been inverted with the base at the top and the General Secretary underneath. Now the attitude from many union members is that they pay the General Secretary, and that if he does not go along with them they will get someone who will. And so it is not only—or would we say it is not primarily?—the General Secretaries we have to convert; it is the members. It is the hundreds of thousands of workers and their families throughout the land.

It is not easy to say this, but the real tragedy over this past year is that I believe that my Party, this Government, has failed in the battle for men's minds and has missed a great opportunity. I think we have reached this stage because we, all of us at Westminster, have failed. Mr. Heath tried. It was his tragedy that he was not the person to succeed. In what I am trying to say I have picked on the unions—if that be the right phrase—because I believe that they, more than any other section of the community, have the power to do this for us all. I believe that they, more than any other section of the community, can strengthen what is now threatened, the basis of our future prosperity and the basis of our political freedom. I believe this because it is what trade unionists themselves believe in.

What do we at Westminster do to command, as today's Motion says, the broadest national support? I can only give my views, which I hope are realistic if not popular. I do not think that a Coalition is possible except when we are engulfed by disaster. Neither do I believe that a Conservative Government could succeed. This is where I cross swords with my noble friend Lord Bruce of Donington. This country is moderate, not extremist, and the British electorate does not favour extreme views. Indeed, the referendum result right across the country is evidence of that.

I say to the Government that we have here an opportunity, an opportunity not only for the asking but for the taking, and we are throwing it away. It is there waiting and only we can take it. I believe that if we, the Government, would now decide no longer to be influenced or dominated by extremist views, whether from the Right or Left, but to proceed with policies acceptable to social democrats, we would have people of all Parties behind us. Indeed, in my view a Labour Government of social democrats could be in power for years and could do all those things that we want to do for this country of ours. Are we going to throw that away because we dare not stand up to the extremists and say, "We have had enough "? Let us give courage to those union members who feel likewise, who only want to lead to carry the day. If enough of us stand up and fight we shall win this battle for mens' minds. We shall come through, but only just.

Lord BRUCE of DONINGTON

My Lords, before my noble friend sits down, may I ask her to indicate which sections of her Party's Manifesto she now wishes to dissent from because I was advocating nothing that was not in the Party's Manifesto?

Baroness BURTON of COVENTRY

My Lords, I imagine that there is a lot in the Manifesto with which I would disagree. What I am dealing with at the moment is moderate opinion in this country, and I believe that the policies that would be approved by the moderate opinion should be carried out.

6.52 p.m.

Lord HANKEY

My Lords, I always listen with great interest to the noble Baroness. Lady Burton of Coventry, and today we had from her an elegant, interesting and well-informed speech on which I compliment her. I also compliment the noble Lord, Lord Bruce of Donington—although his speech ran very much counter to the noble Baroness's—because he made some extremely interesting points. I, too, have the OECD statistics, which make very sad reading. According to the latest OECD statistics of gross domestic product divided per capita over the various member countries, the United Kingdom has now fallen I to seventeenth place in the OECD area. That area consists of the whole of free Europe and Canada, USA, Japan, Australia and New Zealand. The only countries which are poorer in income per head in this area are Turkey, Greece, Italy, Spain, Portgual and Ireland. If anybody can feel complacent about that, I would be horrified.

In 1950 the United Kingdom was the richest country in Europe. By 1966, admittedly after Canada and the United States had joined the OECD, we had fallen to eighth place. By 1970 we were twelfth and now we are seventeenth. Where is the bottom? I ask that because we still appear to be going down.

It really is time for a fearless analysis to be made of why we are failing to this alarming degree. It is quite unfair to our people and totally unfair to our children to be complacent about what is happening, and certainly our debate has not shown much degree of complacency. My feeling—and several noble Lords have mentioned this—is that one of the errors we have made is swinging from one policy to another. The Conservatives do quite a lot when they are in power and then the Labour Party come in and undo a great deal of it. The Conservatives come back and undo a great deal of what the Labour Party have done and in turn Labour are returned and undo a lot of what the Conservatives have achieved. If one owned a village teashop and decided that it was not a great success and that next week one would go over to selling hot dogs and sausages and a month later one decided that because that was not a terrific success one would sell panties and bras, and because that did not do very well one decided a month later to start selling ices, frankly the tea-shop would go bust; one would be going to the bank to borrow more money to start again. This is what has happened with the United Kingdom.

Take, for example, the Industrial Reconstruction Corporation. I think it was an excellent plan but the Conservatives abolished it; after a time only to find that they wanted something similar, so they set up an organisation with another name. Then the Labour Party came in and they abolished that and now we are to have the National Enterprise Board, in itself an excellent idea in my view, as long as it is not used for wasteful forms of nationalisation. In all this process we have had start and stop, organisations have been built up only to be abolished along with their staffs and experience. Their archives have been scattered to the four winds and all this has been wasteful and ridiculous.

I will not go into the way in which this lack of consistent policy has applied in economic terms, because it is too recent in all our minds. We have had stop-go, stop-go, stop-go until industry is fed up and uncertain and we also have very high taxation. From looking at the statistics, it does not appear that the taking by Government of a very large percentage of the national income necessarily makes a country poorer, because Sweden has a much higher percentage in national hands than we have, yet Sweden is ever so much richer. It is, I think, much more a question whether one runs one's labour relations and industrial policy in such a way that industry can make it a success, because only if industry is successful can it borrow money for fresh investment. We have run our policies in such a way that they have not enabled much of our industry to be successful. Our taxation is unreasonable and the Treasury has not recognised the impact of inflation on taxation, or only recently at any rate has it begun to realise this, and then only to a small degree. Thus our industries have not been able to make profits and therefore have not been able to invest in the way they should have done. On this I agree with the noble Lord, Lord Bruce.

Our labour relations have also been incredibly poor. The Labour Party tried to put this right but failed. The Conservatives tried to put it right and I supported the Industrial Relations Act. But that Act did only half of what was required and it was far too complicated; nobody could understand it. Then the Labour Party came in and undid all of that and the industrial relations policy of the present Government is to me totally incomprehensible, except on the basis of wanting to ruin British industry and bring this country to its knees. How can any British industry like British Leyland or any other integrated industry work effectively if anybody can break a works agreement or a contract or can go out and break anybody else's contract? The only excuse they need have, according to the recent Bill which your Lordships passed, most unwisely in my opinion, is to have a "matter" anywhere in the world. On this excuse they can cause an industrial dispute and do anything they like to break contracts. I do not think that this is "on" and I do not know any country where this would succeed. It is one of the things which will bring this country down.

I was interested to discover that the Bill which your Lordships were made to pass last July was drafted by a Communist at the request of the Secretary of State for Employment, and I would not be surprised if that was also true of the Bill which we passed in March this year. I just record that interesting fact without any innuendo. So there in the background we have had Mr. Benn waiting for the shares to fall, waiting until British Leyland shares fell to 10p. One Minister ruins the company and another buys up the shares cheaply. It is like a company director gambling in the shares of his own company. I am really shocked.

Take the ports, my Lords. The ports are absolutely essential to our economy, with all our raw materials and food coming in and all our exports going out to pay for them. I have made careful inquiries about this. To my certain knowledge, British, Canadian, Dutch and Scandinavian sea captains no longer come to British ports unless they must, because the conditions are so bad in our big State-run ports. Turn-round is about 48 hours in Hamburg; it is 36 hours in Rotterdam, and in London or on the Mersey it is very seldom better than two or three weeks and sometimes it is four. I know a man who exports vehicles to America. He used to export them through Southampton—the natural port for him to go to—but he no longer takes them to Southampton because for some reason, they are not accepted there after 4 p.m. If he leaves them there before 4 p.m., any moveable objects in the vehicles, including seats, tend to be stolen. So he has his vehicles driven to Dover and the driver drives them to Antwerp, which is even further up a river than the Port of London. From Antwerp, they are shipped to America.

This does not reflect great credit on our ports. One would think that the TUC and the Government would be very anxious to correct these abuses, but what happens? In practice, we are faced with a policy in the Labour Manifesto of nationalising the ports. But the only ports which work well are those which are not nationalised—Felixstowe, Lowestoft, I think Teesside, and others like that. Then I have friends in Holland who no longer buy British cars. They always used to and they would still like to, but their cars arrive without wheels, or the spare wheel is often lost and very often the generator or the headlights are missing. This is something that we must put right.

I agree with the noble Lord, Lord Bruce of Donington, that it is time to end moderate policies if that is the sort of thing which is going to happen. What is the matter with the British race? They ought to get busy and get furious. It is really the frightening irrelevance of the policies in the Labour Manifesto to our present problems which causes me considerable alarm. It is time that the Labour Party recognised that the Manifesto is out of date. It is about a year old and they ought to think again. I believe that the only hope for the country is to put its shambles of a house in order. I do not think that the Labour Party can do that alone.

I do not believe that the Labour Party inspire sufficient confidence in the employers to be able to carry the country with it and to get investment. Also—and I am terribly sorry to say this—I do not believe the Conservatives can do it either because they are not trusted by the TUC, and the TUC is out to wreck Conservative policies when the Conservatives are in power. As a result, nothing is allowed to work or to get done. We shall have to be very careful that some of the Left-Wing Ministers who remain in the present Government do not make a farce of our continued membership of Europe.

I picked up the point which the noble Baroness made about the AUEW. Having watched television a good deal and having been around a lot, I really think that for a man to stand up at a trade union meeting and vote for something unpopular, or to protest when the person who is taking the meeting with two or three chaps with loudspeakers, standing beside him, announces a result which clearly does not correspond to the show of hands—and we have seen this often on television—requires enormous moral courage. I remember one occasion when a man saw this happen. I believe that it was during the Tilbury strike, to which the noble Baroness referred. A man complained to the BBC about it and was almost at once taken sharply to task by one of the people on the spot. He shut up like a clam and disappeared. I believe that there should be a rule whereby postal votes are required or, at least, if they are asked for, have to be held. But I believe that I am right in saying that, in the [...]eg[...]slation we have passed, we have abolished any requirement about trade union rules conforming to certain principles or even being inspected by the Registrar. So we have given up these very necessary rules. I cannot think of a better preparation for chaos than the Bills we have been passing in the last year.

What is to become of us all? Do we wait until our country reaches the economic and financial waterfall which lies ahead? Do we hope that the Government will fall out of favour before then? Will the Conservatives come in and then undo even the good things—and there have been quite a number—which the present Government have done? I do not believe that we can go on as we are, swinging about from side to side. Surely we must think again. I believe that it is time for a Government of the Centre. I believe that we have all been very impressed by the triumphant and most fertile co-operation between Mr. Wilson, Mr. Jenkins, Mr. Callaghan, Mr. Thorpe, Mr. Steel, Mrs. Thatcher, Mr. Heath and many others in the referendum campaign. Is it equally out of the question to have a campaign to set the country on its feet and for people to get together to do that? Is our common interest restricted only to Europe? Of course it is not. We have the greatest possible interest in making a success of our country and setting it back on its feet again, in making a success of the new Europe and in promoting the new outward look which it has already adopted towards countries outside. We have a very great interest in again setting our country in working order before we finally go bust. We have a very great interest in helping our own people to work properly, as they would dearly like to do, instead of being bedevilled by thefts and abuses in our ports and by strikes, restrictive practices and rackets which frustrate virtually all the delivery dates for our exports and ruin productivity and our earnings.

I have been talking to people in the steel industry in South Wales—ordinary people. They are absolutely fed up. They told me that there were many more strikes there than were ever heard about in the newspapers and that "father never brought back a proper full pay packet".

After what I have said, I suppose somebody will say, "Oh well, you want a Coalition." We have a Coalition now between the Social Democrats and the Left Wing who are, I suppose I may say, virtually Marxists, or at least many of them are. I am terribly sorry to say that what we are witnessing is the failure of social democracy. I have been a social democrat for years. I do not think that there are many people in this House who are not social democrats. What have we to put in the place of social democracy? We have nothing. I do not know what there is. Perhaps there is only something much more authoritarian, of the Left or Right, and the mind boggles at what the consequences would be.

Why, therefore, is social democracy failing? It is very necessary to face this question. It is failing because it has not been able to ensure the production and the productivity which are necessary to pay for the social benefits which it offers to our people, and which we warmly support. Our problem is to ensure that it produces what is necessary to pay for these benefits. I do not want to see them reduced in any way, or abolished, but unless they are paid for we have inflation. It sticks out a mile!

Therefore a Coalition, or perhaps an arrangement involving close co-operation, such as we had in the referendum, involving the social democrats, the Liberals, and the moderate Conservatives, could not be less effective than the present disastrous state of affairs. Indeed, it could be very effective in setting our country on a new line of progress. Besides, a common effort of this sort is absolutely essential if we are to set our labour relations straight.

I wish to make what I believe to be a really constructive contribution on this subject; at any rate it is intended to be highly constructive. What we need is a national contract—not a Social Contract between only the TUC and the Labour Party. If we could get all the Parties in together we could have a national contract. There is an arrangement of this sort in Sweden, and it works marvellously. The TUC, the CBI, perhaps the professions, and certainly the Government, should all be involved in it. I say to the Conservatives that the Government have to be in it. There is no way of avoiding this in modern times, because Governments have to be in control of the national interest and of economic policies. Only the Government know what is the national interest. Any given business knows how to make steel or shoes, but it does not know what the national interest is. The Government must be in on it. Businessmen must somehow learn not to suspect the Government to that degree.

I was recently in the West of Canada and the United States. I know various workers all over the place, and a friend of mine there is a foreman stevedore at Seattle. I had a most interesting conversation with him and I should like to tell your Lordships about it. I said to him: "What happens in your very large docks here? Do you have a lot of strikes?" He said: "Never, of course, while the agreements are in force." I asked: What happens if a strike occurs?" He said: "It would not happen. The union would have to pay 100,000 dollars a day." I have heard that figure from the motor industry and I believe it would be correct. I then asked him: "What happens if the boys go on strike contrary to the advice of their union, as happens in the Port of London and on the Mersey?" He replied: "The union would have to expel them." I asked: "What would happen if the union did not want to expel them, or did not like expelling them?" He said: "Oh, it would have to pay 100,000 dollars a day." That struck me as a remarkable statement, but I have made inquiries and it is the position also in Detroit, and I believe the figure is correct. Of course they sometimes have terrific strikes when the agreements come to an end. But by and large they tend to settle these things and the agreements stick. They do not make the agreements with the intention of breaking them, as often happens here; or at any rate no trouble is taken to prevent agreements being broken.

I then asked my friend: "You have a 10 per cent. inflation, and so what happens after eight months, when the boys find that their wages do not match up to the cost of living and they can't pay for their second automobile, or their deep freeze, or anything else? "He said:" That's quite simple. Our wages are indexed to the cost of living every six months."

I leave this thought with your Lordships. Certain very interesting conclusions can be drawn. First, it seems that you cannot expect labour agreements to stick in a time of inflation, unless there is some indexation of wages. The boys are bound to get fed up after a few months. You have a rash of strikes, you lose productivity, and in the end you have to pay them enough to keep up with the cost of living. On the other hand, if you do not enforce agreements, the indexed settlement which is made merely forms the starting point for more negotiations and for real inflation such as we are getting here. You cannot have indexation without enforcement, and you cannot reasonably inflict enforcement on the workers without indexation. I leave that thought with you, my Lords.

I believe that here we have the germ of something. What I am arguing is that we should have a National Contract in which all Parties, and all men of good will, would be concerned and which they would back. It would contain some sort of incomes policy, indexation, and a measure of enforcement such as I have mentioned. Possibly there would need to be resort to the courts to ensure enforcement. I know that that is not popular, but we are in a time of desperate straits. Perhaps we should also adopt these ideas about the taxation system being brought in to reinforce the enforcement where agreements are made at too high a rate.

I suggest quite seriously that we should think about this, and that there should be an arrangement between the Parties. They ought to be discussing this now. We must try to do something before our country goes over the economic waterfall. Action cannot be taken by any one Party alone. The road divides in front of us. One road goes down into a limbo, a sort of Death Valley, with unforeseeable consequences for our people. I was at a German university shortly after the great inflation of 1924. People there told me that their sufferings in the period of inflation were infinitely worse than anything they suffered in the war. The other road goes up a steep and stony path. but the fair land of the new Europe lies at the top, and it is there that we must make our great constructive contribution in which I believe all moderate men of good will have a strong common interest.

The question is not whether British rates of wages are to go up. They are disgracefully low at present in comparison with Europe. But the question is whether they can go up slowly enough not to plunge us into a major inflation, and whether the workers can somehow be persuaded to allow productivity to rise up to European levels. Sooner or later, if we are to make a success of our membership of Europe, that must happen. So which road are we to take? Together up or divided down? My foreign and Commonwealth friends keep saying to me: Whatever is the matter with Britain? Are you all sleepwalking? My Lords, are we all sleep-walking? Let us make a plan. Let us have a referendum on it, if necessary. If the extreme wings of either Party do not like it, that would show where the will of our people lies, and I believe that they would come down very firmly in favour of something such as I am talking about; and that this might unify the country in favour of a real effort to set it on its feet.

7.19 p.m.

Lord O'NEILL of the MAINE

My Lords, at this stage in the debate I shall be brief, as is my usual custom, but I wish to make a few observations. First, I wish to thank the noble Lord, Lord Byers, for initiating this debate. This is the kind of debate which your Lordships' House can conduct so well, and it is certainly an excellent idea that we should concentrate the attention of the country on the economic problems with which we are faced, after the post-referendum euphoria has ended. Unfortunately, I missed the speech by the noble Lord, Lord Byers, because I was attending an enormous gathering run by the American Chamber of Commerce. The gathering was expecting to be addressed by Mr. Anthony Wedgwood Benn. For obvious reasons he failed to turn up, and one of yesterday's junior Ministers took his place and read his speech—and, by the way, I was interested to hear the phrase "profitable opportunities" used on three or four occasions in that speech. If a different kind of audience had been addressed, those actual words might not have been used.

I was here to hear my noble friend Lady Burton speak. We have co-operated before. Her theme, I felt, was the position of the small man and woman in this country. She has championed them so often before. Today, unfortunately, is the day of the big battalions. I am sure that she was right and that we in this House were right to demand that the facilities of Cromwell Road should not be withdrawn. But nobody paid the slightest attention. There were no big battalions; no threats could be used. There was no one to strike; so that the British families lost those facilities. I feel that she was championing today. That was the theme of her speech. She was championing today the people who have not got the big battalions behind them to get their own way.

In my view, one of the tragedies of the British Party political system is that Party officials carry more weight than the ordinary voter who votes for that particular Party. In the Conservative Party the Right Wing has far too great an effect on the polices which a Conservative Government carries out, and I do not believe that the ordinary Conservative voter really wants that. Equally, when the Labour Party is in power, its Left Wing has far too much effect on the policies which are carried out, an effect which I do not believe the social democratic voter in fact voted for. If our system produces these unfortunate effects we are, I think, driven to consider, as I said the other day on a Motion of my noble friend Lord Alport, the possibility of altering our system of elections. I know that for a long time this has been the view of the Liberal Party, but in the good old days when they could form a majority on the old system they did so.

A Noble Lord

There was no need for it.

Lord O'NEILL of the MAINE

My Lords, the noble Lord is very forthright in his remarks. Nevertheless, today, despite the fact that it has failed in Northern Ireland, it could be that proportional representation, used properly, as it would be in Britain, could produce more moderation. One noble Lord was devastating in his remarks about the moderates; but having paid the price myself for being a moderate I, like the noble Baroness, Lady Burton, stand up for moderation. I feel myself that the future can only lie with us. Otherwise there will be disaster leading eventually to dictatorship.

In 1931, I was in my mid-teens. Everyone realised how serious the situation was. There was no doubt at all about that. To day, with wages rising faster than prices, it is very difficult for the ordinary man or woman in the street to realise that there is any crisis whatsoever. If you have more money in the family budget, more money for your holidays, more money for a new television or for whatever it is, even though the prices have gone up, then, if your wages are in advance of the increase in prices, how can you understand that there is a serious situation? I believe that a lot of decent, ordinary British families do not understand that there is today a serious economic situation.

I mentioned just now that I could well remember the 1931 crisis. One of the things I can remember from my mid-teens—I have not looked it up; I have just remembered it—was that there were financial sacrifices made at the top. When it becomes necessary, as it will before long, for stern measures to be introduced in this country. I wonder whether the Cabinet should not give the lead. Supposing for example—I am just giving an example—a package of stern measures is introduced in two months' time and the Cabinet took a reduction of salary from £13,000 to £12,000. That would be far more dramatic to the man in the street than all this talk about a crisis which they themselves cannot understand and I fear will not understand until unemployment rises and rises. I do not want to drag the Royal family into the discussion (I shall be dubbed the Willie Hamilton of this House), but one of my teenage memories is that the King offered a large cut in the Civil List. It may be that we have not quite reached that point; but I believe something like that will have to be done if the seriousness of the situation is to be brought home to the man and woman in the street in Britain today.

My Lords, I do not want to delay the House. Everybody has already made long speeches explaining all our points of view. I merely wish to say that I personally feel that we are in a very serious situation and that it is going to get worse unless the Government have the courage to tackle it. The noble Baroness, Lady Burton, who made an excellent speech, was talking about the power of the unions. Could I put it in this way as an outside observer? I can remember quite well, as I know noble Lords opposite can remember, that when Mr. Hugh Gaitskell was in trouble with the extreme Left Wing of his Parliamentary Party he could always rely on the trade union leaders to stand by him. That is the measure of the change that has taken place in this country in the last 12 to 15 years. It has taken place gradually and people like Bill Carron have been forgotten. They were the people who led the unions about 12 or 15 years ago.

My Lords, the situation is serious. I hope that when the time comes to deal with it—and it may be that there is not much time left—the Government will do their best to focus the attention of the people on to the seriousness of the situation by making sacrifices. Finally, may I say that if necessary this House should set an example and sacrifice some of their daily attendance allowance. This may have to be done at a time when some serious package is introduced. I merely suggest this so that the situation can be brought home to the people.

Lord BESWICK

My Lords, may I ask the noble Lord before he sits down, since this suggestion has been put forward once or twice recently, whether he took the trouble to find out when Ministers—he was suggesting they take the lead—last had an increase? Can he name any other body of people who have not had an increase since Ministers had their last one?

Lord O'NEILL of the MAINE

My Lords, I am sure that what the Minister said is absolutely correct; but unfortunately it is very difficult to bring this kind of thing home to the man in the street unless you actually make a cut. Postponement of a rise, excellent in itself, does not hit the attention.

Lord BESWICK

My Lords. I asked the noble Lord whether, before making that suggestion, he had bothered to turn up the date on which Ministers of the Crown last had an increase.

Lord O'NEILL of the MAINE

I did not. But, my Lords, I still stick to what I have said: I do not believe it is possible to bring home to the people the seriousness of the situation unless "top people"—to use that ghastly American phrase—make a personal sacrifice.

7.30 p.m.

Lord LEE of NEWTON

My Lords, I thought my noble friend Lord Bruce of Donington was right when he pointed to the cumulative effects of a paucity of investment going back for generations. Indeed, it has now reached the point where we have, among the large industrial nations, compartively low pay because of our inability to expand our industries. That is not because of the Labour Government in the past 18 months frightening people to death, but because of the way by which employers have for generations sought to rely on the physical sweat of labour rather than keeping pace with their competitors abroad in the rates in which they have invested.

I should like to congratulate the noble Load, Lord Byers, for introducing this subject. He said he believed there was scope for improvement in the way in which the NEDC does their work. I entirely agree with him. I have been to NEDC meetings which were disappointing. There was no cutting edge, no decision-taking. The CBI and the TUC are partners of Government at NEDC level. The NEDC is one of the most vital bodies in the deliberations which take place between the Government and both sides of industry, and we are entitled to expect a very high standard of efficiency from them. I put it to the noble Lord that there are weaknesses in both partners which have to be examined. I am glad to see both the CBI and TUC are suggesting methods by which efficiency could be improved. But I think they had better look at their own weaknesses. Neither of them have been granted the power by their constituents to guarantee that those constituents will accept decisions taken by the Government, even when those decisions are based on advice given by the TUC and CBI. Indeed, the whole conception of national organisations as partners of Government in very vital decision taking, a conception which most of us look upon as a most important part of our democratic system, is now becoming more and more difficult. The real power has moved away from the centre into the localities and on to the shop floor.

I have argued for many years that the trade unions should accord far more power in decision-taking to the TUC, otherwise that body cannot fulfil the functon vis-à-vis the Government which most trade unions want it to fill. The irony of the present situation is that the executives of the trade unions, who refuse to relinquish power to the TUC, have now anyway lost much of it to the workshop, while they themselves are left to retain responsibility for decisions taken over which they have no control. I know that in a democracy we do not like too much power to be vested in too few hands. I should have thought we must aim at ensuring that power and responsibility remain in common harness. I am afraid that this is one of the weaknesses of NEDC, in that the TUC has never been accorded the powers which I and many of us believe should have been surrendered to it by the unions; while the CBI, a much more modern conception—it has only been in existence a few years—has never, in fact, had the slightest authority over the firms which make up that body. Therefore, I would have thought both bodies—I do not dispute for one second their great sincerity in wanting to make the NEDC a more efficient organisation—had better begin by arguing within their own constituent bodies the need for them (a) to be given more authority to make decisions, and (b) the assurance their constituents will carry out those decisions once they have been made.

On the only occasion I have mentioned the Social Contract and the return to free collective bargaining in this House, I said that I hoped devoutly that both succeeded. I am now driven to conclude that neither has done so, and Government have little time left in amending both the Social Contract and collective bargaining. I admire greatly much of the good work which this Government have done in a very difficult Parliamentary situation, and I regret that a great deal of it has been dissipated by the failure of these two concepts. On many occasions in the recent past, the Prime Minister and the Chancellor of the Exchequer have stressed the critical nature of our economic problems. They were joined last weekend by the Secretary of State for the Environment, and today Mrs. Shirley Williams has also joined in. All four of them have pointed out that, no matter what degree of inflation was caused by overseas issues in the past, the present levels are largely generated within our own economy—and each of them has pointed to the level of incomes increases as by far the major cause.

As those increases are now such that incomes are to be doubled over a three year period without any real increase in wealth production, it is difficult to fault their reasoning. Each of them has stressed that this failure of collective bargaining to achieve results which are within the nation's resources is bound to result in high levels of unemployment. Some of us have good reason to remember what unemployment is about. In the reference I have made to my right honourable friends such judgments have not been based on political slogans, but on hard economic facts which none of us can possibly refute. Under such circumstances, one feels justified in commenting that the equanimity with which some of those whose jobs are reasonably safe can contain their sorrow at the probability of heavy unemployment among others is truly remarkable.

The permitted ceiling of the Social Contract was not a compromise arrived at after negotiation with either employers or the Government—that ceiling was achieved by the guidelines laid down by the TUC alone. Those were what the TUC suggested after due consideration of the economic indicators—and many of the unions on whose behalf the TUC spoke when producing them have refused to honour them. Yet we hear the very Ministers who, rightly, are bringing the consequences of such conduct to the attention of the nation are also arguing that it is the statutory incomes policy that has failed. I had intended quoting some figures produced by the noble Lord, Lord Kahn, on 30th July 1974, to show the differences which obtained during the years when the Labour Government had an incomes policy as distinct from what they are now.

I had the honour to run that policy for 12 months and I am proud of the results we achieved. Indeed, if it is the case that, as my noble friends said, a statutory incomes policy failed, may I ask: To what levels do inflation and unemployment have to be driven before we hear them arguing that it is collective bargaining that has failed? It is not the case that the failure of collective bargaining is a new development. We hear a great deal more about it now; it is commented upon more than it used to be. But its failure was just as ghastly, indeed even more ghastly, in its consequences during the 'twenties and early 'thirties when power rested with the employers whose anti-social abuse of that power brought about a tragic deflation with mass misery, poverty and unemployment. Today, although there is no difference in either the morals or the methods of operating collective bargaining, industrial power has swung the other way and we are confronted with the prospect of heavy inflation and, again, heavy unemployment.

When we accept the principle of bargaining as a fair way of determining living standards, it seems to me we always assume that the conditions under which that bargaining takes place are roughly balanced between the two sides. I do not believe that it is ever possible to produce that nice balance of industrial and economic power, as between trade unions and employers, which is essential to the ideal of a fair day's work for a fair day's pay. Yet without that balance, so-called collective bargaining is synonymous with jungle law in which you use, or threaten to use, every ounce of advantage you possess in order to achieve your aims. That is what it is all about. For years I had to employ the method of collective bargaining. In those days I had to try to dissuade employers from taking more from us. It was not a very nice time. If some of my friends in the trade union movement had had to encounter that kind of thing they might be a bit wiser in their knowledge of the problem.

Another great weakness is that at any one time many thousands of bargains are being made within industry, and it is impossible for any of the people making those bargains to know what the effect will be on the economy. Therefore one is working in the dark on the question of a responsible attitude towards the nation's problems. Within that system it is not possible to create economic circumstances which favour the low-paid worker, without such circumstances being even more favourable to the higher paid. They are highly paid because they have power; they are low paid because they do not have any power. I see no point at which collective bargaining can do the things which your Lordships have been talking about today.

I have heard mentioned the use of an incomes freeze or the type of incomes policy which is intended as a temporary measure to cushion the economy during an economic crisis, but this is no answer to the problems of a sick economy. In these days, all the main political Parties accept the need for economic planning. The Labour Party, in particular, has preached the vital part which such policies must play if we are to achieve an efficient economy. A belief is economic planning requires us to include incomes in precisely the same way as we include education, health, the social services, housing, defence and so on. There is no way in which one can equate the retention of collective bargaining with economic planning. In that sense it represents the last element of laissez-faire capitalism and its presence is a threat to the ability of any Government to govern.

I have sat around the Cabinet table when we have tried to do the economic planning in which you distribute so much to education, so much to health and so on, and on every occasion when you think you have got that right it all falls down, because you do not have a clue as to the income. Therefore, it is inimical to the whole basis of economic planning, as I understand it. The very fact that members of the Cabinet who are in charge of our economic policies, including the Chancellor of the Exchequer and the Prime Minister, can inform us that a continuation of what we are now doing will lead to massive unemployment, and that it places the nation on a suicide course which they are impotent to prevent, means that the excesses to which I have referred and which are inherent in free collective bargaining are well beyond the control of Government. We have even reached the stage at which we see on our television screens trade union officials who have just negotiated increases of over 30 per cent. telling us that they know how dangerous it is.

My criticism is not directed against individuals; too much of that has gone on in this debate. I do not criticise individuals, whether trade unionists who feel they have to make these demands, or the employers who agree to pay them. They are victims of a vicious system in which neither they nor the Government, so long as we maintain collective bargaining, know the answer. My criticism is against a system which is obviously now out of control and which renders a Government, which is often charged, unfairly in my opinion, with interfering unnecessarily in industrial matters, incapable of action to any good purpose. Every speaker today has been demanding that the Government should act. I challenge any noble Lord to show me how they can act so long as the basis of what we do is the stupid collective bargaining system, under which in pre-war days when the power rested with the employers we suffered from deflation and unemployment. Now, when the pendulum has swung the other way, we suffer from inflation and threatening heavy unemployment again.

I am glad to see that Mr. Jack Jones is trying to devise a new formula which would include flat rate advances for everyone. I hope it is tried; I hope it succeeds. But noble Lords will notice that whatever else that is it is not collective bargaining. It is the refutation of every principle on which collective bargaining is based. They do not say these things but, quite obviously, men of good will are now despairing of their ability ever to get a sensible compromise as long as that golden calf, to which in my time we had to bow down, is still accepted by the nation as the only way by which we determine incomes. The House may well have gathered that I am not the greatest admirer of collective bargaining, which I equate with the haggling of a Middle Eastern bazaar, rather than as a method by which an industrial nation determines its levels of payment. In any event, we now have something which is not based, as collective bargaining used to be, on the ability of a given industry to pay. It is now based on, "Anything you can get I can get, too "—a complete refutation of collective bargaining.

In 1950, I was nearly sacked from the Labour Government for producing an incomes policy. I think it was rather good; I might publish it one day. I wanted a system by which we based our payments on priorities of scale, responsibility, danger and dirt. These should surely be the priorities on which a sensible and constructive incomes policy is based. I still believe that this is the way in which we should begin. I have the impression that a very large majority of the people, including trade unionists, are sick and tired of the whole nonsense and the dangers which it brings, and I believe that a referendum asking whether they would prefer a fair policy on prices and incomes, arrived at by a more rational and scientific method, would result in a far greater majority than the British people gave last week.

7.50 p.m.

Lord BANKS

My Lords, I think there is general agreement that we have had a very interesting debate this afternoon and that my noble friend Lord Byers has performed a valuable service by putting down this Motion today. I should like to make one or two brief comments on some of the very interesting speeches we have listened to. The noble Earl, Lord Gowrie, claimed a certain credit for the Conservative Party for the fact that they had spent 10 years advocating that Britain should be a member of the European Community. I certainly would not want to deny them that credit, but I cannot resist reminding your Lordships that the Liberal Party first put forward that proposal many years ago. I am delighted that we have been joined by successive Conservative and Labour Governments, with the culmination of a very considerable degree of inter-Party co-operation which we have seen during the referendum campaign. I am glad, too, that the noble Earl supported the plea made by the noble Lord, Lord Byers, that similar co-operation should now be applied to our economic situation—a belief which received forceful backing later from the noble Viscount, Lord Amory.

The noble Lord, Lord Shepherd, said he felt that when people talked about "the necessity to ditch policies ", it was always the policies on which the Government had been elected that they meant. But I think we should look with some suspicion at that phrase, "the policies on which the Government were elected ", because it is a fact that they secured only 39 per cent. of the votes at the last General Election. The noble Lord, Lord Shepherd, said there was no need for new policies. Some people were expecting that, with the referendum over, there would now be new policies, but he thought they were unnecessary because the result of the referendum had been anticipated by the Government. They had been planning in the context of such an expected result and therefore their previously established plans could now roll forward majestically. But I think that with a rate of inflation of from 20 per cent. to 25 per cent. that is really not good enough. Something more is expected, and I think there is a general feeling that there has been a hiatus in the development of economic policy and that the time has now come for a new package of economic measures to be put into effect to deal with the inflation rate. I am glad the noble Lord said he would consider the inflation tax, particularly since, as he said, the Social Contract has not come up fully to the Government's expectations. I am also glad that the noble Lord said he would welcome ideas from many quarters. I very much hope he will go beyond that and seek not only ideas but agreement on a set of ideas over as wide an area as possible.

May I say, as one who has recently made his own maiden speech in this House, how much I enjoyed the maiden speech of the right reverend Prelate the Bishop of Worcester. I agree most strongly that our attitude to the European Community should be based on mutual independence and openness to the world, and I support his plea that we need a wider Social Contract, fuller consultation with industry and reform of the electoral system. The noble Lord, Lord Ardwick, said that the Labour Party is not the Liberal Party and cannot be expected to give up the whole of its economic programme. I understand that, but surely some of it could be put into cold storage for the sake of co-operation in a very serious economic situation — because, after all, national survival comes before ideological purity.

The noble Lord, Lord Ardwick, also referred to the CBI plan to cut the rate of inflation over a period of time and the TUC plan to hold the rate of wage increases below the rate of inflation. I would hope these two plans can be brought together and that a national plan may emerge from them and from wider consultations. These need to be backed by political co-operation as well. The noble Lord, Lord Boothby, stressed the need for fresh initiatives, and of course I approve very much of what he had to say about electoral reform and particularly his remark that the electoral system did not seem to be producing the kind of Government that people want. I seemed to detect an echo of that in what was said by the noble Baroness, Lady Burton of Coventry, in her very impressive speech.

I wonder whether I may now refer briefly to one or two political measures because the Motion before us deals with these as well as economic measures. I think it is essential, now the referendum is over, that we should make it very clear that we are wholeheartedly in support of co-operating fully in the European Economic Community and also that we are going to commit ourselves to the concept of political union. If we try to draw back on that we shall create political uncertainty which would once again lead to economic uncertainty. So it is important that the Parliamentary Labour Party should, as soon as possible, take up their seats in Strasbourg and, contrary to the advice of the noble Lord, Lord Boothby, that direct elections should take place by the target date of 1978: also, when the Report of the Belgian Prime Minister on European political union comes to be considered in the near future and the Report of the Commission and Parliament, that the Government will be taking a constructive attitude.

I have heard it said by Members of the Labour Party in another place that the result of the referendum, which has been something of a setback for the Scottish and Welsh nationalists, should be the signal for a "go-slow" on proposals for devolution for Scotland and Wales. I very much hope there will be no acquiescence in that by the Government. I hope they will proceed with their proposals and that, if possible, they will go further than has been proposed and give a real measure of devolution to Scotland and Wales. That should be followed by a similar measure of devolution to the regions of England. Surely this would be a counter-balancing flow of power to that which must inevitably go to the institutions of the Community.

I think there is an increasing realisation that the views of the majority will tend to be frustrated so long as our present voting system is maintained. The Common Market issue provided an interesting illustration of this tendency in action. We have in Office a Labour Government with only 39 per cent. of the votes cast at the General Election, but with a majority in the House of Commons. More than half the Labour Members of Parliament recently voted in another place against continued membership of the Common Market. With this sharp division of opinion in the majority Party and the anti-Market point of view backed by the Labour Party Conference and the trade union movement, it is highly unlikely that the Government would have felt able to recommend continuing Market membership for Britain but for the device of the referendum and the agreement to differ. This was forced on the leadership of the Labour Party by the Labour Left, because they felt confident of winning the referendum and pulling Britain out. So unwittingly they prevented the otherwise inevitable frustration of the majority view.

We are told, on the one hand, that Coalitions are bad; on the other, that the Conservative and Labour Parties are Coalitions anyway. Whether or not all Coalitions are bad, there is enough evidence to suggest that the majority of people in this country do not want to he governed by the present Coalition which goes by the name of the Labour Party. The idea of the Jenkins-Heath-Thorpe Coalition would almost certainly command much wider support.

To talk of a possible Jenkins-Heath-Thorpe Coalition is not necessarily to talk of a formal three-Party Coalition. The latter involves embracing almost the whole political spectrum and would be difficult to hold together. It could last only for a very limited time in the face of near catastrophe. Such a Coalition tends to have a stultifying effect on democratic politics, and very soon new opposition forces arise offering opportunities for extremists to strengthen their position. Nor, clearly, would a Jenkins-Heath-Thorpe Coalition be a two-Party Coalition. In any event, in my view a two-Party Coalition is not possible under our present electoral system involving, as it does, an electoral pact. To talk about a Jenkins-Heath-Thorpe Coalition is really to talk of a realignment of political Parties and political boundaries. Once again we come up against the electoral system which militates against any realignment and reinforces the often artificial dividing lines of current politics.

Let me make it clear that I am not specifically advocating a Jenkins-Heath-Thorpe Coalition; I am merely trying to point out that, although it would be more acceptable to the electorate and no less cohesive than the present Wilson-Jenkins-Benn Coalition, the operation of the electoral system prevents even its possibility. We need much greater flexibility in our political system. We need to prevent this constant frustration of the will of the majority. We need to make realignment of political boundaries possible whatever the new alignments may be and whoever forms the Government. Whether it is old Party, new Party, two-Party or multi-Party, we need more give and take between members of opposing groups. And, above all, we need wide inter-Party agreement on an immediate limited programme of economic measures to fight inflation and unemployment. To my mind, all these things are infinitely more likely of achievement once electoral reform is achieved.

My Lords, I conclude by repeating that the present electoral system has become a barrier to unity, a barrier to co-operation, and a barrier to the supremacy of majority opinion. Its reform has therefore become an urgent necessity. But, pending that reform, I think wide agreement has been expressed in this House this afternon that there should be a considerable degree of Party co-operation, so far as it can be managed in existing circumstances, to secure a common approach to the very serious economic problems which are facing us.

8.2 p.m.

Lord BESWICK

My Lords, we have had some notable speeches and I pay tribute first of all to that made by the right reverend Prelate the Bishop of Worcester. I admired both the substance and the style of what he said and, like others, I look forward to his contributions in the future. I shall have something more to say about his speech later on. From behind me we have had a range of speeches from my noble friends covering the whole political spectrum. If one listened, as I did, with great interest to the speech by my noble friend Lord Bruce of Donington, to that from the noble Lord, Lord Mais, and to the most courageous speech by my noble friend Lord Lee of Newton, and then to the speech, delivered in her customary style and the conciseness, which many of us in this House could probably emulate, from my noble friend Lady Burton of Coventry; and if one remembers they came from members of one political Party, I think we can agree that there is no excessive dragooning of political thought here in this House. None of this would have been possible but for the initiative taken by the noble Lord, Lord Byers, and I pay my tribute to him for the way he introduced his Motion today. We owe him a debt of thanks and I acknowledge that.

As for the terms of the Motion moved by the noble Lord, I have only one reservation. I doubt whether the referendum shed much further light on our economic affairs, and certainly no more than we had, say, at the time of the recent debate introduced by the noble Viscount, Lord Watkinson. I agree, however, that the result of that referendum revealed a quite deep feeling in our nation that we need to achieve a greater and more meaningful community feeling here at home in Britain if current affairs are to be dealt with satisfactorily and if we are to play a proper part in Europe and the world beyond. I know for a fact that there were those who voted, "Yes ", not because they were impressed by Mr. Heath's single-minded insistence on Europe, or by evidence of overwhelming economic advantages since we joined, but simply because on careful and sincere assessment they thought that staying in gave us a greater chance of tackling together the problems, material and moral, which confront us. But having said that, we still return to the question: How, precisely, do we tackle them? We can all agree in general, but what about the particular? Or, as the noble Lord, Lord Byers, put it, we can all agree with the diagnosis, but what about the solutions?

It was our considered view that to help the economic situation in Scotland one solution needed was a new Development Agency. We formed a policy, after long, detailed and earnest study, which proposed to give that Agency the power not only to finance needed industry in Scotland but to maintain a stake in that industry and to reap rewards as a nation for the money we had put in. It was a moderate, longer-term solution. Yet yesterday the House voted to delete those powers. My Lords, why in this urgent situation, when we are asked to drop partisan policies and attitudes, should the built-in majority of this House have insisted on a partisan attitude to what was an essential clause in a constructive Bill?

The Earl of GOWRIE

My Lords, before the noble Lord leaves that point, does he not think that some regard might have been felt in this House for the costs of such a Development Agency at this time?

Lord BESWICK

My Lords, clearly one has to have regard to the cost. Clearly, also, one has to have regard to the cost of under-employment in that area. One has to have regard to the need for investment in that area. One has to look ahead. And we came to a conclusion and the solution we put forward might well have been the right one.

The noble Lord, Lord Byers, gave us the example of Leyland's. No one doubts the need for financing that company if it is to survive. No one suggests that the difficulties of the company stem from this Government's actions. But why should it be called partisan if the taxpayers generally—the nation, that is—have to provide the money and then have a continuing stake in the company? I take the point put sincerely by the noble Lord, Lord Byers, that in the shorter term there are problems in providing the public finance.

Lord BYERS

My Lords, I did not put this point forward in a partisan way. I said it was not common sense to do it this way. It is not a question of whether it is Labour, Liberal or Tory. Why lock up the taxpayers' money?

Lord BESWICK

My Lords, the point I am trying to make is that what appeals to the noble Lord is common sense. What is common sense to us he holds to be partisan. I was going on to say that I accept that there is a difficulty of finding public money on a scale of that kind. But I think the noble Lord was being over-optimistic if he thought it would have been possible, even under guarantee, to raise the money in the City. Certainly no one had put forward that proposal when the matter was considered. When the noble Lord said that nothing would have done more to create confidence than if we had simply guaranteed the private investor, of whose confidence was he thinking? Of those who supply the money only? Or was he thinking as well of those who supplied the labour? Did he bear in mind those who put their whole lifetime's future in the company? Ought we not to give some consideration to them? And had he taken into account the fact that they thought it would be an advantage if the public, having put money in there, retained a stake in the company? I am looking forward to the debates in this House—

Lord BYERS

My Lords, the noble Lord is totally misrepresenting what I have said. I was dealing with this in the context of giving confidence to the business and industrial people who have to make the management decisions. There is no question of excluding the workers. Why does this have to be dealt with on a class basis?

Lord BESWICK

My Lords, I know that the noble Lord was dealing with it in that context.

Lord BYERS

My Lords, why, then, is the noble Lord twisting it?

Lord BESWICK

My Lords, I am trying to put it to the noble Lord that there is another context and that he will not achieve unity unless he recognises there is another context besides that which he has stated. I was going to say that I am looking forward to the debates in this House on the Industry Bill. I am not going to rehearse tonight the arguments that we shall use then. However, we cannot overlook the facts which were put forward in the speech made by the noble Lord, Lord Bruce of Donington.

When the noble Lord, Lord Byers, says that we must limit Governmental intervention, is he seriously suggesting that investment without intervention has been adequate in the past two decades? This is not so. I admit that we have to discuss this. I am looking forward to the discussion, and when the Bill reaches us I hope that we can discuss it in a good spirit. May I say, however, to the noble Lord and to the noble Earl, Lord Gowrie, that they should not convince themselves that unity is possible only on their basis. They may have to take further into account the policies that are put forward by the Government and those whom the Government represent.

The noble Earl, Lord Gowrie, said that the soil of the Western economy was money. I know what he meant, but that is what he said. I do not believe that we can achieve unity in this country on that proposition. Is it not more accurate to say that the real soil from which production will grow is the labour potential of this country—the skills and brains of all the working people at all levels? The policy which my Party put forward at two General Elections was designed to give greater emphasis to greater responsibilities being placed upon human beings, backed by new equipment, financed, where necessary, by public money. The mechanics can be debated. New techniques have to be found. Legitimate doubts on certain aspects have to be met. However, the point I make is this: do not expect constructive unity on policies which appeal only to one side of the House—policies which, moreover, have been tried before and have not succeeded.

As the right reverend Prelate has said, nothing is more needed in this country than a new sense of partnership between Government, unions and employers. We sincerely believe—and I ask noble Lords opposite to accept this—that we can obtain, with proper debate, a new sense of partnership within the framework of the proposals that we are bringing forward for industry. The noble Earl, Lord Gowrie, said that so far as full employment is concerned, we must also be prepared to give up Party policy. He appeared to welcome rising unemployment as an indication, as he put it—

The Earl of GOWRIE

My Lords, not at all.

Lord BESWICK

My Lords, the noble Earl should read what he said. I made a careful note of what the noble Lord said. What he said was that it is a shake-out of surplus labour which we need.

The Earl of GOWRIE

My Lords, I said that I would agree with the Government that unemployment is an undoubted social evil. If the noble Lord will look at what I said he will see that this is the case. I have been trying to put to noble Lords opposite that of course they are right to try to pursue their policies but that they cannot afford to pursue these policies, which I might not agree with but which they might agree with, on a devaluation of the currency of 25 per cent. a year.

Lord BESWICK

My Lords, what the noble Earl said is what he said he said, plus the additional observation that we are now getting a shake-out of surplus labour. He said that this was a good thing and I am putting it to him that, as my noble friend Lord Mais has said, we do not always obtain greater efficiency by putting men out of work. Very often it is the case that we are underusing expensive equipment. Sometimes it is the case that we are not reducing costs but that we are putting up costs. The noble Earl can shake his head and feel self-righteous. I sat through what he said and made a note of what he said, which we shall read in Hansard. I am putting it to him that if it is unity we are after, fine; I agree with it. But we have to decide the basis upon which that unity is achieved and, as I shall argue later on, it is the spirit of debate and readiness to concede through which we shall determine whether we can achieve the essential unity that we want. I hope noble Lords opposite will not be quite so squeamish if I point out to them that there were flaws in the arguments they put forward as they fell on the ears of those on my side of the House.

In connection with the redundancy penalty, the noble Lord, Lord Byers, went on to say that the answer is new equipment for new jobs and alternative work. Of course, I agree with him about that. When the noble Baroness, Lady Seear, raised this question, I said that in certain areas it is not a question of training facilities being required; it is a question of getting people to utilise those training facilities. However, the Government are spending an additional £20 million in 1975–76 and propose to spend a further £30 million in 1976–77 not only on improving and accelerating the growth of the training programmes but on providing additional incentives for job mobility.

May I suggest to the noble Lord, and indeed to the noble Baroness who takes such a keen interest in this matter, that they might well study what we are trying to do and what the British Steel Corporation is trying to do, with full Government co-operation, in Ebbw Vale. I do not believe that in any other industrial country in the Western World a greater effort is being made both to introduce new equipment and to provide the alternative employment that will be required for the labour that is displaced.

The noble Lord, Lord Byers, asked whether I would confirm that 60 per cent. of our gross national product is spent by public authorities. The precise figure is probably 57 or 58 per cent., but there can be no quarrel between us about that. The Chancellor has accepted—and we must all accept it—that this is too large a sum; that it must be reduced and that we shall seek a billion pounds of cuts. All the indications are that we shall achieve that target of cuts.

It was said—I think by the noble Earl, Lord Gowrie—that we need to get our problems into perspective. This is true. If we look at the perspective, there are aspects of this situation which are grave but they ought not to lead us into quite the pessimism which some people suggest is governing their thinking. The recession in industrial production and trade has affected to some extent all advanced industrial countries. Output in the OECD member countries was little changed in 1974 and is forecast by the OECD to show a small fall in 1975. This amounts to the worst recession since the 1930s. Unlike some other countries, Her Majesty's Government have not aggravated that recession by using deflation to put the balance of payments right and to curb inflation. There can be some degree of argument about that, but I think that on balance we were probably right in the line we took, bearing in mind the fact that as a nation we are so dependent upon our export trade.

While our output is undoubtedy depressed, the position is worse in many other advanced industrial countries. Industrial production in the United Kingdom is 5½ per cent. lower than it was in the autumn of 1973 before the power restrictions began. However, during the past year, production in Germany has fallen by 12 per cent., in Italy by 12 per cent., in the United States by 9 per cent. and in Japan by 15 per cent. If we look at trade as well, there are encouraging signs.

At the end of 1973, when the effects of the increase in the price of oil had hardly been felt, our trade balance was nevertheless heavily in deficit. In each quarter of 1974 the balance on our non-oil account was better than it had been in the last quarter of 1973. Over the first four months of this year the non-oil account has been in surplus and to this, of course, must be added the substantial and continuing surplus of the balance of our invisible trade. These encouraging balance of payments figures are supported by the figures for export and import volumes, which suggest that at a time when the volume of world trade has almost certainly been declining we have maintained or even increased our share of world trade. My Lords, those are facts and I think we should be prepared to accept them.

Again, to take unemployment—and I hope the noble Earl who is looking at me so sourly will accept from me that I am as conscious as he of the necessity for seeing that our productive processes are as free from surplus labour as is consistent with a human social policy; because he must bear in mind that there is a social cost of unemployment—while in the United Kingdom unemployment has been up by 40 per cent. on a year ago, the increase in Germany has been 164 per cent., in the United States of America 70 per cent., in France 73 per cent. and in Denmark 390 per cent. This may be of some slight comfort, but our balance of payments remains precarious and there is the urgent need of which all have spoken to bring about moderation in the rate of inflation.

Apart from the debilitating social dangers of which many have spoken, there is another immediate danger and that is, as the latest CBI survey emphasises, that our rate of inflation is becoming a major factor inhibiting export performance. I cannot see that it is going to be possible to quote for really large important orders in the future involving deliveries over a period of years, unless we can do something fairly soon to get inflation under control. We now have an insurance system against inflation, but I do not believe that this will be sufficient to meet the danger which faces us. Something will have to be done about that and I suggest that something is being done about it.

The right reverend Prelate said that a solution to the earnings conflict has to be found, and he emphasised that he was referring to all earnings. I think it must be encouraging, to some extent, that this sentiment which has been put forward from all parts of this House is also now being voiced throughout both sides of industry. Mr. Jack Jones, to whom reference has already been made by one or two speakers, spelt it out very clearly when he said: The interests of working people will best be served at the present time—and let me be frank about this—by sacrificing a few per cent. extra in wage increases so that we can halt unemployment. Let me read what the General Council of the Trades Union Congress have said to their constituent bodies—and I recognise the strength of the argument made by my noble friend Lord Lee of Newton, that there is not conclusive power exercised by the Trades Union Congress over the constituent bodies. Nevertheless, this is the sort of attitude which would have been quite inconceivable in the days when he and I talked about an incomes policy in the 'fifties. They said that if the level of inflation is to be reduced substantially this year settlements should conform to the guidelines, negotiations should not be reopened before their due dates and special case increases and other special factors, such as the low paid target, should not be used as arguments for comparability claims where they do not apply. It is accepted that the important word there, which is "guidelines ", is open to discussion, and some very interesting discussion is taking place.

The noble Lord, Lord Boothby, in a most effective speech, spoke of the enhanced standing of the Prime Minister and asked that he should use his authority in a counter-inflation drive. I think it can fairly be said that the Prime Minister has already given a lead. He has encouraged this positive discussion between the TUC and the CBI. He has talked about the possibility of a new kind of constructive discussion between both sides of industry. He has said that we should aim at getting the best possible estimate of our national product and then seek agreement as to how the cake should be shared as between essential public expenditure, exports, investment and a spendable personal income. Meanwhile, ideas are being put forward and are being discussed about fairness in the distribution of personal incomes.

I was especially pleased to hear Mr. Jack Jones lending his support to the idea of an absolute increase as against the modern fetish of a percentage increase. I have never been able to understand why a man earning £10.000 a year should need £1,000 a year extra to pay the cost of increased grocery bills, while a man on £1,000 a year, eating the same bread, butter and bacon, should need only £100 a year with the allegedly same 10 per cent. increase. That did not seem to me to be absolute fairness. Of course there are difficulties, as the noble Lord, Lord Ardwick, and the noble Earl, Lord Lytton, said, when the question of differentials is considered, and there are some, including craft unions, who will seek to guard differentials. But if we are to think that every argument against any policy is to be accepted we shall do nothing, and the eventual solution will not, in any case, find unqualified acceptance from all quarters. The fact of the matter here is that we have these new and constructive ideas and the Prime Minister has said that they should be considered. Today we had some consideration given by the TUC Economic Committee to this very question.

I agree with the noble Lord, Lord Boothby, that a lead is needed from the top. I have indicated that a lead is being given. But I also agree entirely with what the noble Baroness, Lady Seear, said, that if new ideas are to be adopted, if they are to be known, if they are to be understood, if they are to be discussed and if they are to be supported by those sensible, responsible, mature people who went to the polls last week to give a conscientious vote uninhibited by traditional or prejudiced Party allegiances, then I think that progress can be made. Some of those mature citizens voted, Yes; some voted, No. But I believe all of them, the Yes voters and the No voters, can be mobilised if the right approach is made to them. They can be mobilised for the real task ahead and I have the feeling that they will be mobilised.

8.30 p.m.

Lord BYERS

My Lords, I do not wish to detain the House for very long, particularly as there is a further debate to follow. But I must say at the outset that I thought the winding-up speech that we have just heard from the noble Lord, Lord Beswick, was a complete travesty of misinterpretation of the case put forward with great care from these Benches and, if I may say so, the Benches of the official Opposition. It was a complete misrepresentation on unemployment. Nobody has suggested that we wish to have unemployment. As the noble Lord admitted, I put forward a constructive case for retraining and for giving an incentive to these people.

My Lords, the noble Earl, Lord Gowrie, said that an inflation rate which was edging unemployment to a figure of 2 million was something we could not tolerate in this country, and that shows a social awareness. I was misinterpreted, too, on public expenditure and Government investment. But the idea that we are claiming that unity can only be possible on the basis we put forward is another misinterpretation. I was very careful—and I was delighted with the speech of the noble Lord, Lord Lee of Newton—to say that a forum must be found to identify the issues and to put forward solutions. I also said, and the noble Lord knows it, that I was not putting forward any cast iron proposals of my own, and it was totally unfair of him to take that line in the opening of his winding-up speech.

I want formally to thank those who have taken part in what I think has been a useful debate. In many ways it has been a sad and depressing day. I am amazed and appalled at the complacent reaction of the Government. I found it quite frightening. From all sides—one has only to look at the ticker tape tonight—the Government are being warned of the need for immediate action of some sort to deal with inflation. They are being warned by both Houses of Parliament, from outside and in the Press. Yet the noble Lord, Lord Shepherd, in a very temperate speech, said there was no need for an overhaul of Government policy, and no need for urgent new measures. We differ about this. We offered our support. I wrote the phrase down when he spoke.

But if this is the case, what are the reasons for the warnings by Mr. Healey, Mr. Crosland and Mrs. Shirley Williams? In this House we are living in Cloud Cuckoo-land. I tried to bring these warnings into the House so we could debate them. I am frightened at the lack of any sense of urgency. We have had no policy put forward today from the Government Benches, except that put forward by the noble Lord, Lord Bruce of Donington, who wants to go plodding along with a Manifesto, out of date and irrelevant to the descending value of the pound and the problems facing us day by day. He has it in his inside pocket in case he is challenged. It is his only answer to the brilliant, refreshing and common-sense speech made by the noble Baroness, Lady Burton of Coventry.

My Lords, I thought that the speech of the noble Lord, Lord Lee of Newton, was an important one that ought to be studied. This is what has been worrying many of us who have not had personal experience of the NEDC. There are weaknesses which ought to be exposed. They do not need to be exposed on partisan lines. We could put the machinery right and achieve genuine unity which comes from discussion.

My Lords, I was very encouraged to see how many noble Lords referred to the need for a change in our electoral system. I can only conclude by saying that if the present House of Commons had been elected by proportional representation, we should have neither a Labour Government, nor the abysmal self-satisfaction which has been displayed by the Front Bench today, and which gives me very great fears for the future. With that I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.