ECONOMIC AND INDUSTRIAL PROBLEMS

HL Deb 07 May 1975 vol 360 cc308-440

2.57 p.m.

Viscount WATKINSON rose to call attention to the need for a united approach to the nation's economic and industrial problems; and to move for Papers. The noble Viscount said: My Lords, I beg to move the Motion which stands in my name on the Order Paper. Six months ago I had the honour to initiate an economic debate in your Lordships' House in which I ventured to call attention to what I described as "Operation Industrial Survival". I said that I did not believe that Britain would survive unless we could recover some part of the unity and comradeship with which our nation has faced difficulties in the past. My Lords, it seems appropriate today to examine whether we have made progress towards this more united approach to our industrial and economic problems, though it is plain enough to all of us that the economic situation in which we find ourselves has grown much worse in this six months period. It gives me no particular pleasure to record today that my forecast six months ago of 1 million unemployed has almost been reached, or to forecast today that I believe the nation will be moving on to its second million by the end of the year unless we change our ways; and I say "our ways" because if our nation prices itself out of business it will be entirely our own fault. We can no longer blame the Arabs or anyone else. It is our doing, and ours alone.

I do not want to burden your Lordships' House with a lot of statistics, but a recent OECD forecast for consumer prices says that the British rate of price increases to the end of 1975 is now nearly double that of our main industrial competitors, and, of course, as we all know—the Chancellor said it himself—this alarming increase is almost entirely due to our own increased wage costs. So we are insisting on paying ourselves more than we are earning at a time when we are all living "on tick" and borrowing more each month from our foreign creditors, and all this to support an economic rake's progress that really is very often due to our own selfish actions and our somewhat misjudged policies.

Surely, my Lords, if any situation has ever demanded a national effort to recover our economic sense of proportion it is the situation that we face now. If this is so, then it behoves all of us who realise the truth (and at least most of us do in this House) to try to help and not hinder by what we say. So I do not intend to deal with personalities as such or to make personal attacks, least of all on noble Lords opposite. But one cannot do one's duty as one sees it unless one expresses one's sincere beliefs on what are right and wrong policies at this time.

To avoid any charge, I hope, of one-sidedness, let me start with the Chancellor of the Exchequer and commend him very sincerely for his courage. I and many other businessmen do not agree with his policy on capital transfer tax, 25 per cent. VAT and many other matters, but we congratulate him on trying to tell the country the truth at this time. The truth is that if trade unions or individuals go on demanding a 30 per cent. increase in wages on top of an already ruinous 20 per cent. rate of existing inflation, we shall drive ourselves into massive unemployment and bankruptcy, and no one will rescue us. So let us at least give Mr. Healey credit for speaking out, however late in the day it may be. But one must wish that he did not appear to be playing such a lone hand in his own Government; and, of course, he has yet to repair the serious error of imagining that you can succeed with a wages contract without involving employers, professional men, the City and everyone else. Will he put this error right? If he and the Government are willing to do so then for example, the CBI could make some sensible and practical suggestions, but we have not been asked.

I do not support this Government or their policies, nor do most businessmen. But it should be said that, through the CBI and other bodies, we should certainly be prepared to work with them in the national interest at this critical time if we believed they were trying to pull the whole nation together to surmount our problems. There is a useful precedent close to my heart in the one-time British National Export Council, invented by Mr. Heath and strongly supported by Mr. Wilson as Prime Minister in his day. Here unity was achieved between trade unionists, the nationalised industries, businessmen, all those concerned for a national purpose. It would not be a bad idea if people remembered that kind of precedent.

I have to go on and be blunt about why at least some Members of the Government—I hope through inadvertence—are making willing co-operation unlikely, if not impossible, from many businesmen. First, there is the attitude of the Secretary of State for Employment, which, to many of us, appears to be almost entirely trade union orientated. As noble Lords know, I once had the privilege of serving in the old Ministry of Labour. In those days its watchword was to be impartial and to foster genuine collective bargaining. Today, we feel the bargaining takes place only with the unions; employers' representatives are largely ignored. This is certainly true of the Employment Protection Bill and the Trade Union and Labour Relations Bill. I would only quote here from a recent letter to The Times from the Director General of the CBI, Mr. Campbell Adamson, referring to the Employment Protection Bill: This will undermine the established basis of collective bargaining and pay determination by ignoring considerations of the level of effort and output associated with particular pay levels, and make 'parity' the legitimate argument of pay claims"— a situation, of course, which we are now seeing exactly on the whole labour front.

I give one other short quotation from the CBI Bulletin of April 1975. It refers to the Bill with which I have been dealing, but it could equally apply to the Industry Bill. I quote: Despite all the representations to Ministers and intensive discussions with evil servants, the proposals have remained virtually unchanged and it has not so far proved possible to persuade the Government to inject even a modicum of fairness. Even where the logic of the situation has proved so strong that some small change has had to be made, the TUC has demanded and achieved further concessions". May I make it plain that I am not, nor is the CBI, attacking the trade unions for getting from a willing Government what they can as an advance payment against the Social Contract. What I am saying is that the Government should deal fairly with the employers as well as the trade unions. Whether or not your Lordships agree with the two quotations which I have given, I maintain they reflect an attitude of mind on the part of the employers of which any Government might be wise to take account at this time.

Now I must turn to the Secretary of State for Industry. Many of us in your Lordships' House who are old political hands from the other place, have at least some comprehension of the game which the Secretary of State is playing, with some skill, I imagine. But that is not a comment by me. To the average businessman, what he is doing is quite incomprehensible and extremely frightening and discouraging. I know it will no doubt be said that the Secretary of State is unfairly represented in the media. Let me give one example, therefore, which is based, I hope, on the record rather than the report. The Secretary of State, wearing his Party hat, put his name to a Document called A Ten-Year Industrial Strategy. I quote: Investment funds in the private sector will have to be guided in accordance with national priorities". Then, under the bold heading "Benn stands by his funds-for-industry plan", and presumably wearing his Secretary of State's hat, he is reported by the Financial Times of Tuesday 29th April, as saying to a trade union conference in Edinburgh: We need to develop progressively an economic and industrial strategy that will allow working people through their savings to have an influence on the strength and vitality of our industry and our economy". Meantime, in the same report, the Prime Minister is recorded as informing the Insurance and Life Officers Association that the original document does not in any way represent Government thinking". Jolly good! Also, I understand one of the Secretary of State's own junior Ministers gave much the same kind of reassurance at the Committee stage of the Industry Bill. Mr. Lever is then reported in the Daily Telegraph on Friday, 2nd May, as saying: Avant garde theorists may think they are lunging at finance capitalists but it is the small saver who will get the black eye". How very true. This argument still continues. I do not comment on it as an argument. It is not for me to enter into this kind of politics. But it is my duty to say as firmly as I can that this kind of double talk, as businessmen see it, is totally destroying any feeling of confidence between businessmen and their main sponsoring Department of State. That is a fact which troubles me very much.

One could quote many other examples, such as the Secretary of State's public comments on British Leyland. Many businessmen, including myself, believe that the Ryder Report does not provide the right long-term solution for the British motor car industry. They therefore naturally take exception to the Secretary of State's Statement that there is a Ryder Report to be written on almost every major engineering company". Again, my Lords, let me make it plain—and I hope that the noble Lord, Lord Beswick, will accept this from me—that I am not attacking the Secretary of State personally. He is a man of great skill and political ability—and good luck to him in his own sphere. I am not dealing with that aspect. It is still a free country and if the current rules of collective Cabinet responsibility permit this kind of thing, there is no comment I wish to make. But it is my job to point to the hard fact, as I see it, that if the Secretary of State and his Ministry want willing co-operation from the private sector of industry, then he must stop attacking the businessmen who run free enterprise, and who still provide most of our exports—only over 90 per cent.!—and nearly all the financial sinews of the State; because, if they continue to feel as beleaguered as they feel now, then they, too, may be driven to developing industrial muscle power and with it, however reluctantly, confrontation and non-co-operation.

To be fair, the Secretary of State has always made it plain in meetings which I have attended with him—quite a number now—that his wish is to get co-operation from all sides on whatever proposals he makes. Therefore, I say with sincerity that it may be of value to make it plain that, perhaps inadvertently, many of his present actions are not likely to achieve his own stated ends. How tragic this position would be at a time when the nation needs the highest degree of teamwork and unity from us all.

I very much hope that the Chancellor of the Exchequer, with all other Ministers, will try to give a lead towards this unity. However, this is a problem for the Prime Minister. A number of industrialists, including myself, who have seen him recently, have done their best to impress on him the seriousness of the adverse reaction among directors and managers across industry to what is sincerely believed to be the irrelevance of violent political dogma to the critical situation of the nation. We do not challenge the right of this Government to pursue the broad policy on which they won their narrow electoral majority, but we have the right to say, "It is not what you do; it is the way that you do it that makes it increasingly unlikely that you will get our full co-operation at a time when you need it". I hope that this time the Government will listen, and I apologise to noble Lords for saying, perhaps in rather more peremptory terms, much the same as I said six months ago.

To conclude on as constructive a note as I can, what could be done to move towards unity rather than towards a sharper divergence? Here I suppose we have first to get this divisive device of a referendum behind us. If the vote is to leave the Community, then it is my belief that national unity and sense of purpose will be impossible to achieve in a regressive, inward-looking Britain that has ignored its standards and rejected all its obligations, as I see them, from a trading point of view. But if the vote is a firm "Yes" to remain, as one must pray that it will be, then this could be a watershed—a time when, with the great issue of our generation firmly and finally decided, the British people could be led to a regained sense of purpose and unity. So what could be done on the economic and industrial front to achieve this end, because we should be getting on with it now and not waiting for the referendum?

First, a more balanced judgment must be brought to some of the more controversial and divisive measures now before Parliament and the country, particularly the Industry Bill. We must all seek, and genuinely seek, to try to move the industrial and economic debate on to more neutral ground. Businessmen should not only be consulted—we have no complaint about Ministers not consulting us, because they have done this very fairly—but their views should be carefully listened to and acted on by the Departments of Industry, Employment and others. I believe that here the Prime Minister could help a great deal by stopping the confusions and contradictions of differing Ministerial interpretations of policy, perhaps sincerely held—I do not know. I am talking from the point of view of a businessman who does not understand this game which some of us so much enjoy and which, to be frank, I so much enjoyed when I was in another place. I am not speaking for politicians. I am trying to speak for chaps in West Bromwich and elsewhere who do not understand this kind of politics, anyway.

It would help where Acts leave a wide discretion to Ministers, as in the Industry Bill, if there were a precise legislative code of practice understandable by all and binding on Ministers—and not only the present ones. Because, again, I must make it plain that it is not a question of saying that any particular Minister is right or wrong; if he lays down an Act of Parliament it is binding for all time until it is repealed, and if it is full of anomalies and wide open to interpretation as one goes along it is not surprising that businessmen should throw up their hands and say, "We don't understand" and then retire into their own little businesses and just try to save themselves. I believe that the Prime Minister alone can recreate the spirit of collaboration which, it is only fair to say, he achieved in the export effort through the British National Export Council and, no doubt, through other things. I hope that he will seek to do this in the national interest, for the need is great and urgent.

I hope that the CBI and the TUC are not waiting for the politicians to do it all for them. I am delighted to be able to say today, perhaps on a more hopeful note, that the informal discussions between the CBI and TUC, which have never really been broken off, are now beginning to make progress again. We are, I believe coming to a joint view; for example, on how important developments in the National Economic Development Council should be pushed forward. I make no apology to noble Lords for saying again that I believe—and I think that the CBI believes as well, but let me make it plain that I am certainly speaking not for the CBI today but for myself—that there is now a wide belief in industry that the NEDC and the EDCs could be restructured to form the framework for a national plan for industrial recovery and development that would engage the interest of the nation as a whole; one based, I believe, on a reasonably united approach by the CBI and the TUC on, at least broad principles.

These proposals would, of course, need the support of the Government, and particularly the Chancellor, and I hope his recent statements give some assurance that this will be forthcoming. I quote from the 1962 Neddy terms of reference: To consider together what are the obstacles to quicker growth … to seek agreement upon ways of improving economic performance, competitive power and efficiency. Is not this what we need to do at this time, and is not this perhaps the only neutral ground left on which we could do it—a new basis for the unity of purpose which we need? The Government, in their consideration of this matter, should take very careful account not just of what I have said—that does not matter—but of what industry is saying, and both sides of industry to boot.

I hope the Government will also take very careful account of the TUC proposal that Neddy should have—I quote their words—an "overview" of the National Enterprise Board and other Government agencies. An assurance on this matter by the Prime Minister would at least calm a few fears in industry, because they understand the NEDC, they trust it, they know that it is a fair forum for debate by employers as well as the nationalised industries, the trade unions, the City, independent members, the lot. I do not apologise for saying again that I believe that this is the framework on which one could create, … a united approach to the nation's economic and industrial problems. It is there and the Government need only to have the will to refurbish it, to use it properly and to do it now.

It is very significant that at this morning's meeting of the NEDC one of the more important pieces of business was the discussion of the joint proposal put forward by the CBI and the TUC to enlarge, improve and restructure Neddy. If the noble Lord, Lord Beswick, can tell us more about this I shall be very glad to hear it, because I believe it is very much in the national interest that we should do this, and do it now, because I am not seeking to make matters worse. I am trying very hard to see whether there is now some reasonably neutral ground where all Ministers and all those who oppose them, as I do and as my noble friends certainly do, could at least for the moment perhaps put the sharper, harder and tougher controversies not aside, but just a little out of the way while we try to get our nation back into some sort of solvency.

If we do not, I wonder how long it will be before our overseas creditors are really willing to go on being paid as they are paid now. I wonder how long the IMF and the other international bodies will be willing to go on lending us money without doing as they have done before; that is, demand a presence in Her Majesty's Treasury, and if that is not a cession of sovereignty I do not know what is. I do not want to labour this point, because I think we all know it. The sad thing is that the country does not know. So many people in our country still think, "If this is inflation, if this is politicians' talk of crisis, my wages are well ahead of the game. I've got a major settlement through my union and I'll get another one if I need it, so why should I worry?" As long as that feeling is there, and as long as we cannot do something about it in a voluntary society, we are going to ruin ourselves, and soon.

My Lords, I have tried to make my case for national unity, on the industrial front at least, as plainly as I can and without being more controversial than I must. I believe that many in industry, and perhaps some outside it, share these views and I hope that the Government will try to take heed of them before it is too late. My Lords, I beg to move for Papers.

3.19 p.m.

Lord BESWICK

My Lords, I am sure that the House will accept this Motion. There is no difference between us about the need for national unity. The question is on what basis that essential unity is to be achieved. Few will argue, either, that in recent years there has not been an apparent shift towards disunity. Indeed, one of the paradoxes of modern life is that the increasing industrial integration and technological developments which have made each of us so much more dependent on the rest of us have at the same time made it so much easier for small groups to do damage to a whole society.

So I for one welcome the opportunity which the noble Viscount has given us to stand back and look at what is happening in broader terms than is convenient on a narrower Motion or a particular piece of legislation. If we accept that the trend is towards disunity, the questions for debate are: what are the causes, how do we check the trend, and how do we move to the finer and more satisfying sense of mutual understanding which is an essential ingredient of a productive economy and a harmonious society?

Having said that, I am quite certain that there is nothing at all between myself and the noble Viscount. It would be possible to look at these questions only in the short term. I could make out a case, entirely convincing to a Labour Party audience, and not, indeed, far short of the truth, that the current move towards strife and towards disunity, really started, or got under way, in the days of the last Conservative Administration. Certainly that terrible combination of the Industrial Relations Act, on the one hand and unlimited credit and scope for the speculator on the other, caused both economic and social havoc for which we are still paying. We should not completely forget how well-meaning, patriotic Ministers in that Administration, who inherited a balanced budget and a surplus on overseas trading, brought the nation to the most bitter and imminently totally damaging industrial stoppage. Not since 1926 had we seen such industrial danger as we saw at that time—and then our resources were so much greater.

Moreover, it is fair to say—and I am glad to say that the noble Viscount was fair on this point—bearing in mind certain regressive features of the Budget of the noble Lord, Lord Barber, that no one can reasonably criticise the present Chancellor for lack of political courage or for lack of understanding of industry's problems. The new relief on stocks will be worth £1,300 million this financial year, and there will be positive gains from dropping of the ACT surcharge, the extension of the Price Code provisions on investment, the special aid for exporters in respect of preshipment finance facilities, and so on. All that, I submit—and I believe I have agreement there—indicates that there is some feeling on the part of the Government for the problems of industry.

But I do not press this Party argument and I do not want to look at this Motion on the short-term considerations. I believe we should be identifying deeper causes and longer-term solutions to the problems that the noble Viscount has put before us. If we are to understand the basic problems, we cannot disregard the enormous changes that have taken place in our own life-span. I have said before in this House that we need to remind ourselves of these changes that are taking place and of the differing standards and values which those changes have entailed. As I listened to the noble Viscount and saw what a receptive audience he had in this House, I thought of the audiences I have had on the shop floor, of the discussions I have had with trade union leaders and of the hopes, aspirations and demands which they now have, as against 10 or 20 years ago. I fear that we sometimes forget the changes that have taken place in other parts of the country.

This point was put with especial force by some words which the Bishop of Stepney quoted in The Times newspaper. He said, We have not merely extended the scope and scale of change, we have radically altered its pace. We have in our time revolutionised the tempo of our daily life; we have released a stream of change so accelerated that it influences our sense of time and affects the very way we feel. That is perfectly true, my Lords. So far, in industry, the main impetus behind changes has been the improvement of material standards and, in particular, a bigger wage packet. Much has been achieved in pay, pensions and holidays. I discussed some time ago, with the executives of the Marcel Dassault aircraft firm, the claim that their company had led the way on the Continent in paid holiday entitlement. One week, two, three, four, and I am not sure that in some cases they were not giving five weeks paid holiday a year.

It is not easy to recall that, not so long ago, a paid holiday of any length for an industrial worker was almost unknown. In the North, last month, a company was telling me of the claims being made for a guaranteed working week. The claims would be met, yet I recall when, not so long ago, the men in that factory would turn up and would be sent home because, for that day, no work was available. Off they went, there was no guarantee at all, even for a day, let alone a week or a year. We can all recall that casual labour, in effect, was then the rule and not the exception.

My Lords, there is an impetus behind that demand for material improvement that is difficult to stop. The pressure is, in the integrated society in which we live, almost irresistible. We are not now considering pressure groups only of manual workers. I read that university dons are threatening to withhold examination papers. I heard on the radio yesterday morning that farmers had smashed a consignment of French eggs with crowbars. The other day, fishermen were blockading British ports; and, while I find it difficult to keep abreast of the higher medical activities, I believe that the consulants have only just ended a go-slow, or a work-to-rule.

All this is an outward and visible sign of the fact that individual, and narrow, immediate interests loom larger than longer-term social wellbeing. The question is, how do we deal with this situation; how do we curb this insistent pressure for material gain? Seductive as is the prospect to some of weakening the power of the militant by increasing the threat of unemployment, there is no real evidence that insecurity leads to better industrial relations. I do not believe that national greatness will be achieved by instant redundancies. How are we then to contain this demand, organised in large groups and small, for protection and improvement of material standards?

Some hope, I suggest, is to be found in these words: We need both efficient, publicly-owned industries, and a vigorous, alert, responsible and profitable private sector, working together with the Government in a framework which brings together the interests of all concerned: those who work in industry, whether in management or on the shop floor, those who own its assets, and those who use its products and depend upon its success. I doubt whether the noble Viscount, whom I know to be an eminently reasonable and enlightened man, would fault one of those words, and yet they are the words of my right honourable friend the Secretary of State in the White Paper he presented to Parliament on British Industry.

How are these intentions to be implemented? How are the words to be made flesh, if I may so phrase it?—in the first place, by increasing investment in productive industry. The noble Viscount should not confuse policy with research papers put before a political Party. He quoted from some very interesting papers put out by the Secretary of State in his capacity as a national executive of the Labour Party.

Viscount WATKINSON

My Lords, I made it plain that he was wearing his Party hat, but I would add that businessmen do not understand the difference.

Lord BESWICK

My Lords, possibly between us we can help them to understand. Some things that are said in research offices one year are ten years hence quite acceptable. But do not let us think that everything that is being considered today in the ivory towers of research departments is necessarily for boardroom consideration the next day.

I was saying, my Lords, that there should be increasing investment, and I think that this would be agreed by all. In some cases, it is said in the Industry Bill, that the nation itself would hold the investment, with voluntary agreement. There is some argument about that, but I wonder whether the criticism is not overdone. How can it be divisive if all of us in common own part, or the whole, of an enterprise? If once it is recognised that this is a part—and an inevitable part—of the changes that have been taking place in the world, could this not be a unifying factor? After all, owning things in common is part of very successful union. Of course, one can accept that the role of the publicly-owned concern—its relationship with Whitehall—is a matter for development. Every chance is taken by the Press to magnify—or in some cases to invent—the difficulties. But there are problems here, and these are problems which might very well be discussed in this House in a proper way, in a constructive fashion. But although there are these problems, I will not accept that it is a matter which should operate against the unity which the noble Viscount and I are seeking.

What else is there in the Industry Bill, apart from the NEB? It also seeks to encourage what has come to be called "industrial democracy"—the right to have some say, to make some contribution to the efficient operation of the company in which a worker (and I include all those who work, in whatever capacity) earns his living. This extension of democracy in a free society is surely the way forward. If the energy of organised labour can be channelled from the limited aim of extra money in the pay packet,—probably worthless paper money—to constructive co-operation then there lies the hope for the future. I know there are industrialists in this House who welcome and encourage this development. Some have results to show already. I know—I have discussed it with them. But I always say that these men are entitled to have that as a right, and not just because some people are a little more advanced than others. There is much more to be done in this field.

My Lords, this kind of social and economic progress cannot be guaranteed by Act of Parliament—we are dealing with human beings. But the Bill will encourage natural growth—"organic growth" is the phrase I have used else. where—and we should welcome it. We should see it as an alternative to confrontation. We should see it as a way to a greater satisfaction in industrial life. And we should see it as another move towards the unity of purpose we are all seeking.

There is another provision in the Industry Bill, that much maligned measure towards which my right honourable friend has made such an immense contribution. That is the provision for planning agreements. Here again I know there are doubts, honest doubts—for example, about the extent of disclosure of information to workers. Let us discuss these doubts. The agreements will be voluntary. They are intended to bring together all three sides—management, workforce and Government—in common commitment to planning for important sectors of the economy. No compulsion is involved at all. What a minor tragedy for our country, when so much more can be achieved in a free society by voluntary collaboration of this kind, that the proposed system has been caught up in such a cloud of misrepresentation.

The noble Viscount said that the CBI had made representations to the Minister. May I say, in all fairness to the noble Viscount: ask the President of the CBI how many times he has accepted an invitation from the Secretary of State to discuss this matter?

Viscount WATKINSON

My Lords, the noble Lord should perhaps know that I spent nearly two hours with the Secretary of State at one point, leading a CBI deputation. The noble Lord, Lord Plow-den, took one the other day. We have seen the Prime Minister twice. There were very long sessions and the Prime Minister kindly allowed them to run on as long as we wished, with the Secretary of State present. We will go and talk to him again on any point. The only thing we would like to see is some results.

Lord BESWICK

My Lords, I know what the noble Viscount has done and I applaud it. I have a note to that effect and I hope very much that he will do much more. But since he was talking about the lack of response, I must say that the President of his organisation has, to my knowledge, never yet accepted an invitation to go to see the Secretary of State. I am saying that much could be done to dissipate the uncertainty if there were a greater freedom of exchange.

My Lords, the possible contents of a planning agreement will shortly be put before the CBI and the TUC as a basis for discussion. I know that the noble Viscount will do all he can to ensure constructive discussion, and I for my part, in so far as I have influence—and I work most days on something approaching this—will do all I can to ensure that what is said will receive a sympathetic and understanding hearing.

I may be told that we are dealing with a harsher real world than my high hopes allow for, and that this new approach to economic planning and industrial organisation is far too optimistic. I do not believe this negative and pessimistic view of the future is justified, and I shall say why. First, because despite some obvious indications to the contrary, I believe it is beginning to sink in, as the noble Viscount said, that disaster faces us all if we each, as an individual or a group, try to look after ourselves at the expense of others. I say it is "beginning to sink in". More persuasion is needed. I hope that this discussion will help. There may well be cases, or a case, where harsher discipline is inevitable. Alternatives have to be spelled out. A lot of the political heat has to be extracted from the situation. But I think we can make progress.

There is another facet behind all this which gives me cause for hope. More and more people are beginning to see, and must be helped to see more clearly, that the problems which face us are not transient troubles. We have issues to face in the Western World which involve much more than a cyclical trade depression. Words which impressed me, and which express this thought most clearly, were used by a United Nations director just before last Christmas. He said: After 200 years of industrial expansion, Western countries have reached an historic crunch point. Western, especially American, industrial society must now adapt itself to new priorities of moral, cultural and spiritual growths—or it will collapse. That is the challenge—no less than that. I believe we can meet that challenge. I believe we have the men in British industry who can, and who wish, to meet that challenge—given the right lead and the right atmosphere.

My Lords, if we are to create that right atmosphere, then we should all do well to try a little harder, as the noble Viscount himself has done, to see the better side of the other man's activities—and there usually is a better side. I have heard a good deal of criticism about my right honourable friend the Secretary of State. He was made an honorary member of the Boilermakers Society the other day—a union which itself is not immune from criticism. I looked at a copy of the original rules of that Society. This is what was said: Brothers of every grade high or low, rich or poor, unto you are these words addressed: the foundataion of our order is brotherly love, let it continue, so shall unity flourish and the attacks of prejudice and wickedness shall not prevail against it. What allies the noble Viscount has for his Motion!

Finally, I shall make, if the House will permit, one further quotation. It is from an American journal, which last week stated: Shortly after World War I, an official American observer of the European scene noted that Britain was the staunchest and strongest member of the Western European industrial community, although with the least actual and provable reason for it. Britain's economy was in dire trouble in those days, yet because of the stability of British political institutions and the sturdiness of the British spirit, Britain was in fact the strongest ally and the one on which Washington then based its planning for the economic revival of Western Europe. It is now some 30 years after the Second World War and the condition again is serious. It will test the capacity of those British institutions, political stability and sturdiness of spirit to see it through. My Lords, it is my view, and I hope it is the view of this House, that for the second time in 60 years stability and sturdiness will not be found wanting.

3.41 p.m.

Lord ROCHESTER

My Lords, I should like first, if I may, to thank the noble Viscount, Lord Watkinson, for having introduced this debate and particularly for the terms in which he framed his Motion, calling, as it does, for an approach to our industrial and economic problems that is a united one. It is now nearly 18 months since the noble Lord, Lord Diamond, in a somewhat similar debate in a critical situation under a Conservative Government, suggested that representatives of the three political Parties should meet on a Privy Councillor basis to see whether, by compromise and some sacrifice of Party advantage and philosophy, agreement could be reached on what might first be recommended to Parliament and then to the nation. This suggestion received a welcome from all parts of the House. I recall that it was followed up later by questions addressed to the Government on similar lines by a number of noble Lords, including the noble Lords, Lord Orr-Ewing and Lord Gore-Booth. Nothing came of the initiative of the noble Lord, Lord Diamond, and it was, of course, followed by the three-day week, a coal strike, two General Elections, and by the formation eventually of a majority Labour Government.

Since then things have become worse, and we now have a borrowing requirement of £9,000 million in the current financial year, the prospect of unemployment higher than any we have experienced since before the war, and raging wage and price inflation. I noted that in his speech the noble Viscount did not, any more than did the noble Lord, Lord Diamond, before him, call for a Coalition Government. At the present time that is certainly not practical politics, and speaking from these Benches I have not the slightest authority for suggesting such a Government. I recall, however, that in our economic debate six months ago the noble Viscount, Lord Amory, gave it as his opinion that our situation would continue to deteriorate until the political Parties reached at least a measure of agreement on how inflation could be cured. I do not know whether, in the judgment of the noble Viscount, Lord Amory—for which I have the greatest respect—it follows that a Coalition Government will eventually prove necessary if our problems are to be resolved. However, I agree with him that if inflation is to be conquered, then the policies to be pursued must have the support of all Parties. We on these Benches feel that a united approach would be greatly facilitated by the introduction of some form of proportional representation in our electoral system, and we are much encouraged by the wide support which this idea received recently, and not least in your Lordships' House as the recent debate on the subject demonstrated.

What, then, are the policies that might be expected to command widespread support within the three Parties? May I, first, suggest what in my view they are not? They are not those extreme policies of nationalisation, for example, of the aircraft and shipbuilding and ship repair industries, which, because it can be claimed that they were in the Labour Party Manifesto at the last Election, are said to have a mandate from the people of this country for their execution. In fact, the great majority of those who voted in the last Election may claim that they were opposed to such policies. They are irrelevant to the solution of our industrial and economic problems, and are potentially damaging to the health of our economy, if only because of the expenditure to which their implementation would give rise. Experience shows that they would produce no adequate return on capital investment, no improvement in labour relations, and no increase in productivity, and they should therefore be dropped.

More positively, my Lords, in trying to identify those policies on which perhaps we could go forward together, I should like, as did the noble Viscount, Lord Watkinson, to compliment the Government on the fact that they are now, as we see it, facing in the right direction and taking the first tentative steps to reduce our borrowing requirements by increasing taxation on non-essential items of expenditure and by reducing subsidies on the products of nationalised industries and on food. For our part, we feel that it would be better to eliminate food subsidies altogether and instead to increase family allowances, particularly by bringing forward the time at which payment could be made in respect of the first child. As I see it, these steps are in the right direction but they do not go nearly far enough.

As a nation, we are still living on credit to a much greater extent than we should, and devoting far too much of our slender national resources to consumption and not nearly enough to encouraging capital investment and the exports on which our future depends. We have also noted with interest that in reply to a Question in another place last week, the Chancellor acknowledged that there was a strong case for considering, possibly this time in conjunction with the CBI, whether, before the next wage round, there should be found some means of ensuring that the guidelines in the Social Contract were more rigidly adhered to. We do not know exactly what that form of words portends, but if it amounts to a hint that some statutory incomes policy might be introduced on the lines, advocated by the Liberal Party, of a surcharge on national insurance contributions in cases where wages are increased beyond a certain norm, then we agree wholeheartedly with the Government. Do not so many recent industrial disputes and wages settlements show the urgent need for such a statutory pay policy? Without one, will not one group continue to take industrial action to preserve, or establish, what it thinks should be its position relative to some other group? Are not the alternatives to such a policy either uncontrolled inflation or intolerable unemployment, and maybe a combination of both?

I recognise that this issue cannot well be resolved until after the referendum on 5th June, and we must hope fervently that the British people will vote decisively in favour of our staying in Europe; for then some of the divisions within the Labour Party will be resolved and the current round of wages negotiations will be nearly over It may be said that even then the country will not be ready for such a policy. In that case, I think that the decision may well be taken by our foreign creditors, and we really will have to learn the hard way by having heavy unemployment, bankruptcies and the rest of it. The prospects then for the poorer sections of the community who have no power to defend themselves, and even the outlook for our democratic way of life, will be grim indeed. It may also be argued that it is all too difficult, and that if a statutory wages policy is introduced which certain powerful trade unions do not like, it may not be possible for Parliament to make that policy stick. We reject that argument; for it is to say that it is not Parliament which is sovereign but the trade unions. In our view that is a reason for all Parties in Parliament to support a law which seeks to protect the weak against the monopolistic power of the strong.

I have said that I believe that we should devote more of our resources to industrial investment; and the Secretary of State is constantly saying the same thing. But we must guard against the dangers of unprofitable investment and unproductive employment, of simply putting more and more taxpayers' money into industries which, in comparison with those of some of our foreign competitors, are heavily overmanned and in which productivity is getting relatively worse and worse. I know that in some quarters profit is still rather a dirty word; but in my view there is nothing wrong with profits as such, it is what happens to profits that matters. As Francis Cairn-cross, in a rather discerning article in the Guardian a little time ago, wrote: It is surely more convincing to argue that if companies were more profitable they would invest more, than to argue that if companies invest more they would be more profitable. Is not one of our great problems the need to find some means of uniting in order to create more wealth rather than spending so much of our time squabbling over how such wealth as we have should be distributed?

My Lords, in saying these things I hope you will not accuse me of advocating unemployment; for I am not doing that. It is simply that, as I see it, our problems will not be solved by preserving jobs for the sake of preserving jobs. They will be solved by creating new jobs and then training people for those jobs. At this point I should like to congratulate the Government once more on such financial provision as they have been able to make for this training, but also to say that we think it should be a lot more. My noble friend Lady Seear will be saying a little more on this subject of training later on. I hope to revert to one small aspect of it in a moment.

A particular reason why there is need for agreed policies in the industrial field is that, as those of your Lordships who have experience of industry will know, the time span over which industry has to plan ahead nowadays is very much longer than the expectation of life of a single Government. In terms of national planning, is it not really rather crazy that policies introduced by the Government of the day are so often so completely unacceptable to the Opposition that they are reversed within only a few years and that it is industry which is then left to pick up the pieces? Take questions like nationalisation, like trade union legislation, like taxation and pension policies—and I am sure that your Lordships can think of many more of the same kind! Is it not time that, through consultation in the National Economic Development Council, as the noble Viscount, Lord Watkinson, suggested, or perhaps, better still—in addition, at any rate—through the Parties in Parliament, the Government should put the economic facts on the table and agreement should be sought as to how we can cure at least this overriding problem of inflation? How, otherwise, can industry plan for five or ten years ahead, as it needs to, and at a time when inflation is in any event playing havoc with investment decisions? For my part, I believe that international competition, from which we cannot exclude ourselves, will dictate that the decisions to be taken in British industry, whether nationalised or not, in the end will have to be based primarily on long-term commercial considerations and not on short-term political ones. Some of them will be unpalatable and even hurtful; and that, it seems to me, is a further reason for agreement on them.

Finally, I should like to say a few words on the subject of people. I have learned from experience that good industrial relations cannot just be imposed from outside, by legislation; for example, through provisions such as those in the Industry Bill relating to the disclosure of information, to which the noble Lord, Lord Beswick, was referring earlier. They come only slowly and painfully, they come through leadership, through hard work and training—and especially the training of managers, of supervisors and of shop stewards. I suggest that it is significant that the purpose of this training is often, in the words of the Motion debated this afternoon, to make "a united approach to … industrial problems."

My Lords, I hope you will not think it impertinent of me to confess that I sometimes wonder whether we as politicians could not do with a bit of training of that kind for ourselves. In conclusion, may I simply say that we welcome very much the initiative which the noble Viscount, Lord Watkinson, has taken in introducing his Motion this afternoon and we give it our full support.

4.0 p.m.

Lord CAMPBELL of CROY

My Lords, my noble friend Lord Watkinson has, for the second time within six months, greatly assisted your Lordships' House by furnishing a lucid picture of the nation's economic problems. We are indebted to him for initiating this debate in which he has made clear the gravity of the situation and proposed a united approach to tackle it. His words are always received with great attention and respect, coming from someone, active and prominent in British industry, who has, with vision, done much to promote better relations between management and unions. For my part, I welcome the initiative which he has announced to us this afternoon by the CBI and the TUC in proposing a stronger role for the National Economic Development Coun- cil. The Council is a meeting place for both these bodies together with others concerned with the national economy, including Ministers. The machinery is there and the meeting taking place today could well start a period of closer understanding and co-operation.

Surely there must be two principal aims of such meetings: first and paramount, curbing and reducing inflation; secondly, charting the main points of a programme to take us out of the path of national insolvency. When the Government, the CBI and TUC are discussing action needed in the national interest with representatives of the City, the nationalised industries and others, agreements reached, perhaps under the aegis of NEDC, could be of the greatest consequence; for example, if certain courses of action or principles are endorsed by the whole Council and their acceptance urged on the country. I accept, though, that those present at NEDC meetings do not represent all employers or all employees; nor are individual companies or unions bound to follow guidance from these particular groupings of leaders. But I know of no more representative or influential bodies holding meetings for these purposes; and the effort to work towards national solutions in this way should surely be supported by all of us.

Here, I must make a delicate reference to an old acquaintance, thought by some to be in the later stages of terminal illness and by others to be already deceased. I am alluding of course to the Social Contract. The main weakness of that contract, besides its ambiguity, was that there were only two parties to the guidelines, the Labour Party and the TUC. I shall not pursue now that shadowy and shapeless phantom; rather will I point out that in addition to the members of the NEDC, there is another important estate of the realm to be kept in the picture about any future compact; that is the public. I refer to the public in their roles as consumers, taxpayers, pensioners and in other roles. The success of any policies in solving these national problems will largely depend on the degree of support which they achieve with the public. Indeed, even a deliberate drop in standards of living will be accepted I believe, if necessary, if the reasons for the policies adopted are understood and if they are being carried out, and have been seen to be carried out, fairly. If it is perceived as essential, as it was in wartime, I am sure the country as a whole will respond, despite the expectations which have been aroused in recent years of continuous material improvement.

It is not easy to alert the country to the acute sense of danger, because people are becoming used to living in a prolonged state of crisis, with pundits from time to time warning of the disaster round the corner. The daily round for most people seems to continue much the same as before. There is no overwhelmingly obvious threat to Britain's way of life, no rivetingly visible sense of imminent penury or the nation's activities coming to a halt. It seems that even hyperinflation, though worrying and perplexing to many, can be lived with—a false impression, my Lords, but nevertheless one that could become widespread during the next few months.

But what are the public to think if life goes on without much change, except an induced rush to buy colour televisions, or other inessential goods, before a closing date? Will the precipice be seen by everyone before we find ourselves going over it? Two years ago an annual rate of inflation of 20 per cent. would have been contemplated with horror by almost everyone in the country. I suppose the only exceptions would be a comparatively small number of Communists and others working for the collapse of our system and the end of private property and individual responsibilities. Now that rate of inflation is here and, despite the clearly stated aim of the Budget to reduce that rate of inflation—an aim which is clearly supported by all sides—the question is: Will wage claims be moderated, or will there simply be an attempt to increase those claims in order to offset the effects of the Budget? That is a key question now for the country.

A united effort will be needed to get the warning messages through. I share the view of my noble friend Lord Watkinson, that to be sucessful in turning the tide joint action is needed. I doubt whether one person, or a single body, or the Government on their own could wield enough influence today, unless disaster is already overtaking us. In assessing the magnitude of the task I would point out what happened in the 1930s. Sometimes we are told that our situation is so grave today that a Churchillian type of leadership is needed. But Sir Winston, who inspired efforts and sacrifices on a great scale when we had our backs to the wall, when he was continually warning of those same perils was not listened to in the 1930s, speaking in the country and in Parliament. The situation of 1940 and 1941, in its stark reality, evoked from the country as a whole attitudes entirely different from the torpor unfortunately existing so widely in the pre-war 1930s. I suggest we should be helped were there to be an obvious wall against which to square our backs, but it has not conveniently materialised.

In the event, we should ask: what is likely to be the first tangible sign for the public that a painful day of reckoning is dawning? My noble friend Lord Watkinson pointed out this could be when other countries, or international bodies, refuse to go on lending us money or when they stipulate stringent conditions. This might in turn cause a sweeping reduction in expenditure of different kinds or of goods and services available. Another clear sign could be the onset of high unemployment. I hope that will not have to be experienced in order to register our state of crisis. I sincerely hope neither of these events will be necessary and that this kind of reckoning can be obviated in good time.

When members of the publilc who discern the real nature of our economic situation ask what they should do to help, the answer is usually a prosaic one. Broadly, it is: "Work harder and be prepared to accept a reduced standard of living for a time". That kind of message may well be necessary. It will be acceptable to most of the country if it is endorsed by the country's principal leaders.

Besides the urgent task of defeating inflation, there is the wider operation of economic regeneration leading the country out of a state of insolvency. Here companies and unions have a crucial part to play, both embodying British industry. A large proportion of our industrial output and exports comes from private industry. Indeed, the talents of the entrepreneur are needed and should be encouraged and spread. Also the flexibility and enterprise which private industry can provide should be encouraged and spread. Business is won for Britain when opportunities can be seized at short notice. The health of industry largely governs the health of our economy. In other words, it is what makes the country tick, and I suggest it is short-sighted to cripple industry with penalising taxation and so remove the sources of new investment; or to hamstring industry by the Government trying to control and direct all its main operations.

It is common ground to most of us on both sides of your Lordships' House that we need the efforts of private industry, besides the nationalised industries in the tough haul back to economic health, especially in business abroad, not only from the point of view of exports, but also because we still have the valuable expertise which enables us to design and to help other countries in the building of plant on their own territory. I must remark here that certain recent Government proposals, most of them emanating from the Secretary of State for Industry, are not likely to conduce to a united approach. My noble friend has already drawn attention to this. There has been a rash of new public bodies proposed, with the apparent aim of collectivisation and public ownership of most, if not all, industrial activity. And when this is accompanied by the symbolism implicit in marching in May Day rallies and also addressing them, these proposals understandably cause disquiet.

Let us look at some of the bodies which have been proposed. Besides the National Enterprise Board, there are the Scottish and Welsh Development Agencies, and a new oil corporation which is to take a 51 per cent. participation, not just in offshore oil but in a whole range of other things, including petrol stations on land. Then there are the two new proposed corporations in respect of aerospace and shipbuilding. Apart from the merits or demerits one may see in these proposals, I doubt whether, as a country, we can afford to go in for this kind of action at this stage. Certainly, as my noble friend has pointed out, these proposals cause anxiety and perplexity among many businessmen. In addition they could cause unnecessary antagonism in the City, in business and private industry, and so seriously damage the chances of the kind of united approach which my noble friend has suggested, and which I believe the House as a whole supports.

Let us look more closely at what could happen. When such bodies are set up, either the Government would be seeking to control them closely—as seems to be envisaged in some of the proposals—or else to create more of the equivocal relationships such as the one already unhappily subsisting with the Steel Corporation. That relationship has been characterised during the last two weeks by a bizarre exchange of letters, apparently growing steadily more distant in terms, though geographically separated only by a few hundred yards and delivered by hand. Then there is the suggested way of dealing with British Leyland. A serious situation has developed, and governmental help is clearly needed. But surely it must be conditional upon a new structure of management and agreements to avoid over-manning and other clearly avoidable inefficiency. Otherwise, there is a risk that the whole attitude of those working in industry will be that Government money is always there for rescue purposes and that there is a bottomless purse.

The real test of leadership is surely in the opposite sense. It should be to enlist a full day's work, or even more, from those needed in industry, and acceptance of retraining or redeployment from those who ought to move to other industries. It is even more difficult at this time for such leadership, because this is a time of rising unemployment. We all want to see new jobs for those displaced, but they must be useful and worth-while jobs which will last. It is no service to the nation to indulge in leadership of the facile populist kind, giving the impression that there will be no redundancies, little or no modernisation and that everyone has a right to stay in his present job for ever. If that road had been followed we should still be manufacturing steam locomotives and penny-farthing bicycles. The only way of selling these products would be by directing the railways and the public to use them, and surely there are the seeds of destruction.

Lord BESWICK

If the noble Lord will allow me to say so, he is doing exactly what I suggested we should avoid doing—creating troubles where there are no troubles. Will he say who has said that everyone should stay in the same job for ever?

Lord CAMPBELL of CROY

My Lords, I can assure the noble Lord that there are people in the country who have been—

A noble Lord: Who?

Lord CAMPBELL of CROY

Some of them are Communists and some are near-Communists—

A noble Lord: Who?

Lord CAMPBELL of CROY

—who have been giving the impression that the main object is simply to hang on to the jobs they have. I do not think that this is what Ministers in the present Government want. I believe there is a danger that leading May Day rallies and behaviour of that kind could give the impression of support for those views. If the noble Lord, Lord Beswick, does not appreciate that danger, I can only tell him that I do. I believe there is a real danger that, without meaning to, certain actions and the expression of certain policies can look as though they are giving support to what is put forward by only a very small minority, but a minority who have unfortunately got themselves into positions of influence.

There is a lot to be done as regards worker participation, and I am now coming to a subject which the noble Lord, Lord Beswick, dealt with in his speech. I certainly agree with the principle he expressed. Some companies have made considerable headway in this direction and I am sure that encouragement should be given to further work upon this. But I suggest that, for the moment, there should be no attempt at a blueprint which would be uniformly applied to all firms. It will probably be found that different systems suit different circumstances.

My noble friend Lord Watkinson referred to our membership of the European Economic Community. I agree with him in that I cannot accept any suggestion that leaving it would improve our economic situation or increase our prospects of recovery. I also agree with the article by Mr. Andrew Shonfield in The Times on Monday, in which he said that while the United Kingdom was needed as one of the Big Three for balance in the EEC, the eight other members concerned were prepared to help us in our recovery.

There are some gleams of light ahead, and I draw attention to the gleam of oil. Offshore oil can in due course ease the massive burden on the balance of payments. Although the programme is going more slowly than was foreseen two years, or even one year, ago, it still seems that we shall reach self-sufficiency in 1980 or 1981. But it will not solve all our problems. We must avoid the danger of thinking that such a boon, when it comes, will also solve all our other problems, because it will not.

The most challenging task calling for British statesmanship in this decade is in this field, the subject of the debate raised by my noble friend. It is in three parts: first, the removal of divisions in industry; secondly, helping all who are working in or for British industry to identify themselves with British industry; and, thirdly, creating the conditions for British industry to excel both at home and abroad.

4.19 p.m.

Lord BRIGINSHAW

My Lords, perhaps we might look again at the Motion. It is simple, and calls attention to the need for a united approach to solving the nation's economic problems. I thought that the noble Lord, Lord Rochester, was taking us into exceedingly shallow waters that did not justify the simplicity and intent of the Motion, for which I should like to express my appreciation to the noble Viscount, Lord Watkinson.

First, may I say that I cannot believe that in the political field the EEC "innocent abroad" is a simple businessman—I just cannot accept that. I thought the noble Lord, Lord Campbell, avoided the shallowness of the general possibilities existing here today and, but for one or two things I would not agree with, certainly was conscious of the importance of the Motion. I thought that the noble Lord, Lord Beswick, from this side argued cogently the detail of the necessary reply to the noble Viscount, Lord Watkinson. He struck the central note that ought to have our attention this afternoon when he said that the issue is: On what basis can we find national unity? It seems to me that perhaps this takes us wider than the intent of the mover of the Motion, but the value of the opportunity this afternoon is to take the discussion wider than some of the details that have already been before us.

May I say that I have been a conscious advocate of a form of national unity for the past 25 years. I never thought it could succeed if the old, failed and discredited policies and strategies were to be continued. Contrary to the noble Lord, Lord Rochester, I suggest that a radical and fundamental reappraisal was necessary for success. What I understood him to be saying was that we ought to begin to "pussyfoot" on certain imperatives and necessities, so far as the country and industry are concerned. On the contrary, a radical and fundamental reappraisal was necessary for success. In my view, until we realise this fact we shall not find solutions to our problems. They will become chronic. I might say that they are getting into the borderline of being chronic in many senses. National unity based on the old class dominance is doomed from the beginning.

This theme is not likely to be popular among those entrenched in the past, hoping that a basically Maginot Line philosophy will preserve the status quo. There is no such possibility. We either go forward or inevitably we slip back. Nature refuses a standstill. It seems to me that this is one of the points of our situation. We have to reach down into the coalmines or to the railways, into the factories and offices of our administrations, into our professions, motivating all concerned with a new message for struggle and hope. We need to support those who realise this and try to help them, and not for Party political purposes to hinder them.

On 21st April in another debate in this House, I raised the issue of national unity. I said that whatever our views on the Common Market—and my own I made plain—I thought we could agree that our energy resources are immense. I thought that the noble Lord, Lord Campbell of Croy, referred to this matter a moment ago in another way. I went on to say, as I think will be recalled, that we have the management and the workmen; we have great industrial experience and know-how; the inventive genius of our people is second to none. I am happy that here I am following the words of the noble Lord, Lord Campbell. I went on to suggest that if we really stand up and present ourselves strongly as we should, then other countries will defer to us. This rejects the notion that the possibility of our having some financial storm immediately is present. On the basis of our resources and collateral, energy and all the other factors, this suggestion is perhaps overdoing it. We need to do more and to do better. That unity, I suggest, can be based only on the mass of our people. This is the key to what I want to try to say here today.

We have politically to motivate and activate them. Perhaps all of us suffer too much from being watchers—we watch sporting events. We are standing watching the great "they"—this is perhaps an important point for our people—trying to solve the problems of Britain. Our people must participate. Better a positive radicalism than a nation of political eunuchs and "don't knows". The Press, television and radio could play a more positive role in this connection. Some newspapers have tried to raise the social and political consciousness of our people; others have adulterated and trivialised life to a major degree.

I was speaking in another context on 21st April. I do not propose to try to re-open that debate at this time, but other speakers have mentioned the Common Market. A "Yes" vote could be the turning point that would make us face all the necessary factors—it has been contended that such a vote would bring that situation about. The Motion for Papers by the noble Viscount, Lord Watkinson, and the simple phraseology of his request is too important for such a ploy as to rehash a debate we have had here on a number of occasions. He has unfortunately, in my view, trodden the well-worn path which is a repetition of a political dogma, and I wanted to see whether there was a path by which we could get away from this. I called for a united approach then; he calls for a united approach now to the nation's economic and industrial problems.

In preparing some notes I expected the noble Viscount to deal with his call objectively, and I think this has been done this afternoon, particularly with regard to the reformation of NEDC. Here, I think that a paragraph of a statement in The Times is worth looking at: After several months of secret meetings the Confederation of British Industry and the Trades Union Congress have drawn up a joint paper which says that the NEDC has turned into a talking shop. It proposes a radical revision of the Council's working arrangements. A number of other factors were reported in The Times on that occasion which would indicate that it is not plain sailing, because the TUC and the CBI, as components of the Council, are largely persuasive organisations, and therefore they need the context to which I am drawing attention. Nevertheless, I submit it is a positive factor that we have some grounds for cautious optimism.

May I say at the outset how much I appreciate the mature level of the presentation of today's debate—I have indicated that already. It is so different—if I may say so without scoring Party political points—from the presentation from the Opposition Front Benches in the other House. The industrial immaturity of the Leader of the Opposition in another place will, in my view, widen every aspect of the divisive overtones lingering from the previous period and will simply appall overseas observers. At least Ted Heath knew something about industry, even if he bodged the handling of industrial relations with the trade unions. May I at this stage say that, because the 10 million affiliates of the TUC are human beings—it was mentioned that we are dealing with a human problem—they neither claim to be nor are they, individually or collectively, the acme of perfection. They suffer badly from history in this country. Their organisational structure is less than perfect. It is the outcome of the historical circumstances of Britain's having been the first industrialised country in the world. Most of our present-day institutions have this connotation. Our problems are those of a great nation in considerable immediate difficulty. The Government of the day are, in my view, manfully trying to deal with the quite chronic situation. Britain is not a small shop on a street corner. Therefore, no selfish petit bourgeois solutions will suffice. An adult and mature approach is necessary. Let us be done with the "nit picking" from the Opposition. Let us unite behind the major efforts of the Government of the day.

May I repeat the intentions of the Government's Industry Bill. They are the establishment of a National Enterprise Board; the Employment Protection Act; the establishment of a British National Oil Corporation; the Trade Union and Labour Relations Bill and the Aircraft and Shipbuilding Industry Bill. Both in the long term and in the short term, the situation is that there is no other immediate path than that of a mixed economy. What would the Opposition do if they were in Government tomorrow? The commercial collapse of companies with household names is the result of a half-cock operation of the market forces. Would they do what the noble Lord, Lord Barber, and his colleagues did in the previous Administration—let it rip? That would ensure the absolute ruin of this country. As it was, they were responsible for sowing the wind of inflation which provides the present dangerous inflationary whirlwind. Would they do better?

Our world and our country have been changing. Capitalism cannot live in the old way. If it is to live, it has to interpret what a mixed economy now means. I heard Sir Don Ryder say the other day—no doubt your Lordships read what he said—that we have to change, because we have not been doing too well during the past 25 years. It is extraordinary that hereditary Lords on the other side got the message before so many of their financial and industrial confrères. I read last week of the co-operative established by noble Lords with landed estates.

May I return to my direct theme. We can solve the problems of the United Kingdom only in Britain. I declare an interest in the Advisory Conciliation and Arbitration Service. I am a member of the Board, together with other TUC men, those from the CBI and independents. This Service has had an extremely successful beginning. Its successes get very little publicity. A solved industrial dispute means nothing to our mass media. It seems that they thrive on confrontation. What is important is the large number of industrial disputes which never develop to the point of a stoppage as a result of the painstaking work of the officers of the Service in London and up and down the country. I think they would tell you that the political context is better than it was. This affects the industrial climate and allows for some successes in conciliation and arbitration.

My view is that our major problem is a political one. How do we generate motivation at all levels in our nation? We are suffering from a malaise because the essence of our politics from our dominant establishment has been one of defeatism. The reasoning comes from a strategy which is based on the defence of the status quo. That is why I complimented noble Lords on the property co-operative. They, at least, are moving with the times. I am suggesting that the strategy is wrong. Every sum we do within that misconceived strategy, whether we get it numerically right or wrong, turns out all wrong in the total context.

The question is whether we are operating merely or wholly for a defence of capitalism or whether we are willing to have a single interpretation of the national interest involving all of us in a mixed economy for some time to come. If so, we need radical political changes to do this. We need new conceptions of Britain's role in the world. We shall invest and work to make Britain strong in a new way. On this we could find unity. The conceptions would reject simple reshuffling of the political cards to produce a hybrid national Administration which would be "knackered", if I may use the term in your Lordships' House, from the beginning because of the contradictory policies of the components of such an Administration. Political acumen applied to producing a national plan to which most could subscribe would produce an essentially political plan of a far-reaching character.

Short of this, Britain's interests are best served at this time by expressing our desire for national unity behind the Government of the day in dealing with the formidable tasks before them. I think that the details which have been set out by the noble Lord, Lord Beswick, justify the call for national unity behind the Government of the day.

4.37 p.m.

Lord HAMPTON

My Lords, I ask your indulgence as I speak in your Lordships' House for the first time. It is no empty request when I recall the great variety and great depth of experience of so many of its Members. By tradition, one should be non-controversial, and the subject which the noble Viscount, Lord Watkinson, has raised seems to me to be well suited to such a basis of approach. I have no desire to be provocative. If what I say appears to be obvious, I regret I still believe that it needs saying again and perhaps again.

I will at least start by mentioning something which I am certain your Lordships cannot know. When my great-grandfather died it was found in his Will that he had attempted to order the family's affairs for the next 1,500 years. Certainly this was not wise and legally it was nonsense; and before long it was fortunately set aside. But still he was no fool and, fortunately circumstanced as he was, he felt able to look forward to years which he assumed, with Victorian optimism, would be tranquil and secure, with a steady development of general wellbeing for all, to somewhere around the end of the 34th century.

The point I wish to make is that today few people dare look forward beyond that great psychological barrier—the end of this century. Many of us feel unable to look further ahead than the next few years. I am certainly not seeking to look back with favour to Victorian times. I remember London even just before this last war with beggars on the streets and children in rags, and sometimes without shoes. Thank God that we have that no more! However, I seek to re-emphasise what is obvious to many—that today we as a nation lack a sense of purpose, of confidence and of determination to work together for the good of all.

It saddens me to hear it said that the people want this or do not want that when this refers only to one section of the community. We are all one people, and it is vital that we should accept that and be glad. Inevitably there will be differences of opinion and differences of approach, but so long as we can take consideration of other people's feelings we shall not fail. United we can stand and be great and content, but divided the outlook is black.

I attempt to follow Christian principles. I believe that it is better to try, even though one may fail, than not to try at all. I believe that at this moment we as a nation are too prone to two sins—envy and greed. It is clearly wrong to expect an excessive share of limited resources and it is dangerously evil, although all too understandable, to attempt to pull down those who are happy in better fortune than oneself, unless, of course, it is certain that this really will help those who need and deserve it.

Referring back to the words of the noble Viscount who opened this debate, I would suggest that we not only need to call attention to the necessity for a united approach, we still unfortunately need to call attention to the basic fact of the nation's economic and industrial problems. A lot of people are still entirely unconcerned. After all, as has often been said, if inflation goes up by 25 per cent. and you get a pay increase of 30 per cent., there seems nothing to worry about. I recall the eloquent words of the noble Lord, Lord George-Brown, a little time back, when he referred to his taxi driver's comment, What's all the worry about? I've never had it so good. Two questions arise out of this driver's remark. First, will those who hold such views still be able to say this in five years' time? Secondly, do they realise, and if so do they care, that a great many British people—and I repeat people—are today increasingly filled with frustration, and now even bitterness?

Today I believe we are living in a state of euphoria at times—a state of false well-being—but one sad effect of inflation that is often mentioned was brought home to me personally and markedly the other day. Each member of my family has a few small savings; gifts from their grandfather, Christmas presents, and so on, that they decided they would like to put aside for the future. They asked me tentatively whether these savings were safely invested. I found it difficult to know what to say, for the truthful and sad answer is, of course, that their money is losing value quite rapidly and the logical approach must really be to get the best value possible now and let the future look after itself. I need hardly tell your Lordships that inflation feeds inflation and, unless more people are helped to understand its dangers, everyone is likely to suffer.

But I do not wish to be written off as a pessimist. I have great faith in the British people if they can only unite as one people and forget unworthy divisions and disputes. This century has seen much progress and development of general well-being, but we should do well to retain some humility as we face up to the very real problems that confront us now as much as ever. And, personally, I consider ugliness to be one of the cankers of our time. Deprive men—or women—of beauty in their surroundings and, I think, without perhaps realising it, they will be lacking something that is essential to their full contentment and peace of mind. I forget who it was who said that: …ugliness is one sign of a wrong attitude to life. A friend of mine said the other day that we must trust in God, but there is the saying that I believe to be entirely relevant at this time that, God helps those that help themselves. I believe today there is a great potential of charity and understanding to be tapped, not least among some of those who do not even profess the Christian faith. What we need is a great reawakening of idealism based on a sense of common purpose and that the Heads of Government, whatever Party may be in power, should be prepared to give us a truly courageous and inspiring lead in the difficult days that unfortunately and inevitably lie ahead. My Lords, I thank you.

4.44 p.m.

Lord ROBBINS

My Lords, I am sure that the murmurs of approbation which greeted the noble Lord as he resumed his seat expressed the feelings which his sentiments inspired in us all. We admired his sincerity, we admired his lucidity and we admired the way in which he observed the rule that, in making a maiden speech, one does not provoke violent controversy. I am sure I express the feelings of all noble Lords when I say that we hope we shall hear him often on future occasions.

Several Noble Lords

Hear, hear!

Lord ROBBINS

My Lords, I think we owe a deep debt of gratitude to the noble Viscount, Lord Watkinson, for tabling this Motion, and for tabling it in such simple and straightforward terms. Also, he is to be congratulated on the timeliness of his Motion. The shadows are deepening more rapidly than many of us think. I venture to say that never in the last quarter of a century have we been more in need of a spirit of national unity in confronting the terrible problems which beset us.

But, my Lords, I do not think that unity is likely to come unless there is created a spirit of common understanding, and I venture to suggest that that common understanding is still remote. It may be that in the coming months—it may be even in the coming weeks—the intensification of the dangers which beset us may produce a sudden fusing of communal emotion which will prepare us to take the drastic steps which I am sure will be necessary. But at the moment that is not our state of mind. At the moment those of us who peer into the future with dread can do nothing but try to explain, patiently and without arousing more controversy than is necessary, what the problems are and why the situation is so grave.

There is no need for me to expatiate on the fact of inflation. If one has talked about these things in the past, as I am afraid I often have, one eventually acquires a fear of becoming a bore, and certainly there is no satisfaction for any political economist, who happens to have been right, to be able at this moment to say, "I told you so". The fact is that the perils which four years ago were perhaps the size of a man's hand on the horizon have now grown into dense thunderclouds which threaten the stability of our entire society.

At the present time inflation in this country is probably running at a rate of 25 per cent. per annum. I do not know how the crisis which that kind of thing engenders will come, but I do know that it cannot go on in a society as complex, as differentiated as our own, without eventually destroying it. I remember a speech in which the noble Lord, Lord Platt, expressed the view that perhaps we were living through the crisis of capitalism. With deep respect I would venture to put a gloss on that utterance. I would urge that no economist in his senses would argue that either capitalism or a mixed society can sustain the degree of instability in the value of money which has now arrived and which at present shows no sign of diminishing.

But, my Lords, I ask myself, how many of us realise this? As the noble Lord whose maiden speech we have just listened to with such pleasure has reminded us, there are many people who are suffering from the decline in the value of money. There are many people who, whether they have been aware of it in the past or not, now know that the value of their savings has catastrophically diminished. There are many people whose minimum sensibilia as regards the spending of small sums of money has tremendously diminished as a result of the decline in the value of money and the rise in the general level of prices. Needless to say, it is not only private individuals who suffer. The whole of our complex of cultural institutions, circumscribed as they are in the investment of their money—they were circumscribed in the past, and they are still—almost without exception are in deep financial difficulties which, if prolonged, will certainly lead to the folding up of some of the institutions of that kind, which we most value.

But there are, and I say this without blaming anyone, a large number of people still who do not realise this. Last year the cost of living figures rose by something under 20 per cent. In the same period the average level of earnings rose by something a little over 29 per cent. In the course of this vicissitude, unemployment has begun to increase, and those who are affected must be grievously aware that not all is right with the economy. Even so, on the published figures, more than 90 per cent. of the working population are still in employment and for many of them, given the relationship between prices and earnings which I have already indicated, the word "crisis" means nothing. It has become a "non" word. In a sense it might be said that the economists who began to urge danger when the rate of increase in general price level was, let us say, 3 per cent., were crying "wolf" prematurely. The wolf took some time to appear, but he is showing his fangs now. One of the main difficulties of our position, and one of the main difficulties in creating the degree of unity called for by the noble Viscount, Lord Watkinson, and the noble Lord, Lord Beswick, and other speakers, is that the majority of the population are still living in an atmosphere of almost complete unreality.

My Lords, how has this been sustained? Quite obviously not by spectacular increases in productivity, or in the aggregate volume of production. Far from it. Nor can it be said that it has been sustained by extensive transfers from one class of the community to others, although clearly there has been some support in that direction. Obviously the main reason why living beyond our means, which we are doing on the average, has not yet hit us, has not yet made itself obvious to the majority of the population, is that we have been fortunate enough to have our standard of life sustained and, in certain cases, advanced, by massive borrowing abroad. Last year we borrowed nearly £4 billion. I would be very interested to hear, when the Government Front Bench sums up, whether precise figures can be given as to the rate at which we are borrowing now.

If our standard of life is to be maintained in the short period, a volume of borrowing which most of us would have thought to be quite impossible in the past has to be sustained. All of us in this Chamber can agree that we are surely in a position of intense peril. It is trite to say that the rest of the world does not owe us a living, that eventually there are no free lunches for us internationally. We say it so often that large numbers of the population think that there must be some catch in it, and that there is some mysterious mechanism operating—our prestige in the past, our sacrifices made in the war, and so on—which will make it all right in the end. I say in all seriousness, and conscious of the danger of saying it, that it only needs a few more settlements of rates of pay 30 per cent. above the level of last year for the sedate and conscientious advisers of the foreign lenders, the advisers of foreign banks, the advisers of the sheiks and of the multinational companies, to tell those to whom they have a conscientious responsibility the truth, that London is not a good place in which to keep money, let alone into which to pump more.

My Lords, I do not claim to be a prophet. I do not know when the crack will come, if it comes. There are still some shots in the locker. For instance, we still have some drawing rights unexhausted in the IMF—a circumstance already mentioned in the debate. But let us be under no illlusion; if we fall back on the drawing rights in the IMF, we shall not get much support unless there is quite a radical change of direction in the general conduct of policy. Of course, it is conceivable that what is said in the debate this afternoon may induce our few readers of the House of Lords Hansard and of the small summaries which we get in the quality newspapers to change their minds. But it is certain that our present position is one of immediate danger, and I do not believe that anything that has yet been done will reverse this.

What are we to do? Let me address my remarks first of all to the extraordinary position—because it is an extraordinary position—which is so intensely perilous. If we were a closed community, if we had not these external obligations, we should probably be a much poorer community. The various long-term tendencies leading to an almost zero rate of increase may drag on for years and years without an obvious catastrophe. But we are an especially open community. Our obvious need as regards our external relations, and our obvious need in order to rapidly diminish this dependence on foreign borrowings, with all the perils that that involves, is to increase exports and to diminish imports. That will be the only thing that will save us from the siege economy if the borrowing slows down or dries up.

Now, my Lords, exactly that change in the ratio of the constituents of our foreign trade is what is frustrated by the present rate of inflation. When you are inflating so much faster than your competitors, and you are trying with greater or less success—less just recently—to sustain a fixed rate of exchange, then inflation ipso facto encourages imports and embarrasses exports. Any gain which our competitive position may have enjoyed from earlier depreciation evaporates as the inflation goes on.

Well, what about a further fall in the rate? What about something deliberately engineered or allowed to happen? Incidentally, such a fall is absolutely inevitable if present tendencies continue. A fall in the rate of exchange will do no good if the inflation goes on. But worse than that, my Lords, it is arguable—many economists would argue—that if the rate of inflation were moderated, if the rate of inflation were, let us say, brought down to the rate of our chief industrial competitors, some further depreciation may help us more speedily to re-establish our balance in the international balance of payments. You might see in those circumstances, on the assumption that inflation were moderated to that extent, the sort of surplus which emerged when eventually Mr. Roy Jenkins took the advice of the IMF and put the brakes on. But it takes time, even in such model circumstances, for the volume of exports to be increased and the volume of imports to be diminished.

This is the great danger: with the present guidelines relatively ineffective, as they are—I am choosing the least offensively toned description that I can think of—a rise in the price of imports, due to a fall in the rate of exchange, would immediately give rise to further increases in rates of pay. In a situation in which, after the last Budget, an immediate cry went up for compensatory increases to offset the attempts which the Chancellor of the Exchequer has made to mop up a certain amount of purchasing power, to facilitate his borrowing operations, that frame of mind, that set of tendencies, can only give rise to greater and greater inflation. I have said this once before, and I think when I said it most of your Lordships thought I was making a joke. It is not so much of a joke now. Hyper-inflation always ends in crisis. Ultimately, hyper-inflation can only end in the substitution of a new money. The danger is much worse than when I said that 18 months or so ago.

So what other recourse have we? Men of good will on both sides of the House—I listened with the deepest respect to the noble Lord, Lord Beswick, and the noble Viscount, Lord Watkinson—pin many hopes on an increase of production springing from better industrial relations and so on; make industry more efficient. Heaven forbid! that I should say any- thing to deprecate these truly admirable sentiments, these truly admirable principles, principles which we must pursue if, in the end, the economy of this country is to be healthy. Heaven forbid! that I should say anything disparaging of an increase in production, especially in a situation in which in various directions—which have been indicated by various noble Lords, Lord Campbell of Croy and the noble Viscount, Lord Watkinson—it can be argued that policy is likely to make some inefficiency worse.

But I appeal to you, my Lords, to preserve a sense of proportion in these matters. What is the most that we can hope for in the short period as regards an increase of production? Supposing there were to be a change of heart, on waking up tomorrow, on the part of the majority of the population, and that we were to be united by the same sense of purpose as inspired us in 1940–41. It is extremely difficult for me to believe that there could be such a discontinuous increase in the volume of production as to offset a rate of inflation of 25 per cent. What was the rate of increase of production last year? Was it 1 per cent., 1½ per cent.—something like that? Supposing men of goodwill raised it 7 or 8 per cent. We should still be in a frightful deficit in the volume of production vis-à-vis the volume of financial expenditure. So I say, by all means let us work for better relations, more efficient management, less pushing around of nationalised industry, realistic planning, and so on and so forth. But given all that, I would even then say to your Lordships that the present rate of inflation would still leave us in a position of utmost gravity.

So I come back to the point from which I started. The only immediate remedy which will save us from our immediate dangers is to moderate and eventually stop the rate of inflation by direct measures, by control of the money supply, by control of expenditure. I do not know what your Lordships thought of the Chancellor's Budget, inspired, doubtless, by some perception of the dangers which confront us, but I must confess that it did not reassure me. The Chancellor confessed that his expectations last year of the volume of borrowing greatly underestimated the borrowing that he had to do.

When I look at the increases, the pay settlements which are taking place in nationalised industry, I wonder whether the same fate may not befall him in the current financial year. Although I know that this is an unpopular and, maybe to some noble Lords, a philistine thing to say, frankly the danger is greatest in the nationalised industries. The moderate settlements on the whole are those which are taking place in the private sector, in areas where people have seen some glint of the red light. If there has been such a conception in the conduct of the nationalised industries, I must say that it is not evident in action.

I have some miniscule contact with certain Government subsidised institutions. I value those contacts with the excellent people who work in such institutions. But I suggest to your Lordships that, if a squadron of archangels were to arrive, it would be extremely difficult to persuade such people that the Government will not step in at the last moment. They will say: "We are awfully sorry for you, old chap; we know you have your headaches". They might even admit that we are not in it for profit. "We know you have had crises in the past," they will go on, "but in the end you will not be let down." But, recalling what I described in an earlier debate as the myth of the widow's cruse, we will not in this way get our economy in equilibrium.

Finally, what about incomes policy? Your Lordships will recollect that often in our debates I have expressed some scepticism of statutory regulation of incomes. I have expressed absolute scepticism of the experiment which was tried under the Conservative Government of statutory regulation of incomes policy combined with high pressure inflationary demand. But, in present circumstances—and I shall end on this note—I can see an argument for some kind of pause, either voluntary or imposed. Why? Not because by itself a pause, a freeze, call it what you will, would halt the existing results of deficit financing and inflation. No; the reason is a different one. If inflation is being tackled properly, by financial means, money supply or control of the budget, then it must to some extent lead to more unemployment. The only way in which the increase in unemployment can be alleviated, at a time when inflation is being thoroughly tackled, would be in a situation where the various bodies concerned were not putting forward claims which could not be met under the astringent financial policy that I suggest.

I believe that these are not problems of next year or the year after; they are problems which arise here and now. I think we shall be confronted within the next few months with the most difficult problems that any Party has faced since the war. With the remainder of your Lordships I pray that we shall have enough clarity of mind and determination of will to tackle the very difficult obstacles which will have to be overcome. But it will be a very near thing!

5.16 p.m.

Lord BALFOUR of INCHRYE

My Lords, from these Benches I wish to echo the congratulations of the noble Lord, Lord Robbins, on the maiden speech of the noble Lord, Lord Hampton. He delivered it with sincerity, clarity and brevity. What more can anyone ask of a maiden speech? I am sure that your Lordships look forward to further contributions from the noble Lord.

I am much indebted, as are other noble Lords, to the noble Viscount, Lord Watkinson, for introducing this Motion today. I am particularly glad to be allowed to follow the noble Lord, Lord Robbins, who concentrated the main part of his speech upon an aspect which has hardly been touched on, except briefly in a few speeches. We are sliding down the slope into an economic abyss where social and political results may be such that none of us can foresee the final impact, unless we look back to the history of Germany in 1921 and Austria in 1923.

It is, I submit, a sombre situation that we face today. One can summarise it. Unemployment is rising to economically and socially unacceptable levels; wage demands are out of phase with the economic facts of life, backed as they are by union muscle; we have heard the Social Contract described by some trade union leaders as a scrap of paper; we are suffering from crippling taxation. More and more, the militants are capturing the machinery of administration and control of the trade unions—not the leaders; it is the faceless men on the shop floor who are now obtaining the power.

We are witnessing politics of envy and greed. The printing presses are hard at work printing more and more, which is worth less and less. I think that that is not an unfair summary. I believe that union power in this country today can, if it so wills, break any Government of any Party and, in so doing, probably break the country.

We are not a country of extremes. I wonder whether this is really what the people want. Throughout the speeches we have heard today, there has been a call for a revival of national unity. I agree, but I believe that this revival must come from within. It must be what I would term a spiritual revival in this country. I do not necesarily mean spiritual in the religious sense, although personally I would not mind seeing that. I mean a revival of national pride and effort when each will look at the other, not in suspicion but as comrades in a common cause. I very much doubt whether any of the three Parties could inspire and lead such a national rallying within the time that is left to us, because we are in dire peril.

Even as we debate this afternoon, the pound is going steadily down and as the noble Lord, Lord Robbins, said, there may come a time when those who have trusted the City of London and sterling will no longer do so. I think we are now too divided as a nation to hope for any one Party being the focal point of such a national revival as is essential. I cannot see the national support necessary for the drastic and sacrificial measures which are essential if we are to curb the drop down into the economic abyss through inflation. I cannot see the necessary support being given to any one Party.

I see that the Leader of my Party, Mrs. Thatcher, is reported in the Press as saying that there may be an Election soon. I hope there will not be, because it would be a disaster if our Party were suddenly landed with the present situation which we could not handle, as we would not have sufficient power or good will in the country to do so. Equally, it would be a disaster if the Labour Party were to continue in Office indefinitely. We are going to need drastic and sacrificial measures and when I say that, I really mean sacrificial. I am appalled at the proposals which have been put forward and sanctioned in the last year or 18 months for heavy increases in salaries at what I call the top levels, whether they be civil servants or industrialists.

I listened on the BBC last night to a member of the Institute of Directors comparing the levels of managerial salaries in this country with those in Europe. We are far behind and that should not be the position. I should like to see our managerial salaries brought up to that required level, but having done so I would at once ask for a sacrifice from those who are obtaining the largest salaries in the country. Equally, I should like to see the salaries of senior civil servants—and I hasten to add that I do not grudge them their salaries—brought to the right level, but then at once ask for a sacrifice from them; and, equally, from the top brass in the Services. I am sure that the men with great responsibility in the Army, Navy and Air Force deserve all they get in higher salaries, but as soon as they have been granted let us please ask for a sacrifice from them equal to the sacrifice for which we are having to ask from the lower paid in the country.

The needs of the hour are such that they have gone beyond Party Government and Party strife. For the first time in 30 years as a member of the Conservative Party I turn towards a National Administration formed for one purpose only; that is, to save the people of this country from the terrible results of uncontrolled inflation. The noble Lord, Lord Shinwell, the noble Lord, Lord Tranmire, and myself are, I think, the only three Members of your Lordships' House who were in the other place during the 1931 crisis.

Baroness WARD of NORTH TYNESIDE

I was there, my Lords.

Lord BALFOUR of INCHRYE

The noble Baroness came in 1931, my Lords, and the crisis was before then. I am referring to the 1929, 1930 and 1931 Parliaments. It was during those years that the crisis was upon us. A National Government was formed, and it is interesting to remember that the cause of the crisis was considered terrible—a Budget deficit of £160 million. Think of the Budget deficits of today, my Lords. That was a clumsy Coalition Government and, although it went on for far too long, it nevertheless fulfilled what I would call its overnight purpose of saving the pound from being ravaged by the rest of the world, by America and Europe. Mr. Churchill's Coalition Government of 1940 had but one purpose, and that can be described in a word—victory. When that purpose had been achieved, the Coalition Government broke up. As we know, Mr. Churchill did not wish that to happen, though personally I think it was right that it did, and I do not blame the Labour Party; in fact, I think they were right to come out of the Coalition and revert to Party politics.

Nevertheless, those two Coalition Governments had a single purpose and I believe that our need now is for what I would label a government of national recovery for that one purpose—to save us from the imminent dangers of inflation. When that purpose is over, let us return at once to Party warfare and Party strife, and while that government of national recovery is fulfilling its single purpose there will be no need for anyone belonging to any one political Party to surrender or alter his or her beliefs or views. All that one would ask is for a postponement of their fulfilment until the single purpose has been achieved.

For this government of national recovery personalities and positions must be subordinate to the greater purpose. I do not care who leads it, present Party leaders or others, so long as they are men and women big enough not to think of themselves but to accept responsibility without thought of personal position in order to fulfil the needs of the moment. Like other noble Lords, I think that we are the greatest people in the world, but we are in real danger and there are few chances yet for us to take before it is too late. And because, like other noble Lords, I love my country, I have spoken out tonight in favour of what I advocate.

5.29 p.m.

Lord WALSTON

My Lords, this House has a mass of wisdom and knowledge and there are many noble Lords to whom we can never listen enough. There are many who we always enjoy listening to. Despite that, it is always good to hear a new voice among us, and it was particularly good to listen to the noble Lord, Lord Hampton, speaking so refresh- ingly and with such deep feeling and good sense. I am glad that I am the first from these Benches to congratulate him, and I share the wish already expressed that we will not have to wait long before we hear him again.

My noble friend Lord Beswick suggested that the present troubles from which the country is suffering—and nobody would dare deny their gravity; I go along with everything that was said by the noble Lords, Lord Robbins and Lord Balfour of Inchrye, and others, about the dangers which are upon us at the present time—do not all arise from things which are happening today and which happened in the immediate past. He suggested in a very reasonable manner—as one would expect—that certain actions of the previous Government must bear their share of blame.

I would go further. In my view, the cause of our present troubles, while exacerbated by the present wage inflation—which must at all costs be stopped—must be looked for much further back than the beginning of this or the previous Government. It goes back at least 25 years to the period after the last war. Since that time, we have, as a country, spent far too little on research and on development. Comparisons with the United States, with Germany and with Japan—and I shall not weary your Lordships with figures—bear this out. It is well known to all your Lordships. However, it is not only that: management during that period has been far too easygoing and has shown far too little aggressiveness in its job in every respect. To give one example which is, again, well-known, the Land Rover was introduced some 20 to 25 years ago. It was an immediate success. For years, all of us who wanted a Land Rover, whether we lived in this country or formed part of the export market, have had to wait two or three years before we could take delivery. Why is that? Why did the management of that concern, which is now part of British Leyland, at the time when it had the world at its feet, not make bigger investments to produce more of this manifestly magnificent motor car? Why did it not do everything in its power to ensure that the equipment it had to produce these vehicles was used 24 hours a day, 7 days a week? It is that type of slackness in management which must bear a large part of the responsibility for the troubles we are in today.

My Lords, the same criticism must apply to the attitude of management to wage demands in the past. In the days when everything could be sold and there was plenty of money about, it was very much easier to give way to wage demands and not to try to recoup the higher wages by increased efficiency or productivity but simply to pass the cost on to the consumer. That is very much what management has been doing for many years. I suggest to your Lordships that one of the reasons for this poor management has been something which has been developing in this country over many years. That is the difference in the relative rewards which accrue to those who are engaged in productive industries and those who are engaged in other industries, whether as merchants, bankers, retailers, property speculators, or whoever it may be. The latter are the people who, over the years, have acquired the greatest rewards. They have increased their standard of living most, while those who have been engaged in producing the wealth of the country have lagged behind. It is therefore only natural that the most ambitious and the most able young men looking for jobs in which they can achieve success and material rewards have tended to enter these professions rather than the manufacturing industries. I do not for a moment denigrate the importance of invisible earnings; they are of enormous value to us. The City of London and all its ramifications are of enormous value. But invisible earnings cannot be a substitute for the production of real wealth.

I believe that it is a combination of all these factors which has led to the pervading malaise which one finds throughout our industry today. Of course there are subversive elements to be found but, in spite of the eloquent pleadings and the painstaking research of my noble friend Lord Chalfont, those subversive elements cannot flourish unless the ground is fertile. It is to that fertile ground that we must turn our attention rather than to the subversive elements themselves. I must suggest to your Lordships that it is very unwise to exaggerate the importance of those elements. I do not believe that there are very strong subversive elements among the stable lads at Newmarket, the trawler men or the hospital consultants. Yet, as my noble friend Lord Beswick rightly pointed out, all these have in their own ways taken industrial action of a type analogous to that of workers who go on strike.

I believe that what is happening is that capitalism as we have known it is falling down without any help from the Marxists. We are suffering not only from demands for higher wages which the country cannot possibly afford, but also from a strike of capital. The investor is withholding his capital. We know full well that this is because he cannot get the returns he thinks reasonable. But I do not see any difference between withholding capital unless one gets the interest rate one desires and withholding labour unless one gets the wages one desires.

That is what we are suffering from and, in order to overcome it, it is no use saying how wrong it is of these people, how bad it is and that something must be done. We must accept the facts and give thought to how to overcome them. What we now need is for the best practical brains to give thought not, as so many do at the present time, to how to circumvent present restrictions or how the old order can be re-established, but rather to how the old system can be replaced to the greatest advantage of the country as a whole. It is no good for those on the Right to harp on the good old days of free enterprise and the profit motive. Conditions are not right for that now, however successful it may have been in the past. Equally, it is no good for the Left to harp on nationalisation and State control. The examples we have had so far are not an altogether unqualified success, and one must face the fact that the majority of the country, including many workers, is not wholeheartedly in favour of such actions. What we must have is new ideas and new thinking.

In spite of the groans and despondency which we hear all around and in which we indulge ourselves, the picture is not universally gloomy. In the past years there have been striking examples of great successes in technical advances, in the export field and in the vital aspects of the national economy. A very large proportion of those successes is to be found among the smallest industries and the modern industries, such as electronics. Also—and your Lordships will forgive me for mentioning this—success is to be found in agriculture. Here, productivity has been increasing by 6 per cent. per annum over the past years. There has been a declining labour force, an increased output, higher wages, and prices which are increasingly competitive with those from overseas. I suggest to your Lordships that it is worth looking at agriculture to see whether we can learn some lessons. It is also worth looking at those small industries which I have already mentioned to see what is the reason for their success.

I suggest there are four main headings which bear a great deal of responsibility for these good results. First, there has been a massive, though still insufficient, investment—mainly from the State—in research and development, resulting in enormous technical improvements in such things as seeds, modern methods of weed and disease control, and machinery. Therefore, the first heading would be research and development. Secondly, one has noticed an increasing co-operation between farmers, especially in buying and selling and in the use of expensive specialised machinery and equipment of different types, as well as services. Co-operation would be the second heading. Third, compared with industry, agriculture is in very small units indeed. Even big farmers rarely employ more than 20 men. So there is always close contact, and usually good understanding, between the farmer—the employer—and the workers. The third point, therefore, would be labour relations.

Fourthly—and this may be a somewhat more controversial point—investment in agriculture is not controlled by those rigid economic criteria which exist in industry. It is very rare for a farmer to make an investment which brings him in 20 per cent. He is usually satisfied if he gets 15 per cent. or even 10 per cent. But there are few financial directors in very few industries today who would countenance an investment of a risky nature—as anything in farming must inevitably be—with a return of less than 25 per cent., and in these days of inflation, probably still more. In other words, the investment which has been so necessary to agriculture has been carried out for reasons other than purely economic ones worked out by accountants on a balance sheet. It would take too long to go into the reasons. I just throw this out to your Lordships for further consideration.

I, therefore, suggest to your Lordships that it is worth considering that our future may lie increasingly with small businesses. Perhaps there is something in the saying that "small is beautiful", even in industry. I grant you that some industries, by their very nature, must be large—railways, mining, electricity, heavy industry and things of that kind. Many of these are already Government controlled in one way or another. I am quite sure that this is right, and that the Government must have control of the commanding heights of our industry. But we are far from having found the best possible way of running these industries, and to this we must give more thought. Here we need co-operation from the noble Viscount, Lord Watkinson, and his friends, as well as from my noble friend Lord Briginshaw and his friends. We must have all sides coming in here.

But, above all, we must give increasing thought to the best ways of helping existing small industries and of encouraging new ones. There must be a reversal of the present trend, which is brought about largely by financial and fiscal reasons. whereby small businesses, sooner or later, amalgamate with, or are taken over by, large businesses and there is a gradual disappearance of them. As a start I suggest that there must be more Government help towards basic research for such industries. There must be more help in obtaining capital and more encouragement given to sharing certain types of specialised equipment and services, such as computers, cost-accountancy, and so on. Positive steps must be taken for worker participation, not only in management but also in the eventual profitability of the business as it builds up.

My Lords, I believe that the Government should concentrate their energies and abilities in these directions, instead of giving too much time and thought to controversial legislation, which however desirable, is of no relevance to our present situation. The Government should also impose a complete embargo on all legislation involving fresh expenditure by either Central or local Government. Undoubtedly, this will mean the postponement of many causes close to my heart and to the hearts of many of my colleagues on this side of the House. But I believe it is a postponement which must be made in the interests of national solvency. There is no alternative at the present time.

But all this takes time. As the noble Lord, Lord Robbins, so rightly reminded us we have only months, possibly only weeks, and these things take longer than that. What must be done immediately is to alleviate the symptoms of the disease while, at the same time, studying the causes and mounting an attack on those basic causes. There is no question that at present the most disastrous symptom is world inflation. A statutory wages policy has been tried and has failed; exhortation has been tried and has failed. What we must now have is leadership and example; and leadership includes—as my noble friend Lord Briginshaw so rightly said—the involvement of everybody in the country. It must not he confined only to a small group in Parliament, in the CBI, in the TUC, or where-ever it may be. There must be no more talk of a slowing down of advances in our standard of living. There must be no more talk—at least for the moment—of even maintaining our standard of living. Instead, the Government must say, frankly and boldly, that the standard of living of all but the porest will inevitably fall. There will be fewer washing machines; fewer school playing-fields; fewer holidays in Spain—or, even, in Blackpool; fewer cigarettes; fewer drinks; and fewer many other things which we do not like to give up. But we must be told that.

At the same time there must be a complete freeze on wages until total production in the country starts to rise and until we begin to pay off at least some of our debts. With this wage freeze there must be a voluntary cut—I wish it could be compulsory, but I do not believe that to be practical—of 10 per cent. on all salaries of over £10,000 a year and of 5 per cent. on all salaries between £5,000 and £10,000 a year, with a lead to be given by Her Majesty's Ministers, followed by judges, civil servants, industrialists, doctors, and so on, all the way across the board. My Lords, I believe that, even at this late hour, with a fearless exposition of what the true situation is, with a demand for sacrifice, and with an example of sacrifice from those at the top, people will respond.

5.49 p.m.

Viscount YOUNGER of LECKIE

My Lords, first, I should like to add my congratulations to the noble Lord, Lord Hampton, on his maiden speech. I thought he appreciated that our present troubles were, at least, troubles of morale, and it is very important to recognise that. I hope that we shall hear him again. I cannot quite make up my mind whether I am like the chaps in West Bromwich—about whom the noble Viscount, Lord Watkinson, spoke—who are in some difficulty in discovering what the politicians are playing at. But I suppose that from these Benches I am at least justified in taking such a line.

I am rather glad that the noble Lord, Lord Walston, has brought the debate on to a level somewhat more suitable for what I propose to talk about, which is the question of industrial relations. The reason why I thought I should speak about them is that if, indeed, we are in a position where we have to despair of political Parties and start the necessary movement for a united approach to our problems, the natural place where we should then look is industry. I feel myself—without very much evidence, I must say—that there is room, even now at this moment, for a considerable rapprochement between the two sides of industry in tackling this problem jointly.

I think many people exressed surprise, even at the time of the Industrial Relations Act, as to how little conflict there appeared to be between the two sides of industry, and I feel sure that it is pertinent to make some protest on those lines. The noble Lord, Lord Robbins, quite rightly said that that will be too small and too slow to be of very much help. But is it not true, my Lords, that when you get into a state of rather low national morale, such as we are in now, anything one can do to stir up the general populace to take an interest in the future of the country and in what is going on is worth doing. We really want something to trigger off this united approach, and we do not seem to be getting it from the politicians.

There is a limit to what can be done on the industrial front, but I was very interested to read in Hansard of 21st April, on the first day of the European Community debate, the remarks at the end of the speech of the noble Lord, Lord Houghton of Sowerby—I am sorry he is not here—about industrial relations, which I think are very well worth noting. What he indicated then—I think rightly—is of great importance to our economic problems and to our future productivity and, although results are produced somewhat slowly, I think he felt that there was a great deal that could be done by the two sides of industry getting together. At the same time, the noble Lord mentioned that there are difficulties, to which I should like to refer. Both negotiating bodies, the CBI and the TUC, are still considerably hamstrung by their history and by their brief from their members, and I do not think they can continue in that way. Matters have become too important and I should very much like to see both these bodies convincing their members that they have to give them stronger powers to speak and to undertake action on their behalf. That is one point.

Then there are the difficulties which have been caused by the intrusion of politicians into the detailed running of industries—I am referring not to the nationalised industries, but to industries generally. One might have thought that that would give further incentive for co-operation between the two sides as companions in distress. The TUC had their dose of it for a good many months, or even years, and if the present programme goes through it looks as if the CBI are going to get a dose in the next few months. I think it is fair to point out to both sides that the remedy for that, a way to forestall political intrusion into your affairs, is to put your own house in order. Although much has been done, I do not think either side can claim that it has reached perfection in that respect.

The noble Lord, Lord Walston, took us back some 25 years. I should like to refer to the history of industry and commerce in this country during a rather shorter time, the last 10 to 15 years Around the early 1960s there started this extreme drive for more technical efficiency in industry and, in particular, for more professional management to replace the so-called amateur or perhaps even hereditary managements which preceded it. That has gone ahead at a great rate and has generally achieved that object, but it has largely been done by the creation of very large industrial units. That has produced side effects which are no surprise to most of us. They were predictable and predicted, and exactly what was predicted has happened: that as technical efficiency and professional management of these businesses has gone up, in far too many of them (though not all) human and industrial relations have fallen behind.

It is not difficult to see why. The professional manager, sometimes a bird of passage, a "whiz kid" as they are called, has not got those personal qualities which are required to make a success of industrial relations. Your Lordships will probably agree with me that successful industrial relations cannot be bought; they have to be worked for by somebody who has an acute interest in the subject and in the people he is dealing with. There is a conflict there. A great deal more trouble should be taken about the appointment of lower and middle management staff, from foremen upwards, and on the union side from shop stewards upwards. It is very important to get people with suitable personal qualities in these jobs. It does not matter how clever they are technically. That carries with it the more embarrassing duty, that you must be able to force square pegs out of round holes—never mind what the Protection of Employment Act may say. It is not worth while to leave a person so long in a position of authority dealing with personal relations that he creates a sour atmosphere which stays behind him for years. That is one aspect which management will have to cope with if they are going to help.

I would not presume to be so dogmatic on the union side, but if noble Lords read the speech of the noble Lord, Lord Houghton, to which I referred, they will see some suggestions there. I have the feeling that whereas the management side have rather gone off on the wrong lines, or at least have gone too far in one direction and not far enough in another, the trade unions have not moved far or fast enough in modernising their procedures and in making sure that their procedures, which are intended to be democratic, are in fact so. It is quite difficult to put this across to people, but unless both sides of industry have confidence in the democratic procedures of each other, we shall never get this agreement and reach the position where pressure can be brought on a Government in their dealings with industry.

I want to say a brief word about industrial relations themselves. Of course they cover many different things; but according to my informants in industry—I have been out of industry myself for ten years—there is a widespread lack of job satisfaction in many of the bigger firms, though not in all of them. That is not only very unhealthy, laying the industry open to all kinds of subversion, but it is also dreadful to think that men and women who spend half their lives in their jobs are not getting job satisfaction from them. That is a task in regard to which both sides of industry can contribute in all sorts of ways; but one must realise that it is a highly personal and subjective thing, for what is job satisfaction to one man may be quite the opposite to another.

The reason I mention that is that the only way, I think, of dealing with job satisfaction is not by machinery and elaborate organisations but by the personal contact and the personal management, again, of lower management. It has been said that, however bad your organisation, if you have first-class people in the key positions it will work; and however bad it is, if you have not got first-class people in key positions it will not work at all. I do not know whether there is anything in this suggestion. I should like to think that the two sides of industry—not in NEDC but before getting in touch with politicians at all—could get together and come to some form of agreement on various lines of policy. In that way they might be successful in triggering off a united approach to the industrial problems of the country such as recommended in the Motion.

6.1 p.m.

Viscount AMORY

My Lords, I have to start with an apology for the fact that immediataely I sit down I must rush off temporarily in order to open a building. Any noble Lord who like me belongs to the ancientry, will know that it is a very widely held opinion that there is no more suitable or innocent employment for septuagenarian Peers than opening buildings. I shall come back at the earliest possible moment. The noble Viscount, Lord Younger of Leckie, aimed one or two friendly shafts at politicians. My first instinct was to rush for cover and then I wonder whether, 15 years after retirement from active politics, one still counted as a politician. I will not follow that up. My noble friend Lord Watkinson, in what I am sure the whole House felt was a most excellent speech, spoke with great authority from the standpoint of industry. Now that I have retired completely, it would be in impertinence to follow him in that, but I agreed with everything he said.

The noble Lord, Lord Beswick, as always, gave us a thoughtful speech and I agree with him that insecurity and unemployment are not a good base for unity and co-operation. I admire tremendously the tone and substance of the speech of the noble Lord, Lord Rochester, on a subject of which he has first-hand experience. It was a great pleasure to hear the noble Lord, Lord Hampton, make his maiden speech. I did not know his long-sighted grandfather, but I knew his father well. We shall all look forward to hearing him make more speeches in the same admirable tone as that maiden speech. When my noble friend Lord Balfour of Inchrye spoke of a revival of national pride and effort, I thought he went to the heart of things. I must say that the appeal he made for some measure of political co-operation certainly made an appeal to me.

My Lords, I should like to speak mainly about one aspect of the economic troubles which has already been spoken about by most speakers; that is, our current rate of inflation which the noble Lord, Lord Robbins, said—and surely that is the right figure—is running at between 20 per cent. and 25 per cent. which by any test is a catastrophic rate. At a time when some of those countries who are our main competitors commercially are getting the better of this appalling disease, notably Germany, the US, France and even, I think, Italy, we are allowing our rate to get worse and worse. That can only spell absolute disaster. I say "allowing", because whatever the situation when oil prices and other import prices were rising fast a year or two ago, during the last 12 months, the causes of our utter failure to cure inflation are wholly within our own control. Because we are exercising no control over the rate of increase in wages and salaries, which are the main components of both our consumption expenditure and our costs, we are consuming 7 per cent. or 8 per cent. more than we are earning, and have been doing so for several years, financing the balance largely by borrowing abroad or printing money.

The Party of noble Lords opposite sometimes affects a rather pained and surprised attitude to industry for not investing more; indeed, we need a much higher rate of investment. But the explanation is only too clear. When so little confidence is felt in the prospect of favourable economic policies, and when the earning of profits is clearly still regarded in some quarters (and some influential quarters) as a discreditable activity, there can be little chance of new investment proving a productive process. Over the past few years, the rate of profits in industry, in real terms, has shrunk catastrophically and inflation and penal taxation have been the cause of that. But some Ministers go on blithely blaming British industrialists for not investing more when the blame lies almost wholly on their own shoulders.

My Lords, I should like to say a few words about the Social Contract. If there is to be no kind of statutory guideline, then I agree that some form of voluntary understanding to which the unions are a party is essential. I have never criticised the principle of the Social Contract; but the tragedy is that this one has proved far too loose a conception. The obligations on the Government have been firm and specific, while those on the unions have been imprecise and unspecific. The Government have fulfilled their side of the bargain at a heavy cost to public funds and at some damage to our economy: the unions, their side of the bargain, I am afraid, less and less. Arguments have taken place and are taking place about whether a particular settlement is inside or outside the terms of the Social Contract. If obviously outside, then those pressing that settlement defend it as a special case to rectify some previous inadequacy or some future fear.

The threshold agreements of last year have, in some cases, been paid twice over. I think it is well to remember that even if the original terms of the Social Contract had been strictly adhered to, it could at best have made only a limited contribution to the reduction of the rate of inflation; because by permitting compensation in full for the rise in the cost of living it provided a built-in element of continuing inflation. I presume that even Ministers now regard it as a dead duck. Alas!, it represents the only economic policy that Ministers seem to have or at any rate dare advocate.

Whatever criticisms one has to make of union leadership, I do not underestimate their difficulties. I know how immensely difficult it must be for one trade union leader to restrain his people when other Unions are pressing ahead for bigger claims. If I were a trade union leader at the present time I would be feeling very sad. I have known a number of trade union leaders in my time, and most of them were very responsible men and as patriotic as the rest of us. It must be sad for them that, in our present economic predicament, the trade unions over the past 12 months have, at best, made such an ineffective contribution to the mitigation of inflation and, at worst, have seriously aggravated it. Many trade union leaders, and Mr. Len Murray in particular, are still saying that the primary requirement of the Social Contract is the full preservation of the current living standards of their members, whereas the harsh truth is that in the short term that can only be effected at the cost of the rest of the community.

During the past twelve months, when it was vital that we should bring our consumption into line with our earnings—in other words, until we can increase our earnings, reduce our average standards of consumption—wages paid out, as has already been said by several of your Lordships, have actually risen beyond the increase in the cost of living by from between 5 to 8 per cent. I think that the noble Lord, Lord Robbins, referred to the difference, which is between just under 20 per cent. in the rise of the cost of living and 29 per cent. in increases of earnings, or something like that. Our productivity, alas, has probably only risen, if it has risen at all in this period, by from between 1½ and 2 per cent. Those who have benefited from the rate of increase to which I have referred will not be likely to recognise inflation for the killer disease which it is. It may well be that to get a guideline system accepted will prove beyond the capacity of any one political Party. But I believe that it will have to come. Only in that way shall we eliminate this dread disease without having to run the economy at a deplorably low level of activity. We are now suffering from wage-increase created unemployment. If only we can get agreement on the acceptance of some system of national guidelines which would indicate the biggest rise that could occur in money incomes without aggravating inflation, then we could move forward to a much higher level of employment, a higher level of production, and a higher standard of living.

May I turn now for a moment to Mr. Healey. My Lords, dog does not eat dog. and I have always noted that former Chancellors of the Exchequer are relatively kindly in animadverting on the performances of their successors. Long may such a humane and benevolent attitude continue! I believe that it will be generally recognised, even by Mr. Healey, that he got his spring 1974 Budget wrong. He began correcting that error in the Budget last autumn, and he has continued to correct it in his recent one. This at any rate reflects credit on him, if I may respectfully say so.

But the picture which his Budget story presents of our economic situation is, indeed, a terrible one: wages rising at the rate of nearer 30 per cent. than 20 per cent.; a very weak balance of payments; and estimated unemployment is rising faster, I fear, than the Chancellor of the Exchequer appeared to forecast at the time of the Budget. There is an estimated deficit of unprecedented and really terrifying size and very little confidence that it will not, as last year, be in practice greatly exceeded. Last year, if I remember correctly, the Chancellor hoped to finish the year with a deficit of about £2,750 million. That is a formidable figure. Actually it turned out to be about £6,000 million. Just imagine the situation if he made a similar miscalculation this year and £9,000 million were to become £18,000 million! The biggest weakness of his Budget seems the immense deficit to be covered by borrowing of one kind or another; and so far as it is destined to be covered by borrowing abroad, as the noble Lord, Lord Robbins, said, even if the loans are obtainable, how alarming must be the interest charge alone! Next year, I imagine, the most painful crunch is bound to come on the expenditure of central and local government, perhaps particularly the latter, because it has been growing even faster than central Government spending.

Why has local government expenditure risen so fast? It is not mainly because of any general extravagance on the part of local authorities, nor mainly because of the pattern of the local government reform. The chief reason is the additional commitments being continually laid on local authorities by Parliamentary legislation and the rising costs of the social policies of successive Governments. Government expenditure is still being allowed to grow in real terms, but if an actual reduction in real terms becomes necessary, as it may well do, that must involve the curtailing of some of the policies put in hand over the past few years. In passing, surely the continuation in these circumstances of general food subsidies to everyone, regardless of means must be economic nonsense.

As regards Government intervention in industry, and the proposed National Enterprise Board, the finance of one company alone, British Leyland, is a terrible warning of where this policy will lead in financial terms. It has been said that men of a conservative temperament have often noted that "one thing leads to another". I do not know whether that is true, but I prophesy that if the National Enterprise Board gets going, it will find itself with an astonishing rag-bag of miscellaneous assets, most of them unrealisable and all of them calling for more and more capital injection. Mr. Wedgwood Benn's plans will involve a fantastic rate of future borrowing and continuous political pressure.

I hope that we shall not hear any noble Lords advancing the arguments still used by some who should know better, that if we cannot solve our internal problems, let sterling float down. It is all too probable that sterling will continue to float down as our current inflation continues; but surely we have learned by now that the relief obtained by depreciating one's currency is of a very temporary nature. It is a way of bringing down our standard of consumption. It relieves some problems, but aggravates many others. If you let your currency go down it means there is a need for more internal discipline and deflation and not less. It is not an easy alternative. I know none of the noble Lords on the Front Bench opposite will think it is so, and I am not criticising them in any way. The depreciation of the currency is no lasting cure for internal inflation and indiscipline, but is the consequences of those maladies.

The noble Lord, Lord Houghton of Sowerby, used some words recently in a debate in this House which my noble friend Lord Alport quoted in a subsequent debate. I mentioned to the noble Lord, Lord Houghton of Sowerby, that I would be quoting him. He said: Millions of people will not be coerced, If, however, they reject the disciplines of Parliamentary law, they must find some self-discipline to take its place or we will sink into anarchy or the perils of … dictatorship …".—[Official Report, 15/4/75, col. 307.] Those were wise words, and most relevant to our present position. Parliament at present seems paralysed and helpless in the face of accelerating inflation.

I should now like to summarise, if I can, in a few sentences the urgent needs, as I see them. First, I believe this present malady has gone beyond the power of any one Party to remedy by itself. What is essential—and this brings me to the speech made by the noble Lord, Lord Balfour of Inchrye—is some form of agreement on a programme of anti-inflationary measures, agreed between the main political Parties: nothing less will do. It is no good agreeing on the end of curing inflation unless one agrees on the means to that end. The second need is that our consumption must be brought down to balance our national earnings, and so balance our books. When we increase our income, so much the better, because that is a much better way of doing it. Thirdly, the money and credit supply must be kept to a level something below that required to finance the going rate of inflation. Fourthly, we must provide the resources for a higher rate of investment and a higher rate of return on industrial capital. That higher rate of return on industrial capital must be positively encouraged. Price controls, if retained, must be moderated.

Fifthly, guidelines indicating the rise in wages which can be absorbed without inflationary damage must be laid down in some way under the authority of the Government of the day, and—here is the rub—must be accepted by a consensus of public opinion. That is the way it will work, and it cannot work in any other way. The sixth point is that, as was recommended by my noble friend Lord Watkinson, the case for strengthening the NEDC is very strong indeed. This has always seemed to me—and I can say this since I was not at the Treasury when it was introduced—to be a very good idea. I think the NEDC should be built up by agreement between the CBI, the trade unions and the Government into a more influential and more effective body, with more positive and definite responsibilities. I believe the time is precisely right for that to be done.

Lastly, the present level of public expenditure, as a percentage of the nation's real income, must be strictly contained and any part of it not covered by taxation must be severely curtailed. If such a programme or something like it can be agreed and accepted nationally, as I believe it could be, I am convinced that economic collapse will be warded off and our fortunes will begin to mend. Let us not despair. We in this House are generally glad when we can add our Party strengths together in exploiting common ground. I trust that in this desperately serious economic situation, we shall all individually do our utmost to devise and promote measures which will command all-Party support to defeat this deadly inflation which is at present destroying our nation.

Baroness GAITSKELL

My Lords, before the noble Viscount sits down, may I ask him a very short question? He excused the under-investment of industrialists and employers on the grounds of lack of incentive. But what about the incentive that workers have now—workers in transport, in the mines and everywhere? Have we not come to a time when their incentives have to be taken into account?

Viscount AMORY

My Lords, of course I agree with the noble Baroness. If you mention the word "incentive", it must be an incentive which is fair to everyone; I absolutely agree with that. But if I may just hark back to two things I have said, the contrast at the present time is quite severe. Industrial profits, in real terms, have dropped tremendously over the last two or three years, but wages have increased, in real terms, during the same time. So it is the balance which is the important thing.

6.26 p.m.

Lord HOY

My Lords, I intervene in the debate a little earlier than was intended, but I am delighted to follow the noble Viscount, Lord Amory. All I would say to him is this. When he was making his tribute in terms of, "We ex-Chancellors of the Exchequer have to support each other", I could hardly regard his speech as support for the present Chancellor.

Viscount AMORY

My Lords, if I may put that right, I said that I had an inclination to be kindly and benevolent. If I had not, I would have been far more abrasive.

Lord HOY

My Lords, all I can say is that the noble Viscount's kindly benevolence went unnoticed so far as I was concerned. I can think of some Chancellors who should bear a fair amount of the burden for what is happening at the present time. The noble Viscount was in the period of the noble Lords, Lord Thorneycroft and Lord Barber. I would not regard them as being altogether outstanding examples of custodians of Britain's finances. Indeed, I think that the noble Lord, Lord Barber, represented a great catastrophe for the nation. I do not want to take this argument too far, except to say that I think the noble Viscount goes much too far when he seeks to divert criticism from some of his own colleagues on to the present Chancellor. of the Exchequer.

Viscount AMORY

My Lords, I do not think I delivered a blessing on any Chancellor of the Exchequer. I was referring to the last Budget only.

Lord HOY

My Lords, that is true. But Budgets do not come as a result of a few months, as the noble Viscount knows because he was Chancellor long enough, and you cannot simply pin the responsibility for three months on one Chancellor of the Exchequer. He has to accept what he has inherited; and if the noble Viscount does not understand that then he does not. I am sorry if he does not like it, but I have given way twice in two minutes. So all I am saving to the noble Viscount is that if he does not understand that, he does not understand—and I know he does—a little about commerce. I will not make an assessment about finance, because he and I have been in association over finance for a very long time. Noble Lords may not know it, but during the whole of my life I have been associated with Trustee Savings Banks in this country, and to this day I am still the Honorary President of the Trustee Savings Banks Association. I have always believed that if you want to make a great contribution to your economic strength in any country, whether this or any other, you must have savings to safeguard yourself. I am grateful to the noble Viscount for having made his contribution in this respect. All I would say is that when we have these criticisms we should at least remember what has gone before.

I did not intend speaking quite so early, but I want to say one or two things about industry in general, because people are making their opinions known—and we are delighted to have them—as to how we have gone wrong and how we can provide solutions. I was connected with industry for a long time in a minor capacity. It was then my job to look after between 200 and 300 people, and you knew at the end of the year that unless you used the funds economically you would be in difficulty. So we are today facing the problem of production and the labour force. You cannot get what you want with two or three men working to produce what you require. You need an economic market use of the labour force to get what you want. It is only when you have that that you are able to produce economically.

It is very simple to take out one section of the community and say, "If we could only cut away food subsidies and then increase family allowances, we would solve this part of our economic problem." That may be all right for some people, but I would remind your Lordships that there are 8 million old-age pensioners, or rather more, in this country. It is not relevant to say to them, "We can step up family allowances", because they are not interested in that aspect. Se although we can subdivide the problem into sections, I would nevertheless say that we cannot separate one section from another. If we are looking for a solution, we must remember that we have to find one of general application. I claim no more than that.

I have been thinking about this in relation to the Social Contract. Criticism has been made of it. It may well be that the Social Contract has not worked as successfully as most people would have wanted. But noble Lords ought to be able to say what they would put in its place. We have tried many other remedies under many other Governments. We have tried legislation. We tried legislation with punishments for trade unions and it has not proved successful. This Government decided that the Social Contract might well be the best way out. If anybody enters into a contract of this kind he must accept the responsibility for it, and that applies to both sides. If noble Lords opposite are saying that the Social Contract does not work, something must be produced to put in its place and this House is entitled to expect that noble Lords will spell out the alternative. We are willing to listen. All of us want to find a solution to the problem. If noble Lords opposite are saying to us on this side of the House that our solution is not working, then at least let them provide an alternative which we can consider and discuss. Unless they are able to do that, they ought to curb their criticism of the Social Contract.

The noble Viscount, Lord Amory, was speaking about the great danger that had been engendered by threshold agreements. Let me remind your Lordships that it was not those of us on this side of the House who introduced threshold agreements; they were introduced by the previous Conservative Government. They may have been right, or entitled to think they were right. But it was this Government that had to face up to the consequences of threshold agreements, and we ought not to overlook that fact. When noble Lords criticise what has happened, let it be remembered who was responsible for threshold agreements. They may have been introduced in the best circumstances, but their consequences had a considerable significance for the economic affairs of this country.

This Government have, of course, had to try many things. I am a little perturbed when people seek to criticise this Government for the steps they have taken. I heard a little this afternoon about the motor car industry and what we have done about Leylands. I want a noble Lord opposite to rise and say what he would have done as an alternative to what the Labour Government did.

Lord ORR-EWING

My Lords, perhaps the noble Lord, Lord Hoy, did not read the weekend Press. Mrs. Margaret Thatcher spelled out exactly what steps we felt should have been taken in respect of British Leyland, recognising that some immediate aid was necessary but asking for justification of the other side, so that there was a long-term cure and not an underwritten subsidy for all time.

Lord HOY

My Lords, may I say to the noble Lord, Lord Orr-Ewing, that I read what Mrs. Margaret Thatcher said. It is true to add that she took 10 days to make up her mind about what she wanted to say. It is also true to say that there was not a single Member of the Conservative Party in another place who had any contribution at all to make on the matter. Any noble Lord can rise and say that there was, but I assert that not a single Member from the Conservative Benches in another place had any contribution to make. Until Mrs. Thatcher made her speech, even she could not have provoked that interruption from the noble Lord, Lord Orr-Ewing. If noble Lords opposite have an alternative let them spell it out.

It may be said that we should not have acted as we have done and that we ought to have taken other steps. But the Government decided that from their point of view the step they took was the best way of dealing with the problem. I do not say it is the ultimate solution to any problem, but the noble Lord who interrupted will remember that even when we were faced with the same circumstances concerning Rolls-Royce it was his Leader who took the decision that the Government ought to step in to safeguard Rolls-Royce for this country. I do not know whether the noble Lord is now going to argue that that was the wrong step to take. I think it was the correct one to take, and I think that we were right to take it with Leyland as well. If we are going to take this action we must do it collectively. Of course we have to extemporise, my Lords; all Governments have to extemporise. But we want a long-term policy to meet the needs of this country. Everyone wants to do well for the country. Do not let us pretend about that: we all want to do well.

Last night when my noble friend Lord Hughes was introducing some Government measures to improve the prospects of Scotland—and the noble Lord, Lord Campbell of Croy, will not deny this—there was no other Member of his Party sitting on those Benches to welcome them. The measures were to bring whole development areas in Scotland under the Highlands and Islands Development Board. If there had been a complaint about the Board, the Benches opposite would have been packed. But last night we were taking steps, at the behest of my noble friend Lord Hughes, to correct an imbalance in Scotland. We were adding certain areas such as Mull, Arran, Moray and Nairn; and, as I say, there was no other Member of the Party opposite to welcome it. If noble Lords opposite are saying that we must have a collective agreement to do this job, I would agree with them. We are not going to get out of the difficulty by acting on our own. Whatever happens in our economic life will fall on every one of us, and unless we find a solution the outlook is not very bright.

6.38 p.m.

Lord RHYL

My Lords, I have addressed your Lordships' House only once before and that, oddly enough, was on the subject of inflation. It is a subject that has been in the front of my mind for many years. The effect of inflation is so socially divisive. We now see lecturers in universities and medical specialists taking direct action which would have been unthinkable in the past. Matters have gone a good long way since I spoke here four years ago. I think we can say without fear of contradiction that we have qualified for the second division of the banana republic league and we are quite well placed. perhaps, to reach the first division. There have been endless suggestions; there has been a great outflowing of good will in this House. The suggestions have been about freezes, statutory policies, or no freezes. Surely the main point to get hold of is this. With a borrowing requirement of £9,000 million—of course, in fact it is much more—no policy can conceivably work. It will simply be overtaken by this flood of money. Any economist would agree on that. Even the Hungarian Mafia, now fully represented in this House, know we cannot do it.

What have the Government done? One of their first steps was the Social Contract. It has been fairly well hacked over. People have not been very kind about it but one could not have been more rude about it than the Chancellor of the Exchequer himself. The point that has always interested me is: Why Rousseau? I heard my noble and learned friend Lord Hailsham of Saint Marylebone a short while ago speculating on "Why Rousseau?". I read Rousseau's Social Contract and his confessions to try to discover the reason. In the edition I read there was a great deal of historical, philosophical argument about what, if anything, Rousseau really meant. But as the House may remember he said that everything depended on the general will. It was not clear how you found out what was the general will or how it worked. I think that noble Lords opposite wanted to cut through this, dilemma. They defined the Social Contract as anything that the most powerful unions wanted and could get away with, and that is how it has been acted upon.

"The Confessions" is a most entertaining work. Noble Lords may remember that Rousseau was in the habit of dumping his bastards on other people's doorsteps. That is the exact effect of defining the Social Contract as what the most powerful unions wanted. The "top" unions have done very well, but the unpleasant results have been dumped on everybody else's doorstep.

First, they had a Social Contract and it has not really been much good. The second thing on which the Chancellor prides himself is that he has kept the money supply in some kind of control. I was pleased to see him congratulate himself on that, because I thought that it had always been considered in Left circles as nicer not to talk about the money supply; like ringworm, you do not really want to talk about it. But the Chancellor talked about it. It is perfectly true that he has managed to keep some kind of control over the money supply, but he has done it, first, by colossal borrowing in the London market. In fact, there was a worldwide decrease in short-term rates, and the Government managed to borrow a great deal of money on gilt-edged securities. For the moment that has stopped.

Secondly, there has been really colossal overseas borrowing. What will happen about that? Several noble Lords have given warnings. If the referendum goes the wrong way, we might easily get a very rapid reaction. An article about the referendum in last Friday's Economist was a little "nervy" about the result and it was "nervy" simply because the dominating sentiment of so many people is the old joke in Punch—"He's a foreigner; heave half a brick at him"! For those who cannot look beyond Margate—and there are a great many in the Party opposite—it is a very powerful argument. The Economist urged Mr. Wilson and Mr. Callaghan to go out to the country and sound the clarion call. Romantically enough, it compared them to Achilles and Patroclus sulking in their tents.

If I may return to the question of the overall borrowing requirement, £9,000 million is likely to be far less than the actual borrowing requirement. The Chancellor was hopelessly wrong in his previous estimates of borrowing requirements. When inflation is proceeding at this rate, the real trouble is that it is almost impossible to calculate what will happen. Therefore, the rather simple course of thinking of a number, sometimes halving it and sometimes not has been taken. However, one cannot estimate. Why I am certain that the borrowing requirement will be much greater is that after the Budget was planned and after the Budget speech had been made there have been enormous wage increases in the public sector which cannot have been taken into account in those calculations of the borrowing requirement.

On top of that, we have the threatened measures of nationalisation. There are two main troubles about nationalisation. The first is that anybody whose firm is nationalised thinks that he cannot be put out of a job, because if the firm goes "bust" they will print the money. Therefore, they act accordingly. That was foreseen originally. But what was not foreseen is how appallingly difficult it is to raise the money for their capital expenditure and their losses. Compensation is a tiny factor. The total compensation paid to the railways has been written off several times since nationalisation.

The real problem is the appalling difficulty of raising the money. It is all very well to talk about people not investing enough, but if the Government are in the market for these colossal sums and bidding up for them, it is rather difficult for institutions to lend money cheaply to business. The money is taken away from them and they are out outbidden by the State. I believe that a combination of colossal overspending and nationalisation will produce the most overwhelming overall borrowing requirements.

The Earl of LONGFORD

My Lords, I hope the noble Lord will forgive me for not having heard his opening remarks, but, of course, when I knew that he was speaking I rushed into the Chamber! Is the noble Lord making a speech in favour of any kind of national unity, or is he against it?

Lord RHYL

My Lords, if I may say so, the noble Earl has asked rather a silly question.

The Earl of LONGFORD

My Lords, is the noble Lord callable of answering it?

Lord RHYL

My Lords, what I said was that we are all in favour of good will. However, the point is that good will cannot work if there is such a large borrowing requirement. If I have got that idea into the mind of the noble Earl, it will make me very happy.

The Earl of LONGFORD

My Lords, will it make the noble Lord unhappy if he knows that he has not got it into my mind?

Lord RHYL

My Lords, it was Dr. Johnson who said, I can furnish the noble Lord with an argument but I cannot furnish him with an understanding"! As so many noble Lords have pointed out, why is it that we have done so much worse than other countries? I think it is because we were not humiliated in the war. If one thinks of all the Continental European countries which had enemy baggage wagons going backwards and forward across them and remembers that at the end of the war they had to pull themselves together and do something about the situation, the position is that we did not feel like that then and do not feel like it now. But we cannot save ourselves without drastic action.

For a start, may I suggest that the bribes which were given by the Government at the last two Elections should be cancelled and that all the inflationary nationalisation projects should be concelled. I fear, though, that they will not do so. But the national will will rise again, though we may have to suffer humiliation first. Pray God that it is not too terrible a humiliation!

6.49 p.m.

Lord SOPER

My Lords, I should like to add my thanks to others who have expressed their gratitude to the noble Viscount, Lord Watkinson, for giving us the opportunity to consider this all-important question which, both naturally and ecclesiastically, makes an irresistible appeal to me and to people of the same cloth as myself. In general terms, it seems to me that the noble Viscount has made an impeccable case for the absolute and peremptory need for the kind of common, united action which alone will be sufficient to meet the hazards and dangers of this present time. If in the consequent debate an apocalyptic element has also been introduced into this argument, not least by the noble Lord, Lord Robbins—and who am I to take objection to that?—there was disquiet in my own mind as I listened to the various speeches, some of them constructive, some on the topic under discussion, others not necessarily so. It is disquiet which comes from a question which I cannot answer merely by saying that we ought to do something, or that there is a need to do something. After all, such a leap of action cannot be made out of a morass or a quagmire. It is no good saying to a fellow who is up to his neck in a bog, "What you should do, my friend, is get your friends around you to help you jump out of it". You can only jump out of quicksands when there is a springboard which is sufficiently strong and resilient to enable you to make that leap.

In that respect, may I suggest to your Lordships that the question of unity is a fruit rather than a seed, and that in order to bring it to fruition there are certain necessary prerequisites. Unless they are provided, we are in a Cloud Cuckoo-land of wishful thinking if we imagine there will be any likely response to the very present need for united action to deal with our contemporary problems.

I will venture to introduce the theological—or shall we say the ecclesiastical—prerequisites which the Church has always practised in similar circumstances, because I feel they are entirely relevant to the dicussion on which we have embarked today. The prerequisites of united action in the Christian Church has been bell, book and candle: the bell to sound the warning, the book to prescribe the remedy and the candle to enlighten the hope and faith. It is perhaps easy to see how apposite this kind of prerequisite has been in the tumultuous conditions of warfare, and at the same time to remember how different are the circumstances which now we face, and therefore how dangerous it is to assume that if the bell, book and candle apply to a wartime situation they can necessarily be transferred to the kind of problems that confront us.

In a war there is no doubt that the bell sounds and tolls, and to everyone who hears it, "it tolls for thee". There is an elementary and overwhelming sense of immediate and terrible danger. That is one of the requisites, I believe, of any proper and adequate reaction, and that point has been underlined over and over again in the discussion this afternoon. The book prescribes a remedy which is simple. It is really nothing more than a single page or a single line. There is no difficulty in arriving at a common denominator of activity when you are confronted with one simple alternative: either you are defeated or you are victorious—or you arrive at some suitable compromise and arrange some terms of treaty. Above all, the candle of hope and faith inspires those who see its light, to believe that they are together in an otherwise quite darkened room and their only hope is that they may act together in order to follow the light of that candle and to emerge from their troubles.

I make no apology for quoting those three prerequisites of unity and relating them in particular to the problem of war, in order to distinguish between that problem and the one which now confronts us. There is all the world of difference in the sound of a dropping pound and the sound of a dropping bomb. A dropping bomb has an immediate, irrisistible appeal and the warning, which is sufficient in wartime to bring people together, is not sufficient at the present time; and over and over again your Lordships this afternoon and this evening have given testimony to the way in which we are living in a fool's paradise and are yet unaware of the solemn and terrible fate which I believe faces us. I share it, and I make no bones about saying that as chairman of Shelter and as one who has been engaged in voluntary work for the last 50 years I am appalled at the prospect which confronts voluntary services in the community at the moment. Most of them face liquidity problems which are acute, and some of them are very near to total disaster. It will be a dreadful loss if that particular benefaction to the community is wiped out in the contemporary situation.

But I believe there is a worse and totally unacceptable condition which should act as the most sombre of warnings, and it is the prospect of unemployment. You will allow me, my Lords, as a spectator of this evil, to share with you for a moment its soul-destroying—or at least soul impairing—consequences. The man who has nothing to offer, nobody wants and his domestic life becomes almost crippled; and the prospect that nearer 2 million than 1 million may well be in this sorry state in a comparatively short period of time is to me so totally unacceptable as to take precedence over all other considerations in this human tragedy. I believe that this conversation in your Lordships' House today will have done inestimable good, if it has increased the sense of the warning bell that we are in face of consequences unprecedented and without parallel and all of a most lamentable condition.

On the second element, the book, I find myself all the more aware of the difference between a war situation and one which is so complex and requires so much programming and in which there is so much division. I would not be unfair to the noble Viscount, but it seemed to me from time to time that he was offering us unity in so far as we were to accept his programme, and a continuation of disunity if we were not prepared so to do. I understand that, but I will give notice to him and to many other people that I am as totally committed to the Socialist answer as being the one requisite and necessary answer as he, equally honestly and sincerely, is committed to another kind of answer. I do not therefore see that there is any prospect that by a continuation of discussion or limitation of perspective we are likely to arrive at a common denominator of agreement which would be as simplistic as that which energises those who partake of warfare. It was in that regard that I was the more grateful for his recognition that the acts of unity must fall within a neutral area, for they cannot finally fall within the area of a total ideology or indeed of a total programme.

Let us look for a moment at that neutral area. I, as always on Wednesdays, come to this House from a louder and larger place called Tower Hill; and it was there again today that I was confronted, as I believe you would be if you ventured into such circumstances, with the utter cynicism of so many people about the Social Contract. That Social Contract is lampooned in the Press and is manifestly riddled with evasion. Yet I believe it, and I believe it because it is the one constructive—neutral, shall we say?—programme which could, by its exercise in a fair context, provide something of the answer to which the noble Viscount has invited us to look.

But there is one pre-eminent requirement which does not as yet appear, however much it may be argued about, to have any purchase upon the minds of ordinary people. It is that an arrangement between a Labour Government and a trade union group does not consist of a contract which can be operated over the whole range of industry and commerce; and if the noble Viscount tells us that the CBI and other groups on the other side, so to speak, of the industrial fence have not as yet been invited to come in and take their place in some enlarged contract, surely that is not a sufficient reason in the present emergency to prevent them from making the first advance. Were they so to do—and I should be happy to think that this is already in train, and if it is then let it be trumpeted abroad, for people to hear it—then I believe there could be a renaissance of the Social Contract in the minds of a great many people who would be prepared to see this as a temporary measure whereby at least could be assuaged the acrimonies of political controversy and the abeyance, for a time at least, of the application either of a Socialist programme—as I would believe in—or of a non-Socialist programme as noble Lords on the other side of the House would cherish.

These are practical and I believe recognisable ways within a comparatively neutral field, and I should like to add one comment about the admirable speech of the noble Lord, Lord Rochester. I am quite sure that those who are now proclaiming to what an extent Parliamentary democracy is in decline have a lot of truth on their side. Nothing in my judgment would be more calculated to revive a sense of commitment and belief in that Parliamentary democracy than something done in the role of proportional representation of one kind or another, to relieve us of the unhappy truth that the House of Commons—the other place—is not a truly representative body. It does not in fact represent the commonality of the common people, and it could. The last shred of argument for the retention of the present system has now been dispersed by the application of some form of proportional representation for the people on the other side of St. George's Channel.

My Lords, I believe the Book can at this moment provide a measure of practical advice and agreement. I am warmed to the propositions already made as to voluntary disciplines and, indeed, voluntary cuts by those well-breeched in the interests of those who are not. Not unnaturally, I come to the candle, the candle of hope and faith, the candle that inspires us to see when we live in one room, the light which lightens all that is in the house. It gives me the opportunity of saying how grateful I am to have listened to the maiden speech of the noble Lord, Lord Hampton, and how much I agreed with his plea for an application of those moral principles, without which it seems to me there is no reasonable hope of emerging from our present difficulties. I am disgusted when reading of those rushing to buy television sets and washing machines in order to avoid the discipline of doing without them, in order to express that self-interest which is not even enlightened, and which I find so disagreeable as to be totally immoral in a situation such as this. But then, I have little use for those whose claims for wage increases are such as to retain their standard of living, and to make sure it is not in any way eroded by the inflationary process.

I have long since resisted the temptation to think there is a large element of decadence in our country at the moment but I am reluctantly compelled to believe this is true. I do not necessarily blame those who are decadent. I think the Church has a lot to answer for, as has the system, and the emergence of the shackle age and the commodity age—and those wise words to which I listened so attentively from the noble Lord, Lord Beswick, as to the quantitative assessment of life in contradistinction to its qualitative one—these are elements which should not be disregarded.

Therefore, I conclude by saying that I am quite sure that the bell of warning, the bell that tolls, shall be increasingly heard, and if the fear of God is the beginning of wisdom I am not sure the fear of apocalyptic collapse is not an unsuitable alternative. I believe there is an element of opportunity within the framework of that neutral kind of governmental co-operation, which will go far beyond the acerbities of Party conflicts, will cross the boundary lines of Party allegiance, and will give a wider sense of corporate united opportunity. But, above all, I think the hope of unity rests in a revival of the sense of dignity and decency among ordinary people. I believe that that can come only when there is an overall sense that we belong to a community not yet fully realised, but in principle there.

Most people today, those who belong to the extremities of our political spectrum, do not believe there is any community here at all. Most people within the centre of that spectrum would be only too anxious to respond to it if there were enough sense that the sacrifices required were being required across the board, and did not rest unfairly on one group. This is a matter for governmental action, a matter for individual discipline. It is a project which I believe can light a candle which need not go out, and which can lighten the room permanently.

My Lords, if I may finish, it is no accident in my calendar that this debate has taken place on the eve of Ascension Day. I believe in Ascension, and therefore I cordially welcome the opportunity to share that belief in a debate such as this.

7.5 p.m.

The Earl of LIMERICK

My Lords, I suppose there never has been a time when the words of this Motion are more apposite than today. It is a good thing that the initiative of my noble friend Lord Watkinson has given us a chance to discuss it. I shall seek to follow him in speaking to the terms of his Motion, in speaking of unity, and I shall resist the temptation to treat this as a general economic debate. Indeed, the speeches of the noble Lord, Lord Robbins, and my noble friend Lord Watkinson, have pre-empted any remarks I might have wished to make in that sphere. This debate has given us a chance to hear a most distinguished and thoughtful maiden speech from the noble Lord, Lord Hampton, and I join with others in trusting that we may hear him again.

The noble Lord, Lord Robbins, said, and I believe this hit the nail squarely on the head, that unity demands a spirit of common understanding. The noble Lord, Lord Briginshaw, then urged us to recognise that we are living in a world of social change, and not to cling to old rigidities. Let us take those two propositions as a starting point and see how we can build on them.

It is said that all problems created by man are capable of human solutions. I do not believe that we can any longer be fully confident of this. Some problems at least, of population explosion and of technological explosion, are new to mankind, and I believe we have also to consider this utter cynicism occasionally met which has just been referred to by the noble Lord, Lord Soper. We need change, but there is a limit to the rate of change which society can assimilate without disruption, to the rate at which technological generations can be compressed at an increasing rate into human generations. Inflation accelerates change. All through history the really high rates of inflation, the attempts to run away from real problems by failure to insist on honest money, have led to injustice, hardship, jealousy, to the demoralisation of society, and ultimately, to the collapse of government. I believe it would repay study to look at the lessons to be learnt from the occasions when we have had a rate of inflation which goes notably higher than the rate of interest. These are appalling prospects from which all men of good sense in any walk of life must recoil. What can be done to guide us safely away?

The noble Lord, Lord Beswick, asked how we could curb the inexorable pressure for material gain. There are many who are deeply concerned, but there is no standard to which they feel they can rally. Nor is it likely that there will be a rallying point recognised until a large number of people are convinced, through disillusionment with the false god of materialism, that the way to their individual fulfilment and hence to happiness lies in a total lifestyle, and not merely in the weight of the pay packet. A satisfying job, in a decent environment involving the use of skill, must come to be more highly valued than a better paid job involving uncertainty, stress and strain, or an unhappy environment. The process should shift from consumption to preservation, from the pressure to out-do-the Joneses to the recognition that they are the best people to live alongside, and the recognition also that other Joneses in other climates have their own effective claims on the world's limited resources. Where are we to find a spirit of common understanding? I suggest it is something which we must all seek consciously to create and to extend as a vital prelude to unity. We shall not have unity until we find the courage nationally to face some fundamental facts as a prelude to overcoming them.

Truth is usually unpopular. We shall make no progress until it is widely proclaimed, and generally accepted. What are these truths to which I refer'? I need not develop them, as they have been talked about earlier. First, I think, the truth that we are nationally living beyond our means and cannot long continue to do so. As an obvious measure, the Chancellor, in his Budget speech, told us that our current standard of living is sustained only by an overseas borrowing equivalent to £5 per family per week. Then we must recognise that no country and no individual can go on consuming what has not first been earned or produced. Hire-purchase debts incurred by individuals, and foreign borrowing in another context, for current consumption, are examples in their way of "spend now, pay later". But all debts have to be repaid from future surplus earnings. The wealth, the means of consumption, has first to be created. I note in passing a figure made known recently, that 56 per cent. of our national income is now spent by the public sector; and Professor Friedman, who brought out this figure, commented in passing that not even the Treasury economists could doubt that one.

Then we have to recognise something quite fundamental, that palliatives are not cures. The noble Lord, Lord Beswick, reminded us of some of the things that the Government have recently done, stock valuation measures, abolition of ACT surcharge, pre-shipment finance. To that list I would add cost of escalation, insurance, which amounts in effect to subsidy of our foreign buyers, food subsidies. My point is that these are palliatives and that they would not be needed in a healthy society. They are mere excuses for deferring fundamentally difficult decisions to deal with what are deep and fundamental problems.

Then we must recognise, again as Lord Robbins said, that the world does not owe us a living. We have no national birthright entitling us either to a constantly rising living standard, or, still less, to the job of our choice in the place of our choice. There is a secular trend in the terms of international trade which is moving inexorably against us. So we must accept that our living standards will decline somewhat relative to other industrial countries, and certainly relative to many primary producers; and we must cease to regard the weight of the pay packet as the only thing worth striving for. Life in Britain will continue to offer immense advantages if it is not damaged by unproductive strife against the inevitable and poisoned by resultant jealousies.

There are other things we must recognise and proclaim. I have never worked in a factory, but I have visited factories as far afield as Canada and Rumania, and of course many in Britain. I can think of little that can be more boring than some of the jobs I have seen people performing in those factories. This is not directly related to money, but for once I find no difficulty at all in believing what the industrial psychologists say when they point to the frustration factor as sometimes a major element in industrial relations. Here I follow the noble Viscount, Lord Younger of Leckie, in his concern for increasing job satisfaction by more imaginative management. And last, the problem of size, to which the noble Lord, Lord Walston, convincingly referred. Big units tend to become progressively dehumanised, and this alone would persuade me that the current proposals for nationalising our aircraft and shipbuilding industries are at best irrelevant.

My Lords, I want to end by saying a few words about the position of the chambers of commerce. I have previously declared to the House that I am currently the President of the Association of British Chambers of Commerce, commonly known as ABCC. The ABCC has a membership of 50,000 businesses, from the largest to the smallest. In this way it is uniquely representative in its role, spanning both geography and function. It is a town-based organisation and it is more broadly representative than any other in the country. The ABCC never has, it does not, and never should, engage in Party politics. Its 50,000 members ask nothing better than what we are talking about today, a united approach to our severe problems. They want unity to enable them to concentrate on the business of earning the wealth which ultimately is largely disbursed in the public sector for the benefit of all. They want unity because disunity and confrontation are wasteful, are bad for business and are bad for the country.

Here is something that I would urge upon the Government. As long ago as March 1974 I suggested, in a debate on the loyal Address, that the chambers of commerce had a useful unifying role. Immediately after the Election last October I wrote to the Prime Minister in the name of the ABCC offering cooperation in any sensible policy aimed at curbing inflation, and especially in improving the process of economic consultation. I had a friendly reply, but one which I must describe as non-responsive. I would point to the increasing frustration that is felt by men of good will in the business community, with the concentration on the incomes policy; that confrontation with the big battalions has been the only serious issue facing the country. It is far from being so. This, let me stress, is not a personal complaint that I am voicing. This is the view—and I was at the meeting this morning—of the National Council of the Association. They regard this as a disappointing response. They want to be consulted and to contribute.

We have talked this afternoon about the NEDC, and it may be that an enlarged or modified NEDC would be the right forum for such a discussion. I do not know; it is not for me to say. What I do say is that we do not wish to stand in the way of any other initiatives. We have never been involved in wage bargaining; this is not our object in making this suggestion of consultation and of movement towards consensus. We are not seeking to compete with the CBI. We are working closely with the CBI—and we announced some new measures in that direction a fortnight ago—in seeking to represent the fears and aspirations of the business community and of the private sector. I should like in public to renew this offer that we should provide a counterpart to the process of consultation and the search for consensus which we are all proclaiming. It has been proclaimed from the Government Front Bench; it has been proclaimed from the Front Bench below me; it has been proclaimed from all over the House. I believe that here there is role which can be undertaken by Government and private citizens alike. Here, my Lords, is a practical step we can take to unity.

7.19 p.m.

The Earl of LONGFORD

My Lords, the noble Earl who has just spoken was bringing forward at the end of his speech a proposal which, coming from him in his representative capacity, is obviously one that the Government will wish to take very seriously. Whether they will be able to say anything about it today I know not, but clearly it is an important suggestion. We have had a series of fine speeches, beginning with the two from the Front Benches, and we have moved on through an authoritative address by Lord Robbins and a moving one from Lord Soper. Many years ago I took up the study of economics at New College, Oxford, in the hope of being taught by Lord Robbins, but when he heard I was added to his list of pupils he retired to London, so I was denied those advantages. But at any rate anything he has to say in this House will always be followed with very great fidelity by me. We have also listened to a maiden speech which has been widely praised.

Speaking for myself, however, the two speeches which made, in a sense, the greatest impact on me, because they brought forward the most striking proposals, were those of the noble Lord, Lord Balfour of Inchrye, with his suggestion of what he did not actually call a Coalition Government but was, of course, a Coalition Government under some other name, and the proposal of Lord Walston for a statutory wage freze. I am not saying that either proposal is pernicious or that it will not come about. But I am proceeding today on the assumption that we are continuing in a state of ordinary Party struggle, and in light of the fact that we have not got a statutory wage freeze. Both the noble Lord, Lord Balfour of Inchrye, and the noble Lord, Lord Walston, also dealt with the possibility of obtaining a voluntary incomes policy. I shall have something to say about that later. Finding ourselves where we do, I hope we can try for something rather more fundamental than has been suggested by those speakers who did not favour a coalition. I think that the noble Lord, Lord Balfour of Inchrye, is the only speaker so far to come out fully for a Coalition Government.

In the last few days I have spoken to a high trade union official. I said, "I suppose the trade union movement generally would react suspiciously to a Motion put down in today's terms." I do not cast any reflection on the personal status in union circles of the noble Viscount, Lord Watkinson, which I am aware is high. The union official agreed that this was so. He said trade unionists would feel that they had heard this before, and nothing had come of it. Secondly, they had a shrewd suspicion that when this kind of proposal was suggested it really meant a criticism of the trade union movement. It would be their reaction that somebody was trying to criticise them. Many people who make these proposals couple them with a great deal of union criticism.

Last summer I wrote a letter to The Times under the heading "The crisis deepens, what can I do to help?" In response a large number of people came together. We held an interesting conference. Widely representative people spoke from all Party points of view, and at least one shop steward was present. Trade unions did not respond to the invitation, partly because the conference was organised hurriedly. But I hope that the noble Viscount, Lord Watkinson, would agree that any unity which did not carry a large measure of trade union support would be of small value.

I will quote a sentence from Mr. Healey's Budget speech, which makes the point made by the noble Earl, Lord Limerick. Mr. Healey said: In 1974 we were spending 5 per cent. more as a nation than we were producing. This sentence crystallises what is the main point of our whole discussion. Until we rectify that position we shall be no better off; we shall be getting worse off. It can be argued that this matter can be put right by producing more, but, as the noble Lord, Lord Robbins has explained, even if we all work harder and help other people to work harder the situation will still remain serious. Collectively we in this country, in all walks of society, are doing ourselves too well. Mr. Healey pointed out that the general rate of pay increases has been well above the increase in the cost of living, and much further still above the levels of countries which compete with us. In that sense the primary responsibility must be placed on wage increases. But wage earners do not pay themselves, and employers who, in many cases, compete for labour must take their share of the responsibility.

Mr. Murray, the General Secretary of the TUC, has explained that the was misreported in an Observer interview. He was quoted as saying: How do you connect the national economic position with the heartfelt need of a group of workers? In other words, how do you convince a particular trade union and its members that excessive demands in the long run damage them rather than help them? That is the problem, and I am not sure there has been much light thrown on that this afternoon. This is where I feel we should take a candid look at the values involved when we are asking workers to restrain from exploiting what appears to them at least to be a favourable situation.

Though it is relevant I will not deal with the steep demands being made by many professional men, such as doctors. We also read that the Concorde pilots want an increase of 100 per cent., from £14,000 to £28,000. So I think we can say that this position is widespread throughout the professional as well as the working classes. But I ask bluntly how we can pass amoral judgment on trade union attempts to make hay while the sun seems to be shining, while at the same time paying chairman of large businesses anything from £35,000 to £60,000 or more a year?

I read in the Daily Telegraph a day or two ago that the highest paid British oil executives receive more than £70,000. We either think that this sum is appropriate in this situation, or that it is too much. The Daily Telegraph will not be suspected of being opposed to large business.

A Noble Lord

Were these figures gross or net?

The Earl of LONGFORD

Gross. The argument of the workers who confront me is that their figures are gross, too. We pay the chairman of a nationalised industry £20,000 a year, and the Chairman of the British Steel Corporation a good deal more. We pay top civil servants nowadays the same kind of salary. When I was Minister for Civil Aviation in 1950, a quarter of a century ago, my Permanent Secretary received £3,500 a year. I received £5,000. Today a Minister would get less than a Permanent Secretary That is what they got in 1950. An ordinary Permanent Secretary today receives £19,000 a year. Therefore, we must not talk as though the working class are the only people who have looked after themselves. The cost-of-living figure, which I have verified through one of the Ministries, had admittedly increased by 278 per cent. That is to say, life is nearly four times as expensive as it was in 1950. But the top civil servants receive 5½ times as much as in 1950. So they have come out of it quite well, without being abused by anybody. I am not suggesting that the top civil servants, for whom I have the highest regard, and many of whom sit in this House and play an active part, have been more greedy than others, but we expect from them the highest standards of self-restraint in the public interest.

I am not saying that any one section of the community is behaving more or less selfishly than any other. To quote the words of the song, "Everyone's doing it, doing it, doing it", and if we go on "doing it", between us we shall destroy the nation. That is my message, which is similar to what many speakers have said. But most of the time this afternoon has been spent in assuming that it is the wage earners who are primarily responsible for our economic plight. I am aware that the Royal Commission on the Distribution of Wealth is now sitting under the noble Lord, Lord Diamond, and that their findings are bound to be of the highest relevance, but meanwhile we can at least stop ourselves from going from bad to worse. I was horrified to read in that same Daily Telegraph article on Monday of the Government paying more than £60,000 a year for a chief executive to run the new National Oil Corporation. Indeed another, high-class paper said he might get £80,000. I cannot imagine anyone who calls himself a Socialist at any time agreeing to figures of that kind and I cannot imagine anyone who calls himself, as we all do here, a patriotic British citizen, regarding them as in any way suitable in these days.

What I am suggesting is something that goes deeper than statistics, although statistics illustrate the situation. I am suggestion something that goes closer to the heart of our national morality. On an earlier occasion here not long ago I referred to the national greed, which the last Archbishop of Canterbury and the present Archbishop of Canterbury picked out as a distinguishing characteristic at the present time. I argued then that the organised workers, now that they have the chance, are doing only what their social betters have always done; that is, acting according to the theory that economic man best serves the community by fulfilling his own interests. I said then that economic man was and is a greedy man and I cannot help but repeat that phrase. What this country needs is to break through the vicious circle, this evil train of collective selfishness which has come to be accepted—not, I believe, irrevocably—as the natural way of life at all levels of society. Ask anybody whether he or she has had too much, and in almost every case he or she will say, "Not as much as somebody else". That is true, whatever walk of society they move in. This idea of getting all one can for one's members, again in all walks of society, has come to seem a positive duty by those who are employed to look after collective interests.

But where does all this bring us? I suggest that it brings us to the conclusion—and this is drawing near to what the noble Lord, Lord Balfour of Inchrye, said and, in another way, to what was said by the noble Lord, Lord Walston—that if the leading men on all sides of public life are to make any impact on the minds of the rank and file, of the trade unions, they themselves must recognise the need for more austere standards of consumption and be prepared to set an example. Some years ago, when I was Leader of this House, I was planning to give a party here for quite a number of colleagues—some of those present today may even have attended it—and not long before the party we were in one or our periodic crises. It was the summer of 1966 and I asked a distinguished colleague whether he thought that this party which, after all, was not a necessity—it was a pleasant amenity, shall we say?—should be postponed or even cancelled. He looked quite horrified and said, "Things haven't got as bad as that", and I am afraid that I took the easy way out and accepted his guidance and went on with the party. In a sense it is that attitude which still persists and which I am still complaining of today, and the situation now is, of course, much more serious than it was in 1966.

What we need may be an example of sacrifice in the sense of giving up income or, at least, reducing consumption, or it may involve increased effort, or possibly both. No doubt the one voice that would be listened to beyond all others would be that which came from above politics, but it would be wrong to involve the Throne in any appeal or gesture unless the politicians were in basic agreement first.

Personally, I should like to see the present Cabinet do what Sir Winston Churchill's Cabinet did in 1951 and cut their salaries by, perhaps, 10 per cent. Sir Winston Churchill's Cabinet cut their salaries by 20 per cent., but, at any rate, 10 per cent. would make a very good start. The Cabinet of 1968—I served up to the beginning of 1968—very nearly did so. Without making too many disclosures—although these days people are a good deal more frank than they used to be—I can say that if I had not resigned just before the vote was taken and I had been in a position to cast my vote, I am fairly confident that this cut would have been made. So it is not something that can be regarded as quite absurd, though whenever this kind of thing is suggested someone will always say, "That's just a gimmick". Indeed, any personal example is described as a gimmick. However, that is what I recommend. The noble Lord, Lord Walston, suggested that all those getting more than £10,000 a year should cut their salaries by 10 per cent. I am not ruling out such a possibility, but I think that that would need a lot of preparation and if the Cabinet got off the mark first, that would give a very good lead.

Human nature will not be altered overnight, but somehow we must break this evil chain of habit under which every group asks for everything it hopes to get, and, indeed, a bit more on the theory that it will not get all it asks for. Rather timidly, the Government are beginning to try to involve the ordinary citizen in personal endeavours such as producing more food at home, taking part in the War on Waste or saving fuel. Many proposals of this kind were made at a conference over which I presided last year. But if we really believe, as we surely must, and as all noble Lords who have spoken today seem to believe, that we as a nation are living beyond our means, then, until we are clearly producing more, we must consume less. Taxation, of course, has an indispensable part to play, but taxation will fail unless the nation is, broadly speaking, on the same side.

I am assuming, though I will not go further into this today, that for the moment Party politics, the Party struggle, continues. I am assuming that the Opposition will inevitably use strong endeavours and will make legitimate efforts to discredit and, indeed, overthrow the Government. Unless we have a Coalition, this is part of the democratic process. However, I believe that agreement could be reached that for the moment at least conventional standards of consumption should be moderated. In the last resort the Government of the day possess the prime responsibility for precept and example, but the Opposition Parties and the men and women of influence outside the Party business can make a great difference to the success or failure of such a call for sacrifice and for a fresh endeavour among all the citizens of the country.

7.38 p.m.

Lord ORR-EWING

My Lords, it is an honour to speak following the noble Earl Lord Longford, and I shall come later with humility to deal with some of the points he adduced. We do well to remind ourselves at this stage in the debate that we are discussing a united approach to the nation's economic and industrial problems, and we owe a debt of gratitude at this serious moment in the nation's economic position to the noble Viscount, Lord Watkinson, for having initiated this debate, which has had widespread support and attendance almost throughout.

I did not altogether agree with everything the noble Lord, Lord Beswick, said in his opening speech, though I thought he did exceptionally well, bearing in mind the Motion, actually to avoid using the word "inflation" once throughout the whole of his speech. I am sure that this was an oversight, but the psychologists might have had quite a field day working out how it happened. I feel that I shall make up where he lacked, because I am certainly going to talk about inflation and the impact that that has on our investment programme, on the wellbeing of industry and on its competitive position. Nor did I quite agree with him when he said that it could be argued that public ownership was a "unifying influence." I do not take that view, more particularly because the Government were elected on only 28 per cent. of the electorate's vote, which is a small minority to go right ahead with a full-scale programme from a Manifesto which was so ill supported in the country as a whole. But that is a viewpoint and I hope that perhaps we can come together across the Floor of the House in order to unite on those things which are essential to the wellbeing of our country and perhaps disregard those things which, in this context, are irrelevant.

It has been said many times, but I still repeat it: inflation at this rate literally rots the social fabric of our nation. This is beginning to happen. One sees responsible people who should not stoop, and who, in the old days, would never have stooped, to these tactics, striking, sitting in or demanding wage increases which are totally unrealistic and which I suggest can only further add to our problems. Not only is inflation rotting the social fabric but it is shrinking our export order books. The longer the period of gestation for an export order—that is, the longer the period from the moment the order is obtained to the moment when the goods are delivered overseas—the greater the inflation factor which has to be built into the quoted price.

I should like to draw your Lordships' attention to the sort of thing which is happening. Supposing one has a request to tender for a naval ship for South America. At the present rate of inflation of 20 per cent.—provided it does not go higher than that—one would have to build into one's prices for the normal three-year period between order and delivery a 73 per cent. inflationary factor. One would be competing with the Germans and other nations. Germany is building into its fixed price quotations not 20 per cent. a year but 6 per cent.—one-third of what we have to build in. This is a recipe for the total destruction, not perhaps of orders which have a short time scale, such as motor cars, for which the period between order and delivery is a matter of months, but for such things as factories to be equipped and built overseas, large engineering projects in which this country has so much expertise and prowess, and power stations—possibly, in the future, nuclear power stations, which have a period of gestation as long as 7, 9 or even 10 years. We cannot win competitive orders with an inflation rate of this nature. Therefore we must do something about it.

There is only one inevitable consequence if we go on at this rate: our overseas orders will shrink; our ability to pay for our raw materials and our food will go down in proportion and we shall have massive unemployment. The Chancellor has said that and it is nothing new, but I want to come at it from a different viewpoint. I utterly reject the idea that unemployment will somehow solve our problems. That is a monetarist view. I believe it to be totally unrealistic in this day and age. It will lead to the spinning-out of work, to the increase of overheads, to the total reduction of the profit margin, to increased costs, to strikes, disputes, sit-ins and marches. It will lead to every single thing but the productivity which is so essential to our nation if we are to survive.

Therefore, I echo the words which have been said from all parts of the House this afternoon and evening and on previous occasions. I do not believe that the problem of inflation and the results that it will have can possibly be tackled except on an all-Party basis. Today it was suggested—and I hope that we may hear something from the Government about this—that after 15 months of trial—and we all agreed, I believe, that they should be given a fair trial—it was now time to broaden the base of the Social Contract. Some of my friends in an engineering company with which I am concerned were negotiating a 30 per cent. pay claim. That has become the norm now, as noble Lords will know, though it was the exception in February 1974. When they said, "Look, it is only six months since you had your last award, and 30 per cent. is also outside the Social Contract," they were told that that was bloods, impertinence and that the Social Contract had nothing to do with them at all, for it was only a contract between the Labour Party and the trade unions. They were informed that it was absolutely wrong for a management to try to interfere. If that is the feeling at the cutting edge, at the perimeter, at the place where the work is done and the wealth is created, surely it is time to broaden the Social Contract. It has been discussed this afternoon, and surely it is time for talks with the CBI and other people too to try to get new guide lines and a broader base to the whole foundation of this concept.

I too want to take up the question of investment in industry. The noble Lord who opened the debate referred to Mr. Wedgwood Benn, who has said in a very divisive way—one cannot pretend that he is trying to unite the country by his policies—that British industry, because it is not investing, is "failing the nation". He must know that that is political poppycock. Every person in the country must know that if a firm had the resources it would be delighted to invest in new materials, machines and methods. Of course it would. I have worked all my life in either the electronic or the light engineering industries, from a graduate apprentice onwards, and I know just how much everyone craves a modern machine. It is easier to set, more accurate, quicker to cut metal, nicer to work with. It is better from every aspect, but one must have the right conditions in which to order it.

There was an excellent article in the Sunday Telegraph this week by Leith McGrandle. The author was quoting Mr. Wedgwood Benn again when he talked of: a long period of decline in investment which … explains many of our other problems of inflation, of unemployment, our poor balance of payments performance. I ask your Lordships to look at the facts. Our fixed gross domestic product capital expenditure since 1951 has gone up percentagewise from 14.9 to 21.8 per cent. in 1972. Let us look at the manufacturing investment, because that is the "fall guy". The criticism is that the wealth created in industry has not been invested. I now quote OECD figures for Europe, which are shown as a percentage of the gross domestic product. Top of the league is the Netherlands with 8.4 per cent.; second is France with 6.9 per cent.; third is Italy with 6.4 per cent.; fourth is Belgium with 5.5 per cent.; fifth is West Germany with 4.9 per cent. and sixth in the United Kingdom with 3.8 per cent. Yes, my Lords, we are not as good as they are, but, if one looks at OECD's figure for the USA, it is 3.1 per cent. So there is another factor which comes into these figures; that is, that the older and more mature nations are able to invest less than those which suffered destruction in the war and which are more dynamic at present.

I should add that for our figure, the average over 12 years is 3.8 per cent. of our investment. There are some very wide variations. Our engineering industry has been investing not 3.8 per cent. but 4.7 per cent.—a materially better performance and up with that of a lot of other countries. Our textile industry has a very good record, too, because we introduced a modernisation and rationalisation process in the early 1950s. I also see from a City firm's report which I only received this morning that, whereas last year in this country manufacturing investment was more or less stationary, it was already beginning to fall in Germany and Japan; it was down by 8 per cent. So though we may not have been great in the past, we have not been too bad and at the moment we are—or we were last year—investing as much and holding the position which we had percentagewise.

My Lords, there are other factors—it is not just a question of shortage of cash—which perhaps Mr. Wedgwood Bean and the Government should be looking at and analysing generally. The United Kingdom takes away from industry more of its profits than any of its competitors. We leave less money to invest in the hands of our corporations. In percentage of our gross national product, we take away in corporation tax 3.2 per cent. In France it is 2.5 per cent. In Italy, it is 1.7 per cent. In West Germany it is 1.5 per cent., which is half what we take away. So some of our keenest competitors in Western Europe are taxing their industries much less than we are. Incidentally, those figures come from a Government paper, Economic Trends for October 1974, so I am quoting Government sources.

Secondly, is it not also a factor that we tax our supervisors, our foremen, our executives and our junior and senior managers far more highly, and that we take a much bigger percentage of their salaries than does any other nation in the world? That is my answer to the noble Earl, Lord Longford. We must not look only at gross figures. No other nation takes 83 per cent. of pounds above £20,000 a year. It is all very well saying that the manager of a nationalised industry, or the head of a business, is paid £20,000, but on his last pounds he is taxed at 83 per cent. and keeps only 17 per cent. Of course at a lower level more is left. But I am sure that this point has a bearing on the productivity and on the concentration and the dedication of our management. That is a fact, I am afraid. Perhaps we wish it were not so.

Thirdly, what about our labour utilisation? Is it not true—as everyone has said, in all parts of both Houses—that we suffer from a degree of overmanning in this country which must be brought under control? The noble Lord, Lord Briginshaw, spoke earlier. But I do not think that he mentioned the question of overmanning in the printing industry. I should have liked to have heard him on that subject; it would have been most helpful. A few years ago the Daily Mirror made an examination of the steel industry, a capital intensive industry. That examination found that to produce a given amount of steel needed three men in this country, two in West Germany, and one in the United States of America. Is not this one of the factors which is contributing to the lack of investment in our country? If, after a period of examination and investment, we have the money to buy new tools, are we sure that they will be invested on a lower manning basis, or will some unions demand the whole benefits, even if they agree to work those particular machines?

Lastly, under this heading, has any other industrial nation which is in competition with us got the size of Government overheads which productive industry has to carry in this country in the form of social services, in subsidies, and in administration? We have the biggest overheads, as was said earlier by the noble Earl, Lord Limerick. It was calculated that 56 per cent. of our gross national product is taken by the Government and public services. I saw more recently that it has risen to 60 per cent. That is an enormous burden to impose. Are we therefore surprised that people overseas do not look to this country to make their investments? If they are not to put investment here how will we remain competitive, unless some action is taken?

Before I summarise my points, I should like to say that there is one place where I should like to see the Government taking action; that is to help in redundancy. We are going to have it in industry; it is coming about now. We want to make this as painless as conceivably possible. It is many years now since we initiated the Industrial Training Act. Ought we not to be expanding this? There is certainly manpower available. Ought we not to be preparing the way for retraining people? It is no longer possible to say to a man: "You may stay in the same town at the same job throughout your career." We have to move, and we must make that move as humanly easy as possible not just for a man but for his family as well, taking into account schools, houses, and everything else which goes with that man.

As we in this House get older we become more arthritic. I cannot help wondering whether Britain is now suffering not only from industrial anarchy in certain areas—which is very disturbing—but also from industrial arthritis. In the sense of the Motion, let us broaden the base of our Social Contract, let us grasp the opportunities that have been offered today, because it is desperately urgent that we have "a united approach" to the nation's industrial problems.

7.55 p.m.

Lord RAGLAN

My Lords, the noble Viscount, Lord Watkinson, has remained here throughout the debate, and I wish to congratulate him on his staying power and on his courtesy towards the other speakers in the debate which he initiated. As on the last occasion, he gave a thoughtful, concerned and, above all, unprovocative speech. On the occasion of the noble Viscount's last debate, I ventured to make a few remarks. One matter to which I drew attention was the difficulty caused to the economy by constant changes in Government policy. I wish to concentrate my remarks this evening on one aspect of this.

The Conservatives have been slating the Labour Government for shifts in policy, but in my view both Parties have been greatly at fault in this respect over the years. There are also highly influential sections of both our main political Parties which are doctrinally fiercely opposed to one another and which can be counted upon, when either Party succeeds to power, to try to overturn as much as possible of whatever the other side has done. I suppose that our sporting view of politics as being a series of fierce clashes encourages this.

But of very great significance—yet, in my view, greatly underrated—is the role in the economy of the Departments of the Civil Service. We have possibly the most loyal and most administratively efficient Civil Service in the world. The powers invested in a Minister—especially in a Secretary of State—under our Parliamentary system, combined with the efficiency of the Civil Service, can be a very great blessing. But the other side of the coin is that under uncertain direction, or under frequent changes of Government or of Ministers, this combination of Minister and Department can be devastating to the good working of the economy.

A change of Government, or of Minister, or of Government policy can mean havoc for carefully laid plans. It is said that a week is a long time in politics, but it is an exceedingly short time in setting up a production line, no matter whether the business is private or State owned. What may seem aeons of time, while some battle is being fought out among the factions or personalities in the corridors of power, or while plots are being hatched in the smoking rooms in the House of Commons, is no time at all to someone who is planning a new factory, or thinking of taking a new job or of moving house. I have spoken in agricultural debates on a number of occasions in your Lordships' House, and I have always pleaded for price stability for agricultural produce because, owing to certain conditions in the agricultural industry, the only way of ensuring an even flow of produce to the consumer is to have stable prices for producers, even though those prices are adjustable, in which case they must be predictably adjustable. We have come a long way down that road since 1945, but in my opinion we have not come far enough.

I mention agriculture, because food is so utterly vital to all of us that successive Governments have been forced to recognise that it requires long-term planning. But, all along, agriculture has been helped in this respect. Farmers can switch production—marginally, anyway—surprisingly quickly and produce embarrassing shortages and surpluses. But the image of farming—the plodding yokel, the long cycle of nature, and the long-term turnover—helps restrain Governments from interfering too often with bright ideas; and the concept of conditions of long-term stability is a comparatively easy one to get over to them. As my noble friend Lord Walston told your Lordships this afternoon, the result is a successful industry. The conditions in which it can thrive have been fairly widely recognised.

Nevertheless, it is difficult to plan for farming, even with this stability. In the past 18 months I have been discussing with advisers the best policy over the next 10 years for my farm, and we chose to produce what we hope is the commodity least likely to suffer from a change in Government policy. We have had a hiding on the beef; eggs do not pay; the corn market goes up and down like a yo-yo; and so we have gone for milk. This means a very large investment in proportion to the total value of the farm. It is quite a big risk; I hope that we pull it off. Otherwise, I shall not be able to continue coming to your Lordships' House because I shall have time only to cultivate my "veg" patch. But with regard to my private enterprise, I am having to plan 10 years ahead, and I am hoping for the best, which is that Government policy will not change, because I hope they cannot afford to risk not getting enough milk.

My Lords, I am also connected with a public enterprise, building a New Town—but that is another story. People do not eat houses, and there is just enough housing in the country to house everyone in some way; therefore, housing is exposed to the full blast of government by doctrine and by whim. It takes four years to plan and complete a new housing estate. If the land for it has to be acquired, that will take six years, or it will take eight years if it is a big scheme. That is the kind of timescale we work to yet it is time for several Governments to come and go. Indeed during the five years I have been with the New Town there have been three Government policies: first, the emphasis was on houses to rent; then, when the Conservatives came in it was on houses for sale, and now again it is upon houses to rent.

As for details of policy, over the last four months in our New Town alone we have had 49 assorted circulars from the Department of the Environment and the Welsh Office and 14 from our New Town association. This is, in addition, to having to digest the land Bill and the Finance Act, large chunks of which seem to be not understandable by many people. The sheer weight of work is colossal and is quite demoralising to the staff. I tremble to think how many circulars of all kinds local authorities have received during the same period. It is not that all the different ideas are senseless—though in my opinion some of them are—it is that there are more ways than one of solving the housing shortage and everybody has a pet theory of how to do it. As soon as he or she gets into power this theory is loyally and efficiently put into operation, the sum of all these people's conflicting collective efforts tends to be numbing and self-cancelling to the very purposes we all wish to achieve.

Apart from the major policy changes which I have mentioned, one gets the impression of constant tinkering or desire to tinker. It is as if the people in charge of this magnificent Government machinery cannot keep their hands off it and, tempted by the machines' very responsiveness, must keep making unsettling adjustments. The Department of the Environment is no different from all the other great Government Departments. So far as the economy generally is concerned, nowhere is this tinkering more in evidence than in taxation policy—if it can be called a policy. I have been told that since 1945 there have been 147 major changes in company taxation. I do not know by what criteria changes are called "major", but I am also informed that, judged by the same criteria, in West Germany there have been about one-third of this number. We now have the prospect of two or perhaps more Budgets a year, with almost every edict being issued without prior consultation with people who are to be affected. It seems to me that none of the edicts is inspired with even a hint of the necessary philosophy that we must try for political and economic stability, if we are to grope our way out of our difficulties.

We used to laugh at the French for their frequent changes of Government, and observed that it was their civil service which kept things going. It seems to me that we now have a worse system in this country than ever they had, because we can look forward—if that is the right phrase—not only to changes of policy with changes of Government but to reversals of policy within the short life of those Governments. We can look forward with certainty to the fearful and inevitable prospect of these changes being put into effect quickly by a dutiful and competent Civil Service and accepted by an acquiescent and law-abiding people who have no idea what to make of it all.

Frequently in this House—though perhaps not frequently enough—we have heard extolled the virtues of good management. My noble friend Lord Walston referred to it this afternoon. Industry knows that good management is important. The quality of management, in fact, means not only the difference between profit and loss but between existence and non-existence. The crisis at British Leyland is said to be—as I believe and the noble Lord, Lord Stokes, has confirmed—a crisis of management. The financial pages of our newspapers are full of details and pictures of personalities leaving here or taking over there, and speculation as to the difference this might make to the prospects of firms. It is management that counts, and on such criteria one is forced to the conclusion that we are under poor management, and have been most of the time since the War. If this country were a firm which had suffered the same frequency of changes of policies over the years, it would have been "bust" long ago.

I am suggesting that one important part of this has gone wrong. I have given one illustration from my own experience of how with agriculture successive Governments have been forced by circumstances—if helped on their way by traditional sentiment—to create a stable agricultural industry. I have given another illustration of how with housing, when no such discipline is applied, the Department under a succession of Ministers has not made a very good fist of formulating policy. This is partly because their time-scale and the housing timescale relate to different worlds; partly because the discretion left open to Ministers is so wide, and partly because the temptation to interfere continually is so strong.

I do not know what the solution is—I am merely putting forward these observations for your Lordships' consideration. They are not only my views; increasingly I find them among many people with whom I talk. Better democratic checks do not seem to be possible. Under our system, the Government control Parliament and, anyway, Members of Parliament cannot be expected to keep in touch with one-tenth of what goes on. The Government are unlikely to reduce their own powers nor will those who have hope of Office. This is an almost paradoxical situation in which the very efficiency, zeal and integrity of our Departmental institutions invites action by people who do not know what they are doing just as easily as by people who do. It leaves us wide open to the mercies of any and every political wind and whim. Before I sit down, I should like to make clear that I am not calling for a Coalition, nor do I fear that a dictatorship is upon us. I am calling your Lordships' attention to a practical political problem which I am sure we have to solve in the interests of our economic stability.

8.10 p.m.

Lord GORE-BOOTH

My Lords, I will not follow the noble Lord's interesting remarks, which do in a way affect me as an ex-civil servant. I will just say to him that he brings out a very important fact which perhaps has not been brought out sufficiently. In addition to the burden the taxation places on industry, it also imposes an appalling staff burden for precisely the reasons which the noble Lord has described. Each time Parliament votes, and civil servants administer, new and complicated taxes, an inordinate amount of man-hours has to be absorbed first in understanding what has been decided and, secondly, if necessary, in revising major parts of financial policy in order to suffer the least damage.

I hope your Lordships have already realised—and I hope that the outside world will realise tomorrow morning, if not tonight—that your Lordships have done a historic thing. The debate, as it has proceeded, has brought from more and more people of authority—and I cite the tremendous speeches by the noble Lord, Lord Robbins, and by the noble Viscount, Lord Amory—a conviction that our present situation (and our future situation) cannot be solved by one Party. Perhaps as the debate goes on, one follows it and one does not realise what has happened. What has happened is that this is the considered opinion of well-informed and highly responsible Members of your Lordships' House. It is extremely interesting that this view has come out now, nearly a year and a half after the historic speech by Lord Diamond which was received with some doubt, even hostility. But he arrived at that conclusion then, and it looks prophetic now.

If this is true, if that is the growing opinion in this House, it has another important political consequence. The initiative of the noble Viscount, Lord Watkinson, and these expressions of opinion do, more and more, represent the view of millions and millions—and I am not exaggerating—of people in this country. I do not wish to be rude as a non-politician to political people, but there is a real weariness at this moment with Tweedledum and Tweedledee politics. This is not entirely fair on the politicians because the media love it. If only the media could be weaned away for a moment or two from the personality cult and the admiration of political eccentricity, perhaps there would be a greater rapprochement between Parliament and people on this basic question which we have been discussing.

There is another piece of non-communication which I find baffling but which I commend to our political leaders for thought. It is that I believe inflation has become a sort of worn-out word. One noble Lord raised this point. A great many people regard it as you might regard influenza. It is a sort of thing that effects me a little, or not at all, and what does it mean anyway? I do not know whether somebody better versed in public relations than I can make this more alive. I am sure that many of our fellow citizens do not realise the desperate urgency of our situation as described by the noble Lord, Lord Robbins.

I should like for a moment to dwell on one or two other things which have been falsely said to lead to our present state of morale and financial difficulty, because I think that sometimes they affect our thinking, and they ought to be firmly put in their place. The first is that some people blame it all on financial policies between 1945 and early 1960, or even up to 1970. On that I would take one example. It is pretty striking, if you remember, that in the late 1950s not only were we paying the interest on our large foreign debt because we had to, but actually there were years when we were repaying part of the capital. That seems a terrible long way away at the moment when thinking of the £9,000 million that this debt will now amount to.

There is another, and very serious, infectious doctrine which works on a lot of people who, with a little thought and vitality, would think differently. This is what I would call the defeatist theory of the British economy. Its great and charming protagonist is Professor Neild of Cambridge University, who wrote to The Times on 23rd April: Since the mid-1950s it has become manifest that British industry has become progressively less able to stand up to competition from the industries of other countries. The insidious thing about that is the phrase "less able". I find that an infuriating reflection on our industry. I am certain that it is not less able. I said so when the first renegotiation White Paper was produced, and suggested that because we were not going to grow as fast as other countries we should pay less of the budget. This suggestion, propounded by people of great intelligence, that we are no longer in the same league of capability as the French and the Germans and, by extrapolation, the Dutch and the Italians, and this outlook on our economic capability and prospects, has spread wider than one might think by one letter in The Times. I was glad to see that there was a sharp response by various reputable economists and I hope that the noble Viscount, Lord Watkinson, will give Professor Neild a good "Schwepping".

My Lords, if I may come to more modern instances of how we have gone wrong, I must take up what others have said about what has happened since 1970. It would be unfair to Mr. Roy Jenkins and his remarkable performance as Chancellor in 1968–69 to go back further than that. What I think also accentuated this feeling of Tweedledum and Tweedledee being politically undesirable is the fact—and the noble Lord, Lord Raglan, nearly started down that road—that Governments from 1970 onwards seem to have taken a kind of vicious delight in the abolition of each other's institutions. The Conservative Party came into Office in 1970 and abolished the British National Export Council, replacing it with something which has not yet materialised to the public. They abolished the Consumer Council. Then the Labour Party came back and abolished the Pay Board. There seems to have been a competition in abolition. The public are bewildered by this and feel that something has happened to politics which ought not to happen.

Also there are two main political developments which I think it is right to allude to here. One is the threshold, and the other is the Social Contract. The noble Lord, Lord Hoy, was right to say that the threshold came into being during a Conservative Government. I remember distinctly having a bump in the pit of my stomach when it was introduced; but to me, an amateur economist, it seems clear that if you have a threshold which corresponds to the rise in the cost of living you get the same inflation at a higher level with a very slight diminution through taxation, but not otherwise.

The problem that has now arisen—and I do not think anybody has yet gone into that in detail; but perhaps I may describe it—is a situation in which people working in industry X think they have the right to more than people in industry Y. The people in industry Y catch up and the people in industry X then say they must have more; and I see no end to that self-generating adjustment unless and until all significant Parties, all recognised leaders in this country, blow a whistle and cry "Halt". I do not see how a leader of any one persuasion can bring that about.

On the Social Contract I should like to say that it seems to me to have had one enduring value. I put it slightly into the past for obvious reasons. It has been the first instance where the trade union movement has said, explicitly, that it has obligations towards somebody other than its members. It may be a limited obligation, but it is an obligation and it is quite a new step in trade union philosophy. Perhaps in future history it may prove of value.

Coming to the present, just as we came into this period—perhaps I could go to December 1973—of great difficulty, as an immediate reaction to the 1973 Arab-Israeli War and the quintuplication of the price of oil, there was a moment in December 1973 when the people of this country would have done almost anything. It was a great anti-climax and very sad that they were not asked to do anything. If they had accustomed themselves in what seemed to be a very deep moment to do anything they were asked, to ration petrol, to eat less, or be taxed slightly more, at the psychological moment it would have been all right. But they were not asked to do it and the moment passed.

I come back now to the more economic side of the debate. The moment also passed when we might have given birth to an energy policy, and we said so frequently from these Benches, but neither Government produced such a policy. Those failures to do things have also contributed to our present lack of national comprehension and vitality. We now have the present Government—and here I owe the point to the noble Lord, Lord Rochester, but I think it is worth repeating—the Government would find it hard to deny that they are concentrating far too much on who earns what bit of the lesser national cake, instead of turning all their energy, as they must do at this moment, to making the cake bigger. I hope the Government will take this seriously, because the process of concentrating so much on redistribution, whether of wealth or power, wastes time and prevents us from getting on with the important job of recuperating our economic fortunes.

There is one particular difficulty about the united approach to our problems which makes the challenge greater, just as acceptable, but even more daunting. The noble Lord, Lord Robbins, said it was, in effect, embarrassing to be a bore on a particular subject in your Lordships House. But I am now going to be one. This operation has to be carried out in a country where we have to admit that there is a small minority, but a dedicated and powerful minority, who do not wish it to succeed. They wish a different form of politics, a different form of economy, of policy and an economy which I imagine nobody in this House accepts. Therefore, the middle, to whom I have referred before, have to be aware of this. They must not be pedantic about it. They must decide that we are not defending capitalism, we are not denying social democracy or socialism; we are trying to find, at a time when the people of our country want it, a middle road which will preserve our democratic institutions and restore our economic fortunes.

As to what we should do now, I must confess myself ready for anything. I find some appeal in the suggestion of the noble Lord, Lord Walston, of a degree of austerity in personal earnings. Economically, it will make little difference; it might create a little unemployment as well as saving a little money, but for its symbolic value it would probably help. But never mind the details at the moment; they will have to be worked out. We must see our urgent task as being to restore our fortunes by as unified an endeavour as we can get. Once again, may I say how grateful we are to the noble Viscount, Lord Watkinson, for giving us the chance to discuss this subject in such depth and with so much real anxiety for our beloved country's future.

8.25 p.m.

Lord SELSDON

My Lords, as is usual in your Lordships' House on subjects of this sort, we have heard many sensible, reasonable and excellent speeches. I often feel, as an "outpatient" to your Lordships' "university", that I have learned much about why we went wrong. However, I am not sure how we are going to correct the situation. I have spoken in your Lordships' House earlier on the divisiveness in our society. I have referred before to the peculiar insect, the atropus pulsatorius—the death watch beetle—and I remember trying to persuade your Lordships that there are three factions involved with a division between all of them—Government, management and the shop floor. One realises that over the past nine months there has been further divisiveness and division, and one feels that the atropus pulsatorius is more like the cockroach, and something of a hermaphrodite, which is multiplying again and again. We see divisions within Government, fratricidal struggles within Parties, divisions among civil servants and within industry and management; divisions in the public sector and throughout every walk of life. Almost all of these are, as we have learned, caused by inflation.

We are one of the few nations in the world who have never experienced inflation to its full. We are one of the few nations who do not know at first-hand how destructive inflation can be. We see it start, first of all, with rising prices, something which causes everyone concern. Then it leads on to a feeling of doubt and insecurity. There is the usual demand and cry for leadership, the fear that one's own personal interests are not being looked after by Government. Instead of a feeling of unity, it leads to disunity, to criticisms, even to divisions within familities and households. It destroys societies, many older than our own.

I shall not make what one could call a reasonable, sensible contribution today, for I feel somewhat charged with emotion. For the first time in my life, I feel ashamed of my country and I feel saddened that I can see no way out. Yet we know that the United Kingdom will not sink into a polluted North Sea owned by others. We know there is a moment when the bottom is reached; we know, too, that, in some way of another, Governments can create that moment when we have bottomed and then people start to speak of bottoming out, and the candle referred to by the noble Lord, Lord Soper, the hope, starts to return.

I should not like to go back and try, as an amateur economist, to criticise the economic policies of either of the past two, three or four Administrations. But I should like to emphasise that I do not feel that any Government in the past 10 years has understood the problems of industrial and economic policy. I do not believe, either, that the respected people in the Treasury have fully understood the change which has taken place within the United Kingdom. Most of our earlier policies were based upon a confidence that the United Kingdom could survive on its own. Then people criticised and blamed foreigners for rising prices or the explosion in the price of commodities. Few people realised the effect the outside world had on this country.

We spoke of the falling or the loss of an Empire. We spoke of our collective responsibility for other countries. Then about a year ago, we realised to the full exactly how weak we had become. Now, for the first time, we are seeing what can come about. All the so-called speculators or, as many would describe them, the rats leaving a sinking ship, are off. People are worried about whether they can survive. Inflation is the quickest way of all to a slow death, and with it comes the political problems. In the past two years, I have visited Western Europe and other parts of the world, and I tend to look on my country from outside. I spend many hours arguing with foreigners that the United Kingdom is not finished, that there is a certain strength of purpose which just has to be motivated by somebody or by some action. We see on the Continent the age-old fear that, if you can destroy the British society and the British democratic system, you have Europe at your feet. The Germans are fearful lest Communism should take over here. These emotionally charged arguments are very serious and very real.

The one thing for which foreign nations have respected us is our political stability. I cannot speak of fighting in the streets or of political revolutions, but already the signs one has seen or read about in other countries are apparent. Maybe the history and stability of our society can stand all this, but without some getting together I feel there can be no real solution. And if there is, as we may expect, an upturn in world trade at some time, our competitive position, as my noble friend Lord Orr-Ewing and others have pointed out, will be very much eroded. It has got worse in the last three months, particularly as regards major contracts made in the Middle East or in the Third World. This question of keeping pace with inflation or quoting in inflationary terms has got home so hard now that in the last few weeks British companies have found when tendering for major projects abroad that they are 15 per cent. or 20 per cent. higher than the Swiss or the Germans, and they cannot hope to gamble on inflation falling.

What I feel could help more than anything is some indication put across to the nation to the effect that prices will not necessarily continue to rise at the same rate as they have been rising. You cannot do that in a very short time. The need for austerity is there. Perhaps I might remind your Lordships of the old doctor's saying: "Feed a cold and starve a fever". We had a period of stagnation when the Conservative Government fed the cold rather too much. This lead to a fever, and perhaps the present Government have not starved that fever enough.

The question is not one of increased taxation. I believe it was Bacon who said: Neither will it be that a nation or people overlaid with taxation will ever be valiant and martial. But we have taxation in several forms; and the private individual, because he is becoming used to high taxation, would not expect cuts in personal taxation in a period of austerity. But those on fixed incomes, those who have retired, those who have saved and have done all the things which have made this nation great, are now the weak and under-privileged. They are counting how many years they can afford to live in their house, and wondering whether perhaps they should take out some early insurance policy in the hope that, should they die of despair, their wives would be protected. It is these people who are feeling the pinch; and below them come those who are called by that emotional term "the middle classes".

The middle classes are gradually being wiped out. They are starting to speak; they are starting first of all in the public sector, whether in the universities, the Civil Service or elsewhere. They recognise as a group that they must do something to protect their standard of living. They are, in general, responsible people who do not wish to give up that responsibility. But fear gets into them; they start to talk and they start to worry. They suddenly realise that the nation as a whole is not being austere, and because they did not know the words "wage inflation", for many people it is hard to believe that increased wages in one sector of society can feed inflation to an extent that can destroy our society. They start to worry about this. And at the lower level, where people's wages, because of wage demands, are being inflated and their net take-home pay is rising so that it is more than keeping pace with inflation, comes the added danger of the feeling that inflation is good—because people like to feel that they are earning more and more each year.

It is very difficult to think in real terms and there are people now who feel proud that they borrowed hard and bought white goods, washing machines and other things two years ago. They say, "That refrigerator there is worth three times what it was when I bought it." This feeling leads to a further lack of security in management and industry. They ask: "How can people be so stupid as not to realise that by asking for more money in order to protect themselves from the rising prices they feel will come, they are only furthering the ends of those who wish to further inflation and to encourage it." I have this thrust at me all the time when I am abroad. I struggle as hard as I can in my job to bring investment into this country. As I have previously mentioned to your Lordships, we have been fortunate at times in that investment has come in, but those who have invested are always criticising me for having advised them that the United Kingdom could not collapse, or fall apart or that all could not be destroyed.

My Lords, I do not call for a Coalition Government or a Government of national unity; but we have more disunity than at the time of the Election and we have more disunity than we had at the time of the formation of the Social Contract. What is worse, we have now an element which did not exist then—an element of fear, which can lead to panic. That panic, as we know, could destroy our society. Therefore I should like to ask the noble Lord, Lord Beswick, whether, in the short term, the Government might recognise, as other noble Lords have suggested, that some of the policies which they, with their beliefs, believe should be pursued, should perhaps not be pursued at the current time when we can afford so little.

One would like to see cuts made in the public sector. There are many points one could put forward. One would like to put forward some form of co-ordinated plan, but the key lies in explaining this to the nation. We have, I submit, reached a stage where the Government may soon be unable to govern. The Government have already lost the ability to control expenditure in this country. I feel that unless something is done on the lines suggested by the noble Viscount, Lord Watkinson, that is, taking a date after the referendum as a date for a rebirth and a new beginning, the country I was brought up to be proud of, and indeed am proud of, may be one that I shall continue to feel ashamed of for the rest my life.

8.37 p.m.

Baroness SEEAR

My Lords, I should like to apologise to the noble Viscount, Lord Watkinson, that unfortunately because of a previous engagement I was unable to hear what I believe to have been a most inspiring opening speech. I should also like, from these Benches, to congratulate a new friend and colleague, the noble Lord, Lord Hampton, on a very impressive maiden speech. The hour is late and the debate has been long and so I shall not detain your Lordships for a long time. I shall resist the temptation to examine the more long-term issues, because, in fact, this debate is not really about long-term issues but about what we can do here and now, in a situation of galloping uncertainty and galloping inflation. Like many other speakers, I do not believe that at the present time the answer is a Coalition or a Government of national unity. I believe that in the long run—and this is all I shall say about the long run—this may come; but it will come on the other side of a change in the electoral system and it will come as a natural consequence of that. Political change being what it is and, in particular, constitutional change being what it is, I fear that it will come far too late to deal with the problems we have been discussing tonight. But it is relevant to these problems because of the point made by the noble Lord, Lord Raglan, and it is one I should like to underline very strongly.

It is the fact that the time scale of the politician and that of the manufacturer are totally out of phase. This is not the fault of the manufacturer, of the economic system or of politics: it just is that they are different. It is this fact which has led to so much uncertainty, as the noble Lord, Lard Raglan, said. One hears on all sides, in discussing this matter with people, that they would put up with almost any system of Government control and requirement if there was certainty and stability and they knew where they were. They would accept all manner of what, perhaps, 10 years ago they would have regarded as absurdly doctrinaire requirements, provided they could say, "All right, we accept this: we know that this is how it is going to be for a certain period. It is not going to change." But because of the difficulty of phasing, they are constantly being asked to alter what they do, and it is this that leads to frustration and to a very great sense of loss, uncertainty and economic ineffectiveness. That is one reason for it. This, of course, would be lessened to a very considerable extent if you could have the longer-range plans that Coalition Government, based on proportional representation and following naturally from it, would indeed give you. But that is in the longer run, and it is not the long run that we are talking about tonight.

I will not take your Lordships' time—and it would be very daring of me—to enter into an economic analysis of the present situation. I listened, as we all did, with the greatest interest, and inevitably the greatest anxiety, to the speech of the noble Lord, Lord Robbins, my deeply respected colleague and mentor, and to the warning he gave in clear language with which none of us would quarrel. We would not quarrel with either the way he presented it or the conclusions he put before us. It is on the assumption that, broadly speaking, the House accepts that analysis that I want to turn from a discussion of the basic economic problems and longer-term considerations to what we can do in the here and now. It was the message of Lord Robbins and the message of many speeches here tonight that the sands are running out; that the situation is rapidly becoming worse; that the economic statistics as we read them week by week are statistics of chaos. While there is still in many parts of the country superficially—I believe it to be superficially—a feeling that all is well, money is coming in and, "Why should we worry?" I believe there is also not far from the surface a fear and anxiety which many speakers have mentioned tonight.

What are we going to do in the next—not months, my Lords, but weeks, the minute the 5th June has passed? What are we going to do now to halt this rush towards a totally unnecessary economic catastrophe? I underline the words "totally unnecessary". This is not a catastrophe which is being inflicted on us by our enemies or our competitors or our fates. It is a catastrophe we are inflicting upon ourselves and the control of it is indeed within our own hands. We have spoken in this House this evening about what Government should or should not do. What we have learnt over the last years, if we did not know it before—it surely is self-evident—is that in a democracy (this was the lesson we had to learn so painfully in the 1930s) one can do almost anything if one has the great body of public opinion behind one, but practically nothing without that main body of public opinion. This goes for all political Parties. The catastrophe we are facing is before us because we have failed to convince people in this country of what needs to be done.

If politicians have a task it is that of getting across what the situation is and mobilising public opinion behind what needs to be done. It is no use our talking to each other. We have been speaking quite amiably to each other as between the Opposition and the Government Benches this evening, but this helps us not one whit if public opinion as a whole does not shift. So our task is to ensure that public opinion is mobilised behind what we need to do. I am much reminded as I listen to this debate and as I read the newspapers week in and week out, of the situation in the 1930s which most Members of your Lordships' House, as I do myself, will remember well. The storms were gathering in Europe and Britain and the British public refused to see what those evil signs meant—until they were roused to a realisation of the real situation. Once they understood, there was nothing the people could be asked which they were not prepared to do. As I see it, our task is not to debate any longer the steps that ought to be taken in the short run, but to find common ground on which we can fight the common enemy which we have been identifying again and again from all Benches this evening and which we know full well exists.

Of course there are differences between us about the root causes of the situation in which we find ourselves, and of course there are doctrinal differences about long-term objectives. But I would argue that there is a body of solid agreement throughout this House—and I believe in all political Parties except for small, extremist fringes—that the problem of inflation must be cured; that unemployment must not be allowed to rise; that we cannot live "on tick" for ever; that we must increase our exports. These are the matters about which there is no disagreement. Surely in the short run, to meet the catastrophe which is coming upon us, it is possible to get this over to the people in this country, so that at last behind Government of any Party there is that basis of public support which at present we so totally lack. Some of us have been going around from one side or the other on the European Market campaigning circus. We have been speaking, on three-Party platforms, to crowded halls. It is possible for politicians to go out into the country and to put the facts plainly to people. If we can do it over Europe, why cannot we do it over inflation? Why cannot we agree a limited programme, so that politicians of all Parties who feel that they can subscribe to it will go out into the country and put it to the people?

There are four things we have to do. First, we have to put over the basic facts. There is not a great deal of difference as to what those basic facts are in the short run, and it is the short run we are speaking about. Secondly, we have to say what at least are the minimum things that must be done in order that we can steer away from disaster. Thirdly, we have to tell people what it is that they themselves can do. I have the strong impression that a great many people would like to be called upon to do something. A few moments ago the noble Lord, Lord Gore-Booth, said that there was a moment in 1973 when people would have responded to a challenge of that kind, and that moment passed. But that moment has not necessarily gone beyond recall. We can do it again now. I believe that if we went up and down the country in three-Party teams, if we could make them—and I believe we can—hold meetings of the kind we are having in connection with Europe, and put forward the facts and a short-term programme of what is needed, especially a programme which demanded action from individual people, things would begin to happen—the things we asked people to do. That is important, but what is much more important is that we should begin to get a swelling up of public opinion behind the kind of changes which are needed. And without that growing support of public opinion, based on understanding, no Government can do anything.

Certain things we can ask people to do can be suggested straight away. I think it was the noble Lord, Lord Walston, who suggested there should be cuts in pay. I am not sure that that is a sensible course to suggest at the present time. But what we might suggest is that there should be a special kind of saving to which people could voluntarily contribute—the details could be worked out—and which could be seen to be geared to some way of helping to get Britain out of the situation it is in now. We could be mobilising people to tackle problems of waste and extravagance in their own areas. A great many people are aware of this and would like to find a medium through which they can act against what they see happening and know to be wrong. A programme could be worked out to use people's desire—which it would not be difficult to kindle—to try to get us out of the disgraceful situation about which the noble Lord, Lord Selsdon, has been speaking, with other countries pointing at us and saying how feeble we are in failing to deal with rising prices and how inadequate we are in coping with our problems.

Another point which could be put across to people—and I do not believe it would be too difficult to bring this about—is that the attitude that people are entitled to and must be encouraged to hang on to their job must change. This is a very understandable attitude in the face of rising unemployment, and it is not an attitude lightly to be condemned. However, it is an insulting attitude that men and women should be encouraged to carry on doing jobs which do not really need to be done, rather than that they should be helped and encouraged into jobs which need to be done. I know that your Lordships' House will feel that this subject is rather like King Charles's head, because I am always talking about it. But I want to talk about it again tonight, because it would be a central feature of the kind of campaign which I should like to see getting under way in a few weeks' time. Instead of backing the idea that when there is surplus labour because of over-manning people should be encouraged to stay on, we should harness all our resources of training and manpower forecasting to use training as a counter-cyclical device and as a way of restructuring industry.

May I ask noble Lords on the Government Benches this question? It is over a year since the Manpower Services Commission was formed. This Commission was created to deal with exactly the kind of situation which is now upon us. It should be possible for that Commission to be able to say, area by area, where there is surplus manning and the kind of alternative employment that exists in an area, and then to use every resource it can muster to encourage people to move away from the jobs where they are not wanted and, with every encouragement in pay while they are being trained, go into jobs where they are needed. In this way we could use training both as an antidote to unemployment and, even more important, as a way of bringing about the restructuring in industry which we so badly need.

How much restructuring is going on? We know of the problems in the steel industry. What can the Manpower Services Commission tell us about alternative employment in those areas, and about training facilities to prepare people to come out of steel and go into jobs in the export market where they will be needed. There is no money that we can pay to people to retrain them which is too high a price to get them to move. This should be the centrepiece of the reconstruction that we want to take place.

When I was discussing the cost of retraining not so long ago with a trade unionist in Sweden, the reply he gave me was, "Yes, it is expensive, but it is the price which we pay to get our members' support for technological change." If we could get that support so that we do not hang on to the old ways, with all the excessive manpower that that requires, and make people willing to move in new directions, then there is indeed no price we can pay which is too high. Expensive new facilities do not need to be set up by the Training Services Agency. Up and down the country there are training departments which are manned and equipped and which are not busy at the moment because people are not taking on labour, but into which people who need retraining could be put at minimum cost. All we need to do is train—

Lord BESWICK

My Lords, will the noble Baroness explain what she means when she says that they can be put there? There are vacancies in every training centre I have asked about, but the people will not go. The money is offered and the incentives are there. What more can we do?

Baroness SEEAR

My Lords, obviously that is a good question. This is part of the campaign which we have to conduct. We must get people to understand the facts. They do not understand them at the present time; they do not know what we mean by over-manning; they do not know what we are trying to do through retraining. We must do this at the grass roots level and I believe that it could be done on a three-Party basis. I know that my Party would back this up to the hilt, and we must get it across to people. When one talks to individuals they say, again and again, "Yes, I see. I did not realise it was like that." We are not getting down to the grass roots level.

Of course, we have to counter decades of propaganda in the other direction, but it is not too difficult. Politicians in all Parties know that in the past it has paid to trust the good sense and honesty of people in this country. I am sure it is unnecessary to appeal to noble Lords on the other side of the House to have that same trust and get ourselves out of this quandary, and to bring about this change in attitude and back it with the various devices which I have been talking about, so that change will spring from the grass roots and bring about the recovery that we all seek.

8.57 p.m.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I hardly like to intervene between the genuine attempt to be constructive on the part of the noble Baroness, Lady Seear, and the rather sombre debate in this House—leavened by a most excellent and sincere maiden speech by the noble Lord, Lord Hampton. We have had almost universal agreement—in fact, the bell of the noble Lord, Lord Soper, has been ringing pretty continuously throughout this debate—on the immediacy of the danger of inflation, but we seem unable to communicate this fear, which is so widespread among us, to the mass of the people of the country. We have had very impressive contributions from the noble Lord. Lord Robbins, and the noble Viscount, Lord Amory. The problem of communications was alluded to most effectively by the noble Lord, Lord Gore-Booth, and latterly by the noble Baroness, Lady Seear.

In varying degrees we have been expressing agreement that at this time in our country's affairs we cannot afford to indulge in Party political posturing in the face of a crisis, which we have described as a mounting crisis but which many noble Lords have described as a crisis that is already with us; therefore, we cannot be said to be getting into a crisis. We identify a certain disillusionment in the country with the politicians, who will undoubtedly be judged hardly if they fail to rise to the problems which face them at the present time. What the noble Lord, Lord Gore-Booth, called the Tweedledum and Tweedledee actiivties, which are so widely misunderstood by people outside, are quite friendly debating points here.

Also it is true to say that there has been fairly widespread agreement on all sides that a Government of national unity is not likely to happen at this juncture, and that even if it were likely to happen it might not be the proper solution. We must express our gratitude to my noble friend Viscount Watkinson, an ex-senior Minister and a captain of industry, who has performed a real service this afternoon in calling attention to our plight and issuing a clarion call to us to show ourselves statesmen by seeking a common purpose and unity, however difficult we may find its achievement. In spite of the misgivings which have been expressed by the more gloomy of noble Lords, many of us believe that there is in fact a sufficient unity of purpose to enable us, as the noble Viscount, Lord Watkinson, put it, to seek to move the industrial and economic debate on to a more neutral ground. Perhaps the neutral ground is an expansion of the social compact.

I was somewhat surprised by the rather touching defence made by the noble Lord, Lord Hoy, of what has become known as the "Social Contract". We have talked today about the value of the underlying approach inherent in the social compact, and the possibility of expanding the concept to include those people who should never have been left out in the first place. Certainly on this side of the House it has been regretted that there have been attempts on the part of Members of the Government to suggest that the social compact was something other than what it is. The one thing that it certainly is not is a contract, because a contract implies some sanction against those who break it and there has been pretty general agreement today that sanctions, or force of law, must not be brought into this kind of negotiation. Therefore, our objection to the overplaying of the term ""Social Contract" is the subtle difference that there has been between the "social compact" and "Social Contract". I have never discovered when the two words were changed.

Nevertheless, I should like to suggest that the neutral ground that we are seeking may possibly be based upon the acceptance of some simple, economic realities which are in danger of being submerged in the rising tide of unemployment. There are many ways of expressing this, but I believe we should recognise that the focus of the thinking in an industrial society should be upon the customer and the consumer. The Institute of Marketing defines its role as "the creative function which promotes trade and employment by assessing consumer needs and initiating research and development to meet them"—rather useful activities just at the present time. A book published in 1972 for the British Institute of Management says: Business has no meaning unless to sere and satisfy a customer—at a profit". This point was raised, I think, by the noble Lord, Lord Rochester. The book goes on to remind us of a phrase that the noble Lord, Lord Robbins, said has become something of a truism—"nobody owes us a living". The quality of our livelihood is the issue that we are discussing here. This applies to all sorts of industry and all sorts of activity and, if I may say so, I was particularly pleased to find the noble Lord, Lord Walston, making a plea for what is now sometimes called "small is beautiful". That is a point that I have frequently urged on your Lordships over the years, and I was very glad to hear the same sentiments being expressed by my noble friend Lord Limerick.

I happen to go so far as to believe that, for all its many and manifest imperfections, the market place is basically the best and the fairest arbiter for the allocation of resources. Nevertheless, with varying degrees of enthusiasm and differences of emphasis, we have all come to accept that we are going to have to live in a mixed economy. To me, this means finding ways of working in harmony between the State and private enterprise. By no stretch of the imagination could the recent months be described as a vintage year for free enterprise. I think it was the noble Viscount, Lord Younger of Leckie, who used the expression, "They have failed to forestall political intervention by putting their own house in order."

Nevertheless, I think it is also fair to say that part of the blame rests with Government—both Governments. At least a contributory factor has been the failure of Governments to do the essential job of providing the two basics which industry requires—the framework, and the safeguard for industrial and commercial activity upon which our prosperity depends. I do not think I need to explain in detail what I mean by this. But it occurs to me that if you are driving a car over a rough and difficult road and you find you are making very little progress, it is, at least, worth considering whether you should do something to the road rather than tinker with the engine in the motor car.

On the other side of the coin, we are in danger of making disastrous mistakes, I believe, based on two misconceptions: the one misconception I have already referred to, which is the failure to identify the purpose of enterprise as being customer orientated. Enterprises conducted for the narrow benefit of those who work in them will inevitably fail. This is not for a moment to deny the essential contribution that can be made by involving the workers in the direction of the businesses, provided always that they understand the objectives and the obligations that they take on in assuming such responsibilities. It is all very well to say—and we can feel entirely with the noble Lord, Lord Soper—that 2 million unemployed is, indeed, a desperate situation, even if we have not personally experienced it. But what we have to be extremely careful of is that we can be seduced by the argument of saving unemployment today, and we have to watch that we are not running into creating a much wider universal unemployment throughout the country in the long run. I have a feeling that this was one of the points that was running through many of the remarks made by the noble Baroness, Lady Seear.

My Lords, the second danger lies in the nature of Government involvement. I am in danger of being provocative, but I do not intend to be so. I am trying to put forward the philosophy of management. The point was made by the noble Lords, Lord Rochester and Lord Raglan, and the noble Baroness, Lady Seear, that the time scale in the thinking of Ministers and Ministries is not appropriate to running industries. This is also true of the training, background and experience of people, of Ministers and Ministries.

The record of the nationalised industries is not reassuring, as was pointed out by the noble Lord, Lord Walston. They show a poor return on capital and, regrettably, they have been the leaders in giving in to the pressures of wage inflation. We have been told this afternoon that the Government-controlled industries—in fact. I think the Government themselves—are now disbursing 60 per cent. of the national income.

Lord RAGLAN

My Lords, if the noble Lord will forgive me for interrupting him, I think he would accept that although at the moment the nationalised industries are not doing very well, if one might put it that way, in granting wage increases, the workers in those industries did much worse than others during the statutory wage freeze, and during the previous Government's Phases 1, 2 and 3.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I think this is entirely possible. But the plain fact, surely, is that we can now see the present wages inflation, and we have argued the point. I am not going to argue in front of the economists here whether wages are the primary cause of inflation, but I think everyone would agree that they are a contributory factor. It is fair to say that in recent years it has been the Government's control and influence on these industries which has led the way all down the line. I am sorry to say that. I do not think we are going to gain anything by not facing up to the fact. One talks about the commanding heights of industry; we seem to be talking about something more like the unfathomable depths of bottomless pits when we are talking about many of the industries we have taken over. In the face of this kind of record, the arrogance displayed by those who believe, with no track record whatever, that they can walk in and succeed where all the City institutions and all the captains of industry have failed, seems to me quite breathtaking. I am not wishing them anything but the best of luck, but I do admire their brass! If there was this curious fund of talent, one can only say it has been remarkably well hidden under a bushel all these years.

So, rather than pursue such courses, I urge the Government to heed the noble Viscount, Lord Watkinson, when he refers to the irrelevance of violent political dogma. I appreciate this may be considered contentious, in that concentrating on these kind of cures constitutes a change of policy for the Government. But let us assure this Government that we shall give them our support in the difficult task of curbing the wild, the irresponsible and the Luddites wherever they are found, and in seeking a path of consensus out of our present difficulties. The initiative is theirs. A number of suggestions have been made this evening. Some noble Lords have pointed out that there is even a glimmer of the light of the noble Lord, Lord Soper, a glimmer of oil at the end of the tunnel. But with these bright prospects before us in 1980, I believe it will be a tragedy indeed if we fall into the quick-sands before we get there.

9.13 p.m.

The MINISTER of STATE, SCOTTISH OFFICE (Lord Hughes)

My Lords, it is now 6 hours and 16 minutes since the noble Viscount, Lord Watkinson, initiated this most acceptable and most helpful debate. If I were to follow my normal practice and try and touch, even in the most light fashion, on what everyone has said, I would break all the records for a closing speech. I hasten to assure the noble Viscount who, like myself, has missed only one speech and part of another, that I do not intend to do that, because that would not be the proper treatment to give a debate of this kind. Its value does not lie in the remarks made by the Minister replying to the debate, but the use which the Government will subsequently make of all the contributions which have been made here this afternoon and evening.

Before I go on to the content of the debate generally, I should like to join all those noble Lords who have congratulated the noble Lord, Lord Hampton, on his maiden speech. It is a custom of the House that we say these things. It is the good fortune of the House that we very seldom have to make congratulatory remarks to maiden speakers with our tongues in our cheeks, and we certainly have not had to do this in his case. I join with all those who have congratulated him in expressing the hope that we may hear him regularly and frequently in our debates. I do not know if it is the example which he set (he certainly is here at the end of the debate) but through the mathematics of my noble friend Lord Melchett I am able to inform your Lordships that of the 23 speakers 19 are still present in the House at this time. I think that is perhaps one of the finest compliments that can be paid to the noble Viscount, and to the value of the debate he has initiated.

May I, as my noble friend Lord Beswick said in what I regarded as his most excellent speech, say that I can accept without reservation a very great deal of what the noble Viscount said in putting the Motion before your Lordships. Like him, like the noble Lord, Lord Campbell of Croy, and others, I am glad particularly of any coming together of the CBI and TUC, the prospects of which, or the actual start of which, the noble Viscount referred to. I am particularly glad of that, because if from such contacts there emerges any common view to be held by the CBI and the TUC, obviously this is a view which no Government could afford to ignore. If we are to get any degree of consensus, if it can start in that quarter its accomplishment will come the more quickly and be the more lasting in its effect.

I cannot, of course, go along totally with the remarks of the noble Viscount, because although he tried very hard indeed to wear the hat of the industrialist, inevitably it slipped at times and we were left with the unadorned head of the politician. When he, for instance, referred to the fact that the views of the CBI must not only be sought, must not only be listened to, but must be acted upon, I got the impression that action was not to be acceptable unless it was action along the lines for which the CBI asked. If the Government and the CBI were the same body that would be very easy to accomplish, but sometimes the CBI's views are followed by action, and from their point of view regrettably followed by action which they do not want. In those cases I would suspect that they would have preferred inaction rather than otherwise.

A number of noble Lords asked for the abandonment of divisive measures and the establishment of neutral ground. If this means that there is to be no change, then obviously, of course, we are to get a situation which might be very acceptable to one Party but not to another. But that was not what all of the noble Lords who called for this had in mind. For example, the noble Earl, Lord Limerick, in his, if I may say so, most acceptable speech, started off by saying, or very early in his remarks said, "Of course there must be change; we must accept change", and then went on to say, "but, of course, the circumstances with which we are faced may limit the amount of change which is possible at the present time". The noble Lord, Lord Rhyl, asked for change in another way altogether. He invited the Government to abandon all ideas of nationalisation and to cancel all the Election promises that have been made. I do not know just exactly which particular ones he had in mind. I am quite certain that the old age pensioners would not be particularly grateful to the Government if we reverted to the pre-Election situation. I am not certain that abandonment of many of the things the Government have done would meet with even a modest consensus.

My noble friend Lord Soper pointed out that, as a Socialist, he could not accept that a neutral ground meant the abandonment of any progress at all towards a socialist system. So we have a difficult situation to face if we are to find any degree of neutral ground to occupy. I should like to point out what my noble friend Lord Beswick said in his speech, that we will make no progress in this direction if we do not take fully into account the changes of attitude which have arisen among the masses of people in our country. He referred to the middle and professional classes and what used to be described as the working classes—now, perhaps, a somewhat exclusive body. These changes will not allow us to go back to the kind of solutions that once were possible.

The Government are committed to a mixed economy, notwithstanding the views which are sometimes exaggerated and which are totally erroneously attributed to particular Ministers. But, if there is to be a successful mixed economy it is essential that the private sector should increasingly accept its social responsibilities. It must not be just a good example set by an enlightened minority. There are companies in this country which perhaps set a good example to the nationalised industries, but there are far too many who act only when forced to do so by legislation. If we are to have a successful mixed economy, there must be a willingness by all sections of industry, public and private, to recognise that their responsibility is not merely to shareholders or employees but to the community at large.

Since capitalism started, it has been accepted that to protect the value of money capital was perfectly proper, and that in an age of inflation with high interest rates it was dreadful if the rate of inflation meant that people were lending their money at a negative rate of interest. We still accept that that is a proper argument. But more and more people in industry—the people on the shop floor, the professional people—are saying that there is a corollary to this argument in that their labour capital also has a value which should be preserved. It leads us to the position that if we were to accept the complete concept of a capitalist, profit-earning society the only assets of the community which would have a perpetually declining value are human beings. If we are to have a degree of acceptance of whatever change is necessary, we must be able to carry the great mass of the people with us. The noble Viscount, Lord Amory, said that no Government could succeed in policies if they did not have the backing of the consensus of public opinion, a view which was repeated by more than one noble Lord. I noted particularly that my noble friend Lord Raglan and the noble Baroness, Lady Seear, made this point.

Before the debate started, I was disappointed that when there was a reference to the Social Contract having had less than complete success it was greeted by a certain amount of laughter from the Opposition Benches. I believe that that illustrates part of what is wrong with us. The Social Contract, whether it is a compact or a contract, is an agreement to attempt certain things between the trades unions and the Labour Government, or the Labour Party as it was before we became the Government, and it was never expected to be 100 per cent. successful.

I wish there was less emphasis—and it certainly did not come from the noble Viscount in his remarks—in the media on every failure of the Social Contract. It is the old story—bad news is far publication, while good news must find its own way into the people's knowledge. It is a fact that the great majority of the decisions that have been taken can be held to be within the confines of that agreement. It is obvious that it can be very much improved and if, as a result of the coming together of the CBI and TUC, there could be included in their discussions ways and means of widening and strengthening the Social Contract, that would be a very much more worth while contribution to reaching that mutual ground than the criticism of every failure which the Social Contract attracts.

Another subject which was mentioned by many noble Lords is inflation, and it was not surprising that there was total agreement on this issue. In the absence of my noble friend Lord Soper, I can say that inflation is like sin—nobody is prepared publicly to advocate it, but an awful lot of people enjoy the fruits of it. Unfortunately, this is the situation we are now in regarding inflation. The noble Lord, Lord Robbins, said—and I agree with him—that we must not expect the process of industrial regeneration to produce a short-term economic miracle. The Government have always envisaged the development of their industrial policies and the establishment of a new co-operative spirit in industry as a process which must inevitably stretch over a period of years.

The noble Lord's view on the dangers of a sinking exchange rate was an echo of that made the other day by the Chancellor of the Exchequer, who stated that he did not wish to see the pound depreciate further. He stressed, as did the noble Lord, Lord Robbins, the inflationary consequences, but there were a number of difficulties in the noble Lord's analysis which I must mention. To begin with, while inflation attacks competitiveness, it is still true—this will come as a surprise to some noble Lords—that we are now more competitive, 9 per cent. more so, than we were in mid-1972, when sterling was floated. Secondly, a major recovery of world trade is expected next year and this could boost our exports and help swing our trade balance more quickly towards equilibrium. Thirdly, the inflationary effects of a depreciating pound do not all come through immediately, except for foodstuffs; the lag before final prices are effected can be spread over several quarters.

I shall say more about the remarks of the noble Lord, Lord Robbins, but at this point I am reminded, by what sounded like a mutter from the noble Lord, Lord Orr-Ewing, that I was appalled at the opening of his speech, not because I disagreed with his remarks, but because for the first time I found myself agreeing with what he said when he spoke about the competitive position of the country as regards long-term contracts. I do not think we can get away from what he said on that, and probably because he was thinking about that he did not particularly appreciate what I said about our competitive position. I could not agree more with what he said about his views as to the effects of unemployment in dealing with the situation. We reverted to our normal position quite quickly, because I agreed with very little that he said thereafter, but those were two complete points of success for him or failure for me, whichever way one likes to look at it.

Lord ROBBINS

My Lords, I wonder whether the noble Lord could elucidate a little further as to how he measures our competitive position.

Lord HUGHES

My Lords, I did not measure it at all. It is the information which has been given to me by my technical advisers, who include people who are perhaps not necessarily of the distinction as economists of the noble Lord, Lord Robbins, but who are of the same type.

Lord HOY

They are much more common.

Lord HUGHES

My Lords, to return to what was said by the noble Lord, Lord Orr-Ewing, I believe I am quoting what my noble friend Lord Soper said. The noble Lord brought himself to the verge of apoplexy in error. He exaggerated the weakness of the pound and the speed of the inflationary effort and he under-estimated the strength of our competitive position and the prospect of world recovery. If the noble Lord is in error in that, he is in error, too, in bringing himself to the point of, as I understood it, advocating a crisis pause in incomes. I should not wish in any way—for it would be totally wrong—to minimise the seriousness of our plight. However, we must think very carefully about plunging towards a statutory policy, be it pause or freeze. In my judgment, the recollection of early 1974 still weighs far too heavily in the minds of people overseas. I can think of nothing that would harm us more than a lurch back to that situation.

I should like to refer again to the speech of the noble Earl, Lord Limerick, and to his reference to the Association of British Chambers of Commerce. I am sorry if he thought that his approach to the Prime Minister did not receive as enthusiastic a response as he would have wished. I shall make a point of particularly directing the attention of my right honourable friends the Chancellor of the Exchequer and the Secretary of State for Industry to what the noble Earl has said today. It may be that in these discussions the Government too readily accept that if they talk to the CBI they have spoken to everybody on that side, just as if they speak to the TUC they have spoken to everybody on the other side. It might be worth while particularly drawing the attention of my right honourable friends to the remarks of the noble Earl. That I undertake to do. Having said that—

The Earl of LONGFORD

My Lords, if my noble friend is approaching his peroration, as he has indicated, does he propose to say anything about the suggestion which has been made by several noble Lords, of whom I was one—but only one—that there should be some voluntary cut in top salaries of one kind or another?

Lord HUGHES

No, my Lords. What I was about to say as a pre-peroration was that the best response which I could make to the noble Viscount, Lord Watkinson, and the most fitting response I could offer to the way in which your Lordships have taken part in the debate would be to make certain that all my colleagues in Government have their attention drawn to the many suggestions which have been made in the course of the debate. I have no doubt that when that is done they will look to see what my noble friend Lord Longford has said, as well as what other noble Lords on this side have said. They can, of course, be assured that their remarks will be looked at. However, the nature of the debate has been such that we can be quite certain that my colleagues will not be looking at the suggestions from one side of the House only.

My final point is on training. A number of noble Lords spoke about the value of training and my noble friend Lord Beswick intervened to point out that, regrettably, many of the places available were not being taken up. The noble Baroness, Lady Seear, suggested a campaign—a non-Party or an all-Party campaign—to get people to undergo training. One difficulty in this is not necessarily in getting people into the training places, but rather what happens after that. The difficulty is that they are training for jobs which are in other areas. In far too many cases the jobs for which they are training are not in the area in which they live. They are faced with the task of finding a new home where the jobs are waiting, but sometimes there are housing short- ages in those areas. My noble friend Lord Beswick during a meeting raised the point of why the places were not taken up. One trade unionist said that it was found that this difficulty was a contributory factor to the break-up of families in cases where a man began training, then went away to get a job in another area, and a year or so later was still unable to find a new home for his family where he was working.

I had an approach not very long ago from an officer in your Lordships' House. He asked me to try to find him employment back in Scotland, because he had been unable to find a home down here. He liked his job, but he saw no prospect of his family being able to join him. This problem will not be solved merely by providing training, and I should like to take up what the noble Baroness has said about this. We must find out the ways in which we can follow up the training to ensure that all the places can be taken up and that more and more people can be trained to fill the vacancies which exist.

My Lords, I would have done the noble Viscount a disservice if I had spoken longer than this. But on behalf of the Government I wish to say that we think it has been a very useful debate and we shall do our best to extract the maximum advantage from it for the people of this country.

Lord LYELL

My Lords, before the noble Lord finally sits down, could he possibly—

Several Noble Lords

Order, Order!

Lord LYELL

My Lords, before the noble Lord finally sits down, would he, perhaps, enlighten me on one aspect of his speech which came quite early on? I think I was quite clear in understanding that he was pointing out that he wished to see private industries show a slightly greater social awareness. Could the noble Lord possibly stress that the Government are seeking to prove, through the nationalised industries, that they, too, have a slightly greater commercial awareness, because some of us have been a little worried by that in recent weeks?

Lord HUGHES

My Lords, it remains the objective of the nationalised industries that, one year with another, they should endeavour to match their incomings to their outgoings. That still remains Government policy. What will not have escaped the attention of the noble Lord, Lord Lyell—he being an accountant—is what the Chancellor had to say about the diminution of subsidies to the nationalised industries, a policy which received a very considerable impetus under the last Government.

9.39 p.m.

Viscount WATKINSON

My Lords, I wish to add my congratulations to those already extended to the noble Lord, Lord Hampton, on his maiden speech, and I shall come back to this in a moment. I am very grateful to noble Lords—so many of whom have been kind enough to stay to the end of the debate—for supporting me. I was nervous about introducing this subject. It is a very difficult one to handle, and one is very anxious these days not to start a debate that creates an unhelpful, rather than a helpful, attitude. I am most grateful—more grateful than I can say—to every noble Lord who has spoken.

I now return to what the noble Lord, Lord Hampton, said. He mentioned something which is not a very new saying. He said that it is better to have tried and failed than never to have tried at all. I am always very upset myself that your Lordships' House does not receive the mention in the media that I believe we so often deserve, because I think that we talk sense. I must not say anything about the other place. But, certainly, I think we talk sense up here, and it is very sad that we do not get the coverage in the media that we deserve, May I say to my two noble friends on the Front Bench here, and to the noble Lords, Lord Hughes and Lord Beswick, who could not have been kinder in response to what I have tried to say, that I think every noble Lord has tonight tried, in his own way, to alert our country to the dangers which we all know we face. We could not have tried harder—let us hope that somebody is listening. Thank you once again for being so kind in what I felt was a difficult debate, but one I think which has turned out so well. My Lords, I beg leave to withdraw the Motion.

Motion, for Papers, by leave, withdrawn.