A NATIONAL RECOVERY PROGRAMME

HL Deb 23 March 1977 vol 381 cc518-613

2.44 p.m.

Lord HANKEY rose to call attention to the need for a national stabilisation and recovery programme around which a political consensus on national recovery can be built; and to move for Papers. The noble Lord said: My Lords, I hope to convince all sides of your Lordships' House on three main points with which I will deal in turn. First, that we cannot recover the economic stability and prosperity which our gifted but ailing country deserves unless we cease living from one stop-go measure to another, from one stopgap to another, and adopt a longer term stabilisation and recovery programme. As in Western Germany, I say "programme", not "plan".

Secondly, I shall show that in spite of all the deep political differences which divide us—and we are particularly conscious of these today—there is in fact a growing measure of agreement about the way we have to go, and therefore about the very broad contents of such a programme. Thirdly, I hope to show that no programme can endure, or work, unless the main political Parties, the CBI and the TUC, all agree its main points and co-operate to ensure its success. There must be the same sort of consensus as we have about Europe, or NATO, or agriculture, or even Northern Ireland. Our deep and abiding common interest in our national recovery makes this, I believe, a much less Utopian ambition than it sounds, but it requires greatness of leadership—I repeat, greatness of leadership.

Now I come to my first point, the absolute need for a longer-term programme. I was the last official chairman of OEEC, and the chairman of the economic policy committee of OEEC and OECD for five and a half years, so I can assure your Lordships from experience that the idea of a national stabilisation and recovery programme is not new. It has been applied many times with success in other countries. We have not hitherto had one. But, as we all know, our economy has for decades past been very slow to recover from cyclical recessions. We have repeatedly tried expanding demand by various measures. We have recovered more slowly and suffered more inflation than our main competitors. The pound has in consequence fallen repeatedly, especially in recent years.

Neither of our main Parties can disclaim responsibility, though each, disregarding the mote in its own eye, points to the shocking beam of timber in the eye of the other. So here we are, still slowly losing our share of world trade, the pound propped up with immense foreign loans, with a still unacceptable and indeed alarming degree of inflation and unemployment and, worse still, a deplorably low level of morale among our own people.

In the light of our long-term decline I thought the fascinating economic debate we had here on 26th January showed a considerable degree of euphoria about our real situation. Our debate took place soon after the Government, to their great credit, had arranged the IMF drawing facilities, the mobilisation of funds through the general arrangement to borrow, and through the Central Banks the safety net for the sterling balances.

All that at least gives us just a little time to work out together how we may recover. But history and sad experience show that the pound is most stable when our economy is in recession. As soon as demand expands, artificially or even naturally, imports grow rapidly and there is a great strain on the balance of payments. We have seen this over and over again, yet now we already have a strain on the balance of payments even while we are in recession. It cost us some £900 million between June and December 1976. What will happen to us when world trade recovers and our own trade recovers, as I hope it may soon do? Are we going to use up the IMF loan in the same way? Is it sensible to use our new oil income this way, when successive economic half-measures and palliatives have landed us in this shocking mess?

Look at our real needs more broadly. It is essential, in order to avoid inflation, that our budget should more or less be brought into balance, or at least that any deficit should be most carefully handled. Personally, I think that Professor Friedman has convinced a great many people that this country cannot run a budget deficit of £8,000 million to £11,000 million per annum, either for transfer or other payments, and yet avoid inflation.

We must not distribute wealth which we have not created and earned. Eventually we must get the monetary equation right and we have a very long way to go. But economics is not only about money; it is about people, and we cannot escape that. It is not possible to reduce public expenditure quickly without causing more unemployment and more social hardship. It must be done over a period of years and we must foresee how it is going to be done. On the other side of the account, our direct taxes are already so high that incontestably they destroy personal initiative and effort; but to correct this we cannot increase indirect taxes suddenly without raising prices and endangering the Social Contract. These corrections must also come about over a period of years.

The return to financial rectitude must be balanced by the development of productive industry and the creation of much more employment. For that development it is vital that we provide more profits and more incentives for skill, hard work and genius, and we must find the necessary capital. Even with these possible increased incentives, it will take a number of years to increase industrial investment, raise our quite remarkably low productivity and grow out of the bad habits which cause it. In order to face these longer-and medium-term problems, a great many people will now agree that there should be a properly co-ordinated and agreed programme for stabilisation and recovery; an agreed route back to prosperity and proper employment which everybody, including our creditors, can understand and which will give everyone more confidence to work hard and to invest.

This brings me to my second point; that is, what should such a recovery programme contain? On this point, a rather encouraging preliminary approach to a consensus already seems to be emerging. In Cmnd. 6721 we have recently been given forecasts of public expenditure for two or three years ahead—not very encouraging, but at least they exist. The problem of domestic credit expansion and money supply is being tackled, as the Prime Minister explained in another place on 15th December. The Government, the CBI and the TUC are more or less agreed on the need for an industrial strategy, on giving priority to the needs of industry for more investment and better productivity, and even for better profits to make all this possible.

Starting from Cmnd. 6315 on industrial strategy, in November 1975, there have been important discussions in the National Economic Development Council involving the CBI and the TUC. I hope the Leader of the House can tell us what it all amounts to. What agreed conclusions and action has the analytical framework led to? There is also a considerable degree of willingness in the TUC to see how we can avoid another bout of wage-induced price rises by discussing some form of renewed Social Contract for the year beginning in August 1977; I need not elaborate on the difficulties, notably over differentials, but that is also very encouraging.

Thus, the present degree of agreement is slightly encouraging, but do not let us be under any illusion; our need is for an agreed programme of at least five years, a programme to be constantly studied, brought up to date and implemented. We must be completely realistic about this. The trade unions will never agree to better profits, higher productivity, fewer industrial disputes, fewer restrictive practices and less waste of employed manpower while there is so much unemployment. This must take some years and much continued persistence and hard work by union leaders, shop stewards and management. The coming expansion of world trade will help, but we must live down the thoroughly bad reputation which we have earned abroad.

The point I am trying to drive home is that trade union co-operation is, in the world in which we live, indispensable to secure the effective recovery of our economy. We must already give the trade unions much credit for beginning to move along this road. It is not easy for them. One reason why it is hard to secure a new Social Contract and to secure a real increase in productivity is that no one—not Parliament, the political Parties, the TUC nor the CBI—can really see at present just where we are going. We stagger from one crisis to another and the Government's present medium-term programme is too short and too obscure.

Surely it would all be less controversial if the present approach to co-operation could be carried forward into an agreed five-year programme. Trade unions and shop stewards could then foresee the effect of allowing new machines to work productively, employers could see the way forward to investing productively, and the rise of British wages, prices and productivity to European levels, which must be, and can only be, achieved over a considerable period of years, could then be seen in long-term perspective. In that case, I am sure the business community would willingly invest much more in this country.

However, it cannot be done at once, now. It cannot be done just with promises by any single political Party. Nobody knows whether any given Party will be in power in a year's time—or in a day's time, for that matter—so that a Social Contract for one Party with one side of industry is only half a step towards what we need. Industry needs to see five or ten years ahead if it is to make the investments our people must have in order to earn modern salaries and wages. It is vital that the politicians take account of this. How, therefore, can politicians build up the trust which is now so signally absent? in my view, the only way that can be done is by drawing up a serious, practical stabilisation and recovery programme agreed upon by the main Parties and by both sides of industry. This means dropping all the inter-Party strife which impresses no one outside Westminster. We must drop all the Tweedledee and Tweedle-dummery, at least in all matters affecting the recovery programme. There should at least be a political consensus about the matter, like we have for NATO, for Europe and for agriculture. I know the Leader of the House understands this; he was feted by both the National Farmers' Union and the Agricultural Workers' Union when he ceased to be Secretary of State for Agriculture. Can he help us now to follow that excellent precedent and achieve a still wider consensus?

With North Sea oil coming, if we squander this additional revenue the way we have used our resources in recent years it will not help us much. North Sea oil gives us an opportunity which is not to be missed. It is a very good reason why it is possible to hope for success with a five-year recovery programme such as I have described; only provided we use it the right way in co-operation with each other in industry, the TUC and Parliament. Now—I repeat, now—is the time to be preparing such a stabilisation and recovery programme by carrying forward and expanding the elements of agreement which exist and which encourage us to move forward.

I come to my third point: how do we get the kind of political consensus which we seem to need if we are ever to recover? For the nuts and bolts of this, I believe that the machinery lies more or less ready to hand. We should develop the National Economic Development Council into the necessary organism with additional staff from industry and the Civil Service, especially the Treasury. Neddy combines the Government, the CBI and the TUC. It has Little Neddies for a great many industries. The Government are represented, as indeed they must be, but Neddy would provide a useful barrier between Government and industry. We must at all costs prevent the kind of restrictive delays, short-term interference and general confusion of responsibility which Government control of the nationalised industries has produced. That is a hard thing to say, but I recommend your Lordships to study, if you have not already done so, the report on United Kingdom nationalised industries issued by the National Economic Development Council in November 1976. We shall never get anywhere until we have a better system for the control of these fundamental industries.

If we could have the kind of concensus that I advocate, the Conservatives and the Liberals should, I suggest, be represented on the National Economic Development Council, also. But, of course, it would be no good having all parties represented there if they were more interested in spiking each other in the eye than in helping this country to recover, so naturally, we come back to relations between the political Parties.

I do not agree with those who say that none our great political Parties can now rule Britain. I believe that either of the main Parties can certainly do so, but that, equally, either can prevent the other from ruling Britain successfully. It is high time that we recognised that, in the dreadful pass to which this country has been reduced, we really cannot afford to let that continue. Speaking strictly as a Cross-Bencher I just do not believe that Labour alone can possibly get the investment and co-operation needed to set this country up again. It does not matter whether one goes to the middle or top management, to skilled workers on the shopfloor or the boards of nationalised and private companies, hospitals, universities, the professions or the ports. The feeling of our leaders and our men of genius and practical skill seems to be one of bewilderment if not of despair. That has been made worse by the talk in the Labour Party of more nationalisations to come.

But, let us suppose that we have an Election and the Conservatives come to power, what then? As I think I have already shown, the degree of co-operation needed from the unions to get this ailing country to stand on its feet is so great that one cannot conceive that the Conservatives could enjoy it adequately by themselves. This is not altogether the fault of the Conservatives: one reason is that, if there is no political consensus, members of the Labour Party will inevitably make sure that trade union co-operation is not forthcoming either on the big questions like the Social Contract or the incomes policy, or on the shopfloor. The problem of Labour Party finance alone would make this inevitable.

Finally, do not forget that the harder the opposition Parties press the Labour Party, the more the Labour Party and trade unions are forced to rely on the support of their Leftist fringe of Marxists and not so crypto-Communists, who will continue to extort sociologically divisive and economically damaging measures as the price of their support. I am sure that many of these Leftists do not want a mixed economy to succeed.

I apologise for mentioning such delicate Party matters, especially today when there is a vital debate going on in another place. But we can no longer afford to ignore these issues and they can be mentioned only from these Benches. I should like to say that I think that they will continue to be important, whatever the result of the debate in another place tonight. To put it constructively, I believe that the Conservatives and Liberals must be in the political consensus and must be parties to the recovery programme, because otherwise our people and institutions will not have confidence to invest nor will they feel sure that the private sector and private rights will not be trampled on. The Labour Party and trade unions must equally be full parties to this, because otherwise a great many people on the shopfloor will not be sure that they are getting a fair deal and that their rights will be respected. I hope that the Liberals will be in it in any case. Both sides of industry will, I think, have to be asked very firmly to respect collective bargains and works agreements if integrated industries like motor cars and shipbuilding are to survive in this country. Who can now successfully ask that of the shopfloor except the TUC? —and, may I say, a TUC with a proper set of teeth and really full information to back up their bite. We have seen only a little of it under British Leyland, and the same will apply to the CBI.

Of course there will be many disagreements within the consensus; many sacred cows will have to be slaughtered. I shall not list them now, but I am very conscious of how extremely political are most questions of economic policy. Some will appear to be insoluble by agreement, but I urge that our political system must move with the times. We now have a very sophisticated public. Everyone is educated, more or less. The television informs everyone about current affairs. It would be easy to use the BBC and ITV for, say, a week to inform everybody about some controversial question, and hold a referendum after a week. I am sure that we should get a sensible answer, as we did over Europe. We do not need weeks of campaigning and expense, but our people do not at present feel that they are properly consulted. One does not have to cross the Scottish Border to discover that. Personally, I think the insistence on carrying out Party Manifestoes years after the Election and in quite different circumstances is insulting to the sophistication and intelligence of our people. I believe that a series of mini-referenda would please our nation, give sensible results and make agreements easier to achieve and carry out both in industry and in Westminster. It would certainly be more democratic. It works quite well in other countries.

To conclude, if my analysis and suggestions have caused your Lordships pain, I am very sorry. Experienced diplomats have long recognised that no argument is more devastating than the truth. I have the greatest respect and regard for the leaders of all our great Parties, but the moment of truth has now arrived. My remarks are intended to be entirely constructive and I earnestly hope that this debate will also be constructive and that we may avoid shallow complacency or just blaming the other side. I hope that your Lordships may be able to suggest how our political leaders may, in spite of past and present clashes, be brought together at least on these issues. Can we create a current of opinion that would bring it about in spite of the harsh words that are exchanged in another place? We narrowly avoided a terrible crisis last November: it may well be much worse next time. I hope that a catalyst can be found. We have to see to that somehow.

We all have a much greater interest in the survival and recovery of our country, with its magnificent history and tradition, its abundant present genius and massive common sense, than in seeing any one side in the political arena just beaten down by the other. Our present predicament requires real greatness of leadership and a firm determination to correct the faults of recent decades. I believe that our leaders, whom I know and admire, have the necessary qualities to achieve together the reconstruction of our country, if only the Parties can mend their ways.

There is an old inscription in the ancient parish church of Rye in Sussex which seems to me to give us all the good advice we require: Upon the wreckage of thy yesterday Design the structure of tomorrow; Lay strong cornerstones of purpose and prepare Great blocks of wisdom cut from past despair; Shape mighty pillars of resolve, to sit Deep in the tear-wet mortar of regret; Work on with patience though thy toil be slow, Yet day by day thy edifice shall grow. Believe in God, in thine own self believe; All that thou desirest thou shalt achieve.

My Lords, I beg to move for Papers.

3.10 p.m.

The Earl of GOWRIE

My Lords, it would be naive of us to imagine that the eyes and ears of the country are on this House and this debate today. I am sorry that the noble Lord, Lord Hankey, was both timely and unfortunate in drawing for his Motion a day of high drama in another place, because if I may say so, and as I think the long list of speakers attests, the need for a debate a little removed from the heat of political battle is obvious and useful, and the noble Lord has had many interesting and relevant things to say. But one of the ironies of the present political situation—and speaking for myself I have little doubt that the Government will in fact survive the vote of no confidence tonight—is that confrontation between the Opposition Parties and the Government Party has been acutest just at the time that the Government, ineffectively, reluctantly and much too late, have in fact adopted the kind of policies which we on this side have advocated since the autumn of 1973.

We came to the conclusions to which the Government are now coming 3½ years ago. We came to them the hard way, and as the result of bitter experience, and we came to them reluctantly. It is a myth that Governments of any political complexion do not approve of raising and spending public money. There is much in this country that needs public money spent on it. Look at Heathrow Airport, as a gateway to a trading nation, for instance. "Abandon hope all ye who enter here", is what its muddle and mess seems to say. Consider the wasteland of our dockland areas, to take another example drawn from London; and remember, my Lords, that the South of England remains a rich and prosperous country when compared with huge areas of the Midlands, the North country, Scotland and of course Northern Ireland. Senior Ministers of all political persuasions in this country are generally men of experience and good will and well capable of identifying national needs and trying to direct national resources towards them. But as a Labour Minister said, not a Tory Minister—and how much we all regret his passing—"The party is over now."

I make this point because the noble Lord, Lord Hankey, has called for some kind of consensus where the general management of our political economy is concerned. I take it that that is not so very different from what my right honourable friend Sir Keith Joseph has called the common ground. Put very briefly, this view asks that our adversary politics in this country take place on the battleground of distributing, and not creating, wealth. Labour would become the Party of apportioning income throughout the nation, whether by wage policies or by high direct taxes, or by a combination of the two. Conservatives would become the Party of high incentives, high earnings, but also of course of higher prices, as they shifted the tax burden from direct to purchase taxes and progressively phased out price restrictions and price subsidies. What the Liberals would do I rather doubt, after this evening, we shall ever get a chance to see. Mr. Pardoe dislikes the Conservatives emotionally, but leans towards us intellectually. Mr. Steel is, in my view, a nice unreconstructed young Keynsian. The common ground would be some agreement between the Parties as to what levels of unemployment were broadly acceptable, or I should say bearable, and absolute agreement between the Parties as to what levels of money supply, including of course what chance for credit expansion, were actually to be possible.

My Lords, I have to say that I do not think that this kind of common ground is at present possible. I think that it could be desirable. I believe that it would go a long way towards creating a sufficiently stable political climate for the industrial investment we all agree that we need. I think that men of good will, like those who are taking part in this debate today, should strain themselves to achieve it. But I do not think that it is at present possible. To say why, and to argue what we should try to achieve in order that a common ground might one day become possible, let me return for a brief moment to the present political situation.

The Labour Government have had three years in which to make a start on achieving —and I quote: an irreversible shift in wealth towards work people and their families", which they promised lay at the core of their politics. In the debate on the Address after the General Election of March 1974, we on these Benches told them that they would actually preside over a significant deterioration in the standard of living of all the people. How many of us are now not workers? To adapt a phrase of the noble Lord, Lord Shawcross, we are all workers now.

But even assuming that some workers are more equal than others, there has been in the last three years a significant deterioration in the living standards of the traditional working class. Their earnings have been centrally determined—whether by Statute or under the Social Contract is not relevant. Prices have been subject to compensatory restraint, but few would argue that the net effect has protected the traditional working class, since price controls are of obvious benefit to the better off. The social benefits which workers are said to demand across the board, but which in actuality only the politicised union leadership demands across the board, have combined with price subsidies to inflate the currency. More accurately, I should say that you cannot keep this kind of balloon in the air without inflating the currency.

This domestic inflation has been added to imported inflation and so we have had to watch profitability, investment, and therefore jobs float out of the window. As if that were not enough, the erosion of money values is in itself a form of taxation. So those of the traditional working class who have not lost, or who are not going to lose their jobs, are caught badly by the tax man. When Mr. Healey cuts taxation next Tuesday, if he survives. I hope that all of your Lordships who are in the Gallery will add 15 or 16, or even, to adapt the words of Mr. Roy Hattersley, 21 per cent. to the existing levels of taxation. Are we really so arrogant that we do not expect that workers and their wives cannot do that sum for themselves?

My Lords, the irony of the situation is that the Government know all this. They are this evening asking for a mandate to abandon Socialism. They are reducing, or pretending to reduce, taxation, cutting the public sector borrowing requirement, imposing cash ceilings, lopping £5,000 million off central expenditure. They are behaving like that wicked enemy of the working class, that well-known scourge of the Soviet Union, that creator of industrial chaos and confrontation—Mrs. Thatcher. They are instituting, in short, Tory policies and are enlisting Liberal and Ulster Unionist support to do so. With this mention of Ulster—

Lord LEE of NEWTON

My Lords, in that case, why is there a vote of no confidence in the Government today?

The Earl of GOWRIE

My Lords, the vote of no confidence today arises because the Parliamentary Labour Party refused to vote for the public spending cuts.

With the mention of Ulster I should like to make a short parenthetical point. It has been reported that the Prime Minister and Mr. Foot have promised additional Army men and material to Ulster in return for Unionist support or abstention. I trust that this is a rumour only. We on these Benches utterly reject, whatever the exigencies of minority rule, any involvement of the Army in political horse-trading. One of our greatest national traditions is an apolitical army, and if this kind of thing starts to happen none of us can be certain how long the Army may be content to remain out of politics. I hope that the Lord Privy Seal will reassure us when he comes to wind up the debate.

The Government are not instituting Tory policies because they have been listening to us in the way that they have recently been listening to the Liberals. If they were prepared to listen to us they would be making a controlled and gradual change of direction, not a lurch to the Right which is altogether incompatible with legislation imposed by the Left. They are making the change because the rate of inflation which high State spending helps to generate has infuriated the Government's traditional supporters, and because there has in fact been a shift of wealth away from the individual wage-earner to the State. The individual wage-earner rejects the identification which true Socialists make of his interests with the State's interests. They are not the same thing in a mixed economy. The far Left is quite clear about this. My old friend Mr. Paul Foot is quite clear about it as he campaigns in Stechford. The far Left wishes to achieve a worker-corporation State. That is quite different from, and quite incompatible with, a shift in wealth towards workers achieved by high State taxation and high State spending.

My Lords, it might at this point be said that perhaps the Government are learning their lessons; that perhaps we and the Liberals are teaching them something; and that some kind of consensus is therefore emerging. We have some evidence that what the City would like would be a permanently hamstrung Labour Government: too near to the unions for there to be industrial confrontation or disruption, too far from any majority in the House of Commons to be able to interfere with the political equilibrium which a battered private sector now needs.

My Lords, there is a flaw, unfortunately, in the logic underlying this desire. The Government may have learned some lessons, but the Labour Party has not. The confrontation in another place this evening, as I said earlier in response to the noble Lord, Lord Lee of Newton, is not the doing of my right honourable friend Mrs. Thatcher. It came about because the Government could only get the Parliamentary Party to vote to avoid a General Election, not to approve of the Government's policy on spending. I am afraid, therefore, that even if the consequences of Socialism force Labour Governments to change direction, the causes, which is to say the ideology of State control, will be with our political system for a long while to come. Acknowledging this, and the difficulties which will face this Labour Government if they try to sustain any overt or tacit alliance with other Parties for very long, where do we, who favour the establishment of some common ground, go from here?

My Lords, I am going to be very brief as I have said it all before, and even those of your Lordships who agree with me, let alone those who do not, will not want it all again. I believe that we need a Government—and at present it could only be a Conservative Government—prepared to give more say (not absolute say, but much more say) in the choice and control of expenditure to the individual wage-earner. If you like, this is an irreversible shift in the disposal of real resources to workpeople and their families. For this to be possible, the air must be let out, at a controlled and orderly rate, of the inflationary balloon. In West Germany, for instance, responsibility for this is really in the hands of the Bundesbank; that is to say, it is to some degree out of governmental, and therefore out of political, hands. For this shift in wealth to be possible, wages, again in a controlled and orderly way, must be allowed to rise, and I would say rise considerably. I have argued before that the problem in this country is not high wages but low wages and high State benefit spending.

The problem also facing our country is that the habits and institutions which grew out of one phase of industrial civilisation are now interfering badly with another phase. What I want to see is a high wage, low benefit economy, rather than a low wage and high benefit economy —and our high benefits, of course, are wastefully administered and applied. I want to see lower taxes and tax ceilings. The net result will be that prices will rise, because we cannot redirect the social wage towards those that need it rather than those that do not without some increases in purchase taxes. But, my Lords, such price rises will not in themselves be inflationary as progressively reduced State spending comes in line with a predetermined and prepublicised lowering of money ceilings.

My Lords, I believe that this shift would be irreversible. It would be irreversible because of the difficulty any political Party would have in campaigning in favour of wage controls and in favour of increased taxes. It would therefore become common ground, and our Party contests, alignments and re-alignments could take place within a new framework of political necessity. We have got so used to high taxes and low wages that we—and I think that by this "we" I mean the professional and educated middle classes—are suspicious of those who seek to make changes. Behind most modern social democratic or liberal attitudes (with a small "1") there still lies a great deal of old-fashioned Victorian or Bloomsbury paternalism and élitism: a refusal to trust the mass of people with their own spending decisions.

I have said before that a programme of this nature is radical and would take more than one Parliament to accomplish. But it does have great political attractions, and I say to the noble Lord, Lord Hankey, that, whether or not we like it, politics will for some time be the context in which economic management decisions are taken in this country. Labour Governments, if not the Party, recognise it as the only alternative to wage control, and would therefore find some political difficulties in opposing it when they, once more, were in opposition. It is in line with the Conservative philosophy of greater freedom of choice and greater self-reliance. It would be acceptable, surely, to shop stewards, since it stimulates shop-floor choices by contrasting benefits with cash. It coincides with strong public sentiments, particularly among workers, that the present welfare system attracts those who are capable of working as well as the temporarily deprived or the needy. It might redress the balance, if only a little, between the State and the family. But, my Lords, because this programme is radical it is necessarily political. It can be put into effect only by people who believe in it; and once it is there, it will be politically hard to undo. I agree with the noble Lord, Lord Hankey, that we need a measure of consensus, but we need also the courage of our political convictions to get it.

3.27 p.m.

Lord McNAIR

My Lords, the Motion calls for a consensus, and I am very glad to have found at least one thing on which I can agree with the noble Earl, Lord Gowrie. I agree with him that the noble Lord, Lord Hankey, is to be commiserated with on the coincidence of his Motion with events elsewhere in the building. I think this is a great pity, because inevitably it will mean that less attention will be paid to anything that is said here, despite the fact that Lord Hankey's Motion may well in the long term be more important, just as it is certainly less contentious, than any other Motion being moved in any other part of the Palace today. I suggest that we would do well to resist the temptation to try to take part vicariously in that other debate, and that we should stick as closely as possible to the terms of our Motion and hope to avoid the political double entendre.

It is true that we do not know what may happen tonight. It is true that we could be on the brink of a General Election. My Lords, we have had ten of those since the war; and yet here we are, agreed, I suspect, almost unanimously, on the need for some sort of national recovery programme—a programme for national stabilisation and recovery, to get the wording right. Something must have destabilised us, and there must be something from which we need to recover. I doubt very much that an 11th General Election at this moment would make very much difference to that. If I may translate the admirably positive wording of the Motion into negative terms, I suggest that the noble Lord, Lord Hankey, is moving a Motion of no confidence, not in Her Majesty's Government but in our whole machinery of Government, quite regardless of who sits where.

Perhaps there are two positions from which one might have arrived at this Motion, two alternative viewpoints. There is the view that we are facing a quite exceptional crisis almost comparable with a war and that, therefore, we should take quite exceptional measures, a grand coalition, a Government of national union or some such device, for a limited period until the crisis is over and thereafter we can all safely revert to our former ways. That is one view. The other view, I suggest—and this is my own—is that the morbidity in the body politic, which, after all, has been apparent to some of us for at least 20 years, is caused by, or at least seriously aggravated by, the virtual obsolescence of almost every part of the political machinery that we have. I suspect that this has been a large part of our trouble ever since the war; that we have been using the wrong tools for the job, outdated mechanisms and structures; that we failed to note that our political and economic instruments are unsuited to their purposes and that, even when we have noticed, we have failed to agree on what to do about it.

May I remind your Lordships of a few examples. We seldom stop talking about the need to reform your Lordships' House. I hope I am not saying anything that I ought not to say when I suggest that this is not the only House which, in the jargon of the trade, is ripe for modernisation. And our Civil Service—is it still the envy of the world? I doubt it. I think that we still have the best civil servants, the men and women; but are they selected, organised and deployed in the best possible way? I doubt that very much. I pass over our financial institutions and, in general, our industrial structure because I know that my noble friend Lord Rochester is going to speak about this side of the question.

However, I cannot resist a passing mention of what seems to me to be one of the most curious ironies of my lifetime. At the end of the war, the British trade union movement played a very notable and commendable part in re-establishing and reorganising the trade unions in West Germany. They had been debauched and destroyed by Hitler and his war and we started them off again. In doing so we gave the West Germans, I suggest, a far more logical, workable union structure than we have ourselves. Here it seems to me that too many of our trade unions are still the prisoners of their own history. I ask this in a friendly way. Could not the Labour Party—and, after all, they have won six out of the 10 General Elections since the war—perhaps have done a little more to encourage the reorganisation and streamlining of our union movement? I say this in no spirit of hostility but because I cannot believe that the multiplicity of unions which we have is in the interests of anybody except a very few officials.

My Lords, among the possibly obsolescent institutions which may be impeding our progress towards Utopia, I have mentioned so far this House, the House of Commons, the Civil Service and, to a certain extent, the trade unions; but what of our political Parties? I am not concerned with our internal machinery, our penny-farthings or, to use a metaphor more appropriate in the case of the Liberal Party, our treadmill. These defects are, in the vernacular, our funeral —they do not affect the average man on the Clapham omnibus who, I should remind your Lordships, has more sense than to belong to any of our Parties. Nor, I think, do these internal defects much affect our national problems. The much more serious criticism of our political Parties is surely that they simply do not reflect the divisions of opinion in the population. The boundaries between Parties are artificial and arbitrary and I think there have been signs in the last few years that they are beginning to break down. There is quite a lot more that I could say on this subject, but there are reasons why I should perhaps leave it at that.

What is more, I have been speaking, I see, for eight minutes and I have not yet mentioned electoral reform. Is that a record? I do not know; but I know that it would be an illogical as well as a surprising omission if I did not mention it at all. If we are to have an agreed programme of stabilisation and recovery, we must first get our Parliamentary arithmetic right. We cannot ignore the disciplines of the Division lobbies. May I digress for a brief moment. On these Benches we are frequently rebuked because it is said that our colleagues in another place failed to respond to an invitation from Mr. Heath in early March 1974. Quite apart from the political issues and the details of any offer that may or may not have been made, the arithmetic then was entirely wrong—296 Conservatives plus 14 Liberals came to 310, leaving 325 on the other side. This simple fact seems often to be forgotten.

To return to the present—or, perhaps I should say, to the future—I do not see how we can hope for agreement on any programme lasting the full term of a Parliament, or perhaps longer than that, until we have first ensured that the Parliament, as elected, shall more or less accurately reflect the opinions of the electors. I find it difficult to see how any democrat could strongly disagree with that: one vote, one value. This we shall never achieve so long as we continue to use the deliberately distorting mechanism of the "first past the post" electoral system.

There is always a danger when Liberals speak about electoral reform that we shall give the impression that we regard it as some kind of modern equivalent of the Philosopher's Stone, a magic formula, a panacea for all our ills. Of course, it is nothing of the sort. But many of us, I myself, and I think a growing number of non-Liberals, see electoral reform as an essential pre-condition for any recovery from our chronic political diseases. Given that essential pre-condition, I believe that the concept of the noble Lord, Lord Hankey, of an agreed programme of national recovery becomes a practical, and indeed a most desirable, proposition and I believe it would receive consistent support from these Benches.

3.40 p.m.

Lord HOUGHTON of SOWERBY

My Lords, although it is very early in this debate, I am sure that the noble Lord Lord Hankey, must already have learned a bitter lesson. He must surely realise that the moment the Cross-Bench dream is paraded before a political assembly, the moment he uses the word "consensus", political strife breaks out. That is precisely what has happened this afternoon. The noble Earl, Lord Gowrie made a purely political speech. He borrowed the notes that Mrs. Thatcher was going to use in the House of Commons this afternoon. He gave a mild blessing to the Labour Government, half honing that it might survive, because he said that the Labour Government had come nearer to the Conservative policies which they have been advocating since 1973. So the condition of consensus in the Conservative mind is that others should agree with them. Of course when Mr. Heath, in his search for a consensus, was coming nearer to what the Labour Party was thinking his followers deserted him, he lost the Election, and then they threw him out. That was his reward for an attempt to reach a political consensus.

This, I am afraid, is a disheartening quest that the noble Lord, Lord Hankey, has embarked upon. We all seek solutions to problems outside ourselves. We look for some kind of grandiose political pepper-pot that we can sprinkle over all the ills of mankind and all our economic shortcomings and our political mistakes, hoping that somehow it will pep things up and there will be a response to the spice of political inspiration. It is all a dream. I wish it were not so. But if we are going to look at the possibilities of this stabilisation and national recovery programme, we have to consider what are the conditions for it.

I believe that what we need more than a recovery programme—and there are dozens of programmes of various kinds already—is the will to recover. This is something in the minds of all of us and in the activities of all of us. What an enormous difference it would make to our economic prospects if everybody—all of us—did the job in hand more efficiently! What an enormous difference that would make! One does not need a programme or plan; all one needs is the individual resolve to do one's work better than one did it yesterday. This is not beyond the capacity of human beings. There is plenty of room for it, and we know that.

How does one get this inspiration which will bring people to this new pitch of enthusiasm for the future of the nation? This is what we are really after. We have ourselves the ability, the genius and the experience, for recovery. We are not novices, we have been at it for hundreds of years, surviving, working out new institutions, evolving new modes of life, new aspects of community association, and so on. Yet we appear to have lost this grasp and grip upon our affairs. Why is that? Many reasons for it have been ascribed. I do not think that it helps to go into them too deeply because we have to look to the future. What are we going to do tomorrow? If many people could lose their memories a little more it might help. It is not only the Irish who have good memories; many British people have good memories, too. They harbour grievances which belong to the past.

What we need is a common purpose strong enough to inspire a common effort, and it is not self-evident, as the noble Earl, Lord Gowrie, said, that the conditions for this desirable state of the nation exist at the moment. There are wide differences of political aims and social purposes. We have different political groups in the country thinking very differently about the same things. There are wide differences of opinion even about common aims. Your Lordships have only to look at the Labour Party and the Conservative Party to find that there are wide differences of opinion in those Parties about common aims, let alone the differences of opinion about the aims themselves.

Have we the political and electoral system to provide a satisfactory base, a satisfactory political base, a satisfactory Parliamentary base, for this consensus? Does our electoral system yield to the conditions in Parliamentary and political terms which would enable us to express this common purpose? Where do we begin on electoral reform? What about "first past the post?" What about proportional representation? One has only to mention those two items to find immediately that consensus has gone for a "Burton". There are differences about electoral reform; there are differences on these matters. There are political interests involved and vested interests involved.

Let us look at the state of the political Parties. Our politics are divided in industrial as well as political terms. In this country our politics follow the management-worker conflict more closely than is done anywhere else in Europe. What is more, that great divide, that partition of the nation—and it is a partition of the nation—is separately financed by those who support that partition and who want to maintain that partition. A committee's report, which tried to moderate the financial support for the political and industrial divide, was met with scorn from the Benches opposite.

Nowhere else in Europe is any political Party tied, as our Labour Party is tied, to the trade union movement. I do not refer only to the Labour Party, because in Western Germany, when State aid for the political Parties was introduced, it was to break the hold of industry upon the Conservative elements in the political system. Are we getting any nearer the consensus, my Lords? Am I going along the right path or am I just "stirring it up", as the noble Earl, Lord Gowrie, did a few minutes ago? I believe there will be more health in our politics when the principal Parties cease to rely to a disproportionate extent, as they do at the moment, upon the money of those who want to maintain the great political and industrial divide in Britain. We shall see what happens.

I come next to the industrial structure of the community, from where the wealth comes. This is the front line. After all, you can sweep up the litter and keep the nation tidy—I am all in favour of doing so—but the wealth is going to come from industry, from drive, from initiative, from export, from ingenuity; all the qualities that go to make up the strength of an industrial nation. Those nations which have not got those qualities will never become great industrial nations until they have them.

What, then, are we doing to make the front line efficient, able to withstand attack, able to carry our export drive and our expansion of the British industrial activity throughout the world? What are we doing about that? Let us first look at industrial relations. Dare I mention the word, "Bullock"? Have we got a consensus on Bullock? Hands up all those who feel there is a consensus on Bullock—and I do not put my own hand up, either—because here we obviously have an attempt to find the answer to a most complex situation, and one can only try to move towards it. The difficulty, of course, is that you cannot really get towards a consensus on industrial relations until you have got a better consensus on the condition and structure of our industrial society.

Are we for the mixed economy or are we against it? The noble Earl, Lord Gowrie, repeated the word "Socialism" about half a dozen times, as if we had got it—or even as if the present Labour Government were trying to achieve it. The truth of the matter is that these are relative terms: they are easy words to use for a broad line of thought. But I thought the Labour Government had advanced towards Conservative thinking. The noble Earl, Lord Gowrie, said that a few moments ago.

I think that one of the points on which the Labour Government have advanced towards Conservative thinking is on the desire to promote the prosperity and efficiency of the mixed economy. We want to take away some of the bitterness and some of the divisive nature of the ideological struggle about the future structure of industry. Even Socialists do not want Socialism which would mean the surrender of freedom and the absorption into a fully collectivised State, with all that implies. We see that in operation in other countries, and we have to beware of some of the consequences of collectivisation. Freedom and collective human happiness, a more equal distribution of wealth, the recognition of the dignity of man and the promotion of the health and welfare of families and children; you can call all this Socialism if you like, but these are humanitarian aims and human desires. There is nothing reprehensible, socially, politically or morally in seeking to achieve purposes of that kind.

The truth of the matter is that Socialism, in its ultimate expression, is lofty and noble. It is only when man gets hold of it and applies it politically and endeavours to surround it by all the restrictions of censorship, for example, and the eradication of opposition, that he turns the noble concept into a tyranny. The noble Lord, Lord Mottistone, is going to speak himself in a few moments and I am in full flood—

Lord MOTTISTONE

My Lords, would the noble Lord not agree—

Several noble Lords

Order, order!

Lord HOUGHTON of SOWERBY

I say that it is possible for political divisions to do serious harm to unexceptionable social and political aims. If we are going to look at the mixed economy and the promotion of private industry alongside State enterprise—that is really what we have at the present moment, which is why I call it "mixed"—what are we going to do in practical terms? What about taxation? Are we agreed on taxation? Do we think that taxation is bearing too heavily upon industry or upon individuals? If so, what should be done to provide a remedy? Do we think that the level of direct taxation is too steep or too heavy? If so, are we in favour of a switch to indirect taxation, which of course has entirely different economic effects? Is there any consensus there? Could we even get agreement on my proposition that it is time to consider whether it is worthwhile retaining company taxation at all? Should we convert what is now company taxation into company investment—all of it? Is it worthwhile considering what taxation does to stock valuation and stock appreciation in its mild or its more acute forms? That is where taxation assumes that what you have in stock you have already sold—and you have not—and that after selling it you have made a profit (which you have not) and out of the profits you can pay the tax, but you have not got the money. These fictions go through our taxation system. Could we get an agreement even on that small patch of the taxation system? These are the problems we are up against all the time.

How do we achieve this common purpose? What are the conditions for achieving it? Shall we just take those matters which sow the seed of considerable discontent at the present time and try to remove what may be the most obvious or serious obstacles to getting a consensus? I remember the late Lord Avon when he was Foreign Secretary saying: The problems of the world are so numerous and so complex that to try to deal with them all in one grand sweep of foreign policy, pacification and restoration and international confidence is beyond the power of men. Let us then find where the sharp corners are. Can we find a limited area of conspicuous problems that we could perhaps find a remedy for? The noble Lord, Lord Hankey, did not really detail where these sharp corners are. He provided, so to speak, "the clergyman's introduction" to the great moral and political lesson regarding what we were to do. That was the inspiration; but later on during the service the offertory will go round and we shall be asked to contribute to the great stabilisation and recovery programme. I do not think the response is going to be very generous, because I do not think that many noble Lords will feel that the noble Earl, Lord Halsbury—I beg his pardon, the noble Lord, Lord Hankey—has pointed the way to Heaven. He has not shown us the way, and I believe that he is putting to the House a proposition which is beyond our capacity.

I have mentioned the Party political system and electoral reform. I have mentioned industrial relations and taxation. I would further mention investment in industry. Are we reaching a consensus whereby State investment in industry is not some kind of political delinquency? When the State invests in something, is it to be called, "State intervention "or" State interference"? Is it to be called, "State aid"? What is it to be called? Should it be ruled out or is it to be welcomed? Have we a consensus on that? And so one could go on in this field of economic as well as political difficulty. The formidable nature of the problem and its forbidding prospects lead me to sit down with as inconclusive an observation as the noble Earl, Lord Halsbury—again, I beg his pardon, the noble Lord, Lord Hankey. I can only say that if he is as baffled as I am then we are both in the same boat; but I think I see some of the individual problems more clearly than he does.

Viscount BARRINGTON

My Lords, before the noble Lord sits down, may we have a brief consensus on who is the noble Earl, Lord Halsbury, who is the noble Lord, Lord Hankey, and who is the noble Lord, Lord Houghton, because there seemed to be some slight confusion at the end of the last speech. I feel we can all agree that they have three admirable propositions to put, but they are not the same.

4 p.m.

Lord O'BRIEN of LOTHBURY

My Lords, what an admirable speech your Lordships have just heard! I noticed that it woke up the schoolboys in the Gallery, and in the end it was too strong for them, so they left. It also made me come to the conclusion that there is no substitute for commencing life in the other place, and I therefore grieve over a misused life. But I will do my best.

In opening this debate with a notable speech, the noble Lord, Lord Hankey, conceded that the Motion standing in his name might be held to express somewhat Utopian aspirations. He claimed, however, to see a growing measure of consensus about what we need to do to secure the national recovery which we all so earnestly desire. I, too, see signs of a growing consensus and, like the noble Lord, Lord Hankey, derive some hope from it; and I persist in that notion despite the speeches by the noble Earl, Lord Gowrie, and the noble Lord, Lord Houghton, which made me for a moment think that I was rather a silly billy, and that I had better go home and write my speech again. But, as I say, I still have some hope.

I think it is true that, ever since 1964, at any rate, until fairly recently, it seemed increasingly doubtful whether the essential political support would be forthcoming for the continued successful existence of the private sector of the economy. Politicians repeatedly complained—and I have heard such complaints in your Lordships' House —that the private sector had failed the nation., while they persisted in policies which increasingly undermined that sector's confidence in the prospects of a viable future. At the same time, on all sides, we saw the fruits of past nationalisation and, for the most part, how sour they were—large bureaucratic machines heavily overmanned, for the most part immune from the discipline of the competitive market place, and increasingly insensitive to the needs and convenience of the consumer. Yet the way we were going seemed to lead further down this path, to the satisfaction, no doubt, of the small minority of Left-Wing Socialists, but to the dismay of everyone else. Foreign confidence in us, in our political and economic future, was damagingly impaired.

Today, I think that the climate is a great deal better. This is not because of any radical improvement in our economic circumstances; we still have to wait for that. It is because the mixed economy is no longer under the immediate threat that it so recently was. Responsible politicians, and Ministers in particular, have seen the light—or at least some of it. Likewise, so have the trade unions, who realise now that they themselves were helping, through excessive wage demands and low productivity, to create the unemployment which very properly is their greatest enemy. Attitudes all round, it seems to me, have become more responsible, more thoughtful and more realistic. Surely no Prime Minister could have made a more frank and realistic appraisal of our situation and needs than Mr. Callaghan did at the last Labour Party conference. The Government's economic policies have, for the most part, been tailored accordingly. A Conservative Government might do it better, and perhaps with more conviction, but it would have to do very much the same as is being done now.

So I think one may claim that there is now the makings of a consensus. Market opinion recognises this. I believe that such hopeful signs as have been seen in the market arise more from a feeling that there are the makings of a consensus than from the improvement in our economic position. Of course, the debate between the expansionists and the deflationists, the Keynesians and the Friedmanites, still goes on, in both main political Parties and elsewhere. I can understand and sympathise with the impatience of the expansionists with a régime which condemns the economy to a protracted period of stagnation and high unemployment. But previous unwise expansions, in this and other countries, have been largely responsible for producing both the inflation and the unemployment which we now have.

We have, as I see it, no alternative but to submit to restraint until reasonable price stability is restored. The lesson of the postwar years is that the proper control of the money supply is a continuous vital necessity. I do not say, as some do, that provided the supply of money is effectively controlled no other policy action is necessary. But I do say that if money is not controlled all other policies will be rendered futile.

In this connection, perhaps I may venture an aside and a comment on the claim of the nationalisers that their little game would cause no harm, so far as the money supply was concerned. That it would in a general sense, if, for example, they laid their hands on the banks and the insurance companies, there can to my mind be no doubt. But that is another matter. I want today to examine the argument that, however large the sums involved in an act of nationalisation, the transaction has no effect on the money supply, because only a transfer payment is involved. That there is a transfer payment, in the first instance, is perfectly true. Her Majesty's Government take over the shares of the private holders and give them gilt-edged securities in exchange. This would almost certainly be a reasonably long-term stock. Past experience, even in happier times than today, shows that a large proportion of those forcibly parted from their shares in exchange for gilt-edged securities swiftly dump the latter on the market. The consequences for the gilt-edged market would be highly damaging, not to say demoralising, unless the authorities stepped in to absorb the heavy pressure of sales, as in the past they have always done.

Such action requires cash to pay for the stock. Her Majesty's Government supplies the cash by borrowing it, in the first instance, on Treasury Bills. This increases the public sector borrowing requirement, and thus the problem of keeping the money supply under control. The larger the operation, the bigger the problem involved, and your Lordships can imagine that taking over large banks and insurance companies would be a massive operation. I hope that those who think that it can be done like a conjuring trick will bear this point in mind. For this, and other more important reasons, I hope that we shall hear little or nothing more about further nationalisation in the future. My own experience outside the political field suggests to me that it provides neither efficiency, nor service, nor improved labour relations, and I am sure that the general public is completely disenchanted with it. If we are to move ahead with any confidence, we must have pretty general acceptance of the role of the private sector as the main dynamic element in the economy, and all sections of the community must co-operate to make it so.

Having reached this point in my remarks, it is hard to go on without mentioning the Bullock Report, though I realise that it has already been debated by your Lordships on two occasions. I have already said that, in my view, the implementation of the majority report would be a disaster of the first magnitude. Happily, that now seems unlikely to come about. But the increased participation and involvement of labour in the running of business and industry is, I am sure, vitally important. I have seen many governmental attempts to improve the efficiency of industry. I have tried to involve institutional shareholders to the same end. Neither has had more than partial success, although I am glad to see that the institutions are becoming more effective than they were.

Clearly, those who work in industry are the most powerful force. I should like to see that power exercised more constructively and less destructively. I was much impressed by the speech of the noble Lord, Lord Douglass of Cleveland, in this House last Thursday. I have long favoured statutory works consultative councils, and was much encouraged to hear a man of his great experience speak so strongly in favour of them. I must say I look forward to the day when a workforce goes on strike because machines or manpower are being used inefficiently. That is the kind of spur which management need and we should really be on our way if they got it.

The only way to achieve a real increase in the prosperity of our people lies in growth in the output of the United Kingdom economy. Growth from expansionary policies would, on past experience, be inflationary, short-lived and lead to the familiar grinding stop. Somehow, without the stimulus of sharp expansion, we must achieve a sharp increase in productivity and, if I may spell it out, that is in output per person employed. In far too many of our important industries, using virtually the same machinery as our competitors abroad, our productivity is dramatically lower than what they achieve. Lack of capital investment is not the trouble but inefficient work practices and a lack of common purpose. I would not put the blame for that on one side; it is shared by everyone. Participation and cooperation between labour and management could produce radical improvement. The benefits of this in increased and competitive output and in increased profit should be fairly shared with the labour force. This is the only way in which we can escape from the low wage economy which we now are.

I conclude, therefore, that the British economy is now in less danger of revolutionary change. There still remains the prospect of continuing oscillation of power between political Parties whose central economic philosophies are too far apart to provide the assurance of a sufficiently stable background of industrial and fiscal policy to encourage sensible long-term planning. But even here I see a narrowing of the differences rather than the reverse. To this hopeful conclusion I would only add the cautionary note that industry and commerce cannot operate effectively for very long in the face of rapid rates of inflation if that inflation is treated as a purely temporary aberration best dealt with by suppressing its symptoms. Prices must be allowed to adapt to rising costs if a collapse of employment and investment is not to follow.

4.12 p.m.

Lord HUNT

My Lords, I am not qualified to follow the noble Lord, Lord O'Brien of Lothbury, who has given us his expert views on the economic measures necessary to promote a programme of national economy, nor will I follow other noble Lords who have spoken of the need for administrative changes, for electoral change, and so on. Poised as we are for the moment of truth which is shortly to be revealed in the other place, perhaps it would be unrealistic, tempting fortune and unwise to speak at this moment of a consensus being reached on these matters. What matters to me much more is the programme and the power to enforce a programme for national recovery than the search for this elusive word, "consensus".

I will presume to follow the noble Lord, Lord Houghton of Sowerby, whom I am sorry to see has just left his seat because I so much agreed with a great deal of what he had to say. The noble Lord, Lord Houghton of Sowerby, touched on the matter of industrial relations. We have heard quite a lot about industrial relations in the recent past in the light of the strike at British Leyland and the strike at The Times, and also in connection with the Bullock Report. However, there is one point which has not been made in recent times—in this House, at any rate—and which needs to be made and I should like to make it now. I am going to put it in the form not of an assertion but of a question to those Members of this House who, unlike myself, are directly in contact with British industry or who are closely informed about it, which I am not.

I question whether relations between managements and those who are euphemistically called "the workforce" are anything like so bad, in general, as the general impression created in the minds of the great majority of the British public by the news we receive about the industrial scene. Is it not that the focus and emphasis is almost invariably concentrated on the minority of bad examples—important, no doubt, and serious though those examples are?

I should like to quote from a speech made on 27th January by Mr. Edward Pickering, the Chairman of the Mirror Group of newspapers when he was taking part in a discussion organised by the Industrial Society. Mr. Pickering had this to say: I meet a large cross-section of people in British industry. I rarely hear a good word about our reporting of it", and, knowing Mr. Pickering, I am sure that he is speaking not about the reporting by the Mirror Group of Newspapers but about the reporting by the national Press as a whole. He went on to say: Directors and managers complain to me bitterly about our treatment of industrial troubles. We concentrate, they say, on conflict—rarely on achievement… Equally trade unions complain to us that the balance of comment, particularly in the Press, is loaded against them". Mr. Pickering finished by saying: That complaint is valid". I will leave it there. It would be quite improper for me, as a member of a Royal Commission which is shortly to report on the Press, to take it any further. However, it seems to me that that admission, coming from someone who is so highly placed in our newspaper industry, is significant and has a bearing on what we are speaking about today; that is, the climate of opinion about our industry both at home and among our friends, our rivals and our enemies abroad. Whether that statement is true or false, it is quite refreshing occasionally to hear the other side of the story.

I listened with great interest and encouragement the other evening to Mr. Peter Griffiths, the Managing Director of Chrysler Motors, who spoke in a Party political broadcast about the really excellent industrial relations which, he said, have obtained in that great motor empire since their troubles of a year or two ago. What a pity that it had to be left to a Party political broadcast, since perhaps they enjoy a rather low credibility rating in the public mind, to convey that good news to the public!

Not having had first-hand industrial experience myself but speaking with some experience of management and human relations in other spheres of activity, I will presume to postulate to your Lordships a few ancient truths which should be seen as the background to any kind of programme for national recovery. They are ancient truths but they bear repetition, because we seem for ever to be forgetting them. The first point is that management—no matter in what context, whether it be industrial, social, political, services and even sport, and about the latter two I have some experience—must manage and be firm. This will continue to be true in whatever kind of society we manage to create in future and, more immediately, in whatever forms of industrial democracy emerge from the debate initiated by Lord Bullock. No matter who the managers are and how the directors arrive at the boardroom table, it is their duty and right to make decisions, to make them promptly and to stick to them. Weakness in that quarter can lead only to anarchy. Weakness will be exploited and it is people who want anarchy who will exploit it.

The second ancient truth is that there must be self-discipline within the workforce. That means by and within the union movement. Legislation in the area of industrial relations has properly and predictably proved to be a disastrous failure, which risked bringing the law itself into disrepute. However, the corollary, the only alternative to that, is that industrial action, indulged in unofficially and persisted with in the face of union instructions to the contrary, must be dealt with by the rules of the union, and dealt with firmly. Weakness in that quarter also spells anarchy, and the vast majority of trade unionists in this country do not want that, either.

The third of my ancient truths is that we need to capitalise on youth. This means to rejuvenate industry, to inject fresh life into it from the junior ranks. I cannot speak with authority or knowledge about the application of this principle to the higher echelons of industry, though I get the impression of a slightly more youthful image among some other leading industrial countries, to say nothing of the developing nations. But I take the point made by the noble Lord, Lord Rochester, in a recent debate on unemployment when he suggested that it was better for those who had reached the age of 60 to retire than that there should be unemployment among young people. That goes just as much for the less qualified and the less skilled as it does for the young graduates.

We simply must move towards earlier retirement—perhaps at the age of 55, perhaps lower—as the trend towards labour-saving technology gathers pace and as the developing nations become more industrialised. This creates enormous social problems, to say nothing of the financial implications in terms of pensions, and so on; but if there has to be a choice—and I believe the choice must come—then it is to the young that the older generation should give way. In some industries there are men working on into their late 60s, into their 70s and even, in a few cases, into their 80s. That is no way to promote a virile society; that is no way towards a national recovery. In principle, the miners were absolutely right to demand an earlier retirement.

I recall having made my first speech in your Lordships' House 10 years ago in a debate on industrial relations on a Motion tabled by the late Lord Sieff. This was the point I tried to make then, when I had left after a longish spell in the youth service in close contact with young people at school and at work. This is the really important investment which industry ought to be making for the future, in the 30 years or so of useful life that the juniors have to offer. It is the high ratio of unemployment among the under 25s which to me is the most serious aspect of the whole unemployment situation. It is a very dangerous situation because, once one causes dissolution and apathy and the habit of idleness among young people, they may never recover their enthusiasm and their energy, and they tend to turn against society. That is why I deplore the poor response by firms to the work experience programme as reported by Mr. Mark Jackson in the Times Educational Supplement recently, when he reported that of 34,000 teenagers, for whom the Government grant of £19 million was designed to provide work experience, 7,000 places only had been provided to date; namely, one-tenth of the potential of that scheme.

I find the initiative taken by the Department of Education and Science following the Prime Minister's Oxford speech, which set off the current great debate on education, one of the important signposts towards the future national recovery that we are discussing today. There is a great deal of ignorance and indeed prejudice among teachers about what goes on in factories and in offices in our industrial companies, and the converse is certainly no less true. The scheme is entitled, "Understanding British Industry".

Experiments are being launched to encourage teachers to spend time—not just brief visits—in the firms in their locality and for managers to make extended visits to the local secondary schools. This should apply particularly to our local comprehensive schools about which there is so much ignorance and prejudice as to amount almost to an evil myth, and no service was done towards dispelling that myth by the BBC's "Panorama" programme on Monday. I firmly believe that our secondary education should be more industry-oriented. From reports I am receiving from one or two comprehensive schools with which I am connected, it is going very well; they are building up a better understanding, a healthy mutual respect and they are enabling teachers to prepare their pupils more adequately for their working lives.

I have two suggestions to make about young employees which I believe should form part of any programme for national recovery which could help to transform the spirit prevailing in some parts of our industry and to develop new attitudes to work. The first point relates to training. I believe that the syllabus and scope of many training programmes needs to be widened from the narrow focus of technical skill, necessary though that is, to develop the perspective of apprentices and junior operatives beyond the bounds of their work to enable them to relate their work to the community in which they live and to our nation at large. They should also be enabled to see that the pay packet, important and necessary though that is, is not the be-all and end-all of work, but that there is a more basic satisfaction to be found in the common effort for the general good, and indeed in the satisfaction of a job well done.

There are some enlightened and effective programmes: to name but one, endeavour training, in which the noble Lord, Lord Drumalbyn, and I have been closely associated and to which the noble Lord, Lord Belstead, gave effective help when he was in Government. A number of firms develop these wider perspectives and attitudes, but I am sorry to say they are by no means in a majority. Industrial training boards do not all seem to appreciate the significance of programmes of this kind to the tone and tempo of industry. I could wish that the trade union movement would acknowledge them, also.

My last point is that I hope that, in evolving models for worker participation in the decision-making process in the aftermath of the Bullock Report, the place and claims of junior employees will not be overlooked. This is a principle which has already been conceded in other spheres, notably in the universities, and I cannot see why it should not be applied in industry. There are already junior works councils in a few firms and these could be developed. The representation of young people, perhaps at all levels in the discussion process and perhaps even in the decision-making process, would have a very important psychological effect on young workers generally. They can bring a fresh approach and—it was the noble Lord, Lord Houghton of Sowerby, who mentioned this—that approach is free of the unhappy memories of the past.

The key words are "more responsibility for young people" and indeed the word. "responsibility" has a bearing on both those other ancient truths which I was presumptuous enough to offer your Lordships this afternoon. It applies equally to the need for firm management and it applies no less to the need for self-discipline within the workforce. It applies especially to the granting of more opportunities for young people. My Lords, if I have strayed somewhat widely from the terms of this Motion, I hope your Lordships will forgive me, but I believe—slightly to plagiarise a well-known BBC programme—that what we need is not so much a programme, more a way of life.

4.28 p.m.

Viscount AMORY

My Lords, I always enjoy the chance of following the noble Lord, Lord Hunt, because I have a great admiration for his outlook and his attitude and his achievements. I shall make only two comments on his most interesting speech. First, I agree with him that industrial relations are only bad in three or four industries. In most of the others they are not bad, though in most cases I think we should all agree that they could be more positive and more constructive. The second point is what he said about the elderly. Of course, when there is a limited number of jobs, one agrees that so far as possible preference should be given to the young and not to those who are nearing the end of their careers. I should like to comfort him by saying that in my own case, at the age of 77, I have a marked antipathy to work in any form, so I think he will let me off there!

I believe we should all feel grateful to the noble Lord, Lord Hankey, for tabling this Motion and giving us the chance to have this debate. I propose intervening, I hope only briefly, and I have apologised to the noble Lord, Lord Hankey, that, owing to another commitment which I had before I knew this debate was fixed, I shall have to leave before the end of the debate, a thing I particularly dislike doing; I hope he will forgive me on this occasion. I support the general aims which are described in the Motion. During the past three decades we have been spending, or trying to spend, more than we have been earning. When we have been forced to cut back we have done so late, and, therefore, more sharply than would have been necessary if we had taken action earlier. We have devoured some seed corn, I am afraid, and we have mortgaged the future by borrowing for consumption rather heavily over recent years.

My Lords, we have now, two alternative courses of action. The first one is to go on as we have been doing, in which case, at best, our standard of living relative to our international competitors' will continue to decline, and our actual standard of living, too. The other alternative is to take a grip on ourselves and to resolve resolutely to forgo immediate benefits for some years in order to rebuild our national strength and our national assets. This involves a programme of stern priorities to which all others must be subordinated for the time being.

The first priority must be a reduction in the rate of our inflation, at least to the level of our international competitors, preferably below that, because we have much leeway to make up. A second permanent priority must be a general increase in productivity which will put us on a par with our competitors. Thirdly, there must be, too, no general increases in money incomes which go beyond the increases in our national productivity, and no increase in the money supply which goes beyond our national output. A fourth priority is a decrease in the current levels of direct taxation on incomes, even at the cost of higher indirect taxes, if necessary.

I want to emphasise that I am not expecting or asking for an across-the-board consensus on all economic policies, but only on the essential priority tasks. The noble Lord, Lord Houghton, has left, but I am sure he would not mind my saying that I very much enjoyed his speech, as I always do. It did seem to me that at one moment he was defining the new Socialism as "moving closer to the Tories". I think those were his actual words. That left me slightly perplexed, but not completely dissatisfied. I agree with my noble friend Lord Gowrie that our long-term aim should be a high wage, high productivity economy, but as that has got to be earned we cannot presume to a high wage economy without the high production with it. I also found the speech of the noble Lord, Lord O'Brien, a distinguished former Governor of the Bank, wise and encouraging. That sounds a little patronising, and who am Ito patronise the noble Lord; but I know that he will understand that all I mean to do is to pay him a compliment for the always wise speeches which he makes to us.

These priorities, I am sure, in present circumstances will mean the continuation of some kind of income restraint policy, but one, I hope, which will leave room for the restoration of some of the differentials, reduction of which has certainly had damaging effects during Phases 1 and 2. What we need, if only we could get it, is a kind of strategic framework of limits within which detailed negotiations can take place—but how difficult to achieve! An essential ingredient of such a policy must be a large measure of agreement between the Government and both sides of industry as to what aggregate increase can be absorbed without further inflation, and hopefully without further aggravation of unemployment, which would result from pricing labour out of the market.

My Lords, I think that over the past year or two there has been developing a wider understanding of the role of profits and the need for them as a source of investment for efficient production, think that is what the noble Lord, Lord O'Brien, felt, too. I hope also there is developing a better understanding of the absolute prerequisite of strict monetary control if the abuses of the money-printing press are to be avoided. If such growing understanding could be openly accepted by the Government and both sides of industry as prerequisites of any successful economic policy, how valuable that would be! Perhaps the best instrument there is the one which has already been referred to, the National Economic Development Council.

We must all agree, I am afraid, that the prospects of a substantial fall in the level of unemployment in the near future are not encouraging. To have to accept a level of unemployment for some years longer of one and a quarter million or more would be a deeply humiliating experience for the whole nation; and what a waste of human resources! The strongest reason of all, therefore, I feel, for an agreed programme of national recovery would be that, if adhered to, it could provide a sound basis, and the only sound basis, for growth with rising employment. The Government and industry and the trade unions must agree that these priorities are the only ones which will lay the basis for sustainable growth with increasing employment.

The present Government have set much store by what they have called the Social Contract. My Lords, it has, at a price, of course, brought some valuable short-term benefits which I do not belittle. But the Social Contract does not go beyond the trade unions. What we need is something much wider and more ambitious and something which also goes beyond one annual settlement. We need a kind of national contract—I am not attempting to coin a new phrase, I hasten to say—a contract under which as a nation we commit our loyalties and energies to a national recovery programme, to which all will subordinate immediate benefits, accepting short-term sacrifices so far as is necessary in the interests of rebuilding our strength and our sense of purpose, behind which a spirit of national self-confidence can once again flourish.

I have said several times in this House that our economic recovery cannot be brought about through the efforts of one political Party alone. Our economic priority policies must attract the support and loyalty of all political Parties and the large bulk of the nation at large. A coalition Government is not a necessity to achieve that aim. By costly trial and error, I believe, these essential policies are becoming better understood. As I think Churchill said in the war: Do not let us speak of darker days; let us speak of sterner days". If we can learn these lessons, our feet will be set on the path of national recovery. My Lords, I believe that those are the kind of thoughts, if I may say so, which the noble Lord, Lord Hankey, had in putting down this Motion; and, if so. I, for one, cordially support him.

4.40 p.m.

Lord GORE-BOOTH

My Lords, on a somewhat similar occasion three years ago, I had the privilege of speaking immediately after the noble Viscount, Lord Amory. I have always found that to be encouraging, except in one technical respect. Usually one has the hope that even if one's predecessor may be more knowledgeable on the subject, one might possibly win one or two tricks on charm. The difficulty in following the noble Viscount is that one cannot win either way.

Before I say anything substantial, may I make one remark which, for a CrossBencher, is perhaps important. One speaks on a subject of this kind fully conscious that one has never been elected to anything more than the chairmanship of perhaps the tennis club. Therefore, one must speak with great diffidence about politics in the presence of so many noble Lords who have been through the heat and burden of that particular form of life. One must not presume to tell them that they can do things that they think they cannot do. None the less, in a debate such as this one allows oneself a little more freedom.

In that spirit I should like to thank my noble friend Lord Hankey both for the boldness of his attack on this very obstinate question and, if I may say so without sounding patronising, for the enormous amount of thought and exposition which he packed into quite a short time. He gave us a great deal to think about. If any of us are worried about competition from down the passage, perhaps in a modest way we might reflect on something which Abraham Lincoln said in his Gettysburg Address. I may be misquoting him but I think he said: Men will little note nor long remember what we said here, But they can never forget what they did here. Some of the remarks that have already been made in this debate will, in the long run, compete with events that go on in another place.

My noble friend Lord Hunt was the first to mention the individual. I hope to deal with that consideration, which is very important to this debate, towards the end of my remarks. First of all, I want to quote some remarks from a previous debate. Then I shall remind your Lordships who said them and where. The quotation reads: I am suggesting that there are, from time to time, issues of such gravity that Parliament must speak with a single voice—whatever the differences and whatever the difficulties …"—(Official Report, 18/12/73; col. 204.) Your Lordships may remember—the noble Viscount, Lord Amory, will certainly remember—that to everyone's surprise that was said by the noble Lord, Lord Diamond, in a debate in December 1973. The notion was not popular, but a few of us have never forgotten that intervention and, in a sense, have stuck to the idea that a time might come—not in war time but in peace time—when we shall remember those remarks of the noble Lord. Perhaps we may he given credit for a little foresight in holding to that attitude. The question we are really asking is whether the middle view has a place in national politics. Perhaps I may quote once more the remarks made by a noble Lord in this House. They were made in the debate to which I have already referred. The noble Lord, Lord Taylor of Gryfe, said: …we are living through a situation in which there is a great danger of the middle disappearing from politics …"—(0fficial Report, 18/12/73; col. 303.) My Lords, my theme is that if we believe the noble Earl, Lord Gowrie, or in a degree the noble Lord, Lord Houghton of Sowerby, we are agreeing to the proposition that our institutions are incapable of responding to the view of the majority of our citizens. I mean every word of that. I am convinced—your Lordships do not need to be convinced, but I think that there is much in it—that something that one can call a middle view is probably acceptable to the vast majority of our citizens at this time. This showed itself most clearly when, after the great controversy whether we should confirm our membership of the Common Market—and great expectations were fermented by our friends of the media that it would be a very close thing and that there would be a great deal of ill-feeling—our countrymen went to the polls and voted by 70 per cent. for that middle, commonsensical and clear-headed course. Therefore, perhaps it is not quite enough to say, when presented with the Motion of the noble Lord, Lord Hankey, that it cannot be done, that our way of life and our way of conducting politics simply will not allow it. For a long time noble Lords who say that may be right but not for ever.

I want to attack the problem in a way which has not been previously attempted. I want to take several spheres of policies and suggest that a middle majority is possible. I shall start with the easiest one, which is foreign policy. There it is traditional that we have a consensus. We have not had it completely, but it has revived, as almost every citizen who is not either hopelessly innocent or is in some way implicated now realises that Soviet Marxist Imperialism is real and not invented or under the bed. That has cleared out the one dissidence, if I may use a suggestive word, in matters of foreign policies, that divided the Parties. Now essentially it does not. On that front we can assume that an almost total consensus is possible.

I turn from foreign policy naturally to defence. I suggest that there is a certain consensus, because between those who offer moderate criticism of the Government's actions and those who give slightly troubled support, there is not much difference. If one puts to the nation the proposition: is the person answering this question disturbed about the possibility that our reductions in defence strength are going rather further than anyone admits, the answer would, I am sure, be "Yes". There again there would be a wide consensus.

I now move to a more controversial subject; namely, organisation and financing of industry. I sat through a great deal of the Bill on the nationalisation of the aircraft and shipbuilding industry. I could not forbear to think, though I was not brave enough to say so, that if someone could have abstracted from Party programmes and policies and with some authority have said, "The right thing to do here is to nationalise the shipbuilding industry and to leave the aircraft industry alone", the middle view in the country would have responded completely, and we should not have had the protracted proceedings and ill feeling which occasionally arose. My suggestion is that many steady, commonsensical people—I do not use the expression "silent majority" because it has been worn out—would agree on middle courses for these policies

One can proceed further. Several noble Lords have referred to taxation. Here I speak not in terms of protest in particular, because I take considerable assurance from what both the Chancellor of the Exchequer and Mr. Joel Barnett have said. In quick-thinking countries such as India and Pakistan, your Lordships will find—they may well know already—that the conclusion was reached a year or two ago that anything above a 50 per cent. tax on earned income is simply not worth while because of the amount of administration involved, the deterrent to enterprise and so on. The vast majority of our citizens would wish their legislators to bring themselves up to date in this matter and take actions which would restore incentive and give hope to the ambitious.

In parentheses, in this respect the Duke of Edinburgh in his controversial speech was talking of something which means a great deal to a great many people (and perhaps he was the only person who could have said it) when he said that we are in danger of preferring relief to people who need it to the rewards for enterprise to a degree that is becoming dangerous. The only figure that I shall quote is that I gather, on good statistical authority, that to bring the maximum of income tax on earned income down to 50 per cent. would only cost something between £350 million and £400 million which, in these days, is perhaps not all that great in proportion to the very large amounts in our Budgets. Here again, I believe that I speak for the commonsensical person.

I will make one more comment on this particular design. Many of your Lordships will have attended the debate, or part of it, on heritage. I am, if you like, only guessing, but I think that the ordinary person in this country in that context is beginning not only to disapprove of but to resent the way in which taxes, which we will call altogether death duties under the old title, having begun as a small contribution to the revenue, having proceeded to be something of a fair readjustment of wealth, have now become simply a system of governmental pillage.

On the substance of whether there could be a consensus about a whole lot of things, I have no doubt whatever in my mind that this does exist. But, of course, it is absolutely fair to say, "Very well, but how are you going to bring it about?" There one can only agree with the many noble Lords who have mentioned and explained the difficulties which are inherent in the way in which we run our affairs. On that there can be no sudden conversion of our citizens and our Legislature to ways of doing it differently. Like the noble Lord, Lord McNair, I shall not venture on a lecture on different forms of representation, whether proportional representation or anything else, because they have their weaknesses also. I see no way to the objectives to which the noble Lord, Lord Hankey, pointed us except a continuation of discussion of this kind, and of discussion of this kind among people who, on the whole, tend not to discuss matters, because I believe that there are a great many ideas around which do not conform at the moment to the stereotypes which have established themselves in the present round of Party political controversy.

I present it to your Lordships in that way at least to seek to establish that there is a foundation in public opinion for feeling that the initiative which the noble Lord, Lord Hankey, has started is worth while. But I did say that I would make one allusion to the individual. One cannot cure this situation simply by altering institutions or payments. We have to take a long look at the individual, and if I were to pick out one problem of the individual in this country at the moment it is this: there is a serious loss in the whole of our population of what I would call the sense of obligation. It is not anything very pious, or something drilled into you by your parents; it is simply the sense that if somebody does something for you, you at least owe something back to him in return, or that if you are a human being with a conscience you have a certain obligation to follow it.

It is frightening the degree to which that feeling is no longer a natural feeling in this country, and all the agencies of instruction, exhortation, psychological examination, ought to have that word somewhere on their notice boards to look at all the time; how to persuade the young that obligation is something real. Unless each individual citizen recognises obligation, then I very much doubt whether all the ideas and the plans which may arise in your Lordships' House, or anywhere else, will make the progress we could hope of them. I would hope that that would remain from this debate in everybody's mind as something which it is in all of our interests to observe and to promote.

4.56 p.m.

Lord BOWDEN

My Lords, I am sure that we all owe a great deal to the noble Lord, Lord Hankey, for giving us an opportunity this afternoon of talking about some of the basic problems which afflict us. I am particularly glad because I propose myself to ask whether it is possible to acquire a consensus to several policies which I believe are unpopular with both Parties—in fact, all Parties—and are unknown and ignored by most politicians. Perhaps I may begin, if I am going to be rather controversial, by making what I believe to be a totally uncontroversial statement. If one plots a graph of the total amount of manufactured goods which are sold abroad on logarithmic paper, from the year 1950 to the present date, the curve is fairly regular with a few fluctuations in it. If one plots on the same piece of paper the amount of manufactured goods imported into this country one gets a similar curve which is lower but rising more steeply. Indeed it works out that the two curves will intersect in another five or six years from today, after which we shall be importing more manufactured goods than we are exporting. This is a situation which would leave this country in a difficult position indeed. Therefore, there can be no doubt at all of the extraordinary importance of acquiring some kind of consensus if our economic survival is to be possible at all. That is the first point I would make.

The second point I believe to be equally non-controversial. No country ever became rich or famous by keeping its working population in idleness. To the extent that we are forced by our fiscal policy, by our incomes policy, by our creditors, or by anybody else, to do this very thing, shows in my view that something is wrong not with the working force but with the fiscal system responsible for this quite absurd and anomalous result.

I want to speak briefly on some of the problems which have befallen us as a result of the operations of every successive Government we have had since the end of the war. There can be no doubt that everyone has tried to get rapid growth, and everybody in turn has had to stop and go into reverse because of the inflation which they thereby produced. But in seems to me that the problems have been tackled in far too simplistic a way. The real problem is not so much the inflation, it is the tremendous and appalling consequences for the balance of payments if the economy becomes overheated. We always find our imports immediately grow.

One would have thought, therefore, that the sensible thing to do would be to try to preserve those industries whose effect on the balance of payments is minimal, and whose effect on the total economy of the country is great. If there is one industry particularly which I think satisfies these criteria it is the building and civil engineering industry. It uses remarkably few imported raw materials and depends almost entirely for its product on the work done by British workmen on the things which we can dig up in the soil of our own country—for example, limestone, sand, clay, and steel too, of course. They are of our own manufacture, and we can increase or decrease the growth of the civil engineering industry without having any significant effect on the balance of payments. It may be for that reason that the Government have used the civil engineering industry as their principal regulator, and made its productivity grow and decline in answer to the Treasury dictates more dramatically than has been the case for any other industry.

This industry today has a total potential output of £10,000 million a year, which makes it one of the very largest of all our industries, yet as a result of the cuts which have just been imposed, the reduction in its orders have been about 17 per cent. of its total potential output. The industry may be divided into two parts. The first is what one might call the construction industry, which has about 1½million men in it. The total number unemployed in that part of the industry is about 250,000; in other words, about 16 per cent. of the total labour force is unemployed.

The other part of the industry is that which makes the various products which are used by the construction industry, such as window frames, steel bars, lavatory pans and anything else one cares to name, all of which are used in very large quantities by the building and civil engineering trades. The total number of men engaged in this part of the industry is about 1 million and, by coincidence, there are about 250,000 unemployed in that, too. Thus, that part of our industry as a whole has an unemployment rate of about 25 per cent., deliberately produced by Government policy to damp down the economy and keep inflation within bounds.

I ask seriously whether this particular industry is the right one to have chosen if the real reason for our trouble is the adverse effect of a boom on the balance of payments. There is no other industry of comparable size of which one can say that its raw materials are so totally dependent on our own efforts and so little dependent on imported materials of all kinds. We have a situation in which one of our great industries has been very seriously cut back. Everyone knows the reason—that public expenditure cuts have to be made—but when we come to work out, as we must, the total net result of these cuts, we have to remember that the 500,000 people unemployed somehow have to be supported; they are on the dole, many of them are on social security, they have to eat, they have to be housed and they still have to pay the rents on their television sets. The total effect of putting them out of work is very much less than the gross cost to the Government of the actual buildings they put up, whereas the total benefit to the community is nil.

Instead of having the work of 500,000 men, we have 500,000 men in idleness and, so far as I can make out, the principal effect of putting them to work would be the trivial cost to the community of sending some of them on holiday to the Costa Brava, something which they can no longer save to do for themselves. This is a matter of great importance and what no Chancellor or Government Department seems ever to have seriously considered is the total net effect on the balance of payments of the changes which are made in Government expenditure.

The Government have taken three steps to take the minds of those in the building industry off their troubles. The first of these is to come into effect on 6th April next, when there is to be a change in the system of paying ordinary workmen. As some noble Lords will know, two forms, Nos. 714 and 715, have become notorious throughout the building industry. Before a man can be paid he must prove that he is paying income tax or, alternatively, the man who pays him must pay him, less income tax at the standard rate. This means that an ordinary man who does an odd job from home is paid only two-thirds of what he expects to get and, if he is lucky, he will get the balance at the end of the year when or if the Revenue gets around to it. Almost everybody in the industry is having to use these forms, but unfortunately, owing to a failure on the part of the administrative machine, several tens of thousands of people who have applied for them have not been able to get them and the most terrible chaos is foreseen from 7th April, when the new system comes into being, and contractors will have to submit returns every week—instead of twice a year as they do now. As I say, this is one way of taking the minds of the workmen off their other troubles, although it is certainly no laughing matter.

Another way which has been equally effective has been applied to the manufacturers of some of the commodities used in housing, and I refer particularly to the sanitary ware people. They made a most terrible mistake; they believed the figures which the Government produced in the 1972 White Paper on housing. It predicted a dramatic increase in the number of houses to be built and the number of houses to be converted and modernised. On the strength of that, several of them invested large sums in new plant to produce more baths, washhand basins and so on. One firm spent about £5 million in this context, but now, as a result of the cutback, the new plant has not been able to be used.

While on this subject, your Lordships may remember that on the last occasions I spoke in the House I referred to a factory in the North of England making television sets, a factory which had to be closed down before it was ever opened, for precisely the same reason; namely, because of the credulity of manufacturers who believed a Government forecast, which turned out to be quite wrong. The sanitary ware people who spent £5 million on new plant cannot open the new unit because they cannot get any orders as a result of the Government cut-back, from about 450,000 to about 200,000 this year, on the number of housing starts.

What have the Government done to take their mind off their troubles? They are having them investigated by the Monopolies Commission. The directors are having to abandon their factories for the time being, to engage counsel, prepare briefs and so on, simply to satisfy the Government that if they remain solvent any longer they will not be in breach of the Fair Trading Act as it is interpreted by the Monopolies Commission.

The third step the Government have taken has just been discovered by the professional civil engineers. The salaries to be earned by civil engineers in Government employ—in the employ of the various nationalised industries and the town halls—will on avergae throughout their lives be about £1,000 a year more than such men would earn if they were in industry building houses, bridges and roads. These are three things the Government have done apparently to take the minds of the people who have been so damaged by Government policy away from their troubles and to give them something else to worry about. The Government are behaving like Dr. Johnson: if you argued with him and his pistol misfired he would knock you down with the butt end.

Government policy has been disastrously ineffective, and one matter on which we might seek a consensus is to find if there is any other way of controlling the economy apart from the ways which have been so unsuccessfully used in the last 20-odd years. In my view, it is first and foremost a problem of understanding on the part of officials and successive Chancellors who, in the past, have spoken proudly of controlling the economy—the fine tuning of the economy, as they have put it—and the management of the economy; all of those processes seem to have been disastrously ineffective and dangerous to the people who have been subjected to the operations concerned.

I now deal with a totally different problem but one which I believe is equally important. The other day Sir William Pile, who is the Chief Commissioner of the Department of Inland Revenue, said that, as usual, successive Chancellors had relied on inflation as their most effective tax-gatherer. Noble Lords will be aware that I have referred to this subject before. It was of course Keynes who said that in times of inflation Governments can confiscate secretly and arbitrarily a large part of the wealth of their citizens, and they do so in a manner which only one man in a thousand even notices.

They do it in several ways; the first is to persuade people to lend money to the Government and then pay them back in depreciated currency many years later, retaining perhaps 95 per cent. of the purchasing power entrusted to them by the gullible people who bought gilt-edged in the first instance. Take the case of consuls in 1952. They could be bought by anyone who was the trustee of a will for perhaps £98, but they are now worth about £16. Not only that; the 2½per cent. earned has been taxed as unearned income ever since and, furthermore, the value of the £16 one gets is perhaps £3 in terms of equivalent purchasing power, which means quite simply that the Government have confiscated 97 per cent. of the money entrusted to them by gullible purchasers of consuls in 1952. This has been done joyously by every Government that we have ever had, on the grounds that it is one way of financing the country: if you can maintain inflation at this rate, you can rob your citizens as long as you can persuade them to go on lending money to you.

As I have already said, that is not necessary, and I believe that, if we were to adopt the policy which was adumbrated in, I think, the year 560 in the Koran, we should find that it was possible to adopt a fiscal policy in which the purchasing power of a loan was maintained and, when repaid, the person getting the money back could buy with it an equivalent amount to the amount which he originally lent. This idea has been used by the Muslims for 1,500 years and it was rediscovered by the Chinese in 1948. When the Republic of China took over after the terrible civil war, inflation was running at 10 per cent. a day. This is the second highest rate of inflation of which we have a record and it is considerably higher than that which the Germans had at the very worst time under the Weimar Republic. The Chinese Government immediately decided to do two things. First, they indexed wages and based them on a very simple index calculated from the price of no more than five commodities. These were, rice, millet, cooking oil, fuel and cotton cloth. That very simple index, which would be despised by any economist, worked so well that, by indexing wages to it, the Government persuaded people to go on working because they knew that they would be properly paid even if they were paid a few days late. They indexed bank loans so that anybody putting his money into a bank was sure that he would be able to buy something with it when he got it out. As a result of this operation, the inflation which had been running at this enormous rate stopped cold and disappeared entirely within two years. So this kind of thing can be done.

I believe that, if we were to index Government bonds, we should thereby encourage the building societies to index their loans and we might destroy the present system which uses the building societies as a mechanism—and a very complicated one—for transferring purchasing power from the hands of those who lend money into the hands of those who borrow it. It seems that this astonishing phenomenon has persisted for far too long and that it could be abolished quite quickly if the Government would index their bonds and allow building societies to index their loans. We should then know where we stood and people who lent money would be able to get something in return which would be as much use to them as the money they first lent. So I believe that this is a possibility which could only result in action if all parties were willing to examine it and study it in some detail.

In this country, we have had the report of Sir Francis Sandilands. I read it very carefully and I was strongly reminded of the creed of St. Athanasius which, your Lordships may remember, described the Father as incomprehensible, the Son as incomprehensible, and the Holy Ghost as incomprehensible, yet there are not three incomprehensibles but one incomprehensible. I feel that some of the arguments which have been put forward by my accountants from time to time can be likened only to the theological discussions and the niceties of the Schoolmen.

Nevertheless, progress is being made and the accountants are beginning to realise that the old-fashioned way of doing accounts is not necessarily the right one. It is very remarkable that New Zealand, which is not a country that one would expect to take the initiative in these things, has just produced the Richardson Report, which in my view is a much more helpful document than Sandilands. It is based on Sandilands but goes much further, and it copes with the problem so vexatiously discussed in the columns of The Times about what one should do about the assets of the banks. This is such a fundamental matter that one can hardly understand how any such report could be written without studying it. The Richardson Report covers the matter in some detail. It was introduced to the New Zealanders by Mr. Templeton, the Minister of Finance, and I am sure that before long New Zealand will introduce a system of accounting which makes it possible for industrialists to keep the value of their firms as it was and does not allow the Government successively to take all their assets from them. I believe that they intend to begin by indexing the level at which income tax is levied so that they will not have a system such as we have in England by which as soon as wages go up the Chancellor of the Exchequer starts levying more income tax. This is responsible for what he calls the "buoyancy" of his revenue and is, in my view, an open scandal. So here, again, is another unorthodox proposal on which I believe consensus will have to come sooner or later.

To revert to the subject of New Zealand, we should not feel any embarrassment in accepting the fact that they are ahead of us. After all, they introduced the Welfare State 10 years before we did; they were able to nationalise an insurance company about 100 years ago, and they nationalised at least one of the banks 20 or 30 years ago. They are by no means unenterprising and, in this matter, it seems to me that they are far further on than we are.

So my point is that it is perfectly evident that the policies which have been pursued by successive Governments ever since the war have been totally unsuccessful; that we have in large measure destroyed our industry in an attempt to save it, and that the fine tuning which the Treasury is so proud of has done infinite harm to almost every industry that it has affected. I have quoted television and the building industry, both of which are suffering terribly from the effects of treasury control. I believe that these policies would have been unnecessary had the true net cost of the operations been properly costed out. Furthermore, I believe that, if we were to change our system of accounting and make it impossible for Governments to continue as they always have done ever since 1950 to confiscate the assets of the citizens, we might then hope for economic prosperity as we have not had it for many years. But this could come about only if there were a consensus of very great significance on matters so far undiscussed by either Party.

5.17 p.m.

The Earl of HALSBURY

My Lords, in common with other Members of your Lordships' House, I am grateful to my noble friend Lord Hankey for raising the matters which he has and for giving me an opportunity to express my own views on the subjects he has raised. I believe that this economy has been basically mishandled for at least a decade, and possibly longer. We now have a labour force which is deployed in the wrong direction and I do not believe that we can put it right in less time than it took to put it wrong. How are we to achieve any kind of continuity of management within the framework of our political system unless, following the advice of my noble friend, we can agree on some kind of consensus on matters to be attended to irrespective of ideological dispute?

By consensus, I certainly do not mean political consensus of the type with which a dialogue of the deaf—greatly enjoyed by both of them—between the noble Earl, Lord Gowrie, and the noble Lord, Lord Houghton of Sowerby, would provide us. It must be something that can allow that dialogue to proceed as a pleasant exercise in shadow boxing across the Floor of either Chamber while we try to correct those matters that are wrong with us. That does not mean, to borrow a phrase from the noble and learned Lord, Lord McCluskey, in answering my Question today, "knocking my country". I should be the last person to "knock" my country, but I do not think that trying to diagnose where we went wrong and seeking to put it right is knocking my country. We must face up to our own shortcomings.

Because I agree with so much that has been said, and particularly with what has been said by the noble Lord, Lord Houghton of Sowerby, on the question of whether we have the will to do it, never mind whether we can agree what to do, I shall take a single issue so as not to repeat all the matters with which I am in agreement which have been referred to by noble Lords who have spoken. I shall discuss something rather tough and rather "nitty gritty". It has links with my Question earlier today, though it is a pure coincidence that both items of business happened to come up on the same day.

I want to consider why it is that when personnel directors and chairmen or secretaries of trade unions both want to avoid a strike they are not more successful in doing so. What is the mechanism that makes striking acceptable to those who take part in it? Wages calculations are very tricky, and if one tries to do them as an amateur one gets them wrong because all the differences are subject to differential rates of taxation as marginals. Therefore, with regard to the figures that I am to give to your Lordships I have got the personnel department of a company of which I am a director to go over the figures with one of their wages departments to make sure that I am not misleading you.

I am going to deal with the case of two men. They are real individuals; they actually have names. One is an unskilled worker, a warehouseman, and the other is a skilled worker, an electrician. I will deal first with the position of the warehouseman. He is a married man with two children, aged 12 and six. He is a member of the Transport and General Workers' Union. His basic pay is £42 a week, with £6 supplementary. He gets overtime on his basic, but not on his supplementary. By the 26th week of the PAYE year—and it is important to specify this week because the PAYE refund depends upon the particular PAYE week in the year when it is paid—he has earned a total, in those six months, of £1,482 gross, and out of this he has paid tax of £238, with other deductions of £86, resulting in a take home pay of £1,158, or £44.53 per week.

What happens if in Week 27 of the PAYE year he goes on strike, for just one week? He is all right at the end of Week 27 because he draws the wages that he earned in Week 26. The question is what will happen to him in Week 28 when he goes back to work, because what he earns in Week 28 will not be paid until Week 29? So what has he got to lay his hands on in Week 28? This is the key thing. First, he will get £6 strike pay from the Transport and General Workers' Union, and he will collect £9.50 as PAYE refund. His wife will be given social benefits of £12.70 for herself, £5.35 for the elder child, and £4.35 for the younger child, making £22.40 in all. This, added to his PAYE refund and his strike pay, comes to £37.50, in contrast to his normal take home pay of £44.53. He is £7.03 out of pocket.

Your Lordships might assume that that was a disincentive to go on strike, but it is not nearly as simple as that, because his employer during a week's strike will have lost 40 hours' production and will be willing to recover from that setback by paying overtime. At this man's marginal rates of overtime, 40 hours' overtime, after tax, will be worth £40.92, roughly speaking £1 an hour of overtime work. So, with £7 of overtime which the employer will be willing to pay, he is back in pocket on the £7 that he lost during the strike week, and with another £33 to come to put him back in pocket. If he has to repay the £22 social benefits, which can be required, he is still £11 in pocket without anything to do with what the strike was about.

It is just a wonderful way of knocking off for an hour, losing one hour's pay, and then coming back again and being paid £1.50. So you see, my Lords, the employer's recovery programme is what is in fact financing the willingness to go on strike. This is what I call the kind of analytic consensus that we might achieve. It is not an ideological matter at all. I am not disagreeing with the unions. They simply behave as one would expect them to in the circumstances in which they find themselves. I am not blaming the employers. They want to recover from the effects of a loss of their production. But in fact it is one of the factors which is the driving force in producing this situation.

If, instead of taking the unskilled worker who is a warehouseman, I take the skilled worker who is an electrician, it will be found that the figures are a little different because while he gets the same benefits as the less highly paid worker during Week 28 when he no longer draws any pay, as his take home pay is being bigger, that means that he is more out of pocket; and, instead of recovering in seven hours' overtime, it takes him 18 hours' overtime to recover. If the strike was unofficial, so that he did not get strike pay, it would take him 22 hours to recover. But he still has another 18 hours to come, and by the time he repaid what had been lent to his wife as supplementary benefits he would still be in pocket; and everybody is in pocket as a result of a willingness to go on strike.

Your Lordships might say: Have I not proved too much? This means that everybody would be on strike all the time. No, my Lords, I have not proved too much because everybody could not be on strike all the time. To begin with the willingness of the employers to pay overtime would be exhausted, and there would not be any overtime money coming in. Of course everything has its limits. But I think that this is a very important mechanism, and I want to point out that it is not a mechanism in which one blames either the employers for doing what is natural or the unions for doing what is natural. It is something wrong with the system, and we ought to be able to put it right on a non-Party basis. I believe, if I have seen sufficiently into the mind of my noble friend Lord Hankey, that it is this kind of consensus that he wants us to try to bring about, not a purely superficial transformation of two ideologically opposed Parties into a coalition which would not hang together for anytime at all—

Baroness GAITSKELL

My Lords, I hope the noble Earl will for give me if, before he finishes discussing this particular argument, I ask him a small question. Obviously all that he has said about two men is true, but how many men is he thinking of? Is he really saying that this applies to thousands of men?

The Earl of HALSBURY

My Lords, these figures have been taken out of the wages sheets of a typical week in a big company, employing about 20,000 people, but distributed over a number of factories. I think that they are reasonably representative as rates. If anybody who has worked his way up through the trade union movement would like to challenge them as rates I should gladly give way.

Lord COLLISON

My Lords, I cannot quote figures, but the assumption that the man is better off when on strike than when he is working is not correct. To start with, if he had a week's money the week before the strike, that is considered enough to cover him for the following week. If it is a month's money, it is considered to cover him for the following month. The man's wife and children do not get the allowance. The man is paid the allowance on the basis of supplementary benefit rates which are less than £20 a week, plus an allowance for the wife and an allowance for the children, and if his income is more than that amount he does not get supplementary benefit. It is made up only to that figure. If he has capital that is also taken into account. I am afraid that what has happened here is that there is a common assumption around that people can go on strike or stop working and be feather-bedded, as the noble Earl is saying, to a better degree than when they are working. That simply is not so.

The Earl of HALSBURY

My Lords, I can only say that I have produced these figures in good faith. They were provided for me by a wages office which is dealing with these kind of matters all the time. Obviously I stand corrected by the noble Lord, Lord Collison, who has spent his life in dealing with these matters and who used to be chairman of the committee that administered public benefits. But I cannot be entirely wrong, for this reason. If one looks at the continuous process industries, where it is impossible to work overtime because the process itself permits only so many hours a week to be worked, it is found that they are not strike ridden in this particular way. It is particularly the single shift light engineering factories, which work considerable amounts of overtime and are under pressure regarding deliveries, where the employers are willing to pay overtime in a recovery from the strike programme, that seem to be most affected by this situation.

Therefore, all I can do is to produce this as a contribution to thought and allow the matter to be debated. But I believe that it is the kind of consensus that the noble Lord, Lord Hankey, had in mind, and it is certainly what I have in mind. I believe that it is possible to get consensus. Even if I am wrong, there are plenty of other things on which other people can be right, and I believe it possible that there can be consensuses. This is what the noble Lord is seeking to bring about. I certainly believe that it is possible to do it, and that we should continue this quest.

5.30 p.m.

Viscount HANWORTH

My Lords, I believe that most of us would agree that over the last few years we have pursued a fairly tortuous path down the road. This is perhaps well illustrated by what each Party has said about a wage freeze, or whatever you like to call it. They have each in turn said that under no circumstances whatsoever would they ever introduce anything of the sort; and so we have gone on. There are many of us who believe that the two-Party system which we have at the moment tends to accentuate the differences between the Parties, rather than the reverse. Be that as it may, we feel that a measure of consensus on important issues is necessary for our recovery; and I think that perhaps if the Government remain in power, for the first time we may get this to a degree which we have not seen before.

It has also been said in the debate this evening—and great stress was placed upon it—that an important element in recovery is to have the nation behind us in a recovery programme. We cannot possibly have that if the Government and their policy are not really representative of what the public want. I would say that, certainly in the early stages of this Government, for reasons which I can understand and for which I do not entirely criticise them, most of their legislation was political and completely out of touch with what the majority of the public thought important, or even wanted.

My Lords, all this, I am afraid, leads me in one direction only. I do not believe that we can get the measure of consensus which we need with our present Parliamentary system. Some noble Lords will remember that for the last three or four years, on every reasonable occasion, I have come down on the need for this reform. I am afraid that inevitably this Motion leads straight there. I intend to be brief because I do not think this is the occasion to go over all the arguments; but I would say, as somebody else has said this evening, that some form of proportional representation is an absolute prerequisite. I also believe that we need a partially written Constitution; and I think that we should try to separate the Parties from complete dependence on outside sources.

Those are only three of many measures which I think are necessary, but I am sure that the time is long overdue for these sort of reforms to be made. We want a gradual reform. We do not want to find that our institutions are suddenly upset because we have left reform too late. That leads me on to one remark which, perhaps, by the way, I may make. I think that at least logically, if we are in favour of reform, the first place to make it is in the Commons, and that the form of the House of Lords, or whatever the second Chamber may be, cannot logically be decided on until we have decided on the form that the first Chamber will take.

The only other thing I propose to do is to tell your Lordships very briefly about a Marplan survey which was carried out on behalf of the Sun newspaper. Over 1,000 adults and representatives, by age, sex, occupation, region and so on, were interviewed. I am well aware that these surveys can be far short of the truth, but I think that even if you assume that it is in error plus or minus 15 per cent. it is nevertheless surprising, and I think bears out what I have been saying briefly this evening and what many other noble Lords have said.

The purpose of the poll was to see how satisfied electors are with the existing political system, and what steps, if any, they want to see taken to improve it. Electors are very disillusioned with the existing system of government. Two out of three adults—63 per cent.—do not believe that any political Party can solve either the economic or the political problems facing Britain. Seven out of ten electors replied that a proportional system would be fairer to British voters; and a similar number, 70 per cent., said they would have preferred the proportional result. Even a half—49 per cent.—of the still committed Labour voters would have preferred the proportional vote, which would have given Labour 65 fewer seats. The public demand for electoral reform is huge and insistent. As to referenda, there was a general feeling that they like referenda but that, in the main, they should not be over-used.

Possibly the most surprising figures of the lot concern reforming the House of Lords. The House of Lords is a very popular and respected institution. Seven out of ten adults—that is 70 per cent.—think it does a good job for Britain. Asked whether they would prefer it left as it is, abolished or turned into a second elected Chamber, a clear majority, 56 per cent., said, "Don't touch it." Only among current Labour supporters—22 per cent., or one in five of all the adults—is there some doubt, with half saying it does a good job, and half saying it does a bad job.

My Lords, never mind about the House of Lords: to my mind, this is nothing like as important as getting the necessary changes made in our present Parliamentary and democratic system. One could point out, as I did in a debate three years ago, that there have been so many changes in the whole of our social life that changes must also be made in our political system. It is strange that this is seen so clearly outside and yet there is such tremendous resistance, apparently, even to acknowledging the need for it, within Parliament itself.

5.38 p.m.

Lord MOTTISTONE

My Lords, I must start by congratulating the noble Lord, Lord Hankey, in finding this day for this debate. I know he has been commiserated with, in that it is perhaps not a suitable day on which to expect a great many people to be ready and waiting in the Chamber, but in a sense, I would suggest, it is very suitable. Knowing how long ahead one has to put down a subject for debate, after which it is selected, I should have thought that he had been in collusion with Old Moore in arriving at this day on which to talk about this subject, which is very relevant to what is going on at the other end of that long corridor. I must apologise to the noble Lord, Lord Hankey, that, owing to other commitments, I was too late to hear his introductory remarks. I hope he will forgive me for that.

My Lords, political consensus is the theme, and I must say here that I personally agree with the noble Lord, Lord Houghton of Sowerby, that that is not really practical, in these times or in any times. We in this country are naturally combative, and I feel that we shall never get very far with a political consensus, if it is a political one, because somebody will always find a jolly good reason for creating a non-consensus. It seems to me that, even if it was temporarily arrived at, in times of peace we are most unlikely to achieve that. What I should have thought—and perhaps your Lordships will agree—is that we could perhaps examine how things have gone and whether there are movements which we can take in a slightly different direction. I cannot see us taking major movements in a direction one way or another. It seems to me that that is not only not what the people want or will get accustomed to, but that it is impractical to put into effect.

If we could spend a few minutes looking at what movements might be made, I should say that, coming from a long line of liberals (with both small "1" and capital "L"), having voted Socialist in 1945, having followed the Liberals in 1950 and having found my natural home here in the 1960s, I can perhaps take a wide enough view about what is happening.

I would ask your Lordships—and I hope that this will not cause offence across the Chamber—whether we really have not reached the end of the application of the Socialist theory. This is not to say that it has not been very necessary, good and worth while on the way; but, really, all the things that were postulated 50, 40 or 30 years ago have come about—and almost more so! I would suggest that perhaps the first thing we might agree upon is to go easy on extending yet further what one might call the fundamental theory of Socialism as postulated at the beginning of the century. If we could agree on that, we could start movement in the right direction.

I feel that your Lordships might also agree that the situation we have now reached, with more than 50 per cent., as I understand it, of the national wealth in Government or pseudo-Government hands, is positively harming the mixed economy which most of us agree is a very worthwile way of trying to run a country. I would suggest that that sort of move, or any move in that area, needs to be in reverse rather than creating more Government control, direct or indirect, of our national resources. I would also suggest that the outcome of this (if you like) excessive Government intervention in everyday affairs has been the erosion of the dedication of public servants. A friend of mine in the public service said to me not long ago, "You know, I find it isn't possible to do my job with the same enthusiasm as I used to because I don't find that the people I work with feel that we are here to help the public. They feel that they are here in order to do a job, in order to earn money." He went on, "There was a time when we felt that we were genuinely here as public servants."

I would suggest that what has happened is that the public maw has grown so wide, it has gobbled up so many activities, that in some ways it is employing more people than it reasonably can expect to retain that sense of dedication. I should have thought that the Civil Service proper still remains very much dedicated, but I would suggest that a good example of where this has not come about is in the Post Office which used to have a sense of public service and now no longer has. Ironically, for my argument, this is probably because in a sense it has been denationalised.

What I would suggest, therefore, is that we weigh up which of those enterprises and which of those services are best employed as public services and which of them are best employed as enterprises as free as may be, and to look at this afresh. If we decide that some organisation, some activity, for example, the coal mines, would be best given greater freedom, then perhaps we could take the line that the Government are merely there as a shareholder—and I know that this argument has been put before—and that the enterprise itself should be given the maximum freedom of independence.

That sort of thinking—and I am talking about thinking—is, I am sure, right thinking about the direction in which to go. I would suggest that the next thing we could agree on—and I am talking on a rather more personal basis—would be the need for more encouragement of independent enterprise. I think it is true to say that in all walks of life almost everybody is asking for more freedom to earn for themselves what is reasonable for the effort they put in. I would suggest that the fact that very many good chaps (and young women, too, for that matter) have sought jobs abroad—and this is absolutely undeniable and all of us know examples of it—is because they feel they cannot get a proper reward in this country.

I am hopeful that we shall solve our problems here before those people have exhausted their usefulness to mankind and that we may yet attract them back and that their service in other countries may be of value both to them and to us. But I think it important that we should not duck the issue, for, unless we take special steps to avoid it, these people are not going to come back. We shall have lost them for all time to other countries who, in many respects, are our competitors in world markets. I would suggest that how to give more encouragement and more reward to individual enterprise is something on which we must try to seek agreement.

My Lords, when the noble Lord, Lord Hunt, was talking about more responsibility for young people—he talked about more of other things for young people, too —he was really on the same theme; because encouragement can be given not only by way of material rewards but by way of responsibilities. Most worth while young people will seek the latter perhaps the more; but at the moment they get neither responsibility nor material rewards. It is this that we must try to put right.

My Lords, I should like to suggest that this wish for a greater personal freedom (if you like) is much stronger than one might imagine from listening to those people who are vocal in our midst. I think it is something that is part of the malaise which is brought about by people feeling that it is not worth making a fuss about themselves. Sometimes they do not think it is proper to do so. Whatever the reason may be, I somehow feel that our public understanding of things is getting rather distant from the private situation as it really is. I suggest that we need to study much more what the individual wants, to talk rather less about the masses and more about the individuals. I am sure that everybody agrees with this and I am sure that most people will feel that their Party is doing just that; indeed, I think the noble Lord, Lord Houghton of Sowerby, was saying something very similar to me earlier in the Chamber. But it is my belief that the kind of activity to which his Party has given expression has tended—whatever their good intentions; and I do not doubt them—to downgrade the opportunities for the individual in a desperate attempt to protect those people who require protection.

It is a difficult balance, and I suggest to your Lordships—and this is the main theme of what I am trying to say—that that has become out of balance; and though your Lordships will not doubt that I would think the Party now occupying these Benches would be better able to put that balance right, I personally would be prepared to accept that this situation could be worked towards by any Government in power, if only—and we come back to what other noble Lords have said—there was the will to do it. I suspect that noble Lords opposite do not have the will to do it. I am sorry about that and, because they have not the will to do it, I hope that they will give us the opportunity to take over at the earliest possible moment.

5.51 p.m.

Lord ROBBINS

My Lords, I should like to join with other speakers in expressing my gratitude to the noble Lord, Lord Hankey, for raising this fascinating subject for discussion. It is an ironic coincidence that while in this Chamber we are seeking common grounds of agreement, in another place the contrary state of affairs prevails. I only say—bearing in mind the latest Marplan survey figures—thank Heavens for the House of Lords!

I am glad that Lord Hankey's Motion speaks of a programme rather than a plan. I do not much believe in overall plans with quantitative targets for everything, in the iron curtain fashion. They are apt to be let down by events or, if they are not, those who carry them out are apt to adapt people to the plan rather than the plan to the people. Of course Governments must have plans: plans for expenditure, plans for revenue, plans for borrowing and plans regarding the money supply. However, so far as the broad field of commerce and industry is concerned, I am not convinced that in peacetime at any rate central plans are not actually inhibitors of adaptability. But programmes—to use the noble Lord's word—of broad objectives are another matter. It is very valuable to discuss them, especially when the present situation is still so precarious.

I am not so sure that I agree with the noble Lord about machinery. Frankly, I doubt whether much good comes of these ambiguous get-togethers, of which the famous Neddy is the prime example. I wonder by what fraction of 1 per cent. gross national product has been raised so far at the expense of so much time and so much machinery. I confess that I am also doubtful of the constitutional questions that are raised by this particular recommendation. In my judgment—and this may be old-fashioned—the business of formulation of broad programmes and means of carrying them out is still the business of Parliament and the Administration. I do not think that Parliament and the Administration have deported themselves in a very distinguished way in recent years, but that seems to me to be a case for internal reform rather than for multiplication of organs.

Now what about the objectives, my Lords? In my judgment, they are twofold. Perhaps as I read them you may regard them as threefold. My first objective is clearly both the elimination of inflation and the reduction of unemployment. The second objective, I suggest, is the increase of productivity per head. There is no need at this time of night to say much about inflation. We all know that it is going on, and we know that it is going on at a rate which, if not controlled, will ruin us sooner or later and tear this society asunder. We all know the underlying condition, however much we may differ about the minutiae of causes—it is, spending more than we produce. We all know that there can be endless debates about the exact measures to cure it.

There is more to be said about the objective which I have coupled with the reduction of inflation, namely, the reduction of unemployment. Since unemployment is, in the present circumstances, very largely the aftermath of the process of inflation, I hope that we all agree that unemployment is not to be cured by more inflation. I hope, too, that we agree that in a situation in which excessive spending is being reduced—as I hope it is being reduced at the present—some measure of pay restraint will prevent unemployment growing. That, I am sure, is the correct perspective in which to view measures of pay restraint, however irksome. Then, if pay restraint is maintained as inflation diminishes and confidence revives, we hope that employment will pick up. But as no less a person than the Prime Minister has said recently, that will not happen overnight.

Regarding the second objective, productivity, the important point to realise is the desirability of increased productivity per unit of investment. The noble Lord, Lord O'Brien of Lothbury, touched upon this in his most illuminating discourse earlier in the afternoon, and I do not think that it can be sufficiently emphasised. Our poor performance over the past 20 years or so, compared with our competitors, is very often blamed on deficient investment. I am prepared to agree that so far as investment as a proportion of gross national product is concerned, we have not done as well as might have been hoped.

But the important deficiency is that in productivity per thousand pounds invested. Here, as has been said already in this debate, in many industries our performance in relation to the performance elsewhere, is dismal. Of course here there is a complex of causes: restricted practices, poor management, poor Government, if I may say so—and that applies not only to one Party. Somehow or other, we must get this deficiency right or be content with standards which are considerably inferior to what we all want, and comparatively diminishing as regards the rest of the progressive world.

How are these objectives to be achieved? I have already indicated my distrust of increased machinery; and I should like to digress and to agree with the noble Viscount, Lord Hanworth, in believing in electoral reform. I believe both major Parties are at fault in jibbing at that for considerations of what I must regard as mere short-term advantage. But even with a reformed Parliament and electoral system, Parties are not going to disappear I am quite sure the noble Lord, Lord Hankey, would agree with me on that. It is probably undesirable that they should. Some degree of organisation, especially when more than 12 men are gathered together, is desirable if there is not to be intellectual chaos. What is desirable, surely, is that the differences between Parties should be confined within certain limits and that there should be no fundamental uncertainties overhanging investment and enterprise.

That is why I am so glad that in his opening speech the noble Lord, Lord Hankey, highlighted the desirability of consensus. I am so glad, also, that so frequently the same thought has formed the main focus of speeches which have followed that of the noble Lord. We shall not agree about all sorts of matters. We shall not agree in my lifetime, and we shall not agree for a hundred years; but I hope that the lessons of the last few years have brought men of goodwill together on certain, as I think, quite fundamental propositions.

Let me try to formulate three or four of those in as few words as I can muster. First, I think there should be a degree of consensus on the fact that at the present time it is production and not distribution which is the overwhelming problem. Recent statistical investigations which are not open to serious question—for example, the investigations of Professor Phelps Brown, whose integrity is a shining example to us all, and the investigations of the Diamond Commission—have surely shown that the margin available for redistribution in this economy is capable of great exaggeration. And, of course, if we try to distribute more than we produce or can borrow from outside, then we have inflation once again.

Secondly, I hope we would agree—I am trying to be as non-controversial as possible—that whether enterprise is private or public, regard should be had to prospective profitability. This is not a question of favouring the rich. Investments on a large scale nowadays tend, at any rate in large measure, to be in the hands of companies such as insurance companies, representing many comparatively small people. The question of the desirability of having regard to profitability of investment is one of the prudent allocation of resources; and although there may be exceptions in industries which are essential for national defence, I am quite sure that propping up unprofitable industries is a recipe for further decline.

Thirdly, again seeking consensus, I hope we now recognise that in any sane policy regarding distribution, provisions must be made for differentials and incentives. The remedy for extreme need is to be found not in the structure of payments for work but in the structure of welfare services, about which there is room for generations of legitimate argument and inventive ingenuity.

Finally, as the noble Lord, Lord Gore-Booth, has mentioned the desirability of alleviating the burden of direct taxation, I would urge that there should be a similar consensus on the simplification of the tax structure. I say that with some trepidation in the presence of the noble Lord, Lord Kaldor. Some persons, and even some noble Lords, are apt to blame the Treasury for the present complexity of things. In my judgment, one should never blame civil servants, who are not in a position to defend themselves; but this particular indictment is aimed especially at the wrong target. The responsibility for the present state of affairs is the responsibility of successive Chancellors of the Exchequer in the last quarter of a century, that is, the responsibility of the Chancellor of the Exchequer, not as initially advised by the Treasury but by the Inland Revenue, which, in respect of direct taxation, is, under the Chancellor, almost a separate sovereign state. What is needed is insistence by a determined Chancellor that the present mess, which is so distracting for so many, and which uses so much time which should be given to production, should be cleared up and clarified.

Such, my Lords, are examples of the principles on which, hopefully, we might establish the sort of consensus for which the noble Lord, Lord Hankey, so eloquently pleaded. I personally believe there are many more such propositions which could be subscribed to by men of goodwill on either side of your Lordships' House and in any of the Parties, save those which are avowedly destructionist. So gradually there could be built up a body of generally-recognised limits within which sensible policy might move. That would surely immensely facilitate the conduct of Government.

My Lords, will that happen? I do not know, but I am quite sure that as far as private talk is concerned the field is ripe unto the harvest. In private, people really are much more intelligent than they used to be. Sensible, sane talk about all sorts of affairs is much more prevalent than it was in the days of my youth. The trouble arises in public discussion, so much of which is insincere, over-simplified and based on misconceptions. That is why the persistence of your Lordships' House, so much misrepresented elsewhere, is such a blessing as one of the few public places anywhere known to me where one can still have a grown-up talk, such as the talk which the noble Lord, Lord Hankey, initiated this afternoon.

6.10 p.m.

Lord KAGAN

My Lords, I, too, should like to join in thanking the noble Lord, Lord Hankey, for this most timely debate, and I echo wholeheartedly his wish for more stability in the economy and thus the ability to pave the way to recovery. Industry, particularly the private sector—and I speak from experience in Yorkshire—has suffered most seriously from the constant changes to which it has been subjected, fiscally and by legislation. Ever since the late 1950s, investment allowances and bank rate have changed, certainly from Government to Government, and from Budget to Budget, and in these circumstances it is most difficult to make plans and decisions, because one cannot base them on the facts which will apply by the time they come to fruition. The average investment decision in the textile industry takes three years to materialise, and by the time a machine arrives the picture looks very different from what it was when it was ordered, and that has, in turn, introduced an over-cautious attitude to investment from which we now suffer.

I know that the Government mean well, and I know that the noble Lord, Lord Robbins, said that civil servants are protected—and well they might be, because they are certainly free to act as they wish, but are not free from the consequences of what they have done; and the experiments which have been carried on with industry have very often dislocated and harmed it, and have slowed progress. It has been said that on the Continent politicians change, but policies do not. We have, on a repetitive basis, the same politicians but the policies change very frequently. Therefore, stabilisation is absolutely essential if we want recovery to take place.

These changes also have a very serious effect on the morale of industry, from the board room down to the shop floor. I have spoken about how board room decisions are affected. But on the shop floor—and I periodically talk to some of our textile workers—people are beginning to wonder whether the Government are really concerned about their problems, or are using the problems as a weapon in an ideological battle. Sometimes, I imagine that they would wish to become wards of court, just as children are protected from battling parents who, in their name, usually pursue their own arguments. The same applies to our political scene. We hear a lot about planning agreements. Is it not time to have a planning agreement with the nation rather than with a particular Government, and let industry get on without being regularly interfered with?

We are today aware of what is going on in another place—the euphoria and the chance of getting into power, the passion at the risk of losing it. I sometimes wonder whether one should be reminded of Oscar Wilde's saying: Sometimes God punishes us by granting us our wishes. I should like, with respect, to say that, in my experience, industry has always done well under Labour Governments and the Stock Exchange reflects that. I think that my noble friend Lord Houghton is better qualified to react to some of the harsh things that are said against the Government, when they are really doing their best and even, it is suggested, borrowing Tory policies. Is it a case of: My mind is made up. Do not confuse me with the facts? I say with respect, and more in sorrow than in anger, that what matters is not who goes in the right direction, but whether the Government go in the right direction. I thank your Lordships for your indulgence.

6.16 p.m.

Lord TERRINGTON

My Lords, I am grateful to my noble friend Lord Hankey for introducing this wide-ranging debate, and at this late stage I should like to speak in just a little more detail on one aspect which has been touched upon by several noble Lords. My theme is a very simple one, and it concerns the need for the increased involvement of people in all walks of life in the prosperity of the country, through the medium of investment in industry and commerce, especially at a time when more capital investment is being called for. I believe, as I am sure other noble Lords do, that the successful operation of industry in a mixed economy requires a harmonious development of relations between the providers of labour and the providers of capital, and what better ingredients than this could one have as part of the programme of national recovery? I further believe that this relationship will be improved by a wider spread of capital ownership, leading in turn to a greater appreciation of the contribution which capital makes to the industrial process.

Having said that, I should, before going any further, declare my interest not only as a member of a City partnership, but more particularly as an executive of the Wider Share Ownership Council, which believes, as I do, that ownership of shares by individuals should be encouraged as one of the best and most responsible forms of participation in industry. Over many years now, statistics have unfortunately shown that the private sector has been a net seller of industrial investments to the extent of well over £1,000 million a year.

This is a trend which I deplore, as surely must all those who favour a mixed economy, and I have no doubt in my own mind that it is a result of direct discouragement of savings in industrial securities through the tax system, irrespective of the political Party in power. Moreover, it is a trend which other countries have tried to avert, and in France, for example, because of employee share ownership schemes, they have been able to give workers in Renault a 12½per cent. share in the company, although it is still State owned. In West Germany, twice the percentage of individuals have a direct shareholding in industry compared with the situation in the United Kingdom, and the United States' figure is five times as much as ours in percentage terms.

It might be asked: What is the significance of these comparisons and why introduce them into this debate? All I would say in reply is this. My noble friend, in the terms of his Motion, uses the word "consensus" and, interestingly, the Government have said that one of the requirements for legislation on the Bullock Report is consensus. Furthermore, studies over many years in the United States, where I have spent a good deal of my working life in recent years, indicate that companies with a substantial number of employee shareholders have shown an improving record of productivity —a subject much under discussion this afternoon—and this seems to me a highly desirable objective in the private sector of our own economy.

I now come to the most difficult part of what I have to say, because, obviously, I cannot make these comments without offering some constructive suggestions, and thus I cannot avoid becoming involved in certain matters of taxation. However, despite the imminence of the Budget, I must make three points which I consider to be of long-term importance if we are to get away from the high concentration of capital investment in the hands of the institutions and return to individual participation in the country's economic growth.

First, we must get away from the terms "earned" and "investment income". A great deal of so-called "investment" is today derived from the savings of thrifty people who during their working lives have already met their tax liabilities. No economy comparable with ours has such a distinction—notably the United States, France and West Germany who, as I have already pointed out, have substantially more individual shareholders than we have. This- is a point which I believe deserves considerable emphasis.

Secondly, we must put an end to dividend control in the interests of injecting new capital into industry. If industry is to succeed in attracting individual savers, the risk capital must be adequately rewarded. Here I would stress that I am not pleading for the so-called "idle rich" but for the mass of small, private individuals who stake their savings in British industry. Of these, according to the Diamond Commission's research in 1973, around 50 per cent. had a total statutory income of less than £2,000 a year, and three-fifths were of pensionable age.

I realise that the usual justification for dividend restraint is that if wages and prices are to be restricted, so, in fairness, should the rate of dividend income. But, my Lords, is this justified? I wonder. Taking a look at the period from 1965 to 1973, we find that the total income from dividends was no higher at the end of the period than it was at the beginning, while wages and salaries had doubled and prices had increased by more than 60 per cent. I hate to think what has happened since 1973, but even the statistics I have just given can hardly be described as an encouraging picture for the individual saver who wishes to back British industry.

Quite apart from the unfairness, I would also question the logic of this restriction. The provision of capital for industry means jobs for its workforce. Dividend restraint distorts the allocation of funds raised from savers through the market place, and the successful companies cannot offer the rewards which will attract new funds. This is clearly recognised by the authorities, who have tried to interpret the rules flexibly when a company has wanted to raise new capital. As a result, on such occasions they have usually allowed increases in dividends beyond the maximum—and, in my opinion, quite rightly so. However, this has led to criticism that the rules are being flouted and that dividend control is not being effective. But what it really shows is that the rules are nonsense and that the authorities know they are and act accordingly. Why, therefore, maintain something which is not only unfair but which is acknowledged to be harmful in its effects on capital-raising? I would submit that control should be ended in the interests of industrial investment, greater employment and general prosperity.

Thirdly, I must say a word about capital gains tax. These gains, when realised in inflationary conditions, are frequently only a mitigation of a real loss incurred. To tax such mitigation is excessively harsh and a great discouragement to the very people that this country needs as investors in industry. The report on inflation accounting, which has been generally welcomed and accepted, recommends a radical change in the accounting treatment of assets held by companies. If the financial position of companies is to be corrected for the effects of inflation, it is surely reasonable that the same process should apply to individuals. It seems to me totally inequitable that the private investor in industry should be faced with this tax. By way of encouragement, I would suggest that for the purpose of computing gains, an adjustment be allowed of the purchase price of a security held for more than two years by the difference in the retail price index over the period for which the security has been held.

Finally, I should like to say a very brief word about the Employee Investment Bill which was recently introduced in another place by the honourable Member for Harwich. Like many others concerned with increasing the ownership of industrial shares by individuals, I was most disappointed that this Bill failed to receive a Second Reading. I say this because it seemed a logical follow-up to certain rulings evolved by the Inland Revenue to facilitate the operation in this country of deferred profit sharing schemes for employee share ownership similar to those operating in nearly 200,000 companies in the United States. At this stage, however, I can do no more than express the hope that the 1977 Finance Bill will confirm the important fiscal provisions contained in the Bill.

I hope that what I have said is relevant to my noble friend's Motion. I believe it is, because, as I said earlier, I am convinced that an essential ingredient of a national recovery programme is a reversal of the present trend and a return to direct involvement of individuals in industrial investment. I fully recognise that there are those who are opposed to this type of individual participation and prefer centralisation as a matter of principle. To them I can only respond by expressing my disagreement and by drawing their attention once again to the deliberate policies of our EEC competitors, such as France and West Germany, who appear to be deriving positive advantages from them. If they can do it, why cannot we? However, I do not believe that we can, unless we have an all-Party approach to the matter which can produce the kind of political consensus clearly desired by my noble friend. Surely this kind of agreement is achievable in the interests of the country as a whole.

Personally I do not see this important matter as in any way a Party issue. I will conclude, therefore, by expressing the hope that I may hear some words of encouragement not only from the noble Lord who leads the House, despite the imminence of the Budget, but also from noble Lords in other parts of the House.

6.27 p.m.

Lord ROCHESTER

My Lords, first I should like to say, as simply as other noble Lords have done, that I agree wholeheartedly with the underlying theme of the Motion which has been introduced by the noble Lord, Lord Hankey. However, as has also been noted, the trouble is that as a matter of practical politics, all we can have now, in the short term, is a limited agreement between one or two of the minority Parties and the Government. I think I am speaking for all my noble friends when I say how glad we are to learn that a limited agreement has been reached this afternoon between the Government and the Liberal Party in what we conceive to be the national interest.

Starting, I think, with the noble Lord, Lord Houghton of Sowerby, a number of noble Lords have said—and I certainly agree with them—that the prospects for a longer-term agreed programme for national recovery depend very much upon a general willingness to see this come about. It was the noble Lord, Lord Houghton of Sowerby, who first asked this afternoon how this common purpose could be achieved. As for the answer to that question, I know no more than other noble Lords. I have some idea from my industrial experience of the procedure by which this common purpose could perhaps be achieved, given the will. I am at least clear that the first essential is for those elements in society who are chiefly involved in some of these major national problems to come together in order to confront the problem, or problems, to identify them more closely and to see what areas, however limited, can be found upon which they might build together.

Beyond that I do not see how we can move at present, except to say that it may be that one day events will prove that the electorate is ahead of us as politicians. In other words, if your Lordships will forgive me for striking what may appear to be a partisan note but is not so intended, it may be that the conditions for a political consensus will be created only when a sufficient number of people choose to vote for the Liberal Party or for some other minority Parties and that in that way consensus politics will be brought about.

I had a number of things that I was going to say but with which I will not weary your Lordships now. My noble friend Lord McNair has spoken of a number of points which relate to any long-term national recovery programme that it might be possible to create and which fall in the political field. I should like to mention one or two in, broadly, the industrial and economic fields which I think have not been referred to today. Again, the first has to do with procedure. I agree with the noble Lord, Lord Hankey, that the National Economic Development Council is a body which is ready to hand and that it should be made use of; but because I believe that the rights of the individual are those above all which must be safeguarded, I do not think it will suffice merely for Opposition Parties, as he seemed to be suggesting, to be represented on that body. I am not sure precisely how best to achieve it, but because I believe that the sovereignty of Parliament must somehow be retained, or rather restored, in my view it follows that it is employers and trade unions or their representatives who should somehow become involved in the Parliamentary process, perhaps through an extension of the Select Committee procedure, rather than the other way round.

I have to acknowledge that as events in the last few years have demonstrated very clearly, trade unions exercise great power; but surely it is in the interests of all of us, including union members, that as far as possible we should seek to subordinate their power to that of Parliament. There is a further complication, in that increasingly within trade unions power is being wielded in the localities rather than at the centre; and if we needed any reminder of that, I suggest that recent events concerning the toolmakers at British Leyland have supplied it. However, in contrast to the noble Lord, Lord Hankey, I believe that this calls not only for what might be called more member participation in trade unions, but also for better training of management in leadership, for in my view it is only through joint action by management and trade unions that workable negotiating procedure agreements will first be made and then adhered to.

The only other point that I wish to make relates to the equally difficult questions of productivity, of investment and of the future of incomes policy. I suggest that the first need is to develop the existing agreement between the Government and the TUC so that it formally involves the CBI, for if they are not included there will not be a consensus, the value of any agreement will be limited to bilateral bargaining on pay and on prices, and that will not promote active collaboration between employers and employees in achieving what I believe many trade union leaders would now agree to be the basic purpose of industry, namely, the efficient production of goods and services for the benefit of the community.

From this base, if it were possible to construct it, as I see it there would then be a better prospect of creating a climate of trust in which management could more confidently consult employee representatives from the start about specific investment plans, and there could thus be more joint commitment to increasing the size of the "cake", so to speak, before bargaining about how to slice it up, instead of, as now, after doing so. Arrangements could also be made for management and trade unions to help each other in training shop stewards to achieve what would then be their common purpose, and an institutional framework or superstructure could then be established within which a more effective national incomes policy would have, I suggest, a better chance of surviving.

I do not believe that this is all wishful thinking. Indeed, the company for which I used to work has just held the first meeting of a central business and investment committee with full trade union backing and having just these points in mind. It is representative of all ten divisions of that very large company, and I think I am right in saying that in each case the representative is a shop steward.

I believe it is for us as a nation to choose—although I am not so naive as to suppose that such a desirable general state of affairs will easily come about—between either starting to work together towards some arrangement such as I have sought to suggest, or on the other hand seeing our living standards gradually decline still further while we continue to bicker among ourselves. It may be that things will have to get worse before they get better. I find myself in some sympathy with the noble Viscount, Lord Amory, on this theme; that is to say, it seems to me that in the end the measures that will be needed may prove so unpalatable as to mean that they cannot be achieved by any single Party. It is because the noble Lord, Lord Hankey, has had both the wisdom and the courage to raise this basic issue that I am glad to support his Motion.

Lord MOTTISTONE

My Lords, before the noble Lord sits down I should like to ask him a question. In his opening remarks did he imply that his Party has allowed itself to be sucked into the Socialist whirlpool?

Lord ROCHESTER

My Lords, I do not think it is necessary for me to add very much to what I said, but just to remind the noble Lord, Lord Mottistone—and I hope I have made it plain—that in making this agreement we are satisfied that it is in the national interest. It may be that the noble Lord, Lord Peart, when he comes to reply, will have more to say about it. But certainly I think the noble Lord can rest assured that we are not likely to be party to any Socialist measures of the kind he appears to have in mind.

6.40 p.m.

Lord KILMARNOCK

My Lords, I should like, with respect, before we come to the end of this extremely interesting debate, to refer to an area of study which I believe to be relevant but which has so far not been touched on this evening. As we all know, most discussions on economic and social affairs tend to centre on how to share wealth, and, naturally, as several noble Lords have pointed out, the distribution of wealth depends on its creation. One of the premises of the Welfare State was an expanding growth economy. But though Eddington's universe was an expanding one and that expansion was an essential part of its nature, there is grave doubt that our global economy can expand indefinitely in a similar way. In recent years very substantial doubts have been cast on the possibility of continuous and regular growth among the major industrial Powers. For instance, the Club of Rome's report entitled Limits to Growth, published in 1972, makes fairly chilling reading. One does not have to accept all its conclusions, and many do not, but it is very difficult to dismiss them altogether.

My Lords, it may be possible by competitive prices, wage restraint, increased investment, and even by a dollop of enthusiasm, to improve export performance and balance of payments. But none of this is likely to affect more than marginally the single most malignant ill of our society, which is, of course, unemployment. I was glad that Lord Hunt touched so tellingly on this in relation to youth, and Lord Robbins also, of course, gave it due prominence. This problem affects not only us, but also other industrial countries, whose economies in most respects are much healthier than ours. Last Wednesday we had a very interesting debate on unemployment, and it is not my intention to go over that ground again. But I cannot refrain from quoting Lord McCarthy's first two propositions: namely, that we face a growing threat of mass unemployment which is unprecedented since the depths of the depression in the 'thirties, and which will certainly be much more difficult to remove because we know far less than we did then about how to do it. I beg your Lordships to take note of that disturbing statement, because I shall refer to it again.

Lord McCarthy's second proposition was that the existing policies of the Government are unlikely to have more than a marginal impact on the problem. I take this, incidentally, to be just as true of any Government we are likely to have in the foreseeable future. Even if there is an upturn in the economy, as some predict, it is not likely to affect the level of employment in anything like the same proportion. As the noble Lord, Lord Douglass of Cleveland, has remarked on at least one occasion in this House, investment does not necessarily create employment. Did not the noble Lord, Lord Rochester, tell us the other day of an investment of £65 million which was only expected to create 90 jobs.

"How is this germane to Lord Hankey's Motion?" some of your Lordships may ask. I believe it is highly germane, for until we have an agreed and accepted programme to defeat this evil we shall not get the consensus in the country which the noble Lord, Lord Hankey, calls for. The problem will not be solved by investment, nor by exports, nor by worker directors. It is a disease which marauds across the boundaries of disciplines and departments, laying waste good men and women wherever it goes. We should not delude ourselves—and to be fair I think few of us do—that it is conjunctural, that it will go away when the economy gives its next little skip out of the red with the help of North Sea oil. My Lords, it is not conjunctural, it is structural, and it cannot be solved without a very long, painful, searching look at many of the things we take for granted in our society. It will not be solved, nor will any of the more deep-seated problems facing us be solved, until we face the proposition—I am not saying that we should necessarily accept it, but it would be folly not to face it—that the cut and thrust of industrial competition among the richer nations may no longer be an appropriate or even a viable response to a world where frontiers constantly contract, millions starve, and it is increasingly recognised that resources are finite—in short, a world in which the challenge may shortly not be affluence but survival.

My Lords, I come back to Lord McCarthy's disturbing proposition that we know less about how to solve unemployment than we did in the 'thirties. This is patently true, but is it not extraordinary? In most branches of knowledge, surely, we know more. Why, in the face of this central socio-economic problem, are we so helpless? One part of the answer lies, I should like to suggest, in the increasing role of Government in our lives and in the tremendous complexity of the Government's task. The Governments in democratic societies are of necessity of short duration and tend to plan intensively for quick results which will bear fruit during their term of office. This is not to say that Government Departments in this country do not commission objective analyses of a range of problems confronting them. There has certainly been funding of studies on specific issues by, for example, the DHSS, the Department of the Environment, the Home Office and others, sometimes in conjunction with private trusts, such as the Gulbenkian, and PEP also study selected problems and publish the results. Yet such studies, however excellent, are bound to be limited in their scope by departmental boundaries, while Royal Commissions can be hamstrung by their terms of reference, as in the case of the Bullock Report.

We have, it is true, the Central Policy Review Staff, which is designed, I believe, to be ruthlessly objective, but it can only chew over what the Government puts on its plate. Of course, there are able political and social scientists and econmists working in the universities. Only the other day a review of the current situation was published by the Cambridge Economic Policy Group. Then one must not forget the institutes, such bodies as the RIIA at Chatham House, and the Institute for Strategic Studies, which are independent of the Government, or the Centre for Environmental Studies, which is financed partly by the Government and partly by the Ford Foundation. There are many other institutes covering many aspects of our national and international life.

All this activity is very admirable, but the whole of it—taking into account all the earnest endeavour and all the undoubted brainpower—does not seem to add up to more than the sum of its parts, because the parts do not come together in meaningful interaction; that is to say, in the generation of programmes of action which is what we seek. One of my first ideas was that what was needed was a federation of institutes, to bring together the results of research being done in the fields of social and political science and economics and other fields, and to foster inter-institute contacts, in the hope of some cross-fertilisation. But my information is that this would not be feasible.

Let us look very briefly at what is happening abroad. Perhaps I should start with the EEC, as we belong to it. Here the Commission set up a project entitled Europe Plus Thirty, which was headed by the noble Lord, Lord Kennet, who gave evidence about it to Sub-Committee E of your Lordships' EEC Scrutiny Committee, though I do not know yet whether anything concrete will emerge from this. Of course, it is very easy to dismiss all medium or long-range forecasting as futurology, something that sensible and practical men should have nothing to do with. But even some of our most hardheaded and hardnosed friends and competitors—among them the USA, Canada, Japan, Holland—go in for some kind of futures research.

In the USA, as we all know, "think tanks" abound, of all shapes and sizes, and many degrees of dependence on or independence of government, and of varying credibility. Attached to Congress itself is the Congressional Budget Office, which not only provides Congress with basic budget data and with analyses of alternative budgetary measures, but also provides periodic forecasts and analyses of economic trends and alternative fiscal policies. Here you have something which might be described as Congress's own "think tank." In this connection, Lord Hankey, very rightly, I thought, foresaw an expanded role for NEDC in this country. The Dutch, who few would accuse of being fantasists, published in 1966 a medium-term economic projection by their Central Planning Bureau, and the director of that body published a year later a macro-economic projection up to 1990. A report on physical planning in 1966 tried to describe a kind of Utopia in the year 2000. The Dutch now have a Scientific Council for Government Policy whose members are nominated by the Crown. Its main task is to inform the Government of possible long-term developments, thereby creating a basis for the evaluation of policy alternatives. The council reflects, the Ministers decide. This council is apparently very much alive.

How they order things in the United States of America or Holland may not be in accordance with our more ad hoc system of what perhaps I might be allowed to call "Government by flair". But flair, though always admirable, may not be enough. It is in this context that I should like to call your Lordships' attention to the initiative of Professor Dahrendorf—who until recently, as many of your Lordships will know, was an EEC Commissioner and is now head of the London School of Economics—in the direction of a body in which long-range policy studies and analyses can be carried out on the lines of the Brookings Institute in Washington. I understand that conversations are taking place today among trustees of the Ford Foundation concerning the possibility of establishing a branch of Brookings in this country.

The parent body, which came into being in 1927 as a result of a merger of some even earlier institutes, is an independent, non-partisan organisation and it is the single most important outside consultant to the United States Federal Government. It supplies and lends people to Government and takes them back into research—a two-way traffic perhaps not common enough in this country and perhaps analagous to the two-way traffic which the noble Lord, Lord Tedder, has advocated between the universities and industry. It relies for only 15 per cent. of its finance on Government and it works for Government only on the condition that work will be unclassifiable and publishable.

In my submission, we should welcome Brookings if it comes to these shores, as capable of making a real contribution to better policy-making and better decision-taking. Such a centre might well receive contracts from the TUC, the CBI and Government Departments for long-term forecasts, which no Government are able to carry out themselves owing to day-to-day pressure on their hard pressed officials and owing to the transient nature of ministerial office itself.

Far be it from me to suggest that all our problems will melt away if we copy the Dutch example or queue up on the doorstep of Brookings, or its equivalent, though I hope that the initiative of Professor Dahrendorf and his friends will come to something and become a pace setter in this country. Nor do I wish to under-value what is already being done. Every additional pound earned abroad must be applauded and every job created or saved is worth a cheer. But I want to suggest very strongly that we must recognise the need for longer-range and deeper analysis of policy alternatives than is at the moment common in this country, and for a centre where these activities can be carried out. I do not pretent to know what would emerge from such an institute or centre. Even if it did no more than act as a stimulant to a new type of awareness of our contracting globe, and help to create a new climate of opinion, it would be performing an extremely valuable service. For these, my Lords—a new awareness and a new climate—are the prerequisites of that consensus which the noble Lord, Lord Hankey, called for and which I am sure we all desire.

6.53 p.m.

Lord PEART

My Lords, I, also, should like to thank the noble Lord, Lord Hankey, for this debate and for an excellent speech. He read a very moving quotation to the House. The noble Lord sent me a copy of his speech earlier this month—very real proof of his sincerity in calling for co-operation from all parties. I should like to thank him publicly for the good spirit that he has shown. We have had a fine debate. As one colleague said, this is the House of Lords at its best. We should be honoured by the fact that people think that way. I was glad to receive the results of the Marplan survey on the attitudes of the British people towards the second Chamber. I may want reform although others may not, but I believe it is necessary to have a bicameral system.

A number of noble Lords have referred to the debate in another place on a Motion of no confidence in the present Government. The noble Lord, Lord Mottistone, seemed very disappointed—particularly with the Liberals—in his extravagant phraseology about a whirlpool of Socialism. I am sure he will not mind if I say that it showed that he has had a rather erratic political career. I do not know how many Parties he has been a member of—he read a list. There may be hope for him still. He can have a bet with me, but I think the Government will survive tonight. The noble Lord asked the Liberals about their limited agreement. The sooner he reads that agreement the better. He will find that it is a very sensible one.

I have made notes, as I always do when I reply, on what noble Lords have said. The noble Lord, Lord Terrington, asked me to make sympathetic remarks about share schemes. I believe that he is right and that he made an excellent contribution. He said, quite rightly, that we are in a mixed economy. He quoted the example of the employees in Renault, which is really a nationalised concern; he described how worker participation of that kind has been a success there. I agree with the noble Lord and I appreciate that he has been connected with this movement in a big way. I hope that the movement develops. Direct involvement by workers is important. If a sensible, practical scheme can be worked out at factory level with the unions, all the better. I hope that his point has been noted sympathetically.

The noble Lord, Lord Kagan, referred to fiscal policies affecting employment and to the many changes in the sphere of Government activity in relation to financial measures. The noble Lord is right: businessmen can be very much affected by new taxation. It leads to changes in policy. When I was a director of a fairly large firm I recognised the problem. As a leading industrialist, particularly in the textile industry, the noble Lord knows the difficulties full well.

The noble Lord, Lord Robbins, spoke about a programme but wanted broad objectives. As always, I listened to his remarks carefully. He had doubts about the machinery of Government, whether that would lead to complications and bureaucracy. He argued that it was Parliament and the Administration that should make the decisions, with which I agree. The noble Lord laid down two objectives, although if we include a reduction in the level of unemployment there were three. He said that we must seek to eliminate inflation; that we must seek a reduction in unemployment, and that, above all, we must increase productivity per head in manufacturing industry.

The unemployment theme was taken up by many other noble Lords. The noble Lord, Lord Kilmarnock, stressed unemployment. He developed his theme further and spoke about some of the problems which may affect competitive industry here and, indeed, in countries which are affluent in the world. Conditions are changing so quickly that a new situation could seriously affect us here. The noble Viscount, Lord Hanworth, mentioned a consensus. He supported the need for recovery. He thought that we could not achieve consensus under the present Parliamentary system. He developed a very powerful argument for proportional representation—no doubt he won many friends on the Liberal Benches. Whether the noble Viscount is right, that the reform should be gradual, is another matter; whether he is right, that we should reform the Parliamentary system first before we tackle the problems which face us, I do not know. The objectives that were laid down by the noble Lord, Lord Hankey—I shall deal with his remarks later—and also by the noble Lord, Lord Robbins, were right.

The noble Earl, Lord Halsbury, said that we should have a dialogue but he hoped it would not be a dialogue of the deaf. I hope that he is right. The noble Lord, Lord Bowden, spoke on a theme about which I know he feels passionately. I think that the first speech I heard him make in this House was on indexation and other matters. I wish him well in his campaign, although I cannot agree with him.

The noble Lord, Lord Gore-Booth, said that Parliament must speak with a single voice. I think he read an extract from a speech by the noble Lord, Lord Diamond. He said that he was in the middle position in politics. I am not sure what the middle position is exactly, but I agree with him about consensus. There are parts of policy where we can have consensus. He mentioned particularly foreign policy. I think that that has been true. Broadly speaking, ever since I have been in Parliament, both here and in another place, there has been consensus, certainly between the Leaders of the major Parties. There are always fringe elements in all Parties, but during the period of Labour Government under the Attlee Administration there was consensus. What they sought to do was basically supported by the great Prime Minister Winston Churchill, and also by Lord Avon to whom we paid tribute not long ago. There was a consensus.

It is true also in the field of defence. Naturally, we have to respect the views of those who are against defence for various honourable reasons, such as pacifism, but in the House even now there is consensus. It may well be that noble Lords opposite were rather touchy about cuts in defence expenditure. But, after all, their own Prime Minister said that there must be no sacred cows in the field of public expenditure. You cannot shout for no cuts in defence when you preach cuts in public expenditure. I think there is double talk on this.

The Earl of GOWRIE

My Lords, what we were maintaining was that cuts had already been made, and it was the cuts on cuts that we were objecting to.

Lord PEART

My Lords, that is an easy get-out. You agreed with those early cuts; you had no critical Motion, and there was no critical Motion on the further cuts. I believe the cuts to be necessary as long as defence capability is not harmed. I believe in defence and always have, like most noble Lords in this House, but I believe that there must be no sacred cows.

The noble Lord, Lord Gore-Booth, developed admirably the theme about the middle position. The noble Lord, Lord Hankey, dealt with it in his speech when he referred to agriculture. How I have been feasted by the National Farmers' Union and the Agricultural Workers' Union. I must add another important organisation—very important to noble Lords—the Country Landowners' Association. It was a rather remarkable evening that I had. I see one of my ministerial predecessors, the noble Viscount, Lord Amory. I think he would agree with me even in the sphere of agricultural policy, which is very important for our country, partly because of the efficiency of the industry and its importance to our people, and also partly because of our role in the Community where we make a major agricultural contribution.

There has been a consensus about agriculture for all the time that I have been connected with the industry—since I first became a humble Parliamentary Private Secretary with Torn Williams. It was a Labour Government which initiated that consensus. It was a Labour Government that changed the whole atmosphere in the agricultural field with major measures. There was the 1947 Act, which gave the farming community assured markets and guaranteed prices; which set up an advisory service and enabled the farmers, farm workers, and representatives of the country landowners to sit on executive committees in the regions, where a wonderful consultative system was set up.

Unfortunately, some of that consensus was destroyed by cutting down public expenditure, which was really chicken-feed, in a field which did for a time harm our industry, and I am thinking about what our successors did. But the noble Viscount, Lord Amory, was proud of the industry he represented. I think that consensus is still there, even though some Governments have acted doctrinally, like a rather silly decision to remove, for example, the Rural Development Board, which was going to bring great benefits, I believe, for the hill and upland areas of the North of England. However, broadly speaking there is consensus in that industry, and that is the approach that I want and which I think we can have more of.

Of course, we must still have our own Parliamentary battles. After all, I do not complain about the Party system. It is one of our great traditions that we can have our political battles in a civilised way as we do in this House, and as we sometimes do in another place, and it is right that we should have this. It is right that we should have great debates at periods of time in the country.

The Party system is not a bad system. It has worked. One does not have just to preach the works of Bagehot and other constitutional writers on the virtues of our Parliamentary democracy; it is something we cherish. I hope that we shall never have a one-Party State. The vitality of our Parliamentary system is a great national asset, and I am sure that noble Lords would not want to harm it, although there are siren voices which sometimes try to attract us along certain paths. I think we should be proud of our system, and I see no reason why we should be pessimistic. I think we can have more consensus of the kind that many noble Lords want without harming the Parliamentary system, and still preserve that essential political conflict which enables British people to come to decisions and, when necessary, to change Governments and to elect Governments which suit them at certain different times in our history.

I want to try to make my speech briefer than usual but it is not easy when one is trying to reply to people. The noble Viscount, Lord Amory, talked about a definition of new socialism. I think he was wanting to know really what was behind the view of my noble friend Lord Houghton. I take the view that we must think in terms of a society. I am going to plagiarise a remark of Professor Graham Wallace, who is at the London School of Economics. I hope I do not frighten noble Lords opposite when I say that. He said that freedom was the possession of continuous initiative. I think our aim should be to create a society through consensus, where the wellbeing of our people is assured; where we have better health standards and better education. We should create a society which enables individuals to have continuous initiative. That is what we want, and that is why I am a democratic socialist.

I do not use the world Socialism in the Marxist sense; I use it in the sense of social democracy in Europe, and indeed in the way that my noble friend referred to it. We make no apologies for it. After all, in New Zealand it has worked in the sense that there is a mixed economy there, and the Government from time to time did certain things. They had a national health service and social security, and that is what I want. The noble Lord, Lord Hunt, was quite right when he talked about unemployment and the need to look after our young. I was pleased with his remarks about comprehensive schools. And I must condemn that dreadful film on BBC television the other night. There is something strange about that programme. I think that it was done deliberately. After all, Eton is a comprehensive school for the rich. A very good one, I am told. They have no problem of a dull child there. They get the best education.

I practise what I preach because I sent my only boy, who passed the 11-plus, to a comprehensive school. It has not harmed him. He has done very well. And it is true that the system will work better as it is known better. There is still a lot of political prejudice, but I believe that comprehensive schools are the answer, because the school is, in essence, a microcosm of our society. It is there where the principles of good living and democracy are created. Others will argue that it is in the family, but I believe that it is in both. Therefore, I want to see good schools. It is initiative that we want, and this is where even with people of good will we can have a consensus of opinion. So I am not pessimistic, whatever arguments there may be.

I had better come now to some of the other arguments before I deal with the noble Lord who initiated this debate. The noble Lord, Lord O'Brien of Lothbury, talked, as always, sensibly about financial matters. He said that the Tories would not have acted differently compared with what had been done by the Labour Government, and I think that in reality he is right. I am fairly certain that if noble Lords opposite had been in power they would have acted much the same as we have.

The Earl of GOWRIE

But with conviction, my Lords.

Lord PEART

My Lords, no doubt they would have acted with conviction, even when they acted wrongly. I know that, and for that reason noble Lords opposite can be too stubborn. Perhaps they are rather arrogant in that respect, thinking they have a right to govern us always. I believe the Conservatives would have acted in exactly the same way. In fact, I do not think they are very far from us—I do not want to embarrass my supporters—because on the main matters of economic policy there has been a consensus, except that noble Lords opposite have never really come clean on the question of cuts in public expenditure, and I have often chided them about that. I hope noble Lords will forgive me for becoming a little political, but, after all, I am speaking of the need to obtain a consensus.

Lord O'Brien was right to say that the making of a consensus would depend in the end on market opinion in the economy. He asked for not too much nationalisation. These are all matters about which we can argue. Public enterprise can be a good thing for the country. A mixed economy means precisely that, public and private enterprise, and sometimes there are great dangers from private monopoly. One has only to look at the history of Germany to see what happened there over a long period. The noble Lord, Lord McNair, spoke about British trade unions and I believe it was he who mentioned trade unions on the Continent. It may well be argued that the German trade unions have developed an efficiency, and that they have done that only because they are large, whereas we have too many unions. On the other hand, many people argue that perhaps we should fragment the trade union system and that we have gone too far in relation to Government. I do not know, but certainly these are matters about which we can argue.

One should not be too pessimistic about the attitude of trade unions. Despite what has happened in Leyland, I believe that broad opinion in the trade union movement as represented by the TUC and its committees is helpful in the best sense to the running of our country. I believe that that is equally true of the CBI, and that is why it is a good thing that the leaders of industry can now work together, as they do, on many of the larger committees; "Neddy" was mentioned by Lord Hankey and the same theme was taken up by other noble Lords. Generally speaking, therefore, there is today a measure of broad agreement. The consensus at national level has also been developed through the Social Contract. Our social agreement with the unions has become the envy of the world and it has achieved widespread acceptance of pay policy, a national policy which, in my view, has an immediate impact on ordinary working people both when they receive their wages and when they go to the shops.

This consensus has, however, gone much deeper. As a result of the Social Contract, our industrial relations record has been dramatically improved, and I do not hesitate to make that point despite the difficulties highlighted by the Press recently. In the second major plank of the Government's industrial and economic strategy we have sought co-operation and consensus between the Government and those who work in the various industries covered by the sector Working Parties. I did that as Minister of Agriculture and I did it as the Minister responsible for the fishing industry. We always sought to get agreement for our decisions and the desire was to help the two industries, which were certainly not controlled by Socialists. They were not part of a Socialist economy; they were highly competitive in a capitalist sense. In other words, we have never been doctrinal on this score.

This search for consensus has also prompted us to look for an extension of industrial democracy. I will not develop that theme, because we are still talking and having discussions about it. It is, in my view, as important to ensure partnership between workers and management at the workplace as it is to develop agreement for national policies. I am not arguing now about the details of the Bullock Report, but that is why we commissioned that report on industrial democracy and why we are now engaged in widespread consultations on the best way to achieve this extension of industrial democracy; the search for consensus at the level of the individual firm, the industry and the whole community. This Government have sought and achieved a national consensus of a kind far more lasting than the sort of coalition which we are often encouraged to patch together here at Westminster.

The noble Lord, Lord Hankey, said there was considerable agreement about what should be contained in a national recovery programme, and I am sure he was right. Let me spell out quickly what I consider to be common ground among the vast majority of ordinary working men and women in this country. First—again, this point was made by Lord Hankey—it is common ground that Britain's industrial performance, productivity and overall rate of growth over a long period have been poor by comparison with our competitors. Thus, any programme of recovery must take into account both this and the special economic difficulties that we have had to face in the last year or so. We must encourage an improvement in our overall industrial performance in the long term, as many noble Lords have said today. But, at the same time, we must not minimise the difficulties that we have been experiencing recently, difficulties which arise from our relatively slow cyclical recovery from the worst recession the world has seen in the post-war period.

In my view, therefore, we are on the right path. The Government have been firm in our requirements in the present situation. The first priority is for a reduction in inflation, an improvement in net exports and increased industrial investment. We will need to achieve these in order to sustain growth and move towards full employment. But I would say to noble Lords that our strategy looks further ahead as well. While it is the only way to solve the immediate and pressing problem now facing the economy, it is also an essential step towards the longer-term need to improve our overall growth rates. We have sought to achieve financial stability in order to provide the conditions for recovery in investment, exports and growth in the medium term.

This has meant keeping a firm, I would say unprecedentedly firm, grip on the country's finances. Public expenditure targets have been controlled and met, monetary targets have been set and hit. We have tried to alleviate unemployment through short-term selective measures. Yesterday's figures, showing the largest monthly drop for three years, suggest that we are moving firmly in the right direction. They showed a fall of 38,000, the second successive monthly drop. These are measures which have to be taken in the short term and which I believe are generally accepted as sensible and reasonable, and I could certainly not accept, as the noble Lord, Lord Hankey, alleged, that they are obscure. This acceptance emerged during the debate in this House on 26th January about the Chancellor's December measures. Indeed, Lord O'Brien mentioned the Prime Minister's brave speech at that time, a speech which was welcomed in this House by noble Lords of a different persuasion and which outlined the strategy which we still accept. We debated them fully then and I do not intend to go over them now.

In the medium-term we have agreed with the unions the need to preserve our competitive position abroad, to hold down our costs and reduce our rate of inflation through the Social Contract. We have also, through an extensive system of selective assistance, concentrated on the growth points in the economy as part of our policy to expand this country's industrial base. And, for the medium to long-term through the industrial strategy, we are looking for the likely constraints to future sustained growth. Throughout the development of these policies, we have consulted widely and deeply with unions and industrialists. The political Parties represented here at Westminster have had every opportunity to put their views in debates and during the discussion of legislation. We have been debating the need for a commonly agreed national recovery programme. I agree that this is necessary and I argue that it is what this Government are doing. I have described in general terms the means whereby we have sought to achieve this consensus. I should like quickly to go into a little detail about some aspects of the Government's search for consensus at the level of the national community, the industry and the individual firm.

At the beginning of the debate, the noble Lord, Lord Hankey, said that there was a measure of agreement as to what our economic recovery programme should contain. He mentioned the discussions in the National Economic Development Council and asked what they amounted to. I shall answer him as best I can, though I must admit that I may not be able to better the account of the workings of the industrial strategy given by the noble Viscount, Lord Watkinson, in this House in the economic debate on 26th January. The industrial strategy is conceived as a "bottom up" approach to planning, unlike the National Plan, which attempted to impose a plan with targets and growth rates imposed from above. Decisions which improve actual efficiency are required to be taken in the enterprise and workplace. They must also be taken jointly by management and workers so that the strategy evolves at the level of the individual sector.

Unlike many attempts at planning, the industrial strategy both helps to influence and is influenced by decisions in individual firms and plants. The system is not and must not be too rigid. It allows flexibility so that individual sectors can adapt as the environment in which they are operating changes. A framework almost ideally suited to this "bottom up" approach already existed, as the noble Lord, Lord Hankey, knows, in "Neddy" councils for individual industries, and I agree with the noble Lord, Lord Hankey, that this Council is well placed to tackle this job. These have been in existence for over ten years and the participants have already learnt to work together. They have learnt the benefits to be obtained from improved communications both within and between individual sectors and, just as important, they realise that substantial results must take years to achieve.

I had better pass on and skip some of my speech because the time is getting on. I believe that there is a desire on the part of we, the Government, to further the idea of consensus. People may not always agree with our policy but we are anxious to see that there is full participation with industry, the trade unions and those who have responsibility. I feel that the concept of industrial democracy, when it is finally settled after the further discussions which I mentioned earlier, will in the end help to further the Social Contract and all those other instruments which I believe will, in the long term, do so much to enable our great country to recover.

I should like to pay tribute to the trade union leaders without whom the agreements we have seen so far would have been impossible, and to those forward-looking businessmen in the CBI who have co-operated as well. Here is real consensus. Here is something which we know will in the end enable our country to grow and will enable us to produce much more than we have ever done and to do so more efficiently. Finally, may I, if I dare, end this debate with a quotation in an attempt to match the grave but poetic note with which the noble Lord, Lord Hankey, ended his opening speech? It was in 1776 that Benjamin Franklin said: We must indeed all hang together, for most assuredly if we do not we shall all hang separately. I believe that that thought is every bit as true today as it was over 200 years ago.

7.26 p.m.

Lord HANKEY

My Lords, after that brilliant summing-up, for which I should like to thank the Leader of the House, I shall not attempt to make any great summing-up myself. I feel that we have had a most interesting debate. We have produced an enormous number of constructive suggestions. Very nearly every noble Lord who has spoken has put some useful ideas into the common pot and I only hope that those ideas will be noted and made use of. I should like to thank everybody who has spoken for the trouble they have taken to contribute to our debate.

I think in a sense that we had bad luck about the day. I realised that my speech was bound to be like sowing the dragon's teeth—your Lordships will probably remember that exploit of the great Mr. Jason in ancient times. We had a little of this, but I should like to say that when I am thinking of a consensus I do not believe that it can be a consensus over the whole field. If we were going to have that, we should have a coalition Government, which is manifestly impossible. But I feel that we ought to be able to have a very considerable consensus over a limited field, as my noble friend Lord Robbins pointed out and as I think the noble Lord the Leader of the House also implied. I am not against the Party system of course. One cannot organise a Parliament without it. It would be sheer chaos. On the other hand, I feel that on certain aspects of our national life the Parties would be better occupied trying to see how much they can agree upon rather than how much they can embarrass each other. That, I believe, is where our Parliament has gone wrong in recent decades. I say this with some hesitation, but, honestly, I believe that it is a statement of truth.

I visited Russia with a Parliamentary delegation in May 1968 and, as we sped in smart black Russian cars across the steppes, I was able to have reasonably confidential conversations with members of every Party represented on the delegation. Every one of them said almost the same thing: it was, in effect, that if the next two Governments were not more successful than the last two our whole system would be at risk. I believe that that is the position today. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.