INDUSTRIAL RECOVERY

HL Deb 17 January 1979 vol 397 cc980-1118

3.57 p.m.

Debate resumed.

Lord CARR of HADLEY

My Lords, may I, like my noble friend, start my speech by congratulating the noble Baroness on her promotion (I am sure it is right to call it that) and say what pleasure I am sure it gives to the whole House as well as to her. May I also, before I come to the substance of my speech, ask for the indulgence of the House for the fact that I am afraid that I shall have to leave the House for a short time in the early evening because of an important engagement to which I became committed long before I knew about the date of this debate. I shall be away for as short a time as possible. In view of the number of speakers, I shall be back in plenty of time to hear a further considerable part of the debate.

I am sure your Lordships would wish me to thank and congratulate the noble Viscount, Lord Trenchard, for raising this debate today, for choosing this particular subject. It is another in the series of debates which we have had over the last two years which have dealt with the fundamental aspects of our industrial problems. I am afraid I am going to bring your Lordships back rather nearer to 1979. I found the chronicler of 1990 not only encouraging but interesting, and I think we should take seriously what the noble Viscount put into his chronicler's mouth, because I believe that the sort of improvements which he envisaged are indeed achievable in this country if we go about things in the right way. On the whole I agree with what my noble friend outlined as the right way.

I am not going to be a Jeremiah, because although there is gloom I am sure there is a road ahead open to us. Inflation is undoubtedly Public Enemy No. 1. Unless we can reduce our inflation rate at least to the levels in the other major industrial countries which are our competitors, and keep it down to those levels, we shall not be successful in solving our unemployment problems or in raising the standard of the quality of life in this country. Our decline relative to others will continue.

There are two ways of tackling inflation successfully. One is by restraining the demands for goods and services; but the other is by increasing the output of goods and services. Both of these methods may have to be used, first one and then the other, and it is not paradoxical even to use both together in different measure. But in recent years we in Britain have found it necessary to concentrate almost entirely on the weapon of restraint to control and bring down inflation. This cannot go on indefinitely without our industrial strength relative to that of other countries declining even further and faster. It is increasingly, indeed now desperately, urgent to act also on the output side of the equation and to stimulate productivity—to stimulate production without productivity is no good—and to remove, in the words of the Motion— conditions unfavourable to the creation of wealth and the recovery of British industry". There are many aspects to this problem, taxation and many others which my noble friend mentioned and there are others which he did not have time to mention. I want to concentrate entirely on just one field which is painfully topical at the moment; namely, the urgent need to establish in this country the necessary conditions for responsible collective bargaining in industry.

I agree with the noble Viscount, Lord Trenchard, that a decade and more of Government imposed incomes policies, and the measures which successive Governments have felt compelled to take to try to make those incomes policies acceptable or enforceable, has been one of the main causes of the present industrial stagnation and decline. I want to see them removed. The side effects of imposed incomes policies seem intolerable, but as we are finding again now, the results of present-day British-style free collective bargaining are even more intolerable. Indeed, they are totally insupportable. We must have again in this country, as they do in other countries, responsible collective bargaining within, in the modern world, the context of a broad agreement on an achievable level of incomes increases. That is what we must have, instead of the imposed, rigid incomes policies.

However, it is impossible to have responsible collective bargaining if unions start the bargaining process by putting in claims of 20 per cent., 30 per cent., 40 per cent., and even 50 per cent., when everybody knows quite well that if increases were to average more than 5 per cent. to 10 per cent. inflation would go rocketing up once again. It is impossible to have responsible collective bargaining if unions lack the will or ability, or both, to honour the agreements they make. More than 90 per cent. of all the strikes in this country are unofficial, or at least start as unofficial strikes—that is, in breach of union rules or advice—and the great majority of those are also in direct breach of some aspects of agreements which the unions have entered into.

It is impossible to have responsible collective bargaining if employers have to negotiate a new agreement under threat of strike action even before the existing agreement has run out. Look at the example of Fords, where an unofficial strike took place instantly, before negotiations had a chance to proceed and while a current agreement was still running, and directly in breach of that agreement. Yet what did the union do? They did not try to restrain their members from unofficial action in breach of an agreement; they immediately made the strike official. We cannot have responsible collective bargaining if that sort of thing happens.

Nor can we have responsible collective bargaining if strike action can be used without liability to those taking it, not just against the firm or industry in dispute but against the economy and the community as a whole, as we see in some areas now. We cannot have responsible collective bargaining if unions and strikers are protected against any liability for their actions, unless they are actually criminal acts, particularly when one realises that in this country, and only in this country, such protection not only covers the official action of recognised, certified unions but covers the actions of any informal group of workers of any kind. It is impossible to have responsible collective bargaining if unions receive all this protection not only in disputes with employers but in disputes with each other, as we see in the railway tragedy at the moment.

In short, we cannot have responsible collective bargaining unless, at last, we fairly and squarely face up to the question of union power in this country. It is not the only need—I wish to emphasise that—but it is an absolutely essential one. The Labour Government became convinced of that in 1968; hence their proposals in their White Paper In Place of Strife. The Conservative Govenment were equally convinced of it in 1970; hence the Industrial Relations Act. The present Labour Government hid their heads in the sand and pretended the problem had gone away or would soon disappear. We see it has not, and it is clear that the problem must now be faced. Whether and to what extent it has to be faced by law is a question of its own kind to which I shall return shortly, but it is clearly a problem we must face, and it is clear that we in this country must establish rules—whether or not laid down in law or voluntarily agreed and voluntarily supported by drawing up, for example, codes of practice—and they must be in position, as a matter of urgency, with the full support of unions, employers and Parliament behind them.

We must have rules, for example, under which unions bind themselves to use every best endeavour to honour the terms of the collective agreements they make. This means unions being more prepared to exercise their own rule books—not anybody else's law but their own rule books—in discipling their members who fail to honour their own union agreements. Unions are not slow to throw their rule books at those of their members who refuse to take strike action when strike action is properly ordered, and that is right. But too often they are very slow indeed to use their rule books against members who disobey the union in striking when they should not strike and when it is in breach of union agreements and rules to do so. We must ask unions voluntarily to use their own proper disciplinary powers within their constitutions and rule books. They cannot always succeed, but a little determination and leadership, if we are talking about a voluntary society, would work wonders and is absolutely essential.

We must have rules under which no major strike can be called without a secret ballot; rules under which secondary boycotts and strikes against industries and firms not directly involved in a dispute are at least strictly limited, if not altogether forbidden. We must have rules under which picketing has to be conducted peacefully by a reasonable number of people who are directly concerned with a dispute and in areas and localities which are directly the seats of a dispute, and not over the country at large. We must have rules under which exceptions, exemptions and privileges granted in relation to an industrial dispute are limited to recognised, certified unions, and cannot be enjoyed any more by any ad hoc unofficial group of employees, whether union members or not.

We must have rules under which orderly negotiated procedures are established for dealing with the multi-union situation which exists in so many British companies and industries. It would be nice if we could get to the West German situation of having one union for each major industry, but it is pie in the sky to imagine that we can. However, we can develop model rules by which we can at least regulate collective bargaining in a multi-union situation in a reasonably structured and orderly manner; and we must have rules for doing so.

We must have rules under which unions themselves accept a significant part of the financial burden of supporting the wives and families of strikers. In other words, unions must much more widely get back to the good, traditional purpose—which was an original purpose of trade unionism—of paying adequate strike pay to their members on strike. Nobody wants to see families of strikers starving, but it is no longer tolerable to the majority of people in this country that the rest of the community should shoulder the whole financial burden of maintaining the wives and families of strikers—maintaining them by the taxes of many people who are receiving less income than that which the strikers are on strike for refusing. Strike pay must be more generous and more generally available from the unions when their members are on strike.

We must have rules under which union shops can be established with reasonable protection for the minority who strongly object to joining a union. The Greater London Council has in the past few days shown us an example of what is possible in that respect: reasonable protection of liberty with reasonable security of representation for the union which they are prepared to accept. We must have rules, too, under which the arbitration and conciliation services are as available to employers as they are to unions, and on equal and fair terms to both.

These are just major areas in which we must establish working rules in this country. In every other major industrial country rules of these kind are an integral and natural part of the industrial scene; not of course always working perfectly, because we do not live in a perfect world, but obviously being a powerful, essential factor in creating that degree of responsibility in collective bargaining which makes unnecessary the detailed incomes policies imposed by Government which we have now suffered more or less continuously for well over a decade in this country——

Lord BROWN

My Lords, may I ask the noble Lord a question? I have much sympathy for what he is saying, but he keeps on using the word "rules". Docs he really mean legislation?

Lord CARR of HADLEY

I am just about to come to that point, my Lords. If we want responsible collective bargaining in Britain, and if we want to get rid of the restrictive and damaging effects of our incomes policies, we must ourselves establish and practice sets of rules similar to those operating in other countries. In other countries—and here I come directly to the noble Lord's point—these rules are defined in law and are supported by the law. In Britain the unions, at least so far, have refused to recognise or respect such a framework of law. They refuse to accept it either from a Labour Government or from a Conservative Government. This being so, I believe that we have a right to ask the unions themselves now to come forward with their own solutions to these problems — problems which stare us all in the face and which do as much damage to the millions of trade union members as they do to the rest of the community. If the unions can take the initiative, in cooperation of course with employers and Government, in coming forward with a voluntary system of model rules, codes of practice—call them what you like—which are clear, comprehensive, and relevant, and which they themselves will back with all their power and influence, it will be so much the better for the whole of this country.

I am convinced that such a voluntarily agreed system of self-regulation would be much more in line with the British tradition and would indeed be preferable to law. I do not resile in any way from my conviction that the need to introduce laws in 1968, 1969 and 1970 was inevitable. I believe that it became inevitable. I became convinced of that with great regret; but I am sure that it was necessary. It was rejected, but perhaps in its imposition and in its rejection we all, including the trade unions, may have learnt something. So they now have a chance to come forward with voluntarily established, self-regulating rules and machinery. But we must act as a matter of urgency to establish such a system of rules governing the conduct of collective bargaining and the management of industrial disputes. I believe that with determination and good will it will be possible to deal on such a voluntary basis, without law, with most of the essential subjects that I have listed.

However, there are, I believe, certainly three areas in which legislation is necessary—and urgently necessary. First, there must be a change in the statutory definition of the terms of reference of the Advisory, Conciliation and Arbitration Service (ACAS); and that change—and it can only be made by Statute—is necessary in order to give access to their services on fair terms to employers, equivalent to the access available to unions. That is one area.

The second area where legislation is necessary is that to limit secondary boycotts and to restrict the great legal exemptions and the protection for industrial disputes to break contracts of employment, and to reverse what has in practice proved to be their disastrous extension to action to bring about the breach of commercial contracts at large. Many of us feared that it would be disastrous, and I think that it is now clearly seen that it is. The third area in which I believe we must have legislation is that in which the legal privileges and immunities are restricted to unions which are certified unions, and we should not any longer extend these immunities or privileges to any unofficial or ad hoc group of employees, however temporary or however small. This really should be a proposition on which the great majority of all parties could agree.

The Donovan Royal Commission unanimously recommended that compulsory registration of unions should take place and that the approval of their rules should be a condition of registration. I repeat that that was a unanimous recommendation of the Donovan Commission, which means to say that it had the support of the trade union members of the commission, who included the then General Secretary of the TUC, Mr. George Woodcock. So it was no employers' ramp, nor an academic ramp, nor a Tory ramp. It was a unanimous recommendation of the commission which included leading trade unionists. It followed directly from that that the Donovan Commission recommended that special privileges and legal immunities should be enjoyed only by properly registered or, as we now say, certified unions. I believe that that is the third essential measure of legislation. Apart from that, I believe that with goodwill and determination, learning from our lessons, we could mostly establish the system of rules that we need on a voluntary basis. I believe that that is how we should try to do it.

Finally, we must look at the problem of union power firmly, but also calmly. We must keep it in perspective. Do not let us forget that we need strong unions. We do not want weak ones. The real problem in Britain is not so much the actual strength of union power, but the way in which it is used. There is also a great problem in Britain in the balance of power within the unions. The constitutional power of our British unions tends to be too weak, and the unofficial power within them too strong. Unions in other countries also have great power, but in other countries the power of the unions is made much more accountable both to the community as a whole and to the unions' own members. This surely is what all of us ought to want to achieve in Britain as well.

So I beg the leaders of the trade union movement to think hard and honestly about these problems. I beg them to look overseas and to see that unions in other countries, which have accepted the kind of regulation that I have described have been more able to win better pay and conditions and greater influence for their membership than have the unions in this country. I beg them also to realise that, in the end, the unions' own objectives and ideals can be won in a free society only if they can obtain the confidence and the support of the country as a whole.

My Lords, they are losing that confidence and support woefully: not just in this week or so of crisis, but they have been losing it steadily and damagingly for the last decade at least. If they want to achieve their own ideals, most of which are fine ones, then they must turn out from themselves, stop looking inward and start looking outward, to the wishes, the desires, the interests and the aspirations of all the people of this country; and I believe it is the job of Parliament to give an all-Party lead to the union leaders to act in the way I have suggested.

4.20 p.m.

Lord ROCHESTER

My Lords, from these Benches I should like to join in congratulating the noble Baroness on her new appointment—this is the second time I seem to have done this in two days—and also to thank the noble Viscount, Lord Trenchard, for having introduced this debate, which clearly could not have come at a time more critical than the present for British industry. Indeed, in my view the immediate situation is so serious as to make it no exaggeration to say that in some cases it is no longer a question of industry's recovery but of its very survival; and part of what I have to say will, therefore, relate to the present crisis.

I agree with Lord Trenchard that in recent years there has been too much industrial legislation; that, particularly at the level where power in industry resides, which is not at the centre, the balance has been allowed to swing too far in favour of trade unions and against employers; that management have to spend too much time in fire-fighting; and that they are too heavily taxed. But in my view the question that really matters is not whether these things should be put right but how in practice they can be. I should love to be as cheerful as Lord Trenchard's chronicler, and if I am not it is simply because, as a realist, I have to look at the situation as it is and not look back on it from a position 10 years on in an optimistic way.

For my part, I have become more and more convinced that the economic and industrial problems which we face are now so complex, deep-seated and intractable, and the measures needed to solve them are likely to provoke so much controversy and prove so painful in their application, that neither of the major political Parties will be able to implement them on its own, more especially under the self-imposed handicaps of our present, unrepresentative electoral system. It was, I think, Sir Alastair Pilkington who, in a letter to The Times a year or two ago, wrote that a dictum which in recent years has proved most damaging to industry is that which says that it is the duty of the Opposition to oppose. It is nothing of the kind. Just as often, surely, in the national interest, it should, on the merits of the particular case, be to support. I believe that our system of adversarial politics, which may have been appropriate to this country's economic and industrial situation up to, say, 50 years ago, is in our present conflict-ridden but interdependent society simply no longer tolerable. That is why I was strongly in favour of the Lib-Lab pact and why, under a more representative electoral system, I for my part would be just as happy to work with a Conservative Government as with a Labour one.

A major reason why there is need for agreed policies in the industrial field is that the time-span over which industry now has to plan ahead is considerably longer than the expectation of life of a single Government. It is deplorable that in recent years the policies of the Government of the day have often proved so completely unacceptable to the Opposition that they have been reversed within only a few years; and it is industry which is then left to pick up the pieces. The process looks like being repeated as a result of what the Prime Minister had to say only yesterday on the strengthening of price controls, and here I can only agree with what the noble Viscount, Lord Trenchard, said: If those proposals are implemented, then in my view they are bound to put even more people out of work.

Until agreement is reached among the Government, both sides of industry (not just one) and the political Parties as to how to conquer inflation—and here I very much agree with the noble Lord, Lord Carr, in regarding inflation as still being Public Enemy No. 1—I do no see how large-scale industry is going to be able to plan five, 10 and even more years ahead, as nowadays it has to; nor do I see how, as a nation, we are going to remain solvent. In the end, unless we are gradually to sink into the position of a third-rate Power, I believe that international competition will dictate that the decisions to be taken affecting British industry, whether or not it is nationalised, will have to be based on long-term commercial considerations and not on short-term political ones. In my view, the support of elements, at least, of the Labour, Conservative and Liberal Parties will be needed to implement those decisions, and particularly to solve what I believe is now our greatest national problem—how to get away from this concept of "us" and "them" and unite for the common purpose of creating more wealth, instead of continuing to spend so much of our time in squandering our resources by squabbling over how such diminishing wealth as we possess is to be distributed. Clearly at the present time a coalition Government is not practical politics. It may come to that sooner than we now think; but, if so, I fear it will be after experiences even more hurtful than those that we are now having to endure.

Meanwhile, in tackling our most pressing industrial problems there is need, in my view, to mark out and to build on as much common ground as can be found. The most immediate of these problems is clearly that of pay determination; and here I have to say that I differ from the noble Viscount, Lord Trenchard, as he well knows, in that I believe there is need for an effective national incomes policy in both the short and the long term, for the reasons that he has given. I concede that in an ideal world we would not have incomes policies and that the effect of those we have had in recent years has been to compress too far differentials for responsibility and for skill, although, in my view, if we were to live more within our means and if direct taxation at the higher levels were to be reduced and replaced by higher taxes on the consumption of certain items, this would go a long way towards remedying that particular deficiency.

But, my Lords, we have to deal with the situation as we find it and not as we think that, one day, it ought to be; and the fact is that we have an immediate and extremely serious pay problem to deal with in the next few weeks, and this will not wait for longer-term solutions. So if the crunch comes and we all have to choose between what might well be the two extremes of, on the other hand, an uncontrolled free-for-all and consequently sharply increased inflation or, on the other hand, say, a statutory pay freeze of the kind advocated in the current issue of the Economist, then, however regretfully, I shall have to plump for statutory limitation as the lesser of two evils.

For the longer term, I believe there is a need for agreed procedures for determining the general level of wage and salary increases and I believe that within the Labour, Conservative and Liberal Parties there are already the elements of a political consensus on at least two specific propositions concerning such a policy which may already be present. The first is that the Government, after consultation with the TUC, the CBI and other interested parties, should form a judgment as to the amount the nation can afford by way of increases in pay and—and I acknowledge this to be somewhat more controversial—that that conclusion should receive Parliamentary endorsement. Secondly, the pay of people employed in certain key occupations which are essential to the immediate support of life should be determined not as at present by a number of different bodies that have been set up on an ad hoc basis from time to time in response to particular pressures but by a single, independent and permanently-constituted body in which all parties repose confidence.

There are other complex problems that somehow we must solve between us. The most immediate of these, as I see them, is that of secondary picketing. In my view, if, within a few days, the Transport and General Workers Union proves unable to curb this or the voluntarily agreed code of practice proposed yesterday by the Prime Minister does not prove effective, then legislation will have to be passed immediately to ensure not only that essential food and medical supplies get through but that industry is not literally strangled. Then there is the pressing need to which I have drawn attention on several occasions in this House—and this was the burden of much of what the noble Lord, Lord Carr, has had to say this afternoon—for industrial disputes concerning agreements that have already been entered into to be settled by arbitration instead of industrial action. Incidentally, I understand that the current rail strikes are in breach of an agreement which does not expire for another two or three months.

There are other problems and, since the noble Lord, Lord Carr, developed these at some length, I will do no more than touch on them to indicate in general my support for his contention that they need to be looked at as problems: the recognition of trade unions, the operation of the closed shop and of secret ballots, cases of unfair dismissal and the immunity of trade unions from damages for inducing breaches of contract by people not directly involved in disputes. Then there is the vexed question of social security payments made to those on strike—or, indeed, who are unemployed—together with the taxation of those benefits; and there is the vast problem of the extent to which certain parts of British industry, for example, steel, shipbuilding and volume car production, need to be restructured with consequent loss of jobs, at least in the short term, and perhaps in areas where there is already heavy unemployment so as to improve productivity and so that we lose no more ground to our international competitors. It may be possible—and to the extent that it is I would heartily support this, as, obviously, would the noble Lord, Lord Carr—for a few of these problems to be dealt with by means of agreed codes of practice. But, in my view, they all call for dispassionate review; and, to return to my basic theme I do not see how the changes that may need to be made as a result of such a review are going to be implemented except on a generally agreed basis.

Here I should like to join with the noble Viscount, Lord Trenchard, and the noble Lord, Lord Carr, in pleading with the trade unions to come in and do their share. It cannot be done without them and I join in begging them to do it for the sake of our country. Above all, if British industry is to recover, we have got to find ways in which society at large can gain and, particularly, in which management and employee representatives can share an understanding that in the long run we cannot take out of the national kitty more than we put into it and that if we continue to spend more in the form of wages and salaries than we earn there will have to be corresponding increases in prices, in reductions of investment or jobs or some combination of all these things.

I have one suggestion of a positive kind to offer. Has not the time come for some new and imaginative initiative under which the Government would consult with the TUC and the CBI with a view to setting up a new forum, a kind of national industrial staff college, if you like, at which activities would take place, sponsored jointly by employers and trade unions, and aimed at fulfilling what is the basic purpose of industry—the efficient production of goods and services for the benefit of the whole community? My Lords, I end where I began. I believe that British industry will recover only when the major political and industrial organisations which have a stake in its success are prepared to work together in helping to solve our problems.

4.37 p.m.

Lord BRUCE of DONINGTON

My Lords, you will be grateful to the noble Viscount, Lord Trenchard, for having raised this very important subject here today and also for the very temperate way in which he made his case. It is true that those of us who were privileged to read his feature in the Daily Telegraph last Monday had a preview of the noble Viscount's remarks so that one was able to get a rough idea of the general theme he was going to adopt. I also appreciate—as I am sure did your Lordships—the remarks that fell from the lips of the noble Lord, Lord Carr, who, characteristically, did not do anything to add fuel to any fires anywhere. I thought that the spirit of compromise that animated what he had to say was possibly the best thing that he could impart in the present rather delicate circumstances.

The conditions for the creation of wealth in this realm and for the recovery of British industry have been the subject of detailed and repeated discussion in this House and in another place to my certain knowledge ever since the end of the war. I, myself, have had the opportunity in another place of taking part in them. Recovery, of course, is the key word. At 1945 prices, we suffered approximately £7,100-million of damage in the struggle from which we had then emerged; and the prime task of the Labour Government of 1945–50 which I had the honour of supporting was to assume as their first priority the reconstitution of the country's capital equipment in terms of factories, warehouses, hospitals, schools, plant and machinery and so on. That Government knew when they did this—and in order to do it because of the ending of "lend-lease" immediately after the end of the war and the terms of the American loan—that there would be a considerable shortage of key supplies in practically all fields. If this country was to reconstruct its industries and rebuild its plant, there had to be a sacrifice by all the citizens of the country. For that reason, for those five years—and this will be in the recollection of many of my colleagues—we had to restrict severely the growth of consumer production in this country. Through a partial continuation of rationing we had for five years to limit very much the ordinary standard of life of our people. It was necessary to do this. No less than 20 per cent. of the gross domestic product of the United Kingdom during those years went into restoring our capital equipment.

I was one of those—and I am on the record 30 years ago—who said that we should have done that for at least another five years—I repeat, for at least another five years. But towards 1950, when the General Election was called, there was a deliberate effort to break that national self-discipline. Sneering references in the popular Press were echoed by the then Conservative politicians referring to austerity credits as though the Government of that day were deliberately holding down the standards of life of the people for perverse political reasons. The leaders in that campaign, oddly enough, were the Road Haulage Association who at that time were busily financing the Housewives' League whose business it was, on their own propaganda, to go round and get people to grumble more and more in the shops and say that we ought to have more supplies from overseas.

In other words, once again in succession to the appeal which was made in the war and to which the nation as a whole so warmly responded with a dedicated and disciplined self-service, the smart boys who were after making a quick dollar or so began with the coming of the peace to try to break down that discipline by an appeal to naked self-interest—from which none of us is immune—by inducing us to believe that it was no longer necessary. We were induced to believe that we could let all discipline go, that we could again resume, albeit on a different plane, the ordinary free enterprise activity that had been carried on before, with the weakest going to the wall, the devil taking the hindermost, and a free-for-all. This is indeed exactly what happened. There followed the bonanza years where the ordinary standard of life went up very considerably.

However, one thing sank, and that was industrial investment in the United Kingdom. From that time onwards investment in plant and machinery in the United Kingdom was far lower, some 30 per cent. lower, than that in the Federal Republic of Germany expressed as a percentage of the gross domestic product, and nearly 40 per cent. below that in France, also expressed as a percentage of the gross domestic product.

This country has never recovered from that failure to invest. It has continued throughout the years since that time. It has even continued under successive Governments. Your Lordships will recall the somewhat agonised observations by the former Prime Minister, Mr. Edward Heath, when he addressed the Directors' Club in August 1972. He told them, "The Conservative Government have given you all you wanted. Credit has been derestricted". Indeed, as we well know, the monetary supply went up by 28.7 per cent., something which some Conservative Peers might care to remember when they talk about the restriction of the money supply. Also, Mr. Heath introduced the 100 per cent. depreciation rule in the first year—in other words, all capital equipment of a plant and machinery nature could be claimed for taxation purposes in the year in which the expenditure was in fact incurred. Every conceivable inducement was offered by the Conservative Government of that day, yet Mr. Heath had to complain to the Directors' Club that British industrialists had not responded, and so it continues.

There have been many arguments advanced—the noble Viscount, Lord Watkinson, has alluded to them from time to time. For him, it is a matter of the awful taxation burden which corporations endure at the present time which deprives them of all incentive. I observe that that was not mentioned over-much today. One noble Lord touched upon it, but I observe that the noble Viscount, Lord Trenchard, did not emphasise the point overmuch. He much preferred to deal with the trade union aspect of the matter, to which I shall return presently. No doubt, the noble Lord, Lord Hewlett, will refer to the taxation position when he addresses the House; but I warn him in advance that they have been rumbled on this matter. The theory that corporations are paying anything like a tax of some 52 per cent. on their profits is a complete illusion. Owing to the first year allowances being taken out of profits during the year in which they were incurred and, above all, owing to the stock appreciation allowance which, to my regret, the Chancellor of the Exchequer brought in a few years back, taxation on companies is now running at something under 27 per cent. rather than the 50 per cent. which was originally legislated for. So they would do well to let the taxation position on companies go undisturbed.

The burden of taxation on individuals in this country ought to be relieved at all levels—not at the expense of public expenditure but to restore it to where it in fact belongs—to the corporations themselves, which are paying far less corporate taxes as such than in practically any other country in Europe. The yield from those taxes at the moment is running under the total yield of our tobacco tax in this country.

Viscount TRENCHARD

My Lords, would the noble Lord dispute the figure that I gave of approximately a 4 per cent. return—in real terms—on capital before tax? Twenty-seven per cent. off the tax still leaves a pretty horrible return.

Lord BRUCE of DONINGTON

My Lords, I am not in a position to comment on the noble Viscount's figure. All I can say is that, expressed in terms of current monetary values and as a percentage of capital employed in the business, anything between 15 per cent. and 27 per cent. is gained at the present time, as against 19 per cent. about five years ago.

Viscount TRENCHARD

My Lords, my figures came from the Bank of England reviews and the Government Blue Book.

Lord BRUCE of DONINGTON

My Lords, I shall not dispute what the noble Viscount said on the matter at all. In discussing the recovery of British industry and establishing the conditions for the creation of wealth, we have to stop institutionalising the problem. Production is essentially a social activity involving the activities of living individuals. It is all very well for people from their board rooms to refer, as indeed did the noble Viscount in his article, to a readily available supply of labour—this vast amorphous mass of available labour—to create wealth. I am reminded of the conditions before the war in the East End of London. I used to go round the streets and see notices on the factories saying "Hands wanted". That is all they wanted—they wanted hands, they did not want the brains, the personalities or the initiative. They did not want people, they merely wanted hands. This is exactly what it is getting like today, when people discuss a requirement for labour—" a ready supply of labour", as he put it in his article. He should remember that he is discussing people: people who have aspirations—

Viscount TRENCHARD

My Lords, I am terribly sorry but I did not talk about "a ready supply of labour" either in my article or today. What I have said is that unemployment would be cured very much more quickly if we concentrated on the policies I have outlined.

Lord BRUCE of DONINGTON

My Lords, I must correct the noble Viscount by quoting from his article where he says: Today, however, there seems to be a growing consensus that if the nation is to regain its prosperity it can only be by a return to the market economy where the successful get large rewards, even a killing, and are thus able to invest and attract the labour they want". That is the point I was making. People who work in the factories and in the various institutions in our country, whether in commerce, trade or the professions, are living individuals, with aspirations like anybody else. They are just not to be classed as an amorphous mass of labour.

I somehow think we shall never really solve our problems in this country, or in any other country for that matter, until we begin to regard ourselves as individuals and to regard other people as individuals too. It is all very well for people who are working from 9 till 6 or possibly longer than that to order their lives, as they are entitled to do, in the way they wish; but for the ordinary working of our economy at the present time there are thousands, nay millions, of people who are not working in occupations which are agreeable to them either intellectually or physically. There are a very large number of people working under conditions of danger. Some people, particularly those who have tasks that are agreeable to them—which I think goes for the majority of directors, managing directors and possibly professional people and others—seem to be under the impression that work is an agreeable occupation to everybody. You ask a driver who is hurtling down the M1 in a 32-tonner for five or six days a week whether he finds it agreeable. Ask his wife whether she likes him having to work overtime for four or five hours a day or 10 or 12 hours a week, and would like him to be at home. Ask her what she thinks about work.

We have to approach this matter on a far more human basis than that. We are all prone to do it. Unless we are milkmen we take the delivery of milk for granted; unless we are postmen we take the delivery of the post for granted; and unless we are lorry drivers we tend to take the delivery of petrol to petrol stations for granted. It is when we are inconvenienced that we suddenly appreciate how inter-connected we all are in every way in our economy, and how all our endeavours are knitted together one with the other all the way through, so that if something happens on one side it is bound to affect the rest.

Therefore our task is not to institutionalise the problem by accusation and counter-accusation, but to seek means by which it becomes possible for us to work together far more harmoniously than we have been able to do in the past. This means we have to have a change in the social climate. If you have a social climate in which all the media, whether it be broadcasting or newspapers, are emphasising the virtues of acquiring material things and the vital necessity of acquiring more and more material possessions in competition with everybody else, if you get a climate of opinion in which everybody is deliberately encouraged to be selfish for their own advancement, how then can you complain that society and production do not operate with the co-operative effort that is required?

The noble Viscount made reference in his article, and has made reference this afternoon, to the position in Germany: "Mitbestimmung". I come to his point about the trade unions. Of course it is vital that there should be co-operation between the trade unions and the employers—and it is much more important, incidentally, that there is a feeling of amity at floor level and factory level between those who are working there and those whose task it is to supervise and direct them. That is also important.

I take the noble Viscount's point and I agree with it: this is why public relations are far better in Germany with Mitbestimmung, because in German factories there is a far different atmosphere than there is in some factories over here, though I am not referring to all of them. In the German factory every worker has his status. If he is a floor sweeper and his name is Schmidt, he is "Herr Schmidt" and he has his status. Everybody has his dignity and there is good working together because one side does not treat the other side as social inferiors.

One of the curses of our industrial relationships in this country and one of the reasons why there is so much mutual suspicion today, not throughout the whole of industry but in certain parts, is the social class attitude that is still rampant right through industry whereby the worker, by reason of being a worker, is automatically assumed to be some kind of social inferior. This is in fact so and there is no point in denying it. The Germans have succeeded in largely overcoming this, and that is one reason for their continuing success. The other reason is that perhaps we have worshipped bigness too much. Factories on the Continent, in Germany and France, are now progressively seeing the advantages of working in small units where the management can identify itself with at most 200 or 250 workers, whom they all know. They can dine together with them in the same mess and can establish a friendly relationship.

These are the things towards which we have to work in this country. They cannot be done by legislation or even by rules; and the attacks on the trade union movement that have been made in this country over the last fortnight are scandalous, because when you come to consider the whole trade union history throughout the free world, if there is one trade union movement which has behaved with the utmost responsibility since the end of the war, it is the British trade union movement. It has behaved with the utmost responsibility and the utmost moderation, and those who denounce it would do well to appreciate that.

Lord MACKIE of BENSHIE

My Lord, I wonder whether the noble Lord would permit me to intervene? I have been trying with some difficulty to follow his speech, but I gather he is making a plea for co-operation. Would he like to tell the House how he thinks this speech of his will advance that cause?

Lord BRUCE of DONINGTON

My Lords, I sincerely hope so. We are a democracy in this country and, as I understand it, a democracy always flourishes where there are honest exchanges of opinion, because even where there are differences—and I claim no monopoly of wisdom—at least there can be advance. I have always found that opinions honestly expressed, provided they are expressed with sincerity, do not cause any offence to anybody of a right way of thinking or to those who think to the contrary.

Lord MOTTISTONE

My Lords, would the noble Lord not agree that it should also be well-informed opinion, as well as being honest?

Lord BRUCE of DONINGTON

Yes, my Lords. I entirely agree with the noble Lord. Personally, I tend to regard as reasonable anybody who agrees with me, and I expect that the noble Lord regards others in exactly the same way. I have not before been challenged concerning the data which I have at my disposal, but I can assure the noble Lord that if I am challenged I will most speedily produce any kind of facts that are required to verify what I have said.

The problems that we are discussing are made all the more important by one factor upon which the noble Viscount, Lord Trenchard, did not touch; that is, the development of computerisation in projects over the next 20 years. That will hit the economy like a bomb, will require far less expenditure in terms of manhours over the next 20 years and will undoubtedly present not only trade unions but also management with very considerable problems. For that reason, we should take a new look, not at the question of rules or at changes in the laws, but at helping in the creation of a climate of opinion where a more co-operative attitude may be shown by all concerned.

5.1 p.m.

Lord ERROLL of HALE

My Lords, may I add my thanks to the noble Viscount, Lord Trenchard, for introducing such an interesting and wide-ranging debate, and also congratulate him on the rather original technique of recounting what a prophet might well write today about what could be said of us in 1990—an original and imaginative way to introduce a very complex topic for our debate. Also, I should like to apologise to noble Lords. I had, of course, intended to stay until the end of the debate, but owing to the rail strike tomorrow I shall have to leave shortly in order to fulfil an engagement, which otherwise I could have managed more comfortably by train tomorrow.

In listening to the noble Lord, Lord Bruce, I was fascinated that he should take us back to the 1945–50 Parliament, because he and I were both in the other place at that time, as indeed was my noble friend Lord Boyd-Carpenter on my left. It was interesting to see that this forward-looking man, who was Member of Parliament for, I think, Portsmouth in those days, remembers that period so vividly and seems to have learned so little since. We heard him say all this to us 30-odd years ago—

Lord BOYD-CARPENTER

He says it better now.

Lord ERROLL of HALE

Doubtless through constant repetition. Perhaps in going back to those days—and I did not come prepared to talk about the events of 30 years ago—the noble Lord might have mentioned Marshall Aid, which was of tremendous help to the Labour Government of the time. He might also remember that the British public were tired of those years of austerity, and very much wanted, for example, to have a little red meat. They wanted to have houses of their own. I shall gladly take an example which will be useful to me later in my speech, and the whole trouble with the then Labour Administration was that they thought that controls were the best way of doing things. Even though the right honourable Sir Harold Wilson, as the then President of the Board of Trade, made a bonfire of controls, so-called, they were less essential ones.

As an example, there was a control on buying sweets, which seems unthinkable now. But when the Conservative Administration removed the control on sweets, the consumption went down, because it was the old story of the minimum becoming the maximum and the maximum becoming the minimum. You took up your ration. It was almost a patriotic duty to eat your ration of sweets. As soon as they were no longer controlled, people said: "We need not buy our sweets". While, officially, there was no control on wines and spirits, there was an unofficial control exercised through the shops of a bottle per week per customer. As soon as supplies became more plentiful, the consumption went down, because everybody could have what they wanted. This is the great difference in approach between the Socialist attitude and the free enterprise attitude. Let people decide for themselves. Controls very rarely work out in the way they are expected to do.

I should now like to move on to the subject of this debate; namely, the question of wealth, and I shall link it to jobs. The present Government have repeatedly said—and it has been echoed today—that their most important priority is the control of inflation. But in actual fact, their other high priority is to try to save and create jobs. Job creation is a great preoccupation. They do not talk about wealth creation, but I suggest that in their efforts to create jobs they have forgotten that it is equally important to create wealth.

So often jobs are created without proper regard to whether the work which is done is wanted by the customers. We hear the word "democracy" used a great deal these days. I should like to suggest that we are a customer democracy, almost a customer dictatorship, because it is what the customer wants that decides in the end what shall be made. It is no good making things that people do not want, whether they be ships for oceans where there are far too many ships, or whether they be electric turbine generators which the Central Electricity Generating Board does not want to have, because the public do not want more electricity than they are at present using. So it is very important to look at it the other way around, and say that perhaps it is much more important to create wealth first, and from the additional wealth automatically will flow additional jobs, because the wealth will lead to people spending money and creating jobs for purposes which are really wanted, particularly in the service industries in many different parts of the country.

Lord BROWN

My Lords, may I interrupt the noble Lord? Does he agree that it is well worthwhile ordering a power station in advance, in order to maintain in being in industry wealth-creating teams which would otherwise disappear? Does he agree that this is a good policy in favour of maintaining the creation of wealth?

Lord ERROLL of HALE

Yes, my Lords; there is an element of truth in that. But, of course, the point is that there is no purpose in maintaining indefinitely excess capacity which will probably never be required again. The manufacture of steam railway locomotives has finally been disbanded, because nobody now wants them.

Lord BROWN

That was not my example.

Lord ERROLL of HALE

No, but I am choosing my example. After all, it is my speech. If anybody else wants to have it, he is welcome to it. I am nearly halfway through. I certainly agree that there should be an element of reserve capacity, but if we were to keep everything just as it was we should end up with a great deal of unusable industry, which would be a great burden on the rest of the community. There is no doubt that there has had to be a great shrinkage in the capacity for maintaining turbine generators, and it has not yet gone nearly far enough.

So we have to look at this question of wealth creation. This is a difficult concept for a Labour Government to swallow, because the word "wealth" has a certain connotation. It has the implication of people being rich and of wealthy corporations, but we in this House certainly know what we mean by "wealth". Wealth is a worthwhile thing to create and it produces a community of people who are prosperous. The noble Lord, Lord Bruce of Donington, talked about feverish competition among the advertising media and so on, and acquiring more goods. But surely that is desirable, because, after all, as Adam Smith said, the object of production is consumption. The present Government have used a great deal of public money in bolstering up British Leyland. Yes, we should make motor cars and they provide jobs, but once a person buys a motor car, then, to most people in the Labour movement, he becomes rather sinful. He uses his car to go to work, when he should use public transport; and, worst of all, he uses his car for pleasure, which is a very sinful thing to do, particularly at week-ends, because it congests the seaside resorts.

Lord BRUCE of DONINGTON

My Lords, I am grateful to the noble Lord for giving way. May I take it, then, that he is completely in agreement with the quite cynical efforts that have been made over the last 15 years to exploit the teenage market?

Lord ERROLL of HALE

My Lords, I see nothing cynical in making teenagers well-off, because the sooner they have a high standard of living the more determined they will be to maintain it when they are married and get on in the world. So I welcome a well-to-do teenage population. I should not like to go back to the pre-war days to which the noble Lord referred, when teenagers probably were exploited in some of the small factories, though not in the big ones where labour relations were much better. Accept, if you will, my noble friends, the concept that as a main objective we should create wealth. There are two main ways in which we can do this. One is the development of corporate wealth, The other is the development of personal wealth.

If I may refer first to corporate wealth and to the problems of companies, again the noble Lord, Lord Bruce of Donington, said that we should do well to be quiet on the subject of the taxation of companies. But he did not refer to the increasing burden of tax upon employers; namely, the increased contribution of employers through the National Insurance scheme which is now, particularly in the case of an industry which is labour intensive, a quite severe additional burden of taxation. I mention that in passing.

One of the factors which very much inhibits companies is the number of restrictions instead of freedom—the amount of time which has to be spent upon complying with Government regulations. Some of these may seem to be desirable—for instance, the health and safety at work regulations. However, the industrial tribunal legislation and the whole concept of the employee protection Act involves a very considerable additional burden on executives which detracts from their ability to get on with the main purpose of their life; namely, to increase the prosperity and the profits of their companies.

One of these institutions is particularly burdensome; I refer to the Price Commission. I understand the philosophy behind the Price Commission: that if one can keep down prices it will help to keep down inflation because the index will not go up so much. Therefore, the doctrine is to control prices. However, I should like to put it to noble Lords that I believe that prices would be lower than they are today if there had been no Price Commission. Nowadays we are so wedded to the idea of controls as the only way out of our difficulty that noble Lords may think it surprising that I should even venture to suggest that prices would be lower today without the Price Commission.

The reason for this is, once again, that the maximum becomes the minimum. One goes all out to get an increase whenever one can. Many a company will go and get an increase from the Price Commission, because it is able to do so under the rules, which it might not have bothered to go for if the market had been left to itself. Indeed, it is a matter of principle to go and get your price increase while you may in case you cannot get it later an. Nowadays, managers are not spending their time on considering how to obtain a better share of the market by reducing their prices. Instead, they are spending their time upon building up elaborate cases to put to the Price Commission so as to get their price increases. If one company does it, another company does it, and all prices go up.

The MINISTER of STATE, PRIVY COUNCIL OFFICE (Baroness Birk)

My Lords, as the noble Lord will not be here later on, I wonder whether he would give way for a minute. Is the noble Lord suggesting that firms are spending their time upon thinking of ways in which they can get price rises, and that if they did not have to go to the Price Commission they would not want to raise their prices? This seems to be a most terrible criticism—far worse than any that I would make.

Lord ERROLL of HALE

My Lords, I know how adept the noble Baroness is at making criticisms. Perhaps I have not made myself quite clear. Of course prices would go up if there were no price controls. It would be a relatively simple decision by each individual company, looking at the market and at what the competition was like, to decide whether to raise the price of a particular product or article. Now, however, if they feel that a price increase is necessary they are in general inhibited from making that increase unless they can get permission from the Price Commission. Therefore, they have to study the rules of the Price Commission and develop a case which will pass the rule book of the Price Commission. Only in that way will they be granted the whole or part of their application. That is a very wasteful and time-consuming process. In such circumstances, one must go all out for the maximum because the Price Commission may not give one the full amount. A great deal of time, therefore, is wasted by bargaining with the Price Commission instead of trying to test what are the market conditions and adapting one's price to the market situation.

Another point which I must repeat to the noble Baroness is that you must make your application when the going is good, so to speak. It is no good going along to the Price Commission a year later and saying, "We were good boys and did not make an application when we could, so may we have a double ration now?" You have to do it when you get the chance.

Baroness BIRK

My Lords, any doubts that people may have about the Price Commission and the moves which the Government are making about the Price Commission will be completely erased by what the noble Lord has said. I am sure that the noble Lord must be aware that the Price Commission does not deal with an enormous number of cases and that the Government have a responsibility to keep down inflation. This is the reason for the Price Commission. I apologise for interrupting the noble Lord so much, but as he said that he will not be here later on I cannot reply to him then.

Lord ERROLL of HALE

No, my Lords. I appreciate very much that the noble Baroness is following my speech so closely. However, what has been announced in another place—namely, the further use of the Price Commission to try to hold down prices in the event of an employer giving way to a wage claim above the Government's norm—is a very serious development which may do great harm to companies which are subjected to what is very much the Star Chamber treatment meted out to companies by the Price Commission.

I do not wish to weary the House, but may I mention another control which is working in exactly the wrong way; namely, dividend control. Dividend control has been with us for a number of years. It was first introduced in, I think, 1971. It is always 10 per cent. Once again, the maximum becomes the minimum. Every firm, if it possibly can, always puts up its dividends by 10 per cent. per annum. If there were no dividend control, it could be raised by 6 per cent. one year and 11 per cent. the following year, or by 8 per cent. one year and 12 per cent. the following year. One would then have to make a proper judgment as to what should be distributed from profits by way of dividend.

Now, however, if a company which is making a profit distributes less than 10 per cent. by way of dividend the stock market says, "There must be something wrong with that firm, because they are not increasing their dividend by 10 per cent.". So, if they can, companies hoik up their dividends by 10 per cent. Also, a company may say to itself, "We can only just afford 10 per cent. this year; but if we were to issue only 8 per cent. by way of dividends this year, next year, when we could afford 12 per cent., we should be stuck with only 10 per cent.".

So dividend control has the opposite effect to that which is intended, for it encourages bigger dividends than might prudently be deemed to be right by the companies concerned in their recommendations to shareholders. The noble Baroness shakes her head. I should be very surprised if she were to agree with me, because we are all so wedded to the concept of control, both on this side as well as on the other side of the House. Perhaps it is time to have a fresh look at the problem and to get away from the concept of control, control, control and the belief that we shall get it all right by control. I believe that we should do far better if we had another of Harold Wilson's bonfires of controls and set the people free.

Before sitting down, may I refer very quickly to the other side of wealth creation; personal wealth: the accumulation of wealth by earning salaries or by putting one's money into a small business and helping it to grow. It is a particularly serious matter that the high margin rates of tax should continue year after year. I know that this has been said over and over again, but it needs to be said again and I am sure that we shall all go on saying it until something is done about it. The top rate of tax at 83 per cent. on earned income is far too high. The Prime Minister stated recently that it is far too high but nothing is done about it. When an executive's salary reaches about £21,000, it means that that is his ceiling. Extra effort cannot be adequately rewarded. Brilliant success cannot be adequately rewarded.

It is virtually impossible to have any share incentive scheme. If one wants to reward a good executive for his outstanding effort, may I mention to the House that in order to give a man £10 a week of extra spending money one has to award him a salary increase of no less than £3,000 a year. There is no chance for him to save; there is no chance for him to improve his house very much. He is stuck where he is. He is still a keen man and he still works, but the edge is liable to be blunted. Younger men soon reach the limit and perhaps they settle for a slightly easier life rather than to go in more energetically for the creation of wealth. So what would I advocate? I would say 50 per cent. as the top rate—£1 for the Government and £1 for myself In my own case, since I am being quite personal, I work five days a week for the Government and on Saturdays I work for myself and that is what I pay by way of tax. You can work out the gross income from that simple exercise.

Then, of course, there are those who have wealth and the income is called investment income, and that is therefore taxed up to a maximum rate of 98 per cent. This has a very serious and distorting effect, because it leads those who have fortunes to sell their shares in good industrial companies. The proportion of private investors to institutional investors is going down year by year and it is creating a sense of false values because they prefer to put their money into other forms of goods, such as pictures, works of art or some of the strange exotica which are now becoming very valuable, such as clockwork railway trains, which are selling for hundreds of pounds in the hope that in a few years' time they will be worth thousands of pounds. Then there are old cameras: one has only to look at the beautifully illustrated catalogues of Christies and Sotheby to see that it is not the priceless art treasures that are attracting people now but the curious bits of Victorian bric-à-brac and other items. Even cigarette cards are now becoming of tremendous value. If only I had kept my boyhood collection, I should not have to work today! Why is this done? Because it can be sold afterwards at a capital gains tax rate of only 30 per cent. so why keep your money in securities and have no income at all; why not buy cigarette cards and yield a profit and only pay 30 per cent. on it? I am glad that the noble Baroness is laughing because she is seeing my point.

Baroness BIRK

No, I am enjoying the noble Lord's speech.

Lord ERROLL of HALE

My Lords, I much appreciate the interest shown by the noble Baroness, but I mention this as yet another distortion caused by the present taxation rate on personal wealth and it is thoroughly bad. I know that there have been some improvements in capital gains relief, but they have been very small. A 30 per cent. rate with an inflation rate of, say, 7 to 10 per cent. a year is really creaming off wealth from the individual and back into the hands of the Government. Thus, I should like to say that these are the things that I should like the present Government to think about and perhaps to implement, and if they do not then I hope very much that the successor Government will do what I recommend.

5.23 p.m.

Lord LEE of NEWTON

My Lords, I should like first to apologise to the House for the state of my throat. I had some sympathy with the noble Lord, Lord Erroll of Hale, when he was asked by my noble friend Lord Brown about the problem of ordering power stations. He and I have both had this problem at the Ministry of Power and one just could not win. If you ordered one and it was not needed, you were wrong; if you ordered one and it was needed, you were equally wrong. So I have great sympathy with the way in which the noble Lord answered my noble friend.

We have heard much about the imbalance in industry caused by the growth of the trade unions. It seems to me that the principal issue to which we should now be addressing ourselves is whether that very delicate, largely unwritten system of checks and balances upon which the effectiveness of our democracy depends has become somewhat distorted. For many years, especially when I was a member of another place, I listened to speeches and read articles and autobiographies basing themselves on the proposition that governments in general and prime ministers in particular were arrogating to themselves far too much power. In my own simple way of reasoning I decided that a great deal of it was sheer unadulterated nonsense.

May I suggest that the present situation does nothing to prove that I was wrong in that. In other words, we seem to be witnessing during the last few weeks the fact that various organisations in Britain have the power to disrupt any type of Government policy they wish. Not long ago we saw how Government policies could be knocked completely off-course by the decisions taken by private speculators as to whether they would or would not continue to hold sterling or Government bonds. More recently, we have seen the same thing happening to the dollar. I do not recall much indignation in your Lordships' House when the pound was being treated in that manner by people with probably more power than the trade unions will ever have. Today, of course, the emphasis is on the power to disrupt Government policy by certain organisations of labour and not long ago very many of our newspapers were filling their columns with stories about trade union leaders possessing more power than prime ministers. Indeed some of the newspapers are still flogging that particular line.

I am sorry to quote myself, but, speaking in the debate on the Address on 8th November, 1977, I ventured the proposition that the real problem that we are discussing in this sense is the complete divorce of power from responsibility in the trade union movement, which is the root cause of much of our present difficulty. I said I believed that that was the key to which we must direct our attention. If I am right about that—and present events suggest that I am—the problem now is far and away more serious than even the recent events would indicate.

The TUC and the CBI are supposed to be partners and advisers of Government on economic and industrial matters in the NEDC. I regret to have to say this, but a fat lot of use either of them has been to the nation during the lead-up to our present problems. I am not suggesting that the Government should withdraw NEDC facilities and go it alone; I am suggesting that if these bodies wish to retain their standing in our national life they had better begin to prove their determination and capacity to control the activities of those for whom they purport to speak.

So far as the CBI is concerned, as I understand it, the chairman of Fords, where the present rush began, is a member of the CBI Council, which was of opinion that 5 per cent. was about right. He more than trebled that amount and, when the Government tried to impose sanctions against Fords, the CBI joined in the screams of opposition that culminated in the Tories and Liberals combining to defeat the Government in their use of the only power they had. Indeed, if I am right, I think Fords on four occasions stepped up the amount they were prepared to give. People wonder why, when there are mass meetings, workers refuse to accept, in the belief that the employer has not yet finished conceding increases—four times going up—and, until we can get some kind of a proper determination of policy by important employers, I do not think we shall see the end of many of the troubles that are now before us. It is impossible when one looks back at it to believe that one can get what the noble Lord, Lord Carr, called "responsible collective bargaining" while that kind of thing is going on.

When we talk about what the trade unions should and should not do we had better look at what has happened to the trade unions, and I venture to quote myself on this. On the trade union side, much of the problem, I think, arises because of the utterly absurd and outdated structure of the movement. You must remember that ours was the first trade union movement in the world and we are still suffering from that fact. Let us take the position of the union which has been at the centre so much in the last few weeks, the Transport and General Workers Union. The fact that real power has departed from the national level to relatively small sections of the union's members has brought the supreme irony that an unofficial strike which was threatening the jobs of a far greater number of T and G members has now been declared official, and the trade union dues paid by those whose jobs may now disappear have to be used as strike benefit for those whose actions have rendered them unemployed. One cannot get a much more absurd situation than that.

Therefore, this change in where power resides from national to local level is also demonstrating itself now in the problems we see about secondary picketing. Does the power reside, say, in Transport House? Well, we have heard the diktat come down the line, "Stop a lot of the secondary picketing". They may as well save their breath to cool their porridge, especially in Lancashire, where we are suffering grievously from this. It shows again that now there has been this departure of power into the smaller sections it is not enough for the noble Lord, Lord Carr, or me or anybody else, simply to ask trade union leaders, "Will you agree to do this or that?" The fact is that they have not got the power. It is a sad thing, but it is quite true.

For my part, speaking again of what has happened to the T and G, I would strongly advise those sections of the union whose jobs are now threatened to demand the immediate recall of their conference; that conference is not due to reassemble until later in the year. I would ask them to demand that the conference delegates instruct the lorry drivers to return to work and that the conference reconsider their attitude towards collective bargaining.

My Lords, the structural problem also stems from the very wide diversity of the interests of the large numbers of industries through which the Transport and General Workers Union thrusts its tentacles, almost like a huge octopus. The modern efficient form of trade union development is in the field of industrial unionism with one union to each industry, and British trade unionism just cannot develop along those lines while a huge general workers' union like the T and G is to be found in so many industries.

Again on the subject of industrial unionism, let us take the position of British Rail, which has been mentioned. We have three trade unions, two of which very rarely seem to agree on anything. ASLEF, which does not seem even to make any effort to remind its members on the Southern Region that they have a rule book to which they are supposed to work, pursues a dog-in-the-manger kind of policy in its quest for superior status for footplate men, and that policy often ends up by attacking the travelling public. I do not want to be unfair to ASLEF, but it seems to me, having done some study of the trade union movement, that it is a quite unnecessary organistion. I believe that now that the nation is being confronted with these constant interruptions we are entitled to ask the TUC to instruct the NUR and ASLEF to amalgamate. In the event of a refusal by ASLEF, the TUC should then withdraw its affiliation and permit the NUR to canvass ASLEF members to join them. They have that power under the Bridlington arrangements and my feeling is that the time has come when they must use it.

I am quite well aware that a great many of those who dislike incomes policy—a policy which I have advocated ever since I came to the other place in 1945—usually use the argument that one of the great weaknesses is that once incomes policy begins to fail you get a rush to catch up on the monies people did not get during the incomes policy. I have seen this argument used about the present position. Quite frankly, to believe that there has been restriction of incomes in the last 12 months is sheer nonsense. There has not been a year, certainly since the war, in which living standards have improved so much as they did in 1978; therefore, to say that the present rush is to try to catch up on restrictions does not stand examination in the very least. The Central Statistical Office report shows that personal disposable incomes rose between the second quarters of 1977 and 1978 by no less than 7½ per cent. Can anybody really talk about restriction on that basis?

Among those who have been demanding the end of the incomes policy and a free-for-all without any Government interference the Leader of the Opposition has played the leading role. If she was convinced of the need for Government to keep out of this kind of thing she should now be telling the Government to keep out of this—she should be saying, "Do not interfere!" That should be the logic of her position. But now that she has seen the first results of the free-for-all she is demanding the most rigorous type of Government interference in the form of emergency powers. I will say this for the right honourable lady, when she changes her mind she goes all the way and never deals in half measures. In its way, this about-turn is comparable to Mr. Heath's conversion to incomes policy or St. Paul's conversion on the road to Damascus. Last night in the debate in another place the right honourable lady argued that collective bargaining was utterly unfair because of the far greater power of the trade unions over the employers. But that greater power did not just mature last week. It was the reason Mr. Heath and his Cabinet, of which she was a member, changed over to incomes policy. It was the reason why, after the Barber boom of 1973, based on the use of the printing presses to produce confetti money, we reached in 1974–1975 30 per cent. wage claims and inflation of roughly the same amount. I do not know whether the right honourable lady had forgotten all that history during the past three years during which she has been demanding the return to free collective bargaining, in the full knowledge, apparently, of the great inequalities and what they would result in. I should like someone on the other side to tell us the answer. Did she not understand after all her experiences in the Cabinet that in the jungle one uses power to its full extent over one's opponent, or does she really believe in vegetarian tigers and things of that sort?

By their announcement as regards low pay last night—and I am glad of the Prime Minister's announcement—the Government have really accepted the need for an incomes policy based on what is now commonly known as "kitty bargaining" which involves negotiating within a given total. I have not been too happy about the percentage basis for some time and I think I have said that before. When noble Lords rightly talk about the effect of that kind of incomes policy on differentials they are right, but there is no reason at all why, within a system of "kitty bargaining", differentials should not be maintained. There is no reason whatever. Why then do we not look at how we could adapt it, for example—instead of having the percentage system—to the way in which a Chancellor draws his budget? Is he budgeting for deficits or surpluses? What does that mean in the way of distribution as regards that which can go to incomes and so on? I believe that we have now reached that stage and I should like to see the idea developed.

There are two developments which we must watch in that regard. The first is that there must be no successful demands for differentials to be brought back to where they were before the decision on low pay, because if we were to do that we would be rapidly increasing the level of low pay in order that others can demand that there are no maxima. That is a very important issue at which we should look. The other contentious point which I should like to make is that in certain circumstances—such as those existing at present—Governments should be given power to introduce compulsory arbitration. I can recall that it worked extremely well during the war, but we departed from it too easily. When we reach a stage—and we have seen our economy develop this way—where relatively few people can cause between 30,000 and 50,000 men to lose their jobs; when we reach a situation such as we now see as regards the road haulage strike and the tanker drivers' strike, where great areas of Britain will shortly have hundreds of thousands unemployed, we should surely opt for the alternative of compulsory arbitration in order to get rid of this nonsense.

We are now faced by a different type of strike from the ones which I knew in my youth. We are not faced with strikes against reactionary employers who seek to put the clock back. We are not even witnessing confrontation for a fair share of increased wealth. We are faced with demands on national resources which quite frankly do not even exist, demands which can only be met at the expense of other sections of workers or by diverting resources which have been allocated to the social services, education, housing, health, and pensions, et cetera. If I am right, the price of defeat on this issue is the virtual ending of the Welfare State which this Party fought to create and which has been such a great boon to those sections of our society which are defenceless and inarticulate. It is a fight in which all of us must stand up and be counted. None of us can defend the anarchy which is now prevailing. Older people like myself, who have tried in our own little way to assist in the creation of a great trade union movement, are worried sick as to where all this is taking us. Therefore, I believe that we must all combine to see to it that reasonableness is restored. My Lords, I have tried to say a few things which are critical of the movement which I admire so much. I believe that we must all try constructively—not in a negative spirit—to find how we can get over the problems of today in order that the nation can prosper in the future.

5.44 p.m.

Lord HEWLETT

My Lords, the noble Lord, Lord Bruce of Donington, in his traditional style brought this debate to the immediate post-war period with his Dickensian image of British management and the miseries of the East End of London at the turn of the century. I know that it is all good stuff but it has precious little to do with the present situation. The noble Lord, Lord Bruce of Donington, gave an intriguing, if not a fanciful, survey of our economic history in the immediate post-war era. The only trouble is that it is not borne out by the rest of us who have had to endure those years. I am sorry to say that the Government of 1945–1951 wasted those years which should have been the years when Britain emerged as practically the only un-destroyed country of Western Europe as a result of the war, and took full economic and industrial leadership. However, I am afraid that doctrinaire nationalisation, public wastage on a vast scale and the spending of thousands of millions of pounds on compensation for nationalised industries of all sorts and descriptions, wasted our assets when, frankly, we could have made a very great emergence from the war.

I am sorry, but it simply is not fair to raise, as was raised then, the suggestion that this was the real reason why our present economic and industrial difficulties prevailed. I would not have entered the lists if the noble Lord had not done so, but I should like to say to him, bless his heart, that if he is worried about the problems of bigness, then why on earth does he support nationalisation, because that is the biggest bigness of all? That is where some of the greatest difficulties occur in terms of industrial relations. I wonder when last he actually went inside a factory. I wonder indeed, in view of the impression he had given of the bloated plutocrats on boards of directors, who do not know the men on the shop floor, who call them by their surname and do not have any mutual respect. Come off it, my Lord! You are not in the late 20th century, as we are in industry today.

I shall tell your Lordships what perturbs me. The noble Lord wanted to talk figures, and I shall talk figures with him. Ten years ago, of the gross national product of the United Kingdom 40 per cent. went to central and local government and to nationalised service industries. Five years ago it was 50 per cent. This year 60 per cent. of the wealth created in Britain is going straight into central and local government and nationalised service industries. No wonder we cannot create wealth. We are using and consuming so much of it unnecessarily.

Frankly, the burden of the debate raised so admirably by the noble Viscount, Lord Trenchard, is that we should be trying to create wealth. That is the theme which I should like to develop a little further. I should like to make one other point as regards what the noble Lord, Lord Bruce, said. He made claims regarding the eminent reasonableness of the British trade union movement and attitude since the war and claimed that it was the great leader of trade unions throughout the world in its essential reasonableness. Thank goodness the noble Lord, Lord Lee of Newton, spoke before me! He has blown that one straight out of the water, and I am very grateful to him.

I find myself very largely in support of what the noble Lord, Lord Lee of Newton, had to say, particularly in regard to unofficial strikes and the need to get some sense between the NUR and ASLEF. I cannot go along with him as regards his criticism of the Leader of the Opposition, because frankly, with all respect, he was not quite fair. He missed out one important word. It is not just "free collective bargaining" but "responsible free collective bargaining" that we wish to see established. The noble Lord may laugh, but I and generations of my family before me since 1892 have been involved in a company which has had only two disputes—one last year and one in 1974. Both disputes arose because the trade unions broke their agreements and contracts with us, in one case giving half an hour's notice of a strike, and in the other giving notice of one hour. Apart from that we have had no dispute whatsoever. Therefore, do not laugh when I speak about industrial relations. I have had some first-hand practical experience right up to yesterday.

Lord LEE of NEWTON

My Lords, is not the noble Lord aware that both the noble Lord, Lord Erroll of Hale, and myself came from a huge firm which has never had a single dispute in the whole century of its existence?

Lord HEWLETT

My Lords, I am delighted to hear that and congratulate the noble Lord most warmly. But then I was not laughing at him; the noble Lord was laughing at me.

The noble Lord, Lord Lee of Newton, is right: today arrogance is what worries us perhaps more than any other single characteristic—arrogance which I think is disastrous in the public eye in endeavouring to create a sense of unity and cooperation which is so urgently required today. I go along with the noble Lord; I think that the possibility of enforcing compulsory arbitration as opposed to confrontation at this stage would be most welcome.

Let me refer to the original speech that I wanted to make until the noble Lord, Lord Bruce of Donington, so amiably distracted me. The noble Viscount, Lord Trenchard, could scarcely have guessed when he tabled this Motion just how timely it would be. He is right on the nail between the two one-day railway strikes. If he had not slotted in the debate today, we could not have got here. He is a splendid chap. However, I regret that I do not take with him the truly equitable approach that we really can study this on the basis of the chronicler in 1990. At the moment I am worried about getting through 1979. My aim is not to add gloom and doom to our present situation in British industry—please do not think that. In this House I have frequently expressed the consistent belief that we need not be in this sort of trouble and that we can get out of it reasonably quickly. To some degree we must blame ourselves—yes, all of us—for our decline, because in both these Houses we have pushed through a great deal of legislation; frankly, much of it ultimately not being in the best interests of those it was designed to help, and certainly clogging all the works of industry and wasting a fantastic amount of time, particularly in the medium and smaller-sized companies, which simply cannot afford all the extra bureaucracy which this legislation causes.

Frankly, over the last five years—and we must come straight to the point—it is this Government's policies which have very largely got us into the mess in which we are now. The Government must show a very great deal less complacency and very much more activity to get us out of this trouble, and quickly too. I am all for the very phlegmatic English approach, the unruffled air in the gravest crisis. But the attitude of Her Majesty's present Government is just downright ridiculous. We are in a crisis. I can only speak first hand from my experience of three separate industrial responsibilities, and therefore to an extent, as a chairman, I must declare an interest.

Would that we could even seem to penetrate with our unexaggerated reports the thick veneer of almost total uninterest in the plight of the North-West of England! The noble Lord, Lord Lee of Newton, will agree with me that there is an area in the North-West of England, which is in his very neck of the woods, where at present conditions are indescribably bad. I speak as the president elect of the Central Lancashire Chamber of Commerce, and I spoke last night with Manchester's president. In that area of Northern Greater Manchester we are faced with at least 50,000 additional unemployed, with exports stopped, and it is genuinely feared that there will be long- term damage to markets throughout the whole of that sector. From my own personal experience, a few firms are managing to get by, but many are having to face lay-offs in ever increasing numbers. In parts of Greater Manchester water supplies and sewerage are affected and that particular strike is likely to spread into Lancashire—to places such as Blackburn and Preston—within the next few days, to the deep distress of those trying to live or exist there. The Rossendale Valley—which the noble Lord, Lord Lee, knows perfectly well, as I do—is being thrown into utter confusion for lack of water supplies and proper sewerage facilities, and companies there cannot operate at all.

I am sorry, but London is a little too far away from our neck of the woods for our liking. Since New Year's Day we have had no petrol, no buses, no lorries, in parts no water supply or sewerage disposal. By gosh, you would not let it happen here in London! There would be an outcry! The Southern Region goes on strike occasionally and once or twice you may go short of a few things. But in the North-West strikers are creating a condition that can only be described as chaos.

There is an absolute need for the whole problem to be taken a great deal more seriously and not just fobbed off as though there is nothing terribly untoward at the present time. The people of Lancashire are as loyal as any in Britain, but you can push even them too far. Do not pretend that there is no crisis, and do not pretend that we are not very near indeed to a state of chaos.

I should like to give a direct quotation from a multinational chemical group's President in Europe. It was this corporation which I helped to persuade to come to Grangemouth before we knew whether Britain would join the Common Market. I thought that it was in Britain's interest that it should come. This is its message to the Secretary of State for Transport and the Secretary of State for Scotland respectively. It is not long, and reads: Borg-Warner Ltd. has invested thirty million pounds sterling over the past four years to produce plastic resins in Grangemouth, Scotland, with considerable persuasion by British Government. During the past two years our construction programme has been delayed by successive labour disputes and disruptions. While welcoming the settlement of the tanker driver strike we are now faced with a lorry drivers' strike which has stopped shipments of raw materials into our plants and delivery of products from our plants. We are at a standstill. We employ 500 people at Grangemouth and with this non-movement of product their jobs will be at stake in the next few days. The plastic industry"— which is one of the most important new industries in Britain— is most competitive in Europe with significant overcapacity and with mainland producers who are quick to seize an opportunity to secure business. Both our U.K. market and our export market are affected by the strike and we are in danger of permanently losing Continental business which our plants were built to support". They were built to sustain our own markets and export markets from Britain, and earn tens of millions of dollars doing so. All this, will result in further long-term damage for the British economy. Can your Government please take action to settle this strike so we may proceed with doing business? Labour unrest of the magnitude which we have experienced disrupts the orderly business process and prejudices future investments". Of course it does. This is not simply something which is isolated to us. There are hundreds of companies that have put their faith and trust in Britain, which believe that we know how to run our affairs a great deal better than we do at the present time. Can those who have invested in Britain view without any concern what is now happening to both their home and export markets by the attacks of foreign competitors?—and when there is over-capacity in the industry anyway. More investment is needed to create wealth and this is no way to go about getting it.

Nor in the earlier part of the debate have we faced the issue, which is so important, of creating the stable conditions in which enterprises will invest. That stability includes not just reasonable freedom from all these upsets and disputes, but also reasonably stable levels of interest. In October 1976 the MLR was at an all-time high; it is now twice what it was this time last year. How can any company intelligently plan its future on the basis of that sort of variation? Why cannot we show some initiative? Why cannot we have a two-tier interest system whereby for proper investment approved by Government you would be able to have a flat rate of interest—not necessarily particularly low—to enable you to ensure at least for the next five or 10 years an adequate investment programme? That alone would make a tremendous difference. I am not asking for handouts for industry. I am asking for nothing other than perfectly ordinary stability.

But perhaps I may turn to the chemical industry itself on a slightly broader front, and tell noble Lords what the present state of play is. Some plants, which are continuous process plants, will not take days but weeks to restore to proper efficiency and to full production. Now they are shut down already; I speak of some that I know personally. The situation where the shut-down has had to be precipitated, because people have walked out or they have been secondarily picketed, has meant severe damage to the plant and greater delay.

Export loss, both immediate and longer term, and total erosion of credibility of continuity of supply from the British chemical industry is at stake. In some cases, problems have been reported of possible hazards arising from this secondary picketing and there is widespread and, in some cases, totally out-of-control secondary picketing. How right again the noble Lord, Lord Lee of Newton, was to bring this particular matter to our attention.

There is this harm done to confidence in investment in the United Kingdom both at home and abroad—and by that I mean from both overseas and by our own companies—while the longer-term impact on public health materials, on medicines, and the like is something of great severity to us. There is the longer-term impact on supplies of food and animal feed materials, preservatives and special additives; and frankly we face one-fifth of a million lay-offs in the chemical industry by next week.

Frankly, in the past four years legislation has been passed ever strengthening union power, but not union responsibility. Now those responsible leaders of the movement—and there are many good responsible leaders of the trade union movement—have largely lost control of their members, and nothing less than chaos is resulting. Of course, I grant—I do not need to be the noble Lord, Lord Bruce, to do so—that in the 19th century and in the very early 20th century there was excessive power of capital over the employees and, frankly, trade unionists had to be far better protected, and many statesmen, including Disraeli, moved to that very end; but now the pendulum has swung far too far the other way. The individual citizen of Britain has lost his right to go to work, and to come back from it too, and his family has lost the right to lead a normal life. They are not just threatened with that. Presently, as I have told you, in North Lancashire the privileges of ordinary standards of living are largely withdrawn in the North-West of England.

We cannot look to this Government to tackle all these problems. I have to say—and I am sorry to have to do so—that the trade unions are very largely their Party's paymasters. They dare not act in regard to many of these things. What must be done in the common interests of the ordinary citizen—and I believe this Government could do this and would get united support in both Houses of Parliament to do so—would be to curb some of the excesses of the present day. I will not go through them at length. There have been very good speeches in regard to them. Let me just mention them. An end to the flying pickets, the professional trouble-makers; an end to the secondary picketing. If there is no involvement in that dispute, there should be no picketing by others or of other premises not involved in the dispute. Frankly, we ought in common sense to seek a secret ballot before strike action is able to be taken.

In case noble Lords opposite think I am not interested so far as getting sensible union reaction is concerned, we have pioneered the holding of trade union meetings on company premises in company time, because I so strongly believe that the vast majority of union members do not want to strike, do not want trouble. They want a fair and decent reward for a decent job done in a decent way. It is only the wildcats, the semi-maniacs, who are pushing this country into this situation; comparatively speaking a handful compared to the hundreds of thousands of good, honest, reasonable people who as individuals only want the right to go about their work and do their business.

I think there must be answerability at law for breach of contract—not just between employers and employees, not just between union and management, but even between unions. It is no longer any use claiming that we need to have a separate protection for the trade union movement. That time has long since passed. No section, I submit, should have any special privileges beyond the law. The noble Lord, Lord Carr, was so right in all he said on this subject. In regard to welfare benefits for strikers, and particularly unofficial strikers, of course I do not want anybody to suffer and for there to be hardship to wives and children, but there is no earthly reason why, if we cannot find another answer, we cannot employ this one. Why cannot we lend money from the State to those who are on strike, and it would be understood as an attachment of earnings, as there would be on alimony or any other payment, and, when they return to work, that they must repay. Personally, I would widely differentiate, as I am sure the noble Lord, Lord Lee, would, between the unofficial striker and the properly constituted strike where there is a genuine dispute after all the procedures have been carried through.

The situation is so serious that we can no longer go along with our present ridiculous way of handling these matters. The country is losing out at a fast rate to competition. Not just our recovery but our very survival depends upon such a shift in the balance of power. That is what Lord Lee was really talking about in all that he said. It really is power to which we make reference.

In our earlier debates on this type of subject. I defined one of the great duties of Government. It is not for handouts but for stability, and to create and maintain the conditions in which industry, commerce and agriculture can prosper. This Government have lamentably failed that test, and if they cannot urgently do a great deal better job on this front then they must go and make way for a Government that will. Yesterday's measures in the other place will do nothing to help. They are either inflationary or highly restrictive upon the possibility of creating greater wealth in industry, and therefore likely to cause only greater unemployment.

We have been subjected to far too much biased legislation for far too long. The other two factors I would put before you is that we have gone much too far. I know about fighting the enemy of inflation, but going too far in doing that is closing the differentials and making inadequate reward for hard work and for risk bearing too. The plight of the manager I have to draw to your attention. No other section of the earning public has slipped so far behind in the economic league in the past five years as the good old British manager. Financially as well as fiscally he has been knocked about something awful. I estimate that 40 per cent. is the drop in his standard of living, and these are the people on whom we are depending to create new opportunities and new wealth so that the country can be prosperous. How daft can we be. Far too little attention has been given by the Government to the representations of the British Institute of Management in this regard. Only by good management can we prosper, and good management involves all the co-operation of all sides of industry.

I made my maiden speech in your Lordships' House against the "us and them" syndrome. I have exactly the same feelings today. We have no reason to be "us and them". We are the country; we are the public; the sooner we realise that we have to get together and knock out the nonsenses of the present situation, the better. All I can say, my Lords, is simply this: We are in a desperately serious situation. I am no Little Englander. I am not writing off my country or saying that we are not capable of getting out of our difficulties. Of course we are. But there has to be a great deal more thoroughness, openness and trenchancy about putting the case of the present situation to the British public.

I believe that they cannot see the sense of the secondary picketing and of the ridiculous claims that are being made, which are quite out of the realms of all reasonableness, and then prompt strike action. We have to cease subsidising strikes. We need to have contractual law operating on all facets of life in this country. We have to create a new atmosphere in industry. Many of us—and I have spent only 30 years at it—are proud to say, like the noble Lord, Lord Lee, and the noble Lord, Lord Erroll, that we have had scarcely a dispute in all the time we have been operating. The vast majority of British industry is like this. It is only the comparative few who are spoiling it. I am just as much an enemy of the bad employer as I am of the bad trade unionist. If we do nothing else, after thanking the noble Viscount, Lord Trenchard, for raising this subject, let us hope that the message sent from this House is that we see the problem, we can identify it and we are prepared to give the maximum backing to those who have the courage to put things right.

6.9 p.m.

Lord GEDDES

My Lords, with such a formidable list of speakers in this important debate, I shall restrict my remarks to the tax aspects and at the same time I hope keep that contribution extremely short. I do not claim to be a fiscal or monetary expert. Indeed other noble Lords have such expertise, and I defer to them. But I should like to give just one or two instances of the fetters under which British industry struggles for survival, let alone profitability. United Kingdom Government revenue is raised, to the best of my knowledge, as to 54 per cent. from income tax and corporation tax alone. To reach this level, which I suggest is alarmingly high, we have on income tax, as the noble Lord, Lord Erroll, has mentioned, a maximum rate of tax at 83 per cent. on earned taxable income in excess of £24,000. That is far too high compared even with the United States' maximum of 50 per cent. on earned income.

We have no income tax deductibility for pre-trading expenditure or for abortive projects, a situation which leads in general to projects being considered and implemented only in accepted established commercial fields at the expense of the innovator. We have no write-off against tax for the cost of commercial buildings unless they are being used for storage or the subjection of materials to industrial processes. This hits the service industries hardest, since the cost of acquiring offices or shops is not deductible for tax purposes. We have no tax alowance for the cost of arranging finance—that is, the arrangement and facility fees—a point on which noble Lords who speak after me may wish to comment.

On capital transfer tax, even after the rate changes of October 1977, the rates are still excessive. To give one illustration, if an estate comprises shares in one unquoted company worth £500,000 which the deceased does not control, the CTT payable is £200,000 in round figures, or nearly 40 per cent. of the estate. Nor does our CTT structure at present distinguish to whom gifts are made or estates devolved. Most EEC systems of death duty incorporate a scale whereby when assets are given or left to relatives of the deceased, less tax is payable, depending on the degree of relationship, than on assets left to outsiders. We simply have a flat system; it makes no such differentiation.

In administrative matters—other noble Lords have made this point—recent years have seen the passing of successive legislation by different Governments affecting working conditions, conditions of employment, pension provisions, industrial relations and prices and wage levels, not all of which have been consistent. For example, in recent years we have seen two Industrial Relations Acts, two different proposals for pension reform, health and safety at work legislation, the Equal Opportunities Act and the Employment Protection Act. Apart from the time involved in digesting their implications, they impose an additional administrative burden which directs the entrepreneur's energies away from creating wealth. Requests for more and more statistical and other information from Government Departments have a similar debilitating effect.

As I mentioned in your Lordships' House on 6th December last, I have recently had the privilege of living and working in Hong Kong, and I make no apologies for calling on that experience again in the context of this debate. While appreciating that a complete equation between this country and Hong Kong can be open to criticism, nevertheless I consider that in the example of Hong Kong—and perhaps noble Lords will be aware of other examples—we can and should learn a great deal. To put it bluntly, Hong Kong has found a formula which is successful; the United Kingdom has not. I have already mentioned 54 per cent. of United Kingdom Government revenue being raised from income tax and corporation tax alone. Thirty-nine per cent. of Government revenue in Hong Kong is raised from all direct taxes. In the context of this debate, it is surely direct taxation which has most relevance, and as many noble Lords may be aware, Hong Kong has a flat rate of corporate tax at 17 per cent. on profits earned in Hong Kong. There is no Hong Kong tax on profits earned outside Hong Kong. Losses can be carried forward indefinitely and there is no tax on dividends. Direct personal taxation is at a maximum of 15 per cent. and the majority of the population, having taken personal allowances into account, pay nil or virtually nil in direct tax. For instance, translated into sterling terms at the current conversion rate—which I appreciate is an exercise which can in itself be misleading—a married man with two children earning £4,700 a year would pay only £156 in direct tax

The effect of such a structure, both corporate and personal, is not difficult to visualise. Both companies and individuals have every opportunity to create their own wealth. They stand or fall on their own endeavours and are not shackled by excessive Government interference. The Hong Kong Government, in its turn, finances its increasing expenditure from the growth of business which it attracts and encourages by the low tax base. Hong Kong critics may say, "Ah yes, but such a system simply enables the rich to get richer at the expense of the down-trodden masses". From what I saw over a two-year period, that simply is not true; or, to be more exact, it is only half true, and then only as to the first part. Such a system enables any individual or any company to create wealth as a direct result of his, her or its own hard work and expertise.

It is the old story, but worth repeating for all that: succes breeds success, and Hong Kong is manifestly successful. It has the highest wages in Asia, outside Japan; the highest GDP per capita in Asia, outside Japan; full employment, virtually no strikes, and a social security system which, while being improved annually, continues to aim at what seems to me to be the correct target; namely, to assist the genuinely needy rather than cosset the parasites.

I say to this and any future Government, that we shall never get this country back on to its feet unless we encourage business and particularly small concerns. The fastest way to discourage effort is to tax away the results of success. I have been lucky enough to see and experience the success of Hong Kong. Let us not be too proud to learn from others. Unshackle British Industry from its tax burden. The poor old British industry horse is wearing itself out trying to push the cart. Give it a chance to pull it instead, and the chances of success can only improve, to the benefit not only of the country but of all those who are prepared to work, and work hard.

6.19 p.m.

The Earl of LIMERICK

My Lords, despite the temptation to expatiate on the problems of today, which have been much and most eloquently referred to in earlier speeches, I shall seek to take a long-term view, as invited by the terms of the timely Motion standing in the name of my noble friend Lord Trenchard. I followed with close attention the points made by the noble Lord, Lord Geddes, in his thoughtful speech and some of what he said will enable me to reduce the length of my own contribution.

I start from the point that in considering constraints we are looking at three important matters. The first is the question of individual motivation, with which I link the current lack of differential rewards; the second is the question of institutional discouragement, with which I link excessive Government intrusion into the affairs of the private sector—intrusion both by legislation and by bureaucracy; and the third is the question of stability, with which I link disruption.

The problem, I believe, that Western industrial democracies have created for themselves is that they depend for their survival upon growth and are based upon feeding the expectation of growth. All too typically therefore those who aspire to power first promise too much, then actually reduce the growth potential in the private sector by taking too much from it in a self-defeating attempt to redeem their promises through the public sector. No post-war Governments are blameless. Some, evidently, are more guilty of this than are others, but if we really believe in industrial democracy, we must give more marks to those who increase the potential for growth than to those who act in a manner as to diminish it. To set out to do more than we can afford at a given time is no favour to anyone.

Material progress, generally but erroneously assumed today to be a God-given right, must depend upon economic growth. Economic growth in turn depends upon the creation of wealth with which to pay for it; and in passing one might reflect that it is strange that while no one disputes the need for economic growth, there are people who challenge, nevertheless, the necessity for, or even the desirability of, that creation of wealth which can be its only basis. It cannot be too often stressed that Governments do not create wealth, unless by acting as entrepreneurs and making a net profit on their enterprises. Economic growth is what is left of the sum of private wealth creation after Government has taken its inevitable share for non-productive spending. Government in this sense is a compulsory overhead cost of wealth creation, and if there is too much of it, as is the case if there is too much of any overhead cost, it has the same effect upon the national profit and loss account.

We come to human behaviour within this system of ours. I am constantly surprised by the fact that people see quite a different relationship between input and output in their private lives and in their place of work. We tend in our place of work, particularly if we work in large units, to lose sight of this inexorable relationship between input and output. In our private lives, on the other hand, we accept it without question. Which of us, if digging his garden, who, after half the afternoon has dug half the garden, would question that if he stopped work at that point the other half of the garden would remain undug? Somehow that direct relationship, if one is talking in terms of input to a system, is not appreciated. The effects of arriving late, of standing gossiping, or whatever may be the point at issue, are not seen to impact upon output in the same way as when we are handling our spade in our own garden. This I believe is directly related to the size of units, and that in itself has much to do with this apparent switching off of commonsense.

It applies also to the question of investment. If we think back to 1976, it was suggested even that the shortage of investment was brought about by some form of deliberate investors' strike. I believe that the cause of insufficient industrial investment is much simpler, but at the same time harder to deal with than it would be if that were the case. In 1956 the average pre-tax, replacement cost, rate of return on industrial and commercial investment was running at around 17 per cent., while the inflation rate perhaps was 3 per cent. By 1976 those digits were approximately reversed; that is to say, the return on industrial investment was down to around 4 per cent. while both interest rates and inflation rates were up in the high teens. This represented, evidently, a massive negative rate of real return upon investment, and it needed in those circumstances a super-optimist or a masochist to put money into low-yielding, speculative fixed assets, rather than the alternative of lending it to the Government, whose economic management had driven up interest rates to levels which the industrial sector could not afford for industrial investment, at a multiple of the industrial return. Now, alas!, we again see today something of this situation with a public sector borrowing requirement of £9¼ billion, which may well of itself be incompatible with money supply targets, that is crowding out private borrowings and the private investor.

At this point one must talk about taxation. The noble Lord, Lord Geddes, gave some figures on tax. I should like, because no one has done so before, to give your Lordships the actual figures of marginal tax in some of the major industrial nations. The highest rate of taxation paid in Canada is 45 per cent. In the United States it is 50 per cent. In France it is 54 per cent.; in West Germany 58 per cent.; in Japan 68 per cent.; in Italy 72 per cent., and in this country 82 per cent. But the point that I should like to stress, because those comparisons tell only half the story, is that in Japan, where the rate is 68 per cent., that rate is attained only at a salary level of £204,000 a year equivalent, and in Italy 72 per cent. is attained only at £374,000 equivalent salary. These salaries are equal, respectively, to eight times and 15 times the rate of £25,735 in this country at which the top marginal rate of 82 per cent. becomes applicable. It is also true that we in Britain have the highest marginal tax rates on middle and on lower incomes, down to the national average income. Therefore in this country we pay the highest rates of tax on, relatively, the lowest incomes.

Another point on taxation was raised by the noble Lord, Lord Bruce of Donington, whom I am sorry to see is not in his place at present, and it is worth making a comment here. The noble Lord drew attention to the fact that the overall rate of corporate taxation in this country is only 27 per cent. owing to capital allowances and stock appreciation relief. One must go on to ask why this should be. The reason is that the cash flow of companies has been so strained by a combination of sinking profitability and inflation that successive Governments have found it necessary in order to keep these companies in business, let alone to allow adequate investment for the expansion of their affairs, to restore the cash flow by derogations from the full rate of taxation, notably in the form of capital allowances and, latterly, of stock appreciation relief.

I now wish to return directly to the question of motivation. What would be favourable conditions, trying to look at the subject from the positive side? First, there must be a restoration of personal motivation. Anticipated rewards must be adequate, both absolutely and relatively, to compensate for extra efforts. I refer especially to the acquisition of skills or of qualifications, which may take many years; to working extra long, and to working extra hard; to taking risks, and to taking responsibility.

My Lords, I do not know much about horse-racing but I know that there is a man, somewhere where one cannot see him, who is called the handicapper. If he does his job perfectly, the result is achieved that all the horses arrive simultaneously at the finishing post. But what one has to note about the weapons at his command is that, since it is illegal to stimulate horses to run faster, he can achieve this aim only by penalising or reducing the performance to below maximum of those which are capable of going faster. Now that should give us something to think about.

In human affairs it is not illegal (perhaps I should say it is not yet illegal) to stimulate as an alternative to penalising. What we should be doing is to stimulate. The whole trend in recent years has been to reduce personal motivation. Differential rewards are progressively and substantially reduced to a point where, certainly in large industrial units, neither skill nor responsibility is perceived to be worth acquiring. We do not need to look at the top men for our evidence: we can look, as I mentioned in quoting these marginal tax rates, right down the scale. The living standards of our small entrepreneurs and our middle-managers, on whom the successful development of wealth-creating enterprises depends, are among the very lowest in Europe. Why should they continue to strive when they cannot thrive?

This human desire to improve a man's own position, and particularly to see that his children get a better start in life than he himself enjoyed, is a very powerful driving force. In disregarding this, as we have done progressively over the years, we have not only lost the key to effort but we are in danger of throwing away the mainspring as well.

May I tell your Lordships a rather sad, personal story to illustrate how we have created some unfortunate and unfavourable conditions for economic growth in attitudes to motivation and to productivity? Last summer, at a dinner in the North Midlands, I was sitting alongside a senior trade union official. We talked of the apparent paradox that, in areas of high local unemployment, factories could not expand production and take on more staff, not for lack of demand but solely for lack of skilled workers. He would not agree with me that the virtual absence of wage differentials for skill could be responsible for that. Later, relating export performance to unit cost of production, he remarked, "The trouble with the productivity argument is that, in my book, productivity equals unemployment". He was an intelligent man but his thinking was entirely short-term. He would not concede that in a competitive world it is any relative lack of productivity that spells the inevitability of long-term unemployment.

My Lords, perhaps I may comment very briefly on my second theme—of discouragement—and I will do so by reference to a single example coming out of a recent independent survey of the success and motivation of exporters in France, in Germany and in Britain. What this shows is that if an entrepreneur in Britain puts in extra effort, takes extra risks and wins £100,000 of extra profits for his business, and if he then retires having taken out, in this example, 24 per cent. of that amount by way of dividends, what he will pay in corporation tax on £100,000 is £52,000, capital gains tax of £8,000 and personal tax on the dividends of £23,000. In other words, what is left out of the £100,000 is £17,000 only. In an identical situation, a German entrepreneur would retain over double that amount—£37,400.

My last point was that of stability. Stability is essential in business decisions, and the antithesis of stability is disruption. Businessmen, investors, are thinking, typically, on a 10- or 15-year time scale. This is completely out of kilter with the electoral time scale, and they find themselves quite out of sympathy with the sort of yo-yo policy which affects their decisions. This is a matter which I believe has got to be addressed, whether it be through some consideration of the electoral system or by some other means, so that those who are asked to take decisions can be confident that the climate against which they are taken is not going to alter adversely and fundamentally in the short term.

My Lords, why are these matters so vital? Your Lordships will forgive me if I return to a subject which I spend much of my time thinking about, which is exports and our place in the world. This we have to strive to impove if we are going to maintain, let alone improve, our relative economic standing. Where do we stand in the world? It is common knowledge that our share of industrial exports after the war, when it was about 20 per cent. of the world total, fell to around 8½ per cent. in 1977. From that, I should like to deduce two things. The first is that it was recently estimated by the CBI that to regain a I per cent. share—that is, to go back to 9½ from 8½ per cent.—would represent the recreation of 400,000 jobs. Secondly, we are an overseas-trade-dependent and export-dependent nation.

I need only point out that, as a percentage of GDP in 1977, for the United States exports represented 10 per cent.; for Japan (thought to be such a great exporter) the figure was 15 per cent.; France, 21 per cent.; Germany, 29 per cent.; and for us it was 31 per cent. So our performance, our cost-effectiveness in world markets, is of really central significance to our standard of living. That is why these matters are so vitally important. Most importantly, if we look at where we have got to on that front, we are apparently doing very well in a lot of export markets and absolutely very well in a number of them, yet what we achieved last year, in 1978, was an approximate break-even on our current account after bringing in a credit of £4 billion from North Sea oil. Just think where we would have stood without that windfall which we are sadly in the process of burning without permanent warmth to our future lives.

May I close with a reflection on risk-taking? I believe that in an attempt to create a risk-free economy we have gone a long way to creating an economy which has the seeds of diminution well planted within it. A no-risk society just will not work. People have to take decisions and have to be out front promoting new ideas, new forms of technology, and selling them in new markets, if we are to maintain our place, let alone go ahead. We need to take a robust stance in the world, which we can do only with the confidence of our domestic economic base, addressing our minds to the removal of some of these constraints. A no-risk economy, an attempt to create a feather bed, is doomed to failure. My Lords, by far the majority of people, and may be of countries as well, die in bed.

6.39 p.m.

Lord BROWN

My Lords, in his speech the noble Earl, Lord Limerick, has put the emphasis on taxation. I agree that individual taxation is much too high in this country, but I do not think there would be any real hope of solving the sort of problem we in this country face today by way of the creation of wealth through simply reducing taxation, much as I should be in favour of it. May I remind your Lordships that in the early 'seventies Mr. Heath's Government reduced taxation by, I think, nearly £1,000 million, but in the years immediately following investment fell yet again.

Now, we are faced with a situation which is brought about by an imbalance of power in our society. The focus of the use of this power is around wages, but it does not end there. We see managers at all levels in our factories spending a huge proportion of their time negotiating, not only over money wages but over every conceivable thing, and the focus is taken off the efficient running of industry and our services, to the detriment of us all.

The two most interesting speeches so far, I think, were those of the noble Lord, Lord Carr, and my noble friend Lord Lee. Both were attempts at being constructive. May I say a word about Lord Carr's speech first? He wants union-devised rules which would result in a form of self-discipline on the part of the unions. We have had two examples, one three years ago, of so-called self-regulation by the unions, and we are facing the results of another undertaking by the unions that they would indulge in responsible free collective bargaining; and we all know where it is rapidly taking us.

What is too often forgotten is this. Union general secretaries and their committees do not exercise authority over their members. They are elected by their members and their prime function is to serve the interests of those members and to carry out their wishes. In one sense, it is just as absurd to ask trade union officials and general secretaries to control their members as it would be to ask Members of Parliament to control their constituents. I am not making an absurd comment in saying this. I should not be surprised, although I do not know, if most of the general secretaries of our unions today were as horrified as we are about what is going on at this moment; and they are quite unable to do anything about it. There are some notable examples like Tom Jackson and Sid Weighell who have said this already.

In the terms used by the noble Lord, Lord Bruce of Donington, we are facing the results of being an extremely materialistic society and we are facing a migration of power which has been taking place for a very long time. We had enormous power in the hands of the industrial managers in the 19th century. What did they do? They exploited the working population of this country horribly. Then power migrated to union officials. It migrated from them to the shop stewards and now it is in the course of migrating from the shop stewards to unofficial groups on the factory floors. Here we have a society which is being increasingly interfered with by people who have no responsibility to anybody except themselves and who are beginning to interfere with the liberty of the individual in the society in a very serious way. When Government and Parliament in their wisdom sought to prevent the exploitation by powerful employers of employees, they did it by regulation. We will soon have to do it by regulation again. The focus of the battle that goes on increasingly in industry, and especially in large firms, is around wages. If we get over that battle then the rest of the battle will diminish in heat. It is for this reason that I want to talk about statutory wage policies.

It has been said over and over again in this House and in the Press that statutory wage policies have failed, and in a sense they have. But in one sense they have not—because, beginning with the Labour Government policy in 1968 and going on to the three stages of Mr. Heath's policy and the two stages of the Labour Government's quasi-statutory policy, these policies backed by the TUC and supported by certain Government restrictions on employers have, in a large sense, succeeded. Looking at the strike record during the years of these policies, it has been very good. Employers and managers have had an easier time and have been able to get on with their jobs to a greater extent during the period of these policies than at any other time since the war when such policies have not been in force. The one defect is their inflexibility and the freezing of differentials which arises from them. But, as my noble friend Lord Lee has said, there is no reason why there should not be incorporated into a statutory wage policy a degree of flexibility which would overcome what has been their defect so far.

I have spent a high proportion of my time in the last seven years working out and trying to propagand the details of a scheme which would achieve that flexibility. It is not difficult. It is founded on three pretty obvious principles which are very familiar to anybody who has had anything to do with employment. The first of the principles is this: if you want to change a pattern of differentials you have to get the agreement not only of those who benefit from the change in wages but also the agreement of all those who do not benefit. If we do not get the agreement of those who do not benefit, then they will jump on the band-waggon and we get leapfrogging, That is a familiar principle to people who are concerned with employment.

The second principle is that if you have a kitty to share out—and this is what I am going to propose in a minute—among all the trade unions of the country or among the employees of one particular firm, the people who should decide how that kitty should be shared out are the representatives of those who would be affected, and no others. I have been called in on a number of occasions when I have had to face, in other firms, the problem of demarcation disputes. There is only one way to solve a demarcation conflict; it is to say to the people who are quarrelling about who is to do what that it is nothing to do with management, that management are only concerned that somebody should do it and that the people should take it away and settle it between them— "but do not have us in on the discussion; for we are only there to be the scapegoats if you fail to agree". Differentials are the subject of conflicts between employees and not between employees' representatives and the management. The principle must be that those who would be affected by the change in pattern of differentials and those alone, must be those who decide what the pattern shall be.

The third principle is that of synchronisation. If you are to get any sensible settlement of the whole business of differentials, you must bring national wage policies from every occupation into negotiation over the same period. If you split them through a year, then you open up the door to all sorts of claims about what is going to happen to other industries as a basis for what people are claiming at a given moment in time.

Going on from there, let me make a short analysis of the role of the unions, of the employers and of the Government. It must be clear to everybody that the role of the unions is to look after the interests of the employees or producers. Every time the producers get a large increase in wages, it is the consumers of this country who largely pay for it. The days are past when increases in wages could be paid out of surplus profits. Who is to protect the consumers of this country from the effect of very large and unjustified wage awards to the producers? Is it the employers? It is the underlying fallacy with which we deal with these problems that wage negotiations should be between employer and employed. They should not. The body which protects the consumer is Parliament, the Government. They are elected by the consumers of this country. That is the rationale for a national limit to the amount by which the wage bill can go up every year. We must have continuous limits into the future, got out after consultation with the CBI and the TUC and others; but they must be statutory limits, otherwise the producer is in for a very bad time and our international standing as a trading nation will in due course be finished if we do not produce these limits. We have had enough experience this year and three years ago to know that we have to do something along these lines.

What I am suggesting is a new institution in this country, call it what you like. I have written about it and called it the National Council for the Regulation of Differentials. I want to see elected to it representatives of all employees of this country. I shall not go into too much detail; I have written it all up. I want the Government to decide what the kitty shall be, 5 per cent. or 6 per cent., who knows? I want it to be left to that body with plenty of time—a year—and I want those people who sit on that new body to be paid representatives of the employees of this country to decide how much shall be split up among the various occupations in this country. It may be thought that they could never do it. They will have to do it unanimously if they are to be certain that their plans will be adopted. My suggestion is that if they can agree unanimously, then it becomes a statutory duty of Government to legislate that pattern of differentials for national occupations into existence. If they cannot agree unanimously, if they can only get a 90 per cent. or 80 per cent. vote, then their decisions should become recommendations to Parliament. Parliament will have to decide whether to adopt that pattern or whether to return it to this body.

There is one degree of flexibility as between great occupations. Out of the deliberations of that body, each employment group in the country, each company within it, will have its own kitty. It should be statutorily possible for each of those companies to divide up their kitty among the various grades and ranks of their employees, if some council representing all ranks of employees, not just trade unionists but managers as well, can agree on a sub-division of that kitty. If they cannot do that, all will have to take the same: if it is a 5 per cent. wage increase, everybody will get 5 per cent.

Just look at what is achieved by this. All Governments, Conservative and Labour, are criticised for lack of flexibility. They can never introduce the desired flexibility by making decisions about differentials themselves. Can you imagine Parliament deciding who should get more, boilermakers or shop assistants? It is an impossible idea. If they did in fact set up such an institution, decided the kitty and left it to the representatives to decide the pattern of differentials which were going to arise from its use, in the first year or two there would be no agreement on differentiation because the representatives would not be able to agree. Also at local level representatives of employees in companies would be unable to agree. However, look at the change in the psychological situation. When people in industry came back and said: "This statutory policy has frozen differentials ", the Government would be able to say, "No it has not. You have frozen it. If you want flexibility and attention to what you regard as unfair differentials, you have it statutorily in your power to make those flexible changes, and you have refused to do so. The ball is at your feet, gentlemen". You can say the same to companies.

I would ease this scheme by allowing every company some small percentage. If the national increase was 6 per cent., I would then allow them 1½ per cent., so that management could reward those whom in their judgment were worthy of promotion, and reward those who were entitled to it on the basis of their performance. By these means one should be able to introduce that degree of flexibility into national wage policies which has been the main cause of their rejection by so many people in this country so far.

I end what I have to say here by pointing out that, unless the political Parties of this country can get together and realise that in the interests of the consumers of this country, and of the position of this country in the world economic setting, there must be statutory limits on the amount by which the wage bill can go up, coupled with the type of arrangements of flexibility which I have suggested, then we are going to go on with an ever-growing number of militant power groups seeking their own selfish ends, fighting it out in industry. We are going to have managements whose eye is taken off the ball completely, in an attempt to mediate this conflict, and we are going to leave the whole question of increasing the wealth of the country unattended to because of the extent to which our energies arc diverted into this ridiculous, chaotic conflict which is taking place now.

6.56 p.m.

Lord NUGENT of GUILDFORD

My Lords, I must resist the temptation to discuss the interesting speech which the noble Lord, Lord Brown, has made, and, paying particular attention to the long list of 14 speakers who are to follow me, I hope I am going to follow the excellent example of the noble Lord, Lord Geddes, and keep my speech down to 10 minutes. May I begin by congratulating my noble friend Lord Trenchard on introducing this very interesting topic with a most interesting speech. I hope he may be right when 1990 comes. My word, we have some difficulties to overcome in the meantime! May I apologise in advance to the noble Baroness who is going to wind up? The necessities of getting home tonight by trains which are going to stop running early in order to get in the right places before not running at all tomorrow, mean that I may have to leave rather earlier than I had intended. I hope that the noble Baroness will forgive me.

I share the anxieties generally expressed about our present economic position. We see the danger signals. We see this enormous build-up of debt in the past few years; we see the stagnant position of our industrial production, and we see alongside all this the distressing spectacle of this great increase in the number of unemployed. It is desperately serious for each individual concerned, but is the most terrible waste from the point of view of the economy of the country that there should be this huge number of men and women, 1⅓ million, who are now unemployed and another quarter of a million who are probably subsidised in employment while simply not doing productive work. I, like others, ask myself: "Why are we not exerting our natural skills? There are some bright spots in the gloom—sectors of industry, firms, the City, North Sea oil, and agriculture—where we are still very good. Why are we not doing it over all, my Lords?"

I see three main obstacles. I start straight away with the same one that the noble Lord, Lord Geddes, and the noble Earl, Lord Limerick, spoke about—taxation. There are penal levels of taxation now—I speak particularly about personal taxation—82 per cent. on earned income and 98 per cent. on investment income, plus capital gains tax, plus capital transfer tax. We arc promised that if there is another Labour Government there will be the wealth tax as well. The fact is that this accumulation of taxes as it impinges on the individual undoubtedly cripples effort, both in management and on the shop floor, and prevents the greatest output that we could hope for.

In my judgment much the most serious aspect of it is on the formation of new businesses and expansion of old ones. To start a new business or to expand an old one—but particularly to start a new business—it is necessary to borrow the capital to finance the project. When the individual has got the business going, he must earn enough profit to pay the interest, repay the loans and have something for himself to live on. This is the beginning of wealth creation. Some small businesses grow into big ones. This is how a nation improves its standard of life and employs its citizens. This, as those who have done it would know, is a hazardous undertaking. There are few people who have both the enterprise and courage to do just that—to borrow the money, to have the vision, energy and enterprise to start a new business and then to operate it and to carry all the burdens of repayment of the loan, to meet the debts as they come along, to meet reverses and deal with them as well. There are few people who are ready to face those risks, and the present conditions of taxation today are desperately adverse to men and women starting to do that at all, because taxation rises so quickly to penal level, leaving no margin for loan repayment and income for the operator to live on. Worst still, it is impossible to build up a reserve against the inevitable reverses that arise from time to time. That is the first major obstacle that we are all suffering from, to the creation of wealth.

Secondly, we must undoubtedly bring down the present penally high interest rates of round about 15 per cent. for private borrowing. This is so high that a young business simply cannot carry it. We have to have these rates and bank lending rate has to be set so high to protect the sterling position of the country because of the massive overspending by Government, which goes on year after year. These are the first two major obstacles which any Government has to look at and I hope that this Government and the next Government, whoever they may be, will look at them. At the same time I would say to this Government that they really must look again at their present spending policies. However they justify them, they are vastly in excess of what we as a country can afford. They must also look at the traditional idea which comes from so many members of the Labour Party—men and women for whom I have a great respect; that is, the idea they they regard rich men as objectionable. This really is madness. If we go on regarding rich men as objectionable, there just will not be any in this country. The young men who can earn money will be off, and they will go somewhere else where life is more comfortable. My noble friend Lord Limerick made the excellent point that the British small entrepreneur is the worst remunerated small entrepreneur in Europe; and that is a fact. These are the men and women who create wealth in the beginning, and small businesses grow into big businesses.

The third obstacle is the one which has been spoken of at enormous length and therefore I shall refer to it only briefly: that is the problem of this Government's employment policies. My noble friend Lord Carr made points that I would have wished to make, so I will say very briefly that it is a fact that in the last four or five years the Government's policies have greatly strengthened the position of the employee, vis-à-vis the management. The result is today that the employer cannot terminate employment without excessive compensation; he cannot exert management authority without the risk of heavy damages., and yet on the other hand an employee can break a contract of service, practically speaking, with impunity. This has all been dealt with at very great length today and a great deal has been said about management. Let me just weigh in on that side: management is a very difficult skill. Men and women who can manage businesses are men and women with vision, courage, understanding and human sympathy—because they must maintain good relationships and they must be leaders in order to get a good combined team effort out of the people who work with them. We really must redress the balance here so that the employer and the employee can see that both are going to benefit if it is made possible for management to function in a more satisfactory way.

Almost certainly I would say that new businesses are not forming as fast as old businesses are going out. We know that in 1977 failures reached a record level and it was pretty high again last year. There are no statistics, of course, for very small businesses but I should think almost certainly they are not forming as fast as they are failing. This, again, is another sign of how serious the country's need is that we should reverse this trend of accumulating debt and that we should turn to a different scene where we can begin to create wealth again which we, as a country, used to do and are still well able to do. Everybody would benefit by it; it would make more jobs; it would raise the standard of living and benefit the whole community. Let me stress the point which I think my noble friend Lord Limerick made, which is that Governments do not create money; it is only individuals who do that. It is individuals who create great wealth. They must be encouraged and be given a better deal than they have been given in the last few years, otherwise we shall continue to slide down the slope.

7.6 p.m.

Lord KALDOR

My Lords, I hope that the noble Lord, Lord Nugent, will forgive me if I do not take up the main point of his speech. That is not because I agree with his line: I am afraid this is far from the case, particularly as regards his point on the taxation of small businesses. There is no other country in Europe which gives such favourable treatment to the reinvestment of profits either in fixed capital or in stocks, both on account of the free depreciation introduced by the previous Administration and the stock-relief introduced by the present Administration. In fact any profit which is not spent on consumption but is used for the creation of wealth—that is a term which we have heard often today—suffers no tax charge at all. I merely wanted to point this out because I do not want to spend my time dealing with these points.

There was a great deal in the speech of the noble Viscount, Lord Trenchard, with which I was in agreement and I would say that also of many subsequent speeches, such as that of the noble Lord, Lord Carr. At the same time my immediate reaction after listening to him was to recall the biblical quotation: Why beholdest thou the mote that is in thy brother's eye but considereth not the beam that is within thine own eye? I say this without wishing to express any opinion on the relative sizes of motes and beams.

There can be no question that the general attitude of management and labour towards each other is one of mutual hostility, and that in this respect the situation in Britain compares very unfavourably with other Western countries. Marx, writing over 100 years ago, and describing the state of the British working classes and the attitude of the employers to them with a great deal of bitterness, was nevertheless induced to conclude that, given the general tolerance and good sense of the British people and the nature of their Parliamentary institutions, Britain was likely to be the one country where the class war would abate peacefully and where there might be a transition to socialism which would not involve violent revolutionary upheavals. Unfortunately, that was one of Marx's many predictions which proved wrong. Class war has eased up considerably in countries on the Continent, particularly in Germany, where the workers feel a sense of identification with the enterprises for which they work, which was not present before. In Britain, on the other hand, as many observers have remarked, the sense of alienation of the working classes has become stronger and not weaker with the passage of time—stronger, as the ownership of industry has become more concentrated and as the ultimate responsibility of management has become more distant and more impersonal, as well as being more liable to sudden changes as a result of take-over bids and other financial manipulations which the workers whose lives are affected by them do not really know about or understand. I wish that I could share the optimism of the noble Lord, Lord Hewlett, that the irresponsibility which we now experience with the British working classes is the result of the work of a few maniacs. The point I want to make is that I wish it were true that this is just because of a few maniacs, and that the vast majority of our industrial workers have as much pride and responsibility in their work as they should.

Noble Lords on both sides of the House have been right in stressing that the attitude of the British working classes has become less disciplined and less cooperative. For the first two years, the workers nobly supported the Government's incomes policy in the national interest, even at the cost of an appreciable cut in their real earnings. That was no longer true afterwards, when it became clear that the Government did not have more permanent solutions to offer, by way of new institutional arrangements that would replace the "free-for-all" which is implicit in a system of collective bargaining by numerous individual unions or groups of workers acting in competition with one another.

There is no doubt that our country is in a very tragic situation and, in my view, it would be wrong to put the blame on any one Government or on any one Party; the more so—and this is a point that is frequently overlooked, but which I have often emphasised in this House—since our economic difficulties are of very long standing. They go back to a period which extends at least 40 years before the first World War; in other words, to a period when income tax was 7d (seven old pence) in the pound, when there was no social security, no unemployment benefit, no death duties (at least not till 1892); and nothing of the kind of social policies which so many previous speakers regard as the cause of our present difficulties. I wish to remind Members of the House that between 1873 and 1913 we lived in a kind of "Hong Kongian" paradise—as Hong Kong was described earlier by the noble Lord, Lord Geddes, who I am sorry is not here just now—of low taxation, ripping competition and freedom for the small man, and anyone could get as rich as he liked. Yet our industrial production increased by less than 2 per cent. a year, at a time when German industrial production increased by 4½ per cent. a year and the industrial production of the United States increased by over 5 per cent. a year.

Over that period, 20 million people left this country, very largely because they could not find employment here. So we did not have a paradise, despite the incentives. There were all the incentives to become rich—State expenditure was very small; there was no sign or sniff of a Welfare State, and yet our economic difficulties were much greater in that period than they were after the Second World War, in the post-Keynes, post-Beveridge era. In the 20 years after the Second World War, our performance was very much better not only in comparison to the earlier period I mentioned, but relative to both Germany and America. Germany and America both did better than we did, but not so much better as in the period 1873 to 1913.

In the opinion of foreign observers, management bears the major share of the blame for the general inefficiency with which industry is conducted in this country; the lack of technical expertise, as shown by the inability to compete effectively in either the quality or the range of our industrial products, when compared with more go-ahead industrial countries, such as Germany, America or Japan. But management is also blamed for its inability to develop good working relations, and to make workers feel that they are part of the firm, and that the firm is conducted in the general interests of all and not solely or mainly in the interests of shareholders.

In this country, factories are closed down at the behest of the owners, without any prior consultation with the workers. I heard only last week of an important factory of Vickers at Scotswood near Newcastle, which was one of the few factories producing heavy machinery whose production can be vital in a national emergency, but which was closed because it made losses for two years in succession—ignoring the fact that all heavy engineering plants the world over have been making losses over the last two years. But Vickers has been progressively moving out of this field, moving abroad or moving into all kinds of fancy modern fields such as bottle-making, which promises a higher profit.

I know that noble Lords will not agree with me, but the criterion of profitability is not one that is decisive from the point of view of whether or not a factory should be kept alive or closed down. What is relevant in situations such as we are now in is not profit, but value added by production. If a factory is closed down, what you lose is not only the profit but the wages of the workers who become unemployed, or rather the value of the product of which the wage is only a part. It is the value added by production which should be compared, and not the rate of profit as the noble Earl, Lord Limerick, and so many others emphasised.

It is tempting to attribute the failures of this country to the excessive privileges and immunities of the trade unions, and I am inclined, to a large extent, to go along with what various speakers, including the noble Lord, Lord Carr, said earlier in this debate. But experience during the first part of the period in office of the previous Conservative Government—when these privileges were greatly curtailed by legislation—is far from encouraging, as any impartial observer will now admit. The 1971 legislation brought more strikes, more bitterness and more inflationary settlements, and this experience led the then Prime Minister, Mr. Heath, to recognise that the true solution lies in an incomes policy and not in free collective bargaining (which was the principle accepted by the Tories before they came into power). He recognised that the solution lies in a national consensus and not in confrontation, and this led him in the end to the advocacy of a national Government as the only means by which a policy based on the recognition of common interests could be developed.

The new found hostility of the Conservative Party towards incomes policies and their advocacy of a return to free collective bargaining—and the adjective "responsible" added to free collective bargaining adds nothing to the substance of what they are saying—as part of their free market philosophy makes the emer- gence of such a true national policy, which the previous Conservative leader desired, far more difficult. The belief of the present leaders of the Tory Party that reliance on monetary controls provides an effective substitute to such a consensus is one of the tragic errors which we may still have to endure before a constructive policy commanding universal assent can emerge.

I do not wish to detain the House for much longer, but I should like to remind noble Lords of the hostility with which British management received the proposals of the Bullock Report for worker participation, and their generally negative attitude to the sharing of responsibilities between management and workers along the lines which have developed since the war, not only in Germany but even more in Austria and in the Scandinavian countries—in fact, in all countries which have managed to achieve a comparative absence of industrial strife and which have been able to secure a steady improvement in living standards.

When noble Lords opposite speak of the horrible effects of nationalisation, of the honors of social security and the effect of high social benefits on workers' willingness to work, or of the privilege enjoyed by trade unions, I wish that they could study the experience of Austria. Austria has a very much greater public sector than our own. Far more basic industries have been nationalised in Austria. It has had a Socialist Government, either alone or in coalition, ever since the end of the last war. The rate of growth of the national product in Austria—real wealth creation, in the words of the noble Earl, Lord Limerick—has been much greater, percentagewise, than in any other industrial country except Japan. Austria has had the second highest growth rate. They have had no unemployment and no strikes, and at its maximum their rate of inflation is around 3 or 4 per cent. a year. All this shows that we can be a little too facile in thinking that paradise is around the corner, as the noble Viscount, Lord Trenchard, implied at the beginning of his speech, if only we adopt the system of taxation and competition which prevails in Hong Kong.

Baroness GAITSKELL

My Lords, before my noble friend sits down, may I ask him a very short question regarding his absolutely fascinating speech. Are not the very words "wealth creation" and "wealth creators" in themselves socially divisive, since they are always applied only to employers and never to the workers who work for them?

Lord KALDOR

My Lords, I would not dissent from what the noble Baroness has said. I should be quite prepared to use these words in a neutral sense: in the sense in which Adam Smith employed them in 1776.

The Earl of LIMERICK

My Lords, the noble Lord's sitting down seems to be somewhat delayed. I wonder whether the noble Lord would allow me to clarify one point, for he mentioned my name earlier in relation to the question of profitability and wealth creation. I said specifically that I was taking a long-term view. Does not the noble Lord agree with me that no amount of value added in the long term will produce the investment that is required for maintaining jobs or creating new jobs, unless he is assuming that the State is the only investor?

Lord KALDOR

My Lords, I am grateful to the noble Earl. I do not wish to continue this discussion, but I must confess that I do not feel that the lack of investment in this country is the result of an insufficiency of profits. It is the result of an insufficiency of markets and of our failure to acquire markets either abroad or at home. The noble Earl spoke a great deal about our falling share of the world market, but not much about our falling share of the British market, which is just as important. The problem is a lack of confidence on the part of employers in their ability to sell in competitive markets. It is not a problem of lack of money. There is all the money in the world in search of investment opportunities. In the City of London, any amount of money can be found for any project that appears to be profitable. The problem is the lack of market prospects, and the reasons for that go beyond what I have discussed today, and certainly beyond what I have time to say this evening.

7.26 p.m.

Lord GORE-BOOTH

My Lords, having been a modest student at Oxford, I shall not challenge the Cambridge economics of the noble Lord who has just spoken. He gave us a very interesting time. However, I think—and I expect that noble Lords on the opposite Benches will concur with me in this—that both the noble Lord and the noble Lord, Lord Bruce of Donington, must be creating a bit of an ogre from the past by their description of British employers. If I say that to the Cross-Benches, it may carry just a little weight. Obviously, there have been bad periods—and we have lived through some of them—in which the ethics and the method of behaviour were very unhappy. However, I simply cannot believe that the younger generation of employers in this country is unaware of the mistakes made by their forefathers. I am sure that a very conscious effort is being made rapidly to lift the standard of behaviour and understanding above what this country has admittedly known before.

I sympathise with the noble Viscount who opened this debate in wishing to speak about economics and not to pay too much attention to what is going on and to what is at the front of our minds. I find this to be very difficult. If I venture to have a criticism of this debate, it is that perhaps there has been too little indignation in this House. We are sitting here, after all, in comfortable and agreeable circumstances. We have admirable private relations with each other. Yet we know that trains may not run as the result of a squabble between unions which has nothing whatever to do with the thousands of people who are wondering how they will get home. Equally, we are doing this in the presence on television of people who are actually using violence or violent pressure against each other in order to secure this, that, or the other advantage. While I welcome very much the constructive nature of the debate we have had so far, and I know that it will continue, we ought none the less to put a little steam on and try to get ourselves into a better state of mind and a better state of relationship with industry.

I should like to go over a little of the history, for we need very badly to understand the history. I refer—this is why I can speak about it—to the history of legislation during the last few years. When the Industrial Relations Bill first came before us, I must confess that I was attracted by much that was contained in it. Much of it had logic but it suffered, as I think we all know now, from the rather strange malady of trying to do too much to make everything perfect and not to alter anything. This has turned out to be bad psychology.

The resulting Act was very vulnerable to removal, if there should be a change of Government. There was then an opportunity for statesmanship. There was an opportunity for taking quite a little out of that Act and modifying some of the less logical features of preceding legislation. Most unfortunately—and here it was the other Party whom we have as a nation to blame—the temptation to go much further in the other direction proved to be too strong and we now have an Act which the opposing Party, if it obtained power, would simply, for a whole lot of reasons, feel itself bound to repeal again. This is the sad situation to which our political squabbles about industrial relations have brought us and it is difficult to see how we are going to get out of this spin.

Mercifully—and here this debate would seem to have been of great help so far and will continue to be—stress has been placed by many speakers, notably the noble Lord, Lord Carr of Hadley, on the need for the next stage (and there really has to be a next stage) to be worked out somehow between all the Parties. Clearly for many years there will not be a climate in which one Party will produce legislation which the other Party will be prepared to accept without too much protest. Really, what we are measuring is the length of time before this will be possible.

I feel that there are some illusions about this. I spent a great deal of yesterday listening to the other place and I still find an air of some illusion about this as when, for instance, the Chancellor of the Exchequer after his, as always, most intelligent speech suggested that people must get together round a table. Of course the problem in this sphere has been that there are people who are not prepared to get round a table and there are others who are prepared to get round a table but not to carry out the arrangements agreed to. That is the difficulty of the temper of the time and it makes it much more difficult to see the solution in a short period.

Having brought the difficulty up to date in this dimension I should just like to refer shortly to the business dimension and in particular to the end of the Prime Minister's speech. In the debate in the other place there were speeches of very high calibre and, indeed, oratory, but we were left with two things. Perhaps I may first just do a backward shot. A great deal has been said about excessive union power. It is true to say that the unions have discovered, somewhat surprisingly late in life, that a very few people can damage a great many things and exercise a great deal of pressure on the community. That has been exploited, not by the unions as such but, as has already been said by the noble Lord, Lord Brown, by people who are not prepared to carry out undertakings. That is the measure of the problem and it was really rather cold comfort that, after all the emotion there has been and all the magnificent debate, what should come out of it was, first, what might be called a "hotting up" of price control and, secondly, a promotion of disincentives. This was desperately disappointing and I hope the Government will recognise just how disappointing it was.

Returning to the unions themselves, I think what has gone wrong there is not, if I may say so—and I think the noble Lord, Lord Carr of Hadley referred to it—that the unions have exercised excessive power but that they have found themselves either unable or unwilling and often both, to exercise any authority over the situation. When the excellent Secretary-General of the Trades Union Congress recently produced an economic report, all it said was that we should keep a stronger control over prices—and then one waited for the non-noise to proceed. Unfortunately, this has been a period in which I can say no more than that—and I only speak of two people whom I knew—I wonder what Ernest Bevin and William Lawther would have thought of that. It is not of the quality that we hope to see again in future in the leadership of that Party.

So what in fact are we to do? In this situation it is certainly important for the Parties to be finding some way to get near to each other. It is not easy. There is too much bad temper behind it, as many noble Lords have emphasised.

It is not easy factually and I think your Lordships will have been much interested in the original ideas which have been propounded to us this evening by the noble Lord, Lord Brown. It may not be the way but it is certainly a way to remove some of the impossibilities in the present system of arguing and trying to put the situation right.

I wish to make one further comment before I sit down. It is probably an unpopular one but I believe it to have some force. I think we may be able to move towards better plans and ideas—I hope so—and I am sure that many people will have ingenious ideas and clever solutions of one kind and another, but there is a malady about this country which I have referred to before in your Lordships' House. I think we are suffering from all sorts of importations, I do not know where from, which are called "Couldn't care less", or "It's somebody else's job", or "Its my job and somebody else is doing it so I won't play". There are a whole lot of such influences in this country: I could enumerate many more and unless, whatever our political views, we are prepared as human beings to snap out of some ruts in which at the moment as a nation and as public opinion we wallow we shall not get this right.

There is a moral element in this—I am not talking about sex—and if there could be a greater effort on the part of writers, broadcasters and people generally to get on and help each other, although for obvious reasons it cannot be done as it is done in wartime, we could be somewhat more gracious and more helpful to each other: if we do not do a little more of that the best schemes may not succeed after all.

7.39 p.m.

Viscount ROCHDALE

My Lords, I have listened with great attention to what the noble Lord, Lord Gore-Booth has just been saying and I have a great deal of sympathy with the views he has just put forward. I am most grateful to the noble Viscount, Lord Trenchard, for having introduced this Motion this evening. It has certainly ranged very wide—rather wider than one might have expected had it not been for the events that have been going on for the last week or so and seem likely to continue. When I first read the wording of his Motion, I interpreted it as meaning that he wanted to draw attention to the importance of the industrial climate so that industry could really do its best. Industry is very much like a shrub or a flower; it succeeds best if it is in a congenial climate.

I want, quite briefly, to say something about the industrial climate in rather general terms. As I see it, responsibility for the industrial climate is that of Government; one cannot get away from that. But whereas in the many debates we have had on industry over the last 12 months, on the more internal matters of industry we have been able to keep Party politics out of our discussions, when it comes to climate that is much more difficult. Politics enters into industrial climate because it is, as I have just suggested, a matter largely for Government responsibility. Where political considerations come in, there, of course, it is so difficult to keep controversy, political innuendo, out, and of course any controversy of that nature cannot but react back on to industry and do quite a lot to prevent progress. I would, merely in passing, say that it has been a remarkable thing, if I may with all humility suggest it to your Lordships, that the many subjects that we have had aired today have been discussed with such impartiality and such fairness.

Considering then the approach of Government to industry, whatever their shade it is quite clear that every Government are loud in their professions of recognising how important it is to help industry. I am quite sure that when Government say that they believe it; they believe they are being sincere and I would be the last to suggest or impute insincerity. The fact remains, how many actions of different Governments have been taken which seem in the end to have had the very reverse effect of helping industry? I am not going to discuss today the question of taxation, which many other noble Lords have spoken about, or trade unions, or pay determination. I am not going to deal with those subjects. I have much sympathy with what other noble Lords have said, and they have said it probably far better than I could. I should merely like to refer to one point made by my noble friend Lord Hewlett when he was speaking of the situation in the North-West. Coming from that part of the world myself, I would underline and support very much what he said about the particular problems up there at the present time.

I want to take a rather different line. Over a great number of years that I have had either in industry or associated with industry I have identified three areas where I think we want to consider Government approach to industry. They are three areas in which I think industry can expect, and has a right to expect, certain approaches from Government. First, it has a right to expect an understanding approach by Government to industry; next a friendly and particularly a trusting approach by Government to industry; and lastly, and perhaps most important of all, a consistent approach to industry. I would say a few words about each of those three areas of approach. I will start with the last one, the question of consistency, because I think it is probably the most important, and perhaps one where there is more doubt than in the others.

As other noble Lords have mentioned, in recent years there have been an enormous number of Acts of Parliament directly or indirectly affecting industry. Sometimes they have speeded up Government policy, sometimes slowed it down, sometimes stopped it in its tracks or reversed it completely. Sometimes these changes have taken place within the lifetime of one Parliament, within the five years, where, of course, responsibility, for better or worse, for those changes lies fairly and squarely with the Party in power and it must bear the responsibility for them. Sometimes, of course, they have occurred following a change of Party, following a General Election, and this last situation raises a very difficult problem indeed. It was one that I think the noble Lord, Lord Rochester, just hinted at when he drew attention to our Parliamentary and electoral procedures. There is no doubt about it that where one Party pursues a line of policies and then goes out of power and another Party comes in and alters or reverses the policies, it does really immense harm to industry; it does not know where it is looking.

Perhaps I might for a moment be a little more specific on the question of consistency—and I am now only talking about the situation within the lifetime of a single Government. Let us look at the Parliamentary Session of 1976–77. There were placed in that Parliamentary Session no fewer han 20 new Acts of Parliament which directly or indirectly affected businesses, which companies and their professional advisers had to master and study. The comparable figure for this last Session, 1977–78, was, perhaps not unexpectedly, rather smaller, only 11. But I suspect that this change was due to two main things which are not unimportant; one, of course, the considerable time that Parliament spent on devolution; but, the other, the restraining effect of the Lib/Lab Pact on the more controversial Bills. At any rate, it must be obvious that this mass of legislation, sometimes put forward for ideological reasons, sometimes to meet immediate expediency, can but result in a very considerable burden on management and waste of management's time and skill which would far better be used in some other way.

Let me take just one example, investment. Every Government have always tried to impress upon industry the importance of investment, new plant and machinery, and so on. We have heard a good deal about its importance today and no one would doubt that; though I think sometimes the criticism is a bit unfair and possibly made through ignorance, or at any rate wrong information. Probably more really good investment goes on than is credited. But, taking the efforts that successive Governments have made to encourage investment, let us just look at the changes in investment incentives that have taken place, because these are not unimportant.

From 1945 to 1966 we had initial and investment allowances. That was all changed in 1966 to 1970 to investment grants. From 1970 until now we went back to investment allowances. With these changes there were changes, of course, of the breadth and coverage of the various incentives, and the levels. Main investment, as we all know, does not take place in a matter of two or three years or four or five years, within the lifetime of a Parliament; it takes, as another noble Lord said, 14 or 15 years. So the prospect of investment which seemed fully justified at the time on the basis of existing Government policies may in the event, when that investment comes on stream and is fully active, prove to have been seriously misconceived because of subsequent changes in legislation. I think it was my noble friend Lord Limerick who made that point.

I have no doubt that at the times these changes were made the Government of the day thought they were making the right decision. The arguments, whether political or otherwise, were no doubt convincing and the pressures to make the change were thought to be unavoidable. But what encouragement is that to an investor today, when he knows that this type of change can happen again? Will that really encourage him to invest to the extent that he should? One could quote other areas where these type of change have not helped—changes in regional policy, changes in planning controls and changes in planning agreements. There is the example of uncertainty created by the threat of more nationalisation. However, I shall now leave the important question of consistency.

I turn now to the importance of Government having a trusting approach to industry. When I say "Government" I also mean Government Departments. Perhaps the best example that I could quote concerns the whole question of price control. I must be brief because time is getting on and other noble Lords have already mentioned price control. I admit that over the past 12 months or so there have been some modifications which have helped industry. Even so, the present arrangements are burdensome, particularly when a company is being investigated by the Price Commission. Frankly, in my view, and I believe in the view of a great number of other people—although, unfortunately, not apparently in the view of the Prime Minister—there seems to be no economic justification for these controls at all. There may, admittedly, be some occasions where a price increase goes beyond the level of propriety. I would not deny that. Moreover, some consumers may be hurt. However, I am convinced that the vast majority in industry act and fix their prices in a responsible way, taking all—and I emphasise "all"—the various factors into consideration, factors which will be to the long-term benefit of the country as a whole. Therefore, I believe that the price control system should go. I submit that there can be no possible excuse for its retention except as a quid pro quo when it comes to the question of negotiating wages.

If we take away price control the inference is that the Government may say: "We cannot trust industry to behave properly". That is why I say that there needs to be a more trusting approach to industry. One could quote other examples. However, I should like to make one point which in my view is indicative. The very title of the Secretary of State for Prices—and I am certainly not criticising the present holder of that title—is Secretary of State for Prices and Consumer Protection. Who is being protected? What is he being protected against? The only inference one can possibly draw is that he is being protected against the fantasy of a wicked industrialist who wants to make undue profits, whereas industry, if it is really to do its stuff, should be looked upon not as the enemy of the consumer but as his friend. So much for a trusting approach as regards which I could give many other examples.

My final point concerns the question of understanding. The example I should like to take in this connection is one which I view with some caution because it concerns health and safety at work. I take it with some caution because I do not want to use this example and lay myself open to be regarded as a callous employer. After all, I believe that the vast majority of employers have a great feeling of responsibility for the care and attention of their employees as regards health and safety. Particularly in the smaller and medium sized businesses they know many, probably most, of their employees by name—Bill, John, Jim and so on. No doubt in reverse the employees know many of their employers or immediate managers. They may not call them to their face the "boss", or the "gaffer" or the "old man" or any other endearing term, but they are on friendly terms like that.

Therefore, I believe that nowadays the average employer, whatever may have been the case in the past—and it was not always true then, either—has a great deal of sympathy and idealistic care for those who work for him. No employer wants his employees to be at risk in these particular areas. However, there are degrees of perfection at which relevant legislation may aim which, although perfectly reasonable in the case of a really buoyant industry, go too far and become too onerous when industry is struggling to lift itself up.

Finally, I come to the important point I want to raise as regards this question of understanding. If we look at the composition of the other place and, with respect, of your Lordships' House, the number of Members in another place who have really had some considerable number of years in industry and real responsibility in industry, is deplorably small. That is especially so when we consider that this Parliament is legislating for, and deciding upon what is, the correct industrial climate of an industrial nation—this nation that depends for its livelihood on industry. Surely it does so only with a very small amount of real experience in this area. It does so surely only from theoretical considerations or from what it is told.

This, of course, is a major issue. At present I have no suggestion concerning how it could possibly be cured. It certainly is not something that could be cured by Act of Parliament. However, something needs to be done, and I would urge that both Houses of Parliament and Government Departments should give far more attention to any adverse effect that new legislation may have on industry, rather than giving, as I believe they do now, a tremendous degree of attention to the adverse effect on the consumer. They should look on industry more as the potential national saviour to be befriended, trusted and given his head, and less—and I use the phrase which the noble Lord, Lord Gore-Booth, used a moment ago—as the ogre who, however indispensable and however much he may be thought not to be trusted, must have his freedom of action strictly controlled and monitored, if not even blunted.

We have all been told over and over again, and today, that inflation is our major obstacle. Surely, if we are to help overcome inflation we want to help the producer rather than the consumer, even though there may be occasions when the consumer suffers. But in the long term it is surely the producer rather than the consumer who should be given assistance. We are told that we are consuming more than we produce, and I should have thought that the answer was obvious. Of course, this may raise many very difficult political considerations and may not be helpful to any Party at the hustings. However, I would submit that any Party which may have the far-sighted wisdom and courage to test this will be doing the country a long-term service, and would be a Party to which I, personally, would certainly take off my hat.

8 p.m.

Lord HOUGHTON of SOWERBY

My Lords, like other noble Lords, I feel very much indebted to the noble Viscount, Lord Trenchard, for introducing this debate. Sadly enough, I do not think that he could have realised how topical this subject would be today. He embarked on the debate at a level which has been maintained since and in many respects it has been a very wide-ranging and constructive debate. Two noble Lords raised the temperature of the House ever so slightly. One, of course, was the noble Lord, Lord Hewlett, whom we are always delighted to hear for his robust style and his full-throated support or denunciation of matters in hand. The other, of course, was my noble friend Lord Bruce of Donington, with his rather astringent, steely attack upon some of the political shibboleths which have always enraged him.

Despite what the noble Viscount said at the beginning of his speech about not leaning too heavily upon the short-term events of the day, they are nevertheless of such importance that I think we have all, very rightly, made some reference to them. Unfortunately, current events have been repeated once or twice too often to be regarded only as short-term and of passing importance. In 1974 the mine-workers were defying the pay policy of the Heath Administration. Today workers are defying the pay policy of the present Administration. The scenery may be different, but the tragedy is very much the same.

The noble Viscount introduced a novelty into our debates by presenting us with a new theory of Einstein's theory of relativity. Instead of departing today and arriving yesterday, he set off today and arrived within half an hour at a point 10 years ahead in time. I suppose that he found it easier to look back from his own creation of 1990 than to look forward from the realities of the situation in 1979. Although what he said about 1990 was music to our ears, what we did not hear about was the turbulence of the composers, the quarrels during the rehearsals and the discordant notes that we were going to hear during the next decade in order to arrive at this paradise of 1990, which was the creation of the noble Viscount's mind. Therefore, we are back in 1979 and what we see is not very pleasant. We can only hope for the best for 1990 and, hopefully, some of us might arrive at 1990 and be able to say whether the noble Viscount's vision was right or wrong. I hope that he will be there himself to make his own judgment.

For a few minutes I want to dwell on a few matters which I fully expected to be mentioned during this debate as being blameworthy in the present situation. In his article published in the Daily Telegraph, to which my noble friend Lord Bruce of Donington referred, the noble Viscount referred to the structure of the trade union movement and the need for reorganisation and reform. This is a very old topic. Like the composition of this House, not to mention that of the other place and a number of other institutions in our society, the structure of the trade union movement is part of our inheritance and is extremely difficult to change. I think that we have to make the best of what we have.

Frequently a comparison is made between the rambling structure of the British trade union movement and the streamlined trade unions in Western Germany. However, it took Hitler's war and Allied occupation to bring the German trade unions into the 16 industrial unions that they have at the present time. They had settled for them the controversy that still persists in the British trade union movement regarding the different qualities and advantages of craft unionism and industrial unionism.

However, I do not think that we can regard the structure of the trade union movement today—tiresome though it may be in some respects and much in need of reform—as really blameworthy in the present situation. I think that union power is more material to our consideration. But we want to be clear about what kind of union power we are talking. Is it shop-floor power or is it trade union leadership power? The shop-floor power is undoubtedly a power to be reckoned with today. It is not necessarily entrenched in trade unionism, though it has the framework of trade unions to contain it.

But what is much more important is the sad lack of trade union power at the top. I have never known the leadership of trade unions so weak as it is today and the General Council of the Trades Union Congress so impotent as it is today. In this situation we are hearing nothing from the General Council of the Trades Union Congress simply because it has nothing it can say. The unions took away from the Trades Union Congress their desire to co-operate with the Government on pay and other economic policies. They resolved to revert to what they describe as free collective bargaining and they stripped the General Council of the TUC of any authority in the present situation. That is a very bad state of affairs. Prior to this whoever heard of a trade union making an unofficial strike official in order that it should recover its authority?

The railways stopped yesterday because we were told by the Secretary of ASLEF that the situation would get out of hand if the union attempted to frustrate the mood of its members. That is an illustration of the power of membership and the weakness of leadership in the present situation. We get that also in many other aspects of the present activities of those involved in the dispute.

It may be that the legislation of 1974 and 1976 conceded too much too quickly in the extension of the lawful activities of workers engaged in industrial disputes. However, I am bound to say—especially in the presence of the noble Lord, Lord Carr of Hadley—that much of the present situation derives from the pent-up resentment that there was in the trade union movement against the Industrial Relations Act 1971. We have not got over that, and we might as well recognise that it is still an influence in the present circumstances.

We have heard nothing about strike ballots so I shall spend no time on them, except to say that the one experience we had of a statutory trade union ballot on strike action resulted in an overwhelming vote in favour of the leadership to continue the stoppage. Members of trade unions do not vote for their own defeat. When a strike ballot is imposed upon them they consider it to be a challenge to the authority of the union and its leadership, and in those conditions loyalty alone will undoubtedly result in an affirmative vote. Let them have their own ballots under their own rules and then, as in the case of the National Union of Mineworkers, the results will be observed.

Is the rejection by Parliament of the Government's policy of sanctions in any way a contributory factor to the present position? I believe that the policy of sanctions would have collapsed quickly anyway. It would have been impossible for the Government to find companies to take their business who were not subject to sanctions of some kind, because it is quite obvious that settlements are going outside the Government's guidelines and sanctions would become unenforceable. Personally, I regarded the sanctions policy with extreme distaste. I did not think that this was the way to do it. They were never supported by any legislation, although they did have the support of a vote of the House of Commons.

But when employers are resisting pay claims in the national interest by conforming with guidelines, or indications, given by the Government, and when industrial action against the employer in those circumstances is not unlawful and probably cannot be successfully resisted, then it was grossly unfair to treat firms in that position as though they were delinquents. I think sanctions in any case were uneven, they were capricious, and we only had to look at the deft footwork of the Government in imposing sanctions on the Ford Company, so I was not sorry to see sanctions go. If sanctions are to be imposed on employers for conceding wage claims outside the guidelines, why not impose sanctions upon those who make the claims?

However, this, of course, reopens the old dilemma as to whether you can proceed against unions, or large sections of workers, who may be in breach of the law, and if so how do you enforce it? This was the dilemma of the Labour Government in 1969 when it was considering action against unofficial strikers under the White Paper In Place of Strife. So instead of having unenforceable statutory pay restraint we had this so-called voluntary system, which results in arm twisting, and ear pulling, and other forms of intimidation which I think make a nonsense of the description "a voluntary pay policy".

I think that the intervention of Government in wage negotiations and wage fixations can be effective only in the short term. We have had 10 years of it now, and I doubt very much whether this can be continued without the full agreement of the trade union movement and without general acceptance throughout the community. Otherwise, I think it is better to free a great deal of the industrial relations process between workers, unions and employers, and hope that more genuine productivity bargains can be struck, more flexbility on differentials can be obtained, and a greater response to greater efficiency and higher production can result. That seems to me to be the probable line out of the present dilemma.

I come finally to two other probable causes of failure. Very little has been said during the debate about so-called industrial democracy. I am sorry about that because I believe that if we are going to get this new atmosphere referred to by the noble Lord, Lord Hewlett, and if we are going to get an elimination of the divisions between the two sides of industry, we have to bring those two sides together more closely than normal industrial relations can do. I believe that, if there is going to be power on the one hand in the hands of the management, and power on the other hand with the unions, or the workers, the sensible thing to do is to try to bring power-sharing into the boardroom. I am sorry that there is so little enthusiasm for this. The Bullock Report was met with scorn and derision; thrown out of the window. It may have had many shortcomings, was probably too bold in some respects, but basically it was an attempt to find a formula for Britain which has already been successfully adopted in all the EEC countries. It is not as if there was no model anywhere for what the Bullock Report was proposing.

My noble friend Lord Bruce of Doning-ton referred to the fact that workers in Western Germany, to take one example, had their status, their feeling of esteem; they had their recognised position in the structure of the enterprise. But it is not based on the two sides of industry, and still less is it based on any class division. So in those circumstances I believe there is a great advantage to be gained by trying to bring the so-called two sides of industry into one common enterprise, one initiative, and a unity of management and direction.

Baroness SEEAR

My Lords, I am sorry to interrupt the noble Lord, but may I ask in what European country we have the Bullock pattern of industrial democracy?

Lord HOUGHTON of SOWERBY

My Lords, there are various patterns in Europe. Taking the West German pattern, we have there the supervisory board and the management board. I know Bullock proposed one board, and that was probably the respect in which the Bullock proposals, designed to meet the British situation and our tradition, failed to recognise the difference between the two. But that was arguable. That could be brought into the discussion on the Bullock recommendations. Unfortunately, the door seems to have been slammed in many quarters upon further constructive discussion of the Bullock Report.

Lord GORE-BOOTH

My Lords, would the noble Lord allow me—

Lord HOUGHTON of SOWERBY

My Lords, I have been speaking now for 17 minutes and I must close within the next 3 minutes or I shall reproach myself deeply, so may I be forgiven. Noble Lords are too kind to reproach me, but I would reproach myself. The second thing I want to say, and I can do it in three minutes, is that I believe we have neglected the creation and reward of skills in this country on a scale which is now becoming seriously damaging to our prospects for the future. We ought now to be willing to pay well for learning, and then pay well for the product of learning. Friends of mine in the engineering industry in high technology tell me that there is a generation of very highly-skilled technological engineers for whose replacement there are few people in sight at the present time. By the destruction of highly-skilled workforces at the time we abandoned some of our technological projects like the TSR2, Blue Streak, rocketry of different kinds, we abandoned skills which we are badly in need of today.

People who deride Concorde, and who say that it is a white elephant and ought to be scrapped, should realise that if Concorde went, then a new generation, widespread in its employment and the diversity of its occupations, would be destroyed with it. We shall rue the day if we go on destroying our skilled technical workforce. Therefore, we have to provide for the future on a positive programme of recruitment for learning and encouragement to learn.

At present young people do not feel they need spend five years of close application to a difficult job for the difference in the rewards they will get at the end of it compared with the worker on the assembly line. They want to see those differentials markedly improved, and there is no doubt that wage policy in the last few years has seriously reduced the differential gaps which are very important in a work society where status, esteem and identity are so important to the fulfilment of satisfaction in the job.

There are, therefore, two big problems for the next Parliament. One is industrial democracy and the other is to bring Britain to the pitch where we can earn our money in the world as innovators with inventive skills and with design and not fritter the national wealth away on trying to keep up some aspects of manufacturing industry which other countries can do better than we can. We should be supplying the world with the machines to make the manufactures rather than trying to make the manufactures with machines imported from other countries—something being done on a large scale at the present time. That is my message, at this late hour, to your Lordships' House.

8.22 p.m.

Lord SELSDON

My Lords, it is surely a rather sad comment on the state of our nation that a Motion such as this should even have been tabled, let alone debated, and debated with scales of wind force varying from Force 10 from my noble friend on my left to others who speak with still small voices. I came to this debate from Birmingham, where I was attending an exhibition, and in coming here I exceeded the speed limit—in courtesy to your Lordships' House—in a British car. Having attended the Domestic Appliances Exhibition, I spent the morning trying to find out whether there were any products there made in the United Kingdom.

It was a surprisingly difficult task. The trade was there—British trade—but the manufacturers were foreign, and an interesting question I put to the trade was, "Why don't you buy British? Is it no good?". The answer was, "It isn't bad. It's good, but the people who used to make it can't make a profit any more and we, the trade, can make more profit by importing products from abroad that have been designed by the British, made by British machinery and often using British steel".

That raises an interesting question, and as your Lordships have occasionally retired into historical background, let me consider the start of the Industrial Revolution. That revolution was started not by corporations but by individuals. What we have done today is to deny the individual the opportunity honestly to create prosperity for himself and his family, and therefore for the nation. Some will use the argument that the cause is taxation while others will say it is due to Government interference. But at the end of the day we must face the fact that we are no longer a bubbling economy full of individuals starting things. Instead, we have larger and larger corporations, often in declining industrial centres and shored up by Government, which in due course will fade gently away, and nothing is taking their place.

If today you ask somebody, "Would you like to run your own business? Would you like, in that rather rude phrase, to be a self-made man?" probably most people will reply, "Yes", and of course many people are corporation men. However, one now comes back to a situation in the United Kingdom where, I have calculated, the Government own everything from the knee upwards. When I presented that argument today to one of my Italian friends, he repeated a remark he had made before, "You must learn to do what we have done—do without Government". It is not the fault of the Government that they have so taken over society; it has been inflation, taxation, PAYE and a hundred and one different reasons. It was probably not the intention of the Government that it could or should become such a dominant factor in our lives, particularly when it is weak.

My noble friend Lord Limerick referred to this. It is not the role of Government to create wealth but to create the environment in which people, rather than corporations, can create wealth. The noble Lord, Lord Geddes, pointed out that 54 per cent. of taxation was tax on corporations and individuals. My examination of the latest edition of Economic Trends and Population Statistics shows that this year it is probable that of the total take by the Inland Revenue, 83 per cent. will come from the individual and only 3.8 per cent. from corporations and that the individual will be paying 50 per cent. of the cost of everything in direct taxation, plus, of course, more in indirect taxation.

I submit that the individual cannot support that burden. He cannot afford to support a Government or a nation such as this. Why then, if that is the hypothesis, does one support it? One supports it—at any rate on this one view—on the basis that never before in the history of our democracy has the standing of the other place, or Parliament or Government been so low. I submit that often the trade unionist—not necessarily the trade union movement—has the same feeling of dissatisfaction as I feel, namely, that somebody has let him down. He therefore blames the centre; he blames Government.

That blame may be unfairly laid at the Government's door because it is not all due to Government or bureaucratic failure; it is not all the "bureaucrots", as some people call them these days. That does not mean our friends in Whitehall or in the Civil Service. It is the Corporation State as a whole; we are a State of corporations or, to some extent, a corporate State. And even within the large corporations the individual is stifled. An eminent banking colleague of mine drew attention to something he called the "snake serum syndrome": corporations, governments and large bodies engaged in the game of snakes and ladders are no longer interested in climbing ladders—they are more interested in stopping themselves sliding down snakes, and therefore they take snake serum. Snake serum comes in different forms; merchant bankers, Royal Commissions, Select Committees, everything you can think of—quango-like organisations—so that if you slip down a snake into bankruptcy or despair you can say, "It wasn't my fault. I took precautions", and you try to drag everybody down with you.

Equally, when you find somebody in your organisation who seeks to climb a ladder, you try to stop him with boards or committees and you say, "The committee has decided that we do not have time to discuss it today". You try to stop him going up because, in a way, you are frightened that if he goes up and is successful he may show you all up for being "bureaucrotic". While I cannot remember his exact words, Churchill said something like, "Conservatism is a ladder up which you should encourage people to climb with provision to catch those who fall off". Today we have the situation of a greasy pole which nobody can climb up but down which everybody can slide and end up in a muddle at the bottom. We lack productivity not because we fail to work, not because we fail to have ideas, but because so much of our time is taken up in non-productive affairs.

How do we revitalise the situation? How do we persuade somebody to start something? The Press last weekend—for example, the Observer—took up the case of small businesses. It has been said that if every small business employed one more person there would be no unemployment, but if you talk to small business and ask, "Do you want to employ any more people?" you will probably get the answer," No, not direct employment. The laws are too complicated". One businessman said to me, "I received this letter yesterday. I now employ 100 people, but, unless they are disabled, I'm not allowed to employ any more without permission. As it happens I need a new engineer, but I have told him to fall downstairs before he comes to join me".

The individuals are still there. I thought they had died. I thought the United Kingdom, with its energy and resources, was the right country but with the wrong people. I think that we have the right country and the right people, but probably at the moment we have the wrong structure.

The tanker drivers did not come off strike because they were frightened of anything; yet they were frightened of one thing. I inquired among tanker drivers. "Ah," they said, "the Army will rumble the wet thumb on the dipstick. They will rumble our fiddles." These are perfectly legal perks of the trade. That draws attention to one point which encourages me. It is that the individual in the United Kingdom will not lie down under our "bureaucrotic" system. Instead he moonlights. Moonlighting is not dishonest. When a middle manager wants to have his house painted and it will cost him £100 he will have to earn £200 or so for that £100. The man he pays, if he declares it, will have to charge him £200 in order to keep the £100. So the transaction takes place. This moonlight economy is common practice throughout the Socialist bloc—Italy and the Arab world—and in fact it is shoring up our situation as it stands at the moment. But is it wrong? It may not be wrong when people are so oppressed by the system that they see no other alternative but to go it alone, but this surely is the time to start changing laws and regulations to encourage and revitalise the situation.

I should like to have my own business, but I do not think that I have the guts to start it. I do not have the money to start it. One wonders why, when one thinks of an idea, one cannot get it off the ground. The Wilson Committee will show that there is no problem about adequate finance. There is no problem about technology or know-how. There is no problem about goodwill from within Government Departments in the regions where there are some superb brains and a hundred and one people longing for somebody to take the lead. But instead these days we take the view that, in order to make the arrow travel farther and arrive at the target, we must add more feathers instead of sharpening the point.

The Earl of LIMERICK

My Lords, I did not want to interrupt the noble Lord's flow, but before he sits down I should like to underline one point he made. In the last two years I have spoken in some depth to four people who started businesses for themselves. The businesses could all be counted as successes in profit and loss account terms, yet each of these entrepreneurs who have provided some modest measure of new employment have said, "Never will I do this again because of the enormous administrative load that has been put on me and because of the bureaucracy that is on my back". This, I believe, is a very disturbing reflection.

Lord SELSDON

My Lords, I can only agree with the noble Earl. I sit down in the interests of productivity, having noted that the average time for speeches today has been 20 minutes, and mine has been 10.

8.33 p.m.

Lord MOTTISTONE

My Lords, it is always difficult to follow some speakers. It is particularly difficult to follow my noble friend Lord Selsdon, who speaks with such immense skill. If he will forgive me, I will not follow his line of argument because there are other things to say, and, as he himself has pointed out, there is not very much time in which to speak if one is to be reasonably polite to the rest of the House. First, I wish to say, "Thank you very much", as many other noble Lords have done, to my noble friend Lord Trenchard for putting down the Motion. I wish to make one comment on his absolutely splendid speech which took us into the future. One noble Lord—I think that it was the noble Lord, Lord Lee of Newton—pointed out that my noble friend had been immensely skilful some time ago, before Christmas, in choosing today as an ideal day for this debate, fitting in, as it does, with rail strikes, and bringing us to this subject at a time when other troubles are also being experienced. If my noble friend had that kind of foresight, perhaps his foresight extending to 1990 is also valid, and perhaps we may take hope from that.

I was not planning at all to speak about the present problems, but I have been rather surprised that not many other noble Lords have spoken about them. Indeed, only my noble friend Lord Hewlett, and the noble Lord, Lord Lee of Newton, have made reasonably strong references to the troubles we are now in. Here I must declare an interest as a director of the Cake and Biscuit Alliance which is responsible for the interests of the cake and biscuit manufacturers in this country, and as such I feel that I must add something on the question of the present situation. It is relevant because it is in fact fundamental to the whole issue of whether we can re-engender the conditions in which wealth can be created by industry in this country.

The fact of the matter is that in the last ten days 16,000 people out of 52,000 have been put out of work, though they are in no way concerned with the dispute in question, which for most of that time has been unofficial, but simply because they have the misfortune to be in an industry which was early hit by the process of unofficial striking. So far as one can see, the unofficial strikes were entirely arbitrary. They were particularly strong in Liverpool and in other dock areas. If one had the misfortune to rely upon raw material which came in through those docks one was hit. It so happens that during the last two or three days we have been told that the Transport and General Workers' Union has agreed to a certain list of priorities, which appeared in Monday's Daily Telegraph, though I have not seen it in other papers, which includes food products—all food products.

One would have thought that as the strike has been made official, the power in the trade union hierarchy, which, as many noble Lords have pointed out, is not perhaps as strong as it should be at the top, might have been increased. However, there is no evidence of that whatsoever. Indeed, in some areas making the strike official has made some of the picketing people even more determined to resist the passage of any form of transport at those picketing points. Any suggestion of paying attention to a list of priorities agreed between Transport House and the Government has been brushed aside. That is the reality of the situation; and it is terribly important that the urgency of the situation should be appreciated by the Government.

Like other noble Lords, I should like to suggest that the palliatives offered by the Prime Minister in another place yesterday are certainly no help towards overcoming the immediate problem, and they may indeed exacerbate the situation in the not quite so distant future. I do not wish to go into detail on the matter at this stage as that might move us away from the subject of our debate. It seems to me quite logical that if people have decided to take the law into their own hands, which in effect the pickets have done, they will not be discouraged from so doing because there is a possibility that legislation might be passed to abolish the safeguards on the regulations operated under the Price Commission Act. That surely is another world. It is not something to which one listens if one is enjoying exercising one's own authority at someone's factory gate. In those circumstances, one does not think of that kind of thing, nor if one is told that there is to be a minor adjustment in the permitted or encouraged permitted pay adjustments that might be allowed. This is a very serious situation, to which I shall return in a few moments, which needs to be identified by the Government as requiring immediate action taking a variety of forms, and it is up to them to deal with it.

I wish to return now to what I intended to say, and I promise to be short on this. I believe that all the most important factors relating to the creation of wealth by industry nowadays centre on people. It is absolutely vital that we all realise, and act upon the realisation, that there is an inter-relationship, an interdependence, between us all in a country and within industry in modern times, which makes it undeniably costly to other people whenever we take any action which is irrational and unreasonable and not within the limits which society has agreed should be put upon it. To that extent, any form of unofficial strike on a massive scale, such as we are enduring at the moment, must be contrary to ordinary human decency, quite apart from defeating the purposes of industrial development.

The fact is that at this moment in time, and ever since the 4th January—and we are now at the 17th January—no exports are being or have been permitted to pass through the dock gates in Liverpool, in London or in Hull, or in most of the minor ports, thereby completely destroying our export trade for the whole of a fortnight, and there is no sign of that state of affairs ending. It may be that that is not criminal in law but in human relations terms, in the country's terms, that is surely quite criminal; and it does not really demand much in the way of imagination to see how this sort of action is something which we really must try to stop, so that we can pick up this broken world of ours and put it together again in some form or another.

One thing that I think is fundamental, but which has not been mentioned by other noble Lords, is that much of the information that is available to us all, and available to the pickets in particular, is false. A good example of that is that for a long time the media were saying that the Scottish industrial dispute was official when it was not; and even when Mr. Alex Kitson went to Scotland and said it was not official, the newspapers brushed it aside and went on saying that it was official. That is one example, and that obviously gave strength at that time to the people who were wanting to go on creating the trouble.

There have been other problems. Surely, information could have been provided by the Government this year, in the same way as they provided it in 1977, to show the effects of wage increases beyond the 5 per cent. limit which they recommended. If your Lordships remember, in the 1977 White Paper they said that if there was a wage increase of so much per cent. it would mean an inflation of so much, and so on. This provided information for people by which they could judge their actions. This year that was not done, so there was no information; and in some cases no information is as bad as false information. It sems to me that we really must get that sort of information right, because I think it would make a great difference to the attitudes of mind of people if, as far as possible, they were provided with information as to the likely effects of their actions. For example, that if they demand £X increase in money, or an X per cent. increase, this is bound to lead to an inflationary level of so-and-so; and we have lots of evidence to show that it almost certainly will because we had this experience in 1974–75 followed by an inflation level of 25 per cent. in 1976–77. So that sort of information is one aspect.

Another sort of information which I think needs clarifying and putting straight is exactly what is the situation about industrial disputes in this country. We are told blandly that they occur only in a few big companies, that our record is much lower than that of other countries, and that sort of thing; and yet when, in October, one of the newspapers—and I regret to say I have not been able to track it down—rang round a number of industries, it found that there were almost constant industrial disputes of a minor nature. It found, furthermore, that if an industrial dispute lasted for less than 24 hours it was not reported to the Department of Employment at all, and so it was not included in the statistics. This means that all the minor disputes which take place up and down the country, admittedly in the bigger companies rather than the smaller ones and ones which may happen in part of a big company rather than all of it, if they are resolved reasonably quickly do not get included in the statistics. Although they use up the time of the management, stop the production lines and cause all sorts of hidden costs to this country and to the companies concerned, none of these things get included in the official statistics.

All I would ask of the Government, therefore, is, first, that they should make clear to the country what the effect of a 15 per cent. increase in wages will be, or what the effect (if that is what it ends up at) of a 23 per cent. increase in wages will be, and that they should make it very clear and very public. Secondly, they should set the Department of Employment to work to find out the real situation about industrial disputes in this country. I think that we would get quite a different picture, and that people are probably involved in these troubles without realising the implications as to what happens to other people and, indeed, to their own companies, not to mention other people's jobs and, in the long run, their own jobs. We are not well enough informed about the nitty-gritty, and there are a great many myths around the place. These things can be put right by a few more factual statements, a little more study of things and a little less of blandly saying, "It is all right, boys; we will be all right". Because this is not the case, and we all know it; but we have got to get the facts put to the people who actually do the work in the productive companies.

Lord HEWLETT

My Lords, before the noble Lord sists down, I wonder whether I might comment on his last question and quote from the industrial relations director of Ford. These are his actual words: The apologists for British strikes have three well-known themes: that we have far less damaging strikes than other nations, such as the United States; that, in any event, they only occur in a small part of British industry; and that the time lost through sickness and accidents is far more significant … Unfortunately, all three statements are completely untrue. The strike problem in Britain is endemic and widespread. It is the biggest single cause of our industrial and economic decline as a nation and there is no way that we are going to progress as a nation unless we can solve the problem …".

Lord MOTTISTONE

My Lords, I entirely agree with what my noble friend has contributed.

Baroness BIRK

My Lords, I did not want to interrupt the noble Lord but it is customary, when a noble Lord sits down, merely to ask a question. The noble Lord did rather make another speech, and I do not think it is the custom of the House to do that.

8.49 p.m.

Lord BALOGH

My Lords, may I join those speakers who congratulated my noble friend Lady Birk on her elevation. I wish her strength and I wish that the problems of which she will be in charge in this House will disappear and that she will lead a life of Parliamentary leisure. I do not think that that time has yet come. My Lords, we have had a melancholy debate about a melancholy subject of which all that can be said has been said a long time ago. Certainly the propositions which the noble Viscount, Lord Trenchard, put before us have been heard almost incessantly from the Benches opposite. His propositions present a réchauffé of old arguments echoing the most disturbing phrases of Mr. Moss Evans. In concentrating on the interests of his members the only difference is in membership, not in spirit.

Lord Trenchard's is the Institute of Directors. In line with his father he is a single-weapon strategist. Restore differentials, reduce progressive taxes and all would be well! It is this spirit of social irresponsibility on both sides which has brought us to where we are. Before the war union strength was broken. Did we do better? We did worse. Did we do better before the first World War? We did not. I will not go into the details of it because my noble friend Lord Kaldor has carried out his thorough destroying of certain arguments which have been brought up. It is easy to produce, as did the noble Viscount, Lord Trenchard, statistics comparing recovery after total defeat and destruction with our better fate. What the noble Viscount ought to compare is the expansion before and after the war. As my noble friend Lord Kaldor has shown, we had a post-war situation which was much better than the pre-war one.

Since 1973–75, partly because of a great change in the approach of Governments not only here but elsewhere to the monetary position, we have been suffering very much more serious crises, similar to those that we experienced before the war. We also have experienced steady increase in unemployment after every slump. The recovery from the last slump was even more sluggish or worse and we emerged with a residue of unemployment which was near to the miserable pre-war levels, with vast productive capacity remaining idle and being closed down. As in the dark pre-war days there is now talk about structural unemployment, talk that disappeared during the post-war era of unparalleled rapid expansion. Fears have grown that it will still increase further and remain at a high level afterwards. These fears explain but do not justify some of the bitterness and excesses from which we suffer now. Unemployment creates militancy and not the other way round. We must beware lest that further confrontation could increase it in intensity and we should face what might be called open class war.

The ultimate reason for the dismal setbacks that we are now suffering is the relentless increase in prices. As they increased persistently they accelerated and have become the centre of political storm. Inflation destroyed a large number of Governments and, even in this country, the fight against it became a test of policy. The word "Keynesian" became pejorative because policies based on his analysis—fiscal manipulation—failed to combine stability with high employment.

The main reason for this failure was—and I stress this—the concentration of economic power on both sides of industry. This radically cut the resistance against wage claims even if they were pitched far beyond the increase in productivity because it enabled manufacturers to recoup themselves by higher, manipulated prices. The picture painted by the noble Viscount, Lord Trenchard, about the competitive markets with large-scale units of production does not correspond to the realities in any way.

All Governments (including the German) were forced to apply direct measures especially, more or less stringent, more or less voluntary incomes policies or "guide posts". Nor were these unsuccessful either in America or in this country, not to talk about Germany where there was a tacit agreement on incomes. Their eventual failure was due to their being regarded as a sort of emergency measure and withdrawn once their favourable effects were felt. The history of the last few years shows clearly not that incomes policies are ineffectual but that advanced economies need permanent incomes policies backed by permanent and new institutions flexible enough to avoid an accumulation of anomalies in income differentials while controlling the emergent average. It is astonishing and terribly disappointing that hominis economici can be so stupid, even after seven bouts of crisis, not to realise that in a modern economy, with the concentration of economic power, some sort of independent forum is necessary in order to get the incomes structure right. It is absurd to talk about competition regulating the remuneration of workers in present conditions. We are not in Adam Smith's time, and even in his time there was recognition that there were very many fewer employers than employees. The bargaining power was on the other side. Free collective bargaining necessarily results in leapfrogging inflation. It really means the law of the jungle where each occupation is incited against the rest, with the managers against the workers, and the strong prevail.

Incomes policies are of course acutely unpopular with the unions because they impinge on the activity of general secretaries and shop stewards. If they are successful they diminish union authority and the opportunity to earn personal political laurels. They also make responsi- bility apparent: a good reason for their dislike by politicians and central bankers. It is this that accounts for the attraction of monetarism for so many important and intelligent people. It attributes the ills of inflation to an excessive expansion of the money supply; it asserts that controlling the money supply is not merely a necessity but also a sufficient condition of stability. It was and remains attractive because it de-personalised policies leading to unpopular consequences. If some mechanistic and scientific looking criterion could be found which would alone, by itself, guarantee stability, what a relief for political and trade union leaders, what a boost for econometricians and forecasters!

Yet no one proved how the changes in money stock would by itself automatically create or restrict demand and outlay, if it is possible to control the money supply at all. Nor did its proponents disclose that restrictive monetary policy, as the noble Lord, Lord Carr, said, could only discourage wage demands by creating at least a fear of unemployment. Unemployment together with the existence of idle capacity will discourage investment and the increase in interest rates consequent to that policy accentuates this deterrent effect, as we have seen recently in the United Kingdom and the United States. Yet we sorely need to increase our real income by accelerated investment to damp down the inflationary effects of wage claims. This was also mentioned by the noble Lord, Lord Carr.

The Government seem to pursue contrary policies: sustaining industry by direct grants while creating a general ambiance hostile to investment. This aspect has never been explained. By itself it explains certain false attitudes on the part of trade union leaders. If this is then paralleled by increases in interest rates, the whole situation is aggravated.

The very pundits who yesteryear preached the cure-all effects of depreciation, like Mr. Brittan and Sir Keith Joseph, have swung round with a vengeance and now agitate for fixed exchange rates in Europe. We are back in 1924, the painful months when similar ignorance pressed for a return to the gold standard. Catastrophic as that decision proved to be, the present still vague outline of the European system is stricter and more restrictive —as parities can be changed only by common consent—thus giving the creditors power of decision: the creditors, contrary to the rules of the gold standard, could indulge in restrictive policies and exert pressure on our economy even though they ran huge export surpluses. Premature liberalisation of our foreign economic relations for the sake of the City was one of the most important reasons for our industrial decline.

The Prime Minister has strongly and rightly defended the 5 per cent. norm, which would have brought the inflationary pressure down to the level of most of our competitors (though not so low as Germany). Those on the opposite side who destroyed sanctions designed to help in keeping wage increases within tolerable limits incurred a grave criminal responsibility. It will be exceedingly difficult to keep wages in the private sector from rising faster rather than slower than last year; and even more difficult to avoid confrontation in the public sector on the basis of comparability between the two. One sees the repetition of the 1974–75 experience, with disastrous social impact.

The Prime Minister also—and very wisely—refused to enter the European Monetary System elaborated by Hen-Schmidt. That system would be of great value to the Germans as it would mitigate the upward pressure of "hot" money on the Deutschemark. The Germans were afraid that the appreciation of their currency would hinder their export drive which is maintaining their employment to the detriment of that of her trading partners. The fact that the Irish and the Italians could be bribed to join the system by loans and grants shows that many of them (with the honourable exception of Dr. Carli) were innocent of the character of the real threat implicit in Herr Schmidt's scheme: the maintenance, and very probable increase, of the German current export surplus.

Unless and until we succeed in turning round the frightening loss of competitiveness by a sane incomes policy and by adjusting our exchange rates, both coupled with industrial organisation, we shall continue to run the grave risk of wasting—as we have already done to the tune of over £2,000 million per annum—the windfall gained from our oil and gas mainly in the purchase of foreign, mostly consumption, goods. It must be understood before it is too late that negative monetary measures acting mainly through a rise in interest rates might safeguard the balance of payments, might indeed dampen inflation. But their action is fatal to investment and productivity because it is through a short-term pressure on demand and employment. Investment and innovation are the only long-run remedies of our recurrent and nagging decline.

The present attitude of a number of trade unions is, to say the least, perilous to the nation and to themselves. But that attitude is not shared by men such as Mr. Weighell or Mr. Boyd, who have come out courageously on the terrible consequences of the so-called free collective bargaining. There is therefore some hope that the present crisis will abate and the Government remain victorious in the Election so that we can lift our eyes and contemplate a more prosperous and in the longer term more hopeful Britain.

9.4 p.m.

Lord ROBERTHALL

My Lords, as a number of noble Lords have reminded us, we have had a lot of debates on this type of subject in the past Session, all on the subject of the steady decline on the economic position of Britain. The noble Viscount, Lord Trenchard, has done a great deal to encourage these debates and is I am sure gratified by the support that he has received. At this late hour, when so many aspects of the subject have been covered, I feel that there is little to say. I do not altogether agree that inflation is, in this context, our principal problem. The principal problem is our lack of advance in productivity. It is our inability to produce which is at the root of the difficulties about wealth to which the Motion refers. Basically, I am troubled, as I have said in other debates, by the increase in unemployment and the inability of the Government to do anything about it which to my mind shows that we are becoming less and less adapatable as a society. There is a type of creeping paralysis coming over us in this field, one of the symptons of which is the inability to cope with more and more unemployment.

From that point of view, if one looks at production as a process requiring management, government and labour, I had intended to say—and I hope I can say very briefly—a little about each of these three aspects. First, on management, my experience suggests that British management has actually improved over the relevant period. The great trouble about this country used to be its complacency, the feeling that we did not have to bother and that we tried to live on our record in the past. But there is very little of that left now. The type of remarks made by the noble Lord, Lord Bruce of Donington, seem to me to be completely out of date in describing, for instance, the attitude of management towards the workforce. Connected, as I have been, with a number of businesses with wide international relations, I think there is little doubt that British managers, when they go abroad, compare quite favourably with other managers. Their difficulties are the difficulties which we impose on ourselves.

Turning to the Government, I was going to say something about what I think is the very mixed record of Government in this connection, but the noble Viscount was right to say what he did and he covered that so very well in his speech. He pointed out the ambivalent attitude of Governments—all Governments have been in favour of increased productivity and many of them have taken measures which they think will help, but at the same time they are often doing contradictory things. It is not only the contraditions to which the noble Viscount referred, between policy in one year and policy in the next year and between the policy of one Government and the policy of the next Government. At the same time you find all the individual Departments doing their best to help along the improvements in productivity and in adaptations to the new society. Meanwhile, the Government's whole policy is making the atmosphere more and more difficult, loading industry with an enormous amount of work such as unpaid tax collection, filling in forms and suffering from continuous investigations by the Monopoly Commission, the Price Commission and things of that kind.

However, my Lords, when we are dealing with adaptation and the ability to adjust ourselves to circumstances, the great difficulty, as I think much of this debate has shown and which needs very little proof, is that the trade unions are very strongly opposed to any sort of change. They, perhaps naturally, think of their jobs as a very precious possession and fight very hard against anything which it seems to them would put their jobs in jeopardy. Thus, the task of management and of Government, so far as it sets itself towards this, meets with a tremendous amount of obstruction and difficulty.

As a number of speakers have said, in recent years and especially since the Social Contract, the strength of the trade union movement has increased enormously while, as the noble Lord, Lord Houghton, reminded us, the use of the term "trade union movement" now is very uncertain because of the complete lack of leadership, as was so well put to us by the noble Lord, Lord Houghton. He went on to commend the Bullock proposals or something like them. I do not know whether the difficulty created by the fact that there is no leadership in the trade union movement is fully understood in this connection. It is not so much that people do not want worker-representatives on the main board as that the worker-representatives will not represent anybody because none of their constituents are going to listen to them—except perhaps when it is a matter of obstructive and difficult action.

I will not labour the point, which is only too obvious, that our basic difficulties arise from the industrial relations and the position of the unions; but, listening to the speeches tonight, it seemed to me that most of the speakers who admitted that this was a problem put all their faith in reason, peaceful persuasion and a change of attitude. The noble Viscount, Lord Trenchard, as the noble Lord, Lord Houghton, pointed out, took refuge in the assumption that a miracle was going to occur in the next year or two and then he sketched out all the lovely things that would happen. The noble Lord, Lord Carr, was more realistic but I think he was pinning his hopes mainly on peaceful persuasion.

The speaker who was nearest to my own views on this, was, I think, the noble Lord, Lord Rochester. He said quite rightly that this problem is never going to be dealt with until there is a great deal of combined support behind whatever Government is trying to deal with it. At the moment I am afraid there is very little prospect of that. I think it would be quite unrealistic for us to think that this is an easy problem which can be got over without a great deal of difficulty. The Government are quite powerless to deal with the anarchic situation in which we are now and they can only deal with that situation when they are sure they have public opinion behind them. In an atmosphere of confrontation both in the industrial world and in the political world, this is not going to be easy to bring about.

9.14 p.m.

Lord REMNANT

My Lords, may I start by expressing my appreciation to the noble Viscount, Lord Trenchard, for enabling this debate to take place. It has been a most interesting debate and, quite rightly, there has been much emphasis on managers and on the work force. There has been less emphasis on the providers of capital, and I should like to address my comments towards this sector which is very much part of the industrial scene.

The common division between private individuals and institutions is a misleading one, as under both headings we are considering the savings of individuals, whether managed separately by the person himself or coalesced into larger lumps administered by professional managers. Inadequate physical investment by industry is not caused by lack of finance. There is abundant evidence to show that money is ready and waiting to take advantage of any opportunities which might show themselves, and I was delighted to find this agreed by the noble Lord, Lord Kaldor. The problem is that opportunities show themselves too seldom, and a reason for this is that the reward in real terms from such an investment is too low—a matter on which my noble friend Lord Limerick has touched. Industry cannot be expected to lay out capital investment unless the expected return on the physical investment is sufficient to cover the cost of servicing capital and, in addition, to compensate for the risks involved. Nor, similarly, can investors be expected to supply funds to finance this capital investment unless the return is appropriate.

There is, unfortunately, under-utilisation of capacity in many industries. Many of my noble friends have identified the reasons for this, and the environment which must be created in order to stimulate the required expansion to full utilisation of capacity. Until this surplus has been absorbed, there is no incentive to industry to add to that capacity. It is, to me, astonishing not so much that the level of investment is so low, but that, in all the circumstances of dividend limitation, price controls, poor industrial relations, high taxation and, not least, frequent change in Government policy affecting industry and commerce, British industry is keeping its level of investment as high as it presently is.

Inevitably, inflation has naturally raised its ugly head and it may be constructive to isolate its particular effect on corporate finance. Companies need to use the funds available to them to finance stocks and debtors, and are prejudiced against exposure to the danger of losing liquidity by committing these same funds to fixed assets. Inflation makes it almost impossibly difficult to estimate the final amount which will be committed to any project once started, and inflation usually forces up the rate of interest on borrowing to a level which is unacceptable when set against the return to be earned on the project.

I do not think I need expand on the problems caused by price controls. If companies are to be inhibited from earning reasonable profits, new funds are likely to be discouraged and to require a higher yield. The logic is horribly inescapable. I trust that I may be excused for taking a few moments to touch on these separate elements. We have to create the need for more investment, but once created the environment needs to be very different from the present. At this moment the providers, or potential providers, of capital are subject to a type of Chinese torture—inflation, dividend limitation, price control, changes in Government policy, high taxation, but, above all, too little recognition of the fact that a fair reward is deserved for capital entering the three-way partnership between management, labour and itself.

There is, however, another area which is close to my heart and which gives me cause for concern. This affects the private investor and, in particular, influences the money which he has saved. In the past, the rather more successful creator of wealth has been prepared to put part of his success in financial terms towards entre-preneural high-risk investment. Now, with the effect of high taxation and the requirement to give higher priority to matters nearer home, that individual does not have funds to be directed towards entrepre-neural investment and the nation is the poorer. However, the general standard of living throughout the United Kingdom is substantially higher than it was a decade or so ago, and it should be possible to tap the broadly based financial capabilities of these people.

In order to put this into some perspective may I recount briefly some statistics produced by the Bank of England which show that sales of company securities by the private sector have risen from £1.1 billion for the five-year period 1956 to 1960, to £7.6 billion for the five-year period 1971 to 1975. I suggest that there are at least two conclusions which may be drawn from this: first, that the general pressures of life have been such that private individuals, as a group, have been forced to dig into their savings to pay the grocery bills and that therefore our high levels of taxation have been a major inhibitor; secondly, however, that the fiscal structure has influenced savings towards building societies, pension funds, life assurance, et cetera, all of whom in one way or another benefit from special tax treatment. Over the years 1973 to 1977, a five year period, £17 billion went into building societies from the personal sector and £24 billion into life assurance and superannuation. In the first case—the amount of money which went into building societies—the yearly figure over this short period was 2½ times at the end compared with the beginning, and in the second case—life assurance and superannuation—nearly twice. In contrast, £7 billion was taken out of company securities.

There is, however, a great potential for the private individual in this country. His savings can be turned to splendid use. There is still a great case to be made for ensuring that this individual can carefully follow the course of his own money, not only through the medium of the institution but also in a more carefully encouraged manner. May the powers that be give the same attention to personal savings that they presently give to life assurance premiums, mortgage interest, pension premiums and so on. To be direct, and as an illustration, why cannot we allow "x" per cent., with a particular maximum figure, to be deductible from gross income, provided that it is invested in a qualifying sector—or, to be even more specific, and paying more than lip service to the modern vogue, have new investment in small businesses as tax deductible. It is bad enough that we have eliminated the traditional supporter of such businesses. Let us use our expertise by replacing him by the broader modern equivalent.

It really is quite wrong that we influence the private individual with such weight towards life assurance and pension provision. If we mean what we say and encourage him back to British industry, let him be given the same tax advantages for qualifying savings—no more but equally no less. The man on the factory floor already has a meaningful commitment to British industry through his own pension fund. I believe that he would welcome the chance of investing direct if this were shown to be sufficiently attractive.

May I also plead for the progressive dismantling of exchange controls, whether they relate to direct or portfolio investment overseas. The prosperity of many United Kingdom based companies depends upon their export business, or on their overseas operations. Overseas investment is not made at the expense of United Kingdom investment and employment. Such investment is often necessary to maintain or expand exports in today's competitive world markets and thus contributes directly to the protection of domestic employment. Direct investment by foreign companies into the United Kingdom should be welcomed, providing, as it often does, healthy competition, additional employment and reduced imports.

Free flow of capital is likely in the long term to lead to the most efficient use of resources. The objective should be that national regulations should be neutral in their effect so that foreign investment is neither encouraged nor discouraged. This neutrality should apply to both portfolio and direct investment and to United Kingdom investment overseas and foreign investment in the United Kingdom.

Membership of the European Economic Community requires the free movement of capital within the Community. In the United Kingdom, we should now comply with the commitment in this respect, and in addition extend the necessary relaxation of exchange control to investments in countries outside the Community.

Lastly, may I home in on the relationship between the shareholder and company management, two of the three principal partners in British industry. Tremendous strides have been taken in the last few years in developing this relationship, and the formation of the Institutional Shareholders Committee some years ago, with the encouragement of the Bank of England, has played its part. Individual institutional investors are expending great effort in improving their relationships with the management of companies in which they invest. The Institutional Shareholders Committee has done its best to publicise its own existence in cases where suitable lines of communication do not exist. However, I am left with the impression that, hopefully temporarily, the principal effort is being made by investors. Company managements in general have yet to regain the initiative in this area. I hope that they will do so, as the advantage to be gained for improved investment in British industry from a proper liaison is substantial.

In summary, therefore, my Lords, first let us pay more than lip service to a high rate of return as acceptable for investment in British industry. Secondly, let us create an environment wherein the private individual can increase his savings. Thirdly, let us extend the opportunities by which a private individual can place his savings in support of British industry through equality of tax treatment for all types of savings. Fourthly, let the necessary steps be taken to achieve a meaningful relaxation of exchange controls, affecting both direct and portfolio investments and, last, let company management make even greater effort to improve its relationship with shareholders.

9.26 p.m.

Lord VERNON

My Lords, I promise to make, if not the shortest speech in this debate, at least one of the shortest speeches. I have always previously been hesitant about participating in general economic debates in this House, mainly because I have felt that I lacked the necessary expertise and experience in industrial affairs to justify participation. But today I have not got the same inhibition. The subject of my noble friend's debate is the creation of wealth, but wealth will not be created unless the conditions necessary for its creation are themselves created. Since the disease from which we suffer, known on the Continent as the "English disease", is caused almost entirely by political factors the cure—if cure there is going to be—must be a political cure.

What is wrong with the country at the present time is notorious. It has been stated frequently in the Press and it has been emphasised in speech after speech in your Lordships' House today. People say that we cannot go on any longer behaving in such a reckless and shortsighted way—and yet we do go on, paying ourselves more than we earn, living on the revenue of North Sea oil as if it was inexhaustible, pretending that we have a God-given right to a high standard of living, succumbing to the blackmail of the more powerful trade unions, fightingamong ourselves like spoiled children and all the time our competitors are rubbing their hands at our expense. For an over-populated country which has to export in order to survive we really must have the death wish.

Why do we go on kidding ourselves in this ridiculous and cowardly way and why are our fellow members of the European Economic Community so much more successful than we are? Can it be that they have suffered more than we have and they have learned something by their suffering? After all, we have never endured the horrors of enemy occupation as have other countries in Western Europe and if there is ever a suggestion that the British people should really suffer by being hungry or by being cold or by merely being inconvenienced in order to defeat the power of those who seek to dictate to us by brute force, immediately there is dismay and invariably we give in. It is not only the Government which gives in; it is often the private sector as well, as the noble Lord, Lord Lee, pointed out in the case of the Ford company.

The debilitating effect of the good life seems to have seeped into our bones as it did into those of the citizens of later Imperial Rome. And yet I believe it will only be when things get worse, and are allowed to get worse by the Government, that the nation will come to its senses. The trouble is that neither of the major political Parties has the strength to make a stand on its own. The Tories tried and failed under Mr. Heath. The Labour Party have tried and it is now apparent to all that they have failed. Can we really go on affording the luxury of the Party political slanging match in such circumstances? It may have been appropriate in the past, but it is destroying the fabric of our society today. I believe that the vast majority of the people of this country, and that includes the vast majority of trade unionists, want a strong Government which is willing and able to chart and enforce a new code of behaviour in industrial relations, perhaps something on the lines suggested by the noble Lord, Lord Brown.

Only a truly national Government can have the necessary strength, authority and prestige to take the unpleasant decisions which will have to be taken if we are not to continue down the slippery slope. Not so long ago I remember that my noble friend Lord Thorneycroft prophesied from these Benches—it was just before he took up his present position as chairman of the Conservative Party; I am speaking from memory, but I think I am right—that the next Government would be a coalition and it would be led from the right of the Labour Party. I am only sorry that his prophecy has not yet been fulfilled. Whether it should be led from the Labour or the Conservative side depends perhaps on the wishes of the British people as expressed through the ballot box. But the important thing, in my view, is that there should be a moratorium on Party political warfare, for at least a decade while we put our house in order. What we need is a Government of stature which can do for our country what General de Gaulle did for France, and what a mighty achievement that was! It was really an economic miracle which the French performed, just as the Germans did before them. As my noble friend Lord Trenchard, who introduced the debate this afternoon, said, there is no reason why an economic miracle should not also be performed in this country, but if it is to be performed there will have to be an infinitely greater degree of co-operation on all sides than there has been hitherto.

9.34 p.m.

Lord BLEASE

My Lords, I should like to add my congratulations to the noble Viscount, Lord Trenchard, on having initiated this debate, especially in a week when the productivity of the pundits is piling up yet another massive national surplus of exhortations and rhetoric about the industrial malaise of the United Kingdom. There is of course a substantial school of thought which would argue fairly convincingly that this debate could have taken place at any period during the last hundred years. Since the Great Exhibition of 1851 the newspapers and the media, commissions, reports and surveys have all been repeating the familiar complaints about industrial complacency, about poor quality of our investments, about management and about bad industrial relations.

I am pleased that the noble Viscount dealt mainly with the long-term problems that we are facing. At the same time, like him, I certainly am concerned about the current situation. Indeed, I would be madly insensitive to ignore that these are critical and crucial days for the people of Northern Ireland, where industry and employment are precariously perched because of the present industrial disruption. However, I am very glad to note that the interested parties are continuing in discussions and talks, and I am sure that common sense in the long run will prevail.

While I tend to the view that there are no short-term solutions to long-term problems, I feel that over the years the conviction that there are short-term solutions has produced some of the popular, yet unprincipled, about-turns in policy, about-turns which have unduly inflated public expectations and seriously undermined business confidence. Moreover, I would contend that that belief in ready made solutions may ultimately lead to total lack of confidence in government itself.

With so many world experts and specialists in your Lordships' House it would be imprudent of me to attempt to cover matters concerning investment, the effects of trends in world trade, the impact of industrial imports on our balance of trade and the need for new technology. Instead, I shall comment briefly on some of the ready made solutions currently on offer in the area of industrial relations since my experience as a trade union official has exposed me to a variety of such panaceas over the years.

It is inevitable that people should turn to legal remedies when, in an increasingly complex and highly integrated economy, small groups can shatter the consensus which binds this system together. While there is a high degree of compliance in the political culture of Britain, that compliance is unlikely to bear the strain if the law is used to affect the balance of power in industrial relations; for any piece of legislation to be regarded as a negotiating position in industrial relations is to bring the entire legal system into disrepute. As regards that, I agree with the wisdom propounded in the Donovan Report against such legally imposed solutions, unpopular though this may be, especially with those who think legal remedies can be conjured up on a Sunday morning television programme; and particularly with those whose economic philosophy is based on the competitive pressures which would merely encourage head-on confrontations between the law enforcement agencies on the one hand and strike committees, official or unofficial, on the other.

I agree that trade unionists by industrial action alone cannot gain a secure increase in the share of wages. I agree that industrial action can debase the currency and provoke monetary measures which could lead to stagnation. But in a democracy with a tradition of individual human rights the only course open to us is the difficult one of persuasion and self-restraint. I am appalled that many seem set on a course of free collective bargaining, a course which might throw away rather than build upon the collective community interests we have achieved during the past three years.

In an election year we should be doing much more, rather than less, to assert the common interest, instead of increasing the predictable theoretical differences. Naturally, I consider it foolish to believe that unemployment or the direct weakening of trade union bargaining power can produce stability and economic growth. Nor do I believe that tax cuts or the dismantling of the Welfare State will so transform the ability and spirit of our managers as to make them more powerful and dynamic. One noble Lord suggested that real wealth is created by free private enterprise, and emphasis was placed on free private enterprise. Certain other noble Lords tried to define what was meant by that phrase.

I am not in any way blinded by or in blind opposition to, nor do I have a narrow ideological approach to private enterprise, but it has been my experience that if the industrial development of Northern Ireland, the future for employment in that Province, and the economic well-being of the people of Northern Ireland depended on the efforts, the investment and the actions of free private enterprise, the people of the Province would now be submerged in poverty and utter despair. I am the first to admit that industrial dynamics in Northern Ireland are far from good or what I should wish, but I am glad that the Government generated finance and that public enterprise has found a mutually-agreed partnership with private entrepreneurs with skills and know-how and has been enabled to maintain some levels of employment. I state this because I felt that in the general debate there was an over-emphasis on wealth being produced by finance, which I totally refute. I consider that wealth is a combination of enterprise, labour, the skills of management and finance.

The conditions which I believe to be unfavourable to the creation of wealth and the recovery of industry, which lie within the competence of the Members of this House to effect, are fourfold: first, to deal with the lack of genuine forthright-ness among leaders of political opinion; secondly, to deal with the lack of professionalism at every level in the key decision-making areas of Government and economic activity; thirdly, the lack of a long-term strategy to tackle the plight of the lower paid workers, for without greater equality and consumption that consensus of opinion will never be reached, and it is needed to secure steady political and industrial progress; fourthly, the lack of adequate efforts in education and training and in information and communication to encourage responsible attitudes and to arrest the decline of traditional moral values.

First, how can we achieve steady growth and growing confidence in the economy if there is a drift towards political extremism? I am well aware that the Prime Minister has to contend with his fair share of extremists from various quarters. But it is potentially disastrous for the country to have a Leader of the Opposition who, instead of trying in the nation's interest to share the centre of the political spectrum with him, is desperately trying to convince herself, as she makes her political policy announcements on the wing, that a head-on conflict with the trade unions would create a revival of industrial investment and an increase in productivity and our industrial competitiveness.

The late Professor John Macintosh in his excellent Fawley Foundation lecture at the University of Southampton in November, 1977, said: Democracy is not a machinery for conducting abrupt about turns; if drastic changes are demanded, then long-term planning and confidence will be damaged". It seems to me that the lesson we must learn from the past three years is that whatever political Party is in power, there must be a national agreement about the strategy for economic growth, of which wages policy is an important part. I realise that there must be some method for resolving the wage anomalies within any wages policy and the noble Lord, Lord Brown, indicated one of the ways in which this may be achieved. I consider that unless there is a central agreement about the need for economic growth hammered out annually between the Government, industry and the trade unions, it is futile to envisage a situation where either unions or employers can effectively discipline dissidents. No committed trade unionist can possibly support some of the selfish, senseless and, indeed, mindless tactics which have been adopted in the past few weeks.

However, if sanctions of any kind are to be supported, they must be morally underpinned by clearly communicated and widely understood national agreements which, in turn, are supported by all responsible political spokesmen. In practice, the political leaders of all Parties who have held the middle of the stage have tended to destroy each others credibility by stressing differences which have been more rhetorical than real. However much this may be part of Party political gamesmanship, we cannot expect a more responsible attitude from the electorate and the achievement of a stable economic growth based on agreed national interest if politicians who differ little in practice, exaggerate their disagreements and go out of their way to provoke dissension in the population. I have no need to tell you that I come from a part of the world where we are paying a very high price for our exaggerated views of differences rather than our common needs. I have no doubt that we all need to consider how our political institutions can best reflect the common interest.

On my second point I must stress that one of the basic differences between Britain and its competitors in America, Japan and Germany has been the emphasis they place on achievement rather than inherited social status in recruiting industrial managers. There is also the fact that education and background of our leaders in Government Departments tend to be too heavily concentrated on non-technical disciplines. Whitehall will never understand industry if all its civil servants have their expertise and knowledge only in government. I realise that there have been some institutional changes and some provisions for secondment of some Members of Parliament to industry, and I think that is good, but in my opinion much more requires to be done. I believe that a far greater exchange of personnel and views between industry and Government would benefit both in the interests of the community. It is perhaps not going too far to say that Britain never really imbibed the social values associated with the changes created by the industrial revolution in other countries. We have preserved a class system based on inherited land wealth. Even today the kudos associated with a career in Government, the Army, and in the City financial institutions has been more in common with a declining 17th century Spain than with a 20th century industrial competitiveness.

Your Lordships will be familiar with the many reports on this theme. It seems that for 100 years or more in technical and business education in particular, and the social standing of our industrial leaders in general, we have lagged behind other countries. Let me quote from a recent article by Simon Caulkin in the January issue of Management Today, which is a British Institute of Management publication: In no other manufacturing country in the world is it necessary to remind people that industry is the foundation on which the rest of society is built. In no other country is the culture and background of the nominal rulers (Parliament and the civil service) so magnificently and wholeheartedly irrelevant to the daily concerns and problems of that foundation .Everywhere else, by virtue of unified educational systems, engineers and managers are automatically among the rulers and are thus represented in official thinking, as a matter of course. A more stubborn barrier to innovation and new ideas in industry could hardly be imagined. Hence the perceived view of British industry as more favourable territory for relentless class warriors, than for creative and intelligent minds". The noble Lord, Lord Bruce of Donington, made reference to difficulties in management and trade unions sometimes having discussions with rank and file workers. I think that in many of the structures of management even today, both in private and in public industry and in the Services, manpower and personnel matters are relegated to the fourth and fifth levels of decision-making processes. I know that we have someone here more expert than I am on this problem, but as one who formerly practised in industrial relations I found it extremely difficult at times to come in direct contact with persons who could make decisions about industrial relations problems. Sometimes it was like shadow boxing with a ghost. In many of the large concerns the personnel manager was no more than a welfare officer. I ask, how many personnel officers are on the boards of management and involved in the decision-making?

Crocodile tears are shed over the problems of manpower and industrial relations. If we can have experts on boards of management to deal with engineering and finance, why can we not have on boards of management people able to deal with the crucial and unpredictable element of manpower? While, therefore, I am sure Lord Bruce would agree with the view Lord Hewlett put forward and while I agree that he has a system of management which should be emulated—I would be the first to admit that there are good employers—I believe that industry at large throughout the United Kingdom requires to get its manpower and personnel into proper perspective if the industrial relations problems are to be resolved.

One could argue that social values in Britain reflect and produce a quality of life inherently superior to that of our competitors. If that is so, then we must get our preoccupation with our pure industrial performance into perspective. As someone who remembers the hungry 'thirties, perhaps I shall be forgiven for saying that I would rather see people queuing for petrol than for soup. There may be individuals who are happy with little or no growth and who believe Britain is a better place because of that, but one thing is certain—namely, that it is not those in the dole queue or those suffering from poor housing or those without adequate incomes who would be satisfied with a declining industralised community in the United Kingdom.

My next point is immediately relevant to the current situation. Although it is easy to be wise after the event, I believe it was a weakness in the wages policy last year not to have tried to tackle the special plight of the low paid. However, I am glad that yesterday we had evidence that the Cabinet have had second thoughts on the matter and that steps have been taken to remedy what in my view was an anomaly. All sorts of arguments can be advanced about the danger of pushing up other wage levels in order to retain differentials. Nevertheless, if special attention had been given to this problem, some of our current industrial disputes would have had less emotional force behind them. Whatever is done, in the long term much more attention must be paid to the problems of the lower paid.

We must not neglect the crucial role of education and, in particular, mass communication; other noble Lords have referred to some of the glaring anomalies that exist and have pointed to the way in which further disruption may be caused through wrong information being promoted. We must repeat time and again that to enjoy acceptable standards of living we must produce goods and services which are at least equal in competitive value and which foreigners will want to buy. I believe the Prime Minister and Chancellor of the Exchequer have been trying to get this message across. Indeed, the Prime Minister has gone further and has stressed the importance of traditional virtues such as family life, the home and moderate living as being basic to a prosperous, progressive and happy community. Much of the trouble that we read about in our newspapers and see on television stems from the very nature of the media themselves. They have failed to understand their role in dealing with the problems of industry and I suggest that professional communicators could do much more in positive terms to stimulate new social attitudes.

Finally, mention was made of the need for a staff college, and, while I would wholeheartedly agree with this, I should add that, in addition to what shop stewards may obtain in terms of training and information at such a college, I feel sure that managers also could benefit from basic training in the economic facts of life and in industrial procedures. If we are to secure agreement upon how we are to prosper and to encourage responsible social behaviour in a democratic society, we can look only to education, persuasion and, above all, genuine leadership from public representatives. Easier solutions lead to chaos and not to the creation of the kind of wealth that we can all share in happiness.

9.55 p.m.

Baroness SEEAR

My Lords, first I must apologise to your Lordships' House and to the noble Viscount for not being in my place at the beginning of the debate. This was because of an engagement into which I had entered before I knew that the debate was to take place. Clearly the best amends that I can make is to be as brief as I possibly can be at this late hour. Brief though I intend to be, however, I cannot omit my congratulations to the noble Baroness, Lady Birk, upon her promotion. Of course it is a special pleasure for one woman Peer to congratulate another, although looking at the Labour Front Bench, I must say that one begins to wonder what has happened to the sex balance.

The debate is about the removal of conditions unfavourable to the creation of wealth. I suppose we would all agree that nothing would do more to help the creation of wealth than certainty, or something near certainty, in the minds of managements that there would be reasonably stable industrial relations, that agreements entered into on the pay front would be observed, and that such agreements could be made which would keep the level of pay reasonably in line with what the level of increased productivity makes possible to pay. At the present moment that highly desirable state of affairs seems a fantasy.

Yesterday, in responding to the present situation and to the great need for more stability in pay and in industrial relations, the Prime Minister in another place produced three proposals for improvement. They were: greater assistance for the low paid; comparability studies in the public sector; and stiffer control over prices. I am very sorry to say that in the view of my friends on these Benches and myself none of these proposals is adequate as it stands, except of course there is a problem of the low paid. But let us get it clear to whom we are referring when we speak about the low paid. The problem of the low paid is surely the problem of the low paid family man, or family woman in the case of a single-parent family supported by a woman. Where one is talking about under £70 a week, where there are young single people living at home, or where there are young married people both of whom are working, a figure under £70 a week is not what most of us would regard as gross poverty requiring special treatment. I have urged from these Benches again and again, and I do so again tonight, that the problem of the low paid is a misnomer. Rather, it is the problem of the low paid family person, and that is far better dealt with by increases and improvements in child benefits than by continuously raising the level of pay to the so-called low paid.

By concentrating on the position of the low paid there are two very real dangers. One is that more people in the low paid level will in fact price themselves out of work altogether; secondly, there is the problem of differentials, which is very real at the present time, and which will be further increased, with the inevitable result that there will be inflationary pressures on those in the somewhat higher levels to increase, rather than to restrict, differentials. It seems a most inappropriate response to the present situation.

Then there is the question of comparability. I believe that we all recognise that the problem of pay in the public sector will be a matter of very great seriousness over the coming weeks. One can well understand why the Prime Minister has said that there is to be a comparability study to see that the people in the public sector are not losing out in relation to those in the private sector; and, indeed, it is clear that, perhaps along the lines put forward by Mr. Basnett some months ago, something of this kind must be one element in dealing with the question of pay. But I would point out that there are some real snags in the whole concept of comparability. Genuine comparability studies are far more difficult to carry out than appears to be realised. Nowadays, when we do a comparability study we are not comparing just the size of the pay packet. We must think in terms of total remuneration and total satisfaction, and that not merely at any given moment of time but over a period of time.

I would say to those who are advocating comparability studies to deal with this problem: what factor are they going to include to allow for the much greater security in the public sector than in the private sector, and what factor are they going to include to allow for the very great benefit, in which I share, of an indexed pension? And the fact that indexed pensions are mentioned so frequently, to the great annoyance of many people, does not make the argument any less strong. If you make a calculation of the kind of capital accumulation which is necessary in order to meet an indexed pension you will find that the addition that that makes to the annual salary is very considerable indeed under inflationary conditions such as those obtaining at the present time. So let us have comparability studies, but let us attempt to have genuine comparability studies which will take all these factors into account; and I am not satisfied that up to the present time so-called comparability studies have in fact taken into account all these extremely important, highly relevant factors.

Then there is the question of prices. It is all too easy, in a political situation such as obtains at present, to say that the way to keep down inflation is to attack on the side of prices. Let me make it absolutely clear that, so far as my Party is concerned, we are not prepared to have action by Government on prices when there is no comparable action on incomes. Even-handed treatment, yes, but not single treatment against prices with no comparable action on the front of pay. We have to ask ourselves why, at the present time, the Prime Minister has put forward proposals which are in themselves basically not sound and are not really appropriate to the problems which are confronting us. The reason surely is that it is no way to deal with the problems of prices and of pay—especially of pay—to have them go through piecemeal and subject to the very great political pressures which are occurring at the present time and which always do occur as these crises blow up again and again.

What this inevitably leads us to—and, in many ways, all of us on these Benches are sorry to have to reach this conclusion, but it is an inevitable one—is this. Here, I find myself very much in agreement, rather to my surprise, with the noble Lord, Lord Balogh; he and I do not always agree, as your Lordships have no doubt noticed. We are forced to the conclusion that what we have to have is a statutory prices and wages policy. Come back Aubrey Jones, all is forgiven! It was the greatest mistake on the part of the Opposition Party that when they came into power they dismantled the Prices and Incomes Board at a time when it was beginning to build up a reputation which, if it had continued until the present time, might well have been able to carry the weight of the problems which are confronting us today. Sooner or later we shall have to grasp this nettle, and I urge the Government to do it sooner. If you have a statutory body, you can indeed bring pressure to bear on the employers through prices, because then you are dealing evenly both with incomes and with prices, with employees and with employers. The longer we delay, the worse the problem is going to become. I know the difficulties of enforcement but I believe that we now have to look to such a body to find the answers to certain questions of the greatest importance.

What we have learned about prices and incomes policies is not that they are a total failure; they have on a number of occasions provided considerable assistance to the economy. We have learned that we must find ways in which to have greater flexibility in the application of these policies. It would be one of the prime tasks of such a body to find ways so to do. I am not this evening going to elaborate on this but it seems to us that if you use the concept of value added and the compulsory sharing of profits to enable greater flexibility at plant level in determining what can be paid out and if additional pay is paid out because additional wealth has been created then there is nothing inflationary about that. If you can build this concept of additional payment negotiated at the level of the plants based on additional value added into the application of a statutory incomes policy, then you are on the road to having control over the total amount of money paid out in pay while at the same time building up a degree of flexibility at the level of the enterprise. This is the problem we have been trying to solve: how to have the two things simultaneously: control over the total outlay of additional pay but, at the same time, the necessary flexibility to establish the sort of differential within each enterprise that that enterprise is best able to negotiate—and I underline "to negotiate"—and to establish what is required.

I know that this is not liked. I know that I shall be told: "You cannot have law in relation to industrial relations". This is the greatest possible nonsense. We have law in relation to industrial relations running out of our ears. This House has passed I do not know how many Acts in relation to industrial relations. When people say that you cannot have law in relation to industrial relations, what they mean is that you are not willing to pass laws in relation to industrial relations which the trade unions do not like. That is a reasonable thing to say, but it is not the same as saying that you cannot have law in relation to industrial relations. You can have law in relation to industrial relations if you have a broad basis of support for that law. I believe that the broad basis for support for that law is beginning to grow and to grow pretty fast at the present time and I think that you would find very considerable support for developments of this sort.

We shall be told that you must advance by having further contracts between the Government and the trade unions. Of course, we must have consultation and discussion continuously between Government, trade unions and employers. That goes without saying. But continuous consultation is a very different thing from contracts. The disadvantage of having social contracts, so-called, is, one, that they have been with only one side of industry and Government, and that is a curious way to develop industrial policy; and, secondly they have taken decisions which ought to be made inside Parliament out of the arena of Parliament and into the hands of bodies outside the Parliamentary scene—and that is bad for genuine democracy—and, thirdly, what is the point in making contracts with people who, when the chips are down, cannot see that the contracts are enforced? If we are to have any more contracts with the trade unions, let the trade unions demonstrate now that they are able to say that when they have given their word that something is going to be done, they will take action when their members do not carry out those contracts. If we had evidence that this was happening then there might be something to be said for contracts; but making contracts with people who cannot deliver is the greatest possible waste of time.

To revert once again to contracts is not the answer. We must face the fact that it is a statutory policy that we need to have. I wish that this were not so. I wish that we lived in a world in which we could have free collective bargaining. I am a Liberal. I hate bringing in more statutory bodies. I hope the time will come ultimately when we shall not need to have bodies of this kind. The time will come only, however—and it is a long way ahead—when you no longer have monopoly power in either the hands of the employers or the hands of the trade unions. Then you may begin to have something which enables you to start to return to something that you could, without caricature, without sheer falsehood, call free collective bargaining. That is so far away that we have to say that in the immediate and the near future, and indeed as far in the future as we are likely to see, we need a statutory body of this kind.

However, perhaps we could have less and less controls if two things happen, and we can begin to take steps now to make them happen. One is a far better informed public about what can be done and the consequences of their actions. So much did I agree with the noble Lord, Lord Mottistone, when he said: "Let us get the information over. Let us rub into people what the relationship is between an "X" per cent. pay increase and a "Y" per cent. rise in prices". I have again and again over the years begged the Government to put their weight behind a campaign of this sort. Other countries do it, and there is no reason why we should not do it. That is of the greatest importance.

Secondly, I pick up a point made by the noble Lord, Lord Houghton of Sowerby. I believe that one of the best educative devices, the best ways in which we shall reach the state in which there is enough understanding of these matters for us not to need statutory bodies, is a genuine development of real industrial democracy in which people affected by decisions are faced with the realities of the problems which are confronting companies and in which they really do learn, through the bitter experience of making decisions under very awkward circumstances, what can be done and what cannot be done.

It was in my view very unfortunate that the CBI at its recent conference— only I believe its backwoodsmen; and all organisations have their backwoodsmen, be they trade unions or employers—moved away from the idea that some legislative base for industrial democracy was required. I believe, in fact I know, that that does not represent the best thinking of the best minds in the CBI. There are many people there who know that there must be developments, and those developments must come quickly. I implore all the people who have any influence in this field to get moving on developing patterns of industrial democracy which suit their own organisations. We do not want enforced patterns, but we do want genuine growth because if this comes then there is some hope that we shall not need the statutory controls. In the meanwhile we do, and we need them now.

10.13 p.m.

Baroness BIRK

My Lords, may I first thank the noble Viscount, Lord Trenchard, and the other noble Lords and the noble Baroness who were kind enough to make such nice remarks to me on my being moved into what I feel is a very hot seat. The noble Viscount was very clever to have managed to land the subject of this debate on this particular day. From the time when he rose to move his Motion until now, I feel that we have reached the point at the end of his chronicler and we are now in 1990.

Surprisingly the debate has not concentrated entirely on the present situation but rather on the noble Viscount's Motion which is much wider-ranging and raises issues which go deeply into the ecomomic and social aspects of our society. What came over loud and clear from all parts of the House was that improving the performance of British industry is the key to economic and social progress. This I believe can only be examined in the context of concrete achievement and in the perspective of our overall industrial strategy.

Achievement in the past two years has been substantial, and in spite of Lord Trenchard's view, that all this is irrelevant and, as I understand it, things would have been a lot worse but for these achievements, I still think it is worth reminding ourselves of the facts. In 1978 inflation was kept down to around 8 per cent. Real personal incomes increased by around 6 per cent. and monetary targets and cash limits were strictly adhered to. Exports went up by nearly 6 per cent. in volume and our share of world trade increased. The current account was kept broadly in balance and we ended the year in December with a surplus of £246 million. Investment by manufacturing companies increased by about 13 per cent. and unemployment went down by about 100,000. That does not mean for one moment that I am complacent about the size of our unemployment. These successes—and they are successes and should not be forgotten—result from the Government's economic, monetary and industrial policies and also from the sustained efforts of both sides of industry.

I am not by any means underestimating the gravity of the current situation, but there is a danger that it may temporarily block out the solid fact of economic progress. The list of successes of the past year is not just to give you a list of facts which I am sure you all know, but they do show that a responsible policy can command general assent. It would be tragic if this sense of responsibility and concurrence was lost. The improvement that we have seen could not have been attained without the Government's ability to control inflation. It must be an overriding aim in 1979 to avoid an upward drift. It is particularly important at this time that we should be on the right economic foot as the world recession ends.

I was very glad that the noble Lord, Lord Carr, seemed to agree with this when he designated inflation as public enemy No. 1. I was equally disappointed when the noble Viscount, Lord Trenchard, seemed to think that we had an obsession with inflation. The noble Lord, Lord Remnant, emphasised the link between inflation and investment, although I cannot pretend that I go along with him in all the other remarks that he made. At its peak in mid-1975, inflation—possibly even here we have forgotten this—was running at a disastrous 27 per cent. To have cut that rate progressively to around 8 per cent. is the most effective contribution the Government could have made to the recovery of British industry. What I think we have above all to remember today is that it could never have happened without the unique co-operation of the unions in the first three pay phases; so this can be done and has been done in the past.

This was not a statutory incomes policy such as the noble Baroness wants. My noble friend Lord Balogh referred in his speech to an incomes policy as still being essential, but I thought he left it open at this stage as to whether or not it should be statutory. He did say something with which I agree—something which was also mentioned by my noble friend Lord Blease: that free collective bargaining meant a return to the law of the jungle. Listening to the debate in the other place yesterday, I think that came out very clearly, because one had this extraordinary paradox of the demand for free collective bargaining and at the same time the demand for the Government to stop what is going on at the moment.

Yesterday the Prime Minister reaffirmed the Government's pay policy and announced the three important proposals that will help to ensure that it operates fairly and effectively. He also emphasised again that there is no justification for the inflated and inflationary wage claims now being pressed in some quarters. He also underlined again and again that their long-term effect will not mean any real improvement in living standards, but a return to the intolerable and destructive levels of inflation that we have progressively overcome in the past three years. The Prime Minister also reiterated that the Government would not be prepared to finance any similar inflationary claims in the public sector.

The Government's three new proposals announced yesterday, which were manifestly disliked by the noble Baroness, Lady Seear, and her noble friends, were as she pointed out, modifying the 5 per cent. guideline so that those earning less than £70 a week can obtain increases of £3.50. As many as 8 million people could benefit from this decision, which represents an increase of up to 9 per cent. for lower-paid workers. The noble Viscount, Lord Trenchard, and I think also the noble Baroness, felt that this was inflationary and would erode differentials. But if we have pay restraint—which we have—we must protect the lower paid, many of whom do work which is as essential to the community as that of the higher paid. I am not pretending that it is the acme of economic perfection. It is something that we have to do in the very difficult circumstances in which we find ourselves.

Secondly, the principle of comparability between the pay of public service workers and equivalent grades in private industry will be extended, and new machinery will be set up to provide a detailed factual basis. The results can then be taken into account progressively in future settlements. The noble Baroness asked me which factors are to be included. As I am sure she will appreciate, this was announced by the Prime Minister only yesterday, but I can see no reason why there should not be genuine comparability studies. However, I shall be very grateful, as there is not time tonight, if she will write to me and set down her views, which I can read at leisure and pass on to my right honourable friends. My noble friend Lord Brown and others urged the need for a more rational means of determining pay and differentials, and this is one way of developing that.

Thirdly, legislation will be introduced to strengthen the powers of the Price Commission. They will be enabled to restrict price increases by firms under investigation, although they will also retain their power to allow interim price increases where these are justified. These new arrangements are designed not to put a dagger in the back of employers and industrialists, but to enable the Commission to do their job as effectively as possible. The noble Baroness and many noble Lords, including the noble Lord, Lord Rochester, the noble Earl, Lord Limerick, and the noble Viscount, Lord Rochdale, were very critical of this proposal, but it is simply to reinforce our counter-inflationary policy. The Price Commission are required by Statute to allow efficient firms to make adequate profits, and we have confidence in their experience and responsibility.

It would be a very great pity in the rapport which we are trying to get, and with the, very often, non-partisan debate that has taken place to-day, if a very antagonistic line were taken on this matter by the Party opposite, which would make it very much more difficult to do what we are all trying to do—Members opposite have said exactly the same as we on this side are saying—in order to try to improve the present very grave situation. The Government have thus reaffirmed their pay policy and reinforced it with these proposals. But it cannot succeed without the wholehearted support of the country and, as the Prime Minister said yesterday, our strategy must survive. It is the only one for Britain.

My noble friends Lord Lee, Lord Houghton and Lord Blease made some very pungent comments on the contemporary structure and leadership of the trade union movement. I hope that trade union members will take note of what they said, because they are in the position of being well-known trade unionists themselves, and they could probably have an influence on their colleagues.

The Prime Minister made a very important statement yesterday when he defined the crux of our present dilemma. He asserted what he described as two fundamental principles of our society: first, that in a free society we cannot deny the right of men and women to withdraw their labour; and, secondly, that the community has an overriding right against all sectional interests. The difficulty of modern society is to reconcile these principles, and the Prime Minister called on the road haulage drivers to measure their sense of grievance against the effects that their actions are having on the community at large. I certainly agree with the Prime Minister that anyone has a right to withdraw his labour, but it is indefensible that hardship should be imposed on innocent people not connected with the dispute. It is certainly not clear that a change in the law would deal with these problems. As a historic fact, it was during the period of the Industrial Relations Act 1971 that secondary picketing and flying pickets developed. The Government propose a more practical and broader-based approach. They have invited the TUC—

Lord CARR of HADLEY

My Lords, the noble Baroness made a factual statement which I believe to be wrong. The flying pickets to which she referred were before the Industrial Relations Act passed through Parliament.

Baroness BIRK

My Lords, I am speaking rather quickly, and when I used the word "developed" it was probably a wrong use of the word. Their activities increased. Even before that Act there had been secondary picketing. It was not new, but it was far more rare. It increased, however, after the passage of that Act.

Lord CARR of HADLEY

No, my Lords.

Baroness BIRK

Yes, my Lords, it did.

Lord CARR of HADLEY

My Lords, surely the noble Baroness wants to be fair. If we take the two miners' strikes, in the case of the first, when all the picketing trouble occurred, the Industrial Relations Act was not in force. In the case of the second strike, when there was practically no trouble over picketing of that kind, the Industrial Relations Act was in force. I am not saying that the lack of bad picketing during the second strike was due to the Industrial Relations Act, but it is certainly proof that it was not caused by it.

Baroness BIRK

My Lords, I have now given way twice to the noble Lord. He is still giving an opinion.

Lord CARR of HADLEY

No, my Lords, fact.

Baroness BIRK

No, my Lords. It certainly set the atmosphere and there was an increase in secondary picketing.

Lord CARR of HADLEY

No, my Lords, there was not.

Baroness BIRK

My Lords, this was not denied last night in the other place when it was put to the right honourable lady the Leader of the Opposition.

The important point is that we are looking to the future and joining together to draw up an agreed code of conduct on picketing, which the spokesman on the Opposition Front Bench in the other place has himself put forward many times. As the Prime Minister has said, the Government are not opposed to law on trade union matters. The strong feelings about this held by the noble Baroness did not go quite so far as that, but the law is always more effective and less contentious if it reflects a broad basis of agreement or consensus within the community. That is probably what she meant. If, however, a workable agreement can be reached without the need for legislation, so much the better. This is what the noble Lord, Lord Gore-Booth, meant when he spoke about consensus rather than legislation.

Strikes have been mentioned many times throughout this debate, in particular by the noble Lord, Lord Hewlett. In the light, however, of international comparisons—this was pointed out by my noble friend Lord Brown—the United Kingdom is by no means the worst in terms of days lost per thousand employees. This is not something that the United Kingdom can be proud of, but we have to keep the matter in perspective. The figures published by the International Labour Office in 1977 show that over the period 1967 to 1976 the United Kingdom came 11th in a table of 18 countries, with a markedly better performance than Australia, the United States, Italy and Canada.

Viscount TRENCHARD

My Lords——

Baroness BIRK

My Lords, I must go on. The noble Viscount has the right of reply.

Lord MOTTISTONE

My Lords, would the noble Baroness like to tell us the truth as she goes on?

Baroness BIRK

I am sorry, my Lords. What I have said is quite correct. I should be quite happy to send to the noble Lord the diagram containing the figures from the Official Digest which show that we come 11th in the league. Admittedly, we are a long way below Sweden.

Viscount TRENCHARD

My Lords, I am wondering whether the noble Baroness took in the point which I made.

Several noble Lords: Order, order!

Baroness BIRK

My Lords, I have said that I will put it in writing to the noble Viscount and to the noble Lord, if they wish. Since other business is to follow this debate, I feel that I cannot hold up the House any longer. If the noble Lords were to wait for me to say the next sentence, they might get the answer they are seeking. We are still a long way below Sweden, West Germany and Japan. Nevertheless, our annual average over that 10-year period was well below one day lost per employee per year. I have highlighted this only because the impression that is so easily given is that our strike record is about the worst in the world. This is totally untrue.

The noble Viscount, Lord Trenchard, also complained that management has to waste too much time on industrial relations. But that is one of the primary jobs of management, and it should be one of their principal skills. I think my noble friends Lord Kaldor and Lord Houghton of Sowerby were quite right when they stressed the need for some form of satisfactory industrial relations. Now is not the time to discuss what the structure should be, but the fact that there should be a system and the machinery for it I think is beyond doubt. Perhaps it is because some managements resent the need to handle industrial relations that it is not always well done. I do not underestimate that it is a difficult job and it may be it is done better in other countries, although I doubt that the noble Lord, Lord Geddes, would agree that there is a system of industrial relations in Hong Kong of the sort we are speaking about.

We need to develop in this country a greater sense of the costs imposed by ill-considered strike action, not only on those who are on strike but on other workers and on the community at large. Our prime objective must be to become a "high output—high wage economy". This is not incompatible with pay policy since high wages are our aim, but they must be combined with higher national output. That is essential. We must make more of our industries internationally competitive—both by winning larger shares of overseas markets and by combating import penetration at home, which I think was the point made by the noble Lord, Lord Selsdon. Our industrial strategy has been shaped to promote conditions favourable to industrial growth.

We recognise, as many noble Lords have said, that there is a disincentive element in personal taxation. However, the last Budget provided for tax cuts at both the lower and higher income levels, recognising that incentives are needed at both ends. Over the past two years measures have been taken to reduce income tax by £6 billion. The top marginal rates of income tax are certainly high: the Chancellor has said that he wants to moderate these and he has already moved in this direction. But it would be unrealistic and unjust to look for drastic cuts in a period when pay restraint is essential. The rate of progress must depend on our success in controlling inflation.

Whatever the rates of corporate taxation, they apply only to profits—and the main problem for British industry is not high taxation but low profitability. The rate of return on capital employed for all industry (at replacement cost and after providing for stock appreciation) has been running at less than 5 per cent. before tax; whereas in the 1960s it was continuously in double figures.

In improving productivity the performance of industry has been very disappointing. Even in conditions which were favourable there has been a singular lack of response. Last year, when so many indicators were set fair, it is true that manufacturing output rose by only 1 per cent. Here lies the essential core of our problem. We have to become more competitive and to increase our share of world markets, as the noble Lord, Lord Roberthall, pointed out; and if we fail to improve productivity we become less competitive and unemployment increases. It is in order to deal with that that all the various lines of our policy are directed.

In conclusion, I want to point out that when he spoke in the economic debate last November the noble Viscount, Lord Trenchard, gave a prescription for encouraging growth in this country, which he repeated in his article in the Daily Telegraph on Monday of this week. It was that we shall not get growth until it is again possible for a company or an individual to, make a killing and keep the large part of it".— Official Report, 2/11/78; col. 126.] I find that, if I may say so, an unhappy and anachronistic recipe for contemporary industrial growth and social progress. Nor is it pertinent to securing moderation in wage settlements and, at the same time, achieving real improvements in productivity. A wealthy society, in the widest sense, is a society people want to live in; a society that takes care of its old, its children, their health and education; a society where people do not dread retirement because their savings have been whittled away by inflation. This means a society that recognises that the promotion of industrial growth and efficiency requires the co-operative efforts of everyone involved in industry and the supportive skills and services.

We are still a country foreigners admire and visit in increasing numbers. We do still count for important values in the world even if we are no longer, or not at the present time, in the top economic league. So we must not let our real assets waste away. I entirely agree with the noble Baroness, Lady Seear, and the noble Lord, Lord Mottistone, that an area in which we are not very good is getting information across and doing it in a way which is comprehensible to people so that it attracts them to the point of wanting to read it. I do not think we are very good at that in government. This applies to all Governments, and there is a great deal of room for improvement. We have to build bridges between the factions rather than exacerbate confrontation. This has been reiterated with different emphasis from all sides of the House. My Lords, I do not believe there are any neat legislative short cuts nor handy miracles. In industrial performance, as in industrial relations, we can succeed only be recognising the essential interdependence of everyone on all sides of industry and all constituents of our modern society.

10.37 p.m.

Viscount TRENCHARD

My Lords, I should like to thank everyone who has taken part in this debate, and particularly those who have stayed to the bitter end. Many very valuable and very interesting contributions have been made. I think the one common thread at least is that everybody realises that the situation so far as industry is concerned is very far from perfect and that things must be done.

I should like to make a few points very quickly. The first is to correct a sug- gestion that I prophesied that my chronicler's account would come true. I said that it could come true. I also said that if the present policies, which were diametrically opposed to those which I outlined, were followed it would lead to the destruction of this country as an industrial nation. The next point is that I did give credit to the Government in relation to the reduction of inflation; I said give credit where credit is due. I also said that I regarded the obsession with inflation as a necessary obsession. I pointed out, however, that although it was public enemy No. 1 it had caused a great many things to be accepted on the short-term which had gone on for a long while and which represented conditions unfavourable to British industry. I also said I hoped, but without much optimism, that we would not discuss whether things were slightly better or slightly worse. But I must say that, in comparing how much better they are, you need to look at the figures with and without oil. One must also consider the degree to which current policies which have slightly improved things on the very short-term have been dictated by necessity and the IMF.

The Prime Minister's package has been sufficiently discussed and condemned. I tried to interrupt—apparently I was out of order—when the noble Baroness was talking about the number of days lost in strikes. I had referred to that report and I had said—as the noble Baroness will see if she reads my speech—and I hoped that she had heard it, that we were not out of line in days lost through strike. However, I pointed out that this was an inevitable result of natural economic limits on the number of days strike that can be afforded by either party, and that it was the bargaining position before strike and the constant strike threat position that was unique in the United Kingdom.

I do not apologise for using the word "killing". Killings in a market economy are extremely rare and they come either through great skill or fortune. The result of the killing is money which is invested in growth and in the creation of yet further wealth. I have covered quite a lot of ground and I hope that I may ask the noble Baroness to read my speech, as I shall read hers, perhaps a little carefully because I feel that she misrepresented me on other points which time does not permit me to go into. My Lords, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.