Sitting of 18 December 1947

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]

MESSAGE FROM THE KING
The VICE-CHAMBERLAIN OF THE HOUSEHOLD (Mr. POPPLEWELL) reported His Majesty's Answer to the Addresses, as follows:
I have received your Addresses praying that the Double Taxation Relief (Taxes on Income) (Nigeria) Order, 1947; the Double Taxation Relief (Taxes on Income) (Gold Coast) Order, 1947; the Double Taxation Relief (Taxes on Income) (Sierra Leone) Order, 1947; the Double Taxation Relief (Taxes on Income) (Gambia) Order, 1947; the Double Taxation Relief (Taxes on Income) (Nyasaland) Order, 1947; the Double Taxation Relief (Taxes on Income) (Aden Colony) Order, 1947; the Double Taxation Relief (Taxes on Income) (Palestine) Order, 1947; the Double Taxation Relief (Taxes on Income) (British Honduras) Order, 1947; the Double Taxation Relief (Taxes on Income) (Antigua) Order, 1947; the Double Taxation Relief (Taxes on Income) (St. Christopher and Nevis) Order, 1947; the Double Taxation Relief (Taxes on Income) (Montserrat) Order, 1947; and the Double Taxation Relief (Taxes on Income) (Virgin Islands) Order, 1947, made in the form of the respective Drafts laid before Parliament.
I will comply with your request.

ORAL ANSWERS TO QUESTIONS
  EDUCATION

    Boarding Schools (Shower Baths)
    Mr. Eric Fletcherasked the Minister of Education what is the prescribed number of shower baths to be provided by a local educational authority in a boarding school for 250 boys in accordance with the Ministry's standards.
    The Minister of Education (Mr. Tomlinson): The number prescribed in the regulations, one shower for every five boys, was based on the assumption that boarding facilities would normally be provided in houses or hostels not accommodating more than about 50 to Too boys each. If boarding accommodation were being provided for as many as 250 boys in a single unit, special consideration would need to be given to the shower provision required.
    Lieut.-Colonel Corbett: Has the Minister of Fuel and Power been consulted in this matter?
    Mr. Tomlinson: Not to my knowledge.

    Girls (Vocational Training)
    Mr. Peter Freemanasked the Minister of Education whether, in view of the great shortage of nurses, cooks and home-helps, he will arrange for such training for girls in schools from 14 to 15 years of age, many of whom are at present receiving little further instruction than that obtained before they reached the age of 14 years.
    Mr. Tomlinson: I do not prescribe the details of the curriculum. The general objective is to provide a good all round secondary education, and most girls of secondary school age receive instruction in housecraft. I should, however, deprecate any suggestion that the last year at school should be devoted to specific vocational training; nor do I accept the implication in the last part of the Question.

    Travel Bureau
    Mr. Francis Noel-Bakerasked the Minister of Education by what date he will have established the proposed new bureau for co-ordinating the activities of

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    organisations sponsoring educational travel for young people; what the terms of reference of this bureau will be; what age groups it will deal with; and what organisations he has already consulted.
    Mr. Tomlinson: I hope that the Central Bureau for educational visits and exchanges will have been established before next summer. The terms of reference of the Bureau and the scope of its activities are matters which I am at present considering, in consultation with the Educational Co-operating Body which has been established for U.N.E.S.C.O. purposes. This body includes representatives of the leading educational organisations in the United Kingdom.
    Mr. Noel-Baker: Is my right hon. Friend aware that "until the summer" is rather a long time and that the present situation and uncertainty are making great difficulties for various official and unofficial bodies interested in this kind of travel?
    Mr. Tomlinson: If they will communicate with my Department we shall endeavour to overcome the difficulties before these become insurmountable.
    Mr. Kenneth Lindsay: In view of the fact that currency regulations are cutting down movement between Europe and this country, will the right hon. Gentleman do everything he can to encourage exchanges on these lines?
    Mr. Tomlinson: Yes, Sir. It is because of difficulties that the necessity for setting up a bureau has become urgent.
    Mr. Noel-Baker: Arising out of the previous question, may I ask whether my right hon. Friend will get into touch with the Chancellor of the Exchequer to get him to simplify the instructions he has given governing exchange travel of this kind, because they are confusing?
    Mr. Tomlinson: That is a job for the bureau rather than for me.
    Mr. Pickthorn: Is the right hon. Gentleman careful to avoid the risk that this kind of organisation may result in purely private, personal, single ventures of the sort?
    Mr. Tomlinson: I am careful to avoid a lot of things. I realise some of the difficulties associated with this question.
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    It is because of difficulties that have arisen on the lines that the hon. Member suggests that we want to tie up the matter for this summer, at any rate.

    Inspectorate
    Commander Maitlandasked the Minister of Education to indicate the size of His Majesty's Inspectorate; and whether the numbers in 1947 have increased or decreased compared with those in 1946; and to what extent.
    Mr. Tomlinson: The strength of His Majesty's Inspectorate for England and Wales on 1st December, 1947, is 507 and the corresponding figure on 1st December, 1946, was 424.

    Staggered Holidays
    Mr. A. R. W. Lowasked the Minister of Education what arrangements he is making by adjusting the holiday periods in some schools to assist in the campaign for staggered holidays.
    Mr. Tomlinson: Local education authorities and school governors who are responsible for fixing school holidays are already aware of the need for fitting these holidays in, so far as possible, with the holidays agreed for local industries.
    Mr. Low: Though the local educational authorities may already have been aware of this, what steps has the Minister taken to improve the current position?
    Mr. Tomlinson: The Minister has brought to the notice of the education authorities the difficulties that arise through their not taking notice.

    Milk Scheme
    Mr. Symondsasked the Minister of Education (1) what percentage of local education authorities provide facilities for children to take milk on school premises during school holidays;
    (2) how many local education authorities provide facilities for children to obtain milk during school holidays.
    Mr. Tomlinson: Forty-five out of the 146 local education authorities, namely, 30.8 per cent., make arrangements for children to attend at certain schools or centres to drink milk supplied under the Milk in Schools Scheme during the holidays.
    Mr. Symonds: Is the Minister aware that the number of children enjoying this

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    could be much increased if he did not insist on the milk being consumed on the premises, and is he also aware that at this time of the year parents are very unwilling to send their children on long journeys in cold weather to drink cold milk in cold schools?
    Mr. Tomlinson: I am aware of all the difficulties. I know how easy it would be to multiply the number who would benefit if the facilities were available, but they are just not available.
    Mr. W. R. Williams: Will the right hon. Gentleman discuss with the Minister of Food the possibility of arranging for the milk to be delivered at the homes of the children and so relieve the anxiety of many mothers who feel that the children are not getting a square deal under the existing arrangements?
    Mr. Tomlinson: The difficulties associated with the distribution of milk other than through centres are so great that the possibilities of waste, which have always to be kept in mind, would be considerably increased by attempting to meet those requirements.
    Mr. Williams: Is the Minister aware of the very strong feeling among mothers that there is much more waste this way than there would be if arrangements were made on the lines I suggested?
    Mr. Tomlinson: There may be a feeling of that sort but it is not justified by the facts. By this method we can entirely prevent waste.
    Mr. George Thomas: Is it not a fact that there is a guarantee that the child gets the milk when it is given at a centre? Is it not true that many children would not get the milk if it were not given to them in this way?
    Mr. Sorensenasked the Minister of Education the total amount of milk and the average amount, per child, consumed during an average school week; whether, generally, any records are required to he kept correlating these figures with the health, height and weight of school children; and if he is satisfied that adequate steps are taken to prevent waste.
    Mr. Tomlinson: The average weekly consumption of milk under the Milk in Schools Scheme during October, 1947, is estimated to have been 980,000 gallons,
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    which represents a weekly average of approximately 1.6 pints per child taking milk. I am advised that it would not be practicable to correlate health, height and weight records reliably with these figures. I am satisfied that all concerned are doing their utmost to prevent waste.
    Mr. Sorensen: Has the right hon. Gentleman a medical or educational opinion showing that there is some very intimate relationship between the milk consumed by children and their undoubted improvement in health?
    Mr. Tomlinson: I have no specific evidence of that kind, but the evidence is in the look of the children themselves.

    Teachers (Emergency Training Scheme)
    Mr. Chetwyndasked the Minister of Education to give the number of men and women who have withdrawn from the Emergency Teachers Training Scheme; and the chief reasons for their withdrawal.
    Mr. Tomlinson: Up to 11th December, 5,418 men and 1,628 women who had been accepted for the Emergency Training Scheme had withdrawn their applications or had failed to reply to an offer of a place in a training college. This includes 1,409 men who withdrew for the purpose of entering on two-year courses in permanent training colleges this autumn. Many of the candidates give no reasons for withdrawal. Of the remainder, most mention changes in domestic or financial circumstances or the offer of other permanent employment.
    Mr. Chetwynd: Can my right hon. Friend say if it is the long delay between acceptance and the chance of getting into a college which is causing this withdrawal from the scheme?
    Mr. Tomlinson: I would not draw that deduction from the statements made by the students, though I have no doubt that the length of time has something to do with it.

    Uneducable Children (Certification)
    Mr. Somerville Hastingsasked the Minister of Education whether he is aware that a number of children certified as uneducable are now receiving and benefiting by instruction in special schools; and what steps he proposes to take to legalise this position.
    Mr. Tomlinson: Yes, Sir. At the earliest opportunity I propose to put forward an amendment of the law which at present makes these decisions irrevocable.
    Mr. Hastings: Does my right hon. Friend expect that that will be during the present Session of Parliament?
    Mr. Tomlinson: Yes, Sir, I hope so.
    Mrs. Manning: If these children, who are said to be uneducable, are benefiting by this teaching, was not something wrong with the first examination for their "I.Q."?
    Mr. Tomlinson: I do not think it is that so much as giving an opportunity to the medical profession or others to change their minds after a period of time.

    New Buildings (Costs)
    Mr. E. Fletcherasked the Minister of Education what steps he is proposing to take with regard to the representations made by certain local education authorities as to the high costs involved in complying with the standard requirements laid down by the Ministry for new school buildings.
    Mr. Tomlinson: I am satisfied that in general the standards prescribed in the Ministry's regulations are not in excess of what is required for proper conditions and the efficient conduct of education in the schools. I am, however, at present having the regulations examined to see what detailed modifications, if any, are desirable in the light of experience.
    Mr. Fletcher: In view of the fact that in some cases the standards are defeating their own object in placing a very onerous burden on the local authorities, will the right hon. Gentleman consider giving local authorities much more discretion?
    Mr. Tomlinson: I am prepared to look at it with a view to modification, but we ought to hesitate before we reduce standards because costs have increased.
    Mr. G. Thomas: Is the right hon. Gentleman aware that any decision to lower the standards which have already been set would be received with great dismay by those who are interested in the education service?
    Mr. Tomlinson: Yes, Sir. I am aware of that.

    SOUTH AFRICA (INDIANS)
    Mr. Sorensenasked the Secretary of State for Commonwealth Relations whether any of the Dominions of India and Pakistan and South Africa have approached His Majesty's Government to act as an intermediary in respect of the position of Indians in the South African Union.
    The Secretary of State for Commonwealth Relations (Mr. Philip Noel-Baker): No, Sir.
    Mr. Sorensen: In view of the very serious position which still prevails in South Africa, will the right hon. Gentleman take the initiative and see if he can reconcile the present unhappy differences?
    Mr. Noel-Baker: That is a different question from the one on the Order Paper. I had better not add anything to the very carefully considered reply which I have made.

    INDIA AND PAKISTAN (REFUGEES, RELIEF MEASURES)
    Mrs. Nicholasked the Secretary of State for Commonwealth Relations what steps His Majesty's Government have taken to assist the Governments of India and Pakistan in their efforts to relieve sickness and suffering among the refugees who have entered those countries as a result of the recent disturbances.
    Mr. P. Noel-Baker: Shortly after the troubles in the Punjab began, I met the officers of the British Red Cross Society, and inquired whether they could help to relieve the suffering of the refugees. They told me that they were already sending out some medical supplies and agreed to despatch substantial further quantities. These supplies have been flown to India and Pakistan. After further discussion and a survey of conditions on the spot, the Society are arranging to set up a hospital, and some time ago they sent out a Commissioner to work with the Red Cross Societies of India and Pakistan. To begin with, the Society paid for what they did from their existng resources; and they have decided to spend a further substantial sum. They have also launched a public appeal for funds; this appeal has the most cordial support of His Majesty's

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    Government, who have decided to make a contribution. I should like to express the Government's warm gratitude to the Society for what they have done.
    Mr. Hector Hughes: Has the right hon. Gentleman any specific information as to the numbers and location of refugees needing assistance and the organisation and personnel to deal with the help which is being accorded to them?
    Mr. Noel-Baker: No, Sir. The total number of refugees who have moved from the East Punjab to the West Punjab and vice versa is 8,500,000 or thereabouts. Large numbers of them have been resettled in towns, villages and farms in the new countries to which they have gone. The Governments have made a very great effort to deal with this matter, but I have no details.
    Mr. Hughes: Has the right hon. Gentleman any information of the number of sick and injured and how they are being treated?

  TRADE AND COMMERCE

    Pottery
    Mr. Ellis Smithasked the President of the Board of Trade the amount of plain pottery imported during 1947; to what extent is plain pottery purchased in or from North Staffs, and later decorated by pigments, cellulose paints and other poisons; and what action has been or will be taken to prevent this dangerous practice.
    The President of the Board of Trade (Mr. Harold Wilson): The value of retained imports of plain domestic pottery during the first 10 months of this year was £194,000. I do not know precisely how much plain pottery is purchased from North Staffordshire or elsewhere for later decoration, but 12 concerns are specifically licensed to do this work for export. Fourteen private persons have licences on hardship grounds to decorate pottery for the home market. I have had no corn-plaints about the possible danger to health caused by the use of ware decorated with unfired colours, but I will arrange for an immediate investigation.
    Mr. Ellis Smithasked the President of the Board of Trade the amount of
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    pottery exported and the amount allowed for the home market during 1947; what complaints he has received about the shortage in this country; and what action does he intend to take to bring about a large increase in the output of pottery, sanitary requirements, electrical insulators, etc.
    Mr. H. Wilson: During the first nine months of this year sales for export were valued at £7,058,186 and sales for the home market, excluding Government orders, at £6,137,100. I receive many complaints about the shortage of supplies at home and am doing all I can to help manufacturers to increase production but in view of the great and growing importance of pottery exports I cannot, I regret, promise any early easing of the supply position at home. I am assured that my right hon. Friends the Ministers of Supply and Works are doing all they can to encourage the production of electrical porcelain and sanitary ware respectively.
    Mr. Ellis Smith: Does my right hon. Friend agree that this industry is making a substantial contribution towards our economic recovery, and that it could make a much greater? If so, will he take energetic steps to set machinery in motion that would bring about an enormous increase in production?
    Mr. Wilson: I certainly agree that this industry is making a great contribution both to the export drive and to supplies for the civilian market, and anything I can do to help the industry to do more, I shall be glad to do.
    Mr. Ellis Smith: Will my right hon. Friend then consider the advisability of calling an early conference consisting of representatives of all interests in order that they may pool their ideas, with a view to carrying out the policy he has agreed upon?
    Mr. Wilson: I have already been making arrangements to meet both sides of the industry as early as I can in the New Year.
    Mr. A. Edward Davies: Has the Minister any news about the setting up of the development council about which we were promised some information before the end of the year?
    Mr. Wilson: There is a Question down on the Order Paper later this afternoon about the development council.

    British Film Industry
    Mr. H. D. Hughesasked the President of the Board of Trade what arrangements have been reached with renters and exhibitors for the distribution of short British documentary films, either produced commercially or sponsored by the Central Office of Information.
    Mr. H. Wilson: All British short documentary films can benefit by the quota provisions of the Cinematograph Films Act, 1938. For one ten-minute film every month there is also, I understand, a special arrangement between the exhibitors and the Central Office of Information which assures these films of distribution to a substantial majority of the cinemas.
    Mr. Hughes: Is my right hon. Friend aware that the present position is that important documentary films—as, for example, the recent C.O.I. film "The World is Rich"—are unable to obtain exhibition on any of the main cinema circuits, and in view of the shortage of British films to fill cinema time, will he exercise his influence with the distributors to get this state of affairs remedied?
    Mr. Wilson: I have been going specially into the question of the film mentioned by my hon. Friend only this week, and I can tell him that I am discussing this question, and other similar matters, with the exhibitors early in the New Year.
    Mr. Michael Footasked the President of the Board of Trade whether, in view of the general financial implications for the British film industry involved in the statement issued on 11th December by the General Cinemas Finance Corporation, a copy of which has been sent to him, and if, in view of the fact that the Secretary of this Corporation resigned just prior to the publication of this statement, he will appoint a Commission of inquiry to examine the best methods of protecting the future of the British film industry.
    Mr. H. Wilson: My hon. Friend no doubt refers to the statement issued by Odeon Theatres Ltd., which is to be considered tomorrow by the shareholders. Until this has been done, I do not think it would be appropriate for me to offer any comment. On the question of protecting the future of the British film industry, I hope it may be possible for me
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    to deal with this matter at the time of the Second Reading of the Cinematograph Films Bill.
    Mr. Foot: In view of the extraordinary revelations which were contained in this statement, of the widespread concern aroused by this matter, and of the fact that the meeting of shareholders tomorrow is a foregone conclusion in view of Mr. Rank's holdings, will my right hon. Friend consider the necessity of protecting the interests of the British film industry by having a special inquiry, apart from the action he is projecting under the new Films Bill?
    Mr. Wilson: I do not think any action of any kind is called for until after the shareholders' meeting.
    Major Bruce: Does not my right hon. Friend think that on the evidence already before him there is a case for an investigation under the Companies Act of 1947?
    Mr. Wilson: The powers under the Companies Act as now operative would only enable me to initiate an inquiry on the application of not less than 200 shareholders who could show good reason for requiring an investigation.

    Raw Cotton Commission
    Mr. Errollasked the President of the Board of Trade which trade associations were consulted with regard to the question of representation on the Raw Cotton Commission.
    Mr. H. Wilson: The members of the Raw Cotton Commission have been selected for their personal qualifications without reference to trade associations.
    Mr. Erroll: In view of the fact that the Raw Cotton Commission has worked with the cotton industry, would it not have been beneficial to have had such consultation with the various trade associations concerned?
    Mr. Wilson: I do not think that would have added anything to the information we had already from the gentlemen who were selected. In fact, most, if not all, so far appointed, apart from the full-time members, have been serving in an advisory capacity, and the cotton industry has been working with them now for some years.

    Bankruptcies
    Mr. Edward Evansasked the President of the Board of Trade how many persons and undertakings were adjudicated bankrupt between January, 1919, and August, 1939; what was the average number yearly; and how many from July, 1945, to November, 1947.
    Mr. H. Wilson: Including bankruptcy orders and deeds of arrangements, the figures are 113,554, representing an average of 5,494 a year for the period January, 1919, to August, 1939. For the period July, 1945, to November, 1947, the total number was 136.
    Mr. Evans: Does not the Minister agree that these figures in themselves are a substantial repudiation of the cries of "wolf, wolf," that we hear from certain quarters?
    Mr. Wilson: I think these figures speak for themselves.
    Lieut.-Colonel Sir Thomas Moore: Has any analysis been carried out to ascertain how many were spivs, drones, eels and butterflies, respectively?
    Mr. Wilson: No, Sir, I think it would take too many civil servants to analyse the figures of the spivs, drones, etc., who have become bankrupt.
    Mr. Edward Evansasked the President of the Board of Trade how many farmers or farming undertakings were adjudicated bankrupt between January, 1919, and August, 1939; and how many between July, 1945, and November, 1947.
    Mr. H. Wilson: Including bankruptcy orders and deeds of arrangement the figures are: for January, 1919, to August, 1939, 7,456; and for the period from July, 1945, to November, 1947, 76.
    Mr. Turton: Is the right hon. Gentleman aware that last time we had a Socialist Government, the number of agricultural bankruptcies increased by 30 per cent.? Is he taking steps to see that the position does not again deteriorate?
    Mr. Wilson: The Question relates to the dates set out on the Order Paper and I am not aware—though I could answer the
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    Question if it were put down—that bankruptcies came to an end in 1931.
    Mr. H. D. Hughes: Does not the fact that the hon. Member for Thirsk and Malton (Mr. Turton) has just quoted illustrate the difference between a majority Socialist Government and a minority Socialist Government?

    Outsize Men's Garments, Aberdeen
    Mr. Hector Hughesasked the President of the Board of Trade if he is aware that in the City of Aberdeen there is a shortage of outsize garments, particularly nether garments, for men and boys over six feet in height; and will he take steps to increase the supply and the size, especially in view of the letter which has been sent to him from the mother of a boy 6 feet 2 inches tall, who though offered employment, cannot go to work until he can obtain long trousers.
    Mr. H. Wilson: I am not aware that the shortage of outsize men's garments is more severe in Aberdeen than elsewhere, but I am having special steps taken to deal with the case to which my hon. and learned Friend refers.
    Mr. Hughes: Does the Minister realise that the Question refers not only to nether garments, but to outsize garments of all kinds?
    Mr. Wilson: Yes, Sir, so did my answer.
    Major Guy Lloyd: May I ask the right hon. Gentleman to bear in mind the equalitarian principles of the Socialist creed in considering this matter, and does he realise that many people in Scotland have taken to wearing the kilt because of the shortage of nether garments?
    Mr. Wilson: I would remind the hon. and gallant Gentleman that even prewar it was not always easy to get ready-made suits for very tall boys, whether in Aberdeen or anywhere else.
    Mr. Gerald Williams: Would the Minister pay particular attention to ladies' size 9 shoes?
    Mr. Henry Strauss: What is the difference between nether garments and trousers in Aberdeen?
    An Hon. Member: Kilts.

    Export Targets (Co-operative Wholesale Societies)
    Mr. John Morrisonasked the President of the Board of Trade what has been the contribution of the pottery factory of the English Co-operative Wholesale Society to the total export of pottery in the first nine months of this year.
    Commander Nobleasked the President of the Board of Trade what contribution to the export trade in footwear and soap in the first nine months of this year was made by the footwear and soap factories of the English and Scottish Co-operative Wholesale Societies.
    Major Guy Lloydasked the President of the Board of Trade what proportion of the total manufacturing output of the English and Scottish Co-operative Wholesale Societies is to be allocated to assist in reaching export targets.
    Mr. H. Wilson: Export targets are normally set for industries rather than for individual firms or groups of firms. For this reason no specific export target has been allotted to the English and Scottish Co-operative Wholesale Societies, although, like other industrial undertakings, they are expected to play their full part in the attainment of the export targets for those branches of industry in which they are engaged. As regards the Co-operative Wholesale Society's exports of footwear, soap and pottery, it would not be proper for me to disclose the export performance of any individual undertaking.
    Major Lloyd: May I ask the President of the Board of Trade to assure the House that every care will be taken to allay any possible suspicion that the co-operative societies will receive any biased treatment in this respect, and can he assure the House that if the co-operative societies are unable to attain such export targets as are set, they will, in accordance with the practice for other industries and businesses, be cut short of coal in consequence?
    Mr. Wilson: There is no ground for any public suspicion of any kind on this subject. I can certainly say that the Co-operative Wholesale Society's factories have been treated in exactly the same way as other factories in the same industries.

    Timber Storage, Whitworth Valley
    Mr. Sutcliffeasked the President of the Board of Trade why imported unsawn timber is still being taken by lorry from Liverpool Docks to isolated stone quarries in the Whitworth Valley, 40 miles away, for temporary storage, involving a waste of labour and petrol justified only in time of war.
    Mr. H. Wilson: This timber consists of heavy logs mainly of West African mahogany and I am informed that no suitable storage with the necessary mechanical handling facilities is available nearer the docks. In the main the logs are conveyed as return loads by transport carrying goods to the docks.
    Mr. Sutcliffe: Is the right hon. Gentleman aware that the path to these quarries leads up a mountain road which is deep in mud in winter, and that the waste of tyres, lorries, petrol, etc., must be tremendous? Can he give any idea of the cost, and will he give urgent reconsideration to this matter?
    Mr. Wilson: I agree that the situation is not satisfactory, but I do not know how soon it will be before we can make other arrangements, because that depends on the rate of arrival of these logs in the future, and also on the extent to which we are successful in finding other accommodation.
    Mr. Austin: Would my right hon. Friend look into the question of effecting economies in this matter by the import of sawn and dry timbers?

    Shops (Statistics)
    Mr. Sorensenasked the President of the Board of Trade approximately the number of single shops opened-up in England and Wales since the end of the war; how many of these have failed; how the present total number of these shops compares with the 1938 figure; and the aggregate number who are engaged in shop-keeping and assistance.
    Mr. H. Wilson: Control over the opening of new shops is now confined to the food trades. Information about the total number of shops opened since the end of the war and the number of these which have failed is not, therefore, available, but from 16th August, 1945, to 15th October, 1947, 37,164 licences were

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    issued in England and Wales to sell food by retail, and 11,822 licences were revoked, giving a net increase of 25,342. These figures include a number of licence holders not operating from shop premises. Particulars of the total number of shops operating in England and Wales, and of the number of persons engaged in shopkeeping, will not be known until the results of the first National Census of Distribution, which is planned for 1950, are available.

    Coupon Floats (Applications, Bolton)
    Mr. John Lewisasked the President of the Board of Trade what application has been made by Messrs. Little-woods for a coupon float to enable them to open the store in Deansgate, Bolton, now being converted for this purpose; and whether it is his intention to make an allocation of coupons.
    Mr. H. Wilson: No application of that kind has been made by Messrs. Little-woods.
    Mr. Lewis: In view of the position that may arise if this retail store were allowed to open, which would have the effect of diverting essential labour from the cotton mills, will my right hon. Friend assure the House, having regard to the absence of consumer need in the area, that he will refuse the application for a coupon float if the application should be made?
    Mr. Wilson: We normally only give a coupon float if we are sure that the firm is re-opening after having been closed during the war, or where consumer need is established. It is certain that neither of those conditions has been fulfilled in this case. As to the danger that the proposal to open the shop would draw female labour from the cotton mills, my hon. Friend is having discussions with the firm concerned to see that that does not occur.
    Mr. J. Lewisasked the President of the Board of Trade how many applications for coupon floats have been made to his Regional Office by applicants in Bolton during the last 12 months; and how many have been refused.
    Mr. H. Wilson: Sixty applications, of which 55 were for retail trade, one for making-up and four for wholesale, for coupon floats, have been made during the
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    year to the Board of Trade regional office in Manchester by applicants in Bolton. Of these applications 13 have been granted, 14 refused, 29 have not been followed up by the applicants, and four are still pending.

    Rare Books (Import Licences)
    General Sir George Jeffreysasked the President of the Board of Trade whether he is aware that although a sum of money was granted by the Bank of England to Mr. C. Hopkinson of The Court House, East Meon, Petersfield, Hampshire, for the purchase of rare books in Europe for export to the United States of America, a delay of eight weeks occurred before his Department issued the necessary import licence; and whether in the interests of the export drive and our need of dollars he will give an assurance that for such cases in the future the issue of import licences will be expedited.
    Mr. H. Wilson: Following the revocation of the open general licence for imports of non-fiction books on 12th September last, the volume of applications for individual licences has been very heavy. Delay in dealing with these applications is inevitable until the heavy accumulation of arrears has been overtaken. Steps are being taken to reduce the delay.
    Sir G. Jeffreys: Is it really necessary, in spite of the volume of applications, for letters not to be answered for weeks or even acknowledged? Is it not of some importance that a matter, of this kind, which produces dollars for this country, should be expedited, and assisted?
    Mr. Wilson: As I have said, steps have been taken to put this right.
    Mr. Skeffington-Lodge: Is it not also undesirable that Europe's rare books should go to America, and find a place in such an uncultured and uncouth part of the world?
    Mr. Pickthorn: will the right hon. Gentleman consider consulting with the Chancellor of the Exchequer about what urgent steps can be taken to preserve this country as the central market for books and pictures?
    Mr. Wilson: Yes, we will be very glad to do anything we can.
    Mr. Lipson: On a point of Order. May I ask for your Ruling, Mr. Speaker,

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    whether it is in Order to describe a friendly State like America as "an uncultured and uncouth part of the world?"
    Mr. Speaker: I cannot say that I think it is out of Order; it is merely a matter of taste.
    Mr. Skeffington-Lodge: In case there is any misunderstanding about the phrase I have used, and with the intention of making sure that there is no real offence meant towards the United States of America, with whom we are in friendly relations, I withdraw the use of the words "uncultured and uncouth," lest a wrong meaning should be put upon them.

    Paper Supplies (Magazines)
    Mr. Geoffrey Cooperasked the President of the Board of Trade what facilities are now being granted by his Department for the supply of paper for the publishing of new magazines started since 1945, other than those which are permitted a maximum of 8 cwt. per month.
    Mr. H. Wilson: Under the Control of Paper, No. 70 Order, no new periodical or newspaper may be published if it uses more than 8 cwt. of paper in four months, except under licence. Licences are only granted in very exceptional cases, of which there have been six in the last 12 months.
    Mr. Cooper: Will my right hon. Friend state what these six are? Can he reconcile the information he has just given with the advertisement in the Press of the magazine "Future," started, I understand, since 1945, which is advertising with a view to obtaining subscribers? Is a magazine justified in advertising for new subscribers, when it has an allocation of paper of only 8 cwt. a month?
    Mr. Wilson: I would like to have notice of the second part of that supplementary question. The six magazines are, respectively, "Instructional Screen," "Christian Renewal," "Annals of the Royal College of Surgeons," "International Union of Mineworkers Bulletin," "Coal," and "Voice of the Overseas Chinese."
    Dr. Stephen Taylor: Is my right hon. Friend aware that the magazine "Future" is printed in Czechoslovakia, imported into this country, and re-exported, largely for dollars?
    Mr. Pickthorn: Does the right hon. Gentleman think that paper might be saved by amalgamating these publications?

    Women's Outerwear
    Miss Baconasked the President of the Board of Trade if, in view of the increased stocks of women's outerwear held by retailers, he will consider down-pointing such garments for a limited period.
    Mr. H. Wilson: No, Sir. I do not regard the stocks of women's outerwear held by retailers as abnormally large, and all available stocks of clothing will be required to meet the ration during the coming months when the demands of the export programme will make themselves increasingly felt.
    Miss Bacon: Is my right hon. Friend aware that last week, in answer to a Question of mine, the Parliamentary Secretary said that the stocks in the hands of retailers were today 44 per cent. above those of a year ago? Does he consider those stocks abnormal? Is he further aware that fashions are changing and retailers may have considerable difficulty in disposing of these stocks?
    Mr. Wilson: It is true that the stocks of women's wear, as compared with men's wear, have got a bit out of balance. But, as has already been stated, the production of men's wear is increasing, and of women's wear decreasing, which will help to redress the balance.
    Mr. Sydney Silverman: Will my right hon. Friend now consider answering the letter I wrote to him a little while ago on the same subject, without my putting a Question on the Order Paper?
    Mr. Wilson: Yes, Sir.

    Price Adjustments (Wage Increases)
    Sir William Darlingasked the President of the Board of Trade why, when an advance in wages is granted by the appropriate wages council or other negotiating body, in certain industries, which are subject to control by the Raw Materials Department of the Board of Trade, only 80 per cent. of this wages increase is allowed in any adjustment in selling price; and if he is satisfied that this is in the best interests of production.
    Mr. H. Wilson: I am always anxious to keep prices generally as low as possible. Controlled prices are normally considered on the basis of ascertained costs of production. When an application is made for an increase in such prices immediately after a wage increase, it cannot be assumed that the net increase in costs will be equivalent to the amount of the wage increase. It is, therefore, the normal practice of the Board of Trade not to allow the full amount of the wage increase, but to leave a margin which can be covered in the prices at a later stage when actual costs of production over a reasonable period of working has been ascertained. Ordinarily 20 per cent, is considered to be a fair margin unless special circumstances exist. I am satisfied that this method with the provision for an ex post facto review, is the most likely to serve the best interests of all concerned, including consumers.
    Sir W. Darling: Is the right hon. Gentleman aware that while he may be satisfied, the members of the Chambers of Commerce which are concerned with the operation of these regulations are by no means satisfied, and think it extremely inadequate that they should have to pay wage advances immediately and have to wait for a year for a review of their figures?
    Mr. Wilson: We have to think of the consumers as well as the Chambers of Commerce.

    Utility Cotton and Wool Cloth (Subsidies)
    Mr. Parkinasked the President of the Board of Trade whether he will give further information about the removal of the subsidies from utility cotton and wool cloth.
    Mr. H. Wilson: Yes, Sir. I have now arranged for the subsidy on utility cotton apparel cloths and handkerchief cloths to be discontinued on all cloth invoiced from the weavers to the converters after 31st December. The detailed arrangements for dealing with the subsidy on utility wool cloth are still being worked out and there will be no change in the existing arrangements before the end of February, 1948.
    Mr. Parkin: Will my right hon. Friend say what measures he has in mind to restore the stability of prices which the removal of the subsidies will endanger?
    Mr. Wilson: We are discussing the prices with the trades concerned. It will be our intention to see that the increase in prices resulting from the removal of the subsidies is kept as small as possible.

    Development Councils
    Mr. Parkinasked the President of the Board of Trade what development councils have been appointed under the Industrial Organisation Act; when it is expected that others will be set up; and if he will make a statement.
    Mr. H. Wilson: No development councils have yet been appointed. Good progress has however been made towards the establishment of a council for the cotton industry, and I hope to publish during the Recess a White Paper containing my proposals. Discussions are proceeding with several other industries, and though they have not hitherto gone as fast or as far as I should have liked, I intend to press them forward, and hope to be able to lay proposals before the House early in the New Year.
    Mr. A. Edward Davies: Will the Minister assure the House that the development council for the pottery industry will not be reduced in its powers from being an executive body to one of an advisory nature?
    Mr. Wilson: I would certainly say, in regard to a number of development councils, that in case there is any misunderstanding on this point we intend to proceed with development councils in the full form in which they were envisaged when Parliament passed the Act.
    Sir W. Darling: Is the right hon. Gentleman aware that perhaps his difficulties in setting up these councils are due to the decision not to accept representatives from the various trade associations—that the Ministry want to select individuals themselves?
    Mr. Wilson: I do not think that the difficulties have anything to do with it.

  FUEL AND POWER

    Coal Gas (Motor Vehicles)
    Mr. William Shepherdasked the Minister of Fuel and Power whether he has given instructions that the sale of

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    coal gas for the propulsion of motor vehicles is not to be permitted; and if so, under what regulation.
    The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens): No, Sir. But my right hon. Friend has power to issue a direction under the Control of Motor Fuel Order, 1947, restricting the use of gaseous fuels, if this should become necessary.
    Mr. Shepherd: Is it not a fact that a circular was sent round the regional offices instructing them that they should not grant permission for this purpose?
    Mr. Robens: I am not aware of that fact.
    Mr. Leslie Hale: Is my hon. Friend aware that there is considerable misunderstanding as to the circumstances under which gas can now be used for the propulsion of mechanical vehicles, and will he issue an authoritative statement to clear up this doubt?
    Mr. Robens: I hope that the answer that I have given will do that.

    Pool Petrol (Quality)
    Mr. Shepherdasked the Minister of Fuel and Power if he is aware of the low quality of pool petrol, of the resulting low mileage obtained and the undue wear upon engines; and what steps are being taken to improve this quality.
    Mr. Robens: I agree that pool petrol, though superior to the average grades supplied before the war for commercial vehicles is in some respects inferior to the prewar No. 1 grades used for most private cars. I regret, however, that I cannot hold out hope of any immediate improvement, since directly or indirectly this would involve additional dollar expenditure.
    Mr. Shepherd: Can the hon. Gentleman say what he is doing in order to improve the refining facilities here, and thereby improve the quality of the petrol supply?
    Mr. Robens: I think there is another Question on the Order Paper on that matter.

    Fuel-Burning Appliances (Exhibitions)
    Mr. Keelingasked the Minister of Fuel and Power if he will arrange for
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    exhibitions in large towns of modern fuel-burning appliances, and for advice as to their use.
    Mr. Robens: Yes, Sir. Arrangements for exhibitions of modern domestic fuel burning appliances in London and Glasgow are in hand; similar arrangements will be made in the North Western Region as soon as suitable premises can be obtained. Technical officers will be available at these exhibitions to give advice.
    Mr. Keeling: I presume that the Parliamentary Secretary is aware that if coal were not burned wastefully we should have all the coal we need, and should also see the sun much more often than we do?
    Mr. Robens: We are anxious to have the utmost fuel efficiency and economy. That is the reason for our technical officers and for these exhibitions.

    Load Shedding Schemes
    Sir Hugh Lucas-Toothasked the Minister of Fuel and Power how many electricity supply authorities have initiated schemes whereby any necessary load-shedding cuts are arranged so as to fall upon particular groups of consumers, whether domestic or industrial, within their areas on a specified day or days of the week; how many authorities have not initiated such schemes; and what method is being used to bring particulars of each such scheme to the knowledge of the individuals affected.
    Mr. Robens: Precise information is not available as to how many of the 570 electricity undertakings have adopted a rota system of load shedding, but the system has certainly been widely adopted by undertakings throughout the country for at least a part of their load. All large industrial firms affected have been notified individually; the remainder have been notified either by post or by advertisement in the local Press.
    Sir H. Lucas-Tooth: Does the Parliamentary Secretary agree that these schemes can make a great contribution to public convenience as well as to the economising of electricity if they are widely known to the domestic consumer? Is he aware of the widespread ignorance on the part of the public about the very existence of such schemes, and will he do his best to bring to the notice of the public generally knowledge of the operation of the schemes?
    Mr. Robens: There should be no ignorance on the part of the public where undertakings have introduced this system, as it has been widely advertised in the local Press. There are technical difficulties about making this a rigid national scheme.

    ECONOMIC AFFAIRS (MINISTERIAL RESPONSIBILITY)
    Mr. Charles Smithasked the Prime Minister whether he will define the respective functions and responsibilities of the Economic Section of the Cabinet Office, the Ministry of Economic Affairs, the Department of the Economic Secretary of the Treasury and the Planning Board under Sir Edward Plowden; and to which Minister the last-named body is now responsible.
    The Prime Minister (Mr. Attlee): I would refer my hon. Friend to the reply which I gave on 15th December to my hon. and gallant Friend the Member for Brixton (Lieut.-Colonel Lipton).
    Mr. I. J. Pitmanasked the Prime Minister which of the functions of the Economic Secretary to the Treasury are new and which transferred from another Ministry.
    The Prime Minister: Generally speaking, the Economic Secretary assists my right hon. Friend the Chancellor of the Exchequer on that part of his duties which previously fell to him as Minister for Economic Affairs, and, therefore, on duties which have been transferred from that office.
    Mr. Pitman: Am I right in assuming that there are no new functions and no transferred functions, and that since there was not an opportunity, on the Bill which appointed this new Minister, for the House to discuss anything other than his salary, the Prime Minister will give the House a chance of discussing the functions of this new important Minister?
    The Prime Minister: That matter can be discussed on a Supply Day on the Estimates, or on any other appropriate occasion.
    Mr. Scollan: Is there any mode of approach to this new Minister other than through the Chancellor of the Exchequer, and can any question be put down to him?
    The Prime Minister: The normal course would be to put down a question to the Chancellor of the Exchequer, and, no doubt, if it was appropriate, the Economic Secretary would answer it.
    Sir Waldron Smithers: Can the Prime Minister give an assurance that the appointment of this new Economic Secretary will in no way relax the old established rule that Departments must have Treasury permission before they can spend money?
    The Prime Minister: Certainly. It has nothing to do with that at all.
    Major Legge-Bourke: Can the Prime Minister give an assurance that there will be no interference with the Foreign Secretary's Economic Department by this office?
    The Prime Minister: I do not see how that arises at all.

    SOUTH AFRICA AID TO BRITAIN FUND
    Sir Ralph Glynasked the Prime Minister whether he is now in a position to make statement in regard to the South Africa Aid to Britain Fund.
    The Prime Minister: Yes, Sir. The House will recall that on 18th October, 1946, I received from Field-Marshal Smuts a gold certificate in the sum of £985,000 from the people of the Union of South Africa and the people of Basutoland, the Bechuanaland Protectorate and Swaziland, and a draft for £196,625 from the people of Durban and the Province of Natal. To both these gifts further sums have since been added. Field Marshal Smuts laid upon me the responsibility of distributing this gift, and I decided that a Committee of Members of Parliament drawn from all Parties should be set up to advise me. As the House will remember I asked you, Mr. Speaker, to act as Chairman of this Committee, though not in your official capacity.
    I have today laid in the Library of the House copies of the report of the Committee with other relevant documents. The Report, as hon. Members will see, broadly recommends that one half of the money should be dedicated to the benefit of the young, one-fifth to the benefit of the old, and the remainder to the benefit of others who have a particular claim

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    to our gratitude or compassion. I am in entire agreement with the conclusions of the Committee, to which, and in particular to you, Mr. Speaker, its Chairman, I should like to express my thanks for accepting and carrying out this task. To the givers of this gift we are profoundly grateful. Their names will in one way or another be linked with the schemes which we have in mind and those who in the days to come reap the fruits of their generosity will not forget them.

    INDUSTRIAL PRODUCTIVITY (COMMITTEE)
    Mr. Errollasked the Lord President of the Council whether the Government have any plans for the further development of scientific research as an aid to solving the problems of industrial production.
    Mr. Rhodesasked the Lord President of the Council whether more assistance will be given to the solution of current industrial and economic problems through the application of scientific research.
    Lord President of the Council (Mr. Herbert Morrison): Yes, Sir. I am advised that while a major contribution to industrial productivity cannot be expected in the short run from current research in the natural sciences there are considerable possibilities of increased returns, first, from the more widespread application of research already carried out in the natural sciences and technology, and, secondly, from current research in the social science field.
    I have, therefore, decided, in consultation with my right hon. Friend, the Chancellor of the Exchequer, to supplement the work of the Advisory Council on Scientific Policy by setting up a new Committee on Industrial Productivity.
    The terms of reference of the Committee are:
    "To advise the Lord President of the Council and the Chancellor of the Exchequer on the form and scale of research effort in the natural and social sciences which will best assist an early increase in industrial productivity and further to advise on the manner which the results of such research can best be applied."
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    The main work of the Committee, of which Sir Henry Tizard will be chairman, will be conducted through a number of panels which will be constituted from time to time to investigate and report on various aspects of the problem. In the first instance panels are being set up to deal with Technology and Operational Research under the chairmanship of Sir William Stanier, F.R.S., Import Substitution under Prof. S. Zuckerman, C.B., F.R.S., the Human Factors Affecting Industrial Productivity under the chairmanship of Sir George Schuster, K.C.S.I., K.C.M.G., C.B.E., M.C., and Technical Information Services under the chairmanship of Dr. Alexander King. I will circulate further details, including the names of the other members of the Committee, except those still to be chosen in consultation with the employers and trades unions, in the OFFICIAL REPORT.
    Mr. Erroll: Can the Lord President say how he will ensure that the functions of this new body will not overlap those of the Scientific Advisory Committee, the development councils for industry to be set up by the President of the Board of Trade, and the Industrial Health Research Board, all of which are already doing good work in this and allied fields?
    Mr. Morrison: Sir Henry Tizard will be chairman of this Committee, and that will provide a link with the Scientific Advisory Council. With regard to the other bodies mentioned by the hon. Gentleman, they will be associated by appropriate official representation.
    Mr. Rhodes: Is the right hon. Gentleman aware that his reply will give considerable satisfaction to research workers in industry throughout the country, and may I ask if these planners will be working in close co-operation with the existing research associations?
    Mr. Morrison: Yes, Sir. Appropriate steps will be taken with that end in view.
    Mr. Collins: In view of the importance of this matter, and the possibility of badly needed improvements in managerial efficiency, can the right hon. Gentleman say whether there will be interim reports, and whether the Committee will consider means for disseminating this information so that it gets down to the very smallest firm?
    Mr. Morrison: Yes, Sir. Certainly that will be done. Suitable reports will be disseminated through the appropriate channels, and it may be desirable that a collective statement should be issued publicly from time to time.
    Wing-Commander Hulbert: Can the Lord President say whether any of these chairmen are to be paid?
    Mr. Morrison: No, Sir, they are not.
    Following are the further details:
    Much assistance to industry is already being given through the Department of Scientific and Industrial Research and the grant-aided Research Associations, through the work of the Medical Research Council and in other ways. When the Advisory Council on Scientific Policy was formed early this year, under the Chairmanship of Sir Henry Tizard, I asked the Council to consider the most appropriate form of research effort in the natural and social sciences which would assist in an increase in the national productivity.
    The House will realise that the problems remitted to the new Committee are wide and complex. My right hon. Friend and I have taken the view that the best methods for achieving practical results will have to be evolved according to experience and we have accordingly been anxious to allow for considerable elasticity in procedure as well as to avoid hampering the Committee with more precise and detailed terms of reference. We also recognise that many of the questions involved are intimately connected with matters which are the daily business of industry in the fields both of technological practice and of industrial relations. The success of the Committee's work will accordingly depend on the extent to which it can work in collaboration with those engaged in industry—both management and the trade unions. We feel confident that this collaboration will be forthcoming. Finally, I wish to make it clear that we fully appreciate that much effort is already being directed not only by special institutions and industrial consultants but also by industrial firms and the trade unions to studying the matters with which the Committee will be concerned. I can accordingly perhaps best indicate our purpose by saying that our chief practical aim is to ensure that full advantage is taken of the results of current scientific investigation and of the lessons to be learned from
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    the good work which is being done in many sectors of British industry so that the outstanding achievements of the best may become the standard practice of all.
    Following is the composition of the Committee on Industrial Productivity:
    Chairman: Sir Henry Tizard, K.C.B., F.R.S., Chairman of the Advisory Council on Scientific Policy and of the Defence Research Policy Committee.
    Sir William Starrier, F.R.S., formerly Chief Mechanical Engineer, L.M.S., and Scientific Adviser, Ministry of Supply.
    Professor S. Zuckerman, C.B., F.R.S., Professor of Anatomy, Birmingham.
    Sir George Schuster, K.C.S.I., K.C.M.G., C.B.E., M.C., Chairman of Cotton Working Party, member of Council of the British Institute of Management.
    Dr. A. King, Director, Scientific Secretariat, Lord Presidents' Office; formerly Director, British Commonwealth Scientific Office, Washington.
    One or more employers (chosen in con sultation with F.B.I. and B.E.C.).
    One or more Trades Union Members (chosen in consultation with T.U.C.).
    Sir Edward Appleton, G.B.E., K.C.B., F.R.S., Secretary of the Department of Scientific and Industrial Research.
    Sir Claude Gibb, C.B.E., F.R.S., Chairman and Managing Director, C. A. Parsons & Co., Ltd., formerly Chairman of Tank Board.
    Mr. Hugh Weeks, C.M.G., Central Economic Planning Staff; member of the Economic Planning Board.
    Mr. Robert Hall, Director of Economic Section, Cabinet Office; member of the Economic Planning Board.
    Mr. E. M. Nicholson, Secretary, Office of the Lord President of the Council.
    Mr. G. B. Blaker, Treasury (Economic Affairs Office).
    Secretary: Mr. E. D. T. Jourdain, Scientific Secretariat, Office of the Lord President of the Council.

  EMPLOYMENT

    Coalmining (Foreign Workers)
    Mr. William Shepherdasked the Minister of Labour how many Miners' Union Lodges have passed resolutions

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    refusing to admit Polish or other volunteers to the mines; and how many have agreed to their admission.
    The Parliamentary Secretary to the Ministry of Labour (Mr. Ness Edwards): I am not aware of the number of resolutions passed but the general position is now sound.
    Mr. Gerald Williamsasked the Minister of Labour if he has now received definite proposals from the Italian Government about the importation of miners from Italy to this country to help in the export of coal; and what decision has been reached.
    The Minister of Labour (Mr. Isaacs): I am informed by my right hon. Friend the Secretary of State for Foreign Affairs that he has yet only received an informal note on this subject. At present, therefore, I am not in a position to add anything to the reply given by my right hon. Friend the Minister of Fuel and Power on 6th November.
    Mr. Williams: Will the Minister tell us if he knows for certain that there are spare miners in Italy; and, if there are, does he not consider it would be very advantageous to this country to bring them here, even though all the coal was exported back to Italy?
    Mr. Isaacs: I think I must confine myself to the answer I have already given.
    Earl Winterton: Can the right hon. Gentleman say whether this policy is being considered in connection with the policy of the International Refugee Committee, of which His Majesty's Government is a participating member, which wishes to have work found for refugees in this and other countries? Is the right hon. Gentleman considering the two things in relation to each other.
    Mr. Isaacs: I could not give a specific answer to the noble Lord. I think that that is so, but I would like to look at it.

    Command Paper (Publication)
    Mr. C. S. Taylorasked the Minister of Labour why Command Paper No. 7266 was tabled on 26th November, 1947, and was not available in the Vote Office or on the Table of the House before 6 p.m. on 27th November, 1947.
    Mr. Isaacs: The earliest time at which this Command Paper could be published was 6 p.m. on Thursday, 27th November. As I was anxious to advise the House of its forthcoming publication, I presented it in dummy on 26th November so that it would appear in Votes and Proceedings the next morning.
    Mr. Taylor: Will the right hon. Gentleman say whether it is desirable for these things to be tabled in dummy some 20 hours before they are actually available to hon. Members, and whether it is in accordance with the precedents of this House that that should be done?
    Mr. Isaacs: In this connection, I thought that I was entitled to a medal, from the hon. Gentleman. This Paper reached me at about 12 o'clock on Tuesday morning and, being anxious that the House should get it without delay, and as I could not get it printed earlier, I had it presented in dummy so that all hon. Members would he aware of the fact that it would be ready on the following day.

    Disabled Persons, London (Factories)
    Mr. Thurtleasked the Minister of Labour when a factory designed to provide employment for severely disabled persons is likely to be in operation in the London area; and who is the appropriate authority to whom applications for employment in such a factory should be ad dressed.
    Mr. Isaacs: One such factory, for tuberculosis persons only, is already in operation at 163, Tower Bridge Road. The establishment of others depends upon the acquisition of sites and premises, the search for which has proved particularly difficult in the London area. I hope, however, that negotiations for premises at present in progress will result in further factories being opened in London within the next few months. Applications for employment should be made to the Employment Exchange nearest the applicant's home.
    Mr. Thurtle: Is my right hon. Friend aware that many ex-Service men have been looking forward hopefully for a long time to being employed in these factories, and that they are getting very disheartened at the slowness with which the scheme is being put into operation?
    Mr. Isaacs: I know that that is a fact, but the difficulties are those which I have set out. I hope that these men will not be completely disheartened, because it is the intention of the Government to establish these factories—we have done it elsewhere—as widely as possible. In spite of the present circumstances, they have priority.
    Mr. Warbey: Has my right hon. Friend taken medical advice on the siteing of this factory for tubercular persons, and can he tell us whether his advisers consider that the damp and smoky atmosphere of Tower Bridge Road is suitable?
    Mr. Isaacs: As a resident of the area adjacent to Tower Bridge Road for a number of years, I did not think it necessary to take medical advice.

    Foreign Variety Artists
    Mr. J. Lewisasked the Minister of Labour if he is aware that low-priced foreign vaudeville acts are being allowed to work in this country at a time when our own acts are suffering considerable unemployment; and will he, in the circumstances, withhold permits from all foreign performers who are receiving payment of less than £75 per week.
    Mr. Ness Edwards: Permits for foreign variety acts are issued on the basis of an arrangement agreed between the managerial organisations and the Variety Artists' Federation and no representations have been received from either side that these arrangements are not working satisfactorily or that they need to be varied.
    Mr. Lewis: Would my right hon. Friend assure the House that if such representations are made in the near future he will consider them?
    Mr. Ness Edwards: As there is a meeting tomorrow between both sides of this industry, and as I am sure that they will have noticed this Question, if they feel aggrieved, no doubt they will raise the matter.
    Mr. Frank Byers: Is this the Labour Party's new way of uniting the workers of the world?
    Mr. Ness Edwards: No, Sir. All we are concerned about is getting a proper agreement in order not to put our own people out of employment.
    Mr. Cecil Poole: Will the Minister bear in mind that it is contrary to many of our conceptions of British justice that the big fellow shall work and that the little fellow shall go to the wall?
    Mr. Martin Lindsay: Can the right hon. Gentleman give an assurance that he will not lend himself to a policy of bolstering up indifferent British vaudeville artists?
    Mr. Ness Edwards: No, Sir. Neither will I agree to a policy of bringing in people who will undercut our own artists?
    Mr. Collins: If these people are unemployed and underpaid, would my right hon. Friend say whether it is within the competence of his local officers to advise them that they can get better employment in industry and thus help themselves and the nation, too?
    Mr. Ness Edwards: I do not accept the basis of my hon. Friend's contention. Many of these people are doing a good job of work, and they should be encouraged.

    Retail Price Index
    Mr. Charles Smithasked the Minister of Labour whether he will now publish monthly a full list of the changes in particular retail prices used in compiling the interim retail price index in accordance with the practice followed in respect of the former cost-of-living index.
    Mr. Isaacs: I regret that this is not practicable.
    Mr. Smith: Will my right hon. Friend state why it is not practicable?
    Mr. Isaacs: Yes, Sir. It is necessary to measure price movements and not absolute prices. At the same time, we have to take into consideration the value of the article as well as the price. Therefore, we can only measure the price tendencies, and not the price of specific articles.

    Scottish Woollen Industry (Joint Production Committees)
    Mr. Prydeasked the Minister of Labour what progress has been made towards setting up joint production committees in the Scottish Woollen Industry.
    Mr. Isaacs: I have been in communication with the two sides of the Scottish

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    Woollen Industry on this subject and I understand that a joint meeting may be expected shortly.

    Planers (Safety Measures)
    Mr. Hurdasked the Minister of Labour if he is aware of the risks of injury to workers in the timber trade, who operate such machines as the spindle and overhead planer when a sudden cut is made in the electricity supply; and if he will consult with the trade unions concerned, and employers, to ensure that such exceptional risks are duly covered.
    Mr. Isaacs: No, Sir, but if the hon. Member has any particular case in mind and will send me details, I will have inquiries made.

  NATIONAL FINANCE

    Death Duties (Postwar Credits)
    Sir H. Lucas-Toothasked the Chancellor of the Exchequer whether the amount due to a deceased person in respect of his unpaid postwar credits is brought into account for the purpose of Death Duties; and if so, what valuation is placed upon such credits.
    The Financial Secretary to the Treasury (Mr. Glenvil Hall): In the event of the taxpayer's death before the date fixed for payment of the postwar credit, the amount of the credit is exempted, by Section 7 (4) of the Finance Act, 1941, from Death Duties payable on his death.

    Purchase Tax (Refund Claim)
    Sir Jahn Mellorasked the Chancellor of the Exchequer if he is aware that Radiomobile Limited paid to His Majesty's Commissioners of Customs and Excise, in accordance with their ruling dated 14th August, 1946, sums received as Purchase Tax on car radios before 1st April, 1947; that, although such goods did not become liable to Purchase Tax until after 10th August, 1947, a refund has been refused by the Commissioners, because payment was made under mistake of law; and what action he proposes to take.
    Mr. Glenvil Hall: The answer "None," Sir.
    Sir J. Mellor: Will the right hon. Gentleman say on what moral justification this money is retained, as it was paid over because of a mistaken ruling by the Excise Department, and will he say how the Government can properly retain this money, which the company is claiming on behalf of its customers?
    Mr. Glenvil Hall: There has been only one case of this kind. The Government are entitled to retain money received in this way and it would be quite impossible now—going back to 1940—for customers to have this tax refunded to them.
    Sir J. Mellor: I asked the right hon. Gentleman on what moral justification the Government were keeping the money, which amounts to £12,000? Is it not sheer, rank dishonesty?
    Mr. Glenvil Hall: Well, Mr. Speaker, at the Treasury we deal with finance and not with morals.
    Hon. Members: Oh.
    Mr. H. Strauss: When a Government Department makes a mistake of this kind, is the citizen's belief that they know what they are talking about, a mistake of fact or a mistake of law?
    Mr. Speaker: We are getting rather hypothetical over this.
    Earl Winterton: May I ask the right hon. Gentleman to make it clear when he says, "We at the Treasury rely on law and not upon morals,"—[HON. MEMBERS: "No."]—whether he is speaking for himself, or the Treasury?
    Mr. Glenvil Hall: I think the noble Lord has rather twisted what I really meant as a humorous aside.
    Sir J. Mellor: In view of the cynical nature of the Government reply, I beg to give notice that I shall raise the matter on the Adjournment at the earliest opportunity.

BUSINESS OF THE HOUSE
Mr. Eden: Will the Leader of the House please tell us the Business after the Recess?
Mr. H. Morrison: Yes, Sir. The Business will be as follows:
Tuesday, 20th January—Second Reading of the Princess Elizabeth's and the

1873
Duke of Edinburgh's Annuities Bill; and Report and Third Reading of the Overseas Resources Development Bill.
Wednesday, 21st January—Second Reading of the Cinematograph Films Bill.
Thursday and Friday, 22nd and 23rd January—A Debate on foreign affairs will take place on the Motion for the Adjournment of the House.
Mr. Eden: The Leader of the House will, no doubt, remember that I raised last week the question of the Geneva Trade Agreement. Could we be sure that this will be taken very soon after we resume, perhaps in the second week?
Mr. Morrison: We will take it as soon as possible, and I hope that it will not be long.
Earl Winterton: Will the Whips be put on on 20th January, or will they be taken off if there is an adverse decision on the Government's policy in the morning?
Mr. K. Lindsay: Can my right hon. Friend say when the Bill relating to the Curtis Report will be published, and if he will consider publishing a White Paper in advance of the publication of the Bill?
Mr. Morrison: The Bill is being presented in another place this afternoon. As my hon. Friend will appreciate, that is not quite the same as publication, but publication will soon be effected. With regard to the suggestion about the White Paper, I am not in a position to say anything about that at the present moment, but I will consult with the Home Secretary.
Mr. Boyd-Carpenter: Can the right hon. Gentleman say when the House will be given an opportunity of discussing his own statement, on 4th December, on the subject of Parliamentary proceedings in connection with nationalised industries?
Mr. Morrison: No doubt an opportunity can be found on the Adjournment or otherwise.
Mr. Emrys Hughes: Could the Lord President tell us if there is any possibility of time being given to the consideration of the notice of Motion about giving wider powers to the Scottish Grand Committee to meet in Scotland?
Mr. Morrison: I am not in a position to make any statement about that today.

FOREIGN MINISTERS' CONFERENCE
The Secretary of State for, Foreign Affairs (Mr. Ernest Bevin): I very much regret to have to report to the House the failure of the Foreign Ministers' Conference to reach agreement on the German and Austrian Treaties.
The House will be aware that under the Potsdam Agreement there was established a Council of Foreign Ministers which was given very definite duties. Its specific principal purpose was to draft peace treaties for Italy, the German satellite states, Germany and Austria. While it is true that in the making of treaties, questions of policy of a fundamental character arise, its main purpose, the main intention behind it, was to be a businesslike instrument for the drafting of peace treaties for submission to the Peace Conference. The exact language is as follows:
"As its immediate important task, the Council shall be authorised to draw up, with a view to their submission to the United Nations, treaties of peace with Italy, Rumania, Bulgaria, Hungary and Finland and to propose settlements of territorial questions outstanding on the termination of the war in Europe. The Council shall be utilised for the preparation of a peace settlement for Germany to be accepted by the Government of Germany when a Government adequate for the purpose is established."
Unfortunately, ever since its existence the Council of Foreign Ministers has alternated between carrying out its original function and being used for entirely different purposes. Our work, therefore, in bringing about peace has been handicapped. There is no doubt that this has created despondency in the world, instead of the realisation of the hope that the responsible Ministers of four great Powers would be able to get to know each other and express their views freely to one another, and thereby promote a spirit of friendship and understanding. Unfortunately this has not been the case. To His Majesty's Government this has been a great disappointment. In our view the negotiations for the peace treaties for the satellite countries took far too long and created a great deal of unnecessary misunderstanding. In our view the Italian Treaty was delayed months longer than should have been the case. But at New York at last we did achieve the result of getting treaties for the satellite Powers and Italy.

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Then at last we got to work on the Austrian and German Treaties. In the view of His Majesty's Government the Austrian Treaty was separate and distinct and ought to have been settled quite easily when the satellite treaties were concluded, had there been the will to settle it, especially in view of the declaration of the three Powers in Moscow who agreed in 1943 to recreate Austria as an independent State and of the subsequent agreement to provide a treaty for that purpose. If this had been carried out with speed, Austria, Eastern Europe and the Balkans would now have been working hard on reconstruction and rehabilitation, and all the troops from the Danubian Basin could have been withdrawn.
The main difficulty in the case of the Austrian Treaty, as the House will be aware, was the question of German assets. At Potsdam we were working on the understanding that the Soviet Government would not claim reparations, but would be content with German assets, but the interpretation that has been placed by the Soviet Government on German assets has resulted in the property of United Nations nationals being taken as well. Austrian property has been taken, and, what is more, a claim has been made and is being exercised for extra territoriality in the exploitation of these resources; that is to say, that they are not being subjected to the general Austrian law.
That is a position which, in all these treaties, His Majesty's Government cannot accept; in fact it would have been better, far better, for Austria if she had been told what she would have to pay and to have left her with control of her own economy. So what was thought to be a generous act has, in fact, been used to get a grip on the whole Austrian economy. To an extent, this was due to a lack of definition at Potsdam in the wording of the Agreement, and, no doubt, that is the excuse for this action, but it has been carried beyond any reasonable definition. We have, therefore, to try to get an agreed definition. When we found included in the term "German assets" the whole of what was absorbed by Hitler after the Anschluss, it was, in our view, carrying the definition too far, and doing what was never intended or understood.
This, in a few words, has been the main point which has held up the
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Austrian treaty. However, at Moscow, the question was fully discussed, but we failed to reach agreement. We then set up a commission to work in Vienna on a factual basis, with the hope of getting a concrete settlement which could be submitted to the Governments. A concrete settlement was submitted and accepted by three of the Governments—France, the United States, and ourselves. In consideration of this proposal, on behalf of His Majesty's Government, we offered to make a contribution to the solution of this problem in order to help to get a more definite and final proposal. We also agreed to waive any claim on behalf of our nationals beyond the standard fixed for Austrian nationals themselves for compensation for war damage. That had been done in the hope of getting a final agreement.
However, in spite of the breakdown of the present session of the Conference, and in view of the fact that there was an indication that a new proposal might be forthcoming with different terms than we have had up to that moment, the Austrian question has now been referred back to the deputies, and I would not say a word about this which would embitter the situation. We can only hope that a concrete proposal for the settlement of Austria will soon be forthcoming. If we get it, we will get to work at once and try to clear up this Austrian situation to give Austria again a chance to live after all the travail she has gone through with Hitler and since.
As regards the German settlement, before I went to Moscow in March of this year, His Majesty's Government worked out a set of political and economic principles based on the Potsdam agreement which we regarded as the next stage in the organisation of Germany which would ultimately lead to a final solution. I claim that these proposals were well thought out, and I need not go through them because they have been circulated to the House. We tried at Moscow to make these principles a working paper, comprising, in all its facets, the whole problem of Germany in the next stage of its organisation. I am sorry to say that we made little progress. However, I left Moscow and I hoped that, in November, when the Conference was to meet again, a changed situation would arise and that we might yet get a settlement of this Middle European problem, but, in the

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meantime, a propaganda developed which caused things to go from bad to worse.
I will try to explain the situation, in as short terms as possible. Europe was in chaos, impoverished, unable to find, capital and other equipment for rehabilitation. We were constantly meeting the representatives of Europe who were asking us for help, and it is well known to all sides in this House that our financial and industrial position did not give us the wherewithal to give them assistance. Then came the Marshall speech at Harvard. We welcomed that speech and we tried to turn it to the advantage of Europe as a whole, but, to our great grief, instead of every country taking advantage of that plan, the Soviet Government stepped in and used tremendous pressure on their immediate neighbours, and, in fact, ordered them not to participate. I feel that this action was violating the free choice of these States, and really interfering with their independence and sovereignty. A campaign was then started by the Soviet Union against this attempt to help Europe as a whole, applying epithets to it which I have always felt were totally unjustified.
Then came the formation of the Cominform and the resultant disruptive tendencies in Western Europe. This was followed by the speeches made by the Soviet representatives at the United Nations Assembly, which seemed to His Majesty's Government to be intended to create an atmosphere which would make a settlement very difficult indeed. Similar attacks were made at the Control Council in Berlin just before the Conference opened. To all these attacks, we have not seriously replied. We have endeavoured to go on with the belief that, in the end, we should get agreement. We did feel that it did not augur well for the Conference, but we still persisted and went on with the Conference, hoping that, in the calmer atmosphere of discussion, we should be able to make progress. I have experienced so many of these set-backs that I hoped we might still be able to get to grips. Unfortunately, the hostile propaganda continued during the three weeks that the Conference lasted. It made it really impossible for us to get to grips with the fundamental principles involved.
Then we came to the Conference, and we had a long and, in my view, unneces-
1878
sary argument about the agenda. We settled this after two days, and the Austrian treaty was referred to the deputies, and, after considerable differences there, it came back to the Conference, again with no results. Then, we at last succeeded in getting the British paper on Germany accepted as a working paper. When we got to grips with it, however, and came to face the fundamental issues, we could not make progress. On Germany, we began with the form of the German Peace Treaty. A number of propaganda speeches were made, which were dearly out of place.
After this, we came to the question of the German frontiers. The four Powers must clearly reach an agreement on the frontiers of Germany, subject to confirmation at the Peace Conference. As M. Bidault said, it is ridiculous to try to discuss German affairs without knowing where Germany is going to begin and end. The French put forward their claim for the economic integration of the Saar. As the House knows, His Majesty's Government have always supported this, provided the exact frontier is delimited, and the reparations balance adjusted. There was also a number of other frontier claims put forward by our other Allies.
I suggested that the Council should establish at once one or more frontier commissions, to go thoroughly into these claims, to hear the evidence, and to report to the Council in the shortest possible time. These commissions would cover all the frontiers of Germany, including the Western Polish frontier which was left for the final Peace Conference to determine finally. On the question of whether it ought to be where it is or not, I did not, and do not now, express a view. I was willing that it should be gone into by the Commission. What other means could we adopt for settling this difficult question of frontiers but that one? M. Molotov, however, would not agree, and we had to pass on, leaving this matter unsettled. We did manage to reach agreement on a few minor points about the German Peace Treaty, but there could be no substance in the agreements until the other urgent matters had been settled.
The next matter we discussed was that of the economic principles, that is to say, the principles for securing and maintaining the treatment of Germany as an

1879
economic unit, in accordance with the Potsdam Agreement. Certain fundamental points were thrown up at once. There was, first, the need for a common import-export plan for Germany as a whole, and the pooling of indigenous resources. If these objects are to be realised, the zonal barriers must come down. There must be complete freedom of movement for men, ideas, and goods throughout the whole of Germany. The Soviet delegate did not reject this, but made it clear that he could not agree until central German administrative agencies had been set up. We had to deal with this problem of central German agencies in relation to the whole question of political principles, and that matter was left.
The next point was the unqualified principle that the first charge on Germany's foreign exchange resources, after Germany's essential needs had been met, should be the repayment of the sums advanced to Germany for the payment for her imports. This principle was in exact accord with the Potsdam Agreement. We got nowhere on this, and were met with a number of long speeches, and unjustified and false accusations. I had to make it clear that we in this country had had to borrow precious dollars from America and deprive our own people of what those dollars could buy in food, in order to finance the import of food into Germany owing to the Potsdam Agreement not having been carried out. His Majesty's Government, therefore, expected these advances, which we have borrowed and which we have to repay, to be repaid out of Germany's resources before any more was taken away from German economy.
The third fundamental question was the relinquishment by the Soviet Government of their acquisitions of German enterprises. These acquisitions virtually amount to the exercise of extra-territorial rights in Germany, and would prevent the resources of these undertakings coming into the general pool for a balance of payments. We asked for an undertaking that they should stop. The reply we had was to be accused, untruthfully, of removing enterprises from our zone. The result was that no agreement was reached.
We then came to the question of of reparations, and let me make the position of His Majesty's Government clear
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once again. Capital reparations have been, and are being, removed from the Western zones. That is all to which His Majesty's Government are committed. We did not agree at Potsdam, and, as far as I can trace in all the papers, there was no commitment at Yalta, or anywhere else, to reparations being taken from current production. Neither did we ever agree to an overall figure, whether it was TO billion dollars, or any other amount, for German reparations. On the other hand, I have repeatedly said that I would not close my mind to the possibility of reparations from current production having regard to what the Soviet suffered, once a balance of payments had been reached in Germany. That position stands now.
This is an intricate question, and it depends upon the level of industry, the rate of German recovery, and, above all—and I emphasise this—upon full information as to what has been already taken out of Germany. We and the Americans gave this information in full, and we asked, as we had asked before, for information about removals from the Eastern zone. My experts advise me that the figure I have quoted of seven billion dollars taken from that zone, is an underestimate. However, I asked for the facts. The request was refused, and I cannot see how three other Powers can be expected to commit themselves to any fund of any kind unless the whole of the facts from the four zones are on the table for us to examine. We were told that we could only have this information if we agreed to Soviet claims for reparations in advance.
Our request, I suggest, was just and reasonable, and we asked no more of our Allies than we are willing to do ourselves. I could not make any blind commitments, in these circumstances, on behalf of His Majesty's Government. Reparations can only be paid if raw materials and food are imported, and, if these are imported, I cannot commit this country to find any more money in order that reparations may be paid to any one of our other Allies.
Throughout the whole of the Conference, there was insistent pressure by the Soviet delegation to get us to agree, in advance, to the immediate establishment of a central German Government. The view of His Majesty's Government on this is clearly set out in the political principles to which I have referred. We

1881
recognise how important it is to have a central German Government, just as we recognise the importance of the unity of Germany. We do not want, and cannot agree to, an over-centralised German Government—one that can so easily again become a dictatorship. We are in favour of a central German Government. It is a question of design and powers. It also involves the powers which will be enjoyed by the Länder. It must be a truly representative Government, and not one which is simply a tool in the hands of an occupying Power. It would be no service to the German people, or to the world, to agree to the establishment in Germany of any unrepresentative and bogus German Government.
An attempt was made to make us appear as the opponents of German unity, and the opponents of a German Government. Nothing can be further from the facts. The essential unity of the German people is something which we recognise, and, sooner or later—and I hope, for the sake of all of ns, sooner—this unity will be achieved. I do not want to create a situation which makes unity be created on the basis of an irredentist movement. I would prefer that it came democratically, on an organised basis, and on the foundation of a proper Constitution.
Finally, a word to the German people. I realise that they are still without a Peace Treaty, and that the work of preparing a Peace Treaty has hardly yet begun. I realise how disappointing this is. It is our intention, however, to see, to the best of our ability, that the German people do not suffer from this state of affairs. I do not know what is going to happen in the future. We have been accused of making all kinds of preparations to divide Europe, and to set up alternative Governments. Perhaps it would be a fair criticism to make against us, not that we have made these preparations, but that we have not made any at all. If it is imagined that we entered into all sorts of commitments in case the Conference broke down, that is untrue. All sorts of insinuations have been made, but we have stuck to our policy of German political and economic unity under allied control, with safeguards for our own security. That is the main thing we are considering. This has been the policy of His Majesty's Government throughout and we have not changed it.
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I made it clear, however, in the Conference that if there is to be no settlement between the Four Powers we cannot go on for ever with the burden of cost this represents, with Western Europe in chaos, and with no means of redress. If we are to succeed there must be an acceptance that we British are peace-loving people with nothing else but a desire for a just settlement. We do not accuse those who do not see eye to eye with us of being warmongers or of being dishonest. Meanwhile we are going to push on to raise the Gentian standard of life in accordance with our promises, to rehabilitate their industries, to keep to the new level of industry, always remembering that we must not push Germany ahead of the liberated countries.
His Majesty's Government would prefer time to study the problem as it now is in all its aspects. It really means taking a grave decision in face of the world and of the future and we would prefer to meet the House after the Recess in a full and, I hope, calm Debate, when we could go into the matter more fully. We have no aim and no desire to divide the world. But the termination of the Conference and the manner of its ending, I have no doubt, will cause many people furiously to think. We cannot go on as we have been going on. We have hoped against hope that four-Power collaboration would work. Most of the world Powers can find a basis of agreement; they cannot all be wrong. We shall close no doors. We shall maintain all the contacts we can and we shall do our best to try to find a way out of all these difficult situations, and still to work away hard to produce in the end what I still believe is necessary, not only a united Germany but a united Europe and the peace of the world.
Mr. Eden: I do not think any unprejudiced person in this country can feel other than sympathy with the right hon. Gentleman himself at the breakdown of this Conference. I think we all understand full well how valiantly and how single-mindedly he has laboured to bring it to a successful conclusion. In saying that, I say it also, if I may, so far as I am concerned, to Mr. Marshall and Monsieur Bidault. I understand we are to have a Debate when we come back and, therefore, I do not want to detain the House long, but only want to make two points. First, about

1883
Austria. I hope this deputies' Conference, as I understand it, on Austria will reach a successful conclusion. It seems most unjust that this small country, struggling to try to regain its right place in Europe, shall continually be subjected to these hardships of occupation which make its economic recovery and, if I may say so, its expression of political freedom, virtually impossible. Therefore, I wish the right hon. Gentleman all the success he can in anything he can do in this new sphere.
The other point is on the general situation. I quite understand that the right hon. Gentleman wants to reserve his comments on this occasion. It seems to us on this side of the House that there is now no choice open to us but to do everything in our power to promote recovery in that part of Europe where we are still free to act—that is to say, Western Europe. We should, in our judgment, set to work on that task as speedily as possible. The Marshall Plan is there as a framework, and within that framework we can work successfully and, I trust, speedily and finally. It is evident that Germany will have to play her full part in that and the machinery of Government in the three Western zones of Germany will now require a further readjustment in the light of the present conditions. I hope that can be done quickly. In the interests of the peace of the world we should take account of realities of this breakdown and go ahead with those who will work with us as speedily as we can.
Mr. Clement Davies: We all deeply sympathise with the Foreign Secretary in the failure of his efforts when we all know in the House that he has tried so very hard. It is reasonable that the House should accede to the request he made Lt the end of his speech. The position is a very, very serious one and any decision made may be fraught with the most serious consequences. It is only right that the Government, and all of us, should have time for consideration before we make any suggestions.
Mr. Warbey: While endorsing a good deal of the Foreign Secretary's criticism of the Soviet delegation's use of this Conference for propaganda purposes, could I ask the right hon. Gentleman whether he does not also attach some blame to the
1884
American delegation for the definite breakdown of this Conference?
Hon. Members: No.
Mr. Wilson Harris: I would like to express my admiration for the restraint and objectivity of the statement made by the Foreign Secretary. May I refer to the Austrian situation? He stated that the deputies were at present endeavouring to work out terms of a treaty. In the event of their being successful, will the Foreign Ministers meet again or can the matter be carried through to its conclusion?
Mr. John Hynd: I do not wish to make a long contribution, but I would like to pay tribute to the persistence with which the Foreign Secretary has carried on these negotiations, which have been so unhappily unsuccessful. First, in regard to the Austrian Treaty. In view of the situation that has arisen, whatever happens now the Austrian position cannot be settled within a period of at least a few months. Will the Foreign Secretary see that instructions are issued to our people in Austria that, so long as the occupation is rendered necessary by this set of circumstances, every endeavour will be made to reduce the burden of that occupation, and the burdens inseparable from the occupation for the Austrian people. Will he consider, for example, making an announcement that this country renounces all claim to German assets in Austria which will be of use in rebuilding the Austrian economy?
In regard to the German side, I should like to ask whether, in continuing to pursue our search for a united world through the United Nations organisation now that we are unhappily forced to a unilateral policy of reconstruction in those parts of Europe in which we have some influence, my right hon. Friend will see that some German authority, political or otherwise, will be established in that part of Germany which we do control; and that in considering further immediate steps in Germany, it will be consulted on the basis of co-operation with other nations?
Mr. Gallacher: There are many queries I would like to raise, but I will confine myself to one which I must ask. Will the right hon. Gentleman explain if he is going to carry on developing the

1885
Western part of Germany? It has been emphasised by the deputy Leader of the Opposition. If the Foreign Secretary is in earnest about that, will he keep his promise to this House and nationalise the industries in the British zone of Germany, and will he face up to Mr. Marshall on that question?
Mrs. Ayrton Gould: I should like to pay tribute to the Foreign Secretary for the magnificent effort he has made, and to sympathise with him in its failure. About Austria, I should like to ask whether, in view of the fact that it is no fault of the Austrian people that the occupation forces have to remain there, it would not be possible for us to lighten the burden where our occupation forces are concerned, and to do as I understand the American Government have done—pay tile costs of our own occupation forces.
Mr. Cocks: As to the plan the British Government put before the Conference in Moscow and recently in London, will the right hon. Gentleman publish this plan in the form of a White Paper, so that we may be conversant with all the details?
Mr. Bevin: The first question I was asked was whether the United States Government were responsible for the breakdown. I have not praised or blamed. What I have said is that we could not carry on. If we put forward proposals, and we hear two or three hours of accusations—which have nothing at all to do with the case—about our taking stuff out of Germany, and the rest of it, all I can say to the hon. Member for Luton (Mr. Warbey) is that, although I know he has greater sang-froid than I have, he would become worn out with it as well. One cannot go on like that. We must be accepted as honest people across the table, if we are to settle a problem, and when we give answers and assurances they really must be believed.
With regard to the point made by the hon. Member for West Fife (Mr. Gallacher), I am happy to state that socialisation was one question on which the Soviet Union, France, Great Britain and America arrived at a decision unanimously. It was proposed, I think—I am speaking from memory now—by the United States, that the socialisation of industry in Germany should be made sub-
1886
ject to the endorsement of the German people. That was seconded by Mr. Molotov, and I accepted it.
Mr. Gallacher: Why, then, pass the buck to him all along?
Mr. Bevin: I represent only one Power. This is a four-Power business. We cannot do these things on our own. I put forward what I promised to the House, and advocated it in the Conference. I could not do more. When my colleagues put up a reasonable suggestion, I accept it. That is the only way one can get agreement. I am very glad that on the question of socialisation, unanimity was arrived at between the United States and the Soviet Union. That, I think, augurs well, possibly, for the future on other things.
As to the matter of Austria, I really think I ought not to be asked to answer these questions now. The matter has to be taken into account, with all that is going on in Austria. What I have said is that we would offer to make a contribution. But it is of no use our offering to give up all British assets in Austria, and then leave them to go to another Ally. I want to know what is going to happen to them, and the whole thing has to be negotiated. I met the Austrian representatives yesterday. I shall do what I can. We stand second to none—we do not advertise our good deeds quite enough, I think—but we stand second to none in what we have done for Austria since the occupation. Not long ago a £10 million credit was handed over, and we have done all we can.
There are certain things which I have been asked, concerning which I must ask time for study. With regard to the question about the British plan, I did place it in the Library. It has been there a considerable time, I think, now. Possibly when we come back after the Recess much of what we proposed may have to be changed, and it may be possible to publish a statement of what our future policy may be. It would be better to direct the mind of the House to the future, rather than to what we failed to do in the past.
Mr. James Hudson: I should have liked to ask the Foreign Secretary whether he would persist, in reference to Germany, in the admirable policy that he has indicated. I would ask him still

1887
to pursue it, despite all disappointments about Austria. I think he is very much to be congratulated, after all the difficulties that he has experienced. I hope he will persist in trying to get an eleventh hour settlement in Austria. What I want to know is this. It is a long time to 20th January, when the Debate can take place. Many things may happen. Indications are given in the Press of steps already being taken that may crystallise the situation. That may mean, not what the right hon. Member for Warwick and Leamington (Mr. Eden) said the peace of the world—but precisely the opposite. I would beg at this moment that, despite all his disappointments—and I agree with the Foreign Secretary fully, that he has striven hard, and harder than any man, to avoid the disasters that seem to await—he will, with reference to Germany, and with reference to the world situation arising out of Germany, make another effort to get some sort of arrangement which will be all-inclusive on that matter.
Mr. Skeffington-Lodge: With regard to the matter of refugees, will my right hon. Friend use all his influence with those concerned to prevent a further drift of refugees to the British zone? We cannot possibly afford to assimilate any more in that zone, and one fears that in the present situation there may be a tendency on the part of various people to leave their homes and try to move across the face of Europe to other parts of it. There are far too many wandering nomads already, and I would beg my right hon. Friend to use his influence to prevent more people being uprooted.
Mr. Bevin: I have discussed the question of the refugees with the United States Government and with the International Refugee Organisation, and we are trying to do our best to clear the situation up in the Western zones and in Austria, where it is a great burden. With regard to the crystallising of the position, I think I have already said in the statement that I shall do nothing at all that would create an irredentist movement, but rather work for ultimate unity. However, as the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) said, I cannot let the standard of life go on in Germany at 1,550 calories. We cannot do that whatever the situation may be.

BILLS PRESENTED.
  ATTEMPTED RAPE BILL
  "to authorise the passing of sentences of penal servitude for attempts to commit rape," presented by Mr. Ede; supported by the Attorney-General and Mr. Younger; to be read a Second time tomorrow, and to be printed. [Bill 29.]
  ARMY AND AIR FORCE (WOMEN'S SERVICE) BILL
  "to enable women to be commissioned and enlisted for service in His Majesty's land and air forces, and for purposes connected therewith," presented by Mr. Alexander; supported by Mr. Shinwell and Mr. Henderson; to be read a Second time tomorrow, and to be printed. [Bill 31.]
  ANIMALS BILL
  "to extend the period during which payments may be made under the Agriculture Act, 1937, in connection with the eradication of bovine tuberculosis and to amend the Horse Breeding Act, 1918," presented by Mr. Thomas Williams; supported by Mr. Ede, Mr. Woodburn, Mr. Glenvil Hall and Mr. George Brown; to be read a second time tomorrow, and to be printed. [Bill 30.]
  POLICE PENSIONS BILL
  "to make provision as to the pensions to be paid and in respect of members of police forces and as to the length of the period of their service, to amend and repeal with savings certain statutory provisions relating to the pensions to be paid to and in respect of members of police forces and as to the length of their service, and for purposes connected with the matters aforesaid," presented by Mr. Ede; supported by Mr. Woodburn, Mr. Glenvil Hall, Mr. Younger and Mr. Thomas Fraser; to be read a Second time tomorrow, and to be printed. [Bill 32.]
  POST OFFICE AND TELEGRAPH (MONEY) BILL
  "to provide for raising further money for the development of the postal, telegraphic and telephonic systems and the repayment to the Post Office Fund of money applied thereout for such development," presented by Mr. Wilfred Paling; supported by Mr. Glenvil Hall; to be read a Second time tomorrow, and to be printed. [Bill 33.]
  ROYAL MARINES BILL
  "to provide for the establishment of a Volunteer Reserve of Royal Marines, and to amend the law with respect to engagements in the Royal Marines," presented by Mr. Dugdale; supported by Mr. Walter Edwards; to be read a Second time tomorrow, and to be printed. [Bill 34.]
  BUSINESS OF THE HOUSE
  Proceedings on any Motion for the Adjournment of the House moved by a Minister of the Crown exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House) for one and a half hours after Ten o'Clock.—[Mr. H. Morrison.]
  CHRISTMAS ADJOURNMENT
  House, at its rising Tomorrow, to adjourn till Tuesday, 20th January, 1948.—[Mr. H. Morrison.]
  ORDERS OF THE DAY

    CIVIL LIST
    Resolutions reported:
    1. "That there be charged on the Consolidated Fund the following annual sums,—

    (a) for Her Royal Highness the Princess Elizabeth during her life, as from the day of her marriage with His Royal Highness the Duke of Edinburgh, £25,000 in addition to any sum payable to her under the Civil List Act, 1937;

    (b) for His Royal Highness the Duke of Edinburgh during his life, as from the said day, £10,000;

    (c) for His Royal Highness the Duke of Edinburgh, in case Her Royal Highness the Princess Elizabeth dies in his lifetime leaving a child or children, during any period after her death during which he is living and their child or one of their children is Heir Presumptive to the Throne, £15,000 in addition to the said sum of £10,000."

    2. "That it is expedient to amend the provision made by Section eight of the Civil List Act, 1937, as to that one of His Majesty's daughters who, in the event of Her Royal Highness the Princess Elizabeth predeceasing His Majesty, thereby becomes his eldest surviving daughter, so as to restrict the application thereof to any period during which that one of His Majesty's daughters is Heir Presumptive to the Throne."
    Resolutions agreed to.
    Bill ordered to be brought in upon the said Resolutions by the Chairman of Ways and Means, the Chancellor of the Exchequer, the Prime Minister, Mr. Ede, Mr. Woodburn and Mr. Glenvil Hall.

    PRINCESS ELIZABETH'S AND DUKE OF EDINBURGH'S ANNUITIES BILL
    "make provision for the payment of certain annuities to their Royal Highnesses the Princess Elizabeth and the Duke of Edinburgh, and to amend Section eight of the Civil List Act, 1937," presented accordingly, and read the First time; to be read a Second time tomorrow, and to be printed. [Bill 35.]

  CAPITAL INVESTMENT (WHITE PAPER)
  Motion made, and Question proposed, "That this House do now adjourn."—[Mr. William Whiteley.]
  3.41 p.m.
  The Chancellor of the Exchequer (Sir Stafford Cripps): I am sure the House will forgive me if I use this occasion for giving them a short review of our general economic situation as it appears a t the end of the year, in addition to dealing with the capital investment programme for 1948. It is of the utmost importance that all those who are working so hard in this country today to get us out of our difficulties should be given a full and frank statement of our position. Misrepresentation of facts and wild partisan statements not only do grave harm to our position abroad, threatening the stability of sterling and embarrassing us in our bilateral deals, but they act as a discouragement and a source of confusion to our own people. Criticism and constructive suggestions are welcome and helpful; but irresponsible and misleading assertions make even more difficult the already sufficiently onerous task which the people of this country have to face.
  I will first deal with the investment programme for 1948, which is set out in the White Paper, and which is the primary subject matter of our Debate. Let me make clear what is the real significance of this term "investment." It does not mean, of course, the buying of stocks and shares in enterprises of various kinds. It signifies the expenditure by the country of its resources of productive

  1891
  capacity, materials and manpower in the construction or maintenance of its stock of capital goods, such as factories, houses, transport, roads, machinery and so on.
  The essence of the problem is twofold. First, it is a matter of capacity, materials and labour, and it is in terms of these that we must consider our ability to maintain our investment programme. Secondly, it involves using resources today to make things which cannot be consumed today. It involves postponing and limiting consumption in order to make available these resources. They are the same resources that we require for the urgent purpose of our living standards, whether in the form of goods produced for home consumption or for export in exchange for essential imports. In earlier times we were accustomed to allow the forces of supply and demand to regulate the flow of our resources into capital investment, but the war has left us in an entirely new position.
  Not only have we suffered the destruction of many capital goods—four million houses destroyed or damaged by enemy action, and much industrial plant as well—but, what is even more significant, we have run down the productive value of our capital equipment by deliberately deferring all but the most vital maintenance and repairs. The railways afford a good example of this. They did a magnificent job during the war, but they ended up with vast arrears of repairs and maintenance, the result of which was vividly brought home to us in the exceptional circumstances of last spring. Indeed, it is one of the common experiences of almost every industrial country in the world that the overwork of plant during the war has gone much further and deeper than most people calculated.
  This greatly accentuated demand, covering the whole range of our industrial services and buildings, accompanied by the urgent and increased necessity for exports of every kind in our struggle to balance our overseas payments, made it necessary that we should attempt some allocation of our resources between the competing claims of export, investment and consumption. Our problems could not be solved by any laissez-faire method. It was vital that we should assert the
  1892
  priority of the national interest. We had to make certain that we were not only sending out the exports, but also maintaining the capital equipment of the country in a state of efficiency in which it could continue to provide for our needs.
  To secure these ends it was necessary to have a stricter measure of control. That was the origin of the White Paper. We had to fix our programmes of investment at a level which would maintain and, where necessary, improve the capital equipment of the country, but at the same time at a level which would not make a greater claim on our resources than we were able to sustain. It is not necessary, I am sure, for me to stress the great complication of detail in this matter, but there are two most important general considerations which I would ask the House to bear in mind in reviewing the subject. First, we are dealing with a shortage of men, materials and capacity, but not of money; and secondly, we must look at the problem as a whole.
  Everyone, I have no doubt, will have his own choice as to the things to which he would like to see an overriding priority given. I can assure the House that every one of those priorities has been most vigorously pressed upon us by the Department concerned. But we must so balance the use of our resources as to get the best overall result, and it is that which the plan in the White Paper has attempted. We have postponed nothing for the sake of postponement, but only in order to meet the hard and inescapable facts of the supply position. We have to work within the limits of the manpower, and the steel and timber which we have available. These limits of our resources have forced us to reduce both consumption and investment.
  Consumption has already been severely squeezed by the cuts on imported food, and by the diversion of goods to export in order to balance our trade. Further cuts on consumption have been imposed both by the autumn Budget and by the measures we have taken to steer manpower away from less essential industries. In all these ways the claim of less essential consumption on our resources has been heavily cut back. Our next step was to get our investment coat cut according to the cloth available, while still maintaining as good and as sound a design as possible,

  1893
  bearing in mind that certain overseas investments, such as the developments within the sterling area, were an essential part of the eventual solution of our difficulties.
  The real significance of the White Paper is not in the financial terms which have had to be used to sum up the results of many dissimilar programmes, but in the actual decisions as to physical assets and labour which are to be found in the appendices. The new programme will, we hope, be more realistic than the earlier ones in terms of the resources available. If all the various projects planned for 1948 had proceeded according to their schedules, the volume of investment would have mounted to a very large figure, certainly far in excess of £1,600 million.
  If the manpower and other physical resources we had originally expected to be able to devote to work on investment projects in 1948 could have been made available, they would, we estimate, have produced about £1,600 million worth of physical investment; but when we had made provision for increased export, and for the needs to expand agriculture and other industries at home in order to save imports, it was clear that this quantity of resources could not be found for investment. It has, therefore, been reduced to the level of £1,320 million a year at the end of 1948, or an average over the year of £1,420 million. Moreover, we must see that the number of new projects proceeded with is limited to ensuring that the more important schemes may be completed as rapidly as possible. We cannot afford at the present time to have more of our resources locked up in work in progress than is essential to the ordinary flow of construction.
  There are two main criticisms which have been made. First, that the postponements and reductions are not enough in total, and, second, that more should be spent upon re-equipping our industries, which implies, of course, still severer cuts in other investments. In this respect, the chief suggestion is that housing should have been further cut. It has been suggested that my right hon. Friend the Minister of Health has managed by his vigorous insistence to torpedo the programme. As regards the first criticism, we shall see as it develops next year how far we have enabled the export pro-
  1894
  gramme to be carried out by what we have done.
  The present White Paper on investment is not necessarily a final document, in the sense that if the necessity supervenes we may have to reconsider it. It would be unwise, in such circumstances of world economic disruption as we are now faced with, to have any rigid or final plan. We must always be ready to adapt our economic activities to the rapidly changing world situation, and to our own internal circumstances. We believe, however, that the substantial postponements laid down are about the maximum possible within the mobility and interchangeability of labour that exists.
  The cutting down of projects which merely keeps people unemployed is of no value. It is not our object to waste our labour resources. On the other hand, we desire to get a transference of labour from less essential to more essential activities. It is almost inevitable that the changeover of production necessary to meet our new national requirements will disturb the present pattern of employment. It will be impossible in the course of this changeover to avoid some incidence of temporary unemployment, but we must be careful so to adjust our plans as to minimise the waste that would be caused by any large-scale unemployment. Although there may be, therefore, a theoretical case for sudden and drastic measures and changes, there is a much stronger practical case for taking time to making the changeover smooth and as little disruptive as possible of our production efforts.
  A great deal of the limitation on what we can do as regards our own industrial reconstruction depends upon the availability of steel, which strictly limits the possibilities, in view of the inescapable fact that we must export as many steel goods as we can in various forms, to balance our overseas payments. So far as housing is concerned, timber is the real limiting material, but here we must bear in mind that an essential condition of success in achieving our export and import-saving programme is a degree of mobility of labour which will allow us to move labour from one occupation to another. In securing this mobility, housing is vital, and the more houses we can get quickly finished, the better chance we

  1895
  shall have of achieving our production programme.
  Mining and agriculture are the two most vital industries which we must man-up to help our balance of payments, and neither can be manned-up without a large access of new housing. Housing is not an added or an unnecessary luxury; it is an essential part of capital equipment necessary to carry out our plans. Quite apart from the question of comfort and convenience for our people, which are in themselves of first class importance, as a mere matter of industrial efficiency, the provision of adequate housing accommodation as quickly as possible is a primary consideration. That is a very good reason why we should not at this moment cut our housing programme more than materials compel us to do.
  I do not propose to deal in detail with the arguments and facts set out in the White Paper. My right hon. Friend the Minister of Health, when he sums up, will be able to deal with any special point which may be raised. We have laid down a programme which will be manageable in physical terms, and which we hope will not materially interfere with our attempt to achieve our export task. Do not let us or anyone else overlook the fact that we have done a tremendous amount of new capital work in this country in the last two years. It is a surprisingly large amount, when we bear in mind the circumstances under which the whole country has been labouring. We intend to go forward with a considerable programme, although not so much as we had hoped. In adjusting the plan to our needs, we have tried to maintain an overall balance which will allow us to concentrate upon the most necessary, without wholly neglecting the general pattern of our capital development.
  I now turn to a review of our balance of payments situation, which is, of course, closely associated with the investment programme. Many of the current facts have already been made public. We have had a fairly recent Debate in this House on the matter. I will attempt to give the House a sort of rough balance sheet, accompanied by some observations as to our future situation. It must always be borne in mind that this is not a short-term problem. It is one which
  1896
  will proceed, perhaps with varying emphasis, far into the future, because it arises out of long-standing and difficult tendencies which have been developing over the years in many other countries besides our own. Indeed, it is a world problem.
  We cannot reach a reasonable equilibrium without more settled economic and political conditions throughout the world. All our recent plans and activities have been designed to assist in reducing the size of the problem we have to face. First, the cuts in our imports; second, the forcing up of our exports; then, the capital investment programme designed, as I have said, to free our resources; and, finally, the recent Finance Bill planned to diminish the inflationary pressure which might otherwise disturb our economy and so force up prices and costs, making it more difficult to find markets for our exports. Linked with these steps is the development of our own internal resources including, of course, agriculture, and those of the sterling area, so as to reduce our dependence upon exports from hard currency countries. The final step is the arrangement of bilateral agreements which will secure us the most valuable use of our exports in acquiring the vital imports which we need.
  These are the main elements making for a reasonable hope that we can, in time, achieve an acceptable standard of living for our people, based firmly upon our own economic independence. The Marshall plan, if it is put into operation, will, we hope, help the carrying out of this programme; but it can be no substitute for it. Any assistance we derive from that plan will have to be used for the more rapid development of our own resources and those of Europe and the sterling area, and not merely to enable us to enjoy some temporary improvement in our living standards. We must always have in mind that such a plan is temporary, and can only give us the time in which the better to carry out our own long-term arrangements for securing the supplies and markets we need as a permanent and stable basis for our economy.
  I now turn to a short historical review of our balance of payments position, because it is in the light of the tendencies so disclosed that we must judge our present position. Before 1914, the annual average

  1897
  value of retained imports into this country at the then level of prices was £610 million. Our own physical exports earned £474 million, leaving an annual deficit of £136 million, which was made up by shipping, with earnings of £95 million, and insurance, banking and other commercial services, with £35 million. This still left a deficit of £15 million which was, however, wholly covered by our investment income of more than £150 million sterling, thus enabling us to enjoy a substantial surplus for reinvestment abroad. It was out of this surplus that we developed many areas in the world upon which we could draw for imports of food and raw materials. That general pattern of our policy, however, had one unfortunate result in that it led to the neglect of our own agriculture, a mistake which we must not repeat.
  The war of 1914–18, shook the whole structure of our economy. By 1928, our exports were only just over 84 per cent. of those in 1913, and our share of world exports by value had fallen from 13.9 to 11.2 per cent. Between 1922 and 1928, our annual deficit on current account on overseas payment averaged £143 million, which was closed by using the greater part of our overseas investment income, thus leaving, little or nothing for new overseas investment. Between 1928 and 1938, exports fell still further by 37 per cent., but imports were reduced by only 23 per cent. Fortunately, for us there was, however, in the 1920's a favourable turn in the terms of trade, but the agricultural communities supplying us with our food were deprived of a large part of their current income through the fall in prices of primary products.
  Immediately before the last war, on a three years' average, we were spending £884 million on imports against earnings of £496 million on physical exports and re-exports, an adverse balance in visible trade of £395 million. Against this, we had our earnings from shipping, insurance, banking, commercial services, and so on, and, in particular, £203 million from overseas investments, leaving us with an overall debit balance of about £45 million. We were then living beyond our current income. I have given the House these figures because it is essential to appreciate these long existing tendencies towards the worsening of
  1898
  our position as regards the balance of our overseas payments.
  It was upon this precariously balanced position that the war had its tremendous impact. There were three particular consequences affecting our balance of payments: the concentration of the whole of our productive effort on the war; the cutting to the bone of our exports, with all the long-term consequences of disturbance of prewar trade channels which was necessarily involved, and the destruction of half our Mercantile Marine, together with the loss of much of our income from overseas investments. We have rebuilt a large part of our shipping. Indeed, we are building at present in British yards more tonnage than the rest of the world put together. But we still have not enough ships for international trade, and, therefore, we are unable to set free enough ships to go out and pick up the lucrative trade between other countries which was the basis of our prewar shipping income.
  The income from commercial services, such as banking and insurance, has stood up well, but it has not increased proportionately to the changed value of money. On our overseas investments, we have suffered most sharply. During the war we sold or facilitated the repatriation of overseas investments to the total of over £1,100 million sterling. That means that by far the largest single source available to us before the war for closing the visible trade deficit on current account has been seriously reduced. Moreover, as things turned out, we felt this loss particularly, because a substantial part of it represented the loss of dollar income from dollar securities.
  Nor, indeed, did the process of the sale of investments cease with the end of the war. We have sold many public utilities in Latin-America including, of course, the Argentine railways, and we have sold other lucrative interests elsewhere. It is sometimes suggested that we ought to realise still more of our overseas assets to meet our current bills, but the man who pays his current bills out of capital while making no effort to reduce his expenditure or increase his income faces a bad end. That is equally true of nations and particularly true of our own. As it is, we can only estimate £70 million for 1948 as a return from our overseas investments. In the light of this situation, our

  1899
  resources take on an added importance for they alone stand between the sterling area and possible bankruptcy.
  In some parts of the world a mystery still hangs around the words "sterling area." Indeed, it is by some regarded as a sinister phenomenon. In fact, it is a very old system and is the application to the financial arrangements between the members of the sterling area of the principles of a domestic clearing banking system. For many years past the countries in the sterling area have maintained practically all their reserves in London and paid into London foreign exchange earnings, calling on London in turn to provide such external resources as they required for their current trade. This has enabled the sterling area like the clearing bank to ensure that all the money in the system was made to do its work.
  Through this system we have been able to finance development overseas, and we have, in our turn, received a very substantial contribution to our own foreign exchange resources. Before the war it was a completely free system. During the war we obtained the agreement of the members of the sterling area that they would continue to pay into the system their dollar earnings and they would limit their dollar expenditure to what was essential for their own contribution to the war effort. This voluntary limitation was reinforced by the difficulties of supplies of shipping, but broadly we left it to the local controls to determine in the light of the general policy their claim upon the sterling area resources for dollars. Now, of course, this system is under a great strain. The current dollar earnings of the sterling area though significant are much below their current dollar needs. This would mean, if it were to continue, a very heavy drain on our reserves.
  We must remember when we speak of our reserves we are speaking of the reserves of all countries in the sterling area. As the House knows, we were compelled to spend the American loan much more rapidly than either we or the Americans had foreseen when it was negotiated in 1945. The rate of expenditure was influenced by two main factors—the increasing dependence by practically all countries for essential supplies upon the North American continent, and the very sharp rise of prices in those
  1900
  countries. The final reserves of the sterling area now, therefore, consist of our existing gold and dollar reserves. At the end of this year we expect our reserves to stand at about a figure of £500 million sterling that is after bringing into account the first 100 million dollars of the remaining United States credit and the remainder of the gold that we shall obtain from South Africa under the existing gold contract.
  At the beginning of 1948 we shall have available to us in addition £75 million sterling representing the rest of the United States credit and £70 million, being the approximate amount of the undrawn part of the Canadian credit. We also hope to see in January £80 million in gold under the gold loan from South Africa. We have not in sight any other accruals to those reserves for the first part of 1948. We can look forward in the latter part of 1948 to some reduction in the drain on us for dollars if the Marshall Aid Scheme is by then in full operation.
  On 23rd October I commented on the momentous consequences for democratic civilisation all over the world of the discussions then proceeding at Washington. Since then the United States Government have taken matters further. Interim aid for France and Italy has been voted, and we expect very shortly to see the text of the United States Government Bill giving a clear outline of the form and scope of Mr. Marshall's great project. As I have already said, we must in the first place use the help that comes to us, if it comes, to strengthen the foundations of our economic position rather than have any immediate alleviations of our consumption standards.
  Mr. Oliver Lyttelton: There is one point on which perhaps the right hon. and learned Gentleman would help us. Do I understand that there is no balance left on our drawings under the International Monetary Fund quota?
  Sir S. Cripps: I did not mention it, but there is a balance of £25 million.
  Against the reserves which I have just described, we have external liabilities of £5,300 million, of which £3,550 million represents the sterling balances accumulated by our creditors during the war and as a direct result of the war; £855 million represents the existing liability in respect of the United States credit, and £235

  1901
  million the liabilities on the Canadian credit. Hon. Members will be interested perhaps to have a few figures about the rate of the drain on our gold and dollar reserves since the suspension of convertability on 20th August. In the four weeks ending 20th September the weekly drain averaged more than 90 million dollars. In the following four weeks ending 18th October it fell to the figure of about 65 million dollars. Since then it has run at the rate of rather less than 55 million dollars a week.
  These figures take into account all our transactions in gold. We have had to make considerable sales of gold and these will have to continue, we hope in rapidly diminishing quantities, despite the release of the 400 million dollar credit for which we are so grateful to our American friends. During October we sold £35 million of gold, of which £30 million was in the United States, and we received £12.2 million worth of gold of which a little over fro million was from South Africa, showing a net loss of gold of £22.8 million. In November we sold £47.8 million of which £40 million was in the United States, and nearly £5 million to Belgium towards clearing up the balance under the then existing payment agreement. During November we purchased £11.3 million of gold, of which £10 million was from South Africa, showing a net loss of gold of £36.5 million.
  It is a matter of convenience to some extent whether on any particular occasion we draw on our gold or on the dollars which are available to us. The figures which I quoted a few moments ago to illustrate the rate of drain on our total reserves of gold and dollars show that this total drain is being reduced, but we must reduce it still further if we are to keep within the margin of reasonable safety. Mere arithmetic will show that it is impossible for us to continue at that rate. The various governments of the countries in the sterling area have now announced their policies of further restrictions in dollar imports.
  Sir Arthur Salter: Could the Chancellor say whether the real deficit—that is to say, the deficit which is either less or greater because of a change in the stocks of our imported materials—is substantially different from the cash deficit?
  Sir S. Cripps: Yes, certainly. These figures which I have given take no account of stocks of imported materials at all. It can be seen in the monthly statistical return what those are and how they vary from time to time.
  Sir A. Salter: The figures for raw materials are included, but not those for food stocks.
  Sir S. Cripps: These figures do not include the food stocks at all. If the right hon. Gentleman is interested to know, there has been no material change sufficient to signify from this point of view. They vary from time to time.
  These policies which have been imposed by the Governments of the countries in the sterling area mean inconvenience, and perhaps even worse, for their peoples, but they are accepted as part of the combined policy of the whole sterling area, and we are grateful to them for their generous cooperation. We ourselves will have to watch with very great care every cent of our dollar expenditure. There will have to be further sales of gold to pay for dollar imports, and we shall not be able to avoid some drawing down of the total figure of our reserves during 1948.
  While the policies for the reduction of dollar imports are being brought into effect, these basic reserves of the sterling area have immediately to carry the whole shock of the present difficult world situation. We must remember all the contingencies for which these reserves must provide, not only in the immediate months ahead of us but as part of the whole stability of the sterling area system. No one is in greater danger of losing his independence of action than the man who has no reserves upon which to fall back.
  The maintenance and strengthening of these reserves must, therefore, be a major preoccupation of our external economic policy, and we shall have to postpone alleviation of our own internal position until we have done our best to make this policy secure. It is because of our own action and policy that we, in our turn, are entitled to ask other members of the sterling area to help us in this primary task, even at the cost of personal sacrifice. But we cannot build a healthy economy upon restrictions on imports or a jealous care for our reserves; we must increase our foreign exchange income and retain the confidence

  1903
  of other countries in the stability of our own economy, not by credit from abroad but by our own efforts in production.
  I therefore turn to see how we are progressing with our export-import plans. There are so many uncertainties and incalculables that it is not possible to make any accurate forecast. Who will say what the terms of trade will be, or what will be the outcome of the many bilateral negotiations upon which we are now, or shortly shall be, engaged? Here let me interpolate a word as to the progress of these various negotiations. As the House knows, we are having talks with those countries with whom we have important trade or financial arrangements. I will not give details of all of those, but perhaps I may mention a few. The special agreement as to food grains which we hope to conclude with Russia will be most helpful in spreading our area of supply. We have, I am very glad to say, reached an agreement with Canada, and an agreed announcement of its terms is to be made later this evening.
  With regard to Germany, an agreement with the United States of America as to the finances of the joint zone was announced yesterday. We no longer have direct dollar liability for German imporation.
  Mr. Lyttelton: Could the right hon. and learned Gentleman say anything about the Canadian agreement?
  Sir S. Cripps: I cannot say anything about it at the moment because we have promised not to announce it until later on, at 8 o'clock.
  We no longer have direct dollar liability for German requirements. We shall be paying in sterling for sterling imports into Germany to the extent laid down, and our only liability to pay dollars arises if the balance of the current trade with the combined zone moves substantially against us. We have undertaken to convert the joint agency's sterling balance into dollars if necessary—it now stands at £24 million sterling—but it is the expressed intention of the United States Administration that if possible we should not be called upon to convert more than million in 1948. Among other countries with whom talks are proceeding at the present time are the
  1904
  Argentine, Egypt, Holland and Yugoslavia. Agreement has been reached with Sweden, I am very glad to say, and an announcement will be made in the course of the next day or two.
  For 1948 we shall require about £1,600 million worth of imports on the reduced scale of living but allowing for some increases in prices, and we shall have an invisible import of about another £100 million of Government expenditure overseas. For exports and re-exports, if we fulfil the export programme we should obtain £1,550 million; and from shipping, oil and services together with income from overseas investments we should get another £130 million net. This would give us substantially an overall balance, but even if we do all that, there is still within this total balance a deficit with the Western hemisphere of nearly £300 million sterling which, of course, cannot be set off against our surplus from the other areas. That can only be tackled by cutting off imports from or extending exports to the Western hemisphere.
  There is absolutely no chance of our arriving anywhere near a balance of visible exports with the United States of America. We never have done so since the days when we supplied the capital goods to develop America, and our available exports are not, in the main, such as the United States of America wants or can take. We have always relied upon three-cornered trade for the balance. We must, therefore, continue to encourage that three-cornered trade, and hope that the sterling area as a whole will be able to increase its exports into the United States of America, or that Europe may do so, with whom as a result of the Marshall Plan we may be even more closely linked than before. We are, indeed, now actively studying how that closer integration of our economy with Europe may be brought about.
  Mr. David Eccles: Was the £300 million deficit in the United Kingdom or the sterling area as a whole?
  Sir S. Cripps: The sterling area.
  While these long-term policies of developing other sources of supply for ourselves, and a greater volume of exports to the Western hemisphere from this and other countries, are being put into operation, we must secure that the

  1905
  drain on our reserves is reduced to the lowest possible point. We must make every effort we can to maintain our reserves, for the reasons I have already given to the House. Apart from economies on imports, which we have already imposed almost to the limit of our capacity, we must rely on a greater volume of exports, and that means an overall increase in production. Here, there are some encouraging signs.
  The resumption of coal exports was announced yesterday by my right hon. Friend the Minister of Fuel and Power. That is indeed an important step forward, not because of the benefit it brings to us alone, but because it will be of great help to our European friends, and decrease their dependence on the United States for dollar coal. It is only a small beginning, but even 10 million tons of coal per annum is something well worth while, and we hope that when the winter difficulties are over we shall be able to increase that figure.
  The rising output so far is, of course, almost entirely the result of the efforts of the miners themselves. We have in hand, as well, a very big programme of reconstruction and mechanisation, the effects of which have scarcely begun to show. But while there are good grounds for optimism in the long run, we are by no means out of the wood, so far as coal production is concerned, and we must try to keep a balanced outlook on the results. They are bound to vary with the seasons, weather conditions and other factors, and we should not be wildly excited at every increase or inordinately cast down by every decrease. If we can maintain the present tempo, and gradually improve it, we shall be able to get a really satisfactory export programme next year. I can assure the House that nothing will help our acquisition of foodstuffs and raw materials more than our having coal with which to purchase them. We shall not waste a ton of that coal by allowing it to go for anything that is not of real and vital value to us.
  In steel, too, we have been doing exceedingly well, and I have no doubt that we shall continue to do so provided we can keep up the flow of scrap and pig iron. In both of these we are running oh a very narrow margin, and I cannot emphasise too strongly the most urgent need for every factory and workshop to
  1906
  mobilise its scrap without delay. The whole output of our great engineering industry depends on the flow of steel, and that, in its turn, depends on the flow of scrap.
  In textiles, we can report a really encouraging increase. For a long time output remained almost stationary but now, at last, we have a quickening response to our situation, both in the numbers in the industry and in output, as the figures show. The number of persons employed in our textile industries in June of this year was 756,900. By November the figure had risen to 784,800. The weekly average output of cotton yarns was 12,560,000 yards at the end of June, and had risen to 14,730,000 by November. The output of woven wool fabrics rose from 20 million yards in June to 23,870,000 by the end of November. Nonetheless, to meet our ultimate targets we have still a long way to go.
  In engineering, we have had our rising output checked, unfortunately, from time to time by material shortages, but we hope that the revision of the investment programme will bring relief in that respect. Let me give the House a few figures: In June this year we turned out 56 mainline locomotives; in October, 76. The output of railway wagons, which stood at 2,962 in June, rose to 4,119 in October. The value of the June production of internal combustion engines was £1,618,000. By October that figure had risen to £2,177,000. The corresponding figures for hosiery machinery show an increase from £235,000 to £363,000.
  Agricultural machinery, in which we have the foundation of a most important new export industry, is being turned out in increasing quantities. I will take tractors as one example. Production amounted in the first quarter of this year to 8,308, and, by the third quarter, had risen to 14,318. I have mentioned only some of the main industries on which our exports are largely based. Other industries, too, are contributing to our increased production, so that the overall picture shows an encouraging revival of our internal industrial activities.
  When we come to examine the export position that is more difficult, and not quite so encouraging. There are two important factors: One is within our control, and the other is not within our

  1907
  control. The first is cost. We have either reached, or are reaching, a buyers' market condition in many lines of goods. This means that the price factor becomes more and more important. We are already losing sales overseas in some of the most desirable markets, because of our price level, and we must, therefore, do everything in our power to prevent it rising, and, indeed, to bring it down. The second factor is the import restrictions imposed on our goods by other countries, who are as short of foreign exchange as we are. Here, we can only do our best to persuade them to admit as large a range of our goods as possible, and that is the constant preoccupation of my right hon. Friend the President of the Board of Trade in all the bilateral negotiations he is carrying out.
  In spite of these difficulties, we must not relax for a moment our efforts to develop the types of manufactures which have assured markets, and to switch our exports as much as possible from soft to hard currency markets. We must sell everything we can for hard currency, and we must not allow our preference for habitual methods and traditional markets to deflect us from this paramount objective. This is particularly true of textiles, where the conditions of the industry—surplus plant, a plentiful supply of raw materials, and a market, particularly in North America—are favourable to an even more intensified export drive.
  I have attempted to give a rapid and rough sketch of our present position, with its prospects, because I believe that the House and the country would wish to know what those prospects are. I might perhaps sum up the position in this way: So far as our internal efforts are concerned, we can face next year with quiet confidence, based on the experience of the last few months. A few weeks ago, I said that Britain was on the move. Now we can see clearly the steps forward that our country has already taken. Our people have responded magnificently, on all sides, to the demands which have been made upon them. I see no reason, short of a catastrophic or unforeseen happening, why we should not progress steadily to an ever-increasing volume of production in all our main lines of output—coal, steel, agricultural machinery, textiles, and
  1908
  the rest. But we must remember that we are by no means at the end of the road. The progress I have mentioned, satisfactory as it is, is no more than an approach to the level of production that we must achieve.
  When we turn to the external scene we still have great cause for anxiety. I have told the House the extent of our reserves, and that they do not allow much margin for manoeuvre. The dollar unbalance is proving most stubborn to reduce, despite the efforts of ourselves and our fellow members of the sterling group. Search as we may, there are still large quantities of foodstuffs and raw materials for which there is no other source than the Western hemisphere, where prices are still rising, thus worsening the terms of trade against us. The growing difficulties of international commerce are tending to narrow our opportunities of getting our exports into the markets where we need to sell them, though we hope that this situation will be relieved as a result of our bilateral agreements.
  We are indeed fighting with all the means at our disposal including a reduction in our standard of living—most unwillingly but courageously accepted by our people—against the dollar deficit, but circumstances are still weighted against us. We need to employ every resource available and to make every economy in our own use of our own material. We shall continue our immediate struggle, which cannot be a short one, and we shall, at the same time, lay plans and put them into execution to provide a longer-term solution of our difficulties upon the lines that I indicated earlier. There is no need for pessimism so long as we each do our best, but we must realise that this is a long, uphill struggle which, with the help of our friends overseas, we can and shall win through.
  5.22 p.m.
  Mr. Oliver Lyttelton: The right hon. and learned Gentleman dealt with the larger question of the balance of payment at the end of his speech. Therefore, I had better begin by commenting on that part of his speech before I turn to the White Paper. The right hon. Gentleman had a rather difficult task, which he performed with his accustomed skill. During the last two or three weeks I have detected, and I think rightly, a tendency among Government

  1909
  speakers and spokesmen towards a note of optimism. The right hon. and learned Gentleman has been as fair as possible in concentrating his optimism largely upon two things, in order to avoid speaking with a different voice from his other colleagues. So he first of all dealt with the very heartening increase in our coal production. We all rejoice to see that increase, and we should all like—[HON. MEMBERS: "Oh!"] Yes, all of us, and we would all wish to pay a tribute to the work which the miners have put in, in that dark, dangerous and arduous calling. I mean that, with the very greatest sincerity.
  At the same time, we must recognise—and the right hon. and learned Gentleman went upon the same lines—that the coal target was fixed at a very low figure. That is common knowledge. We must recognise, secondly, that the price of our coal is now very high indeed. The third point is that the quality in calorific value of our coal is between 7 per cent. and 10 per cent. below what it was before the war. That statement is confirmed by the figures, which can be studied, for the power stations. That means, in terms of the present programme, a decrease in calorific value of about 20 million tons. Those are serious figures. There was a low target and there has been a considerable fall in the quality of the coal; nevertheless, we hope to see the tendency increase which has been present during the last few weeks.
  The Minister of Health (Mr. Aneurin Bevan): Would the right hon. Gentleman give the source of his statement about calorific value?
  Mr. Lyttelton: I do not think the right hon. Gentleman could have heard what I said, that I derived that estimate from the figures relating to industrial coal used by the power stations, which figures are published. I also have other means of checking them. I am not claiming infallibility on this matter. If the right hon. Gentleman wishes to contradict the statement and to give other figures, I should be very glad to hear what he has to say. That is the source upon which I am relying.
  The next thing to which the right hon. and learned Gentleman referred—I shall not go into the matter industry by industry, as he did; I have not the same
  1910
  access to the figures—was the increased tempo of production. As far as I can judge from my limited outlook, there is a better tendency in production. We ought to remember the great skill and flexibility shown by employers and managements as well as the efforts, skill and brain power of the men on the factory floor. I have the impression very strongly that the tempo of production is better—or, in other words, that practically all the dislocation caused by the fuel crisis has now been overcome.
  The right hon. and learned Gentleman gave a number of figures. Perhaps the Minister of Health will refer to this matter when he winds up. I would like to know whether, in making his comparison, the right hon. and learned Gentleman adjusted the prices, or whether they are directly comparable as to volume. Again, while it is encouraging to see the increase in production, we have to remember that industry as a whole is working fewer hours than it was. The increase in the tempo of production has probably not done more than to increase the level of productivity to that which had been reached on the higher number of hours worked per week.
  I have noticed during the past week or two a great deal of optimism being put out by the Government. I had the impression that the Lord President of the Council, at least judging by the screech which he issued last weekend, thought that the Government had lost the middle class. Perhaps the word went round: "A little more stuff about being all for the best would help our dispirited supporters to enjoy their Christmas more than they would do otherwise." I do not think that the Chancellor of the Exchequer has subscribed this afternoon to that sort of statement. He confined himself to those encouraging signs—as they are—but we must read those signs in the light of low coal targets and much worse quality, and in the light of the fact that, in production, we have still to make up what we have lost in shorter hours.
  It is unnecessary for me to turn from this subject to the balance of payments, because the right hon. and learned Gentleman has dealt very fully with it. I would like to put the matter in a slightly different way. I do not think that the figures I propose to give are open to very much dispute. If I put one of them wrong

  1911
  I hope that the right hon. and learned Gentleman will interrupt. I have made it out that we shall have about £500 million of reserve gold and hard currency at the end of the year. If to that we add about £25 million as the balance of our International Monetary Fund quota, £75 million unexpended of the American credit, £79 million from Canada and about £80 million of the gold loan from South Africa it makes, according to my rather rudimentary arithmetic, about £760 million of reserves, in gold and in hard currency.
  But they are not expendable reserves. We have it on the authority of the right hon. and learned Gentleman himself that the irreducible minimum of gold and hard currency with which we can operate the banking system of the sterling area is £275 million. That is the substance of what the right hon. and learned Gentleman said in October. From our total reserves we have, therefore, to deduct the irreducible minimum of £275 million, and that will give us something like £485 million of expendable reserves, and by expendable reserves I mean reserves which can be spent to augment the supply of food and raw materials above that which we can pay for with our exports. I thank the right hon. and learned Gentleman for having given us figures of the drain on these reserves. They are still a little obscure because the sales of gold have to be added to the actual dollar drain, but it will not be far out to say that the drain——
  Sir S. Cripps: The drain is an over-all drain and not simply a dollar drain. It is a dollar and gold drain.
  Mr. Lyttelton: I quite understand that, but I would like to ask whether the drain from all causes is now running at about £60 million a month——
  Sir S. Cripps: It is 55 million dollars a week. I gave that figure.
  Mr. Lyttelton: I prefer to say £60 million a month. We are going from one currency to another and befuddling everybody. The last time the right hon. and learned Gentleman spoke he said he would give all the figures in pounds and I have stuck to that and am now on the wrong foot. However, I say £60 million a month. If we have a drain of £55 million or £60 million a month and we have £480 million
  1912
  of expendable reserves, it is quite obvious that by the end of June or July at the present rate of drain we shall have used up all our reserves. Does the right hon. and learned Gentletnan wish to correct that?
  Sir S. Cripps: I would only say that according to my arithmetic six times £55 million is not £480 million.
  Mr. Lyttelton: I said that calculating from 1st December, it will be some time in June or July, and that will be found to be correct.
  Sir S. Cripps: I am sorry to correct the right hon. Gentleman, but the £500 million figure which I gave was to the end of the year and not to 1st December.
  Mr. Lyttelton: The right hon. and learned Gentleman knows perfectly well that when he is calculating the drain upon our dollar and hard currency reserves he is calculating something which is extremely difficult to estimate. I believe that in some of those months the drain will go above this because of claims from the sterling areas which will be very difficult to resist.
  I make the proposition that by June or July the whole of our expendable reserves will have been used up. Some time before that date His Majesty's Government will be faced with the dilemma which we all dread of whether to reduce the imports of raw materials or food or to throw overboard others of our foreign investments. If we reduce our imports of food we shall reach a standard of nutrition which will make rising production extremely difficult to achieve. We are already undernourished for the great efforts we are asked to put out industrially. It is unnecessary to stress what will happen if we reduce our imports of raw materials; cur exports will go down not in the same proportion as our raw materials but in a greater ratio, since the labour, skill and processing which is put into the raw materials is calculated in the value of the exports.
  This situation of the balance of payments is grim in the extreme. Quite frankly, a cold shudder ran down my spine when, if I do not misquote him, I heard the Lord President of the Council say that we were rounding recovery corner. Those words will sound extremely ominous in American ears. They are almost precisely the words used by Mr. Hoover when the

  1913
  United States was about to enter the severest economic crisis it or any part of the world has ever felt. I say quite frankly that those who expect to get away with feeding the British public with that kind of pap will be mistaken. Anybody who says that sort of thing, that we are rounding recovery corner, is not worthy of a responsible position even in this Government.
  Mr. Ungoed-Thomas: Will the right hon. Gentleman——
  Mr. Lyttelton: I cannot give way. I have a lot to say. I say that that is doing a disservice to our fellow citizens and it will retard and may make altogether impossible our survival.
  Mr. Ungoed-Thomas: There is no basis for that statement.
  Mr. Lyttelton: The hon. and learned Member may think so but some may have different opinions.
  Mr. Ungoed-Thomas: There is no basis in fact for the right hon. Gentleman's statement.
  Mr. Lyttelton: No doubt if the hon. and learned Member is lucky enough to catch Mr. Speaker's eye we shall have the advantage of his views later on.
  It is necessary to deal at some length with this matter of the balance of payments. The whole edifice of the Government's figures is erected on certain targets for export. The right hon. and learned Gentleman was extremely candid with the House not only on the last occasion but this afternoon as well. On 23rd October he said:
  "We are proceeding frankly on an optimistic basis so far as the saleability of our exports is concerned."—[OFFICIAL REPORT, 23rd October, 1947; Vol. 443, c. 288.]
  That was a very candid statement. I am very much afraid that a large part of the structure which has been erected on this foundation will topple down. Two things will happen. First of all—I am sorry if the right hon. and learned Gentleman thinks that my expressions are inelegant.
  Sir S. Cripps: I do not.
  Mr. Lyttelton: I thought the right hon. and learned Gentleman was interrupting. We hear far too much with this new system of loudspeakers. We used to be
  1914
  insulated from some of the more difficult remarks owing to the bad acoustics.
  Sir S. Cripps: The right hon. Gentleman must have misheard me. I said nothing rude or discourteous.
  Mr. Lyttelton: The right hon. and learned Gentleman is very seldom rude.
  Mr. Bevan: The amplification must have falsified the remark.
  Mr. Lyttelton: Even a mild expression amplified on this scale may be disconcerting.
  I am afraid that if we are asked to increase our exports by £31 million a month above the present level—that is £I million a day—it is quite certain that two economic laws will come into force. The first one is that we shall see an increase in the number of embargoes put on British goods and there will generally be more difficulty in getting export markets. The right hon. and learned Gentleman has said so. We are aware, especially in the case of textiles which we hope will make a large contribution to our exports, that a number of markets are already completely shut to us, notably for hosiery and knitwear in markets like the Argentine and France. Import licensing is now beginning to spread in a world which has only recently signed the Geneva multilateral agreement.
  The other law which can also operate is that if you try to press a million pounds a day more exports on to the market, you will tend to turn the terms in trade still further against us. They are today about 256 for imports compared with 237 for exports, according to my information. These terms of trade have recently moved against us still further, and we all know that part of the reason is an increase in American prices. In passing, it is worth saying that a main factor in that rise in American prices has been the export of goods to the rest of the world and, more particularly, of foodstuffs.
  Mr. Sydney Silverman: No.
  Mr. Lyttelton: The hon. Gentleman apparently disagrees, as he is quite entitled to do, with the Harriman report, but it was a highly skilled Commission that looked into this matter, and I have

  1915
  been at great pains to identify my authorities. I am sorry that the hon. Member, with his knowledge of American affairs, does not agree with this report. This is what it says:
  "According to one view"—
  That is his view—
  "the persistence of high food prices since the war has been chiefly due to domestic demand, and the influence of food exports has been minor and secondary."
  Perhaps the hon. Gentleman will listen to the rest?
  "The Committee believes that this opinion overlooks the importance of marginal demands, and that it is the extra food withdrawn from the domestic supply by exports which has made the real difference. Through 1946 and the first half of 1947 the continuance of large foreign shipments served to prevent the anticipated decline in agricultural prices, while the recent rise in foreign requirements, coupled with short supplies, has skyrocketed the food market."
  Indeed, in four days in the month of October the Commercial Credit Corporation bought 58 million bushels of wheat for export and that was the main reason why the price went to the very high figure of 3.15 dollars a bushel.
  Mr. S. Silverman: Would the right hon. Gentleman himself, not the Harriman Commission, exclude from the consideration of this matter the enormous rise in food prices in America that followed the withdrawal of controls? The other question I would ask him is whether it is not the case that American exports to Europe, so far from having increased since the end of the war are, in fact, only a very small proportion of what they were during the war?
  Mr. Lyttelton: The hon. Gentleman has asked two questions. I chose my words carefully. I said that a main factor in the rise in American prices was the exports to Europe. I believe that to be true, and I am confirmed in that opinion by no less an authority than the Harriman report.
  Mr. Silverman: Will the right hon. Gentleman answer my other question?
  Mr. Lyttelton: The hon. Member must not be so impatient; I am coming to the other one. If the hon. Member asks me here whether I think the rise in prices has been accelerated by the complete removal of controls, I would say that I
  1916
  think it probably has, and that the Americans are no doubt to be criticised—I prefer that they should do it themselves—for having removed all the controls too quickly. However, I would say that the argument goes no further than that, and that in this world it is absolutely necessary to begin by removing controls and to time it very well. The worst one can say is that some of the timing may have led to an increase in prices.
  Mr. Silverman: But the hon. Gentleman has not answered one of my questions. I asked him whether he agreed or disagreed that the export of foodstuffs to America since the war, so far from having increased, is only a small proportion of what it was during the war?
  Mr. Lyttleton: Of course I have not the operative figures, but I would say that the hon. Gentleman is probably correct, because the United States was at that time feeding the largest army of American citizens in the field which had ever been outside their shores before. I do not think the hon. Gentleman's interjection is a very valuable contribution to our general discussion.
  Mr. Silverman Mr. Silverman rose——
  Mr. Lyttelton: I cannot give way again. I have given way often to the hon. Gentleman, and he must be content to contain himself a little longer. So the summary of all these matters on the broader question is very grim, and I repeat what I said before, that those who go about making optimistic statements are doing a disservice to their fellow citizens and to our chances of emerging from our present difficulties.
  Now I turn to the White Paper itself. We on this side of the House have long been convinced that although our capital investment programme after two great wars requires to be expanded some day at a greater rate, at present it is far beyond our resources. We have long held that our capital programme must be trimmed, and the truth of our contentions on this subject is written large across the face of the White Paper. Reading between the lines, it is a record of a sprawling, un-co-ordinated, diffused capital expenditure and a lack of policy by His Majesty's Government. The blunders and mismanagement of our national affairs are

  1917
  openly confessed in the White Paper—at least, when I say "openly," they are confessed as far as Whitehall language—much of which is Cherokee—permits. Perhaps the most astonishing of all the ingenuous admissions in the White Paper is to be found in paragraph 5, which I must read to the House:
  "Earlier in the year before the development of the acute dollar shortage and the consequent action to reduce imports and increase exports, plans had been made by private industry and by public bodies for a very large total of investment in 1948 … In the altered circumstances resources will not be available for so large an investment …"
  Does this really mean that earlier in the year no gale warnings were observable by the economic general staff, the large planning staff? I am not, of course, including His Majesty's Ministers, we would not expect it of them, but the Civil Service and the Treasury? Did they not even see the drawings on the American loan? If they cannot read that kind of economic weather, what can we expect?
  I want to touch on one other piece of background to the White Paper, the remarkable way in which His Majesty's present advisers have misunderstood the monetary theories to which they subscribed when they signed the Coalition paper on Full Employment. Did they even understand them at the time they signed? I rather doubt it. That monetary theory, which owes a great deal to the inspiration of Lord Keynes, is based on the idea that you withhold capital investment during times of rising business, and in times of declining business you expand capital investment—public, by direct action; private, by persuasion.
  All this modern theory also leads to the idea that in times of slump you budget for deficits, and in time of boom for surpluses. But these theories however unassailable they may seem to us now, will be a complete waste of time if, as has happened in the last two years, the most obvious signs of economic weather pass entirely unheeded by the Government of the day. That kind of myopia will make it impossible to work any sort of capital investment scheme. Instead of budgeting for a very large surplus, and checking inflation, they have gone on expanding the monetary system in time of boom, which is exactly contrary to the monetary theory to which they themselves subscribed when they signed that White Paper. I attribute
  1918
  a lot of this sprawling capital expenditure to the weakening of Treasury control——
  Mr. Bevan: As I have to reply later, I do not want to misunderstand the right hon. Gentleman. Do I understand that he is stating that we are contemplating too ambitious a programme of capital expenditure? If so, would he like to tell us what particular items he would like cut out?
  Mr. Lyttelton: Perhaps the right hon. Gentleman will allow me to continue with my speech, because these are the points with which I am going to deal. The Minister of Health was not committed, but his colleagues were. One of the reasons why the capital expenditure programme has got all over the place, which is confessed in the White Paper, is because an entirely unsound monetary policy has been followed, unsound in present circumstances.
  In the building and engineering section, I shall be entering a field with which the Minister of Health is familiar, although he is not with other fields. Here again there is waste; far too much has been begun, and far too little is finished. Up to 1947 the Government over-stimulated the building of houses by local authorities, and suppressed the building of houses by private enterprise. In consequence, available labour and materials have been wasted. Far too little has been finished and the whole programme has, to use an industrial term, got "out of phase." That is because of administrative incompetence and drift. The same applies to the phenomenal rise in the prices of house building.
  I must devote a few minutes to the background of the Government's present programme. The programme of the Coalition Government was 220,000 houses to be finished by May, 1947, and 80,000 to be in course of construction at that time. It is quite true that the right hon. Member for Wakefield (Mr. Arthur Greenwood) described that as "chicken feed for a hungary nation," and equally true that his colleague, Lord Addison, in another place, I believe, in 1946 said that the programme was, "a fairy tale." Right hon. Gentlemen can have it any way they like, but the difference between chicken feed for a hungry nation and a fairy tale, is a fair measure of the difference between "Let Us Face The

  1919
  Future," and the situation we have to look at in facing the present.
  The present Government have succeeded in getting this programme so much out of phase that by May, 1947, they had completed 87,000 houses and had 224,000-odd under construction. If a more striking confirmation of lack of phase is required, I do not know of it. The Minister of Health, for very good Parliamentary reasons, is rather un-target-minded. He is unlike his colleague, the Chancellor of the Exchequer, who absolutely revels in targets of all kinds, whether they can be reached or not. The Minister of Health does not much like targets, and I can quite understand why, because whenever he has been forced into the open, the results have been unfortunate. I will not begin with him, I will begin with the Minister of Works—[HON. MEMBERS: "Hear, hear."]—not the present Minister of Works. On 14th July, 1946, he said that 100,000 new permanent houses were to be occupied by the end of 1946. Fifty-two thousand and ninety-three were completed, and on 21st December——
  Mr. Bevan: Is the right hon. Gentleman now reading from the fairy story, or the chicken feed story?
  Mr. Lyttelton: I have heard the right hon. Gentleman in better form, I think.
  Mr. Bevan: The right hon. Gentleman will hear him in better form still.
  Mr. Lyttelton: Perhaps we shall all be in better form later on. The Minister of Health said on 21st December that they would get finished and occupied at the end of 1946 all the 20,000 local authority houses then at eaves level. By 31st December, 1946, 14,769 had been completed. Looking at Government promises on housing, if we divide the Minister's promises or estimates by two, we will generally not be far out. It is remarkable that in these two cases performance is almost exactly 50 per cent.
  I wish to deal with the matter of priorities. Again, this afternoon the Chancellor of the Exchequer said something which I think we all believe; that in our present situation there must be priority in housing for mining and agricultural areas. But up to the middle of 1947 at
  1920
  least the Government had completely failed—indeed, I think they had hardly tried—to secure priority for these vital areas. By the end of October, 1947, just under 30,000 houses had been built in agricultural areas, of which about 14,000 were built by private enterprise and about 16,000 by local authorities. Out of that number 3,075 had been let to agricultural workers and no serious attempt has been made to put this position straight. I repeat, this concerns the principal dollar saver in the whole of our economy. Instead of any effort having been made, the usual circular, also largely in Cherokee, has been put out. This is what the Government call giving priority to agricultural housing. I cannot read the whole thing, it is really too tiresome, but it ends up by saying:
  "It is suggested, without making any rigid rule, and consistently with the need to consider the circumstances of the individual applicants, that each rural district council might well have in mind"—
  we know that one—
  "some proportion of houses to be so occupied, based upon the part at present played in their district and the need for increased production."
  That is what the Government call a priority.
  I wish to ask the Minister of Health another question on this point, one with which I am very much concerned. It is a purely constructive question, as all my questions are. The Government's avowed policy over housing is to concentrate on the completion of partly built houses in 1948 and 1949. They have come out into the open and said that they are going to complete well over 140,000 in 1948 and 140,000 in 1949. The policy is to finish partly constructed houses, but, unfortunately for agricultural or mining priorities, the great bulk of these houses is in areas unsuitable for the priorities, not in the right places.
  Will the Minister of Health tell us this evening how he proposes to deal with this serious defect? Personally, I can see only one way; either to stop completion of certain houses already begun, or to cancel contracts already placed. I know that in both instances public opinion will be very much shocked and will see a visible evidence of the incompetence with which the housing programme is being handled.
  Mr. S. Silverman: On a point of Order. May I ask you, Sir, how far, if at all, this discussion of the housing situation will prejudice the housing Debate which, no doubt, will be asked for by the Opposition.
  Mr. Deputy-Speaker (Sir Robert Young): That seems to be a hypothetical question.
  Mr. Lyttleton: It is unfortunate for the intervention of the hon. Member that the last part of the White Paper which we are debating is concerned with housing, but I quite understand his desire to turn me away from too much discussion of figures which are so embarrassing to his side of the House.
  I wish to bring home what is carefully concealed in the White Paper—the effects of these cuts on the housing programme. I refer to building as a whole. Again, if the Minister of Health objects to these figures, perhaps he will correct them later, but as I understand the matter, the figures are incorrect, and the Government, in an official paper they have put out, have admitted that the figures are incorrect but have not corrected them in public, so far as I know, except by a statement made at a Press conference. The figures are extremely elusive and I am trying to get down to a solid basis, which is that at 31st October there were 1,004,000 men employed in the building trade. The White Paper says that at 30th June, 1948, there will be 835,000 so employed. In other words, there will, between then and now, be 165,000 men unemployed in the building trade. Are we not entitled to know, in rather more detail than the vague terms which the right hon. and learned Gentleman used this afternoon, how the Government intend to employ them. Are they to be directed, and if so, to what industries, in what localities and at what rates of pay? The Government are anxious to avoid bringing out this large figure of unemployment which will be caused in the building trade.
  I must go very rapidly over the rest of the White Paper. The right hon. and learned Gentleman himself went over it rapidly. In the building trade, other than houses, there is, first of all, a change of emphasis of some significance between agriculture and fuel and power and another group. The increase in labour for
  1922
  agricultural building other than houses is 10,000 and the increase in the fuel and power group is 8,500. These are almost exactly off-set by a corresponding fall in industrial building and in transport. So this is a mere change of emphasis. I must draw the attention of the House to the fact that the Education and Health Departments are to use more building labour; the increase is 14,000. I confess I am a little doubtful whether it is wise to leave the plus and minuses on the productive industries untouched while according such an increase as this to these two Departments. They will one day pay us very large dividends, if I may use a phrase unworthy of the subject, but I rather doubt whether, in our present hazards, these figures are not a little extravagant.
  I have time only to discuss one other part of the White Paper, that part of Appendix B which deals with plant and machinery. We have now more jobs to do than we have men and women to do them. Everyone will also agree, I think, that there are only three ways, some alternative, some supplementary, in which this problem can be tackled. The first is by increased mechanisation of our industries; the second is by working longer hours; and the third is by the redeployment of the existing labour force on the factory floor. Hon. Members from the North-West of England will know that under that last heading I am thinking particularly of the cotton textile industry. As we are working shorter hours than we were all the more importance is to be attributed to the other alternatives. The trades unions, who alone can make a full contribution in respect of redeployment, are doing so in the cotton textile industry. It is their contribution to the breaking down of restrictive practices which in the past have been erected by employers against bankruptcy and cut-throat prices, and by trades unions against the infiltration into skilled trades of new workers and against the evils of unemployment.
  These restrictive practices on both sides of industry were quite understandable at a time of declining business, but they are, or would be, unpardonable in our present economic situation. In this situation of shorter hours and the limited effect which redeployment of the labour force on the factory floor can make, it is all the more necessary to look to greater mechanisation of our industries. That

  1923
  being so, it is little short of a tragedy that we should be brought to such a plight that we have to ask private industry to reduce to an absolute minimum the replacement of obsolescent tools, and to look with very critical eyes on any plans for the extension or adaptation of their processes.
  I conclude by saying that to make a constructive criticism of the White Paper, such as the Minister of Health a moment or two ago asked me to do, we should have to know, and we are not told, what the manpower, raw materials and dollar budgets really are, because although the right hon. and learned Gentleman did not mention the last one, capital investment goods have a significance in our external balance of payments, though it is a little further off. I thought the right hon. and learned Gentleman concentrated chiefly on manpower and raw materials. However that may be, this White Paper is designed to throw up manpower and raw materials from the lower priority industries, and ultimately to have an effect, amongst other things, upon our external balance of payments. Unless we are to know to what industries and upon what plan, if there is one, these savings of labour and material, notably steel, are to be directed, it is impossible to know whether the general cuts go far enough or go too far.
  I am told, and I believe it to be correct, that there are, in the warehouses of this country, large quantities of what have now come to be called by the rather tragic name of frustrated exports. I hope we shall get some indication from the Minister about the tonnage and the amount of money locked up in these frustrated exports, if any of these are steel. We should require to know how all this is going before we could say whether the proposed savings in steel foreshadowed in the White Paper are necessary, or whether, on the other hand, they go far enough. On the subject of housing, we have to be satisfied with the mere statement in the White Paper that it is necessary to save £5 million worth of timber during 1948, and, later, the White Paper says that the housing programme is governed by the amount of timber. Those are the reasons why we are prevented—through lack of information—from making wide or constructive criticisms on the White Paper.
  The most serious thing is the lack of priorities for agriculture and mining, and
  1924
  other matters of emphasis in the building programme. If the White Paper does nothing else it acknowledges in as grudging a manner as it can the contention which we on this side of the House have been advancing for so long, that our capital expenditure programme has been far too great for our resources, and is at least one of the contributory causes of the inflation, lack of industrial balance, and our disastrous overseas balance of payment, in short, of the very sad economic plight to which this Government have reduced us.
  6.10 p.m.
  Mr. Ellis Smith: In his statement today the Chancellor of the Exchequer set out the great achievements of British industry. No matter what political opinions people may hold, or how critical they may be, they ought, in these days in particular, to give credit where it is due. The achievements of the British people in the past two years have been simply remarkable. Great credit is due to them. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) referred to the high cost of coal. I share his concern about that. At the same time, however, we ought immediately to place on record the fact that cheap coal in the past has been won in this country at the expense of the miners, their wives and children. Injured miners had to seek the pittance of workmen's compensation because of that. The sale of cheap coal was made possible also by the failure to undertake the cost of installing modern equipment in the mines.
  The right hon. Gentleman also complained about the quality of coal. I understand his complaint. I know that he is familiar with the cost of power. He ought to know, as I have no doubt he does, that to a limited extent this results from machine-mining. We cannot use the modern methods of mining, such as we are using today, without paying a small price in regard to quality. When the new screening machinery is introduced, no doubt the position will improve. It is not the fault of the miners that the machinery is not in the mines. It is not the fault of the Government. If any indictment were to be drawn regarding the present condition of the mines, it would be agreed that it is due to the neglect of past generations.

  1925
  I agree with the right hon. Gentleman about the cost of coal and its quality. His remarks apply also to other things. I am very much concerned about the pre-production costs of the whole of the materials used in productive industry in this country. Almost every material that is used in productive industry is "ringed" either by the trade associations, monopolies, or some organisation of that kind. I hope that, sooner or later, my hon. Friends on this side of the House, together with the powerful trade unions and the Labour and Co-operative movements outside, will insist that the time has arrived when a Royal Commission or a Departmental Committee should be appointed with full authority to send for persons and papers so that there can be a very close investigation into the cost of all preproduction materials.
  The right hon. Gentleman also pointed out that we are working shorter hours. That is true: it is time that we were. The right hon. Gentleman ought to have gone a stage further and paid tribute to the patriotic actions of the trade union movement, which has agreed, without any hesitation, to work overtime. In another quarter, he has paid a tribute to the work that has been done. When we are considering our economic position, surely we ought to place on record the credits as well as the debits.
  Mr. Lyttelton: I thought that I had done so. In fact, I did so. The point I was making was a more limited one. I made no remark about whether it was desirable to work shorter hours. I only said that the increased tempo of production probably has not quite made up for the shorter hours that we are working.
  Mr. Ellis Smith: I go further. I say that, as a result of the agreement reached in industry, shorter hours have stimulated the workers. There is a more dynamic atmosphere among the men and women in industry. It would not have been easy to have obtained the overtime had we not, first, agreed to shorter hours. For many years the trade unions have been trying to negotiate shorter hours. As a result of conciliation and negotiation, a fixed working week of shorter hours has now been agreed. That agreement facilitated the agreement on overtime.
  The right hon. Gentleman then quoted from paragraph 5 of the White Paper. I
  1926
  share his concern about that. While I agree with his criticism, I think that the situation would have been far worse if we had had a Conservative Government. My concern is that the Government have not yet planned a national overall plan. That is what we will have to do. But the Conservatives do not agree with planning. Had they been in power, we would have had chaos, probably running into anarchy, instead of the report which the right hon. and learned Gentleman has been able to make this afternoon.
  The Chancellor set out a number of main principles with which I am in complete agreement. For example, I like the phrase that he used when pointing out that this White Paper is not a final document. [Interrupttion.] If the right hon. Gentleman the Member for Bournemouth (Mr. Bracken) were more in touch with industrial affairs instead of financial affairs he would know that a document of this kind cannot be a final document. He would know that, in a quickly changing situation, one cannot have a final document. I hope that the Chancellor of the Exchequer will consider what is said in this Debate in order that adjustments may be made in the White Paper. At one stage he said that while it may be correct, considering the theoretical case, it cannot be practical. The right hon. and learned Gentleman should know that one cannot have correct theory unless it can be translated into correct practice. I hope that that will be remembered in future. He then said that our problems could not be solved by any laissez faire attitude. I think he will find complete agreement on this side of the House, and in the country in general, with his statement that we must look at the problem as a whole.
  In return, I want to ask why we have not yet got a national overall plan. Who is holding up the preparation of such a plan? Ten months ago the Prime Minister promised the House that a four-year plan would be produced. I hope that, in reply to this Debate, the Government spokesman will gave an explanation why that plan has not yet been produced.
  The issues today are: how can we pay our way, and which is the best way to economic recovery and on towards a greater Britain? It should be clearly understood that, relatively, our economy is backward when compared with that of the United States. People in the United

  1927
  States should remember that we strained ourselves to the maximum extent in fighting two world wars. It was left to this country, with its limited resources, to stand for 12 months alone against the mightiest military power ever built. If we had the equality of sacrifice about which so much is said, and if the amount spent on war were measured by national income, then the United States would owe this country 12,000 million dollars. During the war the United States made decades of normal progress in production research and in increased productive capacity. During the last two years they have made even further progress in industrial equipment, organisation and the introduction of designed machine tools. This has further reduced costs of production, at the same time increasing the volume of production and the output per man hour.
  Here are one or two concrete examples which show the seriousness of the policy pursued in the United States. If we are to be called upon to enter into competition with products of that country in the future, we need to be very concerned about the position. The largest pottery manufacturers in the United States, for example, have recently introduced new forms of mechanisation on an increased scale. They claim that they have increased output, reduced cost, and, at the same time, improved quality. A new machine, worked and served by only three persons, can now turn out 240 dozen dessert dishes, or 180 dozen dinner plates, in one hour. By hand dipping, they produce 800 dozen plates in an hour. By a new machine all operations can be carried out—they do not need to use one machine and then another—and they can now produce 1,500 dinner plates per hour.
  The Chevrolet Company recently redesigned their assembly lines. They have changed their production methods, and as a result have secured an enormous increase in output per man-hour. In the production of one part of the car, they have increased output by 33 per cent. In the production of crankshafts, they have increased output by 62 per cent., and in the production of connecting rods they have increased output by 400 per cent. As a result of a vast investigation which has been made we learn that the re-equipment of industry
  1928
  in America, including mining and transport, is now under way on a tremendous scale. New methods and devices, developed during the war, are being experimented with, and in the near future there will be a huge increase in production per man-hour. American industry managed to spend in 1940 between two and three times as much on re-equipment in any year——
  Sir William Darling: I take it that there is no restriction on re-equipment in America?
  Mr. Ellis Smith: What I am attempting to do is to show the seriousness of all this, and afterwards to apply it in relation to our own internal position, and to point out what a serious position we shall be in, compared with the United States, by refusing expenditure on industrial capital equipment. I should have stated that I am quoting from the "Manchester Guardian," who sent out a number of specialists to carry out this investigation. I think that shows great public spirit. It stated:
  "The American industry managed to spend, in 1946, between two and three times as much on re-equipment as in any gear of the prewar decade."
  If any hon. Member thinks that that can be accounted for by increasing prices, I would say that in this section prices have increased very little. In one year this industry will spend the equivalent of two-thirds of a seven-year equipment programme of the whole British steel industry. It is not only spending more on new equipment than it used to do, but much of the new equipment will be more efficient. To those of us who represent the people employed in large-scale and productive industry, these facts are bound to give great concern.
  Britain has always put as little as possible into capital equipment. We have got old mills, old works and old machines. One cannot lay that at the door of this Government. Industrialists and finance capitalists, who are represented so well by the right hon. Member for Bournemouth who has just gone out, preferred to make the workers, and not machines, slaves in this country for generations. From 1931 to 1935 expenditure on capital equipment was postponed, and again, in the main, from 1938 to 1945; but, during that period, practically the whole of expenditure on capital equipment was either on

  1929
  the armament industries, or supply industries which were given super-priority. Now it is suggested again that expenditure on industrial capital equipment should be forestalled further. Irrespective of our political opinions, I wish to ask this question of every hon. Member present. If we are going to pursue a policy of this kind, which this country has pursued for generations, where shall we be in between five and ten years' time, when the sellers' market has finished? The amount of energy, for example, available in 1938 in this country was 181 million tons of coal. In the United States of America it was 334 million. The hydroelectric power in this country was nil. No Labour Government was responsible for that. While no hydro-electric power was available in this country for industry, in the United States it was 31 million tons.
  Mr. Lyttelton: I hope the hon. Gentleman is not suggesting that it is the fault of a Conservative Government that there are no waterfalls in England.
  Mr. Ellis Smith: If the right hon. Gentleman is going to start indulging in that kind of thing, he will get back as good as he is giving. What I am suggesting is that the people responsible for no power being obtained from hydro-electrification in this country are the right hon. Gentleman's friends and the Conservative Government. He knows—or he ought to know—that in 1931 a very fine document was prepared by some of the finest authorities on hydro-electrification in the world. It has been stated by all those who know anything about hydro-electrification that one of the finest sites in the world for obtaining this kind of power is on the River Severn, near Bristol. Time after time that has been postponed, because they preferred to go on in the way they have done, rather than to put money into industry and maintain an efficient and modern industry.
  Another example is Japan, where in 1938 there were 50 per cent. automatic looms. The United States had 95 per cent.; Britain had 5 per cent. This is why this country, in the main, is in the serious economic position it now is. It was appallingly evident before the war that our industrial equipment was relatively obsolete. The working class have paid very dearly for British private enterprise. It has been very private, but we
  1930
  have seen very little enterprise, compared with the examples I have been quoting. During the war we were told, "Give us the tools and we will finish the job." We are now told, "Work or want"—and get on with the job with the blunt, old tools.
  This is a repudiation of the policy so often and so clearly stated by the Lord President of the Council. It is a policy of discouraging modern methods of production and technical progress. It means the continued increase in production by the increased exploitation of human energy, and it is of paramount importance—and here I am appealing to my hon. Friends on this side in particular—that this obsolete policy should be reversed as soon as possible. In view of the facts about American production which I have given, there is no time to lose if we are to hold our own; and we are now in urgent need of effective modernisation. Industry in this country requires a tonic injection of drive and enterprise, and in this sphere the activities of my right hon. and learned Friend will receive the wholehearted co-operation of everyone on this side, everyone in the movement outside and in the great trade union movement; and if only we would take the steps which we ought to be taking at the present time, the results which the Chancellor has been able to give to the House today would be small in comparison with the results that would be obtained from a policy of that kind.
  In three years, American industry proposes to spend on capital equipment alone 14 million dollars, plus millions on research and millions more on industrial education. The United States spent on capital equipment, in 1946, 12 million dollars, and, in 1947, 15 million dollars; in 1948, they propose to spend 13 million dollars. These figures show the serious position we are in, and, if the ordinary competitive struggle for world markets is to continue, this country must face up to its very serious situation. I hope that no right hon. or hon. Gentleman thinks for a moment that I am holding up the United States as an ideal paradise. Far from it. I am only contrasting the policy of the United States, which is a policy of production by machine, with the policy of production by human energy which we have in this country, which we have had for so long, and which we are still proposing to carry out today.

  1931
  Therefore, I say that the battle of the gap will never be won by the present policy, which is a continuation of the old prewar struggle for markets. Ultimately, that is bound to lead to a demand for a reduction in the cost of production, and that is why I want my hon. Friends on this side, in particular, to begin now. We cannot begin too early to give our whole attention to this problem, and to the serious cost of pre-production materials, because if we do not, there will surely be a demand for a reduction in wages. As a result of the election of this Government, we have gone a long way towards bringing into operation in peace time the dynamic democracy that we had during the war, but we have still a long way to go, and, therefore, I want us to take the new road of production by power, by machine, by organisation, based upon plans. We have had the Platt Report, the Reid Report, the Bossom Report, the Steel Report, the Cotton Report—and what action has been taken? Relatively speaking, very little action has been taken on any of these Reports, and now we have before us the White Paper on Capital Investment which we are considering today.
  The workers' blood is glowing with warmth and pride at the achievements of the past two years. The Government have acted fundamentally on coal, power and transport, and, as a result, we are getting every week-end the results which everyone ought to look upon with pride. What can be achieved in the turn-round of wagons can be achieved in the production of coal and in every industry in this country if only we can win the spirit of the people and if we deal with the problem in the fundamental way in which we have already dealt with coal, power and transport. Therefore, I say that the time has arrived when we should take similar fundamental action in dealing with steel and chemicals. Does anyone in this House object to that? The Chancellor and the right hon. Gentleman the Member for Aldershot both pointed out the seriousness of the situation in regard to steel supplies, but I predict that, if we adopt a similar policy in regard to the steel industry, we shall get the same results as we are now getting in mining and other industries.
  The right hon. Gentleman the Leader of the Opposition has made many great speeches, and we have heard quoted
  1932
  recently a speech he made in Manchester. He made another speech in Manchester which completely supported the policy I am now outlining. He was being entertained to dinner, and, replying to a toast, he said that he had not been quite convinced by his experience at the Ministry of Munitions that Socialism was possible, but he had very nearly been convinced, and he was bound to say that he considered that the achievements of the Ministry of Munitions constituted the greatest argument for State Socialism ever produced. We believe that this country will have to act more and more on these lines for economic and technical reasons, and that it is urgently necessary, in the national interest, that the steel and chemical industries of this country should be nationalised before the end of this Parliament.
  Mr. Speaker: Nationalising these industries means legislation, and this Debate is on the Motion for the Adjournment.
  Mr. Ellis Smith: That is quite true, but I was only quoting an example in order to show that this is a contribution towards dealing with our serious economic position, and we are dealing today with capital investment. In conclusion, if we are to obtain the best results, there will have to be drawn up a national overall plan for conducting industry on the lines on which the coal, power and electricity industries are to be conducted, and in that way a greater contribution will be made to the revival of our national economy.
  6.43 p.m.
  Lieut.-Colonel Corbett: We have listened to a very interesting speech from the hon. Member for Stoke (Mr. Ellis Smith), and I think that none of us would disagree with him in advocating greater mechanisation of industry. I am quite certain that we all appreciate, as he does, the improvement in production figures which has been shown recently, but I do not think I could follow him into the argument on which you, Mr. Speaker, cut him short. It is a very good thing that all of us should praise this increase in output and give encouragement to the working men in the country. We cannot do better than that and recognise their efforts, but, at the same time, those of us who are responsible for understanding the situation must recognise the facts as they are.

  1933
  When speaking today, the Chancellor of the Exchequer outlined his targets, and the amount of money available in our national reserve in the sterling area. He showed us how it might be possible to make the balance of payments meet, by cutting down our expenditure on imports and by increasing our exports. But we should remember that these targets, if achieved, are only sufficient to make ends meet on the present bare standard of austerity, and that, therefore, they are nothing to become very enthusiastic about. We hope that the increase in production will go on until ends meet, but we must also hope for a very considerable improvement in our balance of payments, so that we can raise the standard of living as a consequence. Certain dangers to our export programme have been touched upon today. We all recognise that we cannot be certain of holding the export market in particular goods. Therefore, it is most important that we should do all we can to increase production at home.
  I want to say a few words about agriculture, in particular, and about coal-mining. I do not pose as an expert, but there is a coalmine in my constituency. There is one factor which is common to the needs of the people in my constituency which concerns both coal-mining and agriculture—housing. Both these interests are very much affected by housing. The local authorities have had their housing programmes severely curtailed in recent times, which will jeopardise increased production in these two industries. In spite of the fact that we were told that the Government would pay special attention to the housing of agricultural workers and miners, a circular letter was suit round to local authorities in November, in which it was said:
  "(i) The Government policy aims at the completion of houses already in progress in the shortest possible space of time, and
  (ii) bringing the programme into balance by the restriction of new contracts and the elimination from existing contracts of those houses on which no effective progress is being made,"
  The result of that programme, at any rate in my part of the world—and, as I know, in other places also—has been to curtail building by stopping the making of new contracts and the issuing of licences. It has had a very serious effect on the programmes of the local authorities.
  1934
  Both the rural district councils which I represent have got out programmes which, I must admit, were slow in taking shape. Considerable negotiation, particularly in rural districts, is necessary between the local authority and other bodies, such as the N.F.U. and the county agricultural executive committee, in order to discover just where these houses are required. Eventually, these local authorities produced their programmes. They have plans to set in motion building by various contractors who would move on from one place to another. They would, for instance, build four houses in one village, half a dozen houses in another village, and so on, and would keep a certain number of men in constant employment.
  I have had a careful look at these programmes, which seem to me to be quite reasonable, but they are entirely dependent on the early issue of licences, and the early approval of tenders by the Ministry. The present state of affairs is that those builders who are actually building houses, have been stopped by the withholding of any further licences this year. I would urge the Minister to look into this matter, and to allow these contracts to be made in good tune, so that the building programmes can go along smoothly, and without first bringing men into employment, then throwing them out of employment, and then, again, perhaps, later on, bringing them back into employment, as, otherwise, we shall have an uneven situation, and no continuity.
  I will now say a few words about agriculture. It is extremely important that we should have an element of price incentive in our programme of production. The hon. Member for Nelson and Colne (Mr. S. Silverman) interrupted my right hon. Friend the Member for Aldershot (Mr. Lyttelton) during his speech, and a considerable discussion took place about the high prices existing in America. It is well to bear in mind that the high food prices in America, whatever be their cause, whether it be increased exports or increased home consumption, have resulted in a total increase of agricultural produce in America. It has been higher during recent years than ever before in history.
  Major Bruce: Would the hon. and gallant Gentleman be

  1935
  good enough to compare that fact with the unemployment figures in America, which are at the moment, I believe, 2,600,000?
  Lieut.-Colonel Corbett: That has nothing to do with the total amount of food produced in the agricultural areas of America. The output is bigger than it has ever been before, and I have no doubt that the numbers employed are also bigger. I say that advisedly, because our policy here is one of agreed prices. I do not advocate a free market in agriculture, but I recommend the Government to recognise the necessity of relating demand to the price level. Our two most essential products in agriculture, at the present time, are wheat and potatoes, and they are about the two least profitable to grow. That also should be borne in mind by the Government. The price should be related to the demand, and, by adjusting the price, we are able to adjust production.
  The Government should also bear in mind the result of higher prices on employment in the industry. The agricultural industry is still working at about the bottom wage level. Apart from the fact that there are no houses in which to put agricultural workers, it is important to remember that, while the wage offered in agriculture is at the bottom of the scale, it is unlikely there will be any willing increase in the numbers going into that industry.
  I would now like to mention a sideline of agriculture, in which I am particularly interested—grass conservation. It is rather an interesting topic, and it shows only one of many sidelines of agriculture which can be increased by capital investment, and the improvement of machinery generally. I say, advisedly, that it is only one of many sidelines, but I do not propose to go into the others. However, we can increase our output very considerably by giving attention to new and better machinery. Our manufacturers need every encouragement they can receive and this of course entails increased capital expenditure, but at the moment in many lines of agricultural development we are entirely dependent on imported machines.
  Turning to dried grass—rather a dull topic—I would compare its value with
  1936
  another crop, oats. We feed a great deal of our livestock on oats at the present time and it is rather interesting to quote some figures I heard given in a lecture at the Farmers' Club the other day by Dr. Slade. According to him, an acre of dried grass will produce 800 lb. of proteins as compared with an acre of oats which produces 180 lb. of proteins, and the same ratio holds good for starch equivalent. That means if you grow an acre of oats as opposed to an acre of ley you can produce about three to four times the feeding value. We grow in this country over three million acres of oats and if we grew leys and dried them we should increase the total production of feedingstuffs by four times, and that would be very considerable when you are considering a matter of two or three million acres.
  We could of course develop some of the extremely poor pasture which exists, instead of the land now growing oats, but either would greatly increase the value of feedingstuffs. I would not advocate doing away with oats entirely because some of the Scotsmen would be hard hit if we asked them to eat grass instead of porridge. It does show, however, what a remarkable increase in output could be achieved by this form of agricultural production, but it does need a considerable amount of capital investment. I believe that for every 100 acres of dried grass one grows, one has to be prepared to invest about £1,500.
  I have fully expended my time and I would like to emphasise that agriculture above all needs houses so that it can attract new workers, and it needs a policy for incentive through the price structure to encourage farmers to grow the right crop, which would make it much more profitable for them to grow wheat instead of barley. We must encourage more labour, and we need a policy for the improvement of agricultural machinery which, at the moment, is extremely backward in this country.
  6.54 p.m.
  Mr. Clement Davies: There have been very few speakers tonight. It was right that the Chancellor of the Exchequer should take up a considerable amount of time, and it would have been wrong for us to have adjourned until 20th January without having heard his statement. We are rising for

  1937
  the Christmas Recess after having heard today two statements which have not been very cheerful. There was the very sad statement which the Foreign Secretary had to make earlier in the day and there was the statement by the Chancellor of the Exchequer. While, very rightly, the right hon. and learned Gentleman has paid tribute to the great efforts we have made within the country, the position we are now in, so far as our foreign trade is concerned, is not only grim—that is the word he used—but really frightening. Let us just consider what it is.
  In spite of the fact that great efforts were made by the Chancellor of the Exchequer—whom we all respect—during this year as President of the Board of Trade, nevertheless our adverse balance is running at the present moment at the rate of £600 million on the wrong side. It is now proposed to make cuts in our capital expenditure within the country of only £130 million, compared with what we have been expending in 1947. It is £180 million compared with the proposals that were in existence for 1948, but compared with what has actually been done in 1947—which was the figure one really should have taken—it is a cut of only £130 million.
  Therefore, what one wants to know is how this £130 million cut in capital expenditure can be related to what we may get in increased exports to bridge this tremendous gap which still runs at £600 million. It is right that we should acknowledge the tremendous efforts that have been made in the country since the war terminated. Six million people have been returned to ordinary peace-time avocations from war production and from the Services, and there are very remarkable figures set out in the beginning of the White Paper with regard to achievements.
  We knew before the war ended that we would be short of materials and labour, and we knew that after the war, as the Chancellor of the Exchequer has very rightly shown, we would have to export far and away more than we exported before the war. Very rightly, now, he has given figures showing how much we were short before the war in exports of what was necessary to pay for our imports. There has been a deterioration of the position over a number of years. This
  1938
  deterioration has been due to the intense nationalism which beset the world and the raising of barriers and establishing of quotas in country after country, when really what was needed was an extension of trade and an opening up of opportunities for people to get together and trade together. We knew what the position was before the war and we knew, therefore, that greater provision would have to be made by this country for our exports.
  My complaint with regard to the Government is that when the war ended they had greater powers of control over materials and finance than had ever been given to any Government previously and they could, therefore, have guided the country in the use of those materials and of that finance far and away better than they did. They have recognised the position today. My regret is that they did not recognise it very much earlier. They have not been without warning. There was a warning given in a Debate as long as 12 months ago. Then, again, there were the two White Papers in February. It was emphasised that we had a limited number of people and limited resources. What was worse was the fact that there was a possibility that the resources in materials, instead of increasing, would decrease owing to the danger of our having to do what we have since done—cut down our imports. Cutting down imports will never solve anything, except the immediate problems, and what is really wanted, of course, is an extension and not a restriction, if it possibly can be managed.
  We have to deal with a situation in which we have limited quantities. Therefore, one should have related our internal position to our external position, which is just what the Chancellor of the Exchequer suggested today we should do. There was a warning, again, which came suddenly and rather terrifically at the beginning of August, when our American and Canadian resources collapsed over night. I know that that is somewhat of an exaggeration, but yet that is what it really was. The Chancellor himself then began to say, "I have got to arrange for a cut in capital expenditure"; but not until December, not until we are about to adjourn for the Christmas Recess, do we get a White Paper about that. What is worse, when he originally had this in mind, the figure that he gave us was not

  1939
  a £130 million cut, but a cut of £200 million.
  Let me deal with that shortly. I have made the point that the Government have been very dilatory in doing this. I recognise the difficulty of deciding where the cuts should fall. It is a frightfully difficult problem for anybody to settle. The Chancellor asked for constructive suggestions. It is almost impossible for somebody outside the Government without knowledge of all the facts and figures and of what is happening, not only in Government Departments and amongst public bodies, but amongst private companies and firms and individuals, to make any constructive suggestions, to say, "Cut that, but do not cut this." Quite rightly, there is bound to be a tremendous fight between Departments, as to which shall maintain its position and which shall not.
  I am glad the Minister of Health will be replying. I think that one of the most difficult of all problems is the one with which he has to deal. The housing shortage here is still the greatest social sore, and the one that causes more distress than anything else—one which, of course, ought to have been put right years ago. There has been a sort of general statement that, of course, we must have houses in agricultural areas—we all agree about that—and that we must have them near the mines; but, really, the shortage of houses has a great effect upon production, and upon the mobility with which men can be moved about. So I really would not venture to offer any suggestions to the Minister, because he has all the facts and figures, and we have not.
  Consider machinery. The Chancellor has said that he proposes to lessen the quantity of machinery that shall be available for internal use in this country by some £40 million or £50 million, or even more, and use that for export, for this reason, that it is more saleable than almost anything else. To deal with the immediate, short-term problem, we could not have anything better to sell, and so buy back raw materials. But there is tremendous danger in it. We may beat up our exports for the next two years, but what is to happen afterwards? We have not only to beat up our exports in the next two years, but we must have a
  1940
  continuous flow of those exports over a whole number of years; and if we are to sell the machinery to somebody else to use, and lower our own technical position, we shall be committing suicide, only by a long process instead of a quick one. I say this to show the difficulty of the Government in making these cuts. The Chancellor gave us a whole list of figures, and I thought he was going to put before us a national balance sheet. I ask that that should still be done. Not only would it be of benefit to the Government——
  Major Bruce: The right hon. and learned Gentleman was referring to machine exports from this country. I should like to ask him whether he is aware that our machine exports before the war, in the last five years, averaged approximately £56 million per annum. To what figure would he wish to limit our machine exports now?
  Mr. Davies: I was not suggesting any limitation. If the hon. Member had followed me——
  Major Bruce: I was following.
  Mr. Davies: It is about time that the hon. and gallant Member, who has been in the House two years now, got out of the kindergarten class. He is always asking childish questions and making childish interruptions.
  Major Bruce: If my question was so childish, why could not the right hon. and learned Gentleman answer it?
  Mr. Davies: If people understood more, they would respond. What I should have liked the Chancellor to do—I do not know whether the Minister of Health will be able to do it—was to relate this cut of £130 million to the £600 million gap. In other words, what do the Government hope to gain in exports from the production of consumption goods, and turning materials and resources and labour from capital goods into consumption goods to be available for export? Some of them, of course, will have to be available. There must be some estimate as to the amount. We should like to know what it is. It cannot amount to £130 million. There is bound to be unemployment here and there, for we cannot get men to turn from one thing to another quickly, and we cannot get goods switched from one direction to another quickly.

  1941
  One would like to know what is the relation between the cut in the expenditure and the improvement that there ought to be in our export position. Whatever it is, we shall still be left with an adverse balance which is really frightening, and I gather now, from the admission made by the Chancellor, that unless something almost unexpected occurs—unless some manna from Heaven falls—by the middle of the year our resources that we can use will have gone. What is the proposal of the Government for dealing with that situation? That is what we really want to know.
  This is not a party matter. It is a matter for the whole nation. The Government can do a great deal and the Government should have done more than they have done, with their guidance, with their control over finance and their control over resources. However, the result can come only from the people as a whole. It is upon that note that I should like to end—that it is our duty, no matter what our party, to gather together for this one purpose of pulling the country out of the economic mire in which it is at present.
  7.9 p.m.
  Sir Richard Acland: I am sure the right hon. and learned Member for Montgomery (Mr. C. Davies) will excuse me if I postpone for a moment taking him up on one point, that in which he said that the difficulty of raising our exports to prewar level was primarily due to the raising of barriers, of nationalism, all over the world. I hope later to offer him a rather different explanation; but I postpone that, because I should like to begin with one comment on the speech of the right hon. Member for Aldershot (Mr. Lyttelton). I know that the days have long since gone by when hon. Members of this House made their speeches almost entirely in quotations from the Greek and Latin classics strung together with a few words in Anglo-Saxon. Nor would I wish to pose as a classical scholar, but when I heard the right hon. Gentleman castigating various Ministers on this side of the House—and, indeed, when I have recently read speeches from other right hon. Gentlemen on the Opposition Front Bench—I am most forcibly reminded of one of the very few Latin phrases I know, which was, I think, applied by Cicero to the Emperor
  1942
  Nero—and if it was not Cicero and Nero, it must have been two other Romans——
  Mr. Harold Macmillan: There was about a century between them.
  Sir R. Acland: The phrase, by whoever it was used, and to whomsoever it was applied, runs thus: capax imperii, nisi imperasset, on which I hope the right hon. Member for Bromley (Mr. H. Macmillan) will improve when he comes to reply. It means that, listening to them, we would think they were capable of governing this country, had we not already had a dose of their kind of government. Beyond that, I would say only that one has to listen to such Opposition Front Bench speeches very carefully in order to discern that they contain no constructive suggestions at all, and do not answer the question asked by my right hon. Friend the Minister of Health as to which capital expenditure should be cut. I will not presume to anticipate the answer the Minister of Health will give to the charge that this Government did not sufficiently pay attention to the economic weather signals.
  I believe I am right in saying that, when Members return to this House after being, as we put it, refreshed by peculiarly intimate contact with the electorate, it is reasonable for them to offer the House one or two observations based upon their experience; and, of course, if the observations are relevant to the subject under debate, so much the better. I should like to do so, if I may, in this sense, that I hope I speak without too much modesty in saying that perhaps the position in Gravesend is better now than it was a few weeks ago. But undoubtedly, a very few weeks ago, the ordinary people of Gravesend shared with the ordinary people of this country as a whole a very grave misunderstanding—indeed, an almost complete lack of understanding—of the real causes of what is hitting us as a country now. There is almost no appreciation of the facts which lie behind the long-term trends in import and export, to which the Chancellor of the Exchequer drew attention.
  That is important, because we are here dealing with a subject on which Members of this House as individuals are peculiarly qualified to make a real contribution to

  1943
  the solution of the difficulties now confronting our country. For it is indeed true that, if ordinary citizens know what are the causes of their difficulties they will respond with enthusiasm to the demands made upon them; whereas, if there is some mystery, some vagueness as to the real causes of what is happening, then appeals may be made but the response is likely to be very ambiguous. In all this matter, I am sure it is important to differentiate sharply between a whole host of circumstances, which have combined to exacerbate our difficulties up to the point of crisis now, and the simple, stark, root cause of the real difficulty.
  I should like to mention one or two exacerbating factors, such as the unprecedented weather which has afflicted Western Europe in 1947. That has been a very powerful exacerbating factor, but is in no sense a root cause of the present difficulties. Then there was the industrial lethargy of the 20 years which the locusts consumed between the wars. It is very tempting for hon. Members on this side of the House to look at those years, and to see the tragedy that at least one-half of the capital re-equipment now needed could have been carried through in those years if decaying private ownership had not laid its dead hand upon the free enterprise of the British people. But yet, that industrial lethargy is only an exacerbating factor and not a root cause of what we are now suffering. Then there was the war, with all its aspects—destruction here, destruction abroad, the sale of foreign investments. But even when all those are added together, the fact remains that the war itself is only an exacerbating factor and in no sense the root cause of our present difficulties.
  It is of the utmost importance for this whole country to appreciate fully that the root cause of our present difficulties consists, quite simply, in the fact that we are no longer a privileged nation. Throughout the whole of the 19th century we were not only a privileged nation, but the outstandingly privileged nation of the whole world. We, before all others, had made the unique discovery of how to use and to operate great power-driven factories. The whole world was obliged to come to us, bringing us food and raw materials in abundance, because there
  1944
  was nowhere else in the world where from anybody could obtain manufactured goods. Upon that basis our industrial structure was built up, and upon that basis 48 million people came into being in these islands. That basis, the uniquely privileged position of our islands—has now, and inevitably, passed away. I suggest to the right hon. and learned Member for Montgomery, it is that falling away in our uniquely privileged position, more than the mere erection of trade barriers, which is the ultimate explanation of the steady drop in our exports in prewar years.
  There is a simple, one-word change in the situation which, in my opinion, explains it all. A hundred years, even fifty years, ago the whole world was desperately short of the things we had to sell: today, the world is desperately, and increasingly, short of the things we have to buy. That, I believe, is the beginning middle and the end of it; and the 20 years of lethargy, the war itself, the weather of 1947, and many other factors have only served to exacerbate that great root cause up to the present point of crisis. However, it does present us with a desperately serious situation. I am by no means saying this in accusation of anybody else who has not realised this situation in the past. I am saying it much more in confession that I, myself, did not realise how powerful the operation of this fundamental cause of our difficulty would be.
  I suggest to hon. Members opposite that there is at this moment no crime against this nation which is greater than the attempt to persuade the people of this country that all their sufferings are caused, by this Government. Criticism, particularly if it is constructive, is what we ask for and expect, but for a whole political party to seek political advancement in the present situation by deliberately attempting to persuade the people that the single root cause of our present difficulties lies in this Government, is a political crime. Our present situation is far too serious to allow anyone to indulge in the party political game on that scale. While appreciating and rejoicing at the internal signs of increasing tempo and the improvements in production of all kinds, let us not escape from the fact that we shall be very lucky if, in the next 12 or 18 months, we do not step over the edge of that ghastly watershed, on the other side of

  1945
  which lies the spiral of reduced rations, reduced vitality, reduced output, reduced exports, reduced purchasing power abroad and, again, reduced rations, reduced vitality, and so on. Let none of us forget, and let hon. Members opposite who have been making speeches that the difficulties are being solely caused by this Government not forget, that the whole of this country must face the serious risk of that situation.
  Hon. Members opposite may think that this is a pretty grim thing to be said by a Member of this party. They may think that it will bring them political comfort, but I suggest just the opposite conclusions follow. The conclusions I draw from our present situation is that the position in which this country inevitably finds itself is so serious, and the risks in front of us are so great, that in the next 12 months or so we shall be obliged to take all sorts of measures which hon. Members opposite will dislike a great deal more than some of the measures which have already been taken.
  The Chancellor of the Exchequer spoke of our doing the maximum possible within the "mobility and interchangeability of labour that are now available." I am sure he will agree with me that one of the things which is going to prove most necessary in the difficult months which lie ahead, in a world situation which is liable to change any moment with almost kaleidoscopic rapidity, is to increase this mobility and interchangeability of labour. That is not a mere phrase. It is something which has to be interpreted into the living experience of tens of thousands of men and women and their families. A greater interchangeability and mobility of labour calls for courage, adaptability and a willingness to face up to unorthodox situations, and to do things which at the present moment people do not contemplate doing very readily. These things are going to be demanded more and more from the ordinary people in the next 12 or 18 months.
  To make these demands upon our people, and to expect that there will be a response, makes it necessary that we shall not distribute quite so much in dividends and in big salaries, and so on. It makes it necessary that we shall severely curtail, not only the income of the people at the top, but the amount of money which they are allowed to spend on their
  1946
  immediate personal consumption. Something must be done in regard to those who are best off in our community before we can expect a new level of mobility and adaptability from those who are at the bottom of the industrial ladder. I cannot go further without stepping into realms which obviously demand legislation.
  I repeat however that the world forces which have been inevitably gathering around this country over a period of at least 50 years confront us now with difficulties which we shall not surmount, except by all sorts of little people having the courage and the faith to take unconventional, unorthodox and unusual actions, even to the point of individual sacrifice in all sorts of different ways. If that is to be done, and if that is to be asked for from the little people, I am sure that the Government will have to say that they are prepared to introduce all sorts of unconventional Measures to make sure that there is something more like equality of sacrifice at all levels in all that lies ahead of us.
  In conclusion, I come back to the main point I wanted to make, namely, that there lies upon Members of this House, during these next few weeks when most of us will spend some time with our constituents, the supreme duty of trying to explain to the people of this country whence our difficulties have come. I even go to the length of appealing to hon. Members opposite that in this time of national difficulty and crisis, while they should criticise constructively, they should repudiate their steady propaganda of the last 12 months or so that it is this Government and their Measures which are the root cause of the trouble now confronting us.
  7.29 p.m.
  Mr. Molson: It reminds me of old days to hear the hon. Member for Gravesend (Sir R. Acland) once more addressing this House. He could have done very little to cheer up the electors of Gravesend, if that was the kind of speech he made during the time of the by-election.
  Sir R. Acland: Certainly, it was.
  Mr. David Jones: And he won.
  Mr. Molson: I make no complaint about that. I welcome speeches from the other

  1947
  side which face the gravity of the situation. I very much regret that, since he has fallen from office, the right hon. Member for Bishop Auckland (Mr. Dalton) suggested in a speech in the country that the difficulties of the country are now perhaps nearly over. I, therefore, welcome the speech of the Chancellor of the Exchequer this afternoon and also the general tone of the speech made by the hon. Member for Gravesend. When he rebuked my party for having played what he called the party political game, I thought that here was Satan rebuking sin. I remember the time when the dangers of this country were far greater than they are now, and during an electoral truce the hon. Baronet organised a party of his own in order to break down the unity of the country.
  Sir R. Acland: I would at some time like the opportunity of showing the hon. Member some of the letters we received from all over the world from soldiers, sailors and airmen who took part in the victories we fought and won at that time, stating that the one thing that enabled them to go on with their efforts was the realisation that there were people in this country who wanted to have the same kind of country after the war as they did.
  Mr. Molson: I do not think that the hon. Baronet can expect me to read all the letters he receives. I will respond to one of his requests by trying to make constructive criticisms on the White Paper under discussion. On the second Finance Bill of 1946, I asked the then Chancellor of the Exchequer how he anticipated financing the large capital programme which was contemplated by the Government. I reckoned that the housing programme of 4 million houses at approximately £1,000 each, spread over 12 years, would amount to £330 million annually, and that the steel programme for reconstruction was £22½ million spread over 7½ years. The Minister of Transport told us that he anticipated an expenditure on roads amounting to £80 million in the first year.
  I asked the Chancellor also how he thought it would be possible for British industry to produce the vast amount of capital goods that would be required. Capital goods are normally produced out of the savings of individuals and com-
  1948
  panies, and it was quite clear that the reconstruction programme to which the Government had set their hand vastly exceeded any savings which had been available in the past. The White Paper is a belated but frank admission by the Government that in this most vital and important feature of planning they have tried to get much more than a pint out of a pint pot. I hope that Members of the Government have read a number of recent articles by professional economists, and particularly a book by Mr. Roy Harrod on, "Are these hardships necessary."

  ROYAL ASSENT
  Message to attend the Lords Commissioners.
  The House went; and, having returned.
  Mr. SPEAKER reported the Royal Assent to:

  1. Finance (No. 2) Act, 1947.

  2. Emergency Laws (Miscellaneous Provisions) Act, 1947.

  3. Medical Practitioners and Pharmacists Act, 1947.

  4. Pensions (Governors of Dominions &c.) Act, 1947.

  5. Public Works Loans Act, 1947.

  6. Coatbridge Burgh Extension &c. Order Confirmation Act, 1947.

  CAPITAL INVESTMENT (WHITE PAPER)
  Question again proposed "That this House do now adjourn."
  7.45 p.m.
  Mr. Molson: As I was saying, in the Debate on the Second Reading of the Finance Bill in 1946 I pointed out that of the national income such proportion as is currently spent by individuals is ordinarily spent upon consumption goods, and that the most that can be invested in capital goods is the total amount of the national savings. If an attempt is made to carry out more capital works than can be covered by the total amount of savings, the effect must be internal inflation. In that speech I was several times interrupted by hon. Gentlemen opposite who kept on talking about materials and labour being the important thing and not money. I tried unsuccessfully to make it plain that I was only using money in the sense of

  1949
  the common denominator, by which it is possible to measure the total amount of labour and materials required for any particular goods.
  Nearly two years afterwards we find two things. First, we find in the country a state of imperfectly suppressed inflation, and it is quite vain for the hon. Member for Gravesend to expect us not to say what we believe to be the truth about this internal inflation, namely, that it is due to the unwise policy which has been followed by the Government. The other thing we find is that, at long last, a White Paper has been issued in which the Government now admit that, in point of fact, they have undertaken more than it was possible for them to complete. This has occurred in the case of a large number of industries, and perhaps the most notable of them is the building industry. In paragraph 4 the Government say:
  "The volume of new investment undertaken must be brought into proper relationship with the reduced supplies of materials, industrial capacity and manpower that we can afford to make available for this purpose."
  I would have preferred them to admit quite frankly that in the course of the last year in particular they have actually tried to carry out works far in excess of what it was economically possible for the country to perform.
  I would say to the Economic Secretary to the Treasury, whom I should like to congratulate on the extremely responsible office to which he has recently been promoted, that it would have been a good thing if, on the occasion of that Debate on the Finance Bill, the Chancellor of the Exchequer of that time had been good enough to pay attention to the request I humbly put to him from the back benches here to consider the problem of all the vast capital programme which different colleagues of his had endorsed. Had he done so, he might have foreseen that two years after, he or anyone else responsible for the economic policy of the Government would find himself in difficulty.
  I certainly cannot be accused of having no interest in the modernisation and expansion of British industry. During the war some of my hon. Friends on the Tory Reform Committee and I produced a book in which we pointed out how very inadequate is the industrial equipment of this country as compared with that of the United States of America. The limit of
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  what can be done is, in the first place, the limit of the total savings available; and, secondly, of the capital goods industries. What I had hoped would be done in the years immediately after the war was that, to a very large extent, consumption goods would be sent into the export markets in order to pay for the food and the raw materials which we have to import, and that, to a great extent, our heavy engineering industries would expand and modernise the capital equipment of this country.
  Of course, that was conditional upon there being high production and low consumption by the people of this country, and so, in certain White Papers and especially in the Economic Survey for 1947, the Government propounded a most excellent principle. They said there must be no reduction in hours unless it was accompanied by a corresponding increase in production, and they urged upon the trade unions that they should not at present press for higher wages. The hon. Member for Gravesend can hardly blame His Majesty's Opposition if we point out that ever since that White Paper was issued in February of this year, the policy of the Government has not in any way coincided with the principles that were laid down. In all these months there has been a steady stream of negotiations in one industry after another, and in nearly every case that has resulted in a reduction in hours and in many cases an increase in wages. All this is contributing to this internal inflationary pressure which now exists in the country. There has not been that increased production which is desirable, and the increase in wages has undoubtedly contributed to the difficulty to which the Chancellor referred this afternoon when he said that since the sellers' market is now coming to an end, the question of price is becoming of steadily increasing importance in the export markets.
  Now, belatedly, we have this White Paper which announces a restriction in the capital investment which is proposed. In the light of this White Paper, how absurd appear such speeches as were made by the former Chancellor of the Exchequer and the present Minister of Transport during the Second Reading of the Transport Nationalisation Bill, when they spoke about the large-scale rebuilding of the great London termini in order

  1951
  that they should be more cheerful and attractive places. At a time when it is quite obvious that the building industry is already overstrained, and when all the Government departments are being asked to accept economies in even the most urgent and necessary work, it is hardly likely that we shall hear anything more of the rebuilding of the London termini.
  I am glad to see that the Minister of Health is now present. I note that the actual reduction in capital investment which is proposed is now £130 million and not £180 million. It has been said that he is responsible for the very small cuts that are proposed in the housing programme. I would like to ask him how it is intended administratively to ensure the maximum number of houses being built for the benefit of the agricultural and mining industries, when for very many months ahead the building industry will be fully occupied in building the houses which have already been begun and for which contracts have already been made. I know it is now the accepted policy of his Department to try to concentrate upon those two kinds of houses, but I do not see how that can be reconciled with what we have been told about the way in which the existing housing programme is to continue without modification. Quite obviously, the present housing programme has not yet resulted in any great success so far as the agricultural areas are concerned. I believe only 3,000 new houses have been built for agricultural workers up to the end of October, 1947.
  Mr. Collins: The hon. Member said that only 3,000 houses had been built for agricultural workers so far. It would be more correct to say, that about 30,000 houses had been built for workers in agricultural areas, any one of which could have qualified for the additional subsidy, but that only 3,000-odd agricultural workers have been found to go into those houses.
  Mr. Molson: The point is this. An especially large subsidy is provided for houses to be occupied by agricultural workers. Only 3,000 houses have qualified for that higher subsidy up to the end of October, 1947. It appears to be a reasonable deduction to draw from that fact that if the local authorities had
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  been able to draw the higher subsidy as a result of houses being occupied by agricultural labourers, they would have done so.
  Mr. Bevan: This point has been raised over and over, again, and as the hon. Member for the High Peak (Mr. Molson) has already informed me privately that he may not be able to be here later, perhaps I may be allowed to put the point to him now.
  Mr. Molson: I am obliged.
  Mr. Bevan: A large number of houses—between 30,000 and 40,000—have been completed in rural areas, and a very much larger number are under construction at present. The additional housing subsidy is given to a local authority if a house is occupied by a person belonging to the agricultural industry as such. The additional subsidy is given in order to encourage local authorities to provide houses for that purpose. The figure of 3,000-odd is obviously a reflection of the fact that the local authorities in the rural areas, predominantly manned by individuals belonging to the party opposite, have not selected more agricultural workers.
  Mr. Molson: Obviously the right hon. Gentleman does not expect me to take seriously his rather unworthy gibe——
  Mr. Bevan: Why not?
  Mr. Molson: Let me finish my sentence. He cannot expect me to take seriously his rather unworthy gibe about the membership of the local authorities. He need not try to put all the blame on the local authorities.
  Mr. Bevan: The right hon. Member for Aldershot (Mr. Lyttelton) has quoted the circular that I sent out, and the hon. Member himself is a member of the Central Housing Advisory Committee. He knows that the authorities responsible for letting houses are the local authorities, which could have let houses to agricultural workers if they had been in greater need than other workers.
  Mr. Molson: I see no reason to suppose that the local authorities have not been letting them to agricultural workers in those cases where they had built houses, and they were available for that purpose.

  1953
  Before this Government came into office, it was decided to try to increase the personnel of the building industry to 1¼ million workers. At that time the "Economist" took the view that that was a larger building industry than this country would be able to support. I see by the White Paper that it is the intention of the Government to reduce the size of the building industry. I hope that in the reduction of capital expenditure the Government themselves will set an example. I was sorry to see that it was not proposed in the White Paper to stop the building of new Government Departments in Whitehall. I think it would be an extremely good example to set to the country if the Government stopped the building of the new House of Commons. The accommodation we have at present is quite adequate for us, and I should have thought that it would have been possible to postpone constructional work on the new House until other more urgent necessities had been met. I hope that, so far as possible, there will be great economy in new construction for the Ministry of National Insurance. There is also great scope for further economy on roads. The wild figures which the Minister of Transport gave last year have largely been abandoned, but I think there is still scope for more economy. Certainly, it is my impression that in my county it seems quite unnecessary to straighten and widen roads at the present time.
  In conclusion, we must note that despite all that has been done, when the present policy of the Chancellor has been carried to success, when the target for his exports has been reached—if it ever is—and reductions have been carried out in imports, and capital expenditure has been cut in the way that is proposed in the White Paper, we shall still have an unfavourable balance of trade with the North American continent of over one billion dollars per year. Those are the facts of the situation which the country has to face, and I feel that the White Paper is a belated attempt to reduce the capital investment policy of the Government to something more in accordance with our resources. It is plain that it has not gone far enough, and that in the next few months we shall be made even more painfully aware of the fact that the policy of this Government has been too little and too late.
  8.5 p.m.
  Mr. D. J. Williams: I hope that the hon. Member for The High Peak (Mr. Molson) will forgive me if I do not follow his speech in detail. He made a number of interesting and controversial points, but he also made some exceedingly trivial and frivolous points. I may make a few comments on them later, but I realise that my time is limited, and that there are more Members of both sides of the House who wish to take part in this very important Debate. I want to refer to certain special aspects of this problem of capital expenditure, and to ask the Government to give special attention to them, but before I do that, I want, if I may, to make a few general observations on the subject we are debating, and to relate them to the general economic Problem which provides both the reason and background for this Debate.
  Capital expenditure is not something that exists in a vacuum; and it cannot be considered in isolation. It must be related to the structure and pattern of our whole economy, and considered in relation to the background of our general economic situation. During the last few months we have had several Debates on the general economic crisis, and many proposals have been put forward for dealing with it. Already, the Government have taken a number of very drastic steps. They have decided to cut down imports both of food and raw materials; they have decided to denude the home market of many essential goods in an effort to close the gap in our balance of payments. There is no doubt that these cuts constitute a severe strain on the British people, but however onerous they have been, it is evident that they have proved inadequate to meet the crisis. The crisis has not yet been overcome, and shows no signs of being overcome. There is still a yawning gap of about £600 million in our balance of payments, and the remnants of our gold reserves are leaving the country at an alarming rate.
  It is clear that even more drastic steps are needed. Some time ago we had a statement from the Chancellor that our capital expenditure would have to be reduced by £200 million. Later, that figure was amended to £180 million, and now it is given as £130 million. We have now had the White Paper which gives us the reasons for the cuts, breaks down the global figure, and shows how and where

  1955
  the cuts will have to be made. These cuts in capital expenditure are very serious, and must have far-reaching effects on our whole economy. This step is probably the most serious yet taken by the Government to deal with the present crisis. The White Paper has already caused widespread concern and even consternation, and it calls for very serious consideration, especially by this House.
  Two arguments have been advanced in favour of the proposal to cut capital expenditure. First, that the spending of capital has been in excess of our resources; and, second, that it is an inflationary factor and intensifies the inflationary pressure. I agree that there is a great deal of truth in all this, and that we must limit our expenditure in accordance with our resources. But we must take very great care to maintain some sense of proportion in these things and to be careful that in any proposals we make we do not reduce our productive capacity. To do so would be a major blunder, which would have incalculable consequences. It might indeed jeopardise our whole prospect of recovery.
  The White Paper refers to the effects of the war upon our capital equipment. There is no doubt that the war caused enormous damage to our capital structure. We have had presented to us the figures about the effect of the war in physical destruction, in under-maintenance and in the postponement of essential schemes. The war placed a terrific strain upon our economy, a strain which was almost beyond our strength. We have to remember, however, that our economic difficulties did not start with the war. They go back to the wasted years before the war, and some of them have very ancient roots. Long before the war our economy was in a most unhealthy state. For years we experienced a serious decline in our basic industries—coal, textiles, tin plate, shipbuilding, iron and steel, agriculture, and many others. Those industries were starved of capital. They contracted year by year and, for a whole generation they suffered from technical stagnation and paralysis.
  Although, in the interwar years, our basic industries were starved of capital, there was plenty of capital for luxury activities, such as cinemas, hotels and
  1956
  race tracks. It was to that state of affairs the late Lord Keynes referred when he said that we were developing our basic industries as the by-product of a casino. We are now suffering not simply from the aftermath of war, but from years of neglect to equip our basic industries properly. For that omission the party on the other side of the House has to bear a very serious responsibility. There is now an enormous accumulation of work to do. These accumulated arrears represent a prodigious task. This is a matter of the greatest urgency and should have a very high priority, even in our present straitened circumstances. We cannot postpone this task indefinitely, because to do that would hamper our economy and might even make recovery impossible. However difficult the present situation, we must have some thought for the morrow. This is an essential feature of planning, and capital cuts need very careful planning.
  We cannot scrap capital expenditure without regard to the serious social and economic consequences of such action. One criticism I have to make of the White Paper is that it makes no attempt to assess or to estimate the social consequences of the cuts. The Government cannot afford to ignore that very serious aspect of the matter. Neither can this House. Those consequences are many, and serious. I want to refer to three of them. The first is housing, which is one of the most serious problems of our day. I agree with the right hon. and learned Member for Montgomery (Mr. C. Davies), who said that the housing problem was a running sore. It is responsible for a vast amount of human suffering among our people. Moreover, it reduces what the economists call the mobility of labour. I do not like that expression. I have seen vast numbers of the Welsh people uprooted from their native land and made mobile for jobs in other parts of Britain.
  We need large numbers of men in the mining industry and in agriculture, but because of the serious shortage of houses in mining and agricultural districts we cannot get the men. I am pleased to notice that the Minister of Health is present. When he replies to the Debate I hope he will say something about the special houses for miners which have now been allocated to certain mining districts. I do not know the number which has

  1957
  been allocated, but whatever that number is—according to the figures I have it varies from 4,000 to 15,000—it does not touch the fringe of the problem. In many large areas of the coalfield there has been no allocation at all. In the district of South Wales with which I am familiar we have about 20,000 miners and 40 pits, covered by ten local authorities. We have had the grand total of 20 aluminium bungalows for miners.
  I subscribe wholeheartedly to what was said by my hon. Friend the Member for Stoke (Mr. Ellis Smith) about the re-equipment of industry. We cannot afford drastic cuts in capital equipment for industry. Some of our industries are technically in a serious plight. A large part of our existing equipment is worn out and obsolete. Replacements are urgently needed. There is danger, if that replacement is postponed, of a still further deterioration in technical equipment. Industrial re-equipment is already proceeding far too slowly, and at all costs we must not allow our productive capacity to decline further.
  I should like to say a word about another serious aspect of the problem of capital cuts, and that is in relation to the development areas. I hoped that the Chancellor would have said something about that matter. Since the first statement was made about the cutting down of expenditure there has been widespread consternation in South Wales and in the other development areas. In 1945, the Distribution of Industry Act came into operation and brought new hope to the people of the development areas. It was hailed with enthusiasm, but much of that enthusiasm has now waned. There is a growing sense of disillusionment in every one of those areas. The Government have a vast programme of factory building with the object of providing employment in alternative industries and to correct the one-sided dependence on one or two basic industries in those regions.
  I am afraid that reality falls very far short of the promise. In Wales very few factories have been completed. On 30th June, 1947, only 23 Government-financed projects had been completed, and 20 privately financed projects. Others are in prospect The difficulty is said to be shortage of materials such as steel, timber, cement, plaster and components of all kinds. When the matter has been
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  raised with the Board of Trade we have always been told that the rate of construction has been slow because of the shortage of materials and the lack of essential resources. We find, however, that those resources have been going elsewhere. Between December, 1944, and 30th September, 1947, the Board of Trade approved 3,259 projects for new factories and extensions to existing factories. Of these 1,076 were in the Development Areas and 2,183 were outside the Development Areas. In other words, only about one-third of the entire factory building programme has been allocated to the Development Areas.
  The total cost of all these projects has been estimated at £161 million. The White Paper gives the figure £159 million, but the Statistical Digest gives £161 million. For the Development Areas the total is £82,672 and for the non-Development Areas £78,495. That means a tremendous concentration of factory buildings in the Midlands and the London area. There has already been far too much concentration in those areas. The Barlow Commission called attention to that and its recommendation has since been reinforced by our experiences in war, by the planning which has become an accepted thing since the war, and above all, by the serious shortage of labour which now exists everywhere outside the Development Areas. We who come from Development Areas find it difficult to understand why so many factories have been built and will be built in areas where there is a shortage of labour, whereas areas where there is a surplus of labour, like Wales, Scotland and Durham, are getting very few factories, and these factories are going up very slowly and very few have been completed.
  The Development Areas have been starved of capital for 25 years. They were the centres of the old basic industries which were allowed to decline for a generation. No new industries were established for almost the whole of the inter-war period. Vast areas became derelict and hundreds of thousands of people had to migrate in order to get a living. I agree that the Government have done much for the Deveolpment Areas. They have done much to repair the havoc caused by the party opposite, but still more needs to be done. It would be fatal—I stress this on the Government—

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  to cut down the factory programme in the Development Areas. I notice that a number of professional economists from our ancient seats of learning have been advising the Government completely to stop factory building in the Development Areas. I hope the Government will not pay heed to those siren voices. The economists——
  Mr. H. Macmillan: They are mostly in the Government.
  Mr. Williams: —are always wrong. I could give innumerable instances where they have been proved wrong in recent months and years. Their remedies are always theoretically perfect, but in practice they are disastrous. There seems to be a tendency on the part of our economists to live in ivory towers and to ignore the existence of real men and women and real social problems. They live in a world of theories, abstractions and statistics, and in their concern with arithmetical figures they forget the human figures behind them. To stop or to cut down the programme of capital expenditure in the Development Areas would have four disastrous consequences. [Interruption.] This matter is no joke. Some of us have lived through the tragedy of the inter-war years in the Development Areas. There will be four very serious consequences, and if the right hon. Gentleman the Member for Bromley (Mr. H. Macmillan) will have patience I will deal with them.
  Firstly, it would mean a tremendous amount of waste in the work already done and the material which has already been used. Already in South Wales we have a rash of abandoned industrial undertakings of all kinds, monuments to the private enterprise of the inter-war years. I do not want the factories now being constructed to be abandoned as a monument to failure to plan. I hope these factories now in course of construction will be completed, and completed soon. Secondly, to abandon this programme now will condemn a quarter of a million people to prolonged idleness and enforced unemployment. Britain is desperately short of manpower. For months we have been hunting Europe for labour, and these people in the Development Areas—men and women, ex-miners and others—can make a tremendous contribution towards the solution of the problem of production.
  1960
  Thirdly, it would break faith with our people. These people in the Development Areas made the Labour Movement. They laid the foundation for the Labour Government. They provided the cradle and the nurse for the Labour Party, the trade unions and the Labour Movement. They have been loyal to their traditions and their principles, in fair weather and in foul, and they have had more than their share of suffering. Fourthly, to cut down this programme now would react on the morale of the men in the basic industries, which are still in and around the Development Areas. This would do profound psychological harm, and we need the goodwill of these men more than ever.
  I urge the Government to proceed with the Development Area programme, to complete the present programme, to speed up the work and to give those areas a real priority which they have not had up to now. This will make a tremendous contribution to the solution of our economic difficulties. It will bring in more manpower, it will increase our productive capacity and it will help to close the gap in our balance of payments.
  8.27 p.m.
  Sir John Barlow: We have this afternoon heard from the Chancellor of the Exchequer a most comprehensive survey of the investment programme for next year. It was perhaps a little unfortunate that we did not have available in print the very extensive and interesting figures of our national balance sheet which he gave us; it was a little difficult to absorb them as they were given. The national balance sheet and the national investment programme are so closely interwoven that they should be considered as one rather than as two. From the information we were given this afternoon, it seems that the one essential thing to look for in this country is food. That is the one thing we must have to preserve life. We must manufacture a great many goods partly for consumption in this country and partly for export in order to purchase the raw materials and food which cannot be produced here. Undoubtedly we should all like bread and butter and plenty of jam, but the crucial point at the present time is to be sure of having sufficient bread during the next two or three years.
  The more information we get about the financial position of the country, the

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  more serious it seems to be. Most people would agree that the depreciation of plant and machinery in this country in the war period was greater than that of any of the other victorious nations. For one reason or another, it suffered to a far greater extent, and for that reason we have to make good far more depreciation, and the setback is much greater than other countries have had to face. It is suggested that capital investment for next year should be reduced by only approximately 10 per cent. on the figures which were put forward before. In reading through the White Paper, which must be of great interest to everyone, it would seem to me that the Departments which are concerned in most of this expenditure have been vying with each other in seeing how much of that expenditure they could retain, rather than seeing how much they could cut it to a minimum for the national wellbeing.
  I suggest that the way to build up estimates of capital expenditure is to put first the top priority industries such as agriculture, coal, and certain manufacturing industries, and then gradually to give a little to the other less important industries as time goes on. However, from reading the White Paper, one gets the impression that all the Departments have been asked to think of a figure for their expenditure and then reduce it as much as they could, which is not very much. We know a vast amount of expenditure is required, but, in the circumstances, I believe that the cut suggested is insufficient.
  We have a considerable amount of plant in second-rate condition in this country. We have a known amount of labour and a certain amount of materials, and it seems to me to resolve itself into a Chinese puzzle as to how this can be best fitted together to produce food first, consumable and export goods second, and then further goods which represent jam on the bread and butter. As the Chancellor pointed out, it is most difficult to arrange a change of labour from one industry to another without some unemployment; but there must be considerable alterations in order to change from a wartime economy to some semblance of a successful peacetime economy.
  I come back to the one industry which I regard as being of the greatest single importance at the present time, agriculture. I was glad to hear the Chancellor lay such emphasis on agriculture and food. I
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  believe the Treasury has at last come to recognise that it is the greatest dollar saver in this country. It is possible that we may be much more hard up for food in the next few months than we believe possible at present. Foreign exchange may be much more difficult to get than it is even today. We knew the necessity for producing food at all costs during the war, and it is strange that apparently the output of agriculture has diminished since the end of the war. In spite of all the difficulties of production, of enemy action, of the Services taking a large acreage, of a shortage of housing and machinery for the land, a tremendous amount of agricultural produce and food was grown very rapidly in this country. I am not satisfied that we are doing our best at the present time, and I urge the Government to look into that side of the question most carefully. By the end of the war a tremendous impetus had been built up in agriculture, but after the war it seemed to run down and diminish. The impetus for production has not been built up again, and the longer it is left to run down the more difficult will it be to recapture.
  I urge the Chancellor to do everything he can to help agriculture, because it is of first importance. As is well known, the essentials are houses and machinery of all kinds, and I wish to emphasise what my hon. and gallant Friend the Member for Ludlow (Lieut.-Colonel Corbett) said this afternoon. There may be very great possibilities in extensive grass driers, run on a co-operative basis in different parts of the country. The output of feeding-stuffs per acre is, I believe, greater from grass drying than from any other method in parts of the country, especially where the rainfall is heavy. One hears of people and co-operative societies having great difficulty in getting these grass driers for next year. I urge the Chancellor to try to help these people in this fundamental industry because that will be helping the country.
  I entirely agree with what was said by the hon. Member for Stoke (Mr. Ellis Smith) about the necessity for increasing the efficiency of our factories. In many cases there is great room and need for increasing that efficiency. As soon as we can get it, money could very well be spent on that, but it is not as important as primary food for consumption and export goods at the present time.

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  An hon. Member suggested that it was easy to criticise this White Paper, but asked what suggestions could be made. In view of the absence of information, it is difficult for me to suggest anything of a constructive nature. The Government have the information. I suggest that there are economies which could be made. For instance, there is the expenditure of £4 million on rebuilding Euston Station. We all know it probably would be very much better rebuilt, as no doubt most of us have used it regularly for the last 20 or 30 years; but surely a matter of that kind could be left for two or three years while work of much greater importance was put in hand. Probably it is not necessary to construct all the new roads which are projected. I was surprised to read of the large increase in expenditure proposed for the Scottish Home Department. If I were in the Government, I would scrutinise that expenditure very carefully.
  Another matter not mentioned in the White Paper is the great expenditure on Colonial development which is about to be sanctioned by the House. It may be very easy to spend large sums abroad, which means sending from this country machinery and consumable goads to meet the wages which will be paid on the spot. That expenditure now will be redeemed in goods—in this case I am thinking particularly of groundnuts—in three or four years' time. But it is of the utmost importance that all expenditure made now should yield either exchange or foodstuffs in the nearest possible future. Therefore, I urge the Chancellor to peruse the White Paper on Capital Investment again, and when doing so to have in his hand a stout blue pencil, which he should use effectively.
  8.40 p.m.
  Mr. Champion: I am in agreement with many of the points which the hon. Member for Eddisbury (Sir J. Barlow) has made, and in particular with his desire to secure an efficient agriculture, and to equip it with much machinery of which it is now short. I think he also made a strong point about the drying of grass. I was rather surprised to hear him urging that we should cut out the project for rebuilding Euston Station, because that has already been
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  decided upon, and is, in fact, in the White Paper which we are discussing.
  I agree with the Government that there is an urgent need for a careful survey of the whole of our capital expenditure at the present time. Everything that calls for a diversion of effort from the immediate main task of closing the import-export gap should be most carefully examined to see whether it can be permitted to continue or not. That applies even to housing, despite the fact that that should be the last piece of capital expenditure that is not positively and immediately productive to be cut. Nevertheless, it should be considered if the necessity arises. The Government should not flinch from that, because there is no value in any family having a nice house in which to live if they are not to get sufficient food on the table to keep them alive. I was pleased with the Chancellor's statement on this point that it would probably be the last piece of this type of expenditure which would be cut.
  I would like to think, as the hon. Member for Eddisbury does, that the present period is the most difficult that we shall be facing. I believe that that is not true, and that our greatest difficulty will come when the present sellers' market disappears and a buyers' market replaces it. We shall then meet our greatest trouble. Our present difficulty is to make exports; our difficulty then will be to sell them. That will be the problem. The price factor will be one of considerable importance when we have to endeavour to maintain an export of some 25 per cent. of our total output in a buyers' market, with a production efficiency of approximately one-third of our main rival, the United States of America, in conditions which will be, to us, a matter of life and death, and to that rival a mere frill on its life.
  At the present time considerable stupidity is being displayed by exporters who are sending abroad inferior goods at too high a price. Recently, in Denmark, I heard numerous criticisms of the inferiority of the goods we are sending there, and the price which is being charged for them. That might produce an immediate advantage, but obviously it will be a disadvantage to this country in the long run. We cannot afford to do that sort of thing with a market such as we have in Denmark.

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  Everybody is aware of the result of the run-down of our capital equipment during the war period. What is not so immediately obvious and what is glossed over considerably is the run-down of our capital equipment which took place during the period between the two wars. The Chancellor's statement on the transport industry dealt only with the war years, and he dealt particularly with the difficulties caused by the run-down of our capital equipment during the war period. Surely, at the same time he should have dealt with the run-down of our equipment which took place during the whole of the period 1919–1939. That was a period during which the capital equipment of the railways was steadily deteriorating and the replacements were not sufficient to maintain a really efficient undertaking. The road-rail corn-petition prevented the railways from raising the capital which was so vitally necessary if they were to maintain an efficient industry.
  We are competing, and we shall continue to compete, with the United States of America, where, as was pointed out by the hon. Member for Stoke (Mr. Ellis Smith), there is an efficiency in industry which we have so far been unable to attain. If we take the physical output per head and give Britain the figure of 100, the United States, even before the last war, were well ahead. Output in blast furnace products reached 361, compared with 100 in Britain. Other American figures were: smelting and rolling of iron and steel, 168; iron and steel foundries, 186; iron and steel products of wire, cutlery, iron stoves, tools and implements, 400; motor cars, 482; and rubber tyres, 266. This was secured as a result of a greater capital expenditure per head of the workers employed. An indication of this is to be found in the fact that the horse power at the elbow of every worker in the United States was over double that available to his opposite number in England.
  How are we to meet that competition? How are we to challenge that supremacy when the competition begins to get tough, as inevitably it will? Can it be secured by wage reductions in this country? Already, we have a wage advantage for competitive purposes because wages here are about half those of the United States? I do not think that the solution can lie there. An estimate has been made that a
  1966
  10 per cent, cut in wages in this country would leave British labour costs still far above the level of those of the United States. I do not pretend that low wages cannot give a country some competitive advantage. It is obvious from what happened during the period between the wars in our competition with Japan that, in fact, it does give advantages. Nobody in their senses would suggest today that we should be able or attempt to cut wages to such an extent as would enable us to meet the competition from America on the same price level.
  I am inclined to regard low wages as a cause rather than an effect of low productivity. The reason for the delay in the introduction of a high standard of mechanisation in this country was largely because there was a large well of cheap labour upon which employers could draw in the past. In face of the competition which we must meet, we cannot overlook the importance of a large home market which can absorb the goods and ensure that we have the best starting point for a healthy export trade.
  I believe that, at this time, despite any difficulties, we ought to be tackling, as energetically as possible, the technical requirements of our main industries. We ought now to be facing capital expenditure on such a scale as will enable us to live in the difficult years which lie ahead. How is this going to be done? How are we going to make capital expenditures in the vital industries in the difficult situation in which we now find ourselves? I do not believe anybody should make airy statements about capital equipment and technical re-equipment, unless they are prepared to indicate from whence that capital equipment should come, and, indeed, the materials and labour. We ought to be ensuring a capital and technical re-equipment of our industries even if it means the delaying of the relaxation of austerity, and putting off increased consumption in this country—and even at the risk of being reminded of the old cry of "Pie in the sky for the workers"—for the sake of being better equipped to face the difficult years that undoubtedly do lie ahead.
  I believe we ought to be getting our capital expenditure in the right places, partly by cutting all unnecessary expenditure. There is plenty of unnecessary

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  expenditure to be seen in this country today. I would even refer to some of the expenditure that we were discussing in this House yesterday. I am convinced that there are far too many people who are not earning their corn, and are not participating in production as they should. The economy of this country has developed into something like an inverted pyramid with the primary producer at the apex and, swelling out above him, a number of people who are not doing a real and vitally necessary job of work. It is part of the job of the Government, in this connection, to examine carefully what is being done by all the people in this country, and to see if it is possible to ensure that they are, in fact, doing work really necessary to our economy.
  I believe that the proposals of the White Paper itself will partly help us to meet urgent expenditure in every direction. Some of the cuts in expenditure, I think, are right and it was necessary that they should be made, in order that more vital expenditure could be made in other directions. It is time we had an even more drastic cut in the Armed Forces. The surest defence of this country does not lie in a big Army, a big Navy or a big Air Force, but in a soundly based economy. It lies in a thoroughly up-to-date, and properly technically efficient economy, with capital expenditure and capital equipment in the right place. That would enable us to undertake the defence of our country, if it ever became necessary to do so.
  I believe that we ought at this time to be encouraging certain parts of the private sector of industry to embark upon new capital expenditure; that encouragement should be given only after careful examination, and that allowances should be made which would permit those parts of industry which are vitally necessary to lay aside more and more the necessary capital expenditure. I believe that there is a need for a drastic examination and reorganisation of the whole of the private sector. This is vitally necessary. During the period of re-equipment, there will undoubtedly be an urgent necessity for higher output per worker employed with the same capital equipment. As the Chancellor said, the mass of the working people in this country have responded to the
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  call of this Government, and the figures which my right hon. and learned Friend gave are evidence of that fact. This increased output per worker with the old type of equipment is something that cannot continue. We have to give the worker the tools to enable him to do the job. It is possible for us to ensure that, but we must also take care that we properly direct the materials and the labour to the right things.
  If this country is to maintain its importance, it must stand on its own feet, and we can only stand on our own feet if we get into a position to shake off the moneylenders, and I do not mean that in any derogatory sense. Other countries have climbed to industrial supremacy from our shoulders. They started where we left off. Now, somehow, we have to get over what is going to be a difficult period during the closing of the gap, and we shall have to meet all the difficulties that will be consequent on the sellers' market turning into a buyers' market. We now have to take a leap from their shoulders, and start from the point they have reached, and so build up our capital equipment, that we shall be able to restore this country's old greatness.
  8.58 p.m.
  Sir Arnold Gridley: I want at once to sound a note of alarm, and, if possible, give this House, the Government and the country an electric shock. When I read through this White Paper, I must confess that I was gravely concerned when I read pages 25 and 26, which deal with the present and future of the electricity supply of this country. I am not alone in my anxiety about this, because I have had, during the past few days, letters from manufacturers all over the country who are desperately anxious, as we all are who are concerned in productive industry, to help the Chancellor to meet his export targets.
  We are concerned about the outlook ahead, having regard to the cutting down of the programme for increasing the electric power plant of the country, to the extent which is foreshadowed. I do not know whether hon. Members appreciate what this cut amounts to. It is something like 840,000 kilowatts, or over 1,100,000 horse-power, of which we shall be short. We had hoped that, in the next two or three winters, the present situation of shortage might have disap-

  1969
  peared, and that we would have adequate power plant available both for industry and domestic use, as we used to have before the war. We now have to face the prolongation of this state of affairs for another five years.
  I agree with much that was said by the hon. Member for South Derby (Mr. Champion), who stated that, in America, the horse-power per employee was about twice what it is in this country. In America, also they are short of power plant. What are they doing? They are going all out in a programme of power station extensions. Where would Russia have been during the recent great war, if they had not, in the prewar years, gone in for an immense power programme expansion? That programme included great projects, like the Dnieper Dam and similar undertakings, which put the country in a position to produce the munitions of war, and all the rest of it, and enabled them, with the help of other countries, to fight successfully with their allies in the recent great conflict.
  At present, we are meeting the situation in industry only by reducing the demand that we make on the power stations by staggering hours. The staggering of hours has not been easy to arrange, and nobody, neither employer nor worker, likes it, and it is not easy to work. It is causing, particularly in this time of great housing shortage, intense trouble in the homes of the people, because one lot of workers are at work during the day and another lot at night, and those who have to do their household duties during the day have to creep about the place, so as not to disturb those who are trying to snatch a few hours of sleep during the daytime. Our people may be able to stand that for a year or two, but, under this programme, we are faced with the probability that they will be asked to put up with it for another four, five, or six years. I think it is too much to expect the people of this country, willing as they are to help, and doing so well as they are at present, to face a prospect of that kind, if we can do anything to avert it.
  I am not criticising without putting forward a suggestion which I think may, at least, be worthy of exploration. If we cannot spare the steel in this country to provide for these power station extensions, plants, and so on, have we tried to
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  see whether they can be procured from Switzerland, from Sweden, or from France? The Swiss make excellent generating plant as also do the Swedes. We could get boiler plant, I should imagine, from France or Belgium. At any rate, there we have an alternative which is worth exploration. At a time when we are grieviously short of power to drive our industrial plants, which are essential to achieve the export targets that the Government wish us to reach, we ought not to leave any alternative unexplored. We ought to see whether there is any alternative of that kind which we could call to our aid as a temporary measure to meet our straitened circumstances.
  So much for the shortage of electric power plant. There is only one other matter about which I want to say a few words. I have said—and I am sure the Chancellor of the Exchequer knows this is true—that those of us who are engaged in productive industry are anxious to help the Government in any way we can to produce the maximum for export. It is not an easy matter for the Government to produce proper targets at which we should aim in our productive programme, but even that is simple compared with the task of achieving them. I think we have to face the difficulties when we see them, and see what can be done to overcome or avert them.
  In the first place—and I think the Chancellor mentioned this in his speech this afternoon—we are up against the import restrictions of many countries, and that is already having a most serious effect upon many of us so far as our exports are concerned. I know at the moment of cable manufactured for India, not suitable for any other country, built to the specification which is necessary in that country, lying in its drums in the ports at this moment because there is this import embargo placed by India. That may be aggravated a hundredfold, and while I quite believe that the Government are treating this as an urgent problem and are trying to induce other countries to lift these embargoes or to meet us as far as they possibly can, I would impress on the Government that there is really not a moment to be lost in coming to agreements with these countries if we are to do what the Government are asking us to achieve.

  1971
  It is also true that the sellers' market is disappearing and is rapidly becoming a buyers' market, as the hon. Member for South Derby has just mentioned. Another difficulty confronting us all—and the Chancellor knows it quite as well as I do—is that which we shall very quickly have to face in competing for export business with other countries because of the high cost of fuel, steel, wages, rail and shipping freights, and so on, all of which have an enormous cumulative effect on the total cost of putting one's goods on the other side of the world in the hands of the customers whom we are seeking to serve.
  I think it has been a matter for congratulation that, so far as transport in this country is concerned, which last winter was frequently a bottleneck to us, there has been a co-operative effort during recent week-ends in getting the thousands of trucks emptied so that there could be more interflow of traffic. I hope that will be continued throughout the winter, so that one of the difficulties—delays in getting material and so on—will be removed. One of the difficulties that does hamper manufacturers, when they have packed the products upon which they have been engaged, is to find at the last moment that it is impossible for them to be put on rail or ship. Manufacturers get their workshop capacity cluttered up with stuff which they cannot get away, and that in itself is a very serious factor limiting production.
  One could talk for hours upon this White Paper, but these are the only two points I particularly wanted to stress tonight. I am filled with alarm about the power position of the country. It may be asked why I am worrying about it, because, although I have been responsible for providing power for consumers in recent years, in a very short time that responsibility will be taken from me. My responsibility does not end there, as I am a consumer as well, and I shall be on the consumers' side in future, and not on both sides. I am most anxious to ensure that the efforts of those associated with me in business are not going to be hampered—they are real efforts to help the Government pull this country through—by the fact that the Government have not tried every alternative, including the possibility of purchasing plant from abroad, to en-
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  able industrialists to obtain their full electric power requirements and to carry out their full productive programme.
  9.10 p.m.
  Mr. Wilkes: If the solution of this crisis that faces us lay wholly with the people in this country, I must confess that I should be feeling more easy in my mind than I do tonight; but the serious fact is that, until there is a better relationship between the world price levels for food and raw materials and those of manufactured products, so long as there is no better relationship than has existed during the last few years, I am afraid that world price levels will gradually move increasingly against us, as they have done. Consequently, that places us in a situation in which, as now when compared with last year, we may well be continuing to export more and more, to import less and less. I have been struck during this Debate by the fact that hon. Members on the other side of the House seem to have realised for the first time the true, grim nature of our economic crisis. [Laughter.] The last time the Leader of the Opposition spoke in this House, he pithily analysed the nature of our crisis by saying it was due to the fact that Socialist maladministration and red tape had broken the mainspring of the watch. Let hon. Members laugh at that.
  Mr. William Shepherd: I will.
  Mr. Wilkes: The real, grim nature of our crisis is the fact that, though we are producing more steel than ever before, more coal than for many years past, 15 per cent. more foodstuffs than in 1938, and manufacturing 38,000 railway wagons a year instead of 25,000 railway wagons a year, as before the war—although, in other words, the whole economic machine is working much faster and more efficiently than before the war—we are still falling into debt at the rate of £50 million a month. That is the grim nature of the crisis.
  If, indeed, the economic machine was slowing down, if our production figures were less than in 1937 and 1938, and there was still a grim gap of £50 million a month, then indeed the solution would be, as the right hon. Gentleman the Leader of the Opposition thinks, a comparatively easy one. It would be to get rid of in-

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  competent administrators so that we could get back to the production figures of prewar days. However, as I say, the real, grim nature of this crisis is that, although the all-round production figures in important sectors—indeed, in vital sectors—of industry are at higher levels than in prewar days, there should still be this grim gap. I must say that when I said hon. Gentlemen opposite had at last understood the grim nature of our crisis, I should have excepted, apparently, the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) who opened the Debate from the Opposition side today.
  It is obviously important that at this juncture, with steel and other raw materials in such short supply, there should be the optimum efficiency of administration shown by the Government. In one particular aspect, namely, building in the Development Areas and the non-Development Areas, especially factory building, I have been very interested for many months, and I put a Question to the President of the Board of Trade about the number of factories in the Development Areas of 50,000 square feet or over now building. I wanted to find out the relationship between factory building in the Development Areas and factory building in the non-Development Areas. The Board of Trade apparently did not like the Question. They switched it to the Ministry of Works. I got an answer this afternoon:
  "This information cannot be obtained without a detailed inquiry. Under present circumstances, I do not think the time and labour involved would be justified."
  The Government admit that they cannot easily determine, such is the labour involved, the number of factories with a floor space of within 50,000 square feet now built outside the Development Areas. I think that shows a grave lack of administrative urgency. The amount of building inside the Development Areas, as compared with non-Development Area building, is a very important matter, and should be well known to the Government.
  When one takes the express north from King's Cross one sees, as one nears Doncaster, hundreds of tanks apparently rotting under tarpaulins, and hundreds of carriers. I ask the Government, in view of the intense shortage of steel which menaces our building programme, what action they propose to take to make use
  1974
  of the vast number of carriers and tanks which are littered all over the country, as well as on railway sidings, so that the steel may be used for productive and urgent purposes.
  I was glad to hear the Chancellor say that the real hold-up was not money, but labour and raw materials. Therefore, since money, apparently, is not to constitute any hindrance, I would like an assurance from him—and I think that hon. Members who represent the Development Areas as a whole would also be glad of an assurance—that the wide powers given to the Government under Section 5(1) of the Distribution of Industry Act to acquire sites in Development Areas for amenity purposes, so as to make these areas a little more healthy to work in, can be gone ahead with. An immense amount of valuable work can be done which does not involve the use of raw materials. In the building of the new Czechoslovakia a considerable amount of preparatory work is being done by voluntary labour. I think that the same enthusiasm and faith exist in Britain.
  This clearance of derelict factory sites could be done not only by the 30,000 unemployed who still exist in the North East Development Area, and represent a great wastage of human material, but also by students. Students in that area have recently approached the Minister of Labour asking to be allowed to take part in these clearance schemes, and they have been repulsed. I ask the Minister of Health if he will take note of the fact that people anxious to build a better Britain have not received that amount of encouragement from the Government to which they are entitled.
  Mr. Bevan: I rise now because so many points have been raised that I shall not be able to answer them all at the end of the Debate. Will my hon. Friend give an example of a local authority which has been discouraged? I have the distinct impression that local authorities in the Development Areas, in respect of this particular matter, have been encouraged.
  Mr. Wilkes: They have been encouraged, but there has been difficulty about the financial grants. Local authorities have been backward in many parts of the development areas. I suggest that on many occasions the local authori-

  1975
  ties might well have had a prod from the Government to get on with this work, but that lead has not been given. Local authorities are no more perfect than Government Departments, and sometimes they can help each other to be a little more efficient than they are.
  I wish to say how relieved I was that the Chancellor of the Exchequer, in his opening remarks, showed a true realisation of the immense importance of housing in connection with the production drive. Housing is an investment in future production. It must not be forgotten that men in the engineering shops and in the shipyards, who have worked so magnificently during the last two years, have been living under extremely dismal conditions. Mental overcrowding is often worse than physical overcrowding, especially in the case of young people. The gap between generations is always difficult, but it is more difficult when the two generations have to share the same home. Housing is not capital expenditure which can be dispensed with, without repercussions on the production drive. Housing is one of the most important incentives we have to increased production. I notice that the "Economist" last week drew attention to, and attacked the Minister of Health for, his exaggerated housing programme. No doubt, he has seen the article himself. Can anything be more fantastically unreal?
  Mr. W. Shepherd: Perhaps the programme was exaggerated, but the performance has not been exaggerated.
  Mr. Wilkes: The "Economist" did not mean that. They were talking about the expenditure of the raw materials and the houses actually built. To hearten the Minister of Health and to bring this Debate from the general to the specific, I would point out that in Newcastle-upon-Tyne, between 1918 and the beginning of 1921, not a single house was built for renting within the city's boundaries. In 1924, there were 12 houses built. It is not to be wondered, therefore, that there are 15,000 or 16,000 families, the heads of which are almost certainly production workers doing an important job, queueing up for houses, and experiencing all the frustration that a housing shortage means, with its consequent effects on industrial
  1976
  efficiency. We have built just over 1,000 temporary and permanent houses in the last two years. So much for the failure of the housing programme. Hon. Members opposite had better make up their minds whether they are attacking the Minister for building too few houses, or too many.
  Since the Chancellor of the Exchequer said today that the real difficulty in housing is timber, may I put this specific question to the Minister of Health? There are immense timber resources, both of hard and soft woods, in Africa. Have the Cabinet asked the Colonial Development Corporation to make an African survey of the available timber resources, to see whether we cannot get timber from these non-dollar areas? Has that been done, and if so, when can we expect a report? So far as hard timber is concerned, we imported 2.4 million cubic feet in 1938, 4.9 million in 1945, which is twice as much, and 5.2 million in 1946. There are these immense timber resources in Africa, and I hope a survey will be made in order to find alternative sources of supplies.
  Housing is not only a human problem, and the biggest social problem we have to face, but is one of the reasons for a certain distortion of our economy. When people have no proper homes to return to in the evenings after finishing work, they tend to visit the greyhound tracks and the public houses, and those other forms of mass entertainment which have given the Government such a headache in their attempt to control the evil effects upon our economy. One of the ways in which we can cut down, and, indeed solve, this vast expansion of the gambling and entertainment industries, is by making absolutely certain that we go all-out on the housing programme.
  What is at stake in this crisis, in the immense problem of our balance of payments and the relationship between the world price levels of foodstuffs, raw materials and manufactured goods, is not only the fate of the Government—although that would be important—but the whole of our democratic life in this country, and tthe whole of our kindly tolerances and decencies. Hungry bellies and Parliamentary democracy do not go together; they never have done in any other country. When the Government put their

  1977
  efforts into solving this crisis, let them remember that what is at stake is not only the existence of the Labour Government, but the existence of the decent, kindly tolerances to which the practices of Parliamentary democracy have led in this country. If hon. Members opposite would only realise the seriousness of this crisis and the issues at stake, they might be a little more constructive in the future than they have been in the past.
  9.28 p.m.
  Mr. York: The hon. Member for Central Newcastle (Mr. Wilkes) is probably sitting on the wrong side of the House. He started and concluded his speech by attacking this side of the House, while spending most of the rest of his time attacking the Government. It is most unfair to attach a wrong commencement and a wrong peroration to a speech; it rather confuses my hon. Friends.
  I was delighted to hear the Chancellor of the Exchequer proclaim that the economy of our country today had become entirely unbalanced and unhealthy; and when he said we were losing markets because of our high and rising prices, he only echoed what experts have been saying for a considerable number of months, that our markets are growing smaller and more limited. That is a fact which can be denied by nobody. When he said in March of this year:
  "It is only if there is an expanding international trade generally, that we can possibly hope to attain our export target.—[OFFICIAL REPORT, 24th March, 1947; Vol. 435. c. 888.]
  he was making a statement which ought to have made a great deal of difference to the Debate today. That expansion just is not apparent today, and nobody can see it appearing in the near future. Yet we depend upon that expansion in order to eat; and all the talk that has been going on about industrial development omits entirely the real question which we should be discussing, namely, how we are to eat.
  I believe that it is time we returned to the traditional policy from which we departed 100 years ago—[Interruption.] I would ask hon. Members not to interrupt me as I am trying to condense what I have to say. If we return to the traditional policy which we abandoned 100 years ago we should be very much safer than we are today. I contend that our economic policy should be based on a policy of food procurement, and if this
  1978
  policy is adopted instead of the policy of full employment, which was the policy until today, it would be to our advantage. I am very glad that the Chancellor of the Exchequer was realist enough to admit that we have to abandon for the time being the policy of full employment. [Interruption.] I made a note of what the right hon. and learned Gentleman said, and I do not think that I am in any way misquoting him. That is what I really understoood him to say when he said that full employment was not now an overriding policy.
  Mr. Thomas Brown: Because it is here.
  Mr. York: Those are the words which I took down.
  Mr. Ellis Smith: When?
  Mr. York: It is not very important.
  Mr. Warbey: It is important.
  Mr. Bevan: It is not really important what some Members say, but it is important how they are reported to have said it. I do not recollect my right hon. and learned Friend uttering such a statement at all.
  Mr. York: If I am wrong—I do not mean to wrong him—I will withdraw what I said. I was trying to point out that he was taking a more realistic line and concentrating entirely on one policy.
  Mr. Bevan: What my right hon. and learned Friend was pointing out was that it would be necessary in order to bring about a transfer, a re-emphasis and a redeployment of labour for labour to leave some industries for industries of another kind, but that is not unemployment.
  Mr. York: I made a note of what he said at the time and those are the words I put down. If I am wrong I withdraw them, because I do not want to misinterpret what the right hon. and learned Gentleman said.
  If the policy of food procurement is developed as a policy, then our capital investment programme should go along on clear lines. First, home production; we could increase our own food production in the next five years by up to 60 per cent. of our total requirements, and in the next 10 years by 65 to 75 per cent. of our total requirements. The second priority would

  1979
  be the production at home of manufacture which will buy food and raw materials, and I include in that animal feedingstuffs. The criterion would then be, is a capital investment an earner of food or raw material? If the answer is "Yes," then it is administratively possible to cut away the strangling controls which are slowing down production and sales abroad, and we could concentrate the bureaucracy on sharing out the productive capacity of the country that is left, amongst less vital needs. That is my main argument, but I want to put an important subsidiary argument.
  The capital investment policy seems to put its main emphasis upon the procurement of coal and upon exports generally. Other needs flit about, according to political considerations. One point stands out clearly, which is that steel is the real bottleneck in both those needs. It is in the distribution of the steel output that the Government have created the greatest chaos. In the proper allocation of the steel output lies the foundation for a realist investment policy. I am well aware that, in order to carry out the food procurement policy, it would be necessary to give a disproportionate amount of steel to those industries of the country, including agriculture, which are to be used mainly for the procurement of food, but I do not think that is a difficulty which the Chancellor cannot overcome.
  The section of the White Paper which deals with agricultural works and buildings is based upon the programme put forward by the Government in September—or so I presume, and I do not think that I am wrong. That programme is wholly unrelated to our needs and to the potential productivity of the agricultural industry. Also has the Minister of Health examined the possibility of saving on the water supply schemes, which I know to be necessary? Such a saving might be brought about by an intensive anti-pollution policy, under which water for towns that need it would be obtained from the rivers rather than from the gathering grounds? I believe there is something in that suggestion.
  I was a bit alarmed to hear the Chancellor of the Exchequer say that the economies implied in the White Paper would be put into effect if the necessity intervened. Surely the necessity has
  1980
  arrived. I was surprised that he should take an attitude which suggests that we are not in a necessitous period.
  Home food production could be considerably increased within two years, and more rapidly after that, if the Government would accept certain assumptions. The first is that the problem is mainly—here I must speak somewhat technically—an increase in the production of proteins, as well as in increased labour plus an increase in the importation, of foodstuffs. I want to refer particularly to the increase in the production of proteins. The production problem is entirely a capital investment problem. No increase in production is possible to any large extent for human food from our existing arable acreage. A considerable increase is possible, however, by increased production of protein through livestock, because the protein is already present in the country in our grass. If grass is grown specifically for cutting and drying, the protein can be collected and stored. Some examples have been given and I will give a further one. There are over 3,000,000 acres of oats grown in this country. If one million acres—this is theoretical and could not be put into practice immediately—were turned from oats to grass for drying they would produce all the protein produced by 3,000,000 acres of oats, and we should then have the remaining 2,000,000 acres for the production of dried grass or some other commodity. Moreover, oats is not a balanced food, whereas dried grass is.
  The examples which have been given demonstrate the possibilities, but today virtually nothing is being done. There are probably only 300 grass driers in the country and they use about 60,000 acres of land. The Milk Marketing Board hope to produce 20 more before next spring. They "hope" because they do not know whether they can get the steel for the buildings, machinery and equipment, and they cannot go further for reasons partly of financial and partly of productive capacity. If the Government are prepared to accept the assumption that the production of protein is necessary, it can do a very great deal in providing the steel, the productive capacity and the finance to enable the Milk Marketing Board and private farmers to instal this machinery. One thing that convinces me is that I never heard of a farmer

  1981
  who has given up drying grass once he has gone in for it. There must therefore be sound economic reasons why this should be pressed forward.
  The equipment of a grass-drying plant requires between 40 tons and 80 tons of steel according to the size of the plant. The cost of the building and machinery and field machinery is between £3,000 and £8,000, according to the size of the plant. To indicate what could be done, it the Government undertook a really energetic campaign, before the spring of 1949 a further 300 grass-drying plants could be set up. That would take a great deal of capital in various forms for buildings, machinery and so on, but the amount of protein stored would far outweigh any disadvantages accruing from having to take steel and capital investment from other parts of our economy.
  In the building section of the White Paper it is probable that an increase of about 25 per cent. would be necessary, and in the machinery section of the White Paper dealing with agriculture, probably the same amount of increase would be necessary. In addition, it would be necessary to allow the manufacturers of the various parts of the programme an extension of factories. I would point out, however, that there will be considerable unemployment in the structural steel industry—in fact, it is starting now—and this necessary food procurement policy would also have the added advantage of absorbing possible unemployment in that industry.
  In conclusion, I would not fear the future if the Government would undertake a policy of procuring food for this country. I believe it is possible to do this to a considerable extent by increasing our home food resources, but I am afraid that the White Paper policy, and the general attitude of the Government on the matter, leaves me with the feeling that the whole of their outlook is entirely inadequate to meet the food needs of the country in the near future.
  9.47 p.m.
  Mr. House Mr. House (St. Pancras, North) I want to deal with two aspects, one of which is steel. I am a little concerned at the possible over-development of the steel industry, notwithstanding the terrific demand. We are running now at an annual tonnage of 14 million, and the
  1982
  industry is being expanded to reach 15 million tons a year. The highest tonnage prior to that was in 1939, when we produced just over 13 million tons. In 1939 we had had some six years or so of considerable expansion in the steel industry under the dynamic urge of anticipated war, and even throughout the war years, when we were participating in a terrific world war, our output in the steel industry did not reach its present level.
  I should be the last, as things are at present, to feel concerned about any further expansion of the steel industry, but there are many aspects of the position which make me wonder whether possibly a few years hence we shall find our steel industry seriously over-equipped. If a considerable expansion of factory buildings occurs in some industries, those buildings and equipment can possibly be transferred to other industries, but if we have an over-expansion of the steel industry, we shall find that the type of building used for steel production, steel smelting, steel rolling, and so on, will not be amenable to transference to another industry.
  Again, steel is up against serious competitors in the development of nonferrous metals, such as aluminium. Then, with regard to structural steel, we have to bear in mind that there is a serious competitor, which will increase in the near future, in the form of ferro-concrete buildings for which far less steel is used than in normal structural engineering buildings. Therefore, while I am vitally interested to see the reasonable optimum reached in the steel-producing industry I think it ought to be kept under careful review.
  With regard to housing, I am concerned that capital expansion should be limited in this present crisis. Housing appears to be particularly vulnerable, having regard to the present need for capital restriction. It is not like machinery. To restrict capital expenditure on machinery might be argued to be a very narrow-sighted policy. It may be argued in regard to housing that, after all, it does not bring any future improvement in our general expansion of industry. On the other hand, houses are very important to our standard of living, with special reference to the poor. We need to ensure as far as possible that the poor are not singled out by the special circumstances of the case for un-

  1983
  reasonable retrenchment. I urge the Chancellor to avoid what appears to be an economic case for retrenching on housing, and to do what is possible to preserve and extend housing so far as circumstances permit.
  No constructive proposals or alternatives for capital restrictions have been put forward in many speeches which have been made today, other than those which were proposed in the speech of the Chancellor. The reason is that the problem is exceedingly difficult. It is a tantalising problem to find a constructive line. The Minister of Health is subsidising housing, and is to be congratulated on the degree of such subsidy; but there is a startling fact in that the subsidy today on a normal house is equivalent to a capital expenditure of £577, which is a considerable capital payment for a normal house. In regard to flats on more expensive sites, the subsidy goes up to £1,100 and, if my memory is correct, up to £1,700. Where does that money go? On a final analysis, we find that a large amount of that excessive capital outlay goes to the landowner. That all points to the necessity for the taxation of land values.
  Mr. Speaker: It also points to the fact that it is out of Order to discuss that in an Adjournment Debate.
  Mr. House: I appreciate the point, but after all, this is a Debate on the reduction of capital expenditure, and I am submitting a practical line on which we can bring about an effective measure——
  Mr. Speaker: Under our Rules, on the Adjournment one cannot suggest methods which involve legislation.
  Mr. House: I bow to your Ruling, Sir, and leave it there. Fortunately I know the Minister of Health has a very receptive mind. That was going to be my peroration, but I will leave it there, and hope that what I have said in regard to steel and housing, although the latter is ruled out of Order, may have the careful consideration of the Chancellor.
  9.55 p.m.
  Mr. Peter Roberts: I am glad to have the opportunity immediately to reply to the statements of the hon. Member for North St. Pancras
  1984
  (Mr. House) about the steel industry. As a representative of one of the greatest cities connected with steel, I know something of the demands made upon the industry at the moment. I can assure the hon. Member that the demand of consumers for steel is very great and on this supply depends the future prosperity of this industry.
  Mr. House: I agree that there is a terrific demand at the moment.
  Mr. Roberts: That point is made, and I will leave it. I wish to associate myself with the warning given by my right hon. Friend the Member for Aldershot (Mr. Lyttelton) about the seriousness of the situation. The point I wish to make is that although I agree as to the industrial illness through which we are passing, I think that the remedy does not really lie in the issue of the reduction of expenditure about which we are talking tonight. Upon the progress of capital expenditure depends the prosperity of this country. Whether one is speaking of a firm, a business or a nation, one finds that once it begins to stagnate in its capital expenditure, great harm is caused not only to the morale of the people but also to the trade or industry concerned.
  We have heard tonight from various quarters of the House suggestions about directions in which the Government have been asked not to cut down capital expenditure—machine tools, grass drying, housing. We have had various suggestions from all sides of the House to the Government as to what should be released from the cutting down of capital expenditure. This is quite logical. It is impossible to be able to say where expenditure should be cut down and should not be cut down, as each particular item fits into the whole structure. As I see it, the real issue in the next six or seven months is whether we are to get the raw materials with which to keep our industries going.
  The argument I wish to pose is that our export drive with which the Chancellor dealt in great detail depends upon people abroad buying our goods. I am referring to people in the soft currency areas; I am not now speaking so much about the dollar area. The people who buy our goods will have to pay for them in some currency or other. The question is,

  1985
  what are our exporters to receive in payment? They can either receive sterling which is held by those countries, or else they can receive the currency of those countries.
  One of the greatest difficulties about exporting at the moment, and I can assure the Government of this—I see it happening in Sheffield now with regard to the light steel trades and other trades—is that the demand is filling up on the Continent and elsewhere, and it is becoming increasingly difficult to export these goods—goods of good quality—because of the difficulty of getting payment for them. The average exporter is quite prepared to accept sterling but is not prepared at the moment to accept payment in francs, pesetas or drachmas or some other currencies because of the artificial values of those currencies. The franc is pegged at 475 to the pound but its actual value is nearer 900. No exporter will export for payment in francs at 475 to the pound when their real value is 900 to the pound. That means that we are only able to export where payment in sterling is possible which in turn means only from countries from which we have imported something.
  That brings us to the point which the Chancellor made about bilateral agreements. The policy of the Government at the moment is to get bilateral agreements, in other words, a barter trade. That is one side of the picture. The other side is that the Chancellor made it clear that our past prosperity depended upon triangular trade. We could not pay for all our dollar requirements by barter, and, therefore, we had to have triangular trade through other countries. The two things are quite inconsistent. We cannot build up bilateral agreements with Sweden, Russia or other countries, and at the same time expect to have triangular trade with the United States. The difficulty which will come upon this country in the next six months will be the slowing down of our export drive for that reason, that we shall not be able to find markets into which our goods can go. The best will and the best agreements in the world will not help us if the export market goes and we will eventually find that our warehouses are filling up with the goods which should be going abroad. The result of that will be that we shall be cutting down our imports further and further, and that eventually
  1986
  we shall not have the raw materials with which to carry out our production programme.
  I want to deal very briefly with the point raised by the Chancellor of the Exchequer with regard to production. I am afraid I must state that I consider that the note which he struck was too optimistic. He mentioned tractor production. I entirely agree with him about tractor production; but what about rubber tyres for tractors? At the moment, there seems to be great difficulty in obtaining them. A A tractor without tyres is not very much good. He mentioned scrap iron. That is something in which Sheffield is particularly interested. There is a great shortage of scrap. Why, when part of the Italian fleet was allocated for scrap, were ships and submarines recently given back? I know that an answer was given that our break-up shipyards are full. That is only a temporary phase which could be got over. I have seen the results which this deficiency of scrap has had in our steel production in Sheffield.
  I do not intend to go into detail at this stage about the question which was raised about dirt in coal. I think that the Minister of Health intervened upon that subject. I can assure him from my own experience with regard to coking coal—the coke which makes the steel—that the ash content has gone up in the last year, or year and a half, from about 13 per cent. to 15 per cent. That is one example. Moisture is another. The amount of water in slack is increasing, in some cases up to 20 per cent. I hope that the right hon. Gentleman will not try to make out a case that there has not been an increase. Everybody in trade and industry knows that there has been. I hope that he will use his influence with the National Coal Board to reduce the amount of dirt in coal.
  I want to turn to the cost of coal. The Chancellor of the Exchequer said that we must try to keep our costs down in order to export. I entirely agree with him; but it is no good saying that tonight, when yesterday the Ministry of Fuel and Power raised the price of coal by 2s. 6d. That means 5s. on the price of steel and 3s. 6d. on coke. That has its effect throughout our basic structure. The answer, surely, is—and sometimes hon. Members opposite suggest that we are not constructive—that under the theory of nationalisation there was to be a saving

  1987
  on administrative overheads. Let us ask the Coal Board to exercise economies and cause a saving in administrative overheads. The recent increase of 2s. 6d. could be dealt with in such a way. If we ask our exporters to export goods at a price to be met abroad, we cannot continue increasing, by 4s. and by 2s. 6d., the prices of coal and other basic commodities at home. Methods must be found by which economies can be effected.
  To sum up, I wish to say that I think we are making a mistake at this stage in cutting down our capital expenditure. That view may not be held by many Members in this House, but I feel most sincerely that it is a mistake at present to cut our capital expenditure, because upon our capital expenditure depends our prosperity in years to come. It is the very last thing which we should do and only when everything else fails. Then, possibly as a final measure of despair, we should accede to some such idea as this.
  I have tried to put to the Government another method of freeing the currency restrictions. I am certain that America would be prepared to listen to an advance on those lines if it was made from this country. I have noticed that in the Press recently there have been some very damaging remarks about the value of the £ to the dollar. I believe that some figure like 2.10 or even 2.8 dollars to the £ was the price given. I am certain that that is most damaging to the confidence of this country. One of the guides to the real rate is the position in the nearest international zone to this country, which is Tangier, where there is a free exchange of these currencies. There, the price as recently as a month ago was 3.75 dollars to the £, which means only 25 cents to go before parity with the dollar was reached. Therefore, we have not got so far to go before we can see parity between sterling and the dollar, and once that is done, it will be possible to get more overall agreement between the major powers in order to allow the free exchange of currency; to allow freedom to buy forward francs or pesetas in the export trade in the ordinary course of business activities.
  These are the points to which I hope the Government or the Minister of Health will reply. They are essential and funda-
  1988
  mental, and our whole prosperity depends upon our export drive in the next six months. I am sorry to say that I have seen that export drive, even with the best will in the world on the part of exporters, beginning to slow down. Once that happens, we come to great difficulties. But there is yet time in which action can be taken, and I ask the Government tonight to take that action now.
  10.7 p.m.
  Mr. Chetwynd: A little while ago, my hon. Friend the Member for Neath (Mr. D. J. Williams) in a very persuasive speech, spoke of the academic economists in certain universities attacking the expenditure of capital equipment in the Development Areas. I have no objection to economists doing that, because their work is seldom read by people other than economists, who usually disagree with all they have said, but when the Press, and not merely the penny Press but the twopenny and threepenny Press, like the "Manchester Guardian" and "The Times" sees fit to devote editorials to attacking the Government's Development Area policy, I think it is time something was said in this House. On 8th December, the "Manchester Guardian" wrote in this way:
  "For 18 months, the policy of building new factories in what used to be called the Depressed Areas to guard against a return of heavy unemployment, has been doing more harm than good."
  I think that would sound very harsh upon the ears of many thousands of people in Durham, South Wales, Scotland and Cumberland who in the past have known serious unemployment, and I do not think that it can go unchallenged.
  Then, again, it is said that much of this money was used to set up in the Development Areas certain light industries of such a kind as the manufacture of electric fires. That may be so in isolated cases, but, really, the Development Area policy has been to bring a light and diversified economy into the Development Areas, and many of these projects have a direct contribution to make to the export trade and a direct contribution to make to the health of our basic industries. It is quite clear that, on economic grounds alone, the Government is right to pursue this policy in the Development Areas.

  1989
  There we have the sole remaining substantial source of possible labour, and it is not fair to expect these people at this time to be forced to move from their homes to take up employment elsewhere. The limiting factor there is, of course, housing. We cannot move people from Durham into Birmingham or other places unless we can provide houses for them, and I am really surprised that the "Manchester Guardian" takes this line when it says:
  "To get the essential jobs done in time, we must move the workers to them."
  In view of the attitude of the Liberal Party in the Debate on the control of Engagement Order, I wonder if the "Manchester Guardian" now favours large-scale direction of labour in a much more brutal form than could ever be contemplated by this Government.
  I would like to say that there are certain things that must be done immediately if we are to get the fullest benefit from this Development Area policy. It is still a fact that 39 per cent. of the total of wholly unemployed males in the country are to be found in the Development Areas, and 50 per cent. of all those who have been unemployed for over six months are in these areas. As regards the women, it is even worse. Fifty-seven per cent. of the wholly unemployed, and 77 per cent. of those unemployed for six months and over, are in these areas, whereas there is relatively little long-term unemployment elsewhere. Firstly, we should have a campaign to finish those factories not yet completed. That may mean that more building labour should be diverted to those schemes, but, in both the short and longterm view, that will pay this country.
  Secondly, there must be a greater selection from the many potential tenants. Now that we have various firms competing for factory space, it should be more possible for the Board of Trade to select those firms which can make the greatest contribution to our export needs. Then we must make certain that the guarantee given on page 12 of the White Paper, paragraph 20 (4)—
  "Within the reduced volume of factory buildings, preferential treatment will continue to be accorded to the Development Areas"—
  is not just a paper priority. We have the promise of all possible priorities of raw materials to the firms in Development Areas. It is our hope that this
  1990
  promise given in the White Paper will be translated into action.
  There was some argument at the beginning of this Debate as to whether we should talk success or pessimism in the country. I believe we have much of which we can be proud. Many successful things are taking place in this country today, and it is only right that we should take every opportunity to stress this. There is no need for all this gloom and despondency, because, after all, the success of this Government, and our plan, to conquer this economic crisis will, in the end, depend upon the individual workman—whether he has his tail up or whether he has it down. It is our job, as responsible Members of this party, and of this House, to see that we do everything we possibly can to encourage the success of the workers in this country. There is a tremendous amount of enthusiasm in the country, in spite of what is said in America about this being a dying nation. One has only to go to football matches and greyhound races to find it. [HON. MEMBERS: "Hear, hear."] Oh, yes, there is, but we have to make it our job to canalise this enthusiasm behind the Government.
  We can do it by making one Minister responsible for what I would call the coordination of voluntary labour. The recent success of the turn-round of wagons, is just one indication of what can be done. We can unload wagons, clear up bombed sites, work in the fields, help in the Christmas deliveries and, best of all, we can help with the collection of scrap. I would like to see this scrap iron collection taken out of the hands of the barrow boys, and the junk boys, and made a voluntary effort in every part of the country. There could be scrap depots and people could be encouraged to collect scrap and dump it at weekends at these depots. By canalising all this enthusiasm I am convinced that in the next six decisive months, which will decide the fate not only of this Government but of the country, the actions of this Government will pull us through.
  10.15 p.m.
  Mr. Harold Macmillan: Many admirable speeches have been made from all quarters of the House in the course of this Debate, and I hope I shall be excused of discourtesy if I cannot refer to them all. There is one to which I would particularly like to refer.

  1991
  Although he cannot claim the immunity accorded to a maiden speech, I think it would be in accordance with the courtesies of our political life if I were to welcome the intervention by the hon. Baronet the Member for Gravesend (Sir R. Acland). Much as I regret his return to this House on public grounds, may I be allowed to extend to him a welcome on a private basis? I am indeed sorry that, in abandoning the Whig tradition in which he was nurtured, he also shed that intimate knowledge of ancient literature, which was once the pride of his ancestors. It is perhaps typical of his rather confused, if amiable, temperament that, while he was induced by a kind of atavism to attempt a classical quotation, his apostasy led him to attribute the quotation to the wrong writer—about a century wrong—about the wrong person, also about a century out of date. Perhaps that may be regarded as typical of the degree of accuracy he has learned in his long political pilgrimage.
  The Debate has covered a very wide field which is, indeed, natural and proper, for it deals with a very wide subject, one of grave interest to the whole world, and one of vital import to us. These are indeed the years of destiny. In the years that lie ahead, there hang suspended in the balance no less than the continuance and development of the British Empire and Commonwealth, or its gradual decay and dissolution. We who debate and deliberate here are charged with a double responsibility. We are the elected representatives of the central assembly of the Commonwealth, and we are the trustees of that whole system of Parliamentary government which is our chief pride and glory, and also the chief objective of the malice and spite of our enemies at home and abroad. Yet, if this Debate has covered a wide range, if the optical glass of inquiry has traversed a huge panorama, it has observed or revealed singularly little. We have not been given in a single comprehensive statement all the figures and facts necessary for a proper appreciation of the situation, still less have we the basis for constructive solutions.
  Even the Chancellor of the Exchequer in his, if I may be allowed to say so, admirable and comprehensive speech, gave us only one figure which we had not had before, which was the rate of
  1992
  drain for the month of November, and which, by an agreeable chance, whether one puts it in dollars at 55 million a week, or in pounds at £55 million a month, comes to a sum easily understood by the worst mathematicians. That is the only new figure we had. In other words, we have had little pieces of this jigsaw puzzle, but we have hardly started to put them into a reasonable picture. It is true that, on this occasion, we have not had the advantage of one of those illuminating surveys which we used to get from the Lord President of the Council who is also the Leader of the House. I am sorry he is not in his place.
  Captain Crookshank: He never is.
  Mr. Macmillan: Indeed, I do not know what has happened to the Lord President. In the old planning days, he used to plan, or, should I say, went in first for England. But now, he seems to have been dropped from the side, and, naturally, having been left out of the first eleven, he has become a little peevish and restless. It is all right; he goes along playing in every league and club game he can get into. I never open a paper without seeing that he has lunched here and dined there, and whenever he has a meal he makes a speech. Really, that must be very fatiguing for everybody concerned. I liked his last broadcast. It was nice, old fashioned, comfortable, respectable, rather dated stuff which I personally found very enjoyable—like a breath of Edwardian fresh air blowing into the Socialist House. All that stuff about the class war and how the Tories started it. I am afraid he must have given up reading my "Middle Way"; I always fondly believed that to have been his favourite bedside book. He must have borrowed some manual from M. Molotov—the greater the falsehood, the better the propaganda. The Tories started the class war! Oh no! Really, the Lord President cannot get away with that. It will not do at all. Let him tell that to the marines or, perhaps I should say, let him tell it to the Secretary of State for War.
  On the other hand, we on this side, and I personally, have great respect for the Chancellor of the Exchequer—the new one, I mean. We respect his learning, his diligence, his intellectual power, his selflessness, his singleness of purpose. If we do not always trust his judgment; it is

  1993
  because we cannot altogether forget the extravagances into which the very vigour of his doctrine has sometimes led him. He has had a terrible past. But it is indeed past and, really, as we all know, there is no greater asset for a politician than a rather disreputable past. It is a very good technique. It is so much easier to live down a past than to live up to one. Everybody is so much relieved when one turns over a new leaf. Words of ordinary common sense, such as "the undesirability of permanently living upon capital instead of upon income," phrases like that, carry little or no conviction when they are enunciated by an ordinary commonsense man, but when they come unexpectedly, with every felicity of phrase, from the lips of a genius, they have some inspired wisdom.
  At any rate, the Chancellor of the Exchequer has this claim upon our confidence. Almost alone among his colleagues he seems to realise that this administration, in the financial and economic sphere at any rate, has, during the last two and a half years, done almost everything it ought not to have done and left undone almost everything it ought to have done. Now, if the nation as a whole is to construct and carry through a proper plan of national recovery, I would venture to say quite sincerely to him that I hope we may have a more comprehensive presentation of the facts. I cannot frankly say that we have yet been given the full facts. There are too many gaps. There are too many uncertainties. There are too many queries. There are too many estimates. There are too many targets. Figures given to hon. Members in the course of debate are very difficult for them to use effectively. It is very hard to take them down. I think the right hon. and learned Gentleman will agree that, in order that they may be intelligible, it is much better that they should be supplied in a detailed and tabulated form by way of White Paper, or printed document of some kind, prior to the opening of a Debate.
  Let me explain the kind of figures which, I think, we require. First, we should have a far more accurate estimate or forecast of the so-called export targets. We should have these industry by industry. Then we should know how far each industry was consulted before the targets were fixed. We should know how far each industry has fixed its own target,
  1994
  how far it has been made by the Board of Trade, and how far the industry has agreed it is practicable. We should like to know how far the figure is being attained month by month, and what is the trend of targets in each case. We do not now get this entirely out of the "Board of Trade Journal." I know from knowledge of my own industry that it is very difficult in these great groupings to get the kind of analysis I mean. The figures of exports, as I understand them, are figures of values of goods invoiced out of the country. I think that is correct What proportion of these exports is actually sent in response to orders? What proportion is invoiced to the account of subsidiary companies, which is, therefore, really not valuable to us until the goods are sold? What proportion is sold on consignment or on sale or return? All these are very important as indicating the trend of trade. What are the actual sales in all the currencies? How much in the free currencies and in the restricted currencies and in the blocked currencies?
  Since the whole basis of the plan for survival is the export drive, I feel that if the Chancellor will give us more detailed information about this daily progress it will be of the greatest value. It will be of the greatest value to those of us in industry and commerce, because then, by contrivance and co-operation, we can make adjustments here and improvements there. We can cut down on what is not selling well, and put fresh effort behind the more marketable lines; we can see where we really need to put our main effort, or where we need to switch over our effort. For it would be indeed tragical if the more profitable lines which could be exploited were not forthcoming because of any remediable shortages of materials and labour, and materials and labour were being tied up in lines which could not readily be sold.
  The export drive is, of course, now in its easiest stage. The Chancellor, in his very well balanced account, gave us a warning that there was a certain hardening in that situation, but, broadly speaking, we are still operating in a sellers' market, and there are many things which can be sold which may not be readily saleable again. Therefore, it is all the more important that we should put our full efficiency into the more permanent lines we can reckon on as of permanent saleable value.

  1995
  The Chancellor spoke to us about the textile industry and he gave us some moderately encouraging figures but two and a half years have passed since he took over from my right hon. Friend, and I fear that industry has neither been refitted with new equipment nor so improved by a variety of temporary measures, especially in the shape of amenities, as to attract labour to anything like the full extent required. What are the prospects now in the slight rise—I will say substantial rise—to which the right hon. and learned Gentleman was able to call attention today? Let us have, therefore, the export estimates set out trade by trade, industry by industry, showing whether the figure is a target, and whether it is a target made by the Government or by the trade. Perhaps it would be useful to have—certainly I would wish it if I were in charge—in one column what is not merely the optimistic target, but what balance we can reasonably rely on so that we get both a more conservative and a more optimistic figure. On this basis it would be possible to create one side of a comprehensive balance of payments account, and I think on this basis we should have something on which we could judge the progress we are really making.
  On the other hand, on the payments side, surely we could have a more detailed account than the Chancellor of the Exchequer has given us up to now of purchases and imports in hard and soft currencies. We find, certainly in the trade in which I am interested, that we are told to purchase things in hard or soft currencies, but that is only a temporary and not a fixed state. Currencies which are soft become hard and currencies which are hard become soft. Traders cannot switch trade and the organisations they have made for trade with the same rapidity as changes take place in the currency situation. Every possible assistance should be given to industry from that point of view.
  Then what about barter arrangements? How far are they really a big saving to us, for remember that in most of the barter arrangements we have we are in fact paying in the hardest of all currencies, namely, heavy machinery, about the most valuable thing in the world today. Thirdly, there are the arrangements which we ought to make for an increase in our
  1996
  invisible exports; and I feel myself that here is a vast field, by experiment and by controversy, fortified by fiscal assistance, for the increase of the earnings of invisible exports, especially in creative work, if greater incentives and greater assistance could be given. We should not forget that the income from the investments this country made in the past and which has supported it largely as a rentier country throughout a great period of our history, was from investments which were sometimes in the form of great masses of capital goods but were also in the form of the genius and skill of individual traders who founded businesses with very small capital and ventured in marketing and enterprise abroad and are paying very large dividends still to this country. So to that part of our investment, assistance ought to be stepped up to a far greater extent by every possible means in our power.
  Of course, we should welcome the announcement, which I feel we must mark with our recognition, of some reduction upon our dollar expenditure abroad, on the occupation of Germany and Austria. The agreement which the Government of the United States have made, in conformity with the comradeship and friendship of the people of the United States with ourselves, is one which I think we ought not to let pass without expressing our appreciation and gratitude.
  Only in the light of such information as I have been trying to describe is it possible for the capital programme to become intelligible. From this White Paper we can deduce little. I observe that in different quarters of the House hon. Members of all parties have drawn quite different deductions. Some said we are not spending enough on capital account, both on this side of the House and on the other side. Some have said the cuts are not sufficient, both Members who support the Government and Members of the Opposition. The truth is that we can deduce very little from the information at our disposal and we do not really know whether the total is still too high, for what we can bear or not. It is, of course, not too high for what we need. The need for capital reconstruction is enormous. The question is whether it is too high or too low, and that cannot be judged quantitatively except in relation to figures which are not at our disposal.

  1997
  Is it then qualitatively correct? We cannot judge without a complete picture. Are we selling too much of certain types of machinery abroad and keeping too little at home? Are we selling too much machinery to soft currency markets, and too little to hard currency areas? Is there any value in getting rid of machinery to soft currency areas—they are called un requited exports—when we could have kept that machinery at home, and got consumer goods as a result of employing it in our own factories? What about agricultural machinery? Are we selling too much of it abroad when we could be getting some food by keeping it at home, or is it argued that this machinery, exported to the liberated and suffering countries of Europe, might give us a revenue in food which we shall always require unlike the products of some of our other exported machinery?
  These questions lead to the whole question of the export of productive machinery. Take the case of the textile industry, for example. Are we, by the export of textile machinery, building up overseas rivals who will challenge us when the sellers' market begins to fade away? Would it be wiser to keep some of that machinery at home, and put it into our own factories so that we may hold the field now and in the future? This leads to another question—the dollar gap, which is indeed formidable. The Chancellor of the Exchequer gave us the figure of the estimated dollar gap at £300,000,000 worth of dollars. I think that he was temporarily misled by a question into stating that that was the amount in the whole sterling area. I think that I would be right in saying that that was only on account of the United Kingdom dollar shortage with the Western Hemisphere. Obviously, the sterling area as a whole is much larger.
  This gap is great as it is now, but what will it be as the months go by, and one country after another begins to exclude our goods artificially, for the very reasons which have led us to restrict the import of goods from other countries? What, too, will happen if the sellers' market begins to decline naturally because other countries' goods, in sufficient quantities, perhaps of better quality, or at a more attractive price, are produced? Excellent and valuable as the Chancellor of the Exchequer's statement was, we have not
  1998
  had a full opportunity of studying it, and I think that he would agree that we should have the fullest opportunity for thinking about it, and we must ask for a further Debate for two or three days when Parliament reassembles. We shall ask for a Debate in public, and, if necessary, in private, as we did in the last Parliament, greatly to our advantage. We must have fuller debate and fuller information for we do not know the future, the real plan for recovery, or the plan for survival.
  We do not know if the Government have a plan, or if they are in the dark themselves. At any rate, they cannot blame the people of this country. The public has had a series of shocks during the last 30 months. I fear that there are more to come. I do not wish to overstate this case, or make purely party points, but for whatever reason, I think it is true to say—and I think even the Financial Secretary, who is a very emotional but very charming character, will agree with me—that, after the long efforts of the war, people expected an alleviation rather than an intensification of their sacrifices, to put it no higher than that. Many of them expected much more both at home and abroad.
  It is true that the former Chancellor by a prodigy of prodigal financial policy succeeded by the help of foreign loans on an unprecedented scale for one year in creating at home a false sense of security, a sort of mirthless, Micawberish gaiety which now rings hollow indeed. H there was to be ease and prosperity at home it was to be universal peace, disarmament and international unity abroad. If only Conservative Ministers could be removed, Socialists and Communists could lie clown together, and it was thought ill-mannered, not to say reactionary, to inquire which was the lion and which the lamb. At any rate, the Socialist Government in England was to be the natural buddy to the Communist Government in Moscow. Birds of a feather flock together, it was argued; though which could be plucked none could tell. But in these last days this bubble, too, has been pricked.
  The Foreign Secretary made today one of the gravest statements I have ever heard in this House. What is the truth? The truth is that the Grand Alliance, the victorious instrument of victory, the great instrument of victory, in the second

  1999
  world war was formally and finally dissolved on Monday night at Lancaster House. That is a solemn event. Yet in spite of all these trials and disappointments the people have done their part, both in the nationalised and in the free enterprise section of industry and commerce. They are working well. The coal output, even if subjected to a critical scrutiny related to past output in respect of quantity and quality, shows a welcome improvement, and when we take into consideration the inevitable confusion which must have followed so huge a change-over, the problems of organisation involved, I think we must all feel that all engaged in the industry deserve the thanks and congratulation of this House.
  The transport industry is about to pass into a new, and, as many of us think, an almost unworkable system; but however much it is regretted by those who have been long associated with it, I am sure that all concerned, all who remain in the service of the new authority in every grade, will continue to give of their best to the service of the public from the first of January when the change comes. In the free industries, which after all, are by far the greater part of the whole of our effort—some three-quarters—steel, engineering, textiles, general manufacturing, the results are, as I think is generally admitted, remarkably good, exceptionally good. Capital, whether widely distributed or held in small private firms, has cooperated loyally with the Government. We all know that many of us merely by saving and ploughing back capital have in many instances rendered the most useful service which we can perform at this time.
  Management is working with a devotion and enthusiasm, which has earned the praise of all but the least responsible of the right hon. Gentleman's colleagues.
  Have the Government any charge to bring against labour? Certainly not. It is fully pulling its weight, and the workers are working with a great and remarkable degree of variety. With all sincerity then we can say that on the whole the effort of the nation is at a very high level. Naturally there is fatigue and exhaustion, and in some cases there is a sense of frustration and irritation. Actually there are weak points here and there, but I do not see how the nation could be ex-
  2000
  pected to do much more than it is doing now.
  The people are playing their part. What of the Government? I pass over the last two and a half years. I would prefer, so far as human frailty and the original Adam allow, to speak without undue prejudice, but if the nation is so highly geared—and this is the point I want to impress on hon. Members—if there is very little fresh sacrifice that can be imposed upon our internal standards, and if there is very little more we can do by way of exports—because these are higher than a normal figure owing to the world shortage and the consequent pressure of world demand—the outlook is still uncertain if there is still left this dangerous situation this gap between solvency and bankruptcy which is so perilous.
  What is our long-term or even short-term plan? On what do our calculations rest for the years 1948 and 1949? By what criterion is it to be judged? By what policies is it decided? What is the grand design? We must have the facts, accurate calculations and intelligible estimates, and know more of the targets and causes. We must have a true and objective statement of the situation. Responsibility rests upon the Ministers and they cannot evade it. It is no light thing to be charged with the Government of a great nation in dark and uncertain days. It is a problem which, I am convinced, cannot be solved piecemeal. Foreign policy, defence policy, Empire policy are all essential factors, inextricably intertwined with our economic and commercial policy. If we are to survive we need vision and imagination. We need statesmen as well as accountants and lawyers. We must try to lead events and not merely follow in their wake. We are too apt, in my view, after the second world war to try to make comparisons and draw conclusions from the years after the first. I see little reality in these analogies. [Laughter.] Hon. Members opposite laugh and are very fond of these hollow cachinnations, but I do not observe that it adds very much to the brain power they bring to these matters.
  I was venturing to put to my colleagues in the House on this very great occasion tonight that the second world war has shaken the whole balance of the world, thrown down all the old landmarks and

  2001
  broken through the crust—so delicate, alas, though it often seemed to us so firm—of two thousand years of civilisation drawing its inspiration from the sometimes separate, sometimes parallel, and sometimes confluent streams of Christian and classical tradition. We have in the last few days heard and read tributes to a great and greatly-loved English statesman. Behind those tributes has lurked one reservation in some minds, sometimes latent and sometimes overt, and sometimes, if I may say so, expressed in quarters whose own record has least entitled them to express criticism. But what was the criticism? It was that he had neither the vision to foresee, nor the courage to prepare for the coming storm. In all the circumstances, in all the baffling and perplexing uncertainties of these years, this may seem to historians a venial fault. Repeated, it becomes a crime.
  Pray God, we may not have to carry that burden in this House. With much that divides us, there is much which unites us also. This very week, the issues have been greatly clarified. Only the appeasers, the wishful-thinkers, the fellow travellers, go droning on their treacherous theme song. Compared to the great gulf that divides all the rest of us from this poisonous crew, our differences, though great and vital—great as they may be—should not blind us to all that we have in common. I implore the Government to tell us the truth, the whole truth, and nothing but the truth, about the position of this country. And when we reassemble, in the light of the detailed and objective information, however serious, let us take counsel together, and if we cannot agree upon the remedies in every sphere, we may yet perhaps reach some common ground. At least we can play our respective and responsible parts in the great drama that will be unfolded during the coming years as fellow citizens and fellow subjects.
  10.54 p.m.
  The Minister of Health (Mr. Aneurin Bevan): I have very often been envious of the ability some hon. and right hon. Gentlemen in the House to stand apart and perpetrate the most extraordinary speeches in cold blood. We have just heard a speech read out to us, at the end of an exhausting day, which has little or nothing to do with the
  2002
  subject before the House—not that I blame the right hon. Gentleman for avoiding it, because it has many embarrassments for him. He prepared and probably wrote most of his speech before the Debate started. Some of it has sounded quite flat-footed to those who have been listening to the Debate, though I confess that when he referred just now to that book "The Middle Way," I felt somewhat contrite because I believe I am partly responsible for landing the party opposite with him. I remember I had a debate in Middlesbrough a long time ago with the right hon. Gentleman when he was in more respectable company than he is now. The debate was on the subject of his book "The Middle Way," and I pointed out—and I think it had some influence on him—that he could not possibly poise his views in such a manner because after all his was a purely parasitical position. The middle is always the point equidistant between two other points and he never knew what position he was to take up till he knew that his opponents had taken up theirs. From that time on the right hon. Gentleman deserted his untenable position and moved naturally towards the Right.
  The speech that we have heard is an extraordinary one in so far as it has skirted around the subject and has never approached it realistically; but the right hon. Gentleman indulged in one very important Parliamentary trick that I commend to my hon. Friends. It was given to me first of all by a right hon. Gentleman who was one of the most distinguished Parliamentarians of all time—David Lloyd George. He said, "Always, if you have no policy to advance, ask a series of questions." The right hon. Gentleman spent a great deal of his time—three parts of it in fact in asking a series of questions. This has become habitual with hon. Members opposite. It seems that they have infected some parts of the more respectable Press, because you have only to open the newspapers morning after morning to find otherwise quite experienced columnists asking, "Why don't the Government tell us the facts?" They almost always imagine some secret, mysterious fact lurking behind, which, if it were brought forward, would illumine the whole field.
  I have spent many years in this House and I have never known in the whole of my experience, and certainly never in the

  2003
  time or the experience of any administration for which the party opposite was responsible, such a stream of information as pours out now on every aspect of our political and national life. I have been watching this for some time and this is what is the matter with the Opposition—they have no longer a Civil Service to digest the facts for them. That is what is mainly responsible for the incompetence which has been revealed today. I do not blame them—it might happen to us—for if you have been dependent on a great machine to pre-digest information for you, then one day you fall upon lazy ways. It is fairly obvious that the right hon. Gentleman who opened the Debate for the Opposition today had been slightly fatigued in reading the White Paper—and we were slightly fatigued ourselves at the end of his speech—but I would like to ask hon. Gentlemen opposite, what position are they really taking up about the White Paper?
  Captain Crookshank: The right hon. Gentleman is asking questions now.
  Mr. Bevan: But I am going to give the answers as well! The right hon. Member for Aldershot (Mr. Lyttelton) made a lugubrious speech, far different from the speech which we had from the right hon. Gentleman who wound up. It was a most lugubrious speech. What did he say? He said that the capital investment programme was too ambitious.
  Mr. Lyttelton: At short term.
  Mr. Bevan: Oh, no. I have the words down here. He said, "Capital expenditure far too great," and he went on to say, "I have been protesting about it for a long time." Other hon. Members speaking from those Benches said that the capital expenditure programme had been cut too much; and in October—I do not know whether the right hon. Gentleman was speaking for his party or not, because there are so many different streams of opinion in the party opposite that it is awfully difficult for us to find any intelligibility amongst them—he said:
  "The more we concentrate——"
  [Interruption]——
  I understand the right hon. Gentleman's desire to avoid this Debate and get on to another. He will have to stick to this one for the moment.
  I have here the "Industrial Charter", a statement of Conservative industrial policy. Now may I ask a question, because it is very necessary for my purpose, and indeed, after all, the Opposition is an important part of the Constitution and the nation should know what its position is; because if at some time the alternatives are presented to the nation, the nation should be able to decide what kind of choice it should make. Do I understand that this is an authoritative statement? Would the right hon. Gentleman answer whether this is an authoritative statement of Conservative policy? It is very important to know. This is the "Industrial Charter." It was ratified in October. The spokesman for the Opposition said that the investment programme contained in the White Paper was too ambitious. But this is what they said in October in a document which I understand has not yet been changed:
  "The more we concentrate on re-equipment and modernisation now, the sooner we can raise our standard of life. The estimate of £1,700,000,000 capital goods given in the Economic Survey for 1947 is inadequate as a total."
  Is that the position the right hon. Gentleman takes up?
  Mr. Lyttelton: The right hon. Gentleman asks me a question. If he will read what I said in HANSARD he will find that I said the total capital expenditure foreshadowed this year was totally inadequate for our postwar needs, but nevertheless it was now, owing to the mismanagement of the Government, necessary to cut it at short term because we were facing an immediate crisis.
  Mr. Bevan: But this is a statement in October about the existing situation. All these facts were exposed to the nation before the last Recess. This is a statement of the Conservative Party since the crisis.
  Mr. Lyttelton: No.
  Mr. Bevan: Since the crisis.
  Mr. Lyttelton: It is not. The document was published in March.
  Mr. Bevan: And confirmed in October. That may not be the normal period of gestation, but the fact is that the child was born, and was christened here in this document. The position is, therefore, that the spokesman of the Conservative

  2005
  Party—he has not been elevated to the leadership yet, and probably will not get it after this—said the expenditure was inadequate. Many hon. Members behind him repudiated that contention, and said that, so far from the capital investment programme being too low, it is too high.
  The choice between gaining an advantage in the world market and developing the technical efficiency of our basic industries is a very difficult one for any community to make, and our task would be far lighter today if the situation in 1938 had been approached more realistically. In 1938 there were over 1.7 million unemployed in Great Britain—very nearly 2 millions. If those unemployed people had been put to work in our steel works, in our mining industry, in our textile industry and on generating stations, we would have doubled our capital equipment and our position today would have been rendered far easier.
  Now we have to deal with those years of neglect in circumstances of very great difficulty. We can understand—hon. Members opposite saying, "What is the use of making these comparisons?" We understand that they do not want comparisons to be made. If it were merely the scoring of a political point it would not be worth while. We have to deal with the hard, practical, realistic consequences of the fact that today all those industries are not sufficiently expanded for our purpose. And it is essential that the rest of the world should understand why it is that we have these difficulties today. We have them because of the criminal neglect of the party opposite. I must say I was a bit shocked by the references of the right hon. Member for Aldershot to a past Conservative Prime Minister. It appears to me that the party opposite have not got the ordinary instinct of gentlemen, because they did the same thing at Gravesend. They put up people, and then they spat on them afterwards. I sat in this House when the party opposite——
  Captain Crookshank: You never spat on Ramsay Macdonald, I suppose?
  Mr. Bevan: I must say I did not until he became saviour of the Conservative Party.
  The fact is that we have to meet these difficulties. The right hon. Member for
  2006
  Aldershot went on to say, in confirming a statement made by my right hon. Friend the Chancellor of the Exchequer, that it would be increasingly difficult to sell some of our goods in some of the markets in which we are pushing them now because these markets had been partly saturated. He said, therefore, "What is the good of trying to push these goods into those markets, because if you do so very much more, the terms of trade will move progressively against us?" That is exactly what he said. If the right hon. Gentleman believes that the capital investment programme can be reduced and we ought not to push—[Interruption.] I am within the recollection of hon. Members on this side of the House. The fact is that the right hon. Gentleman did not know what he was saying.
  Mr. Lyttelton: I am sure the right hon. Gentleman has retained some sense of fairness even in the height of his eloquence. I said nothing of the kind. I only pointed out that if we balance the figures of our national economy on the assumption that we can increase our ex port by £31 million extra, we place it on a false basis.
  Mr. Bevan: The right hon. Gentleman said "if we pushed the goods into those markets."
  Mr. Lyttelton: No.
  Mr. Bevan: He said the terms of trade were bound to move against us even more. I should really like to know what he would do. If we reduce our capital investment programme and we do not increase consumption or export goods, what do we do with our resources? Leave them unemployed? There are only two things that we can do with our economic resources. We can either devote them to, additional capital investment or we can devote them to the production of consumption goods. There is a third thing we could do—and that is, do nothing at all and have unemployed people. We understand—we have had it before—that the real solution of the problem for the party opposite is to have an army of unemployed.
  Mr. H. Macmillan: Nonsense.
  Mr. Bevan: Because if we had an army of unemployed in Great Britain they would get the social disciplines they would want, and they would not have such high standards of consumption as would enlarge our import programme. They would achieve exactly what they want, because that is the only consequence of accepting the position taken up by the right hon. Gentleman. I know he does not like it, but this is the logical consequence of the position that he has taken up. He went on to discuss another aspect of the matter. The right hon. Gentleman is a little angry, but if he will look at HANSARD he will find complete confirmation for every statement I have made tonight. Of course, he did not make the deductions I am making; they are my own deductions.
  The right hon. Gentleman asked certain questions about houses. I want to know—once more I will ask the question and give the answer—what hon. Gentlemen opposite want to do. Do they want to build more houses or fewer houses? We should like to know. Of course, up to now they have done a very clever thing, They have inspired the organs of opinion that support them to demand a reduction in the housing programme, but they have cleverly avoided making a specific demand themselves. The right hon. Gentleman came nearest to it tonight, because he said that the only way in which we are to provide houses for miners and agricultural workers was to stop houses being built in another part of the country. Does the right hon. Gentleman deny that?
  Mr. Lyttelton Mr. Lyttelton indicated assent.
  Mr. Bevan: I was listening to the right hon. Gentleman very carefully. I wanted to find out what his policy was. We take the view—and we insist upon it—that there can be nothing sillier than to spend large sums of money and much labour and material on bringing houses to a certain stage of completion, and then leave them uncompleted. We think that is nonsense.
  Commander Galbraith: That is what the Government are doing.
  Mr. Bevan: I know. But we have insisted, despite all the statisticians who masquerade as economists, that we are
  2008
  going to complete those houses. They are being completed——
  Commander Galbraith: A year late.
  Mr. Bevan: —at a rate of over 15,000 permanent houses a month at the present time. I can inform Members that that rate of completion is being maintained, and I see no reason why it cannot be maintained right through the winter. But, of course, we are not so able in this matter as Members of the Opposition. We are not as competent builders as the Leader of the Opposition, because he would build his houses without using any timber at all. But this is nothing new. The right hon. Member for Woodford (Mr. Churchill) made a prediction in 1944.
  Captain Crookshank: What did you say in 1944?
  Mr. Bevan: He was speaking on the postwar housing programme. He said that he was going to rely for the satisfaction of British housing needs upon the steel house for the first five years after the war, although everyone could have told him that if he had built steel houses to that extent there would have been no steel for any other purpose whatsoever. It is characteristic of the party opposite that they disregard the realities. We have to buy more than 40 per cent. of our timber from dollar sources. I have not yet heard of anyone who can build houses in this country without any timber at all.
  We will build in 1949, if we get the timber, more houses than are in the projected programme, and between now and 1949 we shall finish the 350,000 houses that are under construction and in contracts. Even with the limitations imposed upon housing, even with the dollar difficulties, we shall still have reached before 1950 the target set by the last Government for houses in this country. [HON. MEMBERS: "Two years."] We shall have built 750,000 houses. I do not want to make this argument over and over again because it is familiar to everybody, but we have built in the first two and a half years at the end of this war more houses than were built in ten years at the end of the 1914–1918 war—and that in addition to the repairing of all the war damage.
  I have been asked a question about agricultural houses and I want to answer

  2009
  it. Members opposite have continually been making reference to the supply of houses to agricultural workers and have said that 30,000–40,000 houses have been completed in rural districts and only 3,000 or 4,000 or 5,000 agricultural workers in them.
  Commander Galbraith: Not thousands.
  Mr. Bevan: I said 3,000 or 4,000 agricultural workers in these houses. What hon. Members fail to realise is that the agricultural worker himself, the employee in the agricultural industry, is a minority even in the deepest rural areas. The mechanic who is repairing ploughs and agricultural machinery is as essential to the farmer as the hedger and ditcher and cowhand. The more you mechanise agriculture, the more you have diversified the ancillary services serving the farmer——
  Mr. Lyttelton: May I ask the right hon. Gentleman why his colleague the Chancellor of the Exchequer says that priority for agricultural houses is one of the most urgent needs of the country?
  Mr. Bevan: Because agricultural houses are not merely to house agricultural workers: they are occupied by all persons serving the agricultural industry. I should have thought that it was an obvious truth that if you have a mechanic in a garage whose job it is to repair ploughs and tractors, he is as at least essential as the farm labourer.
  Mr. Lyttelton: If he is as at least essential why this proportion? Why are there 30,000 houses occupied by only 3,000 agricultural workers?
  Mr. Bevan: I will give the answer at once. Because for many years during the war most of the agricultural workers were retained at home. They are still living in their own homes, and there is not the same situation as exists in other industries. I can tell the right hon. Gentleman that there are rural areas in this country where rural authorities have not got farm labourers on their lists at all. The real problem is an entirely different problem from that. It is to add to the total amount of housing accommodation available in the rural areas. Despite our difficulties we are building far more houses for agricultural workers in two years than was done in 50 years—[Interruption.] Look at the facts. Those are the facts.
  2010
  Of course hon. Members opposite want to run away from the facts.
  Mr. Orr-Ewing: Does the Minister not realise that, as a matter of fact, there has been a big revolution in the whole job of farming in this country, and that it needs more labour on the land than we have ever had before. Merely to quote what was necessary by way of houses before, is no answer at all.
  Mr. Bevan: I thought I had been referring to that revolution. The revolution has been the mechanisation of agriculture, and also the policy of ploughing, up the land. That is perfectly true. Therefore to test the amount of cottages available for agricultural workers by the actual number of agricultural workers living in houses is a false test.
  This is true, too, of mining. The mining areas already have a very large housing programme in progress, and one of the reasons is that in the mining areas are some of the most progressive local authorities in Great Britain. A far larger proportion of housing is going on than in any other part of the country—[An HON. MEMBER: "Because you favour them."]—Of course we favour them. That is what priority means. In addition, we said last July and August that we would provide aluminium bungalows to supplement traditional housing in the mining areas. Those bungalows have already started to arrive, and are arriving week by week, month by month. Eleven thousand to 12,000 of them will add to the housing accommodation of miners and key workers, so that within the programme we are looking after miners and agricultural workers. We cannot look forward further than the middle of next year, and if we cannot obtain more timber than appears to be available, the housing programme will have to be reduced. It will be reviewed next year in the light of timber supplies should we have sufficient available to extend the programme.
  Mr. W. Shepherd: Before the right, hon. Gentleman sits down, would he be good enough to give the House his opinion on the need for more exports?
  Mr. Bevan: I have been speaking of the White Paper, and of the national investment programme, and my remarks have been much more relevant to the purposes of the Debate than the speeches of the hon. Gentlemen who preceded me.

  2011
  We have had in the last few months a very remarkable example of the resilience of the industrial population of this country.
  Mr. Lyttelton: Under private enterprise.
  Mr. Bevan: Under private enterprise, says the right hon. Gentleman. We were taunted a year ago by hon. Members opposite and in the Press that the nationalisation of the mining industry would prove a complete failure. Hon. Members opposite lost no opportunity of pouring scorn upon the miners—[HON. MEMBERS "Nonsense."] Editors of newspapers supporting hon. Members opposite wrote editorial after editorial as though they were trying to dig England's:grave with their pens. They poured vitriol day after day—[HON. MEMBERS: "Never."] The miners have shown that they are not only the most politcally mature, but the most responsible and patriotic, body of citizens in Great Britain. They have shown a recognition of the significance of their position, although that industry was the most poisoned industry in Great Britain——
  Mr. Orr-Ewing: Who poisoned it?
  Mr. Bevan:—and although the nation did not deserve to be requited as it was—[Interruption.] Of course, that is why we are here; the miners know their friends—and their enemies. That is why there is no Member for that party representing a mining constituency. Hon. Members failed to dig England's grave, but they dug their political graves over the last 25 to 30 years in the mining areas.
  Coal is coming from those areas now at a time when we badly need it. The same is happening with steel, in spite of past behaviour. We are having more steel, but we need three to four million tons more than we can have from the industry, and that is largely the result of the policy carried out between the wars. We are getting ships from the shipyards which were neglected. There are two Britains. There is the Britain of Waterloo, the Britain of Trafalgar, the Britain of Blenheim, the Britain of Mons, and the Britain of Dunkirk—[An HON. MEMBER: "And the Britain of Ebbw Vale."]—and there is the Britain of the Levellers, of Peterloo, and of the Chartists. History has two Alain streams of whispers. For us, from
  2012
  those older industrial areas on which we depend, tradition has a different whisper from that which it has for hon. Members opposite. That is our tradition; in that tradition we shall live, and in that tradition we shall conquer.
  Motion, by leave, withdrawn.

  SUNDAY CINEMATOGRAPH ENTERTAINMENTS
  Resolved:
  "That the Order made by the Secretary of State for the Home Department, extending Section I of the Sunday Entertainments Act, 1932, to the County Borough of Bootle, a copy of which Order was presented on 16th December, be approved."
  Resolved:
  "That the Order made by the Secretary of State for the Home Department, extending Section 1 of the Sunday Entertainments Act, 1932, to the Rural District of Border, a copy of which Order was presented on 16th December, be approved."
  Resolved:
  "That the Order made by the Secretary of State for the Home Department, extending Section r of the Sunday Entertainments Act, 1932, to the County Borough of Burton upon Trent, a copy of which Order was presented on 16th December, be approved."
  Resolved:
  "That the Order made by the Secretary of State for the Home Department, extending Section I of the Sunday Entertainments Act, 1932, to the Rural District of Erpingham, a copy of which Order was presented on 16th December, be approved."
  Resolved:
  "That the Order made by the Secretary of State for the Home Department, extending Section 1 of the Sunday Entertainments Act, 1932, to the Urban District of Wymondham, a copy of which Order was presented on 16th December, be approved."—[Mr. Younger.]

  DISABILITY PENSIONS (BASIC RATE)
  Motion made, and Question proposed, "That this House do now adjourn."—[Mr. J. Henderson.]
  11.31 p.m.
  Brigadier Peto: In the short time at my disposal, I propose to put the case for an increase in the basic rate of ex-Service disability pensions. I will start by saying that it is in no sense a party issue. It has a large measure of support in the country not only from hon. Members on the benches behind the Minister of Pensions, of whom no fewer

  2013
  than 80 have taken an active interest in this question, but also from my hon. Friends on this side. Though it is true we are in a considerable minority, 75 Members on this side have taken an active interest, by Question or in other ways, in this matter. Fifteen other hon. Members, representing all the political parties and all shades of opinion, have been equally interested.
  I would remind the Minister that there is a large measure of support by the British Legion, the council of which passed a unanimous resolution on the subject. The Legion represents more than one million votes in this country—exService men and women. There is also support from the Disability Pensions Committee, a body of men who are interested in the welfare of men with whom they served during the last war and in the 1914–18 war. I would mention one particular member of that committee, a very gallant soldier, Lieut.-General Sir Adrian Carton de Wiart, V.C., K.B.E., C.B., C.M.G., D.S.O. There is also a certain measure of support by an organisation known as B.L.E.S.M.A., but to be quite truthful, they are more interested at the moment in getting increased allowances for the worst cases of disablement, such as the limbless men, than they are in a flat rate rise of the basic pension. They think—and probably rightly so—that they are more likely to get something from the Government by way of an increased allowance for the worst cases than to get an increased basic rate for all pensions. That may very likely be the Government's view; we will hear in a moment. I hold that it is more important to deal with the vast majority of pensions than with those particular cases.
  There is also a large measure of support from lett4rs in the Press, and one which I would' venture to mention, appeared in the "Yorkshire Post" of 13th October from Sir David Smith. If the Minister has not seen that letter, I very strongly commend it to him, because it puts the case in extremely clear and easy phraseology, I will quote briefly from it:
  "Why, when the purchasing value of the pound has been halved and wages of workers have risen by as much as 150 per cent. have pensions been raised by only 12½ per cent.?"
  He goes on to say:
  "The official answer seems to be that most of the disabled are able to work and there-
  2014
  fore to benefit by the general rise in wages. Personally, I do not see how a man who is 50 per cent. disabled and who draws a pension of £1 2s. 6d. per week can possibly hope to command an equal income to that of a fit man working in an occupation for which he has been trained."
  I wholeheartedly agree with that sentence. It is well known that a disability pension is granted purely on medical grounds and not with a view to the earning capacity of the recipient. At the same time, surely it is true to say that a pension is granted mainly with a view to seeing that a man who enjoys that pension feels that he has been reasonably compensated for his disability and is not at a disadvantage financially by reason of his disability when he is compared with a fit man.
  If I may choose an example from my own experience, I have lost a large part of my right hand, and I am not a fit man from that point of view. If I had been trained and brought up as a gardener or a manual worker or any sort of farm worker, I should be at a great disadvantage and unable to do what I could do as a fit man. One cannot lift, one cannot grip, one feels at a disadvantage; and that disadvantage in some cases is apt to make a man feel disgruntled and to feel that he has not been given the same rights as other men who are fit—a feeling of bitterness. That is one thing that we must try to avoid.
  Up to February, 1946, according to the Minister's reply to a question on November 18th, the basic pension rate was related to the cost of living. Thereafter, when the 5s. rise was given in February, 1946, it was divorced from the cost of living and was related to the new National Insurance (Industrial Injuries) Act of that year. I think that the crux of the whole matter lies in whether or not the basic rate should or should not be related to the cost of living. I have a few facts that may not be generally known to the public and may not even be known to hon. Members, though, as far as the Ministry is concerned, they are only too well known. I would ask the Minister to bear with me while I give them.
  There is a total of 766,000 ex-Service pensioners, of whom 93 per cent. do not draw any special allowance. There are, out of that three quarters of a million, only 50,650 Service pensioners drawing 100 per cent. pension. On the basis of a man with a wife and two children, the average pension for the 100 per cent. dis-

  2015
  abled is just over £5 a week, counting allowances. Of that 50,000, 4,200 draw 20s. a week constant attendant allowance, and out of that 4,200, only 420 draw the maximum constant attendant allowance of 40s. per week, which puts their ordinary pay from the Ministry of Pensions up to £6 or £7 a week respectively, though, in fact, we should not count that allowance for constant attendant as part of the pay packet, since it goes into one pocket and out of the other. There are 351,000 pensioners from the 1914–18 war. Almost half of these men are nearly 60 years old now, and are not in any way fit, as one knows a fit man.
  Finally, I want to ask the Minister two questions. How can he or the Government maintain that these 351,000 men should be asked to compete with fit men, on modern standards, on the basis of the present basic pension, with the present high cost of living? How can the Government expect them to compete on level terms? If in 1919, 40s. a week was considered adequate as a basic rate, how can anyone maintain that 40s. is an adequate basic rate under modern conditions? In my opinion, that basic rate should not only be raised, but should be doubled.
  11.42 p.m.
  Mr. Geoffrey Cooper: As this is a non-party, or rather an all-party matter, perhaps it would be appropriate if a few points could be made by a representative of each of the Services. The hon. and gallant Gentleman has spoken for the Army. I should like to add one or two things as an ex-member of the Royal Air Force. I want to put four points: the first two are statistical; the third is moral, and the last is perhaps sentimental.
  On 20th October, the last available late for this information, of the 503,483 disabled ex-Service men on the Register of Disabled, kept in compliance with the Employment Act, 1944, 39,054 were unemployed, which is nearly eight out of every 100. This shows the proneness of disabled men to unemployment. My next point is to make a comparison between the pension rate of those receiving 100 per cent. benefit in this country and those in the Dominions. Taking a typical family of a man with a wife and one child, in the United Kingdom an increase of only 9 per cent, has been made in
  2016
  pension rate between 1919 and 1946. In Canada there has been a 27.7 per cent. increase; in New Zealand 42.8 per cent.; in South Africa 82.5 per cent. They all started higher than our pensions in the first instance. I think the answer is not that the cost of living in the Dominions is higher than ours, because what the Dominions have done has been to step up their pension rate by this increase, thereby recognising their obligation to their people to provide adequately for those in receipt of pensions, in view of the increased cost of living due to two wars. Is the Mother Country going to be less willing to recognise the gallant services rendered by those here who are also in receipt of a disability pension? Are we to be less generous in fulfilling our obligations?
  The third point to which I would draw attention is the matter of property which was damaged during the war. We are paying compensation in full to those whose property suffered damage. An owner of damaged property is subjected to little or no hardship, as a result of the generosity of the War Damage Commission. Are we, as a country, going to bow down, pagan-like, to the sacred right of property and forget to act the Good Samaritan to those who, through no fault of their own, have fallen among thieves? Let us remember that the war was not won by bricks and mortar, but by flesh and blood.
  My last point is an appeal to the Minister. We are having practically the last Debate before the Christmas Recess. Could not I appeal to the Minister's sense of generosity? Christmas is the time of good cheer. I believe that this small, but important, section of the community would feel a great sense of relief, and would respond to the sense of good cheer, if the Minister would take this opportunity of announcing that he was prepared to make an increase in the basic rate.
  11.47 p.m.
  Commander Noble (Chelsea): I would like to say a few words in support of the hon. and gallant Member for Barnstapie (Brigadier Peto) who, I think the House will agree, has raised this matter in a most fair and straightforward manner. I was particularly interested to hear the Minister of Pensions, in reply to a Question on 18th November, say that he would like

  2017
  to see the people who now rely on pensions even more humanely treated. I think that that is the very root of what we are trying to say tonight. The Minister also said on that occasion that he was not sure of the best way to make an increase. I hope that I am not forestalling him tonight when I say that I feel he may state, when he comes to reply, that he has had a meeting with the associations and societies concerned, and that they have recommended that an intermediate step should be on this occasion an increase for those who are most in need. That may well be; but I wonder whether the right hon. Gentleman will also tell us what was the background of such a discussion, if it actually took place. Did the Minister say at such a meeting that he was prepared to spend a certain amount? If the Minister does say that, I fully agree; but I do not think that in any way detracts from the case made by my hon. and gallant Friend the Member for Barnstaple tonight.
  I particularly ask that the basic rate should be related once again to the cost of living. I do not want to see it tied to a particular cost of living figure, but I think it is an accepted fact that wages in this country have risen substantially. Take, for example, industrial workers. They have received increases of about 80 per cent., I think, throughout the whole field. It is also an accepted fact that the pound now does not buy what it used to buy. It seems fantastic to me that more consideration has not been given to those men who are partly disabled.
  The Minister may say, as I think he has said before, that these men, also, can benefit from the higher wages; but I think my hon. and gallant Friend has already made out the case for the men of the 1914–18 war. How can the partly-disabled men of that war, at their age, compete in jobs today with the young and fit men? I think we ought to consider also the money which has been spent on other services during the last two or three years, and that we should again consider whether something more cannot be done for these partly-disabled men. I fully realise that this is, finally, a Treasury decision, but I hope that the Minister of Pensions will make a bold and, to use his own words, "humane appeal" to the Chancellor. If he does, and if he succeeds, many will live to thank and respect him.
  11.50 p.m.
  The Minister of Pensions (Mr. Buchanan): This Debate has been well conducted, and the issue perfectly fairly put. I make no complaint of the form and manner in which the issue has been raised, though I would have thought that my hon. Friend the Member for West Middlesbrough (Mr. Cooper) might have been as fair to me as was the last speaker, who said, rightly, that this is not a question merely for the Minister of Pensions, but a question for the whole Government to decide in relation to its expenditure. It is beyond even a new Member asking me to make an announcement tonight.
  In regard to the general issue raised, it is true that if you take comparison by comparison, you can make a case, provided that you do not mention all the other things that the Government have given to the ex-Service men. It is not fair for people claiming to represent ex-Service men, who have seen reform after reform put into effect by this Government, never to mention them as an offset against all the other things. I made this statement in answer to a question. It is true that one has to answer Questions quickly in this House, to think on one's feet, but looking over what I said, I am not ashamed of it. I said this. For 25 years I have been in this House, and over those years the thing on which I have felt most deeply was never the rate of pension, but the fact of the very large number of decent men who were refused any pension at all. I said in reply to that Question that the first thing I would like to do—and I defy any hon. Member opposite, or behind me, to say that I have not translated it into actual practice—was to see that men who were denied any pension and who had anything like a case should be granted one. I say this frankly. If a man is paid too low, then he is one of a large section of the community and is in common circumstances with them; but if he is denied a pension, he is isolated from his fellows, and in that sense, in my view, he is the most deserving of all.
  Let me say a word about the comparisons. Let me take the comparison of 1919, when a Coalition Government with a preponderance of Conservative Members was in office. The hon. and gallant Gentleman, who raised this matter

  2019
  and I have one thing in common: he has a damaged right hand, and so have I. His hand was damaged in the service of his country in the field of war. My right hand was damaged in industry. I presume he gets a regular pension of so much a week. I will tell the House what I got from a generous industry—£25 in all. Whatever he may say about the Government, it is much more generous. Wage rates in 1919 were on an extremely high level, not much less than they are today. When the rate was fixed in 1919 it was 40s. a week for the 100 per cent. man; but there were none of the attendant allowances we are now granting. Today the man in the 100 per cent. category, the normal case of a man with a wife and one or two children, and leaving out family allowances and other additions the State is now giving, can without any exaggeration get well over £5 a week. What is the use of making a comparison that is not fair? What is the use of leaving out the supplementary allowances that have been given since?
  Again, in 1919 more than 50 per cent. of the men were unmarried. They were married subsequently and no pension was payable to their wives, and no pensions or allowances were allowed to their children. To 50 per cent. of them nothing was given.
  Brigadier Peto: Could the Minister answer my two questions? There are but a few moments left. How can a man of the 1914–18 class compete in industry today——
  Mr. Buchanan: I was about to say a word on that. Fifty per cent. of them got no allowance for their wives and children. Forty shillings was all a man got if he was married afterwards. He could have a wife and five children, but he got only 40s. Now in these cases he gets an allowance for his wife and each child he has. He gets 10s. for his wife and 7s. 6d. for each child. It is asked, how can an ageing man compete in industry? We endeavour to meet the case now—and the hon. and gallant Gentleman mentioned this: we give a hardship allowance in such a case of 11s. 3d. per week.
  Brigadier Peto: How many get it?
  Mr. Buchanan: Fairly large numbers. Perhaps, a man's ability in industry has tot been in any way impaired. But a
  2020
  man whose ability in industry is impaired receives the allowance. One reason why at the moment he is not, perhaps, receiving it is that there is very good trade now, so that a man with a slight defect can yet earn his full standard rate of wages. I am prepared, to see what can be done, to look at the case of the man with a 50 per cent. injury. I am prepared to look at the case of the very seriously disabled man. The position of such men has been put to me very strongly and feelingly, by a deputation I received the other day of ex-Service people not connected with the bigger organisations. They put to me the case of the blind man, of the man who has lost a leg, or who has had part of his face destroyed. We give them a maximum of £6 odd. That, however, is 120 per cent. more than they would have got in 1919 under the Coalition Government. When the hon. and gallant Gentleman talks about the rising cost of living, let me remind him that in 1939, when wages had risen considerably, the rate of pension was 32s. 6d.
  Colonel Gomme-Duncan: That is not the point.
  Mr. Buchanan: It is annoying, I know, to hon. Members. I am prepared to look at and re-examine the case of the severely disabled man. I am not unsympathetic. However, I think that even if hon. Gentlemen opposite were in power tomorrow they would make no change in the fundamental, basic pension. What they would do would be to look at the field of pensions generally, and make the administration as humane as possible. It would be easy for me to raise the pension to a much higher standard, but at the same time there would be a much more rigid interpretation of the qualifications for pension. It would be stricter and yet more strict. I prefer the humane administration, an administration as humane as it can be made, even though, possibly, the sums paid may be a little less.
  Major Legge-Bourke: There is only one question I want to ask. The Minister raised a point of some consequence when he said——
  The Question having been proposed after Ten o'Clock and the Debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at One Minute past Twelve o'Clock.

EDUCATION
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  Gas Supply, Helston
  Gas Supply, Helston
  Poplar Generating Station
  Poplar Generating Station
  Sports Meetings (Private Hire Vehicles)
  Sports Meetings (Private Hire Vehicles)
  Working Hours (Staggering)
  Working Hours (Staggering)
  S.R. & O. 2465 (Maps)
  S.R. & O. 2465 (Maps)
  Oil Stocks
  Oil Stocks
  Coal-Oil Conversion
  Coal-Oil Conversion
  Basic Ration (Abolition)
  Basic Ration (Abolition)
  Institutions (Allocations)
  Institutions (Allocations)
  Waste Coal
  Waste Coal
  Household Coal (Prices)
  Household Coal (Prices)
POLICE
  Street Disturbances
  Street Disturbances
  Bonfires, Lambeth
  Bonfires, Lambeth
  Potato Clamps (Thefts)
  Potato Clamps (Thefts)
  CHILD CARE
  CHILD CARE
  DOGS (ATTACKS ON SHEEP)
  DOGS (ATTACKS ON SHEEP)
  CARGO SHIPS (PASSENGERS)
  CARGO SHIPS (PASSENGERS)
  JUSTICES OF THE PEACE (ROYAL COMMISSION)
  JUSTICES OF THE PEACE (ROYAL COMMISSION)
  MARRIAGE GUIDANCE (GRANTS)
  MARRIAGE GUIDANCE (GRANTS)
PRISONS
  Remand Prisons, Durham
  Remand Prisons, Durham
  Confinements
  Confinements
  MAGDALEN HOSPITAL (DIAGNOSIS)
  MAGDALEN HOSPITAL (DIAGNOSIS)
  BIRTH CERTIFICATE REGULATIONS
  BIRTH CERTIFICATE REGULATIONS
HOUSING
  Bungalow, Colchester
  Bungalow, Colchester
  Maximum Prices
  Maximum Prices
  Shops, Wolverhampton
  Shops, Wolverhampton
  War-Destroyed Houses (Tenancies)
  War-Destroyed Houses (Tenancies)
  Prefabricated Houses
  Prefabricated Houses
  Building Restrictions (Stevenage Appeal)
  Building Restrictions (Stevenage Appeal)
PUBLIC HEALTH
  Mass Radiography
  Mass Radiography
  Sewerage, Santon Downham and Brandon
  Sewerage, Santon Downham and Brandon
  Hospital, Shoreditch
  Hospital, Shoreditch
  Health Education
  Health Education
  Nursing Working Party (Minority Report)
  Nursing Working Party (Minority Report)
  Nurses Registration
  Nurses Registration
  Executive Council, Newport
  Executive Council, Newport
  Infant Mortality Rates
  Infant Mortality Rates
  Penicillin
  Penicillin
  National Hearing Aid
  National Hearing Aid
  Unmarried Mothers (Hostels)
  Unmarried Mothers (Hostels)
  Welfare Workers
  Welfare Workers
  REGISTRARS (SALARIES)
  REGISTRARS (SALARIES)
  WATER SUPPLY, BRECONSHIRE
  WATER SUPPLY, BRECONSHIRE
AGRICULTURE
  Basic Slag
  Basic Slag
  Member's Letter (Reply)
  Member's Letter (Reply)
  Dismissed Officials, Norfolk
  Dismissed Officials, Norfolk
  Farm Produce, Llanelian (Conveyance)
  Farm Produce, Llanelian (Conveyance)
  Law Costs
  Law Costs
  Oil Supplies
  Oil Supplies
FORESTRY
  Industrial Site, Cinderford
  Industrial Site, Cinderford
  Denbigh (Scheduled Land)
  Denbigh (Scheduled Land)
MINISTRY OF SUPPLY
  Braille Watches
  Braille Watches
  Barrage Balloon Fabric
  Barrage Balloon Fabric
  Mining Machinery (Exports)
  Mining Machinery (Exports)
  Electric Cable Making (Steel Supply)
  Electric Cable Making (Steel Supply)
  Engineering Industry (Redundancy)
  Engineering Industry (Redundancy)
  Tudor Aircraft (Committee's Report)
  Tudor Aircraft (Committee's Report)
ROADS
  Signposting, Gosberton Risegate
  Signposting, Gosberton Risegate
  Bus Services, Rural Areas
  Bus Services, Rural Areas
  Coaches (Private Parties)
  Coaches (Private Parties)
RAILWAYS
  London—Scotland (Fares)
  London—Scotland (Fares)
  Steel Mineral Wagons
  Steel Mineral Wagons
  Sleeping Berths
  Sleeping Berths
  SHIPPING (MILITARY CARGO, MANCHESTER)
  SHIPPING (MILITARY CARGO, MANCHESTER)
  TRANSPORT DIFFICULTIES (TEXTILE WORKERS)
  TRANSPORT DIFFICULTIES (TEXTILE WORKERS)
FOOD SUPPLIES
  Pigs (Slaughtering)
  Pigs (Slaughtering)
  Stocks (Remote Areas)
  Stocks (Remote Areas)
  Meals (Social Functions)
  Meals (Social Functions)
  Infant Milk Foods, Newcastle
  Infant Milk Foods, Newcastle
  Cereals (Dominion Acreages)
  Cereals (Dominion Acreages)
TOWN AND COUNTRY PLANNING
  Services' Land Requirements
  Services' Land Requirements
  Crawley Development Corporation
  Crawley Development Corporation
POST OFFICE
  Telephone Service (Capital Expenditure)
  Telephone Service (Capital Expenditure)
BRITISH ARMY
  Personal Case
  Personal Case
  Training Area, Torthwald Dalton
  Training Area, Torthwald Dalton
  Battle School Area, Suffolk
  Battle School Area, Suffolk
  PRISONERS OF WAR (CHRISTMAS LEAVE)
  PRISONERS OF WAR (CHRISTMAS LEAVE)
SCOTLAND
  Devolution Proposals
  Devolution Proposals
  Unfit Houses, Highlands and Islands
  Unfit Houses, Highlands and Islands
  Electricity Supply (Hydro-Electric Board)
  Electricity Supply (Hydro-Electric Board)
  Peat Resources
  Peat Resources
  HOUSE OF COMMONS CATERING STAFF (CHRISTMAS FUND)
  HOUSE OF COMMONS CATERING STAFF (CHRISTMAS FUND)
PALESTINE
  Jerusalem—Jaffa Road (Patrols)
  Jerusalem—Jaffa Road (Patrols)
  Transport Protection
  Transport Protection
  Arab Legion (Inquiry)
  Arab Legion (Inquiry)
  MALAYAN UNION (INCOME TAX)
  MALAYAN UNION (INCOME TAX)
  GOLD COAST STUDENTS (UNITED KINGDOM)
  GOLD COAST STUDENTS (UNITED KINGDOM)
  WAR MATERIAL, MIDDLE EAST STATES
  WAR MATERIAL, MIDDLE EAST STATES
  GERMANY (I. G. FARBENINDUSTRIE GESCH.)
  GERMANY (I. G. FARBENINDUSTRIE GESCH.)
ROYAL NAVY
  Dockyard, Portsmouth (Private Meeting)
  Dockyard, Portsmouth (Private Meeting)
  Wives (Maternity Benefit)
  Wives (Maternity Benefit)
  NEW FACTORIES (BUILDING)
  NEW FACTORIES (BUILDING)
NATIONAL INSURANCE
  Confidential Information
  Confidential Information
  Personal Case
  Personal Case
Preamble
The House met at two of the clock. The Lord Chancellor on the Woolsack.
Prayers.

  CHILDREN BILL. [H.L.]
  THE LORD CHANCELLOR (Viscount Jowitt): My Lords, I beg leave to introduce a Bill to make further provision for the care or welfare, up to the age of eighteen and, in certain cases, for further periods, of boys and girls when they are without parents or have been lost or abandoned by, or are living away from, their parents or when their parents are unfit or unable to take care of them, and in certain other circumstances; to amend the Children and Young Persons Act, 1933, the Children and Young Persons (Scotland) Act, 1937, the Guardianship of Infants Act, 1925, and certain other enactments relating to children; and for purposes connected with the matters aforesaid. I beg to move that the Bill be read a first time.
  Moved, That the Bill be now read 1a.—(The Lord Chancellor.)
  On Question, Bill read 1a, and to be printed.

SUPREME COURT OF JUDICATURE (AMENDMENT) BILL. [H.L.]
THE LORD CHANCELLOR: My Lords, I beg leave to introduce a Bill to amend the provisions of the Supreme Court of Judicature (Consolidation) Act, 1925, as to the number of divisions in which the Court of Appeal may sit and to move that the Bill be read a first time.
Moved, That the Bill be now read 1a.—(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

STANDING ORDERS.
2.5 p.m.
THE LORD PRIVY SEAL (Viscount Addison)THE LORD PRIVY SEAL (Viscount Addison) rose to move, That the following Amendment to Standing Order No. CIV and new Standing Orders be made in the Standing Orders of the House:
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Standing Order No. CIV, line 4, after the second ("the") insert ("Office of the").
After Standing Order No. CIV, insert the following new Standing Orders:
"Laying of Statutory Instruments.

13.—Statutory Instruments.
CV.—(1) Where, under any Act of Parliament, a statutory instrument is required to be laid before Parliament, the deposit of a copy of the instrument in the Office of the Clerk of the Parliaments in accordance with this Order at any time during the existence of a Parliament when the House is not sitting for public business shall be deemed to be for all purposes the laying of it before the House:
Provided that nothing in this Order shall apply to any statutory instrument being an order which is subject to special Parliamentary procedure or to any other instrument which is required to be laid before Parliament for any period before it comes into operation.
(2) For the purposes of this Order, a statutory instrument may be deposited on any day except a Sunday, Christmas Day, Good Friday or a Bank Holiday between eleven and one of the clock on a Saturday or eleven and five of the clock on any other weekday.
(3) The Clerk of the Parliaments shall cause to be published, either in the Minutes of Proceedings or in some other manner, particulars of the deposit of statutory instruments under this Standing Order.

Notifications.
CVI. When any notification has been received by the Lord Chancellor, drawing attention to the fact that copies of any statutory instrument have yet to be laid before Parliament, and explaining why such copies have not been so laid before the instrument came into operation, the Lord Chancellor shall thereupon acquaint the House therewith."
The noble Viscount said, My Lords, in moving the Motion standing in my name, I would point out that the first Amendment—to insert, after the word "the," where it occurs for the second time in Standing Order No. CIV, the words "Office of the"—is a slight Amendment to which I hope your Lordships will agree. As to the proposed new Standing Orders I have departed from my usual practice in providing myself with a considered and prepared statement, which I hope your Lordships will allow me to read, as this is a highly technical subject and beyond my ordinary scope.
The object of the Standing Orders is to provide machinery for the working of the Statutory Instruments Act, 1946, which comes into force on January 1,1948. The main purpose of the Act is to ensure

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better Parliamentary control over subordinate legislation, and this is achieved by requiring that, in normal circumstances, such legislation must be laid before Parliament before it becomes operative. There must, however, be occasions when it is essential for the machinery of government to bring into operation delegated legislation at 'times when Parliament is not sitting. This is met by the proviso to Section 4 of the Act, which provides that in cases where subordinate legislation is required to come into operation before it is laid before Parliament, notification should be made to the Lord Chancellor and the Speaker.
The effect of the Standing Orders is to reduce as far as possible these periods by providing that during the existence of a Parliament statutory instruments can be deemed for all purposes to be laid before Parliament if deposited in the Offices of the two Houses. The proposed new Standing Orders, by modifying to a certain extent the use of this proviso, do not in fact change the real intention of the Act. The Standing Orders provide that your Lordships will have intimation of the presentation of these instruments when the House is not sitting, whereas under the existing procedure you would not receive this intimation until the House had mot again. The House of Commons have passed similar Standing Orders, and it is therefore very desirable that your Lordships; should take the step we propose this afternoon in order to maintain the necessary co-ordination in the procedure of the two Houses. This is a highly technical subject, and my noble and learned friend on the Woolsack has kindly undertaken to reply to any questions your Lordships may wish to put to the Government on these Standing Orders.
Moved, That the following Amendment to Standing Order No. CIV and new Standing Orders be made in the Standing Orders of the House:
Standing Order No. CIV, line 4, after the second ("the") insert ("Office of the").
After Standing Order No. CIV insert the said new Standing Orders: Statutory Instruments and Notifications.—(Viscount Addison.)
2.9 p.m.
Viscount SIMON: My Lords, I have no doubt that the arrangement which has been made between the noble Viscount
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the Leader of the House and the noble and learned Viscount on the Woolsack is a great relief to Lord Addison, and I would be far from doubting the ingenuity with which the Lord Chancellor may hereafter seek to explain what I agree is a technical and complicated matter. There is, however, one thing which I very ouch regret, but which I am sure is not the fault of the noble Viscount. He told us perfectly frankly that he was reading from a document with which he had been provided. That document omits altogether to state one of the essential things in the Act of Parliament. I am sure that my noble friend, not having looked into this matter more than he can have been expected to do, is not aware—
Viscount ADDISON: May I say that I have looked into the matter with great pains and at great length?
Viscount SIMON: If that is so, then I am all the more surprised, and the noble Viscount must therefore be conscious of the fact that he has entirely omitted a provision inserted by Parliament in the Statutory Instruments Act, 1946. I would venture, briefly, to restate this. It will not differ from what my noble friend has said as regards the first part, but it will differ very substantially as regards the second part. The Statutory Instruments Act, 1946, as some of us recall, was passed by general consent and was intended to be a code for dealing, in the future, with the proper Parliamentary treatment of these instruments which are, of course, made by Ministers. They are not made by Parliament at all in the first instance and are in fact Executive legislation.
I have never in this House, or outside, denied that in times of great difficulty some such regulations may be required, although I regret the bulk which they have attained. As my noble friend said, the main provision of Section 4 is that where any statutory instrument is made and is required to be laid before Parliament, it shall be laid in a particular way—
"A copy of the instrument shall be laid before each House of Parliament and, subject as hereinafter provided, shall be so laid before the instrument comes into operation."
The noble Viscount, Lord Addison, stated that perfectly correctly. But there is, as he says, a proviso, which is for the case where it is essential that such a piece of Executive legislation should be made and

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come into force when the House is not sitting. It cannot be disputed that to lay a Paper before the House means of course to lay it theoretically on the Table—but only to lay it when the House is sitting. There is an exception concerning Command Papers, but that is dealt with by a special Standing Order. You cannot lay a Paper except when the House is sitting.
The proviso therefore is this—and I call attention to words which I thought were accidentally, but which I now gather were deliberately, omitted from the statement of the Leader of the House:
"Provided that if it is essential that any such instrument should come into operation before copies can be so laid as aforesaid, the instrument may be made so as to come into operation before it has been so laid."
It can come into operation immediately. Suppose you had discovered some new trick of the black market and you needed a new regulation forthwith, Ministers could make a regulation to meet that special case. The proviso goes on:
"and where any statutory instrument comes into operation before it is laid before Parliament, notification shall forthwith be sent to the Lord Chancellor and to the Speaker of the House of Commons drawing attention to the fact that copies of the instrument have yet to be laid before Parliament and explaining why such copies were not so laid before the instrument came into operation."
If the noble Viscount will just look at the Paper he has read, he will see that it omits altogether any reference to the words that I have read. If indeed a case did arise where it was essential that an Executive law should be made when Parliament was not sitting—when you would have a wholly exceptional state of things—it was to be referred to the Lord Chancellor, drawing attention to the fact that the instrument had not yet been made and explaining to the Lord Chancellor why such copies were not so laid before the instrument came into operation.
Viscount ADDISON: It does not affect that.
Viscount SIMON: I am not complaining about what the noble Lord read, but he did not read those words at all. I am pointing out that by Act of Parliament—and Standing Orders cannot alter an Act of Parliament—a statutory instrument of this sort, if indeed it is essential that it should be brought into force when Parliament is not sitting, has to be sent to the
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noble Viscount on the Woolsack with an explanation of why such copies were not so laid. Presumably, when Parliament resumed he would say, in effect, "I have to inform your Lordships that while the House has not been sitting, such and such an instrument has been made and has been brought into force, and this is the explanation which the Minister gives as to why it was really necessary to pursue what on the face of it was an undesirable course"—for it is undesirable. Anyone who cares anything for ordinary British liberty will see that it is undesirable. It is bad enough that we must live in times in which many of the legal penalties and requirements are brought about not by Act of Parliament directly, but by these subordinate Orders. But in order that it should be made quite clear that the making of such Orders when the House was not sitting was limited to cases which were quite essential, the Statute provides that there must be a written explanation—though it is true it does not say explicitly that the explanation should be in writing—from the Minister as to why such copies were not so laid before they came into force.
The Standing Order which is now put by the Government before your Lordships' House is of course a matter of internal regulation. We are simply governing ourselves by making rules of procedure. The fact that these do not correspond with some Standing Order in another place has nothing to do with the matter. There are quite a lot of Standing Orders that do not so correspond. The question, therefore, is first, whether or not you can make a Standing Order which amounts to an amendment or repeals a portion of an existing Act of Parliament. The second question is whether, if such a thing were possible, it would in the circumstances be right or wise to do it. As the noble and learned Viscount, the Lord Chancellor, is going to undertake any reply, I put this to him as a simple question: Is it in dispute when I venture to say that no Standing Order of this House can alter or amend an Act of Parliament, or get rid of a condition which the Act of Parliament imposes? If we agree about that, as of course we do, it is obvious that the Minister must explain why such copies were not so made before the instrument came into operation.

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The noble Viscount the Leader of the House did not, in fact, I think, read the Standing Order. We will excuse him for that, for it is rather technical. But what the Standing Order does is this: it says that whether this House is sitting or not, whether we are dispersed for the vacation or not, one of these instruments is to be deemed to be laid because it is sent to the Clerk of Parliaments, who will then put into motion machinery for sending a copy to the noble Lord who is taking his holiday in the Channel Islands, to another noble Lord who is resting in Scotland, and another who is somewhere else; whereas the whole point about these matters is that you should have the document laid when the House is sitting, because it is by gathering together that members of the House can consider whether they ought at once to pray. It is quite a different thing to say: "Oh, well, the Clerk of Parliaments will send a copy through the post." I think I know what happens to some of these House of Lords documents when they arrive on one's breakfast table during the vacation.
I say without fear of contradiction at all that this Standing Order as framed, in saying that the Order shall be deemed to have been made by that process when in fact it is not laid at all, is cancelling the proviso which was carefully inserted in Section 4 of the Statutory Instruments Act, 1946, and is rendering it superfluous and unnecessary for the Minister to give any explanation at all. It is not a matter about which one need beat the air, but it has a certain importance. We shall all agree that we do not want to see the Executive's power to make regulations increase. We all recognize that the object of Parliament in putting in this proviso was that Ministers should not attempt to do these things when Parliament was not sitting; and that if they felt it was really essential to do, them then, they must be prepared to justify their action. The Standing Order repeals that provision and relieves Ministers from offering any such explanation, and pro tanto makes the road easier for these Orders to be made at times which are undesirable. On those grounds, without wishing at all to be merely technical, for I am simply thinking of what is really for the good of the House, I submit that this Standing Order ought not to be made.
2.21 p.m.
The Marquess of READING: My Lords, may I add a very few words in support of the objection taken by the noble and learned Viscount? We have had in the past unfortunate experiences of attempts to alter by Statutory Rules and Orders provisions of an actual Statute. One would have hoped that that practice had been abandoned, but now we are getting a certain variation of: hat regrettable practice, in an attempt, as it seems to me, to alter the provisions of the Statute not by a Statutory Rule and Order but by a Standing Order of this House, which is perhaps an even more objectionable form of dealing with the situation. One may assume that there was good reason for the provision inserted in the Act that a Minister should be under a duty to make some report to Parliament in cases of emergency where he had had to issue an Order whilst Parliament was not sitting. If it had no value, there was no object in putting it into the Statute; but it was placed in the Statute and, therefore, it must be assumed that Parliament attached importance to it.
Now it is sought by this Standing Order to enable the Minister to dispense with the obligation which was laid upon him by Statute and not to furnish this House with the information which Parliament considered that both Houses should have where this emergency procedure was resorted to. With great respect, surely that cannot be right. It cannot be right that it should be placed in the hands of the Minister to discard a responsibility laid upon him, to deprive Parliament of the information which it is entitled by Statute (and a very recent Statute) to receive. To say that the objects of the Statute are fulfilled merely by the procedure of laying a document upon the Table with no explanation of any kind, I confess seems to me a matter which, however technical it may be in form, has very real substance in fact. I hope that your Lordships will not allow this matter to go through without very closely examining the situation, which seems to me very really to affect the powers and the possibilities of the proper functioning of your Lordships' House.
2.24 p.m.
THE LORD CHANCELLOR: My Lords, may I first of all attempt to clear away the small matters about which I

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think there will be no controversy? The first proposal is that Standing Order No. CIV be amended by putting in the words "Office of the Clerk of the Parliaments" instead of "the Clerk of the Parlaments."
Viscount SIMON: I have no objection.
THE LORD CHANCELLOR: Perhaps I ought to have put them separately, because I am sure that we all agree with that purely drafting Amendment. I do not suppose either that there will be any objection to the new proposed Standing Order No. CVI. The Statutory Instruments Act, as your Lordships will remember, states in the proviso of subsection (4) that notification is to be sent to the Lord Chancellor of certain facts, of which it is obviously the duty of the Lord Chancellor to acquaint the House. This is merely stating how and in what manner a Lord Chancellor is to acquaint the House; I should imagine that there will be no controversy whatsoever as to that.
The point to which remarks have really been addressed is the new Standing Order CV. May I say, in answer to the questions of the noble and learned Viscount who spoke first and of the noble Marquess who spoke afterwards, that it is quite obvious that you cannot, by a Standing Order of this House, alter the requirements of an Act of Parliament. That is too plain. The controversy, therefore, seems to be whether or not the proposed new Standing Order docs alter the requirements of an Act of Parliament, for, if so, it would be quite invalid.
The position at the present time is this. I think I am right, but I may easily be wrong, and if so, I am sure your Lordships will correct me. The requirements of this House as to laying of documents when the House is sitting, are, I think, these: You hand in the necessary paper or document, let me say for the sake of argument, on Wednesday. On Thursday it appears in the Minutes and then, it having appeared in the Minutes on the Thursday, it relates back to the Wednesday, and you treat it as if it was laid on the Wednesday. Your Lordships will observe that to complete the laying on the Wednesday you have to have it in the Minutes of the Thursday. I believe I am right in saying that that is the present position. Standing Order CV is drafted on the assumption, which I believe to be
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correct, that it is for each House to say for itself and to provide by its Standing Orders what constitutes "laying." There is no definition of "laying" in the Act or anywhere else, but, if the Courts had to determine what did constitute "laying" an Order, they would, in my submission to your Lordships—I am not being dogmatic about this; I am stating what my own view is after careful consideration—at once say: "What are the requirements of the House? If we are going to be asked to determine whether an Order is laid or not, we shall want to know what the domestic requirements of the House are as to laying."
At the present time, the Statutory Instruments Act does not operate, and the requirements of nearly all the Statutes are these. If you make an Order, which can come into force on any day you like, the Act requires "that the Order shall be laid as soon as may be thereafter." That is the existing law. At the present time, there is no machinery for laying except when the House is sitting, and, therefore, what is done to-day, and has been done for many years, is that you promulgate your Order, you can make it come into force straight away and then, as soon as the House meets again, you lay the Order in the way I have indicated. On January 1 next year, we get into the region of a new dispensation, and the relevant requirement is this:
"Where by this Act … any statutory instrument is required to be laid before Parliament after being made, a copy of the instrument shall be laid before each House of Parliament and, subject as hereinafter provided, shall be so laid before the instrument comes into operation."
The basis on which this Standing Order has been drafted is this, that it is for each House as a matter of internal and domestic regulation to state what constitutes "laying." If the Courts had to determine whether an instrument had or had not been laid, they would inevitably turn to the domestic rules of either House to see whether those domestic rules had or had not been complied with. That I believe so far to be completely right. The fact that we are following the practice in another place has nothing to do with the point. I quite agree that our rules may differ from those of another place, which also are bound by the provisions of the Act of Parliament. They had very careful advice given by their experts, as I

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have, on this point, and without Division they passed the Standing Order, not precisely but in all substantial respects in the same form as ours. It is as well, I think, that we should in substance agree with them if we can, otherwise, of course, you have the odd result that the Standing Order would, in substance, be put on one side and you would always have to rely on the proviso.
I do not agree with the noble Viscount that the proviso becomes inoperative, or that we have, in effect, repealed it. It is quite true it will apply to a much narrower field. If we do not pass this Standing Order any regulation which is passed and becomes operative when the House is not sitting will have to be reported to the Lord Chancellor. The Ministers will have to state why they have not laid it, and the answer, of course, will be the simple one—because the House is not in session. The proviso will, therefore, extend to a very great many cases. I think it was intended by the framers of this legislation that the proviso should have a much narrower effect. It is possible—often, I suppose—that you may have an Order, in regard to financial matters which requires to be brought into operation at once whilst the House is sitting. Supposing that Order is propounded on the Wednesday and handed in on the Wednesday, but for the reasons I have given cannot be laid until the Thursday as things are to-day, in such a case as that I and the Speaker, in our respective spheres, have to deal with the matter.
As I have said—and I do not think it becomes plainer by being repeated—I maintain, and I invite your Lordships to take the view, that it is for this House, by its own regulations and as a matter of its own domestic internal arrangements, to say what constitutes laying. What we are proposing by this Order is that you can now lay whilst the House is not sitting. Your Lordships will remember, of course, that the forty days are forty days, broadly speaking, whilst the House is in session, so we are not interfering with that principle in the least. But I submit that it would be very much more convenient, if my view is right—and if my view is not right, the Standing Order would, of course, be quite nugatory—that we should follow the House of Commons in their procedure, and provide, as a matter of our own internal and domestic
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arrangements, how a Paper can be laid, and that a Paper can be laid even though the House is not in session. It is on that basis that this Order has been drafted.
Having given it the best consideration—and in fact there has been prolonged consideration with my experts who advise me—I have come to the conclusion that so to provide does not in any way violate the Act of Parliament. I believe that what constitutes "laying" is a matter for this House to decide for itself by its own regulations and its own Standing Orders. I suggest that it is very much more convenient, on the basis that that is right, that we should do it in this way, to bring ourselves into line with the House of Commons and make use of the proviso to cover a much narrower field than otherwise would be the case. If not, when the House is in session after the Summer Recess, I shall, I suppose, have to report a very large number of Orders to your Lordships. The alternative view is that these Papers would be lodged by sending them to the Office of the Clerk of the Parliaments. On the other hand particulars of these Orders would be sent to noble Lords, and they would have the fact that these Orders had been laid brought to their attention, so that they would have complete control over the whole matter. Of course, the fact that the Order had been laid there would not be an explanation of why it had not been laid before it came into operation, because on this hypothesis, it has been laid. The proviso says there shall be an explanation where "copies were not so laid before the instrument came into operation."
Viscount SIMON: I do not wish to interrupt the noble and learned Viscount, but I would like to put this to him. That is just the difficulty I feel. Under the Statute as it will be enacted there is in certain cases an obligation put upon he Minister to furnish an explanation. It is an obligation and not a discretion. The proviso says that in certain cases there shall be sent to the Lord Chancellor an explanation why such copies were not so laid. If you pass a Standing Order which says: "We are going to treat everything as being deemed to be laid any day of the year, it does not matter whether Parliament is sitting or not," then for the life of me, I do not see how there is any

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room for the proviso that the Minister shall explain why the copies have not been laid. The Minister's answer would be: "I see by your own Standing Orders, whether the Order is really laid or not, it is deemed to be laid." I do not think you can say a hen is deemed to have laid an egg if you have been given an artificial omelette. Once you do that the proviso has no mandatory or compulsory power at all, and therefore, with great respect to the noble and learned Viscount's sincerity, I, with equal sincerity, and with an equal desire to serve the House, do venture to point out to him that if you adopt this provision that in every case the thing is deemed to be laid, then there is no room for the mandatory provision that the Minister must in exceptional circumstances give an explanation.
THE LORD CHANCELLOR: It did not need a very long speech to convince me of that. If you are providing by your Standing Orders that the thing is deemed to be laid you cannot give an explanation as to why it has not been laid. The fact is that by our own domestic rules we have stated that a certain thing constitutes laying. But if we do that, and it does constitute laying, you cannot possibly give an explanation as to why the thing was not laid because ex hypothesi it has been laid. That is obvious to a child.
Viscount SIMON: The result is that the Minister is relieved of his obligation to explain. Is that obvious to a child?
THE LORD CHANCELLOR: Of course, the Minister is relieved of his obligation to explain why an Order has not been laid, if it has been laid. But it is not the fact that the proviso has nothing to bite upon. It is quite possible that whilst the House is sitting it may be necessary to bring an Order into force on the very day on which it is promulgated and, by the rules of the House at the present time, that cannot be done. In those circumstances, the Lord Chancellor and the Speaker respectively are under an obligation to explain to the House why the Order has been brought into operation before it has been laid.
The Marquess of SALISBURY: May I ask a question of the Lord Chancellor?
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I quite understood when we had discussions on various subjects in August and September last, that an Order could come into effect as soon as made, but the Government were bound to lay it as soon as Parliament sat. But that did not prevent an Order coming into operation before that date, and that was the very reason, if your Lordships remember, why we decided to sit on September 9, so as to make it possible for us to consider such Orders as soon as possible after they had come into operation.
THE LORD CHANCELLOR: If I may say so, I think the noble Marquess is a little confused. That is under existing procedure, and with regard to that he is entirely right. You can make an Order come into operation at once. The obligation under the existing procedure is to lay it as soon as may be thereafter. What the noble Marquess said relates to August, of course, when we had that system. The noble Marquess will realize that as from January 1 next new procedure comes into force. It is with regard only to this new procedure that difficulty arises. I hope that I make myself plain to the noble Marquess. I am sure he realizes that we must distinguish between the past and future. With regard to the past, he is quite right. You could make an Order, but under existing rules you could not lay it until the House was sitting. The trouble arises under the new dispensation which comes into force as from January 1. There the rule is that this Order may not come into force until it has been laid, but there is a proviso and the proviso says that if it is necessary to bring an Order into force before it has been laid then you are to instruct the Lord Chancellor, to give him an intimation why it is that you wanted the Order to come into force before it has been laid. The Lord Chancellor, under proposed Standing Order CVI, has to inform the House as to what has happened.
There will be, in the future, whilst this House is sitting, I do not doubt, many occasions on which it is required, as in the old days, to give effect to an Order immediately it is made, and before it has been laid in the technical sense. In all those cases the existing proviso will have to operate. The problem is, shall the proviso operate through a much wider field, which I suggest is very inconvenient, when the House is not in Session at all,

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because, it may be, of the Slimmer Recess. Shall we avail ourselves of that procedure, or shall we by our own domestic rules make a rule to say that an Order is to be deemed to be laid even though the House is not in session if certain steps are taken? That is the basis on which these Orders are drafted. I believe these Orders do not conflict with the existing Act of Parliament.
I have suggested to your Lordships that we should follow, in principle, the procedure which the House of Commons have adopted for their provision. It really does not enable the Minister the least bit in the world to get out of an obligation to say why an Order is to come into force before it has been laid. Indeed, in the case given it would be so easy to do it, if you had an Order made whilst the Summer Recess was in progress, and the explanation was that it was necessary to bring it into operation before the House re-assembled, which might be a matter of some months. That is why we are suggesting, after very careful consideration, that we should by our own domestic legislation, that is by Standing Order, provide for the first time what constitutes "laying." There is no definition of "laying" in the Act. I submit this on the basis that it is for this House, by its own domestic rules and regulations, to decide what constitutes "laying," and for these reasons I submit that the new Standing Order which we are suggesting does not in any way conflict with the requirements of the Act of Parliament, should be adopted.
2.44 p.m.
The Marquess of SALISBURY: My Lords, perhaps it will meet the convenience of the House if I say a few words at this juncture. I would like to emphasize to noble Lords opposite that I do so in no controversial spirit. I think we are all anxious to ensure the same thing—that is, that the purpose of the Constitution and the dignity and efficiency of this House should be preserved. I have listened very carefully to what the Lord Chancellor has said—I have no doubt that we have all done so. As I think he himself stated, this is not merely a technical or legal point. It is a constitutional point which, though it may not seem to be very much in itself, enshrines within it a very considerable constitutional prin-
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ciple. I quite agree with the Lord Chancellor that if you look just at the Amendments suggested they seem very small and pretty harmless But even after listening to the noble and learned Viscount, the Lord Chancellor, I am driven to the conclusion—this is only a personal opinion of course—that this does involve modification of an existing Act of Parliament, the Statutory Instruments Act, of 1946.
That Act, as the Lord Chancellor quite rightly said, lays down certain procedure for statutory instruments and their treatment by Parliament, and it does make a special proviso for the convenience of the Executive, the necessary convenience of the Executive, at times when Parliament does not happen to be sitting. I think that that: is a very well balanced proposal. There is no doubt whatever of the purpose of it, but the effect of this Standing Order is to alter that procedure. The Lord Chancellor, I think, admitted that it-alters the procedure. I certainly would say that it does. It says, in effect, that something which had to be done previously shall be deemed to have been done if, in fact, something else is done. Action which had to be taken is now modified in a certain direction. It is a dangerous precedent in my view to alter an Act of Parliament, in however small a degree, by Standing Order.
THE LORD CHANCELLOR: Will the noble Marquess forgive me for interrupting? If this alters an Act of Parliament in the smallest degree, then of course it is invalid. My whole point is that it does not alter it at all. It merely defines what "laying" is. "Laying" is, we say. a matter for domestic definition.
The Marquess ok SALISBURY: I am coming to that if the Lord Chancellor will have patience with me. I have No Intention of evading the point. To us, another important principle appears also to be infringed by this proposal. It does appear to a certain extent to weaken the control of Parliament over the Executive. I know that the noble and learned Viscount the Lord Chancellor will not accept that, of course. I will explain. After all, the actual laying of an Order before this House has a symbolic significance. What it means is that Parliament insists, even in these days of delegated legislation, that the ultimate control shall rest with the two Horses to whom under

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the Constitution is entrusted the management of affairs in this country. It underlines the fact that the Executive is the servant of Parliament just as Parliament is itself the servant of the British people. If an instrument is to be merely deposited in the Office of the Clerk of the Parliaments, I submit that that symbolic significance is to a certain extent lost.
I am sorry that I was not present during the speech of the noble Viscount, the Leader of the House, but I understand from my noble friends here, that he dealt with this issue. There must, of course, be exceptional occasions when Orders must be made and brought into operation when Parliament is not sitting. We are not unreasonable about this; we know that the King's Government must be carried on, and that is a principle which is acepted by every Party. In that case it is clearly right that the Government should afterwards come to Parliament, lay such Orders as have been made, and explain why it was necessary to take this exceptional action when Parliament was not sitting. That is the essence of the control of Parliament over the Executive. If we abandon that I feel we shall be stepping on to a very slippery slope.
I now come to the matter with which the noble and learned Lord Chancellor has just been dealing—that of "laying." He says there has been no definition of "laying." I think we all know what it means—formally bringing a document before Parliament in the form and with the dignity which all these Orders are to placed before Parliament. "Form" is the important word. The very use of the words "assume to have been laid" means that there has been some alteration in that. It is not exactly the same as it was before. As the noble and learned Viscount, Lord Simon, said, a hen cannot be deemed to have laid an egg because an artificial omelette is produced. At any rate there is a certain difference from the rigidity of the former procedure.
The noble and learned Viscount, the Lord Chancellor, said it was for us in this House to decide what we meant by the word "lay" because this was a matter of Parliamentary procedure over which each House has its control. If it were put to me like that, I am bound to say I prefer the former definition to the Lord
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Chancellor's definition. He says it would be inconvenient to have to lay a very large number of Orders after the Recess and either he or his representative would have to make an explanation. Not convenient for whom? Your Lordships would not be inconvenienced. We should regard it as very desirable and possibly essential to have an explanation. The Lord Chancellor quite frankly suggested that if this new procedure is adopted the explanation would go by the board. It would be deemed to have been given, but in fact it would not have been given. I am quite certain I am not speaking to a hostile audience on the other side, because this is a serious consideration. If it were suggested, and it has not been seriously suggested, that we ought to do this because the House of Commons have done it, I do not think that would be constructive to most of us. There are many points in which our procedure differs and many in which we think ours rather better than theirs. We have always taken our own view as to dealing with the Constitution and I hope we shall always do so.
Having said all this, I come to what we shall do about this position. My initial reaction is that we ought to reject this Motion, but f do not want to do that bleakly, if some other course is possible. I think this is an important question which we ought to examine carefully and with an open mind on all sides of the House. I should like to put it to the Leader of the House: Would it not be practicable to send this Motion to one of those important technical expert Committees which we set up to assist us in the deliberations and affairs of this House and see whether they could not make a report to us? Of course that report will not bind us, but I think a report of that kind from experienced members of this House would be of value to us in coming to a final decision. I do not know whether there is any existing Committee competent to deal with this point. There is a Procedure and Standing Orders Committee but I understand that this matter comes outside the scope of that Committee. Would it not be possible to set up an ad hoc Committee to deal with this? Rather than to deal now with this issue, which to my mind is an important one and creates an important precedent, I think it would be a very much better plan to postpone

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the Motion for the moment, look into it with all the great wisdom and experience which your Lordships have on constitutional matters, hear the report of any body we may set up and further consider the matter later on. I put this suggestion before your Lordships in all seriousness.
2.53 p.m.
Viscount SAMUEL: My Lords, I rise to support the suggestion made by the noble Marquess. If this matter were carried to a Division this afternoon, of which there is No Intention, I feel sure a great many of your Lordships, and certainly I myself, would feel uncertain as to the right judgment to deliver. When eminent lawyers of the highest rank fundamentally disagree on matters of this kind, it is very difficult indeed for a House of laymen to adjudicate. It is much better for the matter to be referred for closer examination to some arbitral body, as you might say, which could give it the closest consideration.
For my own part, I have always been exceedingly suspicious of the word "deemed" whenever I see it in a Bill. It really means that what Parliament requires to be done but which is not being done shall be treated as if it had been done. We discussed that point at some length on a Bill which was debated some months or a year or two ago, in which the word "deemed" was peppered through the clauses. The provision that Parliament should require an explanation when regulations are made by a Government or a Minister during a Parliamentary Recess, was obviously designed to put some slight check on an easy recourse to that procedure during the three months of the Parliamentary Recess when a large number of important regulations could be made without Parliament being in Session and on the watch. In order to impose a certain degree of check, an explanation as to the necessity of these regulations was required to be made in every case. But now this proposed new Standing Order which is before us would in effect waive that requirement and the word "deemed" is being employed in order to by-pass it. For this reason it appears to me to be most advisable that the Government should agree that the matter should not be earned further to-day but should be referred to a competent Committee.
2.56 p.m.
Viscount ADDISON: My Lords, I am sure this is a matter of great Parliamentary importance. In reply to Viscount Simon, I would say that the particular points he raised were considered with great care with our legal advisers before that statement was made and I was assured that that obligation was not done away with. That was the reason why it was not mentioned in my statement. I assure him it was not done lightly. We spent a considerable time on it.
Viscount SIMON: That is why I feel a little uneasy about it.
Viscount ADDISON: That is a different matter. I have been making inquiry with the assistance of the Clerk of Parliaments and find that there is no existing Committee to which a matter of this kind could be referred. We cannot commit ourselves either to rejecting summarily an Order which should be made and operated upon if it is a proper Order, nor to doing anything which would in effect be contrary to an existing Act of Parliament—it would be null and void if we did. I do not object a bit to having the matter specially examined and I gladly respond to the suggestion of the noble Marquess.
Viscount SIMON: Is it not possible—it may prove to be the wisest course—to refer the matter to the body that is called the Standing Orders Committee with special authority to that body to deal with this particular matter, pro ianto to enlarge its authority?
Viscount ADDISON: I should have no objection to that if it were in order, but I have inquired into the point and the Standing Orders Committee is not competent. Standing Orders provide that the Committee should consider whether the Standing Orders of the House relating to Private Bills ought to be dispensed with. This matter does not concern the existing Committee although, of course, we could enlarge the scope. But I have another suggestion. I think this is not only a legal question but a Parliamentary question of great importance. We can deal with it more summarily, if the House will agree. I suggest that we should refer the matter to a special Committee and that the Committee should be composed of the Leaders of the three Parties, Viscount Simon and

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the Lord Chancellor. I understand that that would be a proper course. I therefore withdraw my original Motion, in order to move the appointment of this Committee.
3.0 p.m.
The Marquess of SALISBURY: My Lords, I am very grateful to the Leader of the House for his consideration and courtesy in this matter, about which we care a great deal. I am a little doubtful as to the proposed Committee, because this House is really ruled by what is known as the sense of the House. What that really means is that it is not merely ruled by the Front Bench—it never has been—but by distinguished and respected members in all parts of the-House. I would infinitely rather see a Committee containing some of the most respected and experienced Back Benchers. For this purpose I think a Committee of that nature would be more useful. I wonder whether even now it would not be possible to use one of the existing Committees for extending these Orders. After all, these Committees are of our own creation, and I should have thought that in an emergency we could extend the powers for a special purpose. I do not want to be difficult, but I know from past experience in the comparatively short time I have been in this House what an extraordinarily important part the Back Benchers can play in this House. I would be reluctant to cut them entirely out of the discussion on a question which affects us all.
Viscount ADDISON: The last thing I have in mind is to leave out the Back Benchers. I have been given to understand that some such suggestion as that would be acceptable. I do not mind in the least. I am quite prepared to move that it should be referred to a special Committee to examine and report, without naming anybody.
The Marquess of SALISBURY: I should again like to thank the noble Viscount the Leader of the House, very warmly for his conciliatory, accommodating and courteous behaviour on this occasion, as, indeed, always, and would say that we shall be very glad to fit in with the suggestion which he now makes.
Viscount ADDISON: I beg leave to withdraw the Motion now before the House.
Motion, by leave, withdrawn.
Viscount ADDISON: I beg to move that the subject matter of the proposed Standing Orders be referred to a Select Committee.
Moved, that a Select Committee be appointed to consider the Standing Orders proposed to be made relating to the Statutory Instruments Act, 1946, and report thereon to the House.—(Viscount Addison.)
On Question, Motion agreed to, and ordered accordingly.

COAL PRODUCTION FIGURES.
3.4 P-m.
LORD AMHERST of HACKNEY: My Lords, I beg to ask the question standing in my name on the Order Paper.
[The question was as follows:
To ask His Majesty's Government what is the present proportion of coal to dirt and other extraneous minerals in the figures of coal production given by the Ministry of Fuel and Power, and how this proportion compares with the figures before the war.]
LORD HENDERSON: My Lords, the coal production figures published by the Ministry of Fuel and Power refer to saleable coal—that is, the coal sold after dirt and extraneous minerals have been removed by screening and/or mechanical cleaning. No comprehensive information is available about the amount of any dirt and extraneous minerals which may remain in the coal sold.
LORD AMHERST of HACKNEY: I thank the noble Lord for his reply, but would he not agree that at the moment a large quantity of non-combustible material is distributed as coal, which not only makes it difficult to assess the production figures at their true value, but also takes up a lot of valuable transport? Can the noble Lord say what steps are being taken to improve the situation?
LORD HENDERSON: I have no personal information on the lines of the supplementary question put by the noble Lord. As my original reply stated, there are no comprehensive figures available.

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Therefore, I cannot add to the point. Perhaps I may say that in 1938 the deep-mined coal was 96.75 per cent. of coal raised and weighed. In October, 1947, the corresponding figure was 93.24 per cent. which shows that the percentage difference between saleable coal and coal raised and weighed has increased from 3.2 per cent. to 6.7 per cent. since 1938. That is the only additional information I am able to give.
LORD CHERWELL: I take it that the noble Lord would agree, then, that there is twice as much dirt in the coal as there was before the war.

GRINLING GIBBONS STATUE OF JAMES II.
LORD LLOYD: My Lords, I beg to ask the question standing in my name on the Order Paper.
[The question was as follows:
To ask His Majesty's Government whether in view of the representations of the Chelsea Borough Council, and the Chelsea Society, which have received such wide support, they will now reconsider their decision regarding the siting of the Grinling Gibbons Statue of James II.]
LORD HENDERSON: My right honourable friend the Minister of Works has considered the representations that have been made to him about the statue of James II. He feels that, as this is generally acknowledged to be one of the best of the London statues, it should be placed in a more central position than at Chelsea Hospital, and he has decided, as a temporary measure, to erect the statue on the National Gallery site. The matter will be reconsidered when the new Government Offices in Whitehall are completed and the adjoining gardens are laid out. When a more suitable site is found or becomes available he will consult the Royal Fine Art Commission again.
LORD LLOYD: I am grateful to the noble Lord for his reply but, arising out of that, I would like to ask whether he can give me an assurance that the Royal Hospital site has not been entirely eliminated from the considerations of His Majesty's Government by the statue being placed in a temporary site; and whether, before a permanent site is decided upon, there will be an opportunity for the
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Chelsea Borough Council, and the Chelsea Society, to raise the matter again, and to have their case considered by the Fine Art Commission and by His Majesty's Government.
LORD HENDERSON: As I have said, the permanent site has not yet been decided. It is quite permissible for the Chelsea authorities to approach the Royal Fine Art Commission and to make as strong representations as they wish about the site in Chelsea.
LORD DE LTSLE and DUDLEY: Although I have to confess to a certain partiality in this matter, may I urge that the question of the appropriateness of the site of this particular statute may be carefully investigated by the Government when the question again comes up for consideration? Although the site now chosen is obviously a more central one, I doubt whether it is exactly appropriate to the work of art which we are considering.
LORD HENDERSON: I think the Government are taking the right course in consulting the Fine Art Commission as to the best site for the statue.

AGRICULTURAL TRACTOR ENGINES FROM AMERICA.
LORD ROCHDALE: My Lords, I beg to ask the question standing in my name on the Order Paper.
[The question was as follows:
To ask His Majesty's Government whether they will state the monthly value of imports from the United States of America of internal combustion motors for agricultural tractors being manufactured in the United Kingdom.]
The JOINT PARLIAMENTARY SECRETARY, MINISTRY of AGRICULTURE and FISHERIES (The Earl of Huntingdon): My Lords, I regret that particulars of the values of these imports are not separately recorded. Import licences have been issued in respect of about 4,000,000 dollars worth of American engines. These were required to allow two tractor-manufacturing projects to start in this country sooner than would otherwise have been possible. In one case production of suitable British engines has now begun on a considerable scale; in the

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other case, where a much smaller number are needed, arrangements are in hand for manufacture in this country at a later stage.

COATBRIDGE BURGH EXTENSION, ETC., ORDER CONFIRMATION BILL.
Considered on Report (according to Order).
Then, Standing Order No. XXXIX having been suspended (pursuant to Resolution of December 16), Bill read 3a, and passed.

SUNDAY ENTERTAINMENTS ACT, 1932.
COUNTY BOROUGH OF ROCHDALE ORDER;
COUNTY BOROUGH OF WEST HARTLEPOOL ORDER;
BOROUGH OF HENLEY-ON-THAMES ORDER;
BOROUGH OF LUDLOW ORDER;
URBAN DISTRICT OF CLACTON ORDER;
URBAN DISTRICT OF OADBY ORDER;
COUNTY BOROUGH OF BOOTLE ORDER;
COUNTY BOROUGH OF BURTON-UPON-TRENT ORDER;
URBAN DISTRICT OF WYMONDHAM ORDER;
RURAL DISTRICT OF BORDER ORDER;
RURAL DISTRICT OF ERPINGHAM ORDER.
LORD WALKDEN: My Lords, I beg to move that these Orders be approved.
Moved, That the Orders made under the Act by the Secretary of State for the Home Department, for extending Section one of the Act to the said areas, be approved.—(Lord Walkden.)
On Question, Motion agreed to.

MANCHESTER GAS ORDER, 1947.
LORD HENDERSON: My Lords, on behalf of my noble friend Lord Chorley, I beg to move that the Special Orders, as reported from the Special Orders Committee on Tuesday last, be approved.
Moved, That the Special Orders, as reported from the Special Orders Committee on Tuesday last, be approved.—(Lord Henderson.)
On Question, Motion agreed to.

ROCK BAY (CORNWALL) COAST PROTECTION ORDER, 1947.
LORD HENDERSON: My Lords, I beg to move that the Special Orders, as reported from the Special Orders Committee on Tuesday last, be approved.
Moved, That the Special Orders, as reported from the Special Orders Committee on Tuesday last, be approved.—(Lord Henderson.)
On Question, Motion agreed to.

EDUCATION (SCOTLAND) BILL. [H.L.]
Read 3a (according to Order). An Amendment (Privilege) made: Bill passed, and sent to the Commons.

LAW REFORM (PERSONAL INJURIES) BILL. [H.L.]
Amendments reported (according to Order).
Then, Standing Order No. XXXIX having been suspended (pursuant to Resolution of December 16), Bill read 3a, and passed, and sent to the Commons.

RIVER BOARDS BILL. [H.L.]
3.12 p.m.
Read 3a (according to Order).
Clause 2:
Definition of river board areas and constitution of river boards.
(2) An order establishing a river board shall provide for the appointment of such number of members not exceeding forty as may be specified in the order, who shall be appointed as follows:
(b) such number, not being less than three-fifths or more than two-thirds of the remaining members, as may be specified in the order shall be appointed, whether from their own members or not, by the councils of the counties and county boroughs whose area, or any part of whose area, is included in the river board area;
LORD LLEWELLIN LORD LLEWELLIN moved in paragraph (b) of subsection (2), to leave out "three-fifths" and insert "one-half." The noble Lord said: My Lords, you will

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have seen that I have an Amendment down to deal with a point which was raised on the Report stage. As your Lordships who were here may remember, on that occasion the Amendment dealt with the composition of the river boards and proposed substituting one-third for three-fifths as the number of members who should necessarily be appointed by the councils of the counties and county boroughs. After the discussion I withdrew that Amendment and said I would put down a written Amendment on Third Reading, proposing one-half instead of the one-third which I then proposed. I think it is clear—and indeed with his usual frankness the Parliamentary Secretary made it quite clear—that in the two cases of the Welland and the Great Ouse areas drainage interests will contribute to a very large extent. He said: "… in fact their contributions will be in excess of any other contributions to the finances of the board." I am reading the words the noble Earl used.
The point we are putting from this side of the House is that, in such cases the drainage interests should be able, if the Minister wishes, to have a larger representation than that which I quite agree is the normal one over the country as a whole. By leaving the proportions as they are in this Bill at the present time, there is no power in either this Minister, or any successor to him as Minister of Agriculture to do the fair thing in the Welland case, the Ouse case, or perhaps some other case which may arise in the future. That is the sole reason for putting down this Amendment. We are not saying that in those cases the Minister must give these; interests greater representation, but we are leaving it permissive in the hands of the Minister. If he thinks it right, if this Amendment is adopted, he will not be precluded by the words of the Statute from doing what is right in those exceptional cases.
I know—and here again, as one always expects, the noble Earl has been quite frank about it—this figure of three-fifths is, in a way, a compromise figure. I think those are the words he used on the Report stage, and he said: "I stress that." I do not want to take up the time of this House by stressing the fact—which I think needs no stressing here or in another place—that what eventually goes into a Bill must be our responsi-
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bility and our concern, and not that of any arrangement which has previously been made, whether with the county councils or with any other body. I appreciate that in a case like this it is desirable—and I make no criticism of it—to have negotiations with the county council, but it is for Parliament to decide what eventually goes into a Statute, and not for any other body outside either this House or another place.
My sole basis for moving this Amendment is that, in the view of a number of noble Lords who sit on this side of the House, the Minister will not be in a position to give a fair proportion of representation on these river boards, and we are here suggesting that he should have a much wider latitude than he is willing to give himself. That is what we are suggesting. In a way, it is an odd thing that the Government should resist it, but they are resisting it. They resisted the Amendment on Committee stage and on Report stage, but, of coarse, the noble Earl will realize that I have considerably modified the proposal which was put forward on Report stage. I have modified it in. the hope that we can, in the good old British way, compromise by adopting the compromise suggestion which I now put forward, and allow the Bill to go from this House as an agreed Measure. I have put the Amendment down in the hope that that result may be achieved. If it is not, then no great harm will be done.
If we insert this alteration in the Bill in this House—if a majority of noble Lords think that a wise thing to do—no conflict will arise in that way between the two Houses of Parliament, because the Bill originates in this House. Conflict could only arise if the House of Commons sent it back to us and said: "We do not like what you have put in." Then it will not be noble Lords who have raised the conflict but quite clearly the other place. I do hope we may come to agreement on a little measure of this sort. If we do not, and if noble Lords think fit to support the Amendment I now propose, I hope that the other place will think it wise not to raise a conflict with your Lordships upon a matter of this kind. I beg to move.
Amendment moved—
Page 2, line 14, leave out ("three-fifths") and insert ("one-half").—(Lord Llewellin.)
THE EARL OF PERTH: My Lords, I should like to support the Amendment which has been proposed. Your Lordships will remember that the original proposal made by the Government was for three-fifths. I calculate that that would mean twenty-three members. The Amendment proposed was to have one-third; that would be fifteen members. The exact halfway house between these two figures is nineteen. Therefore I am sure that this represents a really genuine compromise.
The Earl of HUNTINGDON: My Lords, the noble Viscount the Leader of the House promised on the Report stage to consider this Amendment very carefully. I should like to say that I appreciate the courtesy of the noble Lord, Lord Llewellin, the moderate way in which he moved this Amendment and also the fact that he has gone some way to meet us in altering the proportion to one-half. That has been gratifying to me and to other noble Lords on these Benches. We all appreciate the friendly way in which this Bill has been received, and it was in that spirit that we looked at this Amendment to see if we could meet noble Lords on the matter. In spite of long discussions, how-over, we were forced most reluctantly to the conclusion that we should have to resist this Amendment. If noble Lords feel that they must put it in, they must put it in. But I should have liked, after the great measure of support we have received, to have an agreed Bill to send to the other place. I think that on the whole this has not been a Party issue, but an issue on which we are all agreed.
LORD LLEWELLIN: I do not think it is a Party issue.
THE EARL OF HUNTINGDON: I quite agree. There are, therefore, one or two points which I should like to bring before your Lordships. Like the noble Lord, Lord Llewellin, I do not want to recapitulate all the arguments which have already been heard; but there are one or two things that I should like your Lordships to consider before finally making up your minds on this rather difficult subject.
In the first place, as I have said, this is a compromise measure and I would like noble Lords to consider this question from that point of view. We have
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drafted this Bill so that it will be workable and will satisfy the various interests which are and will be affected by it. In this connexion I should like to refer to the Land Drainage Act of 1930, which set up the catchment boards. The noble Lord talked of the Yorkshire Ouse area and the Welland area. Under that Act the drainage authorities have only six members out of thirty; that is to say one-fifth of the board. In this Bill, instead of one-fifth we are giving them one-third. That is a big advance. At the same time, we are giving the river boards far more functions which are really broader local authority interests rather than purely drainage interests. We have thus given less representation to the local authorities while increasing the burden of their functions. It is true that we have had representations by the Association of Municipal Corporations and others, some of whom are anxious that the present provision should stand in the Bill. But others think that we should go back to the old formula, and that may well be pressed in another place. At the same time I would like to correct an impression, which I think was given erroneously or which at any rate was due to a misunderstanding. His Majesty's Government have made no pledge or commitment in regard to this Bill. We have had very full discussions with the interested parties, but we have not pledged ourselves in any way.
The Milne Committee, on whose Report we have based our national water policy, proposed separate representation for the various interests on the board. We felt that we had to refuse that, since it would make the boards much too unwieldy; but if we accept this Amendment, those interests may well press to come on to the boards. It is rather like a jig-saw puzzle. If we alter one part, the other parts may have to be rearranged, and we should be extremely reluctant to have to do that. That is a matter I must point out to your Lordships. On the whole, the real question—and I think this is the line which divides His Majesty's Government from the noble Lords opposite—is whether the principle of this Bill shall rest on a voting basis. The drainage authorities concerned in this question contribute large sums to the boards; the question is whether they shall form a large proportion of the boards, or whether we should adhere to the Government principle that

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the boards shall be built up on specialized knowledge, to work as a team, looking after their areas and protecting the interests of the river board in general. That, I think, is the big issue between us; whether the issues shall be decided by sectional voting or whether we shall collect the necessary specialized knowledge and incorporate it into the best board we can find to work as a team.
If we are to alter the proportion as is suggested, it would be almost impossible to resist the demands of the other side. You cannot have the argument one way, without conceding it the other.
LORD LLEWELLIN: If I may interrupt the noble Earl, we are not seeking to alter the number to more than two-thirds.
THE EARL OF HUNTINGDON: I know that the noble Lord is not seeking to alter that. But if we accept his Amendment others will certainly press their alternatives, and it will be difficult to resist them. I think that on balance it would leave drainage authorities in a very bad position in most parts of the country. Even in these areas, the two areas which are causing the whole of the trouble, I cannot conceive that the local authorities themselves will not appoint people with drainage knowledge on the board, so that we shall have representatives with drainage interests appointed by the Minister, with representation of the drainage people themselves. I submit that that should give the boards all the drainage interests and the knowledge they want. I will once again stress that this is a compromise Bill, built up with a great deal of trouble and after much consultation. I do very earnestly beg noble Lords not to destroy the unity which we have achieved so well on the Bill. Perhaps, in view of these arguments, the noble Lord may be induced to withdraw his Amendment.
3.30 p.m.
THE MARQUESS OF SALISBURY: My Lords, I take it, from the trend of the noble Earl's speech, that the House of Lords should never disagree with anything done by the Government! In fact, there has been a very happy spirit of unity and good will throughout, and the whole point of this Amendment is whether or not, on the whole, it gives a fair deal to the local authorities. The noble Earl himself said just now that the local author-
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ities would resent it very much if they were placed in a minority. They cannot be placed in a minority under our Amendment, because the minimum representation they can get is 50 per cent.; and, in the vast majority of cases, they can have considerably more. It is a question of striking a fair balance between local authorities and other interests concerned.
We should like to insert our words, not with a view to embarrassing the Government (I do not think they will), but because we believe that it is necessary that there should be this power in the hands of the Minister instituting these boards to vary a little more that he does at present the representation on the individual boards. We are in the happy position of knowing that this Bill has been inaugurated in your Lordships' House. It is not a question of disagreeing with something that has been done in another place. We are trying to do something which we believe will improve the Bill, and then it is merely for the consideration of another place when it gets there. After that, we shall have to examine the position further. I do not pretend that this is a very important Amendment, but we believe that on balance, just from the point of view of revising and improving the Bill, it would be useful to adopt this Amendment. Therefore we propose, we hope with No 111-will on either side, to press for its adoption.
Viscount ADDISON: My Lords, I would ask the noble Marquess not to press it. After all, what is it all about? It affects only two boards out of a total of, I believe, twenty-nine; that is all. The dispute is as to whether the minimum should be one-half or three-fifths. In the Welland and Ouse districts, the two cases which were conjured up, drainage is their very life. In view of their subjection to the inundations of the present year, it is unthinkable that the county councils or local authorities in those places will not be fully alive to these matters. They have, in fact, suffered grievously from such things in the last twelve months. It is unthinkable that in those two cases, which are the only cases for which this provision is proposed, it will be of the slightest use. The scheme is all built up by good will and compromise. There is really nothing in this, and I do hope

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that the noble Lord opposite will not press his Amendment.
The Marquess of SALISBURY: If there is nothing in it, I cannot see why this Amendment should not be accepted. I think we must put it in, if only for the technical purpose of improving the Bill. No great moral principle or differences
Resolved in the negative, and Amendment agreed to accordingly.
An Amendment (Privilege) made: Bill passed, and sent to the Commons.

PENSIONS (GOVERNORS OF DOMINIONS, &c.) BILL.
Read 3a (according to Order), and passed.
PUBLIC WORKS LOANS BILL.
Read 3a (according to Order), and passed.

FINANCE BILL.
3.44 p.m.
Order of the Day for the Second Reading read.
The CHANCELLOR of the DUCHY of LANCASTER (Lord Pakenham): My Lords, I rise to move the Second Reading of the Finance Bill (No. 2), 1947. I think that most members of the House are aware
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have arisen between the Parties. It is purely a technical point, but even if it affects very few areas, it is better to have justice done.
On Question, Whether the words "three-fifths" shall stand part of the Bill?
Their Lordships divided: Contents, 16; Not-Contents, 45.

CONTENTS:

Jowitt, V. (L. Chancellor.)

Ammon, L.

Marley, L.

Crook, L.

Mountevans, L.

Huntingdon, E.

Henderson, L. [Teller.]

Pakenham, L.

Holden, L.

Pethick-Lawrence, L.

Addison, V.

Inman, L.

Shepherd, L.

St. Davids, V.

Lucas of Chilworth, L.

Walkden, L. [Teller.]

NOT-CONTENTS

Salisbury, M.

Simon, V.

Hutchison of Montrose, L.

Trenchard, V.

Kenilworth, L.

Beatty, E.

Killanin, L.

Carlisle, E.

Airedale, L.

Kinnaird, L.

Fortescue, E. [Teller.]

Amherst of Hackney, L.

Llewellin, L.

Howe, E.

Balfour of Inchrye, L.

Lloyd, L.

Iveagh, E.

Brand, L.

Mancroft, L.

Lindsay, E.

Broughshane, L.

O'Hagan, L.

Lucan, E.

Carrington, L.

Rennell, L.

Munster, E.

Cawley, L.

Rochdale, L.

Perth, E.

Cherwell, L.

Roche, L.

Fairfax of Cameron, L.

St. Oswald, L.

Elibank, V.

Gifford, L.

Stanmore, L.

Long, V.

Hatherton, L. [Teller.]

Teynham, L.

Mersey, V.

Hawke, L.

Tweedsmuir, L.

Samuel, V.

Howard of Glossop, L.

Waleran, L.

of the external factors which have imposed on us a rather peculiar pattern of operations this afternoon. We think that what we are doing is most convenient in the circumstances, and briefly the suggestion for procedure is this. I would ask your permission to turn away in a moment from the Finance Bill in order to make to you an important statement that is very shortly being made elsewhere by my right honourable friend, the Foreign Secretary, dealing with the recent meeting of the Council of Foreign Ministers. After that, I propose to continue to introduce to you the Finance Bill, confining myself fairly narrowly to its provisions and leaving till later in the afternoon any wider treatment of the economic position of the country. Noble Lords who follow me on the Second Reading will not, of course, be inhibited in this or in any other respect, and when they have said their say I hope and trust that the House will give the Bill a Second Reading.
I should then desire to inflict myself again on the House in moving the Third Reading of the Finance Bill, and at this

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point to introduce a certain amount of new matter which is being laid before another place by my right honourable friend the Chancellor of the Exchequer. Noble Lords (including, let us hope, the noble Viscount, Lord Samuel, who so kindly withdrew his Motion last week) will probably wish to offer their views on the questions raised. Finally, if a reply seems to he required, I shall crave the further indulgence of the House to address them for the fourth and last time. I can assure the House that I extend to them a liberal measure of sympathy in regard to the somewhat monotonous diet that is about to be placed before them, but I hope for a certain measure of indulgence in return.
My Lords, I will make to you, if I may, the statement that is being made elsewhere by my right honourable friend the Foreign Secretary. I will use his words so that when I avail myself of the expression "I" it refers to my right honourable friend the Foreign Minister and not to myself, although of course I entirely endorse his remarks. This is the statement:
"I very much regret to have to report to the House the failure of the Foreign Ministers' Conference to reach agreement on a German or Austrian treaty. The House will be well aware that at Potsdam, under the Potsdam Agreement, there was established the Council of Foreign Ministers, which was given definite instructions. Its specific purpose was to draft the Peace Treaties for Italy, the German Satellites and Germany and Austria. While it is true that in the making of treaties, questions of policy of a fundamental character arise, its main purpose was to be a business-like instrument for the drafting of peace treaties for submission to the Peace Conference. The exact language is as follows:
"As its immediate important task, the Council shall be authorized to draw up, with a view to their submission to the United Nations, treaties of peace with Italy, Rumania, Bulgaria, Hungary and Finland, and to propose settlements of territorial questions outstanding on the termination of the war in Europe. The Council shall be utilized for the preparation of a peace settlement for Germany to be accepted by the Government of Germany when a Government adequate for the purpose is established.'
"Unfortunately, ever since its existence the Council of Foreign Ministers has alternated between carrying out its original functions and being used for entirely
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different purposes. Our work has therefore been handicapped. This has created despondency in the world, instead of the hope that the responsible Ministers of four Great Powers would be able to get to know each other, express their views freely to one another, and thereby promote a spirit of friendship and understanding. This has not been the case. To His Majesty's Government it has been a great disappointment. In our view, negotiations for the Peace Treaties for the satellite countries took far too bag, and created a great deal of misunderstanding. In our view the Italian Treaty was delayed months longer than should have beer the case. However, in New York we did at last achieve that purpose. Thus, at last, we got to work on the Austrian and German Treaties.
"In the view of His Majesty's Government, the Austrian Peace Treaty was separate and distinct, and could have been settled quite easily when the satellite treaties were concluded had there been the will to settle. Austria, Eastern Europe, and the Balkans would now have been working hard on reconstruction and rehabilitation. The main difficulty in the case of the Austrian Treaty, as the House is well aware, was the question of German assets. At Potsdam we were given to understand that the Soviet Government would not claim reparations, but would be content with German assets. But the interpretation that has been placed by the Soviet Government on German assets has resulted in the property of United Nations nationals being taken. Austrian property has been taken, and extra-territoriality in the exploitation of these resources has also been imposed.
"In fact, it would have been better for Austria, far better, to have fixed a sum which she knew she would have to pay, and then to have left her with the control of her own economy. What was thought to be a generous act has in effect been used to get a grip on the whole of Austrian economy. To the extent that the vagueness of the wording of the Agreement gives an excuse for this, we can say nothing. But when it is carried beyond that, we have to get a definition. When in addition, you include in the term 'German assets' the whole question of what was absorbed by Hitler after the Anschluss, it was in our view carrying it too far and was never intended. This, in a few words, is what has held us up,

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However, at Moscow the question was discussed. We failed to reach agreement. We set up a Commission in Vienna to work on it and a concrete settlement was submitted which was adopted by three of the Governments. We offered to make a contribution to the solution of this problem in order to help to get a more definite and final proposal. However, in spite of the breakdown of the present session of the Conference, the Austrian question has now been referred to the Deputies, and I will not say a word which would embitter the situation. We can only hope that a concrete proposal for settlement will soon be forthcoming. If we get it, we will get to work at once and try to clear up this Austrian situation.
"As regards the German settlement, before I went to Moscow in March of this year, His Majesty's Government worked out a set of political and economic principles, based on the Potsdam Agreement. These principles were well thought out, and they have been circulated to the House. We tried at Moscow to make these principles a working paper in order to present in all its facets the whole problem of Germany. We made very little progress. However, I left Moscow not without hope that in November, when the Conference would meet again, a changed situation would arise. But in the meantime, from a propaganda point of view, things went from bad to worse. I will try to explain the situation in a few words.
"Europe was in chaos, impoverished, unable to find capital and other equipment for rehabilitation. Then came the Marshall speech. We tried to turn this to the advantage of Europe as a whole, but to our great grief, instead of every country taking advantage of the plan, the Soviet Union stepped in and used tremendous pressure on their immediate neighbours and, in effect, ordered them not to participate, and violated their free choice and sovereignty. A campaign was started by the Soviet Union against this attempt to help Europe as a whole. Then came the formation of the Cominform, and the resulting disruptive tendencies in Western Europe. The speeches made by the Soviet Union representative at the United Nations Assembly seemed to His Majesty's Government intended to create
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an atmosphere which would make settlement very difficult.
"Similar attacks were made at the Control Council in Berlin just before the Conference opened. This did not augur well for the Conference. But still we persisted and went on with the Conference, hoping that in the calmer atmosphere of discussion we should make progress. I have experienced so many of these set-backs, and I hoped that the steam having been blown off, we might at last be able to get to grips. Unfortunately the hostile propaganda showed itself through all the discussions during the three weeks the Conference lasted. It made it impossible for us to get to grips with any fundamental principle. Then when we came to the Conference, we began with an unnecessary argument about our agenda. We settled this after two days and the Austrian Treaty was referred to the Deputies after considerable difficulty. It came back to us with no result. Then we at last succeeded in getting the British paper on Germany accepted as a working paper. When we got to grips with it, however, the real issues came up and on these we could not make any progress.
"On Germany we began with the form of the German Peace Treaty. A number of propaganda speeches were made which were clearly out of place. After these we came to the question of German frontiers. We clearly must reach agreement on the frontiers of Germany, subject to confirmation at the Peace Conference. As Monsieur Bidault said, it is ridiculous to try to discuss German affairs without knowing where Germany begins or ends. The French put forward their claim for the economic integration of the Saar. As the House knows, His Majesty's Government have always supported this, provided the exact frontier is delimited and the reparations balance adjusted. There were also a number of other frontier claims put forward by our other Allies. I suggested that the Council should establish one or more frontier Commissions to go into these claims thoroughly, to hear the evidence and to report to the Council in a short time. These Commissions would cover all the frontiers of Germany. What other means could we adopt for settling these difficult questions? M. Molotov however would not agree, and we had to pass on, leaving this matter unsettled. We did

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manage to reach agreement on a few minor points about the German Peace Treaty, but there could be no substance in the agreements until the other urgent matters had been settled.
"The next matter we discussed was the economic principles—that is to say, the principles for securing and maintaining the treatment of Germany as an economic unit in accordance with the Potsdam Agreement Certain fundamental points were thrown up at once. There was, first, the need for a common export-import plan for Germany as a whole and the pooling of indigenous resources. If these objects are to be realized, the zonal barrier must come down and there must be complete freedom of movement for men, ideas and goods throughout the whole of Germany. M. Molotov did not reject this but made it clear that he would not agree until Central German Administrative Agencies had been set up, and this was left until we got to political principles.
"The next point was the unqualified principle that the first charge on Germany's foreign exchange resources, after Germany's essential needs had been met, should be the repayment of the sums advanced to Germany for the payment of her imports. This principle was in exact accordance with the Potsdam Agreement. We got nowhere on this and were met with a number of unjustified and false accusations. I made it clear that we had had to borrow precious dollars and deprive our own people of what those dollars could buy in order to finance the import of food into Germany. His Majesty's Government expected these advances to be repaid out of Germany's resources before any more was taken away from the German economy.
"A third fundamental question was the relinquishment by the Soviet Government of their acquisitions of German enterprises. These acquisitions amount virtually to the exercise of extra-territorial rights in Germany. We asked for an undertaking that they should stop, which is in accordance with Potsdam. In reply, we were accused quite untruthfully of removing enterprises from our own Zone; and no undertaking was given.
"We then came to the question of reparations. Let me make my position clear once again. Capital reparations have been and are being removed from the Western Zones. This is all to which His Majesty's
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Government are committed. We did not agree at Potsdam or at Yalta, or anywhere else, to reparations being taken from current production. Nor did we ever agree to an over-all figure, whether ten billion dollars, or any other amount, for German reparations. On the other hand, I have never closed my mind to the possibility of reparations from current production once a balance of payments has been reached in Germany. This is an intricate question and it depends upon the level of industry, the rate of German recovery, and above all upon full information as to what has already been taken out of Germany. We and the Americans gave this information in full and we asked, as we: have asked before, for information about removals from the Eastern Zone. This request was refused. We were told that we could only have the information if we agreed to the Soviet claim to reparations. Our request was just and reasonable, and we asked no more of our Allies than we had done ourselves. I could not make any blind commitment in these circumstances on behalf of His Majesty's Government. Reparations can only be paid if materials and food are found. I cannot commit this country to finding more money for Germany in order that reparations may be paid to others.
"Throughout the whole of the Conference, there was insistent pressure by the Soviet Delegation to get us to agree to the immediate establishment of a Central German Government. The view of His Majesty's Government on this is clearly set out in the political principles to which I have referred. We recognize how important it is to have a Central German Government, just as we recognize the importance of the unity of Germany. We do not want an over-centralized German Government: one that can so easily become a dictatorship. But we are in favour of a Central German Government. It is a question of its design and powers. It must he a truly representative Government, and not one which is simply a tool in the hands of the occupying powers. It would be no service to the German people, or to the world, to agree to establish in Germany an unrepresentative and bogus German Government. An attempt was made to make us appear as the opponents of German unity and the opponents of a German Government. Nothing could be further from the facts. The essential unity of the German people

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is something which we recognize, and sooner or later—and I hope for the sake of us all sooner—this unity must be achieved.
"Finally, a word to the German people. I realize that they are still without a Peace Treaty and that the work of preparing a Peace Treaty has hardly yet begun. I realize how disappointing this must be. It is our intention, however, to see to the best of our ability that the German people do not suffer from this state of affairs. I do not know what is going to happen in the future. We have been accused of all kinds of preparations. Perhaps it is a fair criticism to make against us, not that we have made these preparations, but that we have not made them. If it is imagined that we have entered into all sorts of commitments in the case of a breakdown of the Conference, it is untrue. All sorts of insinuations have been made, but we have stuck to our policy of German political and economic unity under Allied control and with safeguards for our security. That has been His Majesty's Government's policy throughout and we have not changed it.
I have made it clear, however, in the Conference, that if there is to be no settlement between the four Powers we cannot go on for ever with the burden of cost and with Western Europe in chaos with no means of redress. His Majesty's Government would prefer time to study the problem as it now is in all its aspects. It really means taking a grave decision in face of the world and the future: and we would prefer to meet the House after the Recess in a full debate, when we can go into this matter more fully
"We have no aim or desire to divide the world. The termination of this Conference and the manner of its ending will cause people to think. We cannot go on as we have been. We have hoped against hope that four-Power collaboration would work. Most of the world Parties can find a basis of agreement. They cannot all be wrong. We shall close no doors; we shall maintain all the contacts we can. But if we are to succeed there must be acceptance that we are a peace-loving people and desire a just settlement. We do not regard or accuse those who do not see eye to eye with us of being warmongers or dishonest.
"Meanwhile, we are going to push on with vigour to raise the German standard of life, in accordance with our promises to rehabilitate their industries, but keeping to the new level of industry and always remembering that we must not push Germany ahead of the liberated countries."
I am grateful to the House for having allowed me to make this statement.
4.7 p.m.
THE MARQUESS OF SALISBURY: My Lords, I do not propose to make any comments on the very important statement the noble Lord has made. I have taken the step of tabling a Motion for a debate on foreign affairs on the first day after Recess and I hope that the Government will agree that we should have a full debate.
THE EARL OF PERTH: My Lords, it is clearly inappropriate to make any lengthy comment on this most important statement, particularly in view of the fact that the House is preparing for a weighty debate on economic affairs. I understand that we shall have an occasion for discussing international affairs as soon as we resume in the New Year, but I should, nevertheless, wish to take this opportunity of paying tribute to the very great patience which has been displayed by the Foreign Secretary in the face of provocation, and also to express appreciation of the fact that he has not yielded when questions of high principle were under discussion.
We must all deplore the failure of the Conference to reach its ends, but I hope we shall not be too despondent. In my view it is better that the Conference should stand adjourned indefinitely rather than that an uneasy and patched-up agreement should have been reached about Germany, an agreement which, unhappily, would have been interpreted, as we know by experience, differently in different countries, and possibly, again judging by precedent, ill-observed. Your Lordships will forgive me if I say one word about Austria. There is happily a distinction which we sometimes forget between Germany and Austria. I feel that a treaty about Austria may be within the bounds of political possibility. If so, that would mean real progress towards peace making. I sincerely hope that the Soviet Government will assist towards that and that the obligation assumed at the Conference in their great capital of Moscow,

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that a free and independent Austria shall be constituted, will at long last be fulfilled.
Viscount ADDISON: My Lords, if I may intervene for one moment. I am not sure of any particular programme, but I shall try to co-operate with the noble Marquess to have a debate as soon as it can possibly be arranged.
4.10 p.m.
LORD PAKENHAM: My Lords, I thank the noble Lords opposite who have spoken of their desire to help us in every way, and I assure the noble Earl, Lord Perth, that I will convey what he said to the Foreign Secretary.
I now propose to turn to the Finance Bill. I hope the House will neither exaggerate nor underestimate the importance of this Bill, which, as we all know, embodies a second and supplementary Budget for the year 1947. This is not a tremendous, dramatic measure. It does not compare with Mr. Gladstone's Budget of 1853, or even his Budget of 1860; it does not compare with Sir William Harcourt's Budget of 1894, or with Mr. Lloyd George's Budget of 1909. Nor does it compare with any Budget introduced by the noble Viscount opposite, Lord Simon, or by Mr. Hugh Dalton, the late Chancellor of the Exchequer. It is strictly limited in its objective, but that does not mean that it is not an extremely useful and serviceable measure; indeed, it is necessary and indispensable.
Put quite simply, the object of this Budget is to help to counteract the inflation which would otherwise emerge as a by-product of the special measures being taken by the Government to improve the trade balance. As we all know, inflation arises when too much money chases too few goods, and although an improvement in the trade balance is altogether good and desirable and vital, such an improvement has one unfortunate by-product. It means that, compared with what was happening previously, more goods go out and fewer come in, so that there is less here for us to buy; and unless the amount of money is reduced accordingly, inflation inevitably results. It is with this special problem, and not with any emergency arising from our internal budgetary position, which contains many reassuring features, that the Bill before the House seeks to deal.
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As regards the expenditure side of the Budget, I would refer the House, if I may, to what was said by the late Chancellor of the Exchequer in introducing these proposals on November 12. He pointed out that this is the season when the Estimates of the various Departments are being prepared for submission to and discussion with the Treasury—the Estimates, that is, for the year 1948-49. We are all at one in this House in desiring to see the total level of national expenditure reduced. On the strength of our debates, in practically all of which I have participated during the last two-and-a-half years, I venture to say that we all find it equally hard to point to substantial economies that should be made.
While, therefore, I would like the House to realize that we are re-doubling our efforts to see how expenditure can be reduced during the year 1948-49, and while various measures now being taken—such as the capital cuts, which will be referred to later this afternoon—will assist us in that direction, if we are looking for immediate steps to increase the Budget surplus this year we must seek them in the field of increased taxes. The House knows by now of the changes in revenue proposed. The extra sum to be raised is £196,000,000 in a full year, and £48,000,000 by the end of the present financial year. It is proposed to raise it as follows, putting the increases under four broad heads: £78,000,000 extra is to come from an increase of Purchase Tax, £56,000,000 from increased duties on beers, wines and spirits, £47,000,000 extra from doubling the Profits Tax, and £15,000,000 from a new duty on pool betting.
As all these taxes have been discussed so fully elsewhere, perhaps the House will allow me to confine myself to one or two words about each of them. As regards the increases in the Purchase Tax, these are greater on the lower rates than on the higher. What are called the reduced rates are increased from 16⅔ per cent. to 33⅓ per cent.—that is to say, they are doubled—while the higher rates are only increased from 100 per cent. to 125 per cent., that is, by a quarter. The reason is, of course, that if you increased the higher rates much more they would tend to become prohibitive, and you would lose in total revenue.
As regard the Profits Tax, the second of my four broad heads, the increase on

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distributed profits is from 12½ per cent. to 25 per cent., and from 5 per cent. to 10 per cent. in the case of undistributed profits. The profits of companies generally are at present running at a very high level, as everyone who is fortunate enough to possess any shares is aware. Whatever the arguments in the abstract for and against a Profits Tax in normal times, it is clearly appropriate that a Budget directed to reducing inflationary pressure by increased taxation should pay special attention to them. I am aware that there has been some unhappiness among good men and true in certain quarters about the increase of tax on undistributed profits, but the real point there is that the increase in the rate on undistributed profits should tend to reduce expenditure in the capital goods market, which I understand is desired by all of us.
The increases on beers, wines and spirits proved quite uncontroversial in another place, so I will take leave to pass them over. The Pool Betting Duty imposes a tax on all forms of pool betting other than betting on totalizators set up on an approved horse racecourse by or under the authority of the Racecourse Betting Control Hoard. It imposes, of course, no tax on bookmakers as such, or on bets other than pool bets—for example, bets with racecourse bookmakers. A pool bet, speaking broadly—I am no expert—is one where the gambler and the gambling agency are part of the same co-operative society, and the gambling agency is simply paid for performing a managerial function. In practice the new duty will affect mainly dog-racing totalizators and football pools. The only criticisms that have been seriously made of these proposals is not that they are wrong, but that they do not go far enough—the net is not cast sufficiently wide. In particular, it is asked why bookmakers are not brought under the harrow, and why horse-racing and totalizators are excluded.
As regards "bookies"—if I may call them that, though I have no special intimacy with that elegant community—no one wants to exclude them, but they are infernally elusive gentlemen who have always proved too smart for even the most astute of Chancellors. I am not, of course, reflecting on their private characters, of which I know nothing; I am
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simply referring to them as an occupational class. The reason for the exclusion of horse-racing totalizators is that the Racecourse Betting Control Board is a non-profit making body which makes an important contribution to the development of horse breeding and other allied activities. When we appreciate that this industry has earned for this country no less than £3,000,000 in the first nine months of this calendar year, we find it easy to draw a sharp distinction between greyhound racing and horse racing in this connexion, and to decide without many qualms that the one should be taken, and the other left. I do not plead guilty to any partiality in the matter. I only once partook in a point-to-point horse race, in which I sustained concussion and finished up the wrong way round.
I do not think that anyone could call our positive measures controversial. A doubt exists in certain reputable minds as to whether they go far enough towards dealing with the addition to the inflationary gap which an improvement in the trade balance involves. As to that, I would just say two things. First, I would suggest, with great respect, that considerable responsibility does fall on those who make this criticism for indicating, not, of course, in detail—one could not expect that—but in outline, what important reductions of expenditure, or substantial increases of taxation, from which we have shrunk, they themselves would have embarked upon in our place. The arrangements which the House have kindly accepted for our work this afternoon enable me to hold my fire until I have drawn that of any adversaries who may present themselves, so I will leave matters where they are for the moment, without putting into the fertile minds—sometimes, if I may say so, the over-fertile minds—of noble Lords opposite any ideas of a whimsical character which do not lurk there already.
The other thing I would say in conclusion is this. Even if we confine ourselves, as I have done in these remarks, to studying the best way to tackle any new inflation likely to arise from an improvement in the trade balance, we must not delude ourselves—I speak in all seriousness—into supposing that the present Bill is, or is intended to be, sufficient for that purpose. It is one prong of a three-pronged attack. The other

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two prongs are a decision by our people to spend less and a determination on their part to work still harder and in directions still more calculated to serve the national interest. In both these last two fields—the field of spending less or, to put it the other way round, of saving more, and the field of harder and more useful work—the Government carry their own heavy responsibility of assisting our people by their own example, by any inspiration which it is in our power to provide and by sensible organization and planning., There is much that the House can do and may well do this afternoon to assist us and, what is infinitely more important, to assist the country.
In the meantime I commend to your Lordships this practical instalment of anti-inflationary measures consisting, as I believe it does, of taxes not calculated of course to arouse any special enthusiasm—taxes very seldom do—but carefully conceived to cause hardship to as few people as possible and to play a useful part, I submit to the House, in helping us to travel along the straight and narrow road to recovery. I beg to move..
Moved, That the Rill be now read 2a.—(Lord Pakenham.)
4.23 p.m.
Viscount SIMON: My Lords, the noble Lord who has just sat clown has shown, not for the first time, his infinite versatility. On the Second Reading of the Finance Bill being called, he began by making that most grave and important statement on foreign affairs. Fortunately, the rules of our House find no objection to what, on the face of it, might seem a slight departure from the relevant. He then justified the immediate purpose of his rising by turning to the Finance (No. 2) Bill, and made a speech which we have just heard—and for which we are grateful—and gave a short explanation of the taxes. This House has nothing to do with the imposing of taxes—it may happen that some members of your Lordships' House have to pay them—but we are entitled to use this occasion to look briefly at the general financial situation. Indeed, I think it more useful to do that than to discuss taxes which we have not the slightest intention of altering. I shall be very brief about it, but I shall take advantage of the noble Lord's suggestion
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—which indeed in the circumstances it would be very curmudgeonly of me to refuse—that I should deal not so much with additional taxes as with the economic situation as it stands at this moment. That is a vast subject. Others are going to speak, and I will endeavour to put what I have to say into moderate compass.
It seems to me that there are two features about this Finance (No. 2) Bill which are very unusual. Of course, the Finance Bill is an immense instrument for all sorts of purposes. It may greatly promote the public good in many things besides extracting money. It is unusual to have a Finance Bill such as this, which is not really introduced for the purpose of balancing revenue against expenditure, but has the one object—and I think I am quoting correctly the words of the Financial Secretary in another placd—of reducing inflationary pressure. As the noble Lord has said, and as was pointed out in another place, that is the object of this Bill. In other words, its purpose is not to strengthen the financial position of the Treasury; it is to weaken the purchasing power of the people, because there is an excess of purchasing power which creates, if it does not define, the inflationary pressure. It is obvious that I am right about that because your Lordships will recall that the former Chancel or of the Exchequer, in his regular Budget in April, claimed that he had balanced the Budget and indeed that he had a great surplus. Of course, in that situation we should not have new taxes for the sake of new taxes.
LORD PAKENHAM: May I interrupt the noble, and learned Viscount for a moment? It may be obvious to him that that is the object of the Bill, but I am afraid his exposition of it would give a very misleading impression of the intention behind this measure. The use of the words "purchasing power" in that connexion would throw more darkness than light.
Viscount SIMON: Then let us leave that out. But I am sure I am right in repeating what has been said by Mr. Glenvil Hall—I am quoting the exact words—that it is "the one object and the one object only." Perhaps that is not quite so grammatical, but he means that the one and only object of the Budget is to reduce inflationary pressure.
LORD PAKENHAM: If I may explain why I intervened, I will not interrupt again unless the noble Viscount forces me. The noble Viscount has sent it out from his place, with his great reputation, that the object of the Bill is to weaken the purchasing power of the people. I should say that the object was precisely the opposite: it is to enable the people to purchase more in the long run, and certainly in the short run to purchase no less.
Viscount SIMON: I am grateful for the explanation. I was just observing that of course it should not be the object of this Finance Bill to effect any great change in our revenue. Various figures might be given, and whether the sum involved is £30,000,000 or £40,000,000 this year, it is, of course, a very small percentage of the amount at which the Budget in April was alleged to be balanced. The expenditure budgeted for was £3,000,000,000, and it was claimed that we had not only raised that money—thanks to Dr. Dalton's methods—but got a surplus into the bargain. Of course, nobody wants to raise more taxes—looking at it simply from the finance point of view—if that is the situation. Therefore, I think I am right in saying that these new taxes are really—I think my noble friend opposite said as much—designed to have a good effect upon our general economic difficulties. Therefore, I will not spend time in discussing them.
I might observe in passing that this happened before. When a new Chancellor of the Exchequer takes over from a previous Chancellor—it even happened to me—he says he is going to support every proposal of his predecessor. It is very right and loyal that he should, but it does sometimes happen that he drops one of them. I am glad myself that the allowance for advertisement expenditure is still to be regarded as a legitimate deduction in arriving at trading profit. On that matter it seems to me that Sir Stafford Cripps is perfectly right. As for the other matter to which my noble friend referred, which is the doubling of the Profits Tax, I do not think his account of the reasons for the increase is quite adequate. The real history is that last year businesses and companies were most strongly urged by the then Chancellor of the Exchequer to avoid distributing more than a moderate profit and to plough back their
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profits into the business. This was, I think rightly, regarded as the wise thing to do and a great many people have done it. Now you have a doubling of the Profits Tax, including the Profits Tax on what was reserved. It is to be a retrospective provision. I must say I think it is not unnatural that a great many people regard that as not a very happy feature of the present proposals.
That is the first observation I would make as to the unusual character of this Finance Bill. I will say at once that in my view, and I think in the view of a great many people, a far better way of endeavouring to get back to a more satisfactory position is not to increase the taxes, which are most frightfully heavy, but to reduce expenditure. It was not until very recently that the Government have shown, publicly at any rate, any consciousness of the fact that large capital expenditure was a very grave part of our present difficulties, and made proposals to reduce it. I do not think they had ever publicly stated this principle until August—more than two years after this Government had come into office. I was very glad to hear the noble Lord say, with all the weight of his and the Government's authority, that he was in favour of the view that it is really immensely important to try to reduce the amount of the expenditure. I ventured to say to your Lordships when we discussed the main Finance Bill earlier in the year, that I did not believe that this country could justify or tolerate a Budget which was balanced at the figure of £3,000,000,000, which, after all, is one-third of the total national income of the country. Therefore, reduction of expenditure is a more fruitful way of getting back than the imposition of more taxes.
But what I want to call your Lordships' special attention to is the second peculiarity of this Budget. It certainly is well worth inquiring about, and I am very glad that my noble friend will have an opportunity of speaking again. Why is there this year a second Finance Bill? What is it that requires there to be a second Finance Bill? What is the explanation of that? It cannot of course be, as it was in September, 1939, that we have been put into the actual presence of war, where every single day's expenditure is enormously increased and we must have an emergency Budget as we had within weeks of the outbreak of war, in which taxes

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were increased in ways which inflicted sores hardly yet healed on the backs of some of your Lordships. It is not that. Whatever else has happened to us we have not got into another war. What, then, is the explanation? The noble Lord in his speech just now pointed out that efforts to improve the trade balance might in certain circumstances operate so as to promote further inflation. That is not a new discovery. I hope that it is the intention of the Government to apply their minds to this problem and that it has not been necessary for them to be in office for over two years to discover it.
What is the explanation of why there should be Finance Bill No. 2 this year? If you look at the thing first of all in an abstract way it seems to me capable of only one of two possible explanations. One is that there has occurred in the interval since last April some totally unexpected event which His Majesty's Government's present advisers could not be expected to calculate or estimate. If so, I should like to know what it is. What has happened? I do not see anything that can be fairly classed as a "totally unexpected event." There remains one more explanation, which I advance in all humility because it is not flattering, and it is that there has been a most unhappy failure to estimate or calculate what was bound to happen because the original Budget and the original Finance Bill were, as I ventured to submit at the time, quite inadequate to meet the coming situation. A famous passage of a Victorian poet says of the Light Brigade:
"Their's not to make reply,
Someone had blundered."
I do not think the noble Lord when he comes to answer will be able to say it is not for him to reply; but I venture respectfully to submit that someone has blundered—very, very badly; and I will shortly show where I think that failure rests. It is a prodigious blunder, and not one that has got to be laid on the back of Dr. Dalton alone. As Sir Stafford Cripps has said, these great financial decisions are matters for the whole Government.
Here is a quotation from Dr. Dalton's speech on April 15 when he was introducing his Budget earlier in the year. I invite your Lordships' attention to this
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declaration made at a very important moment. To me at least it is rather surprising. This is what the then Chancellor of the Exchequer said:
"To-day there is plenty of purchasing power. That has been our aim. We have sought; to lubricate the economic system with a sufficiency of purchasing power much more evenly than before the war That has been our aim and we have achieved it."
I think that by common consent the fundamental difficulty which arises from the threat of inflation was not that people had a deficiency in purchasing power but that their purchasing power was so great that it did not correspond to he diminished supplies that were available. And here is the former Chancellor of the Exchequer explaining chat he regards his conduct of our financial policy as "lubricating the machine." Why, he so deluged the machine with oil that the thing chokes and will not work, and we are now getting the results of that miscalculation in the most stalwart efforts made by Sir Stafford Cripps to try to reverse the consequences of that policy.
I think it is true to say that it is the amount of this present purchasing power which is the cause of inflationary pressure. I see opposite the noble Lord, Lord Brand, who knows this subject of course so much better than I do and than most of us; but I submit to him that that is a correct proposition. It is a fact that the purchasing power at present in this country is so great that it is the cause of this inflationary pressure. It was the noble Lord, Lord Cherwell, I think, who in the debate in July here made a very witty remark which unfortunately did not catch the ear of the newspapers. I address myself to your Lordships in the hope that this gem may not be lost in a necessarily abbreviated report. The noble Lord, Lord Cherwell, observed that in another branch of science, not economics but another branch, "Daltonism" was the name given to that distressing defect which affects some colour-blind people who cannot distinguish red from green. Surely that was a really pointed observation.
Of course, the former Chancellor's advisers knew perfectly well where the real danger lay, but that did not deter Dr. Dalton from telling the Labour Party Conference this, I think, in the summer of 1946. I have his words here:
"The fear of inflation is diminishing; it has largely passed away."

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Can it really be that the advisers of this distinguished man gave him that advice? Let us test it by just considering what has happened in the present year. Let us test it by putting together four or five figures in the lamentable story of the use of the American Loan. Perhaps the noble Lord opposite would be good enough to note these figures and he might be able to tell me whether any of them are wrong. I state what I believe them to be. The total Loan, American and Canadian together, amounted, I think, to dollars equivalent to £1,250,000,000, and in February of this year His Majesty's Government circulated a White Paper entitled Economic Survey for 1947, which was a very carefully written document presented to Parliament. That document was issued to show that the Government were very good planners.
If your Lordships will look at page 18 and just work out the figures, your Lordships will see that what the Government said was that they intended to draw on these Loans during this present year, 1947, at the rate of £30,000,000 sterling in dollars per month. To be precisely correct in my arithmetic, the figure for the year was £350,000,000 sterling in dollars, which is, therefore, rather less than £30,000,000 sterling per month. That would leave the Government at the end of this calender year (as was here stated, and, no doubt, that would be right) with about £600,000,000 sterling in dollars with which to start the year 1948. If they went on in this cautious way, they were well justified in believing that they would still be living on this happy relief well into 1949. Indeed, I think that one of the supporters of the Government in another place, who has since become Economic Under-Secretary to the Treasury, said as much, and Mr. Dalton approved. If that is so, how does it come about that, if you take the first half of this present year, the actual average expenditure for the six months was, I think, £68,000,000? How does it come about that, when we got to the August just past, we found ourselves left with only £100,000,000 of the American Loan?
To give two more figures which I believe are right, in July we drew in that single month £125,000,000 from the Loan; in August we drew £150,000,000 from the Loan. How does all this come about? Of course, we all understand that July
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was a critical month because on July 15 the terms of our Agreement with the United States required that we should convert sterling sums due on current account into dollars if so desired. We were not required to convert sterling deposits; it was sums due on current account. Even so, the danger of this stipulation was obvious. I do not claim that people of my poor knowledge of these things necessarily saw it all so clearly at the time, but I am quite certain that some people did. As we drew nearer to this date, everybody was alive to that fact.
I do not know whether any communications passed between His Majesty's Government and the United States Government about the difficulties we might be in if this stipulation was strictly observed; I do not know. It is difficult to think that, if that had been done the United States Government would not have considered the matter, as indeed they have considered a great many matters, with much sympathy towards our difficulties. But what was the attitude of the then Chancellor of the Exchequer? That is what amazes me so much. On July 8, just a week before this stipulation came into force, he was asked about this in another place by Mr. Eden, representing a body of anxious opinion, and this was his reply:
"I think that in a large measure July 15 has already been discounted and the additional burden of assuming these new obligations under the Anglo-American Loan Agreement will be noticeably less than many people may suppose."
Of course, we are all of us liable to make miscalculations and to regret that we have not been wiser prophets, but is there any instance in modern financial history where there has been a more appallingly unfortunate view expressed on behalf of His Majesty's Government than that?
The result was, your Lordships know, that, instead of this being a matter of small importance—July 15 had "already been discounted," whatever that means—it did, in fact, result in this appalling drain of dollars. So far from the plan of this White Paper being fulfilled, there is not the slightest prospect of our having any part of this Loan to take advantage of, above the £100,000,000—whether it has already been drawn or not I do not know—and all the plans for 1948-49 have just gone down the drain. I think it is legitimate to ask whether that is an accurate

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record? If it is, can it sincerely be justified?
There is the further question which has been put prominently by an Oxford economist, Mr. Roy Harrod, to which I do not profess to know the answer. But it is interesting to ask also: How did we come to spend out of this loan in the two months July and August, the equivalent of £283,000,000? How did we do it? What people got it? What, if anything, did we get in return? Mr. Harrod has pointed out that the adverse trade balance in those two months was far less than that figure, and it seems to me that we are simply left in mystery as to what happened to this enormous sum. It is greatly to be wished that we may have a White Paper showing us plainly to what creditors and on what account these prodigious amounts were poured out in the summer, because until that happens we cannot really understand how such a frightful consequence occurred.
I wish to speak with moderation but I hold a clear view, and I feel I ought to express it. It seems to me that the whole story shows that His Majesty's Government failed to recognize what was coming, listened to no warning and indeed refused to recognize uncomfortable truths for as long as they could. Language is used—and I am sure I join in it sincerely—complimenting Sir Stafford Cripps because in recent statements he has been so candid and has declared to the people the unpleasant truth. No doubt that may be supplemented by what we shall hear later on to-day. But a compliment to a Chancellor of the Exchequer to-day because he has been candid and has told the people the truth, has a certain reflection upon His Majesty's Government before he became Chancellor of the Exchequer. I am afraid it is the fact that a hopeful view was taken, I am sure very honestly, by His Majesty's Government, who, like other people, try to do their best. But Governments have to be judged not by their motives and intentions but by the skill with which they carry on their business, and I do not see how these simple facts are quite consistent with a proper carrying on of the Government's business.
With regard to the reduction of capital expenditure, we welcome the recognition—as it is—that unlimited Government expenditure of a capital kind, even on
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objects which are extremely good objects and ones with which I warmly sympathize, is quite unjustified by our financial position. It was only on August 6 of this year that the Prime Minister said:
"I would agree that it might have been better if we had had a greater concentration of effort. It may be we have tried to do too much in a short time."
That is an exercise in what I think the Greeks would call μ εωα , an understatement, and is a very proper admission by the Prime Minister that he is gravely anxious lest his Government have not in these measures been going too far.
There is another question which I think it is useful to put now, and then I will stop. We are asked to observe and be grateful for the figures in regard to our exports. Nobody, I suppose, doubts that to increase our exports is really essential to preserve or to restore the country from terrible danger. But what is this figure which is called in the returns "exports"? I asked a question two days ago (and it was kindly answered by Lord Chorley), as to whether tobacco which was sent to the Channel Islands was subject to any sort of restriction, whether it was not being bought with dollars, and whether it was not the fact that in the Channel Islands it is to be got both cheaply and in the most abundant supply. I naturally made inquiries first, and that is so. The noble Lord who answered me said that no restrictions are placed on the export of tobacco goods from this country. He said he could not give us the figure of dollars involved; but it must be very considerable. Of course, it is not export to the Channel Islands, because it starts from a British port and it goes to the Channel Islands, which themselves happen to be British islands. But what conceivable relevance has it got to the question as to whether our exports, regarded as a way of getting out of our terrible difficulties, have grown? I have no doubt the figures are statistically right. I presume the office of Customs and Excise have carefully valued each thing that is pat on the ship. It is exported because it goes out of a port, but it obviously has no more to do with the improvement of our export position in any relevant sense than if you sent the stuff to the Isle of Wight.

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Again, in relation to these figures of exports given us month by month, I hope the noble Lord will be able to tell me this: Do they include everything which goes from this country by way of export, whether it is sold or not? It is perfectly true there has been a great drive for exports. Anybody who has taken part in that has to be much congratulated. But for the purpose of improving our position and our dollar balance it does not help us to send goods abroad at whatever figure you may value them at the British port, unless they are sold. Am I wrong in thinking that there is quite a large quantity of so-called exported goods which have not in fact been sold at all? Is it wrong in fact to suggest that some of them are being stored in warehouses, and nobody can be found to buy them?
I do not take any pleasure, of course, in asking these questions, but I think we should know, because it is a great mistake that we should be willing to accept these figures without knowing where we are. I therefore submit to the House that in this most difficult matter, which I do not think any Government would have found it possible to handle without making some mistakes, most dreadful mistakes have been made. What is the explanation? My Lords, the explanation is not, of course, that His Majesty's Ministers are not striving with all their might and with the greatest diligence to master the subject. I am afraid I think that the explanation partly is that the present Government contain people who do not understand this subject at all. Some of them do, of course, but the others do not at all. Let me quote to you three simple extracts from the year 1944, all coming from men who were just going to be Ministers of the Crown, by which you can measure the extent of their knowledge on these subjects. Mr. Aneurin Bevan in an election booklet—and this was in 1945—said this:
"We are told by some people who ought to know better that we shall need to increase our exports after the war by fifty per cent. Expanding exports are the will-o'-the-wisp private enterprise is compelled to pursue."
I wonder what contribution the Minister of Health has made to these economic discussions in the Cabinet during the last few months.
Next, here is Mr. Emanuel Shinwell, speaking in the House of Commons. Of
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course one does not for a moment suggest that he did not believe what he said. The question is whether or not he said something which was perfectly silly. Speaking on June 22,1944, Mr. Shinwell said:
"Increased exports are demanded. There never was a greater fallacy uttered in this or any other assembly.
"You might imagine that if you fail to increase exports this country's standard of living will diminish."
There is a valuable contribution for you. I am not altogether surprised that it has taken the Prime Minister, poor man, two years to drive these people into the right frame of mind. Here is another quotation, this time from the writings of Mr. John Strachey, who illustrates the Shakespearean proposition that "One man in his time plays many parts." In a book called Why You Should be a Socialist, published in 1944 (I used to have the book; unfortunately I have lost it; but I still have the extract). Mr. Strachey wrote:
"Hard work will not make the workers any richer, but it will make their employers much richer."
That seems to me to be a very dangerous doctrine to spread among working people but there it is. The passage goes on:
"You remember the old 'produce more' cry? I suppose we shall get it again after this war too."
Well, we have got it again. It has been on every poster. It is a doctrine which is now being pressed upon all of us with, I am sure, the greatest sincerity and also with considerable success by His Majesty's Government.
But when we look at the surroundings of this Finance Bill, Number 2, and consider what it is for, I submit that it goes to show that the Government in this matter have not exercised the forethought which they ought to have exercised. They are not, of course, responsible for all the bad conditions which beset us, but they have undoubtedly contributed to the gravity of the situation by their want of judgment and knowledge. Now, more than two years after they came into office, we find that we are still in this slough out of which everyone has got to try to extract the country. And of course everyone is most willing and anxious to do so. But we are entitled here, in this free House, to say in con-

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nexion with the Bill: "Look at the record of this Government in its treatment of economics and finance, and judge if it deserves the support of the people."
5.3 p.m.
LORD BRABAZON of TARA: My Lords I do not know whether I recommend following an ex-Chancellor of the Exchequer in speaking on the Finance Bill. Indeed, I rather think that it is a poor role to play. I must say that we have all very much enjoyed the noble and learned Viscount's speech, and I am confident that when the noble Lord, Lord Pakenham, comes to his third or fourth speech, he will find it will give him considerable difficulty.
LORD PAKENHAM: Give whom difficulty?
LORD BRABAZON of TARA: Lord Pakenham.
LORD PAKENHAM: But who is going to experience the difficulty?
LORD BRABAZON of TARA: You are. But the proceedings are really very enjoyable. We start with foreign policy, and then we swing over to finance; and we are conscious the whole time that, in no circumstances, can we alter so much as a comma of the Bill. That is also very satisfactory. There is one question which the noble and learned Viscount, Lord Simon, asked that I, too, would like to hear answered. That is: Why this second Finance Bill? I can well see how much Lord Dalton—
A NOBLE LORD: Not yet!
LORD BRABAZON of TARA: Well, Doctor Dalton, or Mr. Dalton, whichever you like. If it had not been for the second Finance Bill we should still have had Doctor Dalton. So it would seem that there is some advantage in this second Finance Bill. But from the point of view of the general public one Finance Bill a year is quite enough. It is, of course, accepted that what the Chancellor of the Exchequer was trying to do was, in some way, to stop that most dangerous of ail things, inflation. I wish to raise one point in particular—it was the fourth point of Lord Pakenham's speech. I refer, of course, to the point about gambling. The Chancellor, greatly daring, has proposed to tax gambling, and I think it is only right that we should have
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a word about this. There is a lot of ignorance on the subject of gambling, and I would like to throw some light upon it if I can.
We human beings do not gamble only with our money; we gamble with our happiness and with our lives. Those who say that gambling is immoral must, I think, question that opinion very severely, because if we are not to gamble in our actions, in what we do from day to day, if our life is all to be regulated by some outside control, then it will be a very poor existence. After all, have not all the great actions which we have taken in our lives in fact been gambles? It is notorious that the greatest gamble in which we can indulge is marriage. That is admitted. On the very unsatisfactory basis of physical attraction we glibly choose the partner with whom we are to live in spiritual contentment for the rest of our lives. That is a terrible thought. For my part, after forty-one years, I congratulate myself on my youthful perspicacity. It is the only coup I have ever brought off. But it does not stop me from enjoying gambling.
A lot of nonsense is talked by the more important racehorse owners, who say that in running horses you do not gamble. You cannot avoid it. If you enter a horse to run in a race you enter a sweepstake, which means that you are automatically gambling. Do not let us have that sort of nonsense. It is very annoying to hear. I would like the Chancellor to think over this particular problem from the point of view of inflation, and from that point of view only. Is gambling such a bad thing? If it were all stopped, would there not be more money chasing fewer goods? It is a curious thought. I am glad that the Bishops are not here, but I think that the Treasury should view this matter dispassionately because it needs investigation. It is only right to say, when speaking on these matters, where one's personal interest lies. I am a director of a great greyhound company. It is through that that I know a certain amount about betting and its ramifications.
My noble friend confessed that he did not know a lot about it. There are two types of betting—betting on the course and betting off the course—and it has always been laid down by everyone who has studied the question that if you bet on the course you are not doing anything very wrong, because you are using money

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which is in your pocket and you may go back without it. But "off the course" betting is thoroughly vicious, because there you are not betting with cash, you are betting "on tick." And unless you plead the Gaming Act, you may ruin yourself. The curious thing about greyhound racing is that all betting, be it with "bookies" or with the totalizator, is "on the course" betting; there is practically no "off the course" betting. Yet this is the type of betting which is now to be taxed. The Government are going to leave alone the other vicious "off the course" type—where people queue up in clubs to watch the tape and that sort of thing—and are choosing the totalizator, of the two types of betting, to tax. And they are to do so for a very curious reason—namely, that the tax is easy to collect. That is the only reason one can possibly think of for this.
That will be very hard on the small punter because his unit is only two shillings. Few people have the moral courage to go up to a bookmaker and make a bet with two shillings. It is the poor man with a small stake on whom the Government are to clamp 16 per cent. tax. It is an enormous figure. If the Chancellor had made it 2½ per cent., he might have raised a lot of money. But do your Lordships realize that with 16 per cent., if you bet for a place at odds-on you will lose your money, even if you win! That is an Irish "bull" but it is true. Nothing more fantastic can possibly be imagined. The noble Lord, Lord Pakenham, did not seem to know much about bookmaking. Bookmakers are a charming lot of people, with a great knowledge of the world. The trouble is that most of them are rich. But one must not have an inverted snobbery against the rich.
After all, look at the purse-proud members of the Socialist Party. Do we despise them because they are rich, while Lord Woolton is collecting postal orders? There they are, grinding the faces of the poor by compulsorily extracting money from their modest pay packets. Dear, dear, dear, no! I was surprised when the noble Lord, Lord Pakenham, said that it was not proposed to tax the bookmaker because he was so sly that he could get out of it easily. It seemed to me a most dangerous reason to advance, that
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because somebody is crafty and going to get out of a tax that is a reason for not taxing him. What is going to happen? The very reverse of what the Chancellor expects to happen. He is going to tax totalizators at "the dogs," and betting will shift to the bookmaker. That is perfectly obvious, just as, if all motorcars were Austins and Morrises and Austins were taxed, everybody would use a Morris, and there would be no tax collected on Austins.
I was rather surprised, too, at what is said about the Control Board having done such marvels for horse breeding. I do not know if the noble Lord has looked at the accounts of the Racecourse Betting Control Board. They are rather interesting. Most of the money is spent on amenities, for transport of horses, and improvement of courses. In the end, out of £1,500,000 only £34,000 goes to the encouragement of horse breeding. So do not let us be over-impressed by that particular point of view. I would like to quote these words of Dr. Dalton last year when he considered the possibility of this tax:
"Most of all, the Labour Party stands for justice, and to tax 'totes' and pools alone and let the bookmaker go free would be wrong. It would be unjust, and it would be repudiated by all right thinking men and women."
That is exactly what he has done.
We now have a new Chancellor of the Exchequer. I am perfectly aware of the tremendous subjects that he has to tackle in the short time before his new Budget, but I do ask him to give attention to this question: whether it is desirable to tax betting at all—first of all, from the point of view of inflation, and secondly, from the point of view, on which the Church feels so strongly, of giving a status to gambling. If he does consider it a proper way to raise money—and I agree with him that it will raise money—then I think it is only right that he should invent some equitable system of making all pay, whatever the medium through which they may indulge their betting. I know the difficulties that he has inherited, but I am perfectly certain that he would not like to introduce a Budget which makes and leaves injustice rampant and indefensible.
5.13 p.m.
LORD BRAND: My Lords, I am afraid you will find what I have to say very plebian after the two brilliant speeches

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of very contrasted type to which you have just listened. I wish to make a few observations on the general financial situation before I come to some comments on the Finance Bill itself. I believe it is desirable that we should refresh our memories as to the exact position of the country in certain respects, before we come to consider questions of taxation or inflation. I am going to quote a few figures, which will show your Lordships how the position stands. Before the August import cuts, we were importing at a rate of £1,700,000,000 a year and the overall deficit of our balance of payments was then estimated at £600,000,000 a year. I think it was the Prime Minister who in August proposed cuts of £228,000,000, of which £200,000,000 came from the dollar areas. That reduced the deficit to £372,000,000. Sir Stafford Cripps, as Minister for Economic Affairs, made further cuts of dollar imports of £121,000,000. The two cuts in dollar imports together amounted to £321,000,000, while the total import cuts, including that figure, came to £349,000,000.
I think your Lordships will agree that these are tremendous figures. We are proposing to cut £1,000,000 a day in our imports from the dollar areas and something added from the non-dollar areas. We have not yet felt their effect, but it must be very great in reducing the goods available for purchase. The cuts are justified, because we are living in a great and extreme crisis. As a result of all this, and if our exports are increased, as the present Chancellor of the Exchequer hopes, to 164 per cent. of what they were before the war, then our dollar deficit, which is in fact our deficit with the whole Western hemisphere, will, at the end of 1948, still be running at £250,000,000, or a billion dollars per annum, while during the actual year 1948 it is estimated, I believe, to amount to £300,000,000. Our reserves, Sir Stafford Cripps estimated, would at the end of 1948 amount to only £270,000,000. What our over-all deficit is estimated to be I do not think anybody has told us, but from something Sir Stafford Cripps said I imagine that it may have been expected that we should have a surplus with the non-dollar countries equal to something like our deficit with the dollar countries, so that the over-all deficit would then be nil. I must say, if we do arrive at that situation, that
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I consider the country will have made a tremendous effort.
I have two comments to make, however, on the figures that I have just given. While it was estimated that our reserves will be £270,000,000 at the end of 1948, they are now still flowing out at a rate which would, I think, reduce that figure a very great deal. During the last three months we have been selling gold and dollars at the rate of £800,000,000 a year—a rate described, I think, by the late Chancellor of the Exchequer as "a ruinous rate," and certainly a rate that could not possibly be allowed to continue. Our import cuts, of course, are not yet effective, nor have we felt the beneficial result of any great increase in exports. Nevertheless, it is quite clear that steps have to be taken to reduce to a much smaller figure the flow of our reserves. We might perhaps have considered whether it would not be well to join France and Italy in getting some interim aid, if we could, from the United States, because we have to remember that once these gold and dollar reserves diminish, the losses, so far as we can see, are irrecoverable by cur own efforts. Before we can add to them at all, we must have a surplus on cur balance of payments, and that seems to me to be a long way off.
The second comment I would make is that the present Chancellor of the Exchequer's figures give the appearance of a large surplus with the non-dollar countries, and, therefore, it seems to me (although I may be wrong) that we shall have to limit the amount of unrequited exports we make—that is, exports in return for which we receive only unconvertible currency. They are a dead loss to us for the time being, and it may be that the labour and the materials put into unrequited exports could be much better used in this country towards supplying some of our own requirements. I realize the difficulty of the Chancellor of the Exchequer in deciding between doing too much and doing too little. Such exports would no doubt be very valuable to the countries to which they go, and it is extremely important to us that those countries should become more prosperous. But, if there should be many of them, it would strain us too greatly.
That being the general situation, I should like to draw certain conclusions. The first conclusion I chaw is that the

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dollar deficit is by far the most fundamental of our difficulties. Whatever Government were in power, no early or complete solution is possible. We cannot, in fact, solve that particular problem by our own efforts alone. Like other European countries, we are inevitably dependent at present on the Western hemisphere, for the reasons given so admirably in the Paris Report of the Committee presided over by Sir Oliver Franks. Those reasons, which no doubt your Lordships know, are, broadly, that while before the war Europe had a big deficit with the United States and the whole Western hemisphere she filled that gap by multilateral or triangular trade, through large exports to other countries, who in turn exported to the United States. That is now impossible. Europe does not possess the goods. Other European countries besides ourselves have lost great amounts of invisible exports. Moreover, the Far East does not now send enough dollar-producing goods to the United States, and that particular triangular trade is impossible. For the time being, therefore, there seems to be no means of filling the dollar gap.
The second conclusion at which I arrive (though here I do not intend to follow my noble and learned friend Viscount Simon at too great a length in criticism of the Government) is that if there had been less delay in putting into force the measures that are now being put into force we should be better off than we are, and our reserves might not be in so great a danger. I believe that if many members of the Government would try to recapture the frame of mind in which they were living eighteen months ago, they would be surprised at the difference it would show from what they are thinking now. It is perfectly true that a great many things have happened since which have brought the true position more vividly before people's minds. It is true, as the noble and learned Viscount, Lord Simon, pointed out, that the American Loan—for whatever reasons—has lasted a shorter time than was anticipated; the international situation is worse; prices have greatly increased; and the dollar scarcity has now revealed itself much more clearly. Nevertheless, my own view is that, even eighteen months or two years ago, everyone could and should have seen that we
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were floating down to Niagara Falls—as we are still doing.
In my opinion, the trouble was that the American Loan made the water seem so smooth, and the scenery so beautiful, that some members of the Government—perhaps it is not going too far to say this—thought it more pleasant to row us towards the Falls rather than away from them. I am referring particularly to what I think was a serious mistake, the very cheap money policy, and the fact that in 1946, at a time when, as we now see, it was vitally important to stop inflation, the deposits of our big joint stock banks were allowed to increase by over £800,000,000, adding greatly to the inflationary danger before the country. However, I do not wish to dwell on that side of the question. I am confident myself that the present Chancellor of the Exchequer is pursuing, and will pursue with energy, all means of remedying our present situation.
My third conclusion is that, even if we get Marshall aid, we must not relax any of our efforts to solve our problems, and particularly our dollar problem. This is vital if we are ever to be independent of other countries. But that depends, as I have said, not only upon our own efforts, but on the general recovery of production in the rest of the world, and particularly in Europe and the Far East. Unfortunately, too, it depends more than anything else on the return of peace and confidence in the world, and it is quite possible that Russia might render impossible everything we want to do. But we can still do much ourselves. We can substitute other trade for our dollar trade; we can increase our exports to the dollar area—particularly, for instance, to Canada and the Argentine—and we can produce more ourselves. Our trouble is that so many countries, not having confidence in sterling, demand dollars. If they had more confidence in sterling, or if we could send them more exports, they would not demand dollars, and we should not have so great a dependence upon the help from the United States as we now have.
We should also support the European organization which the United States Government are anxious that we should create in response to aid under the Marshall Plan. The Americans, to my mind, are too optimistic in what they

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think we can do in the direction of a United Europe or a Customs Union. But there is much to be done, I feel sure, in co-operation with the European countries; and possibly much to be done, particularly, in the development of cooperative measures in connexion with the production of steel, fertilizers and other industrial products. No doubt we should be able to take such measures without raising from the United States criticism that we are forming European cartels or monopolies. As your Lordships know, no word creates more hostile feelings in the American mind than the word "cartel." Still more important is it, of course, that we should not relax our own internal measures. We forget, perhaps, that all we have now in the way of resources—except for quite a small income from abroad—are our own labour, our own skill and our own plant and materials. The right use of them is vital, and we cannot afford to squander any of them upon unessential uses.
It is this question of the right use of our resources which brings me to the Finance Bill. As I understand it—and I hope my noble friend Lord Pakenham will agree—the purpose of the Finance Bill is to see that our resources are rightly used, following the closing of the inflationary gap, which is being so greatly enlarged by our import outs and by our export increases. For, of course, both the export increases and the import cuts reduce the amount of goods in this country. Purchasing power, if left as it is, will then produce inflation to a greater extent than before, and my understanding clearly was that the Government considered it desirable, and did intend, to mop up purchasing power in this country, so far as they could, in order to prevent inflationary results ensuing. The measures which the Government have taken are, in the main, the taxation of roughly £200,000,000 proposed by Dr. Dalton and the capital expenditure cuts of £180,000,000 proposed by Sir Stafford Cripps. Personally, I can only approve these plans, although I greatly regret the necessity. They are necessary because our capital expenditure and our consumption expenditure are together much too large for our resources. Nevertheless, until we know more about the Marshall Plan, and whether we are actually going to receive aid, we can hardly determine
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whether all these plans will be satisfactory; many of them, it seems to me, will have to be reconsidered—certainly the capital expenditure cuts, or some of them—according to how we propose to use any Marshall aid we may obtain.
I would like to repeat what I think I said in this House on the last occasion I spoke. I regard capital expenditure on the modernization of our industry as having an A1 priority, because in my view the standard of life of our people depends upon the efficiency of our plants compared with the efficiency of plants of other nations. We have to remember that Western Germany, for instance, is in exactly the same economic position as we are. If her standard of life is to be allowed to go up, she will be an immense competitor of ours in the future, and we have to see that we are as efficient as our competitors.
Finally, I would say a few words on the vexed question of food subsidies, to which the noble Lord, Lord Pakenham, did not refer, and which both Chancellors of the Exchequer, past and present, have deeded against. If I advocate a reduction of the food subsidies, it is for the reason which actuates those who oppose such a reduction—namely, with the object of improving the general welfare of the community and increasing production, out of which alone can come a higher standard for the wage earners. I realize to the full the importance of stable prices in order to keep stable wages, and that too much of an immediate reduction might bring dangers. Nevertheless, this enormous burden of the food subsidies must be reduced some day. It is a burden which amounts to as much as four-fifths of the service of the total National Debt.
LORD AMWELL: Would the noble Lord allow me to ask one question, which seems to me rather important? If the noble Lord uses the argument that the reduction of food subsidies is necessary because of their proportionate amount, why should we not use the same argument with regard, say. to education, where the State takes the whole of the responsibility, and not to nutrition?
LORD BRAND: That raises big questions. Of course, you can decide to run vour economy by subsidizing the consumer in every direction so that in the end the consumer pays nothing and the taxpayer pays everything.
LORD AMWELL: They are the same person.
LORD BRAND: That may be a desirable thing to do, but I think it would be a monstrous form of economy and quite unworkable. I was going on to another objection which I have to the food subsidies. They hide from us our real position. Nobody knows what are our real costs in this country. We cannot tell what is the real cost of exports because we do not know. One of our main costs is subsidized. We introduced subsidies during the war for the purpose of maintaining, in a highly critical moment, the stability of our economy and stability of wages. But nobody had any idea that food subsidies would ever reach anything like the figure they have now reached. Even the late Chancellor of the Exchequer, who obviously greatly dislikes the thought of reducing food subsidies, came to the conclusion that they could not possibly be increased. He came to that conclusion in his Budget speech. Therefore, there is no principle in question. The question is how far we can go.
My own view is that, the sooner we begin to reduce food subsidies, the better it will be for all classes of the community. Those who oppose that idea, I think, are animated by the feeling that it is the State or the well-to-do part of the population who are subsidizing the wage earner. But that is not so. The taxpayers as a whole are subsidizing the wage earners; thus the wage earner is partly subsidizing himself. When the Chancellor of the Exchequer proposes an increase in the Purchase Tax amounting to a very large sum, probably half of which, and possibly more, is paid by the wage earners, nobody objects—at least, nobody objects in principle. We know that in the circumstances that increased taxation is necessary. But there is some sort of complex about food subsidies. There is a feeling, perhaps, that it is not the wage earners who are paying, partly at any rate, for themselves; it is that the State is paying for them; and that the State is something to which they do not have to contribute.
LORD PAKENHAM: If the noble Lord will allow me, may I ask whether he would care to indicate the order of magnitude of the cuts in the food subsidies which he proposes?
LORD BRAND: I should find it very difficult to do. The Government would
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have had to increase food subsidies this year, because of prices, but for the pledge which the Chancellor of the Exchequer gave that they would not be increased. What you could start with I could not say— £50,000,000 perhaps in the first year; I am making a shot in the dark. I do not know, for instance, what is the figure that, had it not been decided not to increase the food subsidies, the Government would have added to them this year. But the Government have decided not to increase the food subsidies because, as the Chancellor of the Exchequer said, one can have too much of a good thing—
LORD PAKENHAM: You count that to us for righteousness?
LORD BRAND: Yes. If we had a normal economy working, without food subsidies—which we have never had before this war; we may have had in the last war; I forget—the Government would never think of introducing food subsidies. They would try to see that the wage earner received the highest rate of wage he could get in relation to the economy of the country and the necessities of production and so on—
LORD AMWELL: Why not apply that to both education and medicine?
LORD BRAND: One difference is that one comes into the cost of production and everything that is produced, and the other does not. If one were to follow that argument it would lead one to ask: Why not subsidize everything? When a man buys a suit of clothes, why not subsidize that? Perhaps they do in some countries. An American friend of mine told me recently that he went into a chemist's shop in New Zealand and bought some tooth paste. The man behind the counter said, "Why do you pay for it? You have only to go to a doctor and he will give you a certificate and you can get the tooth paste free." Apparently, anything to do with health—and tooth paste is so regarded—can be obtained free. You may develop that kind of economy if you like; but I think you will find that the taxation will be such that enterprise and initiative will be greatly damaged. You would not be able to compete with other countries, because the charges upon your industry would be so great that you would be out of the running.

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My own view is that, in meeting the inflation problem, you can adopt various methods. You can use the taxation method, or you can employ the method of a forced loan, as the Russians have just done, to reduce purchasing power; or you can reduce food subsidies so as to mop up a certain amount of purchasing power. I was much struck by the figures which Mr. Robert Boothby quoted the other day showing that while there were certain main foodstuffs on which the consumer's expenditure was £500,000,000, the expenditure on alcohol, tobacco and entertainment was £1,500,000,000. My own view is that not a single pound's worth less of food would be bought if the food subsidies were reduced. Allowances would certainly have to be made for hard cases, as has been proposed. That we must reach a time when we have a normal economy and can do away with food subsidies, I have no doubt whatever.
I consider that the reduction of food subsidies is necessary if we are to return to a normal working economy. That we should do so is, to my mind, of the greatest importance. So long as we have great shortages of materials, so long as we have an unfavourable balance of payments, we are bound to have many controls and all sorts of interferences with enterprise. That cannot be avoided. But I would appeal to the Chancellor of the Exchequer to allow as much of a free working economy as is possible in the circumstances. To move in that direction will be not only to the advantage of industry but greatly to the advantage of the whole community, and particularly of the wage earning classes.
5.48 p.m.
LORD HAWKE: My Lords, your Lordships' House is a House of great experts. We have heard in succession three of the greatest experts on their particular topics; but inevitably in the affairs of men there creeps in the inexorable law of averages! I shall not detain your Lordships for more than a few minutes. I have a certain distrust of figures. When I know how figures are prepared and compiled I usually find that their proper interpretation takes me a long way from their face value. When I see the economists purporting to tell us there is too much spending power I believe they may approach near the mark; similarly, when they tell us how many goods are available. But
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when they attempt to estimate the amount of services available, I must say that they strain my credulity. Whenever I go to a cinema and see empty seats, whenever I see a train thundering past with empty seats, I wonder if these have been reckoned as services. I wonder also why there are these empty seats in an economy which is supposed to be bulging with money and abounding in goods and services.
There is a school of thought which swallows the figures I have mentioned, does a subtraction sum and then says that so much extra taxation must be piled on the luckless taxpayer that he has no money left available to chase goods. Quite apart from whether if is possible to arrive at what is the surplus money (and this I question), I submit that the removal of it by taxation in this way is both futile and inhuman. First, as to its futility, I would point out that so long as some of the major needs of life are in short supply, surely money will continue to chase those major needs. Money will desert its other pursuits and chase them. If you removed so much money that; that did not take place, there would be no money left to pay for the primary expenses of life.
On the question of inhumanity, it seems to me that the aim of the theorists is to remove from everybody's pockets any money above that needed to maintain the individual taxpayer at some agreed standard of life. How this can be done by any system of taxation operated in a civilized country beats me. The only analogy that I can think of is that of the Oriental moneylender whose rapacity is tempered exactly to the circumstances of each of his clients, whose debt is always far beyond his capacity to pay. That is the only method which can exactly draw from every taxpayer the surplus money in his possession. Surely Parliament and its instrument, the Inland Revenue, cannot make such ad hoc distinctions between man and man? They must treat humanity as falling broadly into certain classes of taxpayers. Under the existing system, therefore, if you draw off from the whole body of taxpayers the amount of money which you calculate to be surplus over the whole, you are bound to be overdrawing from some and under-drawing from others. The cash of those from whom you underdraw will go on merrily chasing the goods, while those from whom you overdraw will suffer in

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that degree of silence appropriate to their position in the new order.
Consider some of the inevitable anomalies of direct taxation. The Inland Revenue reckon the cost of keeping a wife at nine-twentieths of £70— £31 10s. 0d.; they reckon the cost of keeping a child at nine-twentieths of £60— £27. In addition, there is a family allowance of £13. This—unkindest cut of all—is subject to tax. If I may digress for a minute, may I hope that the obvious interest of the noble Lord, Lord Pakenham, in this subject will not inhibit him from raising with his colleague, the Chancellor of the Exchequer, this matter, which rankles very much with many people. It is clear that the tax allowances for family commitments are far less than the cost of those commitments, and so even to-day purchasing power is being drawn off proportionately in a far greater ratio from the man with commitments than from the man with no commitments. When one turns to indirect taxation, the same anomaly applies. The unit of several persons, the family, requires to consume far more taxed articles than does the single person. If the views of the "mop it up by taxation" school are to prevail—I myself disagree profoundly with them—then the incidence of taxation will have to receive much consideration in order that those with commitments do not suffer grievously while those without commitments have their purchasing power left comparatively uncurbed.
Surely the proper destination for such surplus spending power as there is, is savings. Savings have been very bad this last year, for two reasons. In the first place, those who have the saving habit have not had the cash to save; and secondly, the former Chancellor's disastrous "cheaper money" campaign made goods more attractive than bonds. The Government must try to reverse those processes. They must try to produce an atmosphere of thought which believes that the purchasing power of money will increase and that the price of goods will go down. Furthermore, they must pay a rate of interest which, after deduction of tax, will encourage the formation of capital with a view to a man's saving for his ultimate retirement. Before now, I have suggested to His Majesty's Government that it seemed anomalous that two of
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the greatest needs of the State to-day, housing and savings, could not be linked together. I think those words fell on deaf ears at the time, but I do hope that this time some consideration may be given to them.
5.58 p.m.
LORD BROUGHSHANE: My Lords, as your Lordships may be aware, I have for some time been endeavouring to ascertain what was the statutory authority which enabled Purchase Tax to be levied on goods which had been purchased and paid for before the tax was imposed, but which, for one reason or another, had not been actually collected. May I say that this is not a Party question in any sense of the word. In fact, it was suggested to me by a member of the Government that I was something of a Bolshevik in desiring to stir up a matter that had been generally accepted as right and proper by all Parties. I think that that is a very good reason why it should be stirred up, to find out whether it is right or not. I personally think that it is all wrong and that it needs looking into.
On Tuesday, I asked the Government to inform me what was their statutory authority for the levying of this tax—tax charged on goods purchased and paid for prior to the imposition of the tax and awaiting delivery to the purchasers. Naturally, I expected a short and concise reply. I had not in mind at the moment what the noble Lord, Lord Hawke, has just indicated, that figures are often misleading and confusing. An old friend of mine used to say that, with the exception of facts, nothing is so misleading as figures. If your Lordships will bear with me, I will read you the reply to a very simple question in relation to what was the statutory authority for putting Purchase Tax on goods which had been purchased and the property in which had gone to the purchaser, so that the purchaser could sue the person if he did not get the goods. This was the reply, the clarity of which perhaps your Lordships will appreciate better than I can. Lord Pakenham said in reply to my question:
"When Purchase Tax is imposed, or the rate of tax is altered, on any class of goods, the relative Finance Bill provides, as on the present occasion, that the new tax or the new rate of tax, as the case may be, shall apply if the goods are delivered under a chargeable

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purchase on or after the operative date of the change, notwithstanding that the purchase may have been made before that date. Section 20 (3) of the Finance (No. 2) Act, 1940, provides in similar terms in cases where the tax is imposed or the rate changed by Treasury Order made under that section."
Well, that may be clear to your Lordships. I think you can make something out of it, but it is not the simple reply that I expected, and I am at a loss to understand why I should not have received a reply as to why Purchase Tax can be levied on goods which have ceased to belong to the vendor and have become the property of the purchaser. Your Lordships will remember that the transaction which I have indicated was at an end; the purchase had been completed before the tax was imposed. The fact that the goods may or may not have been actually collected or delivered is, I submit, quite immaterial. The purchase was completed before the tax was imposed. Possibly the goods may have been sold to a second, third or even a fourth person. Is that tax to be followed to such second, third, or fourth person? That appears to be a most improper suggestion. Altogether the argument seems to me quite fantastic. I submit to your Lordships that the only question to be decided is: Was the transfer of the ownership in the goods completed before the tax was imposed or not? If it was completed, then the person who purchased the goods clearly is not liable to a tax which was not the law when he became the owner, whether the goods were actually delivered to him or not.
LORD PAKENHAM: Before the noble Lord sits down, could be tell us whether he is still questioning the legal validity of the present process, or is raising a moral or political issue?
LORD BROUGHSHANE: I am raising both the legal and the moral aspect. I think that it is a travesty to say that you can levy Purchase Tax on goods the property in which has passed to a purchaser, so that they belong to him and if he does not get them he can sue for them.
LORD PAKENHAM: My Lords, without further consultation I am not able to deliver legal views to the noble Lord. So far as I know, he is not learned in the law, and neither am I. On the strength of the learned advice tendered to me, I gave him a very carefully drawn up reply
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on the legal aspects of the matter, and I have no reason to think that the noble Lord is capable of improving on it. As he has challenged the legal validity of the answer he received, I will certainly look into the matter again, in the course of the next hour or two perhaps, and see whether I can put the legal case for the procedure that is now being followed in a way that will make sense to the noble Lord and will finally convince him.
LORD BROUGHSHANE: The public are certainly greatly concerned in this matter.
LORD PAKENHAM: Well, they are not worrying me about it yet, and that is usually a very good sign.
My Lords, I am entirely in the hands of the House, but I will try to cut short these transitional remarks and leave to the end any attempt to wind up the debate. It is important, I think, for those who wish to take part in the debate further, that certain things should be laid before them, and I suppose as a matter of correct procedure I should now move the conclusion of the Second Reading.
VISCOUNT SIMON: I can claim no greater authority, of course, than the noble Lord. I was thinking only of the hour and of the fact that there are noble Lords who want to take part in the debate, whether on the Second Reading or the Third Reading. So far as I am concerned, I am perfectly content if he wishes to take the Second Reading now, so that he may then make his Third Reading statement and add anything else he wants to say. But it is purely for the purpose of saving time.
VISCOUNT SAMUEL: I understood the suggestion was that we should deal with the important points raised by my noble friend, Lord Simon, and other speeches that have been made, on the Second Reading debate, and that the Government spokesman would reply on those points, and on those points only; then that the House should pass the Second Reading formally without a Division, and immediately afterwards we should pass over the Committee and Report stages and the noble Lord should deliver his other speech, beginning with the statement from Sir Stafford Cripps which has been made to the other place and with such elaboration as he thinks it requires. My noble friend, Lord Rennell, and others

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will follow, and the debate to-day will, therefore, divide itself into two parts, one dealing with matters that have been reached already, and the other relating to the speech of the Chancellor of the Exchequer.
LORD PAKENHAM: The only difficulty about that is that I shall inflict myself on the House on three more occasions. I think, if I may say so, that I would be right in asking the House to allow me to reply to the debate later. Would it be permissible to ask that the Bill be now read a Second time and go through Committee, and then to offer some observations in reply to the noble Lords who have spoken and to bring forward certain matters that are being dealt with by Sir Stafford Cripps?
Viscount SIMON: I think that would be all right.
On Question, Bill read 2a; Committee negatived.
Then, Standing Order No. XXXIX having been suspended (pursuant to the Resolution of December 16):
6.9 p.m.
LORD PAKENHAM: My Lords, I rise to move that this Bill be now read a third time. I would like to lay before you without more ado certain information, not of a very sensational kind, which is being placed before the other place by the Chancellor of the Exchequer this afternoon. First of all, a word about our reserves which, of course, are not only the reserves of the United Kingdom but the final reserves of the sterling area. At the end of this year we expect that they will stand at about the figure of £500,000,000. (I hope noble Lords will stop me if I tend to go too fast.) This is after bringing into account the first 100,000,000 dollars (the first £25,000,000) of the remaining United States credit, and the remainder of the gold we shall obtain from South Africa under the existing gold contract.
At the beginning of 1948 we shall have available to us in addition £75,000,000 representing the rest of the United States credit, and £70,000,000 being the approximate amount of the undrawn part of the Canadian credit. We also hope to receive in January, £80,000,000 of gold—the gold loan from South Africa. These items amount together to £225,000,000
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which will come to be added to the £500,000,000. We cannot expect any other accruals to these reserves for at least the first part of 1948, though when Marshall aid becomes effective, as we hope it will, we shall hope to have a reduction in the drain on us for dollars. Against this we have external liabilities of £5,300,000,000, out of which £3,550,000,000 represents the sterling balances accumulated by our creditors during the war and as a direct result of the war. Another £855,000,000 represents existing liabilities in respect of the United States credit and £235,000,000 the liabilities on the Canadian credit.
Noble Lords may further be interested to have a few figures about the rate of the drain on our reserves since the suspension of convertibility on August 20. In the four weeks ended September 20, the weekly drain averaged more than 90,000,000 dollars. In the following four weeks, ended October 15, it fell to a figure of about 65,000,000 dollars. Since then it has run at the rate of rather less than 55,000,000 dollars a week. There has been a drop, therefore, from 90,000,000 dollars a week in the period ended September 20 to 55,000,000 dollars a week at the present time. That can be compared roughly, but not quite exactly—I expect the purists will know what I have in mind—with the figure of 77,000,000 dollars a week for the period from January 1 to June 30 of this year, with the figure of 115,000,000 dollars a week from July 1 to the middle of August, and of 237,000,000 dollars in the last week before the suspension of convertibility. At that time 237,000,000 dollars ran away from us, while in the present weeks the drain has been at the rate of 55,000,000 dollars.
Viscount SIMON: In the figures which you are giving you speak of so many million dollars a week. I take it that they are really dollars which are equivalent to that amount of sterling.
LORD PAKENHAM: No, it is the drain in dollars. It is measured in dollars and it represents the loss of ultimate reserves.
LORD RENNELL: May I ask if that is the drain for all purposes—for domestic purposes and for sterling area countries?
LORD PAKENHAM: Yes, I was coming to that: Perhaps you will allow

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me to put it in the way in which I have it drawn up, but the answer is "Yes" There is, as I said, a small difference in the basis of comparison as between the later period since we moved away from convertibility and the period before that. The two outstanding points are that the rate of drain has diminished sharply during the last few weeks, but that it is still far too high. At the present rate, which, of course, cannot be allowed to continue, the total drain would be over £700,000,000 a year, of which about two-thirds would come from United Kingdom requirements and about one-third from the rest of the sterling area.
My right honourable friend, the Chancellor of the Exchequer, is dealing in another place at considerable length with the various efforts we are making and with the various fronts on which we are attacking the problem. I will, in order to try to put the effort of the country in some perspective to this House, refer only to the productive effort which is being made by the British people. The House will have read the pretty full statement which was made yesterday by the Minister of Fuel and Power. He said that an export of 10,000,000 tons of coal next year is already envisaged, and we hope that when the winter difficulties are over we shall be able to improve on that figure. The rise in the output of coal so far is almost entirely the result of the efforts of the miners themselves. We have in mind, as is well known, a very big programme of reconstruction and mechanization, the effects of which have scarcely begun to show as yet. It is necessary that many cautionary words should be said, but the solid facts at this moment drawn from the coal industry are distinctly encouraging. During the last few weeks extra hours of work have been almost universally in operation.
Taking coal output as a whole—and I would like to stress these figures among other;; which, though interesting, are not quite so cardinal—we have produced over 2,000,000 tons more coal in the first six weeks of this winter than we did during the corresponding period of last year. Noble Lords who are experts in the coal industry know that in that industry the winter begins on November 1. As I say, during the first six weeks of this winter we have produced 2,000,000 tons more
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coal than in the same period last year. Last week's output (they call it a "bull week" output, if I may use that term in your Lordships' House) of 4,366,000 tons was the highest since the week ended August 17,1940. So at last we are getting somewhere in the coal industry, and all credit is due to the miners for it.
In paying our tribute to the miners, however, we should certainly not forget the splendid efforts which have been made to speed up the turn round of railway wagons. I know that the records which have been achieved in this connexion will appeal very strongly to the noble Lord, Lord Walkden, and other noble Lords who are keenly interested in railways. The amount of coal production lost last week through wagon shortage was negligible. In the corresponding week of 1946 it was 103,470 tons. And this is despite the fact that more coal has had to be lifted and the total number of wagons available have been less. In steel, too, we have been doing exceedingly well, and I have no doubt that we shall continue to do so provided that we can keep up the necessary flow of scrap and pig iron. In both of these materials we are running on a very narrow margin, and I cannot emphasize too strongly the most urgent necessity that exists for every factory and workshop to mobilize its scrap without delay.
In textiles—and I know that this will interest the House particularly, because in earlier debates allusion has been made on many occasions to the textile industry and the need for a big effort there—we can report a really encouraging increase. For a long time output remained almost stationary, but now at last we have a quickening response to our situation, as the figures show. The number of persons employed in the textile industry at the end of June this year was 756,900. By November the figure had risen to 784,800, an increase of 28,000. The weekly average output of cotton yarns was 12,560,000 pounds at the end of June, but it had risen to 14,730,000 by November. That was the position with regard to cotton yarn. The output of woven wool fabrics was 20,000,000 yards in June and had risen to 23,870,000 by November. Members will wish to study these figures in HANSARD, but I think that, given quite rapidly, they enable the general trend to be seen.
VISCOUNT SIMON: Do the figures of operatives include part-time workers on a basis of two workers to one in the statistics?
LORD PAKENHAM: I will deal with that in one of my later speeches.
In engineering we have had an ever-rising output, checked from time to time by material shortages, but a revision of the investment programme will bring relief here. I would illustrate this with some further figures. In June of this year we turned out 56 main line locomotives; by October this number had risen to 76. The output of railway wagons, which stood at 2,962, rose to 4,119 by October. The value of the June production of internal combustion engines was £1,618,000; by October it had risen to £2,177,000. The corresponding figures for hosiery machinery show an increase from £235,000 to £363,000, a particularly good step forward. Agricultural machinery also, in which we have the foundations of an important new export industry, is being turned out in increasing quantities. To take agricultural tractors as an example, 8,308 were produced in the first quarter of this year and by the third quarter this had risen to 14,318. I would ask you not to express an opinion on those figures without study and reflection. But Britain is looking up and moving forward, and I do feel that we are entitled to go away for Christmas happier in many ways when we survey the economic situation than we were when we went away, or tried to get away, or failed to get away, for our summer holidays.
I turn to some of the points raised by previous speakers. The noble and learned Viscount, Lord Simon, has been so kind to me in many ways since I became a member of this House that I hesitate to reply to him as violently as my passions incline me to do. He once gave me an excellent piece of advice about how to conduct myself in this House. Among other things, be laid down that I should try and proceed with minimum irritation to all concerned, and I hope he will not be unduly irritated if I tell him straight out that his speech was a terrible speech. It shocked me—shocked me profoundly. It was so unhelpful, so unlike the noble Viscount. It dealt with the past, which has already been threshed out several times in this House, and I can only beg him next time we return to this matter
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to bring his formidable talents to bear on the situation now confronting us and give us the advantage of constructive advice for the future. The noble Lord, Lord Brand, joined with the noble Viscount in passing strictures on the manner in which the finances of this country have been administered in the past, but, if I understood him aright, he passed a fairly complete and wholehearted vote of confidence on the way in which they are now being handled by Sir Stafford Cripps. I am grateful to him for what he said. I hope the noble Viscount joins with him in his vote of confidence.
Viscount SIMON: I shall want to know about it.
LORD PAKENHAM: I had felt sure that the noble Viscount, in embarking on this question of great moment and speaking with all the authority of the Opposition, would have instructed himself fully on the existing situation, and I am sorry to think that he did not feel able to pass any vote of confidence or offer any comment on the way in which the finances are being administered.
Viscount SIMON: Is there a great change?
LORD PAKENHAM: I was not aware of a great change, but the noble Lord, Lord Brand, detected one. Those who think there is a change and draw encouragement from that, may draw encouragement.
LORD BRAND: May I interrupt for a moment? I do not know whether you limit finance to its narrower sense. I was talking about the general economic programme which the present Chancellor of the Exchequer intends to put into force. I do not know if he has so much as adumbrated the financial side. I hope that, in addition to the physical measures, he will use the financial weapon more than it has been used in the past. But I am in full agreement with his general economic efforts to get the country out of its troubles, and I think he deserves the help from the community which I feel sure he will get.
LORD PAKENHAM: After that very handsome tribute I am sure he will get help not only from Lord Brand but from the noble Viscount, who, at an earlier stage, informed us, if I do not exaggerate,

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that he was as a child in these matters compared with the noble Lord, Lord Brand. So I am sure he will be prepared to follow Lord Brand in what he has just said. We can go forward without worrying too much about the past, secure in the knowledge that the noble Lord, Lord Brand, who is regarded by the Opposition (and it is not for me to deny the claim) as the leading financial pundit in this House, is confident that we shall manage the affairs of the country well, at any rate in the financial and economic fields.
The Marquess of SALISBURY: He said he would give his good will.
LORD PAKENHAM: I think that when the words are studied they will be found to be the words the Chancellor of the Exchequer would like to read. If a Division were to be taken now on the economic and financial administration of this country, we should expect to have the noble Lord with us in the Lobby—and, of course, the noble Viscount, Lord Simon. There was perhaps one point on which the noble Lord did not carry all of us with him so completely—the point on food subsidies—but even there I do not think we have much to disagree with him about except when he suggested that there should be a cut of the order of £50,000,000 in the year ahead. He seemed to feel we had taken the right step in freezing subsidies where they are, and he hoped that some cut would come in 1948. As to that, I cannot make any promises. I am not in a position to do so, and if I were I should not be able to say everything that would be in my mind.
LORD BRAND: I did not go quite so far as that. I did not say you were right in not reducing the subsidies this year. I pointed out that you have accepted the principle that the subsidies should not be allowed to increase in the same way as before. I should have liked to see them reduced, but we shall do better to hold them where they are than to increase them.
LORD PAKENHAM: The noble Lord has not gone quite so far in giving his confidence in that matter as in some others, but I do not see anything violently to object to in what he has said. On subsidies, I rather hope I may draw the noble and learned Viscount along with
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us. I suggest that this is the kind of reasoning which would very much appeal to him. "We all know that if subsidies were withdrawn there would be a serious danger of a substantial rise in food prices, and that might well induce further wage demands. Very few would feel that the remedy of compulsory wages was desirable or practicable, and by raising food prices it is intended that the main mass of the people should have less money to spend on less necessary articles. Then there is the question of whether it is right or necessary at this juncture to oppress the consumer still further. The consumer has had much to bear during the last eight years. It is all very well to be scornful of his amusements as trumpery, but some relaxation is needed. We talk of incentive, but what incentive would be available if there was nothing to buy with the extra wages?" All this reasoning should commend itself to the noble Viscount. If I am asked why that is so, I would say that it flows from that great economist—a friend of many of us—who is quoted with much deference in your Lordships' House, and who has been referred to eulogistically this afternoon. I refer, of course, to Mr. Harrod. Mr. Harrod is a gentleman who is frequently invoked in this House, but if he is, invoked in one direction he should certainly be invoked in other directions, and he is against the suggested cuts in food subsidies.
Viscount SIMON: I hesitate to interrupt the noble Lord, but I referred to Mr. Harrod because he had asked a very pertinent question. I was hoping—not necessarily now, but at some time—that the question might be answered. The question was: Where did all the American Loan go to in the months of July and August?
LORD PAKENHAM: I am coming to that point in a moment. Meanwhile, I will just point out to the noble Viscount, and to other noble Lords on the Benches opposite, that Mr. Harrod, who is, as I say, a very old friend of many of us, and who has been deified by noble Lords on the Liberal Benches in this debate, gives it as his opinion that it would be a great mistake to cut down the food subsidies.
I come now to the question raised by the noble Viscount: Where has the Loan gone? I take leave not to say very much about that to-day for the simple reason

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that I said a great deal about it in our last debate. I talked about it almost interminably, though not at such great length as some speakers in another place. One Government speaker held the attention of the other place for two hours on this very subject. Therefore, unless the noble Viscount asks me to go into the matter in detail again, I would refer him to the volumes of Hansard. I will not say more at this stage, except to throw myself open once again to any ether points that may be raised. If it is felt that things that have been said already have been cursorily treated—obviously one cannot deal with these great issues in so short a time—I will gladly return to them. Meanwhile, I formally move that this Bill be read a third time.
Moved, that the Bill be now read 3a.—(Lord Pakenham.)
LORD HAWKE: May I ask the noble Lord whether he will give some undertaking to bring before his colleague the Chancellor of the Exchequer my two points: first, as to taxation of family allowances, and, secondly, the linking of savings with housing?
LORD PAKENHAM: I will certainly bring both those points to the notice of my right honourable friend. I am sorry not to have mentioned the very interesting speech of the noble Lord. I need hardly say that he pointed out with gentle humour that no one will benefit more than myself from any increase in the family allowances.
6.33 p.m.
LORD RENNELL: My Lords, I thought when I was, as it were, billed to speak in this debate that it was going to be a very difficult debate in which to participate, but the way in which it has developed has made it almost impossible. I have tried to get down a few of the figures which the noble Lord was good enough to give just now. I think I have them down accurately, but if not perhaps the noble Lord will correct me as I go along. Let me start by saying that I do not wish to rake up what has happened in the past, except to this extent. I think it is common property in fact, whatever the noble Lord in his good-humoured and pleasant manner may suggest, that there has been a change of policy, and that that change of policy
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was overdue. There has been a recognition of inflation. In your Lordships' House we have discussed this situation on more than one occasion, and, indeed, the point made by the noble Lord, Lord Brand, about the direct connexion between internal financial policy and our external exchange situation is one which was raised in considerable detail in the earlier part of this year. Those two elements in our financial and economic situation—namely, the internal policy pursued hitherto, which now frankly appears to be undergoing a change, whatever the noble Lord, Lord Pakenham, may say, and the external exchange position in which we find ourselves—are inseparable. That, I think, has come to receive recognition on all sides of the House, and generally in the country, and more especially in quarters which hitherto had not accepted that connexion.
I think it is perhaps germane in this far-flung debate—at least, I hope it is; certainly I think it may be of interest to your Lordships—to refer to a document which came into my hands a little while ago. It is a report on the economic situation in Sweden, where, as your Lordships will recollect, a Socialist Government has been in power, I think, since 1920. There a truth—the recognition of which I think has been accepted by all economists but not politically in this country until now—has been stated which I hope His Majesty's Government will accept as being the inevitable consequences of the situation in which we find ourselves. In this report, addressed by the Central Bank of Sweden to the Swedish Government, the opening sentences refer to the acuteness of the foreign exchange difficulties in that country caused by the increase in domestic purchasing power. In that country that question has received wide political attention. Speaking of the remedies for this situation in restricting imports from dollar countries—and I believe it is as true there as it is here to-day—the report says:
"This limitation of imports"—
that is of dollar imports—
"cannot be compensated by imports of corresponding commodities from Europe"—
that is from other sources—
"and must therefore result in an appreciably lower standard of living as compared to what would have been possible under a multilateral trade system."

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That is precisely the situation in which we find ourselves.
Unless a multilateral trade system can be restored, a lower standard of living here is inevitable; and pending the restoration of that multilateral trade system, a lower standard of living must come upon us. That will take, as I am sure the noble Lord will agree, one or two perfectly obvious forms. One is the reduction which we suffer in the foodstuffs available for consumption. The other is a reduction in the amenities, the services and general standard, due to the cuts in capital expenditure which the Chancellor of the Exchequer has announced and which, for my part, I think are probably only the first instalment, because more will have to come. Those cuts in themselves, I may say in parenthesis, are the overt recognition, in spite of anything which the noble Lord may have said or insinuated, of the fact that capital expenditure has been excessive.. In other words, too much has been done, and we are now quite rightly back-pedalling. But let us face the fact that a lower standard of living, as a result of what has happened here in the last two or three years, is quite inevitable in this country until such time as we can get back to a multilateral trade basis. It is no good blinking the fact.
There is one point in this connexion to which I think it is inevitable that I should refer. For many months in the course of this year, while our foreign exchange situation was deteriorating, and while the inflationary tendency was obvious to everybody concerned, a series of statements was put out that in no circumstances could the standard of feeding in this county be cut down. The only substantial economy which can be made, apart from economy in the administration and feeding of Germany, is in the purchases from dollar countries. That has been obvious. It is so obvious that it really is not worth wasting your Lordships' time referring to it. It has been obvious to everybody in your Lordships' House since the beginning of the year, and I think the noble Lord himself, in the course of our many economic debates, has referred constantly to the difficulties involved in getting dollars to buy imports, including imports of food. It has been commonly accepted.
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Nevertheless, I find—and this is the disquieting thing—that reported in the Press on as late a date as December 5, the Minister of Food is reported as having said that the dollar factor was a new one governing our supplies. He said:
"I think it may not have been completely realized that the character of our food problem has not entirely but has, to a very considerable extent, changed …."
as a result of a dollar shortage. If it has taken from the beginning of this year to December 5 for the Minister of Food to realize that, it is that attitude of mind, that lack of apprehension of the situation which creates in our minds on this side of the House a far greater and graver sense of disquiet than the actual difficult situation in which we find ourselves. I do not want: to go back over similar instances—the noble and learned Viscount, Lord Simon, has quoted a number of them—but this is one so recent and so glaring that I cannot refrain from alluding to it.
The figures which the noble Lord has been good enough to give us, and which have been announced by the Chancellor of the Exchequer in another place, are frankly much more reassuring—I am speaking of the exchange situations—than I had expected them to be. I am sure all your Lordships are profoundly thankful that the situation is not worse but rather better than some of us may have thought. The diminution in volume of the drain in itself is satisfactory, although perhaps nothing like so big as we would have hoped, and probably not as big as the Government would have hoped. But when we have said that, what have we said? We have said that the situation is better because it looks as if our total foreign exchange reserves—including this additional and very grateful contribution from South Africa—produce a sum which at the present rate of outflow will last us in this country, and in the sterling areas as a whole, about one year. I think that is the figure the noble Lord himself mentioned. The present rate of drain is about £700,000,000 a year. The total figures he gave, if I took them down correctly, amounted to £500,000,000 of the surviving reserves, plus £75,000,000 from the United States Loan, plus £70,000,000 from the Canadian Loan and £80,000,000 from South Africa, making £225,000,000, or £725,000,000 altogether.
LORD PAKENHAM: I would not like the noble Lord to push that conclusion too hard and too far, because there are contingent possibilities.
LORD RENNELL: On the figures we have been given the rate of drain is of such size as to enable us to see ahead for one year to the point of exhaustion. I am frankly much more reassured than I was, because I expected the figures to be considerably lower than that. That, at any rate, gives a few months' breathing space in which to continue the obvious satisfactory developments to which the noble Lord also referred—notably, the increase in coal production, the increase in the production of textiles and so on. For those favourable developments I am sure we are all profoundly thankful, and the greatest credit must be given to all those concerned in producing that improvement. But that does not really get us out of the problem in which we are. The appalling figure is that we have enough left on capital account to balance our income and expenditure in foreign exchange for a year, and we have nothing left on capital account to repay anything with. That is the proven fact. What are the remedies for that, or what remedies can be conceived of that situation? It is a situation in which we shall be owing on foreign account— £5,300,000,000?
LORD PAKENHAM: Yes.
LORD RENNELL: And with foreign assets to pay for that at the end of next year, nil.
LORD PAKENHAM: May I interrupt the noble Lord? Of course, there will be remaining overseas investments. I hesitate to mention them because it might give the impression that I thought they would be used for this purpose. But the House should not forget that we have substantial foreign investments.
LORD RENNELL: I appreciate that. If the noble Lord is referring to the reviving dollar investments, the amount is negligible in the face of figures of that size. I do not want to go into details of figures. I do want if possible to ask the noble Lord, when he makes his next speech, if he can give your Lordships any idea of what we do next. He has shown that we can survive. He has shown that we can increase our production, and have increased our production, by so many millions of tons of coal and by so many
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millions of pounds of textiles and yarn. But unless the Chancellor in another place has given it without our knowledge, as yet we have no sort of indication of what the plan is by which we are going to get out of our present situation.
I want to suggest with great diffidence that the plan in that context must be this. We can never get out of this situation on a basis of purely bilateral trade and bilateral agreements between two sets of countries at a time. That way, and the way of controls and tightening up and rationing, ultimately lead down to zero. Everybody is to some extent in this situation in Western Europe, and therefore everybody must be doing very much what we are trying to do. That is very clear from the report to which I have referred. If we all try to do that we all get to a standstill at varying intervals. The policy of restricting bilateral trading must be broken, and must be broken soon, or within a measurable space of time, within a measurable space of months, we shall be inevitably brought to a standstill in which we cannot even get enough food into the country, because we have nothing to send out and other people cannot buy what we have.
The one obvious answer which prima facie seems a fantastic one to put forward is that dollars and sterling have to become interchangeable. Without free interchangeability and freedom to exchange we must be reduced to a standstill. How and on what basis can that be achieved? It is not for me at this late hour to develop that question in detail; but there are, there must be, certain circumstances in which an investment of foreign money in the British Empire is worth while. I do not myself doubt that there is in America more confidence in the ultimate solution to the problems here than many people in this country to-day are prepared to admit. That is a question of ratio. At what point will the United States of America and the people over there consider that an investment in the British Empire is worth while? That turns on two main and major factors. The first one is on the confidence of these people in us as a whole and in the Government of this country. The second thing is perhaps more an economic issue which I do not wish at this late hour to develop. It depends upon the rate and the freedom of transaction.

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There has been put forward in connexion with the Marshall aid plans a number of different methods of approaching this particular problem. It is not for us to discuss what those methods are, because the initiative there lies on the other side of the Atlantic. But I am quite sure that the one main sine qua non in all those schemes is and must be that should British currency, sterling, come into the possession of the United States in one form or another, either through private individuals or publicly, that sterling must be usable by them and not blocked. That is the first step, as I see it, which must precede the breakdown of this crystallization, this icing up of exchanges of goods, people and things that we are witnessing all over Western Europe at the present moment. I wonder whether we are not entitled to expect from His Majesty's Government now or soon some statement or plan, some view which is going to look a little further forward than the few months that are left in 1948 during which we still have enough cash in the till to be able to pay for an ever-diminishing quantity of imports.
6.55 p.m.
VISCOUNT BRUCE OF MELBOURNE: My Lords, I do not propose to deal with the items in the Finance Bill but I do propose to take advantage of the fact that it is a Finance Bill, which allows one to range somewhat far afield. What I desire to do is to deal with some of the broad topics of the situation in which this country now finds itself. In some respects I should almost like to respond to the invitation of the noble Lord, Lord Rennell, who has suggested that the question to be answered is "What do we do next?"; but I am afraid that the Government would prefer to answer that for themselves. At the same time I should be delighted if they would adopt the suggestions that I wish to put to them.
Broadly, the position we are in has been indicated by the statement that at July last there was a deficit in our annual balance of payments of about £600,000,000. That gap has got to be filled; that is obvious. Ways have been discussed. We are told in effect "Reduce your imports and expand your exports." The Government, who are the only people who know, have said that we can reduce imports to a point where if we increase our exports by 60 per cent. we
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shall fill that gap and balance our payments. I do not want to address myself to the question whether we can get the production necessary for that, nor do I want to go into any of the methods by which we might get it. But I want to refer to what I imagine some noble Lords will begin to think is my "King Charles's head", and that is the question: If you did get that production and you could export that amount, where are you going to sell it? While I have dealt with this subject before and do not wish to weary noble Lords by going over the ground again, I should like to remind your Lordships of one or two facts.
Before the war the markets of the world were not sufficient to absorb the products that it was desired to sell in them. The result was that countries adopted quotas, prohibitions, increased tariffs, currency controls—every device they could think of, to protect their own economies. The position cannot be described as very much better to-day. One country after another is adopting a policy of restricting imports, and of course no country more than this country, which was the greatest importer before the war. In face of that situation, you have got a tremendously increased production in the world. In the United States industrial production is up by 100 per cent. in volume of industry since before the war; and the goods that it is desired to place upon the world's markets have tremendously increased. Prior to the war America's average exports were about four billion dollars. This year, 1947, they will probably be something in the region of sixteen billion dollars; and that is not going to disappear. I should like to read to your Lordships what was said by Mr, Dean Acheson in a very wise and illuminating speech two or three months ago:
"When the process of reconversion at home is completed we are going to find ourselves far more dependent upon exports than before the war to maintain levels of business activity to which our economy has become accustomed."
We have got that from America.
Great Britain was one of the biggest exporters before the war. She wants an extra 60 per cent. and personally I believe you must increase that very considerably if you are to maintain the standard of living of the people of this country. And that brings us up against some hard facts. There are not

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the markets in the world for the world's present production. Unless we do something very drastic about it the world is heading inevitably to something considerably worse than the economic and financial crisis of 1929–32.
The first encouraging sign we have had that the necessity for action is recognized, is the very wise, statesmanlike and wide-visioned speech which Mr. Marshall made at Harvard in June of this year, when he put forward his proposals which are now known as the Marshall Plan. That Plan, to my mind, is the first great encouraging sign in the world. I agree that it has not yet passed Congress, but I am absolutely convinced that it is going through Congress, even though it may be modified or altered. If that is going to happen, it would be well if we did a little forward thinking. I do not know whether I misunderstood the noble Lord, Lord Rennell, but I thought he rather implied that it was not our business to say what was to be done under the Marshall Plan. I venture to say, with the limitations which I will indicate in a moment, that it is entirely our business, and it is for us to produce the plans which will convince the American people that we are really getting on with the job of putting ourselves on our feet and getting out of our present troubles.
LORD RENNELL: It has not been suggested that it was not our business to consider the Marshall Plan. What I meant to imply was that I did not think it became us to consider the ways and means of administering the Marshall Plan in so far as sterling was concerned.
VISCOUNT BRUCE OF MELBOURNE: I am very pleased if I did misunderstand the noble Lord, and I apologize if in any way I misrepresented him. As I have said, the Marshall Plan, to me, seems the first really hopeful sign. I have rather gained the impression that what the Marshall Plan means and what its repercussions might be have not yet been even dimly realized. For a few minutes, if I may, I should like to examine exactly what it does mean. The basis of the Marshall Plan, of course, is that generous. aid should be extended to the sixteen European nations that have accepted the Plan, with a view to the rehabilitation of their whole economies and the expansion
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of their production, so that all those countries can play a significant part in the restoration and expansion of the total world economy. That is the object, and everybody has subscribed to that. But I think you have to go a little further and examine exactly how it will work and what the operation of the credits will be.
In order to examine that, it is desirable to take the example of an individual country. The one that I would take would be the United Kingdom, which has subscribed to the Plan. The first point that we must get clear in our minds is that any aid extended under the Marshall Plan is a gift and not a loan. That is fundamentally important because it makes all the difference in the way you handle the dollar credits which you will receive. In order to appreciate the difference, I should like to take a specific example. I will assume that Britain wanted £20,000,000 worth of timber by way of imports for a great housing programme. If the timber were available in America and were shipped here, or if it were purchased with dollars provided out of the Marshall credit, that timber would come into this country and a debit would merely be placed against our account for aid under the Marshall Plan. When the timber comes to this country, we have to remember, that timber is sold to contractors, the individual citizen pays for the timber in the house that is built for him, and then payments in sterling flow back. If the money was part of the Loan, it would flow into the coffers of the Government and the Government would use it for the ordinary purposes of the Government's financing of the country as a whole. But when it is money under the Marshall Plan, it will have to be placed in a special fund and it will have to be employed for the purposes (probably agreed in broad outline with the Americans) of the rehabilitation and the expansion of the internal economy of this country.
That immediately visualizes a vast sterling fund but, in addition, you have also a dollar fund. Now try to consider what the volume of that dollar fund would be. There was a suggestion that twenty-two billion dollars were needed for rehabilitation under the Marshall Plan. Assume for a moment that that is cut down to fifteen billion dollars when it goes through Congress. I have not the shadow of a doubt that Britain's share of

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that fifteen billion dollars, as she is one of the participating countries, would be not less than £400,000,000. I personally believe it would probably be considerably more. Therefore, the position with which we are faced is that we have this vast dollar sum for the purchase of whatever we might need in the nature of raw materials and equipment for the development of this country, without drawing upon our current dollar resources to the extent of even one dollar.
In addition, there is this great sterling fund, that would be built up as the result of payments for these imports when they were put into houses or were sold in any other way, which would be available for capital investment in the sterling area. That, I venture to suggest, opens up a tremendous possibility. With the resources of the dollar credit and the resources of the sterling fund for capital investments, we must have lost our imagination, our powers of construction and our initiative if we cannot from that change the whole economy and financial position of this country and, what is even more important, change the whole outlook of the people towards the future.
May I indicate how I see it working? I have stressed one thing, and that is that the expenditures out of our dollar credit should be in respect of materials. I have purposely omitted mention of food. I consider that the purchases of food under that credit should comprise only such as are necessary to meet our absolutely urgent, vital and inescapable requirements. But, for our eventual salvation, I think we have to follow the hard road. We have got to put up for a further time with austerity; we have got to put up with these unpleasant controls and restrictions which make the daily lives of our people so extraordinarily difficult. We have to do that for a time. Food, however, is the vital requirement and so we have to see how we can get increasing supplies of food. We have got, not directly but indirectly, to use the credits which we are going to obtain for the purpose of expanding food production. I suggest that if the Marshall Plan goes through, the first thing we must do is to get the representatives of British agriculture together. We must ask them what is the maximum which they can produce over, say, five years, and we must tell them to set their target high. Then, I suggest, we have got to
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rake the whole British Empire and Commonwealth to try and see where we can really get a large expansion of food production. That means that we have got to think big and conceive something really worth while. We must get in touch with the Dominions and try to get their fullest co-operation in such plans.
I would that the machinery for Dominions or any British Government consultation was better than it is. As I have a Motion which is just going on the Notice; Paper relating to this subject, I will reserve anything I have to say upon it till later. But on the Colonial side I would suggest that you have got to use this new board, the Colonial Development Board, that you have created. You have got to tell them to give you both short-term and long-term projects, that they must think very big in what they propose, and that they are not to be confined to the financial side of it at all—the reason I will give you in a moment. Out of those plans you will get a pretty tremendous picture, but for heaven's sake do not be frightened of it. You will find that you have to build roads, railways, bridges and accommodation, and must clear vast tracts of land. Innumerable bull-dozers and every type of machinery in such measure as at first blush might frighten anybody, will be required. I say "Do not be frightened," because I believe there is an answer to it all.
Then, when you have got that picture, there is obviously going to be a tremendous task. How do you really set about accomplishing that task? As I have said, talk to the farmers, and ask them for a plan. But, in relation to British agriculture, you have to go a little further than that. You have also got: to get the picture, when they put up a maximum plan of production, of what they will need to accomplish it—how many more houses, what tractors, what spare parts, what farm implements, everything that is necessary. The Colonial Development Board must also be pressed to give its picture, and what it also will require.
When you have ail the requirements to the scheme, you have to send for the representatives of British industry, tell them that they may have to make great expansions, and point out to them that, in respect to any future plans to meet the supplies that are required, they will have the first priority on the dollar resources

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of the Marshall Fund, so that they can import into this country the things needed to carry out those plans. When you think that the dollar resources that you have available are about 1,600,000,000 dollars, there is some scope for doing something. You must also tell them that they will have the first priority on the Sterling Fund that will be created, and for capital expenditure—expenditures where the finance cannot be provided through the ordinary sources because the amount is too great, or the money is tied up too long—you must be prepared to finance it through those funds that will be available. I would have liked to add this advice: Do not make the loans direct from the fund, but employ the machinery that has been created for this purpose; but as I am the chairman of the biggest corporation that has been created to mobilize the finances of the City of London for the restoration and expansion of British industry, I am, perhaps, precluded from doing so.
When this whole picture is drawn, I suggest it is going to be a fascinating one and one that will pass far beyond anything that we have so far had in our minds. I believe that it will be a food production such as we have never visualized. I believe that it will be an equipment production such as would surpass anything we have previously envisaged. But I do not believe that any of it is impossible. I believe that it can be done; and it is the task of this country to undertake it, with the new hope that has come from this conception of the Marshall Plan, the significance of which I do not think everybody has yet realized.
The things I have been dealing with are the material and the practical problems which may be found in this matter. But there is something far more important than that; and that is the human factor. To-day our people in Britain are undaunted, they are patient, good-tempered and dogged, and they are carrying on. But I believe they are doing it without inspiration and with extraordinarily little hope for the future. If only we could change that! They are appalled, too, by the political and ideological brawling that goes on at every international conference. They have also a feeling of frustration that the new and better world that was to come from their sacrifices in the war now seems
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to be all an unrealizable dream. If only we could provide the inspiration—if only we could restore the people's hopes—the whole atmosphere would change, and we should again restore the same spirit that we had in this country in the dark days of Dunkirk.
I believe that this Marshall Plan gives us an opportunity to do those things. I believe that it opens again an opportunity to the British peoples throughout the whole world to give the leadership we have given in the past. We can, I believe, save ourselves by our own efforts and, in doing it, I believe we can give a lead to the world. We can give a lead in the direction which, to my mind, is most vital—that is, in bringing about international co-operation in the economic field. That, so far as I can see, is the only conceivable way in which we can get over the difficulties that exist in the political field. And unless those difficulties are overcome, they will make any idea of world peace, security and prosperity, quite hopeless.
7.18 p.m.
LORD PAKENHAM: My Lords, I hope the House will not take it amiss if I reply in a couple of sentences. I just rise to say that everything that has been said will be studied with very great care by myself and by my right honourable friends; and that applies to any words of praise or words of criticism. I will make sure that my right honourable friends read what has been said, and I, in turn, will communicate with the noble Lords concerned. I would like to say with what interest I have listened to the last two speeches. Obviously, one cannot begin to try to cover the territory that they traversed, and I would like only to refer noble Lords once more to the important and far-reaching speech which has been made by the Chancellor of the Exchequer this afternoon. If I may do so, too, I would call their attention to what was said yesterday by the Secretary of State for Foreign Affairs on the subject of the Marshall Plan.
It was suggested in another place that perhaps this country was not sufficiently interested in the Marshall Plan and was not taking sufficient steps to give a lead to Europe. While the subject is too vast to deal with at this moment, I feel that if noble Lords will refer to what my right honourable friend the Foreign Secretary

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said yesterday, they will see that there is absolutely nothing in that allegation. We attach tremendous importance to all that has been suggested in connexion with the Marshall Plan, and look forward to what is to come of it. I would like to say, on behalf of the Government, how valuable I feel debates of this kind are. This one, I think, has been even more valuable than usual. I feel that we have every reason to be thankful to the House of Lords. With those words I hope that this Bill will now be read a third time.
7.22 p.m.
THE MARQUESS OF SALISBURY: My Lords, I would like to say one word before the question is put, and I hope the noble Lord, Lord Pakenham, will take it in the spirit in which it is meant. I feel that it may be very unfair to criticize the replies of a Government spokesman who, after all, is immensely overburdened with work, and the noble Lord has to-day had to accomplish what in the cinema world would be called a continuous performance. But I must say that I have never heard an important debate answered with less respect for the House. Very pertinent arguments and questions of great importance have been raised by some of the greatest experts on their subjects in this country at the present time, and they have had no answer of any kind on any single point. I think that that will be borne out by other noble Lords. There was for example, Lord Brabazon—nothing has been said about his speech. The noble Viscount, Lord Bruce, spoke at a very late hour, and therefore I can well understand the difficulty of dealing with what he said.
In the case of the noble and learned Viscount, Lord Simon, who produced a powerful indictment of Government policy in the past, all that was said to him was—and I thought it was a little disrespectful to an ex-Foreign Secretary and an ex-Chancellor of the Exchequer—that it was somewhat regrettable that he had delved into the past and a pity that he had not been rather more constructive about the future. That was all that was said in answer to his long speech, except for some reference to a report in Hansard of a speech previously made by the noble Lord, Lord Pakenham, himself. Then there was the contribution of the noble Lord, Lord Brand. I thought that his speech was obviously not
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intended as an attack on the Government but was a completely objective speech, although it contained, quite legitimately, certain very severe criticisms. All that was said to him by the noble Lord, Lord Pakenham, in reply, was that, so far as he could understand, he thought Lord Brand largely agreed with the Government. That was not true at all. Lord Brand said very clearly—at least it seemed very clear to all of us—that he thought food subsidies ought to be reduced. That, of course, is a matter of opinion. It is a matter on which people may hold differing views. It was not true in the least that Lord Brand agreed with the policy which the Government had adopted. Lord Pakenham said that it might have been worse; the Government might have put subsidies up. That is the sort of argument I might have expected in a debate in the Oxford Union, but not in a debate in such a serious and distinguished assembly as this House.
We all like and respect the noble Lord, Lord Pakenham, and we are fully conscious of the difficulties under which he works. I consider that the Government give him far too much work at the present time. It is very hard on him that he should be put up to speak for the Government in a debate of this kind, but I do beg of him, when speeches of the weight and substance that have been made to-day have formed part of a debate, to recognize that an answer must be given if the reputations of both the noble Lord and of this House are to be preserved. In my view the reply given was the most deplorable the Government have given at any time that I can remember since I have been in this House.
LORD PAKENHAM: My Lords, may I, with the permission of your Lordships, express my deepest regret to all noble Lords to whom it may have seemed that I have treated any subject with levi y? If I had had any idea that it was desired that I should make a full reply now, I should, of course, have been only too glad to do so. I was simply acting in a manner which I thought would best meet with the convenience of your Lordships' House. I have come here equipped with an enormous mass of information which I could have given to your Lordships. If it had crossed my mind for a moment that the right course for me to

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pursue was to detain your Lordships further in order to do so at this late hour—and the attendance in the House is now somewhat thin—I would most certainly have done so. I hope that your Lordships will accept what I have said in the spirit in which it is offered.
On Question, Bill read 3a, and passed.
House adjourned during pleasure. House resumed.

ROYAL COMMISSION.
7.35 p.m.
The following Bills received the Royal Assent:

Finance (No. 2),

Emergency Laws (Miscellaneous Provisions),

Medical Practitioners and Pharmacists,

Pensions (Governors of Dominions, amp;c.),

Public Works Loans,

Coatbridge Burgh Extension Order, amp;c., Order Confirmation,

  ACCOUNTS OF AIRWAYS CORPORATIONS.
  ACCOUNTS OF AIRWAYS CORPORATIONS.
  BURMA SERVICES: EUROPEAN OFFICERS' PENSIONS.
  BURMA SERVICES: EUROPEAN OFFICERS' PENSIONS.
  SCOTTISH AFFAIRS.
  SCOTTISH AFFAIRS.