Sitting of 15 April 1953

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  BROMLEY CORPORATION BILL [Lords] (by Order)
  Second Reading deferred till Monday next.
  RUNCORN-WIDNES BRIDGE BILL [Lords] (by Order)
  Second Reading deferred till Tomorrow.
ORAL ANSWERS TO QUESTIONS

  SUDAN (MINISTER'S VISIT)
  Mr. Fenner Brockwayasked the Secretary of State for Foreign Affairs if he will make a statement regarding the visit of the Minister of State to the Sudan.
  The Minister of State (Mr. Selwyn Lloyd): As the hon. Member is no doubt aware, I made a statement on this subject on 2nd April.
  Mr. Fenner Brockway: Is the right hon. and learned Gentleman now able to say when elections are likely to take place in the Sudan?
  Mr. Lloyd: No, I am not yet able to say that. The Electoral Commission was appointed on 6th April and I think they have that matter very much in mind.
  Mr. Fenner Brockway: May I ask whether the prospects are that it will be possible to hold the elections this summer, or will they have to be postponed until the autumn?
  Mr. Lloyd: I do not know the answer to that question. I think I had better not guess at the moment.

  GERMANY

    Arrested Nazi Leaders
    Dr. Kingasked the Secretary of State for Foreign Affairs what links his investigations have revealed between the Naumann group of neo-Nazis and British Fascist leaders.
    Mrs. Castleasked the Secretary of State for Foreign Affairs what evidence has been revealed by the British investigations which led to the arrest of Werner Naumann that the new German Nazi movement is being partly financed from British sources.
    Mr. Selwyn Lloyd: As the House is aware, the case against Werner Naumann and his associates has now been transferred, at the request of Dr. Adenauer, to the German judicial authorities. It is therefore sub judice in Germany and it would be undesirable for me to make any statement on the information revealed by the British investigations, which has now been communicated to the German authorities for them to study.
    Dr. King: Is the right hon. and learned Gentleman aware that Herr Adenauer has himself publicly stated that the evidence which our Government handed over has revealed close financial help given by British Fascists, among others, to neo-Nazis? Since he took such excellent and resolute action in dealing with neo-Nazis in Germany, can the right hon. and learned Gentleman do something to deal with supporters and financiers of neo-Nazism in this country?
    Mr. Lloyd: I would certainly not dispute that as a general proposition, but I think that in the meantime the hon. Member had better wait for these judicial proceedings to take place in Germany and for matters to be given in evidence before further action is taken.
    Mrs. Castle: Is the right hon. and learned Gentleman aware that the Questions he is answering relate to the British end of the problem and not to the German end of the problem and that there is great concern in this country as a result of Herr Adenauer's revelations on this matter? Will the Minister put in the Library the details of the evidence on which Herr Adenauer made this statement?
    Mr. Lloyd: No, I think it is much better for that evidence to be given in a court of law in Germany and we can see what it is. I can assure the hon. Lady that if action is needed to be taken in this country, it will be taken.
    Mr. S. Silverman: I take it that the right hon. and learned Gentleman is not saying that this House is precluded, or any Minister of the Crown is precluded from discussing in the House of Commons, any matter merely because it is sub judice in a foreign court?
    Mr. Lloyd: Certainly not.

    Free Elections
    Mr. Donnellyasked the Secretary of State for Foreign Affairs what recent consultations he has had with the representatives of the Governments of the United States of America and France with a view to calling a four-Power conference to consider the holding of free elections for a united German Parliament.
    Mr. A. J. Irvineasked the Secretary of State for Foreign Affairs whether in view of the altered international situation, he will take the initiative to convene a four-Power conference to discuss future policy in Germany and the holding of free elections for a united German Parliament.
    Mr. Selwyn Lloyd: The views of Her Majesty's Government on a four-Power conference to consider the holding of free elections throughout Germany were conveyed to the Soviet Government in a Note of 23rd September last. It will be recalled that, in this Note, Her Majesty's Government renewed their previous proposals to the Soviet Government for an early four-Power meeting to discuss the formation of an impartial commission of investigation, with a view to creating the conditions necessary to hold free elections throughout Germany.
    The next step would be to discuss the holding of these elections and the formation of an all-German Government. When free elections had been held and an all-German Government formed, the peace settlement could be negotiated. No reply has been received from the Soviet Government, but the offer still remains open.
    Mr. Donnelly: Is it not a fact that the Russian representatives have
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    suggested to the British High Commissioner in Germany that the talks on air traffic control might be extended to political subjects as well? In view of that does not the right hon. and learned Gentleman agree that this is a most opportune time for us to consult with the other Governments to see what might be done about this proposal for a united Germany?
    Mr. Lloyd: I am not aware of any such proposal as that to which the hon. Member has just referred. He asked me about consultations with representatives of the Governments of the United States and France; he did not ask me about any representations received from the Soviet Government. I am not aware that they have put forward any such representations.
    Major Beamish: While the holding of free elections throughout Germany would obviously be welcome to all of us here, might not the holding of free elections in the Eastern zone of Germany be a useful preliminary step?
    Mr. Beswick: Are we to take it that the right hon. and learned Gentleman is content to leave the matter as it was left by his Note of last year? Is he not taking any other steps or any further initiative?
    Mr. Lloyd: That raises an interesting matter. We have put forward a perfectly clear and definite offer. No reply has yet been received to it, but it remains open.
    Mr. Dalton: As Her Majesty's Ambassador in Moscow has, we understand, been over here for consultations, and has just had a consultation with Mr. Molotov, is not this a matter which he might take up in this somewhat improved atmosphere which we all wish further to improve? Is it enough to say that a Note that was sent last September has not been answered?
    Mr. Lloyd: The fact that I have stated in this House today that the offer is still open puts the matter beyond any doubt whatever.

    British Aircraft (Russian Attack)
    Mr. Odeyasked the Secretary of State for Foreign Affairs if he can now state what compensation the Union of Soviet Socialist Republics propose to pay

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    to the dependants of the airmen who were shot down in the Lincoln bomber on 12th March.
    Mr. Selwyn Lloyd: No reply has yet been received from the Soviet authorities in Germany on the question of compensation for the loss of British lives and property resulting from the shooting down of this bomber. The United Kingdom High Commissioner in Germany has been instructed to pursue the matter with the Soviet authorities and to renew to them the demand of Her Majesty's Government that adequate compensation should be paid.
    Mr. Odey: Is my right hon. and learned Friend aware that a number of these families are in very straitened circumstances, and will he impress upon the Soviet Union that their protestations of peaceful intentions will be regarded much more favourably if they will back their words by deeds in matters of this kind?
    Mr. Lloyd: I will certainly see that that aspect of the matter is drawn to the attention of the Soviet authorities.

  N.A.T.O. HEADQUARTERS (REORGANISATION)
  Mr. T. Reidasked the Secretary of State for Foreign Affairs what information he has received from the North Atlantic Treaty Organisation on the plans for the reorganisation of the office administration of the headquarters of the organisation.
  Mr. Selwyn Lloyd: The headquarters of the North Atlantic Treaty Organisation were reorganised at the time of their move from London to Paris a year ago. I am not aware that the Secretary-General is contemplating another reorganisation at the present time.
  Mr. Reid: Has the right hon. and learned Gentleman endorsed the strictures passed by Field Marshal Lord Montgomery on the office administration of this institution?
  Mr. Lloyd: I gather that the principal complaint of the Field Marshal was of too much paper. I think that is a comment I might apply to many institutions.

  FAR EAST (CHINESE NATIONALIST FORCES)
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs what representations have been received from the United States Government with regard to a co-ordinated defence system in the Far East, to include Chinese Nationalist forces on Formosa.
  Mr. Selwyn Lloyd: No such representations have been received from the United States Government.
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs what instructions have been given to the United Kingdom representative at the United Nations in regard to the official complaint lodged by the Burmese Government relating to the presence of Chinese Nationalist forces in Burma.
  Mr. Selwyn Lloyd: It is not the practice to disclose instructions given to the United Kingdom Delegation. It is not yet clear in what form this matter will be discussed at the United Nations. But I can assure the House that Her Majesty's Government are actively concerned to effect a settlement.
  Mr. Henderson: Do Her Majesty's Government themselves accept the repeated assurances which have been given to them by the Chinese Nationalist authorities that they have no responsibility for these troops, in view of the evidence to the contrary that has been collected by the Government of Burma?
  Mr. Lloyd: I am not aware at the moment that we have received any assurances from the Chinese Nationalist authorities with regard to that matter. However, we certainly regard this as a serious problem which might be a possible danger to peace, and we are anxious to have it cleared up as early as possible. The right hon. and learned Gentleman will remember that in February last year we took the initiative in seeking one way by which the matter might have been cleared up.
  Mr. Henderson: I am sorry to have to press this point, but the Joint Undersecretary of State stated in the House in June last year that Her Majesty's Government had repeatedly received assurances

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  from the Chinese Nationalist authorities in Formosa that they had no responsibility for these troops.
  Mr. Lloyd: I think that in fact those assurances came through the Chinese Delegation at the United Nations.
  An Hon. Member: Worthless.

  KOREA (EXCHANGE OF PRISONERS AND TRUCE TALKS)
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs to make a statement on the Korean armistice discussions.
  Mr. Hector Hughesasked the Secretary of State for Foreign Affairs to make a statement on the present position of the negotiations in Korea for the exchange of prisoners.
  Mr. Selwyn Lloyd: I would ask the right hon. and learned Member and the hon. and learned Member to await the reply which the Prime Minister will give to Question No. 45.
  Mr. Hughes: On a point of order. Question No. 20 is my Question and I was given no information that it would be answered by a different Minister. I should like to ask your guidance, Mr. Speaker, as to what is the proper procedure. Should I not have received such information?
  Mr. Speaker: When Questions are transferred from one Department to another it is desirable that Ministers should give as early notice as possible. Beyond saying that, I cannot help the hon. and learned Member.
  Mr. Hector Hughesasked the Secretary of State for Foreign Affairs what advances have been made to date towards peace in Korea; and what matters of disagreement are now outstanding between the respective parties to the present negotiations there.
  Mr. Selwyn Lloyd: On the first part of the Question, I would refer the hon. and learned Member to the statement of the Prime Minister on 1st April and would also ask him to await the reply which the Prime Minister will give to Question No. 45 as regards later developments. On the
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  second part of the Question, I would refer the hon. and learned Member to the reply given to his similar Question on 25th February.
  Mr. Hughes: With regard to the answer to the first part of the Question, in view of the fact that these disagreements have proceeded so long, is not it time the Foreign Secretary took some new initiative which would have a more fruitful result in bringing about the peace which the world desires?
  Mr. Lloyd: I should think that at the present moment there could not be a more inappropriate supplementary question.
  Mr. Donnellyasked the Prime Minister whether he will make a further statement on the progress of the Korean truce talks.
  The Prime Minister (Mr. Winston Churchill): I am glad to be able to report that since my statement of 1st April an agreement has been reached at Panmunjom between the liaison groups on both sides for the exchange of certain sick and wounded prisoners. Under this agreement, which was signed on 11th April, both sides undertake to start the delivery of sick and wounded prisoners at Panmunjom on 20th April and to complete the process by 20 days thereafter. The United Nations Command will hand over 5,800 Communist prisoners and the Communists 600 United Nations prisoners. The House will agree with me that this is a welcome and encouraging development.
  About the resumption of the main armistice negotiations, I hope to be able to make a statement to the House in the near future.
  Mr. Donnelly: Is the right hon. Gentleman aware that there will be universal satisfaction about the first part of his answer, and will he accept the best wishes of everybody on this side for a speedy furtherance of the second part concerning the statement he hopes to make to the House in the near future?
  Mr. Hector Hughes: May I ask the Prime Minister whether, as stated earlier, he was answering Question No. 20 in addition to Question No. 45?
  Mr. Speaker: Question No. 20 was answered by the Minister of State.
  Mr. Hughes: On a point of order. I understood the Minister of State to say that the Prime Minister would answer my Question No. 20 with Question No. 45.
  Mr. Speaker: The Minister asked the hon. and learned Gentleman to await the answer to Question No. 45 which would come later. The reason I called the hon. and learned Gentleman to ask his supplementary was because his Question No. 20 was on the same matter. If he will now ask his supplementary, perhaps he will get an answer.
  Mr. Hughes: Thank you, Mr. Speaker. Will the Minister state what is the actual arrangement with regard to the exchange of prisoners? Is the idea to exchange man-for-man, or is the arrangement only to apply to the sick and wounded?
  The Prime Minister: The man-for-man basis would not have led to any conclusion at all in view of the fact that we have 10 times as many prisoners as the other side.
  Mr. Chetwynd: Can the Prime Minister give the number of British prisoners of war who will be repatriated?
  The Prime Minister: I am speaking without reference to exact notes, but I think it is only about 20.

  HUMAN RIGHTS (BULGARIAN CONTRAVENTION)
  Major Beamishasked the Secretary of State for Foreign Affairs whether he has considered the law recently published in the Bulgarian State Gazette, under Article 72 (a) and (b) of which heavy sentences are laid down for the relations and friends of refugees who have sought, or may seek, asylum outside Bulgaria and who refuse to return to that country; if he is aware that this law contravenes the human rights Clauses of the Bulgarian Peace Treaty; and what action Her Majesty's Government are taking with regard to this contravention.
  Mr. Selwyn Lloyd: Yes, Sir. I have considered this law and am aware that it contravenes the human rights Clauses of the Peace Treaty with Bulgaria. The punishment of innocent people for actions which they have not committed or to which they are not accessories, violates
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  a principle universally accepted by civilised nations. Her Majesty's Government deplore this further evidence that the Bulgarian Government are unmoved either by elementary principles of justice or by the obligations laid on them by the Peace Treaty. I propose to add this new evidence to the documents already submitted to the United Nations by Her Majesty's Government in accordance with the General Assembly's Resolution of November, 1950.
  Mr. S. Silverman: Will the right hon. and learned Gentleman at the same time draw the attention of his right hon. colleague the Secretary of State for the Colonies to his remarks about the punishment of people for acts which they could not control and with which they have had nothing to do so that the practice of collective penalties shall cease before we make complaints about other people?
  Mr. Lloyd: That is a totally different matter from the one on the Order Paper.

  ICELANDIC FISHERIES DISPUTE
  Mr. Doddsasked the Secretary of State for Foreign Affairs what progress has been made in recognising Iceland's closure of her inshore fishing grounds and in ending the ban imposed on Icelandic ships unloading their catches at British ports.
  Mrs. Braddockasked the Secretary of State for Foreign Affairs if he has observed the landings of fish by British trawlers from Icelandic waters in January and February, 1953, in comparison to the same months in 1952; and, in view of the fact that they show the wisdom of the Icelandic Government's action in conservation of fish by increasing the fishing area limits to protect the breeding grounds, what action he is taking to come to an agreement with the Icelandic Government.
  The Joint Under-Secretary of State for Foreign Affairs (Mr. Anthony Nutting): I am aware of the figures for fish landings from Icelandic waters in January and February, 1953. We are still awaiting a definite reply from the Icelandic Government to the proposals made by Her Majesty's Government. Until that

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  reply is received, I am not in a position to make any statement about a possible settlement of the dispute.
  Meanwhile Her Majesty's Government have arranged to include in the agenda of the Permanent Commission set up under the Overfishing Convention a proposal that the Permanent Commission should study whether measures additional to those for which the Convention specifically provides are desirable for the proper conservation of fish stocks in the neighbourhood of Iceland.
  Mr. Hoy: While welcoming the last part of the Minister's reply, might I ask him if he is aware that he asked us some eight months ago not to press him on this issue? Could he now be more specific about the date by which we might expect a settlement of this problem?
  Mr. Nutting: We have made a proposal to the Government of Iceland; we made it some weeks ago and we still await their reply. They have asked for an elucidation of the proposal, which they have received, but it has not so far proved possible to obtain a final and definite answer from the Icelandic Government.
  Mr. Hector Hughes: Does the hon. Gentleman remember I have been asking him Questions on this subject for a long time? Does he realise that in the interests of the fishing industry and consumers alike the time is long overdue for him to take a new initiative in this matter and resolve the outstanding problems?
  Mr. Nutting: The hon. and learned Member should not assume that I ever forget any of his Questions.
  Mr. Younger: While appreciating that a settlement is not entirely within the control of Her Majesty's Government, might I ask the hon. Gentleman if it is the view of the Government that the continued exclusion of Iceland fish from this country—not of course by Government action—accords with the spirit of the Government's trading policy in Europe? If the answer to that is in the negative, may I further ask the hon. Gentleman whether he is content to leave this matter month after month without any expression of opinion in public in this country as to what view the Government have? Does he not think it is
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  almost getting time now for the Government to take some line or other on the merits of this dispute?
  Mr. Nutting: We very much hope that we shall be able to arrive at a reasonable and fair solution of this problem, which —I agree with the whole House—has dragged on for a considerable time. In the meantime, I think it would be inappropriate for me to comment on the action of certain industrial organisations which, so far as Her Majesty's Government are concerned, is in no way in conflict with Government policy regarding trade in Europe.

  AUSTRIAN TREATY
  Mr. Ernest Daviesasked the Secretary of State for Foreign Affairs when it is proposed to summon the next meeting of the Deputies engaged in preparing the Austrian Treaty.
  Mr. Selwyn Lloyd: This matter is under consideration but no decision has yet been reached.
  Mr. Davies: Would the Minister say whether the British Ambassador in Moscow, in his recent conversation with Mr. Molotov, suggested that such a meeting should take place, because it is quite clear that this treaty has reached a point where it could easily be signed with a little good will on each side, in view of the improved situation, and it would put Russia to the test as to whether her protestations of peace are sincere or no?
  Mr. Lloyd: It is impossible for me to give to the House details of a confidential conversation between our Ambassador and the Soviet Foreign Minister. One of the difficulties in regard to an Austrian Treaty is the fact that at recent meetings of the Allied Council, so far from any manifestations of increasing good will or an increased endeavour to reach a settlement being seen, the trend has been rather the contrary. If any Questions are put down in regard to that matter, I will certainly answer them. We must wait to see whether there is any evidence in that field of some desire to reach a settlement before we decide.
  Viscount Hinchingbrooke: While appreciating the Minister's point of view on this matter, would he yet be prepared to

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  say that in some ways the preparation and conclusion of an Austrian peace treaty is the most propitious ground upon which to test the sincerity of the Russian peace overtures?
  Mr. Lloyd: I absolutely agree, and as soon as Her Majesty's Government think that the particular step about which I am asked is the right one to take, we shall take it.
  Mr. Davies: If the right hon. and learned Gentleman takes that point of view, why cannot a suggestion be put forward now for a meeting of the deputies to be called immediately?
  Mr. Lloyd: As I have said, we have had a meeting of the Allied Council within the last few days, and there was another meeting about a fortnight ago at which it was quite clear that the Soviet attitude towards various matters was not such as to make a meeting of the deputies advantageous at the present time.

  ALBANIAN GOLD (ARBITRATION AWARD)
  Mr. Ernest Daviesasked the Secretary of State for Foreign Affairs if he has yet received the report from the arbitrator in connection with claims to gold looted by the Germans from Rome.
  Mr. Selwyn Lloyd: Yes, Sir. The arbitrator's award was pronounced on 20th February. The arbitrator found that the gold in question was the property of the National Bank of Albania.
  Mr. Davies: While welcoming the fact that the arbitrator has made this decision, even though it is belated, may I ask if this means that it is a step towards the settlement of the Corfu Channel incident and this gold will now come to Britain?
  Mr. Lloyd: I hope so.

  HUNGARY AND YUGOSLAVIA (INFORMATION SERVICES)
  Mr. Ernest Daviesasked the Secretary of State for Foreign Affairs the reason for the increase in the estimate for public information services for Hungary from £68,050 for 1952–53 to £87,810 for 1953–54, and for the decrease in the estimated expenditure for Yugoslavia to £102,730 from £191,940.
  Mr. Nutting: The figures quoted represent not estimates for information services alone, but for all functions of Her Majesty's Missions in both countries. The increase in Hungary represents an increase in local costs; and the decrease in Yugoslavia is due to the change in the rate of exchange. The level of information activity has not been altered in either case.
  Mr. Davies: In view of the closer relations with Yugoslavia and the greater willingness of the Yugoslav Government to have contact with the West, would not it be better to use the windfall we have obtained through the change in the value of the dinar to increase our services? It would cost the Government no more.
  Mr. Nutting: As the hon. Gentleman knows, the policy of Her Majesty's Government, while the independent committee of inquiry is proceeding into the information services, is that the present level of information activities throughout the world is not to be changed. It would therefore inevitably be in conflict with that policy were we to increase the amount of money to be spent in Yugoslavia beyond any which may be necessary to maintain the level of activities against a rise in cost.
  Mr. Brooman-White: Might not the information services in Hungary usefully endeavour to disseminate news of last night's Adjournment debate and impress upon the Hungarians the resentment felt in this country at their barbarous and continuous mistreatment of Mr. Sanders?
  Mr. Nutting: Action to that end has already been taken.

  RUSSIAN-BORN WIVES OF BRITISH SUBJECTS
  Mr. Hollisasked the Secretary of State for Foreign Affairs whether he will request the Soviet Government to give permission to leave Soviet territory to Soviet-born wives of British subjects who may request it.
  Mr. Selwyn Lloyd: I can assure my hon. Friend that this matter is very much in my mind. It is however a delicate one, and I should prefer to make no further comment at the present time.
  Mr. Hollis: While appreciating the answer given by my right hon. and learned Friend, may I ask if he will promise to give the House information as soon as it is possible to do so? Simply because of the smallness of this problem from the point of view of the security policy of the Soviet Government, it is an acid test of their sincerity.
  Mr. Lloyd: I will certainly give that undertaking.

  MINISTRY OF FOOD

    Cuban Sugar Purchase
    Mr. G. Williamsasked the Minister of Food whether, in view of the fact that United Kingdom dollar expenditure on Cuban raw sugar is now 25 per cent. less than the dollar revenue obtained from Canada in respect of the British West Indian sugar which the former replaces, he will state what approximate dollar surplus results; and whether he will consider at an early opportunity using such surplus, or part of it, to increase purchases of sugar for Great Britain, thus enabling housewives to make better use of home-produced fruit crops and avoid unnecessary expenditure on imported substitutes for sugar.
    The Minister of Food (Major Lloyd George): Dollar earnings from sugar cannot be treated differently from dollar earnings generally. There is therefore no direct relation between dollars earned by the Commonwealth in Canada and the dollars that we can afford to spend in Cuba.
    Mr. Williams: Is the Minister aware that the announcement yesterday gives me complete satisfaction, and that it will be appreciated by Socialists as well as Conservatives?
    Mr. J. Paton: Can the Minister tell the House how many dollars are involved in the statement made yesterday by the Chancellor about the purchase of Cuban sugar?
    Major Lloyd George: I shall be able to give a full statement later on.
    Mr. Nabarro: Can my right hon. and gallant Friend give the House an assurance that yesterday's decision to purchase 1 million tons of dollar sugar will not in any way weaken the structure of the
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    Commonwealth Sugar Agreement and that this country will continue to take every ton of available sugar from all parts of the British Commonwealth?
    Major Lloyd George: That is written into the Commonwealth Agreement most plainly. It is the main purpose of the agreement to give a guarantee to Commonwealth producers that we shall take all the sugar they can produce.
    Mr. Dalton: Cannot the right hon. and gallant Gentleman tell us in round figures how many dollars this Cuban sugar will cost?
    Major Lloyd George: The right hon. Gentleman will appreciate that the actual figure depends to a large extent on details yet to be decided.
    Mr. Manuel: Was the Minister not consulted?
    Major Lloyd George: The hon. Gentleman should know that a great deal depends on the times at which shipments are made and so on, but I should say roughly from £22 million to £23 million over the two years.
    Mr. Osborneasked the Minister of Food how much extra sugar imports would now be required to end all sugar rationing; in what quantities it is available; what would be the cost; and how far it could be purchased in sterling.
    Major Lloyd George: I would refer my hon. Friend to the announcement on sugar made yesterday by my right hon. Friend the Chancellor of the Exchequer.
    Mr. Osborne: While I congratulate my right hon. and gallant Friend on the announcement made by the Chancellor yesterday, may I ask him why, instead of purchasing one million tons of sugar in Cuba, he did not purchase the two million tons that were available? Was it a shortage of dollars that caused him not to buy the lot?
    Major Lloyd George: That happened to be what we wanted to enable us to take it off the ration.
    Mrs. Mann: Can the Minister say what will be the retail price of this sugar which is bulk purchased from Cuba?
    Major Lloyd George: No, I do not think I am able to do that, but I may be able to disappoint the hon. Lady when she finds out.
    Mr. Nabarro: Is it not a fact that the purchase of any quantity of sugar above one million tons from Cuba or from other dollar sources would inevitably have had a detrimental effect on the Commonwealth Sugar Agreement; and will my right hon. and gallant Friend resist all temptations to go outside that Agreement unless it is strictly necessary?
    Major Lloyd George: I can assure my hon. Friend that we cannot go outside the Agreement, which is quite specific, and that we have no intention whatever of trying to do so, because we regard the Sugar Agreement with the Commonwealth as one of the most important things we have done for many years.
    Mr. Royle: Will the Minister say what is the price under the new arrangement with Cuba, as compared with the guaranteed price to the British West Indies?
    Major Lloyd George: All I can say, without having the actual figures in my head, is that it is very much lower than the price to the British West Indies.
    Hon. Members: How much lower?
    Major Lloyd George: I would say that it is somewhere about £19 per ton lower.

    Cereals and Feedingstuffs (Decontrol)
    Mr. Hurdasked the Minister of Food the arrangements for the resumption of commercial trading in cereals and feedingstuffs.
    Major Lloyd George: My right hon. Friend the President of the Board of Trade has now issued a notice to importers setting out the arrangements for the private importation of cereals and animal feedingstuffs as from 1st May, 1953. A copy of the notice is in the Library.
    Mr. Hurd: Would my right hon. and gallant Friend tell us when his Ministry will be out of the grain trade and when the whole trade will be in the hands of the commercial buyers?
    Major Lloyd George: We shall lose no time.

    Sugar Beet Factory, Southern England
    Mr. Rentonasked the Minister of Food whether he is aware that the cost of transporting sugar beet from farms to
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    factories increased by about 7 per cent. between the past two seasons and is to be increased by 6s. per ton for next season's crop; and whether, for those and other reasons, he will consult the British Sugar Corporation Limited with a view to their building a new sugar beet factory in the south of England.
    Major Lloyd George: I would refer my hon. Friend to the reply which I gave to my hon. Friend the Member for Maid-stone (Mr. Bossom) on 11th November last.
    Mr. Renton: Would my right hon. and gallant Friend agree that there is great scope and need for increasing our home grown sugar beet production and that we shall not get that increased production without another sugar beet factory in the South of England? Has he any views on that important matter of general policy?
    Major Lloyd George: In view of the capital investment position, the most important thing at the moment is to improve the capacity of the existing factories, which is being done and which will have a very beneficial effect on production.

    Milk Consumption
    Mr. Doddsasked the Minister of Food the average weekly milk consumption per person for the fourth quarter of 1952; and how this compares with the same period in 1950 and 1951.
    Major Lloyd George: 4.8 pints, compared with 4.7 pints in 1950 and 4.9 pints in 1951, according to the National Food Survey.
    Mr. Dodds: In view of the unanimity of opinion about the value of milk to the health of the nation, will the Minister give an undertaking to resist any attempts now being made to increase the price of milk?
    Major Lloyd George: I am not aware of any such attempts.
    Mr. F. Willey: Is the right hon. and gallant Gentleman aware that the latest official figures published by his Ministry show a fall of 4 per cent. in the consumption of fresh milk? Does he regard this fall as serious or will he tell the House what the amount of the fall must be before he regards it as serious?
    Major Lloyd George: Perhaps I may be allowed to let the hon. Gentleman know that at some other time.

    Sausages (Meat Content)
    Mr. D. Brookasked the Minister of Food if he is aware of the deterioration in the meat content of some makes of sausages since decontrol; and what action he proposes to take.
    Major Lloyd George: I am not aware of any such deterioration.
    Mr. Brook: Is the right hon. and gallant Gentleman aware that in the "Grocer" of 7th March it was stated that one firm was making pork sausages with a meat content of 45 per cent. as against the figure of 65 per cent. under control? What action does he intend to take to protect the interests of the consumer in such circumstances?
    Major Lloyd George: I should like to see the consumers take some action themselves occasionally. There are plenty of varieties of sausage today, not only among those made by the big manufacturers, but among those to be found in butchers' shops. If the consumer exercised the choice open to him, I am sure there would be an improvement.
    Mr. J. T. Price: Is the right hon. and gallant Gentleman aware that in the Manchester district there has been an average increase of 4d. a lb. in the price of sausages since they were decontrolled?
    Major Lloyd George: I have got the figures for Halifax before and after control. There has been practically no change at all there.
    Mr. Nabarro: Will the Minister resist all blandishments from the benches opposite to reintroduce that milk sausage which was the symbol of Socialist rule for six years?

    International Wheat Agreement (Prices)
    Mr. Osborneasked the Minister of Food why the negotiations of the International Wheat Agreement have continued for two months without a settlement; and whether he will make a statement on the position.
    Major Lloyd George: By a majority vote the International Wheat Council has
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    decided to recommend to member Governments that the International Wheat Agreement be extended for a further three year period at a new price range per bushel of 2.05 dollars maximum and 1.55 dollars minimum to replace the present range of 1.80 dollars maximum and 1.20 dollars minimum.
    After mature consideration Her Majesty's Government have decided not to accede to the new Agreement. In the judgment of Her Majesty's Government the maximum price of 1.80 dollars written into the present Agreement—with the valuable insurance afforded by the guarantee at the minimum price—is a fair reflection of the value of wheat in present conditions in a free market.
    We were nevertheless prepared, in a sincere attempt to reach a settlement acceptable to all, to agree to an increase of 20 cents in the maximum price—and an increase of 35 cents in the minimum price—despite the heavy additional dollar expenditure this would have involved. Her Majesty's Government consider that this would provide a generous settlement and feel unable to go further.
    Mr. Osborne: Is the Minister aware that he will have the whole country behind him in refusing to pay an exhorbi-tant price for wheat? Can he say whether the British negotiators pointed out to the American sellers how unreasonable it is for them to demand higher prices for their wheat at a time when they are buying sterling commodities like rubber and tin so much cheaper? Has he ever bought wheat at the minimum price or is the maximum always the minimum?
    Major Lloyd George: In answer to the last question, I would say that the experience of the last four years of the agreement has been that on almost all occasions the maximum price has been received by the exporter and paid by us. Of course, every possible occasion was taken during the negotiations to make clear what the hon. Gentleman suggested, that in our opinion it was too high a price.
    Mr. T. Reid: What is the cause of, or the justification for, this increase in price? Is not it that the American Government have a farm support policy which pushes up the price of wheat and now they are asking us to meet the cost of that policy?
    Major Lloyd George: I think that there is a great deal in what the hon. Gentleman says. They have a support price policy which involves them in considerable payments. We think that the price we offered was very generous. Naturally we were prepared to make certain payments for an agreement, but an agreement at any price was more than we could support.
    Sir W. Smithers: Is not the cause of all these difficulties the fact that the Government still persist in bulk purchase? Why not get out of the business and let the experts deal with these matters? It may be that we want to buy wheat, but the Canadians also want to sell it.
    Mr. Bottomley: In view of the decision announced earlier today that the purchase of cereals and feedingstuffs is to be handed over to private traders, can we have an assurance from the Government that those traders will be prevented from paying a higher price for this wheat?
    Major Lloyd George: It would be a very clever man indeed who could forecast the price of wheat for the next three or four years. I am perfectly satisfied that the price will have to come down, especially in view of the stock position which is very plentiful. I cannot possibly foretell what the position will be, but I am satisfied that we could not possibly have agreed to the suggested figure of 2.05 dollars.

    Chocolates (Supplies)
    Mr. G. Jegerasked the Minister of Food whether he is aware that chocolate manufacturers are informing retailers that they can still only supply limited allocations during the established ration periods; and whether he will take steps to enable manufacturers to furnish retailers with adequate supplies of chocolates without relating these supplies to the fixed ration periods.
    Major Lloyd George: No, Sir. The trade is adjusting itself to the new conditions, and I must leave it to them.
    Mr. Jeger: When the right hon. and gallant Gentleman replies, "No, Sir," does he intend to deny that the trade are imposing this regulation or sticking to the ration periods?
    Major Lloyd George: No, Sir. I was referring to the latter part of the hon. Gentleman's Question, which asked whether I would take steps, and replying, "No, Sir." The trade must do it itself.
    Lieut.-Colonel Lipton: Does the Minister still deny that there is a nation-wide continued shortage of chocolates and sweets?
    Major Lloyd George: I deny it absolutely. There is a shortage of certain lines at certain times, but it still remains a fact that I have had no complaint yet from a consumer.
    Mr. G. H. R. Rogers: Is the Minister aware that some wholesalers are offering retailers supplies of the more popular brands if they will accept a reduction in the profit margin, especially in the Wembley area?
    Major Lloyd George: I have no knowledge of that, but it is a matter for the trade to settle. In any case, whatever difficulties there may be—and I do not think that they are as great as some hon. Gentlemen suggest—the announcement made yesterday will remove them.

    Flour (Calcium Content)
    Dr. Strossasked the Minister of Food (1) if the number of days involved in the original experiment in 1942, when, after a diet in which 50 per cent. of the calories were supplied from flour of 92 per cent. extraction, it was noted that absorption of calcium decreased;
    (2) his reasons for continuing the fortification of bread with chalk; and whether, in view of recent research he will consider revising his policy; and
    (3) whether he has noted the fact that the human body can and does acclimatize itself to high intakes of phytic acid if ingested over a prolonged period; and whether he will now cease to fortify bread with chalk.
    Major Lloyd George: In the 1942 experiment referred to the subjects were under observation for 21 to 28 days. As stated in my reply to my hon. Friend the Member for South Bucks on 11th February calcium carbonate is now added to flour to ensure that total food supplies

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    provide sufficient calcium to meet nutritional requirements. Flour provides nearly 30 per cent. of the total amount of calcium in the diet; and any adverse effect of phytic acid on its absorption is of small importance in relation to that amount.
    Dr. Stross: Does the Minister think that after all these years we should still be tied to one single experiment which lasted only three or four weeks as a result of which we have been imbibing or ingesting large quantities of chalk in our bread ever since? Has not he been informed of more recent work which shows that phytic acid is not detrimental to human beings and that we do not need to nibble away the cliffs of Dover entirely against a danger which we feel now does not exist at all? Will not the Government look at the matter again?
    Major Lloyd George: We are prepared to look at anything, because this is a matter of tremendous importance to the nation as a whole. It is true that the experiments lasted only three or four weeks, but they were repeated on several occasions during many months. The best opinion at the moment is that there would be a deficiency of calcium in the national diet of 30 per cent. if we did not add to the flour.
    Dr. Stross: Is the Minister aware that no one denies the validity of the specific experiment which he mentioned but that recent research has shown that chalk in flour is not needed, for the human body adapts itself to the increased phytic acid which is found in wholemeal flour?
    Major Lloyd George: As the hon. Gentleman appreciates, this is a technical matter. While I should be only too happy to discuss it with him, I think that it would be far better if he discussed it with someone with greater knowledge than I possess.

    Canned Pilchards
    Mr. Haymanasked the Minister of Food what quantities of Japanese canned pilchards were imported during 1952; at what cost; and what are the figures for 1953 to the latest convenient date.
    Major Lloyd George: None, Sir.
    32. Mr. Haymanasked the Minister of Food what quantities of South African canned pilchards were imported during 1952; at what cost; and what are the figures for 1953 to the latest convenient date.
    Major Lloyd George: From South Africa, 4,891 tons valued at £756,167 c.i.f. in 1952; 230 tons valued at £35,010 in January-February, 1953, the latest period for which figures are available. From South West Africa, 745 tons valued at £123,328 in 1952, and 271 tons valued at £43,826 in January-February, 1953. These were all imported on private account.
    Mr. Hayman: Is the Minister aware that there were heavy importations of South African canned pilchards at the height of the Cornish canning season last year, and that the stocks of Cornish canned pilchards in January, 1952, were 720,000, of which 44 per cent. had been sold abroad, whereas, in January of this year, the figure was 1,707,000, of which very little was sold abroad? Will he bear in mind that this industry and the Cornish pilchard fishing industry will almost be facing extinction unless some effort is made to give help to these industries?
    Major Lloyd George: The hon. Gentleman will appreciate that that really is not in my power, because these imports were freed in August, 1951, and, therefore, the matter has nothing whatever to do with me. The only point that I would make is that, of course, as a result of the freeing of the market, there were probably very much heavier imports in 1952 than would be the normal, and that that probably accounts for a very great deal of the glut on the market.
    Mr. G. R. Howard: Would my right hon. and gallant Friend not agree that the answer probably lies in the reply given yesterday by his hon. Friend in the fact that we should adjust the tariff on the imports of these pilchards, especially while our pilchards are denied the South African market?
    Major Lloyd George: My hon. Friend will appreciate that that is not a point for my Department.

    Eggs
    Mr. Hurdasked the Minister of Food if he will make known widely to housewives that they will do well to buy

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    eggs for preserving now; and how the present price of eggs in London shops compares with the controlled price a year ago.
    Major Lloyd George: I can assure my hon. Friend that every opportunity has been taken to emphasise to housewives the advantage of preserving eggs now while they are plentiful. Retail prices in many London shops are now a little lower than they were a year ago under control.
    Mr. Snow: Has the right hon. and gallant Gentleman by any chance read a comment in last Sunday's "Observer" by a normally well-informed writer named Alison Settle to the effect that it is no use preserving fertile eggs? Is this correct, because, if so, many housewives may be misled?
    Major Lloyd George: I think it would be very difficult to avoid doing that on occasion, but I would not know. I believe there were some in the same category before the war, and I can only say that that is normal in purchases of eggs. I think it is probably perfectly safe to leave it to the housewife to know which eggs to preserve, and all that I am anxious to do is to let the housewife know when they are plentiful and suggest that that is the time to do it.
    Mr. Speaker: Sir Waldron Smithers.
    Mr. Snow: On a point of order. I do not think the right hon. and gallant Gentleman has understood my Question.
    Mr. Speaker: I cannot say whether he did or not, but we have now passed to the next Question.

    Potatoes
    Sir W. Smithersasked the Minister of Food whether, in view of the financial inducement given to farmers to offer substandard ware potatoes to his Department not later than 31st January, 1954, as shown by the price results of the Annual Review, and, in view of the application by the National Farmers' Union for an increase in the import duty on new potatoes in the period 16th May to 30th June, he will ensure that proper storage facilities exist so that supplies of eatable main-crop potatoes in good condition may be available to old age pensioners and other poor people in the period when
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    new potatoes may be made more expensive through increased import duties.
    Major Lloyd George: Enough old potatoes to satisfy requirements will still be kept in the clamps to the end of the season.
    Sir W. Smithers: Will my right hon. and gallant Friend act in the spirit of the Budget and stop interference with the potato business? Will he allow the expert manufacturers and dealers to store and process potatoes without Government interference?

  COLONIAL EMPIRE (SECURITY FORCES)
  Mr. T. Reidasked the Secretary of State for the Colonies what steps he is taking to induce Colonies and other Dependencies to maintain forces sufficient to secure internal order.
  The Secretary of State for the Colonies (Mr. Oliver Lyttelton): The Governments of all these Territories fully recognise and accept their responsibilities in this matter and no special action on my part is necessary. Her Majesty's Government already provide expert advice on the size and organisation of the military forces established to secure law and order in normal conditions and, when necessary, they make grants towards the cost of the local military forces which have been raised in many territories to provide the backing required in an emergency.
  Mr. Reid: Is it not a fact that many of these Colonies have not got such forces at all, and that we had an instance recently where British troops had to be sent to restore law and order? Is it not necessary that each of these Colonies should have near at hand small forces for emergency?
  Mr. Lyttelton: That is rather a wide question. There are a certain number of smaller Colonies which do not maintain police forces, and there I agree with the hon. Member.

  MR. DAVIDSON, KENYA (DEPORTATION)
  Mr. Fenner Brockwayasked the Secretary of State for the Colonies what reports he has received on the arrest,

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  prison treatment and deportation of Lieut.-Commander Struan Robert Davidson from Kenya; and what action he proposes to take in the matter.
  Mr. Lyttelton: Mr. Davidson was convicted for offences under the Immigration Control Ordinance on the 29th October, 1952, and sentenced to pay £50 in fines, or in default to serve one month's imprisonment. He did not pay the fines, and was therefore committed to prison. A subsequent order for his deportation provided that he should be detained in prison custody while arrangements for his deportation were made. He was therefore in lawful custody. He was not treated as a common criminal prisoner, and was given ordinary prison diet which he could have supplemented.
  He made a complaint about his treatment in prison which was investigated by the Resident Magistrate, Mombasa, in his capacity as a visiting Justice of the prison. The Resident Magistrate considered that such action as had been taken against Mr. Davidson was in the proper execution of duty, and ordered that Mr. Davidson submit in future to proper prison discipline. I do not propose to take any action in the matter.
  Mr. Fenner Brockway: May I ask the right hon. Gentleman whether Lieut.-Commander Struan Robert Davidson was not a resident in Kenya, whether he had not left that country temporarily, and whether he was not unaware that an immigration permit was necessary? If charges have been made against him, could he not have been tried in court before being deported in this way?
  Mr. Lyttelton: He was convicted in court of offences against the Immigration Control Ordinance.
  Mr. Baldwin: Is my right hon. Friend aware that not only is it important to deport agitators from Kenya, but that it is also important to take steps to stop them entering Kenya, and that if such action had been taken 12 months ago many innocent people might now be alive?
  Mr. Fenner Brockway: May I ask the right hon. Gentleman whether there is any suggestion that Lieut.-Commander Davidson is an agitator in the sense used by the hon. Gentleman opposite?
  Mr. Lyttelton: I prefer to confine myself to the answer which I have given to the hon. Member. Mr. Davidson was convicted for offences under the Immigration Control Ordinance.
  Mr. Gordon Walker: Was he detained in prison after the expiry of his sentence, and, if so, is that not really an extraordinary state of affairs?
  Mr. Lyttelton: It was done under the law.
  Hon. Members: What law?
  Mr. Fenner Brockway: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter on the Adjournment.

  WEST INDIAN FEDERATION CONFERENCE
  Mr. Hector Hughesasked the Secretary of State for the Colonies the full agenda for the West Indian Federation Conference; and which Governments have sent to it representatives and observers, respectively.
  Mr. Lyttelton: The discussions are based on the report of the Standing Closer Association Committee (Colonial No. 255). Representatives of the Governments of Jamaica, Trinidad, the Leeward Islands, the Windward Islands and Barbados are taking part in the Conference. British Guiana and British Honduras have sent observers.
  Mr. Hughes: While wishing success to the labours of this Conference, is the Minister in a position to say what degree of support the idea of federation is getting at this Conference which has now been sitting for some days? Is he in a position to make an interim statement?
  Mr. Lyttelton: I shall not make an interim statement, and I am sure the hon. and learned Gentleman would not expect me to disclose the course of negotiations while they are still taking place.
  Mr. Hamilton: In view of the fact that British Guiana and British Honduras are not at the moment in favour of federation, will the right hon. Gentleman give an undertaking that it will not be enforced?
  Mr. Lyttelton: There is no question of enforcement. This is a conference among the principal West Indian Colonies to decide whether they wish to federate.
  Mr. Royle: Does the right hon. Gentleman hold the opinion that there is a chance that the observers there from British Guiana and British Honduras may become representatives before the Conference concludes?
  Mr. Lyttelton: I do not think the hon. Gentleman should ask me to assume the mantle of a prophet.

  ROYAL STYLE AND TITLE
  Lieut.-Colonel Elliotasked the Prime Minister whether, in advising the Sovereign to assume the title of Elizabeth II, he took into consideration the desirability of adopting the principle of using whichever numeral in the English or Scottish lines of Kings and Queens happens to be the higher.
  The Prime Minister: The decision to assume the title of Elizabeth II was of course taken on the advice of the Accession Council and the form of the proclamation was approved by Her Majesty's Government.
  Since the Act of Union the principle to which my right hon. and gallant Friend refers has in fact been followed. Although I am sure neither The Queen nor her advisers could seek to bind their successors in such a matter, I think it would be reasonable and logical to continue to adopt in future whichever numeral in the English or Scottish line were higher. Thus if, for instance, a King Robert or a King James came to the throne he might well be designated by the numeral appropriate to the Scottish succession, thereby emphasising that our Royal Family traces its descent through the English Royal line from William the Conqueror and beyond, and through the Scottish Royal line from Robert the Bruce and Malcolm Canmore and still further back. Her Majesty's present advisers would for their part find no difficulty in accepting such a principle. From this it naturally follows that there should not in their view be any difficulty anywhere in acknowledging the Style and Title of Her present Majesty.
  Lieut.-Colonel Elliot: Will my right hon. Friend have a special note taken
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  of this matter for the archives in future years so that a point of great interest to many people and one of much historical importance should never be overlooked?
  The Prime Minister: I cannot conceive that it will be ignored by the regular methods of reporting, and not remembered by all who take a special interest in it.
  Mr. Woodburn: Is the Prime Minister aware that however trifling it may seem to people on this side of the Border, the handling of this thing has caused a certain amount of irritation among the population of Scotland and that it would be very useful if some courtesy were shown to Scotland when they ask for information? The Prime Minister has gone some way towards that.
  Mrs. Mann: Is the Prime Minister aware that this decision has set Scotland one terrific problem because the Mint has decided to issue the coins with "Elizabeth II," and Scots who object to this title are placed in an awful dilemma?
  The Prime Minister: I hope that theoretical refinements will not prevent the normal conduct of business.
  Mr. Gower: Can the Prime Minister state what course will be followed if a future British monarch should bear the name Llewellyn?
  The Prime Minister: I hope I may ask for long notice of that question
  Mr. Manuel: Will the right hon. Gentleman indicate, in connection with the adoption of the title of Elizabeth II, what discussions he had with the Secretary of State for Scotland and what his attitude was?
  The Prime Minister: I had long and searching discussions with the Secretary of State for Scotland who has gone up, I believe, on some political engagement in the North at the present time. We searchingly examined the whole problem, and it was with his full concurrence, and even on his advice, that I gave the answer which I have just read to the House.
  Mr. Ross: Will the Prime Minister tell us why he decided on 1066 as the starting date for this? Was it to get out of the difficulty of the fact that the first King Edward is not known as Edward I, but as Edward the Confessor?
  The Prime Minister: As the great scroll of history unfolds many complicated incidents occur which it is difficult to introduce effectively into the pattern of the likes and dislikes of the epoch in which we live.

B.B.C. (UNITED STATES VISITORS)
Mr. Wigg(by Private Notice) asked the Assistant Postmaster-General what facilities will be granted to Senator McCarthy's investigators, Mr. Cohn and Mr. Schine, to inspect the B.B.C.
The Assistant Postmaster-General (Mr. David Gammans): It is entirely a matter for the B.B.C. to decide what courtesy they should extend to visitors from abroad.
Mr. Wigg: Would the hon. Gentleman extend to these gentlemen the customary British welcome, but would he also assure them that we should regard it as thoroughly reprehensible that any visit to this country should be used as an occasion to gather evidence to prosecute and deliberately smear liberal-minded persons in America?
Mr. Gammans; That is a purely hypothetical question to which it would be improper for me to give an answer. No application whatever has been made, either to the B.B.C. or to the Post Office, for any facilities for these two gentlemen.
Mr. Hobson: In view of the fact that in the last analysis the Postmaster-General has complete power over the B.B.C, does the Minister propose to tender any advice to the B.B.C?
Mr. Gammans: No advice has been asked for by the B.B.C, because no application has been made to them. The question of granting courtesy is always left to the B.B.C. and the Government have complete faith in the power of the B.B.C. to exercise that discretion.
Mr. S. Silverman: Would the hon. Gentleman, at any rate, undertake on behalf of the Government that no obstacle of any kind will be placed in the way of these gentlemen visiting this country, and that if they come they will be given the fullest possible facilities for observing democracy at work?
Mr. Gammans: The question of granting facilities for people to come to this country is not a matter that concerns me.

GUIDED WEAPONS (OPERATIONAL RESPONSIBILITY)
The Parliamentary Secretary to the Ministry of Defence (Mr. Nigel Birch): With your permission, Mr. Speaker, and that of the House, I should like to make a statement about responsibility for the operation of ground to air guided weapons.
The stage has now been reached when we can see that ground to air guided missiles have a very important part to play in the air defence of the United Kingdom. Development of these weapons is proceeding satisfactorily and arrangements must now be studied for their future introduction and operation as part of the air defence system. After full consideration, Her Majesty's Government have decided that the manning and operation of ground to air guided weapons will become the responsibility of the Royal Air Force.
This decision is based on the fact that these guided weapons will be complementary to fighter aircraft and operate in the same air space and must therefore be under the same ground control. Their introduction will be a gradual process. For many years to come Regular and Territorial anti-aircraft regiments will continue to carry out an essential part in our air defence system. These arrangements do not affect the responsibility of the Ministry of Supply for research, development and production.
Mr. A. Henderson: Is the Parliamentary's statement intended to indicate that the ground to air guided weapon is not likely to be available for at least some years to come? If that be so, is it intended that Fighter Command shall have operational responsibility for all Regular and Territorial anti-aircraft batteries which up-to-date have formed part of Anti-Aircraft Command?
Mr. Birch: The statement that I have made indicates nothing about the timing, except that guided weapons are not now in service. What it does indicate is that

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plans are being laid for their introduction into service. The relationship between Fighter Command and Anti-Aircraft Command remains exactly as it is at the moment.
Mr. Henderson: I do not want to ask any embarrassing question, but the statement has been made by the Minister, in the presence of the Secretary of State for War, that for many years to come Regular and Territorial anti-aircraft regiments will continue to bear the main responsibility in this field of action. Is it not therefore reasonable to suggest that the time factor was introduced by the Minister into his statement? Is it not a reasonable inference from his statement that this weapon is not likely to be operationally available for some years to come?
Mr. Birch: No, I do not think that that is a reasonable deduction, for the simple reason that anti-aircraft guns of various sorts will be needed after the introduction of guided missiles.
Mr. Henderson: May I ask, therefore, whether the House can take it that this weapon will be available in the near future?
Mr. Birch: I am not prepared to give any date.
Mr. Ian Harvey: Will my hon. Friend, in the light of that statement, undertake
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to carry out with his colleague, the Secretary of State for War, a review of expenditure on existing anti-aircraft weapons to see if some economies can be made?
Mr. Birch: That subject, of course, has been deeply studied over the last year.

BALLOT FOR NOTICES OF MOTION
  COLONIAL EMPIRE (COLOUR BAR)
  Mr. Fenner Brockway: I beg to give notice that on Friday, 1st May, I shall raise the appropriate question of the abolition of the colour bar in the Colonies, the Protectorates and British Trusteeship Territories, and move a Resolution.
  FUEL AND POWER (ANCILLARY PRODUCTS)
  Mr. McAdden: I beg to give notice that on Friday, 1st May, I shall call attention to the need to develop the ancillary products of the coal, oil, gas and electrical industries, and move a Resolution.
  COAL MINES (CONSOLIDATION OF LAW)
  Mr. A. Roberts: I beg to give notice that on Friday, 1st May, I shall call attention to the need to consolidate the law relating to coal mines, and move a Resolution.

SLAUGHTER OF ANIMALS (PIGS)
Brigadier Ralph Rayner: I beg to move,
That leave be given to bring in a Bill to provide for the humane slaughter of pigs in places other than slaughter houses and knackers' yards; and for purposes connected therewith.
I apologise for delaying the start of the Budget debate. I rise to ask the permission of the House to bring forward a small, straightforward Bill, which is supported by hon. Members of all parties, to deal with the humane slaughter of pigs outside the public abattoir. I regret to have to try to add even one small Bill to the formidable weight of laws and regulations which still afflict us; but the multiplication of backyard pigs which must follow from the freeing of feeding-stuffs makes this matter very urgent, and I feel too strongly about it to remain silent.
When last I spoke in this House about humane slaughter, the hon. Member for South Ayrshire (Mr. Emrys Hughes) pointed out that as a brigadier I was a licensed slaughterer, and various hon. Members opposite who have a deep and very genuine objection to foxhunting reminded me that I was a hunting man. Certainly I am a soldier, and certainly very occasionally I still hunt the fox, but I hope on this occasion hon. Members will acquit me on the charge of hypocrisy, and allow me my opinion that the killing of domestic animals in cold blood is something apart from killing in battle or during the chase.
The domestic pig does not enjoy freedom or chance the hazards of the wild. From birth he is in every way the friend and servant of man. He provides us with our best shaving brushes, and from then on he subscribes to half a hundred articles that we may well use during the day. He provides us with our best breakfast and from then on with some of the most tasty dishes that we may have at any meal. Surely, in return, the least we can do is to see that he is efficiently and mercifully dispatched.
My wife and I keep pigs in Devon, quite a lot of them, and the more I see of the pig the more I respect him. He is naturally a clean animal if given half a chance, and when the modern pig pen
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has a soiling annexe he uses the lavatory a few times a day like any gentleman. Moreover, he is an intelligent animal. His cousin the wild boar, as hon. Members know, is one of the bravest and most intelligent denizens of the jungle and has often been known to see off a tiger, and the domestic pig shares in that intelligence, at any rate.
Hon. Members will have read in "The Times" the other day of the porker, fallen down a deep well, which swam round until a ladder was procured and lowered,, when he put his fore feet under one rung and his snout under another and was pulled to safety, whereupon he grunted a word of thanks and wandered off. That shows his intelligence, and so do some of the circus acts that many of us have seen. The very fact then that he is intelligent and clean makes a messy and murderous death for him all the more horrible.
If there is any question of cruelty to a dog or a cat or a horse, there is an immediate wave of public indignation and letters on the subject pile up in the Members' Post Office. But there is little public opinion about the question of humane slaughter. Domestic animals have to be killed, even little lambs, and "the less we think about it the better" is the general attitude. I do not enjoy making this speech, and hon. Members even less enjoy listening to it, but the very fact that there is no public opinion on the matter puts a responsibility on this House, I suggest, to deal with what is a scandal.
I am not going to harry the feelings of hon. Members with accounts of how innumerable pigs have met their deaths in backyards in the past and how innumerable pigs will meet their deaths in the future unless we do something about it. I am asking this House to do something about it. I am asking for leave to bring in this very short Bill for Second Reading. I may say that I have been in touch with the Ministry of Agriculture and the Ministry of Food, the Federation of Meat Traders' Associations, and the Small Pig Keepers' Council, and I hope to have their blessing on the Second Reading.
Question put, and agreed to.
Bill ordered to be brought in by Brigadier Rayner, Mr. Peter Freeman, Mr. G. Williams, Brigadier Peto, Mr. Anthony Greenwood, Sir T. Moore and Mr. Hylton-Foster.

SLAUGHTER OF ANIMALS (PIGS) BILL
"to provide for the humane slaughter of pigs in places other than slaughter houses and knackers' yards; and for purposes connected therewith," presented accordingly, and read the First time; to be read a Second time upon Friday, 24th April, and to be printed. [Bill 71.]
ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee [Progress, 14th April].
  [Sir CHARLES MACANDREW in the Chair]
  Question again proposed,

  AMENDMENT OF LAW
  That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to the making of amendments of the law relating to purchase tax except amendments, if any,—

  (a) making the same provision for or in respect of chargeable goods of whatever description; or

  (b) relating to the administration or enforcement of the enactments relating to the tax; or

  (c) reducing any of the rates of the tax generally for all goods to which that rate applies.

BUDGET PROPOSALS
3.47 p.m.
Mr. John McKay: I am grateful for the tolerance of the House in allowing me to continue an interrupted speech. I sat yesterday in this Chamber from 2.30 until nearly 10 o'clock and I had about three minutes in which to make my speech, and in the circumstances I think I am justified in continuing my speech. Looking at the OFFICIAL REPORT of yesterday's debate, I find that the average length of the speeches was about 30 minutes.
There is no doubt that the eyes of the country are upon this Budget situation, and I want to consider the situation as expounded by the Chancellor from the point of view of its effect upon the people of the country. I do not intend to go into many details, but I should like to indicate how I think this Budget will affect various sections of the community.
The Chancellor announced that one section of the community, the old people, who have money invested and who are receiving further incomes in addition to their pensions, ought to get some concession, which will amount in total to £1 million. That is all to the good; I do not think there is much objection to it. Then there is another concession

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in respect of dependent relatives and housekeepers the allowance for whom is to be £60 instead of £50, and this concession is estimated to cost between £3½ million and £4½ million; let us say £4 million.
Then we come to what I call the neutral concessions, and here I include Purchase Tax. I call them neutral concessions because, while we may disagree on the articles in respect of which Purchase Tax has been reduced, nevertheless I think it will be admitted that these concessions apply practically to all classes of people. These neutral concessions will cost from £45 million to £60 million.
Next, we come to the reduction of 6d. in the lower rates of Income Tax; and here we are dealing with a section of Income Tax payers which includes a very large proportion of the workers. The total concession here amounts to £57 million. We can see, therefore, that all these concessions—to the old people receiving incomes from investment, or for dependant relatives and housekeepers, or reductions on the lower rates of Income Tax—amount to about £62 million to certain sections of the community.
Let us see what concessions are given to other classes in the country. First, let us take the Excess Profits Levy which is to be ended on 4th January. This concession amounts to about £100 million. Although the effect of the initial allowances does not operate now, it is admitted that these will cost on an average about £67 million a year, considered over the years 1954–55 and 1955–56.
Next, we come to the reduction of 6d. in the standard rate of Income Tax, which is to cost £64 million to £73 million. Let us call it £68 million. These concessions largely affect the well-to-do people of the country. When we take that broad view of the situation, we see that the Chancellor of the Exchequer is in a position to make concessions and that, generally, this is how he has made them: £62 million to the millions of workers in the country who have very little income and about £235 million to the people who, on the whole, are in a very comfortable position.
This policy is advanced, of course, with the claim that, while this concession of £235 million is made to these people, the ultimate effect on the country will be favourable and will react throughout the
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country and to everyone's benefit. That claim has yet to be tested and many of us have our doubts about it.
The question arises as to what are the real necessities which must be applied to meet the present economic position. Let us look at the position as examined by such people as the London and Cambridge Statistical Organisation. They tell us that, from 1938 to the present time, company profits have nearly trebled. Some hon. Members may say, "That may be so, but the amount of capital invested has increased tremendously." Let us therefore leave that point and consider the dividends which have been declared. In their statistical tables, the organisation tell us that, from 1938 to the present time dividends, have increased from 8 per cent. to 16 per cent. One would think, therefore, that companies are not in such a very bad position, after all.
I want to point out what seems to me another remarkable fact. It is recognised that the purchasing power of the £ is less than half its value. When we consider the question of the £ invested, instead of it going down in value, in money rates, the invested £ in industry has doubled its value. That seems peculiar to me. In the one case, the £ used by the people has fallen in value by half, yet the value of the returns on the invested £ has doubled.
That being so, one wonders whether there is any truth or reality in the general economic position which has been outlined and whether these industries needed the concessions which have been made. I have read various articles on these matters. When one has to do so, one finds that many of these financial articles are written with the idea of meeting the viewpoint of the people who employ the writers. There is no doubt that during the past month a general psychology has been created as a result of the attitude of traders in the country and as a result of the attitude of economists and financial writers, who have been trying to impress upon the country that whatever else is done, one of the things which must be done is to reduce Income Tax and give concessions in other respects to traders and companies.
I do not want to go into this in too much detail, but nevertheless I have a duty to perform to myself and my constituents. While I will not labour the point

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too much, I expect due attention to be given to the matters about which I am speaking and which are of interest to my constituents, if they are not to the Committee. One of the most amazing things which has been publicised a great deal in the North of England has been the suggestion that a Scottish millionaire came down to Newcastle trying to negotiate a sale with Binns, Ltd., who have a tremendous amount of property and who deal in clothing, drapery and other things. The amount of money which the Scottish millionaire was prepared to pay for Binns, Ltd.—for the original shares—was almost 20 times the original price. That begins to make us doubt whether there is any need to deal with the economic situation on the lines which the Chancellor has adopted.
Another fact which has been pointed out by financial writers, in connection with these companies concerns Swann and Hunter's, at Wallsend, which is part of my constituency. Financial writers have drawn attention to the fact that in 1951 this company paid 18 per cent. and that this year, their jubilee year, instead of paying 18 per cent. they are paying 28 per cent. This financial writer goes over the details of this company and indicates that it is in a very good position. Its reserves are sound and its future prospects exceedingly good.
The writer goes also into the details of Imperial Chemical Industries and points out how well they are doing, what great reserves they have created, what dividends they have paid, what their future prospects are, and how much capital they have invested and are intending to invest. He notes how Unilever, Limited, are spreading out in all directions and have apparently sufficient capital to carry on doing so while paying jolly good dividends. He concludes with this passage:
"Mr. Harry S. Broom, chairman of the engineering firm of Broom and Wade, has hit the right note. … He does not disagree with his fellow-directors over the alleged effects of high taxation. But he admitted recently in his annual statement to shareholders that, since the formation of the company in 1935, he had been able to leave profits exceeding £1 million in the business. That was more than the total sum paid up in cash on various issues to shareholders. He regarded this as a remarkable achievement, 'and without we should not have been able to build up the business to its present extent with up-to-date buildings and modern plant.'"
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So there we have an admission by one of the great engineering firms that they have been able to modernise and maintain their plant on the proceeds of their business, despite taxation.
I want to deal with another aspect of the Budget. Many millions of pounds of reliefs have been conceded by it. It may be an electioneering Budget. It may be that these are the conscientious decisions of the Chancellor, and that these proposals are an absolute necessity. Nevertheless, while the Budget may give encouragement to big trading concerns, who are very happy about it, what the Chancellor has to consider is not only the position of the big proprietors of economic concerns, he has to consider the whole of the people in general. Let us see what is happening to them.
We all have regard to the aged pensioners. We all have regard to the sick. We all have regard to the needs of the unemployed. Yet while wages are rising with the cost of living, while the invested £ has doubled its value since 1938, what is the position of the aged pensioners, the sick, the unemployed, the injured, and the war pensioners? We all thought in 1946 that we had made a great step forward to help them. Both sides of the Committee agreed with what was being done. We were then dealing with the people of the country in general, with the people who were in difficulties and who had helped to produce the wealth of the country.
We decided in 1946, in all conscientiousness and justice, to give some benefits to those people. The London and Cambridge Economic statistics show that since 1946 the prices of commodities have gone up 48 per cent. One would have thought that when hundreds of millions of pounds were being conceded by the Chancellor of the Exchequer in reliefs something would have been done to help war pensioners, men injured in the factories, the sick, the unemployed, and the aged.
Had the Chancellor decided, in making these concessions, to keep the position of those people in proportion to that of the wage earners and the industrialists, things would be different. That is not the position, however. If it had been the position, to offset the 48 per cent. rise in the prices of commodities, the 42s. of sickness and unemployment benefit,

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and the married aged pensioners would be 62s. a week. The Army pensioner's 45s. a week would be about 66s. and injury's benefit would also be 66s. The Chancellor has ignored those people in making the concession. He has ignored those who need concessions most while giving concessions to people who can fight through the economic struggles fairly well.
Anyone who analyses the position knows that there are nearly 12 million people who do not reach the standard level of Income Tax, and the people who are getting real benefit by the Income Tax concessions are those with annual incomes of thousands of pounds, not the people with £5 or £6 or £10 a week.
Hon. Members on that side of the Committee and on this side have agreed in principle that equal pay for women is a justifiable thing. Here are concessions costing hundreds of millions of pounds, but the women are ignored. Are we hypocrites? We ought to have been doing something for the women in these concessions. The invidious distinction made between men and women in the payment of wages and salaries has an historical growth. The idea was that a man had extra payment because he had a family to keep.
But what is happening? First, women are handicapped in that, while doing the same work as men, they get less pay for it, but further to that, the married man gets allowances for his wife and allowances for his children, before paying tax. A man married with two children gets the extra wages above the woman doing the same job, but the Government give him extra allowances for his wife, £90, and for his two children £170, which, if he is being taxed, relieves him of £260 at say, the 5s. rate which would be a net gain in addition of £65. Then he gets £21 family allowance, making a total net gain of £86; and women are being taxed to provide this.
The position requires serious consideration, and, whether this is an election Budget or otherwise, I am satisfied that the mass of the people, to the extent that they apply their minds to these matters, are bound to come to the conclusion that, in making concessions amounting to a tremendous sum of money, the Government have ignored all the people who require aid and help. There are great and
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invidious distinctions made which I feel sure will not receive the support of the masses of the people, no matter how much financial writers in the various newspapers attempt to build up the Budget.
The truth is that it is a rich man's Budget, as one would expect to come from the other side of the Committee. We hope that as time goes on the people of the country will be able and sufficiently interested to go into these matters and understand them better. To the extent that they do so, there is no question about what their judgment will be. They will come to the conclusion, as they did in 1945, that their hope of real justice, in consideration of the wealth they produce, lies with the Labour Party rather than with the Conservative Party.
4.12 p.m.
Mr. Hugh Gaitskell: In presenting his Budget yesterday, the Chancellor tried very hard to establish two propositions. The first was that the improvement in our balance of payments was in the main due to the efforts and sacrifices of the British people, under the guidance of Her Majesty's Government. The second was that this improvement was entirely in accordance with the plans laid down in last year's Budget. If there is any doubt as to what I am saying about the Chancellor's view, perhaps I might dispel it by quoting from his broadcast, when he said, speaking of this improvement:
"Much of it springs directly from the hard decisions we took a year and more ago.…"
He spoke later of the "strict and unwelcome measures" that had been adopted. He further said:
"Our efforts, during last year, have shown there is something worth striving for; that effort and sacrifice can bring results."
As to the second proposition, that it was all according to plan, the right hon. Gentleman said, in his speech here:
"The developments of 1952 have indicated the strategy of the last Budget."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 41.]
And in the Economic Survey, the following words occur, in paragraph 59:
"Thus the changes in the economy during 1952 were broadly in line with the main objectives of Government policy as set out in the Budget."
I think, therefore, we might accept it that those were the two major themes.

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The reason the right hon. Gentleman tried to establish those two propositions was in order to provide himself with a politically watertight excuse for the concessions in the Budget. If he could show that we had all worked very hard, that we had all tightened our belts, that everything was going splendidly, then there was, of course, a case for a reward for the people who had done so well, and for the Government who had helped them so greatly and guided them so wisely. He wanted, I would say, to hide the fact that the real justification for Budgetary concessions this year is not the flourishing state of the economy but the stagnation into which production has fallen.
I submit that neither of the two propositions I have mentioned will stand up to serious examination. Before we can pass judgment on the merits of the Budget concessions, we must clear away the jungle of "phoney" propaganda which surrounds the whole background. We must show what is the real situation which exists today. Were the efforts and sacrifices of our people the cause of the improvement in our balance of payments?
Obviously at least one part of it shown in the figures cannot be so ascribed. I mean, of course, the £120 million of defence aid which is included in the balance of payments figures. I very much regret that the Chancellor has included that sum in that way. When we received Marshall Aid—and we were very grateful for it—we always left it out of our balance of payments figures and showed it as a capital grant which helped us, in some cases, to increase our surplus, in other cases to cover a deficit or transform a deficit into a surplus, but it was always treated as a capital item. I cannot see the justification for treating defence aid as though it were a normal part of our exports. It not only misleads our own people; it also misleads the American public. That is a silly thing to do.
There are two other points about the figures, minor ones perhaps, to which I wish to refer. First, it is interesting to notice that the figures for last year's deficit have been substantially modified. I think they were originally £530 million; they are now £390-odd million. Second,
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there is another peculiar feature of the figures for this year, namely, the extraordinary difference in the improvement in the balance of trade as calculated by the figures published by the Customs and Excise Department of imports and exports and the figures of payments as calculated by the Treasury and the Statistical Office.
The difference in the improvement as between those two methods of calculation is, as the Economic Survey clearly shows, no less than £250 million, so that if we were to calculate the balance of payments on the Customs figures we should presumably, after deducting defence aid, not be in surplus at all. I am not questioning the method of calculation; that is a technical point which we could discuss at some other time. It is interesting, however, to notice the extraordinary difference between these two methods.
Still, accepting the method of calculating on the basis of payments, we have an improvement of £570 million, a very substantial one. How was it done? Was it really the result of a buoyant economy, with output expanding, exports booming, and a complacent population sitting there, holding their belts very tightly? Of course, in a way, that picture is a very natural one to propagate. The ordinary man no doubt thinks that if his spending is outrunning his income, the only way to put things right is either to work harder, do more work, earn more money or consume less—to cut his standard of living. That is what I suppose we would all expect.
The facts are, however, that this was utterly remote from the reality. Did we work harder in 1952? Of course we did not. Production was down, employment was down, there was more short-time, there was less over-time. Almost every index we can take was down, except, as an hon. Member reminds me, the cost of living. There was less investment. I am not blaming our fellow countrymen or ourselves for this. The fact is that people were not allowed to make the effort. There was not the demand there; there was not the requirement for their services. The figures are well-known. There was a net fall of 3 per cent. in our industrial production, falling for the first time since the war, which is calculated as implying a decline in total output of £100 million. I accept that

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figure for the moment, although there are questions which, if I had more time, I would have asked about it.
The second question is: Did we consume less? Here the Government are in some difficulty because it very often suits them to claim that we are in fact all much better off now as a result of their efforts, and, if that were the case, obviously we would not have cut consumption at all. That is the propaganda tack which is sometimes followed. Let us look into it.
The figures of food consumption published in the Economic Survey are very interesting. They occur on page 21 of the Survey, where they are all set out in Table 16. There we find that the average daily intake per head of protein, whether animal or vegetable, is down. The average daily intake per head of fat is down. "Visible fat," whatever that may be. as contrasted with "fat from all sources"—we could think, of course, of some ways of describing it—is also down. The total energy value, measured in calories, falls to 2,950, below 3,000 for the first time at any rate for several years.
And if we take the consumption of foods per head, it is the same story: dairy products, less per head; fish, less per head; eggs, less per head, oils and fats, less; sugar and syrups, less. Only meat has increased at all. We must concede that to the Government, and the reason for it is, of course, the very great difficulty we got into in the previous year because of the refusal of the Argentine to supply the meat.
Pulses and nuts were up 1 per cent. per head and, I think, vegetables by a very small percentage as well. Every other item in this table shows a decline. I must say that perhaps that is where the belt tightening comes in. But, of course, as the Chancellor pointed out yesterday, if we take consumption as a whole, apparently in the fiscal year there was no change and in the calendar year only a very slight decline. What has happened, I am afraid, in this. As a result of the higher food prices caused directly by last year's Budget, some people have consumed less and have been forced to consume less—those people who did not get the benefit of the tax concessions and have not had sufficient wage increases to make up the difference since then.
On the other hand, the people who got the benefit of the tax concessions, large
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benefits in some cases, have, of course, consumed more. So there has been a redistribution in favour of people who are better off. But we must accept—1 do not question the Chancellor's figures here— that, taking it as a whole, there has been no reduction. If that is so, it is really a rather remarkable fact. We have produced less, we have not consumed less, yet the balance of payments has improved by £570 million. That is not all. Government expenditure—real expenditure— is up, according to the Survey, by £325 million, most of it, of course, on defence —although I cannot help commiserating with the Chancellor that even his little mouse of £50 million real savings, which he produced last year so proudly, seems to have been completely washed away in the flood of additional expenditure.
Well, then, we have this situation: a switch of £570 million in the balance of payments and an increase of £325 million—pulled, so to speak, towards defence and other purposes by the Government— a total burden on the economy of no less than £900 million. This is very puzzling. How is it done? Where does the answer lie?
Part of it, of course, as the Chancellor said in his speech yesterday—and, if I may say so, more clearly than the Economic Survey shows—is due to the improvement in the terms of trade. We shall do well to remember the extraordinary differences that changes in the terms of trade can and do make to our fortunes. In 1951, as the Bulletin for Industry, published by the Treasury, has now shown, we lost in that year on account of adverse terms of trade no less than £500 million. That accounts in itself for the deficit for that year, for the change, or practically all of it. In 1952, on the other hand, we had a gain of something like £350 million. That was very nice. But I think that the Chancellor would probably agree that it was fortuitous—it was something certainly not under our control, it was simply the movement of world prices at that particular phase of economic history. It is true, on the other hand—I want to be perfectly fair in going through these figures—there was a loss of £85 million on invisibles as against the hoped for improvement of £100 million.
The improvement in the terms of trade is clearly part of the answer, but it is not the whole of it, and it cannot be the whole of it. We have to explain how

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somehow or other £900 million was conjured up, and a gain of £350 million partly offset by a drop of £85 million in invisibles does not go far towards that. The answer can only be that it comes from a decline in investment. The truth of the matter is that last year, in 1952. investment in total in this country in real terms fell by close on £600 million.
The figure now given for the increase in stocks and work in progress in 1951 is £450 million. In fact, 1951 was a year in which we were stockpiling at a very rapid rate. I do not know whether the Leader of the House remembers some of the curious remarks he made after the Election about bare cupboards and skeletons hanging from chandeliers. He has probably learned a little since then. I remember that not long ago—I think that it was in one of our summer debates —he did not seem to understand this point about stocks and work in progress, but the Economic Survey makes it very plain, and I hope that he will read it this year.
In 1952, as we know, there was no increase in stocks and work in progress in this country. There was no increase at all, but there was something else. There was a decline in stocks on their way to and from this country, but under British ownership, of £100 million. If I may say so to the Chancellor, he was less than frank with the Committee yesterday when he emphasised that stocks in this country had not fallen, because we are dealing with balance of payment figures which, after all, are based on payments and which take into account what is owned by British citizens and traders in ships coming to or going from this country.
Therefore, it is perfectly plain that, if we are talking in terms of explaining the balance of payments situation and all these figures, we must admit that there was a decline of £100 million in stocks as against a build-up of £450 million in the previous year. That is £550 million, and there is the extra £35 million decline in fixed investment. So I repeat that the extent of the fall in investment is close upon £600 million.
The conclusions that I draw from this are the following. First of all, the release of resources by the fact that we did not build up stocks, and, indeed, drew
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them down slightly, last year was only possible because of the accumulation which we had made in 1951. If it had not been for that, the Government could not have drawn the stocks down and got the relief.
Secondly, I think it is worth pointing out that if—as I should have thought was a reasonable proposition—we take with the balance of payments figures the changes in the stock position—because most of us know that a cash account does not reveal a great deal and we also want to know at least what is happening to the stocks—then a rather interesting result comes out. In 1950, when there was a decline in stocks but a large surplus, larger than the surplus minus defence aid for 1952, there was, roughly speaking, a surplus of £100 million. In 1951, again bringing stocks into the account, there was a surplus of £50 million, and in 1952 there was a surplus of about £70 million. In other words, taking the two things together, there is not all that difference between the three years.
One must therefore conclude—this is my third conclusion—that there has been no effort and sacrifice as a whole in 1952 and that the improvement in the balance of payments position has come wholly from the favourable terms of trade and from the fall in investment. Of course, that is why it has all been so painless, but it is also why it is so precarious.
The second proposition which I mentioned at the beginning of my speech is that all this was done in accordance with the plan of the Budget. I find it hard to understand how the Chancellor can seriously put forward any such proposition. After all, he had to admit to us yesterday that the Budget surplus which had been planned at £510 million turned out to be £88 million, not exactly what one would call "according to plan." Incidentally, I cannot help saying that I believe that if the Labour Party had turned out such a short-fall on a surplus, the Conservative Opposition would have made the most terrible fuss about "Socialist extravagance" and, indeed, as my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) reminds me, their newspapers would have had a lot to say about it, too.
Apart from the budgetary position, what about the plan for the economy? Let me say at once that here I must com-

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pare the calendar year 1952 with the fiscal year 1952–53, because we have not the figures for the later fiscal year, but I do not think there will be any very great divergence. The plan was, first of all, that production should rise by £250 million worth; the outcome was a decline of £100 million. So we were minus £350 million on that. The plan was that Government expenditure would increase by £150 million; it actually increased by £325 million, a substantial difference of £175 million. The plan was that the terms of trade would improve by £150 million; they actually improved by some £350 million. The plan was that invisibles would improve by £100 million; they actually worsened by £85 million. The plan was that fixed investment would decline by £100 million; it declined by £35 million.
I particularly ask the Committee to notice the next figure. The plan was that investment in stocks would be lowered to the extent of £150 million; in other words, that there would be an increase in stocks of £300 million. The reality was a decline of £550 million in investment in stocks. All I can say is that these figures speak for themselves and if it really is true that the Government intended all these results, then they stand convicted at the very least of grossly misleading the public.
The Economic Survey and the Chancellor's speech this year give a rather different impression of the Government's attitude to their monetary policy. We found it very difficult to understand last year and we tried several times to get the Chancellor or one of his colleagues to explain to us just how the monetary policy assisted the balance of payments situation. Now we have the Economic Survey very much bolder on the subject and we have the Chancellor explaining to us what really happened. Unfortunately, there is no one place in the Survey where one can say that the whole position is set out, but I will draw to the attention of hon. Members paragraph 31, where the Survey says:
"Exports, personal consumption and fixed investment are all estimated to have fallen slightly in real terms, but these falls were more than offset by the rise in the current expenditure of public authorities, which was almost wholly on account of defence."
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It continued:
"The immediate explanation of the fall in output must therefore be sought in changes in investment in stocks of finished and semi-finished goods and work in progress."
In other words, according to the Survey, the decline in output is due to the decline in stocks.
I now turn to paragraphs 55 and 56. Here the same point is made and elaborated. In paragraph 55 the Survey says:
"The check to production in the middle of the year appears to have marked a phase of readjustment, in which stock changes were a major factor."
In the following paragraph we are told:
"… consumption of imported raw materials was considerably reduced because of the lower level of industrial activity "—
indeed, that is so—
"which was itself largely associated with the movements in stocks and finished and semi-finished goods and work in progress. Thus the disinflationary developments at home, in which monetary policy was an important factor, played their part in restoring our overseas position."
What exactly does this mean? It means just this, that the monetary policy worked because it brought production down. The link between monetary policy, the improvement in the balance of payments position and the cut in imports is simply the fall in production. I am glad the Government have at last admitted it. Of course, it is no doubt the case to a certain extent, though I shall have some comments to make on it later on.
I ask myself these questions. What precisely had the Government in mind? What was the aim when they, apparently, on their own admission, tried to reduce investment in stocks? Was it that they wanted to throw out of work the people who had previously been making these stocks? Did they want those people to be left out of work or did they want them to be re-absorbed, and, if so, did they want them to be employed somewhere else in the country? I could see the argument there. I could visualise the Chancellor coming forward and saying, "We cannot afford this year to go on accumulating stocks and we must put the labour previously doing this sort of work into something more important, such as into exports or fixed investment." But where did the labour go?
Let me say, in elaborating that, that I am not arguing that we should have

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continued the stockpiling that we had in 1951. On the contrary, I repeat that the fact that we stockpiled in 1951 gave us the opportunity to release resources. However, my question is not merely "Were they released or not?", but "Were they employed elsewhere? Were they used for an effective purpose from the point of view of the economy?"
What happened, in fact, to the movement of labour? Again the Economic Survey helps us. In page 41 there is a table setting out the movement. We know, of course, that during the year there was a reduction of the numbers employed of 145,000 in civilian employment, but as between the different industries I can see one industry only where I will concede, whether it was due to this or not is very hard to say, a very welcome improvement has taken place, and that is coalmining. But as against that, where there was an increase of 22,000, there is in agriculture, which I venture to say is almost equally important, a decline of 22,000. If one looks to see where the biggest increases are to be found, they are in the distributive trades and the professional, financial and miscellaneous services. There is there an increase of 40,000 men. That is the re-deployment that is taking place as a result of the release of these resources.
The Chancellor yesterday referred to the aircraft industry, and, of course, there has been some increase there, but a very large part of that increase occurred by the middle of 1952, not long after last year's Budget. I must also point out, as far as engineering as a whole and vehicles are concerned, the really striking increase that took place there of 200,000 —in my view a very necessary increase— between June, 1950, and December, 1951. Since then there has been no increase at all in this vital, important group of industries.
How are we to explain this failure, as it must be admitted, of re-deployment? I would venture the following explanation. The truth about the changes in investment, in stocks and stock-building is, I think, that monetary policy has not had such a decisive effect. I think a far more important point is the expectations of businessmen and traders all along the line, and the level of demand itself. I believe these play a much
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more important part than credit and interest rates. I will concede straight away—indeed, it is part of my indictment of the Government—that the Bank rate policy created, and I say was deliberately intended to create, an atmosphere of pessimism and uncertainty, which was calculated to discourge the accumulation of stocks. It did more than that; it created this atmosphere throughout the whole of the economy.
The result was a fall in stock-building, much of which I think was inevitable, and which I would not myself say was regrettable in the circumstances. But I repeat that the important point is that re-deployment of labour should have taken place but has not taken place. I believe the reason for that was that we have not got in those industries, particularly the investment industries, the climate of opinion which at the moment is inclined to take on more labour.
In other words, there is pessimism, uncertainty, general worry and anxiety about future prospects, which it was the explicit purpose of the Bank rate policy to create. As a result, resources have been released but not taken into the vital services, and, therefore, we have a situation where production is stagnant. It is not enough for the Chancellor to say, as he said on various occasions, "We have released resources for export," or to say, as the Survey does,
"The economy … is in a better position to respond to any increased demand for our goods in overseas markets."
That is all very well if there is any increase in demand, but if there is none, of course it does not help us at all. Nor is it any good for the Chancellor to say, "We have created room to expand exports," unless they are really going to expand.
It is not only a matter of exports. The Chancellor is really saying, "We have created unemployment. That is a fine thing to do. Now the people can come along and employ the labour." But they are not employing the labour; they are not coming along. Exports are not expanding and investment is not going up. All that is largely due to the Governments' policy. I draw the attention of the Committee to one other important sentence in the Survey, that we are now dependent simply and solely on the expectations of businessmen in a way that we have not been when there was a high

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level of demand on which we could rely for an expansion taking place. Now we are at the mercy of what businessmen may think may happen some time.
I believe that in his heart of hearts the Chancellor has some recognition of the dilemma in which he finds himself. Indeed, if he had not this recognition it is very hard to see how, on the basis of the balance of payments figures, he would still be pressing for more exports; it is difficult to see why he would not be satisfied with the position of £300 million, including the defence aid; it is difficult to see why he should be so concerned to stimulate a demand for investment and how this should be done.
In other words, I think in his heart of hearts he realises what this Budget does not face up to, that it is not a booming, flourishing economy progressing in a splendid way, but a stagnant economy with production flagging which had to be given a shot in the arm. That is the real background to the Budget proposals in the light of which we have to judge their importance. We have to ask ourselves: do the proposals match up to the needs— the needs, I say, which are very different from those described by the Chancellor?
There is one aspect of this which I do not propose to touch on. If we are thinking in terms of expansion of exports —and we are all agreed that that is vitally important—a large part of it must depend on international factors, and the policy being followed in the international field. I leave that to my right hon. and hon. Friends to develop, saying, only briefly, that it is not good enough for the Chancellor to come along and say, "It is an awful thing, but I am afraid that other Governments keep on shutting out our goods." Why do they do that? Because we shut out theirs. There is a process taking place in the dollar world, which is described euphemistically as disinflationary, which involves people continuing to buy less and less from each other, and unless we can change the climate of opinion and policies in the non-dollar world the prospect is extremely bleak.
Let me add one other thing. There is a good deal of talk about making sterling scarce, and I understand the arguments, but let us bear this in mind—sterling can be made just a bit too scarce, so scarce that people have not got it and will not
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buy our goods in consequence. I would urge the Chancellor to watch that point, otherwise he will not find much opportunity for expanding exports.
Turning to the measures themselves, let me say one word about the food subsidies. The right hon. Gentleman has avoided a frontal attack upon them, and I suppose that in the light of what was said in the Tory Press and of the arguments pressed upon him by reactionary people and journalists, we must be slightly relieved. We must be glad that the Trades Union Congress this time has been listened to, and that the arguments which were put forward very forcibly from these benches last year not only about the unfairness of the cuts but the dangerous effect on the costs in the export trade have now been taken to heart.
Indeed, I wish they had been taken a little more to heart, because the fact remains that in a quiet sort of way the Chancellor has cut the food subsidies by at least another £30 million, to which we have to add the reduction in the sugar subsidy which he claims will not put up prices. I hope he is right, but we should be wise to assume that something like another £40 million is going on to the consumers in other prices.
The Chancellor of the Exchequer (Mr. R. A. Butler): I do not want to interrupt, but for the sake of accuracy may I point out that I said it was not clearly necessary for the price to go up.
Mr. Gaitskell: I can understand the uneasiness of the right hon. Gentleman. There were certain remarks in the speech of the Chancellor about housing subsidies which have given rise to much concern on these benches. The right hon. Gentleman seemed to imply that having made it very difficult for people to buy houses by putting up the rate of interest, he was now going to put up the rents and cut the subsidies so that they could not become tenants of houses either. That is one way of cutting a housing programme, if that is what he is trying to do. [Interruption.] Do not let hon. Members imagine, from the figures we have had, that there has been any great response to the proposal that people should buy a lot more houses. The figures that the Minister of Housing and Local Government gave the other day show that very clearly, and we all have

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experience of it in our local authorities. However, I will leave that point to be developed by others.
There are two things that the Chancellor has done which have our approval. I think it was right to restore the initial allowances. When the suspension was announced it was recognised as a temporary measure and one that had to be brought in at the beginning of rearmament. But why has the right hon. Gentleman limited the restoration to 20 per cent.? Why not put it back to 40 per cent.? After all, there is quite a lot to be said for giving people encouragement, to equip themselves, is there not? We want to increase investment.
If he will not increase the figure to 40 per cent. for everybody, may I suggest this to him? He has put it at 40 per cent. for mining concerns and has introduced thereby an interesting development, a discrimination in the use of initial allowances so that he can encourage one type of development rather than another. I suggest that the right hon. Gentleman might consider going a bit further with that if he wants to encourage exports and a certain type of investment. Why not give higher initial allowances, as I think was suggested by the Millard Tucker Report, to industries in which the Government want to encourage investment?
The second proposal with which we agree, so far as it goes, is the removal of the absurd and bad Excess Profits Levy. Our views on this, unlike those of the Chancellor, have never changed; we always thought it was a bad tax. But what a performance! He brings it in one year, we spend hours and hours of Parliamentary time on it. Hon. Gentlemen opposite really must be feeling rather fed up about the time they spent in trying to persuade the right hon. Gentleman to make concessions. And goodness knows how much time has been spent by accountants and lawyers, and will still be spent. And then the Chancellor announces its withdrawal next year. I suppose we must write it off as the price of the Prime Minister when an Election is on.
There is one important comment I have to make in this connection. When the Chancellor brought in the Excess Profits Levy, he reduced the Profits Tax. He has not said anything about replac-
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ing this Profits Tax when he takes off the Excess Profits Levy. I ask him straight away: Does this mean that there is to be no replacement at all; that, in fact, not only are we to have the removal of the E.P.L. but a lower level of Profits Tax than existed before it was imposed?
There are a number of concessions, some not very important, some quite important, and we shall go into those when the Finance Bill comes along. However, I must refer to one, and that is the predeliction of the Chancellor for cricket. This, of course, represents a victory for the Parliamentary Private Secretary of the Chancellor. No doubt, as I encouraged the hon. Gentleman last year to do his best, I suppose I ought not to complain, but the hon. Member for Chelmsford (Mr. Ashton) should remember that he was not only a cricket blue but a soccer blue and a hockey blue as well. I do not mind telling the Chancellor that on this side of the Committee there are a large number of people interested in all sorts of other sports. There are champion swimmers and champion boxers and very good rugby players, and we shall be after him, when the Finance Bill comes along, to get this concession extended to all sports.
Now I turn to rather more serious considerations. The major change consists of the reductions in Purchase Tax and Income Tax and the purpose of those reductions is fairly clear. It is to increase demand, to give the economy a boost, as I think the Chancellor called it in his broadcast. We have to ask three questions about this. First, is it desirable that there should be this release of extra purchasing power? Secondly, is it going to the right places from the point of view of the economy? Thirdly, are the beneficiaries of this the right beneficiaries? In other words, is the largesse distributed fairly?
As to the first, I do not think there is much doubt that the stagnation into which the Government have allowed industry to fall produces the need for more spending. I want to ask the Chancellor, or whoever is replying, this question: Do the Government wish to increase consumption? I should have thought that with the state of the economy as a whole the prime need, apart from expanding exports, was an expansion in investment.

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I do not know and I want to know, does he think we can afford more consumption as well? Of course, it may be said that we need a little more consumption in order to encourage investment—a sort of pump-priming operation. Indeed, it is a part of the dilemma of a private enterprise economy that to persuade people to invest one has to give them good immediate prospects, which, incidentally, makes it harder to draw resources away from consumption.
If, however, one is to judge by the Purchase Tax concessions, I suppose the idea is that consumption should go up. Can we have some more light on this? What are the intentions of the Government? Do they want, for example, more cars to be sold on the home market? Have they given up all hope of an expansion in the export of cars? The industry, apart from the regrettable strike at Austins, has been producing fairly near capacity recently or certainly has every prospect of doing so.
We want to know exactly where we stand here. I am not saying that there may not be some case here, but I am saying that if we are to increase consumption and are aiming at full employment as well, then we cannot at the same time have an expansion of exports.
Mr. Arthur Colegate: Of course we can.
Mr. Gaitskell: If there is only a limited amount available then, and if more comes to the home market less goes to export. If the hon. Member does not remember the early stages of the controversy between Sir Stafford Cripps and the motor car industry, I recommend him to look it up. First, they said they could never export more than 50 per cent. and demanded an enormous home quota. Then they were refused, and eventually exports went up to 80 per cent.
Our main criticism of these measures is that if we want to stimulate demand we believe it should have been done in a way which would help poorer people. We would like to have seen, and we think the Government should have seen to it, that the Purchase Tax should have become more and more of a luxury tax, as we were gradually making it. It would have been far better to have taken off the tax altogether from a number of semi-necessities or near necessities than
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it was to reduce the tax quite substantially on what are plainly and simply luxuries—jewellery, furs, and so on.
I turn to the Income Tax. The first striking feature of the Income Tax concessions is, of course, the great benefits which are to accrue to shareholders; £45 million of the £117 million will go to undistributed profits—I do not know how much goes to distributed profits, but there must be a certain amount there as well. What is the reason? Is it that the Chancellor does not want this money spent? If it is not meant to encourage additional spending, does the Chancellor think that because it will go to undistributed profits it will be put to reserve and saved in the ordinary way? If that is his view, and if he thinks that this will not have any effect on dividends, he is quite wrong. It is almost and I would say quite certain that the effect of this concession will be an increase in the rate of dividends. [Interruption.] As my right hon. Friend the Member for Bishop Auckland says, we should look at the Stock Exchange.
Why did the Chancellor make no reference to dividends? Does he still hold the view that he expressed at Question time recently that dividend increases were undesirable? Does he still believe that it is necessary to put a brake on them, and what does he think the effect of dividend increases will be on the wage situation? He may have thought a little more carefully about food subsidies, but he does not seem to have thought more seriously about the repercussions of dividend increases. The right thing would have been to sweep away the Excess Profits Levy, reimpose the Profits Tax and introduce dividend limitation at the same time.
Let me, however, take the case of the tax concession money which is not distributed and which has, in fact, increased the capital assets of shareholders. The argument put forward by the Chancellor of the Exchequer is that it is needed for investment. It is an argument that we have heard again and again from the other side of the Committee in previous debates of this kind. I should have thought that the figures shown in the National Income White Paper this year were conclusive evidence that there is no case whatever for giving shareholders extra money on the ground that companies were short of capital. As the

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White Paper shows clearly—the Economic Survey refers to it—no less than £800 million last year was available, after taxation, after payment of dividends, after deducting the actual capital invested in the business. That was £800 million available to repay debt and to pile up financial assets.
The argument that we have to give companies still more, and that by putting still more into their pockets you get them to invest more, seems completely and entirely unconvincing. There is nothing In history or logic to suggest that this concession will make the slightest difference to investment. Before the war taxation was at a very much lower level, but did we have a very high rate of investment? We had a very low rate of investment, which we regretted, in steel, coal and many other industries.
Speaking more generally, if it is more spending that is wanted, we must ask, "Who is to do the spending?" Surely the Chancellor must have asked himself that question. He had some relief to give, and I would have thought that in the circumstances he would ask, "How can I give this relief in a way that will ease where the shoe pinches most, where it will help people who need it most? "If that is the principle, let us look at the application. I make these comments. First of all, the particular concessions that the Chancellor has chosen to make here involve that nobody below Income Tax level gets a penny, so that virtually the whole of the old-age pensioners and lower-paid workers whom the Chancellor is so proud of having left out of paying Income Tax, are without any benefits whatever.
Secondly, within the Income Tax range, there are three undeniable propositions. The first is that the richer you are the far greater concessions you get. The second is that the fewer children and dependants you have the bigger the concession you get. The third is that the more your income consists of unearned income the bigger the concessions you get. I could give any number of examples, and I have no doubt that the right hon. Gentleman and his friends will hear some from all sides of the Committee. There are examples from the Financial Statement.
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We can take what examples we like. Let us take the case of a married couple with two children at £500 a year. They get the magnificent sum of 4s. 6d. in the year as a result of this concession, or about a penny a week. Take, at the other end of the scale, that fortunate individual the eligible bachelor, with £100,000 a year of unearned income. [HON. MEMBERS: "Name."] I do not want to be personal about hon. Gentlemen opposite. Let me tell such individuals, whoever they are, that they will get out of this concession £2,500 in the year, a cool £50 a week, and that their tax-free income will go up 50 per cent. as a result of the Chancellor's generosity. This is the kind of man whom we are to encourage to work harder. [Laughter.] I know that hon. Gentlemen opposite do not like this comment.
If the Chancellor really wanted to increase consumption—I presume that he did—would it not have been better to help people who needed it more? For instance, would it not have been better to reduce the tax on earned income, to increase the earned income allowance, keeping the ceiling where it was, and to concentrate reliefs at the lower end of the tax scale, as we always did year after year in the Labour Government? Would it not have been better to have thought, "Could not I give some kind of help to people outside the tax range and particularly to old-age pensioners who, as most of us know from our constituency experience, are living in greater poverty than anybody else?" This is the way the largesse should have been distributed, and not in this entirely unfair and unsatisfactory manner.
The Budget has been presented on the basis of a false account of our balance-of-payments improvement. That improvement was due very largely to fortuitous and perhaps temporary changes in world prices, not caused, I think we all agree, by Government policy. For the rest, it was due to cuts in imports made possible only by a fall in investment in stocks, which, in turn, was possible only because of the higher degree of stockpiling carried out in 1951. In so far as Government policy had anything to do with this, as the Economic Survey shows, it was simply to reduce production and to create stagnation in our economy. This stagna-

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tion is the real justification for the concessions, a stagnation which leaves us today two years behind. We are still producing less, if the preliminary February figures are to be believed, than we were two years ago, instead of the steady progress of 3 per cent. or 4 per cent. per annum, or even more, that we had in the previous years.
This stagnation is the real cause for the Budget concessions. In our opinion, these concessions will not be sufficient to galvanise the economy into the higher state of activity which is so vital, so long as the Government fail to take the lead in combating deflationary policies abroad as well as at home, so long as the Government refuse to try to alter that pessimistic climate of opinion which they themselves have created, and so long as they refuse to take far more positive action to procure the effective re-equipment of industry at home.
But above all, this Budget marks the sharp reversal of the progress made in these last years towards social justice. [Interruption.] I ask the Prime Minister, whom I am very pleased to see here—he does not always honour us with his presence-—because he obviously has not followed my speech, to read it and he will see the answer. Hon. Members opposite can say what they like. One thing that they cannot deny is that the effect of this Budget is to increase substantially, instead of diminishing, the differences in incomes. It helps most the least deserving people. [An HON. MEMBER: "What are you getting at? "] It may please the City, the financial Press and the company directors, but it is not, I venture to say, on them that the future of our country depends so much as upon the workers in our industries. For them—let us face it—the Budget offers nothing more than a few crumbs, as it were, falling from the rich man's table.
Like last year's Budget this also is called an incentive Budget. Like last year's Budget it is unfair. Like last year's Budget I believe it will fail to produce that rise in production which is long overdue. And, like last year's Budget, it will long be remembered as only one more example of the Tory efforts to put back the clock and to strengthen the wealth, power and privilege of the well-to-do.
5.12 p.m.
Mr. Ralph Assheton: When my right hon. Friend the Chancellor of the Exchequer sat down last night at the end of his brilliant Budget speech, I was profoundly thankful for the country but I was very sorry for the right hon. Member for Leeds, South (Mr. Gaitskell), who has had to make the first speech today. He had a very difficult task indeed. Of course, he avoided some of his difficulty by spending the greater part of the time discussing not the Budget, but the economic state of the nation, and during that time he did his best to try to make us all as miserable as he could.
Mr. A. C. Manuel: We could not be any worse.
Mr. Assheton: It must have been very discouraging for the right hon. Member for Leeds, South when he woke up this morning and looked at the newspaper headlines. In "The Times" he would have seen, "Lightening the burden." [HON. MEMBERS: "Whose burden?"] He would have seen in the "News Chronicle," "Butler's bumper Budget." In the "Manchester Guardian" he would have seen, "Mr. Butler eases the yoke"; in the "Daily Telegraph," "A brave and a wise Budget"—[HON. MEMBERS: "Who for?'"]—and so on. The only two papers in which he could have found any criticism were the "Daily Herald" and the "Daily Worker," who I am glad to see in step again at last. What is more, they are both in step again with the Opposition Front Bench. That must be very comforting, but I do not suppose it will last for very long.
When the former Chancellor of the Exchequer came to criticise the Budget in detail, he found his problem a very difficult one. He talked about dividends not being limited. I should like him to study the newspapers. If he looks, for example, at today's issue of "The Times," he will see that among those companies today reporting their dividends, more have reduced their dividends than have increased them. When it came to the right hon. Gentleman's attack upon the reduction in the Income Tax, what were the main items of his attack? They were taken from an excellent—excellent, from the point of view of the party opposite—article by the right hon. Member for Battersea, North (Mr. Jay) in today's "Daily Herald." One of his incontro-

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vertible propositions was that, "The bigger your income, the bigger relief you get." That is quite true. When taxes are reduced, that is what always happens. If the tax on beer is reduced by Id. a pint, the man who drinks eight pints will get much more tax reduction than the man who drinks one pint.
The next proposition of the right hon. Member for Battersea, North was that, "perhaps stranger still, the larger his family, the less a man will get out of the Budget." Of course, if a man's income does not suffer any tax because he has a number of children, he cannot get any tax reductions in Income Tax—he is not paying any Income Tax; but it is quite wrong to say that he does not get anything out of the Budget, because his wife, who goes into the shops to buy things for her children, has to pay less Purchase Tax, and so everybody will get something out of it. [HON. MEMBERS: "Nonsense."] Hon. Members opposite say that nobody benefits except those who actually receive the Income Tax reliefs, 'but is that true? Of course it is not. The Chancellor told us yesterday that half of these reliefs went to industry. What does that mean? [HON. MEMBERS: "More dividends."] No, It means that there will be money in industry to secure the employment and pay the wages of the workers. [HON. MEMBERS: "Oh!"] Hon. Members opposite can laugh and jeer, but that is the truth.
We have put the case for some time that the cash of industry was running down—and it had been running down— and wants reinforcing. It is as important to working people as to any other section of the community that industry should be in a position to pay their wages and provide for the improvements which we need.
Mr. Frederick Lee Mr. Frederick Lee (Newton) rose—
Mr. Assheton: Perhaps the hon. Member will forgive me if I do not give way.
So it is that the right hon. Member for Leeds, South has had a difficult task. When I was leaving the House last night, one of my right hon. Friends on the Front Bench said that even the ranks of Tuscany could scarce afford to jeer. And so it is, because my right hon. Friend has made a Budget which is not only wise but is popular, as hon. Members opposite will find when they go to their con-
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stituencies. It is wise and popular, too, because my right hon. Friend has begun to take the weight off the backs of the people and off the back of industry.
The opening part of my right hon. Friend's speech yesterday was a fair and honest review of the year. The large number of beneficial changes which he has made show that he has taken enormous pains in considering the various points that have been raised during the course of the year. I do not remember any Chancellor of the Exchequer who has shown a greater grasp of his subject or a greater attention to detail.
This is a Budget which, for the first time since the war, moves in a new direction and I am very glad to see it. There are no new taxes and a great many taxes have been reduced. That is a good direction in which to go, whatever hon. Members opposite may think. The Conservative carrot replaces the Socialist stick and carrots are very good for lots of people besides donkeys.
We were all obliged to concede that the Chancellor was quite right in providing for increased defence expenditure. That is necessary; we can obviously negotiate best from strength. Increasing the strength of N.A.T.O. must have had a tremendous influence in bringing about the new situation in world politics and that must be maintained. I for one was glad to see that the civil expenditure had been reduced by £60 million, although prices had been rising. That is a distinct achievement, but I am very glad that the Chancellor admits that the pressure has to be kept on and that he agrees that taxation is still much too heavy. There is no doubt that expenditure is still much too high. I am sure the Chancellor recognises that and I am sure that he will do all he can to reduce it.
There is still plenty of scope for economy and reducing expenditure. There are plenty of economies to make—[HON. MEMBERS: "Where?"]—I gave the Committee a great many examples last year and I will give more this year. I am glad to see that there has been a reduction of 22,000 civil servants, but that is not nearly enough. In any large organisation it is very difficult to make economies, and the State is the largest organisation in the country. We have to be unceasingly vigilant if we want to do it. It is not only in the State that we want to do this, but in the nationalised

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industries, which are almost part of the State. [An HON. MEMBER: "In local government?"] Local government would be another field for economy, and I will say a word about that later.
I want to say a word about the Welfare State. The Chancellor has proved in two Budgets that the Tories are not out to destroy the Welfare State. [HON. MEMBERS: "Oh!"] He has proved that. What we want to do is to make it solvent and to earn enough money to pay for it and continue the policy, which is essentially a Conservative policy, of letting the strong help the weak. I suggest to the Committee that we must find ways of doing that so that the more capable citizens are not crippled in order to benefit those who are less worthy or less industrious. We want to do it in such a way that the more capable citizens are not crippled; they can bear a heavy burden, but they must not be crippled.
I think that the review of the Health Service which the Minister of Health is to institute is timely. I feel that more financial responsibility might be placed on the shoulders of the hospital boards and that there should be less effort spent in the minute control of expenditure from Whitehall. That applies right through the administrative machine of Government where there are always too many people watching each other spend money and not enough people in responsible positions having the duty of controlling that expenditure and being responsible for expenditure. We all know many faults in the administrative machine through daily contact with it in our own humble way.
If, on both sides of the Committee, we work together and give Ministers the advantage of our experience—as many hon. Members on both sides of the Committee have great experience, particularly in local government—we can see that our money is better spent and that we get value for it. I do not believe that the people of this country mind paying well for a good thing, but they do hate seeing their money wasted.
Coming to the specific proposals in the Budget, I touch, first, upon sugar and congratulate the Minister of Food, whom I am glad to see here, and also the Chancellor on the proposals which have been put forward. Their action will
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be approved by every housewife in Britain. It is one of the things which made the Chancellor's Budget speech a popular speech. As the derationing process goes on and prices fall, I hope that subsidies can be further reduced. Subsidies, whether on food or housing, suffer from one great disadvantage. That is that they come out of the pockets of all the taxpayers or ratepayers, however poor they are, and go into the pockets of everybody, however rich they are; so it is not a clever device and we want to find something better.
Industry, I know, will welcome the re-introduction of the initial allowances. There are some, I suppose, who would share the criticism made by the right hon. Member for Leeds, South that the 20 per cent. was not 40 per cent., but I agree with the Chancellor. I think 20 per cent. is adequate and is to be preferred to 40 per cent. One must remember, also, that this is really only an advance of money to industry free of interest, nothing more, and that it has to be provided for. I look forward to the revision of the whole system of depreciation when the Royal Commission report.
I trust that the total wear and tear allowances will be increased in many cases, but, as an interim measure, I think that this attempt to deal with the initial allowances will be welcomed by industry. I hope that in the period when the final review takes place the question of depreciation on buildings will be seriously considered apart from industrial buildings. I attach importance to the new allowances for capital expenditure on mining and extractive operations, particularly overseas. I think this is very important and I am glad that the Chancellor has done it.
I come to the Purchase Tax which, of course, is the popular feature of the Budget. Hon. Members opposite may say what they like in their constituencies, but people will be glad of these reductions. A general reduction of 25 per cent. will be widely welcomed and the moderation of the reduction will avoid some of the most serious repercussions for retailers who have stocks and who undoubtedly suffer hardship when a tax is reduced. The Hutton Report has not found a solution for that particular difficulty.
Mr. Sydney Silverman: I was wondering whether the right hon. Member had abandoned his view that it would assist the textile trade if Purchase Tax came off textiles.
Mr. Assheton: I am coming to that; I have a note of it.
I was saying that the country would be very glad—including constituents of the hon. Member and mine—to see this reduction in Purchase Tax. Many will be glad to see that the reduction has not been more than a reasonable amount on this occasion because, as the Hutton Report points out, if we make too severe a cut at any time retailers suffer very great hardship and that has to be borne in mind. I think the retailers will have to endure hardship; I cannot see a way out of it, but I hope that by taking this nasty medicine they will eventually benefit by better trade and that must be their hope. The tax on so many articles of daily household use has been reduced—cutlery, carpets, bicycles, toys, a hundred and one things that are bought in the shops, and that will be very welcome.
This means also that the cost of living will be reduced. I do not know whether it will reduce the cost-of-living index, but, certainly, the cost of living will be reduced and that is what really affects the housewife more than the index, so she will be very pleased. The increase in the cost of living—not in the index—has been causing more trouble in this country and giving rise to more complaints than any single thing since the war. Here, we are coming to the conclusion that much of this cost-of-living increase has been due to taxes being too high. I have been saying so for years.
We now recognise that it is true and we shall reduce taxes and prices and reduce the cost of living. We are getting firmly started once again on the right road, the road to a cheaper and greater supply of goods. I am sorry that the right hon. Member for Leeds, South is anxious lest the consumer will be able to buy more things, but I trust that some people will enjoy a better standard of life than they did last year. The £60 million in this field in a full year will bring relief to every householder in the country.
About textiles, the hon. Member for Nelson and Colne (Mr. S. Silverman) must remember this. I said last year, and
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I still say, that I want Purchase Tax taken right off textiles. That is my ambition. Last year he and I, and various other Lancashire and Yorkshire Members, were able to make certain protests about this tax, and we got our reductions then. We got it a year ahead of the rest of the country, and we must be profoundly thankful for that because it came at a time when our trade was suffering badly. We got our reduction in tax when it was more important to us, and we are very thankful to the Chancellor for letting us have it.
Mr. S. Silverman Mr. S. Silverman rose—
Mr. Assheton: I cannot give way again. Perhaps later on, during the Finance Bill, we shall have an opportunity of discussing this in more detail. There are so many topics that I want to examine, and I do not want to take more than a reasonable time.
I know that in my part of the country both amateur dramatic societies and sports clubs will be very pleased about the change made in the Entertainments Duty. I do not believe that even the most ardent football and dog racing fans will grudge cricket its deserved good fortune—not in Lancashire anyway.
The Chancellor's proposals on overseas profits are wise. His decision with regard to profits blocked overseas is eminently practical and sound, and I am grateful to him for dealing with this matter which we have been representing to him for so long. People cannot be expected to pay tax on profits which cannot be brought home, but when they have got the profits the tax can be paid to the Chancellor. I am sure, also, that the minor relief on the savings of those over 65 will be very much welcomed, as will be the increased allowances for dependent relatives and housekeepers.
I am glad to see the concession to authors, but I hope that before next year the Chancellor will be good enough to look into the case of inventors, which, to my mind, is just as important, and is perhaps of particular importance to the country at this time.
Next I want to thank the Chancellor very much indeed for the decision about the business chattels scheme. I was particularly glad of his proposal to settle those claims, long overdue, of business

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people who had their goods destroyed in the war, who, although they had paid their premiums, had not been paid for the goods which were destroyed. The fact that those claims had not been paid was a standing complaint which I am glad to see removed.
On E.P.L. I say very little. The right hon. Member for Leeds, South has the same views about E.P.L. as myself. I congratulate the Chancellor on deciding to abandon it. It is a striking disincentive to the most enterprising firms, and I hope that after our long experience of it this tax will never again appear on the Statute Book. Its vice has been proved up to the hilt.
We shall have plenty of opportunity later to go into the details of the Income Tax changes, and who exactly is getting what, but I still maintain that we cannot expect any reduction of the standard rate of tax to benefit the man with the smaller income as much as the man with the larger income. However much that tax is reduced, the man with the larger income will always benefit more than the man with the smaller income, so that criticism of the right hon. Gentleman is really nothing more than a debating point; a very good debating point, and a very good platform point which hon. Members opposite can make in their speeches throughout the country, but not sensible.
The Chancellor was so right to remind us that industry is an organic structure of men and women, and that no depreciation allowances, or anything like that, will have half as good a psychological effect as reducing Income Tax. That is the fact, and I congratulate the Chancellor on what he has done. I wish he had reduced it more. I wish he had been able to reduce it by 1s. instead of 6d., but I dare say that he was bearing in mind the effect his Budget has abroad and did not want to close his Budget without providing for a handsome surplus. Bankers and traders overseas look very carefully at our affairs, and they look particularly carefully at our note issue, as I always find when talking to bankers overseas, when assessing the value of sterling. If we are to achieve our great and most important objective of all, namely, restoring free exchange in sterling, we must be careful to do nothing
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to check rising confidence. So I accept the Chancellor's judgment on that, and I hope he will do more for us next year.
I think commerce would rather have seen larger Income Tax reductions than in the initial allowances. The initial allowances are very useful for industry and manufacturers, but for commerce greater reduction in Income Tax would have been more helpful, as it would have been to the professional man and woman. I have no doubt that the Chancellor has all these things in mind, and I earnestly hope that before this Government reaches the end of its allotted span—and I have no idea how long that span will be— Income Tax will be reduced to 7s. 6d. in the £.
I hope that local authorities will be encouraged by the remission of Stamp Duty to finance their housing directly by loans. I cannot pretend to be happy to see a housing programme, which is essentially a long-term investment, being sustained by the issue of Treasury bills. That is not satisfactory finance. One does not want to borrow short and lend long; that gets people into trouble; it always has done, and we must get out of it. I dare say that a long-term Government loan to mop up genuine savings may be in the Chancellor's mind to meet this criticism, but I should not dream of asking him to make any reference to it unless he wants to. When such a loan does come, if it does, I should like to suggest that one tranche of it might be issued at a low rate of interest with a special arrangement for its use in settling Death Duties, in the same way that Victory Bonds were used after the First World, War, because the Death Duties tax on capital is having a very serious effect on private businesss. I do not think that can be denied.
I think that the Chancellor has produced a fair Budget which encourages production and trade, and which gives incentive to workers and, to some extent, to work providers, although work providers do not come out of it very well yet. Before the end of next year I hope to see the end of food rationing and a further reduction in taxation. I look forward to the Chancellor's proposals for reviewing the whole system of the taxation of profits. The Royal Commission is sitting on that and its work is of the highest importance.

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I also want to hear, during the life of this Government, a plan for dealing with the finances of local Government, because the present source of income of local government is entirely inadequate and unsatisfactory. It tends to make local authorities the agents of Whitehall rather than the independent and responsible bodies they were intended to be and ought to be. That is more important than dealing with the functions of local authorities, which must come afterwards. Deal with their finances first and see that they have got the money before putting further burdens upon them or spending time deciding what their functions or boundaries should be. Finance comes first there.
The Chancellor has undoubtedly taken some risks, as "The Times" pointed out so wisely this morning. More than half the concessions have to be paid for in future Budgets. Do not let us forget that. These risks will be justified only if he succeeds. I think he will succeed, as indeed he must, in further reducing expenditure and giving every incentive he can to saving. He has paid more attention in this Budget to the needs of trade and of industry, and that benefits every man, woman and child. We thank him for what he has done; we trust he will do more next year; we shall support his poposals with confidence, and we wish him well on his journey down the right road.
5.39 p.m.
Mr. W. E. Wheeldon: I rise to address the Committee for the first time, and in doing so I am sure that I can rely upon that indulgence which the Committee, by tradition, always gives to those addressing it for the first time. I understand that the two essentials of a maiden speech are, first, brevity, and, secondly, that it should be as far as possible non-controversial. The first I think is quite easy, and I shall not err in that respect; but I am not quite so sure about the second, having regard to the debate which is taking place today.
The two speeches to which we have just listened have been very wide ranging and I do not propose to deal with matters that have been discussed already. I prefer to devote my remarks to one comparatively small but, I believe, important aspect which arises from the Govern-
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ment's financial policy. I refer to the effect of the financial policy of the Government on local government.
That matter was referred to briefly by the right hon. Member for Blackburn, West (Mr. Assheton). He did not develop the point except to hope that the Government would deal with the finances of local government before long. I agree with him that finance should be dealt with before functions. That is the logical order. I would go further and say it is high time that a distinct and radical step was taken to alter the present foundations of local government finance. Perhaps the most important and immediate question is that of derating. There are also the matters of assessment and equalisation grants, and a general review of the basis of the Government contribution to local government expenditure.
The matter to which I wish to refer more fully is the capital expenditure which local authorities today are more or less compelled to incur. The figure is now running at about £400 million a year. We have heard criticisms of local government expenditure, but much of it, if not the whole, is not only desirable, but necessary. Arrears from the war still need to be overtaken. What is more, every penny piece of this expenditure must be approved by a Department of the central Government, and to that extent it may be regarded as expenditure which is essential for the well-being of the citizen.
If there is capital expenditure for that amount there must also be a fairly substantial amount spent each year in interest payments. I believe that the figure for the current financial year will be about £70 million. Obviously, therefore, if local authorities have to pay that sum by way of interest payments they are seriously concerned about the action of the Government in increasing the rate of interest on moneys borrowed from the Public Works Loan Board. It will be within the recollection of hon. Members that the rate was increased from 3 per cent. to 4¼ per cent. That has made a substantial difference to the burden on local authorities.
I wish to illustrate that by referring to Birmingham; first, because I know it best, having served as a member of the local authority for more than 25 years,

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and secondly, because the experience of Birmingham is not singular. Other large county boroughs, and indeed some of the smaller authorities have had a similar experience. Therefore, what I say can be applied quite fairly to local government generally.
In Birmingham, the total amount of interest paid in the current financial year amounts approximately to £1 million. I am not suggesting that the whole of this amount is borne as a direct charge on the rates. It is not. Some of it will be paid by the citizen as a taxpayer, or as a ratepayer, or as a consumer of local government services. But, at any rate, it has to be paid. Schools, roads, houses, almost every aspect of local government work today is feeling the additional burden of interest payments.
I shall not go into the various services, because that would take too long, but I wish to refer to one which, today, is responsible for the greatest expenditure. I refer, of course, to housing. Today, in most local authorities, housing represents approximately 60 per cent. of the capital expenditure. In Birmingham, it is just under 60 per cent. The average cost of houses being built in the City of Birmingham is £1,670. The weekly economic rent, exclusive of rates, amounts to 36s. Of that sum, no less than 19s. arises from interest payments. More than half of the economic rent of the house is due to interest payments.
To put it another way, the total cost of an average house in Birmingham today on the 4½ per cent. basis is £2,970 in interest charges alone. On the old 3 per cent. basis, which applied up to November, 1951, the total interest payments in respect of that house over its 60 years of life amounted to £1,951. The difference between those figures is £1,019. That, in effect, is the additional cost which the Birmingham local authority has to bear by reason of the Government's decision to increase the rate of interest to borrowers from the Public Works Loan Board.
From housing I turn to the general picture to illustrate the same story. In Birmingham, it is necessary every year to raise about £13 million capital expenditure. About £3 million of that is found internally and the remaining £10 million has to be borrowed in one form or an-
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other. The rise in the interest rate has cost the city £125,000 a year, on the assumption, as I said a moment ago, that £10 million of capital expenditure is required to be borrowed each year. In other words, it is equivalent of a 4d. rate and that is a very high price to pay for this dear money policy.
My third illustration refers to something fairly well known to hon. Members, the recent loan raised by the City of Birmingham. I was Chairman of the Finance Committee at that time, and, therefore, I am particularly and closely acquainted with that operation. The term of that loan, if it runs for the proper period, is 17 years. The additional interest we are called upon to pay as a result of the increase from 3 per cent. to 4¼ per cent. is about £75,000 a year. That is an additional cost due to the increase in the Bank rate. But I need hardly say that it is not now possible to borrow at 4¼ per cent. on the market. No local authority that I know of can go on the market today and borrow at much under 4½ per cent. Unless I am wrong, I believe that shortly, when there is a queue of local authorities wishing to go on the market, rates will harden still further and that even more heavy interest burdens will have to be met.
Yesterday, the Chancellor referred to the freedom that local authorities had been given to go on to the market. I suggest that that freedom is quite fictitious and spurious. There is no real freedom for local authorities today as between borrowing from the Public Works Loan Board and going on to the market. When the rate of interest was 2½ per cent. or 3 per cent. local authorities were happy to borrow from the Board despite the fact that certain rigid conditions applied. What is more, the Chancellor seemed to suggest that the conditions were much more favourable now. Against that, I would say that by raising the rate of interest the Government deliberately made conditions of borrowing from the Board much more onerous and, therefore, forced local authorities on to the market.
That was the position with Birmingham and, I think, with other local authorities also. The Treasury still persist in adhering to regulations which are antiquated and indefensibly restrictive. Every loan borrowed from the Public

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Works Loan Board must be borrowed for the full period of the loan sanction. Obviously, no local authority in its senses, or no local authority which has a sense of duty to its citizens and ratepayers, will pay 4½ per cent. for periods of 40 to 60 years. The authorities follow the very sound practice that when rates are high one should borrow short.
This is a most important question for the local authorities. The representations made by the Association of Municipal Corporations and other local government bodies are receiving the consideration of the Government. I hope that very soon it will be possible for a favourable decision to be made. I hope that there will be a change which will allow local authorities to have a real freedom to go on to the market. There is no justification for a continuance of the present type of regulation.
I trust that I have been able to emphasise, or re-emphasise, that the rate of interest is a most important factor today in civic life and development, and that the existing rate is a grievous burden which will prove a serious handicap in the development of the legitimate and most necessary local government activities which are taking place.
5.55 p.m.
The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): There falls to me the always agreeable duty of congratulating an hon. Member on his maiden speech. The hon. Member for Small Heath (Mr. Wheeldon) made a most agreeable, polished and knowledgeable speech. I think that I speak for the whole Committee when I say that it was evident that the hon. Member was speaking with authority upon a subject with which plainly he is well acquainted, and that he spoke with a successful concealment of the nervousness which all of us, in our hearts, suffer when we go through the ordeal which he has just so successfully surmounted.
I hope that the hon. Gentleman will contribute to future debates with the same clarity and force as he has on this occasion and that he will feel himself no more trammelled by the need for relative impartiality than he did this afternoon during his maiden speech. He started with the great advantage of
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having succeeded an hon. Member whom all of us on both sides of the Committee knew, respected and admired. The hon. Member fully justified his succession to his late hon. Friend's seat by his very agreeable demeanour this afternoon. To add one not particularly impartial comment, I might say that I was delighted to listen to a speech upon local government finance by a representative of the great city of Birmingham which, as hon. Members know, has set so successful an example of recourse to the stock market under the new freedom given to local authorities.
I wish to address a few observations to the Committee in reply to certain parts of the speech made by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell). In fairness to the right hon. Gentleman, I should tell the Committee that he was courteous enough to indicate that it would not be possible for him to be here. I understand that his absence has something to do with a subsequent appearance in the Light Programme of the B.B.C. I thought that I ought to tell hon. Members that since the right hon. Gentleman, I know, observes all the punctilio and courtesy of debate and I should not like to leave the Committee under any apprehension that the right hon. Gentleman had been guilty of a breach of those standards on this occasion. I, equally, communicated to the right hon. Gentleman the fact that his absence would not wholly prevent me suggesting to the Committee one or two of the reasons why some of his conclusions appeared to me to be in some degree fallacious.
The right hon. Gentleman's speech fell very neatly into two parts. There was— and I use the term in no discourtesy—the economic lecture delivered with his usual lucidity, leading, as it always does, to the conclusion which was politically convenient to the right hon. Gentleman. I thought that the right hon. Gentleman was a little less than generous, not to Her Majesty's Government—we do not seek his generosity—but to the British people, when he went out of his way to indicate that no particular efforts and no particular sacrifices had been made to achieve the improvement in our balance of payments position.
The right hon. Gentleman's flawless lucidity of exposition would perhaps have

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been a little more convincing if there had not come into my mind, as I am sure there came to the minds of many of us in this Committee, the recollection that the right hon. Gentleman, who was demonstrating, at any rate to his own satisfaction, the complete perfection of his own economic policy and the imperfections of the Chancellor's, was the same right hon. Gentleman who left the finances of the country in a condition of a grave and growing balance of payments crisis which required urgent action to prevent a national disaster. It would have become the right hon. Gentleman a little better if he had at one stage or other of his observations indicated that the heritage which he handed over to my right hon. Friend in October, 1951, was not exactly that of a smoothly running concern.
I shall not seek to weary the Committee with my own observations on much of the right hon. Gentleman's arguments on the plane of economic theory, since I understand that, if he has the good fortune to catch your eye, Mr. Speaker, my hon. Friend the Economic Secretary to the Treasury will make some comments on that topic. We therefore pass, as the right hon. Gentleman passed with it seemed to me manifest reluctance, from the high plane of economic theory to which he devoted the first part of his speech to the somewhat lower level of contemporary partisan politics to which he devoted the concluding parts of his observations.
I am bound to say, as my right hon. Friend the Member for Blackburn, West (Mr. Assheton) said, that we all sympathised with the right hon. Gentleman. It was pathetic to see a fine animal with all his fine qualities struggling with the all but impossible task of finding valid and penetrating criticisms of the Budget which my right hon. Friend introduced yesterday. It is always impressive to see a fine performer playing a very difficult part. It is amusing for everybody, except perhaps the performer, and I hope, therefore, that what I am about to say about that performance will not indicate any lack of understanding of the inherent difficulties of the right hon. Gentleman's position.
His speech displayed the same confusion of counsel about the Budget as
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those of us who read that remarkable organ found in this morning's "Daily Herald," and it is somewhat revealing that, on this particular topic, both on the first and second pages of that charming newspaper, there is an indication that my right hon. Friend's speech contained proposals of such obvious popularity as to indicate an election in the near future. "A Bold Bid for Popular Favour" is the description conveyed by the political correspondent, yet, on the first page, these same proposals are described as "A Thoroughly Unjust Budget." The right hon. Gentleman the Member for Batter-sea, North (Mr. Jay), who, I understand, provides the "Daily Herald" from time to time with such economic information as comes his way, referred to the tax reliefs as being on an unfair and unashamedly class basis.
Neither the right hon. Gentleman nor the "Daily Herald" can have it both ways. They must take a very curious view of the English people, and the Scottish and the Welsh peoples, if they think that a bold bid for popular favour can be made by a thoroughly unjust Budget. They cannot really claim simultaneously, though they can, no doubt, do it at separate times, both that my right hon. Friend indulged in acts of oppression of the poor in the interests of the rich, and, at the same time, was openly seeking popular electoral favour. Really, a great newspaper and those who take their opinions from it must make up their minds which of these two horses they are going to ride, because, if they do not, then inevitably they will fall off and find themselves on neither.
The right hon. Gentleman concentrated his argument this afternoon very much along the lines which those of us who read his right hon. Friend's article in this morning's "Daily Herald" could have forecast with quite remarkable accuracy. The whole gravamen of his case was that concessions were being heaped upon what he described as the least deserving, by which I understood him to mean what the late Sir Stafford Cripps used to describe more politely as the higher income groups, while, on the other hand, nothing was being done for other sections of the community who were in great need. I think that is a fair summary of that part of the right

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hon. Gentleman's speech, and I should like to follow it up a little.
First, let me follow up the implication that the concessions on Income Tax only matter to a few very rich men. There are some 16½ million Income Tax payers today, and that represents more than 16½ million people, since in many cases husband and wife are what the Inland Revenue crudely describe as one Income Tax unit, and, indeed, the income of that husband and wife is often the main support of a family. We are dealing, therefore, as far as I can make out, with the interests of something of the order of 30 million people, and it is important to appreciate that, as the result of what my right hon. Friend has done, every one of the Income Tax payers, who, with their families, make up these 30 million, gains some benefit by reduction of his liability to tax.
Now, I do not know exactly what category of people it is to which the right hon. Gentleman suggests that my right hon. Friend was so terribly oppressive. I do not know to whom the "Daily Herald" suggests that my right hon. Friend was terribly oppressive. Is it to the readers of the "Daily Herald," because, if it is, the "Daily Herald" itself does not seem to think so. As recently as 15th January, that distinguished organ of opinion put an advertisement in the "Advertisers' Weekly" containing the no doubt sound suggestion that advertisers would do good business by advertising in the "Daily Herald." In order to support this proposition, this assertion included these words:
"One-third better off than pre-war (despite increased cost of living) and with more than half of them enjoying two or more wage packets every week, 'Daily Herald' families have vast spending power."
They do not seem to be doing so badly, despite the gloomy views of the right hon. Gentleman, and I assume that, before inserting an advertisement of that character and suggesting that people, on the basis of this assertion, should spend money on purchasing advertising space, a responsible newspaper sought advice from the normal sources of economic inspiration, and that, therefore, these are the views of the right hon. Gentleman the Member for Battersea, North.
But I do suggest to the Committee that file fair test, in the ultimate analysis, of
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the Budget proposals is not as to whether they serve in greater or less degree the precise individual or sectional interests of one section of society or another. Surely, the only test which this Committee ought to apply to the Budget proposals is, aye or no, whether they serve the fundamental interests of this nation and the fundamental necessity of revivifying and restoring our economy and our competitive power. I think it would be wrong if we were to conduct these proceedings solely on the basis of X being a penny better off and Y being a penny worse off, because, surely, in this Committee, we can all take it for granted that the greatest interest of everyone in this nation is the restored capacity of this nation's economy, because if we fail to restore it, everybody in every section of society will suffer, and if we succeed in restoring it, every section of society will gain.
But I will, none the less, try to analyse a little more fully than has been done so far the direction in which the concessions on direct taxation fall. I am not going to worry very much about that figure of the right hon. Gentleman's imagination—the bachelor with an unearned income of £100,000 a year. Within my limited acquaintance, such fortunate beings do not, as far as I know, exist, and, although the right hon. Gentleman the Member for Leeds, South is apparently more fortunate in his acquaintances, I do not think any of us need spend much time on this somewhat intangible figure.
I should like to go a little more into the sphere of reality. [Interruption.] I would say to the hon. Gentleman that even the appearance of a figure in a White Paper does not necessarily connote a real figure on a bench or in a street. What I think has not been brought out is that my right hon. Friend's proposals provide for a reduction of 6d., not only in the standard rate of Income Tax of 9s. 6d,. which comes down to 9s., but also in the three existing lower rates. The 7s. 6d. rate falls to 7s., the 5s. 6d. rate to 5s. and the 3s. rate to 2s. 6d., and the Committee will recall that it is at these lower levels that those taxpayers in the lower income groups are mainly taxed.
There are some millions of taxpayers, I understand, who only pay tax at the lowest rate, formerly 3s. and now to be 2s. 6d. The 6d. reduction on the lowest rate of 3s. is a reduction in the tax bill

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of those who pay at that rate only of no less than one-sixth—16⅔ per cent.—and hon. Members will notice that, as the 6d. reduction runs right through the tax scale, the biggest proportionate reduction in the tax bill comes at the bottom of the scale, falling, therefore, from one-sixth at the bottom to, I think I am right in saying, little more than l/38th in the case of the right hon. Gentleman's bachelor friend.
That makes it clear that the biggest proportionate reduction in the rate of tax applies to the lowest incomes which are subject to tax. Although the right hon. Gentleman rather brushed aside the various figures in the tax tables, it is the fact that even in the case of a somewhat more real figure than the right hon. Gentleman's friend, that of a single man with an earned income of £175, there is some appreciable gain. As we come a little higher up to the single person with an earned income of £300 a year, we find that his tax bill is cut by nearly £3 from £18 13s. 4d. to £15 16s. 8d.
There is another class of society worthy, I should have thought, of the attention of this Committee. Take the married couple with three children on £1,000 a year, a not unfamiliar type faced with not unfamiliar financial problems. That couple find their tax reduced by some £8. And so it goes on through the various salary scales. I think the right hon. Gentleman was hardly fair in omitting in this way from his allegations of my right hon. Friend's failure to deal with hardship all reference to the specific concessions to this end which are included in these proposals.
The context of what the right hon. Gentleman said was less than fair to the concessions made to those who have the heavy burden of maintaining on a small income a dependent relative or of employing a housekeeper; nor did he refer to a very welcome relief indeed, the age relief, which has been raised from £500 to £600. One cannot really judge what my right hon. Friend is doing if one ignores altogether what is done for real people in substantial numbers and, instead, spends one's time talking about people with unearned income of £100,000 a year.
At this stage of the Budget debate there is a chance to get some idea of the first thoughts of people in this Committee and outside upon my right hon. Friend's proposals, and it is the fact, like it or not,
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that, in general, those proposals have been received outside by a public which, if I may use the words of the old hymn, has been
"Slow to chide and swift to bless."
It is the gathering realisation growing in the minds of our fellow countrymen that my right hon. Friend has succeeded in the twin task of concentrating much of his effort upon the major factor of stimulating national recovery, while not forgetting the human necessities which he has been able to help, which is responsible for the favourable reception his proposals have had. He has succeeded—a kind of success so rarely found—in combining fundamental economic purpose with the touch of common humanity.
As my right hon. Friend the Member for Blackburn, West pointed out, it is conspicuous that this is the first Budget for many years which neither increases taxation nor imposes new taxes. Indeed, it may interest hon. Members to know that if one excepts the Budget for 1945, at a time when the war was rapidly coming to an end, one has to go back to 1935 to find a precedent for this. Therefore, my right hon. Friend the Member for Blackburn, West, in his most interesting speech, was wholly right in pointing to the new approach to the problems of taxation which my right hon. Friend's proposals embody, the realisation of the immense burden of taxation borne in this country alike by industry and by the individual, and of the dangers which lurk in a burden of that weight.
The right hon. Member for Leeds, South showed in his closing words how fundamentally different was his approach to the subject of taxation. Referring with reluctant kindliness to my right hon. Friend's decision with regard to the Excess Profits Levy, he then went on to say that he would himself, if that had to be done, impose dividend limitation and raise the Profits Tax. That was a very revealing comment because it seemed to indicate that the right hon. Gentleman regarded high taxation upon industry, not as the necessary means of raising the national revenue, but as something that was good in itself and that it was wrong, even though it might be financially possible, to lighten the burden on industry.
I thought that attitude was equally revealed when the right hon. Gentleman referred to tax concessions as largesse. It

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is a curious conception, when a State, as our State is doing, is raising from its citizens a higher rate of taxation than has ever been known before, that when it becomes possible to relax in some small degree that burden, a right hon. Gentleman who has himself been a Chancellor of the Exchequer should refer to this small lightening of the burden as a distribution of largesse. That is a very revealing comment and shows the vast gulf which yawns between right hon. Gentlemen opposite and ourselves on this question of taxation.
One would have thought that the right hon. Gentleman, with all his economic knowledge, would have appreciated the fact that high taxation on industry, carried on year after year, has a good many ill effects which it may be possible to exaggerate but which it is not possible to ignore. The knowledge that as profits rise so in proportion more goes to the tax gatherer must, in the course of years, somewhat blunt and diminish the willingness to make new effort, extra effort, to experiment, to plan and to go ahead, which are, of course, the very dynamics of a free enterprise society.
It seemed to me that, from this point of view, the right hon. Gentleman revealed an attitude of mind which he certainly succeeded in concealing with some skill when he sat in my right hon. Friend's place, but which, perhaps, now accounts for the greater harmony he is said to have with certain elements in the party opposite. The right hon. Gentleman was terribly anxious that the owners of industry should not get an extra penny. It is not my purpose to argue that matter on an ethical, metaphysical or philosophical plane, but it is surely fundamental to the problem of stimulating investment, which the right hon. Gentleman admitted to be necessary, to give to the prospective investor some prospect that his investment will at some time bring back some reward. What the right hon. Gentleman wholly failed to appreciate was that all Ministerial admonitions on the value of savings will not cut much ice until saving and risk taking is to be rewarded by material recompense if the enterprise is a sound and successful one.
He said—and it was less than fair— that no one under the Income Tax level gets a single penny. That is simply not
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true. My right hon. Friend has proposed reductions in Purchase Tax costing no less than £60 million in a full year, and many of them are upon articles which go to a great many homes. It is not for me to exaggerate—and I have no intention of doing so—what effect they may or may not have on the cost-of-living index or on the cost of living, but it is a fact that this cut is a contribution to a steady reduction in prices, which must be a peculiar and special benefit to those whose incomes are lowest and therefore most susceptible to movements in the level of prices.
No doubt the right hon. Gentleman was pressed for time, but it was quite wrong of him to make an assertion of that kind in the face of the fact that in this respect, as in others to which I have referred, my right hon. Friend's Budget is a carefully constructed whole in which he is not only serving the major economic purpose of this country's recovery but has sought, within the limits possible, to bring easement, aid and comfort to a very wide variety of people in this country.
It will in due course be for people outside this Chamber as well as inside to judge not only upon this Budget but upon the full financial proposals. I hope that I may be allowed to say that I do not believe that the attempt to play upon narrow class sectional feelings, in which the right hon. Gentleman thought it consistent with his high reputation to indulge, will cut very much ice with the British people. I believe that they will prefer the proposals of my right hon. Friend which are conceived with one purpose only—the restoration of this country's economy from the mess in which he found it.
6.23 p.m.
Mr. George Thomas: The Financial Secretary to the Treasury always commands the attention of the Committee, because he not only brings eloquence to his subject—and I am not speaking as if his were a maiden speech— but brings astonishing indignation into every word that he utters. I often feel that he would have made a good Nonconformist divine. He is able to put up so many skittles and to enjoy himself knocking them down.
As he moved towards his peroration, the hon. Gentleman spoke about my right hon. Friend the Member for Leeds, South

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(Mr. Gaitskell) as introducing his speech on narrow class lines. Such an accusation will hurt my right hon. Friend very deeply, because there is no one on this side of the Committee who would accuse him, above all people, of wanting to speak on narrow class lines. The appeal which my right hon. Friend made attracted the attention of the Commitee from those who benefit directly by this Budget to some of the people who do not benefit.
The hon. Gentleman said that the greatest aim of the Chancellor must be to restore the capacity of the nation's economy. I could not agree more with that. He also said that the incentives that are necessary in the field of industry and commerce must be well applied. But I suggest to the Financial Secretary that the incentives have been restricted to those with a financial interest on the investment side of industry. The shareholders will be smiling, but the workers who produce will not have nearly such a pleasant prospect held before them, as I hope to show today.
When people are not victims of new taxes imposed by the Chancellor, the immediate reaction is one of such profound relief that a temporary blessing is given upon his head. Then come second thoughts, and the question is asked as to who benefits by the Budget and what are the nation's prospects in the forthcoming year. It appears that the main aim of the Chancellor is to try to correct some of the disastrous blunders in his Budget last year. It appears that he realises that the fall in production and the increase in the cost of living are leading us into a very serious economic position indeed.
This Budget can only be assessed correctly in the perspective of last year's Budget. The Chancellor himself stressed that point. As all hon. Members are aware, last year's Budget led to an increase in the cost of the people's food of roughly 9 per cent. during the year.
Mr. John Arbuthnot: Compared with 18 per cent. the year before.
Mr. Thomas: The Chancellor has succeeded in increasing the cost still further above what it was when he took over; and since he has had his hand on economic operations the cost of living has soared and soared until it has become
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a very serious problem indeed for working people to meet their obligations. The increased Bank rate led to a further substantial increase in the rate burden of local authorities and in the cost of our primary products. The cost of living must be considered very seriously when we look at the Chancellor's proposals, for there are three sections of the community to whom I want to refer who have been completely forgotten by the Chancellor in distributing his "relief"—if the Parliamentary Secretary prefers that word to "largesse."
I think, first of all, of the old age pensioners. To the old people this Budget is a tragedy. It leaves them in their plight. There is no relief at all for them. The old age pensioner does not want to buy a mink coat, a new motor car, a radio or a television set and so get the reduction in the cost. The old age pensioner cannot afford those things. The benefit of this tax reduction will go to people who are already well off in comparison with the old folk of the nation. These old folk ought to be regarded as the honoured guests of the nation who have worked to create the wealth which we possess. But they find that there is no prospect of relief held out to them.
There is not a millionaire in Britain who is not counting his gains tonight as a result of this Budget. There is not an old age pensioner, not a widow, not an unemployed person, not a man on sick pay who is not sick at the prospect before him and who does not realise that for him there is no relief at all. This Budget classifies them as the forgotten people.
There are others whom the Chancellor appears to have forgotten. During the course of the year the Chancellor has received powerful deputations from the National Union of Teachers, the Trades Union Congress and Civil Service organisations on the subject of equal pay for women in the public service and in industry. Without anyone on the Government Front Bench having the moral courage to vote against the Motion for equal pay, the House went on record as having agreed that equal pay should be introduced into the public service. The Chancellor made not even a passing reference to this question.
There has been a campaign throughout the country amongst teachers and civil

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servants and people in other walks of life that this long overdue justice should be given to our women colleagues, and we were awaiting the Budget statement expecting an announcement to that effect, but the Chancellor has not even repeated the statement that the Government accept the principle, and he has refused to name the date. There will be profound dismay that the Chancellor, when he has had money to share out, has not thought it worth while to do justice to the women in the public service of this country. I warn the Financial Secretary that, when he comes to deal with the women employed in the public service, he will find that this Budget is not as popular as he tried to lead us to believe this afternoon.
There is one other group of people to whom I want to refer. I asked Questions yesterday of the Minister of Pensions concerning the disabled persons in receipt of disability pensions arising from the 1914–18 war. I asked the Minister what it would cost to give the 15s. a week increase in the basic rate to those men in receipt of the alternative pension, and I was told that it would cost £15,000 a year. There has been a campaign by B.L.E.S.M.A. and the British Legion on behalf of those men, and powerful speeches on this question have been made in the country by hon. Members opposite.
The Chancellor could easily have granted this concession and the whole nation would have applauded him. I hope that in the course of the Budget discussions he will take the opportunity to increase the disability allowance for those men of the 1914–18 war who have been outside the increases that have been given in other fields. I hope that more human consideration will be given to the women, the disabled and our old folk than would appear in the Budget speech.
6.33 p.m.
Mr. G. P. Stevens: The hon. Member for Cardiff, West (Mr. G. Thomas) at the beginning of his speech said that it seemed to him that the Chancellor yesterday was trying to correct some of the disastrous blunders of last year. I want to follow that thought of his for a moment or two.
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As I sat here yesterday listening to my right hon. Friend, my mind went back two years to April, 1951, when the Chancellor of the Exchequer was the right hon. Member for Leeds, South (Mr. Gaitskell), who has addressed us this afternoon. As I thought of that very impressive dialectical performance two years ago, I could not help recalling very clearly that at the time I was strongly reminded of the man who
"… turns no more his head;
Because he knows, a frightful fiend
Doth close behind him tread."
The fearful fiend I had in mind two years ago was the fiend of inflation which was then very much in the minds of all of us.
Yesterday, as I listened to my right hon. Friend the Chancellor of the Exchequer, it was very clear that that fiend was no longer the menacing solid body that he was two years ago. He is still a spectre; we have still got to respect him in some degree, but to a large extent he has disappeared from the calculations which a Chancellor has to make in preparing his Budget. I do not call that fact a disastrous consequence of the Budget of a year ago. I think it is a great tribute to what the Chancellor did on that occasion.
The right hon. Member for Leeds, South, as the Financial Secretary said a few moments ago, spent the first part— indeed, the greater part—of his speech in dealing with the economic situation, trying to explain away various features of the present economic situation; but there are four economic facts which exist today and which no amount of explanation can dissipate. It may be that it can be suggested that there are alternative reasons for them, but the facts as such remain.
First and foremost, at the top of the list, I put the striking improvement in the balance of payments resulting in a surplus for 1952 of £291 million. It may well be that a large part of that surplus has resulted from an improvement in the terms of trade. It may be that the restriction of imports has something to do with it, but the fact of that surplus remains. The second fact is the increase in our gold and dollar reserves. There may be more than one reason for that, but the fact remains.
Thirdly—and this is immensely important—there is the strength of the £

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sterling in the United States of America. That surely indicates one thing above all else—namely, the confidence of the American nation, to whom we are still indebted this year, as the right hon. Member for Leeds, South said, in our ability to pull ourselves up by our own shoe strings, with the Chancellor's aid. The fourth fact that I have in mind is the maintenance of a high level of employment. Those are four solid concrete facts, and they show quite clearly that the bogy of inflation has to some degree disappeared from our economy at the moment.
That means that the financial situation is more stable than it was a year ago. It means that the cost of living, to which the hon. Member for Cardiff, West referred so eloquently, is no longer rising at the appalling rate at which it was rising a year ago and in the years before. There is a more stable position. Can that more stable position be held? Can it be improved? I think it can. But outside direct Budget policy there are two factors affecting the stability of the financial situation which have to De considered; one is wage levels and the other is dividends.
The right hon. Member for Leeds, South this afternoon called for the statutory limitation of dividends, and "our own great" "Daily Herald" this morning waxed very eloquent on the subject. It said that the Chancellor
"… has also declined to place a legal limit on dividends, though he must know that leaping dividends are a profound irritant to wage earners at a time when the Government is appealing for 'income restraint' by all classes."
That kind of propaganda, if it be true, is very dangerous; if it be untrue, it is very mischievous.
I recall that last week the right hon. Member for Leeds, South and the right hon. Member for Battersea, North (Mr. Jay) gave an example in this House of a company which had declared a dividend of 187½ per cent., and it may well be that the right hon. Member for Huyton (Mr. H. Wilson) could tell this Committee something useful about policies directed towards paying higher dividends than those paid in the past. It is certainly true that there may be black sheep in every fold, and it is equally true that if all the circumstances of these cases are investigated it will be found that those
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sheep are not nearly as black as right hon. Gentlemen opposite would have us and the country believe. I am quite sure that the right hon. Member for Huyton would agree with that. It is perfectly easy to take out of any set of circumstances a single solitary example and try to build up a completely strong point.
I am not prepared to do that. I much prefer to turn, not to a propaganda document, but to the 95th Report of the Commissioners of Her Majesty's Inland Revenue. There we find, not single examples taken at random, but on pages 64 to 70 we get the results of industry in tabular form, split into convenient categories. Turnover is taken for convenience as 100. Costs, such as materials —in other words, purchases; personnel —that is, wages; depreciation allowances and taxation and distribution—that is dividends; are all shown as a percentage of 100. The results of three years are given: 1938–39, the last pre-war year; 1949–50 and 1950–51. It is quite true that that takes us only to 1950–51, but this document is always a little in arrear.
I want to quote some figures from it. As the hon. Member for Cardiff, West (Mr. G. Thomas) started with skittles, I propose to start with drink. If we turn to the drink trade, we find that in 1938–39 wages took 10.4 per cent. of the turnover, In 1950–51 they took only 7.1 per cent. —a decrease of 31.7 per cent. Since 1938–39 there has been an increase in productivity throughout industry and one would therefore expect wages, expressed as a percentage of turnover, to fall. When we come to dividends, we find that in the same years they have fallen from 10 per cent. to 4.9 per cent. Whereas wages have fallen by 31.7 per cent., dividends have fallen by 51 per cent., while taxation has increased by 40 per cent.
Let us turn to another group of industries. I agree that I have not selected these at random, but I am prepared to take any group of industries anyone likes to mention. Take the case of cotton. There, the decrease in wages, expressed as a percentage, has been 21.2 per cent. The decrease in dividends has been 29 per cent. and the increase in taxation has been 587 per cent. Let us take a very large group—the electrical group: wages decreased by 17.9 per cent., dividends decreased by 45 per cent. and taxation increased by 84 per cent.
Mr. Austen Albu: Has the hon. Gentleman observed from the National Income White Paper that dividends and interest payments have risen every year since 1949?
Mr. Stevens: Yes, and I have also realised that the purchasing power of money has fallen at the same time. These tables are strictly comparable; they take into consideration the reduction in the purchasing power of money. The figures which the hon. Member for Edmonton (Mr. Albu) quoted are just as "phoney" as today's leading article in the "Daily Herald." The figures which I have quoted completely contradict the assertion that dividends have been leaping ahead of wages. That is entirely untrue and is mischievous propaganda.
There is a great deal of difference between the two sides of the Committee in the view they take of the value to our economy of risk capital. A good many hon. Members opposite forget that, despite nationalisation, 80 per cent. of our economy still depends upon private capital. Not all of that is risk capital, but a very large proportion is; and as long as any proportion of our economy is in private hands, so long must risk capital be encouraged.
How are we to foster the growth of risk capital? Two things are necessary. First, it is necessary to offer a chance of an income return in the shape of dividends large enough to cover, over the years and over a variety of enterprises, the very real risk of the entire loss of the capital invested. Secondly, it is necessary to make it possible for that capital to be found at all by reducing direct taxation and thus enabling savings to take place.
It is for that reason that I welcome the Chancellor's decision to take 6d. off the standard rate of Income Tax. There has been a little misapprehension, whether deliberate or otherwise I would not know, about the persons or bodies who are to benefit from that reduction. It is obviously untrue to say that the only people who will benefit from a reduction in the standard rate of Income Tax are the people who are themselves liable to pay Income Tax. Obviously, if a reduction in the standard rate of Income Tax benefits a business and enables it to produce more cheaply, then any consumer of the articles produced by that business will receive a direct benefit.
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The right hon. Member for Leeds, South missed a very important point which was brought out on Wednesday, 8th April, by "The Times." It said:
"In spite of the multiplicity of different taxes invented in recent years, income tax is still the bell-whether. It permeates the whole private and business life of the nation as no other tax does. A change in it has a psychological significance all of its own."
I could not agree more, and it is for that reason, if for no other, that I personally wish the Chancellor had been able to go further still and to reduce the standard rate of Income Tax by Is. I know it is exceedingly difficult, but that would have been a dynamic sign to the whole of industry and business of this country and I think everyone in the country would have benefited.
Let us, however, count our blessings. I welcome the obituary notice of the Excess Profits Levy which my hon. Friend the Member for Oldham, East (Mr. Horobin) dubbed "a lunatic nightmare of a tax." His nightmare will not be with him very much longer. We are very grateful to the Chancellor for that. How fantastic for anyone to suggest that, with the death of the Excess Profits Levy, there should be an increase in some other tax; that is "moonbeams from the lesser madness" on an inspired note.
A fresh note has been struck by this Budget and by the Budget last year. In six post-war Budgets, successive Chancellors seemed to be perfectly aware of the presence of this fiend of inflation but seemed equally quite unable to exorcise it. What they did was to dig ever deeper into the bottom of the pot and dole out the proceeds. In 1952 and this year the Chancellor has realised that we cannot take out of the pot unless we have put something into it. "The Times" today says
"Mr. Butler's ability to make concessions is due … partly perhaps to the new hope that he has inspired."
I am full of hope that my right hon. Friend has got away from the theory which seemed popular among the party opposite some years ago that hard work never made workers richer. He seems to have accepted the very much sounder idea that the labourer is worthy of his hire. This is a wise Budget and will be strongly supported in this Committee and in the country.
6.48 p.m.
Mr. Malcolm MacPherson: The hon. Member for Langstone (Mr. Stevens) has pointed to one or two things which from his point of view suggest a considerable degree of satisfaction with the Budget, but he has omitted what seems to me the most important matter in connection with the affairs which we are discussing—the general state of production in the country. He has dealt with a large number of matters which are decidedly subsidiary, and hon. Members on this side of the Committee are bound to remind him of the statement by the Financial Secretary to the Treasury that we should be dealing with fundamental matters.
The right hon. Member for Blackburn, West (Mr. Assheton) rather frowned on the idea of dealing with the broad field of the factors covered by the Economic Survey. It seems to me that this is one of the things with which we should be dealing now, and I make no apology for turning to one of the factors which is not an immediate Budget matter but which concerns our general economic prospects.
Before doing that, I will interpolate a constituency matter for a couple of minutes. I do not think it is appropriate to make a constituency speech on an occasion like this and I am balloting to raise the matter on the Adjournment. Since I am pretty unlucky in ballots, and since the matter is very serious for my constituency, I want to get in a couple of words about it now. It is the matter of the light castings industry. This industry is not following the ordinary fortunes of manufacturing industries in the country in general. It is in a very much worse position than industry in general, and is at the moment undergoing what I can only describe as a crisis.
It has lost a good part of its home market because of the decline in purchasing power. For example, my area produces slow combustion stoves. The demand for them has recently suddenly dropped—not gradually declined. The industry has lost very considerably through the Australian import cuts. These matters are very directly the responsibility of the Government because of the bearing of Government policy upon them. There are also a number of long-term factors in the situation that make the outlook for the industry, concentrated
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as it is, very largely in one small part of the country, my constituency and round about, very bleak. I draw the attention of the Government to that situation and ask them rather hopefully, when I do manage to bring the matter up later on the Adjournment, to produce some constructive ideas about it.
I turn to the much broader question of manpower, which plays such an important part in our economic fortunes. I shall try to make, fairly quickly, three points in connection with that. I would, however, say by way of introduction that it does not seem to me that we give to the question of manpower anything like the importance that we should. Manpower is one of our three really great economic resources; coal, agriculture, and our skill and ability to do a job. Those three are the only really big economic assets we have. We give a tremendous amount of attention to the first two, but comparatively little to the third. We have had a great deal of discussion, a great deal of planning, a great deal of legislation about the first two. We have had very little about the third, about manpower, and yet one of the key difficulties just now is the shortage of the kinds of manpower that will be most useful to us.
We are short of skilled and able men at almost every level. We are short of skilled craftsmen; we are short of technicians; we are short of good managers. All those are key groups of people. We do comparatively little to put things right. Some time ago Professor Arthur Lewis had an article in the "Observer" in which he made what I think was a very sound statement that illustrates just how casual we are about this business. What he said was that 10 years thence—he was writing in 1950—in 1960, if we had our manpower in those industries in which we wanted it, it would be as a result of a most unlikely miracle. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) pointed out today the existing illustration of that situation.
We are not giving any serious attention to getting the right kind of manpower in the right places. It is a long-term matter, and one or two of the things I have to say will be things which are not simply of concern for the next year or two. I think most of us realise, since the Chancellor's statement last year, that our

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economic difficulties began some 50 years ago, that our economic situation now cannot be cleared up in a matter of a few years. We have difficulties which will last probably for our generation, certainly for a long time.
I want, as I said, to make three points on the subject of manpower. The first concerns training for industry, commerce and the work of the nation in general. Training of our labour force is of immense importance. Skill is one of our major national assets. If we talk about increasing the engineering industry, we talk about increasing the need for people with very highly developed skills. If we talk about increasing our income from exports, we have got to think about exports which use a comparatively small proportion of raw materials and a comparatively high proportion of brains and skill. So the training we give to the people who enter our labour force is of immense importance.
Just after he came to office in November, 1951, the Minister of Labour made a speech—in fact, I believe, he made two or three speeches—in which he stressed the importance of modernising and expanding training for industry. I ask the Government, what has been the outcome of his interest? What has happened since then? I am no expert with figures, but, as far as I can make out, the situation is something like this. Of all the youngsters of school-leaving age, decidedly less than a third enter occupations which give any sort of apprenticeship or progressive training or any kind of professional training. Those youngsters include the people who stay on at school or take university courses. Less than a third of all the entrants to industry, commerce and the nation's work in general are being trained for their jobs.
That is not a situation we should be happy about in our position. There should be far greater encouragement of training schemes, particularly in the major industries. We are told that 70 or 80 major industries nowadays have training schemes, but we are also told that some of the most important industries have none. That is not a position with which we can rest content.
The second point I want to make is about science and scientists. Just as we need trained people, so we need scientists.
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They constitute one of the keys to our future industrial progress. Our achievement in science actually is of extremely high quality. I need not weary the Committee with examples of that. There is no doubt that we have produced a scientific achievement of an unusually high order, and one would therefore be inclined to say that the expansion of the engineering industry, and the development of science-based modern industries, is a natural thing to us. Yet we are faced with immensely great difficulties because we are short of a great many of the types of scientists needed in our industrial programmes. We are short of physicists, chemists, chemical engineers, electrical engineers for the development of our electronics industry, and mechanical engineers for our aeronautical industry. We are very short of all kinds of applied scientists who can bring the discoveries of science into application in industry.
There was an extremely interesting article in "Lloyds Bank Review" a month or two ago, in which Professor R. S. Edwards gave one indication of how we compare with the United States in this respect. He said that in the United States one person out of every 400 is a full-time science or technological student, whereas in this country only one out of every 1,400 is. As he pointed out, the comparison is not exactly between like and like; there is a very great difference between American science degrees and ours; but the broad picture is there. If we are to compete with America and to overcome the difficulties which lie ahead in developing a modern industry and in expanding our industry, we must do a great deal more than this in the production of scientists.
In this regard, we are not merely not doing what we should but we are actually slipping back. If the schools are to produce people who can become scientists, they need scientists on their staffs, but more and more the schools are finding that they cannot get them. Science departments in some secondary schools have closed down in recent years, and their staffing has been of very much poorer quality. That is common knowledge; we have known about that development for a year or two. What is not always realised is that the water-table, as one might say, of low scientific achievement is rising.

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Professor Curtis of Durham University gave an interesting address a few months ago to the Parliamentary and Scientific Society in which he pointed out that the universities would very shortly be confronted with the possibility, in science subjects, of having to lower their standards. He gave further information indicating why he reached that conclusion after consulting his colleagues in his scientific subject in other universities. We are confronted with a situation in which this country, which for its salvation must depend on the development of engineering and science-based industries, finds that its universities must actually consider a lowering of standards. We should regard the situation thus revealed as one of considerable urgency.
The right hon. Gentleman made what seemed to me a very sensible decision, if I may say so, when he selected the Imperial College for the development of a technological university. But a technological institution of any sort cannot be developed in a vacuum; there must be the development underneath of the schools; there must be the students who can benefit from the courses, and the production of possible scientists must be built up generally in order that the Imperial College can play the part we hope it will play.
My third and final point is that, besides failing to staff our schools with scientists, and therefore failing to produce an adequate number of scientists of the right quality, we are also inclined to fail to staff a number of other occupations which might be described as maintenance occupations. Those great activities which are carrying on the machine of the State are finding that they cannot get sufficient men of the necessary quality. The schools are one instance, and the Civil Service is another.
Hon. Members should realise that the Civil Service Commissioners have reported an inability to maintain the previous high standard of recruitment to the administrative class. Officers of the Armed Services are another instance, and various other Civil Service classes are another. Generally speaking, those classes of the community who are educated and able to manage our national affairs and who are paid by the taxpayer tend to become smaller; the quality tends
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to go down; the pull of industry, with its better pay and conditions and prospects, is far too great.
Not so long ago we were faced with the situation in which industry in this country had run down its physical assets. There had not been nearly enough investment of the ordinary material sort. A parallel situation is beginning to show itself in the nation as a whole, not in material matters but in personnel. The nation is reaching a situation in which we cannot get enough of what might be called human capital investment. The quality of those attracted to those parts of the State organisation and the community organisation which keep our affairs going is becoming too low. That is an extremely dangerous situation. The pull of industry grows stronger and stronger. Industry is making more and more vigorous attempts to attract the best young men, and is very largely succeeding.
This Budget, it seems to me, will tend to encourage this. The Chancellor gave no indication that there is likely to be any strengthening of our great national institutions—the schools, the Civil Service, and so on—and I should imagine that one of the results of his Budget will be greatly to increase the movement of able young people away from that type of occupation, and it will tend, therefore, to lessen the possibility of carrying on our educational system, and our Governmental system, at its previous high level. If the present tendency continues, I imagine that the Chancellor's successor 20 years hence will not be able to draw on advice of the same high quality as he obtains at the moment.
Those seem to be one or two of the attributes which are important in this respect—the skill, the ability and competence of our people—and whatever may be said about the three points with which I have dealt, I should like to finish by emphasising what I started with. We must give more attention to this asset. Too often we end our statements about our economic affairs with the cliché that education must be improved. Of course it must. But there is a great deal more to it than that. We in this country depend, above everything, upon the quality of our manpower, and we are not giving that economic asset anything like the attention it deserves.
7.9 p.m.
Mr. Niall Macpherson: Nobody will dispute the importance of the subject with which the hon. Member for Stirling and Falkirk Burghs (Mr. Malcolm MacPherson) has just been dealing. I do not intend to follow him in detail, but I simply suggest to the Committee that perhaps one of the reasons for the difficulty which has arisen, to which he very rightly draws attention, has been the continuing course of inflation since the war. It is a natural result of inflation that we have hitherto been suffering from, and I think that by the same token my right hon. Friend's Budget should do something to correct it. I believe that we may look forward to an improvement in that situation within a year or two—because these things do not correct themselves quickly.
The fact is, of course, that this Budget has been delivered in a completely different atmosphere from that of previous Budgets. The atmosphere is, I think, reflected in the country as a whole. One has only to compare the tenseness with which the previous Budgets have been delivered, and the general feeling of stringency which has been felt in the country, with the calm confidence which was exuded by my right hon. Friend in presenting this Budget to realise the difference in the atmosphere in the country as a whole. Previous Budgets have reminded me of a player in a tennis match who is extended to the full, returning gallantly, with great difficulty, balls from the back line and rushing up to the net. This time, my right hon. Friend was playing the ball well within his capacity the entire time—and, as he rightly said, he was leaving room for exports.
One has to remember that last year we had to face a desperate problem which was a legacy from the previous Government—the balance of payments problem. On its solution everything depended. To its solution all other claims had to be subordinated. Britain has shown—and here I disagree very strongly with what was said by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) —what she can do under calm and competent leadership. My hon. Friend has produced an entirely different atmosphere.
Mr. Wilfred FienburghIt has reduced production.
Mr. Macpherson: It may have reduced production, but the fundamental problem was, first, to get the balance of payments right. Until that had been done nothing else could be done.
Now we come to the second stage. The fact is that taxation and inflation have been for too long eating away our patrimony. The resources of industry, instead of going into the replacement of assets, were being absorbed by the replacement of stocks at ever rising prices. Of the resulting paper profits the State was taking fully half away and using them largely for current consumption. The depreciation allowance is a matter which needs to be overhauled. We understand the reasons why my right hon. Friend has not been able to deal with that in this Budget. We hope that before the next Budget he will have received and studied the Royal Commission's Report, and that we shall be able to get this position put right. As things are, the danger is that in a few years' time we in this country will be competing with out-of-date equipment against other countries to whom we have sold the most up-to-date equipment. Thus the most vital problem of this Budget seems to me to be the need for industry to build up its resources, and I am certain that my right hon. Friend was dead right in putting the emphasis mainly there.
The announcement that the Excess Profits Levy is to go will be a very welcome one to industry. I think that industry deserves the greatest credit for the way in which it has behaved under this additional incubus which was placed upon it. Industry will be very pleased indeed that this levy is to go—that this unwanted monstrosity is to be put away after only two years' existence—and that the relief to industry will be about £100 million a year.
The second thing, of course, is the drop in Income Tax. As the Chancellor of the Exchequer said, this will give relief of £64 million, of which about one-half will go back to industry. That will also be a valuable adjunct. The initial allowances, in my view, are of equal importance. In particular, the 40 per cent. on mining works, both home and overseas, will give a terrific impetus to the development of the Commonwealth and the Colonies. It will also give impetus to the establishment

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of new industries in the Development Areas.
That, together with the relaxation of Income Tax and the disappearance of E.P.L., will be of the greatest importance. It has to be remembered that E.P.L. disappears in January, 1954, and that any industry started up now will not be got going before then. It is now possible, therefore, for industry to start up in various areas where it is required, and industry will be much more willing to do so, because what has been holding it back most of all has been the fact that those engaged in it have not seen how, with capital costs as they are at present, they are to be able to succeed if they start up now. I think that the measures that have been taken will be of immense benefit to the Development Areas and other areas in this country which require new industries. An important point is, of course, that these initial allowances are also available for agriculture.
I should like to express particular thanks to the Chancellor of the Exchequer for the concession which he has made to those whose herds were slaughtered during the foot-and-mouth epidemic. He apologised for mentioning this in his Budget speech as being a matter of detail, but. in fact, to many people in my constituency and in others this is a matter of the utmost importance. The renewal of the option to elect for herd basis will be of real value in enabling those whose herds have been smitten by foot-and-mouth disease to rebuild them.
So far as the ordinary citizen is concerned, hon. Members opposite will say that this is a Budget which appears to benefit the better-to-do. What one has to consider, in my view, is that, in the first place, we can give no relief to people who are paying no taxation.
Mr. Fienburgh: The Chancellor could give food subsidies.
Mr. Macpherson: That is true and I shall deal with that later, but he cannot grant any tax relief to people who are paying no taxes.
In the second place, and what is even more important, unless we are in a position to give encouragement to people to go out and found their own businesses and run them, the ordinary men in the street will, in the long run, not benefit either from the resulting employment. That is the
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main justification for what the Chancellor is doing now. One might wonder whether he has carried it quite far enough. I would say that we have a long way to go to make up the ground that has been lost as the result of the war years and of the period since the war. We cannot make up this leeway by a few grand gestures. What has to be done is to give a little here and there—adjust the economy here and there gradually—so that the economy adapts itself to the needs of the moment and that, at the same time, we gradually get back to a position in which as much as possible of what a man earns is left with him.
I think that the fundamental difference of approach on this side of the Committee and on the other is that we on this side consider that the individual is entitled to the enjoyment of his own property, that it is for the State to take as much of that property as it needs and no more and to leave the individual with as much as possible. The Opposition take an entirely different view. They seem to regard everybody's earnings as national income to be divided out in the Budget. Surely if we do that we are not giving the ordinary man confidence to do things for himself and to gain a position in life for himself which he feels that successive Governments will allow him to retain.
The reliefs which will be most welcomed by the ordinary citizen are the reduction in Purchase Tax and the freeing of sugar. I join in congratulating my right hon. Friend the Chancellor of the Exchequer and my right hon. and gallant Friend the Minister of Food and also the Parliamentary Secretary, whom I see in the Chamber. The Ministry have done a splendid bit of buying. In principle, we on this side prefer trade to be done by the traders and not by Governments. The Socialists prefer bulk buying, but they do not seem to be as good at it as the present Government. Under this deal we expect 600,000 tons of sugar to arrive in this country before very long. I trust that arrangements can be made for it to arrive quickly for there will otherwise be considerable congestion in sugar stocks. I understand that the refineries are able adequately to deal with any sugar which arrives and I hope that as a result of this purchase a refinery in Scotland which has recently been closed may be set in motion again.

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The sooner the sugar from Cuba arrives in this country the sooner shall we have derationing, and the ordinary housewife attaches more importance to that than to any other matter in her budget at present. The continual complaint, particularly in summer, has been the shortage of sugar. If we can deration sugar by the time the fruit crop comes along there will be a great saving in fruit and an end to the wastage that we have had year after year.
I believe that we ought to get rid of food subsidies at the earliest possible moment. The trouble about food subsidies is that they are a perpetual temptation to politicians and Governments to manipulate for party ends. Once we have got rid of them and our people are paying the real value of food and not an artificial value, the country will be in a much better position to review its state and get on with production. Food subsidies conceal the true cost of living, and to a large extent they mean that we are selling goods abroad at a lower price than we should do because wages are not at their proper level.
Mr. Douglas Houghton: Does the hon. Gentleman agree that taxes on commodities also conceal the true price and value of goods?
Mr. Macpherson: Taxes certainly do, and we should like to see a reduction in some of the enormous taxes on such commodities as tobacco and beer. That must be a matter for future Budgets, when the policies which my right hon. Friend is so ably pursuing have brought still greater results.
With regard to the encouragement of foreign earnings, I welcome very much my right hon. Friend's decision to implement the recommendations in the first Report of the Royal Commission on the Taxation of Profits and Income. The recommendation about enabling unilateral relief for double taxation to be granted and that to enable a trader to exclude from assessment profits which are blocked in another country and cannot be legally remitted will have very beneficial effects on companies which have subsidiaries abroad and do a great deal to encourage an increase in our invisible earnings. With regard to the first recommendation, I hope that
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Commonwealth countries will come to consider it normal that such mutual arrangements should exist.
The Chancellor said nothing about the third recommendation of the Royal Commission concerning taxation concessions to pioneer industries. I hope he agrees with the recommendation. I should like to know whether it is his intention to take powers in the Finance Bill to negotiate with other countries about this or whether the Government already possesses such powers. In any case, I hope he will use what powers are available to him to ensure that the concession is given only in cases in which it is in the national interest to give encouragement to particular industries in particular countries. I have in mind especially the Colonies and the Commonwealth.
My last point is on the agreeable subject of wines. In 1949 the then Chancellor of the Exchequer cut the tariff on so-called light wines by half. By doing so he benefited not only the producer and the consumer but also the Treasury, because the withdrawals of French, Italian and Spanish light wines have quadrupled compared with 1949 and are nearly three times what they were in 1948. The Commonwealth sends this country hardly any so-called light wine. Most of the wine from South Africa and Australia is classified as heavy. The duty on heavy wine was left as it was, and the result is that the withdrawals of heavy wines from Commonwealth countries have fallen by about one-third while the imports of heavy wines from other countries have remained more or less stationary. Before the war the heavy wines were preferred by the ordinary consumer. I urge my right hon. Friend, between now and the Finance Bill, to consider making a similar concession for heavy wines, in the hope—one cannot put it higher than that—that in the long run it will cost him nothing at all.
The process on which we are now rightly engaged is that of trying to get back to some kind of normality. At the end of the war we demobilised our military services, but we never really demobilised our civilian services. What we have to do is gradually to relieve the ordinary citizen of the tremendous burdens involved in these gigantic services. What has been done this year is a start

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in the right direction. When I say "in the right direction" I also mean "in the right way." To have made sudden decisions to take off all the food subsidies or to have drastically reduced Income Tax at one time would undoubtedly have had bad effects. My right hon. Friend is right in adjusting a little at a time and seeing how it goes.
As has been said by my right hon. Friend the Member for Blackburn, West (Mr. Assheton), whether it will be possible to continue this process in the future will depend on the response of the country as a whole and the success of our trading efforts. I wonder whether it has occurred to hon. Gentlemen opposite that the general easing of the international situation may have been due, at least in some measure, to the fact that a start has been made in demobilising our civilian services. Some promise and indication that we are really in earnest in departing from our war economy may have had a certain influence in that direction.
I am not doubting in any way that all of us are in earnest in not desiring war. I am thinking of the effect of these measures on other countries as seen through their eyes. So long as other countries saw that we were retaining the same civilian paraphernalia as we had during the war they were bound to think that at least to some extent we had in mind the possibility of going to war very soon again. I welcome the general hope of international peace and of greater prosperity which the Chancellor's Budget has given to the nation.
7.30 p.m.
Mr. A. Blenkinsop: The hon. Member for Dumfries (Mr. N. Macpherson) has displayed a complacency which is wholly unjustified by the facts of the present situation. As far as I can follow him, he seems to recommend a wine-drinking nation with the Chancellor of the Exchequer playing tennis perpetually and well within his own capacity. It might well indeed be to the benefit of the nation if that were to be true, but what we must face—and face with some care for reality —is that during these last few months we have seen a steady fall in actual productivity in our industry, which is, after all, the prime factor in the whole of our
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life in these islands. That factor represents to us the hope of our progress to any form of real prosperity, and although it is true that the Chancellor has had a great deal of adventitious aid from outside sources, which has helped to cloak the reality of the situation, the real danger still confronts us.
I am very concerned when I hear an hon. Member refer, as the hon. Member for Dumfries did, to the great easing of the present situation compared with the comparative tension of a year or two ago. Surely we are living in a world of dreams if we imagine that the tension has, in fact, eased as compared with a few years ago. Indeed, the danger now is greater because the facts are cloaked by the sudden change in the terms of trade that have flowed to the advantage of the Government.
In these circumstances it is all the more important to insist upon the reality of the dangers that we face and to examine the measures that have been taken with that in view. It is a very serious feature when the best that the Chancellor himself can say is that he hopes that during the course of this financial year we may be able to build production up to the figures achieved in 1951. This country has a right to demand something very much better than that if we are to achieve a better future for our people in the coming years.
The Chancellor might well have adopted a much more modest tone in view of the financial out-turn of the year as he reported it to the Committee yesterday. The Committee is entitled to a much fuller explanation of what can only be termed the wild inaccuracies of the Budget estimates of a year ago. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) rightly commented this afternoon that if such false estimates had been put forward two or three years ago, they would have been fastened on by Members from the benches opposite.
Mr. R. R. Stokes: And by the Press.
Mr. Blenkinsop: And, indeed, by the Press. The Chancellor has been saved in spite of himself by the improved world factors, over which he himself would not claim any control. In view of the financial out-turn of the past year, can we

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have much hope in the prospects for the coming year? First of all, the right hon. Gentleman's estimates are based upon a certain hope of a new buoyancy in the economy. There is, in fact, precious little evidence of it today, or that we can achieve the very modest target of a return to the production of 1951. Indeed, there are many factors in the world situation that threaten us with further reductions in production rather than increases, and there are further dangers to our export trade of which very little account has been taken during debates here.
Secondly, the right hon. Gentleman's estimates for the future and his ability to offer further concessions are, of course, linked up with civilian expenditure. He made some play and took pride in the fact that some £200 million less has been spent under the civilian Estimates this year as against last year. This is particularly welcome to hon. Members opposite who hold the view expressed by the hon. Member for Dumfries that, in fact, Government expenditure by itself is something evil which must be held down to the minimum, and private expenditure, by the very fact of it being private, should automatically be encouraged, whatever the object on which the money is to be spent.
I want to examine for a moment one or two major items in the expenditure field, and the effect of the Chancellor's determination to reduce Government expenditure without regard to the quality of the service provided and the necessity of the service. When we examine the civilian expenditure upon which the Budget is based, we find that the main item is the expenditure on the social services, and one of the main items in that is the National Health Service.
I think it is worth commenting that just at the time when we had announced in the House that the Minister of Health had appointed a Committee to make a report on proposed economies in the Health Service, the Chancellor of the Exchequer announces that his own friends, the industrialists, are to receive the benefits of the withdrawal of the E.P.L. without any proposal to increase the Profits Tax. It may well be that the withdrawal of the Excess Profit Levy may be financed, or an attempt may be made to finance it,
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out of further savings from the Health Service. That is something which we must have very much in our minds. There is no doubt that hon. Members opposite will welcome this further example of the reduction of Government spending, as they have always shown a dislike for the principle and basis of the National Health Service.
Mr. R. Jennings: Vote catching.
Mr. Blenkinsop: Let us examine with care the actual figures of the Health Service Estimates. We notice that there is a slight reduction of some £20 million this year as against last year, but it can fairly be pointed out that that reduction is largely accounted for by the exceptional expenditure last year on back payments under the Danckwerts Award to the doctors. That means that approximately the same amount in money is available for the Health Service this year as last year, and it is misleading for the Chancellor to indicate, as he did in his Budget speech, that further increased expenditure was to be made possible. He said:
"This represents an increase of £18 million." —[OFFICIAL REPORT, 14th April, 1953: Vol. 514, c. 42.]
It is only an increase over the Estimates of last year and not over the actual expenditure. Therefore, the very misleading impression is conveyed to the Committee and to the public at large that we are finding extra money for the National Health Service this year. It is not true. The amount of money available will be about the same.
That situation means, in terms of service to be provided, that very much less will be provided for the same sum of money, because some £6½ million to £7 million of extra cost is involved straight away in wage and salary advances to hospital staffs, negotiated during the last 12 months. That sum must be taken out of the money available to the hospital part of the service. There are considerable further increases in food costs directly caused by the administrative policy of the Government, and they can only result in reduced quality of service in the National Health Service, unless we have an increase in the now quite artificial ceiling, which is still being maintained in the service and has been maintained for some four years.

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When one examines the details of the Estimates of the Health Service, one faces astonishing facts about the reductions which are being secured over last year. There is a considerable drop in the medical staff, particularly in teaching hospitals. That may be partly due to some of the senior registrars going out of the service, which has been threatened for some time, and is leaving some hospitals in a very serious position. Unless an effort is made to recruit new staff there will inevitably be a reduction in the standard of service in our greatest hospitals.
Oddly enough, in spite of what hon. and right hon. Gentlemen opposite have said from time to time about the need for reduction of administrative costs, the Esti-mates show considerable extra provision for the administrative staff of the National Health Service. One would imagine that all hon. Members who clamoured so vigorously for economies in that matter have achieved absolutely nothing, as the Government have been making provision not only for extra administrative costs but for a very damaging reduction in the medical staffs at the hospitals. One of the most striking and most shocking provisions in these Estimates for the National Health Service is—
Mr. Jennings: Would not the hon. Gentleman agree that he is putting up a perfectly good case for the Minister of Health to have an inquiry into the service to see whether we are getting value for money?
Mr. Blenkinsop: Not a bit of it. This is a matter for the House of Commons to tackle and not one which requires further inquiry. It is known perfectly well by every hon. Member, especially by those who have had contact with the hospitals in their own constituencies.
When we come to the maintenance of buildings, we find the most serious reductions of all. The figures in the Estimates provide nearly £8½ million for the maintenance of buildings and plant in our hospitals during the coming year, as against £9½ million last year, and even this figure was wholly inadequate, as anyone would agree who has knowledge of the subject. This is serious, and must inevitably mean very much higher expenditure in the years to come.
What kind of expenditure is this? It is not wasteful, not a new provision of
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any kind, but vital expenditure to maintain the fabric of our hospitals. Every hon. Member who is in contact with the hospital committee in his area knows that this matter is of very serious consequence all over the country to people responsible for our hospital buildings. Painting and repairs of plant, heating appliances and boilers are vital matters. If we do not carry out maintenance work, we shall be left with very much heavier bills in future years, unless we are prepared to face the closing down of whole sections of our hospitals.
We must not only examine in the Budget proposals the provisions for revenue but also examine them very carefully to see whether there is not a great deal of false economy on the expenditure side. Hon. Gentlemen on the Government side, in their plans for further reductions in Government expenditure, may be and in my view are driving the Government into the craziest form of economy imaginable, and into completely artificial restrictions on necessary expenditure of this kind in the most vital service in the country. I warn the Minister responsible and the Chancellor that they may very well need to face considerable increases in the Supplementary Estimates, as the Chancellor did last year, in order to make some necessary additional provision for the Health Service.
It is clear that the Minister of Health has handed over the whole control of the service to the Chancellor of the Exchequer, on the one hand, and to outside independent bodies of whom we do not yet know the names on the other. I should like to believe that the Minister is anxious to maintain the service for which he is responsible, but there is no evidence of that whatever.
To all those people who have been working conscientiously in the hospital field it must be a positive disgrace that at this very time we are proposing relief amounting to some £4½ million to people earning £10,000 a year and more, and are handing out £42 million in extra interest charges due to the higher interest rates that the Government themselves introduced, despite the fact that these sums of money are needed in one of our most vital services, upon which people in all walks of life depend at one time or another.

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In framing his Budget the Chancellor has wholly forgotten that if a greater effort is to come from the community it means a greater effort from the working people as well as from the rich. He must give some sign of recognition of the need for fair treatment between one section of the community and another. I am quite sure that he is not recognising that factor when he is preventing the proper development of a public service of this kind which is of such vital consequence to every family in the country.
There are many thousands, if not millions, of people who will not get a halfpenny of benefit out of the Budget this year but who may need some attention under the Health Service. That Health Service is going downhill by virtue of the attacks being made upon it by the Chancellor and the Minister of Health in co-operation one with another.
Mr. Gerald Nabarro: Surely the whole of the argument is being directed to the general surmise that no economies of any description are possible in the National Health Service? May I recommend the hon. Gentleman to go to the Vote Office and get a copy of the Report of the Comptroller and Auditor General upon the operation of the National Health Service in Scotland, 1951–52, which shows the most glaring waste of money and in which there could be economies made without in any way impairing the efficiency of the service?
Mr. Blenkinsop: There are many ways in which we would be willing to co-operate in securing economies in the Health Service. They would include measures that I fear would not get the support of hon. Members opposite, particularly measures relating to the profits made in the drug industry, which are a scandal that might well be attended to by hon. Gentlemen opposite.
We are concerned about the actual estimates on which the Budget has been framed and I am calling attention to the inadequacies of one of our most vital services. It is essential that we should have a reply because this is a service upon which the whole community depends and upon which the economy of the country depends. This is one of the ways in which the Chancellor could show his desire to ensure fair and equal treat-
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ment between different sections of the community instead of, as at the present time, attempting to ensure that the benefits of his Budget go to one section alone.
7.52 p.m.
Mr. Cyril Osborne: I hope that the hon. Gentleman the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) will not think I am discourteous to him if I do not follow him in discussing the National Health Service and its charges. I want to look at the Budget from one sharp aspect, the aspect of productivity. I also want to add my congratulations to those already given to the Chancellor on what I consider a sound and excellent Budget.
The test of the Budget will be solely this: Will it help to increase productivity? If it does that, it will succeed; if it fails in that, it will fail in everything. The most ominous sentence in the Economic Survey is that productivity in 1952 fell by 4 per cent. and that the output per man-year fell considerably. Unless that is altered, and altered soon, this nation must face shorter rations and, ultimately, unemployment. Therefore, it is on that narrow question of productivity that the Budget must be judged.
Before long we all hope that there will be general peace following on the ending of the Korean war. When that comes about there will be much more intense competition in international markets. In the last 10 years the American productive capacity has doubled. Germany, Japan and possibly Russia will be coming into the international markets and we shall not survive at all unless our productive machinery is better and keener than it has been in the past.
A few weeks ago I attended the Productivity Council Conference at which the Chancellor urged upon the trade union leaders and the heads of business firms the need for greater productivity. He described that not as a demand for gross increase of production but for the production of better goods at lower prices. Nearly everyone at that Conference agreed with the wisdom of his policy, but also agreed that unless that message reached the man at the shop level, all the talking in the world would produce no results.
To my mind here lies the crux of our national economic problem: How can we

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get the man on the shop floor to realise this? It is obviously unfair to him to expect him to do something to increase productivity—that is, producing more units at less labour cost per unit—unless he realises the urgency of the matter. The Budget calculations and the Budget figures that we heard yesterday are to him just higher mathematics or, at their worst, they are incomprehensible hieroglyphics which mean nothing. All that he is bothered about is how the Budget affects himself and his family, and in that connection I want to make a suggestion or two which I hope my hon. Friend will pass on to the Chancellor.
I suggest that the Chancellor should undertake an intensive drive throughout the country; that he Should stump the country for the next six months trying to educate our people in our basic economic problems because, until they realise these, it is unreasonable to expect them to make the necessary effort. In doing so, his first and perhaps most difficult task will be to try to remove the fears and misconceptions about industry that are held largely by men who work at the shop floor level. For example, many men still fear, to my mind reasonably, that if they work harder and produce more they are likely to work themselves and their pals out of a job. Until that fear is removed, we cannot expect men to do their utmost and so all of us should try to get rid of that fear.
I know that the memories of the 1920s and the 1930s are still vivid in the minds of older men. Most of us know that these are the old Luddite fears which, 130 years ago, were proved to be groundless, but they are still held by some people so I ask the Chancellor to try to remove them. Furthermore, I ask him to explain to the country that increased productivity does not mean merely putting more profits into the boss's pockets. Few men at the shop level realise that between 60 per cent. and 70 per cent. of all the profits in a company go to maintain the Welfare State of which we are all so justly proud. There is no link in the minds of the men working at the shop level between the profits that they think they are earning for someone else and the privileges they enjoy in the shape of social services which they value so highly, so the Chancellor must get that point over to them.
In America the workers are proud and pleased to be engaged by big profit-
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earning concerns. They know from experience that the big profit-earning companies guarantee to them good wage packets, regular jobs and make big contributions to the Welfare State. It is the successful business man who is the greatest prop of the Welfare State for, without him, unless there were immensely increased taxes, the Welfare State could not be maintained. This, I think, is the root of the problem that the Chancellor will have to face, and I want him to go up and down the country and try to explain these matters.
Next, the Chancellor of the Exchequer could do very well to spend some time in explaining to the man at the shop level that increased productivity—greater output for less costs—is well within the national capacity. A 10 per cent. increase would put us completely right, and it could be done without any national nigger-driving. It could be done quite easily. Some industries are doing much better than others. As a general rule, I should say that those industries whose products are being sold either abroad or in competition with imported goods at home are more efficient than the sheltered industries. It is within the scope of the sheltered industries that great improvements have to be made.
Let me give an example. We on this side are specially pleased that more houses are being erected. But they are costing too much. The last Government report on housing said that productivity in housing was still 20 per cent. below pre-war. If every industry had a productivity level of 20 per cent. below prewar, we would be in a sorry mess. It is in the sheltered industries that so much has to be done.
I should also like my right hon. Friend to explain to the men at shop level that while "the carrot and the stick" policy has been abolished, oftentimes—far too much—it is still applied to us in the export markets. If we do not compete, the foreigner has no concept of an international Welfare State that will cause him to be kind to our exports. If he can push us out of the markets he will do so.
Then, I should like it to be explained to the man at the shop level how fortunate we are as a nation—all of us, in all walks of life—compared with the man against whose products we are having to compete. For example, we now have to

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start to compete with the textile products of India. But India has, on an average, a standard of living which is one-twentieth of what we have; and against Japanese products with which we have to compete, the Japanese have an average standard which is only one-seventh of ours.
The world does not owe us a living and it will not give us one. We shall only get one in so far as we earn it. I ask my hon. Friend the Economic Secretary to pass on this message to the Chancellor: The extra productivity that we require will only come if the men are paid for it. I believe that Income Tax and Surtax together are far too high. In my opinion, the law of diminishing returns—
Mr. Fienburgh Mr. Fienburgh rose—
Mr. Osborne: Let me finish.
The law of diminishing returns operates when we have to pay more than 10s. in the £, for then man is working less for himself and more for the State. Direct taxation is far too high, not only upon the man at the shop floor level—
Mr. Fienburgh: How much Surtax does he pay?
Mr. Osborne: —but also upon the men who have to run industry.
I am grateful to the right hon. Gentleman the Member for Ipswich (Mr. Stokes) for his courtesy in coming into the Chamber, to hear what I have to say, because I want to refer to the circular that he sent to his 1,300 workpeople. I should like my right hon. Friend the Chancellor to copy the excellent example of the right hon. Member for Ipswich for the whole country. What I cannot understand about the right hon. Member for Ipswich, for whose honesty and capacity I have the highest regard, is how he comes to be sitting on the other side of the Committee.
The right hon. Member is, quite rightly, proud of the success of his business, and its success is as much due to his brains and drive as to the work of the men on the shop floor whom he employs. At the end of last year, he sent this circular to his workpeople. It is headed:
"Hard facts about the world economic situation."
On the front page the right hon. Gentleman said:
"In 1953, we must make greater effort and get bigger output still. The Chancellor has
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called for a 20 per cent. increase all round, especially of capital goods."
I discussed this with the right hon. Gentleman and he quite rightly points out that he was asking his workpeople for an extra 10 per cent. output so that he could get a 20 per cent. increase in his exports. I wish that every Tory business man had the common sense shown by the right hon. Gentleman.
There are three out of the 11 points in the right hon. Gentleman's circular that I commend to the Committee. I commend hon. Members opposite to get a copy—I have two. In paragraph 9, with great courage and common sense, the right hon. Gentleman told his workpeople —and I commend this to the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop), who has talked to glibly about the social services:
"Between 1945 and 1952 the British social services have, in considerable measure, been financed by wealth taken from West Africa, Malaya, etc. Not only is this immoral, but it cannot go on. It is well to remember that no one owes us a living, least of all the poor people overseas."
That is the message I want the Chancellor to ram home.
In the next paragraph, the right hon. Gentleman—I admire him immensely for his courage—says:
"In other words, we cannot have welfare unless we ourselves produce wealth sufficient to provide it. We have for too long been living on wealth created by our forebears. Our economy will come to a standstill and our standard of living, which, at present, on average, is the highest in the world, will suffer a catastrophic drop unless this process is reversed."
The next sentence is in italics:
"We must, in fact, create more than we consume if we are to survive. At present, we consume more than we create."
I ask that the Chancellor should use such courageous words. Whether it gets votes or not, for goodness sake let us tell the people the truth.
Lastly, I commend the right hon. Gentleman for paragraph 11, in which he says:
"It is a profound mistake to think that we can get out of our difficulties by heeding only our own domestic affairs. We can only maintain"—
I commend this especially to the hon. Member for Newcastle-upon-Tyne, East—
"the social services we now enjoy so long as we can pay for them ourselves, which we

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are not now doing and have never done in full since the Welfare State started in 1945."
Tell the people that. Do not fool them that they can have something without working for it. This is something that affects the Committee as a whole, and not one side alone.
I come now to my final word, which I ask my hon. Friend the Economic Secretary to pass on to the Chancellor. I believe that the best article written by the "Economist" in recent years appeared in its issue of 29th June, 1946, under the heading, "The Carrot and the Stick." I take out just one sentence, which I should like to be passed to the Chancellor of the Exchequer:
"The British community is sound in wind and limb, it has an immense accumulation of subconscious judgment, it rarely makes a very stupid mistake, prudence is its middle name—but it moves so slowly."
I beg of the Chancellor to stump the country to drive these economic facts home, and then to follow the example of the right hon. Member for Ipswich in seeing that every wage packet contains something similar to what he produced. I am confident that if my right hon. Friend does that, the British people will not fail him.
8.9 p.m.
Mr. Austen Albu: The hon. Member for Louth (Mr. Osborne), with his customary sincerity, has broken through the wall of complacency which has been typified by the speeches we have had from the Government side of the Committee. While I agree with very much of what the hon. Member says, I beg of him not only to address his homilies to the workers in industry; and when he makes his appeal for higher productivity, repeating the appeals that have been made by every Labour Chancellor of the Exchequer since the end of the war, and by most Labour Members of Parliament during the whole of that time and by the Trades Union Congress, he should remember that exhortation and propaganda alone will not achieve the results that he wants.
A friend of mine used to say, "You cannot sell a face cream made of vitriol," and I suggest to the hon. Member that it is not much use asking the workers to work harder in an economy which, as my right hon. Friend pointed out at the beginning of the debate, is rapidly
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approaching stagnation. The Financial Secretary to the Treasury, in a speech which was flippant, I imagine, because he was quite unable to deal with the arguments of my right hon. Friend, in exactly the same way as other hon. Gentlemen who have spoken since were quite unable to deal with them, preferred to deal with trivialities rather than with the economic conditions of our country. In boasting of the Chancellor's Budget, the Financial Secretary said that this was the first time that there had been a reduction in taxation since 1935. I would remind hon. Gentlemen opposite that in 1935 there were something like two million unemployed.
The Chancellor was lucky to be able to introduce his Budget at a time when the balance of payments had benefited from the very considerable fall in home production and the very great improvement in the terms of trade, and also at a time when they had not suffered from any serious decline in demand for sterling area commodities. I suggest that this situation cannot last, because if home production improves, costs will rise, and unless exports are then expanded substantially, our overseas account will again be in deficit. On the other hand, of course, the reverse situation may take place, and we may find ourselves very short of dollars.
The Chancellor made the appropriate noises and mouthed the appropriate platitudes about higher productivity and higher exports, but the whole of his speech was shot through with complacency. Perhaps the most surprising thing about his speech, and about the speeches of all other hon. Gentlemen who have spoken from the other side, is that no account appears to have been taken at all of the change in the economic climate in the world, due to the very considerable change in the climate of international affairs that has taken place during the last month.
I do not intend, nor do I think it necessary, to describe in detail the chilling horrors that might well fall on this country, and on the world as a whole, from a fall in industrial activity in the United States by, shall we say, four or five per cent. Every serious observer and every serious economist and writer has been expressing considerable anxiety on this matter during the last two or three weeks.

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This anxiety arises not only because of the very high proportion of United States economic activity which is due directly to defence orders, but also to the very high level of industrial investment in the United States during the last two or three years, the high level of consumer credit and the very high sales of consumer durable goods. I must say that it looks as if it will be extremely difficult for the United States to substitute any other expenditure for a reduction in defence expenditure. Therefore, pipe-dreams of free trade and an approach to the convertibility of sterling are nothing more or less than escapism from the realities of the present economic situation—a situation which is likely to be with us for the rest of our lifetimes.
I do not know whether the present United States Administration is either willing or able to maintain the present level of economic activity in that country. It may very well be that a Government of businessmen, like the Conservative Government in this country, prefers an economy that is not operating in conditions of full employment. Perhaps, as Professor Galbraith has suggested, these businessmen dislike Government measures to maintain economic activity, because they destroy their own sense of power.
Whether this is true or not, I think we can all agree that the American Administration would think they had done very well indeed—and I would think so too—if they succeeded in maintaining industrial production in that country, after the defence programme had levelled off or been reduced, at, shall we say, 90 or 95 per cent. of its present level. But this, of course, could spell disaster for this country and for the rest of the sterling area as a whole. I doubt myself whether even radical changes in American tariff policy would make any very great difference. He would be a dreamer indeed who believed that such a reduction in tariffs would be possible under those conditions.
Therefore, I suggest to the Committee that every effort must now be concentrated on making our economy more independent of that of America; but I would go further, because I believe that we must reduce our dependence on foreign trade altogether. I do not believe
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it is possible in the modern world to continue to rely on imports for one-third of our whole national income, whatever may have been possible in our industrial heyday at the end of the last century or before the First World War. We must, therefore, have a policy and a plan for dealing with this situation.
It is clear that the first step in such a plan must be a radical increase in agricultural production, not so much per man as per acre, but in actual fact last year the increase in agricultural production was on a level about one-third of that of the three previous years, and there was a fall in manpower in the agricultural industry of 22,000. There are no signs here of a policy for decreasing our dependence on food imports.
Our second need, I believe, is to reduce the import content of our industrial production, and this can be done in two ways. We must, first of all, raise the proportion of our exports which have a very high conversion ratio; in other words, a very high proportion of labour, and so forth, to raw materials, and particularly imported raw materials. Of that conversion factor a very high proportion should be skilled labour, and the use of scientific research and development. I cannot see how it can help such a situation when the Government, in fact, make a cut in the expenditure on scientific research. This is the time for a very great increase in scientific research and development, because although the results may not be immediately available, they will certainly be very much needed in the next few years.
Such a policy as I have tried briefly to describe will, I believe, make us very much less dependent on the violent fluctuations in raw material prices. I think that the experience we have had since the war—and it is no good hon. Gentlemen opposite talking about returning to normal if by normal they mean the situation in which a large part of our imports were paid for by the proceeds of foreign investments—and the lessons we have drawn from post-war history are that steady economic expansion is almost impossible under conditions of such violent changes in the prices of raw materials and imported commodities as we had between 1950 and 1951, and again, in the other direction, between 1951 and 1952.

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It is not only the enormous effect which these have on the national economy and the balance of the national accounts —such an effect that I do not believe any Chancellor of the Exchequer can catch up with the swings and even out the fluctuations. We have seen how almost impossible it is, without violent changes in taxation policy, to deal with such a situation. There is also the effect which these violent changes in prices have on individual businesses. As long as individual businessmen feel that they must retain large liquid assets to deal with stock fluctuations, I believe that they will be chary of new fixed capital investment.
It is from these violent changes in stock values that a large part of the demand for a reduction in business taxation really comes, because businessmen need the increased liquid assets in order to cover the changes in stock values. To be quite honest, I do not believe any taxation system can logically and fairly deal with such violent fluctuations in profits caused by violent fluctuations in commodity prices.
Is this not the occasion, while we are negotiating a new international wheat agreement, to try to obtain commodity agreements for other raw materials? Some suggestion of this sort was made by one of my hon. Friends during Question time, and I thought it received a not unfriendly reply. I hope that when the Economic Secretary speaks tomorrow he will be able to enlarge on that a little. It seems to me that the benefit of such commodity agreements, which we might use our buying power to assist in obtaining, would apply not only to the British economy, but also to those territories in which the materials are produced and on which they are mainly dependent.
The situation described in the excellent little leaflet of my right hon. Friend the Member for Ipswich (Mr. Stokes) which was quoted by the hon. Member for Louth (Mr. Osborne), in which it is pointed out that we are practically living on the backs of the Colonial Territories, will be even worse if the Colonial Territories are not even able to sell their main crops and their main products. I do not need to remind the Committee that this matter is of very great political as well as economic significance.
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The other aspect of my proposals, that we should go in for the production of new types of industrial goods, especially in the chemical industry and of the synthetic fibres and other synthetic materials based on the chemical industry, requires, of course, a very high level of investment. The Chancellor, it seemed to me, both in his speech yesterday and in the very terms of his Budget, has admitted that the problem today is not so much to create the savings as to get the financial and other resources which are available into use.
Apart from the initial allowances, which I think are a direct incentive to fixed capital investment—although I do not think the relief is high enough, and I entirely agree with my right hon. Friend that they should be used in a discriminatory manner—I cannot see in what way the taxation reliefs given by the Chancellor are going to have any comparable effect on the investment decisions of businessmen compared with the deterrent effect of approaching market conditions in the world.
The country must understand that this Government are returning as my right hon. Friend pointed out, to a situation where only private industry takes the decisions and the Government are passive. Indeed, the Chancellor is moving to the situation of laissez faire. Perhaps the most significant support which the Chancellor has received today was from the right hon. Member for Blackburn, West (Mr. Assheton), who last year was one of the most bitter critics of the Chancellor's policy. It is clear that the right hon. Member for Blackburn, West feels —and no doubt the City of London feels with him—that the Chancellor is returning to the situation where the City determines the level of economic activity and not the Chancellor and the Government.
The alternative to this policy is that which my right hon. and hon. Friends on this side of the Committee would put into operation if we had to deal with this very serious economic situation. Taking a longer view than private industry and individual industrial firms either can or will, I think that the Government will have to participate in industrial investment, where necessary assuming control of particular companies for the purpose. The present methods of the Government can never, in my opinion, deal with the long-run problems which our country so seriously faces.
8.26 p.m.
Mr. H. A. Price: I have listened to every speech that has been made in the Committee today, and I have noticed two or three dominant themes running through practically all of them. I propose to choose as my starting point the speech of the right hon. Member for Leeds, South (Mr. Gaitskell). As I was not educated either at Winchester or the London School of Economics, I cannot follow him into the high realms of economic theory, but I was fascinated by the facility with which he juggled with figures and I thought his arithmetic impeccable. Nevertheless, he failed to convince me, and I think he will completely fail to convince the country, because he is up against two facts which cannot be controverted and one deduction which can be very strongly supported.
The first fact is that the financial policy which he advocates and which right hon. and hon. Members opposite support is the financial policy which, between 1945 and 1951, landed this country in three very serious financial crises, each one more serious than the last, and the last of them, the one which we inherited, being the most serious of them all. The second fact which cannot be controverted is that the financial policies which the right hon. Gentleman was trying to criticise are those which have rescued this country from that economic crisis and which have produced the results to which my right hon. Friend the Chancellor was able to refer yesterday.
But there is a third deduction which can be strongly supported, and it is this. At the moment, we are comparing the position as it exists today with the position that existed 12 months ago. I suggest that we ought to carry the comparison a little further and compare the situation as it exists with what it would have been today had the policies of my right hon. Friend not been put into operation. Shortly after the General Election of October, 1951, the right hon. Gentleman the Leader of the Opposition and the right hon. Member for Leeds, South both admitted in this House that the position was so serious that unpleasant measures would have to be taken to deal with it.
The right hon. Member for Blyth (Mr. Robens) went even further. He said that the position was so serious that he doubted whether the man in the street
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realised just how serious it was. That being so, perhaps we might be forgiven for having expected a little support for some of the unpleasant measures which we had to take 12 months ago, and before, to deal with the situation which we found. But we did not. We had no support at all.
On the contrary, every unpleasant measure that we took, every economy that we proposed was bitterly attacked by hon. and right hon. Gentlemen opposite, both in the House of Commons and in the country. The only logical deduction from that is that they would not have carried out any of them. If that is true, then nothing could have saved this country from economic ruin last spring. Widespread hunger and unemployment would have swept through the country and would have invaded nine homes out of every ten.
Mr. Harold Wilson: Is it not a fact that the only single action taken by the Government last year which has had the remotest effect on the balance of payments was the import cuts, and is it not a fact that my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), on 6th November, 1951, the day on which they were announced, said that we should have had to do the same thing if we had been in power?
Mr. Price: That is what I am complaining about. The right hon. Gentleman the Member for Leeds, South and others said that, but ever since then every internal economy that we have sought to impose has been bitterly attacked. If there has been an exception I hope that hon. Members will forgive me for saying that I cannot think of one. If this is so, it is fair to deduce that the improvement which has taken place in our affairs would not have taken place under the leadership of hon. and right hon. Gentlemen opposite.
I want to deal with three specific points which have arisen in this debate. The first is one which has been present almost universally in speeches from the benches opposite. The right hon. Gentleman the Member for Leeds, South referred to the past 12 months and said that production was down 3 per cent, employment was down, and short-time was up, and practically every speaker from the benches opposite has mentioned

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those facts. They are quite true. But I must warn hon. Members opposite that when they are referring to those facts they are skating on very thin ice indeed. They imply that those are the result of actions by the present Government when the fact is that they are not.
This process began four months before the last Election, as can be verified from the Digest of Statistics. All that hon. Members have to do is to refer to table 23, which shows that during the second half of 1951 unemployment in this country rose by 133,000, a process which began in July of that year when the figure stood at 209,000. [An HON. MEMBER: "It happens every year."] It usually happens in winter, but not in summer; but it happened in July, 1951. The figure went up by 19,000 to August, by another 13,000 to September and by 49,000 to October, and so on. As I said, that process began four months before the last Election. I do not attempt to draw any deductions from that except one, which is that it could not have been the result of any action by this Government. [An HON. MEMBER: "Who said so?"] Every hon. Member who has spoken today from the benches opposite has implied that it was so, and hon. Members opposite have been doing that for months.
Another point was raised by the hon. Member for Cardiff, West (Mr. G. Thomas) in particular. It has been dealt with previously, but I think that another word on the same subject will not come amiss. It is the question of the increase in the cost of living during the last year. I cannot understand hon. Members opposite persisting in flogging this horse, because it has been dead for months. The truth of the matter is that the cost of living rose remorselessly month after month under the previous Socialist Government. In 1951, it rose by 13 per cent. more than 2s. 6d. in the £—and it continued to rise for a little while after we came into office.
I had considerable faith in a Conservative Government, but even I did not expect the Government to be able to turn that off overnight as though by means of a tap. It took eight months to do it. The cost of living continued to rise until last June, since when it has been stable for nine months. That is a feat unparalleled since the war broke out in 1939, and I
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believe that the people are beginning to realise it.
Mr. Anthony Crosland: With no help from import prices?
Mr. Price: I will deal with that in a moment.
If we exclude food—which I realise we cannot do—the cost of living has not risen at all during that period. We have been criticised for cutting the food subsidies. What my right hon. Friend the Chancellor of the Exchequer did in last year's Budget was to increase the nation's food bill by £160 million per annum, but he gave the people £250 million per annum with which to pay that bill. That is incontestable.
But that is not the end of the story. I suggest that hon. Members opposite should turn to another page in the Digest of Statistics and look at table 147, where they will find the next chapter in the story, which is this. To meet the increased cost of living in 1951 the wage earners of this country received wage increases of 11 per cent.—2 per cent. less than the increased cost of living. In 1952, to meet an increase in the cost of living of 4½ per cent. they received wage increases of 7 per cent. In other words, under the Socialist Administration, during their last year at any rate, they were 2 per cent. worse off, and under the Tory Administration they were 4½ per cent. better off. So much for the story that the Tories are attacking the living standards of the working people, which we hear so often.
I could have taken figures which would have made my story even better. I could have taken the average figures quoted at the top of page 120 of the Digest of Statistics, which indicate that the working classes were 4 per cent. worse off in 1951 and 5½ per cent. better off in 1952. I have been generous to Her Majesty's Opposition. I have taken the figures which were less favourable to my case.
The next point I want to deal with is one which has already been raised with regard to the way in which the terms of trade have changed in our favour. My right hon. Friend admitted that fact with no qualifications yesterday, and I think those who criticise him on this score are being unfair. He admitted the full effect of that factor, yet I suggest that he was being unduly modest. It is true that the

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terms of trade have changed in our favour, but it is not true that none of the credit for that is due to the Government.
I should like to tell the Committee of one case of which I have personal knowledge. I am sorry that the right hon. Member for Huyton (Mr. H. Wilson) has left the Chamber, because I think that he, too, would have personal knowledge of this matter. This country imports from Sweden about 250,000 tons of wood pulp every year. When this Government took over we were paying Sweden £110 a ton, £88 of which was for the wood pulp and £22 of which was export duty on the wood pulp. That £22 did not go to the Swedish producer of wood pulp; it went to help the Swedish taxpayer.
In other words, the consumers in this country, the general public, were helping the Swedish man in the street to pay his taxes, and that has been accepted by the previous Government. It was not accepted by this Government. We said, in effect, "We will pay you the proper price for your pulp, £88 a ton, but we are not going to pay you the other £22 in duty. The British public have quite enough to do to pay their own taxes without helping you to pay yours." The Swedish Government, no doubt reluctantly, gave in and we got our pulp for £88 a ton.
That, however, was only the beginning of the story. A reduction of £22 a ton in the price of pulp meant a reduction in the price of paper produced from that pulp, and for the first time in 12 years in this country the paper user got a reduction in the price of his paper, which set off a chain of events. First of all, he immediately ceased a policy of putting into stock every piece of paper he could acquire lest in a little while it became dearer.
Immediately there opened up to him the possibility that in a month or so there might be another reduction in price. Therefore, the demand for paper was reduced. The mills in this country received fewer orders and they therefore ordered less pulp, so that the price came down again. The price of that pulp today is less than half what it was in October, 1951. The people of this country have been saved £13 million or £14 million. That is not just the terms of trade swinging in our favour; that is the result of
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positive action by the Government and, what is more, it is not politics, it is not a quaint ideology worked out by longhaired men and short-haired women in a back room of Transport House; it is sheer business acumen and common sense.
Mr. Fienburgh: Why was this superlative "common sense" not applied in the case of the Argentine?
Mr. Price: As far as I know, the Argentine do not impose an export duty. I can give no other answer apart from that. Perhaps those who negotiated the 1949 Treaty will care to answer.
That is the conclusion of my comments upon speeches which have been made from hon. Members opposite, but I want to say a few words about speeches made from this side of the Committee. I do not suppose that any Budget could be perfect, but I believe my right hon. Friend produced very nearly a perfect one yesterday when we bear in mind the very small amount of elbow room he has and, even more, when we consider the Budget against the sombre backcloth of the position in this country 12 months ago.
It is possible to criticise the Budget. I have some sympathy with a criticism made by the right hon. Member for Leeds, South. I, too, would have preferred a greater reduction in Purchase Tax on essentials and household goods even if that meant leaving the 100 per cent. class untouched, but I appreciate my right hon. Friend's reasons; he was thinking not only of the consumers, but of the industries which produce these goods. I therefore accept his decision.
There is, however, one implication about which I am very uneasy. I regard the recommendations of the Hutton Committee—about the non-return of Purchase Tax paid on stock bearing Purchase Tax —as being immoral. To suggest, as that Report suggests, that retailers should be able to recoup themselves when Purchase Tax goes up for the losses they incur when Purchase Tax goes down is the best example I have yet met of offering the shadow for the substance, and I hope that the Treasury will have another look at this matter because there are many right hon. and hon. Members on both sides of the Committee who are uneasy about it.

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I add my weight to those who are pressing the Government for still further economies, and I will make one or two specific suggestions. Until the Government can make further economies, they will not be able to go very much further along the road we have been treading, which has produced the results which the country welcomed yesterday. I believe that if we are honest and can leave politics aside—I know the difficulty—we all realise that there is room for economies in the National Health Service without interfering with the efficiency of the service, and perhaps while improving it. We all know cases of five people doing the work previously done by two. I know of a case, not in my constituency but just outside it, and I am sure other hon. Members know of instances. That is the sort of thing which we must eradicate and it is one reason why I welcome the creation of the committee which the Minister of Health announced the other day.
May I be a little more specific about another matter? I believe there is room for economy in the administration of the housing subsidies and for a greater degree of justice in their administration. We all know that there are thousands of families who are living in subsidised dwellings who could well afford to pay the economic rent, while, at the same time, there are hundreds of families who are having to refuse the offer of council accommodation because they cannot afford to pay even the subsidised rent. Yet the latter, through their rates and taxes, are helping to pay the subsidies of the former.
It really is farcical, and I strongly urge the Government, although I realise that this is not entirely the responsibility of the Chancellor, to look at this problem. I would even be in favour of increasing subsidies to those who really needed an increase in order that they should have the accommodation they so urgently need, but I believe that, on balance, there would be substantial economies.
I believe that there is room for economy in the administration of education. I am sure those of us who are in close touch with education, who are or have been members of an education authority, know quite well that there is ample room for economies without inter-
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fering with the essential fabric of education.
Mr. F. Blackburn: Would the hon. Gentleman give an example?
Mr. Price: Gladly, although I may run some risk in doing so. I know a case in my constituency where a motor mower has been sent out to mow a lawn the size of a pocket handkerchief. When a question was asked why the motor mower had been sent the answer given was, "The money for it is in our estimates, and if we do not spend it this year we shall not get it next." That is an example I give on the spur of the moment, but that sort of attitude, that if we do not spend the money this year we shall not be allocated it the next, leads to waste.
Mr. Ellis Smith: I am concerned with large workingclass areas where they have no grass to mow. In those areas it is common for our children to attend schools in classes of between 40 and 50. How can we economise in a situation of that kind?
Mr. Price: I will develop this a little further, since I am challenged. There is a school not very far away which has in the playground a futuristic piece of sculpture against which the children play cricket and for which the education authority paid £850. There is another example of waste. [HON. MEMBERS: "Where?"] Stevenage. If hon. Gentlemen opposite want further examples of this let them give me 24 hours' notice and I will provide them with plenty.
Mr. Blackburn: What of the "essential fabric of education" the Minister talks about?
Mr. Price: What I have said is that these economies could be made without interfering with the essential fabric. That is the whole of my case.
Mr. Dryden Brook: Would the hon. Gentleman come to my constituency and conduct an inquiry into our educational services and give us some insight how to economise?
Mr. Price: I should be delighted to do so if it were my job to do it, and if I could get leave of absence from my Chief Whip, which I doubt. Cannot we be a little serious about this for a moment?

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Do not we all know that these instances of wastage do occur frequently?
Mr. Fienburgh: No.
Mr. Price: Then I suggest it is time that hon. Members got a little closer to the problem, when they would find that what I have said is perfectly justifiable.
I completely support what my hon. Friend the Member for Louth (Mr. Osborne) said in his concluding remarks. Whatever economies the Government institute, whatever changes of policy the Government propose, we shall not solve our problems unless we can achieve what is so often called greater productivity. I prefer the terms greater efficiency and more hard work. It does not matter which we call it so long as we know what it is.
By this Budget the Chancellor has done what he can to encourage greater efficiency in industry. But that is not enough. Industry is composed not only of management but of men, too, and somehow or another we have to persuade them all to make their maximum effort. I have said in this Chamber before that we have the finest working population in the world. I believe that to be true. If we can persuade them to put forward their maximum effort there is little that is not possible.
The problem is how. The trouble is that we are dealing with a generation which has been taught for so long and by so many that to work harder is a mug's game because it puts more profit into the boss's pocket and helps them not at all. That is not true, and never has been. It was put very well by the leader in the "Daily Telegraph" on 20th March, which said that in America the workers will strike if the most modern machinery is not installed, but in this country the workers will strike if it is. They admitted that that was an exaggeration. I agree that it is an exaggeration, but it pinpoints the problem. There is no point in installing modern labour-saving machinery, more efficient machinery, if it is to be used to produce the same output with less effort instead of more output with the same effort.
This is a psychological problem. What we must do is to "unteach" the false teachings which have been poured into
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the workers' ears for so long. I believe that my hon. Friend the Member for Louth was on the right track when he said that we must convince them that greater effort will benefit not only the bosses—but also them and their neighbours. What we must do is to put into operation a document we published some little while ago, but about which not much has been heard since, a document known as the "Workers' Charter." I wonder whether somebody could tell me what has happened to it.
Mr. Tom Brown: Surely the hon. Gentleman is advocating something that has already been done. Is he now suggesting that he would go to the men in the mining industry, who have responded so well to the introduction of some of the most advanced machinery science has produced without making a complaint, but have accepted it wholeheartedly, and who, a few weeks ago, in one district, were advocating greater output to help the nation's economy and have responded with a further increase of 10 per cent. in their output?
Mr. Ellis Smith: The same applies to the engineers.
Mr. Price: The hon. Gentleman is taking an unfair advantage of me, if he does not mind my saying so, because he knows that as Parliamentary Private Secretary to the Minister I cannot say a word on that subject in this Committee. If he wants to discuss it with me in the corridor outside, I shall be delighted to do so.
Mr. Smith: Are they working all right in Fenton?
Mr. Price: I think the hon. Gentleman has got the name wrong, but if he means the pit to which I went they are working very well indeed.
Let me get back to the theme of my speech and conclude, because I know there are others who want to speak. What we must do is to show the workers of this country that they can be capitalists and enjoy the fruits of capitalism; that capitalism is something not for the few but for the many. If we can do that— and I believe we can—we shall get all the results we want, and the Socialists' shibboleths can be consigned to the rubbish heap where they belong.
8.54 p.m.
Mr. Douglas Houghton: Some parts of the speech of the hon. Member for Lewisham, West (Mr. H. A. Price) were astonishing and some were absolutely incredible. He began by accusing my right hon. Friends of not co-operating with the Government in the essential measures necessary to save our balance of payments situation. Surely he knows that on the necessary emergency measures taken before the Budget of last year we on this side of the Committee did co-operate with Her Majesty's Government in carrying them through.
What he has reproached us with was that we did not co-operate with Her Majesty's Government in making their mistakes. That is what we did not do. In the last Budget there were a number of matters with which we said we profoundly disagreed, and which we did not think were necessary for solving the balance of payments problem; which were not equitable; and which would not produce the results the Chancellor thought they would. The experience of the last 12 months has shown how right we were. The whole story in the Economic Survey is one of disappointment. The financial results for last year, as already pointed out by many of my hon. Friends, were surely not in accordance with expectations.
I want to refer to another matter which the hon. Gentleman mentioned— that of economy. Here in the background of the Budget is the public service and the level of Government expenditure. I think that it will be doing a great disservice to the public service if we now regard economies as a kind of propaganda platform, especially as they relate to members of the Civil Service.
The Chancellor of the Exchequer made a reference to the size of the Civil Service and joyfully said that he fully expected that when the figures were available we would find that it had been reduced by 22,000 during the past year. I do not stand for the retention of an inflated public service if the level of Government activity is to change so that there will be fewer people required in the public service, but I think that we shall be making a mistake if we exaggerate the effect of economies in the public service personnel on the level of Government expenditure. The sacking of 22,000 would
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save £1½ million in salaries. To abolish the whole of the Inland Revenue Department and the Customs and Excise Department would save only enough money to take 3d. off the Income Tax.
That is where the cry for economy will misfire if the Chancellor is seeking in that way to reduce the level of Government expenditure. I think that it will be a great pity indeed if members of the public service are to be regarded as some kind of parasites, because this Committee and the country owe an enormous debt to the public service for the way in which they have discharged an enormous load of administrative complexity and difficulty in the last 10 years. To do anything to undermine their morale and make them feel that they are doing less than a good job to the State will be, I believe, an unfortunate thing.
I wish also to refer to a matter mentioned by my hon. Friend the Member for Cardiff, West (Mr. G. Thomas), and that is equal pay for women in the public service. The Chancellor of the Exchequer has given away to taxpayers money which is part of the rightful rate for the job of women civil servants and others in the public service. I think that it is absolutely inexcusable that the right hon. Gentleman has said nothing whatever about his pledge on this matter, which he has repeatedly given; and one would have thought that this was an occasion for some mention to be made of it.
The right hon. Gentleman's pledge was that when the economic and financial position allows, he will implement the Motion to introduce equal pay in the public service. I do not know whether this is in the mind of the Chancellor as the occasion when the economic and financial position will allow this to be done—it has certainly allowed of a great deal to be done in other ways—but I hope that before the debate is over, someone on the benches opposite will say where Her Majesty's Government stand on this matter, because there is a very large number of women in the public service who want to know.
Mr. H. A. Price Mr. H. A. Price rose—
Mr. Houghton: I cannot give way. I think that the hon. Gentleman gave way far too much. The more he was interrupted, the sooner he got to his motor mower and the pocket handkerchief to

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put it on. I think that he had better listen for a change.
Another thing to bear in mind in connection with economies in the public service is that the Civil Service cannot help mistakes or changes in policy which bring about substantial alterations in the level of administrative costs. The Excess Profits Levy is an example of how the administrative machinery was mounted for this additional task and is now to be scrapped at the end of two years. Excess Profits Levy centres were set up in a dozen cities to deal with the complexities of companies which had associations with other companies and cases where the Excess Profits Levy could not suitably be dealt with in one tax district. Additional posts have been created.
The inspectors of taxes went to arbitration and got a lump sum of £175 for doing the extra work. The Arbitration Tribunal rejected the claim for a continuing annual allowance, restricting its award to one single payment, perhaps realising that this incredible tax was about to collapse and that one single payment would be an ample reward for the inspectors who would be asked to do the work. That is an example of how the costs of administration have nothing to do with the Civil Service, with whether it is working hard or whether it is efficient, but depend solely on Government policy decisions.
Leaving one of the features of the background of the Budget, I wish to say a few things about what the Budget sets out to do. The Chancellor repeated phrases and words which we have heard from him before. He said that this was to be an incentive Budget and that we needed a stimulus to both output and savings. He has chosen certain methods of bringing about the conditions which he hopes will yield greater output and more savings. The Opposition believe that he has been wise not to tamper further with food subsidies. At this stage that would have prejudiced very much indeed any possibility of getting the cooperation of the trade union movement. The cycle of wage increases since the last Budget owe their origin to the provocation of the substantial cut in food subsidies last year.
There are hon. Gentlemen opposite who still have not the matter of subsidies clear
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in their minds. A gentleman in my constituency writes to the newspaper and says that one thing about the cut in the food subsidies last year was that the working man has the satisfaction of knowing that he is paying an honest price for his food. If a cut in the food subsidies restores an honest price for food, what does 7½d. on a gallon of petrol do? Does that create a dishonest price? What do taxes on all sorts of commodities, especially beer and tobacco, do? The truth is that one can employ the device of subsidies to cheapen the things one wishes to cheapen and the device of taxation to make dearer the things that one wants to make dearer or that one feels one can make dearer and still not substantially reduce consumption, as in the case of beer and tobacco.
In deciding this year to offer no further provocation to the trade unions, the Chancellor has been wise indeed. If he can now hold the cost of living and combine higher consumption and greater output with fuller employment and a steady cost of living figure, he will not only perform a miracle but will at the same time have saved the trade unions from any major claim for further wage increases. What the Chancellor did not say in the course of his statement was whether he wants these tax remissions to be spent or whether he wants them to be saved. There were only two references in the whole of his speech to saving, and surely he must have from private and corporate savings as much as he feels is needful to use for financial and industrial investment. I believe he will be in need of somebody's savings before he has finished to cover the below-the-line expenditure. He has not stated how he proposes to deal with the substantial expenditure below the line; he has certainly made no provision for it in his surplus.
The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) congratulated the Chancellor on the decision to pay out the claims against chattels in the war damage scheme, but up to now there is no foreseeable source from which the money will come. If he is again this year going to use the fortuitous aid from private savings which assisted him so much in the Budget of last year, then he will have to urge that there should be more savings for the purpose—or worse, perhaps he may use monetary policy to get the frozen investment that he needs.

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How does he propose to get these objectives? The tax remissions that he has given are, as I estimate, something like two-thirds of direct taxation and one-third of indirect taxation. At this time tax remissions are justified on this scale only if they are essential for the achievement of the major purpose of the Budget. The question we have to ask ourselves is whether they do and will boost output? I wish I could see that that would be the result.
Last year the Chancellor referred to all the needs which he has stressed again this year. He told us that we want harder work, and so on. He said in his Budget speech last March:
"A true and lasting solution for our present troubles can be found only through increased production, harder work and increased output. … I am convinced that the present weight of direct taxation, particularly on the lower and middle income groups acts as a very positive discouragement to extra effort."— [OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1302.]
He pinned everything on the incentives of tax reductions in the Budget of last year, and yet we have this disappointing story as revealed in the Economic Survey. He gave tax concessions to mine workers along with others who were in the Income Tax field, but the mine worker was not content to yield greater output until he shared in the wage increases which other workers were getting, and which were a result of the financial policy of the Government and the cuts in the food subsidies. Output in the mining industry has not been up to the expectations of last year.
These are problems which every trade unionist has to face. The hon. Member for Louth (Mr. Osborne) has just delivered his customary lecture to Tory employers and has exhorted them to behave like Socialists. It is significant that he has to come across to the benches on this side of the Committee for the text on which to base his sermon to Tory employers. When the hon. Member said that he hoped that hon. Gentlemen on the other side of the Committee would copy my right hon. Friend the Member for Ipswich (Mr. Stokes), he should have said that the first thing they have to copy is his political philosophy. Until then they are not beginning to speak the same language. The explanation of the success with which my right hon. Friend can speak to his workers is that the workers know where
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he stands politically and ethically. They are not sure where hon. Members opposite stand in these two respects.
When the hon. Member for Louth says that we must stump the country and preach increased productivity and all the rest of it, is he unaware of what the trade unions and the Trades Union Congress have been doing all these years? Surely hon. Members on the other side of the Committee read the other day of the rebuke given to a member of the General Council of the Trades Union Congress who spoke out of turn at the Productivity Council. Surely all that correspondence has not been lost on hon Gentlemen opposite. Yet Mr. Hill, the rebuked member of the General Council, was saying what many workers are saying all the time, and there has to be an answer to that.
It is no good saying that we must get the worker on the shop floor to understand. He understands an enormous lot already, often a great deal more than his employer gives him credit for. Although the balance of payments and the higher mathematics of Budgetry policy may not be as clear to him as they are to some— not all—members of this Committee, other things are very clear to him indeed. He likes to see them stated in simple principles. One thing he wants is an assurance of greater partnership between employer and worker. He wants a full share of the product of his labour, and wants to see that it will not be distributed unduly generously to those who have their capital invested in the business. Until a new spirit of greater confidence can be built up, we are bound to have these differences of outlook between employer and workpeople.
We know what happens in America, but their industrial history is very different from ours. We have a lot to live down. Many workers have bitter memories of the past and we have to eradicate feelings of distrust, suspicion, and indeed of hostility towards employers as a whole. It has to be done painfully and slowly, but patiently. We hope that it can be done.
The hon. Member for Louth was certainly right if he was conveying to the Committee, as I am sure he was, that Budgets alone will not get greater output, and will not give all the incentives necessary to greater output. There is

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more in work than money, although there is a great deal in the money. There is the attitude of the employer and of the management, there are working conditions, and the acute problems of how to make dull work interesting and how to give rewards for higher output without any suggestion of exploitation or of discrimination. Those are highly difficult problems of human relationships in industry which we still have to study, and we have to apply as best we can the results of our study. I can only say to the hon. Member for Louth that, in addressing this side of the Committee, he was preaching to the converted and that we would have excused him if he had turned his back on us and addressed his hon. Friends on that side.
I reiterate the main criticism of the Budget from our point of view. The Chancellor has ignored the claim of the aged, the helpless and the sick and has given scant attention to those with heavy family responsibilities. It is no good saying that the reliefs given to them in reductions of Purchase Tax are anything like equitable, having regard to the reliefs given to the Income Tax payer. For the first time since 1941, reliefs in the higher ranges of taxation have not been accompanied by a corresponding adjustment of Surtax. That is why the 6d. by which the standard rate of Income Tax has been reduced goes right up to the top and gives what will appear to be excessively generous relief to those who have very large incomes.
One does not need to go to the hypothetical bachelor getting £100,000 a year in unearned income for an example. One has only to go as far as Her Majesty's judges, who have been given indirectly an increase in pay of £110 a year. I do not know whether that is enough to justify Her Majesty's Government now in finally withdrawing the Judges Remuneration Bill. At all events every little helps, even if it is only £110 on £5,000 a year, and it would be necessary to give quite a lot of gross income at that level to produce a net gain of £110.
The Income Tax payers share the tax reliefs from Purchase Tax. They get a double relief, while those who are not tax payers will get only the relief from the Purchase Tax reductions. So the former are double beneficiaries from the
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tax remissions in the Budget. Last night the Chancellor moved his listeners to his broadcast about those who care for their aged relatives and those who keep the home together. He will remember, of course, that the additional reliefs he is giving to the dependent relatives allowance is only 25s. a year at the bottom and 90s. a year at the top rate. I do not think he can crow too much about those modest reliefs.
The major relief is the 6d. off the rate of Income Tax, especially for those with large incomes. The inequitable distribution of the tax remains as the major flaw in the Budget from our point of view and we are bound to criticise that. I do not myself say that this is a rich man's Budget, but I say that it is a higher incomes Budget. It applies to a large section of the community with whom this Budget undoubtedly will be popular. However, popularity is not enough. Those who will feel discontented with this Budget have not such ready access to the columns of the Tory Press as those with whom it will be popular. That is why we had an almost universal chorus of approval from the Tory Press this morning. The discontented have yet to find their way into the correspondence columns. No doubt they will get there, but if they do not get into the correspondence columns, possibly there will be an opportunity for them to get into the polling booths—one never knows.
The inequity of these tax remissions is bound to appeal to all those who have a sense of social justice and who will not look at it solely from the point of view which the Chancellor apparently thinks they should, that he has imposed no further taxes upon them. What the final verdict of the country on the Budget will be depends on where we stand 12 months from now. That will be the real test of this Budget as it was of the last one. I conclude by saying that if the measure of success of this Budget is not greater than that of the last, the Chancellor will face far greater difficulties 12 months hence than he does at the moment.
9.19 p.m.
Mr. Anthony Barber: I was a little surprised at the hon. Gentleman the Member for Sowerby (Mr. Houghton) giving a somewhat extraordinary example of the effect of saving to the community by a reduction in the

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Civil Service of 22,000. I am a little diffident about referring to his comments on that, because I am sure that he has a very great knowledge of these matters, but it seems to me that when he says that a reduction of the Civil Service by 22,000 would save the country £1,500,000, he must be doing so on the conclusion that the average wage of civil servants was £68 3s. 7½d.. a year. If he looks at it a little closer, and if he were a little better in looking after those people for whom he is supposed to cater, he would find that the saving to the country would be between £10 and £15 million a year.
Mr. Houghton: Twenty-two thousand civil servants did not go out for the whole year. The figure was distributed throughout the year, and I doubt whether the economy was greater than £1 million in the last financial year.
Mr. Barber: I certainly cannot agree with that.
Then the hon. Member went on to say that the whole story of the Economic Survey is one of disappointment. While we all agree that certain disappointments occurred during the past year, surely the main object of the Chancellor, both when the Conservative Government took office and at the time of his last Budget, in 1952, was to balance our overseas accounts. It is all very well for the hon. Member to say that this is a tale of disappointment, but the fact remains—it it cannot be denied—that in 1951 we had a deficit on our United Kingdom balance of payments of something like £400 million and in 1952 we had a surplus of £291 million.
That is something of which my right hon. Friend the Chancellor has every reason to be proud, and, like many of my hon. Friends, I am just a little surprised that the right hon. Member for Leeds, South (Mr. Gaitskell) did not give him just a little bit of credit for his efforts in that matter.
Mr. Houghton: May I interrupt the hon. Member?
Mr. Barber: The hon. Member a short time ago refused to give way to my hon. Friend the Member for Lewisham, West (Mr. H. A. Price). He will, therefore, perhaps, understand my not giving way now.
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The hon. Member for Sowerby referred to old age pensioners and said that while they might be given some relief in Purchase Tax, Income Tax payers were getting a double relief. No doubt literally that is true, but if I understand the hon. Member aright it would be a corollary of his argument, and it would be Socialist policy, that when Income Tax is imposed or increased, the old age pensioner should also suffer some double burden; whereas, as the hon. Member knows only too well, it has been the policy of neither of the two major parties when Income Tax is increased that the old age pensioners should suffer an additional burden on that account.
It is not unnatural that there should be considerable criticism from the Opposition benches—nobody complains about that. But whatever we may say, what really matters is the effect of the Chancellor's proposals upon the economy of the country and upon the level of production. The second factor, perhaps not quite so important, but still of considerable importance, is the reaction of the great mass of the people to my right hon. Friend's proposals. By far the most significant indication of what people are thinking as a result of the Budget is indicated by the cry which one heard last night from all quarters of the Opposition that we would have an autumn election. Hon. and right hon. Members opposite know perfectly well that this is a good Budget.
I am concerned as much as Members opposite, and equally with my hon. and right hon. Friends also, with the fall in production by, I think, about 3 per cent. last year. It is fair to say, however, that whatever disagreements we may have as to the approach to these fiscal matters, the fact remains that in this Budget the Chancellor has done a great deal to make it worth a man's while to do just a little more. That is one of the most important things that any Chancellor, whatever his party, must bear in mind at the present time.
Whenever a Chancellor of the Exchequer is able to give some relief by way of taxation he is confronted with three possible categories of beneficiaries. First, there are those men and women, by far and away the vast majority, who toil in the factories, on the land and in the offices, and who pay Income Tax.

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Secondly, there is what is called, in a rather nebulous way, industry, as though it were a metaphysical entity divorced from the people who compose it, which is often a very bad thing.
Then there is industry itself, because, after all, nobody would disagree that British industry must have the wherewithal to re-equip itself and constantly be modernising its machinery and plant. Indeed, the right hon. Gentleman the Member for Leeds, South has consistently agreed with my right hon. Friend that, unless we are able to approve the efficiency of our industries and increase our exports, there can be only one result— that we shall not have the foreign currency with which to buy our food and raw materials and so keep our factories going and maintain full employment.
The third category of beneficiaries which any Chancellor would have in mind are those individuals, many of them old and infirm, who pay no direct taxes, and it seems to me that the most remarkable facet or achievement of the present Budget has been that the Chancellor has found it possible to do something for each of these categories. I know that there are differences of opinion between us, but it remains true, and I think nobody can deny it, that each of these three major categories has benefited to some extent in this Budget. For all those who pay any appreciable amount of Income Tax, there are the tax reductions, which may not be much, but it really is fantastic to suggest that anything but good can be derived from the reduction in the Income Tax.
Listening to the right hon. Gentleman the Member for Leeds, South, it seemed to me that he had considerable doubt whether he supported the cut of 6d. in the Income Tax or not. I can only say that he came to my constituency during the last Election, and that I would like him to come along again and speak in Doncaster and tell the people if he does not agree with the cut in the Income Tax. I can assure the right hon. Gentleman that he will not get a very good reception from the coal miners or the thousands of railway workers in my constituency if he goes about the country advocating that view.
So far as industry is concerned, I am delighted that the Chancellor has seen
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fit to restore the initial allowances. As is well known, they are not so much a remission of tax as an interest-free loan from the Treasury, but I do believe that this step, which I am delighted to see has the support of the right hon. Gentleman opposite, will have good results.
Perhaps I may now turn to one rather small matter which was referred to by the hon. Member for Sowerby, and on which I am in considerable agreement with him. It concerns the hon. Gentleman's remarks about the Excess Profits Levy, because, like so many of my hon. Friends, last year I came to the conclusion that it was probably the worst direct tax that had ever been invented. I want to be quite frank with the Committee and admit that I supported the Chancellor of the Exchequer of the Conservative Government, because it seemed to me that it was necessary in the economic conditions of that time. I do not mind admitting that, having had some concern with the operation of the Excess Profits Levy over the past year, and having had the unhappy task of having to interpret some of the provisions in the Finance Act, for which I so happily voted during its passage through the House, I agree with very much of what the hon. Member for Sowerby said.
The tax was, in effect, a deliberate penalisation of success, and I know that the right hon. Gentleman the Member for Leeds, South has made much fun this afternoon about the action of my right hon. Friend the Chancellor in imposing an Excess Profits Levy in the last Budget and deciding only a year later to do away with it on 1st January, 1954. Perhaps I may say that the decision of the Chancellor to abolish the levy shows not only that he is a good economist and one who is willing to learn by experience of the operation of the tax for a year, but, also, that he is a man of most unusual political courage in coming to this Committee only a year later and saying, "We are going to abolish it."
There are those who, by inference, seem to suggest in their speeches that help for industry is not help for the millions of people who inhabit these islands. People who make that suggestion, whether directly or by inference, are deluding not only themselves, but many other people in this country, and are actively engaged, albeit unknowingly, in

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a campaign for lowering the standard of living of those they represent. It is a happy thing for this country that neither the T.U.C. nor the average working man or woman pay much heed to those who put forward that line today.
The Government have given us a lead in this Budget. The opportunities for increased production in this country are enormous. After all, we are members of a Commonwealth and Empire which are rich in untold raw materials. We have among our numbers the finest technicians and craftsmen in the world. I know that our population is not very great, but the right hon. Member for Battersea, North (Mr. Jay), who, I am delighted to see, is present, admitted a long time ago that the United States of America produced half the world's goods with only 7 per cent. of the world's population. The opportunity is there, and it is for the British people, with the help and guidance of the Government, to grasp it.
While I am on this question of reliefs for industry, perhaps I may be permitted to diverge for a moment to say that there are some people who have been suggesting and hinting that there should be industrial action by the workers against the policies of the present Government. Frankly, I was astonished and a little disgusted on the day before we adjourned for the Easter Recess to hear the right hon. Member for Ebbw Vale (Mr. Bevan) suggesting that there was a desire for industrial action among the railwaymen of this country. That was a wicked taunt against a very loyal section of our community, and it was only made slightly amusing by the fact that the right hon. Gentleman seemed to classify himself among those who were resisting such a suggestion. I can only say that there are thousands of railwaymen in my constituency, and that there is not the slightest sign of any suggestion of industrial action.
The fact is that working men and women know full well that they are better off under a Conservative Government. [Laughter.] Hon. Members opposite may laugh, but during 1952 wage rates rose on the average by the same percentage as the cost of living. Indeed, the "Daily Herald," if hon. Members care to look it up, quoted without comment the Ministry of Labour Gazette in saying that this is probably the first time that wage rates have gone up in the same proportion as
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the cost of living. In the same period trading profits fell.
The right hon. Member for Leeds, South made some play this afternoon with the Chancellor's forecasts during the Budget debate last year. I can only remind the Committee that the working people would have some cause for alarm if they listened to the tale of woe which has been expounded by so many right hon. Members opposite. What about the last Socialist Minister of Labour, the right hon. Member for Blyth, (Mr. Robens), who forecast that before the end of 1952 the unemployment figure would reach one million? What utter nonsense. It did not reach anything like that; it was less than 400,000.
What about the spending power of working people in this country? Apart from reading the more responsible newspapers, I am also an assiduous, regular reader of the "Daily Herald," and of "Punch." They seem to have very much in common these days. I was very interested to note the Financial Secretary's reference this afternoon to the "Daily Herald" advertisement in the "Advertiser's Weekly." He quoted from one issue of that great paper, the "Advertiser's Weekly" and perhaps I may be allowed to quote from another, of 1st January this year. This was the advertisement:
"'Daily Herald' families will buy more of your products this year. Their incomes are higher than ever."
Finally, there are those people—the third category about which I spoke initially—who pay no Income Tax at all. There may be some difference of opinion with regard to degree, but the fact remains that by slashing Purchase Tax by 25 per cent. the Chancellor has done something to help everybody; and it is nonsense to say that the old, the infirm and the pensioners have nothing to gain from this Budget.
The hon. Member for Cardiff, West (Mr. G. Thomas), a man whom all of us in this Committee like and respect, said that the old age pensioner gains nothing. He asked what it meant to the old age pensioner that Purchase Tax had been reduced on a mink coat. I was a little surprised that he did not ask what it meant to the old age pensioner that the Purchase Tax had been reduced on kettles, buckets, kitchenware, linoleum,

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fire screens, radios, electrical and gas fires, to name only a few articles. It is utter nonsense to suggest that this Budget does not benefit those who do not pay Income Tax. My only regret is that the Government have seen fit to accept the report of the Hutton Committee on tax-paid stocks.
It seems to me that the recommendations of that Committee are completely out of touch either with present economic and fiscal trends or the commercial activities of retailers. The only real help that the Committee suggested was help in the event of an increase in Purchase Tax, which we all knew, even before this Budget, was most unlikely to occur. This is not the time or place to discuss it, but I hope that the Chancellor will yet do something to assist retailers in this connection.
It seems to me to be a remarkable feat that the Chancellor, in addition to providing these reliefs from taxation, has also found it possible to spend an additional £80 million on the social services, an additional £18 million on the National Health Service, an additional £27 million on education and yet, at the same time, to reduce the aggregate of civil supply expenditure by some £60 million. Whatever we may say in this Committee about the Chancellor's proposals, I have no doubt that the British people are well satisfied with the Budget of 1953.
9.38 p.m.
Mr. Anthony Crosland: The Chancellor claimed— and so did a number of hon. Members on the back benches opposite, whose references to the Chancellor were so adulatory as to suggest very widespread expectation of coming Ministerial vacancies—that this Budget represented an entirely new departure. The Chancellor said that it moved for the first time for many years in a new direction, the reason for this being that there was no increase in taxation and, on the other hand, there were substantial remissions.
A number of newspaper writers this morning seem to have been taken in by what seems to me, if I may say so, a brazen claim which on examination turns out to be quite false. All the remissions of taxation made in this Budget are remissions of taxes imposed solely for the
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temporary period of rearmament. The remissions are, first, the Excess Profits Levy, introduced by the Chancellor himself purely for the rearmament period and now remitted before that period is over. Secondly, there is the restoration of the initial allowance, which my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) took off in 1951, again purely for the period of rearmament. Thirdly, there is the 6d. off the Income Tax, a 6d. which again was put on by my right hon. Friend the Member for Leeds, South in 1951 purely with the rearmament programme in mind. Lastly, there are the concessions on the Purchase Tax, a great number of them merely reversals of Purchase Tax increases imposed by my right hon. Friend in 1951 purely to deal with the rearmament situation.
Almost every single remission of taxation, therefore, is a remission of tax which was imposed with this one object in mind of paying for a large but short rearmament programme. Now that the Government have found that rearmament can be financed more easily than was thought possible a year or two ago, they naturally find themselves in a position to take off these taxes, and any Government in their situation would have been able to remit taxation to this extent this year. There really is nothing in the claim that all this is a completely new departure. It is merely getting rid of additional taxes which were imposed with this one special object in mind. There is nothing for the Chancellor or his supporters to make such a song and dance about.
The second reason that the Chancellor finds himself in a new situation, and enabled to introduce a new type of Budget, is a reason which has already been pointed out in many speeches on this side of the Committee. What is new, after all, is not the fact of a lenient Budget. What is new is the fact of a fall in production. Naturally it hardly comes as a surprise that in a situation where output is lower, and where the economy has a considerable amount of slack in it, taxation can be reduced.
Of course, it is true that under the Labour Government taxation was higher, but at least the national income was rising every year. Now that we have a quite different Government in power—I am not saying for a moment that it is all their fault, although it certainly is partly

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their fault—we have lower production, slack in the economy, and, therefore, the possibility of lower taxation. But it is only fair to warn hon. Members opposite that if the Chancellor is successful in his purpose, which I hope he is, of expanding production, with the risk that that will bring of a new inflationary pressure, hon. Members opposite are in for an unpleasant surprise in next year's Budget, as the Chancellor knows quite well.
If I could digress for a moment on this question of production, the fact that total output has fallen has attracted a great deal of comment. What has attracted much less comment is the equally, if not more, significant fact that not merely has total output fallen but productivity has fallen, too. The Economic Survey this year speaks of a significant decline in output per man, and it is a rather ironic situation that the party of business efficiency, the party that spoke so big about productivity and the need for higher output per man, should provide the first Government since the end of the war under which productivity has fallen compared with the year before.
Turning to the positive proposals made in this year's Budget, the first effect and the one that has been most discussed this afternoon is their effect on the distribution of incomes. A number of references have already been made to the effect of this Income Tax concession on the degree of equality of incomes in the country. My right hon. Friend the Member for Leeds, South spoke about this, and attempts were made by the Financial Secretary and the right hon. Member for Blackburn, West (Mr. Assheton) to pooh-pooh his allegation, which I should have thought was unchallengable enough, that this has the effect of making income distribution much more unequal than before.
The right hon. Member for Blackburn, West said that a concession in Income Tax was bound to benefit most those with high incomes because they pay the most tax. Precisely; and it is precisely the reason why this particular method of tax concession does not seem to us the best that could have been chosen. We would very much have preferred—most of us on this side, as indeed would the "Economist," rather surprisingly—the same amount of money to be given away, if the Chancellor decided that he could
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afford it, as I agree that he could, by way of an increase in the earned income allowance and an increase in other allowances which would not have anything like the same effect on the distribution of incomes after taxation, as would 6d. off the standard rate.
The Financial Secretary, in a speech which, like a number of his speeches, was a very agreeable knockabout but did not add anything to the serious part of the debate, had a great deal of fun this afternoon with this rakish dissolute figure which my right hon. Friend the Member for Leeds, South, conjured up—the bachelor living on £100,000 a year wholly unearned. Everybody agrees that this is perhaps a figure of the imagination. I see that the Leader of the House has entered the Chamber. The only difficulty about identifying the Leader of the House with this definition is that my right hon. Friend referred to "an eligible bachelor" and not just to "a bachelor."
But the fact remains, as everybody knows, that there are a great number of people—many thousands of people—in the country with incomes, after taxation, of £3,000, £4,000, £5,000 or £6,000 a year, and the fact also remains that all these people will benefit, some of them by hundreds of pounds and many of them by thousands of pounds a year. There is no getting over this fact, and equally there is no getting over the fact that people in the lower wage earning class, if they pay Income Tax at all, will benefit only to the extent of a few shillings a year. These are irrefutable facts and in the light of them it cannot be denied that the equality of incomes after taxation has been greatly diminished by the Budget.
Before this Budget, we had a range of incomes after taxation which extended at the bottom from, I suppose, about £400 a year—one could easily find lower incomes —up to a little over £6,000 a year. That was the range of post-taxation incomes two days ago. Today the range is from £400 at the bottom end to £8,500 at the top. In the light of these figures it cannot be denied that a very considerable social change has occurred as a direct result of the Budget.
I should like also to consider for a few moments the effects of the changes in profits taxation. My right hon. Friend

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the Member for Leeds, South made it quite clear that we did not oppose the concessions which were made to profits, on the understanding that they were used for re-equipment; and the Chancellor himself obviously agrees with this view because, in his Budget speech yesterday, he refers to them as
"… a potent augmentation of company reserves available for … development, upon which, I trust, it should be spent."—[OFFICIAL REPORT. 14th April, 1953; Vol. 514, c. 60.]
The Chancellor may trust, but others, alas, dispose. It is a significant fact that we have had today a considerable rise in share values on the Stock Exchange which, indeed, is only the culmination of a fairly steady rise in values over the last two or three months, based almost entirely on the expectation of precisely the sort of Budget which we had yesterday. Why has there been this rise? It is perfectly clear; there is no mystery about it. It has been due to an expectation that reduced profits taxation would be followed by a great number of dividend increases.
There are two points to note about this. The first is that this rise in share values and the untaxed capital gains associated with it are another factor making for greater inequality as a result of the Budget. The second point to notice—and I think the Chancellor would agree with this, because he implied agreement in his speech—is that there cannot be a strong economic case today for a general increase in dividends in order to attract new capital to industry. We have seen in the Economic Survey figures showing the extent to which industry last year saved a great deal more than it required for investment, and was able to repay bank indebtedness on a very large scale.
On top of this, we now have the E.P.L. concession, the Income Tax concession, much of which will accrue to profits, and the initial allowance relief. That, coming on top of a situation in which industry was already saving much more than it was investing, means that no case can be made for saying that industry in general is so short of capital that higher dividends are absolutely necessary in order to attract new capital. Since there is neither a social justification nor an economic justification for a general increase in dividend payments this year, my right hon. Friend was surely right to
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suggest that if these concessions were made they should be accompanied by other measures to ensure that they were not dissipated in higher dividends but were used for the purpose for which they were intended.
In this connection the Financial Secretary attacked my right hon. Friend the Member for Leeds, South for suggesting that Profits Tax should be raised when E.P.L. disappears. He said that this showed the fundamental difference between the two parties and their attitudes to taxation. He said that hon. Members opposite wanted taxation only for the one purpose of covering minimum Government expenditure, but that we on this side of the Committee wanted high taxation for its own sake. It is certainly true that on this side of the Committee we do not treat taxation solely as a method of paying for minimum Government expenditure—for the Army, the police forces, the essential services of the State. We also treat taxation as a prime weapon for ensuring that distribution of incomes which we think is right.
After all, the distribution of incomes before taxation is grotesquely unequal even today, and taxation is much the quickest, simplest and easiest method of making that distribution more equal. We certainly, therefore, do not regard any reduction in taxation of whatever kind as being necessarily good, because it may have a very powerful effect in making the distribution much less equal. If the Chancellor wants to reduce taxation on the lower incomes he will find hon. Members on this side very sympathetic. If he wants to reduce taxation by eliminating Surtax he will find hon. Members on this side very hostile. If the Financial Secretary then says that this represents a fundamental difference in attitude between the two sides we shall be the first to agree with him.
In the few minutes still available to me, I want to turn to the economic effects of the Budget. I am very glad that the Chancellor did not take some of the more austere advice tendered to him in the economic weeklies. I am glad he was willing to take a risk on the side of demand as a whole. I think that that was an absolutely correct decision as against some of the advice which was tendered to him. On this side of the Committee we would

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thoroughly support his desire to expand production once again, to get us back on the rising curve of production on which we were from 1946 to 1951. However, there are two very important corollaries of this policy of expanding industrial production, and I would say a word on each.
First, and much the more serious, is this question, is there going to be coal to support the higher output? I take the view that the coal situation at the moment is extremely alarming. The shortage of coal threatens to frustrate the entire policy of raising output. I do not want to go into the details about the facts. They are fairly well known.
The demand for coal is likely to be very much higher this year than last. Exports, it is hoped, will be three million tons higher. Home demand will be about four million tons higher on a very conservative estimate. We are losing—and nobody grudges this loss—a great deal of output owing to the second week's holiday, which, after all, is a good deal overdue today; and we shall lose some output because of the Coronation holiday. We are faced with a possible gap between the supply of and the demand for coal of over 10 million tons. This is a situation which really threatens the whole of our economic recovery.
One can approach this problem from the side of supply or the side of demand. I do not want to say anything about supply, about which I am not competent to speak. But on the side of demand, in order to release more coal for export and for industrial production, I believe the situation is so serious that the Chancellor should now make it his personal responsibility to take measures to encourage fuel economy. All that we have had so far is a Government offer of £1 million in loans, at full commercial rates of interest, to be used for installing fuel-saving equipment. Those loans have been quite ineffective. Only a small part of this sum has been taken up. There is an overwhelming case for a 100 per cent. initial allowance on fuel saving equipment. The hon. Member for Kidderminster (Mr. Nabarro), with not all of whose recent public utterances all hon. Members will agree, nevertheless on this particular subject has done nothing but good by his constant insistence that there is this overwhelming case.
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We have had the principle of discrimination in respect of initial allowances accepted in this Budget, and I urge the Chancellor to consider this as a matter of desperate urgency. But I am sure that by itself it will not be enough. I am quite certain that we shall some day have to adopt what will be highly unpopular on both sides of the Committee, and even more unpopular in the country, namely, a tax on coal. I am absolutely certain of it. The situation is so serious that, however unpopular it will be in the Labour Party, the Tory Party, or any other party, we shall have to come down to this in the end.
The next point to which I wish to draw attention is the effect of a policy of expanding output on the balance of payments. There is clearly a very serious danger that higher output will lead to higher imports, and will plunge us back again into a balance of payments crisis. Now how are we to avoid this? It seems to me inescapable that the corollary of a policy of expanding production at home is determined planning and strict control in the sphere of foreign trade. The Chancellor has spoken—and it is a rather disturbing attitude—of freeing trade from restrictions, moving towards convertibility, and the like. We are going to spend more dollars on Cuban sugar. We shall spend more dollars on oil as a result of re-introducing branded petrol. We have relaxed restrictions on E.P.U. imports. If this kind of derestriction of imports is to continue we shall be plunged into the most appalling balance of payments crisis again.
I urge the Chancellor—and I hope he will be sympathetic to this attitude—to realise that strict control over imports is a necessary accompaniment of any policy of expanding production at home. I think the principle should be only to relax restrictions on imports from those countries which at the same time will take higher exports from us. This applies very obviously to the sterling area countries. It applies, I would say, also to countries such as the South American countries, with whom there are very promising possibilities of bilateral agreements to increase two-way trade. I hope the Government will very seriously consider the possibility of making bilateral payments agreements with countries such as

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South American countries. They are short of sterling and we are short of their currencies. We have both got surplus export capacity, and it is ridiculous that trade between us should be stagnating. Neither of us can afford much higher dollar trade than we have now, but we can both afford, and both gain from the effects of, a much higher level of trade between us than we now have.
It is my personal opinion that there is a very strong argument for going further than this in the case of South America. It seems to me a market with enormous potentialities looking ahead. It is also a market in which we have lost much ground both to Germany and America. It is a market in which at the moment, judging by reports coming from there, competition is not a matter of price or delivery dates but of the provision of credit, and I think the Government should seriously consider whether it is not worth while now offering credit facilities to South American countries in order to encourage our exports. It might be a magnificent chance of getting a large share in a market which in future will be of overwhelming importance.
Lastly, just a few sentences on the question referred to by my hon. Friend the Member for Edmonton (Mr. Albu), namely, the possibility, indeed the likelihood, of an American recession in the quite near future. I have spoken about this more than once in this Committee, but obviously the likelihood looks much greater now than it did a few months ago. Even the "Economist" had a whole supplement on this subject, which suggests that it is at least something worth considering seriously.
Are the Government really making their plans to deal with the situation when it comes? Are they really making preparations now to deal with it? —because an American slump is not something that can be improvised against in a few days, a few weeks, or even a few months, when it suddenly comes upon us. It is something which has got to be planned for, and it is only right to say to the Chancellor that the country will not forgive him if, in his pursuit and decontrol and laisser-faire, he dismantles our defences, and leaves us helpless, against a recession which might sweep away all the advances of the last few years.
It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
Committee report Progress; to sit again Tomorrow.

COASTAL FLOODING (EMERGENCY PROVISIONS) [MONEY]
Resolution reported,
That, for the purposes of any Act of the present Session to make provision for work for defence against sea water in localities affected by the flood of January, 1953, and to provide for the rehabilitation of agricultural land flooded with salt water, it is expedient to authorise the payment out of moneys provided by Parliament of:—

(a) grants to river boards in respect of expenditure incurred by them in, or in connection with or in consequence of, the exercise of powers conferred on them by or under the said Act;

(b) expenditure authorised by the said Act in making acreage payments for the purpose of promoting the rehabilitation of agricultural land that has been flooded with salt water;

(c) any increase attributable to provisions of the said Act in the sums payable out of moneys provided by Parliament under Part I of the Local Government Act, 1948, or under section forty-nine of the Town and Country Planning Act, 1947, or in the sums payable out of the Road Fund.

Resolution agreed to.

LOCAL GOVERNMENT (MISCELLANEOUS PROVISIONS) [MONEY]
Considered in Committee under Standing Order No. 84 (Money Committees) [Queen's Recommendation signified].
[Sir CHARLES MACANDREW in the Chair]
Resolved,
That, for the purposes of any Act of the present Session to amend the law relating to local authorities, it is expedient to authorise the payment out of moneys provided by Parliament of any increase in the sums payable under any other enactment out of moneys so provided which may be attributable to provisions of the said Act of the present Session—

(a) authorising local authorities to establish capital funds, renewals and repairs funds, and funds for the insurance of their own risks, and providing for payments to be made into such funds by the authorities by whom they are established;

(b) enabling local authorities to provide and maintain shelters and other accommoda-

329
tion for persons intending to travel on public service vehicles, and otherwise relating to such accommodation provided by local authorities whether before or after the commencement of the said Act of the present Session;

(c) providing for the payment of allowances under section eighteen of the Housing Act, 1936, to persons displaced from premises affected by closing orders made under the said Act of the present Session;

(d) authorising local authorities themselves to bear certain expenses recoverable by those authorities under section forty-one of the Third Schedule to the Water Act, 1945, or any corresponding local enactment or order, or under section thirty-six of the Public Health Act, 1936; or

(e) amending section one hundred and twelve of the Local Government Act, 1948. —[Mr. Boyd-Carpenter.]

Resolution to be reported Tomorrow.

INCUMBENTS (DISCIPLINE) AND CHURCH DIGNITARIES (RETIREMENT) AMENDMENT MEASURE
10.2 p.m.
Sir John Crowder (Second Church Estates Commissioner): I beg to move,
That the Incumbents (Discipline) and Church Dignitaries (Retirement) Amendment Measure, 1953, passed by the National Assembly of the Church of England, be presented to Her Majesty for Her Royal Assent in the form in which the said Measure was laid before Parliament.
This Measure was introduced and passed by the Church Assembly in response to a request from the hon. Member for Maldon (Mr. Driberg) and an undertaking given by the hon. Member for Gravesend (Sir R. Acland) when the Discipline Measure concerning the bishops was approved by this House.
The object of this Measure is to bring the existing Measures dealing with the discipline of the clergy into conformity one with another, in so far as they relate to social or political opinions and activities. There are three such Measures, namely, the Incumbents (Discipline) Measure, 1947, the Church Dignitaries (Retirement) Measure, 1949, and the Bishops (Retirement) Measure, 1951.
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The relevant provisions of these three Measures, as they stand at present, are set out on page 3 of the Comments and Explanations submitted by the Legislative Committee. It will be seen that the offences for which proceedings may be brought under all three Measures fall under two heads: (a) unbecoming conduct, and (b) serious, persistent or continuous neglect of duty; but the three Measures differ in their treatment of social or political opinions and activities.
The Incumbents Measure precludes proceedings under either head in respect of social or political opinions. But it does not mention "activities," and this has led to considerable doubt and controversy. The Dignitaries Measure precludes proceedings under either head in respect of either opinions or activities, that is to say, social or political opinions or activities cannot amount either to unbecoming conduct or to neglect of duty.
The Bishops Measure precludes proceedings under head (a)—unbecoming conduct—in respect of either opinions or activities, but proceedings under head (b)—neglect of duty—can be brought in respect of social or political activities, but not in respect of opinions. The reason for this is that a man may devote so much time to his social or political activities that he is unable to perform his duties properly.
The effect of the present Measure is to make the provisions of the three measures correspond as far as possible by assimilating the Incumbents Measure and the Dignitaries Measure to the Bishops Measure. It gives effect to the desire for uniformity which was expressed in the House in the debate on the Bishops Measure. The Measure was passed by the Assembly throughout all its stages without a division and has been reported on favourably by the Ecclesiastical Committee.
Sir Edward Keeling: I beg to second the Motion.
Question put, and agreed to.

COAL INDUSTRY (DOMESTIC SUPPLIES)
Motion made, and Question proposed, "That this House do now adjourn."— [Mr. Redmayne.]
10.6 p.m.
Mr. Gerald Nabarro: I intend in a short speech to make reference to one aspect of the coal situation alluded to in a different context by the hon. Member for Gloucestershire, South (Mr. Crosland) a few moments ago. I intend to draw attention to three aspects of the house coal situation; namely, the price, the quality and the rationing system, which has now been in force for 10 years or more. There is a general feeling that the price of house coal is too high, that the quality is too low, and many members of the general public question whether the existing rationing system should now be continued.
Before I pass in some detail to those issues I wish to say something about the trends in use of the various forms of fuel in the household during the post-war period. The Minister of Fuel and Power has said on several occasions in the lifetime of this Parliament that it is the policy of Her Majesty's Government to encourage free competition between the nationalised industries in the sale of the various forms of fuel. I have on previous occasions questioned the wisdom of that policy in existing circumstances. It is an undeniable fact that, whereas today electricity and gas remain unrationed and both are used for household heating purposes, solid fuel in the form of coal and coke is severely rationed, and the tendency has, therefore, been during the past few years, particularly since 1945, for an artificial demand to be created for electricity and gas due to the shortage of house coal and coke for domestic space heating.
There is ample statistical evidence of the rise in consumption of domestic electricity between 1945 and 1950. The amount of electricity used in the households of this country increased by 70 per cent. in that span of five to six years. I would not suggest for one moment that all of that was on account of domestic
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space heating. There has, of course, been a great and very desirable increase in the use of electrical appliances other than heaters and all of us support that, but a very large part of the increase in the domestic use of electricity has been on account of domestic space heating, a purpose for which, in my view, electricity is not particularly efficient.
The figure of 70 per cent. compares rather unfavourably with the increased use of electricity for industrial purposes. In the same period of five to six years industrial electricity consumption increased by only 18 per cent. In other words, consumption of domestic electicity increased by nearly four times as much as industrial electricity and that at a time when all of us should have been concerned primarily with increasing the electric power available to the elbow of every workman in every workshop in Britain. I believe, with good cause from those figures, that industrial power development in this country in the post-war period has been mortgaged and jeopardised very largely by the demand for domestic electricity, notably for space heating. However, that is only a general background to the post-war period.
Let me now deal specifically with the three issues in connection with house coal. I said that the first is the price of house coal. Taking an average grade, it is approximately £5 a ton near the coalfields, goes up to more than £6 a ton in London and ranges as high as £7 15s. a ton in Cornwall and other remote parts of the United Kingdom. House coal is severely rationed. North of a line from approximately the Wash to Bristol a householder can have 50 cwt. of coal a year, but south of the line he can have only 34 cwt. a year.
Today, the situation has arisen that one in four households are unable to afford to buy more than the existing ration of house coal. That is not a surmise on my part, but has been brought out very clearly and graphically by a recent survey conducted by the Coal Utilisation Council, which was published only a few weeks ago. Careful inquiries were made in 2,000 households in all parts of the country, and that statement of one in four who cannot afford more household coal was before the recent increase of 5s. 6d. per ton in the price of coal. It follows, therefore, that

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the percentage who cannot afford more household coal is probably greater as a result of the increased price.
I should like to pause here to say that many hon. Members of this House and of the general public are somewhat mystified to know exactly how the 5s. 6d. per ton for coal increase in price has been made up. Only a few pence per ton is on account of miners' wages. We know part of it is for the loss made by the Coal Board last year, we know that there is an allowance for export losses, and we know that certain excess depreciation factors for plant and equipment enter into consideration.
What I am concerned with at the moment is the future trend in the price of coal, because whereas 5s. 6d. per ton was only put on a few weeks ago it was substantially to make good the loss down to the end of 1952. Last year, the National Coal Board succeeded in selling in Europe about 8 million to 9 million tons of coal at a substantial export differential, which brought them in 15s. to 25s. per ton more than for the price of coal sold in this country.
Today, the export markets are hardening against us. American high grade coking coal is being sold in Rotterdam on a c.i.f. basis at a lower price than British coal of approximately equivalent quality and the American coal has 2 per cent. less ash content than the British equivalent. The concomitant of this is that with hardening export markets we shall find it infinitely harder in 1953 to maintain our export differential, and as the export differential wanes, so the National Coal Board will have to make good the loss in respect of the differential, by adding it to the home price of coal.
I believe, therefore, from a very careful study of these price trends, that before 1953 is out we shall witness a further increase in the price of coal which may be to the householder and to industry anything from 5s. to 7s. per ton. That will have the effect, of course, of making it even more difficult for those householders who cannot afford to buy their full ration of house-coal.
Mr. W. R. Rees-Davies: Perhaps my hon. Friend will deal with a matter which arises from the price of coal, the astonishing anomaly
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which exists at present in some towns and of which my hon. Friend may be aware. May I draw the attention of the House to the fact that there is an Act of Parliament, dated 1792, which affects some towns and which, in particular, affects towns in my constituency. It is a remarkable fact that today, in the town of Ramsgate, for example, the price of coal is 2s. more per ton, as it is on all solid fuel, than the price which exists in other towns.
Mr. Speaker Mr. Speaker rose—
Mr. Rees-Davies: In the case of—
Mr. Speaker: Perhaps the hon. Member does not know that he should sit down when I rise. He is new to the House. This is a rather long incursion into the very limited time that the hon. Member for Kidderminster (Mr. Nabarro) has at his disposal.
Mr. Nabarro: I am deeply sympathetic with the local problem to which my hon. Friend has drawn attention, and I am sure that the Parliamentary Secretary will use his utmost influence with the Coal Board and their Marketing Director to have the anomaly speedily removed.
I pass from this question of price to the equally difficult problem of the quality of house coal, about which there is widespread complaint. I do not deny for one moment that the Coal Board must perforce, in present circumstances, work seams at greater depth, or which are more difficult, thinner or more remote, and are often dirtier, but the consumer ought to be protected against the depredations of a malignant monopoly, because he has no alternative source of coal supplies.
In the course of the last few years the Coal Board have been investing, rightly, large sums of money in mechanical development in the pits. They have invested a larger percentage of their money in cutting and underground transport equipment, largely to the detriment of cleaning and washing equipment at the pithead, and the development between these two classes of equipment has evidently got out of balance.
I hope that my hon. Friend the Parliamentary Secretary will deal with this point in some detail when he replies, because it is very necessary, if the householder is to be called upon to pay still

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higher prices, that he should get good coal, and not brickbats, rubbish, bits of conveyor belt, and so on; malpractices against which he has little or no protection. There should be an increased capital allocation for cleaning and washing plants to overcome this difficulty
Now I pass to the third point, the continuance or otherwise of the house coal rationing system, which springs from the Coal Distribution Order, 1943. The householders are now taking about 32 million tons of coal per year. In pre-war years they took 43 million tons, and the difference is the decrease in domestic consumption, which has thus dropped by approximately 25 per cent. The Coal Utilisation Council's Survey, published in February of this year, speaking about the additional demand which might arise if house coal were derationed, said:
"Forty-four per cent. of households claim to have needed more solid fuel than they got and each said they would like an average of an additional 14 cwts This is equivalent to about 6 cwts. [per annum] for every household throughout the country, or a total of approximately 4½ million tons, a figure which is remarkably close to the Ridley Committee's estimate that the current unsatisfied domestic demand for coal is about 5 million tons a year. Thirty-nine per cent. of families would definitely buy more coal if they could, and 11 per cent. would possibly buy more. About one out of two coke users would buy more."
They continue:
"In other words 24 per cent. of all housewives cannot afford more coal at present prices even if they need more."
That was before the increase of 5s. 6d. per ton.
House coal today is rationed by the purse. If a free market were restored in house coal there would not, I believe, be any very great increase in the demand for it. I estimate that more than two families in five cannot afford to pay the greatly increased price for house coal. I am a firm believer that if house coal were placed on a free market and rationing were ended, there would be a substantial diminution in the use of electricity and gas for space heating. The hon. Member for Cleveland (Mr. Palmer) nods his head—
Mr. Arthur Palmer: I shook my head.
Mr. Nabarro: I imagined that the hon. Gentleman was indicating dissent. I will
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send him a copy tomorrow of the Survey into the Domestic Use of Solid Fuel, issued by the Coal Utilisation Council.
Mr. Jack Jones: Send us all one.
Mr. Nabarro: There is this rather significant statement in it—that if coal were derationed, much less consumption of gas and electricity for domestic use, notably electrical space and water heating for which purposes electricity is most wasteful, would accrue. About 15 per cent. of all homes would save electricity and 13 per cent. would save gas.
What the net overall economy would be is imponderable, but it is undeniable that, if house coal were derationed, there would be a compensating coal economy at electricity power houses and at the gas works in respect of coal at present consumed there for the production of those services. There is the additional consideration that year by year now, we are putting into the homes of this country 1½ million or more modern solid fuel-burning appliances which economise in the use of coal. They bum smaller and poorer grades of coal than we have been accustomed to hitherto. I have always regarded as the counterpart of mechanisation in the pits a necessity to introduce into our homes the maximum possible number of improved modern appliances in order that smaller and lower quality grades of coal can be employed without loss of comfort to British households. It leads also, of course, to a decline in house coal demand if those trends continue.
My final point in this section is in connection with the administrative costs of household rationing. My right hon. Friend informed me recently, in reply to Parliamentary Questions, that we are at present employing 1,100 part-time fuel overseers and 350 full-time fuel overseers, a total of 1,450 persons in all parts of the United Kingdom for the purpose of carrying out the domestic rationing of coal and coke. The cost to the taxpayer is £1½ million a year. Therefore, it would mean a significant economy if house coal rationing were abandoned at a fairly early date.
We can argue indefinitely that because of the overall shortage of coal, house coal rationing cannot be ended. That argument can be made in every year and in

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any circumstance to suit the economic climate of the moment. What is quite certain is that if we decided to abandon house coal rationing, for many of the powerful reasons I have advanced this evening, it must be done in the springtime and not at the beginning of the coal winter, that is, at the end of October. If we do it in the springtime, we give all householders an opportunity to stock up with solid fuel, as far as they are able. during the summer months.
Summarising what I have said, I believe that it might be possible, in the course of the next few weeks to abandon house coal rationing. It is already rationed, in degree by its high price and that will be accentuated in the course of the next few months for the reasons I have given. Any increased demand that resulted from derationing would, in large measure, be offset by compensating economies at electricity power houses and at the gas works.
There is an increased and increasing flow of domestic modern solid fuel burning appliances which would limit any immediate upsurge in demand for house coal. Finally, in conformity with the policy of Her Majesty's Government— and we are talking in the Budget period —it is desirable to try to save that £1½ million in administrative costs, if we can possibly do so, and economise with the labour of 1,450 persons.
I hope that my hon. Friend will deal with these arguments shortly, under the three headings: the price of house coal, the quality of house coal, and the future of the rationing scheme. Although he may not be able to meet me in full measure tonight, I hope that in the course of the next few months he will view my supplications with a good deal of generosity.
10.25 p.m.
The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. L. W. Joynson-Hicks): My hon. Friend the Member for Kidderminster (Mr. Nabarro) has given us, as usual, a good deal to talk about in rather a short time. I should like very much to be able to follow him right through the speech which he made, but I assure him first and foremost that any matters which he puts before us will always be considered with, I hope, generosity. Secondly, I assure my
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hon. Friend that we are in the deepest sympathy with his desire to save £1,500,000 of the taxpayers' money, whether it be by the revocation of the Coal Distribution Order, 1943, or in any other practicable way that we can find.
The point which my hon. Friend particularly stressed tonight is his desire for the derationing of house coal. That links up, of course, with the revocation of the Coal Distribution Order. That is a desirable project, and my hon. Friend indicated that, in his view, it would not lead, immediately at any rate, to any appreciable increase in the consumption of household coal. Against that, however, he also quoted the opinion which was expressed by the Ridley Committee very recently, that there was an unsatisfied demand of 5 million tons of household coal. He also quoted the survey of the Coal Utilisation Council, which is of still more recent date, who estimated as a result of this survey that there is an unsatisfied demand of 4,500,000 tons. Therefore, I do not think it would be possible to embark upon any scheme which would result in doing away with the allocation system for household coal unless there were adequate supplies—
Mr. Jack Jones: Hear, hear.
Mr. Joynson-Hicks:—which could be used to ensure that people were able to get their needs.
Mr. Jones: Some of the poorer people.
Mr. Joynson-Hicks: I quite agree that poor and rich should be treated alike in that respect.
My hon. Friend has studied this matter with great thoroughness and has been good enough to be in communication both with myself and with my right hon. Friend as to the possibilities of being able to divert coal suitable for the household market from other sources. It has been suggested from time to time, though not tonight, that the electricity industry, among the very large quantities of coal which it consumes, is consuming coal which is suitable for the household market. I have investigated that and I find that it only has 14,000 tons a year, which really is an insignificant figure.
Is it possible to divert from the gas industry coal which is suitable for the household market? The difficulty is that gas coal is itself in short supply. It

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is difficult to get sufficient coal for the gas industry to begin with, but if we reduce the amount of coal available to it, consequently we reduce the amount of coke which is available also for the household market and this coke is eminently suitable for burning in the improved appliances to which my hon. Friend has referred; and so we cannot go there.
What about general industry? Ever since 1943, long before nationalisation, a very real effort has been made, both by the Ministry and through the trade, to ensure that supplies of large coal suitable for the household market were not used in industry if it was possibly avoidable. There are, however, certain industries which need those supplies. If they did not need them, it is almost inconceivable that they would use them, because there is a very strong price incentive for them to use the smaller, cheaper coals.
The iron and steel and sugar beet industries all need quite a lot of coal in their locomotive engines. The engineering industry, as the hon. Member for Rotherham (Mr. Jack Jones) knows full well, uses it for annealing furnaces, and must have large coal for that purpose. There are many hand-fired vertical boilers, as my hon. Friend will be well aware, which need large coal throughout industry.
Mr. Jack Jones: Too many.
Mr. Joynson-Hicks: I agree. There are many hospitals and institutions, as well as Service Departments and hotels, which also need large coal for open fires; but it is not technically called house coal because it does not come into the house coal category in the ordinary way, but is large coal which appears in the industrial allocations. There is also the large coal which is necessary and essential for us to send to Northern Ireland and to the Channel Islands, and for coastwise bunkering and matters of that sort.
The only possible source, and one well known to my hon. Friend though he did not mention it particularly tonight, is the railways. I was interested last week to learn that Germany, efficient as we believe them to be, certainly seemed to be no more efficient in their coal utilisation on the railways than we are. But that is not
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saying very much. I do think that there is still an urgent need for the Transport Commission to reconsider this matter of their use of large coal before the supplies of large coal cease to be available for them. It is no good them coming along at a time when, as my hon. Friend has warned us, the available supplies of large coal are diminishing, and saying, "We have no alternative on which to run the railways; we must have large coal."
Where does all this lead us? If we were to assume that there was the large coal available to deration—and it is a very big assumption and one which I cannot accept myself—I would ask my hon. Friend to turn back to his Coal Utilisation Council's survey and consider table 14, because there we have a very interesting point. My hon. Friend is well known to the whole House to be the prime advocate of fuel efficiency. Yet in table 14 we read that, according to the survey, 95 per cent. of the people met with would not at present consider installing an open grate with a back boiler; 83 per cent. would not consider installing a continuous burning fire, and, in fact, over 90 per cent. would not consider installing any form of improved appliance at all.
What my hon. Friend is really advocating is that we should divert an estimated amount of about 5 million tons of coal to the house coal category to be consumed in the most inefficient way known to the fuel efficiency experts at the present time, and divert it at the expense of electricity and gas which are admittedly efficient methods of consumption.
Mr. Nabarro: I am sure that my hon. Friend would not wish to misquote me. I do not admit that the unsatisfied demand, taking into account all the factors mentioned, is anything like 5 million tons.
Mr. Joynson-Hicks: I appreciate that my hon. Friend does not admit it, but there must be some form of unsatisfied demand, and that is the effect which it would have.
May I add one word about the question of the possible rise in coal price to which my hon. Friend referred? If I heard him aright—and I may not have done so—I think he said that the recent rise of 5s. 6d. was to cover the loss in 1952.
Mr. Nabarro: Substantially.
Mr. Joynson-Hicks: Well, that is not so. My hon. Friend is in error there. It was specifically to prevent a loss in 1953. If I may refer my hon. Friend to the statement issued by the National Coal Board on 21st February last, it said then that the
"pit-head price of coal must be increased by 10 per cent. in order that the Board may avoid incurring a further loss in 1953;"
it added that
"it will, however, cover the anticipated rate of loss during 1953."
In addition to that, I would remind him that the Chairman of the National Coal Board, in his "Face the Facts" conferences that he has been holding, has repeatedly emphasised that
"we have reached the limit of increased coal prices."
On top of that I would remind the House that the Secretary to the National Union of Mineworkers, with his colleagues co-operating in the "Face the Facts" conferences, is quoted as having
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stated that the reforms which he is, naturally, advocating—a genuine five-day week, and increases in wages and pensions —all depend on increased efficiency within the industry, and there is no suggestion that they are to come out of any increase in the price of coal, at any rate during this year. I wish to emphasise that in case of any erroneous impression which my hon. Friend's words may have caused.
In conclusion, and wishing I had the time in which to deal with other points my hon. Friend raised, I would simply say that I am entirely in agreement with him as to the desirability of revoking the Coal Distribution Order of 1943 as early as possible—
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 Twenty-four Minutes to Eleven o'Clock.

  BRITISH PROPERTY, ROME (DAMAGE)
  BRITISH PROPERTY, ROME (DAMAGE)
  O.E.E.C. COUNTRIES (SUGAR RATIONING)
  O.E.E.C. COUNTRIES (SUGAR RATIONING)
MINISTRY OF FOOD
  Confectionery (Shortage)
  Confectionery (Shortage)
  Soft Drink Industry (Sugar Quota)
  Soft Drink Industry (Sugar Quota)
GERMANY
  British Forces (Maintenance)
  British Forces (Maintenance)
  Destroyed British Aircraft (Information)
  Destroyed British Aircraft (Information)
EAST AFRICA
  African Coffee Growers, Kenya (Licences)
  African Coffee Growers, Kenya (Licences)
  Coffee Industry Uganda (Reorganisation)
  Coffee Industry Uganda (Reorganisation)
WEST INDIES
  United States Hospital, St. Lucia (Use)
  United States Hospital, St. Lucia (Use)
  Cocoa Industry, Grenada
  Cocoa Industry, Grenada
  Technical Education
  Technical Education
NIGERIA
  Overseas Industries
  Overseas Industries
  Groundnuts Storage (Cost)
  Groundnuts Storage (Cost)
  ADEN (TEACHERS' HOUSES)
  ADEN (TEACHERS' HOUSES)
CENTRAL AFRICA
  Nyasaland Chiefs' Conference (Message)
  Nyasaland Chiefs' Conference (Message)
  Federation Proposals (Cardiff Church's Appeal)
  Federation Proposals (Cardiff Church's Appeal)
POST OFFICE
  Country Postmen (Motor Assisted Cycles)
  Country Postmen (Motor Assisted Cycles)
  Union Officials (Telephones)
  Union Officials (Telephones)
NATIONAL FINANCE
  Industry (Capital Formation)
  Industry (Capital Formation)
  National Income (Fixed Investment)
  National Income (Fixed Investment)
  Fixed Capital (Depreciation)
  Fixed Capital (Depreciation)
  Industrial Workers (Income Tax)
  Industrial Workers (Income Tax)
  National Wealth (Estimate)
  National Wealth (Estimate)
  EX-HOME GUARD OFFICER (PAY)
  EX-HOME GUARD OFFICER (PAY)
Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
The Lord Glenavy—Sat first in Parliament after the death of his father.

GREAT NORTHERN LONDON CEMETERY (CREMATORIUM) BILL [H.L.]
2.36 p.m.
Read 3a, and passed, and sent to the Commons.

DUDLEY EXTENSION BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

BUSINESS OF THE HOUSE
2.37 p.m.
THE LORD PRESIDENT OF THE COUNCIL (THE MARQUESS OF SALISBURY): My Lords, I think that before we begin the Business of the day it might be convenient if I said a word about our arrangements. A large number of noble Lords wish to take part in the debate on Defence to-day and to-morrow, and what I would suggest, if it is convenient to noble Lords, is that we should sit until a quarter past seven this evening, by which time I hope that we may have completed a large number of speeches, and then begin to-morrow at 2.30 p.m. and complete the debate. I think it will probably be for the convenience of the House that we should not sit after dinner, if that can be avoided.
EARL JOWITT: My Lords, I am much obliged to the noble Marquess; that seems a very satisfactory arrangement.

FLOOD DISASTER: POSITION OF SUB-POSTMASTERS
2.38 p.m.
THE EARL OF LUCAN: My Lords, I beg to ask Her Majesty's Government the Question of which I have given private notice—namely, whether their attention has been drawn to a recent statement by the President of the National Federation of Sub-Postmasters that sub-postmasters and sub-postmistresses displaced by the recent floods were dismissed without notice.
THE POSTMASTER GENERAL (EARL DE LA WARR): My Lords, I have seen the statement referred to by the noble Earl, and I can assure him that no sub-postmaster or sub-postmistress has been dismissed as a result of the recent floods, nor have any of those affected suffered any net loss of Post Office emoluments during the period of their enforced displacement. As soon as the matter was brought to the notice of higher authority, immediate steps were taken to arrange to apply to these flood cases the exceptional terms granted during the war for blitzed sub-offices, whereby net emoluments could be continued for three months, instead of for one month under the normal rules applying to offices temporarily closed. The House will, I think, be interested to know that, in fact, only one sub-postmaster is still prevented, owing to flood damage, from reoccupying his office. He is still receiving his net emoluments, and his case will, of course, be reconsidered if the period of three months runs out before he can resume duty.
THE EARL OF LUCAN: I thank the noble Earl for his reply. I am sure that your Lordships will all be glad to hear his explicit denials of the statement in question.
LORD SHEPHERD: May I ask a further question, purely with a view to obtaining information? I presume I am right in assuming that if there were any change of policy on the part of the Government in respect of this matter consultations would take place between the Government and organisations interested in these people before action was taken.
EARL DE LA WARR: Certainly.

RAW COTTON STOCKS
2.41 p.m.
LORD HAWKE: My Lords, on behalf of my noble friend Lord Barnby, I beg to ask the Question which stands in his name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of Government encouragement to restrict acreage in cotton-growing countries, particularly Egypt and U.S.A., a course which contributes to sustaining high prices for cotton with artificial reaction on price of other commercial fibres, they will state the stocks of (a) Egyptian, (b) U.S.A. origins held in this country on December 31, 1952, and the same relative stocks as of December 31, 1950 and 1951, or the nearest reportable date. In the event of such figures being unavailable for the whole country, will they state the relative figures of such stocks held by the Raw Cotton Commission on the dates mentioned.]
LORD MANCROFT: My Lords, the total stocks of raw cotton held in the United Kingdom were 233,000 tons on December 31, 1952, and 285,000 tons and 282,000 tons at the corresponding dates in 1950 and 1951 respectively. It would not be in accordance with the usual practice to disclose what portions of these stocks come from particular countries or are of particular types.

DEFENCE
2.43 p.m.
THE MINISTER OF DEFENCE (EARL ALEXANDER OF TUNIS)THE MINISTER OF DEFENCE (EARL ALEXANDER OF TUNIS) rose to move to resolve, That this House approves the Statement on Defence, 1953 (Cmd. 8768). The noble and gallant Earl said: My Lords, a year ago I made my first speech as a member of your Lordships' House on the Statement on Defence for 1952. We now have the Statement for 1953, for which we are asking the approval of the House in this Resolution. In presenting this Statement it has been our aim to give as full information as possible, short of compromising security, because I believe that those who have to foot the bill are entitled to know what they are spending then money on. Furthermore, since defence is a national concern, it seems to
734
me only right and fair that those who are about to debate the whole matter should have, so far as possible, full information on the issues involved. I hope, therefore, that your Lordships will appreciate the design of this White Paper and the spirit in which it has been presented. It is, of course, impossible in a White Paper of this sort to cover al the ground, but we have tried to present an informative document in which are stated the reasons for our military policy on defence. But before we examine these I should like, as briefly as possible, to set out the world strategic picture as a background against which our fighting forces are being organised and set up
When hostilities ended in 1945, with the defeat of our enemies, we looked forward to an era of peace when we could repair the damage done to us and build again cur economic strength and prosperity, to ensure that our people might enjoy a decent measure of security and well-being. The first step was to reduce the size of our fighting forces from a war-time to a peace-time level. Few can quarrel with that decision. It was essential if we were to be able to rehabilitate our shattered economy. Our Allies in the United States adopted much the same policy; their run-down, in terms of lighting forces, was at least as great as ours. To put it simply, we did what we could to get back to the conditions of peace, to build and help build a new world at peace. In fact the policy which the free world followed was one of unilateral disarmament.
Unfortunately, that great Power which had been our Ally in war had quite different ideas. Russia not only continued to maintain large forces on a war footing but actively pursued an aggressive foreign policy which was a direct threat to the safety of other nations. The results were inevitable: the nations were divided into two worlds—the world of the Communists and the world of free men. After the war, we had based our hopes on collective security under the United Nations, of which Russia was a member, but it soon became apparent that we could not rely on this alone. It became clear that, always within the framework of the United Nations, we must develop a more, limited system which would deter, and, if necessary, resist the encroachments of Communist aggression. The events

735
which led up to the signing of the North Atlantic Treaty in April, 1949, are well known to your Lordships, and I do not propose to repeat them. But I must add that the outbreak of hostilities in Korea came as a further rude shock, intensified a few months later by the open intervention of the Chinese. The free world was now roused and thoroughly alarmed at these aggressive events, and, quite rightly, began to stand to arms, to protect itself. At the beginning of 1951, the late Government ordered what is now known as the £4,700 million rearmament programme. This was a bold and courageous act, even if events have proved that it was over-optimistic as regards its practical implementation. This is the background against which we must examine our defence needs and review our present strategic position. With these thoughts in mind, we have carried out, and are still carrying out, a very careful and studied review of the whole problem, the results of which are set out in this White Paper.
I should like to emphasise that our whole defence programme forms part of a combined effort by the members of the North Atlantic Treaty Organisation to increase their military strength in their common defence. In this respect, a great step forward was taken when the North Atlantic Council adopted the procedure of the Annual Review. For the first time, fourteen countries have agreed to consider their military problems and programmes in common and to establish, year by year, goals for the build-up of forces designed not just for the narrow purpose of national defence alone—a concept which is completely outmoded—but as a contribution by all for the joint defence of all. In consequence, much has been done, but I must warn your Lordships that we have a long way to go yet before we can feel satisfied that our defences are adequate. Since I took up my present appointment a year ago, there have been developments in the military scene which I think justify us in taking heart for the future. The goals for 1952, which the North Atlantic countries set themselves at Lisbon, have been substantially achieved. We can say, therefore, that there has been a real and steady growth in the strength of the Western world and its defences.
Now for an example of this. The Italian armoured divisions have now been equipped with modern weapons supplied by the United States under its programme of military aid. Canada also is helping. In particular, we are very grateful for the Sabre aircraft, which are being jointly provided for us by the United States and Canada. The United States make the engines, Canada makes the frames, and then they are sent to us. As your Lordships probably know, the first Sabre jet fighters started arriving in this country last December. We, too, are able to make our contribution to the common pool under the American programme of off-shore procurement. The Centurion tanks which the Americans buy from us go to equip the armoured forces of the Dutch and Danish Armies. The Americans have also ordered from us aircraft, ammunition and other military stores.
We are also helping in another way by contributing towards the cost of the N.A.T.O. infrastructure programme. I do not know if it would interest your Lordships to know what "infrastructure"means—it is probably a new word to your Lordships, as it was to me. "Infrastructure" is a French railway term used to describe the work done on the road-bed before the rail tracks are actually laid—cuttings, culverts, embankments and drainage. All that kind of work is the infrastructure. In modern military phraseology it has come to mean all static installations for armies in the field and works of a permanent nature. As little seems to be known about this programme, perhaps I might say a word or two about it. It consists essentially of fixed installations needed for the effective operation of N.A.T.O. forces in peace or war, the cost of which could not be settled by geographical considerations alone and has therefore been made the subject of common financing. Up to now the programme approved by the North Atlantic Council is estimated to cost about £350 million, of which the British share is about £50 million. Your Lordships will see from this that we are paying about one-seventh or something like 14 per cent., of the total cost.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I do not quite recognise the figures. Can the noble and gallant Earl relate that to paragraph 23 of the White Paper?
EARL ALEXANDER OF TUNIS: Paragraph 23 is all about male strength; it is not about infrastructure.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I apologise to the noble Earl. I mean paragraph 14.
EARL ALEXANDER OF TUNIS: I think if you add up these columns it will give the figure I mentioned.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I understand it now as being a four years' plan.
EARL ALEXANDER OF TUNIS: Yes, that is right. However, those are the figures which the North Atlantic Council has estimated as the cost on this infrastructure programme—namely, £350 million, of which the British share is about £50 million. By far the greater part of the programme consists of airfields. The rest is made up of war headquarters, of which for obvious reasons I can say little, and of communications. There are over 140 airfields in the programme and 21 of these were approved in December last. Of the rest, over two-thirds are either complete or have reached a stage at which they are already usable or available in emergency. Most of them will be completed during1953. The communications are largely connected with the airfield programme and the control and reporting system in Western Europe. The airfields are now to be connected up by a jet fuel pipeline system, which was also approved last December, and preparatory work is now beginning. Joining up these airfields with a pipeline system is an entirely new idea. The reason for it is that modern jet aircraft use up such a large amount of fuel that it is almost impossible to keep them fed in active operations by trucks alone. It was considered more satisfactory and better in every sense, in the long run, to pump the fuel by pipeline from one airfield to another.
LORD HENDERSON: Perhaps I may interrupt the noble and gallant Earl. Do I understand him to say that the decision about piping all jet fuel was taken last December at the Council of Ministers?
EARL ALEXANDER OF TUNIS: A programme of construction was decided when I was in Paris last December, and quite a big thing was made of it. Certain of the work has been done. What I can
738
say is that at present the programme as a whole is now well under construction. The infrastructure programme is a quite unprecedented international effort for common defence, and the fact that it exists at all is a remarkable tribute to the willingness of the N.A.T.O. countries to pool their resources in the common interest. That it has made such excellent progress in the short time in which it has been in existence demonstrates what can be done when a group of countries is determined to make real progress; it is also a testimonial to the work of the central organisation of N.A.T.O. under the direction of Lord Is may. In all this build-up of military strength I know how valuable a part is being played by the Supreme Allied Commander in Europe, General Ridgway. During the war, it was my good fortune to serve with this fine soldier, and I can assure your Lordships that he is a commander of the highest quality.
In my opinion, the greatest immediate need is the ratification of the Treaty setting up the European Defence Community, so that Western Germany may be enabled to make her contribution both to the defence of her own territory and to the defence of Western Europe. If it is true that the prospects of a Third World War have receded, If think we can ascribe it only to the deterrent effect of Allied military build-up. However, what we have done so far is only the foundation, and the effort, costly as it is, must continue, not as a short tug but as a long steady pull. Nevertheless, we can take justifiable pride in the expansion of our strength in the past twelve months, because here we have achieved something of real value, which can rightly give us cause for modest satisfaction and more confidence in the future. Your Lordships will not have failed to observe recently a number of seemingly conciliatory gestures to the West by the leaders of the Communist world. It is impossible to know yet what significance to attach to these, and although we welcome them we are bound to proceed with caution while we test their sincerity. One swallow does not make a summer, nor does one dove, or half a dozen doves, automatically bring peace. Common sense and prudence demand that we should not relax our defence preparations. The stronger we are, the greater chance we have of establishing genuine and lasting peace.

739
My Lords, that is the broad international picture of our defence effort. Now I should like to say something of our own domestic problems. When we survey our present position we must be struck by the dispersal of our strength. This particularly applies to the Army. The cold war, which might well be called the "twilight war," since it is neither war nor peace, but between the two, compels us to disperse the Army all over the world. From every point of view this is unsatisfactory. Speaking as a military man of some experience, I should like to see our forces, highly efficient and mobile, so stationed as to be readily available for trouble, wherever it might arise. But, unfortunately, what one would like is not the same as what one may have to accept; and that is the position in which we find ourselves to-day. For instance, we have the equivalent of nearly two infantry brigades in active combat in Korea as part of the United Nations Forces there. In addition, we have a naval contingent and air force personnel actively engaged in that theatre of operations. In Malaya we have some 30,000 troops, including British, Gurkha, Fiji, East African and Malayan regiments, fighting the Communist bandits in very unpleasant and difficult conditions. In Hong Kong we maintain a considerable garrison, supported by naval and air forces, for its protection against possible aggression. Recently we have had to reinforce the local Colonial garrison of Kenya against the Mau Mau by sending an infantry brigade. Furthermore, we have troops in Berlin, Austria and Trieste, and there are the normal garrisons which we must maintain in places like Gibraltar and Malta, together with our Mediterranean Fleet and Royal Air Force contingents. All these are additional to our large land and air forces in Western Europe and the forces that we maintain in the Middle East.
What I have mentioned is not a complete list of our commitments by any means, but I think it is sufficient to illustrate the enormous demands on our fighting men which results in the dispersal of our strength and which accounts for the fact that over ten divisions are outside this country. The Royal Navy continues to meet the continuous requests for the kind of help that the country has always expected of it. The commitment to sup-
740
port our foreign and Colonial policy is world-wide, and its fulfilment has never been more important than it is to-day. To mention only two of its more recent and, in some ways, novel commitments, the Royal Navy has had to provide for the atomic trials on the Monte Bello Islands, and also to take part in large-scale participation in recent N.A.T.O. exercises. Much as we regret it, the cold war and our other current commitments are facts which are with us, and we cannot escape our liabilities in connection with them. At the same time, we have to go on building up our forces so that they can play their part as a deterrent to aggression and be ready, should war be forced upon us, to take their place alongside our Allies.
In some respects, there is a conflict between the demands made upon us by the cold war and the preparations against a possible hot war. As I have said before, our task is made more difficult and more complicated because we are trying to do two things at the same time. All three Services are concerned, although the demands made upon the Army in the cold war are greater than those made on the Royal Air Force or the Royal Navy. Though all three Services play their part, the cold war must be waged to a large extent by men on the ground; and consequently the demands on manpower are very heavy. Malaya is a good illustration of this. We are, I am glad to say, making good progress in Malaya, but it is compelling us, as I have already stated, to deploy some 30,000 troops, together with substantial R.A.F. support and help from the Royal Navy in patrolling the coasts. For the tasks which confront us in this theatre of operations we require certain specialised equipment, and I should like to take this opportunity of again expressing our sincere gratitude to the United States of America for making available to us ten large helicopters. These aircraft are of the greatest use, and are playing a valuable role in our operations against the bandits. But by and large, the cold war demands men rather than equipment.
When, however, we look to the preparations against the danger of a hot war, equipment becomes a much more vital issue. Let me explain this further. The Royal Navy, in co-operation with the Royal Air Force, must be in a position to deal with the serious threat of enemy submarines and mines which would be

741
our greatest menace at sea if war should come, and which would arise from the very first day. For this purpose, they must have fast frigates and modern minesweepers and aircraft, together with the necessary ancillary equipment of a highly technical nature. The Army must have the best tanks, anti-tank guns, field and medium artillery, last-moving vehicles and so on. The Royal Air Force must be built up both defensively and offensively—that is, in terms of fighters and bombers. As your Lordships know, we are beginning to re-equip our medium bomber force with four-engined jet aircraft of the highest performance and striking power. This force would be our best means of attacking at source an enemy's offensive potential in the event of a war breaking out. So much for the broad demands of the three Services. I shall return later to this question of equipment and give your Lordships more details. At this stage, I hope that I have said enough to explain to your Lordships that our problem is the difficult one of striking a balance between what we do to meet immediate needs and what we do to provide against immediate dangers.
Now let me say something about the Defence Estimates for 1953–54. In determining what proportion of our resources we can devote to defence, the Government must take full account of the economic position of the country in order that we shall not run an undue risk of causing the foundations of our defence programme to collapse. Shortly after the rearmament programme was started, the economic situation took a serious turn for the worse. It has certainly been greatly improved by the measures which the Government have taken, but the trouble is deep-seated and the cure will be lengthy. Against this background the £1,637 million which we are going to spend on defence is a very large sum of money—in fact, it is a whale of a sum; but so are our needs. It is my responsibility as Minister of Defence to allocate the sum so that we get the best value for our money.
This matter must be looked at not only nationally but internationally. We must take account of what other members of the Commonwealth will contribute and what N.A.T.O. and our other friends and Allies will contribute to the defence of the free world. Of course, in all this
742
I have the advice of the Chiefs of Staff, who have our world strategy constantly under review. Here, I should like to take the opportunity of expressing my appreciation of the work of the Chiefs of Staff machine. Their expert advice is invaluable to me, as your Lordships can well imagine. Recently we have said goodbye to two outstanding figures, Field Marshal Sir William Slim and Marshal of the Royal Air Force Sir John Slessor. I am sure that your Lordships would wish to join with me in paying tribute to these two officers, both as commanders and as Chiefs of Staff of their respective Services.
Returning to the question of allocation, let me say this. Against the broad strategic background which I have all too briefly given to your Lordships many factors have to be taken into account amongst which we must consider our present commitments in the cold war—and here we mast provide for the immediate needs of our forces. Then there is the planning for a possible major war, and the forces and types of equipment which we should require for that, taking into account: that we should be fighting alongside Allies amongst whom the Americans are particularly powerful on sea and in the air. We must also consider the prospects of new equipment and what we can afford to spend on it. In the light of all this, and after frank and full discussions with the Service Ministers and their advisers, I must decide what is the best allocation of the total money available. As I am sure your Lordships will agree, this is not an easy task, but it is the same problem which faces friend and foe alike. It always has been a difficult problem, and always will be. Our solution to this problem has been set out in this White Paper, upon which we should welcome your Lordships' views. I do not suggest for a moment that any individual Service is satisfied with its share, but I do most certainly claim that there is a general acceptance that the programme on which the Estimates for 1953–54 are based represents the most effective use of our available resources.
I now propose to say something in detail about our rearmament programme, which has made steady progress over the past twelve months. New types of equipment are beginning to flow from the production lines and are coming into the hands of our fighting forces. Ever since I have been in office I have made it a

743
practice to visit our fighting services and the factories, as well as our research and development establishments, as often as I can possibly get away from London. This has for the most part been on Fridays, when your Lordships' House is not sitting. So I have seen quite a lot of these Services and establishments which produce our output, and I have been very impressed and heartened by what I have seen. The engineering, shipbuilding and other firms and the Government establishments which are making our equipment are doing a fine job, and we owe them a great debt of gratitude for what they are doing to help us. I hope that both management and labour realise how much we appreciate their efforts, which are indeed vital to our whole problem of defence.
With regard to the Royal Navy, the new construction and conversion programme is going well, although there has been trouble with the new aircraft for naval aviation. However, we have learned a great deal from past errors and experience, and I am hopeful that the efforts which the First Lord and the Minister of Supply have made will change this situation for the better. In the longer term we shall have the new two-engined jet fighter for the Navy, which is to be added to the list of super-priorities. As the First Lord recently explained in another place, great strides are being made with naval equipment: the anti-submarine mortar and the aircraft carrier angled deck, to mention only two. I do not know whether your Lordships know what all this means, but I can explain if your Lordships wish. The new aircraft angled deck arrangement is to make landing on the deck easier and safer for jet aircraft; that is what it amounts to. The landing path of the aircraft is set off at an angle to the centre of the ship.
Now for the Army. The most satisfactory features are the new family of anti-tank weapons, of which the Secretary of State for War spoke in another place in introducing the Army Estimates. I will not repeat again what the family of antitank weapons are—unless your Lordships want to know. They are weapons for the individual, the platoon and the battalion; and of these weapons the neatest little one of all is a little recoilless gun which weighs only three-quarters of a
744
ton and which will replace the seventeen-pounder. It is much more effective than the seventeen-pounder and, being so light, is more easily manhandled. It is a splendid little weapon. The Centurion tank, which is now being produced in large quantities, is probably as good as any tank in the world. In addition, we are producing a new heavy gun tank which is superior in fire power and performance to any tank known to exist. In the field of smaller arms, the new machine carbine is now under trial and looks like being an excellent little weapon. It is light, accurate and easy to handle, and will, I know, be very popular with the troops when it begins to reach them in quantity.
For the Royal Air Force we are, as your Lordships know, producing the latest types of jet aircraft. Our new swept-wing fighters have suffered some delay as compared with the hopes entertained when they were ordered, but production is now well advanced and the Swift should be in squadron service before the end of this year. The Swift will be followed very soon by the Hunter. I have seen these aircraft being made in the factory. They are being produced now, but it will take some time before they can get into squadron service because they have to go through certain tests carried out by the Ministry of Supply, and must be fitted with weapons. Therefore it does not necessarily follow that when they are ready to leave the workshops they are ready to go immediately into the hands of the Royal Air Force. At the same time, it will not be long before they are in the hands of the Royal Air Force.
To obtain full benefit from these new aircraft there must be an adequate and up-to-date control and reporting system. The rearmament programme has therefore included a comprehensive programme of rehabilitation and expansion of the last war system. Rehabilitation of as much of the last war chain of radar stations as is necessary has already been completed. The expansion of the system and the provision of up-to-date equipment is proceeding according to schedule. Work is already going ahead on a control and reporting system on the Continent of Europe. I should be misleading the House, however, if I did not point out that the technical development of radar has not been able to keep pace

745
with improvements in aircraft performance. Relatively speaking, therefore, the aircraft for the time being has had an advantage over this form of defence.
Now let me say something about research and development. Ever since the close of the late war, successive Governments and the Services have—rightly, in my opinion—attached the highest importance to gaining and keeping a technical lead in weapons of both offence and defence. This must be wise when we consider that we can never match our potential enemy in terms of manpower. To survive we must counter-mass with better weapons and better technique. Consequently, ever-increasing sums of money have been devoted to research and development. Since 1946 the annual rate of expenditure in this field has been more than doubled.
As the White Paper points out, it has increased by more than 40 per cent. in the last two years. This coming year, 1953–54, we are proposing to spend about £10 million more than in the present year. This increase is a very moderate one when we consider the astonishing developments in the scientific field which have taken place in recent years. Fifteen years ago radar was still a new idea whose vast potentialities were not realised. The jet engine is only twelve years old, and the first atomic bomb was exploded only eight years ago. These three inventions alone have revolutionised the whole technique of military warfare—and so the revolution goes on.
We are now approaching the age of supersonic flight and that of the guided missile. The results of the efforts which have been devoted to research and development in the past are now beginning to bear fruit. To instance one alone, let me mention the guided weapons. Here, I am glad to say, our progress during the past year has been satisfactory. These weapons fall into two main groups. First the air to air weapon which is expected to increase the destructive power of our fighter force by perhaps as much as four-fold. Secondly, the surface to air weapon, which will be of the greatest importance to the safety of these crowded islands against modern high-flying, high-speed aircraft. The stage has now been reached when we can see that surface to air guided missiles, together with the fighters of the Royal Air Force and the
746
A.A.guns of the Army, have a very important role to play in the air defence of the United Kingdom. Development of these weapons is, as I have said, proceeding satisfactorily, and arrangements must now be studied for their introduction and operation as part of the air defence system. After full consideration of I all the factors involved, it has been decided that the manning and operation of these guided weapons shall become the responsibility of the Royal Air Force. In my opinion, this is the right decision because surface to air guided missiles are complementary to lighter aircraft, and operate in the same air space, and must therefore be under the same ground control. Their introduction will be a gradual process. For many years to come regular and territorial anti-aircraft regiments will continue to play an essential part in our air defence system. The employment of A..A. guns will have to be closely integrated with that of the guided weapons. The introduction of these new weapons will therefore call for a continuance of the present close co-operation between the R.A.F. and Anti-Aircraft Command. These arrangements do not, of course, affect the responsibility of the Ministry of Supply for research and development.
In the short time at my disposal, I have tried to give your Lordships a general survey of our strategic position, the problems which face us and how we propose to solve them. I have tried, so far as possible, not to traverse ground which has already teen covered by the three Service Ministers, but rather to give a balanced picture of the whole. There is, however, one matter which I know is of great concern, not only to your Lordships but also to all our countrymen, and that is National Service. The issues are well known to you and have been fully debated in another place. I do not propose therefore to repeat those arguments. But let me say this. In my opinion, so long as our commitments remain at their present level I can see no prospect either of doing away with National Service or of reducing the period of service below two years. But I can assure your Lordships that the Government will continue to watch the situation with the utmost care, and should it improve we shall not hesitate to propose such modifications in the system as are consistent with our obligations and our own security. In the meantime we shall

747
continue to strive for the utmost economies in manpower. It is our aim that every man in the Services should pull his full weight, and that every man who wears the Queen's uniform should be capable of bearing arms and, if necessary, take his place in the front line. It is for this reason that all training establishments and schools of instruction at home have been given a combatant rôle, so that if we are attacked we shall have mobile columns trained and rehearsed in the duty of defending the homeland. These flying columns will be backed up by Home Guard units who can play a valuable rôle in an emergency by taking over and guarding key points and thus freeing Regular units and Territorial formations to carry out the duties for which they are designed.
I have now given you, my Lords, my report for the year, but before I conclude I must say this. I should not like to leave the impression that everything in the garden is rosy, and that we have nothing more to worry about. We still have a great deal to worry about, and a long pull before we reach the top of the hill, which is still a long way off; and it will need many sacrifices and a great effort before we get there. But I believe that at last we are on the right lines and, given sufficient time, we shall have fighting forces, comparatively small maybe, but as efficient as any in the world. I have been a soldier for over forty years, during which time I have fought on many battlefields, together with, or against, most of the warring nations. And, in my experience, there are no finer or better fighting men than our own countrymen. Given good leadership, modern weapons and proper training, they will do their duty, on land, at sea or in the air. They will not fail us; they will not let us down. It is our duty to see that we do not let them down. I beg to move.
Moved to resolve, That this House approves the Statement on Defence, 1953 (Cmd. 8768).—(Earl Alexander of Tunis.)
3.28 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am sure that I shall be speaking for the whole of the House when I say that we have listened to a very clear and charming exposition
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of the White Paper. I am always willing to sit at the feet of the Field Marshal who is now Minister of Defence, and to hear him on military questions. I shall always carry with me in my mind, when I come to have reminiscences, the occasion when he returned to a meeting of Ministers—some present Ministers may remember it—and for the space of one hour regaled us with the most extraordinary sequence of information on the North African campaign that I have listened to from anybody. Therefore, I always listen with very great respect to what the present Minister of Defence has to say.
This afternoon he has defended the formation and general set-up of the White Paper. No doubt it would appear to be a little inconsistent for an ex-Minister who was in at the very making of the first White Paper on Defence in post-war circumstances to have any grouse about the matter at the present time. However, I do feel that the very rapid chain of developing events that has been seen in the last five years means that the Houses of Parliament—especially the Commons, The representatives of the people, but ourselves included—ought to have as much information as possible. I do not mean that we should be given any very close secrets where security is involved, but we should be given enough information to enable us to judge two things: first, whether our money, being used in great volume in expenditure, is being wisely spent; and second, whether our progress in development is sufficiently comprehensive and particular to meet the needs of the moment. The Minister has satisfied me on a number of problems I had in my mind when I first suggested to him that there ought to be a little consideration in regard to the construction of the White Paper. He has given a wider survey than did the Prime Minister when he was introducing the White Paper in another place. Whilst I am sure the Prime Minister, as always, made a most charming and brilliant speech in another place, nevertheless I did not get from his speech the information which I have been enabled to get to-day from the Minister's exposition of the White Paper.
For a number of reasons there has been some considerable interval of time between the presentation of the White Paper in another place and our debate here to-day—and events have not stayed still.

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A great deal has happened in the last seven weeks. Therefore, whilst in the ordinary way I suppose one would get down to the details of all the matters contained in the White Paper on Defence, I feel very strongly that to-day, in the light of those happenings, we should probably be doing a great deal better if we considered, as well as the record, the general recommendations in the White Paper. Of course, the essential part of what we have to consider in relation to defence is what our policy should be in relation to the events which have been taking place. Whilst I thoroughly agree with the general needs of the forces, to which the Minister referred towards the end of his speech, I feel that we must also be exceedingly careful in our defence programme, and in our judgment of it, that we are not caught in such a way that, if peace should "break out," as some people put it, we should then be forced by public opinion so to slash our programme as to leave our forces in perhaps nothing like the technically efficient condition in which they may be found to-day.
Policy is the thing that counts at the present moment. I was glad, therefore, that the Minister made some reference to the recent suggestions which have been made from Moscow, and I was interested in what he had to say about how they should be received. I know that this touches very closely upon foreign policy in general. Perhaps I might be allowed to say how much I personally—and I am sure I speak for my colleagues—regret that at this very difficult period the Foreign Secretary should be laid aside by illness, and to express our hope that he will have a speedy recovery. However much we may differ from some of his political allegiances, he is one of the most popular Members of Parliament that it has been our lot to meet.
Foreign policy is exceedingly important in relation to defence at the present moment. I am not sure whether all your Lordships have been able to read a recent speech by Mr. Kardelj, perhaps the best foreign affairs authority of the Jugoslav people, in which he indicated something which we cannot say too often just now—namely, that the reaction in world opinion to the statements which have been recently made from Moscow on different matters connected with peace negotiations and various other gestures, is proof to all
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impartial minds that the peace which the U.S.S.R. talks about is there for the taking, if she will approach and follow through the matter in anything like a reasonable spirit, and a spirit of good will. If Russia could do that it would be to the greatest possible benefit to the world at the present moment, and it would have a great effect upon the defence expenditure of the nations. In such circumstances, the attitude of our country, I think, should be to welcome the gestures and to welcome early conferences.
I do not yet know what the arrangements will be. I have not seen any late telegrams about the reopening of negotiations for an armistice in Korea, but I hope that they will not be delayed because of our unfortunate experiences in the recent negotiations. If there is an opportunity for filling up any other time by open conferences upon some of the gestures which have been made from Moscow, I hope that we shall make it quite clear that we are willing to meet the Russians halfway and that we have the utmost good will in trying to come to a permanent understanding. They could make things much easier for us in this direction if, even before we reached the conference table, they indicated what their attitude is likely to be on one or two points—although I should not stop the conference if they did not wish to do this. The great test would be as to how they treated the answer to the question relating to the long delayed signing of the Austrian Treaty, as to how they would approach the question of free elections in Germany, and as to how far we might expect a new approach to, and a genuine consideration of disarmament, I hope giving effect to the suggestion made by the United Nations that any agreed basis of disarmament must be accompanied by the safeguard of an inspection, conducted, of course, under the auspices of the United Nations. The same thing would apply to atomic energy.
I should have thought that the new régime in Moscow and the people of the U.S.S.R. would stand to receive such enormous benefits in the scaling up of their industrial and social development by a permanent peace understanding, which would lighten the burden of armaments, that they would be quite anxious to come to a peaceful arrangement. I pointed out in a debate on defence last year how our increased expenditure on

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armaments has not been bringing us correspondingly increased security, as compared with Russian organisation and expenditure upon armaments. In Russia there is now an enormous expenditure upon armaments, and I should have thought that, with the opening which now exists, it would he greatly to the advantage of the people of the U.S.S.R., as well as to our own people, to come to a peaceful arrangement. On the other hand, I would suggest that our own contribution to the discussion which may arise should not be confined to pointing out where the Russians have been wrong, but should include putting forward more constructive suggestions than appears to be the case. We cannot, of course, speak with any real knowledge on that point, because, no doubt, things are often said through private diplomatic channels about which we do not hear, as to what our constructive contribution should be.
In that connection, I should like to say that I have a very high appreciation of the position of the President of the United States of America—General Eisenhower, as he was formerly called. In view of my personal knowledge of the President I have a great deal of faith and trust in him. I believe that if negotiations are opened he will endeavour to see that constructive proposals are made. On the other hand. I have not (I say this quite frankly, for I think that one is entitled to speak frankly in dealing with friendly Allies) an equal amount of faith in the attitude of certain other individuals on the other side of the Atlantic. I know that the President will have a fairly difficult row to hoe, but I am very anxious that the Allies in the free world should make the greatest possible contribution to bringing a peace conference, or a series of peace conferences, to a really successful issue.
The part of the noble and gallant Earl's speech on this matter which appealed to me most this afternoon was the re-affirmation—for it was nothing new—of the manner in which our policy is anchored to support of the United Nations Organisation. In all these matters, we must continue to hold fast by that. I have welcomed the greater interest shown from time to time by the United States of America in foreign affairs and matters arising in connection with foreign affairs in different parts of
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the world, but I am exceedingly anxious at the present time that we should learn more about what the Government are thinking, and what they propose to do, in relation to defence questions in the Middle East, in the Pacific Ocean, and in the Far East generally. The Minister, if I may say so, seemed to me to skate just a little lightly in his speech—though I am sure he was serious in his mind about it—over some of these topics, and I should have thought that, before the debate ends, we ought to know a little more of what the Government regard as being the general position and how much progress is being made. For example, we might be told how long the campaign in Malaya is likely to be maintained; how long it will take to conclude it. Incidentally, we are all exceedingly grateful to the Military High Commissioner whom we sent out for the way he has directed the Malayan campaign. If before the debate ends, we could have some more information on these lines I should be grateful.
Coming now to the White Paper, the figures referred to by the Minister in regard to infrastructure are clearer to me now than they were before he spoke. But I am a little anxious as to the exact allocation of those different national contributions to this total of £350 million over the four years. It seems as if over those four years we had gradually—in fact I may say speedily—reduced our percentage of contribution to the whole cost of infrastructure. In the first year, it is said, we subscribed £9 million out of £33 million; in the second year we subscribed £14 million out of £79 million; in the third year £20 million out of £152 million, and in the fourth year only £7 million out of £82 million. It was being rumoured a little while ago, at the last meeting in Paris that there was even a suggestion that the £7 million contribution should be reduced. I have some recollection of something being said about it. At any rate, if that is not so, may we please be given a reassurance to that effect, because it is possible that the kind of rumours that get about may give rise to the idea that everything was not, if I may use the old term, "completely happy in the State of Denmark" on that occasion. Perhaps such a reassurance may allay any disquiet arising from some of the rumours about disunity in the headquarters of the

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military organisation of European defence.
In view of the newspaper reports in that connection, I hope the Minister may be able to satisfy us that we are making our proper contribution and not more than our proper contribution—I do not want to force him to make more than our proper contribution—to this general collective defence. In the second place, can he tell us something about progress and the situation generally with regard to the whole of the arrangements at the top of the European organisation? One thing about which we do not know very much is the detailed progress which is being made and the speed of that progress. We do not know whether the speed is satisfactory or unsatisfactory in the progress which is being made in our productive programme. The original programme instituted by the late Government was to be covered, if possible, in three years. Before the Labour Government went out of office it was plain that it could not be covered in that time, and I think a four years' programme was evisaged. It is now assumed by most of us that it will be completely covered in five years—the idea of a four years' programme seems to have been dropped. I am not sure whether it will be found possible actually to complete in five years the programme which was set out.
I think we ought to have some information from the Minister as to how that is affecting the equipment of our own troops, both in regard to their current service in the field, and its detachment, as the Minister has pointed out, to operations which are regarded as being connected with cold war. We ought also to be told how much is being put into store or devoted to actual training use for the preparation of any outbreak of hot war. We can hardly expect that the number of personnel whom we have provided for in the different Estimates of the Service Ministers will all be equipped on a modern basis, at the present rate of development. Perhaps the Minister would give us any reassurance he can upon that point. The Minister quite rightly referred in specific terms to the question of research and development, and I agree wholeheartedly how vitally important that section of the White Paper is, and how necessary it is for us to keep pace with the growth of scientific
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evolution and the latest methods of applying it to weapons of offence and defence.
It was the Government of which I was a member which was, I think, the first to allocate in peace time a large annual fixed sum to research and development, and that sum has grown enormously. In 1946, it was fixed at £30 million. It is now five times that figure, and more. That is the figure which appeared in the Defence Estimates, and to that has to be added the expenditure on research in the atomic field; so that the sum is high, indeed. I understand that this is not all being spent on fundamental research, but some of it is being expended on experimentation stage by stage up to the production of prototypes and the eliminating of the earlier teething troubles of production before there is any attempt to consider line production. People ought to have some idea of what they are getting for the enormous expenditure that is now taking place on research. They ought to know exactly how long direct expenditure upon the development of an article which is the result of this research should remain a military charge and how soon it should be a charge on the firms handling the final production—firms who, judging from their reports, are able to make very large profits from producing machines and apparatus which are the result of Government research expenditure. Perhaps the Minister could tell us something more about that.
There is another point in the noble and gallant Earl's speech in which I was interested, especially as the noble and gallant Viscount, Lord Trenchard, is to speak later on his own Motion—namely, how far the three Services are satisfied with the allocation of expenditure. I must say that in my time as Minister of Defence there was always a good deal of patience and care necessary on my part when I came to deal with the final Estimates, but I never experienced any great and acute controversy between the three Departments during the years from 1946 to 1950. Matters arose that had to be adjusted, but there was a general desire to co-operate and to do what was best in the interests of the scientific development of our defence as a whole that pleased me very much indeed. I am glad to notice that the Minister referred

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to a matter raised recently by noble Lords on both sides of the House—that is, the question of aircraft for the Royal Navy. In view of the reply given the other day, reinforced by the First Lord when dealing with the Estimates in another place, I had hoped that we should receive a more definite assurance than we have received to-day about naval aircraft. However, if the Minister is not able to tell us more about how far modern jet planes are available to the Royal Navy, perhaps he will see that instructions are given for fuller information to be given about this when there is a Naval debate in this House later on. If so, I shall be very much obliged.
The question of atomic development as a whole is another difficulty. In view of this country's large contribution to fundamental research in atomic energy, the contribution we made in the war to the United States' endeavours in this field, and the comparative difficulty experienced since in exchanging information, some of which is largely due to the MacMahon Act and some, so it seems to me, due to personalities, it is a great pity that in this matter, as in all others that arise in the military work of N.A.T.O., there cannot be more co-operation. So much publicity has been given to American activities in atomic research—they are not giving away trade secrets, but they are giving great publicity to their development of atomic energy and the obvious uses of it in warfare—that I feel that this country would like to be assured, because of our great contribution to the American development of atomic energy, that we are getting a fair deal in the exchange of information available. I should like to know whether we are still giving confidential information on this matter, and whether we are getting in return adequate information which we desire to have from them.
I come to the last point raised by the Minister towards the end of his speech—that was, a general reference to how our forces should be enlisted, whether voluntarily or under National Service. From the time I first discussed this matter with the Chiefs of Staff in 1946, having regard to the state of the world then, the fact that we were under pledge regarding a demobilisation scheme
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(which, by the way, was not as rapid as the American demobilisation; on a percentage basis we never demobilised so much as the United States), and in view of the fact that we did not obtain the circumstances we had hoped for as a result of victory—a long period of peace—but almost immediate difficulty, I have been convinced that there is no way of meeting the difficulty other than by National Service. We should have had difficulty in this country at any time in introducing and enforcing in peace time a period of National Service. That has never been within our general tradition in modern times. But I know that by getting the greatest unanimity we possibly could on this matter among members of another place, the constituencies accepted it with amazing unanimity, and in general we have had no great opposition throughout the country to the carrying out of the system of National Service.
I agree that in the circumstances which arose later, the extension of the period of National Service training from eighteen months to two years was essential if the tasks were to be fulfilled. I know that some members of my Party, and even ex-colleagues in the Ministry, have argued differently from what I am arguing now; nevertheless I feel that the Minister has not said anything on this matter with which I could disagree. However, in view of the expense—because, after all, more than half of our defence expenditure goes on personnel—it is essential to review the matter at every conceivable opportunity consistent with security.
If we do approach something like a reasonable basis for a constructive peace by agreement, I hope it will be possible, in general conformity with the United Nations organisation, to reduce our military expenditure, for undoubtedly an expenditure in gross of £33 or £34 a year per head of the population, man, woman and child, in these days of economic difficulty, is really more than we can bear. It has been eased a little by the American defence aid, which has reduced the cost to about £31 per year for every man, woman and child in the country. It is an extremely heavy charge, but if it is going to be necessary to continue that charge in order to maintain our freedom, then it must be done. However, if there is any opportunity of arriving at a progressive peace, then surely we ought to reconsider,

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almost as one of the first things, the period of National Service. Having said that, I leave the question entirely as the Minister put it to the House: that he will review the position from time to time to see whether anything can be done in this direction. In the end, if we come to a regular peace basis, we shall be better off with smaller forces, but with continuing expenditure on the improvement of arms and equipment in order to meet any new situation which may arise, than by having larger forces which are not properly equipped. I hope that the House—perhaps on a little of the information for which we are asking being given—will support the Minister by approving the White Paper.
4.2 p.m.
VISCOUNT TRENCHARDhad on the Order Paper a Notice that he would call attention to Defence, with particular reference to air, and move for Papers. The noble and gallant Viscount said: My Lords, for the last two weeks I have been somewhat exercised in my mind whether I should make the speech I had intended to make to-day, in view of the apparent changed situation with regard to Russia. However, I came to the conclusion that, change or no change in Russia, it is most important that the organisation of our defence forces should be up to date and should take into account all the great changes that have taken place in the last five years. Thirty-five years ago the Air Force came into existence. It was formed on April 1, 1918, as one Service, not as two or three. The three people who formed that Service and laid the foundations of all that has gone on since were General Sir David Henderson, General Smuts and Sir William Weir (now Lord Weir). Those three men had more to do with the formation of the Royal Air Force than any other men in this country—and Sir David Henderson's name is not so well known as it ought to be.
As your Lordships know, in those days aeroplanes were not very reliable. We were not at all certain what could be done. They could not go very fast or very far, and most of our ideas were based on theory. Has that theory been proved wrong? I think not. When we were young, and somebody made an impossible proposal, we used to say: "He might as well try to fly." I little expected to hear the noble and gallant Lord, Lord Chatfield (I gave him notice that I
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would refer to him, and I am glad he is here to-day) some two or three weeks ago, on the debate on Life Peers, say:
"You can no more select your centre Party in this House than you can fly."
LORD CHATFIELD: My Lords, as I have been mentioned by name, perhaps I may interrupt the noble and gallant Viscount. Man can swim and walk, but he still is quite unable to fly. He has to get into a machine to do that. That was the meaning of my reference.
VISCOUNT TRENCHARD: I have nothing to withdraw; in fact, I have some additions to make. No wonder we have so many aircraft carriers to-day! They must still be in use, because it is not yet fully realised that aeroplanes can fly long distances. Do we realise—and does the noble and gallant Lord realise, that the other day an aeroplane flew to Australia in twenty-three hours, including time for refuelling, and that we have flown to Tokio in under thirty-six hours? Do we realise that more first-class passengers are carried by air across the Atlantic, both ways, than by all the ships, including the "Queens" and all the big new ships which cross the Atlantic? Do we realise that to-day there are more people arriving at London Airport than at the port of Dover? Have we absorbed what all this means?
From the Report of the Defence debate in another place on March 5—I admit I read it hurriedly, but I read it twice—I find that, with one exception, no one spoke about air power. Transport aircraft were slightly mentioned, as were helicopters, but, with one exception, nothing was said in that debate on Defence about the power of the air. That exception came at the end of the debate, when Mr. Birch, the Parliamentary Secretary to the Minister of Defence, made a most useful statement on the subject. He said, amongst other things (OFFICIAL REPORT, Commons, Vol. 512, (No. 67), col. 686):
"…we have decided to build up our light bomber force to a lower peak than we had originally intended and to go into immediate production with the now long-range medium bombers. We shall not have a very large strategic air force, but it will be a highly effective one."
This was quite a guarded statement, but I understand by it that we are going to build bombers which can carry the atom bomb the required distances. Therefore,

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I hope that this long-range medium bomber has the necessary range. Mr. Birch also said:
"We have exploded our first weapon"—
that is, atom weapon—
"at Monte Bello; and in the Vulcan, the Valiant and the Victor we have medium long-range bombers which we believe will be the best in the world."
I agree with him, but does that mean what it says? If it does, and the noble and gallant Lord can assure me that it is so, then we have the range to carry the atom bomb.
Mr. Birch further stated that naval construction is being concentrated on minesweepers, escort vessels and aircraft carriers. With the much greater explosive power of the bomb, as in the atom bomb, the important factor now is range. It must not be forgotten that the long-range bomber can be used for short-range work, but that the short-range bomber cannot be used for long-range work. I conclude that the Vulcan, the Valiant and the Victor are the bombers that will do this long-range work. Is this so? I look upon air power—and that is the reason why I am speaking to-day—as the cornerstone of defence; and you cannot discuss defence without saying that you are going to use the cornerstone.
In discussing defence, reference must be made to the cost. If the standard of living must not come down—and I am not saying that it must, or must not; it is not within my province, nor do I know—where are we to get the money to make defence really efficient? Where can we save £2 million or £3 million? Not by cutting out a few cars, lady typists here and a few typewriters somewhere else, as we did before. I want to make it quite clear that, whatever I say, it is not my intention to criticise the Secretary of State for Air or the Air Staff. I believe that they realise the power of the air. I am referring to those outside the Air Service, who do not realise the power of the air to-day. As I have already said, the Air Service, when General Smuts sponsored it in 1918, was formed as one Service, and now we are trying to run it as two or three Services. This cannot be done without loss of efficiency and without undue expense. You cannot divide air power. As the range increases, so it is absolutely essential that the Air Force
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should be organised less rigidly than it was even in my day, and not more rigidly.
We hear a great deal to-day about the Tactical Air Force, which cannot operate unless we have command of the air; we hear a lot about Coastal Command, the Fleet Air Arm, the Naval Air Service, the Strategical Air Force and the Bomber Force—and more and more divisions of responsibility in the air and over the sea. By reverting to the original idea of one Service to cover all air operations, we could do away with the overlapping in training and recruiting, in staffs at the Air Ministry, the Admiralty, at the bases and aerodromes, in equipment; and thereby we could save millions of pounds—probably up to £100,000,000 a year. Your Lordships may say that it is a large sum, and may ask whether it is stated light-heartedly. My answer is, No; it is not. You have to remember all the ports, the dockyards and all the ships to escort those big carriers, and all the small carriers; and I say that £100,000,000 a year could be saved if the air was combined again; and our position would be more secure. There are no boundaries in the air. That was said in the very early days, but many did not understand it then and it is not fully understood to-day. The Admiralty look upon the responsibility of the air over the sea as something quite separate from any other air responsibility. I do not believe there is an airman to-day who thinks like that.
On February 17, in your Lordships' House, in the debate on the supply of aircraft, I was amazed to hear two Ministers answer about the supply of aircraft—two separate Ministers. I will make no comment on such a state of affairs. Also in that debate I was surprised at the consensus of opinion on both sides of the House by those who had had experience of the Naval Air Service. They all seemed to imply that the Naval Air Service was badly let down with regard to the supply of up-to-date machines. Nobody said anything except the noble and gallant Lord, Lord Dowding, who told the House why carrier-based aircraft were inferior to land-based aircraft, and nobody knows more about it than he does. I could not agree with him more. I have always said that the carrier-based aircraft will always be inferior to the shore-based aircraft. The machines made for what

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is called to-day naval air work—that is, to land on carriers—have always been inferior. Naval aircraft in these days have to carry an incredible amount of equipment, including life-saving apparatus and all the other impedimenta too numerous to mention. All this has to he landed on the deck of a carrier. Think of the different types of machine that would have to be accommodated on a carrier if you specialised with each type of work from a carrier, and did not make a machine into a "Jack of all trades." It would be still more inferior than it is to-day.
It has been stated that there are gaps in the Atlantic and the Pacific which cannot be effectively dealt with by shore-based aircraft. I should weary your Lordships if I went into all the details, but I wish to ask one question. If there are such gaps, where are the hostile forces coming from? We talk about England being an aerodrome and being vulnerable. England is not one-quarter as vulnerable as a carrier. Carriers have their uses, I know, in small wars—if you can call them wars. In my day we used to call them expeditions; or even—when the Government did not want to give a medal for them—patrols. I have been on all of them. I have been on many patrols that we used to think ought to have been called expeditions. But to-day I am not talking of small wars. I could say a great deal on the small war question with regard to the small carriers. I have said in your Lordships' House several times that distance dominated air power at the end of the last war. But air power now dominates distance, so far as this planet is concerned.
For security reasons I am not going to discuss to-day in any way the guided missile. Although it may be with us in the future, even in the fairly near future—it will be the distant future for the long-range work—I will not even go any further than to say that it is not with us at present; and if we do not get through the present there will be no future. Therefore, let us be efficient for the next three or four years without it. If the long-range bombers, as I now understand is the case, have the range to carry the atom bomb as far as we want it carried, we shall not have to fight to get aerodromes and bases to ring the enemy, as we did in the last war, and
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which Field Marshal Montgomery, early in the war, recognised as necessary. I am not proposing giving up the aerodromes we have; I am talking now about fighting for new aerodromes. The terrific cost in casualties and time caused by the fight to get such aerodromes has been eliminated. We already have them; and therefore I say to the Government, "Do not let us waste our efforts on what will be unnecessary for the next war." This applies to carriers and to the maintenance of bases and immense volumes of stores all over the world to enable them to operate. Indeed, the need for some of the bases overseas should be reviewed.
In the White Paper on Defence for 1953 it is stated that the original plan put in hand by the previous Government—I think the noble and gallant Earl mentioned the figure in his speech this afternoon—was to have cost £4,700 million at the price levels prevailing at the end of 1950, and was to have been completed by March, 1954. From very rough calculations that I have made, if the programme had been carried out as originally planned by the Party of noble Lords opposite, it would have cost, not £4,700 million but, with rising prices, increasing wages, et cetera, £6,200 million—£1,500 million more than was planned for. I am not criticising the present Opposition in any way on that point, but the fact remains that it would have cost that figure. That has been prevented, and rightly. From these figures it would appear that there has, been a considerable cut. I am not, of course, saying that this reduction was not necessary, but it is vital to use some of the manpower and money saved to speed up the production of the three new long-range medium bombers. Surely the Government have cancelled some orders for aircraft and reduced the number of types of light bombers. I know the difficulty of changing mechanics from one firm to another, but surely the Government could have speeded up production of these long-range bombers, now—at once: time is short. It is right that the Government should not order types of aircraft that will be out of date as soon as they are off the assembly lines, but we must speed up the production of the new bombers. Now that we have the range, let us build the machines that can use it. One of the difficulties I feel we make for ourselves

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nowadays, with all these modern appliances, is that we try to look too far ahead. We allow the long view to obscure and confuse the present. We do not use what we are given. We are still trying to look too far ahead. And if we continue to look too far ahead there will be no future.
The far-reaching changes that came about from 1914 to 1918, and since, have not been completely comprehended. We talked then about "2,000 leagues under the sea" and "as the crow flies." The achievements of the manufacturers and the scientists have far outstripped our imagination. The brains of those who organise and direct the use of the new inventions do not match the brains of the scientists who produce them. We must absorb all we have got to-day. I see everywhere, every day, attempts to use the new instruments provided for us, like radar and atomic energy, by the old methods. This is happening in every walk of life—in politics, in business and in what I am more competent to talk about, defence. My Lords, I feel very strongly that the wonderful inventions of to-day have changed the situation far more than we realise. Our minds have not progressed to the same extent as the minds of those who have designed and produced the modern aeroplane and its equipment.
I would ask the Government, Are they really making the best and most up-to-date use of all the most modern inventions and developments available, particularly in the air? If we do not soon learn the best way of using them, we shall lag behind. We have seen much discussion in the Press about atomic bullets and atomic shells being made for rifles and guns. Are we really to-day going to try to fire atomic bullets and atomic shells? This means that ships and transport aircraft in ever-increasing numbers will be necessary to carry the men to fire these rifles, together with all their equipment. It is the same old method of warfare as in 1914–1918 and part of 1939–1940. Remember that you cannot get away from the stark fact that we do not possess, nor shall we ever possess, as many riflemen as our potential enemies. Is that fully realised? I was reading the other day a recently-published book about the Prime Minister.
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In that book the author made a reference to the Egyptian campaign against the Mahdi of long ago. Mr. Winston Churchill is quoted as saying that their numbers far exceeded ours and that a few of them had antiquated guns, but most had lances and swords. I hope, my Lords, that in a hundred years' time history will not recall that the British, hopelessly outnumbered, as was inevitable for so small an island, had also lost their age-long superiority in armaments and had only a few antiquated rifles and guns, and a few old aeroplanes.
It will be said that I am proposing to abolish the Navy and the Army. I am not—far from it—any more than I was thirty years ago, when Mr. Churchill suggested that the Air Force should take over the responsibility for the garrisoning of Iraq, so as to reduce the Army's strength from (I think it was) in the neighbourhood of eighteen battalions, with some armoured car companies and five squadrons, to four. We accepted the responsibility, and for it we wanted only four battalions and eight squadrons. But the Army refused to give us less than twelve battalions and two armoured car companies; they said it was not safe unless they could give us twelve battalions. The noble Viscount who was Secretary of State for Air at that time will perhaps bear that out. The Army would not give us what we wanted, as they considered it was not safe. That caused the Air Ministry to raise the Assyrian levies and to form the Royal Air Force Regiment—or the forerunner of it. That shows that we wanted an Army, but not to be used in the same way as it was when it was the chief weapon of offence, or for averting defeat. We had to form our own armies; and I say that we need to look at this problem to-day as a whole, and certainly not with the idea of doing away with the Army or the Navy.
What, then, must we have first? There have been discussions about what is called the strategic reserve—it was mentioned in another place by a former Secretary of State for War. He raised the question of the non-existence to-day of a Central Commonwealth Strategic Reserve. In support of his argument that this is vitally necessary—meaning, of course, army reserves—he referred to the Prime Minister's Memoirs, describing a visit

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which the Prime Minister made to the French Government in 1940. Mr. Churchill asked General Gamelin, "Where is the mass of manœuvre?" and General Gamelin replied, "There is none." Mr. Churchill, writing of this, says:
"I was dumbfounded. It had never occurred to me that any commanders, having to defend 500 miles of engaged front, would have left themselves unprovided with a mass of a manœuvre."
My Lords, the mass of manœuvre to-day is the bomber force, with the long-range bombers and the atom bomb. That is the great reserve to-day—not masses of infantry massed together with guns. Is this view accepted by the Government? Has it been argued out? The Prime Minister, speaking at Boston not long ago, said this:
"For good or ill, air mastery is to-day the supreme expression of military power, and fleets and armies, however necessary, must accept a subordinate rank."
That brings me to my last point. In spite of our Prime Minister's words, that
"air mastery is to-day the supreme expression of military power…"
we find not one British airman as a Commander-in-Chief. In Europe to-day, in the South, the danger is principally naval and air; and an Admiral is Commander-in-Chief. In the centre, the danger is army and air, and who is in command?—a General. In the north, the danger is from the sea and air. Who is the Commander-in-Chief?—a General. He was recently an Admiral, but now he is a General. And the whole set-up is commanded by a General. In all this, I am not talking about whether they are politically good or bad. I am taking the men who are there. After forty years of air, can it be said that there is nobody who can now come forward from the Air Force to be a Commander-in-Chief? Think what it means. When a Government or a group of nations appoint a Commander-in-Chief, he is almost omnipotent for his first few years. He comes along and says, as in the case of the invasion of Europe when a General was appointed, "We must have five divisions, not three, which have been planned." He gets them at once—and he always will. The Commander-in-Chief in Europe wants more divisions. There is not one Commander-in-Chief who says, "I must have
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a Tactical Air Force." He says, "I must have this mass of reserves."
For 200 years everybody has been aware of what the Royal Navy has done for this country. Boys and old men were watching always that we did not let the Navy down, and rightly. Now, unless the leaders of all Parties, of all institutions, and of all organisations, get that same feeling about the air and the air battle fleet, the long-range bombers, as we had for the Navy, then, instead of our being the great nation that we still are, I fear that we shall be amongst those who "also ran." A few weeks ago, I went to a race meeting at Sandown, the Grand Military—I seldom go to a race meeting these days. I saw on the card the name of a horse running in the Grand Military Gold Cup, "Atom Bomb." I thought it was appropriate, as I had put down a Motion, that I should back it, I did, and it won, due in no small measure to the skilful and determined handling by its rider, Major Fielden. Now we have Mr. Butler, the Chancellor of the Exchequer, who has ridden the Budget horse to a gallant finish over a punishing course. May I hope that, as a result of this debate, the Secretary of State for Air and the Air Staff will show the same skilful and determined handling of the superb material available for the defence of this country and the Commonwealth to enable us to win the race in the air?
4.34 p.m.
LORD FREYBERG: My Lords, it is with due humility that I rise this afternoon to address your Lordships in this Chamber, where I have spent many hours listening to your words of wisdom and learning the form of your Lordships' House. Much as I dislike making this speech, I feel that anybody with specialised knowledge should contribute to a Defence debate. It is for this reason that I have intervened so soon after taking my seat in your Lordships' House. May I start by saying what pleasure it was for me to see my old friend, the Defence Minister, introduce this debate, and assure him that it reminded me of many other occasions, ten years ago, in yet another place where his advice and help meant so much to us all? Now, as then. I find myself in agreement with what he has to say and with the White Paper on Defence.

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I feel also that it is a great honour to speak in a debate after the noble and gallant Marshal of the Royal Air Force, Lord Trenchard. I always listen with the greatest interest to everything he says and I have great respect for his opinions. He always moves with the times, and he has raised many points that will give us a good deal of cause to think, and think deeply. His arguments will, I know, be examined by us all. Although I disagree with many of his conclusions, I find myself in complete agreement with one. I feel he has made a clear case for the Royal Air Force to be taken into full partnership with the Royal Navy and the Army. I see no reason why an airman should not be given one of the overall higher commands. It is only when the noble and gallant Viscount fails to get down to the tactical use of air power that I find myself at variance with his opinions.
Further, I do not agree that air power can prevent armies from moving, deploying or fighting on land; and although I am not competent to pass any opinion on whether aircraft carriers are obsolete or not the arguments put forward have a familiar ring. They remind me of the same arguments that were put forward between the wars. I remember being told in 1937 by a most distinguished person that if we had 10,000 aircraft we could reduce the Navy, and one military writer came out with a full-scale attack on the Army and opposed sending armies across to the Continent. Three years later, in 1940, we were only too grateful to accept fifty obsolete American destroyers to fill up the gaps in our depleted Navy. May I restate my opinion after the defence of Greece and Crete and other places. I maintain that air power by itself cannot prevent ships from moving on the sea or armies from moving and fighting battles on land.
In a debate such as this, I feel we should acknowledge the debt of gratitude we, as a nation, owe to the very able organisation, including civil servants as well as Service men, who have worked away in Whitehall organising and planning the defence of our Empire. It has not fallen to my lot to work, to any great extent, with the Admiralty or the Air Ministry, but I have first-hand knowledge of the War Office. After a long experience I want to pay tribute to the excellent
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results they have achieved over a period of many years. It is of interest and comfort in days like this to realise that the groundwork of our Services has stood the test of war.
Towards the end of the last war, Allied Forces Headquarters, Mediterranean, of which the Defence Minister was the Commander-in-Chief, sent a team of staff officers to study the methods of the New Zealand Expeditionary Force in the operations of the 9th to the 16th April, 1945, when we were crossing the Senio River and facing up to the River Po. These staff officers had come to investigate our methods and see how it was that we continued to get the good results we did. We explained that our men and our officers were of a very high grade, but, notwithstanding that, it was with great satisfaction that we were able to assure these Staff officers that we got our results by following to the letter the excellent doctrines, policies and instructions laid down by the manuals of the British General Staff, as issued by the War Office. We never departed from the normal. We would not alter or deviate by a single man from the organisation which the British General Staff had set up. We accepted their administrative system, their ration, and even their much abused but excellent Navy, Army and Air Force Institute. As a result, we finished six years of war as one of the best organised, best equipped and, though I say it myself, best trained fighting forces in the field. I tell your Lordships this because it should comfort us, when we are carrying such a burden, to realise that the money and manpower spent on defence is being well and wisely used.
Lastly I should like to deal with an aspect of defence which has been all too little considered in the past. The White Paper deals with co-operation within the Commonwealth and within the North Atlantic Treaty Organisation. We are all glad to hear from the Defence Minister after his visit to the Far East that the Commonwealth troops in Korea form an outstanding example of excellent co-operation in defence. That is good news and in keeping with traditions. The rank and file of our Services have always been our best ambassadors abroad. But, with all respect and every wish to help. I would urge the Government that a more complete study should be made of the

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more difficult problem of command and integration of the armies of the Common-weath in a large-scale war. Speaking as one who has commanded a Commonwealth force for six years on active service, I know the problems and the friction which have occurred, especially during the early years of a long war. I also know the mistakes I made, and, with the experience I have, I feel that I should not make them a second time. But I was not by any means the only one to make mistakes. I doubt whether many of my senior commanders knew the mistakes they made, or, if they knew, that they ever recorded for future guidance the lessons that were to be learned. In any case, many of the senior commanders are passing on and their invaluable knowledge is being lost. That is why I press this afternoon the need to study this problem further while these men are still alive.
I know that friction in the Middle East during the first two and a half years of the war did harm to our war effort and did not improve the otherwise harmonious atmosphere that existed between various parts of our Commonwealth. Reading through the diaries and reminiscences of the various commanders who commanded Commonwealth forces in the First World War, one comes across the same situation. We had General Curry commanding the Canadians, and General Monash commanding the Australians, referring in highly critical terms to the management of the war; and in his last diary we find that the late Earl Haig referred in terms to some of the Commonwealth commanders as being swollen-headed. My Lords, there are many reasons to believe that General Curry was a very highly trained officer, but he did disagree with the whole Passchendaele adventure.
Let me explain to your Lordships the difficulties that faced me on going to the Middle East. My Government gave me full powers to organise, to equip and to train the New Zealand Expeditionary Force in Egypt; and when they were fit for war I was to notify the New Zealand Government, who would decide where they were to be employed. When France capitulated Egypt became a theatre of war, and Middle East Headquarters in Cairo held a conference at which I was not present, and sent me a message saying that they were splitting the New Zealand Forces into six. Part were to go to each
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of the 7th Armoured, 6th Australian and 4th Indian Divisions, part to the Western Defence Force, part were to be in reserve and part on the lines of communication. Cynically, New Zealand Force Headquarters with its commander were to remain in Cairo—in other words, my headquarters and my staff were to remain in Cairo whilst the rest of my troops were sent out to do battle in the Western Desert. My Lords, this cable profoundly shocked us, and we naturally refused to obey this improper order. We pressed Middle East for the return of some of the units that we had lent, them, because our Division was together and we wanted to train as a Division. There was an angry exchange of letters, and from that moment our relationship deteriorated. My Lords, that period in the Middle East was unpleasant, and things were said and done that cannot be too quickly forgotten. Naturally, I kept the New Zealand Government in touch with all I was doing, and they agreed entirely that the New Zealand Forces should be kept together.
Early in 1941 the plan to go to Greece was made, without reference to either the Australian or the New Zealand commanders. That is quite in keeping with ordinary procedure. But I should like to point out what my responsibilities were. When I took over command of the New Zealand Forces the New Zealand Government made it perfectly clear to me that I was responsible for their health, their welfare and their safety while they were overseas. When we went to Greece I found myself in a position that was anything but secure. I was occupying a situation that would have taken an Army Corps to hold; and in point of fact we got into position one day before Germany declared war and attacked us with the whole 12th Army. When the disaster of the Greek and Crete Campaign developed we nearly lost the whole of the New Zealand Division, first in Greece in April and then in Crete in May. We should have been lost but for the skill of one Member of your Lordships' House, Admiral of the Fleet Lord Cunningham, and the devotion and efficiency of the officers and men of the Royal Navy.
When the disaster developed it became obvious to the New Zealand Government, who had a two-Party House—they had not a National Party and they were

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holding General Elections every three years—that if they lost the New Zealand Division completely, there would be very serious political repercussions. The Prime Minister of New Zealand flew to Egypt and interrogated all the men as they came over from Greece and Crete. These included six of the Members of the House of Representatives—all good men who had served through the Greek and Crete campaign. One of them made a charge against me of not having control during the retreat from Mount Olympus to the Thermopylae line. After two months of heavy fighting, on arriving in Egypt on June 2, I found myself facing a court of inquiry. The court was a British court, assembled by the Commander-in-Chief, Middle East. They upheld my action. The complaint against me was that I stayed with the rearguard instead of going to the beaches to organise the defence. My position was that I had my Division together for the first time. We had not even had a signal exercise because our signals had been separated from us. In the state they were in I thought it would be better to stay with the rearguard and be certain that we got them back, rather than go back and find nobody coming back to me. The court upheld my action and gave me an unsolicited testimonial.
I tell your Lordships this because I want you to realise that when we came back my Prime Minister was dissatisfied with the way the New Zealand Forces were being integrated into the Army in the Middle East. After the court of inquiry, he sent for me and told me that I had failed them; that I did not warn them that the campaign in Greece was a dangerous operation. I told him it is very difficult for a junior officer to disagree on major strategy with an army group commander, and his reply was perfectly clear. He said: "No matter who your C.-in-C. or what his rank may be, it is your duty to keep us in touch with the situation." I could see trouble ahead. What a Prime Minister says goes, and he is perfectly right to lay down any conditions he likes for his national affairs. I could see stormy times ahead, for he made two conditions under which I commanded my force. He said, first: "When you are ordered to take part in operations, you will personally find out
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whether there is air cover for operations anticipated and you will communicate with us and tell us that you are satisfied"; and secondly, "Your troops will not be exposed without tank support to hostile tank attack." I could see a great deal of trouble for my period in the Middle East.
You know the military mind. You have had a lot of military people here in this House—distinguished Admirals, Generals, Field Marshals and Marshals of the Royal Air Force. They are men with hearts of gold, but your Lordships will agree with me when I say that they dislike backseat driving by a junior officer—indeed, that is an understatement; they dislike the situation intensely—and it was a very difficult position for a Commander of a Commonwealth force. When the situation got particularly difficult I used to let them know what was happening on my side of the hill. I received a cable as we were moving out to battle and it ran like this
"I hear you are on the move"—
it was from my Prime Minister.
"We are not going to have another Greece and Crete. Wire at once who your corps and army commanders are and what you think of them."
My Lords, I sent the cable to the Commander-in-Chief and said, "Will you please brief me as to what I have to say in answer?"
That is nothing. Perhaps your Lordships would like to hear my report on General Alexander and General Montgomery. Early in October, 1942, my Prime Minister said:
"I hear you have a change of Government in the Middle East. Wire at once what you think of the new arrangement."
On October 3, twenty days before Alamein, I wired:
"The complete change in Middle East management has cleared the air. One good result is that they now insist that divisions must be kept intact. The result of this simple decision will be manifest in our future battles. It makes the position here much easier, as for two and a half years I have striven to prevent the New Zealand Division being divided into brigade groups."
That, as I have said, was twenty days before Alamein.
"The result of this simple decision will be manifest in our future battles."

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Ten days after Alamein, on November 3, I sent a cable to the Prime Minister, in which I said:
"The present situation here shaping well. I feel that the future here is bright. I believe the German resistance was finally broken by the last attack. We shall push him back in the near future to the frontier and eventually clear Africa."
That was before we broke out from Alamein. My Lords, one of the things that shocked me profoundly was the evacuation of Greece. For the evacuation of Greece they had, in me, the most experienced man in running away, evacuating or retreating that they had ever had in the British Army. I evacuated Antwerp and Gallipoli and several rearguards in France; I evacuated part of the rearguard from Mount Olympus to Thermopylae. But did they ask me one question? They never referred to me: they handed me my orders.
This problem of handling the armies of the Commonwealth has been facing us for many years—in fact since the First World War. The story of the rise to efficiency of the armies of the Commonwealth is an interesting one. It has a human as well as a military side. When they sent across the "Lustre" force to Greece there were two Australian divisions and a New Zealand division. There you have a cable of February 8, from the Chief of the Imperial General Staff, Sir John Dill, saying that there were only two officers to be considered for the Command, General "A" and General "B," both British officers, and it ended, "As Blamey and Freyburg are such strong characters, it had better be General 'A'." When we came back from Greece there were in North Africa three Australian divisions, two Indian, two South African, one New Zealand—that is, eight Commonwealth divisions—and one British division, the 7th Armoured, and I think one other division was on its way, the 50th. When they picked the two commanders to take over the armies on the other side they put a British officer in the Western Desert and a British officer in Palestine. This did not escape very severe criticism from the Commonwealth forces, and an Australian came to London and complained that Blamey was not given one of the jobs. In the end they made a special job for him as Deputy Commander-in-Chief, Middle East.
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I do not want your Lordships to think I was in the running for any jobs, because I was not. When I took over command of the New Zealand Division I agreed not to accept promotion, and on three occasions I was offered, very kindly, by several of the commanders the command of a corps; the last time being by the present Defence Minister in Italy in 1944. To me the most important job was keeping in touch with the New Zealand Government. My job in 1942 was to brief the New Zealand Government, to advise them as to whether they should keep the New Zealand forces in the Western Desert or to send them to the Pacific to take part in the fight against Japan. I had a certain influence; they respected my opinions, and I maintained that my work there in that field was very important.
This problem of integration has a simple solution; it is the old story of the father not realising, and I believe not wanting to realise, that his sons have grown up and want full partnership in the family business. These forces of the Dominion countries are co-equal in every respect; they are highly trained and are worthy of every consideration. I know that your Lordships will forgive me if I do not wait for the end of the debate to-night, because I have an engagement of long standing. I do not believe, in view of my good attendance in your Lordships' House, that even the noble Lord, Lord Silkin, will accuse me of having treated your House with disrespect if I leave to keep that engagement. I am sorry for having spoken for so long, and I now beg to support the Motion.
5.0 p.m.
LORD HENDERSON: My Lords, may I begin by offering sincere congratulations to the noble and gallant Lord who has just addressed your Lordships' House for the first time? The noble and gallant Lord has a record of distinguished service, both to his country and to the Commonwealth, in peace and in war. His presence in your Lordships' House means a notable addition to its collective knowledge and experience, and his speech this afternoon, has shown that he has his own valuable contributions to make to your Lordships' discussions. I am quite sure that I am speaking for noble Lords in all parts of the House

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when I say that we shall hope to hear his voice on many future occasions.
This debate has been a remarkable one so far. We have had speeches from four noble Lords who are pre-eminently qualified to discuss defence matters. It would not be easy, I think, in any other Parliamentary Chamber in the world to find four successive speakers with such personal authority, knowledge and experience of Service and defence problems. The three noble and gallant Lords have had brilliant careers as military or Air Force leaders. My noble friend Lord Alexander of Hillsborough was, for most of the Second World War, the political chief of the Admiralty; and later for some years he was Minister of Defence. It is with some diffidence, therefore, that I venture to intervene in the debate, especially at this early stage. But defence concerns not only the great experts and specialists; it is a matter of vital importance to the whole community.
We are in the third year of our rearmament programme. It is making great demands on our productive resources and a considerable impact, as my noble friend has reminded the House, on the lives of our people and on their standard of life. The proposals outlined in the White Paper call for an expenditure in the coming year of £1,600 million, for 860,000 men in the Armed Forces and for 850,000 industrial workers in the armament industries. Our forces are the largest, the strongest, and the most costly we have ever maintained in time of peace. Science and invention are constantly developing new weapons and improving existing ones, with the double consequence that, while efficiency is always rising, so also is the cost of production. The programme upon which we are engaged represents a very heavy national burden. We have it on the authority of the Prime Minister that
"the effort we are making in defence is the absolute maximum of which we are capable."
The effort is a continuing effort, and the burden is a continuing burden, and both are so, not from our choice but from necessity. And the necessity will be inescapable, so long as the free world is menaced by aggressive Communism and Communist aggression.
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We are no longer living in a world in which British defence policy and provision have to be developed solely on the basis of British responsibilities and in isolation from the defence policy and efforts of the free world as a whole. It would be difficult to visualise a situation in which we should have to stand alone resisting aggression. Indeed, the Prime Minister has said that he and Marshal Tito agreed that
"there can be no question of thinking in terms of a localised war in Europe."
We are living in a world where aggression has to be resisted by collective effort on the basis of the common action of "one for all, and all for one." That is why the defence of the free world is being developed, as never before, within a collective system—a system of contractual engagements of mutual assistance against aggression.
The security of these islands must, of course, always be our first and overriding responsibility. But our own security is not to be assured apart from the security of Western Europe and the free world as a whole. In practical terms, British defence for the foreseeable future can be made effective only within the wider context of North Atlantic community defence. In saying that, I am not saying anything new. It is now firm British policy to ensure British security through pooled security by collective defence effort and mutual assistance—collective effort that takes the form of regional agreements in harmony with the Charter of the United Nations. I stress this point because it is one of cardinal importance, and because it seems to me that much more attention should be given in future Defence debates to collective defence developments under N.A.T.O. than has hitherto been the case.
I agree with the noble and gallant Earl the Minister of Defence that there is no new international factor which can be held to have diminished in any way the need to build up the collective defences of the West. Potential dangers still menace peace and security. We are still faced with localised but related wars in Asia, and with persistent cold war in the rest of the world, but particularly in Europe. And none of us knows how long that unhappy and unsettled state is likely to continue. It may, of course, begin to change for the better in the coming

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months. We are all encouraged by recent Communist gestures to cautious hope that there maybe a reasonable chance of East and West coming together in a genuine effort to work for an agreed settlement of issues which at present divide them. That is what we want to see happen, and happen soon. Every one of us must realise how greatly the world could be transformed if the Soviet leaders were willing and ready to seek with the Western nations honest agreement by negotiation on major matters—on Korea, on the Far East, on Austria, on Germany unity, on disarmament. Life will be happier and more secure for all nations if tensions can be lessened, their causes removed, and the burden of armaments reduced; and we must all wish that no opportunity should be missed, and no effort spared, to achieve that desired goal.
But all that lies with the future—though we hope that important first steps will be taken in the near future. Nothing, however, has occurred yet—I repeat "yet"—to lessen the need for adequate Western defence or to justify a slowing down or curtailment of Western defence preparations. We must keep hard realities clearly in mind. Soviet Russia and her satellites have formidable military power. They continue to possess a considerable military preponderance over the free West. I have read from time to time unofficial estimates and statements of the strength of their armed forces. The Soviet are said to have 175 divisions, of which about one-third are mechanised and tank divisions, and the satellites and the Soviet Zone of Germany have between 65 and 75 divisions. Soviet air strength has been variously estimated at between 18,000 and 20,000 war 'planes, of which about 7,000 are said to be jets. It was stated in January of this year by the well-informed military correspondent of the New York Times, Mr. Hanson Baldwin, that there are 34 Soviet divisions and 2,500 military aircraft stationed in East Germany and other European countries behind the Iron Curtain. I have no means of deciding how reliable those estimates may be, but we do know that the Russians themselves publicly boast of their military might, and make no secret of the fact that they continue to consolidate it and increase it.
We are now told, on the authority of the First Lord of the Admiralty, that the Russian Navy is the second largest in the
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world in ships actually in commission. The qualifying words are "in commission," and we know, of course, that the Royal Navy has a large number of vessels laid up in reserve but ready for service should the need arise. The First Lord cited the 350 submarines which, as we know, form a Main element in the Russian Navy. I confess that I read the First Lord's statement with surprise, despite the qualifying words, and I believe that the general impression left upon the public was that the Royal Navy was no longer the world's second navy. I think it is important that we should be quite clear what the position is. Can we be told whether, as a fighting force, the Russian Navy is superior or inferior to the Royal Navy? Is it, in fact, by all the normal tests, the second navy in the world? Doubt and confusion should not be left in the public mind on such a vitally important defence matter. What does, however, seem clear beyond doubt, is that the Russian Navy is a powerful offensive weapon, and that its strength for this function is being constantly increased. Moreover, we must not forget that, in addition to the military, air and naval strength which the Soviet Empire has at its command, there are the atomic bomb and other modern offensive weapons for mass destruction which she has developed. All this massed power must be regarded as constituting a great potential danger to the peace and security of the free world.
I am not concerned at this moment with assumptions regarding the political intentions of the Soviet Government, but with the formidable military capabilities at their disposal. For some time now, Western statesmen have been assuring their peoples that war is not inevitable. That is true. Wes is never inevitable until some Government have deliberately decided to invoke armed force as the instrument of their national policy—as, for example, when Hitler insisted on attacking Poland. At no time has there been any convincing evidence that Soviet Russia had decided and was planning to gamble on a war of aggression against the West. Expansion without involving herself directly in war has been her policy. But so long as fighting continues in Asia, and the cold war is carried on in Europe, with the silent backing of Russia's great and growing military

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power, and so long as the world is kept in a state of fear and insecurity, there is always the danger of a situation arising, whether by accident or design, in which the capacity of the free West to defend itself would be put to the test.
The question I should like to ask is: Are we within sight of the minimum forces required to serve as an effective deterrent to a potential aggressor? Lord Ismay, the Secretary-General of N.A.T.O., stated recently that from 1949–50 to the current year, defence expenditure in European N.A.T.O. countries has increased by 120 per cent., and that there has been an increase in the number of men under arms in Western Europe from 2,450,000 to 3,300,000. I think it would be reasonable to assume that the bulk of this increase in Western armed forces is accounted for by Greece and Turkey, who joined N.A.T.O. last year. No figure was given of the total number of trained reserves who have flowed out of the same period. It must be a considerable number. In our own case the National Service reserve alone will be, roughly, 500,000 by the middle of next year. Lord Ismay also said that there had been a steady improvement in equipment, quality and training. At Lisbon the military target was set at 50 divisions by the end of 1952–25 front-line and 25 reserve divisions. Following their meeting in Paris last December, the Committee of Ministers stated that they
"noted with satisfaction the increase in forces agreed to at Lisbon had been substantially achieved by the end of 1952, and that it was planned to make further individual and collective efforts to increase, improve and strengthen the forces now in being."
I do not think there can be any doubt that the progress that has been made has been both substantial and encouraging, though, as the noble and gallant Earl told us this afternoon, there is still a long way to go.
Nevertheless, there appear some aspects which are disturbing. For on the same day as the N.A.T.O. Council issued that communiqué, N.A.T.O. officials were reported to have informed the Press that General Ridgway, the Supreme Allied Commander, was of the opinion that his 50 divisions were more like 35; that some of the divisions (and here I take it he was referring to reserve divisions) at present available to him were incapable
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of real resistance, would take more than thirty days to mobilise and would still be under-equipped, under-trained and under-supplied. In his view the Allied Forces available
"would prove gravely inadequate if put to the test."
In the middle of March, General Ridgway is reported to have warned an assembly of more than 100 of the highest ranking military, air and naval officers of the N.A.T.O. countries that
"during the foreseeable future we shall be critically short of much of our material"
needed to fight a war. An American commentator stated that:
"In ammunition, a minimum need in a war theatre is generally regarded as 90 days' supply, and if this is taken as a standard, then it is certain that fewer than one quarter of General Ridgway's divisions in Western Europe are ready to fight."
Then there is N.A.T.O. air defence, to which this country's direct contribution takes the form of the 2nd Tactical Air Force. We have never been told what that contribution is, in terms of squadrons and 'planes, though we do know that all the 'planes are jets. If any target was fixed at Lisbon for the size of the N.A.T.O. Air Force by the end of 1952, I have no recollection of any figure having been made public. The figure of 9,000 'planes by the end of 1955 has been mentioned in the Press. We now have a statement by Lord Ismay that
"through the combined efforts of European production and shipment from the United States, the Air Forces of Western Europe would be equipped with more than 4,000 'planes by the end of this year. This would be more than double the strength at the beginning of 1952, and most of the 'planes would be modern jets."
This is, of course, a substantial increase in two years, but no doubt part of the increase is due to the inclusion of Greek and Turkish air contributions, which have become available since the beginning of 1952. An American correspondent has said within the last few days that it is exclusive of about 1,200 aircraft of the R.A.F. stationed in the United Kingdom and the French metropolitan air commands, whose strength he did not give. But if this growing strength of N.A.T.O. air forces can be regarded as encouraging, there appears to have been strong disagreement on the part of the N.A.T.O. military chiefs with the decision taken by the Ministers last December, which it

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was urged would seriously prejudice Western air defence. This was the point upon which I intervened when the noble and gallant Earl the Minister of Defence was making his speech.
General Ridgway had proposed that £163 million should be provided for the 1953 military construction programme, which is another definition of "infrastructure," about which we have heard from the noble and gallant Earl this afternoon. It is reported that the Ministers slashed this amount by half. One adverse effect of this decision was stated to be that the planned improvements to pipe jet fuel to existing Allied air bases, and to store enough there to keep existing jet fighter squadrons operational for at least a month in an attack, would have to be postponed. Another effect was that large parts of the programme for providing an effective radar screen along the Iron Curtain would have to be suspended. General Ridgway was stated to have been strongly opposed to the cut, and apparently kept up his pressure—and it would seem successfully, for I understand that less than two months later, not only was the cut restored but an extra £5 million was allocated.
From the standpoint of effective defence the reversal of the December decision is to be welcomed, but one cannot help wondering what caused the original decision, and what were the new grounds for restoring the cuts within two months, and for announcing that decision without waiting for the Ministers' meeting in London later this month. Has there been a battle between the soldiers and the Ministers; and has General Ridgway, as one Press correspondent wrote, "won his battle"? What significance is to be attached to the various critical statements to which I have referred? Do they indicate that the N.A.T.O. Ministers and the military leaders do not see eye to eye on important aspects of the build-up of N.A.T.O. defences? Are there substantial points of difference between them? Is the process of building up the Western defence structure proceeding, in the view of the Supreme Allied Commander, less satisfactorily than the Ministers stated they regarded it in December? What purpose had Field Marshal Viscount Montgomery, the Deputy Supreme Commander, in mind when he announced to the world that N.A.T.O. required
"less paper work, less talk, more and quicker decisions, and more practical action"?
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If that is a true picture of the N.A.T.O. position, who is responsible for it? At whom were his criticisms directed? General Gruenther, the S.H.A.P.E. Chief of Staff, said in Washington that Lord Montgomery was speaking on "a political level." What does that mean? Do N.A.T.O. military chiefs speak publicly on "a political level"? Are we to understand that he was addressing the Council of Ministers from outside the council chamber? I think we, should be told by the Government whether they agree with the Field Marshal's criticism, because it seems to me that if the working of N.A.T.O. is as stated by him it calls for the attention of the Council of Ministers.
LORD WINSTER: Perhaps the noble Lord would allow me to interrupt. When General Gruenther made these comments on the speech by Field Marshal Montgomery he also said that, as usual, the Field Marshal did not understand his case.
LORD HENDERSON: I submit that it is not sufficient that Parliament and the people should be told, of course within limits, only about British defence efforts and about the state of British defence forces. We are vitally concerned as a partner in N.A.T.O. We have four of our best divisions in Western Germany, which form part of the N.A.T.O. front-line covering forces. We make a substantial contribution to N.A.T.O. air strength. A large part of the Royal Navy is included in the N.A.T.O. Naval defence forces. As I have stated, our own defence is intimately bound up with N.A.T.O. defence. It seems to me that both Parliament and the people should be kept much better informed than they are at present about the build-up and the condition of NA.T.O. defence. They should be told not only what we are doing as a member of N.A.T.O., but what our partners are doing. Collective defence means collective responsibility, and where we have responsibility, and where our national safety is involved, the public should be given as much information as possible, subject only to genuine security considerations, because public interest and public support are vital to the success of all collective efforts for the defence of peace and security.

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I have been astonished at the amount of information about N.A.T.O. defence which appears in the American newspapers, and it seems to me that N.A.T.O. and Whitehall differ considerably in their interpretation of what is meant by "the needs of security." I wish, therefore, to ask the Minister to consider a practical suggestion. It is that he should propose at the coming meeting of the N.A.T.O. Council of Ministers that a report be prepared giving an up-to-date progress report of the present state of the build-up of N.A.T.O. defences, including a breakdown of the collective armed forces into national contributions. This report should then be published in this country as a White Paper, so that Parliament may have an opportunity, if it so wishes, to discuss N.A.T.O. defence.
Let me give a supporting illustration. I read in the Manchester Guardian of March 17 an interesting and informative article on Italy's new army. It referred to Italy's two completed armoured divisions, to a third which is nearing completion, and to twelve infantry divisions expected to be ready by the end of the year, bringing the new Italian army up to fifteen fully equipped divisions. The noble and gallant Earl the Minister of Defence told us in his speech that these fully equipped armoured divisions had been so equipped as a result of the assistance of the United States. I have no doubt that similar information has been published about the defence efforts and achievements of other N.A.T.O. countries. What I am suggesting is an authoritative report giving a digest of the N.A.T.O. defence progress and of national contributions, so that we can have reliable information about what is being done, instead of having to rely so much on newspaper items of information that may be official, semi-official or from "well informed sources" or even in the form of "calculated indiscretions."
There is one other matter to which I wish to refer, and that is the present position of the proposed European Army and the European Defence Community. The European Army is intended to be an integral part of Western defence under N.A.T.O. It is designed to fill a gap by providing for a German armed contribution. That contribution has been fixed at twelve divisions and 1,300 military'planes—a powerful addition to the pre-
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sent defence forces at the disposal of N.A.T.O. It is about a year since the E.D.C. Treaty was signed. So far not a single one of the six Governments concerned has ratified the Treaty, though in Western Germany it has passed Third Reading in the Bundestag. It is in France that the main difficulties and doubts have shown themselves. I am not now concerned with E.D.C. as an essential element in building up Western Union, but it is as an element in N.A.T.O. and in effective Western defence that it is appropriate to this debate. If Germany is to contribute to a system of collective security and is to do so without having a national army with its own General Staff, in what other way can we secure it if not through E.D.C.? And if E.D.C. collapses in ruins, what is there to take its place?
I need scarcely remind your Lordships that this country, together with the United States and France, is at this moment committed to regard an attack on Berlin or on Federal Germany as an attack upon themselves. That commitment will remain unless and until it is replaced by the proposed reciprocal obligations between N.A.T.O. and E.D.C. It may be regarded as an outside risk at the present, but if in the meantime events should call upon us to defend Berlin and Federal Germany, we should have to do so without any armed assistance from the defended territories and peoples.
We know that Her Majesty's Government have made proposals to the six E.D.C. Powers regarding British military association and political liaison. The French Foreign Minister has told the French Assembly that the French Government realised that Great Britain could not for the present accept the idea of a supra-national authority. "But," he continued, "it"—that is, the French Government—"had proposed political participation in E.D.C., together with certain undertakings about the maintenance of troops in Europe." What was Her Majesty's Government's reply? M. Bidault has said that the British proposals were technical and touched only one aspect of the question. The German Chancellor, on the other hand, has stated that
"the obligation to E.D.C. has been reinforced, and in particular, Britain has agreed to support an extension of N.A.T.O. to fifty years, to bring it into line with E.D.C."

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In these statements made in the Parliaments of other countries we find some indication of what is being asked of this country and what Her Majesty's Government have offered to do. Cannot we be told what the Government have proposed in their desire to assist the bringing of E.D.C. into existence? We all realise that without the six ratifications there can be no E.D.C. Without E.D.C. there can be no European Army. Without a European Army there can be no German armed contribution to Western defence under N.A.T.O. except on a basis which France will not accept and the Federal German Chancellor does not want. It is recognised in all the N.A.T.O. countries that Western defence cannot possess the minimum adequate forces to withstand the initial drive of a potential aggressor unless there is a German armed contribution. That is certainly the view of the Supreme Allied Commander and his staff.
I, personally, still hope that E.D.C. will be ratified, for failure would have a serious effect on the strength of the Western defence forces. It would have a disturbing political and psychological effect in all the N.A.T.O. countries. It would inflict great damage to the Continental efforts to build up an integrated Western Europe and it would, I believe, do grave harm to the prospects of Franco-German reconciliation and co-operation, to the attainment of which both Dr. Adenauer and M. Schuman have devoted themselves with sincerity and faith. Have the Government offered to reinforce their obligations to E.D.C.? Have they agreed to support an extension of N.A.T.O. to fifty years? Have they offered to place any British forces, even a token force, within the European Army? I ask the Government to tell the House what they have said they are prepared as a non-member to do to bring E.D.C. into existence and so make it possible for Western defence to be strengthened by a German armed contribution through a European Army.
5.36 p.m.
VISCOUNT MERSEY: My Lords, it is not the practice in your Lordships' House to oppose for the sake of opposition, and certainly I am neither able nor anxious to do so. But two particular thoughts have arisen in my mind during this debate. The first is, how
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extraordinarily fortunate we are to have the Ministry of Defence in the hands of the noble and gallant Field Marshal. He is one of the best-known strategists in the world; he has governed one of the principal sources from which we draw men and material, and he has an intimate and local knowledge of Russia.
On the other hand, he has the usual difficulties of men money and materials. I was turning over some old letters of the end of the seventeenth century last night, and I found that these are old difficulties which recur. I was looking at some letters of King William III, the Duke of Marlborough, Lord Godolphin and George I. There was a letter of the Duke of Marlborough in very careful words to the Captain of a ship, not ordering but asking him to move his ship. There was a letter from George I, then Elector of Hanover, saying to the Duke of Marlborough, "I am very sorry but I must have back those four regiments I lent you six months ago." That, I imagine, happens often. There was also a letter from William III to some indeterminate German princeling, one of his very difficult allies, which was full of compliments and saying what a great man he was.
Probably the noble and gallant Earl is able to deal with questions of that sort. He has to get money; he has to get men and materials. Those happy days have gone when we used to say, easily,
"We've got the ships, we've got the men,
We've got the money, too."
I am sure that this House will give every good wish to the noble and gallant Earl the Minister of Defence in his difficult task. I expect that there are few people who are able to deal with it as well as he can, though he is a modest man. The ordinary basic recommendations with which everybody is ready are hardly worth while putting forward on this occasion, for he knows them much better than we do. Nevertheless, perhaps I may be allowed to say that the presentation of prospects in the Army in such a way as to make it clear that the Army is an attractive Service would be an important factor in getting recruits for the Territorials to take service with the Regular Army. I wish that I were able to contribute something a little more useful titan these few words.
5.42 p.m.
LORD TEDDER: My Lords, I do not wish at this late stage in the evening to be reminiscent; but perhaps I may be allowed to say that about ten years ago I got into serious trouble with high authorities by asserting in public that there was such a thing as air warfare as distinct from naval warfare and land warfare. I am more than ever convinced that it is true. When I said "distinct from" I meant "distinct from"—not separate from. In the past, many centuries of tradition led most people, except a few geniuses like Pitt, to regard land and sea warfare as something entirely separate from each other; but in modern conditions, when war is total, when it involves every aspect of a nation's life, such separation can have literally devastating results. Such results undoubtedly contributed in no small degree to Germany's defeat in two wars; and it was a factor at the root of some of the disasters we suffered during the first years of the last war.
Unfortunately, it is still alive and active in some, at least, of the N.A.T.O. nations. Dissent and bickering between land, sea and air Services, and refusal on the part of the senior Services properly to recognise air forces as anything except convenient adjuncts to their own operations on land or sea—these and other survivals of traditional separation still cramp the smooth and, above all, economic development of N.A.T.O. defences. For if there is one thing that is quite certain, as the noble and gallant Viscount, Lord Trenchard, has said, it is that separation between the Services cannot but lead to a great increase in cost without a corresponding increase in effectiveness. The noble and gallant Viscount referred to the fact that this country has two air forces. There is one N.A.T.O. nation which now has virtually four: a naval, a marine, an air and an army air force. I do not see how any nation, however rich, can go on indefinitely on those lines. I am afraid it is necessary still to hammer away the lesson which most of us British learned the hard way: that air warfare is something quite distinct from land warfare and sea warfare, and that it has an essential unity of its own. But then, having got that fully accepted, there is a corollary: that operations on land or sea or in the air are not separate but are parts of one closely-knit unity.
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After four years on the Chiefs of Staffs Committee, including three years as Chairman, I was only too well aware that we still had some way to go before we could honestly say we considered every problem purely objectively and without any separate Service bias. We tried hard, and I think we made a little progress towards a real unity of view, and I am sure that further progress towards unity has been achieved during the past three years. I am told, and I believe it, that the relationships between the three Services, from the Chiefs of Staffs downwards, are excellent—a much happier situation than has sometimes obtained and than obtains now elsewhere. But I hope that that happy state of affairs has not been arrived at by some sort of gentleman's agreement not to press awkward issues. When I hear it said that we need a large aircraft carrier force to deal with the submarine threat, and even. I have been told, to operate in the North Sea, I find it difficult to believe that even now we are thinking in modern terms, either as regards the practicability of operating carriers in places like that or, still more, the practicability of paying for them.
It has been rather depressing recently to see complaints made by protagonists of one Service or another that their own particular protégé has not got its proper share of the available fund. Honestly, I was slightly shocked to hear the noble and gallant Earl, the Minister of Defence, use the word "share"—the impression being that the Defence Vote as a whole is, as it were, a piece of cake to be divided up amongst the three Services with a minimum of squabbling. One had hoped that we had got beyond that stage. Surely we can agree that the rational way to deal with defence is, first, to examine the various threats that face us, their nature, their relative likelihood, and the extent to which they endanger the security of this country, and then, having analysed them, to consider the various possible means and methods of defence and finally to select the method and means calculated to be fully effective and at the same time most economical. It is only at that stage that the question arises as to which Service (or Services) undertakes the responsibility for a particular aspect of defence and which Vote is to carry the burden.

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I know only too well how difficult it is to be completely objective in this way. As a nation it is often said that we are essentially liberal, with a small "l," in limiters of the mind, but in practical affairs, in methods, we are, I think, essentially conservative, with a small "c." It is a characteristic which has its points, but in the rapidly changing conditions of this modern world it has its dangers. We are apt to promote habit into custom, and custom into tradition—and then to tradition we bow the head. Unfortunately, a bowed head is not conducive to clear thought. True tradition always has been and always will be a vital factor in morale, but I myself do not feel that habits in methods of defence are tradition in the true sense, or can be; they are just plain habits. We should not bow to them but should keep a very wary and critical eye on them, for the chances are that they are out of date, and in that case they are bad habits.
It is difficult to judge from the White Paper how far past habits are still being allowed to masquerade as traditions and consequently to determine policy, or how far they have been relegated to their proper resting places in the war museums. Can we really be assured that our defence forces are being organised to meet the conditions and tempo—the tempo particularly—not of the wars of the, past but of a possible future war? If we can bring that about, it will be for the first time in our history. The White Paper discusses the burden on our national economy—a very welcome reminder, since loose purse-strings lead to loose thinking and certainly not to economy of force; but unfortunately I can find no indication that that burden has been relieved by that vigorous, difficult but healthy process of selection which alone ensures real economy. It is true that the importance of getting the fullest possible value for our money is stressed, but apparently that refers strictly to limiting the purchase of equipment likely to become quickly obsolescent. The only other economy that one can trace is obtained by slowing up the rate of production. That has already been commented on, so I will not comment further upon it.
One is concerned about this because one cannot but remember what happened before September, 1939. No effective selection was made. We tried to be strong everywhere and only succeeded in
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being weak everywhere, at sea, on land, and in the air, with the result that we spent the first three years of the war fighting in the last ditch, fighting not to win the war—that came later—but to prevent losing the war, Then after September, 1939, we went over to the "blank cheque" basis. True, there were fights between the Services for sudden and very ephemeral priorities, but true selection there was none. We won the war with the overwhelming material superiority which the blank cheque gave. Whether or not that was, from a military point of view, the best and most effective way of winning the war, I think is arguable. Whether we, as a great Power, can recover from that victory, is, I am afraid, despite yesterday's Budget, still in the balance, and I am sure in my own mind that we could not survive another victory of that sort.
The clumsy methods of the late régime in Moscow made it possible for Governments in the free world to allocate funds for defence on a scale which certainly has not forced a very searching selection or economy. But recent events suggest there may be a change. It may be that the new régime has come to the conclusion that the cold war is a frost. In this case, later, I hope, rather than sooner, all Governments will be under heavy pressure to reduce defence expenditure. It is when that happens that we shall be in the greatest danger. There would be little chance in that atmosphere of carrying out a thorough re-assessment of the defence problems followed by a re-allocation of defence effort rigidly to ensure maximum power with the minimum of expenditure. No; the inevitable demand in such conditions would be an all-round percentage cut, with the inevitable and, I am sure, fatal result of all-round weakness. I am sure that hidden away somewhere between the lines of this White Paper there must be some evidence that defence is being considered as a single composite problem: that it is not a question of shares; and that some endeavour has been made to achieve true economy of force and its corollary, the concentration of power where it is most needed. Nevertheless, do feel that we have not gone far enough up that road, and I suspect that separate Service considerations still carry too much weight.

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It is good to see the Admiralty are now concentrating their efforts against mining and anti-submarine operations; but the aircraft carrier programme to which I have already referred does rather shake one's confidence, and the separate Naval Air Force sounds to me much more like a return to the last war but one, rather than a preparation for a possible future war. I fear that this part of the programme is, at best, due to a misguided attempt to imitate the methods of the American Navy in the Pacific in the last war. Personally, I can think of nothing more inappropriate to meet the problems which may face us in the future, or more utterly inconsistent with any idea of economy of force.
The noble and gallant Viscount, Lord Trenchard, referred to the tactical air force. There have been some who have seen in our use of that title symptoms of a similar separation of "army air" from the main Air Force. I suppose I must plead guilty to having been largely responsible for introducing the two terms "tactical" and "strategic" in that connection. I did so to try to make clear to my colleagues on land and at sea the distinction between the two main rôles of the Air Force, and to emphasise that the part of the force allocated to direct co-operation with the ground forces (its composition would change from week to week) was in fact an integral part of the main air forces. So far as the British Army is concerned, I do not think there has been any separatist move since the one-time Commander of 8th Army, speaking from some considerable experience of successful land-air operations, said:
"The first and great principle of war is that you must first win your air battle."
He then added another principle:
"The Air Force side of the fighting machine must be centralised and kept under Air Force Command."
My Lords, I am happy about the British Army, but I am frankly uneasy about the position in the N.A.T.O. forces. There are very few senior Army officers of the other N.A.T.O. nations, except the Americans, who have any real experience of full-scale, land-air operations and the full range of them; and still fewer understand the meaning of the air battle. Moreover, unfortunately, the American attitude
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regarding air policy is still bedevilled in some quarters by inter-Service rivalries and friction. Yet, I saw in the Press quite recently that it had been decided to place the air forces in Europe under command of the Land Force Commander. In my view, that decision goes dead against all our experience and is most dangerously retrograde. One has also noticed that in nearly all of the almost interminable arguments about N.A.T.O. strengths, there appears to be only one criterion—namely, divisions, divisions, divisions. I admit I did once see a reference, in parenthesis, to "and appropriate tactical air forces"—whatever that may mean. Are there really still people who do not realise that "you must first win your air battle"? Have people still no conception of what the development of the atomic bomb means to all our old ideas of warfare? With the atomic bomb in its latest development in the modern armoury, we simply cannot afford to risk another 1940.
My Lords, I should like to offer one other comment about N.A.T.O. It is easy enough to criticise, as we have recently seen. Attacks on excessive "paper" are probably justified, and in any case are good for the system. I myself can remember occasions, when I was in the Organisation in Washington, when I felt almost overwhelmed by feelings of frustration. But to get agreement and a clear-cut decision from twelve highly individualistic nations takes a bit of doing. It is not one of those simple things that we sometimes hear of. There are now fourteen nations, and that is a big team to handle on any democratic basis. It was for that reason that the Standing Group was set up, to provide leadership for the whole Allied team and also to serve as an executive body for the Chiefs of Staff of all nations. It is on the prestige, authority and leadership of the Standing Group that the effective working of N.A.T.O. to a very considerable extent depends. In peace time it is very important; in war it would be vital. Yet I noticed that the announcement of the change in the European Command set-up, which I mentioned just now, was made from Paris, with a footnote to the effect that it was being submitted to the Standing Group who would certainly agree. My Lords, I wonder what would have happened if at Allied Headquarters at Algiers or Versailles we had treated the Combined Chiefs of Staff like that?

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I realise that there may have been special circumstances about this, but I still say that it was a bad and dangerous precedent.
Frankly, my Lords, I believe that we ourselves have made a mistake in the past and are now making a double mistake about the Standing Group. I believe that our representative on the Standing Group should be an ex-Chief of Staff. I say this not merely to ensure that we British have the most authoritative representation possible on the Standing Group, but also to build up and maintain its prestige and authority, so that it can provide the effective leadership without which N.A.T.O. will certainly be in danger of suffocation by paper. My successor on the Standing Group two years ago was not an ex-Chief of Staff. Fortunately, he had considerable experience of working with the Chiefs of Staff Committee, and served on it as the Chief Staff Officer to the Minister. There was also the advantage that he was an airman, and so kept the balance right on the three-man Committee at Standing Group. I have a very great admiration for his judgment and ability and, from all I hear, he has been a great success in Washington. His prospective successor (if he is the man I understand is likely to be selected) is another man of very wide experience—an old colleague of mine, in foul days and fair, for whom I have in every way the highest possible regard. But he has not been one of the Chiefs of Staff, and, since he is a soldier, there will now be no airman on the Standing Group.
People pay much lip service to air power as the dominant factor in defence, but what does all that talk really amount to? As the noble Viscount, Lord Trenchard, asked, where are the air officers in high command? Are they in a position where they can ensure that this new predominant factor is accorded its proper place in the larger unity of defence? And on the material plane, what real evidence is there that we not merely believe in air power but are acting on our beliefs? What are we giving up in order to have adequate air strength? I would repeat that, my Lords. What are we giving up—what have we given up—to ensure that we have adequate air strength? I know that the Air Force has given up much of its transport, has drastically
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limited items like helicopters, and is apparently going to give up flying boats altogether, in order to maintain the essential minimum of fighters and bombers. Is that right? Is it not a symptom that defence is still being considered in separate compartments and not as a unity?
There are probably few people in the world now who do not want peace more than anything else, but it is to be hoped that if there is going to be a sudden thaw in the cold war, which seems quite possible, people will not allow themselves to be swept away in an avalanche of woolly good intentions, and led to think that in future peace can be maintained by good intentions alone. For nearly 100 years before the so-called First Great War, wars were prevented from spreading, and world peace was kept, by a very effective deterrent—the British Fleet in being. Those days are over but there is no doubt that during recent critical years the peace has been kept by a new deterrent, the American strategic bomber force and its atomic weapons. We, fortunately, have never accepted the suggestion that since the United States is rich and we are relatively poor, and since atomic bombs and atomic bombers are very expensive, we should leave that part of defence to the Americans. It is true that ever since the end of the war the Royal Air Force has followed a policy of postponing re-equipment until major advances were possible, and so have avoided heavy expenditure which early obsolescence and early replacement involves—expenditure, incidentally, which the United States has been able and willing to accept, fortunately for the peace of the world.
Meantime, British aircraft and engine designers have a way of going to the top, and the position now is that the new bombers with which the Air Force could be equipped are, in design and performance, well ahead of anything. They are brilliant examples of a completely new generation of aircraft and are most unlikely to suffer from early obsolescence. Here, at least, is an opportunity for which we have planned and waited, the psychological moment, the right moment, for modernising the Royal Air Force and making it once again a power in the world, a power for peace, the modern Fleet in being. Yet all the official statements I have seen or heard regarding

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re-equipment with these new bombers, have been vague, almost hesitant. And, to be frank, I was not greatly inspired by the apologetic air with which the Under-Secretary of State announced the production of the new types—
"We shall not have a very large strategic air force but…."
One does not get inspiration or leadership from "buts." I wonder, is it realised that owing to our technical advances, and owing to developments in fighter and other forms of air defence on the other side, it is quite possible that for a period it may be the British strategic bombers which can best deliver the atomic weapon? And it is even conceivable that in some circumstances they might prove to be the only effective means, of delivery. In that case the onus of maintaining the deterrent on which the whole of world peace depends would be on the shoulders of Great Britain. Are we going to shirk that responsibility?
It may be we are entering a new phase of world affairs; a period, we hope, of relaxed tension, perhaps even of peace. If so, I believe it to be a period in which there will be immense scope for British leadership. There will be some new problems to solve, a great many of them, and those of defence, in particular, will not he easy; but it is in that field especially that I believe that British leadership would be invaluable; and, due in no small part to the high prestige that Britain has in all air matters, I believe that our leadership would be especially acceptable. We shall have no opportunity of exercising that leadership so long as we continue to keep our airmen out of positions of high authority; nor will our leadership be accepted so long as we are hesitant or apologetic about maintaining a force adequate to ensure peace. After all, more than ever before, and more than in the case of any other nation, Britain's interests lie in peace. But it must be "peace with teeth," to use General Smuts' famous phrase. I believe that, given the teeth, plenty and sharp, Britain can play a vital part in N.A.T.O. defence and in maintaining the peace of the world long enough for real peace to develop.
I ask your Lordships to believe me when I say that I have not spoken as I have, of airmen, bombers and bombs, because I was once an airman. I have
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spoken as I have because I believe that the development of the atomic bomb has altered the whole tempo and scale, and completely overturned the old balances, of war, especially as regards this country. I fear most deeply that once again we are playing the old, old game of thinking of the future in the terms of the past—making, of course, a few concessions to scientific progress, a few atomic guns, perhaps; a bigger and better tank; jet propulsion for bigger and better carriers. We cannot afford to play with our security like that. The last thing I should wish to be is alarmist, but the blunt fact is that in a future war the stakes for which Britain would be playing would not be merely those of victory or defeat, but, literally, those of life or death.
6.19 p.m.
LORD TEYNHAM: My Lords, I am sure we have all listened with interest to the speech of the noble and gallant Lord, Lord Tedder, but I fear I cannot support him in many of his arguments. I suggest that the essential common factor in our defence policy should be the protection of our ocean trade routes. The noble and gallant Viscount, Lord Trenchard, pointed out very forcibly that we can fly. But we certainly cannot fly without oil. The noble and gallant Lord, Lord Tedder, said, "You must first win your air battle." But, my Lords, unless we can be certain of giving reasonable protection to our convoys, all our European defence system will quickly break down for want of supplies of oil and stores, and I am not convinced that this protection is yet available, either in ships or aircraft. It was only very recently that we had a debate in your Lordships' House on the supply of aircraft, and special reference was made by a number of speakers to naval aircraft, especially naval fighters. In fact, Her Majesty's Government agreed that the present state of naval aviation was unsatisfactory, and this, I think, was borne out by the recent exercise known as "Mainbrace," when it was found that, in spite of very efficient air crews, the performance of naval aviation was not up to modern standards.
I think it is true to say that the aircraft carrier has taken the place of the battleship. And I think it was a naval correspondent in the Press who recently

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pointed out that the inferiority in naval aircraft was equivalent to an inferiority in the main armament of the battle fleet in pre-war days. What a stir such a statement would have caused in this country in those days! That was something the people could understand, but I could say that naval aviation is still something that is not fully understood or its importance realised. I was sorry to hear that the noble and gallant Viscount, Lord Trenchard, has been harping back to getting naval aviation back under the umbrella of the Air Ministry. I feel very strongly on this matter, and I cannot help saying that this is the sort of argument which does disservice to both the Royal Navy and the Royal Air Force. Lord Tedder has told us that the relationship between the three Services is on a very good basis, and the sort of argument which we have heard used by the noble and gallant Viscount, Lord Trenchard, in my view, does a disservice to the three Services.
With regard to the supply of naval aircraft, I certainly do not want to go over the arguments used in the previous debate as to types of aircraft and priorities, but I suggest that to speed up supply the aviation industry should concentrate on the production of the two most vital types—the anti-submarine aircraft and the intercepter fighter. I hope that the noble and gallant Lord who is to reply for Her Majesty's Government will be able to give the House an assurance that the whole question of naval aviation is under constant review, and that every effort will be made to bring it up to an efficient standard as soon as possible. With all due respect to the great experience of the noble and gallant Viscount, Lord Trenchard, I am afraid that I cannot agree with some of his further arguments in relation to the use of aircraft carriers. In war, the defence of our convoys must be of paramount importance, and it cannot really be disputed that once a convoy is roughly more than fifty miles from shore it is beyond effective cover from land-based fighters, and roust rely on carrier-borne aircraft operating from a carrier within the convoy or attached to a supporting task force. I see that the former First Sea Lord is in his place, and I am sure he will agree with that argument.
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Again, a convoy may be attacked by submarines in areas which are beyond the range of land-based air patrols, and it may take a long time to establish a more effective land base, whereas the carrier can be made available at short notice in any area. There is no doubt that the enemy would employ long-range jet-propelled reconnaissance aircraft to shadow convoys and "home" submarines on to their target, and I have little doubt that carrier-borne aircraft is the only effective answer to this form of attack. I can assure your Lordships, from practical experience as a convoy escort commander in the late war, that this operation of the enemy was one of the most dangerous elements in convoy protection, and it would certainly exist in another war. I maintain that there is, as yet, no development in land-based aircraft that can be a substitute for this form of protection.
I think your Lordships will agree how very effective has been the co-operation of our carriers with the naval and military forces in Korea, and it is obvious that a carrier is necessary to give support to amphibious operations which may, of course, be beyond the range of shore-based tactical air forces. It may be open to argument whether a carrier-borne task force operating in a closed sea such as the Mediterranean, would at the present time be successfully used as a striking force far beyond the coastal area and, at the same time, be able to protect itself, and also whether the land-based bomber would not be more suitable for the job. There is, of course, argument on that point. On the other hand, there is no shadow of doubt that for the protection of our convoys, carrier-borne aircraft are essential for swift and effective counter-attack in the outer seas. I hope that this controversy as to the necessity or otherwise of aircraft carriers will cease. I suggest it is a bad thing for the Services to be constantly pricking at one another. The last war was fought to a successful conclusion by the combined operations of all three Services, and it is a combination of strategic bombing, land-based aircraft, both fighters and patrol, together with carrier-borne aircraft, which will provide effective protection for our convoys.
And now, for a few moments, I should like to refer to one or two specific points

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raised in the Statement on Defence, 1953. On page 14, paragraph 55, it is stated that:
"the emphasis of the modernisation and conversion programme is on the conversion of destroyers to anti-submarine units."
I should like to ask Her Majesty's Government whether there is to be any slowing down of such conversions during the coming period as compared with last year, and whether they can give some idea of the numbers which are to be taken in hand. I should also like to refer to the rather serious statement which appears in paragraph 56 of the White Paper, where it says that in order to carry out the programme of construction, modernisation and conversion:
"the provision made for ammunition, oil fuel and stores must he on a reduced scale."
I hope that the noble and gallant Lord who is to reply for Her Majesty's Government can give an assurance that sufficient stocks of ammunition for naval vessels, oil fuel and stores are available for a considerable period of active service. I am sure we are all glad to notice that the present White Paper is a good deal more informative than has been the case in previous years, and my only criticism is that little or nothing is mentioned about the programme for guided missiles, which, I suggest, is daily growing in importance. I should like to see something more about guided missiles, plans for their production and so on. It may be that these are matters which are too secret to disclose, and, if that is so, I would not press for information. But I do feel that some further information could be vouchsafed without giving too much away.
6.27 p.m.
LORD WINSTER: My Lords, the noble and gallant Lord, Lord Freyberg, has left the Chamber, otherwise I should have asked him to let me add my congratulations to those which he has already received. Like all your Lordships, I found his speech of most absorbing interest. This question of defence at the present moment presents us with a far from reassuring picture. It is, I suppose, the most vital and difficult issue which a Government has to handle. In my opinion it certainly cannot be handled on the understanding that we can have only as much defence as can be managed without disturbing the social services. We
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have to put our target rather higher than that. But what makes the matter particularly difficult is that the industries required for rearmament are the very industries which we specially require in connection with the export drive. To strike a balance between the two requirements on those industries must be a matter of peculiar difficulty.
There is another side to this matter which was touched upon by the noble and gallant Lord, Lord Tedder—that is, the cost of modern armaments. That is no new thing with the noble and gallant Lord, for some years ago he sent me a print of a lecture which he had delivered in which he had called attention most forcibly and, in my opinion, most wisely to this question of the cost of modern weapons and equipment. Service Ministers when they make their speeches on the Estimates, and on other occasions, like to dwell upon technical developments and the marvels of new weapons and equipment. But the expense of these things is such as to confront us with bankruptcy. We, in this country, at the present moment are carrying far and away the heaviest burden of any N.A.T.O. member except the United States, and to-day only three nations seem able to face up to the cost of modern war. It is a cost which has done much to force up our taxation—so happily, if slightly, relieved yesterday by the Chancellor of the Exchequer; it is a cost which takes fourpence out of every shilling of the very heavy taxation we still have to bear.
A word about the White Paper. I thought the salient feature of the White Paper was its conversion to "Bevanism." Evidently a great deal of what Mr. Bevan said at the time when the late Government introduced their rearmament programme, on the subject of expense and relating the expense of rearmament to our economy, has now become accepted doctrine. There was one point which I was particularly glad to notice in the debate on the White Paper in the other place, and that was that the Prime Minister said nothing to the effect that the danger of war has receded. I never knew on what evidence that assertion was made. I have no doubt that we have a wonderful Secret Service, but I am perfectly sure that the Secret Service do not penetrate inside the Kremlin. At any rate, that statement, often repeated by the Prime

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Minister and the Foreign Secretary, is certainly not shared by Lord Ismay, by General Ridgway and by Marshal of France Juin. And on such matters I prefer to take the opinion of professional soldiers rather than that of an amateur strategist, however versatile and gifted. As General Ridgway has said:
"The threat to our way of life has not diminished one iota in the past two years."
And Lord Ismay has said that he agrees with General Ridgway 100 per cent.
General Ridgway went on to say that the military capability of "the potential aggressors" not only has not decreased but is continuing to increase. The Allied Forces would be "gravely inadequate" if tested now, and
"we would enter battle under grave handicaps. We would sustain heavy losses of life and arms."
In face of statements such as that, what is the good of talking about the danger of war having receded? My noble friend Lord Alexander of Hillsborough spoke this afternoon of the risk of peace "breaking out." I think he may be reassured and not sleep uneasily to-night on that account. The expression by the Prime Minister of this view about the "danger of war receding" has done a great deal of harm by encouraging those nations in N.A.T.O. who are dragging their feet to use it as an alibi.
One other thing which attracted my attention was that it was not until literally the last three minutes of the debate in another place that, in response to a protest by Captain Ryder, the Government spokesman very kindly gave the Royal Navy twelve perfunctory lines in Hansard. The debate centred around National Service and Egypt. I will say only this about National Service. I found it strange that a former Minister of Defence who had advocated two years' service and urged it upon the French, should advise his successor to reduce the period, without producing any evidence to show why the period should be reduced. In my view, the agitation for a reduction in the period of National Service is a foolish agitation. If we had anything of the sort, the N.A.T.O. member States would be the first to reproach us for letting the side down. On the question of Egypt, which featured largely in that debate, the former Secretary of State for Air, Mr.
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Strachey, linked Egypt with the Middle East, where he considers our real interests are the interests "of the great oil companies"—those were his words. I put it a little higher. I think we are on the Canal and in the Middle East in the interests of world peace and of world commerce. While this is not the moment to enter into any lengthy talk about the Canal and Egypt, in face of what is in train at the present moment, I feel it fair to say that.
Mr. Strachey advanced another idea, which I think is of great interest in defence pure and simple, and is not introducing foreign affairs into the matter. Mr. Strachey feels that we have overextended ourselves from a military point of view and would like to withdraw all our forces abroad into this country to form a strategic reserve here, relying on our being able to get them by air to where they may be wanted as and when required. It is an attractive idea: one might almost say that it is a characteristically slick idea; but it seems to me completely to overlook two questions. The first is that at the present moment we have no fleet of air transports to carry out such a hurried movement of forces to where they may be wanted. Secondly, it appears to me completely to neglect all questions of logistics and infrastructure. Mr. Strachey thinks that we may perish through over-extending ourselves. I think we have twenty garrisons abroad. I do not know whether his idea extends to withdrawing all these garrisons but, in my view, to withdraw in this way all signs of our power to defend ourselves might well mean our decline and fall. Mr. Strachey said, in support of his view, that we should cease trying to behave as if we were still the leading world Empire. One hears many remarks of a similar nature, and the thing that raises a question in my mind is that those who make these remarks often give me the impression of licking their lips as they make them; and in that I find a grave fault. But I think that to concentrate all our military resources and all our war production potential in this island, and ideal target for the atom bomb and guided missiles, may be even more dangerous than our present policy of dispersal. There are risks, of course, either way; but the fact we have to face up to is that all through our history

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Britain has had to live dangerously, and I suppose Britain will have to continue to live dangerously until the era of peace dawns at last.
May I say one or two words about the Ministry of Defence? I was an early advocate of such a Ministry; I was advocating it in 1945. But one lives and learns; at any rate, some of us do, and we all ought to try to do so. I remember that at that time, though an advocate of such a Ministry, I pointed out that it would involve reducing the status of the political heads of the three Departments to that of Under-Secretaries; and that, in effect, is what has happened. These Ministers are no longer in the Cabinet. I know it is said that whenever their presence is required they are summoned to the Cabinet, and that they have the advantage of being, in the Cabinet whenever anything affecting their Departments is under discussion. But that is not the same thing as being a full Cabinet Minister: it involves a certain loss of status. I should like to put this question to the present Prime Minister, who has twice been First Lord of the Admiralty. Would he ever have accepted that position, if he understood that when he was wanted he would be sent for by the Cabinet and had no prescriptive right to be there?
I come to the Minister of Defence. In what I have to say now I know that the noble and gallant Earl will fully recognise that I discuss this matter in a vacuum. No personal references of any sort are involved, and I fully share the admiration for the noble Earl which has been expressed by more than one speaker to-day. But as things are, the Minister of Defence is really an overlord: he is an illustration of a Churchillian experiment which, admittedly, has failed. I do not think that the noble Lord, Lord Woolton, will be found doing any more overlording. I notice that the noble Lord, Lord Leathers, regretfully had to retire, suddenly ill, when that very tricky and complicated Transport Bill had to be put through the House. I cannot imagine the present Transport Minister submitting to being overlorded. He is of rather tougher material than Mr. Maclay, who gave up the task. It really begins to look as if the Minister of
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Defence is the last of these Mohicans, the overlords.
Two questions arise. Is a Ministry of Defence a good thing? Ought a Minister of Defence to be a Service officer? My reply to the second question is, emphatically, "No." An officer of equal military distinction to that of the noble and gallant Earl told me that he did not care much about the idea because, in his opinion, it merely meant adding one more Chief of Staff to the Chiefs of Staffs Committee. In my opinion, which I believe is shared in many quarters, only a political head should hold that post, because only a political head will be credited with complete impartiality as between the three Services. One knows that there could not be a more impartial man than the noble and gallant Earl who is now Minister of Defence, but it is not enough to be impartial: as Minister of Defence you must be believed to be impartial. The Navy does not consist only of officers; there is the lower deck, too. The lower deck will take a great deal of convincing that when the Army gets £518,000,000 in the Estimates, and the Navy gets only £314,000,000, there is not a bias against the Navy somewhere or other. I think it is peculiarly a post where a political head is required. Service heads from time to time have to be knocked together, and I think only a Minister with long political experience is able to perform that operation effectively.
There is one thing of which I am certain—namely, that if the post is to be retained, if we are to have a Minister of Defence in war time, then that Minister of Defence ought not to constitute himself a grand director of strategy. We saw the disastrous results of that in the last war. We saw them in Greece, about which the noble and gallant Lord, Lord Freyberg spoke; we saw them at Dakar, and at Singapore. In reading Mr. Churchill's Memoirs I have never been impressed by the stream of minutes, directives and memoranda addressed to those carrying heavy burdens. I had to review one of those volumes, and I expressed the wish in that review that we should have the replies and comments to all this prodding from some of those who received the prods. My wish was gratified, because the noble Viscount, Admiral of the Fleet Lord

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Cunningham, has published his memoirs. In those I find this passage:
"It was in the sort of prodding message received by me that Mr. Churchill was so often ungracious and hasty. Such messages to those doing their utmost were not an encouragement, merely an annoyance."
Again, he says;
"This constant advice, not to say interference, on how to run our business from those who seemed unaware of the facts of the situation did not help."
But the quotation which gave me particular pleasure, if I may venture to give it to your Lordships, was this. Finally came a prod, says Lord Cunningham, to which
"I did not reply. We were far too busy with our commitments."
I think that another objection to a Prime Minister being Minister of Defence and director of strategy in war time is that he feels he must be infallible, and that a scapegoat must be found for everything that goes wrong. I remember, in connection with Dakar, a scapegoat being found in the person of an Admiral, against whom there was not a shred of evidence to blame him for what happened but who had to suffer the humiliation of being ordered to haul down his flag in war time. Why? Because a scapegoat had to be found.
To come back to N.A.T.O. for a moment, I wish that we could have a debate on N.A.T.O., and also upon the atom bomb, because they are two subjects of immense importance. In a debate on the Defence White Paper these most important subjects cannot be treated with the fullness which they deserve. But looking at N.A.T.O. in the broad, I feel that it affords us very little security for immense expense. General Ridgway has given us a warning that we shall be short of much material essential for fighting a war. This last exercise, "Command Post II," revealed serious shortages in the fifty divisions available to N.A.T.O.: fewer than a quarter of the divisions ready to fight; shortages of ammunition, of artillery, of communications equipment, of trained officers and non-commissioned officers and of logistical support generally. The minimum standard requirement of ammunition in a war area, I am told, is a ninety days' supply. I should like to know how many of the divisions available to N.A.T.O. have that amount of ammunition at their disposal. General Ridgway has warned us that "We would
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sustain heavy losses of life and arms, "which losses could, however, be greatly lessened by timely action now. In view of some of the things which have been said to day about the atom bomb, I would say that General Ridgway has also warned us against relying upon the atom bomb in lieu of logistics and supply.
A great deal has been said to-day on the subject of the Air Force and the Navy. I do not propose to join in that at any length, because we are to debate the Navy Estimates on May 6, when I have no doubt that the noble and gallant Viscount, Lord Trenchard, will find that there is an adequate reply to many of the theories which he advanced to-day. I felt that his speech was all part of a process, which has been going on for some time now, of trying to run down the Navy. There is good evidence to that effect. A leader in The Times, speaking of the White Paper, argued against
"reshaping the defence programme with a greater naval bias at the expense of the Royal Air Force."
I wonder who inspired that leader. I wonder whether the naval correspondent of The Times has asked for and been given an adequate opportunity to reply to that statement.
LORD PAKENHAM: What was the statement?
LORD WINSTER: It was a leader in The Times on the Defence debate. The debate took place on March 12, so the leader would be on March 13. In the debate, Air Commodore Harvey said that we were proud of our Army and Navy—and the Navy returns thanks for those very kind words from the Air Commodore. But he went on to ask what the Navy and the Army would really be able to do in the next war Mr. Noel-Baker, winding up the debate, said (OFFICIAL REPORT, Commons: Vol. 512. col. 669.):
"Aircraft are now the deciding factor in modern war."
Apparently, they settle the matter. I see that Mr. Arthur Henderson, who was in charge of the Air Ministry (or was it the other way round?), said:
"It will have to be decided that air defence must be given everything necessary to safeguard the security of our Islands, the balance being divided between the other two Services."
I felt that that was a speech of a dutiful parrot who had learned his lesson from

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the Air Staff. But it is full of fallacies, because, whatever you gave the Air Force, the Air Force alone could not safeguard the security of our Islands. We dare not take risks with our sea communications. Our honour is involved in not letting the smaller countries be sacrificed, and we must keep the enemy out of the Atlantic and out of the Channel ports. That is where the Navy plays an essential part.
Does the Minister of Defence endorse the Air Staff policy of making what they call "strategic bombing" No. 1 priority? That is the policy which nearly lost us the last war, by creating a shortage of long-range aircraft for war at sea, and also a shortage of fighters. The Air Staff do not agree with that view, or recognise that the first principle of strategy is, after all, security for the base and for its communications. That is the first priority which must be fulfilled before the offensive can be undertaken. American scientists are also questioning the idea of strategic bombing, on the grounds that an adequate radar screen will enable guided missiles to "put paid" to the bomber. We had better examine rather carefully this question of strategic bombing.
There are very strong arguments in favour of a defensive strategy within which, of course, the air should be as offensive as possible, but not trying to bomb Moscow or to win the war single-handed, which seems to be their idea and their delusion at the moment. Our policy now seems to me to be an all-out gamble to win a war quickly by bombing, leaving defence to look after itself. The motto is, "Offence is the best defence." Of course, that has a popular appeal, but it is only true in certain given circumstances. We cannot be sure that such a gamble will come off. Even air experts doubt whether it would be successful for many weeks or even months, during which time the enemy submarines and enemy bombers would not be idle but would be concentrating on Liverpool, on Southampton, on the Clyde, and on London. The advocates of strategic bombing had better remember that two can "play bombers". Strategic defence must not be thought of in terms of the Maginot Line: it should be fluid, permitting of strong
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local offensives which, given good strategy and tactics, can maul the enemy very severely.
For all these reasons, the air should choose the strategy which best works in with sea and land defence: we want one strategy for the three Services. Above all, let us remember that strategic defence is not a faint-hearted cautious strategy, but only the first step in an all-out offensive to be mounted at the earliest possible moment. As I have said, air forces can be offensive within such a strategy, attacking enemy land communications, but not in the opening stages bombing Moscow and the back areas. This country will be the hard core of the N.A.T.O. organisation if war comes, because of geography and because of our fighting qualities. In those circumstances, if the Air Staff's policy of strategic bombing does not give us a quick victory and our sea communications have been interrupted, all Allied operations, by land, by sea and by air, and the bombing operations, will be held up, as in fact they were in the last war. This will greatly increase the duration of the war, because oil, fuel, food and other supplies will all be in short supply. And these, incidentally, have to come to us by sea.
In my opinion, all these things point to an initial defensive strategy, especially as the aggressor, and only the aggressor, will know zero day long in advance and have his forces concentrated, ready and in the right places, while ours will be scattered over Canada, over Australasia, over the United States and over the Colonies. Our concentration will be slow, and it will have to be effected by sea, under possibly very heavy submarine attack, against which the noble Viscount, Lord Trenchard, Air Commodore Harvey and Mr. Noel-Baker seem to think that naval measures would be quite superfluous. But if we do not defend our base, these dispersed forces may never be able to join up. The noble Viscount, Lord Trenchard, wrote or said something the other day about "squadrons of great battleships of the sky." I have seen the water-borne battleship become obsolete, and the noble Viscount's airborne battleships may represent an already obsolete strategic idea. In saying what I have. I should like to make one last point

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clear: that I myself would never be a party to begrudging anything in the way of equipment which is necessary for the work which will fall upon the Air Force; nor would I wish to see Air Force officers "done out of" those highest commands of which they are so fully entitled to have their share. In what I have said to-day, I have said nothing with a wish to create any feeling between the Services. I noticed how fair-minded the noble and gallant Lord, Lord Tedder, was, and how generously he spoke in that respect. But it is only by this interchange of ideas that we can arrive at the right policies upon which to conduct our defence.
6.56 p.m.
VISCOUNT BRIDGEMAN: My Lords, although my noble friend, Lord Freyberg, has left the Chamber I should like to join with other noble Lords in saying how very glad I was that he addressed us to-day, for the first time, and to express the hope that he will address us on many other occasions and, if I may be taken not too seriously in saying so, will maintain a balanced force upon the Cross Benches.
The more often I look at this White Paper and the more I listened to speeches to-day, the greater is my impression that the Ministry of Defence and the Minister have had a year which has been far from easy. For one thing, economic conditions have kept on changing; for another, it has clearly been difficult to decide what positive steps should be taken in ordering aircraft, weapons and material of war. Last, but not least, the year has been an extremely difficult one from the diplomatic point of view, particularly in regard to the progress or lack of progress in the direction of the European Defence Community. And yet, through the White Paper, there seems to me to run a clear thread—a clear indication that the Ministry of Defence is getting more and more on its feet, and that the work done by noble Lords opposite some years ago in establishing the Ministry of Defence is now beginning to bear fruit—fruit which we expected it would bear when we supported the idea of a Ministry. I think that the idea which the noble Lord, Lord Winster, put to us that the White Paper has accepted the policy of Bevanism is not only an idea which is very distasteful to noble Lords on these Benches, but it is almost certainly incorrect.
LORD PAKENHAM: Why?
VISCOUNT BRIDGEMAN: I will say why in a moment. It is rather a pity that, so far as if know, the word "Bevanism" has not been precisely defined but as I understood it, it meant that, whatever happened, the needs of the Welfare State came first, and that if there was any money over it could then go to defence. I hardly think that a Government policy which not only makes people pay for false teeth but also makes some reductions in the defence programme can really be called "Bevanism." Other names might be suitable, but not that. In any case, it strikes me that what has happened is this: that in a year of changing economic and diplomatic conditions, the Government has had regard to those conditions instead of slavishly following a policy which seemed right from the conditions existing a year or two ago.
LORD WINSTER: May I interrupt the noble Viscount for one moment? What I said was that at the time the late Government put forward its rearmament programme Mr. Bevan related the proposed expenditure to our economy and put forth the opinion that we could not meet that expenditure; and that view does seem to me to have been accepted since by both Governments.
VISCOUNT BRIDGEMAN: That may be so; but as I understand the White Paper, the view that was taken was that that expenditure was not strictly necessary in the changed circumstances, and that the requisite amount of money has been spent or will be voted during the coming year on the Government Defence programme. In that, I think, lies the difference between the two expositions of what has happened.
I think the manpower picture is clearer in the White Paper than is the picture as regards material. It seems plain to me that two years' National Service is still justified in the present circumstances. If I remember aright, when we were asked to agree to the increase from eighteen months to two years, a good deal of stress was laid on the point that that was necessary in order to produce trained soldiers and leaders. Nothing has happened since then to make it appear that we do not want trained soldiers and leaders. We want them all the time—still more as long

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as the difficulties in Korea and Malaya and now Kenya go on. The real need for the two years' service is the requirement to produce a proper proportion of leaders, especially technicians—in other words, to produce an army instead of a collection of people doing their National Service.
A great deal of work has been done to reduce what has often been called the "tail." That word, I think, is used rather loosely: I think that certainly where the Army is concerned, and probably the Air Force also, there are really two types of tail, one necessary and one unnecessary. With regard to the Army there are numbers of people who do not actually fight—the R.E.M.E., the R.A.S.C., and people of that sort—but whose presence in a field force formation is yet absolutely necessary for the tight. There are other people, at bases and training establishments, in overloaded headquarters and other places of that sort, who are unnecessary: a tail which could be cut very much more and which, indeed, I gather, has already been severely cut during the past year, as is described in the White Paper. In the meantime, so long as we keep on our two years' National Service, we have the necessary foundation for one of the chief tasks which lie ahead of all three Services, and that is the building up of professional leaders. A great deal more could be said about that, but this is not the time of day or the debate in which to do so. We may get on to that subject of potential leaders when we come to the debates on the three Services.
Let me take another question which was raised by the noble Lord, Lord Winster, and which was debated a good deal in another place, and that is the question of concentration overseas and of dispersal. I think that this matter has once or twice been rather oversimplified. The trouble is that although when you come to real operations of war concentration is necessary—when you come to the battlefield you must concentrate on the battlefield—the conditions of the cold war, of the so-called peace, are something entirely different. There you may well find, as my noble and gallant friend Lord Alexander said, that, whatever may be the concentration of forces you want once war breaks out, you cannot have that concentration, partly because of the distractions of the cold
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war and partly because the task of British forces in the past has been (and I think still is) to forestall minor outbreaks which in the end may develop into a major conflict. That can be done only by having the right numbers of people at the right spots. That has been our traditional job, and I do not think that the atomic weapon alters that position very much.
There is a phase, when a country possesses a most lethal weapon—whether the atomic weapon of to-day or the poison gas of yesterday—at which the Government which owns the atomic bomb or poison gas has to decide when the right moment has come to use it; and there are moments when you are obliged to have forces dispersed, up to a point, to deal with minor outbreaks which may become a major conflict. What we must develop are means of rapid transportation of those dispersed forces to the area of concentration, wherever it may be, in the quickest possible time. I think there is no doubt that that is one of the things which demand the earliest possible attention.
LORD PAKENHAM: May I interrupt the noble Viscount? May I ask him whether he, who is such an expert on manpower questions, considers that all our men in the Middle East are being usefully employed? Could not their number be reduced?
VISCOUNT BRIDGEMAN: That is not a matter to which I was immediately addressing myself, and I am afraid that at the moment I have no idea. It really amounts to this: do we know, at this moment of great uncertainty in the Middle East, how many people we want there? We certainly have no desire or intention, I presume, to keep any more troops in the Middle East than are absolutely necessary, if only for diplomatic relations' sake. That is a matter on which I must rely on my noble friends in front of me to speak. I would rather not give a Back Bench opinion.
This problem of concentration brings up fairly straightly the problem of Western defence, and a good deal has been said about that to-day. After all, at the moment, whatever may be going on in the Near or the Far East, the main thing is that we—that is to say, N.A.T.O.—should be strong in Western Europe. A good deal of anxiety has

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been expressed this afternoon on both sides of the House, and rightly, about the progress of Western defence The noble Lord, Lord Henderson, spoke about it; and I think everybody will feel a good deal of concern at the lack of progress—despite a certain amount of recent progress in Germany in the preparations for the European Defence Community. After all, it has been said over and over again that no national feelings can make up for what is dictated by geography. So long as there are nations in Western Europe, and Western Europe is vulnerable from the East, so long will there be a danger to the whole of Western civilisation—and an acute danger—until all those concerned get together and propose a plan that will lead to the possibility of being able, if necessary, to fight a battle and to win it. We are not by any means at that stage yet; and whatever may be the difficulties to which the noble and gallant Lord, Lord Tedder, referred concerning Allied command and Allied commanders in the European Defence Community, we are still a good way away from that stage. Until the European Defence Community itself really takes shape, it is not going to help very much to wonder who is going to command it. Let us get the layout of the European Defence Community settled first, and see that we get the right people, irrespective of nationality, to prepare the defence of Western Europe.
There has been a good deal of talk of late about our position outside the European Defence Community. I, for one, was glad to see that the White Paper dealt with this matter and said that the United Kingdom has explained her inability to become a member of the European Defence Community. After all, what is it that really matters? What really matters, surely, is that the United Kingdom should contribute to the fullest extent that is right towards the North Atlantic Treaty Organisation. We can contribute to the security of Western Europe perfectly well through N.A.T.O. and, if we make that contribution full enough and firm enough, surely there is no need to say that we should make it fuller or firmer by actually joining the E.D.C.
There is one point which here occurs to me. Honourable friends in another
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place are very busy with the Army Act. I think they have found it a good deal sterner task than originally they thought, but that is neither here nor there. I should like to throw out a thought as to whether the Army Act, which in theory allows an Army for only a year at a time, is quite consistent in these modern times with our rather longer-term commitments towards N.A.T.O., and thereby to the E.D.C. That is a point that perhaps we may think about in this House when the Army Annual Bill appears in a few weeks' time. But, apart from that, surely what is wanted is not that we should make gestures in joining the E.D.C., as if in fact we lived in the Continent of Europe and not on an Island, but that we should do something which is far more realistic and solid and leave absolutely no doubt among the nations in Western Europe, or for that matter in the United States, that we intend to place at the disposal of N.A..T.O. a properly-sized force with first-class commanders, and that there will be no risk of that force being withdrawn or reduced or in any way rendered less efficient while the emergency in Western Europe continues. What we want is the substance much more than any sort of gesture or shadow.
May I turn for one moment to the materials situation, because I think that that is a good deal more obscure in the White Paper. There is a good deal more room for doubt, and possibly for argument. I noticed one rather curious remark. At page 14 of the White Paper it is said that the steel allocation as a whole was sufficient for the needs of those industries which were working for defence. I greatly doubt it. It certainly was not completely sufficient, and my view would be that the difficulties and shortages in the supplies of steel have interfered with the production of defence equipment much more than the White Paper appears to hint. None the less, I am sure that my noble and gallant friend Lord Alexander was abundantly right when in the speech he made just now he paid a tribute to the way in which that industry had worked during the year to produce defence equipment. But I fancy that the real difficulties were in the matter of development of design and research. There is no doubt at all, on reading the White Paper, that that development has progressed very rapidly this year and that

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the real difficulty has been to decide which are the winning designs. That is where Ministers make such a tremendous contribution to the progress of defence in this country, when they can "spot the winners" in equipment—those pieces of equipment which are going to last not merely for their generation but for two, three or four generations. When they can "spot the winners" and spot the winning designers and the winning technicians, and back them and push them through and see that their plans go to production, then their reward comes by finding that the equipment has lasted many times longer than the normal span of defence equipment. It strikes me that this year is being a particularly difficult year in which to "spot the winners." It sounds as if in regard to infantry equipment the winners have been spotted. We shall see. We can only hope that they have been spotted. It is my belief that they have been.
We come now, just for a moment—because I will not detain your Lordships long—to the question of anti-aircraft defence. It struck me that what the noble and gallant Earl, Lord Alexander, said about the guided missiles represented by far the biggest advance in planning of A.A. defence that we have had since we started these debates after the war. In the past, there has been a great deal of uncertainty among those people, many of them part-time forces, who expect to be concerned with things of this sort. The A.A. units of the Territorial Army, the Observer Corps, the Civil Defence and the Home Guard have all had a very uncertain time. I am not blaming anybody, because the fact of the matter is that it was far too early to make a plan and it is quite useless to expect part-time people to show tremendous enthusiasm until their full-time leaders can come along and say: "We have now decided what we want you to do, and this it is. Now go and practise for it." It looks as if we are moving several steps forward in that direction, and I can assure my noble and gallant friend Lord Alexander that, from what I know of the part-time forces, they will be absolutely delighted to be given clear instructions and told to get on with the job. There is no doubt at all about that.
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Civil Defence is mentioned in the White Paper. I am glad to see that, because to keep it outside is merely to delude yourself into thinking that, if you are fighting a defensive battle, you and not the aggressor decide what that battle is going to be. But it is the aggressor who will decide how the Civil Defence people are to be threatened; and as I have said here before, he will not recognise any difference between the Ministry of Defence and the Home Office. Therefore, it is with great pleasure that I see these references to Civil Defence. It is with still greater pleasure that I notice that outside this House instructions to Civil Defence organisations are getting more objective, and that those who are asked to give their time and trouble are being given definite jobs. I have little doubt that that is in great part due to the successful running of the Civil Defence Staff College, because I hear on all sides from those people who go there extremely good accounts.
I feel that those are the main points among many points in the White Paper. I believe that it has been a difficult Paper to produce, and that the decisions about spending money or saving money, in backing this type of equipment or cancelling that, have been difficult ones. I feel that the diplomatic situation, coupled with threats outside Western Europe, has presented almost as difficult and tangled a picture as it possibly could have done. None the less, I feel that, like the Budget which was introduced yesterday in another place, this White Paper represents a definite advance in many directions in very difficult circumstances.
7.20 p.m.
THE EARL OF LUCAN: My Lords, at the end of a long debate there is no time to refer to the many subjects that have been taken up, though in the Defence White Paper there are a great many subjects requiring comment. Nor shall I take any part in the spirited engagement that has taken place between air and sea, an engagement in that war which has been going on for some thirty-five years and seems still to be undecided. As a mere soldier I should like only to draw attention to one aspect of the White Paper, and in particular to a sentence at the bottom of the first page—namely:

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"In times of stringency it is specially important to get the fullest possible value for our money"
—and perhaps one might add to that "for our manpower and also for our productive capacity." The White Paper is silent on that subject.
I have looked back to a White Paper issued in 1946, Cmd. 6923, which I understand is the blueprint for the present organisation of the Service Departments; it is called The Central Organisation for Defence. I understand from that Paper that the primary object in setting up the Ministry of Defence was to have a Minister with the time and authority to formulate and apply a unified defence policy for the three Services. But the Ministry were also given other functions, which are set out in paragraph 26. Briefly, they are, first, the apportionment in broad outline of the available resources between the three Services; second, the settlement of questions of general administration on which a common policy is desirable; and third, the administration of inter-Service organisations. So far as the first of those functions is concerned—namely, the apportionment of resources—I think it is quite clear from the White Paper that the Defence budget has been apportioned among the different Services according to strategic needs. There is only one thing on which I personally should like to be reassured, and that is that no one of the Services has staked out a private empire of industry for its own production. Can we be assured that the whole of the productive capacity of the country, or such part of it as is set aside for defence at the moment, and in war the whole of it, is pooled among the three Services?
With regard to the common policy on general administration, there is a sentence in the earlier White Paper to the effect that a study was being made of the possible advantages of drawing together certain administrative services which are now provided separately for each of the three Fighting Services—mentionis made particularly of the medical services—and forming a combined organisation which would provide services common to all branches of the armed Forces. On that aspect there is literally nothing in the present White Paper, and I think it is something which is directly related not only to economy in manpower and
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money but also to the creation of what I might call an inter-Service spirit. The more functions and experiences which are shared in common, surely, the more likelihood there is of real co-operation at all levels and on all occasions between the three Services. The medical services have often been talked about, and no doubt have been studied. Obviously, there are certain aspects of medicine in the Services which are quite specialised and require specially trained personnel. All over the world sick parades are being held, and young men in different coloured uniforms are seeing medical officers for various minor ailments. Surely there is scope for pooling some of the resources in medical officers which, as we know, are very scarce. I suggest that that is one of the directions in which economy might be sought.
Then there is the question of mechanical transport. All three Services have motor transport departments, some larger than others. Do they buy their vehicles in competition with each other? Do they each go to industry, possibly through the Ministry of Supply, and order the particular type which suits them best? Surely there would be scope for economy if all three Services could agree on a measure of standardisation of vehicles? There is always a danger that General Staffs, when they lay down a specification in regard to an article of equipment, think of their ideal as being something that will do everything they want. I suggest that one of the functions of the Ministry of Defence is to scrutinise this demand on industry and, if necessary, to enforce some modification of the requirements set out by each Service. Then there are motor transport workshops. All over the world there are highly trained men using equipment for the servicing of motor transport for all three Services. Is there, at Malta for instance, any attempt at combining the M.T. departments of the different Services? One could go on with a long list, but it is very late. Then works services do all three Services maintain highly skilled building departments? Do they compete with each other for bricks and mortar, for manpower and so on? Are the lands branches all co-ordinated, or do they compete with each other? Then, recruiting and publicity: are there different recruiting offices in the various towns, each trying to put up a

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slightly bigger and better show in order to attract recruits from the other Services?
In regard to movement, I wonder whether the Army still undertake the movement service for the other two Services. Do they set up a movement organisation? Is there full co-operation in the matter of air trooping between the Army, the Navy, and Transport Command of the Royal Air Force? There is a sentence in the Memorandum of the Secretary of State for War which rather suggested that the Army were going in for buying transport aircraft of their own. I hope that there is no truth in that. In other matters, like rations, communications, postal services, the Judge Advocate-General's department, and security, there has been some measure of pooling, certainly in the field, for a good many years. I think that deserves at least a small mention in the annual report of the Ministry of Defence to show what is being done on these lines.
It is very important that the three Services should learn to work together. Possibly, outright amalgamation of the Services is a long, long way in the future; perhaps it is not desirable; perhaps it will never occur. But something towards that is necessary. Closer association—to borrow a term from another field of politics—among the Services could be achieved with, I suggest, little effort, and certainly the idea deserves study.
7.29 p.m.
THE EARL OF ONSLOW: My Lords, on behalf of my noble friend Lord Balfour of Inchrye, I beg to move that the debate be now adjourned.
Moved, That the Debate be now adjourned.—(The Earl of Onslow.)
On Question, Motion agreed to, and debate adjourned accordingly.

CITY OF LONDON (CENTRAL CRIMINAL COURT) BILL [H.L.]
Returned from the Commons, agreed to.
HERTS AND ESSEX WATER BILL
Reported, with Amendments.
WARKWORTH HARBOUR BILL [H.L.]
Reported, with Amendments.

SCARCITY OF SHILLING COINS
LORD AMMON LORD AMMON asked Her Majesty's Government whether attention has been directed to the shortage of shilling coins and the consequent inconvenience to many whose gas and electric supply meters are operated by this means, and who in emergency have used substitutes for coins, and have been charged with committing a criminal offence, and will Her Majesty's Government take action to remedy the shortage.
THE EARL OF SELKIRK THE EARL OF SELKIRK: A shortage of shillings was reported to the Mint in January. In order to meet it, six million shillings were issued from reserves by the end of February, and a further four million have been issued since. In addition the Royal Mint's programme for the next six months provides for striking a quantity of shillings judged to be sufficient to meet requirements. The Royal Mint are also in contact with the British Gas Council and the British Electricity Authority in order that they may have timely notice of any steps likely to increase the demand for shillings for slot meters.
House adjourned at half past seven o'clock.