Sitting of 16 April 1953

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

    METROPOLITAN WATER BOARD BILL
    NATIONAL TRUST BILL [Lords]
    As amended, considered; to be read the Third time.

    RUNCORN-WIDNES BRIDGE BILL [Lords] (by Order)
    Second Reading deferred till Monday next.
ORAL ANSWERS TO QUESTIONS
  TRADE AND COMMERCE

    German Pit Equipment, West Lothian (Licences)
    Mr. Nabarroasked the President of the Board of Trade what consultations have taken place between representatives of the National Coal Board and his Department in regard to the granting of United Kingdom import licences for more than £500,000 of machinery and equipment which the National Coal Board have ordered in West Germany for the Kinneil new pit, West Lothian; and what is now the policy of his Department on the importation by nationalised undertakings of German-manufactured products.
    The President of the Board of Trade (Mr. Peter Thorneycroft): Mining machinery can be imported from Western Germany under open general licence; no separate import licences were, therefore, necessary in this case. No consultation on this matter between representatives of the National Coal Board and my Department were required, and none has taken place.
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    Our import licensing arrangements apply to private concerns and nationalised undertakings alike.
    Mr. Nabarro: In consideration of the fact that the United Kingdom has a large accumulated deficit on European Payments Union account, including Western Germany, is it not rather startling that these large orders have been placed in Germany for mining equipment which could well have been made by British engineering firms if they had not been fully engaged on defence work?
    Mr. Thorneycroft: Nearly all types of machinery were left on open general licence even when the restrictions were imposed in November, 1951, and March, 1952. It would be a very great reversal of policy now to withdraw it.
    Mr. Edelman: Will the President make it quite clear that there is no fundamental objection in principle to trade with Germany, provided that it prospers the national interest?
    Mr. Thorneycroft: In this matter, of course, there is no distinction between private or publicly-owned concerns. They are free to buy on open general licence where they will.
    Mr. Shinwell: Has the right hon. Gentleman ascertained whether the Coal Board could purchase the machinery in this country, at what price, whether the price was reasonable, or if there were some physical difficulties in the way?
    Mr. Thorneycroft: It would be quite inappropriate of me to make any such inquiry from the Coal Board or any private concern using their own commercial judgment.
    Mr. Shinwell: While it is, perhaps, not the responsibility of the right hon. Gentleman to approach the Coal Board, would not his right hon. Friend the Minister of Fuel and Power be justified in so doing?
    Mr. Thorneycroft: Perhaps the right hon. Gentleman will put down a Question.
    Mr. Nabarroasked the Chancellor of the Exchequer why the National Coal Board have been able to obtain his permission for purchase of West German marks during the next two years, for

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    acquisition of more than £500,000 of machinery and equipment for sinking a new pit at Kinneil, West Lothian; and what consideration was given by the Treasury to the claims of three British engineering firms to manufacture the equipment before consent was granted to the National Coal Board for purchase of the foreign exchange.
    The Economic Secretary to the Treasury (Mr. R. Maudling): The machinery and equipment in question can be imported from Western Germany under open general licence so that the National Coal Board was not required to obtain permission for the foreign currency expenditure involved.
    The second part of the Question does not therefore arise.
    Mr. Nabarro: Is my hon. Friend aware that a number of British engineering firms tendered for this equipment, giving delivery dates comparable with those offered by the Germans and good prices? In view of our foreign exchange position and our balance of payments, why should these orders for heavy engineering equipment be placed by a nationalised undertaking with our principal overseas competitors? It is thoroughly reprehensible.
    Mr. Maudling: The Treasury responsibility is for exchange control, and I think my hon. Friend will agree that where there is an open general licence it is reasonable that there should be an automatic allocation of foreign exchange. So far as the more particular questions are concerned, I would refer my hon. Friend to what has already been said this afternoon by my right hon. Friend the President of the Board of Trade.
    Mr. T. Brown: Is not the hon. Gentleman aware that the time factor in this case is of paramount importance and that the sooner we can get the machinery we need with which to develop that coalfield, the sooner coal production will be increased?
    Mr. Maudling: I am aware that that is a factor which may be of great importance. It is not, of course, for the Treasury, as in the matter of the exchange control, to interfere with the day to day working of the Coal Board.
    Mr. G. R. Strauss: Is the hon. Gentleman aware that if he accepts the arguments of his hon. Friend the Member for Kidderminster (Mr. Nabarro), he will be supporting the action of the American authorities in turning down the electrical contract?
    Mr. Maudling: I always try to accept the arguments of my hon. Friend when they are good ones. I think the argument of the right hon. Gentleman is a trifle abstruse.
    Mr. Shepherd: Is it not a fact that the machinery ordered on this occasion was for a type of gear not previously used in this country of which the Germans had considerable experience? Is there not a good deal of justification for taking advantage of their experience?
    Mr. Maudling: I think that that question would be more properly addressed to my right hon. Friend the Minister of Fuel and Power.
    Mr. Nabarro: As I am thoroughly dissatisfied with the answer given by my hon. Friend, I beg to give notice that I shall raise the matter on the Adjournment as soon as possible.

    Anglo-Turkish Trade
    Mr. Osborneasked the President of the Board of Trade if he will make a statement on the Turkish boycott on British imports; which trades will be most affected; and why the recent Turkish Parliamentary Delegation to the United Kingdom failed to secure increased imports from that country.
    Mr. P. Thorneycroft: The Turkish Minister of Commerce recently suggested that Turkey would in future give preference over imports from the United Kingdom to imports from countries with which Turkey's balance of trade was less unfavourable. I should regard any such action as inconsistent with Turkey's obligations as a member of the Organisation for European Economic Co-operation, and I am keeping a close watch on what is happening.
    The recent unofficial Turkish Trade Mission to this country made many contacts with private buyers as well as Government Departments; and I cannot therefore make any comprehensive statement about what sales were made during or as a result of the Mission's visit. The

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    Ministry of Food had discussions, however, with the Mission on various commodities, and has bought a further quantity of Turkish sultanas.
    I would emphasise again that sales of Turkish goods to this country must, naturally, depend largely on commercial considerations, particularly on quality and price.
    Mr. Osborne: In view of the fact that Turkey imports many millions of pounds' worth of goods from this country more than we buy from her, and since Turkey is a very important factor in our defences in that part of the world, is there nothing that the Government can do to encourage imports of Turkish commodities so as to make the trade between the two countries more reasonable?
    Mr. Thorneycroft: Within the sphere of Government action, certain purchases have just been made by the Ministry of Food. Other purchases are a matter for private traders to make up their minds on ordinary commercial considerations.
    Mr. Tilney: Would my right hon. Friend agree that Turkey has decided to remain a raw materials and agricultural producing country, and that, therefore, its economy is complementary to that of this country? Would he do everything in his power to foster trade between this stalwart member of the North Atlantic Treaty Organisation and the United Kingdom?
    Mr. Thorneycroft: Certainly. I am as anxious as anyone to see trade between the two countries expanding. The possibility of Turkey expanding her exports to this country must, I think, depend to a large extent on the quality and price of her goods.
    Mr. Bottomley: In supporting the sentiments expressed about trade with Turkey, may I ask the President whether he is aware that the members of the recent Mission said that Turkey had for sale goods which, both in quality and price, were equal to any others that could be purchased? Why have not the Government done something to meet Turkey and buy more from that country?
    Mr. Thorneycroft: If Turkey has such goods for sale, I have no doubt that they will be bought.

    Imports and Exports
    Mr. Holtasked the President of the Board of Trade (1) what proportion of imports into the United Kingdom in 1952 came from the sterling area, excluding the Commonwealth;
    (2) what proportion of imports into the United Kingdom in 1952 came from the non-sterling area, excluding dollar countries;
    (3) what were the respective percentages of the United Kingdom exports during 1952 which went to the sterling area, and to the non-sterling area, excluding dollar countries.
    Mr. P. Thorneycroft: The proportion of our total imports in 1952 which came from non-Commonwealth sterling countries was 4 per cent., and from non-sterling countries outside the dollar area 38 per cent. The proportion of United Kingdom exports in 1952 which went to the sterling area was 49 per cent., and to non-sterling countries outside the dollar area 38 per cent. If re-exports are included these figures would be 47 and 39 respectively.
    Mr. Holt: Though the implications of some of these figures need more careful study, would the right hon. Gentleman, in relation to this particular problem, care to make a statement on what appeared in the Press today about the English Electric Company being unsuccessful in obtaining an order for transformers and generators from the State Department of America, and whether Her Majesty's Government have made any representations on the subject? It seems a vital matter in connection with our dollar market.
    Mr. Thorneycroft: This Question merely asks for certain percentages to be given to the hon. Gentleman. If he has a particular case in mind, perhaps he will put it down on the Order Paper.

    Yugoslavian Apples
    Brigadier Medlicottasked the President of the Board of Trade what imports of apples, in value and weight, are due to be received from Yugloslavia during the current year, and if the amount so to be imported is included in or is additional to the season's quota for all overseas countries already announced.
    Mr. P. Thorneycroft: Our current trade arrangements with Yugoslavia permit the

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    import of up to £60,000 of apples during 1953. These imports are additional to the announced global quota, which covers imports only from those Western European and other non-sterling countries from which, until November, 1951, apples were imported under open general licence.
    Brigadier Medlicott: Is the Minister aware that home growers of apples are disturbed when quotas are exceeded? Could we have an assurance that, generally speaking, once the quota for a particular season has been fixed, it will not be exceeded except for very special reasons?
    Mr. Thorneycroft: This quota is no more than that for last year, and last year's quota was certainly not exceeded In fact, the quantity of apples received under it was rather less.
    Mr. Bottomley: Would not the right hon. Gentleman agree that the constant pressure exerted by hon. Members opposite to restrict trade with other countries will, in turn, affect exports from this country? Is not that a bad thing?
    Mr. Thorneycroft: I think it is quite proper for hon. Members whose constituencies have particular interests to put those interests to the Minister concerned.
    Brigadier Medlicott: Is my right hon. Friend aware that my Question is in no sense directed towards a restriction of trade, but purely to the desirability that quotas should remain constant once they have been fixed so that home growers may know what is expected of them?
    Mr. Mellish: Is it not about time that on a question of this kind our own people should reduce the price of their commodities so that housewives can get them cheaper?

    Film Production Fund
    Mr. Swinglerasked the President of the Board of Trade what progress has been made towards securing voluntary agreement in the film industry for the continuance of the British Film Production Fund.
    Mr. P. Thorneycroft: All the sections of the film industry concerned are aware of the statement I made in answer to Questions on 10th March; and we must now allow them a reasonable period for discussion.
    Mr. Swingler: How long does the Minister expect to permit these negotiations to go on? Is he not aware that they have now been going on for well over six months, and will he say, having given notice that he will introduce a statutory arrangement, whether he intends to do that before the end of the present Parliamentary Session?
    Mr. Thorneycroft: All I will say at the moment is that as I only made a statement in answer to Questions on 10th March, I think it reasonable that the various sections of this industry should have time to study that statement and to discuss the matter together.

  NATIONAL FINANCE

    Costa Rica (Sterling Debt)
    Sir Edward Keelingasked the Chancellor of the Exchequer what progress has been made in the settlement by Costa Rica of its debt.
    Mr. Maudling: In December last the Costa Rican Government stated that it was ready to begin discussions with the Council of Foreign Bondholders and hoped to arrive at a satisfactory settlement of the sterling debt as soon as possible along the same lines as the settlement of the dollar debt, now awaiting ratification. So far, however, the Costa Rican Government have failed to nominate any representative for the discussions.
    Sir E. Keeling: Is my hon. Friend aware that the American creditors, who have made an agreement, are no more long-suffering that the British creditors?
    Mr. Maudling: Yes, I am aware of this feature of the situation in which my right hon. Friend is taking a close interest.

    Overseas Receipts and Expenditure
    Mr. Shepherdasked the Chancellor of the Exchequer the total amounts which have been expended by the United Kingdom since the end of the war on defence purposes overseas, loans and assistance to other nations, redemption of sterling balances, and investment overseas, respectively; and the total amount received in loans and assistance by this country over a comparable period.
    Mr. Maudling: The cost of defence in terms of direct United Kingdom military expenditure overseas was £1,158 million between 1st January, 1946, and 31st December, 1952. In the same period the total of United Kingdom sterling liabilities to overseas countries was reduced by £266 million. Post-war assistance by Her Majesty's Government in the form of loans and grants to overseas countries, including United Kingdom Colonies, and to international organisations, amounted at 31st December, 1952, to £1,504 million, and the corresponding assistance received by Her Majesty's Government to £2,556 million. It is not possible to estimate with precision the amount of overseas investment undertaken.
    Mr. Shepherd: Can my hon. Friend reconcile the statement made by many people during the past five years that this country has not paid its way?
    Mr. Maudling: Though many responsibilities devolve upon the Treasury they do not include the reconciling of statements made by anonymous individuals.

    American States (Debts to United Kingdom)
    Mr. Shepherdasked the Chancellor of the Exchequer the amounts owed to the United Kingdom by states of the United States of America, and the value of the accumulated interest.
    Mr. Maudling: I have no detailed information regarding these transactions, in which neither Her Majesty's Government nor the Government of the United States was directly concerned. Such information as is available has been published from time to time in the reports of the Council of Foreign Bondholders.

    Nationalised Industries (Scrutiny)
    Mr. Nabarroasked the Chancellor of the Exchequer whether, in view of the success of the Comptroller and Auditor General of the Exchequer and Audit Department, in apprehending and publicizing waste that occurs in Government Departments and illustrated particularly by recent reports, he will take steps by legislation or otherwise, to appoint a similar auditor, scrutineer and general investigator to exercise surveillance in the affairs of the nationalised industries with a view to checking any financial indiscretions
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    and excesses, and economising moneys that will otherwise have to be paid by consumers.
    The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): No, Sir. Adequate powers of investigation such as my hon. Friend suggests could not be conferred except as part of a complete recasting of the statutory relationship of the nationalised industries to Ministers and Parliament. Her Majesty's Government have no proposals to make on this at the present time.

    Road Haulage Lorries (Purchase Loans)
    Mr. Callaghanasked the Chancellor of the Exchequer if he will reverse his advice to the banks that loans to finance houses and other private persons for the purpose of buying lorries from the Road Haulage Executive may be given the same priority as loans for export, defence, agriculture and Commonwealth development, in view of the present restrictions on borrowing.
    Mr. Maudling: No, Sir. The general priorities which the banks have been asked to apply in accordance with the Government's credit policy remain unchanged. They have been told that the provision of credit for the purchase of assets from the Road Haulage Executive, in accordance with the Bill now before Parliament, will be regarded as consistent with Government policy. It must, of course, be left to the banks themselves to decide whether to provide facilities for individual customers.
    Mr. Callaghan: Does this mean that the United Dominions Trust and other finance houses are to have credit facilities, which are better than those given to normal businessmen who wish to expand their enterprises, merely for the sake of breaking up the Road Haulage Executive?
    Mr. Maudling: My answer was carefully phrased to explain the position of Government credit policy; but I think that the hon. Gentleman and his hon. Friends tend to ignore the difference in economic significance between a transfer of assets and their associated finance and the creation of new assets and new finance.
    Mr. Callaghan: Does not this mean that upwards of £100 million have to be raised by the banks to finance this purchase? Will not that be directly in competition with other businesses which want credit facilities for doing jobs that are really necessary?
    Mr. Maudling: The whole point of my previous reply was to explain that that is completely inaccurate.
    Mr. H. Morrison: Is this not a case where Government influence over credit facilities is being deliberately used for party political purposes? Is this not a case where credit is restricted over a wide field of normal business, but is being relaxed to suit nothing short of the party political purposes of Her Majesty's Government?
    Mr. Maudling: Before the right hon. Gentleman makes these party points I am sure that, wishing to be fair, as he always does, he will study what I said about the economic difference between the transfer of assets which are already financed and the creation of new assets which need new finance.
    Mr. Lee: Is it not a fact that the Government have already publicly announced that they will sell these important national assets at knock-down prices? Now that the Government are giving this most favourable treatment, why not be honest and give them all away?
    Mr. Maudling: I would hardly regard that as a question, but as a statement which is wholly inaccurate.
    Mr. Callaghan: Does the hon. Gentleman really regard the transfer of these assets, which must involve the raising of money in the City by someone, as being of equivalent importance to dollar exports?
    Mr. Maudling: That is an entirely misleading point. The hon. Gentleman is perfectly aware—or he will be if he studies my answer, and I ask him to try to understand it—of the difference between the transfer of existing assets and the creation of new assets and new finance.
    Mr. Callaghan: Is not the hon. Gentleman aware that the Earl of Selkirk, as Government spokesman in another place.
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    said that the transfer of assets will be given the same degree of priority as exports which may secure dollars?
    Hon. Members: Answer.
    Mr. Speaker: Order. We cannot debate this matter now.

    Arts Council (Grant)
    Mr. Bossomasked the Secretary to the Treasury on what basis the grant-in-aid to the Arts Council is decided.
    Mr. Boyd-Carpenter: The grant-in-aid of the Arts Council is based on detailed estimates of expenditure submitted annually to the Treasury, who decide what total sum can be made available for the activities undertaken by the Council under the terms of its charter.
    Mr. Bossom: Would this include the award of abnormal prizes for rather unusual art competitions?
    Mr. Boyd-Carpenter: It depends on what my hon. Friend would regard as abnormal whether or not an item of that sort would, in the first place, be included in the estimates and, in the second place, would be approved by my right hon. Friend the Chancellor of the Exchequer.
    Mr. Snow: Disregarding the obvious attempt to make political capital out of artistic endeavour, may I ask the Financial Secretary whether his answer does not make nonsense of the statement which he has made in the House more than once that grants by the Treasury to the Arts Council are not conditional grants? Is it not a fact that a programme of expenditure of this type has to be approved by the Treasury first, and was not one special conditional grant made for the repair and re-habilitation of Covent Garden last year?
    Mr. Boyd-Carpenter: These grants are not, as the hon. Member suggests, conditional. But it must obviously be the case that in deciding what is the appropriate sum to make available to this or any other body, one should be given in advance a general picture of expenditure which, if these funds are made available, that body would like to undertake. Any other approach to this matter would be completely irresponsible.
    Miss Ward: May I have an assurance that when conditional programmes are

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    presented to the Treasury the provinces' desire to obtain some money will be adequately safeguarded?
    Mr. Boyd-Carpenter: I have already explained that they are not conditional programmes. The second part of my hon. Friend's question therefore does not arise.
    Miss Ward: Even if my hon. Friend does rather twist my question, may I have an assurance that when the programme submitted by the Arts Council is scrutinised by the Treasury the position of the provinces will be adequately safeguarded? The money comes from the taxpayer in the provinces as well as from the taxpayer in London.
    Mr. Boyd-Carpenter: I shall not attempt even to repeat my hon. Friend's question lest she feels that I do so in a gyratory manner, but I can assure her that the sort of consideration which she has in mind is, of course, given proper weight.
    Mr. Jeger: Will the Financial Secretary assure us that he will do all in his power to extend the work of the Arts Council and extend the grants that are made to them? Will he encourage them in the excellent work that they are doing in London and the provinces to encourage artists, musicians and the like, and also their efforts in the field of experimental work?
    Mr. Boyd-Carpenter: I accept what the hon. Gentleman says about the excellent work which this body is doing. In reply to the first part of his question, no doubt he will be reassured by the fact that the grant for 1953–54 is £785,000 as compared with £675,000 in 1952–53.
    Mr. Bossom: Can my hon. Friend say whether, in relation to the competition which is now the subject of exhibits in the Tate Gallery, information was given to the Treasury before the grant was made last year?
    Mr. Boyd-Carpenter: I should like to have notice of that question, the relevance of which to the Question on the Order Paper I am inclined to doubt.
    Mr. Snow: In view of the unsatisfactory nature of these replies and the apparent persistent intention of the Government to demand artistic scrutiny, I beg to give notice that I shall raise this matter on the Adjournment.

  AGRICULTURE

    Cement Dust Nuisance, Kent
    Mr. Doddsasked the Minister of Agriculture whether he will cause an inquiry to be held into the harmful effect on agriculture and horticulture of the heavy cement dust deposits over a wide area of North-West Kent in recent months with a view to taking action designed to reduce the losses to farmers, nurserymen, smallholders and allotment keepers and gardeners.
    The Minister of Agriculture (Sir Thomas Dugdale): No, Sir. My right hon. Friend the Minister of Housing and Local Government has explained to the hon. Member, on 24th March and on 14th April, the measures that are being taken to reduce the discharge of this cement dust.
    Mr. Dodds: In view of the bitter protests that have been made by nurserymen and farmers and of the vital necessity of obtaining more food, would not the Minister himself, purely as a piece of private enterprise, look into this problem and reassure those who are producing food that they will secure protection from the Ministry of Agriculture?
    Sir T. Dugdale: We know the problem quite well without any further inquiry into it. It is true that the weather during March helped in the accumulation of deposits of this dust, but the effect on agriculture itself is by way of reducing the marketing qualities of the produce rather than of direct damage, though dust of this kind on glasshouses is harmful to plant growth.

    Smallholdings, County Durham
    Mr. Bartleyasked the Minister of Agriculture the acreage of smallholdings owned or leased by Durham County Council; the number of holdings this acreage constitutes; and the number of tenants occupying such holdings.
    Sir T. Dugdale: I understand that the Durham County Council own or lease 5,920 acres of land used for smallholdings. 350 smallholdings are let direct by the county council, and land is also let to smallholdings societies, who sub-let to 203 sub-tenants.
    Mr. Bartley: Can the Minister say whether the acreage per tenant has been

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    increased in recent years and, also, whether he is satisfied that the land and the equipment on the holdings is being used to ensure maximum production?
    Sir T. Dugdale: Perhaps the hon. Gentleman will put down a question dealing with the first part of his supplementary, which is on a different point. As for the second part, I am satisfied that improvement to equipment on these smallholdings is going on all the time in County Durham.
    Mr. Bartley: But is the Minister satisfied that full use is now being made of the equipment, such as piggeries, so as to ensure full production?
    Sir T. Dugdale: I will certainly look into that point, but as far as I know conditions in the county are satisfactory.
    Mr. Bartleyasked the Minister of Agriculture the number of applicants awaiting smallholdings in County Durham; the average period such applicants have been waiting; the area of land required to meet this demand; and what action is being taken to acquire land for this purpose.
    Sir T. Dugdale: I understand that 186 applicants have been approved by the county council and are now awaiting smallholdings in the county. The county council inform me that the average period of waiting is probably about seven years. If smallholdings were to be provided at once for all these applicants, some 7,000 to 9,000 acres would be required, depending on the types of holding provided. No estates suitable for subdivision into smallholdings have been in the market recently, but the county council are considering proposals for reorganising and purchasing a smallholdings estate already held on lease.
    Mr. Bartley: I appreciate the difficulty of acquiring farms in the ordinary market, but will the Minister consider taking action to reclaim the land, many acres of which have been lost in County Durham through damage by coal mining subsidence, and making it available for smallholdings.
    Sir T. Dugdale: If the Durham County Council were to submit a scheme for purchasing Coal Board land, I would certainly give it careful consideration.
    Mr. Bartley: Is the Minister aware that it is not just Coal Board land which is concerned? That is true to some extent, but other land has also been damaged and is at present out of use. It could be reclaimed by some expenditure and work on it.
    Sir T. Dugdale: Very often that kind of land would not be suitable for smallholdings.

    Tillage Crop Acreage
    Mr. Hurdasked the Minister of Agriculture if he can now give an estimate of the increased acreage in Great Britain of grain and other tillage crops for this year's harvest resulting from the ploughing of grassland under the grant scheme.
    Sir T. Dugdale: I regret that it is not yet possible to give the estimate the hon. Member desires, but the latest returns indicate that there are good prospects of obtaining a substantial additional acreage of tillage crops in 1953 in areas not affected by coastal floods.
    Mr. Hurd: Will my right hon. Friend take the earliest possible opportunity of publishing an estimate, particularly of the grain acreage, so that importers and the whole grain trade may know how much they will need to balance the supply of feedingstuffs for next winter?
    Sir T. Dugdale: Yes, Sir. As at present advised, I do not think it will be possible to give a reasonably firm estimate until we have received the returns from the county committees, which will be about the middle of June.
    Mr. Donnelly: When the right hon. Gentleman is publishing the figures, could he say, at the same time, how much has been paid out in grants?
    Sir T. Dugdale: Perhaps the hon. Gentleman will put a Question down in due course.

    RIVER ELY (DREDGING SCHEME)
    Mr. G. Thomasasked the Minister of Agriculture what reply he has sent to the letter from the Cardiff Naturalists' Society concerning the scheme proposed by the Glamorgan Rivers Board for the dredging of the River Ely.
    Sir T. Dugdale: The President of the Society has been told that the contents of his letter will be borne in mind when the river board's proposals are being examined.
    Mr. Thomas: Will the Minister ensure that the plant life of this area is protected as far as possible by the new proposals?
    Sir T. Dugdale: Yes, Sir. I should like to tell the House that the Nature Conservancy will be consulted before any scheme is approved by my Department and to explain that the technical consideration of the scheme has been delayed because of the preoccupation of my land drainage engineers with East Coast defences.
    Mr. Gower: Will the Minister bear in mind the many representations which I have forwarded to him? Will he note that those representations come from all kinds of people, including anglers, farmers, agriculturists, nature lovers and ordinary people?
    Sir T. Dugdale: Yes, Sir.
    Mr. Anthony Greenwood: Will it be the Minister's general practice to consult the Nature Conservancy before dredging schemes of this kind are undertaken in the country?
    Sir T. Dugdale: I do not think I can go further in answer to the Question on the Order Paper.

    REAFFORESTATION (DEVASTATED AREAS)
    Brigadier Medlicottasked the Minister of Agriculture what arrangements are being made to increase the afforestation programme of planting in England and Wales to compensate for losses by the January storms throughout the United Kingdom.
    Sir T. Dugdale: As my right hon. Friend the Secretary of State for Scotland informed the right hon. Member for East Stirling (Mr. Woodburn) on 14th April, it is not practicable to effect any increase in the afforestation programme to make good the losses due to the storm. It has, however, been made a condition of all licences for the clearing of the devastated areas that they shall be restocked.

  CIVIL DEFENCE

    Industrial Enrolment
    Mr. Ian Harveyasked the Secretary of State for the Home Department whether it is now possible to state how many people are enrolled in industrial civil defence.
    The Joint Under-Secretary of State for the Home Department (Sir Hugh Lucas-Tooth): No, Sir. My right hon. and learned Friend endorses the view expressed by the Mabane Committee that this information should be available, but proposes to seek it after the issue of a second Industrial Bulletin now in preparation setting up the Industrial Civil Defence Service to which he referred in answer to my hon. Friend's Question on 18th December last.
    Mr. Harvey: Is my hon. Friend aware that his answer will give satisfaction to all those interested in Civil Defence who have felt that the absence of these figures gave a very false picture? Will he also note that there is great concern that the industrial Civil Defence and normal Civil Defence organisations appear to be drifting apart?
    Sir H. Lucas-Tooth: Yes, Sir.

    Injury and Sickness Benefits
    Mr. Ian Harveyasked the Secretary of State for the Home Department what are the temporary benefits for injury and sickness and the long-term benefits in case of disablement for members of the Civil Defence Corps and the Auxiliary Fire Service.
    Sir H. Lucas-Tooth: Members of the Civil Defence Corps and the Auxiliary Fire Service who are injured while on duty are entitled to the full benefits of the Industrial Injury Acts. If and when disablement benefit is awarded, they may also receive sickness benefit under the National Insurance Acts. I am sending my hon. Friend fuller details of the various benefits.
    Mr. Harvey: Will my hon. Friend ensure that there are no discrepancies between such benefits for Civil Defence workers and those for other similar voluntary activities?
    Sir H. Lucas-Tooth: As I have told my hon. Friend, the Civil Defence workers

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    come under the general law covered by the Industrial Insurance and National Insurance provisions.
    Lieut.-Colonel Lipton: Is the Undersecretary aware that representations have been made by several people, including myself, that there should be some additional compensation in cases such as that which I have brought to his notice, of a man who is now a permanent inmate of a mental home as a result of injuries received during training?
    Sir H. Lucas-Tooth: I can tell the hon. and gallant Gentleman that my right hon. and learned Friend is about to communicate certain proposals to the local authority associations for consideration in that connection.

    Exchequer Grants
    Mr. Jannerasked the Secretary of State for the Home Department whether, in view of the continual rise in rates, he will consider taking over the whole cost of Civil Defence, and so relieve the local authorities of their contribution of 25 per cent.
    Sir H. Lucas-Tooth: My right hon. and learned Friend and my right hon. Friend the Secretary of State for Scotland reached agreement with representatives of the local authorities at a meeting on 13th March on the rate of Exchequer grant to be prescribed by regulations under Section 3 of the Civil Defence Act, 1948, in relation to various categories of expenditure incurred by local authorities in the discharge of their Civil Defence functions.
    As the Act requires, the grant will represent full reimbursement in respect of some categories and 75 per cent. in respect of the remainder. The representatives of the local authorities did not suggest, and Her Majesty's Government would not be able to agree, that there should be reimbursement of all categories.
    Mr. Janner: As there is such a heavy increase in rates at present does the hon. Gentleman not think that, as this is a national service and is required only to me6t a national emergency, what I am suggesting is reasonable to assist the local authorities and people to meet the demands that come upon them? Would he reconsider the matter?
    Sir H. Lucas-Tooth: The suggestion that the cost of Civil Defence should be entirely borne by the Exchequer was fully discussed during the Second Reading debate and the Committee stage of the Civil Defence Bill in 1948, and it was then rejected. The reasons still hold.
    Mr. Shinwell: When the hon. Gentleman speaks of agreement having been reached at the present conference does he mean that the local authorities agreed with what was offered or that they were compelled to take what was offered?
    Sir H. Lucas-Tooth: I should like notice of that. To the best of my recollection there was agreement.
    Mr. Shinwell: The hon. Gentleman said, and he repeats now, that there was complete agreement. Does that mean that the local authorities were satisfied, having made their request, with what was offered? Or were they dissatisfied?
    Sir H. Lucas-Tooth: Perhaps the right hon. Gentleman would put down a Question. To the best of my information they were quite satisfied.
    Mr. H. Morrison: Was not the hon. Gentleman there, and if he was not there does he not know whether this was mutually agreed, or whether it was forced upon the local authorities? I am not on the merits of the case now. What is the good of the hon. Gentleman's coming to the Box if he cannot answer an elementary question of this sort?
    Sir H. Lucas-Tooth: The right hon. Gentleman knows pefectly well that his right hon. Friend was asking a question about what was going on in the minds of the local authorities. [HON. MEMBERS: "No."] That was the question which was asked. It is impossible for me or anyone else to give an answer.
    Mr. C. Williams: Is my hon. Friend aware that there is by no means complete agreement as to who should be the Deputy Leader of the Opposition?
    Mr. Morrison: My right hon. Friend was not asking a question about what was in the minds of the local authorities. It is quite easy to know, from the record, which the hon. Gentleman must have read, or ought to have read before he came to that Box, if he was not at the consultations, whether there was mutual

    363
    agreement at the end of the discussion or whether the local authorities said, "We do not agree," and the Secretary of State then said, "I am very sorry that you do not agree, but that is all I can do." Which was it?
    Sir H. Lucas-Tooth: That is not the question which was put to me. The question was whether the local authorities were satisfied. What goes on in the minds of local authorities I cannot answer. However, I have told the right hon. Gentleman that to the best of my knowledge the local authorities are entirely satisfied with the result.
    Mr. Shinwell: Following on the question of the right hon. Gentleman the Member for Torquay (Mr. C. Williams), may I ask the Under-Secretary whether he is aware that there is not complete agreement in the country as to who should be the Government and that the present Government do not represent the great majority?
    Mr. Speaker: Order. We are getting very wide of the Question.

  HOME DEPARTMENT

    Vehicles (Headlight Dipping)
    Mr. R. Bellasked the Secretary of State for the Home Department how many prosecutions took place in 1952 against motorists for not having in good order a headlamp-dipping device in accordance with the Vehicles Lighting Regulations, 1950.
    Sir H. Lucas-Tooth: No separate records are kept of the number of proceedings taken for this offence.
    Mr. R. Bellasked the Secretary of State for the Home Department what steps he is taking to deal with the widespread infringement of the Vehicles Lighting Regulations, 1950, by drivers who have no device in working order for dipping their headlamps.
    Sir H. Lucas-Tooth: The enforcement of the relevant regulation is a matter for the police and is undertaken by them in the ordinary course of their duty. My right hon. and learned Friend has no reason for thinking that the police do not pay suitable attention to this aspect of vehicle lighting.
    Mr. Bell: Is my hon. Friend aware that it is common knowledge that there is a great deal of evasion of the regulation? Will he tell the police that it is quite easy to detect infringements of the regulation, because if they will stop any motorist who has an extinguished offside front lamp and the inside head lamp undipped, they will find that in at least half of the cases the dipping device is out of order?
    Sir H. Lucas-Tooth: If my hon. Friend will give evidence of the facts which he has just stated, that evidence will, of course, be considered.
    Mr. Poole: Does the Minister not realise that dazzle is one of the greatest hazards in driving on the roads today and that he ought to stimulate the police to take action in this matter in order that those motorists who are not only failing to dim their lights but are also using headlights of capacity in excess of that allowed by the law are suitably dealt with?
    Sir H. Lucas-Tooth: As I have said, if the hon. Gentleman will provide evidence of those facts, that evidence will, of course, be considered. Without evidence, it is impossible to take action.

    Firearms (Voluntary Surrender)
    Mr. Jannerasked the Secretary of State for the Home Department whether he will now make a statement on the matter of promoting the voluntary surrender of firearms of persons who are in possession of a firearm without having a licence, on the understanding that no penalty will be imposed if these are handed over to the police by a certain date.
    Sir H. Lucas-Tooth: I regret that I am not in a position to add to the reply my right hon. and learned Friend gave to the hon. Member on 26th February.
    Mr. Janner: It is a long time since 26th February. Does the hon. Gentleman appreciate that there is not very much more time before a certain event will take place which will provide an excuse for bringing in the concession for which I am asking? Will he reconsider the matter quickly, as the suggestion I have made should be brought into effect while the time is ripe for it?
    Sir H. Lucas-Tooth: The hon. Member knows very well that the question of waiver of penalties is always very difficult. I think that, in view of that, the time spent on considering it has not been excessively long.

    Capital Punishment (Report)
    Brigadier Medlicottasked the Secretary of State for the Home Department how soon he now anticipates that the Royal Commission on Capital Punishment will make their report.
    Sir H. Lucas-Tooth: My right hon. and learned Friend has been in touch with the Chairman of the Royal Commission, who informs him that the Commission arrived at their conclusions on all the questions referred to them some time ago; that the preparation of the final report, involving, as it does, a close examination of many subjects, some of them highly technical, has necessarily taken a long time; but that it is now practically complete and a large part of it already in the hands of the printers.

    EMPLOYMENT, BRIXT0N
    Lieut.-Colonel Liptonasked the Minister of Labour how many unemployed were registered at the Brixton Employment Exchange in March, 1951. 1952 and 1953, respectively.
    The Minister of Labour (Sir Walter Monckton): 1,265 at 12th March, 1951; 1,773 at 17th March, 1952; and 2,219 at 16th March, 1953.
    Lieut.-Colonel Lipton: Can the Minister explain why these figures should be so much worse in Brixton than the average for the whole of the country? Did he bring this distressing increase to the notice of the Chancellor of the Exchequer when the Chancellor was deciding to whom the bounty should be distributed in this year's Budget?
    Sir W. Monckton: I was not consulted about what the hon. and gallant Gentleman describes as a "bounty," but I am sure he would be the first to say that one could not look at all the distinctions between Brixton and the rest of the country without reflecting, first of all, that in Brixton it is a good thing that the number is 200 fewer than last month
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    and that in the rest of the country there is a drop between 1952 and 1953 of no fewer than 36,000 in the number of unemployed.
    Mr. Shinwell: What is the right hon. and learned Gentleman's position? On which leg does he stand? When the unemployment figures rise does he pass the buck to somebody else? On the other hand, when the unemployment figures decline, does he take credit for it?
    Sir W. Monckton: I think I may say that I try to stand firmly upon a tripod. I take the middle course of regretting any rise in unemployment and of following a policy of attempting to do what I can in the limits of my Department to reduce those figures.
    Lieut.-Colonel Lipton: Will the right hon. and learned Gentleman please recognise the dismal fact that the unemployment figures for Brixton are nearly twice as high now as they were two years ago?
    Sir W. Monckton: I do recognise the figures. I recognise that the figures have gone up in that way. I am glad it is not true of the country as a whole. I shall do what I can in that area.

  NATIONAL HEALTH SERVICE

    Dental Treatment (Applications)
    Mr. Bairdasked the Minister of Health the number of applications made for conservative dental treatment and dental appliances, respectively, in the months of October, November and December, 1951, and during the corresponding months of 1952.
    The Minister of Health (Mr. Iain Macleod): As the answer involves a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Baird: Would the Minister tell me whether the tendency has been upward or downward during those months?
    Mr. Macleod: So far as conservative dental treatment is concerned, the figures in those three months are practically stationary. There is a drop in dental appliances.
    Following are the figures:

    1951

    1952

    October (5 weeks)

    November (4 weeks)

    December (4 weeks)

    October (5 weeks)

    November (4 weeks)

    December (4 weeks)

    Conservative dental treatment

    Courses of treatment not requir-ing prior approval of the Dental Estimates Board for which claim for payment has been submitted (Note 1)

    495,000

    363,000

    388,000

    496,000

    414,000

    333,000

    Dental appliances

    Applications to the Denta Estimates Board for prior approval to treatment and the provision of appliances (Note 2)

    172,000

    124,000

    92,000

    151,000

    121,000

    74,000

    1. No record of applications for conservative treatment is kept since such courses of treatment do not require prior approval. These courses are normally completed within a few weeks of commencement and the statistics are based on the receipt of claims for payment.

    2. Approximately 90 per cent. of the courses requiring prior approval relate to the provision of dental appliances.

    Hospital Medical Staffs (Reduction)
    Mr. Blenkinsopasked the Minister of Health what total reduction in the medical staffs of teaching and non-teaching hospitals he anticipates during the current financial year.
    Mr. Iain Macleod: I cannot predict the results of the special review of medical staff which I have asked hospital authorities to make.
    Mr. Blenkinsop: Can the right hon. Gentleman say how many of the registrars, of which he must know the number, are likely to go out of practice during the next 12 months?
    Mr. Macleod: There is no particular pressure being put on my Department in that matter, although it is a difficult one. If the hon. Gentleman likes to put a special Question down about registrars I shall give him all the information I can.
    Dr. Stross: Is the Minister not aware that many hospitals are finding difficulty in obtaining junior registrars? Has he considered what he could do to help them so that men in senior appointments have the necessary help to carry on their work?
    Mr. Macleod: The figures for junior registrars have been for some time very closely in accordance with the planned schedule laid down by the Socialist Gov-
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    ernment. There are difficulties there, but the total number of specialist posts becoming available is, unhappily, not as high as was hoped when it was laid down.
    Mr. Blenkinsop: Can the right hon. Gentleman explain, then, how it is that there has been a very big drop in the provision made in the estimates for medical staff of the teaching and the non-teaching hospitals?
    Mr. Macleod: The hon. Member is fallaciously comparing this year's estimates with last year's estimates instead of last year's outlay. There has, in fact, been no change.

    Stores and Appliances (Central Purchasing)
    Mr. Blenkinsopasked the Minister of Health why he is proposing to reduce the amount of central purchasing of general medical and surgical stores and appliances, and drugs and vaccines in the current financial year, in view of the economies that have been effected by central purchasing in the past.
    Mr. Iain Macleod: The reduction in estimated expenditure on these supplies in 1953–54 is due mainly to revision of the estimated amount of direct purchases for other Government Departments. The amount of central purchasing and contracting for the National Health Service has not been reduced.
    Mr. Blenkinsop: Are we to understand from that reply that there has been no change of policy to encourage a gradual development in suitable fields of central purchases for the Health Service?
    Mr. Macleod: If I can secure economies through this method or any other I shall do so.
    Mr. Blenkinsop: For which Government Departments is it proposed to reduce central purchases, and for what reason?
    Mr. Macleod: In those matters I act as agent for other Government Departments. It is no part of my business to control the financial arrangements they make. I act as their agent.
    Mr. Blenkinsop: The right hon. Gentleman might at least let us know to which Government Departments he is referring,
    Mr. Macleod: I have said that in this field the Health Service is not being reduced at all, which was the main question I know the hon. Gentleman had in mind. There are certain agency arrangements, many of which may have been for stockpiling for strategic reasons, for example, which no longer have to be continued. If the hon. Gentleman would like to know about any particular Department, clearly the Question must go to that Department.

    Hospital, Leicester (Superintendent's Letter)
    Mr. Bowdenasked the Minister of Health whether his attention has been drawn to the letter received by the hon. Member for Leicester, South-West from the Physician Superintendent of the Leicester Isolation Hospital and Chest Unit, Groby Road, Leicester, in reply to an inquiry about a constituent patient, a copy of which has been sent him; and whether he will make a statement.
    Mr. Iain Macleod: Yes, Sir. I regret that owing to certain misunderstandings the hon. Member's inquiries were not answered more fully and promptly. As he knows, however, the patient's operation was not urgent, and it has now been successfully performed.
    Mr. Bowden: In view of the implication contained in the letter that Members of Parliament writing to hospitals, or to this hospital in particular, are engaged in
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    politics, will the Minister say whether, in his view, an hon. Member should write on behalf of a constituent to a hospital, or to the regional hospital board, or to the Ministry itself?
    Mr. Macleod: Members of Parliament, of course, have the very fullest rights in those matters, subject to the fact—and all hon. Members will agree with this—that there are many clinical and other matters which quite properly could not possibly be divulged to them or anyone else. I very much regret the misunderstanding that took place between the hospital and the hon. Member, but I must say that I did not read such a sinister imputation into the letter he received from the hospital as he did himself.
    Mr. Bowden: Is the Minister aware that between my writing to Dr. Mackenzie in the first place, a month and a day elapsed before I wrote to him a second time, and that I then waited for a further month before I received a rather discourteous reply?

  EDUCATION

    New Schools
    Mr. G. Jegerasked the Minister of Education how many new schools have been opened since October, 1951; and how many of these had been started after that date.
    The Minister of Education (Miss Florence Horsbrugh): Between 1st October, 1951, and 1st February, 1953, 643 new schools were taken into use, including nine which were started after 1st October, 1951.
    Mr. Jeger: Do not these figures show how nonsensical and misleading is the current Conservative propaganda which claims credit for all the new schools now being opened month by month, when the overwhelming majority of them were started by the right hon. Lady's predecessor?
    Miss Horsbrugh: I do not know whether I can help the hon. Gentleman by repeating some of the things I have said before—[HON. MEMBERS: "No."]— but I never give up hope. If one states the truth, it may be understood some time. The schools are being completed

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    more quickly, and, therefore, we are getting school places at a quicker rate than ever before.
    Miss Ward: Is it not a fact that the contribution the Conservative Government have made is that we have enabled money to be made available, which would not have been done if the party opposite had remained in power?
    Miss Horsbrugh: It is the fact that we have done more schoolbuilding work this year than ever before, and we have been able to produce the money, the materials and the labour.
    Mr. Jeger: Would the right hon. Lady direct her inquiries to the Conservative Central Office propaganda department and get them to stop their misleading propaganda on this matter?
    Miss Horsbrugh: I should be only too glad to do so if they were not giving full recognition, as I hope they are, to the wonderful work that is being done.
    Mr. Blackburnasked the Minister of Education when the first new school begun after January, 1952, was completed; and the total number of such schools, the local authorities concerned and the total cost.
    Miss Horsbrugh: The following is the information requested: Hampshire, Blackfield County Primary, £12,585, completed in December, 1952; Derbyshire, Birley County Primary, £56,400, completed in February, 1953.
    Mr. Blackburn: In view of the fact that the first school was obviously completed in under 12 months, would the Minister not agree that it is now possible to accelerate the present school building programme in order to relieve the distressing conditions that exist in schools in so many parts of the country?
    Miss Horsbrugh: Yes, it is, and we have accelerated it. In most cases we seem to be taking half the time to build schools that was taken before.

    Roundway House, Devizes
    Mr. Hollisasked the Minister of Education to make a statement on the future of Roundway House, Devizes.
    Miss Horsbrugh: The local education authority for Wiltshire have fully considered the future of Roundway House
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    and have reached the conclusion that it should be sold. I have informed the authority that I am prepared to consider favourably this proposal.
    Mr. Hollisasked the Minister of Education what sum of public money has been spent in the purchase and subsequent upkeep of Roundway House, Devizes.
    Miss Horsbrugh: The cost of purchase was £7,500. The gross cost of upkeep, including cost of necessary repairs, for the four years ending 31st March, 1952, totalled £10,134, but the cost to public funds was reduced by letting.
    Mr. Hollis: Was not this a very odd purchase by the Ministry of Education in the time of the last Government, for which my right hon. Friend was in no way responsible—the purchase of Round-way House for a teachers' training college when apparently it was highly unsuitable for that purpose and could not be used?
    Miss Horsbrugh: It is quite clear from the figures I have now given that it was unfortunate that this purchase was made.
    Mr. G. Thomas: Is the Minister reposing her confidence in the same advisers who advised the previous Minister on that transaction?
    Miss Horsbrugh: I could not tell the hon. Gentleman who actually advised my predecessor about this, but I can assure him that I shall look very, very carefully into the matter when purchases of this sort have to be made in future.

    Schoolbuilding, Staffordshire (Mineworkers' Families)
    Mr. Swinglerasked the Minister of Education to what extent the prospective influx of mineworkers and their families from other coalfields has been taken into account in determining the size of the 1953–54 schoolbuilding programme for Staffordshire.
    Miss Horsbrugh: No provision was made in the 1953–54 building programme for the erection of a new school in Newcastle-under-Lyme. As I told the hon. Member last October, the local education authority and my Department are fully aware of the arrangements being made for the housing of miners in this

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    area, and its needs will be further reviewed in relation to the 1954–55 programme.

    Adult Education (Discussions)
    Mr. Swinglerasked the Minister of Education if she has now received the information which she requested from adult education bodies; the nature of this information; and if she can now make a statement about the proposed 10 per cent. cut in grants.
    Miss Horsbrugh: I have now received the information from the responsible bodies and have arranged to meet their representatives shortly. Until I have met them I cannot make any further statement.
    Mr. Swingler: Are we to take it that the Minister accepts the assertion in the last part of the Question; and are we to understand that the right hon. Lady has temporarily withdrawn her proposal for a 10 per cent. cut in these grants pending discussions with responsible bodies?
    Miss Horsbrugh: The discussions with responsible bodies were arranged from the start, and have been going on for some time. I cannot give the hon. Gentleman any more information until the discussions are concluded. As I have stated, I am meeting them soon.
    Mr. Swingler: But is the Minister having discussions with the responsible bodies on the basis that she is proposing a 10 per cent. cut, or has she withdrawn her 10 per cent. cut proposal and is now discussing the situation anew? What is the situation?
    Miss Horsbrugh: The situation is the same as it was some months ago: discussions are going on. The only difference is that the discussions will, I hope, now be concluded, and I shall be able to inform the hon. Gentleman.
    Mr. Ede: When does the right hon. Lady expect to be able to publish the correspondence that has passed?
    Miss Horsbrugh: As I have said before —and I think the right hon. Gentleman will agree—it is useful for Ministers in charge of Departments to have consultations, which will be looked upon as confidential, before coming to decisions. That
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    has been the practice in every Department, and if a Minister wanted to have consultations with outside bodies it would be a pity if, before the consultations concluded, the whole thing had to be published. We would not get the same value from the consultations which take place.
    Mr. Ede: Would the right hon. Lady now answer my question?
    Miss Horsbrugh: I propose to make a statement when the discussions are concluded, but no statement before then.
    Mr. H. Morrison: Surely this initiation of discussions, starting with a communication—a letter—was part of an important decision on policy by the Government or of a provisional decision on policy by the Government. When will the right hon. Lady learn that Parliament has a right to know of such Government decisions, and why does not she respond to the elementary request of my right hon. Friend and publish the letter?
    Miss Horsbrugh: As soon as there is a Government decision—and I hope that it will not be long delayed—I shall inform Parliament. There has been no Government final decision as yet. Consultations have been going on, as I am sure they did several times when the right hon. Gentleman was in charge of a Department, which are helpful to the Minister before final decisions are taken. I think that it would be a great pity if the custom of having these consultations had to be given up.
    Mr. Shinwell: I think that for purposes of elucidation the House is entitled to know the facts. Will the right hon. Lady tell the House on what basis these discussions are proceeding, and has any proposal of a financial character yet been made to the bodies concerned?
    Miss Horsbrugh: I am continuing these discussions, which have been regarded, I thought, as confidential. I hope that the discussions will be completed very shortly, and then I shall make a statement to Parliament.
    Sir H. Williams: On a point of order, Mr. Speaker. May I inquire why four questions should be asked in series by Privy Councillors, abusing their privileges in this House?
    Mr. Speaker: That is not a point of order.
    Mr. Langford-Holt: Will my right hon. Friend reject the principle put forward rather surprisingly by two ex-Home Secretaries that before a Minister reaches a decision the correspondence and the discussions should be made public?
    Several Hon. Members—
    Mr. Speaker: Order. It is well after 3.30.

BUSINESS OF THE HOUSE
Mr. H. Morrison: May I ask the Leader of the House to state the business for next week?
The Lord Privy Seal (Mr. Harry Crook-shank): The business for next week will be as follows:
MONDAY, 20TH APRIL—Conclusion of the general debate on the Budget resolutions.
TUESDAY, 21ST APRIL—Lords Amendments to the Transport Bill.
WEDNESDAY, 22ND APRIL—Report stage of the Budget resolutions.
Motion to commit the University of St. Andrews Bill [Lords] to the Scottish Standing Committee under Standing Order No. 60.
As the House is aware neither of these items of business is debatable under the Standing Orders.
Lords Amendments to the Transport Bill.
THURSDAY, 23RD APRIL—Second Reading: National Insurance Bill.
FRIDAY, 24TH APRIL—Private Members' Bills.
Mr. Morrison: Will the right hon. Gentleman be good enough to take note that we shall be asking for an early date on which to have a general debate on foreign affairs?
Mr. Crookshank: Yes, Sir. The Government will be very pleased for discussions to take place through the usual channels.
Viscount Hinchingbrooke: Can my right hon. Friend say whether it is proposed to suspend the rule on Tuesday?
Mr. Crookshank: I think that we shall have to do that as a precautionary measure.
Mr. Shinwell: Has not the right hon. Gentleman a remarkable grasp of the obvious?
Mr. A. J. Irvine: With reference to what the right hon. Gentleman has said about a debate on foreign affairs, and having regard to the fact that incomparably the most important event in recent weeks has been the sign of alteration in Soviet policy, will the Government afford two days' debate on this subject, and bear in mind the widespread public disquiet at the apparent lack of response of the Western Powers?
Mr. Crookshank: That is a suggestion which might be discussed through the usual channels, and I think I would rather leave it there at the moment.
Mr. Mellish: Will the right hon. Gentleman take note of the fact that the Report stage on the Education (Miscellaneous Provisions) Bill is eagerly awaited by many hon. Members and that three million people are waiting for the Bill to become law? Can he say when the Bill is likely to be discussed?
Mr. Crookshank: I was only asked to state the business for next week. I cannot get the Bill in next week's business, but I am quite aware of its importance.

MR. SPEAKER (ST. ANDREWS UNIVERSITY DEGREE)
Mr. Speaker: I have to inform the House that the University of St. Andrews propose to do me the honour of conferring upon me tomorrow the degree of Doctor of Laws. I therefore ask for the indulgence of the House and for leave of absence to enable me to attend the University for that purpose.
Mr. Crookshank: I am sure that the whole House will be happy to congratulate you, Mr. Speaker, on this auspicious occasion.
Mr. Morrison: May I associate myself with the Leader of the House on that point. We are very glad about it. Would you assure the University of St. Andrews that it has been announced today that progress has been made with the Bill in which they are interested?
Mr. Speaker: I thank the House for what has been said.

ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee [Progress, 15th 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
  3.38 p.m.
  The Economic Secretary to the Treasury (Mr. R. Maudling): It will be my intention this afternoon to try to deal with the economic background to my right hon. Friend's Budget, and at the same time I should like to make a certain number of comments upon the speech of the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell).
  The main economic developments last year were the dramatic change in the balance of payments of the United Kingdom and of the sterling area, the reversal of the downward trend of the gold reserves, and the restoration of international confidence in sterling. In 1951, the United Kingdom had a large adverse balance of payments. In 1952, we achieved a healthy surplus. In 1951, there commenced a rapid decline in our gold reserves. In 1952, that decline was checked, held, and the reserves started to mount again. In 1951 we thought that confidence in sterling had begun to flag and waver. In 1952, confidence in sterling was restored. Let no one underestimate the importance of all these things to the livelihood and the standard of living of everyone in this country. As a trading, importing and banking nation, we cannot maintain our
  378
  prosperity and our standards of living unless we have a currency which is acceptable in the world and unless we are able to buy the food imports which we need to keep our people fed and the raw materials to keep our industry turning over.
  Those were the major developments of 1952—the change between a deficit and a credit in the balance of payments, and a reversal in the trend of gold reserves. That was no mean achievement. It was a massive achievement of which Her Majesty's Government, and more particularly the country as a whole, are entitled to be proud. We made clear once again to the world the strength and the resilience of the British economy. We are entitled to be proud of that fact.
  I was a little sorry that the right hon. Gentleman seemed in his remarks yesterday to endeavour to prove that this was merely a matter of good fortune and chance. This was not an achievement to be tucked away at the back of a party newspaper or hidden away under rather tendentious headlines about axeing subsidies which have not actually been axed. I hope the right hon. Gentleman will not —I am sure he will not—fall into the error of regarding our national problems and difficulties in a rather different light because he is looking at them from the other side of the Chamber.
  Let us consider the situation which Her Majesty's present Government inherited from our predecessors. In late 1951 when we formed a Government, the gold reserves were running out at a faster rate than they had ever done before. It was the most rapid run-down we had yet had. In 1949 the device of devaluation had already been employed, and even at this lower rate of valuation of sterling the reserves were running out faster than they had ever done before.
  It is a fact also that the recession in the textile trades had already commenced and was spreading, a fact which may have escaped the attention of the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) when in September of that year he was advising housewives to stop buying textiles, perhaps oblivious of the fact that, if people do not buy goods, manufacturers do not employ men and women to make them. That was the situation, a situation of rapid depletion of our reserves, a situation of growing recession in the textile industry. It is

  379
  from that situation that, with the direction of our economic affairs under my right hon. Friend, we have restored the position, achieved a breathing space and regained the economic initiative.
  What are the factors which led up to this major change in our economic position? The right hon. Gentleman analysed them with great detail and with much accuracy of figures yesterday, but in doing so he did not entirely set matters out in their true perspective. It is true that if we look at the figures alone, the major difference in our balance of payments between 1951 and 1952 was the reduction in the cost of imports arising partly from the fall in import prices and partly from the reduction in the physical volume of imports.
  These were not wholly accidental factors. The reduction in the volume of imports was due to the restrictive measures taken by my right hon. Friend. One of the first tasks he had to undertake on becoming Chancellor of the Exchequer was to impose these restrictions. No one wants to impose restrictions, but when one's last reserves are running out at that rate one has no alternative. It is not unfair to make the comment that the right hon. Gentleman fairly said, when the restrictions were imposed, that he agreed with them and thought they were necessary. How much better it would have been if this had been done earlier when he was the Chancellor of the Exchequer, if it had been done before the General Election which he and his right hon. and hon. Friends decided to have at that time.
  The restrictions that we imposed were of very great importance. They were absolutely essential. At this stage I pause for a moment to say that it is a great tribute to the value of the Organisation for European Economic Cooperation that, despite the restrictions that we imposed, countervailing restrictions were not imposed by our fellow members of the same organisation. We imposed these restrictions as a deliberate act of policy.
  What of the reduction in import prices? It is just not true to say that the United Kingdom policy had no effect on import prices. Perhaps with the exception of America, this country is the greatest imparting nation in the world.
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  The United Kingdom market for many commodities is the world's largest market. What the market does, restrictions imposed on the market, monetary policy with its consequent effects on the level of demand in the United Kingdom market, inevitably affect import prices. It is not true to say that the fall in our import prices is wholly unrelated to policy in the United Kingdom.
  Mr. Joseph T. Price: What about Argentine meat?
  Mr. Maudling: I am trying to develop a consecutive argument, and I hope hon. Members opposite will allow me to do so, although they may not agree with it.
  My third point is that it is true to some extent falling prices have assisted us, but if hon. Members opposite refer to that it is only fair for them also to refer to the fact that, in a world where markets are becoming less inflationary and prices are tending to drop, it becomes increasingly difficult to sell exports. There are two sides to the story. Though we get some assistance from falling prices, that factor also greatly increases the difficulty of maintaining the level of exports.
  There is also the confidence factor. This is immensely important. At a time when the balance of payments is going against us, the trend always tends to be exaggerated by what are called "leads and lags"; in other words, traders seek to delay payment for British goods which they have received and demand early payment for goods sent to this country because they think there may be a variation in the rate of United Kingdom exchange. That confidence factor can have a very big effect indeed. It has a cumulative effect.
  When the balance of payments is going against us, the confidence factor puts a new and sometimes dramatic weight on it. That is one of the explanations for the discrepancy to which the right hon. Gentleman referred between the balance of payments figures and the trade figures. Normally we pay for our goods in advance of the receipt of them in this country. Therefore, we see the effect of the import restrictions in the trade figures a good deal later than in the other case. At the time of the rapid exhaustion of our gold reserves the confidence factor was of the greatest possible importance.

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  In dealing with the confidence factor, I ask the Committee not to underestimate the very great effect of our monetary policy. In the first place, there is the direct effect of a tighter credit policy which not only restricts credit internally but also restricts it externally. The effect of a tighter money policy is to countervail the confidence factor. Quite apart from the effect of dearer money, the psychological effect of the increase in the Bank rate last year from 4 per cent. cannot possibly be over-estimated. That is borne out by the dramatic change which took place shortly afterwards in the movement of our gold reserves.
  I beg the Committee not to underestimate the importance of confidence in sterling to this country. It is essential to us. It is essential to us as importers that we should be able to pay for the goods we need in currency acceptable to exporters abroad. It is essential to us as traders that the currency in which a good half of the world's trade is conducted—it is not only our trade but half the world's trade—shall be sound and acceptable.
  Then there is the position of our invisible exports. Our invisible exports, the earnings of our merchanting, insurance, shipping and banking services in the City of London, Liverpool and elsewhere, are of great value to our balance of payments, not only for what they earn themselves but also for the visible trade which follows the invisible activities. I ask hon. Members not to imagine that the value to this country of our invisible earnings stops just there; without the activities of our banking houses, our finance houses and so on, a great blow would be struck at our visible trade.
  Then, as bankers for the sterling area, we have received deposits, as it were, from other members of the sterling area which are invested in the British economy, and, from the point of view of our being bankers, it is most important that confidence should be retained in the currency in which those balances are placed.
  Finally, there is the question of cheap sterling transactions. Confidence in sterling flagged towards the end of 1951, and the cheaper sterling enabled operators in different countries to acquire dollars or hard currencies for sterling or for commodities that we should have
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  obtained through the normal channels of trade.
  It is, in the opinion of Her Majesty's Government, of the greatest importance to maintain confidence in sterling. This has been reflected in 1952 in the growing confidence on the world markets, and since the end of 1952 in the constant high level of the quotation of sterling against the dollar, which so often in recent months has been knocking against the upper level of 2.82. So much for what the right hon. Gentleman called the jungle of "phoney" propaganda about 1952.
  I was a little interested in his use of the word "Jungle," because I had been watching the development of his political and economic themes in recent speeches. I have admired the skill with which he was threading his way through the Labour Party jungle by swinging from one olive branch to another olive branch.
  I turn now to the question of the level of activity at home and the level of production. Clearly the duty of any Government is to maintain the highest possible level of economic activity, but we must never forget that, placed as we are in this island with our import and export needs, it is quite possible for us to have a very high level of economic activity and still become bankrupt. We can produce a great deal, but if we are not producing the goods that the world markets require and at competitive prices, then we cannot afford to pay for our imports.
  We cannot live in this country by taking in each other's washing. We can produce activity by sending people to dig holes in the ground, but we cannot sell holes in the ground for dollars. [Interruption.] I am sorry if this appears obvious, but it is important. I am sorry if what I have said to hon. Members opposite is something of which they are aware, but I may have been misled about the awareness of some of them by their speeches and the actions which were taken by previous Governments. The consistent factor in the financial policy of the previous Labour Governments was to ignore the essential connection between the state of the home market and the balance of payments.
  Obviously we must be able to produce goods which the world will buy. In a

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  changing world that means change and re-adjustment in the economy. It is true that the index of production in the course of this year has fallen, but it has recently started to climb again. As a result of the Budget, it will climb a great deal further. If we had not taken the measures we had, and if we had continued the policy of our predecessors, the index of production would have fallen drastically because we should no longer have been able to import the raw materials that we need.
  There has been a very great change in the whole world economic climate since the days of the previous Government. It is no longer a question of producing goods which, broadly speaking, sell themselves, but a problem of selling at competitive prices and also at competitive delivery dates. That is what underlay a good deal of the policy of 1952.
  The right hon. Gentleman the Member for Leeds, South, himself took measures which had effect in 1952 by abolishing the initial allowances. This was designed to reduce investment and to make room for defence and exports. Why does he criticise my right hon. Friend and make great play of his claim to make room for exports. That is precisely what we did in 1952. It is all very well to say, "What is the good of making room for exports if you cannot sell them?" But the answer to that is, "What is the good of getting export orders if the economy is so overloaded that you cannot meet them?"
  The truth is that in the changing conditions we have had to meet, with the disappearance of the world sellers' market, a more flexible economy has been essential. The policy of the Labour Party was to tackle inflation by a Budgetary surplus based on high and excessive levels of expenditure, while ignoring the efficacy of the monetary weapon. There was no doubt that it was a courageous move, particularly the move by Sir Stafford Cripps in maintaining the Budget surplus, but it was the wrong thing to do. It was based on a high level of expenditure, and it ignored the use of the monetary weapon, which experience in the last year has shown to be far more efficacious than hon. Members opposite ever were prepared to admit.
  Not only is the monetary weapon more flexible, but the point is that the cost of
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  dear money is a great deal less than the cost of a vast surplus. When people talk about the cost of dearer money, they would do well to realise that the costs given in estimates are gross and not net. and that the cost of a monetary weapon is a great deal less than the cost of a large Budget surplus. Surely it is only sense if we want to restrict the monetary demand in the country that we should restrict spending of borrowed money by a tighter credit policy rather than by restricting the amount of money available by taking it away from our people in the form of higher taxation.
  The problem which the Chancellor has to face lies between two dangers, the danger of inflation and a decline of exports, and, on the other hand, a danger of excessive disinflation, which would lead to a waste of our resources. The same thing applies abroad. The right hon. Gentleman the Member for Leeds, South referred to the question of making sterling scarce. He said that he recognised that it was a good thing to make it scarce but a bad thing to make it too scarce. In that he is entirely right. The fact is that the value of a currency is determined by supply and demand, and if the currency is too easily available in the world the value of the currency will decrease. That is why we have taken steps to reduce the supply of sterling in the world. That is why we have taken pains to make sterling more scarce both by the many cuts in the United Kingdom and in the sterling area and by the monetary policy to which I have referred.
  On the other hand, if sterling is made too scarce we run into the difficulty of selling exports, and that is why recently we took the measures which we did to relax our restrictions on imports from O.E.E.C. That was a bold move to make, because, as the Committee is aware, our position in O.E.E.C. is that we have still a large outstanding debt of some £200 million. I do not wish anyone to underestimate the importance of this relaxation. The right hon. Gentleman rather implied, I thought, that we were pursuing a policy of deliberate restrictions on international trade and finance. I do not think that that squares with our action in O.E.E.C. and elsewhere, and, in view of the opinions he has expressed, I should like to ask him what is the joint policy of his party on this question of imports

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  from Europe? Do they believe in expanding them or restricting them? So much for the position abroad.
  At home the position is the same, namely, to maintain the level of purchasing power but not allow it to be excessive or too small. That was the policy stated by my right hon. Friend in his Budget last year; and he maintained the level of personal consumption by not imposing any additional or new taxes, and restrained investment by the monetary policy and by other means. Both those things have happened.
  The other development in our internal policy is the sharp change in the accumulation of stocks, and I want to deal with this point for a moment. First, it should be made clear that what happened in 1952 was a decline in what the Americans call the "inventories" in industry. In 1952 we ceased to accumulate inventories at the very rapid rate at which they were accumulating in 1951, and a very sensible thing it was, too. In 1951 we were accumulating inventories at the top of the market. That was not a very sensible thing to do, but it always happens in circumstances where there is a loose credit policy. People were going into goods rather than into money. We were accumulating inventories at the top of the market and at the expense of our overseas reserves.
  The right hon. Gentleman has pointed out that the improvement in our overseas position is balanced by this difference in the rate of accumulation of inventories. But that is precisely our point. It is ridiculous to go on accumulating goods and inventories at the cost of essential overseas reserves. In his broadcast last night, the right hon. Gentleman said that in taking account of the position of a company you must take account of the stocks. I quite agree, but would it be sensible to accumulate very large stocks, and to go to the shareholders and say: "We have piled up great stocks. We have used up our credit and are going into bankruptcy. It is a pity that the company cannot any longer continue; but look at the large stocks we should have if we were still running."
  Mr. Hugh Gaitskell: I was pointing out that it was untrue to say that the improvement in our overseas trade balance was the result of reduced consumption here, and that it has simply
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  been the result of ceasing to build up stocks, plus, incidentally, drawing down stocks to the extent of £100 million. I did not criticise that. I criticised the unemployment resulting from the Government's policy in trying to carry it out.
  Mr. Maudling: The position about stocks I should like to make clear. In spite of what the right hon. Gentleman says is a difference of £100 million in stocks in the pipeline, there was some increase in the recorded stocks of imported commodities; not the entire £100 million but a large proportion of it. I agree with the right hon. Gentleman that we have ceased to accumulate inventories. That is exactly what we wanted to do. We were accumulating them at the cost of our gold reserves. It seemed plain common sense in those circumstances to stop accumulating excessive inventories.
  The position we reached this year was as follows. Last year, although the surplus on current account was only £80 million, the Government were able to maintain their capital expenditure without causing inflation. In fact, on the whole, the inflationary pressure eased. Therefore, it seems reasonable to argue that it is possible for the Government this year again to cover capital expenditure of a similar size or extent without any greater surplus on current account. My right hon. Friend showed that at current rates of taxation the surplus would considerably increase from £88 million to over £250 million. But it is clear that the Government had no need to budget for a greater surplus, in broad terms, than the level achieved last year.
  The Government argued that it would be possible to remit some of the burden of taxation by reducing the prospective surplus by something in the neighbourhood of £150 million, without causing any additional inflation because the remissions of taxation created would either go into savings and not be expended or, in so far as they were expended, would be matched by new production that could be generated from the spare capital already in existence in the economy. I want to make that point clear. It is important, from the point of view of how overseas countries look at our economy, to realise that it is quite possible in the circumstances to reduce the prospective surplus in the way my right hon. Friend

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  has done without in any way running into the danger, or the result, of inflationary pressure.
  Having decided that this amount of taxation should be remitted, we ask, as our next question, how the remissions should be distributed? The view taken by my right hon. Friend was that we had to stimulate and encourage exports. The right hon. Gentleman seemed to throw a certain amount of doubt on this and he asked why, if my right hon. Friend had a surplus of £291 million, which was pretty near his figure of £300 million, it was on that showing a good thing to stimulate further exports? Of course, the surplus of £291 million includes the sum of £120 million for defence aid. The right hon. Gentleman was rather less than fair to my right hon. Friend the Chancellor of the Exchequer when he alleged that in his speech my right hon. Friend had tried to gloss over it.
  Mr. Gaitskell: As I understood the Chancellor's statement about the O.E.E.C., the target figure of from £300 million to £350 million was after taking account of defence aid.
  Mr. Maudling: Obviously defence aid is an important factor, and it is the next item I am coming to. I am sorry if I misunderstood what the right hon. Gentleman was saying, which I thought was that my right hon. Friend had concealed the fact that a large element in the surplus was defence aid. In his speech, my right hon. Friend clearly referred to the fact that we received United States defence aid last year of £121 million. There is a great difference between the defence aid that we have received and the economic aid received by the previous Government. The defence aid is received in respect of the additional burden of defence expenditure, a very heavy direct burden on the balance of payments. That is why there is a very great difference between the two.
  How are we to achieve our object and stimulate exports? There are people who say that the right financial policy to stimulate exports is by further contracting the home market. It is true that if demand in the home market is excessive it detracts from exports, but that argument can be carried rather too far. There is a point beyond which disinflation hinders exports
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  and economic activity generally. Some economic commentators tend to overestimate the flexibility of our resources and seem to think that if we reduce employment in one place it increases automatically elsewhere. That is as if a young woman lost her job as a cinema usherette in South London and was immediately moved to the Midlands, where she changed her job and her sex and started work in a drop forging plant. That is the fallacy that underlies—
  Mr. Aneurin Bevan: It is a philosophy described by the Federation of British Industries as "the mobility of labour brought about by unemployment."
  Mr. Maudling: It is a fallacy that underlies a certain amount of economic comment, and that underlay the question that the right hon. Gentleman asked yesterday, which was why people engaged in accumulating stocks did not immediately go and do something else.
  There are two other ways in which Budgetary policy can stimulate exports. The first is by the provision of artificial tax incentives to exports and by discriminatory taxes in regard to exports. That is a method practised by a number of European countries and it has been suggested that Her Majesty's Government should go in for the same policy. The opinion of Her Majesty's Government is that it would start a race in this type of incentive to export by artificial stimulus that would do nobody any good but would strain the whole economy of the world in the long run. We have decided to try to restrict the use of these artificial devices in Europe.
  The main way in which the Budget helps to stimulate exports is by stimulating the expansion, re-equipment and modernisation of British industry. No one can doubt the paramount importance of stimulating those processes, but there seems some doubt whether what is holding back industrial expansion is the shortage of risk capital. The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) referred to figures relating to the shortage of risk capital, and the right hon. Gentleman by implication agreed that there was a shortage of capital for industrial expansion by supporting the re-introduction of initial allowances, the whole purpose of which is to give short-term loans to industry.

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  Much play has been made with the figures in the Economic Survey over the financial position of companies in 1952. The right hon. Gentleman was slightly in error in this respect when he referred to a figure of £800 million as being the amount of money available to companies last year for the reduction of debt, and so forth, after paying taxes, dividends, interest and other fixed charges. Included in that figure are £167 million additions to tax reserve. I do not think that the money put on one side to meet tax liability can be regarded as available for the repayment of other debts.
  Mr. Gaitskell: The figure is in the text of the Economic Survey.
  Mr. Maudling: That is exactly what I was pointing out. Anyone with experience of industry knows that at the moment there are shortages of capital for expansion. The main brake on the expansion of industry is not that, however. It is that we cannot expect in a private enterprise economy the healthy and flourishing development of industry in circumstances where, if the enterprise takes a risk, the entire loss is borne by the enterprise and the greater part of any profits is taken by the Chancellor of the Exchequer. That is why the only effective way of encouraging re-equipment and industrial expansion is by reducing the total burden of taxation on industry, as my right hon Friend said.
  Mr. H. Rhodes: If that is so, why was it that in the time of Sir Stafford Cripps, when £25 million were made available for the Lancashire cotton industry, only £16 million were taken up?
  Mr. Maudling: That might well be due to the fact that the companies concerned considered that the machinery they could purchase would not have been justified in their particular circumstances. The argument I am making is that the right, indeed the only, way to encourage industrial equipment and re-equipment is by reducing the total load of taxation on industry, and this is the prime purpose of the Budget of my right hon. Friend.
  Taking his major measures in turn, the Excess Profits Levy, falling as it does on marginal profits and increased output, was clearly a tax that must be brought to an end as soon as possible. There is a clear difference between the circum-
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  stances of 1952, when the important thing was to restrain industrial investment, and the circumstances of 1953, when our object is to expand industrial investment. Where conditions change, Her Majesty's present Government are anxious to change their policies with them.
  Mr. C. R. Hobson: Like a pendulum.
  Mr. Maudling: I can well understand that the right hon. Gentleman may criticise that point of view, since most of the creative political thought of the Labour Party is devoted to solving problems that have been solved long since.
  Turning next to Purchase Tax, the right hon. Gentleman should not lay too much stress on luxury articles since what is a luxury sometimes to the consumer is not a luxury to the man who is trying to make and sell the article. Where there is spare capacity in industry, obviously there is a strong case for reducing Purchase Tax in the way that my right hon. Friend has done.
  Now I turn to the final and most important proposals. The one which has aroused the most anger from right hon. Gentlemen opposite is the reduction of the standard rate of Income Tax. The reasons for adopting this measure are clear, that it is the broadest possible sweep of taxation. By reducing the standard rate of Income Tax one affords relief to companies, partnerships, sole traders, professional men, farmers and 16½ million individual taxpayers. No other measure can provide the same broad sweep of relief as can the reduction of the standard rate of Income Tax.
  Also one must not under-estimate the psychological effect of a direct frontal assault on the main burden of direct taxation. The party opposite have developed the argument that these reductions in Income Tax are unacceptable because, as a result, the richer man gets a greater reduction of taxation than the poorer. That is an inevitable result of any progressive system of taxation. It is the result particularly of the increasingly steep levels of direct taxation which were imposed during their periods of office, and the only logical conclusion of the argument is that it is never justifiable in any circumstances to reduce the standard rate of tax. The argument of right hon. Gentlemen opposite appears to be that we

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  are going to the extent of allowing the wealthy man, through his top slice of income, to retain a whole shilling out of every £. If that is their main opposition to our Income Tax changes, we are certainly prepared to face it.
  Before I end there are two pieces of information I will give to the Committee. First, there is the technical matter about the abolition of the Excess Profits Levy. For technical reasons, an additional Resolution will be necessary before the Committee reports to the House. We are putting this down today, hon. Members will be able to study it over the weekend, and we shall ask the Committee to take it on Monday.
  There is also the Money Resolution on the Order Paper today which contains a reference to the post-war refunds of Excess Profits Tax. These refunds are at present payable on the giving of certain undertakings, the most important of which is that the money will be used to develop or re-equip a specified business This enabled industry to re-equip itself and overcome the back-log of investment and deterioration which occurred during the war.
  It was never intended that this refund should be policed indefinitely. Over £260 million have already been paid and the Advisory Panel under the Act of 1945 have urged that taxpayers should be released from existing undertakings and that future refunds, probably not exceeding £10 million, should be paid without further undertakings. We have accepted that recommendation, and provision will be made accordingly in the Finance Bill. That is the reason for the form taken by the Resolution on the Order Paper.
  I sum up by referring to the tax reduction proposals of my right hon. Friend as a whole. They are designed to lighten progressively the burden on industry and enterprise. The Income Tax concessions take effect, from the Budgetary point of view, this year. The restoration of the initial allowances will take effect next year. The abolition of E.P.L. at the end of this year will take effect the year after. Thus we are putting forward a series of measures designed to reduce industrial taxation burdens over a period and designed to enable businesses to plan ahead. I am sure this will meet with the approval of the right hon. Gentleman the
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  Member for Ebbw Vale (Mr. Bevan), who so often criticises the Treasury for taking the annual review of financial affairs represented by the traditions of a pastoral society. We are doing nothing of the sort. We are looking ahead three years.
  Mr. Bevan: May I point out to the hon. Gentleman that, whereas I congratulate the Treasury upon making some slight advance, our Parliamentary procedure still holds, and that next year they need not continue it.
  Mr. Maudling: I have a feeling that next year we shall certainly continue it. not for reasons of constitutional Parliamentary procedure, but for reasons of continuing political fact.
  The purpose of these proposals, taken together, is to give industry a real alleviation of the burden of taxation. It has been suggested by some commentators—it was referred to by my right hon. Friend the Member for Blackburn, West (Mr. Assheton)—that the Chancellor, in committing forward this amount of revenue, is taking a risk. Whatever a Chancellor does, he takes some risk. If he takes no risks at all, if he allows the status quo to continue, he is taking some risk; but in this case what he is doing is giving an opportunity to British industry to expand production, to create more wealth and to expand the national product. If the national product can be rapidly and effectively expanded, clearly we can obtain the taxation that we need without any additional rate of taxation; the same rate of taxation will produce a much higher yield.
  The opportunity is taken and given in this Budget of providing for industry a reduction in the burden of taxation on enterprise and effort, which has pressed too hard in the past. It gives to industry an opportunity, which it will take, of showing how the national product and the national prosperity can be expanded and maintained and can progress under wise and sensible financial direction.
  4.21 p.m.
  Mr. Harold Wilson: Like the Economic Secretary to the Treasury, I do not propose to deal in any detail with the proposals which the Chancellor of the Exchequer has put before the Committee, the more so as those proposals were dealt with fully yesterday by

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  my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and by other of my hon. Friends. In particular, I should like to refer to the speech of my hon. Friend the Member for Small Heath (Mr. Wheeldon), whom we all welcome here. The tremendous wealth of experience that he showed of local government finance will be of great value, not only to this Committee, but to other Committees in succeeding years.
  Before I proceed to reply to some of the extravagant claims and hopes which the Economic Secretary has just been making, I ought to deal with one reference in the speech yesterday of the Financial Secretary to the Treasury, who seemed to suggest that there was something sordid and petty in the action of my right hon. Friend the Member for Leeds, South in discussing the distribution of tax concessions between different sections of the community. The hon. Gentleman went on to say that the arguments of my right hon. Friend showed the gulf that existed between us on this side and hon. Members opposite.
  If the Tory line is that it is a matter of supreme indifference who gets the tax concessions—provided, of course, that the right people get them—we shall be proud to accept that there is this wide gulf between the two parties. Certainly when my right hon. Friends, including my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) and Sir Stafford Cripps, introduced Budgets which transferred wealth from the rich to the poor, the Tory Opposition at the time were not so sublimely indifferent to the distribution of tax burdens between different sections of the community.
  The difference between us is fundamental. The Financial Secretary thinks —he said this yesterday—that since the rich pay higher taxes, a tax concession to them is, in fact, only giving them back their own, and that those who are left out in the cold ought not to object. We take the view that the taxing activities of the Government cannot be separated from the other economic activities of the community, and we regard taxes as a way of redressing the other distortions, anomalies and injustices of the economic situation. They are a means also of taking for the use of the community as a whole the wealth which the community as a whole,
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  and not any single individual, has created. It was a Labour Chancellor, or one who later became a Labour Chancellor, who said many years ago that in dealing with taxation it is not a question of how much one takes away; it is a question of how much is left after it is taken away.
  The Financial Secretary sought to justify any inequity by saying that we all have a vested interest in the solvency of the country. Of course we have; we entirely agree. But the Tory Party—and the speech of the Economic Secretary this afternoon supported this—have not yet learnt what is involved in the present economic situation, because they are still glorying in the sunshine of this entirely "phoney" and temporary recovery. [Laughter.] I hope that the Chancellor of the Exchequer does not laugh too noticeably; I may have to remind him of this again later. Before long, the Tory Party will realise how precarious and how vulnerable is our economy, and when they do so the whole structure of the right hon. Gentleman's Budget and of his economic policy will collapse like a house built of cards.
  At that stage the Tory Party will learn, as we have been warning them for some time, that the country is facing a fundamental underlying problem in its economic affairs, a problem arising in the main from the war and from the unequal sacrifices which this country assumed compared with some others. As the Chancellor himself said—and we endorsed and applauded it—some 15 months ago, this problem has been developing for 50 years and was made worse by two world wars.
  The lesson of that, when hon. Members opposite are able to disenchant themselves from the present position, is that this country, no matter what Government are in power, will be faced with at least 10 years of very hard slogging, a purposeful direction of our economy, and an intensive programme of overseas development. In that struggle, involving as it does many sacrifices and great efforts, it becomes more necessary and not less necessary to protect the weak by our taxation system, to protect those who have the lowest standards of living. That is why we must look at the Budget as a whole and not simply at the distribution of the Chancellor's surplus.

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  The Budget obviously has two sides, revenue and expenditure. This Budget, as indeed is true of every Budget, cannot be judged purely on the revenue side alone. We have to consider, for instance, what desirable expenditure has been given up in order to make particular tax concessions possible. It is now almost a cliché that the Government have entirely failed to honour their election pledge about slashing reductions in Government expenditure which nobody would feel. We remember the speech during the last Election of the present Minister of Works, which, I gather, was so highly regarded that its text was circulated to all Tory candidates, a speech in which he showed how easy it would be to achieve a reduction of £600 or £700 million in Government expenditure. Where is that reduction?
  Mr. I. Mikardo: That is why he got "the works."
  Mr. Wilson: Despite that failure of the right hon. Gentleman, the figures which have been included in the Budget involve some fairly serious cuts. For instance, the cuts, which we have debated and referred to time and time again, in the real value of the education service have to be set against these concessions in taxation on which the Government are priding themselves. It is clear also—and this is obviously the background of the Budget—that the Government are planning another onslaught on the Health Service. And so we must set these tax remissions on fur coats, jewellery and all the rest of it against the petty educational economies on which the Government are insisting and against further economies which will, no doubt, be coming at the expense of the sick.
  We have to judge not only the Budget, but the economic policy as a whole, not by the marginal effect of the particular remissions which have been referred to, but by the standard of living of the people as a whole, and particularly of the most hard-hit sections. My right hon. Friend the Member for Leeds, South last night quoted from the Economic Survey figures on food consumption showing a lowering of the average standard of food consumption in this country—only a small one, I agree, but nevertheless a lowering in food consumption standards last year, in a year when food supplies
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  were more plentiful than at any time since the end of the war. That happened at a time when there was growing inequality in the consumption of food in this country.
  If one studies the Economic Survey, one finds again—and this is a very serious fact—that in a year when there has been heavy unemployment in textiles and clothing, when there has been an abundance of textiles and clothing in the shops, on which hon. Members opposite have prided themselves, the people's consumption and purchases of clothing of all kinds have been falling. They were £832 million last year compared with £857 million in the previous year, £945 million in 1950 and £853 million in 1948.
  Mr. Cyril Osborne: The right hon. Member for Bishop Auckland (Mr. Dalton) started a buyers' strike.
  Mr. Wilson: Before the hon. Gentleman gets too excited, let me point out to him that these figures of consumption last year, in a time of freedom for all and of abundance, and, indeed, of unemployment, were lower than in the last full year of clothes rationing under the previous Government.
  Mr. Osborne: Surely the right hon. Gentleman remembers that it was his right hon. Friend the Member for Bishop Auckland (Mr. Dalton) who advised the public not to buy. It was his advice that started the ball rolling.
  Mr. Wilson: I do not think that my right hon. Friend would claim such powers for his speech. Even if he did, I would have thought that the hon. Member for Louth (Mr. Osborne) would have been one of those on the opposite side of the House who have said that the consumer must be sovereign and must decide when to stop buying. The fact is that the people decided to stop buying because food was costing them so much last year that they had nothing left.
  Then, again, the expenditure on household goods last year was the lowest for four years. In view of these figures, it is the more surprising that nothing has been done in this Budget about the D scheme and taxation on textiles and clothing, or at any rate on cotton, rayon and linen; I am not specifically mentioning wool. We all recognise—indeed, the right hon. Gentleman who is now the

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  Minister of Materials said many times last year when the scheme was introduced —that the scheme is a very rough-and-ready one. There were bound to be anomalies.
  One would have thought that after a year's experience of these anomalies the Government would have been prepared to come forward with some proposals, because at a time when the Chancellor is reducing taxation on luxuries, to make no reduction at all on clothing and textiles means that, in the first place, it is a blow against home consumption of these goods; that in the second place it might have a very serious effect, as Lancashire believes, on the future of the textile industry; and thirdly, that the Chancellor is apparently oblivious to the connection between that tax and export trade at the present time. Certainly we must expect more exports from the Lancashire textile industry and the clothing industry than the Chancellor will get from jewellery and silver plate and some of the other luxuries on which the tax has been reduced.
  I was surprised yesterday at the feebleness of the right hon. Member for Blackburn, West (Mr. Assheton). After all the fire and flame that he had been breathing last year about Purchase Tax, he was obviously so excited yesterday about the prospect of a reduction in direct taxation that he was willing almost totally to forget about the needs of Blackburn and other textile districts of a reduction in Purchase Tax.
  While referring to textiles, one of the serious points that emerge in the Economic Survey is the decline in the sales of the products of the textile machinery industry. There is no industry in this country in which re-equipment is more urgently needed than in the cotton industry, and I am bound to say to the Economic Secretary, who tried to deal with the interruption of my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes), that he must talk to the President of the Board of Trade and learn the real facts.
  Although something has been done since the war—perhaps more than some people expected—it still remains the case that that industry has got a great job ahead in re-equipping itself in order to deal with a whole generation of neglect in re-equipping between the two wars. An excessive proportion of that industry
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  is still working on machinery that was put. in before the First World War and in many cases during the reign of Her late Majesty Queen Victoria.
  Turning from the Budget proposals to the economic policy underlying this Budget, it is clear that that policy is based on two things: first, a legend, and secondly, a gamble. Under this legend we have a new folklore developing in Tory circles that recovery has been achieved as a result of certain policies adopted by this Government, and I was surprised to find one so well informed as the Economic Secretary still giving currency to that legend. The gamble to which I was referring is the Chancellor's hope that the Budget proposals will in some way, which he does not define, create conditions in which we shall see a miraculous leap forward in production and exports.
  The legend was exposed yesterday by my right hon. Friend the Member for Leeds, South. He showed how much of the recovery in our balance of payments was due to an improvement in the terms of trade for which the Government can claim no credit whatsoever. He showed how much of it was due to a reduction in investment and a reduction in stocks and work in progress, including stocks on the high seas and elsewhere outside this country. Hon. Members opposite claim credit for the reduction in imports. They are entitled to; that was a deliberate decision of the Government. But the extraordinary thing is that they blandly disclaim any responsibility for the reduction in our exports caused by countervailing import cuts in other countries.
  They have made a great deal of this claim of theirs, that despite the import cuts, visible stocks in this country are no lower than they were a year earlier. Of course, it is a fact that some raw material stocks are up and some are down, as the Minister knows, and on balance it may well be that the stocks are about the same as they were a year ago. But the fall in industrial production in 1952, and indeed the use of raw materials resulting from that, was even greater than the cuts in imports, and that is why the Government have been able to maintain stocks.
  Mr. William Shepherd: The right hon. Gentleman says that the Government are responsible by their

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  import cuts for the reduction in our exports. Has not the main reduction in our exports been in the sterling area, and is it not a fact that in the sterling area we have had practically no cuts in imports?
  Mr. Wilson: I did not say they were entirely responsible. I said that they were blandly denying all responsibility. We warned the Chancellor when he made his announcement on 6th November, 1951, that import cuts are an infectious disease, and once a Government in this country announce such cuts any other country in balance of payments difficulties is bound to catch the infection.
  Mr. Maudling Mr. Maudling rose—
  Mr. Wilson: I know the hon. Gentleman is going to tell me that we supported the cuts. In fact, I reminded him of the point yesterday. Certainly it was inevitable that some cuts should be made What was not inevitable and what should never have happened was that, immediately following the Commonwealth Conference a year ago, we should find cuts within the sterling area in our exports to other sterling area countries.
  There is nothing clever in maintaining stocks and cutting imports in a shrinking and declining economy, which is what happened last year. That is why our stocks did not fall to dangerously low levels last year. Food stocks did fall, and that has frankly appeared in the Economic Survey. This has happened under a Government which at Christmas, 1951, said that the country could not even have a token Christmas bonus because the cupboard was bare and there were not any stocks available.
  But the improvement—I am still dealing with the legend—is due not only to the cuts in imports and the reduction to which I have referred. Of course, it has been helped by the speculative movement to which the hon. Gentleman referred, and the Chancellor's success in improving confidence in sterling, and we hope that confidence will continue to be justified. It has also been assisted, as my right hon. Friend said, by United States aid.
  Mr. Osborne Mr. Osborne rose—
  Mr. Wilson: The hon. Member for Louth must realise the difference between
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  a confidence factor to which the hon. Gentleman referred and a confidence trick, because one cannot maintain real confidence under a shrinking economy for very long.
  This economic situation must be viewed against the background of declining national production. We all remember the election broadcast of the Prime Minister in which he referred to what he called the "paralysis of our national enterprise, contrivance and genius." Elect a Government of businessmen, he said, and production and enterprise would leap up. What happened? They fell for the first time since the war. Now the Chancellor in his Budget speech holds out a hope that, if all things go well and we keep our fingers crossed, this Government of businessmen may succeed by the end of 1953 in getting production back to where it was when the Labour Government left office in 1951.
  Of course the Chancellor is not without a rich reserve of alibis and excuses for the fall in production. He talks about world disinflation. My right hon. Friend dealt with that one yesterday. Conservative arguments about international statistics and comparisons are sometimes very extraordinary. One remembers that the Prime Minister, in 1949, in one of those speeches he used to make with the purpose of increasing confidence in sterling and the prestige of this country, said that
  "every one of the countries in Europe outside the Iron Curtain has got its life going in many ways better than we have done under a Socialist Government."
  He said that at a time when the United Kingdom was top of the European league in production, productivity, exports and progress in bridging the dollar gap. But what he said then his Government have now made true as a result of last year's activities.
  If we look now at the world league tables for production, we find that the statement of the right hon. Gentleman, if not accurate, was at least prophetic. If we look, for instance, at the World Economic Report, published by the United Nations, which is immediately available, showing figures of industrial production between 1951 and 1952, we find that industrial production in Western Germany has gone up by 7 per cent., in France by 4 per cent., in Canada by 3 per cent., in Italy, the Netherlands. Norway and the United States no change,

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  in Sweden down by 2 per cent., in the United Kingdom down by 3 per cent., in Denmark down by 4 per cent. and in Belgium down by 4 per cent. In these league tables only Belgium and Denmark were lower than we were. We are occupying the proud position of Chelsea in Division I at the present time.
  If we compare the figures, not with 1951, but with 1950, we find that every country is up—Germany by 28 per cent., France by 18 per cent.—except for Britain, whose production was no higher than in 1950, and Denmark, where production was 2 per cent. down. So we have the achievement that, whereas under a Labour Government Britain led Europe in production, under a Conservative Government production has stagnated so much that we are now almost last in the race.
  When one looks at the figures for the cost of living, we find that under a Labour Government, against the background of rising world prices, the cost of living rose a great deal less in this country than in most others. But in the first half of last year, for which figures are available, at a time when the cost of living fell in many countries, it rose more in Britain than in any other of the O.E.E.C. countries. One is bound to say that this is not a coincidence. These facts stem from the monetary and economic policies of the Government.
  Mr. Spearman: However much we may all agree in deploring the fall in production, would not the right hon. Gentleman also agree that it is far better to produce a little less of the things we do not want so much and a few more of those we want more for export?
  Mr. Wilson: I have noticed from the figures in the Economic Survey that we are producing a little less of certain types of capital equipment, and I notice from the Chancellor's speech that he wants to encourage the production of silverplate, jewellery, fur coats and television sets; but the point made by the hon. Member will no doubt be noted by the Chancellor.
  One of the most important things is the reduction in investment. The Economic Survey gives figures of the total amount of products of the metal goods industries. Investment last year was cut from £985 million to £940 million at 1951 prices. What is the ground for hoping for an
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  increase—which we all agree is needed— in investment goods? Does the Chancellor think that by creating more liquid balances we shall in fact get this investment, and does he think we shall get it in the right places and in the right industries? It is no use talking of investment in terms purely of quantity without talking of the direction of investment. Under the Labour Government we canalised the investment of the country into the places where it was most needed —power stations, coal mines and the expansion of steel and chemical industries and dollar export firms.
  The Economic Survey records the results of increased production as a direct result of those investments. For instance, my right hon. Friend mentioned the effect of our oil refinery programme. Now, as a result of the announcement of the Chancellor, a lot of this investment is left to go free and will, in fact, follow Purchase Tax changes, and we shall be getting more television sets when the need is for capital equipment for the export market and raising the standard of life of the backward areas.
  We have fallen a long way behind other countries. Last year we devoted about one-sixth as much to capital equipment as in the United States when the ratio should be the other way round because of our need for increasing exports. When we have to face the competiton of the re-equipped United States industries and of Japan and Germany the President of the Board of Trade knows what will be in store for us.
  Turning from investment, I must say a word about exports. The only hope the Chancellor gave us about exports was that he is leaving room for more exports. The same proud claim might have been made by pre-war Conservative Governments about their record in the derelict areas with a million unemployed. There was plenty of room for increasing employment, but we did not get the exports— or the employment. In fact, last year exports fell by 6 per cent. by volume although there was a 5 per cent. rise in prices.
  We have had very disturbing news about the export situation this morning, as I think the President of the Board of Trade will admit. In March our exports were £213 million as against £240 million

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  a year ago, despite the increase in prices. No doubt the President of the Board of Trade will give the figure when he speaks on Monday, but I calculate that there has been a fall in the volume of our exports of something between 12 per cent. and 15 per cent. compared with a year ago. Where is the Chancellor hoping to get recovery on these figures, particularly as imports are up and the visible trade gap —with all the reservations we must make about the visible trade gap—is up to £62 million in a month against an average of £41 million in the last quarter of 1952?
  One is bound to ask the Government where they hope to get these increased exports Are we to get them in the Commonwealth, where for the first time since the war our exports have fallen, for reasons with which both sides of the Committee are familiar, and about which we are all equally concerned? Is the President of the Board of Trade still hopeful of getting a big increase in exports to the dollar area? There is a battle going on there about the future of the tariff situation.
  We are very encouraged at least by some of the recent pronouncements of some progressive businessmen in the United States about the tariff position, and by the recent announcement by Congressional leaders that they hope this year to simplify the Customs procedure which, as the President of the Board of Trade knows, is no longer an organisation for collecting revenue but an organised system for the prevention of international trade.
  At the same time there are other serious facts to be considered. We have just seen that the President has appointed an avowed protectionist to the Tariff Commission. This morning we have had one of our most serious blows to Anglo-American trade with the cancellation, by the American Government, of a very big order for this country, in Seattle. I saw something of the hopes of our people; I happened to fly across to Seattle in the same plane as some of them. Though our price was one million dollars below the lowest American bid, even after paying 600,000 dollars duty, our successful bid was set aside, and we have lost that possibility of earning dollars. It was set aside by the American Secretary for Defence,
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  if the statements in the Press are correct. No doubt the President of the Board of Trade will tell us rather more about the matter when he speaks on Monday.
  The President of the Board of Trade (Mr. Peter Thorneycroft): It was not announced in the Press this morning that it was a cancellation. What was announced was that the offer had been withdrawn in order that new specifications should be drawn up. I am not challenging the proposition of the right hon. Gentleman, but I thought he would like to be accurate as to the exact state of the game at the moment.
  Mr. Wilson: The right hon. Gentleman is technically correct, but some of us have suspicions about the reasons for the withdrawal and the altered specifications; I see that the Chancellor has the same doubts. Certainly it is expected in the United States that the specifications will be altered in such a way that we cannot hope to compete. I hope that the representatives of the right hon. Gentleman the President in the United States are being very active at this time in calling the attention of the American Government to the feeling in all quarters of this Committee about what is going on.
  It is unfortunate that the President of the Board of Trade should choose this moment for sacking his superintending trade consuls in the United States. Just at the time when we want to expand dollar trade, and when they have done a first class job in the areas in which they have been functioning, the right hon. Gentleman has had to give way, as I believe, to the pressure of the establishment department of the Foreign Office, who never liked them anyway. I was in Chicago a few weeks ago, and I gained some idea of the consternation which this decision has caused there, and the extent to which a lot of people over there think that it reflects on the determination of the Chancellor, which we all know is real, to have trade not aid.
  I have referred to the United States. What of Canada? I said something about that in a speech in the House a few weeks ago. I think that our problem there must be that of expanding our exports of capital goods equipment. The market is wide open to anything we can sell, but we are losing order after order because of our long delivery dates; and,

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  worse still, because delivery dates that are quoted are not honoured when the time comes. The previous Government announced, at the time of the armaments programme, that exports of engineering goods to Canada were to rank as of equal priority to defence orders. I hope that the President of the Board of Trade will tell us next Monday whether this Government have honoured that pledge which we gave, because the people of Canada are certainly very doubtful about it.
  I do not know if we expect increased exports to Europe. I turn to South America, where only this week we see that the Argentine has defaulted on the undertaking it gave to provide a list of goods which it was going to import from this country. We see the position summed up in the Economic Survey, in which it is stated that there is little prospect of expanding world markets, and that, therefore, within existing world markets we have to struggle as hard as we can to try to get a bigger share. That is a very unprofitable business and a big struggle. The Government should be doing everything in their power not to talk about disinflation abroad and the condition of world markets but to try to expand the whole basis of world trade.
  There is the whole question of East-West trade. We all know there the difficulties about the strategic list, particularly while fighting is going on in Korea, although I have felt for some time that a review of that list is now appropriate, indeed overdue. Certainly if and when the fighting stops in Korea, as we hope it will, the Government should be ready to dismantle a large part of these strategic controls. Unfortunately, the Government, with their unerring instinct not only for doing the wrong thing but for doing it at the wrong time, have chosen this moment to tighten up the blockade of shipments to China. They will realise the importance of expanding rubber sales and increasing the price of rubber and the importance of getting rice for the sterling area. That is why we should aim at wider trading areas.
  We want more stability in international trade. I am glad that the Government made a real effort to get agreement on the International Wheat Agreement. Some of us were a little afraid that the Gov-
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  ernment would pull out. They were right to make an effort, and they were right to resist pressure to pay more than they said they were willing to pay. I hope that that experience will not discourage them. I hope that they will go ahead to promote international commodity agreements for rubber, tin, cotton and a number of other commodities, and that they will make the fullest use of long-term purchasing arrangements also.
  We had the extraordinary experience of hearing hon. Gentlemen opposite the other day cheering the bulk-purchase agreement with Cuba. It was all the more extraordinary when we recollect how the Conservative Press denounced the so-called "black pact" with Cuba negotiated by the Labour Government, and when we remember the fine fury into which the Minister of Transport worked himself in successive Questions in this House.
  On the question of our balance of payments, I wish to refer to invisible earnings. It is a very serious matter that these worsened by £85 million last year. One looks at the figures to see what has caused that. There has been a £21 million increase in Government military expenditure in 1952 compared with 1951. I hope that we shall be told on Monday whether as a result of the arrangement made in connection with Germany we must expect a further big increase in that figure. There was a worsening of £21 million in relation to shipping. The most serious matter was an increase of £30 million in respect of increased interest payments on sterling balances in London as a direct result of the Chancellor's policy.
  We rarely get through economic debates without someone opposite shouting "Groundnuts." The total cost of the groundnuts operation—[Interruption.] I hope that the hon. Member will read some references I have made in a book which has just gone to the printer—cost us £36 million. The Chancellor is losing us £30 million every year in increased interest payments, as a result of his monetary policy, for which we get nothing at all, not even a real attempt to raise the standard of living of the people and all that went with the groundnuts scheme.
  There goes with this the fall in overseas investments—from £325 million in

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  1951 to £109 million last year. This shows that overseas investment in the Colonies is not a matter for laisser faire. If we have laisser faire and lack of control there is always the possibility of more capital going to South African breweries when we need more Government expenditure on the economic overheads of basic developments in the Colonies.
  We welcome the announcement of the Chancellor about the 40 per cent. provision for mining development. I would ask the right hon. Gentleman to consider extending that 40 per cent. to all colonial and other Commonwealth development, because of the very high risk involved in this kind of activity. We can see that, as a result of his policy, there has been a very serious reduction in the rate of overseas development. In his annual report last year the Chairman of the Colonial Development Corporation made a very strong comment on the way in which the interest rate policy was tending to inhibit new colonial development.
  Obviously the Chancellor is still very optimistic about the economic situation, especially when he is in the United States. But this is really a fair weather Budget. Although the Chancellor does not look the part, he is very like the grasshopper in the Aesop fable, who sported and played in the summer and made no preparation whatever for the winter that was certain to follow. I ask the Government, do they feel that we are less vulnerable to any possible change in the economic climate?
  Does the Government feel that such a change is less likely to occur now than two years ago? All the facts and all the figures which the Chancellor has been able to quote about improvement in 1952 occurred on a greater scale in 1950. If we look back to the situation two years ago we would be able to acclaim much bigger and more exciting economic recovery in the balance of payments than anything the Chancellor has been able to report to the Committee this year. Yet we all know what happened in 1951.
  Perhaps the Chancellor will tell us on Monday whether he thinks the same, but I would have said that we are in a very vulnerable position indeed if there is any change in what the right hon. Gentleman calls the economic climate. We are dependent once again on United States
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  military aid. Our exports are dependent to a scale far greater than ever before on the sale of military goods abroad, which must be a very precarious market and which is going on at a time when we are losing our real long-term markets.
  Above all, I consider we are vulnerable because of our dependence on a record United States boom. If that boom comes to an end one day, as most people expect it will, we know from experience that dollar earnings from the sale of sterling area exports such" as copper, wool, tin and the rest will collapse in a matter of weeks—almost overnight—and the whole economic policy of the Government will collapse with it.
  Some of us have been warning the Government about that danger, and now I see that the "Economist" in a special supplement has started to elaborate this warning in rather more elegant language. But even before the recent developments in foreign affairs—with the change in the situation in Russia and China—there have been many American observers who foresaw an end to the American boom, perhaps after this year's harvest, with all that that would mean for this country.
  And now of course we have a new feature, what some American newspapers call the "Peace scare." We have seen from the reaction in Wall Street that there are at any rate some American business interests who are not only scared of war but appear to be at least as scared of the economic consequences of peace. We know what it would mean to dollar balances were there a change in the psychology of the market, in the purchasing of sterling area materials on dollar account. Does this Budget, or even the policy underlying it, create conditions in which we can avoid such a crisis if it is forced upon us?
  We agree with the effort of the Chancellor to give a boost to production, but we must ask whether this Budget will give that boost. Some of the measures will help enterprising firms to expand production and exports, but it does nothing to stimulate the less enterprising firms. A so-called incentive Budget—even if we ignore the repressive character of certain of its parts—operating against the monetary policy of the Government is not likely to be successful. An incentive

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  Budget which is purely a Budget policy may be an adjunct to but never a substitute for the instruments of a planned economy. The economic crisis with which hon. Members on this side of the Committee believe that we are faced will require incentives to overcome, not only incentives to business men, but to workers as well. The experience of 1952 has shown us that it is no good appealing for increased effort from men already on short-time or who are in danger of working themselves out of a job.
  This economic crisis demands a planned increase in production, in investments and in exports, and an active intervention, both at home and abroad, to create conditions in which exports can flourish. Finally, as I said a few minutes ago, it requires a social policy of justice and fair shares, because these things, in the conditions we are facing, are not only social objectives but essential conditions to reaching a position of solvency and independence which must be the first aim of our economic policy. I submit that against these requirements the Government's economic and Budget policy stands condemned.
  5.6 p.m.
  Mr. Geoffrey Hirst: As a very junior Member of this Committee it falls to my lot to congratulate the right hon. Member for Huyton (Mr. H. Wilson) on his return to the Dispatch Box. We are pleased to see him there once again. I am reminded that in the debates last year my right hon. Friend the Chancellor, in amusing and bantering mood, referred to the hon. Member for Stechford (Mr. Jenkins) and the hon. Member for Gloucestershire, South (Mr. Crosland) as "the heavenly twins." I could not help thinking, when I saw the exuberant faces side by side of the right hon. Gentlemen the Members for Huyton and Ebb Vale (Mr. Bevan) that in a more mature sense we have a fresh pair of heavenly twins.
  My right hon. Friend the President of the Board of Trade will deal with the major points mentioned by the right hon. Member for Huyton, but there are one or two matters upon which I wish to comment. The right hon. Gentleman said the Budget cannot be judged entirely by taxation proposals, and we on this side of the Committee heartily agree with him. The Budget should be judged, as
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  indeed it is, by the renewed confidence it is spreading throughout the country.
  The right hon. Gentleman referred to the textile slump and for some reason or other appeared to bring food costs into it. He must know that the textile slump was an international trouble which started before the last Election—certainly so far as the woollen textile trade is concerned. I do not think he is being fair to my right hon. Friend the Member for Blackburn, West (Mr. Assheton) or myself or to any other hon. Member who has a constituency interest in textiles, when he assumes that because we do not make, shall I say, a strong attack on the Government for not doing something about the Purchase Tax on textiles, we are unmindful of the needs of the textile industry.
  We feel that in the Finance Act last year the Chancellor went a long way to meet the difficulties of the textile industry and that it would not be fair to be selfish in these things and to ask for too much so quickly, when so many other industries which need help are getting it at this time. All of us who are connected with textile industries would welcome, not only some adjustment of the Purchase Tax, but eventually its complete cancellation.
  The right hon. Gentleman also seemed to make a lot of play with the comments of my right hon. Friend about making room for more exports. I do not see anything wrong with that. I am sure that when the right hon. Member for Huyton has been in industry for a bit longer he will realise what the phrase means. There is a feeling among industrialists that with the present rates of taxation there is no desire or even any sound business ethics in taking risks, but with the greater rewards that this Budget provides and, even more, the hope that it holds out for the future, the whole pattern changes, confidence is re-born— in short, there is more encouragement to plan ahead and make, in the Chancellor's words, more room for exports.
  From the one or two companies in which I am interested, I know the feeling that has gone out within 24 hours of the Budget and the planning which is now taking place as a result. I am certain that the right hon. Gentleman the Member for Huyton will earn the distinction, if indeed it be one, that was earned last year by the right hon. Gentleman the

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  Member for Battersea, North (Mr. Jay), of being a Jeremiah.
  Many of my hon. Friends quoted the London Press yesterday. I should like to make one or two quotations from the provincial Press because they show as much approval of the Budget proposals as do the London and national papers. The "Yorkshire Post," a paper of great prominence which is respected in many parts of England apart from Yorkshire, said:
  "It is eminently the work of a statesman looking skilfully ahead."
  And so it is. The "Yorkshire Observer," another leading provincial paper, said:
  "There are no new taxes, no new restrictions. Therein lies the expression of Mr. Bulter's faith in the British people of all kinds."
  I agree with the "Financial Times" today when they review the whole situation, after a whole day in which to consider the matter, and say:
  "He has lifted the Budget out of the restrictive rut."
  My right hon. Friend the Chancellor is entitled to say what a striking change has come over our affairs. A year ago we were bracing ourselves to struggle out of a crisis of international payments, a crisis from which the right hon. Gentleman who dared to criticise ran away with his hon. and right hon. Friends like rats from a sinking ship. We had to overcome the difficulties of an ever-growing buyers market and the difficulty caused by the action of Australia which affected the textile industry of my Shipley constituency very seriously. We also had to get over the damning repercussions of six years of Socialism.
  Let us look at the position today. As my hon. Friend the Economic Secretary to the Treasury said, international payments are in balance and the strength of the £ sterling in the markets of the world is of great comfort to those who planned our policy a year ago. My right hon. Friend is entitled on the facts to receive from right hon. and hon. Gentlemen opposite a great deal of applause for his actions.
  Again, the textile recovery is truly remarkable. I pressed the Chancellor last year on more than one occasion on behalf of the wool textile industry which is predominant in my constituency. I wish to
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  say that I am grateful, as is the industry, for the actions he took and for the fillip he gave to the industry with the full cooperation of my right hon. Friend the President of the Board of Trade. In fact, a little encouragement and a feeling of confidence in forward orders bridged the industry over the difficulties until the time came for recovery. Confidence is pre-eminent. An industry does not sell if it is not confident. It does not plan unless it is confident. Confidence is pre-eminnent in all business dealings.
  There is no doubt that the outstanding feature of the Budget is that there is to be no new taxation. What a joy that has been to people's hearts. It is absolutely absurd for hon. Gentlemen opposite to talk about this Budget as an unpopular one. It is vastly popular. It appeals to all people, and perhaps the greatest thing that appeals to them is that for the first time for many years there are no new taxation proposals. Nothing that hon. and right hon. Gentlemen opposite say can go against the feeling of thankfulness enjoyed by people in every walk of life about that fact alone.
  The cut of 6d. in Income Tax may not be a great deal, but the value does not lie so much in the amount, although the cut is welcome. The value lies in the fact that it heralds a change of financial climate. The country is confident that under a Conservative Government greater production will lead to greater reliefs. That in itself is a spur to greater productivity. I realise the difficulties for the Inland Revenue Department and those connected with P.A.Y.E.—and this is a minor point—but it would have been nice if the back pay could have been allowed in the week before 7th June and before the Coronation.
  I suport what has been said by many of my hon. Friends about initial allowances. I have studied this matter for many years. I hope that the time will come when depreciation allowances will be put upon a sound footing. Even before the war the difference between our country and Germany, let alone the United States of America, was most marked. I hope that when the Committee studying this question has submitted its report something can be done to remedy the position.
  These reliefs, and the fact that E.P.L. is to go—and I congratulate my right hon.

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  Friend on his courage—provide a great tonic for industry and prepare the way for more exports. They provide a great tonic not only for industry but for all concerned in it. I am delighted by the measures taken by my right hon. Friend in connection with Purchase Tax. Naturally, as a man interested in the textile industry, I regret—although I see the reason why—that a further reduction cannot be made there. The Purchase Tax proposals will reduce the cost of living. As some one once said, people do not eat statistics but they feel their effect on the cost of living.
  Mr. H. Wilson: The hon. Gentleman says that he sees the reason why it was not possible to do anything about the tax on textiles. Would he be good enough to explain it to this side of the Committee? We also would like to see it.
  Mr. Hirst: I thought that I had explained in my opening remarks. We realise that the Chancellor went a long way in helping the textile industry last year. He selected it out of all other industries, with, I believe, the leather industry as well. We do not honestly feel that it would be reasonable to ask for a further reduction this year, when there are other industries which have equal needs now even if they did not have them a year ago. I want to be fair to my right hon. Friend in this matter—
  Mr. Wilson: Is one to take it that the hon. Gentleman does not agree that, a special differentiation having been created last year, it should not be continued this year by lowering the rate still further or abolishing it altogether? Secondly, will the hon. Gentleman say whether he is prepared to go back to Shipley and tell his constituents that he can quite happily vote for a reduction of taxation on some of these luxuries—silverplate, jewellery and fur coats, and all the rest of it— while leaving the present rate on textiles untouched?
  Mr. Hirst: The right hon. Gentleman has very little knowledge of my constituency of Shipley.
  Mr. Hobson: He was born on its doorstep.
  Mr. Hirst: That was in the days when the right hon. Gentleman was without his boots. Shipley is a very fair-minded
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  place. I do not have to explain to my constituency every effort I have made since I was elected. Nobody knows better than my right hon. Friend the Chancellor the efforts that I have made for the textile industry. I am prepared to go back and talk perfectly straight to them and to say that, in fairness, I will support the Chancellor in reducing taxation in other directions this time just as I supported him when he reduced it in their interests last time. It will not prevent me pressing for further reductions in future. It is a perfectly straightforward statement, and I am not in the least afraid of saying it in Shipley.
  I am a little disturbed about the effects on retail trade. I hope my right hon. Friend will forgive me if I say that I think he was rather too precipitate in accepting the recommendations of the Hutton Report. I think it needed a little more study, and I feel that, after reflection and further study, not only of the recommendations but of the evidence put before the Committee, they may not all be regarded as sound, since they appear to me certainly not to have been.
  Then there is the general statement about a rich man's Budget, and I hope that during the rest of the debate we shall hear less of that kind of thing. It is just childish, and my right hon. Friend the Member for Blackburn, West gave an accurate description of that attitude. He said that if beer was reduced 1d. or 2d. a pint, the man who drank eight pints of beer would get a bigger share of that reduction than the man who drank two pints, and so it is. When taxation goes up these people pay more, and when it comes down those who pay more naturally pay less. It is just common sense and justice. It is a perfectly legitimate method, and if we want to reduce taxation, it should be done in such a way, as in this instance, that it goes over the whole field of that particular form of taxation. In my opinion, it is a perfectly fair way, and that is also the opinion of a very large section of the public.
  May I now say something on our hopes for the future? I agree with my right hon. Friend the Member for Blackburn, West that taxation is still too high. Ever since the war, indeed, on every occasion both outside this House and since I have been a Member of it, I have stressed the vital importance of bringing down the proportion of the national

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  income required for central and local government purposes from something like 40 or 45 per cent. to something much nearer 30 per cent. Such a goal is a long way off, and it is also conditioned by great expenditure on re-armament.
  I do not see any reason why a start cannot be made, because, until that reduction can be made, savings cannot be sufficient to meet investment needs here and, above all, overseas, and really adequate taxation reliefs cannot be available. I am gratified to observe that, at long last, my right hon. Friend has acted com-mendably in obtaining a check on civil expenditure. I think the fact should not be lost sight of that a reduction has been achieved after an additional sum of something like £80 million has been spent by this Government on social services, and I think that is very commendable indeed. Some 22,000 civil servants have also gone, but, quite frankly, that figure is not nearly enough; I want to see another 50,000 off the total.
  What I am going to say now is not likely to be very popular, but I think it is important to reinforce the internal Government drive for economy, which I know is going on, in suitable instances by investigations into Government expenditure. I personally applaud the decision for an investigation into the expenditure on the National Health Service. We must not accept that all this expenditure is necessarily efficient. There are many occasions when too many cooks spoil the meal, and when fewer and more efficient ones would make a better meal, and so it is in Government Departments. Until these investigations are made and their fruits are brought to light, we cannot expect relief such as we would hope for.
  In saying this, I must not be accused of advocating indiscriminate economies of an arbitrary nature. There is plenty of scope in the Departments without touching on that, and I hope that the Cabinet will give to my right hon. Friend the full powers which the Treasury must have, particularly in relation to Supplementary Estimates. Some of them, of course, arise out of decisions of this House, and some particularly out of the Budget, but many of them are examples of over-extravagance in the Departments, and they should be brought to an end.
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  If that was done, on the one hand, and industry, under this incentive Budget, as I am sure it will, can "get cracking," we shall then be on the horizon of a real opportunity which will be opened out for us.
  It is in that climate that I should like to see something done about the Profits Tax. It was a shock to hear the right hon. Gentleman the Member for Leeds. South (Mr. Gaitskell) say that it ought to have gone up. Frankly, I think it ought to be cancelled altogether, and the idea that a form of Supertax should be charged on profits retained in a business is quite fantastic. Next, I should like to see something done about post-war credits, now amounting to between £450 million and £500 million. I believe that the rate by which they are being reduced is 3 per cent. Surely we can fairly soon reach the position when, if a man dies the beneficiary can cash the post-war credit, and not have these things continuing over two and three generations?
  There is one small matter which I am sorry was not tackled in the Budget, and that is the Entertainments Duty on the cinema industry. Here I must declare a minor interest. My sister is a film producer, and I am associated with her on the business side. I must say that I was impressed by the Cinema Association in the modest extent to which they went in making their proposals. If we take the middle-priced seats, say 2s., the duty is 10d., or something like 40 per cent., whereas the Association asked only for a 1d. reduction.
  I think that was pretty reasonable, and if we are to have a good, sound British film industry, we must give sufficient security on the home market, and that is essential to any future prosperity of the industry as a whole. It cannot go unremarked by the industry that the reduction of the Purchase Tax on television sets, admirable as it is in itself, is in fact helping the growth of an entertainment which is contrary to the interests of the cinema, and I should certainly hope that the Association's very reasonable case will receive more attention, possibly, in the Finance Bill.
  Finally, I want to mention what is to my mind one form of taxation with a most outstanding claim for relief, and I refer to Death Duties, especially on family businesses. It is no exaggeration

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  to say that the family business has been the basis of all our past prosperity and is the basis of all our future prosperity, because the family business derives from the enterprise and hard work of individuals willing to take risks. We depend on the judgment of such people. We depend on them to maintain the fundamental strength of our economy, to build up the large businesses of the future. [Interruption.] Well, where would the people have been today if others had not built up these family businesses which have grown into much larger concerns?
  The basis of that growth was the family business, which was built up by the man who was prepared to take risks. We also depend upon such people to provide outlets for new ideas and fresh inventions, and to ensure a high and prosperous level of employment. Hon. Gentlemen opposite must have taken leave of their senses if they suggest that such people should not be helped. They are the very people who built up the prosperity of our country in the past and on whom we shall depend for the development of business in the future.
  They are most affected by the burden of Death Duties. It should be remembered that it was more or less a quirk of war-time legislation which was not very fully discussed and which contained all sorts of unseen complications and acted contrary to the undertakings given at the time, that is responsible for family businesses being broken up or seriously damaged by the mischance of death. Surely in addition, there is a sound argument for having a graduated scale of Death Duties.
  Last year I supported very heartily the Amendment of my hon. Friend the Member for Buckinghamshire, South (Mr. R. Bell) which suggested that there should be some form of scale, rather like Surtax, instead of the present arrangement whereby the State takes the whole lot at the highest rate. But be that as it may, nothing that I have said detracts one single iota from the bold, imaginative, inspiring and incentive filled Budget of my right hon. Friend.
  I congratulate him on every count, not least in finally moving away from the dismal, dreary dogma and drift of Socialist restriction and repression. Equally, and indeed with a very full heart, I thank him for opening up once
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  again an era in which opportunity, hard work and enterprise may look forward to ever increasing reward. I can assure the right hon. Member for Huyton that it will do that. I also thank my right hon. Friend for giving the country an opportunity of looking forward to a period of prosperity of. I trust, real and lasting greatness.
  5.33 p.m.
  Mr. Clement Davies: On Tuesday the right hon. Member for Lewisham, South (Mr. H. Morrison), in his few congratulatory remarks to the Chancellor, referred sympathetically on behalf of all members of the Committee to the cause of the absence of the Foreign Secretary and expressed the wish of all of us for his speedy recovery and return to this House. In that, very rightly, he was followed by the Chancellor.
  I think it also right that I should refer on behalf of hon. Members on all sides of this Committee to the absence that we all regret of one who has by his integrity, his conscientiousness, his ability and his sense of duty, and by his high office, won, and deservedly won, the respect and admiration of all. I refer to the right hon. Gentleman the Leader of the Opposition who is absent through illness, and whose speedy return to this House we all desire. The right hon. Gentleman has earned not only the respect, but the affection of Members in this House and of people outside who are not of his party and who. in fact, do not agree with him.
  It is not often realised what a tremendous burden has been borne by the right hon. Gentleman for nearly a whole generation. He has been the Leader of the Opposition, Deputy-Prime Minister, Prime Minister, and again Leader of the Opposition without a break since, roughly, 1931 right down to the present day. It is amazing how he has been able to bear that burden year after year. We all wish to see him back, and we wish him well.
  I wish to join with a number of other hon. Members in congratulating the Chancellor of the Exchequer upon the clarity and lucidity of his speech. I have heard a great number of Budget speeches, and my memory goes back to the great Budget of 1909 to which I listened from the Gallery, because I was then not a Member of this House. I have never known a Chancellor of the Exchequer

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  who showed less exhaustion at the end of his Budget speech than did the right hon. Gentleman on this occasion. That shows that he is a master of his work and has applied himself very conscientiously to the study of it throughout the years, because, otherwise, all the facts and figures which he gave would not have come so readily to his mind.
  There is little doubt that the right hon. Gentleman has produced a popular Budget. I do not think that is doubted by hon. Members on this side of the Committee, as otherwise there would not be all this talk of it being an electoral Budget. I cannot imagine that the Opposition believe that the Government would proceed to an election soon after bringing in an unpopular Budget, because in that case they would stand to lose millions of votes. Therefore, the Opposition must think that the Chancellor has succeeded in producing a Budget which will have a very wide appeal, and I agree with them in so thinking.
  I also think that the Chancellor has earned the gratitude of the Opposition for he has succeeded in doing something which I did not think would come about for some time. Not since March, 1951, have I seen sitting cheek by jowl on the Opposition Front Bench the right hon. Member for Ebbw Vale (Mr. Bevan), the right hon. Member for Huyton (Mr. H. Wilson) and the right hon. Member for Leeds, South (Mr. Gaitskell), and not only sitting together, but enjoying one another's jokes, thoroughly happy, and now a united party. If that does not earn the gratitude of the Opposition, I do not know what would. The Chancellor has succeeded in bringing about a kind of miracle which no member of the Labour Party has hitherto been able to achieve.
  I agree that this is a popular Budget. It is the first one since 1936 which did not introduce a new tax or add to an existing tax. That is surely an achievement in itself. From 1936 to 1945 we were face to face with the burden of war. In 1945, we thought that we were going to be relieved of that burden, but, unfortunately, we became involved in another war effort. Now, for the first time, the Chancellor has found himself able to introduce a Budget in which there
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  is no new tax and no addition to an old one.
  That is still more of an achievement when one recalls the position in September, October and November, 1951, when the Conservative Government took office. I have listened to all the criticisms that have been made with regard to what has happened since that time. But during that period our gold reserves were falling, our debts were increasing, and we were face to face with a great economic and financial crisis.
  I did what I could at the time, in that period before the General Election, to ask that the Government of the day should take upon themselves the responsibility of dealing with that situation and of bringing forward an autumn Budget to prevent disaster coming upon us. They chose to take the other course and to fight an election, which they lost, and the new Government was at once face to face with a very critical situation. We recovered; and we recovered through the very steps which were taken by the Government from the day on which they took office. They are certainly to be congratulated upon that. That is a matter upon which I cannot see that the Opposition are entitled to criticise. What would they have done? Would they not have done much the same kind of thing if they had remained in office? Would they not have brought in, as they should have done in November, 1951, an autumn Budget to meet that very serious position?
  The fact that there is no new tax and no extra taxation in this Budget has given a great sense of relief to the people. As I have said for nearly a generation—and I am not sure that it has not been for longer—year by year the people have been bracing themselves, awaiting the fresh burden that would be placed upon their shoulders, wondering from where it would come and who would be hit the hardest. Now, for the first time, they say, "It looks as if we have reached the limit of taxation and no further burden can be expected." No doubt that must give a great deal of encouragement to everyone. I think that we all sincerely hope that we have reached the limit. When one remembers that even now 44 per cent. of the national income is taken away from the people and spent by the Government of the day one must feel that surely this should be the peak figure to be taken away from the taxpayer.

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  The Government have achieved the present favourable position in spite of the fact that Marshall Aid has ceased. That aid brought tremendous benefits to us, for which we are all grateful. The Government have also succeeded in paying off what we had undertaken to pay, when times were better, to the United States and Canada. The remarkable change in the balance of payments also gives confidence not only to ourselves, which is important in itself, but also confidence to others, especially in the sterling area, in us as bankers.
  I agree, and I am sure that Members of the Government will agree with what has been said by the right hon. Gentleman the Member for Leeds, South—that this has been achieved in the main through two things. First, it has been achieved through the decrease in the value and the volume of imports from the non-sterling area, and secondly through the fall in prices. I agree also with what was said in a very fine and able speech by the Economic Secretary to the Treasury.
  Without casting any reflection upon other hon. or right hon. Members who are occupying the Front Bench at the moment on either side, I was very pleased to observe that the hon. Gentleman began his speech without a document in his hand. We have been go accustomed for so many years to see a brief placed on the Box and to listen to the steady reading of it that I am very grateful to him for breaking what was becoming a tradition. I agree with him that this country has been for so many years the great buyer of the world that when it ceases to buy it is bound to have an effect upon prices everywhere.
  With those two factors working in our favour the position has been achieved whereby we have stopped the fall in our reserves and the outward flow of gold, and we are beginning to build up. But much has to be done before the position becomes stable. Still more has to be done before sterling can be trusted by everyone, a state of affairs which we are hoping will come about. I should have thought that everybody on all sides would agree that import cuts are bad in themselves and that we should not have to resort to them except as a drastic panic measure to stop the outflow. It is like applying a tourniquet to stop the flow of
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  blood. The stoppage of imports works in the same way. One cannot pursue that kind of policy permanently without ruining a country, and especially a country such as ours which is so dependent upon its exports and in which exports are so dependent upon the right imports.
  No wonder production fell. It could not do otherwise when we were putting a stop to the ordinary flow of trade in this way. I am glad that that has ceased to be the policy of Her Majesty's Government. I congratulated the Foreign Secretary the other day, when he came back from the United States with the Chancellor of the Exchequer, when it appeared that once again Her Majesty's Government, as well as the Governments of the Commonwealth and also the Republican Government of the United States, were agreed that the safety and economic security of the world depend upon multilateral, universal trading—the freeing of trade completely so that goods could flow freely from one country to another.
  We have a long way to go before we can build stability. It is suggested in the White Paper that we have to build a balance of between £300 million and £350 million on our income. If we are to do that there must be a very large increase in our national savings, or there must be a greater reduction in stock investment, or a little of both. I do not like a reduction of investment in industry. It can be really dangerous. As is now admitted by everybody, there has been a reduction in stock investment in this country. It was part of Government policy. There was not the same stocking up as previously. I am not sure of the true position—whether it was actually less by some £100 million or was just negative. A stoppage of investment in stocks can be and, of course, will be dangerous. It might lead us very quickly into a position in which we would be lagging behind our very keen competitors who are now in the world market.
  I am hoping, therefore, for more and more savings and I only wish that the Chancellor had emphasised that need more than he did. As far as I can see, he only made one reference to it in his Budget speech. I agree that in the main the Chancellor has been stressing the need for a boost and a tonic at the present time, for a realisation by all of us that we are

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  in a sort of doldrums and that we must get out of them. The Chancellor said, as reported in column 52:
  "The first conclusion I have drawn from this is that I shall propose no new taxes at all. For the first time since the war—and high time it is—we take a step in a new direction. The reliefs which I shall propose are designed to improve our competitive efficiency"
  That is No. 1.
  "to provide incentives for greater effort"
  That is No. 2.
  "and to encourage private savings."— [OFFICIAL REPORT, 14th April. 1953; Vol. 514, c. 52.]
  As far as I know, that is the only reference which the right hon. Gentleman made in his speech to the need for saving. I hope that Members of the Government, including the Chancellor, will stress that need, otherwise, as I shall show in a moment, I do not see how they will meet the difficulties even of this coming year.
  One of the main points made by the right hon. Member for Huyton was that we are in a very precarious position and that unless things go well this Budget will collapse like a pack of cards. But that is true of every Budget in every year. I remember how precarious was the position upon which Sir Stafford Cripps used to budget. It was mainly, as he said, placing a tremendous burden upon the working class of this country, and especially the trade unions, trusting that they would keep wages steady. If, perchance, wages got out of hand, then the whole of the economy would collapse to the ground like a pack of cards.
  One has to take risks, and a Chancellor does take risks. It is quite obvious that all the Chancellor's figures will go wrong if a new increase is required in defence expenditure either in this country or in Europe, and certainly if it is required in both. Secondly, I agree with the right hon. Member for Huyton that they also depend upon the continued import of goods by the United States, especially of raw materials, and upon there being no drop in the coming year. If they are not continued, the figures and estimates which we have today will all go wrong. If there is a serious recession in the United States it will affect all of us. It will not merely affect these figures and the economic position, but will affect our standard of living and unemployment and will, of course, affect the whole world.
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  Some risk has to be taken and is taken by every Chancellor, but there is another gamble taken by the Chancellor in this Budget. I do not condemn it; in fact, it is found in the Keynesian theory and one also finds it in the yellow book of 1928 which has been the standard book not only of right hon. Gentlemen opposite but also of the right hon. Member for Lewisham, South. During all the economic debates which I can remember he has introduced the yellow book. The theory was this—that we could have a deficit below the line but, according to the true Keynesian doctrine, there ought to be a sufficient surplus above the line to meet it. If we look at the figures we find that the surplus above the line is only £109 million, whereas the deficit below the line is £549 million, so that there is a net deficit of £440 million.
  From where is that to come? It is not coming from Revenue. It could have come from Revenue had the Chancellor seen fit to introduce extra taxation in order to meet the deficit, but he has not done so. It can therefore come only from borrowing. From whom is the Chancellor going to borrow? Obviously he will have to go to the City to borrow; he will have to borrow from private persons—and back again we come to savings. He is therefore gambling upon this—that during the financial year private persons will be saving out of their incomes sufficient to lend him this £440 million. He is certainly taking an optimistic view of the future and I sincerely hope that that view is justified.
  Mr. Maudling: It is a fact that the Chancellor was able to cover that amount of borrowing last year, because the figure of below-the-line expenditure is about the same.
  Mr. Davies: I know, and I was coming to that. But, without a doubt, there is in the Budget this year an encouragement to spend to the extent of the £160 million which is given to the public and which, according to the Chancellor, is given as a boost in order that they may spend. Fortunately, a good part of it will go to companies and I hope they will not spend, but without doubt this danger exists.
  The Chancellor intends to borrow. We all know that the local authorities also have to borrow. The two will be going

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  into the City, competing with one another. What will be the position? There is an old inflexible law that when demand goes up and supply is limited, costs increase; and it looks to me as if there may be quite a substantial rise in interest rates unless the borrowing is carried out with the greatest care and in conjunction with the local authorities.
  Let me turn to the Chancellor's remissions. They are in themselves inflationary, but I would give this word of warning. It has been suggested by the right hon. Member for Lewisham, South and others that the Chancellor could have gone much further, for example with Purchase Tax. If he had, what would have been the inflationary position? As long as we have this inflationary pressure we have to release money with the greatest care, otherwise the position can be dangerous unless you are relying on people to save and not to overspend.
  Turning to the small remissions, I must admit that I did not know some of these taxes existed. They brought in very little money in a Budget of nearly £5,000 million, and it is not necessary to bring in these few hundreds or thousands in this way. It is much better that the reliefs should be made. Attention has been drawn to the fact that the Chancellor has distinguished between cricket and football and in favour of cricket. The answer was well given by one of the newspapers the other day which said that association football was a sport in this country but cricket was something far more—it was, indeed, a religion. There is something in that, and it is treated rather differently. I think that is justified.
  Over 16 million are paying Income Tax, and that means far and away the greater proportion of the householders in this country. Now we have the cry that this relief of 6d. in the £ favours the wealthier Income Tax paying groups and that no consideration has been given to those with incomes below the level at which Income Tax is levied. However, both this and the previous Government have gone a long way to relieve some millions of people from the payment of Income Tax altogether. There have been slight changes since 1945, but, on the whole, the tendency has been to raise the minimum on which Income Tax is liable. So that that freedom has already been reached.
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  Let me point this out. I remember that in the autumn of 1945, although it is true this did not come into effect until April, 1946, the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), who was then the Chancellor, made a reduction of 1s. in the £, and there was no suggestion then that he was doing something he should not have done. It is true that at the same time he put on an addition to Surtax, but the Surtax is still there.
  Mr. Gordon Walker: He had already made slight adjustments in the allowances just to avoid the effect of the reduction.
  Mr. Davies: I agree. All those allowances are still going on. I really do think that it is rather extraordinary that there should be this shout that taking off 6d. in the Income Tax is wrong when it is done by one Government but perfectly right when it is done by another.
  Mr. Douglas Jay: The right hon. and learned Gentleman has misunderstood the argument, which is that it is wrong if done by itself, without changes in the allowances.
  Mr. Davies: I shall come to certain other things which I think should be done. I quite agree they should be, but not along the lines that have so far been stressed by right hon. Gentlemen on the Opposition Front Bench, but that have been very rightly stressed by the back benchers here. Indeed, one of the most remarkable speeches in this sense was that made by the hon. Member for Wallsend (Mr. McKay), and I propose to return to that, and the need to help the people in real difficulties.
  I believe the Chancellor is quite entitled to take this risk and is justified in taking it. What, I think, is really and truly the economic position of this country at the present moment, owing to the changes that have taken place in the attitude of Russia, is that we are practically back, or getting back, into the pre-Korea position, to something like what the position was in June, 1950. I sincerely hope that that is so. For the moment there should be no relaxation, but it really looks as if the world itself felt there was some relief of tension.
  As to Purchase Tax, I never did like it. I opposed it when it was first brought

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  forward. It is a bad tax. It is a selective tax. It directs people as to what they should buy, and limits their choice. It has one other really bad effect. It deteriorates quality, and I am perfectly sure that it has had an effect upon our exports.
  It is all nonsense to think that people start a business with the idea of exporting and nothing else, that they put up a factory and say, "Now we will export to some country." What they do is to set up a factory and build up home trade; as production is improved they look for expanding markets and send their products overseas. What has been happening? In order to meet the pockets of the consumers at home and the double price caused by the 100 per cent. tax put on goods, manufacturers have been producing something far cheaper, nothing like so good an article or so lasting as that which they formerly made, but which looks the same, and they have put that on the market.
  No wonder then that we have heard complaints—for the first time—from abroad about the quality of British goods. I feel very strongly that Purchase Tax has had a great deal to do with that. It ought to go. I am sorry that the right hon. Gentleman the Member for Bishop Auckland is not here, because he rather liked this tax. I remember his first speech as Chancellor in 1945, and his saying that this was not to be put on temporarily, for a passing moment, but that this was a really fine tax. I fundamentally disagree with him. I think it ought to go, and I think that the right hon. Gentleman the Member for Leeds, South is also of the same opinion.
  I come to another very bad tax, the Excess Profits Levy. This was a bad tax when it was proposed by the late Mr. Neville Chamberlain in 1937, and I opposed it strongly then. I then had the tremendous assistance of the present Prime Minister, who, even more strongly than I, opposed it. We both had the great joy of seeing Mr. Chamberlain standing up at that Box, and, before the tax was actually introduced, withdrawing it, during the Second Reading of the Finance Bill. I only wish that the right hon. Gentleman had taken the same
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  course last year. I do congratulate him upon taking the course this year. It will not lessen his reputation in the slightest degree that, realising this is a tax which can have a very bad effect, he is withdrawing it before it can have a permanent effect. Let it be remembered, however, that it will be some time before the effects of this tax can be cleared right off. A beginning will not be made with clearing them off until next year, and it will probably be 1955 before the last payments under it are made.
  I come to the initial allowances. These are designed very rightly as a boost. What is needed above everything at the present moment is better tooling up, better factories, better plant, better machinery. If we are to compete with our keen competitors, not only the United States, but the coming competition from Germany and the coming competition from Japan, which we had before the war, and also the new competition coming from other countries, our factories will have to be absolutely up to date, with all the latest machinery and plant and scientific inventions, and it is only right that every incentive should be given which will boost this industrial improvement. The only thing is, I am not sure this is the best way of doing it. When it was introduced by Sir John Anderson when he was Chancellor it turned out to be a rather expensive loan for the time being which had to be repaid by the manufacturer.
  I come now to one or two matters to which I promised to refer. This Budget does not take account of those who need real help. First of all come the family once more. Last year, I know, the Chancellor made a very big concession in raising the allowances from 5s. to 8s. for the children after the first. I begged him then and I beg him now to reconsider whether it is not possible to apply that concession also to the first child. We all know that it is the first child that is the greatest expense upon the family. We also all know that what is needed most for a healthy, strong nation is the care of the children in their tender years, and if it is possible for the Chancellor in that way to make a further concession for the benefit of the family, which, after all, thank God, is the main unit of society in this country, he should do so.

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  Now I come to the matter mentioned by the hon. Gentleman the Member for Wallsend, the position of the pensioners. Their condition is really hard. It is pathetic. Day by day I receive letters showing what their position is. We are not treating them fairly. It does not lie in the mouths of right hon. and hon. Gentleman on this side to taunt any right hon. or hon. Gentlemen on that side. They had their opportunity to deal fairly with the pensioners, whether the old age pensioners or the war pensioners, and I have felt and I feel that all along, with regard to both groups, we have not been carrying out our word. We have been guilty, rather, or a breach of confidence. The value of the £ has fallen since the bargain was made with either group, and they are getting less than we undertook to give them at the time the pensions were awarded. I beg hon. Members on both sides to see whether further help cannot be given to those very deserving people.
  Once more I ask: How long have we to wait before we get justice for the women? The promise of equal pay has been made by Chancellor after Chancellor, saying, "The moment the time comes I shall be prepared to do it. In principle I agree with it. It is the right thing to do. Equal pay for equal work." But having made that statement they always say, "I am awfully sorry, but I cannot do it this year." When will it be given? It is a matter upon which both sides ought to try to help, because we are all agreed about the principle.
  I think that this is a fair Budget designed to meet the present position, and therefore it has rightly been well received. I finish on this note. How long are we going on with this method of budgeting? It is an extraordinary way of meeting the country's liabilities. I only wish the hon. Member for Ealing, North (Mr. J. Hudson) were here. I wonder whether he realises what would be the position if he had his way completely and there were prohibition in this country and no smoking.
  It is extraordinary that something like £1,000 million out of this nearly £5,000 million Budget is provided by the smokers and the drinkers, and that we are dependent for balancing our Budget, for our Welfare State, and for our defence upon the extent to which there is indulgence
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  in either smoking or liquor. It is high time that there was a fuller inquiry into the whole question of taxation in this country. I know that there is an inquiry going on now with regard to Income Tax, but I hope that some day some Chancellor will say that the time has come for a better review so that we may have a proper and sounder method of taxation than we have got at the present moment.
  6.12 p.m.
  Mr. John Strachey: The shape of this debate today has been concerned with the larger issues of the health of the economy with which the Chancellor invited us to be concerned. Its shape has been quite a natural one in that hon. and right hon. Members opposite have naturally stressed the improvement in the balance of payments, and we on this side have stressed the relative and very considerable stagnation in the economy at home. Whether the latter is the cause of the former, or need have been, is what I should like to address my observation to this afternoon; and to make, as it were, an honest comparison, if I can, between those two factors, both of them obviously real, which face the Committee this afternoon.
  As the debate has gone on, I do not think there is much argument about what has improved the balance of payments. It has been three things, has it not? First, the improvement in the terms of trade. That has been a very real and very substantial factor. Let me say at once, I think it is a factor which is essentially a matter of good fortune for the Government. But they are none the worse for that, and we on this side ought to recognise the old saying that we cannot argue against luck. It is something which has been lucky for the Government, and it has been lucky for the country too, so that, therefore, we are glad it has happened. But, of course, it has not been the only factor.
  There has been the very important and large factor of what one might call relative de-stocking; the fact that we stopped stocking up on the very great scale on which that was being done in 1951. There is the criticism, which might have been made from the other side of the Committee about the party on this side, that we stocked up too much in 1951; that we bought too much at too high a price. I, personally, would have had certain sym-

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  pathies with that criticism if it had been made. But I understand why it was not made from the other side.
  Mr. Maudling: It was made.
  Mr. Strachey: Was it made by the hon. Gentleman? I did not appreciate that. If it was, that is interesting; but he certainly did not draw the lesson, which would be, to my mind at any rate, that if we had avoided that it would have necessitated a still stricter control over imports and over foreign transactions generally than was maintained by the Government of the day. I will come in a moment to the other conceivable way of doing it, the deflationary way, by reducing demand altogether. The third thing, which has improved the balance of payments is the import cuts. Those are the things which have happened and the things which have been done, and they have made a substantial improvement in the balance of payments position. But those are not the only things the Government have done.
  Last year the Government, partly in their Budget but more importantly in their monetary policy, undertook a considerable programme of disinflation, deflation, or whatever you like to call it. In other words, they reduced total demand, and by reducing total demand incidentally reduced the demand for imports as well. That seems to us the nub of the question, whether that is the right thing to do. Our criticism is essentially that that must be a most terribly indiscriminating way of reducing the demand for imports; a way which must produce what it did produce, namely, a very considerable stagnation in the economy at home.
  It is no part of my argument to say that the Government, from their point of view, with their economic philosophy, could have avoided doing that. I understand why they did it. They tell us in every speech that they did it to restore confidence. If they set their face against controls at what, to my mind is the critical point, controls over foreign transactions, and set their face towards at any rate a laissez-faire free market economy, then they must take into account the dealers or foreign speculators.
  Mr. Ronald Bell (Bucks, South): Would the right hon. Gentleman say how controls at that point would affect the demand for imports as distinct from the supply of imports?
  Mr. Strachey: Of course it would not affect the demand, but the actual amount of the demand which would become effective would be controlled. The present Government still do so to a great extent. The hon. Gentleman is surely not suggesting that that cannot be done, because his own Government are still doing it to a very large extent. The import cut, the very substantial one, made by the Government was just that. I therefore say that from the point of view of their economic philosophy they were bound to undertake the very appreciable degree of disinflation, or deflation, which they did in 1952.
  What I want to draw the attention of the Committee to once more is the actual price of that. The record of the internal economy over the past year is, after all, a very grave one indeed. The Chancellor never tires of calling our attention to the importance of exports, yet the record is of a very considerable drop in the volume of exports over the year. In consumption at home there has also been a drop, though in this case a very small one; probably about 1 per cent.; in production altogether a drop, for the first time, of 3 per cent. See what that means. That is a drop of 3 per cent. after year after year production going up at something between 3 per cent. and 5 per cent. It is a very sharp reversal of trend, far greater than the mere figure of 3 per cent. would indicate.
  Another element is sometimes given us as a cause for congratulation, and it is in one way: it is the fact that employment dropped by only 1 per cent. But see what it means, if production drops by 3 per cent. and employment only drops by 1 per cent. It may be a good thing and, of course, it is socially for the workers concerned, but what an affect it must have on the efficiency of the whole economy of which the Chancellor has always stressed the importance. Obviously it must mean that productivity has gone down very sharply indeed. And that is, again, the inevitable price which we pay for taking the whole momentum, the whole way, off the economy. That the Chancellor had to do deliberately.

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  of course, if he was to embark on his deflationary course.
  Lastly, with regard to the stagnation in investment, I shall not argue whether investment has actually gone down. It has gone down very greatly if we take work in progress and stock into account. If we take work in progress, the figures show that; but if we take fixed investment, I should say it has merely stagnated. There again, all the way and all the momentum, the very great momentum which our economy had gathered in recent years since the war, suddenly came to an end. That is the price which the country is paying for the deflationary policy which the Government felt was a necessary part of their general economy philosophy.
  I think that one of the most interesting factors in this debate, and the most interesting impression one has had in listening to it, is the impression given on the other side of the Committee that, after all, this stagnation in the internal economy, this fact that production has ceased to rise and has gone down for the first time, does not really very much matter. They put all their stress, naturally of course, on the improvement of the balance of payments, and their speeches show that they pay little or no attention to the fact that the production in the country has ceased to grow.
  I think that is a most terrifying approach to the economic condition of this country. It is only too reminiscent of the period of the '30s when they were last in charge of the economy of this country. If that is prolonged, it means a return to the stagnation comparable to that of the '30s. But these are not the '30s. The world situation is a very different one. The world situation is one in which our competitor nations—the other great industrial nations of the world—are by no means stagnating. They are going ahead very fast indeed. My right hon. Friend the Member for Huyton (Mr. H. Wilson) gave some of the figures. In the United States economy, the amount of investment going on is perfectly colossal.
  There is one other consideration which, I think, the Committee should take into account. Many hon. Members have referred to the improvement, still young, but we all greet it with hope, in the
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  international situation. We all hope and pray that the cold war is getting less intense. We all hope and pray fervently that we are entering a period of more settled conditions in international relations. If that is so, is it not time we thought a little of what I would call the economics of co-existence? If we are entering into a period of co-existence with Russia, let us think of the economic, and of the social, problems, too, which co-existence will pose.
  The economists have a good deal of difficulty in reckoning what is the exact rate of Russian economic progress, but I think that most of them put it at somewhere between a 6 and 9 per cent. per annum increase in production today—a not inconsiderable rate of progress. That does not mean that Russian consumption is anything like as high as ours. The economists reckon that the Russians are devoting some 40 per cent. to defence and investment and holding consumption at a pretty low level. But even that is beginning to come up now, because although that very high investment rate still exists, they are not increasing it and, therefore, consumption is beginning to rise.
  According to Professor Myardal's figures, Russian consumption is already running somewhere between that of Italy and France, and they reckon, although one can hardly contemplate such a prospect, that if the stagnation of the British economy went on as it has gone on for two years already—and the Chancellor had little hope that it would not go on for a third year also—Russian consumption would reach about our present level in the early '60s. That would be a very formidable factor indeed.
  Generally, we can take the comparison with Russia as perhaps the most striking, but if we make it with all the industrial countries of the world, could there be anything worse for this country than to continue in the stagnation of the last two years and, according to the Chancellor's prophecy, of the next year, while all its great rivals and competitors were going steadily ahead? Therefore, we on this side of the Committee regard the fact that momentum has been taken off the economy, and that the best that the Chancellor can suggest is that he may be able to get a little above the level of two years ago in the coming year, as by

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  far the most serious factor which faces this country.
  There could be one justification for this. It was mentioned by the hon. Member for Scarborough and Whitby (Mr. Spearman). It can be argued from the other side that a pause in economic progress, in the increase of production, can be justified if it enables a large transfer of resources from one field to another; from where they are being relatively wasted, it can be said; from where they are not so desirable, to more desirable things.
  If that is happening that may be an important justification, though it would remain to be seen whether we need pay such a frightful price for it. We all know the kind of transfer of resources we would wish for. We all wish for a transfer of resources first from production for the home market to export, and then, as a whole, from the production of consumption goods to the production of investment goods—of capital goods. That is the type of transfer, about which I do not think there will be any dispute in the Committee on either side, which is needed.
  But is there the slightest sign in the White Paper, in the Chancellor's speech or anywhere else that such a transfer of resources is taking place. By far the most deadly passage, I think, in the speech of my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was when he called attention to Table 30 of the Economic Survey. Table 30 gives us the actual story of what amount of transfer of resources has or has not taken place.
  If we look down that table, what do we find? What we have to look for is the plus signs. It is a table of the changes in employment. It is no good looking to the minus signs, of the places from which labour has been withdrawn. A lot of labour has been drawn from various places because the way has come off the economy and unemployment has perceptibly increased. So various trades and industries have lost quite a lot of labour. But it is the plus signs that count, for it is no good releasing this labour unless it gets re-absorbed where we want to get it absorbed.
  The Chancellor noticed, as he is quite entitled to do, the single exception of coal
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  mining, which has gone up by about 22,000. But where are the other plus signs? They are in distributive trades, 23,000; professional, financial and miscellaneous services, 17,000; unemployed, 80,000. In the great key points to which we want the resources to be transferred, engineering shows no increase whatever and agriculture, by far the worst case of all, shows an actual decrease of 17,000.
  If I am over-emphasising this and am doing any special pleading, I can be very easily corrected, but does not this table force us to the conclusion that this terribly expensive stagnation in our economy, by which we have lost two whole years of the growth of national production, has been lost all in vain? It has not resulted in any transfer of resources. That is the really serious thing which faces us. Does it not show that in a modern economy such as ours, merely to take off way, to give what the Chancellor calls "flexibility," does not serve the purpose; it does not transfer resources?
  The thing simply does not happen. We simply take the impetus out of the economy and it stagnates, but we do not change its shape. That is the only way I can read the figures today, and that seems to me to be the worst tragedy of this two years' pause which we have had in economic growth.
  Mr. Gerald Nabarro: I am sure that the right hon. Member does not wish to be less than fair in this matter of production, but he has failed to observe that in the three most important basic industries—coal mining, steel and agriculture—there was in each instance an increase of production in 1952 compared with 1951.
  Mr. Strachey: Yes, there was some increase, but as the hon. Member has been one of the first to point out, not an increase in coal mining which was at all proportionate with our needs. I give the hon. Member that point, for what it is worth. In agriculture also it is nothing like the increase which is needed. Obviously, in the case of agriculture and of engineering for exports, we failed to transfer to these industries any new manpower. Manpower, of course, is only an indication of resources in general, but it is the indication which the Economic Survey gives, and it is the best indication, and the one which we are entitled to take.

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  What is the prospect for the coming year? The Chancellor, of course, recognises the force of what I have been saying, because his Budget is intended to reflate the economy. It is intended to undo some of the work which has been done over the past two years. But what expectation can he give that even if he succeeds again in expanding production as a whole it will not be in exactly the same shape? If he has not succeeded in making any of these transfers of resources, all that he will have done is to push down demand a little bit in the last two years and then to let it up a little bit in this year. The real problem which has to be tackled—and it has to be tackled on both sides of the Committee —will not have been affected at all. That seems to me by far the most serious symptom which the Chancellor's speech and the Economic Survey reveal.
  Finally in this situation, without having tackled that problem, what are we to expect if we run into heavier economic weather? As most speakers have said, sooner or later, and sooner rather than later, we are bound to run into heavier economic weather. The "Economist" which is not a paper with which I usually agree had a brilliant article describing the situation of this country as "sunshades in the rain." The Chancellor's first Budget was more or less an umbrella Budget, but this certainly has been a sunshade Budget.
  Undoubtedly the economic climate of the world is at the moment very favourable indeed. I wonder whether the Chancellor fully realises just how favourable it is. As he said, he cannot complain now of the price of our raw materials. At the same time, economic activity throughout the world remains at a high level, because American activity remains at a high level. But is not the precarious improvement in our overseas situation entirely dependent upon American activity—not merely upon America avoiding a slump, but upon her avoiding even a pause in her upward progress? Is it not entirely dependent on 100 per cent. success in American economic policy? We are being unfair to the Americans if we ask them to be as successful as that. They may manage their economic affairs very well—in many ways they have done so in recent years—but we cannot expect them to be as successful as that. They are bound to have pauses, they are
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  bound to have some elements of recession, and what will happen then?
  Think of those ominous figures which I can never get out of my head. The economists calculate that a 4 per cent. recession in American demand affects sterling area imports into America by 33⅓ per cent.—an appalling thought. That is the storm which "The Economist" had in mind, and the sunshades which we have out for it in this Budget may look terribly bedraggled if it hits us. That seems to me the real indictment which will be made upon the Budget. By his whole economic approach—not merely in the Budget, which is only one part of it— the Chancellor seems to be weakening the ability of this economy to meet those situations.
  There is one phrase in the Economic Survey which, I think, is the key phrase in the whole document. It has been recognised as such: it is in paragraph 129. where the authors tell us that
  "economic activity has become much more directly dependent on the assessment made by business people of economic prospects. …"
  The internal vulnerability is growing. It is true that the Chancellor has not yet undermined the control of foreign transactions, foreign payments, and imports into this country, but he is always telling us that he desires to do so. He is always telling us that he wishes to go along that convertibility road which, as I have ventured to say before, I believe to be the road of sheer economic suicide for this country today.
  In the economic climate which we are bound to meet sooner or later, we cannot expect not to meet sharp fluctuations from America. We need to go in exactly the reverse way to that of the Chancellor: the exact reverse of the general economic philosophy which is gradually—rather gently, but steadily—being put into effect by the party opposite. When we return to the responsibilities of office, we must apply a much more drastic form of control on foreign transactions than we have ever done before.
  It will not do to hover between these two approaches. In the economic weather which this country is only too likely to encounter—I cannot say when, but over the years—either we have to push the Chancellor's line far further than he has pushed it now, or we must take a far

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  more drastic measure of control over imports and foreign payments—that is the key point. We do not need so much more drastic controls of home economic activity. We may need to have those also, but not necessarily physical ones. We can work there largely through demand.
  Mr. Spearman: Would the right hon. Gentleman explain how, if he is going to control imports more, he is going to prevent an enormous rise of prices at home unless demand is kept down?
  Mr. Strachey: I was in the concluding sentences of my speech and the hon. Member must not tempt me into a further speech.
  I repeat what I have said to the House before, that for this country, so dependent on its foreign trade and foreign transactions, control over foreign transactions is the key to the situation. Any party which wishes to preserve the economic independence of this country — and that really means the political independence of this country, too—will have to devote itself to that problem. I give this to the hon. Gentleman; it is not an easy problem. But it is a problem which a future Socialist Government will certainly have to meet. For any Government which is not willing to go down the capitalist road, to give it its widest name, the road of laissez-faire and free markets, on which the Chancellor has already put his feet somewhat tentatively, must address itself to the problem of securing the economic independence of this country by a system of complete control over its citizens' foreign transactions and payments.
  6.41 p.m.
  Mr. Ian Horobin: I should like to develop one or two points which the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) made in his most interesting speech, with almost all of which I agree. Before doing so I should like to suggest an answer to two of his concluding questions, which were almost the only criticism of the Budget.
  The right hon. and learned Gentleman asked why something was not done for the old age pensioners and about equal pay. Surely the brief answer to that is
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  that all the reliefs in this Budget, rightly or wrongly—and in our opinion rightly— were devoted to where they may be hoped directly to assist either productive industry or savings. I do not think, however much all of us wish for the improvements suggested by the right hon. and learned Gentleman—and most of us do wish for those kinds of improvements in those particular sections of society—that they would meet the situation which the Chancellor had in mind in this Budget. That is the short answer to the only criticism made by the right-hon. and learned Gentleman.
  That partly answers a good deal of the very interesting speech to which we have just listened from the right hon. Gentleman the Member for Dundee, West (Mr. Strachey), although we do not agree with it. Any medicine in this wicked world has some unpleasant effects, and the medicine introduced into our system a year ago has had some unpleasant effects though not nearly as many as some people suggested. It is because in this Budget the Chancellor of the Exchequer is doing something to assist industry to meet the kind of danger to which the right hon. Gentleman directed our attention that I welcome the Budget proposals.
  But most of what I want to say to the Committee reverts to the speech of the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), because that was almost the only attempt—a difficult and noble effort though it was—to attack the Budget. The rest of the speeches from the benches opposite have been in the form of a desperate search for gloom at any price.
  The right hon. Gentleman spent a good deal of time making fun of my right hon. Friend because so many of his figures and prophecies had gone adrift. I want to say a word about that. They are in two separate departments. First of all, there are the prognostications which are the proper job of the Chancellor. His prognostications of the revenue and the expenditure were each £200 million wrong, and that is a genuine criticism. There are, however, one or two things which hon. Members opposite would do well to remember.
  The first is that my right hon. Friend had to fight his way past the duns to get into the Treasury Chambers at all, and if he was a bit erratic in his first reactions

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  it is hardly surprising. That has direct relevance to what we are dealing with, because it cannot have escaped the Committee's knowledge that the revenue estimates in last year's Budget were brought forward for an early Budget in order to meet the emergency which had resulted. The normal procedure of the Inland Revenue for measuring the probable revenue returns was put out of gear. There is no doubt that a very substantial amount of the inaccuracies in the estimates of revenue were due to the fact that the Budget had, for reasons outside the responsibility of my right hon. Friend, to be brought forward before the usual date.
  As regards errors in expenditure estimation, at least half of it can be very easily explained, and there is no conceivable ground of criticism from the opposite benches because of that. At least half of it is due to the greater success in building up the defences of this country, and the Danckwerts Award, which we inherited from the party opposite.
  About the other errors, personally I am very glad they are all wrong. They always have been wrong and they always will be wrong. All these attempts to prognosticate what the invisible exports will be and what the rate of exports will be are doomed to failure. All planning in that sense is bunk, and the sooner this Committee and the country realise it the better. They have all gone adrift again and they always will.
  Mr. Frederick Peart Mr. Frederick Peart (Workington) rose—
  Mr. Horobin: No, I cannot give way as there are others who wish to speak.
  The Board of Inland Revenue and the Chancellor of the Exchequer have to make very rough-and-ready guesses for their own guidance, and all that is very good for themselves but it is impossible to try to treat the future as an exact map. [Interruption.] If the hon. Member for Keighley (Mr. Hobson) would put up his head and put down his feet, he might understand what I am saying. I was saying that it was the duty of my right hon. Friend and the Board of Inland Revenue to estimate the figures of revenue and expenditure, but it is not their duty or even within their power to estimate what millions of unknown merchants, manufacturers and consumers are
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  going to do 12 months ahead. I say that in that sense planning is bunk and no sure foundation for any economic policy. I am not in the least sorry that once again, as in previous years, it has proved to be entirely fallacious.
  If it is true, then, that so many of the figures in the Survey have gone adrift, how is it that in the year which is just closed the Chancellor's general strategy has been so overwhelmingly justified? I will take the liberty of reminding the Committee of the debate we had on the Budget proposals of last year when I pointed out at the time how precarious the figures were. I think I can sum up the situation I am trying to develop tonight by reading a couple of sentences from that speech. I said:
  "I would sum up the position by saying that this Budget stands or falls by the rise in the Bank rate. Personally, I believe the Chancellor of the Exchequer has done probably just about enough to make the situation manageable, provided the Bank rate is allowed to fulfil its old functions."—[OFFICIAL REPORT. 13th March, 1952; Vol. 497, c. 1690.]
  That is exactly what happened. The prognostications were wrong, but for the first time since the war we had a Chancellor who had the courage to do an extremely unpopular thing, a thing which all the intellectuals said was quite out of date but which our Victorian ancestors, when building up our Empire, had found by experience to be right, namely, if we wanted to stop inflation it happened if the Bank rate was put up. The Chancellor put it up, and he has killed inflation.
  It is not very difficult to see why, in these circumstances, it did work. First of all it made a completely different situation in the foreign appreciations of our position. Instead of trying to get their money away from us, people either left their money here or brought it here. It also stopped the re-stocking which was taking place. Hon. Gentlemen opposite are inclined to think that the only increase of stocks in 1951 was of those under Government control, but everybody all over England was hoarding stocks in that inflationary condition, which had all sorts of other disadvantages, quite apart from the effect on our balance of payments.
  The Bank rate change caused people in the City, merchants and others who knew by experience—whatever the pundits on the other side of the Committee may say

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  —to cease hoarding stocks. The right hon. Member for Leeds, South (Mr. Gaitskell) is continually endeavouring to confuse the country as to the difference between stopping the increase and actually reducing the stocks and he has finally succeeded in confusing himself. He wrote a letter to "The Times" in which he was £400 million wrong in this way and it took him a week to discover his mistake. I repeat it was not only that the Government stopped increasing stocks, but that everybody else stopped doing so, too.
  I was very glad to hear the remarks made by the Economic Secretary to the Treasury on the question of the terms of trade, on a point which I have often made myself. [Laughter.] It is unwise of hon. Gentlemen opposite to laugh. It is clear that the general financial policy of Her Majesty's Government, carried out not only here but, as the result of the Commonwealth Conference, in other parts of the Empire, had an immediate effect upon the terms of trade. I want to be much more generous and fair than hon. Gentlemen opposite. I am not going to claim, and I am sure that the Minister would not do so, that the whole improvement in the terms of trade is due to that. They were, in fact, moving in our favour in the summer of the year before we came to office, but while the whole is not due to us, a substantial part of it is.
  We may take it, therefore, as proved that the decision which the Chancellor made soon after coming into office to set at work the old and well-tried monetary machine for stopping the inflation which was ruining us succeeded in the course of the year, although it has left anxieties of its own. After having been saved from drowning, we do not grumble at still having a slight cold. It is necessary for me to go further and point out what a frightful Budget we should have had if the Chancellor had not succeeded in that way.
  Before the present reliefs were given in this Budget, my right hon. Friend had to budget for about £270 million surplus above the line and about £540 million deficit below the line. In other words, he had to find about £270 million. If we had still been in an inflationary position he, as an honest man, just as Sir Stafford Cripps was honest, would have had to
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  cover the whole £270 million by new taxation. It would not have been a question of knocking 6d. off the Income Tax but more like putting 1s. on.
  That would not have been the end of it. My right hon. Friend would not only have had to find £270 million by extra taxation, but if he had not already made a saving on the Civil Estimates of about £250 million—every bit of which saving was bitterly fought on the other side of the Committee—he would have had to find that extra £250 million by taxation too. I leave it to the Committee and the country to imagine the kind of Budget we should be facing now if the inflation had not been squeezed out of the system by the monetary policy of Her Majesty's Government in the last 12 months.
  However, we must not go from one extreme to the other. We shall face quite an anxious Budgetary situation in the next two years. The reliefs already given in the Budget will pile up to about another £400 million. In addition to that, there is at least one major new liability falling upon us by the automatic increase in the Budgetary claims of the National Insurance Fund. That is one of the most serious things hanging over Budgets in future years. To find it we have only about £100 million surplus left above the line. Even on the assumption that we can go on covering the whole below-the-line expenditure outside the Budget, we shall have to find in the next year or two something like £400 million.
  Maybe a saving will by then be possible on defence, and some more from the naturally increasing buoyancy of the Revenue. Income Tax has been increasing in the order of £100 million, and something substantial will come from that. The moral of the figures which I have just given is that the search for further savings in Government expenditure must be ruthlessly carried on. How these savings are to be found is a matter for legitimate difference of opinion, but no responsible person in any part of the Committee can differ from the proposition that a reduction in some way or another in Government expenditure over the next few years is an absolutely inescapable necessity.
  I shall not go over the various other points raised by the Budget, although I should like to have made one or two

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  observations on such subjects as the Excess Profits Levy. My right hon. Friend may remember that I made some very tentative observations on that subject a year ago. I would say here and now that we could not fairly have expected anything more from the Chancellor of the Exchequer in this direction than he has done. I am sure that he has taken a sensible course in not getting rid of E.P.L. this year but of fixing a time-limit, and for having had the courage to get rid next year of this unstable gargoyle on the fiscal edifice.
  I would make one short comment on the extent to which this is an incentive Budget. Industry will cordially welcome the broad outline of the changes made this year, but we must not run away with the idea that they are a huge gift to industry which will have immediate and spectacular results. I am sure the Chancellor does not think of them in that way. The changes in last year's Budget in Profits Tax and E.P.L. together mean that next year industry would have to pay about £64 million less. On the assumption that about half the Income Tax is paid by industry, that would cost industry an additional £84 million. Together these would have meant a £20 million greater burden of tax on industry. This year's change in Income Tax —on the assumption that half of Income Tax is so paid—will reduce the burden on industry by about £58 million. Adding £3 million for various miscellaneous items, the total reduction in the burden on industry this year is thus of the order of £61 million.
  By the latest figures, industry is paying £893 million. In other words, the Chancellor has taken about 5 per cent. of the burden off industry, or about 1s. in the £. Industry is grateful, but it is no good giving ourselves the impression that the Budget proposals will be so immediately and spectacularly successful that they will lighten the burden on industry immediately. It is a good beginning and we are most grateful for it, but it must be carried further.
  Now I want to take up a point raised by the right hon. and learned Gentleman the Member for Montgomery and also by my right hon. Friend the Member for Blackburn, West (Mr. Assheton), the financing of the overall deficit, because it is a point of fundamental importance.
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  Last year the fundamental point was the initiating of a change in our monetary policy. That has had the good effects referred to during this debate. But what has been the effect on Government debt? In the year which has just passed, we have added about £450 million in Treasury bills which we have used to build houses. That is putting it crudely, but it is not far wrong. This year, assuming that all is going according to Cocker, the same thing will happen— £450 million of extra Treasury bills will be added to Government debt and will be used for below-the-line capital expenditure.
  No one will accuse me of not being a strong supporter of the use of the Bank rate and its effectiveness, but I hope the Chancellor will not overwork the willing horse. The success of his general monetary policy has been remarkable this year, in spite of the fact that all the time he has had to work against an ever-increasing overall budgetary deficit. My right hon. Friend is hoping to do the same this current year and, as far as one can estimate, he will probably get away with it. However, we cannot go on hoping indefinitely to have an overall budgetary deficit running into hundreds of millions without falling into one of two dangerous situations.
  Either it will make the present Bank rate policy ineffective and we shall start the inflation again—in other words, 1953 will lay the foundations of the balance of payments crisis of 1955 and that will be the end of us—or, alternatively—and this is a danger which I think will appeal to hon. Members opposite—we shall reach this position: the classical prescription, which has been applied, for killing inflation is indeed dearer money, but it has to be short and sharp. We have not been very sharp and the result is that we may not be very short, and if one keeps dear money on for a long time many of the objections to it which have been urged from the benches opposite become true, as they are not true when it is used as a remedy for desperate diseases and is not kept on too long.
  I feel that the fundamental financial problem before Her Majesty's Government in this year is the successful floating of a loan to the general public to mop up the increasing short-term loans which are the inevitable, temporary result of the

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  Budgetary outcome of last year and the Budgetary intentions of this. It is impossible to be dogmatic on such a subject, and it would be presumptuous for a private Member to tender any advice. It is only the Chancellor and those in his most intimate circle who can test the time and the terms of such an undertaking.
  I only beg and implore him if, as I feel must be the case, in this coming year a substantial funding operation is to be undertaken, not to try to be too clever, not to try and buck the market. The great thing is to get the money. Even if it turned out that he might have got it a little cheaper, it is not worth taking the risk. Anything would be better than either leaving ourselves where we have to put on even a higher Bank rate or keep it on longer than we need or, alternatively, if we did not get the money, find ourselves running into an inflationary situation.
  In the light of informed opinion in the country and the general reaction of the public, I cannot feel that there will not be general agreement that in the last year we have come triumphantly through a grave crisis, aided by a little luck—but, Heaven knows, we deserve some luck in this country—though, by and large, by the sensible application of well-tried remedies. We now have to face the danger which those remedies themselves have introduced into the system.
  I have every confidence that we shall surmount those problems as we have in the past and that we may say that, under the guidance of my right hon. Friend, far from following the advice tendered to us in the previous speech, of going back to the dreary prospect of more and more controls and restrictions, we shall give our countrymen the chance to earn the rewards of skill by taking the risks of freedom.
  7.6 p.m.
  Mr. Donald Chapman: I hope the hon. Member for Oldham, East (Mr. Horobin) will forgive me if I do not follow him in the interesting matters he has been raising, but I want to spend a few minutes asking some questions about the plans of the Government and their ideas for the future of exports. We have a most serious statement in the Economic Survey, namely, that we are expecting a con-
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  siderable increase of imports in the current 12 months compared with the last 12 months and that it will be almost impossible—the Survey almost says that in so many words in paragraph 106—to get sent abroad the amount of exports we need.
  I am shocked at the amount of complacency there has been throughout this debate on the difficult question of exports. There has been so much basking in the sun of a temporary lull in our difficulties in regard to the balance of payments that nobody has been thinking, as far as I can see, of where we are going from here. It is surprising that we have as yet heard nothing from the Chancellor or from the Government spokesmen. For that reason, I want to devote the major part of what I shall say to that problem but, before I do so, I shall refer to the comments we have heard about the redistributory effects of this Budget on the equality of purchasing power and on the standard of living as a result of the taxation reductions proposed by the Chancellor.
  We have heard it said from the other side of the Committee that it is almost indecent to say that the reductions in taxation are unjust because they relieve people higher up in the scale to the tune of several hundreds or possibly thousands of pounds. This is an amazing statement. Let us look at the simple facts. I am sure the Economic Secretary to the Treasury will agree with me that we are in a situation where, by and large, no reliefs are given to the people at the bottom of the earning scales. If Purchase Tax reductions are pointed out as a contradiction of my main point, I say at once that they represent little more than 6d. a week to everybody, and certainly will have no effect by the time one measures what it is that ordinary people spend their incomes on.
  As a whole, therefore, they have no relief from this Budget. Who gets the relief? I tried to discover who will get as much as 2s. 6d. a week, which is the least we would want to give anybody as a small present these days from a Budget. I find that it is a married couple with £12 a week, a married couple with one child with £14 a week, and a married couple with two children with £16 a week. That is the income they have to reach before they get as little as 2s. 6d. a week.

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  It is not only a question—and this is the main point I wanted to make—of whether the lower paid get any positive reliefs and therefore whether they may be staying as they are for another 12 months. The fact is that people below these taxation levels are bound to face a very much more difficult position in the coming year, because we have yet to feel a good number of the effects of the last Budget. Their lot will become worse by several shillings a week, I imagine, by the time the next 12 months have passed.
  Look what is still to come to make worse the lot of those people who have had no tax reliefs in this Budget. They have still to feel, in a weekly sense, the effect of recent rate increases. We are promised, later in the year, a Bill which will probably increase rents. They have to face an increase in the price of coal of five or more shillings per ton. As a consequence, they have to face an increase in the cost of electricity and of gas, the prices of which are bound to go up as the year progresses.
  Awaiting this Budget there are a number of wage claims which will now be pressed with the vigour which they deserve in view of the few concessions given. They include claims for the distributive grades, for example, affecting 1½ million workers, and they will again put up the cost of what the ordinary person, and particularly the lower income group, buys. The situation is quite distinctly, therefore, that not only have these people no reliefs from their present position but they will need reliefs on a much greater scale because of the increased cost of living which these factors will create during the next 12 months.
  Finally, we have the effect of bus fares. This may seem a small item to raise, but this morning I received a telegram from the chairman of the transport committee in Birmingham in which he said:
  "I urge the strongest protest against the fuel oil tax which costs Birmingham £750,000. No relief will mean that fares will have to be increased resulting in a higher cost of living for workers."
  They have been living on reserves, hoping that this Budget would give some relief— and there are many other transport authorities in the country which have been running into the red and which will now have to make a substantial increase in fares. On top of all the things I have mentioned,
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  therefore, we can expect an increase in bus fares.
  It is thus not only important to say that these people have had no reliefs; but it is important also to say that in the coming 12 months they will need them more than ever and that this Budget gives them very cold comfort for what is in store.
  I wanted, however, to speak mainly about exports, and perhaps I may now ask the questions which I intended to ask. The complacency on the Government side of the Committee on this subject has been quite remarkable. We have admitted the temporary nature of this year's fortunate turn in the balance of payments, the effect of the fortuitous movements in the terms of trade and the effect of import cuts and the relative fall—and I am a little afraid of this phrase because one may get involved and the Economic Secretary would then be very angry—in stocking up, which I think is a way in which I can put it safely.
  This situation has been accompanied by something like a 6 per cent. fall in our exports. To some extent that is a reflection of last year's Budget which, by interfering with wage costs, put up export costs. As far as I can see, the opportunity provided by this fortunate lull in our difficulties is not being taken. It is, surely, a time for reflection. If I may use the Chancellor's nautical metaphor, it is a time to chart a course for where we are going from here in exports. It is a time to chart a course for increasing them substantially before the next crisis occurs and before we reach a situation in which we have to have a low employment level because we cannot get enough exports out of the country to afford enough imports to keep our people in jobs.
  It is a time for taking a slightly detached view for trying to see where we are likely to go in the next 10 years and how we can raise the level of British exports. The basic problem is, I think, both insufficiently and yet, in some quarters, sufficiently realised. It is a problem which faces Britain in a long historical sense. We know that we are now spending abroad something like £3,000 million in the purchase of goods and that we want to export more than that. Our need for exports is so much the greater because we now have to send abroad more goods and can rely so much

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  less on other forms of overseas incomes. Secondly, we know that we have to face a problem of increased prices against Britain, the adverse terms of trade, which are likely to be against us for a long time.
  What does that mean when it comes to the practical problem of exports in the next 10 years? It means that somehow we must get for Britain a larger share in world trade of manufactured products, because we now rely on manufactured products for some 88 per cent. of our exports. What are our prospects and our chances? I beg the Government to give a lead here—and in a minute I will mention one industry which needs that lead. What are our chances of getting an increased share of world trade in manufactures?
  When we come to consider that problem we must ask the question of whether, in fact, we shall ever get back to the 1938 level of imports; because we are now nowhere near that level, but are at something like 80 per cent. of the 1938 imports. How are we to get back to the pre-war level of imports by exporting enough? There is no lead; there are just some hopes and some exhortations that we must go on exporting more and no lead as to how to do it.
  The problem is enormous because we are depending, in our exports, on goods in which we are so vulnerable. As Professor G. C. Allen pointed out in the Westminster Bank Review some time ago, the important thing about Britain's post-war export trade is that we are depending in the main on the exporting of goods in which we are most vulnerable in world markets. There are goods and trades like motor cars, furniture, certain branches of textiles which we developed in between the wars but which, as exporting industries, we have now developed for the first time in our history.
  How can we keep the lead in those products against the manufacturing competition of America, Germany, Japan and other countries? How can we do something which this country has never done before? First of all, as I say, we are vulnerable to that kind of competition. Secondly, the prospect is very
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  difficult, as will be seen merely by looking at the figures involved. Professor Austin Robinson has given the best lead on this subject in the Three Banks' Review, which was published in March of this year. He tried to make an analysis of what the future world trade is going to be in manufactured products, what our share of it is likely to be and, on that basis, how many imports we will be able to afford. The figures are very staggering indeed.
  He says that with Britain and America both accounting for about 20 or so per cent. of the world trade in manufactures and with two or three other countries accounting for nearly all the world trade in manufactures, our job of snatching some trade to increase our share is going to be almost impossible. He comes to a very important conclusion. He says that he has tried to calculate what are the conditions in which we might hope to finance the full 1938 volume of imports into this country and he comes to the conclusion that, in terms of projection of historical figures, it is going to be almost impossible.
  He says that on certain assumptions about the terms of trade, which are very justifiable, it would require total exports of 191 per cent. of those of 1938 with a component of manufactured exports of the order of 217 per cent. of 1938, or 192 per cent. of 1937, and this we could only reach by securing a 21½ per cent. share of a world volume of manufactured exports as great as that of 1951, or some similar combination.
  What in fact he says in that article is that if he takes both pessimistic and optimistic assumptions about the future of world trade in manufactured products, and pessimistic and optimistic assumptions about the terms of trade, and then sees what share of world trade Britain can reasonably expect to capture, the chances of getting back to 1938 levels of imports are almost impossible.
  Mr. Shepherd: The hon. Member is pressing this point of getting back to the 1938 volume of imports. Surely that is not necessarily a target for this nation. We have not increased our agricultural production. We have not started the manufacture of multifarious products which we previously imported from the dollar areas merely to continue the import pattern as before.
  Mr. Chapman: Part of my case which I propose to develop is that if we are now, as Professor Robinson suggests, practically condemned to 80 per cent. or 90 per cent. of pre-war exports, the job is a double one for Great Britain. We have to decide not only what extraordinary measures can be taken to increase exports but also how we can economise in imports, by increased agricultural production for example, as the hon. Member suggests.
  Let me deal first with the question of increased exports. The motor car industry is a very good example of the dilemma. Last year we had an enormous fall in our exports of motor vehicles to the extent of some 60,000 units. At the present rate of motor car exports we shall do worse than we did last year. They are running at something like 20,000 a month and that will certainly amount to less even than last year's exports. Why will the Government not give a lead on what these industries are to do? What happened at the Commonwealth Economic Conference on these matters? What can the manufacturers in these industries expect to happen in the next four or five years? What kind of lead was given at other conferences?
  Let us take what happened in the consultations in the United States of America. Where did all these consultations about future levels of world trade get to, and what sort of pattern do we expect for exports? Not one mention has been made of that in this debate.
  I want to make some suggestions that should be put into practice. As I have tried to show, this is an emergency problem of great magnitude, if we are to be condemned to this very low level of imports, for the next five or 10 years. The first thing we certainly need is a greater discriminatory use of initial allowances. This has already been mentioned in the debate, but I am sure that we must now take emergency action. Industries which export, which can get a high level of exports and which can fit into a plan for expanded exports must be given some extra incentive and ability to build themselves up, to modernise their equipment and expand. We have a precedent already in the extra initial allowances which are being given to the mining industry.
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  Secondly, we need some Government-plus-industry top level consultations on how we are to get into some of the markets. My hon. Friend the Member for Gloucestershire, South (Mr. Crosland) has mentioned the South American markets, and has suggested bilateral trading agreements with them. Then we need consultation about after sales service and the adaptation of products for those and other special markets.
  I should particularly like to mention an article by Mr. Leslie Gamage in the "Financial Times" some time ago when he said:
  "There is no doubt that we have not had half the success we might have had in American and other hard currency countries because we have just not taken the trouble to find out exactly what the intended customer wants. We must be prepared to send representatives for lengthy periods, we must test our markets by properly conducted research, we must use every local device to promote our sales and we must give support to our agents and after-sales service to his customers at least equal in quality to that offered by our competitors from other countries. In some cases this will mean altering our product to suit local taste overseas."
  He is right. We need a Government investigation with industry into whether credits are sufficient to allow this after-sales service in these dollar markets and other markets throughout the world. We need consultation about adaptation of products. We need market research on an enormous scale. Are the funds available? If not, can industry be helped by emergency methods to get into those markets and carry out the kind of reorganisation which Mr. Gamage and others are suggesting.
  We need other incentives to export. The Economic Secretary said that the Government were not going to indulge in a race with export subsidies, but he has already admitted that export subsidies exist throughout Europe, so that we shall not be initiating any race if we start using export subsidies. One of the best examples of export subsidies that we have had are the food subsidies, because by keeping down the demands for wages we have helped to keep down prices of goods sold in export markets. That is a hidden subsidy for exports.
  Lastly, I think the industry needs to be taken into the confidence of the Chancellor of the Exchequer on what future he sees in the export markets. We have had no indication of what happened in

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  the economic conference with the rest of the world and particularly with the Commonwealth. It is said in the Economic Survey that we shall require a considerable increase in the volume of export shipments even to maintain last year's earnings. The figures this year are going entirely the other way. The problem, therefore, is an immediate one. It is also, as I have tried to show, very much a long term one, one involving Britain in living at a lower level of imports for many years to come.
  Is it too much to plead that in a Budget debate, or in a speech by a Chancellor of the Exchequer, we could have had something more than platitudes and exhortations, a little more indication of what is in his mind—a little more, if you like, of detachment from the immediate scene—and some indication as to just how we are to keep up in the next five or 10 years in the export market?
  I hope that the debate will not conclude next week until we have had some real indication that the short-term problem and the longer-term problem of exports have evoked ideas from the Government as to how we are to face them. I agree we have to increase agricultural production and economise on imports and all those sort of things, but, if we do not also increase exports by emergency measures, we are permanently condemning ourselves to a lower standard of living in this country. I therefore hope that before the end of the debate we shall have an indication of how the Government expect us to avoid that.
  7.31 p.m.
  Sir Edward Boyle: In view of what was said yesterday by the right hon. Member for Leeds, South (Mr. Gaitskell), I do not know whether it is by set purpose, Sir, that you have called two successive bachelors, both of whom sit for the City of Birmingham. To the best of my knowledge, neither of us has a private income approaching six figures and, as far as our eligibility is concerned, as we both have reasonably large majorities, the Committee will have a means of judging that in the years ahead. I will not follow the hon. Member for Northfield (Mr. Chapman) on the question of exports, but I am sure that the President of the Board of Trade will deal with that subject when he intervenes later in the debate.
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  I am very pleased to see the hon. Member for Small Heath (Mr. Wheeldon) with us in the Chamber. I think I am the first Conservative Member for Birmingham to take part in this debate since he spoke, and I should like to say how very interesting I found his contribution to our proceedings yesterday afternoon. He comes here with a very great reputation for work in connection with local government in Birmingham, and I am sure we shall not only have the benefit of his advice in this Committee, but we shall frequently have his assistance in other parts of the Palace of Westminster, also, where the publicity given to our proceedings is much less, but where very much valuable work is often done.
  The Opposition have been faced with a very difficult task in this debate because, with one solitary exception which I shall mention, all their usual lines of attack have been closed to them. In the first place, they cannot claim that this Budget puts up prices. I notice that the Ministry of Labour have already announced that as a result of the Budget there will be a slight fall in the Retail Price Index. I am quite sure that the public will judge the Budget by its effect on prices more than by any other single factor.
  Secondly, the Opposition cannot claim that this Budget attacks the social services. My hon. Friend the Member for Doncaster (Mr. Barber), in his admirable speech last night, made a very valuable point when he reminded the Committee that the Chancellor has not only reduced taxation and lowered the total of civil expenditure by £60 million, but in addition he has actually increased expenditure on the social services by as much as £80 million, including £18 million on the Health Service, and £27 million on education. It was only just before Easter that the right hon. Member for Ebbw Vale (Mr. Bevan) was accusing my right hon. Friend the Minister of Health of wishing to mutilate the National Health Service. The more encounters that take place between those two right hon. Gentlemen, the better pleased are we on this side of the Committee.
  Thirdly, I do not think hon. Members opposite can claim that this Budget will lead to an increase in unemployment, because, as the Chancellor said in his

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  Budget speech, the whole aim of the Budget is
  "to bring out the full production of which we are capable."—[OFFICIAL REPORT, 14th April. 1953; Vol. 514. c. 50.]
  It really is rather absurd to say, as the hon. Member for Edmonton (Mr. Albu) said yesterday,
  "the Conservative Government in this country, prefers an economy that is not operating in conditions of full employment."
  He went on to say, on the authority of a certain Professor Galbraith, that
  "these businessmen dislike Government measures to maintain economic activity, because they destroy their own sense of power." —[OFFICIAL REPORT. 15th April, 1953; Vol. 514, c. 291.]
  I do not know who is the Professor Galbraith referred to. The only Professor Galbraith I know of is the present Regius Professor at Oxford and he is not much interested in public affairs after the reign of King Richard II. When it comes to a question of a sense of power, I do not think any class of the community has a greater lust for power than certain academic economists. In this connection, I hope hon. Members will read—or re-read—a book called "The Dollar Crisis," by Mr. Thomas Balogh, especially the chapter on Britain and the Problem of European Planning, because a book more absolutely steeped in the spirit of a lust for power I have never read.
  Fourthly, I do not think anyone can claim that this is a Budget which will only benefit Conservative supporters. If anyone does make such a claim, the electoral prospects of the Conservative Party are even better than I dared hope. Really, the only argument which hon. Members opposite have been able to deploy is the very threadbare argument in favour of penalties on success. I think the attitude of hon. Members opposite was exemplified perfectly yesterday by the reference of the right hon. Member for Leeds, South to the Excess Profits Levy.
  I thought we should hear some wisecrack at the expense of the Prime Minister and none of us felt in any way evilly disposed to the right hon. Member because of that. I was even afraid we might have one or two of the staler jokes about the overlords and I was a little surprised that the right hon. Member made no reference to Lord Cherwell.
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  But the main concern of the right hon. Member for Leeds, South was to find out what new burden the Chancellor intended to impose on industry when the Excess Profits Levy had been removed.
  That attitude comes very strangely from the right hon. Member, because he once said, in a Budget speech in 1951, that profits should be a reward for efficiency. I cannot therefore understand how he can urge the Chancellor to take a step which must reduce the difference between the respective rewards earned by efficient and inefficient producers. My right hon. Friend believes in lowering the burden of taxation on industry and we on this side of the Committee firmly believe that new wealth has to be created before it can be distributed to anyone.
  Passing to the question of Income Tax, I am very glad that yesterday the Financial Secretary reminded the Committee that the lower rates of tax are being reduced as well as the standard rate of tax. This reduction of the lower rates of tax will help many people living on small fixed incomes, and many who have suffered particularly severely from the rise in prices since the war. A second point is that far too many Opposition speakers have tended to speak as though the bulk of the tax relief represented by the reduction in the standard rate will go to individual persons, whereas the Chancellor pointed out in his Budget speech that more than half the reduction in the standard rate will go to corporate industry. He said, in his speech:
  "At current levels of profits and of distributions—and this is why] am impressed by its value for industry—the reduction of 6d. would represent £45 million relief on the undistributed profits of companies—a very potent augmentation of the company reserves available for maintenance, innovation, and development, upon which, I trust, it should be spent."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514. c. 60.]
  To those who complain that my right hon. Friend did not stress sufficiently that this money should be put to the renovation of industry rather than be distributed in dividends, I say that I do not think he could have gone further in making his views on that subject perfectly clear.
  I wish to turn to two points in the speech of the right hon. Member for Leeds, South yesterday. I have listened to every speech he has made in a major debate since I have been a Member of

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  the House. I find him, as a rule, lucid and easy to follow, but there were times during his speech yesterday when I felt a little like the small boy who said "I think I could understand if only you would not try to explain." It rather worried me that every criticism he made, and every argument he advanced, seemed to lead unerringly to the conclusion that the present Budget was just about the one that the nation required.
  The first of the two points of his speech to which I wish to draw the attention of the Committee was that he took credit for the fact that 1951 was a year in which we stockpiled at a very rapid rate. It has always puzzled me that the right hon. Gentleman and the Government of which he was a Member should want to take any credit for the fact that they ran down stocks in 1950 and had to build them up again in 1951, just at the time when the terms of trade were turning sharply against us. I never felt that episode to be a happy example of Socialist planning.
  Mr. Hobson: What about the Korean war?
  Sir E. Boyle: We should never have allowed our stocks to get as low as they were before the outbreak of the Korean war. The great mistake was to let our stocks run down in the months after devaluation, so that we had to stock up after prices had risen sharply following the outbreak of the Korean war.
  A more important point on which I should like to take up the right hon. Gentleman is the question of monetary policy. No one has ever denied that monetary policy, like other economic weapons, is a blunt weapon. From the point of view of the preservation of individual liberty it is a good thing that all economic weapons are blunt weapons. But it is broadly true to say that the monetary policy of the present Government has had the financial effects which we claimed for it, and that it has not been accompanied by the harmful effects which many hon. and right hon. Members opposite expected.
  We always said that monetary policy would help to stem the drain on our gold and dollar reserves. I do not think that any hon. or right hon. Member opposite can deny that the drain on our reserves
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  last year stopped abruptly in the months following the Budget, in which the Bank rate was put up to 4 per cent. In the first quarter of the year the drain was £227 million; in the second quarter it was reduced to £5 million, and by the third quarter there was no drain at all.
  That was not solely due to import cuts and the improved terms of trade. It was also in part due to increased confidence in sterling and in part due to the fact that a higher Bank rate definitely discouraged and effectively checked speculation against sterling. In the early months of last year a number of hon. Members opposite—the hon. Member for Gloucestershire, South (Mr. Crosland) was one —laid great stress on the speculative movement against sterling which was taking place. By putting up the Bank rate to 4 per cent., we effectively helped to check this speculative movement.
  There is a second point to be considered. One of the evil legacies which we inherited from the party opposite, and one which I think has largely been forgotten, was an economic situation in which our heavy industries were seriously overloaded. When we came to power we simply had not all the resources we required for home investment, for the export of capital goods and for our defence programme. One of the reasons we raised the Bank rate was in order to raise the cost of carrying stocks of goods against borrowed money, so as to slow down replacement orders and to lessen the burden on our heavy industries.
  It has rather puzzled me that the right hon. Member for Huyton (Mr. H. Wilson), who is such an opponent of a higher Bank rate, should also be one of those who complains that our delivery dates for capital goods are still too distant. The cut in investment in stocks compared with the previous year, on which the right hon. Member for Leeds, South laid such stress, was therefore entirely in accordance with Government policy; but it is absolute nonsense to imply, as he definitely seemed to imply yesterday in his speech, and today in an interruption when the Economic Secretary to the Treasury was speaking, that the rise in the Bank rate to 4 per cent. was responsible for an increase in unemployment. That just is not true. In April, 1952, the unemployment figure was 467,871; that was very shortly after

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  the Bank rate had been raised: in December, 1952, it was down to just below 400,000. I do not think that it is possible, on those figures, to claim that the higher Bank rate caused greater unemployment in this country.
  The higher Treasury bill rate did not lead to nearly so big a charge on the Revenue as a number of hon. and right hon. Members opposite feared. The right hon. Member for Battersea, North (Mr. Jay), in a speech during the Committee stage of the Finance Bill last year, said:
  "I know that none of these things is as simple as it looks, but on rough arithmetic, … presumably an extra 1¾ per cent. would mean something rather over £75 million gross —say, £80 million, …"—[OFFICIAL REPORT, 27th May, 1952; Vol. 501, c. 1208.]
  In fact, the figures given in the Financial Statement show that the extra cost of the higher Treasury bill rate was about £42 million, and substantially less than the right hon. Gentleman expected.
  One other accusation is that the higher Bank rate has been responsible for pessimism and uncertainty. I do not agree, and I believe that if we had had a slightly higher Bank rate in the period between 1945 and 1951, we should never have had that panic buying after the outbreak of the Korean war which was so largely responsible for the severe textile recession at the beginning of last year. The trouble is that hon. and right hon. Gentlemen cannot understand that it is possible to have a higher Bank rate and at the same time to maintain a high and stable rate of employment.
  I cannot help feeling that the real grouse on the benches opposite throughout the debate has been that we no longer have any inflation in our economy, and that total demand no longer exceeds supply. We on this side of the Committee have always held firmly to the view that inflation is the greatest evil which can afflict a trading nation like our own. I entirely agree with the views that Professor Lionel Robbins expressed in his Stamp Lecture, a year or two ago, when he said "Stop the inflation, stop it at all costs." Now my right hon. Friend has effectively stopped it, and, as the Economic Survey shows, we still have a high and stable level of employment in this country, and a percentage of unemployment which is little more than half of what both Lord Beveridge and the right hon. Member for Leeds, South recognised as a full employment standard.
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  I wish, if I can, to create a record for the debate so far today by ending my speech within 20 minutes of rising. I therefore wish to comment very briefly on two taxes which my right hon. Friend has decreased. I must first say how pleased I am that he has made an all-round reduction in Purchase Tax.
  A few weeks ago I was responsible for initiating a debate on the jewellery and silverware industries. It would only be courteous on my part to thank my right hon. Friend for having specifically referred to those industries in his Budget speech, and for having referred to the silverware industry in his broadcast. I much preferred the attitude to those industries displayed by my right hon. Friend to the rather contemptuous attitude shown by the right hon. Gentleman the Member for Leeds, South yesterday when he referred to jewellery and furs as typical luxury trades. If he talked to some hon. Members opposite who supported the Motion I moved a few weeks ago, he would realise that there is a very strong case for doing something to assist those industries.
  I am glad to see the 40 per cent. initial allowance for mining works. Some of us, including my hon. Friends the Members for Stafford and Stone (Mr. H. Fraser) and Oswestry (Mr. Ormsby-Gore) have in recent years put down Amendments or new Clauses on this subject. We once received the unexpected support of the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan) who was at that time in opposition, not only to us, but to his own Front Bench, and I hope he will be as pleased as we are about this relief.
  I think this is a courageous Budget. I have no doubt some people will say that my right hon. Friend has taken too big a risk in giving reliefs of such a magnitude. I quite recognise that the position always looks less inflationary in February than in July. I also understand the fears of those who say that a reduction in taxation, coupled with the hope of higher production this year and the import relaxations which have been announced, may tempt us once again into taking a higher level of inessential imports than this country can afford.
  I agree with the apprehensions which were expressed by the hon. Member for Gloucestershire, South last night. I am sure, however, that my right hon. Friend

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  would not have acted without carefully weighing up all the various factors which have contributed to his decision. I have confidence that, under his guidance, this country will get through an odd-numbered year without a major economic crisis, for the first time since the war.
  Finally, we can all be pleased at the improved position of the £, and let us remember that a strong £ is not only a security for the standard of living of the people of this country, but is also absolutely essential if Britain and her Commonwealth are to make a worthy contribution towards the leadership of the free nations.
  7.53 p.m.
  Mr. Michael Stewart: Like the hon. Member for Handsworth (Sir E. Boyle), I shall endeavour to keep my remarks within a modest compass. I should like first to underline two pleas made by my hon. Friends the Members for Cardiff, West (Mr. G. Thomas) and Sowerby (Mr. Houghton). On the subject of equal pay it is true that for 30 years successive Governments of all colours have admitted the justice of this principle. I would remind the present Government Front Bench, and particularly the Financial Secretary, that this Government went further than merely admitting the principle. Nearly a year ago they agreed it was important to name a definite and early day. The Financial Secretary and the Parliamentary Secretary to the Treasury were in the House at the time concurring with that Motion.
  Any Government might reasonably say that "a definite and early day" cannot mean within the same financial year as the undertaking is given and that there must be an opportunity to look at the finances of the nation as a whole. But would not this have been an opportunity to decide that the words, "definite and early day" should mean something? Hon. Gentlemen will agree that 12 months is not usually considered to be an early day after a pronouncement is made. If the Government feel, as they may, that the economic situation does not warrant taking this step in the foreseeable future, I believe their right course would be to invite the House to reverse its previous decision. If the Government have not the resolution to do that, I believe
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  they should put a definite content and meaning into the words. "definite and early day."
  The other plea I wish to reinforce is that for poor elderly people, old age pensioners. The amount of relief they would get from this Budget is literally infinitesimal. Some of the results of the last Budget are still bearing heavily on them and there will be further costs which will bear on them within the coming 12 months. Having referred to these two points, I wish now to comment on the general relation of the Budget to the economy of the country.
  The burden of the speeches of hon. Members opposite has been to acclaim a year of progress and to attribute it to the wisdom and virtue of the Chancellor. But what does the Government's own Economic Survey tell us has been happening during this year which is acclaimed as a year of progress? From the Economic Survey we find that production is perceptibly lower, and consumption is slightly but still unquestionably lower. What we have added to our fixed capital assets, on which our productive efficiency depends has been perceptibly less, and unemployment figures and short-time, though not yet catastrophic, have been significantly more.
  That is the year through which we have just passed. When one hears so many hon. Gentlemen opposite congratulating the Chancellor on the way in which he has been progressing, and expressing the hope that he will go further in the same direction, one wonders what will be the economic state of this country if those hopes are fulfilled and we have a few more years of this kind.
  There have been one or two jocular references to the "Daily Herald" during the debate, but I wish to quote from another source a sentence which gives a significant commentary on the year we have gone through. I would quote from the annual report of a local Conservative association describing what happened at a fair held towards the end of last year. The report states:
  "The net profit resulting from our fair was disappointing compared with previous years, but that is a sign of the times."
  That refers to the first year of Con-versatism which was disappointing compared with previous years.

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  The speech made by the Economic Secretary this afternoon was far and away the weakest we have heard from the Government Front Bench in support of this Budget. As we know very well, having heard him on other occasions, that was not because of any lack of personal ability. It was because he had been asked to defend the weakest sector, and because his own ability had revealed to him the fact that it was the weakest sector. The plain facts of the economic situation are that we are a less productive community, we are consuming less, adding less to our general store of wealth and using our resources less efficiently than a year ago.
  The effect of all that may for the time being be masked by the decided tilt of the terms of trade in our favour—by the tendency of the prices of things we sell to go up and the prices of the things we buy to go down. The Economic Secretary did his best to point out that the action of the Government could have some slight influence on the terms of trade. But as he knows very well that influence is very slight indeed. For good or ill the movement of the terms of trade is as much, or very nearly as much outside the control of the Government of this country as is the climate and the weather.
  The effect of the decline in our economy has been masked from us by this movement of the terms of trade in our favour which can be calculated at something like £500 million. But that mask will not always be there. We may, as hon. Members opposite have expressed the hope that we shall, go on in the same direction of lower production and consumption and rising figures of unemployment, but we cannot hope for an improvement in the terms of trade at that rate year after year. The fundamental facts of this country's economy in the mid-20th century remain unchanged.
  We are, and are likely to be for a long time, in a state of siege. Occasionally it may happen that the pressure of the siege is relaxed a little. In fact, the threat will be there for a very long time. It can only be dealt with if this country becomes steadily more productive, if the actual amount of wealth produced by a week's or an hour's work goes steadily up and, perhaps equally important, if we get a right alignment of our resources and
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  manpower and a right allocation between consumption and investment, an investment in the right proportion to the different industries and the full use of all our manpower, again in the right proportion between different industries.
  What is the Budget's contribution to the solution of those major economic problems which have to be solved if we are not to be constantly liable to balance of payments crises? The Budget solution is simply to make the assumption that these major economic problems of our productivity and of the alignment of our resources and manpower can be solved merely by giving taxation reliefs to the private capitalist, and then to assume that he in consequence will simply go ahead and solve the problem and that out of the unrelated activities of large numbers of private groups of persons the right answers will somehow emerge.
  It is the philosophy that if one looks after the pounds of the rich man the pence of the poor man will somehow look after themselves. It is that philosophy that is made the excuse for denying any relief to the claims of the poor elderly people in this Budget and for the nibbling at the social services—which will soon become a devouring—like that which has marked the last year.
  As was pointed out by my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop), a former Parliamentary Secretary to the Ministry of Health, when we examine the figures of the Health Service we find that we are faced with a reduction. We know very well that such increases as have occurred in education would have been imposed on any Government by the increase in the number of children to be provided for. The actual value of the service rendered has been reduced all along the line, and it has been reduced deliberately. If it has not been reduced, the torrent of circulars and warning speeches which have come from one Member of the Government after another have had no meaning at all.
  All this is excused on the ground that one must give encouragement to the private capitalist and that if one does that the rest of the picture will fall into place. I do not think that it is a caricature to say that in the main that is what hon. Members opposite believe. Will this happen? I will freely grant to the

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  Chancellor that there is already one sign of his incentive Budget getting to work. I find from the "Evening Standard" that:
  "City cafes, normally crowded in the morning by stockbrokers drinking coffee, were deserted today. Every one was queuing up outside the Stock Exchange waiting for dealings to start after Mr. Butler's Budget."
  It is gratifying to read of these austerities. One knows that from time to time poor people have to go without their rations because they cannot afford to buy them, but when it comes to stockbrokers doing without their coffee one must admit that there is perhaps one swallow, but will that swallow be followed—
  The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): It is not a swallow.
  Mr. Stewart: The Financial Secretary to the Treasury has applied his usual acumen to the problem. It is an attractive theory that if one does the best one can for a limited number of fairly well off people the rest of the country will sort itself out. The only drawback to this assumption is that we know from bitter experience that it does not work. The moves towards it made in the last Budget have not resulted in increased production or in getting our economy any nearer to the right alignment needed to meet the problems of the middle of the 20th Century.
  More decisive still, this is exactly the line of policy tried out in the inter-war years when we faced, if not quite so seriously, fundamentally the same problem as we are facing today. There was the task then of readjusting the economy of the country to changed overseas demands, of re-equipping industry with more up to date equipment, of getting greater mobility into our manpower and getting big shifts of manpower from one industry to another.
  The solution which under the leadership of Conservative Governments was continually presented to the country was that if one left it to private capitalism the thing would sort itself out. What do we find in practice? In the main the private capitalist, moved quite naturally by the motive of profit, as he intended to be moved, does not seek profit so much in more production and in getting the right alignment of our resources. He seeks it more easily and more readily, as he did
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  in those years, by restriction, by cartels, by pleading to the Government of the day for tariffs, guarantees and subsidies and for all kinds of devices which would save him from performing the one function which according to the text book he was supposed to perform—that of actually taking the risks and bearing the loss if his judgment was wrong.
  Time and again during these years the Government called upon the nation to foot the bill to prevent private capitalists incurring losses. They were not performing the risk-taking function which is so repeatedly ascribed to them and which is made the justification for one Budget concession after another. Of course, the solution then adopted by the country to the problem of having manpower available whenever there was any new demand was always to have a huge pool of unemployed. That was the answer then and that is the answer which follows naturally if we leave our economic problems to be solved in this laissez faire fashion.
  Those results do not occur through any individual inefficiency on the part of the private capitalist. The things he actually concerned himself with were often performed with very great efficiency. It is indeed a matter of marvel to the student to note the immense skill and efficiency with which whole industries would be arranged in order to prevent their production rising above a certain figure. The tragedy was in the misapplication of so much talent and ability. Matters turned out that way not because of the deficiencies of any individual but because the major economic problems that a modern industrial State has to face are too large and too complex to be solved by separate groups of private individuals.
  The great questions of how much ought to be invested, what ought to be the comparative size of different industries, what should be the different groups of investment in different industries, in what part of the country should new industries spring up, how should we secure mobility of labour—all these are questions the answers to which require resources and knowledge which cannot be at the disposal of private persons. One can no more solve those problems in this way than one can leave the traffic in Piccadilly Circus or Holborn to sort itself out by leaving it to the enlightened self-

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  interest of each separate driver and pedestrian.
  It is significant that spokesmen of the Government from time to time, to console us in the last 12 months for the declining figures of production, have pointed to one or two bright spots. Where did the President of the Board of Trade find the bright spots not long ago? He found them in the coal and steel industries. There is also the notable contribution of the aircraft industry to our export problems. In these three industries to an increasing extent the major economic decisions—the decisions to devote a great mass of resources in a certain way and to take the risk that it will prove to be the right one—have been taken by a public authority and not by private persons. Inevitably, that development is continuing.
  If we are to solve the fundamental economic problems which beset us, and which will continue to beset us, what do we need? One of the things which we need is a closer relationship between the size of people's incomes and the amount of work which they do, whether by hand or by brain, and I think it is a consideration for Chancellors whether they cannot make a still sharper distinction between incomes which are the result of work, either by hand or by brain, and incomes which have come to the possessor not as a result of work he is doing now or of work he has done in the past.
  One of the criticisms of the type of relief we have in this Budget is that it does not in any way add to this distinction. When we are living in a siege economy, as we are, we must have an increasing predominance of the claims of those who are helping to drive the besiegers back.
  Mr. Boyd-Carpenter: Old age pensioners.
  Mr. Stewart: The Financial Secretary mentions old age pensioners, but I think he knows very well the point I have in mind. Those who have worked hard all their lives are in one category. I am concerned with another category—people who get comfortably-sized incomes from the day of their birth for which they have done nothing at all and will do nothing. Both economically and, still more, morally and psychologically, that is something which this country cannot afford.
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  We also need a sure confidence on the part of working people that full employment will be maintained. The movement of the figures, as shown in the Economic Survey, is not such as to maintain that confidence, but it must be maintained at a high level if we are to get the attitude on the part of workers which will make them eagerly willing to accept new technical methods of production and willing to accept the degree of mobility of labour which we shall need if the country is to deal with these difficulties.
  We also need an increasing measure of social justice. Hon. Members opposite are constantly trying to find discreditable facts in the record of the last Government, although sometimes they are not quite sure which facts to take. For example, 18 months ago, it was said to be the fault of the late Government that they went out of office leaving the cupboard bare. The hon. Member for Handsworth has just told us that it was our fault that we left the cupboard too full.
  But this at least was apparent. During those years, although we had to face balance of payments crises, as this Government has had to face them and will have to face them again, we came through them with an economy which continued to produce more. The nation came through the last balance of payments crisis, but at the end of it the patient's vitality was lowered and his productive power was less. One reason why we achieved those results with the last Government was that, by and large, the working people in the country were convinced of the justice of the society within which and for which they were working. We have to increase that sense of justice if we are to reverse this downward trend in production.
  Further, we have to make a positive advance in the field of technical education. It will not be enough for Governments to say that we are spending just enough more on education not quite to keep pace with the increasing number of children. Quite apart from any of the other arguments which may be advanced about education, the need for an improvement in the quantity and quality of our technical education is one of the pressing economic needs of the time.
  Finally, among the things which we need. I mentioned that this job of investment and direction of our resources

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  needs to be done today increasingly by public authorities rather than by private persons. We therefore need an increasing section of our economy under public ownership and direction, otherwise we shall reproduce the results which appeared in the years between the wars because, all that time, we had this lower level of taxation which hon. Members opposite keep telling us will solve all our problems—and it did no such thing.
  Those four things are at least some of the things which we need—a greater relationship between people's incomes and what they do to earn them; an increasing degree of social justice; improved technical education: and a larger public sector in our economy. Over all those points we are walking in the wrong direction, and I believe that if we continue to do so we shall, in the words of the late Lord Keynes, which he used in condemning the way in which this country's problems were dealt with in the 1930s, end with the Budget balanced at nought on both sides and with ourselves lying flat on our backs producing nothing and consuming nothing.
  8.16 p.m.
  Lieut.-Colonel Wentworth Schofield: The hon. Member for Handsworth (Sir E. Boyle) hoped to create a record in speeches in the debate by completing the course in something like 20 minutes. I do not know whether 20 minutes constitutes a record, but, if it does, I can assure hon. Members that I intend to smash it and reduce it to something less than half the time taken by everybody else.
  I hope that what I have to say will not be taken as unduly criticising a Budget which I believe has been well received by most people in the country, but, representing as I do a constituency in which a large number of people depend for their livelihood upon the well-being of the cotton textile industry, I feel that I must draw the Committee's attention to an important omission in the Chancellor's alleviation of that most unpopular tax, Purchase Tax, in that the benefits which he has so generously conferred upon others have in this Budget been denied to those in the textile trade.
  When the Committee debated the Finance Bill last year, hon. Members on both sides were receiving appeals from
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  various branches of the textile industry asking for the removal of Purchase Tax as a means of stimulating much-needed demand for cotton textiles, the industry of which was languishing very badly in the throes of a world-wide recession in trade. At that time I refrained from joining in those appeals because I realised the difficulties with which the Chancellor had been faced in having to frame a Budget in economic and financial circumstances as bad as, if not worse than, those which any previous Chancellor had ever had to face, and, moreover, at a time when he was having to find ways and means of avoiding national bankruptcy.
  I believe that the Chancellor went as far as prudence would allow in modifying the incidence of Purchase Tax by removing the Utility scheme and substituting for it what is known as the D scheme. Hon. Members will recall that he also went out of his way to help the industry by accelerating the placing of defence contracts for certain types of textile production. After a year's experience of the working of the D scheme, examination has shown that it has not been quite the success it was hoped it would be. Indeed, in cotton textiles it seems to have created one or two new troubles. One of the greatest objections to the operation of the D scheme is the manner in which it tends to distort the pattern of production for the home market.
  Because of the general dislike of retailers against holding taxed goods, and the fear that they may be left holding the baby in the event of a reduction of Purchase Tax, they naturally endeavour to keep their stocks of taxed goods as low as possible. Because of this fear on the part of retailers and in an endeavour to encourage them to buy and hold stocks, some manufacturers are tempted to debase the quality of cloths which sell just above the D line so as to bring them below the D line, whilst long-established brands, which for years have borne a reputation for reliability and constant quality, and which no manufacturer dare debase, are being sold only in rather meagre quantities. Many of them, unless we are very careful, will pass out of existence. The result is that manufacturers and traders alike minimise their risk of loss by scrapping lines which come above the D line and tend to concentrate

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  on lines of inferior cloth which come below the D line.
  It requires no words of mine to emphasise the bad consequences which must result from the discouragement of better type production. How often has it been heard that Britain's future lies in the production of goods of the finest quality and design, and that our success in the export field depends largely on our ability to meet our competitors in the production of such goods. Of all the great industries of this country the cotton textile industry is the least suited to a tax of this kind. Though it is slowly recovering from the depression which reached its peak somewhere about the middle of last year it is noticeable that it is those sections of the industry which produce the finest quality goods which are slowest in making that recovery.
  Last year the textile industry was suffering badly from a depression in trade which did not affect other industries. Something had to be done to help the industry, and the Chancellor certainly went out of his way to help, but the fact that he went out of his way to help, and that he gave the help, and that the industry is slowing recovering from that depression in trade is surely not a good reason why it should now be denied the tonic of reduced Purchase Tax which has been given to others. I can assure the Chancellor that instead of being left out of any reductions of Purchase Tax the industry was hoping that the tax would be removed completely.
  Whatever we in this Committee may think about the effect on the cotton textile industry, there is no doubt at all that most of the responsible leaders in that industry share the view that Purchase Tax is an important factor which is militating against the full recovery of the industry, and that so long as it exists, just so long will there exist that annual recurrent phase of uncertainty which influences buyers to hold off buying because of what may happen to Purchase Tax. In an industry like the cotton industry, in which the normal flow of trade can be affected by the vagaries of nature and by all sorts of external and internal factors outside the power of the industry to control, any tax which has a variable content of the level and of the rate at which it may operate is bound to be a subject for speculation by buyers, and
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  cannot help but militate against the smooth and free flow of trade.
  I ask the Chancellor, therefore, to look again at the effect which his decision may have upon the cotton textile industry in the hope that he will be able to extend his reductions of Purchase Tax so that the textile industries will be able to get the same degree of satisfaction as other industries from what is undoubtedly one of the most encouraging Budgets since the war.
  8.25 p.m.
  Mr. Wilfred Fienburgh: My first reaction to this Budget was one of astonishment at my seven year old daughter's political acumen, because she managed far more successfully than I, on the very morning of Budget day, to forecast the Budget which the Conservative Chancellor introduced.
  On that morning I had returned from Germany and was distributing a few small presents around the household. My seven-year-old daughter, who has a fine and mercenary sense of values, asked me how much money I took to Germany. I said only £5. She asked me, "Why did not you take the full £40? I heard on the wireless that the Chancellor of the Exchequer was now giving a £40 allowance where previously he had given a £20 allowance." "My daughter," I said, "this is a harsh and a wicked world. The fact that the foreign travel allowance was increased by £20 does not mean that the Chancellor hands anybody the additional £20 so that he may the more enjoy his foreign travel." "Well," she said, "I think he ought to." And that very afternoon he did, because he handed to the slightly less eligible bachelor on £900 a year, as well as to the very eligible bachelor, a further £20 to increase his eligibility by travelling overseas.
  That shows that my seven-year-old daughter had a touching faith in a Conservative Chancellor of the Exchequer, very properly equalled by the faith which those with over £900 a year have in a Conservative Chancellor of the Exchequer, faith that is not, of course, felt equally by the average man with an average family and with an average salary, who, for all the so-called concessions which have been given in this Budget, is no better off. My constituents in Islington are not queueing up to buy pianos tax-free. They may get a penny or 2d.

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  off a frying pan from time to time, but they do not regard this as a Budget which brings them any material benefits.
  Yesterday during the debate there was what I thought a particularly revolting expression of glee on the faces of many hon. Members opposite when the simple theory was expressed from the other side of the Committee that, after all, inevitably if the standard rate of tax is reduced, those who originally paid higher taxation will be progressively better relieved and better recompensed. They thought we were very wrong in suggesting that this distribution of largesse for some was not the proper function of taxation in society.
  Let us imagine that there is produced each year by those who work by hand and brain in this society a pool of goods and services, a pool of goods and services compounded of what we produce at home less what we export but to which we add our imports. That is what is available at the beginning of any tax year for the people of this country to share out amongst themselves. Our claims upon that pool of goods and services are conditioned by the income which we have, less the taxation which we pay, on the one hand, or, on the other hand, by the income which we have plus the subsidies which we receive, if we are not in a tax-paying category. Therefore, if in the nature of that balance some section of the community is given £20 extra a year, they have £20 more value out of the pool of goods and services produced in that year.
  If at the end of the scale those who produce are given only 4s. 1d. a year, they get only an extra 4s. 1d. out of that pool of goods and services. That is where we see the iniquity of this Budget. Some people will get nothing extra this year out of what has been produced, whereas others will get anything up to 10s. or £1 a week extra out of what has been produced.
  Would hon. Gentlemen opposite who were so gleeful at the realisation that this would benefit their friends be equally gleeful if the people we represent were to say, "Why should the eligible bachelor at £900 a year be allowed roughly 10s. a week more value out of what we produce? We must ourselves demand a wage increase of 10s. a week to compensate for it. Why should he gain what we are
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  not gaining?" That is an entirely different appreciation of the place of taxation and subsidies in society. It is a different appreciation than that of hon. Members opposite who take the view that there is something divinely pre-ordained in a differential in basic incomes in this country.
  I would much rather there was a smaller difference in pre-tax income than there is at the moment. This fiddling with taxation, on the one hand, and subsidies, on the other, is not satisfactory, and we must get a much more originally equitable distribution of our national income sources. But while we have this grotesque difference in pre-tax income, it is only proper that the taxation instrument should be used to put it right.
  This Budget is based on three false assumptions which lead to five gross instances of a betrayal of the electorate. Let me first of all list the three false assumptions. The first assumption is that lower taxation on the wealthy leads to higher investment from personal savings. The second assumption is that lower taxation on the wealthy increases personal productive effort. The third assumption is that lower company taxation will lead to increased fixed investment. That, of course, was the gravamen of the speech of the Economic Secretary this afternoon. I did not take down his words exactly, but he said something along these lines: "We cannot expect a flourishing effort in private industry in circumstances in which the private industrialist loses his profit by taxation and stands whatever losses he makes himself." I think he will agree that, although those are not exactly the words he used, he said something along those lines.
  Let us examine the assumptions upon which this budgetary assessment of taxation has been made against what happened last year and what happened previously under Labour Governments, because this very prescription of lowering the standard rate of taxation as an incentive to investment and production was tried last year. Although it has been stressed very many times, I see no harm in stressing it again. It was a very poor prescription. It did not have the result, as an incentive, which had been anticipated for it. In fact, production and investment went down. Under a Labour

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  Government, when there was a high rate of personal taxation, when the Profits Tax was actually increased from one year to another and from one Budget to another, two things happened. First, production continued to rise; and secondly, the rate of fixed investment continued to be very high indeed, and usually rose from one year to another.
  We have a complete collapse—to my satisfaction, at any rate, although not, I am afraid, to the satisfaction of hon. Gentlemen opposite—of the economic. or attempted economic, justification for what is, in effect, a political action on the part of the Chancellor. We have grown used to a certain standard of integrity and honesty in the presentation of the nation's accounts, and this is the first year in which that tradition has been broken. If, for whatever reason, hon. Members opposite wish to give tax reliefs to some sections of the community, let them for goodness' sake not claim it on a false economic doctrine by pretending it will have a result it has never had before.
  Therefore, my summing up of the three speeches which we have so far heard from Ministers on the other side of the Committee is that from the Chancellor of the Exchequer we got a terrifying complacency, from the Financial Secretary to the Treasury we had levity, and from the Economic Secretary to the Treasury, who was given the job of trying to find some economic verification for these extraordinary arguments and proposals, we had a very sad and distressing sight which led us in the end either to doubt his intellectual ability or his intellectual integrity. His integrity, however, kept peeping through as he went through his speech.
  He started with supreme confidence. He had no notes on the Box, his notes were on the side of the Table, which we were not supposed to see at all. But as he went on, he began himself to realise that he was using threadbare and worn-out arguments and at that stage his notes came on to the Dispatch Box to assist him. In the end, he sought to sustain himself by increasing his speed of speaking until he threatened to defeat even the efforts of the HANSARD reporters.
  Mr. Maudling: I am beginning to doubt the capacity of some Members to
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  appreciate the arguments which I laid before them.
  Mr. Fienburgh: It did not help us to appreciate them when the hon. Gentleman read his notes twice as fast as he had previously been speaking.
  We all agree that there must be an increase of investment. The hon. Gentleman and myself will have a particular interest in this problem because we stand as fairly young Members in this House of Commons. He has a fairly reasonable majority and I have a very reasonable majority and, therefore, for some time to come, we may be locked in battle across the Floor of this House on economic problems.
  Is he not afraid of the legacy which is going to be handed to our generation in 10 or 20 years from now as a result of the failure to maintain our investment in industry during the last year and the potential failure to do so during the coming year? Is he not afraid, when he looks at the high rate of investment in the United States, Germany and Japan and other countries, that we are going to be left with a decrepit, worn-out and strangled industry, totally incapable of standing up to overseas competition? I fear, even more than I fear the growth in inequality in reward between rich and poor, the stamp which will be set upon the economic pattern of this country 20 or 30 years from now, if the present policy is continued.
  It means that we shall be left to feed an even bigger nation than we have now with a less efficient industry and smaller resources. There is the feeling that dangers which sometimes confront other countries cannot happen here. We are used to thinking that floods which devastate areas of China can never happen here. We are used to thinking that ferry boats overturn somewhere else in the world, but we never thought that the "Princess Victoria" could go down crossing from Scotland to Ireland. There is the general feeling that starvation and hunger may happen to people in Calabria, China, Southern Spain and other countries but that it cannot happen here. But it will happen here and every successive Budget from the Conservative Party makes it more certain that it is going to happen here.
  How are we to achieve the high level of investment that is needed? There

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  are three ways of doing it. One way is to give to a certain section of the community such grossly extravagant incomes either through earnings or investment, that even if they were to eat three meals every meal-time and drive two Packards or Rolls-Royces around they could not spend their income and they would be forced, because their personal extravagance could not mop it all up, to use it in industrial investment. That is a tenable theory. It was the way in which a great deal of our industrial investment was done in the old days.
  If we are to try to establish our investment in that way, we have to say to our working men and women: these people who enjoy an extravagantly high standard of living are not doing it because they enjoy it but as a favour to you, because by enjoying that standard of living they are able to make industry more productive by investment. That is the proposal of the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) when he talks about the work providers and the bonus which this particular Budget will give to the work providers.
  The Chancellor has not even done that. I am prepared to accept any really determined attempt to maintain the high rate of investment that this country needs. There would at least have been something to say for the Chancellor had be exploited this economic theory, gone haywire, wiped out all the Surtax and given a few people so much money that they would be bound to invest a large amount of it. But he did not do so. He has handed out the odd £20 which will be used for the odd extra trip overseas, and the odd little bit here and there which will be dissipated, but he has done nothing to increase productive investment in this country.
  Basically and ethically, I do not accept the economic theory of allowing some people to be grossly rich in order that they may invest; but other methods are possible. One is for the Government itself, through taxation, to raise sufficient funds for investment. The Conservative Chancellor has, of course, turned his back on that method of dealing with the problem. He has done so because any productive investment from Government sources involves public accountability and
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  what Conservative business men regard as gross interference in their private affairs. Thus, the Conservatives are loth to allow public investment in private industry. However, that is a method: it was not adequately exploited by the last Labour Government, it should be studied further by the next Labour Government.
  Another way is to encourage self-financing within industry; that is, to allow an industry to retain a larger amount of its profits and hope that the profits will be invested in the industry. In theory, the Conservative Chancellor has at least done that; but two other things are needed. First, we must allow a company to retain its profits, and second, we must then prevent the distribution of those profits. It is no good allowing companies to retain profits if they are to distribute them right away; that is no way to increase the productive efficiency or rate of investment in industry. There are two ways in which distribution can be prevented or discouraged. One is by outright and courageous dividend limitation. by saying that no more than a certain amount shall be distributed and that the rest must be invested, and the other is by the creation of a wide differential in the rate of taxation between undistributed and distributed profits.
  What has happened about the latter alternative which, as the Government reject dividend limitation, is presumably the theory upon which the Government operate? When the Excess Profits Levy was introduced, the Chancellor very wisely tidied it up with Profits Tax, which had got into a very untidy situation. Before the levy was introduced the net tax on undistributed profits stood at 5 per cent. and that on distributed profits at 22½ per cent. a differential of 17½ per cent., and it was something like an incentive to plough back profits instead of distributing them. When the Chancellor simplified the incidence of Profits Tax he reduced the tax on undistributed profits to 2½ per cent. and the tax on distributed profits to 17½ per cent. a differential of 14½ per cent. That was wise and acceptable while the levy remained because it meant that there was the same net yield from taxation.
  But now the levy is to go quietly like a shade in the night and we are to be given no further Profits Tax to take its place unless something crops up in the

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  next Budget. Now that the new differential between undistributed and distributed profits is 14½ per cent. as against the previous 17½ per cent., that is less of an encouragement to plough back profits and more of an encouragement to distribute them. As a result of the removal of the E.P.L. and the smaller differential between distributed and undistributed profits, two things have happened. First of all, there is a smaller scooping up from the profits pool, by taxation, for investment by the Government, and second, there is a smaller differential and a greater encouragement to distribute.
  The Chancellor may say that by removing or restoring the initial equipment allowances he has at least given some incentive for further and new investment. I hate quoting "The Times" because, like all politicians, I only quote "The Times" when it is very favourable to me and ignore it when it is not. I will quote it on this occasion because it was right when it said last Tuesday that it doubted very much whether the initial allowances would provide much actual stimulus to re-equipment, and it indicated that on the whole it was rather doubtful of that theory. I agree with "The Times" in that because the industrialist, when he is considering re-equipment, does not look solely at the tax concessions he is going to get. He looks at the state of industry as a whole and from that he makes his deductions.
  What does he find now? He finds lower production all the way round and even lower profit in many spheres. He sees that the number of companies forced into liquidation went up by 6½ per cent. and the number of companies for whom receiving orders were issued went up by 12½ per cent. last year. He finds a not very encouraging economic position. As has been described from these benches during this debate, he finds increasing industrial stagnation, and his attitude, therefore, is not one which will provoke him into a large amount of expensive investment even though he has the initial allowances to help him.
  We hold, therefore, that the high level of industrial investment which is required should be obtained by a combination of dividend limitation, a wide differential between distributed and undistributed taxation rates and a high yield from
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  taxation to be used for Government investment.
  I mentioned at the beginning that the previous economic policy of the Government had led to some gross betrayals of the electorate. I mourn the passing of some of the robust political phrases which we used to enjoy so much. I think it is a great pity that the phrase "bulk purchase" has been dropped out of our political vocabulary. There was never a more stupid political campaign than that launched by the Economic Secretary in his previous incarnation, which tried to lay the whole blame for our economic difficulties on bulk purchase. Now we have, first of all, the Prime Minister himself pulling off an enormous bulk purchase scheme in steel and now the new bulk purchase in sugar, which provides an additional sweetener to the Budget.
  I am sorry that the word "calories" has vanished from our political dictionary. We used to hear about the small intake of calories under Labour, but now that we have an even smaller intake of calories under the Tories the word has gone altogether. We were told by hon. and right hon. Gentlemen opposite during the election campaign that the Profits Tax was to be improved, increased and maintained. We find instead that it is being dissipated and done away with.
  We were told many other things, but as time is running out it would be a labour on the patience of the Committee to go into them all. I will reiterate the main points. The revisions in taxation of last year were supposed to be incentives to production and investment. We have had neither of those things, but rather a reduction of production and a reduction of investment. Therefore, this is not an economic Budget, and we on this side of the Committee have paid it a great compliment in trying to discuss it in terms of economics at all. It is a down-to-earth, rumbustious, political Budget such as one might expect from right hon. Gentlemen opposite.
  8.50 p.m.
  Mr. J. B. Godber: I echo the warm welcome which has been given by hon. Members on this side of the Committee to what we all believe to be a bold and courageous Budget, which deserves something a little better than

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  the mean and distorted reception which has been given to it by some Members of the envious Opposition. The country as a whole will judge it and find it favourable, and that is the reason for the outburst. When I read the "Daily Herald" yesterday, I could not help feeling the force of the arguments of the right hon. Member for Lewisham, South (Mr. H. Morrison) when he talks about the need for a Press Council. The distortions which occurred in that paper yesterday were really appalling.
  The Budget sets out to provide a stimulus and a challenge to those engaged in industry. Responsibility is being given back to tie individual whether he is on the shop floor or in the manager's office. I think that responsibility will be taken up. We have to rely more than ever on the success of the export drive. We heard from one or two hon. Gentlemen this evening about exports, and we have heard a good deal about the lowering of the standard of production and of industrial output during the last 12 months.
  None of those criticisms have faced the fact that the export markets today are of vastly different proportions to what they were when the Socialist Party were in office and that they had been drying up rapidly for a considerable time. We have to be increasingly competitive if we hope to survive. Hon. Gentlemen opposite know perfectly well that that is the real reason for the reduction in the standard of output.
  The Budget gives industry the opportunity and the incentive to take bold measures to ensure a fully competitive position. It now rests with the people in industry to do their bit to make the Budget a success and, by their expanding efforts, to provide the means for further concessions in the future. It really comes down to what happens on the floor of the factory. The Budget only provides the means, and it is up to the people in the factories to produce the results. That is why this is a bold Budget. It is definitely taking chances which have to be grasped, and I am sure that they will be grasped. The future of this country depends upon industry accepting the challenge.
  On the question of exports, there are factories in my constituency producing as
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  much as 98 per cent. for export. I know the difficulties that many of these factories are running into in the markets of the world. By the concessions he is making, my right hon. Friend is giving these people an opportunity to reshape their export programme and to try to become more competitive than before. That is the only way in which we can hope not only to increase output but to maintain our level of employment and prevent unemployment from increasing. That is what it comes down to. It is not facing the position properly if hon. and right hon. Gentlemen opposite keep talking about a fall in the level of production when they know perfectly well that it is due to a drying up of the export market.
  Particularly welcome is the restoration of the initial allowances. This will be of great help to industry and will be welcomed by the agricultural community as a great help in their efforts at food production. We heard earlier this evening that agriculture is one of the three main industries which are still increasing their production, although it is losing some of its labour. Only by still greater mechanisation in agriculture can we hope to maintain this position.
  It is still not sufficiently realised in the House and in the country that in the last 15 years agriculture has undergone a major revolution requiring a tremendous increase in capital investment. Only by extending this to a far greater extent can we increase agricultural output, which is important, if we are not to be able to expand our exports. We have to try this as an alternative. It is still possible further to expand production, and some of the measures taken in the Budget will have a substantial effect in stimulating greater production in agriculture.
  I should like the Chancellor in his present mood, to have a look at the capital allocation for rural electrification to see if something more cannot be done in this direction. A lot depends on this in extending mechanisation and improving methods of agriculture. Electrification is playing an increasing part, and can play a vastly greater part in increasing food production. Also it can have a considerable effect on the position due to the loss of labour from the land about which we have heard today.

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  People are leaving the land because of the lack of amenities in the countryside. I know of places in my own constituency where the farm workers are going into the factories not because they want to leave the land, but merely because their wives are not content to continue using oil lamps. That is what we are up against. Therefore electrification has a double function: It increases the yield from the land and produces contented workers.
  The concession whereby farmers can elect for the herd basis for cattle where compulsory slaughter has taken place will be welcomed by rural Members on whichever side of the Committee they sit. It will be a real help to farmers who have suffered from the misfortune of losing their stock through foot-and-mouth disease. It has been a heart-rending problem for many of those people, and I am glad that the Chancellor has given this help.
  Of the many small concessions in the Budget, while all are to be welcomed, I welcome especially the one to cricket, not so much because I am a supporter of it but because I feel that it needs this support, and anyone who can endure watching cricket all day deserves to be subsidised.
  Mr. Hobson: The hon. Gentleman would not say that in Yorkshire.
  Mr. Godber: There are two categories I should like to have seen dealt with in the Budget, the first being the old age pensioners. I feel that they are deserving of a little more help since they are definitely those who are the hardest hit at the moment. The other category was mentioned by my hon. Friend the Member for Croydon, East (Sir H. Williams) earlier, namely, post-war credits. We shall have to grasp this nettle at some time and try to reduce the age at which these credits can be paid. There are many people now who are coming up to the age of 60 who are really hard hit and whom the postwar credits would help tremendously. It is not asking too much that the age for those people should be reduced by five years.
  I realise that in both these last categories the Chancellor is seeking by his present policy of freedom and initiative to help them in the most effective way they can be helped, namely, by restoring the value of money and so bringing down the
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  cost of living. That, after all, is what is behind this Budget, and if that can be done we shall all benefit. For six years we have had a policy of over-cheap money, with inflation scarcely held in check by artificial restrictions. Last year we reverted to a more orthodox financial policy, and now I think we can go forward with real incentives which can and should lead to greater production and to a fall in the cost of living with benefit to everyone in the land.
  9.0 p.m.
  Mr. F. Blackburn: I hope that if I speak very quickly my hon. Friend the Member for Islington, North (Mr. Fienburgh) will not attribute to me the same qualities that he attributed to the Economic Secretary to the Treasury. I want, however, to limit myself to a very short time in order to give to other Members an opportunity of speaking before half-past nine.
  First, I congratulate the Chancellor of the Exchequer on his ability to make his case sound reasonable. I think he could get away with murder. At any rate, if he were going to murder someone and allowed his victim a choice of deaths, he would make it sound as if he were conferring a favour upon his victim.
  I was perturbed when I heard the Chancellor refer to the Budget as an incentive Budget. We had an incentive Budget last year, and what happened? We had a fall in production, a fall in exports, an increase in unemployment and an increase in the cost of living. We want no more incentive Budgets of that kind. I suppose that last year it was an incentive Budget to improve upon what had happened before. This year it is an incentive Budget to try to catch up with where we ought to have been had we not fallen back in the past year.
  I want to refer more particularly and in some detail to the balance of payments and the gold and dollar reserves, and to examine these so that we may understand exactly the position. I do not want to rob the Government of any credit that they claim because of the balance of payments. Quite naturally, they claim the credit for it, and I suppose it is only right, because if it had not been balanced we would have blamed them. It is important, however, to realise how precarious

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  the position is and that, if we do not examine it in detail, we are likely to fall into a dangerous complacency that has been so obvious in some hon. Members opposite. If we do not examine the position in detail we shall not appreciate the precariousness of the present position. It ought to be noted that we are not today in as strong a position to meet an economic crisis as we were in October, 1951.
  Turning to the gold and dollar reserves, according to the figure given by the Chancellor of £774 million, the gold and dollar reserves on 31st March were about 56 per cent. of what they were in June, 1951. At that date our reserves were £1,381 million. At 30th September, 1951, they had fallen to £1,167 million, by 31st December, 1951, to £833 million, and in June, 1951, to £601 million. At 31st December, 1952, the figure was £659 million. They had begun to go up, and then by 31st March they had gone up again to £774 million.
  As everyone knows, in the third quarter of 1951 there began a serious drain on our reserves. The recovery has been in stopping the drain and in beginning to build up again, but the position is still not one that we can view with any complacency. I have listened to some of the speeches from hon. Members opposite and it is clear that quite a number of them still do not understand what was the reason for the economic crisis. I suggest seriously to a number of hon. Members opposite that it would pay them to read the speech of the Chancellor of the Exchequer in November, 1951.
  When the gold and dollar reserves began running out, my right hon. Friend the Leader of the Opposition, who was then Prime Minister, quite rightly decided to appeal to the country. The phrase from the other side of the Committee this afternoon about rats leaving a sinking ship was most objectionable. With the record of achievement that the Labour Government had, my right hon. Friend had every reason to believe that he would retain the confidence of the people.
  We had been fighting with a very slender majority and a non-co-operative Opposition. I am told that even when my right hon. Friend went to America on important business connected with the welfare of the country and the peace of
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  the world generally, the Conservative Party would not even give him a pair. Our majority was maintained merely by bringing sick people out of hospital, and obviously, when important decisions had to be made, such a state of affairs could not have been allowed to continue.
  One of the advantages that the present Government have had is that there had been no people going abroad denigrating their own country. In addition, they have had the Press on their side. The importance of this is not only that the Press is read in this country, but that it is read also in other countries and perhaps too much attention is sometimes paid to it.
  Turning to the balance of payments problem, paragraph 14 of the Economic Survey says:
  "It is impossible to say exactly how much of the improvement in the balance of payments in 1952 was due to better terms of trade, but price changes were probably responsible for something like half of the improvement of £657 million in the visible trade balance shown in Table 4…"
  The improvement claimed by the Economic Survey is due half to improvement of the terms of trade and half to reduction of imports, but the improvement in the terms of trade, in spite of what the Economic Secretary said, is something over which the Government have very little control. According to the Economic Survey, import prices were 2 per cent. less during 1952 and export prices were 5 per cent. higher. As my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) said yesterday, the terms of trade in 1951 were £500 million against us, whereas in 1952 they were £350 million in our favour.
  There is also another matter which has not been referred to. There was an advantage in 1952 of £250 million because of different accounting periods. If stocks were not increased during the year there was not the expenditure which the Labour Government had. Some hon. Members opposite seem to forget that those stocks were accumulated partly in accordance with the re-armament programme.
  Reduction of imports was direct action taken by the Government, but I should point out that in the reduction of imports the import of raw cotton and raw wool decreased by £200 million in 1952. Therefore, it was the misfortunes of the textile workers of my constituency of Stalybridge and Hyde and other textile

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  constituencies which contributed to this reduction in imports. But surely we are not expecting that to continue for another year. This year we are expecting that the improvement which has taken place in the textile industry will continue and that therefore it will put up the import bill by another £200 million.
  Turning to the matter of exports, the Economic Survey says:
  "The driving force behind our export expansion can come only from industry, but it is the Government's duty to create and maintain economic conditions favourable to such an expansion."
  My complaint is that the Government are not doing that. I wish to refer to two complaints from industrialists in my constituency which show the slackness of the Government in taking the urgent measures which are necessary.
  First there is the question of the balances in Brazil. The Secretary for Overseas Trade yesterday answered a Question from an hon. Member opposite about money owing by Brazil. He referred the hon. Member to a reply he had given in January. In January, after the problem had been in existence about 12 months, his answer was that there had been talks with the Ambassador and the Government were hoping to have more formal talks later. Now we are in April and there have been talks, not only with the Ambassador here, but also with our Ambassador in Rio de Janeiro. That is as far as they have gone; there have not yet been formal talks.
  The second complaint was in regard to shipments to Mombassa. When I raised the question why there was a delay of nine months in our shipping compared with that of the Continent, it was not helpful to be told that the Port of Mombassa was not big enough for our shipping.
  A very serious matter is raised on the export problem by the export of armaments. I would refer the Committee to paragraph 50 of the White Paper on Defence and paragraph 111 in the Economic Survey. It is a definite policy of the Government to try to balance our payments by the export of armaments. To me that is crazy economics. If we are making more armaments than we need and exporting them we are thereby losing markets for our traditional exports. I am not arguing against the
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  rearmament programme, but I say it is wrong that we should be trying to build up our balance of payments on a short term by exporting armaments. We are losing ground all the time; we are leaving it open to Germany and Japan to get in.
  Secondly, we may find ourselves in a position where a general reduction in armaments could cause a slump here. The trouble is, in the matter of the export of armaments, that we are strengthening a group whose financial interests would be antagonistic to disarmament. I should like to follow that up by dealing with the internal position of the country, but in view of the pledge I gave that I would restrict my comments to a space of 10 minutes, I had better leave to some future occasion any other comments that I have to make on the Budget.
  9.11 p.m.
  Mr. John Arbuthnot: The hon. Member for Stalybridge and Hyde (Mr. Blackburn) has given us an extremely interesting speech. One point he made is that we were not as strong today to face an economic crisis as we were in 1951. All he has to do is to look at the rate of the £ sterling on the foreign exchange to get the answer to that assertion. He also chided us for not having been co-operative when we were in Opposition. Whether he really suggests that the article on the Budget written by his right hon. Friend the Member for Battersea, North (Mr. Jay) in the "Daily Herald" was exactly co-operative I leave to the hon. Member to decide.
  He also told the Committee that the average man was no better off after this Budget than he had been before it was introduced. The reception which the Budget has received throughout the country gives the lie to that. It is clear that everybody is better off as a result of the Budget, and that the all-round reductions in Purchase Tax have been of considerable advantage. We are already beginning to see the prices of goods coming down in the shops. What fascinated me particularly about the speech of the hon. Member for Islington, North (Mr. Fienburgh) was the way in which he attacked the Chancellor of the Exchequer for treating too liberally the people with incomes of £1,000 a year. I wonder how that ties up with the clamant demand of hon. Members on

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  the benches opposite for an increase in their own salaries.
  A point with which I wish to deal is the question of the cost of living, because much of the gravamen of the speeches from the other side of the Committee has been that since we have been in power the cost of living has continued to rise. It is perfectly true that that is so, but we made it quite clear that it would take time to overcome the legacy which we inherited from the party opposite when they left office. What is important is that we should get the trend of the cost of living reversed. The effect of that downward trend will then become cumulative and hasten the progress towards lower costs.
  Last year the cost of living rose under a Conservative Government by 4½ per cent., compared with 12 per cent. in the last year under the party opposite. Even food prices, which rose more rapidly because of the removal of food subsidies, rose only 9 per cent. compared with 18 per cent. the year before. It will be seen that we have already started to reduce the rate of the rise. This Budget will have the effect of bringing down the cost of living, and once we achieve that we shall have honoured the pledge we gave at the time of the Election.
  The hon. Member for Gloucestershire, South (Mr. Crosland) was right when he said that if the Budget succeeds in stimulating production, as we are convinced it will, there is a danger that we may find ourselves without sufficient coal to meet the increased industrial demand. I hope my right hon. Friend will be able to do something more to stimulate the use of coal economising plant in order to encourage the more efficient use of coal.
  I do not agree with the hon. Member for Gloucestershire, South that a way out of the difficulty would be to impose a tax on coal. The whole country would feel that to put a tax on coal to discourage its use would be a return to Socialist methods. We should encourage the economic use of coal in every possible positive way. I would pay tribute to the miners who have increased their output and who are fully aware of the difficulties which would face this country if we do not get enough of this basic commodity.
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  Unlike the right hon. Gentleman the Member for Dundee, West (Mr. Strachey), I welcome the statement of the Chancellor that he is moving towards convertibility as rapidly as possible. The purpose of money is to assist the exchange of goods, whether between individuals or countries, and to avoid the inconveniences and difficulties of bartering. Lack of convertibility hampers the proper functioning of money in the international sphere and if we can achieve convertibility it will prove a considerable advantage.
  Hon. Members opposite fear, if I understand them correctly, that if we have a convertible £ people will hoard their £s in order to exchange them at a later date for dollars rather than use them to help buy the goods we produce in this country. They fear that making the £ convertible would deal a blow at the exports of this country. Surely that would apply only if people continue to believe that the £ will depreciate in value in terms of dollars or gold. If we convince people that the £ is good currency, and if anything better than the dollar, there will be no temptation for anybody to hoard £s in order to convert them into dollars, gold or anything else.
  The essential pre-requisite to convertibility is to convince the world that Britain will maintain a stable £ and stop trying to get 21s. worth of goods out of 20s. worth of work, as we did when the party opposite were in power. I believe that this Budget by increasing production will play a large part in bringing nearer the day when convertibility is practicable. I welcome the Budget and congratulate my right hon. Friend the Chancellor of the Exchequer
  9.20 p.m.
  Mr. William Reid: I should like at the outset to congratulate the right hon. Gentleman the Chancellor of the Exchequer on his presentation of the Budget and the able survey he made of our whole financial situation. All of us on both sides of the Committee realise that he has a tremendously difficult problem to face.
  I wish to draw attention to the impact on bus fares of the duty on diesel oil used in road passenger vehicles, and to the inflationery effect of this inescapable tax. The vast majority of bus passengers are daily users travelling to and from

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  their places of business or, in the case of housewives, travelling to and from shopping centres. To them bus travel is therefore essential, and not a matter on which they can exercise any choice or self-restraint as they can with regard to the purchase of luxury or semi-luxury goods.
  With few exceptions, buses throughout the United Kingdom are run on diesel oil. The basic price of diesel oil is about 1s. 2d. per gallon. The duty, which remained stable at 9d. per gallon from 1938 to 1950, was doubled in the latter year. In 1951 it was raised to 1s. 10½d. and in 1952 to 2s. 6d.—an imposition of 214 per cent. on the basic price. Complete exemption from this tax is granted when the fuel is used, one, for agricultural purposes, two, for industrial purposes and, three, by diesel railway locomotives. This duty is payable only in respect of the buses, and it has to be passed on in full to the passengers.
  The duty is manifestly inflationary in its effect, because higher costs of travel are one of the factors affecting demands for wage increases. These increases, when granted, add to the cost of production and thus give another twist to the inflationary spiral. I hold strong views that the fuel tax is quite wrong in principle, selective and discriminatory. Fuel oil is the primary raw material of the motor-bus industry. I am not aware of any other essential industry which has its raw material taxed, or taxed as savagely as is fuel oil.
  The services which motor-bus vehicles provide to the public are fundamental and essential to the life of the nation. The tax is thus a direct tax on a necessity, and the medium of this tax ensures that it is borne throughout the land more by the poorer than by the richer classes. Whatever may or may not be the case for heavy taxation on the petrol used by the owners of motor cars, with the purpose of restricting the importation of fuel, that case cannot be applicable to the fuel oil used to provide motor-bus services. These services must be provided. They are essential to the industrial life of the nation, and the consumption of fuel oil on these services cannot be avoided.
  The tax on public utility road passenger transport services throws into bold relief the absence of any similar tax on other public utility services such as gas, electri-
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  city and water. I feel that the tax on fuel oil is greatly excessive, being at a rate substantially higher than the rate of duties on such luxuries as cosmetics. In fact, it is difficult to find any other commodity on which the rate of duty is comparable with that on fuel oil. The only ones which come to mind are liquor and tobacco, and the injustice to the public at large of including fuel oil in this category is manifest. Liquor and tobacco consumption can be reduced, or even almost entirely eliminated if necessary, to balance the family budget, but the family's essential travelling cannot.
  The Glasgow Corporation—the Corporation of the City which I have the honour to represent in this House— operate their own motor-bus services. Last year, they paid in tax no less a sum than £400,000. If Glasgow Corporation were treated in the same way as British Railways, which has that tax eliminated for the driving of diesel engines, it would mean to the City of Glasgow a reduction in bus fares of no less than 20 per cent.
  I therefore ask the Chancellor to give this matter his serious and urgent consideration. I would impress upon him that the abolition, or at least substantial reduction, of the tax on fuel oil would, first, stabilise fares, and secondly, materially assist in stabilising the cost of living.
  Owing to the short time available, I have stated these facts as briefly as possible, in order to bring to the notice of the Chancellor of the Exchequer the iniquity of a tax imposed on a very large section of the community, which cannot be justified on any financial or economic grounds and from which the yield to the Exchequer is relatively small. In view of the pledge I gave you, Sir Charles, that I would stop at 9.30 I shall resume my seat, and continue this argument at another time.
  9.30 p.m.
  Mr. Douglas Jay: What has most impressed me about this varied debate has been the complacency of the Chancellor of the Exchequer, equalled only by the flippancy of the Financial Secretary. The Chancellor's complacency is rather frightening as well as surprising. Sir Stafford Cripps, whether one agreed with him or not, at least strove to tell the country the facts. But the present Chancellor has spent a

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  great deal of time in building up a glow of synthetic sunshine which, I fear, is beginning to mislead him as well as the rest of the public.
  What have been the real facts of the economic life of this country in the last year or so, as they have emerged from this three days' debate? I think there are three that stand out. They are not quite the same ones as the Economic Secretary mentioned earlier today. There is first the fall in production; second, the swing round in the balance of payments; and third, the fall in the volume of our exports. The public are a bit puzzled to understand how our overseas balance has recovered when production and exports have both been falling. It should surely have been the Chancellor's job to have given the answer to that question, but that answer has emerged clearly not from his speech but from the speeches of my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and my right hon. Friend the Member for Huyton (Mr. H. Wilson).
  The first cause was the physical cut in imports made by the Chancellor with our support, and, indeed, on a plan prepared by the previous Government, as I think he will agree, before he actually got to the Treasury. I fully agree that in that respect we should have done exactly the same thing ourselves. [An HON. MEMBER: "Why did they not then?"] The second reason has been the sharp recovery of the terms of trade which gave us a windfall of about £350 million. The Economic Secretary produced a new argument today in which he tried to maintain that that was somehow due to the action of the present Government. He said the fall in world prices was somehow caused by the Chancellor's policy. Surely the hon. Gentleman will agree that nowadays it is not the British market, but the United States economy, which dominates almost entirely the movements of world prices. So I do not really think we can accept that argument.
  The next and, I think, most significant cause of all was the cessation of stock building in 1951 and the drop of £100 million of stocks in the pipeline in 1952, which is recorded in the Economic Survey. I do hope that the Committee will note the crucial importance of linking these movements of stocks with the
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  changes, for better or worse, in the balance of payments. My right hon. Friend the Member for Leeds, South gave the Committee some figures about that yesterday. But in case the Committee does not accept them from him, I would ask hon. Members to look at an article in the District Bank Review recently by Professor Paish. Professor Paish shows that, in the three years 1950, 1951 and 1952, stocks rose while the balance of payments was worsening and fell when it was improving. Professor Paish draws this conclusion about the present outlook:
  "While the fall in stocks has provided a relief from the immediate balance of payments crisis the cure is essentially temporary and cannot be relied on to solve the problem permanently, or, perhaps, even in 1953."
  That, I believe, is sound, but it is not quite what the country would have grasped from the Chancellor's Budget speech. In saying, to use his own words, that stocks in the United Kingdom had not fallen in 1952, the Chancellor seemed to me to be carrying verbal conjuring tricks rather too far; just as it seems to us he is when in his speeches and in the balance of payments White Papers he counts American defence aid as being equivalent to a British export. So much for the balance of payments.
  Now why is it that in 1952 our production fell by 3 per cent. and the volume of exports by 6 per cent.? Surely that is one of the vital questions we ought to try to answer. Today the Economic Secretary rather minimised the fall in production, but I hope the Committee realises that it is at this moment 10 per cent. below what it would have been if in the last two years it had continued at the rate of the four or five years before. That is a loss on our national income of certainly more than £500 million, or very many times more than the total tax cuts which the Chancellor has given in this Budget. Why did that reduction occur? I think it is true that production fell last year, partly because of the decline in stocks induced by the Government's own credit policy, but mainly because exports themselves were falling owing to a fall in the demand for them. Why, then, was it that last year our exports fell for the first time for five years or more?
  In this debate a year ago there was a controversy between the two sides of the

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  Committee about the effects on production and exports of the Chancellor's Income Tax concessions and cuts in subsidies. We on this side said that the subsidy cuts would inflate costs and so make exports harder to sell. The Chancellor said that his tax cuts would in some magical way boost or stimulate production and exports. One can always tell when the present Chancellor has no rational argument, because he takes refuge in rather woolly and vague metaphors of this kind—lightening the ship, flexibility, and all the rest of it.
  Perhaps I might quote just one sentence from what I said in this debate a year ago:
  "I believe—and the coming months will show, one way or the other—that the Chancellor delivered last week"—
  that is to say in his Budget speech then—
  "a really wounding blow at the prospects of our export trade."—[OFFICIAL REPORT, 17th March, 1952; Vol. 497, c. 1945.]
  In point of fact, those months did show —and I am reading the lesson of experience—a 6 to 10 per cent. fall in the volume of our exports. Hon. Members may say, very naturally, that that was all due to a falling off in world demand; what they call the disappearance of the sellers' market. Incidentally, that admits straight away that it is mainly demand, as of course it is, which determines production and exports, and not some rather inexplicable effect of altering the Income Tax and so giving an incentive to those who produce something they may not be able to sell. That is an interesting admission straight away. I suggest the evidence establishes that the fall in exports was by no means wholly due to those changes in the outside world. The subsidy cuts here led to a rise in our cost of living relatively to that in other countries last year.
  If hon. Members look at the United Nations' World Economic Report for 1952, which has already been quoted today, they will find that it says this about the world as a whole:
  "The cost of living increased less from 1951–52 than from 1950–51 in all countries except the United Kingdom."
  That means that we were relatively worse off in 1952. Naturally, therefore, while our exports were falling other countries' exports were rising, and that is what in fact occurred.
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  The U.N.O. Report says, for instance, that in the first nine months of 1952 the total of all O.E.E.C. countries' exports was 6 per cent. in volume above 1950 and the United Kingdom volume was 5 per cent. below it. If the Committee want further evidence, let them read the article by Professor Austin Robinson who, I am sure, the Chancellor will respect as an ornament of Cambridge, in the Three Banks Review for March of this year. He gives provisional figures which show that the United Kingdom's share in the world export of manufactures fell actually from 22.2 in 1951 to 18.4 in the third quarter of 1952. That really does not justify complacency.
  The truth is that world production was rising last year while United Kingdom production was falling. World production actually, according to the U.N.O. figures, went up by 2 per cent. and production in what that Report calls the Western industrialised countries, including North America, also went up by 2 per cent. while it fell here by 3 per cent. That, I believe, should rouse us to action rather than to self-congratulation.
  This evidence surely proves that it was a fatal and damaging mistake to force up living costs artificially in the Budget of last year, just when world competition was growing more acute. I am delighted that the Chancellor of the Exchequer in deciding not to sweep away the remaining food subsidies has now admitted, in fact, that on this we were right last year and he was wrong.
  He said on Tuesday, in his usual rather sly fashion:
  "I must try to avoid increasing living costs by this Budget."—[OFFICIAL REPORT. 14th April, 1953; Vol. 514, c. 52.]
  Note the words "by this Budget." There we have the Chancellor's admission, first, that he did raise the cost of living by his Budget of a year ago and, second, that he was wrong to do so.
  Now when we look below the financial crust to the real facts of our economic life, last year was really not very much to boast about. I suppose that the purpose of economic policy is to see that production, investment and exports go up and that unemployment and prices are kept down. But in 1952, on the evidence of the Chancellor's own Economic Survey, the volume of production, exports, productivity, investment, stocks, con-

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  sumption, employment and real wages all went down. And prices and unemployment went up.
  Yet the Economic Survey tells us:
  "Thus the changes in the economy during 1952 were broadly in line with the main objectives of Government policy."
  Indeed, the Chancellor of the Exchequer himself said in his speech on Tuesday that the "developments of 1952 had vindicated the strategy of the last Budget." If he really meant that I must say, heaven help the British people in 1953.
  It was, of course, because the previous Budget had hampered export and stock-building, and so created under-employment, that the Chancellor felt able to give his tax remissions this year. It is a little dangerous to encourage the public to think that if we push down production one year, we can make tax concessions the next; at least, it is dangerous unless you clearly explain that to depress exports one year by raising costs, and to increase home demand a year afterwards, is the surest way of getting back again into a balance of payments deficit.
  There are several financial aspects of the Budget which the Committee ought to note but which the Chancellor did not bring out quite clearly. First of all, the real deficit of all expenditure over all revenue for which the Chancellor is budgeting is £440 million—the highest deficit in any year since 1945. Strangely enough, we do not even find that figure in the Financial Statement.
  Secondly, the Chancellor, rather slyly again, boasted of a reduction of £60 million in civil supply expenditure this year, but he did not tell the Committee —if I am wrong I am sure the Government will contradict this on Monday— that that reduction is almost entirely represented by the abandonment of the holding of stocks by the Ministry of Food, which is, of course, a once-for-all operation, and will mean a rise of £60 million or so again in the subsequent year.
  Thirdly, many of the tax reliefs for which the Chancellor is now claiming political credit will have to be paid for in cash by whoever is Chancellor next year and in the years after that. That is true of the abolition of the E.P.L. and of the restoration of the initial allowance.
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  Therefore, we should note that the financial foundation is built up in more ways than one by borrowing on the future. Indeed, in addition to that there is no provision in the figures for the new liability of perhaps £100 million which will arise, if the Bonn Agreements are ratified, for extra defence expenditure in Germany.
  Still granting the Economic Secretary's argument that tax cuts of £170 million can in the circumstances be justified, none of the Treasury spokesmen seem to me yet to have produced a shred of defence for the extraordinarily inequitable manner in which they have been framed. The Financial Secretary admitted that he had no serious arguments by taking refuge entirely in frivolity on this point. These questions of social justice in taxation are, in my view, serious and deserve our serious consideration.
  The leading feature of the Budget— this is a hard statistical fact—is the huge bonus given to both profits and unearned income. Strangely enough, that is done in a year when the Economic Survey has shown that companies had a large sum— the Economic Secretary prefers to make it £600 million instead of £800 million, and I willingly accept that figure—over and above what they needed for taxation, dividends and investment.
  On top of all this, the Income Tax cut is so framed as to benefit unearned incomes most of all. Working people and old age pensioners will not join with the Financial Secretary in regarding this as little more than a joke. Why should it be, for instance, that at the £500 level a single man gets £7 a year out of the Budget if his income is earned, and about £9 10s. if it is unearned? What is the purpose of this? Do hon. Gentlemen opposite really regard it as an incentive to work? This is the change the Chancellor has in fact made. We ought to know the reason.
  Why again—and we have had no answer to this—give the biggest relief to those with the biggest incomes? Take a very ordinary case, a married couple with two children, an average family. At £500 a year, which is a normal level of income, the earner gets 4s. 6d. out of this Budget, whereas at a level of £50,000 the benefit is £1,200 a year. The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) and the

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  Economic Secretary tried to argue that this could not be helped, that it was an inevitable effect of the change in Income Tax. If they really think that, they are remarkably ignorant of the structure of Income Tax. By altering the allowances almost anything can be done in Income Tax.
  Mr. Maudling: What I did say was that it was the inevitable result of the change in the standard rate.
  Mr. Hugh Dalton: Alone.
  Mr. Jay: And that is why we object to the change in the standard rate on its own.
  Mr. Gerald Williams: The right hon. Gentleman should tell that to his constituents. They will not object.
  Mr. Jay: The earned Income Tax allowance could have been altered in such a way as to exempt from Income Tax altogether several millions of the small taxpayers now paying the tax. I believe myself that that would have been the right thing to do at this stage. These figures are a little out of date, but they are the latest, and it is a remarkable fact that 5 million taxpayers receiving the smallest incomes within the Income Tax range are only paying altogether about £30 million out of a total yield of £1,400 million in Income Tax. I think the Chancellor would have done much better if he had made a start in exempting some of the smaller taxpayers.
  More surprising still is the further discrimination against the family in this Budget. One of the worst feature of the Income Tax is that it discriminates so heavily against the family with one earner and several dependents, and in favour of the family with several earners and few dependents. We can all give figures to show that the effect of this change is to make that discrimination worse and not better.
  I hope the Chancellor will tell us why he did this. It seems to me a gross mistake. If he did it on purpose, perhaps he will tell us why. But if, as a matter of fact, he did not intend to do it, I hope he will correct it during the Finance Bill. I can assure him that we will give him our support if he will do so.
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  But perhaps the worst feature of all —and here I agree with the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies)—is that old age pensioners and others below the Income Tax level have been treated worst of all by this Budget. They will not have the benefit to any significant degree of the Purchase Tax cuts, as the Financial Secretary tried to make out. They will certainly lose more by the rise in the price of sugar and other foods which is going to follow from the Chancellor's decisions.
  Mr. G. Williams: The right hon. Gentleman hopes it is going to rise.
  Mr. Jay: Finally I should like to say this. What we really need surely at this time is something quite different from the Government's policy of drift and stagnation. We need a positive strategy and a positive policy for more production, more investment, and more exports. At this moment we are losing the production race in the world. We are losing not merely to the United States and to many European countries. But as my right hon. Friend the Member for Dundee, West (M. Strachey) quite rightly said, at the moment the evidence shows that in Russia production is increasing rapidly at the very time when it is stagnating here. That is a formidable fact to which we should not shut our eyes in this Committee. It would not be particularly wise to do so.
  I hope that the Committee will also take note of the fact that the dollar situation today is more precarious than some people appear to realise. The American economy is now running at an all-time high record level. Dollar imports in the sterling area are heavily restricted. We still get considerable dollar aid from the United States, and our gold reserve—let us remember this—at 2,166 dollars is still 1,100 million dollars less than it was at the time of the General Election. What is going to happen— this is a question we ought to ask ourselves—if there is even a slight United States recession in these circumstances? If, as we all hope and believe, international tension is relaxing, that possibility may become even less remote.
  If any hon. Gentleman opposite thinks these are just mere imaginings of mine,

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  I may quote the "Economist" which, only on 28th March, said that a drop of 2 per cent. or 3 per cent. in America's national income from its present all-time high level would throw the sterling area —with its present very low reserves—into crisis; and that a drop of 4 per cent. or 5 per cent. would throw it into something like catastrophe. Very rightly the "Economist" made this comment on those calculations:
  "Everything must be done to push forward with dollar earning and dollar saving projects while the boom lasts."
  Is that being done by the present Government? I should like to draw the Chancellor's attention also to Professor Austin Robinson's summing up in the three Banks Review. He said this:
  "We have in any case been failing to use a period of good trade to strengthen reserves which will be certain to be needed if a recession reduces, as it would almost certainly do, our exports more than our imports."
  I believe that is the truth of the situation. Nobody knows when the economic weather will change. Surely we ought to be prudent enough to be forewarned and forearmed against the change which may come at any time, the precise moment of which we cannot possibly predict. [HON. MEMBERS: "Cheer up."] That is a fair summary of the situation, and it is the substance of our complaint against the Chancellor today.
  It is about these disturbing possibilities that the Chancellor should be thinking and planning and warning the country, rather than talking with his partially sealed lips about some convertibility scheme of which we have never been very clearly told, and conjuring the newspapers into the rather hilarious state of unrealism which we saw on Wednesday morning. The Chancellor may come to regret this complacent attitude. The speech that we listened to on Tuesday would not have been made by a Chancellor who really cared either for social justice—[HON. MEMBERS: "Oh."]—or wished the country to understand the economic dangers which may be facing it.
  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.

  FINANCE [MONEY]
  Considered in Committee under Standing Order No. 84 (Money Committees). —[Queen's Recommendation signified.]
  [Sir CHARLES MACANDREW in the Chair]
  Resolved,
  That it is expedient to authorise the issue out of the Consolidated Fund—

  (a) of the sum of six hundred and fifteen million pounds (instead of the sum of three hundred and fifty-five million pounds) for the permanent annual charge for the National Debt for the current financial year; and

  (b) of any sums required for the purpose of making payments of, or on account of, post-war refunds of excess profits tax by reason of provisions contained in any Act of the present Session relating to finance;

  and the borrowing of money under the National Loans Act, 1939, for the purpose of providing any such sums as are mentioned in paragraph (b) of this Resolution.—[Mr. Boyd Carpenter.]
  Resolution to be reported Tomorrow.

  LOCAL GOVERNMENT (MISCELLANEOUS PROVISIONS) [MONEY]
  Resolution reported,
  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 accommodation 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.

  Resolution agreed to.

  GRANITE INDUSTRY, CORNWALL
  Motion made, and Question proposed, "That this House do now adjourn."— [Mr. Kaberry.]
  10.1 p.m.
  Mr. F. H. Hayman: I have been lucky enough to get this Adjournment debate to speak about the Cornish granite industry and the difficulties which are now facing it. Everyone here is familiar with the granite cliffs of West Cornwall of which Lands End forms part. Lands End is known the world over, and so is Cornish granite because, as I shall show, Cornish granite has been used in works all over the world.
  This week I have had to draw attention to two Cornish industries which are suffering heavy blows at the present time. The Cornish pilchard industry has been affected by heavy imports of South African pilchards which have depressed the canning industry and are depressing the pilchard fishing industry itself. But although the granite cliffs of Cornwall are a danger at times to the fishermen and a landmark to them at most times, it is not my purpose to speak any more about that industry now.
  The granite industry has been witnessing in recent years a steady drift of skilled craftsmen from the industry. That drift has been marked by the full employment of the post-war years, although unemployment is increasing as a whole throughout the country and is slightly increasing throughout Cornwall. In 1947 the granite masters produced a handbook setting out the main features of the industry and employed acknowledged experts on geology, architecture and civil engineering. The Lord Lieutenant of Cornwall, now Sir Edward Bolitho, in a characteristic foreword, said that Cornwall has always been proud of her granite and we have always been proud of our granite industry. Sir Luke Fawcett, who was then General Secretary of the Amalgamated Union of Building Trade Workers, contributed a chapter on welfare. It was an enterprising production, and I will hand the Minister a copy at the end of this debate in the hope that he may find time to peruse it.
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  Granite in Britain is localised. It is found in the North of Scotland, in Cumberland and Leicestershire, in Devon and in Cornwall. I believe that the Aberdeen granite industry at the present time is appealing to the Government for aid, just as I am making an appeal now for the Cornish granite industry, but we were first in the field with our appeal. We might say that Aberdeen and Cornwall are suffering both from depression in the granite industry and from the lack of television facilities for the Coronation. I hope we shall be more fortunate with the granite industry than we have been over television.
  In my constituency we have the Carnmenellis granite mass, an area of 40 square miles, and most of the quarries in Cornwall are situated in that granite area. My home is close to it and I believe that the mass itself is the base of a former mountain system. The Phoenicians are supposed to have traded in granite lintels as well as in tin, but that is something of which we are not sure. What we are sure of is that granite is a very fine stone for use in many ways.
  The megalithic menhirs of West Cornwall have stood for centuries and were the first granite structures in these islands. In Cornwall we know them as "longstones," which is an apt description, but in addition there is a modern example of Cornish granite used in construction in the river wall of the South Bank Festival of Britain Exhibition site.
  We can find fine examples of Cornish architecture in the Cornish churches, particularly in the towers. In Camborne Church there are magnificent monolithic granite pillars. In Launceston, in the constituency of North Cornwall, there is a magnificent example of carved granite architecture. A modern example of the use of granite in ecclesiastical architecture is the Metropolitan Cathedral of Liverpool. There are also civil engineering and monumental sides to the industry.
  The Cornish and Devon industries are somewhat interlocked. Dartmoor granite supplied the stone for the first Eddystone lighthouse in 1759. The Plymouth breakwater, which took 10 years to build, was erected early in the 19th Century. London Bridge is of Devon granite and has stood for 120 years, but that is a comparatively short time when compared with some of the old Cornish bridges

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  which still carry the immense weight of modern vehicular traffic.
  Cornish granite was used in big extensions in Devonport dockyard a century ago. Rennie's Waterloo Bridge was of Cornish granite and so is the modern Lambeth Bridge, as well as other London bridges. Cornish granite was used in County Hall, London. It has been used in lighthouses all round the coasts of Britain and in the high level bridge at Gateshead. Anybody who has motored through Cornwall must have admired the magnificent granite piers of the railway viaducts. In harbour works we can quote the Manchester Ship Canal, the Dover harbour walls and breakwater, harbour works in India, Ceylon and the Argentine, as well as the naval bases of Gibraltar, Singapore and South Africa.
  It will be of interest that a trade union was formed in Constantine in my constituency, for granite workers in 1832 and another in the constituency of the hon. Member for Cornwall, North (Sir H. Roper). That was two years before the Tolpuddle Martyrs were sentenced. So that it can be seen that the men of Cornwall are as tough as the granite and were prepared, as they still are, to take great risks.
  At the end of the 19th Century thousands of men were employed in the industry. By 1914 the number had fallen to about 2,500 and, by 1939, to 1,200. Today the number is 700, and it is an interesting fact that 100 are working employers. I am sorry to say that this evening I have had a telephone message saying that in the last week or so 40 men have been declared redundant in one of the works. Freeman's Yard at Penryn is an example of the magnitude of the fall. This yard alone employed 1,500 at the beginning of the century. Today there are only 40 apprentices in the industry, which is a very serious ractor.
  A reason for the decline is the introduction of machinery, about which no one can complain because the production of machinery involves labour and we cannot rely on antiquated methods. Another reason is granite imports in the inter-war years from Scandinavia, Germany and Czechoslovakia and the competition of Italian marble. The growth of cremation and the formation of lawn cemeteries
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  have also had an effect on the monumental side of the industry, but these factors are inevitable and will increase.
  In 1950 the granite industry of Britan was facing a crisis. It had a great shock when it failed to secure a contract for granite for work on the Manchester Ship Canal. The contract went to Norway, but a licence was granted for only half the granite required and we were glad to see that British granite was used for the second part of the contract. Part of that work came to Cornwall. Last year the Cornish and Devon granite industries had another shock when they failed to secure the use of granite, or any really effective consideration of its use, for a reservoir in connection with the South Devon Water Board. The National Parks Commission took a hand and also the Consultative Council for the Stone Industry but, for the first time, arrangements are being made to use a stone other than granite for a Dartmoor reservoir.
  The industry has excellent arrangements for sharing contracts so that the small man gets a look in as well as the big firm. The President of the Board of Trade, in an answer to the Question put by me on 17th March, said that the imports of granite wholly or mainly manufactured in the post-war years had risen from 20,000 tons in 1947 to 79,000 tons in 1951. An interesting factor is that in the first three post-war years the price averaged £8 a ton and in the last three years it was £22 a ton. Even so, those running the industry in Cornwall regard that figure with some suspicion even allowing for all the favourable factors which go to the production of Scandinavian granite. Marble, wholly or mainly manufactured, was imported in 1948 at the rate of 50 tons and, in 1951, there were 850 tons at a cost of £76,000. These imports hit the smallest firms most because they depend on monumental work.
  We ask the Minister to investigate the possibility of limiting imports, to inquire whether Italian marble is subsidised, as some think it is, whether there are any imports of Indian granite, and what is the effect of this on our economy. We also ask him to consider the possibility of illicit imports. The allegation has been made; I hope that it can be examined. I have no idea of the country or countries of origin. We ask the appropriate Minister to consider the use of

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  granite in connection with sea defences of the East Coast. Examples of such work can be found at Dawlish and Penzance, in the constituency of the hon. Member for St. Ives (Mr. G. R. Howard). There is plenty of waste granite in and around the quarries of Cornwall. I am reliably informed that it can be shipped from Falmouth to the East Coast at 30s. a ton. There is the possibility that it might be used in the sea defences of Holland. We ask that that might be considered.
  Last year the Imperial War Graves Commission decided to place an order with a single firm to get the inscriptions on the gravestones engraved by machinery instead of allowing the work to be parcelled out among firms all over the country in which there were skilled craftsmen. Again, although the Consultative Council for the Stone Industry intervened, the Imperial War Graves Commission had its way, to the detriment of the industry.
  I ask the Minister of Labour to keep separate statistics for the granite industry so that these can be used as a barometer of the state of the industry. I would ask the First Lord and his colleagues to consider every method and possibility of using granite in engineering works, in bridges and harbour works, because they have always been the mainstay of the industry. I ask Government Departments to be lenient in granting licences for the building of bridges containing much stone work.
  The Minister of Works recently said that he was permitting £10 million worth of licences for City of London offices. We ask that the use of granite for facing buildings be encouraged. Unity House is an example of polished granite used in that way, as is the Kodak building in Kingsway. Granite was used in the building of New Scotland Yard. We ask that the repair and reconditioning of old and damaged buildings where granite was previously used be taken into account so that granite can be used again.
  We say that everything should be done to preserve this ancient industry. The machinery that has been installed cannot be used to the full because there is insufficient work, and that means that the overhead costs are unnecessarily high. We cannot afford to lose the skilled
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  craftsmen who have so enriched our aesthetic and industrial life. If the present trend continues it will not be long before it will be impossible to get craftsmen even for maintenance work. We must keep the long-term interests of the industry in mind. Finally, I say, let us do something while there is yet time.
  10.19 p.m.
  The Secretary for Overseas Trade (Mr. H. R. Mackesou): I am grateful to the hon. Member for Falmouth and Camborne (Mr. Hayman) for the tone in which he raised this important subject, and also for his courtesy in letting me know the general line that he intended to take. But for that I should have had little hope, as he will appreciate, of answering the questions of which I have a note, covering the Ministry of Agriculture, the Treasury, the Admiralty, the Ministry of Works, the Ministry of Labour, the Imperial War Graves Commission, the Ministry of Transport and the Post Office, as well as the Department which I represent. Without previous indication of those questions, it would have been extremely difficult for me to have answered the hon. Member.
  I take it the hon. Member would like me to refer to that Cornish industry rather than to the industry as a whole. The industry is concerned both with marble and granite, and produced 7,800 tons last year compared with 7,100 tons in 1951. The hon. Gentleman suggested that we should reduce the import of marble and granite, particularly from Italy. The short answer to that is that neither this Government nor the preceding Labour Government had any doubts on this subject. It is not the policy of this Government, nor was it that of its predecessors, to use import restrictions for protectionist purposes. If we did that the complications to our export trade would be very severe. Such restrictions are used, and we are obliged to use them for balance of payments reasons in order to protect our economy. If any industry appeals for higher tariffs it would be for that industry to put up a case which would receive careful consideration.
  The technical position with regard to imports of the various kinds of granite and marble is as follows. The former Administration placed rough marble on open general licence in March, 1951, as part of its policy for the liberalisation of

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  European trade. The present Government revoked the general licence in March, 1952, as part of our total import cuts imposed for balance of payments reasons. In continuation of the policy of liberalisation of international trade pursued by the preceding Government. the present Government have recently been able to restore rough marble to open general licence, in view of the improved situation of our balance of payments.
  Raw granite, manufactured granite and manufactured marble are in a different category. They are admitted only under limited bilateral quotas fixed during trade negotiations with several overseas countries to which the hon. Gentleman referred, and in particular with Scandinavia. The level of imports under the quotas is small compared with the pre-war level. The total imports of marble and granite, rough and manufactured, were 43,000 tons in 1952 compared with the pre-war level of 119,000 tons.
  The time at my disposal is limited and I will answer the hon. Gentleman's questions as quickly as possible. If I can assist him by correspondence, I shall be at his disposal. He asked whether Italian marble is subsidised. I have looked into this, and I am assured by our Ambassador in Rome that there is no reason to suppose there is any export subsidy by the Italians. If the hon. Gentleman has any information to the contrary, I hope he will let me have it. The hon. Gentleman and the House will know that the whole question of export subsidies is being actively pursued by the Government in connection with the International Monetary Fund. We do not approve of subsidisation, but we have no reason to suppose the Italians are doing it. Imports of Indian manufactured granite were 8,955 tons in 1938 and 280 tons in 1952.
  I was interested in the hon. Member's suggestion that illicit imports of granite may be coming into this country, and I took it that he meant in the form of ballast in ships. I am advised that this is entirely a matter for the Customs, but if there is any information in his possession about that, I hope I may have it. I am prepared to deal with it, although it is a matter for which the Customs are responsible, and, in fact, the hon. Gen-
  512
  tleman should write to the Financial Secretary to the Treasury.
  I was extremely interested in the hon. Gentleman's suggestion that we might be able to dispose of some of this very valuable stone, produced by this fine race of Cornishmen—
  Mr. John Taylor: And Aberdonians.
  Mr. Mackeson: —to Holland for the Dutch sea defences. I was in Holland about a month ago visiting the flooded islands of Goeree and Overflakkee, and I found that they put stone in the bottom of their dykes. I do not know where this stone comes from, but very large quantities are being used. After this debate we shall send a message to our commercial counsellor in The Hague to see if we can dispose of any of this to our Dutch friends; but, of course, it is a matter for the industry and not for the Government. We will do what we can by asking the commercial counsellor to see if that is possible.
  Very large quantities of stone are being used to fill these dykes. The problem at the moment is not so much concerned with stone but with clay to cover the embankments. I believe that this is also true of our own sea defences in East Anglia for which my right hon. Friend the Minister of Agriculture is responsible. The Consultative Committee for the Stone Industry, to which the hon. Gentleman referred, have examined a suggestion that Cornish granite should be used to rebuild our sea defences.
  This has been submitted to an inter-Departmental committee under Lord Waverley which is investigating the whole question of the safety of our sea defences. It is open to the granite industry to supply evidence to this committee of the advantages of granite but the possibilities have already been noted. I shall see, as a result of the hon. Gentleman's remarks, that the matter is again referred to. The most effective action the industry could take would be to tender for the rebuilding schemes of the various local authorities, the river boards and other bodies concerned.
  The hon. Member referred to the Imperial War Graves Commission. It is the normal policy of the Commission to use Portland stone for headstones all over

  513
  the world, but there are exceptions because of climatic conditions and other reasons, and granite and marble headstones are used in certain places, of which Scotland is one. During the last war quotations were invited for granite headstones, but unfortunately the prices were too high. The Commission, like all Government Departments and private concerns, has to take into consideration the importance of keeping down expenditure.
  The hon. Gentleman asked about the possibility of the Minister of Labour splitting his returns on employment to give details of this industry. I cannot commit my right hon. and learned Friend tonight, but we will consider the matter. I would say that the fewer publications issued by the Government the better. We are already printing a very great number of statistics.
  I have left to the last the important point which I am sure is behind the anxiety of the hon. Gentleman and my hon. Friend the Member for St. Ives (Mr. G. R. Howard), who has raised all these questions recently with the various Ministers concerned. Perhaps my Department have come off a little more lightly in the treatment than has the Ministry of Agriculture with whom I know my hon. Friend has had considerable correspondence. The Ministry of Works Building Apprenticeship and Training Council are looking into the question of skilled labour which is a matter of the greatest importance to our country. It would be a tragedy if this country lost the skilled masons to whom we owe not only the buildings built by our forbears but the House of Commons in which we are so proud to be today.
  The Ministry of Works are anxious to assist building in stone, and consideration is being given for the question of giving some priority for the inclusion of natural stonework in the construction of buildings built by Government Departments. The difficulty is that, generally speaking, granite is initially more expensive. The cost factor is, of course, important to private enterprise and to Government Departments, though it is equally true that, broadly speaking, granite gives considerable saving in long-term maintenance costs.
  514
  The Government's policy is to licence maintenance work in stone freely and to consider favourably applications for medium-sized new works in stone. The Ministry of Housing may make a grant under the Housing Act, 1949, towards the extra cost of building in stone in stone districts, which, of course, would include other places besides Cornwall. As the hon. Gentleman will know, my right hon. Friend the Minister of Works recently announced that licences to the value of £10 million will be issued this year in connection with new projects in Central London. One of the criteria for the selection of the projects concerned is the contribution they could make to the employment of stonemasons.
  This, I think, illustrates our attitude to the industry. We are most anxious to help them. I am grateful to the hon. Gentleman for raising this subject. I appreciate the difficulties of the industry. The price element naturally comes into consideration, but I cannot honestly say that the import restriction for which the hon. Gentleman asks could reasonably be granted. That would be a complete change in the policy of British Governments for a long time, but I have already given him an opportunity to advise his friends to apply for an increase in the tariff.
  Mr. G. R. Howard (St. Ives): I am sure that the hon. Member for Falmouth and Camborne (Mr. Hayman) would agree with me when I say that we in Cornwall are pleased that my hon. Friend has been so helpful in his reply to this debate. I hope that the Waverley Committee which is inquiring into the rebuilding of the sea defences in the flooded areas will bear in mind the fact that even though the initial cost of granite may be heavier the stone is so good and will last so long that in the end there will be a saving, and that its employment will assist this Cornish industry which has suffered over recent years.
  The Question having been proposed after Ten o'Clock, and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at Twenty-nine Minutes to Eleven o'Clock.

  ICELANDIC FISHERIES (BRITISH LANDINGS)
  ICELANDIC FISHERIES (BRITISH LANDINGS)
  WICKHAM MARKET FRUIT STATION
  WICKHAM MARKET FRUIT STATION
HOME DEPARTMENT
  Cremation Certificates (Doctors' Fees)
  Cremation Certificates (Doctors' Fees)
  Police Pensions
  Police Pensions
  PURCHASE TAX (ANTISEPTICS)
  PURCHASE TAX (ANTISEPTICS)
HOSPITALS
  X-ray Department, South Hams
  X-ray Department, South Hams
  Senior Registrars
  Senior Registrars
  Maternity Home, Modbury
  Maternity Home, Modbury
EDUCATION
  School Meals, West Ham
  School Meals, West Ham
  School Transport
  School Transport
  MEDICAL RESEARCH COUNCIL
  MEDICAL RESEARCH COUNCIL
  NATIONALISED INDUSTRIES (INFORMATION)
  NATIONALISED INDUSTRIES (INFORMATION)
  WAR PENSIONS (ARREARS)
  WAR PENSIONS (ARREARS)
  INDUSTRIAL INJURIES ACT (COMMITTEE)
  INDUSTRIAL INJURIES ACT (COMMITTEE)
  AGRICULTURAL INDUSTRY (FINANCIAL ASSISTANCE)
  AGRICULTURAL INDUSTRY (FINANCIAL ASSISTANCE)
  SUGAR (NON-DOLLAR PURCHASES)
  SUGAR (NON-DOLLAR PURCHASES)
  HOSTELS CORPORATION (GRANT)
  HOSTELS CORPORATION (GRANT)
  GROUNDNUTS, KANO (STORAGE COST)
  GROUNDNUTS, KANO (STORAGE COST)
  KOREA (EXCHANGE OF PRISONERS)
  KOREA (EXCHANGE OF PRISONERS)
Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers

  TEES CONSERVANCY SUPERANNUATION SCHEME BILL
  2.35 p.m.
  Read 2a, and committed.

TYNEMOUTH CORPORATION BILL
Read 2a, and committed; the Committee to be proposed by the Committee of Selection.
BELPER URBAN DISTRICT COUNCIL BILL
Read 2a, and committed.

DEFENCE
2.36 p.m.
Debate resumed (according to Order), on the Motion moved yesterday by Earl Alexander of Tunis, That this House approves the Statement on Defence, 1953 (Cmd. 8768).
LORD STRABOLGI: My Lords, if I may be permitted to continue this most interesting and important debate which was opened with such a felicitous and, if I may say so, brilliant speech by the noble and gallant Earl, Lord Alexander of Tunis, I would first of all remark on the extraordinary onslaught on the accepted strategy of defence, particularly on the oceans, which was made by the two Air Marshals, the noble and gallant Viscount, Lord Trenchard, and the noble and gallant Lord, Lord Tedder, yesterday. They did not actually say so, but their arguments all led up to the thesis which I confess to flirting with a little myself in my younger days, when I had not so much sense as I have now—that we should rely for our whole defence and our whole striking force on air power; that we could, in effect, practically abolish the
822
Navy, except for a few coastguard cutters and that sort of thing and—this will interest the noble Lord, Lord Jeffreys, who I believe is intervening in the debate later—abolish the Army as well, and rely entirely on various forms of aircraft. I venture to say that that policy would be suicidal as things are now for a nation situated as we are, with our immense overseas responsibility and our complete dependence on sea borne trade for our food and raw materials and for carrying on the commerce without which our economy would collapse.
I have never been able to understand how an air force can possibly take the place of the Navy in, for example, carrying Out control of commerce and imposing blockade, unless they are going to rely on frightfulness, and say that a certain area shall be prohibited and that they are going to bomb and destroy everything in that area, as the Germans did, to the disgust of the whole civilised world, in the two great wars. I do not see how they are going to carry on the recognised and legitimate method of visit and search and holding up the trade of the enemy while not interfering with the trade of the neutrals. If you try to use aircraft indiscriminately as a blockade weapon then you must be prepared to fight the whole world, because, sooner or later, you are bound to be involved with the neutrals, as happened in the case of the Germans when they became involved with the United States in the First World War. Nor do I see how aircraft can carry out control of the sea routes at night—I do not see how even helicopters could do that. So I cannot understand how the control of commerce can be undertaken by air force alone unless we are going to embark upon an immense expenditure on large flying boats. In that case, we might just as well stick to the well-tried ships, which after all, can carry aeroplanes as well.
As for the onslaught which was made on the aircraft carriers, which the two principal navies in the world, those of Great Britain and the United. States, rather specialise in, I do not see how you can create air cover for your convoys unless you have carriers. I think it would be very much of a gamble to rely entirely on land-based aircraft when we remember how vulnerable aerodromes are. Those are a few technical arguments which I venture to pose against the vast authority

823
and experience of the two Air Marshals in their own particular sphere. And I maintain that all the lessons of history, including most recent history, show that there is no substitute for sea power, and that you have to control the sea routes by ships—aided, of course, by the aeroplane wherever you can use it; with that I most certainly agree. And, in our position, we must do that if we are to survive.
One of the complaints which I am going to voice—and I believe I am speaking for a number of my colleagues in this matter; particularly, I believe, I have the support of my own noble and learned Leader in it—is that we are unbalanced in our expenditure. I suggest that we are spending too much on the Army. We have an Army which is, perhaps, necessary in the present state of affairs, but which we cannot maintain indefinitely. I do not say that we are spending too much on the Air Force—not at all. But I am quite certain that as things are we are spending too little on the Navy. I regret very much the cuts both in expenditure and manpower which will take effect by April next year. When the noble and gallant Earl, Lord Alexander of Tunis, accepted the great office of Minister of Defence, I congratulated your Lordships and the Government on the accession of so brilliant a soldier and so experienced a statesman. But I said I thought it was a mistake to have a soldier as Minister of Defence, and I said that without any reflection of any kind on the noble and gallant Earl. I am sorry to say that I have found myself justified.
Our naval strength is insufficient for our purposes. We are making the old mistake of preparing for the next war, if it should come, in the way we should have prepared for the last. We are also making the mistake of concentrating too much on one potential enemy. We can see that in the obsession, if I may put it that way, on the so-called Russian danger. I do not minimise that danger, but it is an obsession when it becomes a fixed idea. We see an example of that in the fact that because the Russians, as least during all my professional life, have had a great reputation as minelayers, we in this country are now concentrating on minesweepers. We have a vast fleet of minesweepers, but we are woefully short
824
of cruisers—I shall come to that matter in a moment. We cannot be satisfied with a Navy suitable only for the sort of war that is filling the minds of nearly everyone in the Pentagon on the other side of the Atlantic, and on both sides of Whitehall here. We need an ocean navy, which takes a long time to build up, but which is capable of meeting any emergency or danger that may arise.
One thing I have learned in my life is that we cannot foretell who will be our possible enemy and who will be our future friend. The first time I mobilised was against France. We cleared for action because France was an ally of Russia and Russia was at war with Japan. As a result of the unfortunate business of the Baltic Fleet firing, on the British fishing fleet on the Dogger Bank, we nearly went to war with Russia, and so with France. The next time I prepared for action was when the Austrians, as the noble and gallant Earl will remember, seized Bosnia and Herzegovina from the Turks, which was one of the train of events that led to the First World War. The third time I prepared for action, and when the guns did go off, was against Germany in the First World War. In both world wars Russia was our Ally and in both wars she saved the situation for us. By their premature offensive in East Prussia our Russian Allies saved Paris in the First World War and saved the whole of the Alliance—that is admitted. And in the Second World War, by drawing off a large part of the German Army, she gave us the necessary breathing space and gave the Americans time to prepare and so saved the whole of the Allied cause. Now the whole argument is that Russia is the only enemy; that we must be prepared for war with Russia. I say that that may lead to an unbalance, a dispersion, of our Armed Forces which may be dangerous. After all, let us be realists.
A good deal has happened since March 25, the date for which this debate was first fixed. The noble and gallant Earl, Lord Alexander of Tunis, and my noble friends Lord Alexander of Hillsborough and Lord Henderson all referred to the change which has taken place in the international situation. We have all seen how quickly the international situation can change. Our enemy of to-morrow becomes our friend of to-day. Germany is the "blue-eyed boy" at the present time, although we fought Germany in two

825
of the greatest wars in history. I understand that in the United States of America, Germany is looked on as the most important potential ally. No one can tell how the Germans will react in the future, and what the policy of a United Germany will be, or what her alliances will be. Who can tell what Japan will do, if Japan is rearmed and recovers her economic strength? Who can tell what will be the future policy of China, potentially the greatest Power in the world in population and resources? Who can tell, indeed, what will be the future of the United Nations? We on these Benches, as a fixed article of policy, believe in supporting and strengthening the United Nations and we look upon it as one of the great bulwarks of peace. But it may not last.
What I am trying to suggest to your Lordships, and I believe that I shall have your assent, is that the one thing we may be sure about is that the international situation can change very quickly. The whole climate can change. But the building up of forces for the control of the oceans of the world is a slow process. The Army can be built up fairly quickly, as we have seen; the Air Force takes a little longer; but to build up the Navy is the longest process of all. The degree of technical training required, and the adequate provision of material, take a long time, and unless our naval foundations are well laid and maintained we may find ourselves in very serious trouble. That is why I regret that cuts have taken place in the Navy, and why I regret that of this vast expenditure on armaments the Air Force has taken £498 million and the Army, £526 million—I do not grudge it to them—and the Navy only £329 million. And this at a time when in commissioned ships the Royal Navy has sunk to third place in the world. I am not a tall comfortable about that. It is not a question of pride, but of hard facts. I do not believe that at present we have the naval force available to meet all our commitments.
Take, for example, the cruiser position. We have only eleven cruisers in commission, of which I believe at one time or another seven have been employed in the Korean campaign, leaving four for the rest of the world. The cruiser is a self-contained unit which can be sent anywhere; it has considerable force of itself, and is absolutely invaluable. In every
826
war in which we have been engaged, from the War of the Spanish Succession, through the Napoleonic Wars to the First World War and the Second World War we have always been short of cruisers. Nelson complained of the lack of frigates, and our Admirals in the First and Second World Wars complained of the lack of cruisers. We were nearly defeated in consequence of this lack, because of the threatened interruption of our trade routes and food supplies. I see that work on the three cruisers that we were building has been suspended. One reason I am told—I do not know whether it is true, and I do not press for an answer from the noble and gallant Lord who is to reply to-day—is that there is still indecision about what sort of weapons they should be armed with: whether we can yet rely on guided missiles, or whether they must be armed with conventional weapons. But I feel it is a great mistake that they are not being proceeded with. We shall surely have enough suitable armaments for them, and they are badly needed at present. I do not want to be accused of being oblivious to the tremendous importance of the air arm. In this connection, I air sorry that Coastal Command has not received a greater share of the necessary expenditure and material. Coastal Command is a valuable adjunct of the Navy and should be strengthened without delay.
I should like to refer to the method of recruiting men for this vast Army that we have scattered about the world, which is a matter that has already been referred to by several noble Lords, and particularly those on this side of the House. I do not want to impinge on the debate on Foreign Affairs which I understand my noble friend Lord Henderson will initiate a little later in the Session, but I hope that it will be possible to get some settlement soon enabling us to withdraw our troops from Trieste, Austria and, indeed, from Germany, too. We have these armies of occupation, and although these young men are very fine soldiers, all history shows that the duties of an army of occupation are not good for the Army. It is difficult to keep the men properly employed, and I believe I am right in saying that, from a training point of view, an army of occupation is not a good thing at all. If we could get these armies out, so much the better.

827
I hope, also, that there will be a settlement soon with Egypt, which will enable us to reduce in numbers the 80,000 men in the Canal Zone. That is not a good place to keep a great army like that.
With these armies scattered about all over the world, we are losing tremendously all the time in the pipeline. With short service, and the need for continually replacing men, a great deal of time is spent in trooping, and great expense is incurred which does no good whatever. It is not good, either, for soldiers to take long sea trips. I hope that, with better recruiting and long-service engagements increasing in the Army, I am speaking to the converted in the person of the Minister of Defence when I repeat that our ideal Army should be a long-term body, much smaller in numbers but consisting of highly-trained, professional men; the sort of Army we had before the First World War; an Army that could go anywhere at any time, and which was armed with the latest weapons, in the use of which the men were thoroughly trained. That is the sort of Army which I believe will be required in the future, containing the long-term, professional soldier, who, incidentally, could be used with far less detriment in an army of occupation. If any of the distinguished military men in your Lordships' House are going to support me in resisting the blandishments of Lord Trenchard and Lord Tedder, I hope they will ask those two noble and gallant Lords how they propose that an Air Force should occupy territory that is required to be occupied.
I hope we are thinking a little ahead here, and looking to the day when we can abolish conscription and get enough recruits for the sort of voluntary Army which we have always found most suitable in the past; and that we shall be able to avoid this often fatal two years in the careers of young men which in many cases is doing so much harm to the youth of the country. I would add one rider to that. Is it impossible to take Army recruits for their two years' National Service training at a slightly older age, as is done in the case of university students? Many employers of labour would much prefer that. They say that the present early entry into compulsory service for two years is most unsettling to the young men.
828
They are not properly formed in their minds and in their habits when they go into the Army, and often they come out bone-lazy and difficult to train; whereas if they could go in at, say, twenty-two or twenty-three years of age, they would have learned a trade and, I should have thought, would be more useful in the Army itself, where there is always a need for skilled mechanics and men with that sort of skill. If that were done, the two years' compulsory service would not do these young men so much harm and would not so seriously interrupt their training in their professional or industrial career.
My Lords, some of my observations may have appeared to be critical. I do not differ from those noble Lords who have supported the need for this heavy expenditure on armaments with which we are faced. We know the cause of it. Let us hope that times will be better in the near future. I have made my plea, and my criticism of what I think is a mistake in the balance of our expenditure, which is affecting the Navy adversely in a way that may be most embarrassing for us in the future.
2.58 p.m.
LORD JEFFREYS: My Lords, I have no intention of discussing in detail any matters concerning the Army, in particular, or either of the other two Services, but I will endeavour to speak on the Motion of my noble and gallant friend the Minister of Defence, which is that this House approves the Statement on Defence. That document deals with the requirements in manpower, equipment, armament and materials of the three armed Services, which three Services, I submit, are, in fact, one Service of the Crown, each with its own individuality and characteristics but none the less united as branches of the national defence organisation. Each is essential to the defence of the country, and each is essential to the other two Services; but each has its limitations. The great Lord Salisbury, if I may so venture to describe the grandfather of the noble Marquess, the Leader of the House, once said:
"The Navy cannot climb mountains."
That expressed a great deal; they cannot climb mountains. Similarly, the Air Force can be the eyes of the other two forces; it can destroy; it can terrify; but

829
it cannot occupy or, still less, pacify. It cannot, for instance, deal with a situation such as prevails at present in Malaya. The Army cannot ford the Channel nor can it rise in the air to see for itself. Those are its limitations. And I would say that one of the duties of the Minister of Defence is to see that there is a proper balance between the three Services. Possibly the noble Lord, Lord Strabolgi, would agree with me at any rate that far.
His Royal Highness The Duke of Edinburgh, speaking the other day at Plymouth, said:
"The enemy can only be defeated by action at sea, on land and in the air."
He went on to say:
"The only effective action is the concerted action of the total defences of this country."
That sums up in very few words what the functions of the three Services are, or ought to be, Now this unity of the three Services was recognised by the creation of the Ministry of Defence, and I am certain that there will be general agreement that no one could be more appropriate to put forward this Statement than my noble and gallant friend, the Minister of Defence. Speaking yesterday, the noble Lord, Lord Winster, said that it was very undesirable that Service officers should be appointed as Minister of Defence. I would say that we want the best available man for the job, and if he belongs to one of the Services and is still the best available man, there can be no objection to his appointment. I am sure we have the best available man in my noble and gallant friend, and there is certainly no man who is more trusted by, I believe, all three Services than my noble and gallant friend.
Even in these times some people forget or will not see that armed strength is necessary for us—necessary to support our national policy and to protect our national interests. No Power, great or small—and I would say particularly at this time certainly no Eastern Power—respects weakness Therefore, whatever else we are, we cannot afford to be weak in policy or in arms, and we must not only be strong but we must be prepared. There is no sounder proverb then the old Roman proverb, which says:
"If you want peace, be prepared for war."
For if we are not strong and not prepared, we shall be taken advantage of, for absolute certainty. There was recently a
830
letter in a popular newspaper criticising some statements of that newspaper in praise of the morale, the skill and the gallantry of our Forces. The letter said, in effect: "All these things are of no account. Modern weapons, modern machines and modern explosives are all that matter." It is still the man behind the gun, or the man behind the machine, or the man behind the bomb or whatever it may be, who wins the battle, and the morale of the nation, as well as its force in particular, is a matter of the utmost importance which should never be lost sight of and which should be continually maintained and encouraged.
We must not only be prepared for war, but prepared for successful war, which is not always the same thing. A leading British soldier of the First World War, Field Marshal Sir Henry Wilson, used to say that there are two kinds of war: successful war and unsuccessful war. He said, "If you instruct me, I can prepare for either form of war. The first is terribly costly in treasure and in life, and the second must mean for the losing Power utter ruin." That put the case fairly plainly, and I think all noble Lords—certainly all who have any experience of war—will agree with that summing-up. It is certain that our efforts to be prepared for all eventualities, whether of the cold war or of actual war, must be continued. Those efforts were initiated by the late Government; they are being continued by the present Government: and by whatever Government they are carried out, they must cost, unfortunately, immense sums of money. The estimate for 1953–54, as shown in the White Paper, is no less than £1,636 million.
In this connection, I was glad to hear the tribute paid yesterday by the noble and gallant Earl, the Minister of Defence, to the way in which industry has worked on production during this year. Also in this connection, I am glad to hear that hitherto there has been no looking back on the part of industry anywhere. Production is at all times not only an expensive but, most unfortunately, a very lengthy business. That is one of the troubles with which we have to contend. It is all very well for a Minister to say that it is the policy to provide certain new and up-to-date armaments, new and up-to-date machinery, and so forth, but it

831
is quite another matter to get those armaments and that machinery into being and functioning. As the White Paper says in paragraph 4:
"… it is specially important to get the fullest possible value for our money….
If this full value for money is secured, although the total expenditure will be at a level unknown before in peacetime, I feel certain that the nation will willingly shoulder the burden and will not grudge the cost.
It was undoubtedly a wise decision, made with the object of maintaining the strength of the economy, to spread rearmament over a longer period than was at first envisaged, by keeping the expenditure on a lower scale each year. Yet, in spite of the decision, a further very large contribution must be made and will be made in 1953–54 towards the modernisation, the re-equipment and the expansion of the Services and, in the words of my noble friend, the most effective use of our available resources. The summary of Estimates for 1953–54 shows that the Navy is to cost £364 million, the Army £581 million and the Air Force £548 million. That does not meet with the approval of the noble Lord, Lord Strabolgi. If these Estimates had been put forward independently by the Ministries, I think there would have been many queries as to why the Navy is to get less than the other two, and why the Army is to cost the most of the three Services. But I feel sure that my noble friend has considered this matter from every point of view, and he has explained the special heavy burdens which are now falling on the Army, such as, for instance, Malaya, Korea and the present situation in the Suez Canal area and the Middle East. I am sure that what he recomments is a correct apportionment of the cost.
As regards manpower, I welcome the statement in paragraph 18 that the maintenance of efficient forces depends upon there being adequate numbers of Regulars serving a long-term engagement; for, as was said by my noble and gallant friend, Lord Bridgeman, from Regulars come commanders. leaders, instructors and the framework of our Forces. But if there are to be adequate numbers of Regulars the conditions of service must be good, and about this I shall have
832
something more to say a little later on. I am glad that it is recognised that two years' whole-time service must continue. Here again, I am afraid that I differ from the noble Lord, Lord Strabolgi. So long as we have forces abroad, one of the difficulties is that these National Service men have to be brought backwards and forwards. That takes a very long time. Moreover, in these days they have very considerable intricacies in training with which to contend, and two years is none too long to produce efficient airmen, soldiers or seamen. Necessary also is the decision to extend the terms of whole and part-time service for a further period of five years' liability to recall in emergency. It is absurd that a young man called up at eighteen years of age should be exempt at the age of twenty-three from further liability to recall in an emergency. It is right, too, in view of this decision, that the annual call-up of Class Z Reservists, who have done good service in their time, should now be discontinued.
As regards weapons, material and equipment, it is good to hear from my noble friend that the Centurion tank is now back in production in large quantities, and that for the Royal Air Force jet aircraft are also being produced. At the same time it is a matter for anxiety to be told again by my noble and gallant friend that the existing radar equipment has not, so to speak, kept up with the modern supersonic jet aircraft. I have no doubt that the steps which he told us he is taking will be effective, and that in due course radar will resume its former importance in our system.
With reference to paragraph 31 of the White Paper, it is, of course, important that as many National Service reservists as possible should undertake voluntary engagements with the Reserve or Auxiliary forces; but I would suggest that for these forces, which originally were entirely voluntary forces, some voluntary enlistments in lieu of the normal call-up might again be allowed. Those of us who have sat in the other place have had pressure put upon us to urge the exemption or deferment of certain classes from the normal call-up—for instance, such people as university students, apprentices, learners of various trades and others with special reasons. I suggest that a limited number of such

833
young men who have a definite minimum educational standard—I regard that as important—might be allowed to enlist in, for instance, the Territorial Army or Royal Air Force Volunteer Reserves for three months' elementary training, which might he a camp in the summer, followed by not less than four years and nine months part-time service under Territorial Army conditions, but with a considerably higher liability for drills and training than has hitherto been exacted from the Territorial Army. I suggest that the possibility of such a system might at any rate be carefully inquired into, for I believe that it might produce an appreciable number of desirable volunteers.
Then there is the question of what my noble friend's predecessor called the "non-fighting" element in the Services. I know that the present Secretary of State for War is keen on reducing the "tail" of the Army, and that he has, in fact, made considerable reductions in Staffs, services and departments and in semi-combatant or non-combatant corps which do not contribute to the actual fighting strength of the Army. I understand that similar reductions have been made in the other two Services, but I wonder whether further reductions could not be made. If the Geddes Axe were once more wielded, I believe that a good many superfluities could be eliminated, a good many economies made, and a good many additions made to the fighting strength of the Services.
There is one more suggestion that I would make. It is that at stations where there are mixed forces, perhaps of all three Services, there should be joint establishments. This is a matter upon which the noble Earl, Lord Lucan spoke. There should be joint establishments, such as, for instance, joint hospitals, joint supply services, and, possibly, joint transport services. I know that joint hospitals and joint supply services have been tried; I have had some experience of them myself in the Army—for instance, joint hospitals at naval ports where there is also a garrison; and joint supply services at certain stations where there are both troops and airmen. I know that various objections have been made, chiefly by medical officers, to the pooling of the medical officer system. But in these days,
834
when all three Services are largely dependent on young National Service medical officers, I think a system under which there could be some pooling and spreading of senior medical officers might be for the benefit of all. I am not suggesting that there should be joint services on board ships at sea, or for mobile branches of the Army or Air Force, but it is essential to have medical officers for the Forces in garrisons and for other stationary troops, and I do not see why something of this kind should not be done. I think it would save a great deal of money. After all, the qualifications of medical officers are the same everywhere.
We have heard a great deal about the atomic bomb. I am not going to attempt, in my ignorance, to say much about the atomic bomb, but a great many people in this country have the idea—and this is very evident when one is dealing with such matters as Civil Defence—that it is useless trying to do anything against the atomic bomb and that we had better give up the ghost. There is no doubt that proper precautions are effective, and that the damage caused by the atomic bomb can at least be modified. There are many steps which can be taken to make it less dangerous and less annihilating than it might otherwise be. But I hope we shall remember that the best form of dealing with the atomic bomb is attack on our own part against the launching stations and on the air forces which might convey the bomb.
Lastly, I would say that the conditions of service require constant attention, and they must be made sufficiently attractive if the requisite numbers of Regulars are to be attracted and retained. The noble Lord, Lord Strabolgi, and I dare say many other noble Lords, will agree with me that it is desirable to have in this country a large, effective, long-service Regular Army. If you are going to get Regular soldiers, whether for the present Army or for any other Army, you have to make the conditions sufficiently attractive for them. At present, a high proportion of the Services is serving abroad, and separation from wives and families is the rule rather than the exception. Housing conditions are mostly poor and moves are frequent. Few married officers, or warrant officers or non-commissioned officers, know what it is to have a settled home for any length of time; and, consequently, many are leaving the Service.

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I have heard of individual cases of young, or comparatively young, and very efficient officers who, after being separated for years from their families, say that the minute they get away from Korea or Malaya, or wherever it is, they will leave the Service, although their prospects in it are good. They cannot tolerate being separated for years and years from their wives and families.
Those are some of the objections. Pay has been improved, but has barely kept pace with the fall in the value of money and the rise in the cost of living. Moreover, whilst long overdue improvements have been made in pensions for widows and children of officers and long-service other ranks, nothing has been done to give reasonable treatment to those officers who retired under the terms of the Royal Warrant and corresponding instruments of 1919—that is, practically all the officers of all three Services between the two wars. The retired pay of those officers was stabilised at 9½ per cent. below the rates of 1919, in spite of the provision in the Warrant that it should rise and fall according to the rise and fall in the cost of living. We know how the cost of living has risen since then. This unfair treatment is bitterly resented by those affected, and it acts as a very strong deterrent to their sons' and dependents' entering the Services as Regulars. Whilst I am much encouraged by the undertaking, given in a previous debate in this House by my noble and gallant friend the Minister, that the matter will be constantly kept in mind, I am disappointed to see that, whilst other concessions have been made, no concession was made for these men in the Budget which has recently been put before another place. None the less, I am perfectly certain that my noble and gallant friend means what he says. I feel confident that in the end, at long last, justice will be done for these officers.
As regards production, research and development, all I would say is that the complexity and technicality of modern arms and equipment make rearmament and re-equipment, whether of sea, land or air forces, not only a very expensive but a terribly lengthy business—I am sure your Lordships realise this. I wish I could feel that the country, too, realises it. I hope that ere long a new rifle will be made available, but in this, as in other
836
matters of armament, I hope that the advantages of standardisation of arms, equipment and ammunition used by the various forces of different nations acting in common will be borne in mind. It is not always easy to arrange—I know that well—but perhaps it might be a little less difficult at this time when quite a few nations in N.A.T.O. are practically starting from scratch.
I was glad to note from paragraph 76 that the defence policy of the United Kingdom is based on the closest possible co-operation with its partners, both in the Commonwealth and in N.A.T.O. This is important, and its importance was emphasised by the speech of my noble and gallant friend Lord Freyberg yesterday. I should like to congratulate the noble Lord upon that speech, and I hope that we shall hear him very often again, but I am certain that, if his speech brought out one lesson more than another, it was the necessity for the closest understanding between the different parts, and not only between the forces of the different parts of the British Empire but between the Governments of the respective countries.
I trust that definite plans exist now for Empire—I do not apologise for using that term; I infinitely prefer it to the term "Commonwealth"—co-operation, especially in the Far East. I hope, too, that definite agreements have been or will be come to with the Commonwealth countries concerned as to the forces and equipment which they will provide. Definite agreements are necessary, not merely airy phrases of how desirable it is that we should work together, but definite agreements for working together in certain circumstances. Here, too, I would say that organisation and preparedness are essential. Improvisation has been in many ways the curse of this country: we have a genius for improvisation, but improvisation can never take the place of real preparation, and last-minute preparations are not good enough. It is good to know that the essential experiments and trials with guided weapons are being carried out at Woomera in Central Australia, and I am sure we were glad to hear the statement made by my noble and gallant friend the Minister, that great advances have been made in these experiments and that great things are hoped for from guided weapons.

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It is also interesting and very satisfactory to know that the atomic tests at Monte Bello were carried out in close co-operation with the Australian Government. Best of all, if I may say so, is the statement in the White Paper about the efficiency and good feeling in the Commonwealth Division in Korea. There is no doubt that that Division has done wonderfully well. I have heard from entirely independent and non-official sources about it, and of the good feeling within the Division, between its various parts. I believe that it is a wonderful preamble, if I may so call it, to a much closet integration of the forces of the Empire in the future.
I would say one word as to the Home Guard and Civil Defence. I am glad to see that both are included in the Statement on Defence, for those are essential parts of our defence organisation, and it is a matter for regret that recruiting in both eases has been somewhat disappointing. In the last war, the Home Guard was raised as an afterthought—that is the only word that one can use—when we were in desperate trouble at about the time of Dunkirk. It was kept separate from the Civil Defence organisation. I would suggest that it ought to be part of the Civil Defence organisation and, if that were the case, the most appropriate men could be assigned to the most appropriate duties in those two forces, and the whole could work as one organisation. It was a mistake not to have preserved the cadre of the war-time Home Guard. If that had been done, it would have been far easier to reconstitute it when the time came. In any case, there must be, and should be, the very closest liaison between the Civil Defence and the Home Guard.
LORD PAKENHAM: May I interrupt the noble Lord, who is being very interesting, as always? Would he place the Home Guard under Civil Defence—he said he would make them part of it—or would Civil Defence be placed under military command?
LORD JEFFREYS: I would say that, for administrative purposes, both should be placed under the Territorial Army associations, which are both local bodies and intimately connected with the War Department. Then I would say that the system under which different Ministries
838
are concerned, together with the Home Office, with Civil Defence—in the last war there were fifteen Ministries concerned with Civil Defence in one form and another—is an unsatisfactory system, resulting in delays, overlapping and, not infrequently, friction.
The Home Office and civil servants-generally have much to learn about Civil Defence, and often have much to learn about local government. They are often too wedded to Civil Service methods. Regional machinery is too slow, too cumbrous, and is often a hindrance rather than a help to Civil Defence. I suggest that regional organisations should act towards local authorities in a spirit of understanding and helpfulness rather than, as certainly was too often the case in the last war, with the idea of scrutinising, querying and delaying anything that is put up to them. In the Fighting Services the function of a staff officer is to assist his own immediate chiefs and to assist also the subordinates of his chief. It would be very well if regional staff officer; for Civil Defence were to act on those lines.
Finally, I agree with both the noble and gallant Earl, Lord Alexander, and also the noble and gallant Lord, Lord Tedder, in hoping that the apparent adoption by Russia of a new attitude will not cause us in any way to relax our precautions, our preparations or our readiness for war. If we are strong and ready, we shall not be attacked; but if we are weak and unready we shall almost certainly have to face trouble. Modern attacks with modern weapons come terribly quickly and we shall have no time for improvisation. I hope and pray that we may never see again what many of us have seen twice—our small Regular Army offered up as a sacrifice whilst the nation is getting ready for war. Should this again occur, we might well be defeated and destroyed before we could mobilise the nation in arms.
3.34 p.m.
LORD HADEN-GUEST: My Lords, I was interested to listen to the noble Lord who has just spoken, especially so because he raised the question of Civil Defence, to which I intend particularly to address my remarks this afternoon. There was a very elaborate Civil Defence organisation in the last war, and we might well study the way in which it was

839
controlled and organised before we try anything fresh, because it was really well done.
It is rather interesting to notice in this Statement on Defence, which runs into twenty pages, that only part of a page is devoted to Civil Defence. That is not, I think, because the Government do not wish to face the matter, but because they are considering it, no doubt in various ways and through various committees, and are not yet ready to bring forward precise and concrete proposals. I hope, however, that this afternoon the Government will be able to give us some further information on the matter.
Noble Lords will remember that during the last war the Civil Defence organisation made possible the evacuation of large numbers of the population, a very large number of schoolchildren and children below school age, to areas less dangerous than their normal place of residence. Noble Lords will remember what a remarkable piece of organisation the plan of evacuation was, and how well it worked. But since that time weapons used in attack have been revolutionised—we have guided missiles, we have aeroplanes travelling at speed greater than sound, and we have the possibility of atomic attack. Before the last war large numbers of people, including members of the Government, did not consider it necessary to have any evacuation from the towns and cities of this country. I well remember debates in another place when the idea that a Civil Defence organisation and evacuation of the population might be necessary was resisted by the then Government. It was only after the most earnest discussion in the House that a special Committee was set up to consider the question of the need for and the means to be adopted in carrying out evacuation of the towns and cities. Sir John Anderson, now sitting in this House as Lord Waverley, Mr. George Doland, a Conservative Member, Mr. Percy Harris, a well-known Liberal, and myself as one who had raised the matter on a number of occasions in the House of Commons, and representing the Labour Party, were appointed to sit on this Committee.
I think it is well worth while looking back to that time, and considering the conclusions contained in the Report on Evacuation which was presented in
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another place in July, 1938. The Committee bring the matter to a definite and concrete point. That is why I venture to read an abbreviated summary of the Conclusions which were reached and published in that Report. They were as follows:

"(1) The whole issue in any future war may well turn on the manner in which the problem of evacuation from densely populated industrial areas is handled.

(2) Plans of evacuation are no substitute for active and passive defence.

(3) The necessity for the evacuation of nonessential persons must be faced.

(4) The country will not be fully prepared for attack … until the necessary organisation has been set up and schemes of evacuation worked out.

(5) Schemes must be voluntary (except in emergency).

(6) Plans must be drawn up and carried out to whatever extent is decided by the authorities.

(7) There appear to be adequate transport facilities, certainly in the London area"—

there were, in fact, found to be adequate transport facilities throughout the country.

"(8) In areas for reception the organisations should be housed in private dwellings and a scheme of billeting, voluntary as far as possible, should be established in those areas affected.

(9) Local authorities should make at once a survey of billeting accommodation."

The view of the Committee was that there would be no serious difficulty about feeding, and that was, in fact, found to be the case. The welfare services had to be maintained, and they were maintained, although not always up to the highest possible standard. The dispersal of the remaining population into evacuation areas was found to be absolutely essential. To a very large extent, all children of school age were dealt with, and the Government paid the whole cost of civil evacuation.
My Lords, I believe the situation is much the same at the present time. I do not think we can visualise a true picture of this country facing a national emergency and the possibility of attack and having itself to engage in warlike operations, without facing the fact that we shall need an elaborate Civil Defence organisation as well as an active defence organisation. With supersonic speed 'planes, guided missiles and atomic bombs, the problem of the dispersal of the population will become for us, as it will for all the nations involved in war,

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a matter of the first priority. I suggest, therefore, that Her Majesty's Government should consider setting up a 1953 Committee on the problem of Civil Defence. In any future war this will be a much bigger problem than any with which we had to deal in 1938, and it will be one extending over a much larger area. There is already a great mass of information available for study, so that a 1953 Committee on Evacuation and Civil Defence would have ample facts at its disposal. Those facts the people of this country have a right to know. I hope we shall have an assurance from the Government that the knowledge necessary to secure the protection of the people in this matter will be available.
3.40 p.m.
LORD HANKEY: My Lords, I do not want to intervene out of place in the debate, but, as a matter of historical accuracy, I am anxious that an impression should not be left on the House that no one had thought anything of this matter before 1938. The fact is that it had been the subject of very detailed plans—I am able to speak only from memory, but I should say at least ten years before that time. We started on these things, I believe, in 1926, in the Committee of Imperial Defence, and the paper plans—not the plans applied in detail but the paper plans—were there before the Committee. I think it was known at the time that such plans existed although they had not been much publicised. I am not underrating the work done in 1938, but I should be sorry for anyone to go away with the impression that nothing was thought about this matter until 1938.
LORD HADEN-GUEST: May I interrupt the noble Lord?
LORD HANKEY: Yes, certainly.
LORD HADEN-GUEST: It is true that a great deal of work had been done, but in point of fact there were no definite, concrete, useful plans put forward. Those of us who are concerned in this matter had knowledge of it. I was myself for some time before the war began an instructor in Civil Defence for an area including the London Region. I was one of the twelve instructors in this country. I therefore knew the subject. I can assure the noble Lord that in point of fact no adequate preparations whatsoever were made to deal with these questions.
LORD HANKEY: I would distinguish between plans and preparations. The plans were there, but the difficulty was to get any Government to put up money for implementing them. Until you could get some money, you could not get preparations. I know nothing about what is happening behind the scenes, but I am absolutely certain that the planning is adequately advanced now.
3.44 p.m.
LORD FRASER OF NORTH CAPE: My Lords, I have the greatest respect for the opinions of the two noble and gallant Lords, Marshals of the Air Force, who spoke yesterday, and I should like to pay a special tribute to Lord Tedder, who was our great leader of the Chiefs of Staff latterly, through a very difficult time. But I do wish—and perhaps it is rather a plaintive wish—that the two noble Lords would not make so continuously strong attacks on the requirements of another Service, and I would ask them whether they could not make their minds a little less rigid against argument.
There are three matters that I should like to consider—first, Coastal Command secondly, aircraft carriers and, thirdly, command, all of which were raised in yesterday's debate. In regard to Coastal Command, I must go back a little, because in 1936 I was the captain of an aircraft carrier. In those days we had on board both "Light Blues" and "Dark Blues"—half and half. The "Light Blues," as usual, were splendid fellows. I think that, on the whole, the "Light Blues" were probably better fliers than the Navy boys. But when it came to operations over the sea the Navy won every time. And it demonstrated, even in those days, how essential it is to have training in work over the sea and training for Army requirements. Sometimes it seems to me that the Air Force rather think that that comes as a matter of course. But I can assure your Lordships, from our experience in the last war, that when we had to take on shore targets we found ourselves very much adrift in Photograph analysis, interpretation of dummy targets, and all those things which go with attacking a new sort of target. So I hope that that aspect will not be neglected. Co-operation was superb, but it was clear it could

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not go on, because we were under dual control: we served two masters. Sometimes it is bad enough to serve one master, but two masters are too many.
So, in 1938, we had that Committee which, your Lordships may remember, returned their shore-based aircraft to the Air Force and the remainder to the Royal Navy. Of course the Navy was deeply disappointed, and it led to great bitterness of feeling between our two Services—a bitterness which, fortunately, the war completely eradicated. It has completely gone now. But, when the war started, the operations of Coastal Command were not successful, and, very wisely and generously, after about a year of the war, the Air Ministry decided to put Coastal Command under the operational control of the Admiralty. For the remainder of the war the co-operation was superb; I think we could not have had better working and understanding than in those last years. I have an idea—though I may be wrong—that it was Coastal Command which suggested the occupation of the Azores, in order to increase control over the seas.
I am not claiming that the Admiralty could control Coastal Command any better than the Air Ministry. It was just that it resulted during the war in close co-operation. We had the A.O.C.C.C. coming in every day to the Admiralty—it was Sir John Slessor then, I think—to see how matters were going. In recent months there has been some talk that the Navy should take over Coastal Command, but when the noble and gallant Viscount, Lord Trenchard, attacks us on carriers, he must remember that he has a "Cinderella" in his own Service—namely, Coastal Command. In my view when we have a system which worked perfectly in all the last stages of the war then we should not change it now. I should be very strongly against the Navy starting an argument with the idea of taking back Coastal Command. I am sure that is wrong; and it would just start all the old bitterness over again.
With regard to my second point as to carriers, I would ask the noble and gallant Viscount, Lord Trenchard, this question: If you take over responsibility for the air cover for the Navy and convoys, would you abolish aircraft carriers?
VISCOUNT TRENCHARD: Is the noble and gallant Lord asking, me to answer now?
LORD FRASER OF NORTH CAPE: Yes.
VISCOUNT TRENCHARD: I should abolish the big aircraft carriers in war.
SEVERAL NOBLE LORDS: We did not hear that reply.
LORD FRASER OF NORTH CAPE: Perhaps the noble Viscount will repeat his answer.
VISCOUNT TRENCHARD: If we are going into this question now, I will say this. I recommended yesterday that the large aircraft carriers should not be built. I suggested that they would not be usable, any more than we could use battleships in an area which could be hit by land-based aircraft. I still hold that opinion.
LORD FRASER OF NORTH CAPE: My Lords, the noble Viscount has not quite answered my question. I asked whether he proposed to abolish all aircraft carriers. He did not reply to that, but I assume from what he says that he would like to have small aircraft carriers. The noble Viscount said yesterday that aircraft operating from carriers cannot be quite up to the mark of shore-based aircraft. I agree with that in certain ways, but small aircraft carriers would make the position ten times worse, because the small carrier has an unsteady platform; it cannot operate in a seaway; its runway is smaller; it does not give the height to stow aircraft, and it has less protection. So that the noble Viscount is just accentuating the insecurity of the naval aircraft.
VISCOUNT TRENCHARD: The noble and gallant Lord asked me a question, and I would ask him one in return. Where is the enemy which carrier-based aircraft are to fight coming from?
LORD FRASER OF NORTH CAPE: Now, having settled the basis of the carrier, I should like to give an example of how useful we found the carrier to be. When I was Commander-in-Chief, Home Fleet, at the end of 1942 and the beginning of 1943, when we were getting great opposition by air and submarine to our Russian convoys—your Lordships may rememberP.Q.18, with its great

845
losses through air attack—we had no air cover, and in the summer months we had to stop the convoys. They were resumed towards the darker months, about October, when we had the good fortune to have a spare carrier available, and I sent the carrier with that convoy. The effect was terrific. On the first night that carrier, with its rather old-fashioned aircraft, sank two submarines. Previously, submarines had been attacking the convoy while submerged, then coming to the surface astern, going ahead at fifteen knots and overtaking the convoy for a second attack. And so it went on. As soon as the two submarines were sunk, that finished that manœuvre. That aircraft carrier was invaluable to us. Then there was the "von Tirpitz" in the Alten Fjord. There were only two ways of getting to it. One was by midget submarine and the other by aircraft carrier inshore. We put it out of action for the space of six months each time, but we had to leave the final sinking to the gallant Royal Air Force.
I turn to the Pacific. Here I would say that, whilst the noble and gallant Lords, Lord Tedder and Lord Trenchard, have a great deal more experience than I have, I have a certain amount of geographical width of experience. In the Pacific my post was to accompany the American Fleet from Leyte to land in the Lingayen Gulf for the final occupation of the Philippines. I went with that Fleet, which was escorted by six or eight American carriers. We lost a carrier, but that Fleet, with its convoy and its landing craft, would not have got through without the carriers. They were going up the coast line of the Philippines within thirty miles of the Japanese shore bases. I can see no other means of covering the convoy in that expedition. Then finally, the American carriers sank the last remaining Japanese battleship north of Leyte, because the Japanese did not provide air cover. To my mind, those examples, whoever the enemy is going to be, show that something of that kind is going to happen. One must take one's aerodrome about if there are likely to be sudden attacks. There is not the time to call up aircraft from shore bases, perhaps two or three hours' flying away. The case for the necessity of aircraft carriers has been absolutely proved in the last war. What is more, the two navies of the world who had the greatest experience in the last
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war, the Americans and ourselves, are unanimous in that requirement.
The third thing about which I should like to say a word is the question of Air Force officer sin command, to which the noble and gallant Lord, Lord Tedder, referred. In my opinion a combined operation must have a General in command. The reason for that is not that someone else may not be equally good, but that the Army, surely, have to take the responsibility, if they have landed on the beach, of retreating or advancing front the beach; they have to take all the casualties; they have to take the decisions, on which the other two Services depend, about giving ground or advancing. In my view, in a combined operation the Navy and the Air Force are the servants of the Army. I think there is no question about that. In the R.2 services we have our own command. The Navy has the Commanders-in-Chief, Home Fleet and Western Approaches; the Air Force has Bomber Command, Fighter Command and the command over ground-air defences. These are most important tasks, but in the case of combined operations I in favour of having a General in command.
It is true, as the noble and gallant Lord, Lord Tedder, said, that we had an Admiral in Northern Command. But that had nothing to do with naval requirements; it was at the request of General Eisenhower. And in fact the Navy were strongly against that appointment. How much we were against it may be seen from a letter that General Eisenhower wrote to me after the appointment. Perhaps I may read the letter. It says:
"DEAR FRASER;
It would scarcely be possible for me to tell you how deeply I appreciate your fine note, to say nothing of the co-operative spirit that brought you to agree to acceptance of command in the North. I know you did not particularly care for that one—but I assure you that you've cemented some firm friendships in Denmark and Norway by taking it on."
The letter goes on:
"I have a little present for the British Chiefs of Staff…. Its purpose is merely to remind you that the man means well, even though he's too often a so-and-so and a this-and-that.—Cordially, IRE."
That letter was rather nice. I think that is all I have to say. I hope that I have not kept the House too long. I should

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like to support the Motion which the Minister of Defence has put before the House.
3.59 p.m.
VISCOUNT GOSCHEN: My Lords, I find it difficult to follow the noble and gallant Lord, Lord Fraser, in view of the most interesting speech he has given us, but I hope I shall be able to steer a course between troubled air and water. I should like to refer to a remark made by the noble Lord, Lord Strabolgi. He said it was difficult to occupy the time of our army of occupation. I do not find that to be the case. Commanding officers and other officers have told me that never in their lives have they worked so hard as in Germany. They have never been able to train their troops so well at home. Besides, they have a great number of garrison and other duties to perform.
The questions on which I desired to say a few words were those of manpower and accommodation. A good deal has been said about manpower by several noble Lords, and particularly by the noble Viscount, Lord Bridgeman, and the noble Lord, Lord Jeffreys, but there are still one or two points I should like to make. I feel sure we are all agreed about the Regular Army. As has been said, it is essential to have leaders, warrant officers and non-commissioned officers. I read in the Press the other day of a boy who had been made a full sergeant after only six months' training. He must be a remarkable young man to achieve that rank after so short a time. That may be all right here in England, in peace time, but it is a very different thing for so young an N.C.O. and one with so little experience, to be good enough to fill that post abroad, under fighting conditions. When men are tired, hungry and wet through, the job of the N.C.O. is a difficult one, and experienced men are needed for it. There is now the twenty-two years' engagement, with opportunities for it to be broken at periods of three years. There are the short-service engagements in the Royal Air Force and in the Army, with which good results have been achieved. After these short engagements men have been taking on in reasonably good numbers, and that is what we want. Once the men get an interest in the Army, or in one
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of the other Services, you find they gradually get into it and want to take on altogether.
A good deal has already been said about National Service, but I should like to say a few words on that matter. It has been said, quite rightly, that owing to our present commitments all over the world it is impossible to cut down National Service to less than two years whole-time, and three and a half years part-time. It is essential, also, that the National Service scheme should be extended for another five years, and not year by year. If the latter course were adopted, and it was extended year by year, I feel, as was said in another place, that it would discourage our friends abroad and encourage the others. It would also create uncertainty in the minds of the men to be called up as to how long they were going to be called up for, whether they would be there the whole time, or not, and when they would be called up. Another point in that regard is that it would inevitably cause trouble in the families as well; and, as noble Lords who have had experience of this know, families are difficult people to deal with when it is a question of their boys being called up. Most noble Lords with experience in the Army and in the Services generally will know that officers often get infinitely more trouble from the families of soldiers than from the soldiers themselves.
One good point about the two years' service is that a man is able to give his best service to his country for about nine months—the last nine months of his service. As has been said, in some cases it takes six months, and in other cases nine months, to train a man as a sailor, soldier or airman, and therefore it does not leave much time during which the man can give really good service. If the period is cut down by six months, it means that he takes a long time to reach a satisfactory standard, and no sooner does he reach it than his service is finished. Again, there is the question of junior N.C.O.s. It is possible in the two years to train good young junior N.C.O.s and instructors for training in minor weapons, and other such-like courses. The overheads of these training schools will remain just the same whether the period of call-up is for two years or eighteen months, because the number called up remains the same; but there

849
will not be so many National Service instructors to help out with instruction, and it will mean that more Regulars will have to be called in from the fighting units, which is the one thing that we all desire to avoid.
We have already been told that large quantities of transport aircraft will not be available for some time, and therefore the trooping will have to be done by sea—the noble Lord, Lord Jeffreys, has already mentioned that. It is an enormous job to take these National Service men out to the Middle East, the Far East and all over the world, and if we cut down the length of time they are abroad it is going to make it even worse; there will be a vast number of men in transit the whole time. Another point is that if we cut down service for the National Service man to eighteen months, it means that the time the men will be able to spend in Korea—a campaign which we hope will not go on for very long—in Malaya, Kenya, or wherever you like, will be considerably reduced and it is bad for any unit, whether actually fighting in those theatres or merely acting as a garrison, to have its personnel continually changed; there is no continuity, and it is not a good thing at all.
My Lords, it is too often thought that National Service is rather like going to prison for two years. I do not think it is. After the men have got over the initial shock of discipline, being orientated and told what to do, many of them rather enjoy it; perhaps they will not tell you so, but I believe they do. In many ways they get great advantages from their service. If they were not called up, possibly they would remain in one town or in one village for the rest of their lives. By being taken out of it, and in many cases going abroad, they do get a broadening of their minds and meet people from other nations; and I believe that when they come back they are better prepared for service in whatever industry they enter. The noble Lord, Lord Strabolgi, mentioned the question of a later call-up, and said that young men should be able to do a university course before they are called up. Arrangements are already made for that. A young man's service can be deferred until he has completed his university course, or some special training course, so long as he is under the higher limit of the call-up age. I understand that the educational
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authorities are rather in two minds about whether it is better for young men to be deferred, or to go straight from school into the Army and then learn a trade after their service is completed. In National Service the education of the soldier or airman is carried on, so far as possible, and he may easily pick up a trade whilst doing his National Service. Equally, if a man has a trade, when he becomes a National Service man every effort is made to put him into some unit in which that trade will be of use both to the nation and to him, either in making him mere proficient in his trade or to give him better experience.
The only other point I wish to make is again one which was raised by my noble friend Lord Jeffreys, and that is with regard to accommodation. Much has been done in this respect since 1949. Married quarters have been greatly improved in this country, and the improvements have been paid for mainly by funds made available to the Services under the Armed Forces (Housing Loans) Act, 1949. I notice that the White Paper mentions that a further loan is envisaged. As most of the money in that first 1949 loan has already been spent, or is at any rate committed, I consider that that is an extremely good thing. I would here make a plea for the single man, whether he is a soldier, a sailor or an airman. Of recent years the emphasis has rather been on married people. One knows that they are very important, but it is equally important that the single man should have a fair deal. Many of the barracks in which he is quartered in this country are extremely old; they have, no real modern facilities, and in many cases they have been condemned for years. There is a very good example of that within a stone's throw of this House. It is important that the single man should be looked after.
The question of married quarters abroad is, of course, a very difficult one, but I feel that everything that can be done will be done. As the noble Lord, Lord Jeffreys, said, one hears cases of good officers and good other ranks who are giving up the Service because of this question of always being away from their wives and families. It was suggested to me the other day that some use might be made of caravans for these men with families. I understand that the Royal Air Force use a considerable number

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round airfields in this country, and I do not see why caravans should not be used as temporary homes for men with families. I also understand that they could be purchased at a very reasonable price. One was quoted to me at about £600 or £700, and they are not very difficult to ship. It is only a thought, but we must try to think of anything that might help the married families and to help the lot of the officers and men in all parts of the world. I am sure that would do much to achieve what the noble Lord, Lord Jeffreys wanted, and what I think we all want—a really good Regular Army.
4.15 p.m.
LORD THURLOW: My Lords, I do not intend to detain your Lordships for long. We have been privileged to hear the opinions, the warnings and the recommendations of a number of noble Lords who were the political and military leaders of our Services before, during and since the war. It might be not inappropriate if one serving officer spoke in this debate. It is a great tribute to the noble and gallant Earl the Minister of Defence that throughout this debate there has been little real criticism of the White Paper, in spite of the enormous financial sacrifices that it demands. I feel that the really difficult decisions will come if the conciliatory attitude of Russia is maintained, for inevitably then there will be a demand for a decrease in defence expenditure and, in company with it, demands for cutting the period of National Service. I was very glad that the noble Lord, Lord Winster, reminded us yesterday of General Ridgway's statement:
"The threat to our way of life has not diminished one iota in the past two years."
A good deal of mention has been made of National Service. No one dislikes the system of National Service more than those of us in the Regular Army, because we lose so many of the personnel just when they have learnt their job, and the field force units are denuded of the experienced N.C.O.s because of the requirements of the basic training establishments.
We have learnt from various noble Lords with great experience how great is the need for certain types of aircraft and certain types of ships. No noble
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Lord with military affiliations has dared to ask for more soldiers, and I do not intend to do so. But I should like to remind the noble Lord, Lord Strabolgi—though I am sorry he is not still in his place—that we have far fewer Regular and Territorial Army infantry battalions to-day than we had before the last war; and there is no indication that we shall need fewer infantry tanks or guns if we have to face another war. Indeed, Korea, Indo-China, Malaya, and now Kenya, have proved exactly the opposite. The noble Lord, Lord Jeffreys, has reminded us that almost all our Regular fighting units are serving abroad, many in conditions of real war, and usually the nearest they ever get to home service is a period of service in Germany. So short are we, indeed, that I notice that one distinguished county regiment which was flown to the Middle East for the Canal Zone emergency, and which returned only late last year, have now been shuffled off again to Kenya, presumably leaving their families behind once again. Therefore, though the noble Lord, Lord Strabolgi, may think that we can cut down the Army, I believe that the noble Earl the Minister of Defence will have to call up the Boy Scouts if we have to continue meeting these difficult commitments all over the world. While these conditions exist we shall not get the long-term volunteers to make up our requirements of highly trained N.C.O.s and technicians.
Lastly, I should like to assure noble Lords who have expressed hopes, and even slight misgivings, that co-operation between the Services is getting better and better all the time. It seems incredible that twelve years ago, at the Battle of Keren, I was issued with the lids of boot polish tins so that my troops could flash their whereabouts to the few aircraft that could be spared to support us. It is a very different state to-day. Now, at every level, combined training is paramount, and those two great colleges, the Imperial Defence College and the Joint Services Staff College, one double its pre-war size and the other a new institution, bring together on long courses the officers of all the Services, including the Foreign Service, and the home civil Services of all the Commonwealth countries. These are in addition to the schools of combined operations and air support which are also doing a great job. I think I am probably

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the only member of your Lordships' House who knows all these establishments from the inside, so I should like to take the opportunity of assuring your Lordships of the grand job they are doing to make all the Services of all the Commonwealth countries appreciate each other's difficulties, learn how each other works and to evolve a common doctrine. Nor does co-operation and understanding with the United States forces take any lower place.
I hope that whatever retrenchments are forced upon us in the future, these four establishments will be kept on. It would be a really retrograde step if any of them were closed. Nevertheless, I think that there is still room for improvement, and there is a great deal in the suggestions made by the noble Earl, Lord Lucan, yesterday and the noble Lord, Lord Jeffreys, to-day. I would go even further—though with some trepidation, as I am within combat range of the noble Lord, Lord Fraser of North Cape, and the noble and gallant Viscount, Lord Trenchard—and suggest that we should not lose sight of the possibility one day of amalgamating the great colleges of Dartmouth, Sandhurst and Cranwell, so that inter-Service co-operation can be started at an even earlier stage.
4.22 p.m.
VISCOUNT CALDECOTE: My Lords, I should like to start by apologising to your Lordships, and in particular to the noble and gallant Earl the Minister of Defence, for not being here yesterday to hear him make his excellent statement on the White Paper. During the last few weeks there has been a remarkable change in the international scene, and we have to read the White Paper in a rather different light from that in which it was written. It is right to be encouraged by the new signs of co-operation. It is right that we should not be hostile, or unduly suspicious; but, as the noble and gallant Earl has said, it is far too early, on the strength of the signs we have so far had, to reshape our defence policy. Once confidence is shaken it takes a long time to build it up again, and nothing would be gained by slowing down our rearmament programme at this stage. Indeed I am sure, as the White Paper suggests, that the progress which has been made so far has been an important factor in lessening the risk of
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war, and any wavering now could only do serious harm to the cause of freedom and peace.
We must not underestimate the intelligence of our potential enemies. Surely we have made it plain to them, and they must know, that we have no aggressive intentions. If we can further convince them not only that we shall resolutely oppose any aggression but that we can do so effectively, the stage will be set for a restoration of confidence and stability; and on that basis alone can a lasting peace be built. The building up of Western strength, towards which our rearmament programme is such an important contribution, is, I am sure, the only way of achieving that situation. In studying this White Paper I gained a slight impression that because we have made progress, and because things are a little better, because there is slightly less risk of war, there is therefore somewhat less urgency. Paragraph 4 says:
"In times of stringency it is specially important to get the fullest possible value for our money; we must avoid committing ourselves too deeply to equipment which will have to be replaced at heavy cost within a relatively short space of time; …"
In paragraph 7 there is a somewhat similar observation. The paragraph contains these words:
"It also appeared that if the programme were maintained in full during 1953–54, heavy expenditure would be incurred in some parts of the programme on the production of equipment which was not of the most advanced types."
I do not believe that Her Majesty's Government intend to give that impression of less urgency, but I hope that the noble and gallant Earl will make that clear. It is easy to say we must not give the Communists a bloodless victory by crippling our economy. What does that mean? It means that if we are to maintain our standard of living we cannot spend larger sums on defence. No doubt that is true. But surely the important question is this: Is it safe and wise to try to maintain that standard of living if it means sacrificing security? Are we maintaining it at the expense of securing the conditions which make it possible? Or, to put it in another way, is the present rate of rearmament adequate to ensure our security? And by our security I think we mean that no sudden blow could cripple us; that our sea-lanes can be kept open

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and that we can make an adequate contribution to the defence of Western Europe.
Much has been achieved in the past few years, but there are still disturbing gaps in our defences. In the Royal Air Force at the moment we are dependent for our fighters mainly on those supplied from across the Atlantic. And the designs which we have in any quantity are largely obsolescent. True, there are new and excellent designs, and they are being produced; but I am afraid that there will not be a large number in service within the next nine months. In the Navy, good progress has been made with minesweepers, but the number of anti-submarine vessels which has been produced and ordered seems to me alarmingly small. The cruisers—which are almost becoming an annual joke—are still awaiting the development of equipment. The construction of aircraft carriers is going ahead fairly satisfactorily, but again the modern aircraft are lagging behind. It seems to me that it will be some time before the Navy and the Royal Air Force are adequately equipped.
I hope your Lordships will not think that I am being unduly critical when I say that I get the impression from the White Paper that perhaps it does not sufficiently stress the urgency of the situation with regard to the production of equipment in these two Services. The gaps are due, as we all know, to the inevitable delays in production of modern complicated equipment. It is always necessary to get good value for money, but I do not think we can safely endure any further delay in production on the ground that when the equipment is produced it will be obsolescent. It seems to me that, whenever you start production, by the time it is finished the equipment will be obsolescent, in the sense that something better is on the drawing-board. It is natural to wish to have up-to-date and perfect equipment. It is intriguing and attractive for the Service users to lay down stringent specifications. Some will be essential and some only desirable. Some extra accuracy which is demanded may entail years of development and research. It may mean that standard parts which are available in the industry cannot be used, whereas some slight and perhaps unimportant relaxation of speci-
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fication would mean that standard parts could be used, so that production would be accelerated and costs reduced.
These are all highly technical considerations that can be settled only in conferences between users, designers and manufacturers. I am not suggesting that we should provide second-rate equipment for our forces—far from it; but I am concerned lest, in striving to produce perfect equipment, we should produce it too late and in too small quantities. My plea would be to bring the manufacturers in earlier, so that the skill and knowledge of those who actually make the equipment can be used, not to modify some design that has been completed, as so often happens, but from the start in the development and design of the equipment, so that not only will a first-class piece of equipment be produced, but it will be a piece of equipment that can be manufactured quickly and economically. I hope that attention will be directed towards that simplification and closer co-operation which I am sure could achieve a great deal. I am sure that it would pay, in economy and in better equipment, more than the rather dangerous expedient of delaying production because the equipment may he obsolescent by the time it is finished.
I have tried to pick out a few of the less good points in the White Paper. I hope that your Lordships will not feel that I am critical of the whole White Paper. I am not. I support wholeheartedly the Motion moved by the noble and gallant Earl yesterday. It is all too easy to criticise the balance that is advocated between economy and security. But we must not forget how near to disaster we came in 1940 because of misguided and over-cautious Treasury policy in the years before. I would beg Her Majesty's Government to be honest with the country and tell us what they consider necessary, both in expenditure and in sacrifice, and not only what we can achieve without too much discomfort. The price of peace, as well as of freedom, is eternal vigilance, and we dare not yet relax.
4.33 p.m.
LORD CHORLEY: My Lords, I should like to refer for a few minutes to a subject which is rather on the periphery of this debate but which is very germane

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to it. It has been referred to by a number of your Lordships during the course of the debate, and in particular by the noble Lord, Lord Jeffreys—that is, the subject of Civil Defence. I enjoyed and agreed with a great deal that the noble Lord said. I entirely concur with him in thinking that it is a really important part of this subject and that the White Paper deals with it in a rather cursory way; but what really brings me to my feet is the suggestion which the noble Lord made, which was to put the whole of Civil Defence, apparently, into the hands of the Territorial associations—a proposal he made in reply to a very pertinent question put to him by my noble friend Lord Pakenham. Surely, Civil Defence is really the fourth arm in a war. It is not the military arm, and the very fact which the noble Lord, Lord Jeffreys, pointed out, that there were something like fourteen different Departments interested in the problems which were raised by Civil Defence during the last war, is an unanswerable argument against the case which the noble Lord, Lord Jeffreys, was putting forward.
The Home Guard should certainly be in the closest possible relationship with the Civil Defence personnel and its leadership, but the Home Guard when mobilised in war must be under military discipline and subject to military law. You cannot expect the millions of ordinary citizens who take part in the work of Civil Defence to be subject to military law and discipline in that sort of way, and, indeed, the proposal that they should be, in my view, destroys the whole balance of the Civil Defence organisation. Nor is it a feasible proposition that all these different aspects of the matter which at every single point impinge on the civil life of the community, without which the waging of war becomes impossible, can be entrusted in effect to the Minister of Defence. With all respect to the noble and gallant Earl, and with all the admiration I have for his abilities, I would suggest that it is completely impossible that he should add that to his responsibilities. When one goes into the matter, one must realise that Civil Defence impinges on almost every aspect of life in a community which is attacked during a war: industry, the factory, the workshop, the running of the hospitals
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and the running of the police service—I could go on enumerating case after case. In those circumstances, surely the only way of carrying through Civil Defence in a satisfactory and efficient manner is to regard it as a fourth arm in war and to entrust it to its own leadership.
I might be content to have made that point but I should like to make one further one—that is, that the noble Lord, no doubt as a result of inadequate information, made what I thought was a rather unfair attack on the work of the Regional Organisations during the late war. He suggested that the Regional Organisations really regarded it as their job to suppress the initiative of the local authorities. As one who took part as a deputy commissioner for Civil Defence during a good deal of the last war, should like to say that that charge is, entirely unfounded.
LORD JEFFREYS: May I interrupt the noble Lord for one moment? As he has said that he was a commissioner during the last war, so I should say, on the other hand, that throughout the last war I was the heat of a county Civil Defence, and I am speaking of my experience there.
LORD CHORLEY: There may, here and there, have been unfortunate experiences. I think one ought to remember that the Regional Commissioners were thought of during the preparatory period as officers who were to do an entirely different sort of work from that which was afterwards given to them—the co-ordination of the local Civil Defence arrangements. That was not the job for which they were originally established, and undoubtedly in the initial stages, while the organisation was being built up, the personnel collected and the arrangements made, there were growing pains and difficulties; but, if it is suggested that there was any deliberate thwarting of local authorities in that way, then I deny that emphatically. Obviously. it was essential that somebody should co-ordinate the work of all the local authorities who took part in it in the different regions. It clearly could not be done by the Minister from his headquarters in London. If the local authorities had been left completely to themselves, undoubtedly a condition of chaos would have arisen.

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I can give instance after instance. This one comes to my mind. An important local authority built hundreds of air raid shelters and, in the hurry to do so, they constructed them using very inferior cement. As a result of this, it was possible almost to push them over. This was obviously a matter for the intervention of the Regional Commissioner. My Lords, that type of control is obviously essential in the interests both of the taxpayer and the citizens of the towns in question who have to be protected. This difficulty was discovered by the officers of the Regional Commissioner, and there was a good deal of trouble about it. Other instances of this kind could be mentioned. Surely, this is not really a case where the Commissioner has been interfering with and preventing the local authority from doing its job properly, but is the use of a very proper control.
A good deal of history relating to the Civil Defence arrangements and the part which Regional Commissioners and their staffs took in the whole problem of defending the country against air attack during the war has already been written. So far as I have been able to study it, although here and there there may be instances of the kind to which the noble Lord has referred, on the whole the improvisation of Civil Defence and the part which the Regional Commissioners and their staffs took in this matter comprised one of the most successful efforts of all in the magnificent resistance which this country put up during the war. I hope that the noble Lord, Lord Jeffreys, will look into the matter a little more carefully and, as a result of doing so, perhaps find it in his heart to be rather fairer to the Regional Commissioners and their staffs.
4.42 p.m.
LORD PAKENHAM: My Lords, we are sometimes accused of providing too much mutual admiration in this House, but I do not think that a debate in which we have listened to contributions from Lord Alexander of Tunis, Lord Trenchard, Lord Tedder and Lord Fraser, is one that will be easily forgotten. If this goes on, I think we shall be able to charge for admittance and fill the Gallery many times over, which may help us all with our Coronation robes, or in other ways.
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I should like to say, first, if it is necessary to say it (and I hardly think it is), that the noble Earl, Lord Alexander of Tunis, carries the complete personal confidence of everybody in your Lordships' House. As one would expect, his speech was manly and calm, and, of course, very charming. I do not think that the most depressing thing he said has been touched on directly, although it may have been in the mind of more than one speaker. He was speaking about naval aircraft and was obviously doing his best to put as bright a face as he honestly could on the situation. But all he could say about it was (OFFICIAL REPORT. Vol. 181, Col. 745):
"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."
That is as far as he felt he could go, and I think most of us will watch the situation very closely and a shade suspiciously and, without any kind of Party bias (because, heaven knows! we all share responsibility in this particular field), many of us will wish to return to it when we come to the Naval debate.
I suppose that most noble Lords carry in their minds a short list of speeches which they would regard as the finest they have listened to in this Chamber. Some of us will remember the speech of Lord Keynes on the American Loan, and others the speech of Lord Halifax on India. I myself treasure at least one speech from the noble Viscount, Lord Stansgate—for example when he was proposing the reform of your Lordships' House. But in any list, however short, I believe that the oration of the noble Lord, Lord Fraser, will find a place, delivered, as one could not help observing, without any need to refer to anything so ignominious as notes, and prepared, I rather fancy, at the last minute. I feel that that speech by itself would justify this debate, which in many other ways has been remarkable. When some minnow like myself confronts a whale like the noble and gallant Viscount, Lord Trenchard, with his assistant, the noble and gallant Lord, Lord Tedder, one's first temptation is simply to touch one's cap, say "Very good, sir." and hold one's tongue. But that is a temptation which, after some thought, I have decided to resist, and I shall return in a few

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minutes quite strenuously to some of the remarks made by the noble and gallant Viscount. Let me say at this point, in order not to conceal my meaning, that he seemed to be living up to the motto of the grand Service which he, more than anyone else, first started and fostered, the Royal Air Force—"Per ardua ad astra." He made his way through a series of arguments, difficult to follow, to a conclusion lost in the clouds.
My Lords, I wish to return to that subject later but, meanwhile, to raise a number of somewhat smaller though always important points. Let me say a few words about the position of Service Ministers. For a very short time I was a Service Minister, tutored by the noble Lord, Lord Fraser. What I have to say is purely my own opinion—it does not represent any collective view. I do not know what Lord Fraser's opinion is, but, on balance, I myself believe that it would be better if the Service Ministers were included in the Cabinet. There are strong arguments either way. Undoubtedly it is more symmetrical to keep them out. I believe that this is a matter about which people could differ, and where a certain amount would depend on the personalities of the day. Now we have a Minister of Defence, which seems to me a good plan. But I do not believe that in the long run it is possible for Service Ministers, unless they are members of the Cabinet, to give that leadership which the great Services require. That is a personal view.
There are other arguments—and I submit one. By excluding the Service Ministers from the Cabinet, it may be possible to draw on younger talent than might be necessary if some of the "old boys," so to speak, who had some claim to Cabinet position, were appointed—I have been called to order, but I have not been referring to anybody present, such as the noble and gallant Earl, Lord Alexander. Undoubtedly it would leave the Service Ministers on a slightly lower level and it would be possible to draw in younger talent, as has been clone, it seems to me, with considerable personal success by the present Prime Minister. If I felt that Her Majesty's present Administration were going to last much longer, I should suggest that in due course they should all be promoted. My personal conviction is that it would be far better if the Service Ministers were full members of the Cabinet.
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Now let me say a word on one or two somewhat isolated points. First of all, I will deal with the Home Guard. When we were in office I remember a debate initiated by the noble Lord, Lord De L'Isle and Dudley on the Home Guard. He was knocking me all over the place for not getting on with the formation of the Home Guard and, so far as anything was left of me, the noble Viscount, Lord Swinton drove a few residual nails into my coffin. Altogether, they had a very good time. But what have the Government done? They have gone ahead, and they have started the Home Guard. I personally am not questioning that decision. I think it was a difficult decision to make and it may be a wrong decision; but it is one of those decisions which the Government of the day have to take, and they must accept responsibility. Only the Government of the day know everything relevant in a case like that.
But, having started the Home Guard, they are neglecting it. Here, I venture to criticise even the noble and gallant Earl, Lord Alexander. I should have hoped that in his speech he could manage a stronger reference to the Home Guard, and I hope that at the end of the debate the noble and gallant Lord, Lord De L'Isle and Dudley, will reassure the Home Guardsmen. I have been making a few inquiries about them and they all tell me that matters are going a little better; but, frankly, they feel that they are a forgotten army; and at least in one area they certainly hoped before this debate that something would be said to show that the Government attach a great deal of importance to them. Well, there was a reference front which we gather that they are to have a sort of supporting role to the flying columns. There was a little passage in the noble Earl's speech about that. He told us simply that all these flying columns will be backed up by Home Guard units, and then he said a few friendly words about the Home Guard. I know how difficult it is in a world-wide speech of that kind to fit in everything, but I hope that the noble and gallant Earl and the noble and gallant Lord will say something pretty strong and clear that will reach far and wide about the importance which they attach to the Home Guard.

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May I now say something about another isolated matter? This is something which I think we might follow up with advantage when we come to the Army debate. I refer to the education of children of Service parents. The noble and gallant Lord has had notice of this point and he is, I believe, interested. I put it to him, without going into details, that we ought to provide more assistance to enable Servicemen, both officers and other ranks, to educate their children at home when they themselves are serving abroad, if that is their wish. Of course, it must be done in a way that provides no distinction between officers and men. I feel that a good deal more could be done in this matter. I have a shrewd suspicion that the Army, if they could overcome their old enemy the Treasury, would like to do something. I counsel the noble and gallant Earl and the noble and gallant Lord to fight very hard for this. They could do it by enabling children to come home to be educated here or by providing more secondary boarding schools overseas. I know that there are some secondary boarding schools overseas which are run in a most healthy way—in particular in Malaya. I am told that there the daughter of the Chief of Staff sits on a form in such a school next to the daughter of a private soldier, so there is no question at all about class distinction. I hope that the noble and gallant Lord when he comes to reply will say something more upon this matter and will at any rate promise to labour very hard at it before we have another "go" at him in the Army debate.
There is another Army point, and it is not a question of detail this time—indeed, it involves high strategy. Can the Secretary of State tell us—if not now, then in the Army debate—in the broadest outline, of course, what our troops are doing now in the Middle East? I agree with the noble and gallant Earl, Lord Alexander of Tunis, and with my noble friend, Lord Alexander of Hillsborough, that we shall have to stick to the two years' service. I do not want to suggest that if you could bring some troops back from the Middle East you could cut the length of the service. They would probably be wanted for building up a strategic reserve. But I say that, apart from the effect on the unfortunate
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men out there and their families, it would help a great deal with the public if they felt certain that not a man was being wasted, and that we were not keeping people abroad for reasons not quite clear to anyone. On this question of the Middle East, I hope that the noble and gallant Lord will tell us to-day—certainly we shall come back to it if he does not deal with it on this occasion—even in the broadest outline, what this large force is doing, even though he cannot give us the exact numbers engaged. Are they guarding the base? If so, what against? Are they guarding it against pilfering or against attack from some hostile force as a result of war? Are they preparing themselves to act as a strategic reserve, to move hither and thither in the event of a crisis? If so, are they thinking of war against Russia or—I think it was the noble Viscount who used the term—of some kind of patrol, some minor operation against some Middle Eastern country?
I cannot help feeling that it may be that reasons of prestige have something to do with the presence of that large force in that area. That is only my view, of course, and the noble and gallant Lord can put me right at once if I am talking nonsense. But I have an idea that some of our people are there because we think that if we have a force of a certain size there it exercises more influence, in some sort of unspecified way, than a smaller force. I suggest that if that is the argument it is completely false. I am not saying anything which relates closely to the discussions with Egypt. I am not discussing the question of evacuation or settlement, because we must leave that during this difficult period to the Government. I am asking why, quite apart from the effect of any negotiations with Egypt, we have such a large force in the Middle East. And, I ask, does the noble Lord see any chance of bringing them back? I have a shrewd suspicion that the Army would like to do so, and I cannot understand who is the "nigger in the woodpile"; with whom it is that the objection lies.
Before coming to the air/sea controversy, may I say a word about the Naval programme? I do not speak with any tremendous knowledge of such matters, but I was First Lord of the Admiralty for a few months, and inevitably I follow

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naval matters as closely as I can. The present First Lord of the Admiralty in his speech in another place referred to the re-phasing of the new construction programme, the result of which was to reduce the Navy Estimates for 1953–54 to much about the same as the figure for 1952–53. He went on to say that much of the Fleet which was of pre-war or war construction was in such a condition that the replacement programme was growing urgent. Several noble Lords, including my noble friend Lord Strabolgi, think that the Navy has had the worst of the argument as we understand it. Obviously, from outside one cannot express a very potent opinion, but I am bound to express disquiet. I believe it to be shared by many who know the Navy better than I do. But during the short time when I was First Lord I could not help observing that this problem of Fleet replacement was beginning to take shape. It was obvious that many ships were nearing the end of their useful lives, unless great sums were going to be spent on re-equipment and modernisation. I would express the fear now that even if the Navy have not had the worst of it this time, they will get the worst of it unless this matter is attended to even more carefully than hitherto. I express that fear—one cannot of course be dogmatic in matters like this—and I hope that Her Majesty's Government will see fit to embark on an ordered programme of replacing ships in all classes except the battleship class. I hope that the noble and gallant Lord who is going to reply for the Government will have something to say about that, otherwise we shall raise the matter when we come to the Naval debate.
Now a word about the controversy which has been carried to a much higher plane by the noble and gallant Lord, Lord Fraser. It is not for me to try to synthesise, so to speak, the views of the Air Force; we have had the thesis from one quarter, the antithesis from Lord Fraser, and we await the synthesis from the noble Lord, Lord de L'Isle and Dudley. I was rather staggered by the speech of the noble and gallant Lord, Lord Tedder. I am glad he is here, for otherwise I should have found myself in some embarrassment. I suppose all of us in this country owe a tremendous amount
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—more than we probably know—to Lord Trenchard and Lord Tedder. I know that they will take that from me as representing the views of noble Lords behind me and I should think of thousands—indeed, if they have any sense, millions—of our fellow countrymen.
The noble and gallant Lord, Lord Tedder, in the course of a fine statesmanlike speech, indulged in what seemed to me a rather cheap sort of partisanship at the expense of the Navy. I remember that not so long ago, when Mr. Aneurin Bevan was speaking in the House of Commons, Mr. Churchill interrupted at one point to protest against a personal reference and said, "Don't spoil a fine speech." That is how felt about Lord Tedder's speech, because so much of it was so wise and profound that I regret enormously some of his cracks and stabs at the Navy. He assumed a judicial tone. He begged us to put aside the approach of purely the point of view of one Service and suggested (I think I am quoting him accurately) that we should consider every problem objectively and "without any Service bias." But how far did he stick to that lofty doctrine? We soon found him saying, "the separate Naval Air Force sounds to me much more like a return to the last war but one …" All he wants is to abolish naval aviation, or "pinch" it—well, seize it, on behalf of the Air Force. In making the claim in that form he seemed to invalidate completely his claim to be an impartial judge between the Services.
The noble Viscount, Lord Trenchard, told us that by reverting to the original idea of one Service to cover all air operations we should probably save up to £100 million—the noble Viscount nods his head—but he did not explain to us how this could be achieved. I think it will need a great deal of explanation before anyone takes it seriously, even coming from such an illustrious authority as the noble Viscount. To the best of my knowledge the total expenditure on naval aviation does not amount to three-quarters of £100 million a year, so if it were abolished completely, we would not save anything, like £100 million, and I am sure the noble Viscount is not suggesting total abolition. With respect, I suggest to the noble Viscount that that is a fantastic figure, and I hope that

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when he comes to reply he will say that the amount to be saved is more like 10 million—and I believe that even that would be an over-statement.
Two questions are involved in considering naval aviation. One is the strategic and technical question. Any claims I have to speak on that subject are based on my friendship and what contact I may have with the noble and gallant Lord, Lord Fraser; and when Lord Fraser has spoken, there is no reason for me to elaborate his points. I think the noble and gallant Lord convinced us all that it was impossible in war in the foreseeable future to protect our convoys adequately without a carrier programme. It is no good my offering a further opinion. The noble Lord explained it as effectively and as authoritatively as anybody could. Everyone will agree that we should starve without adequate convoy protection. Speaking as a novice, compared to the noble Lords, Lord Tedder and Lord Trenchard, I nevertheless defer to the noble Lord, Lord Fraser, in this question of convoy protection, and if I have to choose between the two noble Lords and the noble Lord, Lord Fraser, I must choose the noble Lord who has most experience of that form of protection. No one who has heard him is going to argue that the carrier, large or small, is on the way out.
VISCOUNT STANSGATE: My Lords, if another civilian may say a word, I venture to do what my noble friend says cannot be done. I express the opinion that the benighted views of my noble friend are not generally held on these Benches.
LORD PAKENHAM: Well, this sort of "cloak and dagger" warfare shows one the character of the fourth arm in war.
THE SECRETARY OF STATE FOR AIR (LORD DE L'ISLE AND DUDLEY): Of the fifth column?
LORD PAKENHAM: It is not for me to refer in those terms to my noble colleague, though he has sent every sort of broadside into a difficult part of my anatomy. I am assured by those sitting closest to me that he speaks for himself, as always. I am only at liberty to say that when my noble friend Lord Stansgate does speak for the majority on these
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Benches, I am sure he will say so specifically, because it will be a comparatively rare occasion. We can regard him as a gallant martyr surrounded by dissidents and standing out for a very peculiar view. I can only take the authority of my noble friend Lord Alexander of Hillsborough, who is in charge of this side of the House and whose authority is absolute, so far as I am concerned.
VISCOUNT STANSGATE: This is quite impossible. It is absolutely intolerable that the noble Lord speaking from these Benches should claim that the noble Viscount who speaks for the Navy, being a Baptist, is expressing the views of the Party he represents.
THE SECRETARY OF STATE FOR COMMONWEALTH RELATIONS (VISCOUNT SWINTON): May I offer my co-ordinating services?
LORD PAKENHAM: Until I hear anything to the contrary; until I hear that there has been a palace revolution behind me, I shall assume that my noble friend Lord Alexander of Hillsborough is Acting Leader for to-day, and is in charge of the debate for this side of the House. I shall ignore all interventions from whatever quarter, however exalted and however pernickety. I appreciate this incredible Service loyalty, although it is a little confused in the case of the noble Viscount, Lord Stansgate, who, I believe, has been a soldier, a sailor and an airman, and is for the moment wearing an Air Force cap.
If we are going to retain carriers, nobody seriously suggests that we should take away the aircraft from the Navy. I should think not. If we had abolished the carrier, there would be a much stronger case for seizing naval aviation. But I believe that the Government mean to stick to carriers, and I would say the case is overwhelming. And, if so, one cannot seriously believe at this time of day that anybody, unless it be my noble friend Lord Stansgate, is seriously going to suggest that the carriers should be placed under Air Force command. So long as the Navy retains the carriers, I would say it is fairly obvious that it will retain the aviators, too. I feel there is another point—noble Lords can use this either way, but I must say it. I do not think the Navy is sufficiently air-minded,

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and I do not think the Air Force is sufficiently sea-minded. I do not think that the Services are sufficiently cognizant of each other's point of view. I believe that if anyone begins to try to filch naval aviation, he is dealing a serious blow at the prospect of rendering the Navy as air-minded as everyone would wish to see it. That is my personal opinion, and noble Lords will take it as such.
As regards Coastal Command, I am not so reticent or so discreet as the noble and gallant Lord, Lord Fraser. When I was First Lord two years ago, I was strongly attracted by the logical case for placing Coastal Command fully under the Navy. I think that on paper the case is so strong as to be almost overwhelming. But I agree with the noble Lord, Lord Fraser, that it would not be a patriotic service (it certainly would not have been then: nor is it now) to start such a national controversy as that would involve. On that ground I do not think the gain would more than balance the loss.
More generally, I want to issue an appeal to the noble Viscount, Lord Trenchard, to the noble Lord, Lord Tedder, and to their representative on these Benches, the noble Viscount, Lord Stansgate. We all honour the Royal Air Force, but I wish they would get rid of this inferiority complex. That is really the great difficulty about them. They are like newcomers who are always calling attention to their presence, when we are only too anxious to recognise it and do them the fullest honour. They want to seize some of the valued positions of the Navy, but, after all, it is not so long ago when they were practically "down and out." Noble Lords may remember that in 1948, in this very House, my noble and gallant friend Marshal of the Air Force Lord Douglas said that, unless urgent steps were taken to improve the rate of recruiting, it looked as if the Royal Air Force would before long die on its feet. These are the people—I say this with great respect—who are coming to the Navy, with her tradition of Nelson and the tradition of 1,000 years, and saying that they can do a large part of their work better than Her Majesty's Navy. This was on the testimonial of Marshal of the Royal Air Force Lord Douglas.
VISCOUNT TRENCHARD: What date was that?
LORD PAKENHAM: October 26, 1948.
VISCOUNT TRENCHARD: Exactly.
VISCOUNT STANSGATE: Does my noble friend suggest that Lord Douglas came here and declared that the recruitment was so poor that the Air Force was a thing of the past?
LORD PAKENHAM: I am not declaring anything, except what I read out.
VISCOUNT STANSGATE: What does it mean?
LORD PAKENHAM: I imagine it means very much what it says, that unless the recruiting improved a great deal the Royal Air Force would die on its feet. I do not know the difference between dying on your feet and dying in bed, but the noble Lord regarded it as moribund at that time, which was only four years ago. I say, with great respect, that these are the people who come along and say they can run things so much better than Her Majesty's Navy. I know that recruiting has improved, and I am glad of it; I am glad to think that they are no longer moribund, but alive and kicking—kicking violently, and from all quarters, behind and in front, and at all ages. I hope that they will not take it amiss if I say that, while I am glad they are now alive, they really must not try to live at the expense of other people. The Royal Air Force are doing a wonderful job, and they do not hesitate to tell us so; the Royal Navy are doing a wonderful job, and they wait for us to tell them so; the Army are doing a wonderful job, and they would be astounded if anybody told them so. They have all a lot to learn from each other. I think I can leave it there.
Before concluding, I should like to say a word or two on the international aspect. We have this tremendous task in front of us, and we have a Foreign Affairs debate in which to discuss it a week from to-day. We have this duty of preparing our own national defences; we have the duty of building the Atlantic defences. Within that circle we have the duty of building the European defences, which means working out a complicated political arrangement; and we have the continued task—here I know that I shall carry with me my noble

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friend Lord Stansgate—of seeking reconciliation between East and West. Some of these are military tasks, others economic, and others political. We cannot neglect any of them. I should like to call attention to one question which my noble friend Lord Henderson put, and to which I know he attaches special importance. The noble Lord said (OFFICIAL REPORT, Vol. 181, col. 785):
"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…."
That was a question to which the noble Lord, Lord Henderson, attached particular importance, and I hope that the noble and gallant Lord, Lord De L'Isle and Dudley, will deal with it when he comes to reply.
I am afraid that I have not touched on many of the speeches made. We recall that the present Prime Minister's father ruined his career by forgetting Goschen. I hope that the noble Viscount, Lord Goschen, will allow me to pass him over, without forgetting him, and that other speakers also will forgive me if I do not refer to their remarks. I believe we are all agreed about fundamentals. We are involved, as a country, through no fault of our own—we did not begin it—in an arms race. In the past, an arms race of that kind has usually led to war. That is a sobering thought. I feel sure the whole House will agree that we shall win this arms race only if we can stop it; and we can do that only by this double policy—it is easier said than carried out—of building up our own strength, in conjunction with that of friendly countries, while at the same time never missing a chance of seeking peace. I think there is fundamental agreement running throughout this House and throughout the majority of our fellow citizens as to what is most important. We are anxious to back the Government in all these objectives. We shall differ from them—naturally, we think we could do it better; that is the way of politics—but so long as they persist in the double policy of building up strength and seeking peace they will have the support of all patriotic
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citizens, and certainly not least of noble Lords who sit on this side of the House.
5.16 p.m.
LORD LAYTON: My Lords, I should like to add a word or two to the appeal made by the noble Lord, Lord Pakenham, in reference to the question asked by the noble Lord, Lord Henderson, that we should have a White Paper dealing with N.A.T.O. and similar subjects. The European Defence Treaty is of enormous importance to this country, and perhaps one of the most important statements made by the noble and gallant Earl, Lord Alexander of Tunis, had relation to the ratification of that Treaty. Britain is involved because we have substantially guaranteed the Treaty, or will do so if it comes into effect. There is no official translation of the E.D.C. Treaty in existence—I think I am right in saying that—and there is no version of the Treaty available to the public, to the Press, or to Members of Parliament in this country. I would urge that, if a White Paper is issued, the Foreign Office, or the appropriate Ministry, should take steps to see that so important a Treaty is available for reading by those interested in Great Britain in public affairs.
5.17 p.m.
LORD DE L'ISLE AND DUDLEY: My Lords, we have had a long, interesting and sometimes almost heated debate. When the noble Lord, Lord Pakenham, suggested in his opening remarks that we might charge admission, I turned over in my mind whether under the new Budget Resolutions we should not be exempt from entertainment tax. Now I have made up my mind that we should certainly fall within the ambit of that tax. Difficult though I find it to do so, I am going to resist the invitation to enter into inter-Service polemics, of which the noble Lord, Lord Pakenham, gave such a brilliant display. If I may say so with great respect to the noble Lord, I should have thought that they were more fitting to the bars of some of the great Service clubs, where officers of middle rank love to tease and provoke each other. I will do my best, subject to the patience of the House—and I warn your Lordships that it will be necessary to be a little patient—to address myself to what I hope will be regarded as a serious argument. It may not meet the views of noble Lords in all parts of the House, but I assure

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noble Lords that in preparing my winding-up speech I have endeavoured to prepare a connected argument. One can either reply to a series of points somewhat disjointedly, or try to adduce an argument. I have attempted to do the latter, and I declare my hand before I start. Before doing that, I should like to have the honour of congratulating the noble Lord, Lord Freyberg, from these Benches. We welcome him to our deliberations, and we greatly hope he will give us in the future the benefit of his tremendous experience, of which I think we can claim to be collectively justly proud.
I should like, first of all, to answer the question of the noble Lord, Lord Pakenham, in relation to the Middle East. I can assure the noble Lord at once that Her Majesty's Government do not keep troops in the Canal Zone for the purpose of prestige. I am not going to say more than that. The strategic, administrative and local security tasks laid upon those forces make the numbers which are now there vitally necessary. To return to the main theme of this debate, I think we have had a debate which has been in a sense a debate within a debate, because we are debating not only the Motion moved by my noble friend Lord Alexander on behalf of the Government, but also the Motion of my noble friend Lord Trenchard. It is my task to-clay to try and deal with this debate within a debate, because, with my special responsibilities, I am sure noble Lords would not wish me to ride over the air aspects of the matter. The noble and gallant Earl, Lord Alexander, put the question very clearly in its historical perspective, and explained the many critical considerations which have combined to form the views of the Government in the White. Paper.
Now I hope it is agreed—I think it is—that, whatever our policy, it is impossible for this country to avoid running very great risks in the armed state of the world as it is to-day, and it must be an accepted fact that that is so. It is our duty to try to minimise those risks. It would be true, I think, if our resources were greater and our commitments were smaller. It has not been said in this debate, but some speakers in another place have said, "Well, cut the commitments." One Back Bench Member of the Party opposite said, "Why not move into a three-roomed villa out of the draughty,
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unheated country house?" Leaving aside the great moral issues—and there are great moral issues—which would be involved in such abdication, in the view of Her Majesty's Government we cannot sacrifice our obligations without putting at grave risk the livelihood of the 50 million people who inhabit these Islands. Often in our history events have demanded not only courage and intelligence but endurance as well, and I am certain that endurance will continue to be demanded of us. Certainly Her Majesty's Government are not going to adopt the policy of sitting in front of the electric heater in a well-furnished villa and pottering in the back garden on sunny afternoons. I believe that that is the general view of this country and of noble Lords opposite, so well expressed by the noble Lord, Lord Pakenham, in his closing remarks, which I warmly reciprocate.
The differences which have appeared to-day in our debates have not been Party differences, although they have not been the less by that fact. They have rather tended to emerge in loyalty to one or other of the Armed Services—compliments, if I may say so, to the Services which have provoked such loyalties. But we all believe that in present world conditions we must have strong deterrents to adventure, and we find our greatest hope of safety in a strong alliance among freedom-loving peoples. The so-called £4,700 million programme of the late Government—which is a kind of telescopic phrase to comprise the totality of that programme—still demands great sacrifices, despite its modifications. It was a programme devised to meet a grave and immediate international danger, and Her Majesty's present Administration have not—I wish to emphasise this—in any sense abandoned the rearmament programme.
Your Lordships might be interested to know how expenditure under the all-important heading of equipment has increased over the last few years on the basis of common price levels, and I am sure we must agree as to that. Making a calculation on the basis of prices ruling in 1948 and 1949, we find that expenditure on equipment has gone up from £114 million in 1948–49 to £462 million in this year. There has been an increase of over £40 million on the same basis compared with last year, and an increase

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of no less than £220 million compared with two years ago. I think this should well be known, so that we can see these matter in perspective. Of course, as events have unfolded themselves, it seems clear to the Government—to use the Prime Minister's words—that what is required is "not a violent jerk but a prolonged pull." We are all agreed—and I was glad to hear so many noble Lords reiterate this—that the sure way to lose any advantage we have gained would be to relapse into weakness. Our problem is to maintain, possibly for a long time, a considerable level of military power.
There is a second factor in the modern world, which is the power which now exists for a nation to strike a sudden, perhaps crippling, blow from the air. That fact, disagreeable though it is, must make us re-examine the very basis of our defence policy. It was a great advantage—an advantage which we enjoyed and, I think, exploited for a long time—when we were able, with suitable preparations, to rely upon time as our ally. That roughly speaking, was true ever since we became a great seafaring nation. But the allegiance of time has been, at any rate to a large extent, seduced by science, and science is busy undermining the loyalty of space as well.
Here I come to a point which may be said to be controversial. The most painful changes are not so much physical changes or hardships, but changes in our habits of thought. The noble Lord, Lord Pakenham, will forgive me, for I do it in no critical spirit, but I could not help observing that the noble Lord, who is sometimes almost revolutionary in his political thinking and in his approach to human nature and the history of human nature and its development, is so conservative—with a small "c"—where material is concerned. I have no doubt it is realised that I am Conservative with a big "C," but I find myself almost revolutionary in matters where material is concerned. Modern weapons demand of us a constant state of readiness. That is the fact, because the first blow could be the last, and preparations to mobilise after the war has started, necessary though they are, must take second place to the necessity of maintaining a very high state of readiness of the forces needed to survive the first fierce clash.
LORD PAKENHAM: May I interrupt the noble Lord? No doubt he intends to develop his criticism of me, but otherwise, to use a phrase of Mr. Churchill, "I do not altogether feel utterly extinguished."
LORD DE L'ISLE AND DUDLEY: I am glad the noble Lord has quoted Mr. Churchill. The last thing I would wish to do, even if I could, would be to extinguish the noble Lord.
The one way to ensure a short war would be to lose the first round. I emphasise that I speak in priorities, because we mean to survive that first clash and we mean to have the sea borne supplies about which we have heard so much today. But we must see that the initiative does not remain with the aggressor. The power to strike back is an essential part of defence. It is also essential as a deterrent to adventure, and for the prevention of a terrible conflict which we should all so long to avoid. But it is necessary, if we are to devise a viable defence policy, to gaze without flinching on the possibilities of modern war. It is all the more important to do so clearly and with an unbiased mind because we have no surplus of resources to expend or to lay out.
It is perfectly true that my noble friend, the Minister of Defence, and my Service colleagues deeply need many additional items of equipment. I assure the noble Lord, Lord Jeffreys, that we want better amenities for the Services, and we should like to see a greater expenditure of resources. But I do submit that we have to face three ineluctable choices. I do not pose them in any attempt to dodge criticism or avoid the issue by manufacturing sophistical dilemmas. But those choices seem to be these: to expend more of the nation's money on defence than is now proposed; to change the existing allocation of resources—preferring some projects and abandoning others; or, thirdly, to propose economies—by paring, pruning and scraping—in existing expenditure and so release resources for the projects advocated. None of these choices are mutually exclusive.
Let me deal with the first. There are two schools of criticism. We have heard much to-day of the first and, I am glad to say, almost nothing of the second. The two schools consist of those on the one hand who say that we are not spending

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enough, and, on the other hard, those who say we are spending too much. Now I think it is accepted that the "prolonged pull" of which I have spoken is likely to place a very great burden, not only on our internal economy but on our external position also. I would remind your Lordships that we have expanded and are expanding the Royal Air Force; we are equipping it with an entirely new range of modern machines. We have also in being and are maintaining what is perhaps the largest British Army that has ever before existed in peace time—I leave out the Indian Army. We have three armed divisions in Europe, each of which costs as much as ten modern destroyers. Perhaps I might remind your Lordships that a modern destroyer costs about £2,500,000, whereas before the war the most modern battleship, the King George V, cost something like £8,000,000. We are carrying out a formidable naval shipbuilding programme—not perhaps as spectacular as in the days when we built those great battleships, but still expensive at the modern price per ton of warship. We are maintaining a very expensive research and development programme. So I think there is a wide measure of agreement with the words of the Prime Minister: "The effort we are making on defence is the absolute maximum of which we are capable."
That is why the White Paper says we are holding defence expenditure to a "lower peak." There is already a certain amount of cancellation of orders for some aircraft—and I should like advocates of the Navy to realise that—and a stretching out of certain types of equipment and certain delays in the naval construction programme. I declare—and it is the view of Her Majesty's Government—that with, the altered emphasis on modern developments, that is a firm and logical policy and that the Government and the country may be proud of the progress we have made. I reiterate once again that it must be accepted that under any policy we run great risks. I am not going to answer the silent critics who advocate a cut in our defences, because that would mean an incursion into foreign policy into which I am riot going to be led. But I repeat that sacrificing obligations would not bring us either relief or safety.
I turn to our second choice. This is the one which has created the greatest
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controversy and presents the greatest difficulty. I am not going to come between the noble Lord, Lord Pakenham, and the noble and gallant Lord, Lord Tedder—they are both very well able to look after themselves—but those who re-read that remarkable speech of Lord Tedder will realise that it was extremely well thought out and clearly conceived, and because you do not like the conclusion to the argument you should not damnify the steps which led up to it. I do not think that he made anything which could be called an ill-natured attack—
LORD PAKENHAM: I never accused the noble and gallant Lord, Lord Tedder, of ill temper or ill nature, and I must ask the noble Lord to withdraw that.
LORD DE L'ISLE AND DUDLEY: The noble Lord did "go for" Lord Tedder, but, as I have said, Lord Tedder is capable of looking after himself. I was expressing my own view but I acquit the noble Lord of using those words and of any improper expression in relation to this.
LORD PAKENHAM: I do not often pursue a noble Lord in such a matter as this, but I should have thought it was hardly enough to say that he acquitted me of using the words. I should have thought he might have added a word of regret.
LORD DE L'ISLE AND DUDLEY: I have the greatest pleasure in doing that. I withdraw what was perhaps an ill-chosen word.
Now for this question of priority, which is of such critical importance. I do not think it is unfair to say that the critics who proposed this or that policy or this or that expenditure, advocating it with great force and vigour, have very often a happy knack of forgetting the all-important premise of limited resources. I think many of then are apt to forget the conditions under which a future war is likely to be fought. In fact, some of them fail to follow the curve of expectancy. I find myself to-day delicately poised between Scylla and Charybdis. I recall the motto of the famous West Kent regiment—I dwell in Kent myself—"Quo fas et gloria ducunt."
LORD PAKENHAM: Translate!
LORD DE L'ISLE AND DUDLEY: I cannot resist quoting to the House a passage from Homer.
SEVERAL NOBLE LORDS: Hear, hear!
LORD DE L'ISLE AND DUDLEY: I am not proposing to quote it in the original. The quotation is as follows:
"Then Scylla grasped six of my comrades from the hollow ship who were most renowned for their strength and courage.
She brandished them aloft and I heard them calling upon me for the very last time with a most pitiful sound.
Of all my sufferings in my wanderings on sea and land this tried me to the uttermost."
We shall see whether Scylla performed so notable a feat to-day when he winds up. I can only say this: that in our view, however passionately an opinion may be held by any member of any Service, neither prestige nor settled habits must preclude a thorough re-examination from time to time of the various means of protecting these Islands and our sea communications as well; and we must take into account modern trends of development.
Now I come to research and development. The noble Viscount, Lord Alexander of Hillsborough, who courteously apologised to me for not being able to be present at the end of the debate, displayed a very proper interest in this programme. I am glad to say that he gave general support to the policy, which is no more than a continuation of the late Government's policy, of devoting a considerable sum of money to this important part of our defence. He asked one or two particular questions about Ministry of Supply contracts, with which I tried to deal in a recent debate in this House on aircraft supplies. Perhaps I may repeat that all contracts for research and development with firms contain a clause to the effect that the firm must agree the price at which they may sell commercially any article resulting from the development and the share of that price which should go to the Ministry of Supply; and I think that policy has been agreed for some time as a proper Departmental policy.
On the important question of research and development we are faced with a dilemma. We feel acutely the need for many items of equipment now, but the pace of scientific development is very hot
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and our position particularly, of all nations in the world, most forbids us to be left behind in this race. We have a guided weapons programme. That is a very formidable and expensive part of research and development. Then we have aero-engines. The aero-engine is the core about which the rest of the machine is wrapped, and a significant advance in design and performance of an aero-engine means a significant change in the balance of air power, and so of military power in general. Of course, in aero-engines we have some off-set in civil aviation. I do assure the House, with my noble and gallant friend Lord Alexander of Tunis, that that programme will continue to receive a very careful combing. We are aware that our financial resources and the resources of scientific knowledge are not only strictly limited but must be applied to the most important projects. I think I can reassure noble Lords, and particularly the noble Viscount, Lord Caldecote, that we do not make the awaiting of the final outcome of a project, or rather the ideal development of it, the excuse for putting off the day of production. We are going into production of a large range of very important items of equipment, of which the family of anti-tank guns is one.
The third proposition is that we can regain sufficient resources for the more important projects which are not now included by a process of pruning and scraping. Economy in general is always popular, but economies always seem to me to earn the opprobrious epithets of "narrow-minded" and "short-sighted." That is the same for all Governments at all times, and all Governments at all times are vulnerable upon this, particularly in the modern world where the range of administration is very large. I do not think it is any false humility to say that we all feel that signs of waste and extravagance which are brought to the notice of Ministers ought to be welcome, because that is the duty of Parliament, and in particular of the Opposition. This "prolonged pull" faces all free nations.
I was deeply interested in the thoughtful speech of the noble Lord, Lord Henderson, yesterday. He raised a number of questions, and he seemed to be asking for more information—a plea which was supported by the Liberal

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Benches just now. I do not deny that it is difficult to present adequate information to the public. First of all, we have to make up our minds in the fourteen nations about what is and what is not security. Secondly, I am afraid that in an organisation of this character, there are bound to be leaks, sometimes inaccurate and sometimes accurate; it is impossible to prevent them. They get into the Press which produces this half-digested information. I assure the noble Lord that his suggestion will be carefully considered, but, as he knows, my noble and gallant friend Lord Alexander goes, I think, next week to the North Atlantic Council, and perhaps after that we can consider whether we ought to have a debate about these affairs. I hope the noble Lord will forgive me if I do not go into details answering his particular questions to-day.
To sum up, I think we ought to say that, taking a perspective view, it is only two years since General (now President) Eisenhower was appointed Supreme Commander at S.H.A.P.E. It is sometimes difficult to remember that until one forces oneself to look back. I think we can take a legitimate pride—and I admit that the late Government are entitled to a full share in that pride, because Mr. Ernest Bevin and his successor took so great a part in forming this great Alliance—that under that Supreme Commander so many nations are already taking part in full-scale exercises, that there are integrated commands and supply systems. If I may take the example of the 2nd Allied Tactical Air Force, we have British, Dutch and Belgian squadrons and wings serving under an integrated Staff, under the command of a distinguished British Air Marshal. We must not be too gloomy about this, but we must remember that the threat is very great and we must not relax our pressure to make our preparations better.
I ought to say at this point that we must beware—and I open myself to attacks from either naval or military sources—of calculating relative strengths merely in divisions, or regarding air power as a kind of bonus or supplement to land power. Her Majesty's Government attach the greatest importance to the proper weight being attached to the factor of air power when striking a balance. It is a truism, and it has often been said, that we face a world-wide threat. Our responsibilities are heavy
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and varied. Not only have we to do our best to ensure that the vital area of Western Europe remains free, but we cannot stand by and see the cession of large and important are as of the world to Communism. It is often said that military resistance is not the cure for this disease. Whether or not that is true, I am certain that, without the means to offer resistance, no other policy could prevail. And these burdens overseas are burdens borne at arm's length. I am happy that we have had support from the Benches opposite about the necessity in present circumstances—and I emphasise those words—for a period of National Service of two years.
I do not propose to retraverse the arguments which have been used, both here and in another place, but it has been advanced that the increased use of air transport would be a very considerable alleviation of our manpower difficulties. While not denying the importance of the theme, I ought to remind the House that already we are transporting some 80 per cent. of our men and women into the Middle East theatre by air. To the Far East, sea-trooping is at the moment more economical than air transport, but air transport may well to a large extent, though never completely, displace sea transport, if the great new machines which are coming into being can be put into the service of the Armed Forces. But again we must remember the economics. To do so means a very heavy capital outlay. Some of these large aircraft, with a life provision for spares, cost as much as £1 million—I say this by way of illustration, and not to test the cogency of the argument. But, although in the long-term I think that great strategic and economic advantages will come from a much greater employment, even to the Far East, of air transport, we must face the fact that in order to get these future benefits, savings must be effected in some other part of our national economy. I have no quarrel with those who question the rate of progress in this respect, but we must not underestimate what has been and is being achieved in the air.
Last year in a debate on air matters, which was the first time I had the honour to address your Lordships' House as Minister, I tried to put the position as I saw it. Some said that I was too gloomy, or that I did scant justice to the previous

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Administration. It is no good imagining that our relative position in the air, either then or now, is good—and I speak not so much of numbers as of performance, because a programme of this kind takes much longer to mature than is generally supposed. I say to noble Lords opposite, with great willingness, that good selected seeds were planted in fertile ground, and I regard it as my duty to tend the Growing plants and preserve the rotation in cultivation.
LORD HENDERSON: May I, on behalf of noble Lords on this side of the House, thank the noble Lord for that expression?
VISCOUNT STANSGATE: What is the rotation?
LORD DE L'ISLE AND DUDLEY: I leave the noble Viscount to work that out.
My Lords, there have been, and are likely to be in the future, some disappointments in the progress of production. But in reference to Civil Aviation, I told the House the other day, and at some length—soI will not detain the House to-night—that in our view super-priority has worked and is giving us greater production than we should have otherwise obtained. In air defence it might be said that there are two pillars. I will start with the first—the fighter force and its associated equipment. I tried to make it plain last year that the new swept-wing fighters were not just round the corner, and that for the time being we were behind in this race. I confess that I hoped that we should begin to see some of the new fighters in service before the middle of this year, but my noble friend Lord Alexander has already told the House that it is probable that they will come into service only towards the end of the year. The fact is that their development trials have taken longer than was hoped. But I must emphasise that it would be wrong, though it might be tempting, to dress the window. An aircraft of this kind must come into service as a fully operational machine. Those who cut the corners may get the numbers, but at a price in performance which we are not willing to pay. I am glad to say that this great new family of fighters—the Hunter, the Swift and the Javelin—all have development in them in the view
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of those who are qualified to judge (if I may be forgiven for using technical jargon), which means that later marks can be improved and have a superior performance without a complete redesign, which is very important.
Now, my Lords, for the new star which is coming over the horizon in this question of our metropolitan defence—guided weapons. My noble friend Lord Alexander yesterday made an important announcement in this respect. I would only add that the Royal Air Force deeply appreciates this new responsibility which is laid upon it; but it in no way underestimates the magnitude of the new task. The Air Force is accustomed by habit and by circumstance to the rapid march of science and invention, and it knows that this new responsibility is a challenge to its military intellect, organising ability and technical skill. Perhaps the most difficult aspect is this last one. I make no bones about the fact that we are short of the necessary highly skilled technicians in the Air Force. This, of course, is common to the other Services—in fact it is not too much to say that it is a national shortage. This is especially so in radar and electronics, and the organisation which we set up for the handling of these guided weapons must take fully into account the need to employ these rare skills to the utmost advantage. Again, I must point out that this is not a short-term project, and that the development into operational use of guided weapons will be slow—at any rate much slower than the public mind is likely to be accustomed to.
The third factor in the home defence system is the rebirth of the radar system. As noble Lords no doubt realise, this falls into three parts. There is the provision of specialised buildings and living quarters; then the provision of an immense network of communications, work upon which is being carried out by the Post Office, and to my noble friend the Postmaster General and his Ministry I should like to pay a well-deserved tribute in that respect. Thirdly, there is the manufacture of new and far more efficient radar equipment. My noble friend Lord Alexander told the House yesterday that the radar equipment at present available has been outstripped by the present generation of air engines and machines, and every effort is being made to catch up in this vitally important sector of our

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defence. I can say that the electronics industry and the Government research establishments are making good progress in this respect.
I have already referred to the 2nd Allied Tactical Air Force, which is a fully mobile Air Force. The fact of ensuring mobility in itself presents great difficulties and necessitates great expenditure in vehicles. We are now beginning to receive the Venoms and the Sabres. The Sabres are manufactured in Canada, and with United States' engines, for which we are very grateful. We are also to get a certain number of Sabre squadrons in Fighter Command of the Royal Air Force, thanks to United States' generosity. And there are the Neptunes in Coastal Command, a force which, I assure Lord Fraser, for quality and equipment and operational technique, is maintaining the high standards which it attained during the late war when (I am sure he will agree with this) more than half the U-boats destroyed were sunk by air action—I am not specifying under whose command lest I should again provoke a further controversy.
LORD FRASER OF NORTH CAPE: Including naval air.
LORD DE L'ISLE AND DUDLEY: My Lords, I come to the second pillar. I hope that I am not wearying the House. I warned the House that I should speak at some length. The second pillar of our defence is the power to strike back at the source of the enemy's power, wherever it may be. The instrument for that must be the long-range bomber, of which there are to be three types, the Valiant, the Vulcan and the Victor. I will not at this stage go into the arguments for and against more than one type. I can reassure my noble friend Lord Trenchard that they have the capabilities which he desires them to have. Here, again, in the modern world quality, both in aircrew and in machines, is the most vital factor.
Although we must never be terrified by anything which may occur to us, I do not think it is too much to say that the advent of the atomic bomb is the critical military factor in the world and has deeply affected relations between the nations. Earlier in my speech I spoke of the risk which its existence brings of a terribly swift blow, and I assert that,
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whatever we may have to forgo owing to lack of resources, it surely cannot be right for us to forgo this supreme expression of military power in the modern world. Much as we value the weight and strength of the United States Air Force, we should be quite wrong to leave the counter-offensive to them. I am glad to say that the Valiant aircraft is coming on well. It is still engaged on its trials, and I am not at this stage going to prophesy exactly when it will come into service, but I should like to say that the firm who are making them—namely, Vickers—have recently been informed that they will receive the necessary follow-on orders to enable them to maintain their full rate of production. These highly costly new machines need men of the highest skill to maintain them, and this problem is very closely exercising the thoughts of the Air Council at the present moment. I am not going at this moment to lay any proposals before the House but I think it right to let the House know that this is a very critical matter in Air Force affairs.
Again, with regard to air crews, I spoke just now about the necessity of quality. Indeed, in modern times, to the venturesome young man, the air—I am not going to specify whether the Naval branch or the Royal Air Force—offers a very great career and a great opportunity for his spirit of adventure. We believe that in present circumstances we ought to reshape the plans of our air crew reserves. What we need, as we envisage things at the moment, is, first, that we should have smaller air crew reserves, of a higher state of training. That is why, with the deepest regret, we felt it right to close our connection with some of the reserve flying schools. It was a peculiarly painful task because these schools have been run so well, and many of them for so long and so faithfully, by enthusiasts for the air. But it would have been a misapplication of our resources to continue with these schools in present circumstances, because so many of the products of these schools would not have been able to make their contribution until after what we believe will be the critical stage, the initial phase, had passed.
The noble and gallant Earl, Lord Alexander, said yesterday, and said very rightly, that policy in these matters was all-important. Our defence policy needs

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constant management. Our main objective, as the noble Lord, Lord Pakenham, said in his closing remarks, must remain the peace and security of these Islands, of our dependences, of our sister nations, and of our Allies. We have, it is true, to balance, almost on a razor edge, one risk against another, but we ought not thereby to repine. Nor do we. For as one noble Lord, Lord Winster, said yesterday, this is not the first time that we have faced great difficulties and great odds. And because history shows that we overcame them, it does not mean that the odds were smaller or the difficulties and dangers less grave. We seek peace not because we fear danger, but because we believe that it is righteous so to do. But we know that it is not to be purchased by submission or acquiescence. If necessary, we shall stay armed until the threat has gone. Even if there has been, if I may so put it, a slight thawing in international relations, I think it is fair to say that we must pay regard not so much to words as to deeds. Therefore, however much we deplore the cause we can nevertheless take pride that it is given to us as a nation to take so leading a part in the defence of the free world.
On Question, Motion agreed to.
6.4 p.m.
VISCOUNT TRENCHARD: My Lords, I do not propose to move the Motion standing in my name on the Order Paper, but I should like to say just a few words. I will not repeat the speech which I made yesterday; I am sure that your Lordships would not wish to hear it again. But I made that speech after giving careful consideration to every line of it, and I stand by it—including the statement about the £100 million saving. I feel that there is little to say now, because very few arguments have been put up against my proposals, though the noble and gallant Lord, Lord Fraser, put a question to me on one matter. I will deal with that in one moment. None of the other points that I referred to—for instance, that about aircraft carriers—were controverted, except that Lord Teynham said that the aircraft carrier had replaced the battleship. I hope the fate of the aircraft carrier will not be the same as that of the battleship in the past.
With regard to the question which Lord Fraser put to me, all I need say,
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I think, is that I heard that question twenty-five years ago. Your Lordships, I am sure, do not want to hear a debate upon it. Since the days when that question was originally put to me, we have seen the development of the atom bomb, and I thoroughly agree with the noble Lord who replied for the Government that that weapon completely alters the whole aspect of that question. Secondly, I would say that the jet-propelled machine, with treble the speed of its forerunners—it has trebled their speed, not merely added a matter of five knots—has altered it, too. Your Lordships will not wish to hear a technical discussion and there is just one last thing I wish to say. I feel rather sad at the general impression conveyed, I thought, by some of the speakers, that in their view I am doing a disservice to the country and to the Services in raising this point about what the air means to this nation. I do it with a full sense of responsibility, and I prefer to be the judge of my own duty on that.

BUSINESS OF THE HOUSE
6.6 p.m.
THE LORD PRESIDENT OF THE COUNCIL (THE MARQUESS OF SALISBURY): My Lords, perhaps I may say one word about the business on Monday. As your Lordships are aware, we shall proceed on Monday afternoon to the discussion of the Committee stage of the I Iron and Steel Bill. I would propose that we should rise at seven o'clock on Monday. We have allotted another day to the Committee stage, and we might extend it if necessary over into Wednesday, but I hope that that will not be necessary unless noble Lords opposite are too mightily borne on by enthusiasm for their Amendments. In default of that unhappy event, I think we ought to be fairly certain of finishing on Tuesday. In any case, I hope we shall finish on Tuesday.
LORD SILKIN: My Lords, as one who is personally concerned in the business on Monday, I thank the noble Marquess. I feel it is only right to assume that we shall act with good sense. I think the noble Marquess will find that we are not going to talk for the sake of talking, and I hope the Government will be as reasonable.

MILFORD DOCKS BILL
Reported, with Amendments.
  NURSING SERVICES
  NURSING SERVICES