Sitting of 29 April 1953

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  MANCHESTER CORPORATION (ADVERTISE MENTS) BILL [Lords] (by Order)
  Second Reading deferred till Tomorrow.
ORAL ANSWERS TO QUESTIONS
  MINISTRY OF DEFENCE

    Air Mail Parcel Rates
    Miss Bartonasked the Parliamentary Secretary to the Ministry of Defence if he will consider making a flat rate charge for sending parcels by air mail to all Her Majesty's forces stationed overseas whether in or outside Europe.
    The Parliamentary Secretary to the Ministry of Defence (Mr. Nigel Birch): The cost of the hon. Lady's proposal would be prohibitive unless the present rates to forces stationed in the nearer theatres, such as Germany, were raised appreciably: this course is not regarded as practicable.
    Miss Burton: Is the Parliamentary Secretary aware that that is the answer given me by his predecessor, and is he aware that that is not the point? Does he consider it right that it costs 6s. 6d. to send a 4 lb. parcel by air mail to Germany and 63s. to send the same parcel to Korea? Does he not think that the men in the distant theatres of war should have a preference and not be treated worse than those nearer home?
    Mr. Birch: I always try to copy the right hon. Gentleman the Member for Easington (Mr. Shinwell), when it is appropriate to do so. I can see the force of the hon. Lady's contention, but she will realise that there are a great many
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    things which make a station desirable or undesirable besides the rates for parcel post. I think that the man in the Forces accepts the luck of the draw and realises that in some cases he will be more fortunate than in others.
    Mr. Shinwell: Since the hon. Gentleman has mentioned me, might I ask him whether it is not true that the present Government's only claim to fame is that they make an improvement upon the previous Government, and if that is their claim, why do they not do something about this matter?
    Mr. Birch: I think the right hon. Gentleman has missed out the words "where appropriate" in my answer.
    Miss Burtonasked the Parliamentary Secretary to the Ministry of Defence if he will consider the sending of parcels up to 3 lb. in weight, letters, newspapers, limited in weight if necessary, by air mail to Her Majesty's Forces outside Europe free of charge except for the ordinary postal rate incurred in this country.
    Mr. Birch: I regret that I cannot accept the hon. Lady's proposal, which would involve a heavy addition to the cost of present postal concessions for the Forces.
    Miss Burton: Is the Parliamentary Secretary not aware of the very great worry caused to families of the men who are serving overseas by these rates? Has he himself not had letters from them saying that it is quite impossible to send newspapers or small parcels to the men because of the cost, and, if not, may I send him some?
    Mr. Birch: I shall certainly be willing to receive any communication from the hon. Lady who has put up a gallant fight in this matter for a number of years. I can see her point, but she will realise that the present postal concessions already cost over £1,600,000 and there must be some limit to them.
    Miss Burton: I am glad the Parliamentary Secretary appreciates my gallant fight, but would he not appreciate still more the gallantry these men are putting up overseas, and is he not aware that on this matter the people of this country are quite prepared to pay an extra cost for a cheaper postal rate to the men out there?

    Coronation Amnesty (Protection Certificates)
    Lieut.-Colonel Liptonasked the Parliamentary Secretary to the Ministry of Defence how many eligible applications have now been received for protection certificates under the terms of the Coronation amnesty for deserters; and how many protection certificates have been issued to date.
    Mr. Birch: Up to 25th April, 1,663 eligible applications had been received for protection certificates under the amnesty. Protection certificates will be issued within the next fortnight.
    Lieut.-Colonel Lipton: Is it not deplorable that these men who have applied for an amnesty should be kept waiting so long? Quite a number of them think they are going to be prosecuted, and will the Parliamentary Secretary give an assurance that these protection certificates will be issued within the next week or so?
    Mr. Birch: My answer says that we hope they will be issued within the next fortnight. The hon. and gallant Gentleman realises, no doubt, that these men have waited some time before now.
    Lieut.-Colonel Liptonasked the Parliamentary Secretary to the Ministry of Defence how many protection certificates have been issued to deserters resident in Eire; and to which army or other Reserve these applicants have been posted.
    Mr. Birch: None, Sir. Applicants will be posted to Class Z or equivalent Reserves.
    Lieut.-Colonel Lipton: What is the good of posting these residents of Eire on Class Z or other equivalent Reserves when, if an emergency breaks out, it will be quite impossible to enforce the call-up notice?
    Mr. Birch: It will be impossible if they are in Eire, but I see no particular reason why such men should be in a privileged position.

  KENYA

    Prohibited Areas (Use of Force)
    Mr. Fenner Brockwayasked the Secretary of State for the Colonies if he will ask the Governor of Kenya to report on the operation of the Emergency Regulation which gives any member of the
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    police force and Her Majesty's Forces and any administrative officer, forest officer or game officer or subordinate officer within the meaning of the Wild Animals Protection Ordinance authority in a prohibited area to use force extending to voluntarily causing death in the case of any person who fails to stop when challenged, and in a special area to the use of lethal weapons in the case of any person who resists arrest or attempts to escape from arrest or fails to stop and submit to a search when called upon to do so.
    Mr. Haleasked the Secretary of State for the Colonies for what reason, and under whose authority, Nairobi has been designated a special area; under what provisions instructions have been given permitting authorised persons to shoot persons who do not stop when challenged; and whether the request to stop has to be given in the language of the persons challenged.
    The Secretary of State for the Colonies (Mr. Oliver Lyttelton): Under Emergency Regulation 22b, which is available in the Library, if it appears to the Governor to be necessary or expedient that special precautions should be taken to prevent malicious injury to persons or property, he may by order declare an area to be a special area. The same regulation permits authorised persons to use such force as in the circumstances of the case may be reasonably necessary, including the use of lethal weapons to arrest any person who fails to stop when challenged. The request to stop is given in a language which the person concerned would certainly understand.
    Special areas have been declared since the middle of January and in these 335 persons have been shot under the provisions of the Emergency Regulations when resisting arrest or attempting to escape. Of these 224 have been identified as persons wanted for murder and other serious crimes.
    The Emergency Regulation referred to in the second Question has been amended and the authority which it gives to take, in a prohibited area, measures including means dangerous or fatal to human life is now restricted to members of the police force, of tribal police forces, of Her Majesty's Forces and Administrative Officers. Twenty-nine terrorists have

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    been shot after being challenged and failing to halt in prohibited areas since the first of such areas was declared at the beginning of the year.
    Mr. Brockway: While it is- recognised on both sides of the House that the police and Forces in Kenya have been acting under a very great strain and with great restraint, is it not also a fact that the European-controlled Press in Nairobi, as well as the Government in Kenya, have shown some concern about these powers being wrongly used? Is he aware that I have a number of statements from Nairobi, including one from an African policeman who declined an order to shoot a man in the back? In view of all those circumstances, will he ask for some report from the Kenya Government upon this matter?
    Mr. Lyttelton: The hon. Gentleman has mentioned a case of which I have had no notice at all. My position in this matter and that of the Kenya Government is quite clear. Where we get evidence that any of these powers are being misused, the culprit will be visited with the utmost severity. So far, I have received some representations about this, but I have received no evidence.
    Mr. J. Griffiths: While I recognise, as does my hon. Friend the Member for Eton and Slough (Mr. Fenner Brockway), that the Forces and police are living and working under a very great strain in Kenya, was the Secretary of State's attention called to an editorial in "The Times" this week, not for the first time expressing some concern at the report of abuses of these powers? Since these tend to bring the forces of law and order into disrepute, will he make full inquiries and make a statement to the House at the earliest possible opportunity?
    Mr. Lyttelton: I cannot undertake to make a statement to the House. I am in complete sympathy with the sentiments expressed in that article, but so far no evidence, other than rumours, has come to my knowledge. As the right hon. Gentleman is aware, two circulars have been sent out by the Governor on this very point.
    Mr. Griffiths: The Secretary of State has said that before, but, nevertheless, correspondents of considerable repute.
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    whose reports are generally very reliable, continue to make these statements. That is why I urge the Secretary of State to consult with the Governor. I think a statement could be made both in this House and in Kenya.
    Mr. Lyttelton: This is nothing new. I have been in close touch with the Governor on this very matter for, I suppose, six weeks. I share the concern which the right hon. Gentleman has expressed and that of reputable correspondents, but he must not expect me to pre-judge any cases until I have definite evidence. I have asked for that. I can only assure him that we shall follow it up.
    Mr. Hale: Will the right hon. Gentleman bear in mind that Question No. 34 asks for the reason why Nairobi itself has been declared a special area in view of the statement in the Press that no new emergency had occurred there and that this was merely a question of tidying up or trying to follow suspected people from one area to another? Will he bear in mind, in view of foolish interjections from hon. Members opposite, that it is difficult for corpses to complain? Once a man has been shot on an allegation that he is resisting arrest, or on suspicion, or, having been challenged in a language which he may or may not understand, it is not easy to produce evidence to justify a complaint. That is one of the fears which we seriously entertain. Is it not unprecedented to make this great capital city an emergency area for this purpose unless there is some very grave reason for it?
    Mr. Lyttelton: I resist the allegation that because people are shot no evidence can be forthcoming. If one believes statements made, evidence can be gathered from other members of the security forces and other Africans. So far, no definite piece of evidence, other than hearsay, has come to my knowledge. If the hon. Member will await my statement at the end of Questions about the situation in Kenya, I hope he will be satisfied with the reasons why Nairobi has been declared a special area.
    Mr. Baldwin: Is my right hon. Friend aware that the Governor of Kenya and those who are advising him are quite capable of managing their own affairs

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    without so much interference from Members of this House and that these allegations which are being made are only adding fuel to a fire which is already furious enough?

    Casualties and Arrested Persons
    Mr. Hector Hughesasked the Secretary of State for the Colonies how many people in Kenya, up to date, have been arrested in connection with the disturbances there; how many have been screened and tried or released; how many are now in custody; and where the latter are.
    Mr. Haleasked the Secretary of State for the Colonies whether he will now state the total casualties in Kenya since the passing of the emergency laws, including the number of persons arrested; the number of persons detained for screening; the number of persons imprisoned, and who have not been brought to trial; the number of persons imprisoned and released without trial; the number of persons shot after a challenge to stop; and the number of persons shot whilst resisting arrest.
    Mr. Lyttelton: Up to 14th April, 270 members of security forces and civilians had been murdered (255 Africans, three Asians and 12 Europeans) and 166 wounded (153 Africans, four Asians and nine Europeans). Since the beginning of the Emergency 82,840 persons have been arrested. Of them 8,975 were released at once; 38,947 have been screened and released, and 28,912 screened and tried. Six thousand and six persons are now in custody awaiting trial, of whom 2,549 are in police custody, 2,116 in prison custody and 1,291 in remand homes. Four hundred and thirty persons have been shot while resisting arrest or after being challenged to stop.
    Mr. Hughes: I am obliged to the Minister for that detailed reply. Would he tell us whether anything is being done to those in custody with a view to divesting their minds of the perverted ideas of Mau Mau and giving them an opportunity of learning how to be good citizens?
    Mr. Lyttelton: I think the hon. and learned Member will not press me on the narrow subject of men awaiting trial on particular charges. We and the Kenya
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    Government are doing everything we can to make the position clear to the Kikuyu tribe in general.
    Mr. Hale: Does the right hon. Gentleman think that, on the whole, these figures are a testimony to the success of a policy of collective punishment and the punishment of the whole Kikuyu tribe and of driving good Kikuyu workers from the farms back to the Reserves? Would he not accede to a plea that one really genuine effort be made at conciliation, even at this stage, through the national leaders of the Kikuyu, making a real appeal to try to get understanding and toleration?
    Mr. Lyttelton: I am afraid the hon. Gentleman is in deep error on this matter. If he considers that collective punishment has anything to do with the arrest of people charged with definite crimes, he must think again. We must resist threats to law and order. At the same time, we must make it clear that the law-abiding have a future, and a prosperous future.
    Mr. Alport: Is my right hon. Friend aware that the movement of the Kikuyu from the settled areas back to the Reserves was not as a result of pressure from the authorities but as a result of the policy of the Mau Mau leaders in order to embarrass the authorities and cause hardship to the people concerned?
    Mr. Lyttelton: Yes, that is so. Of course, the murder of over 200 Africans, many of them squatters, has led to a movement, which the Government have tried to check, of Kikuyu squatters from the farms back to the Reserves.

    Ex-Chief Koinange (Detention)
    Mr. Fenner Brockwayasked the Secretary of State for the Colonies on what grounds ex-Chief Koinange has been detained in Kenya.
    Mr. Lyttelton: Ex-Chief Koinange was detained under Emergency Regulation 2 (1) because the Governor was satisfied that for purposes of maintaining public order it was necessary to exercise control over him.
    Mr. Brockway: Is the right hon. Gentleman aware that ex-Chief Koinange was kept in prison for six months pending trial for murder and those of us who

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    knew him never believed he was guilty of it, that he was entirely acquitted but immediately the acquittal took place was arrested by the Government under these Orders? Will the right hon. Gentleman reconsider that action?
    Mr. Lyttelton: It is not a matter for me to reconsider at all. Ex-Chief Koinange was detained under the equivalent of Regulation 18B in this country, and I am quite satisfied that there is no reason whatever why I should intervene.
    Mr. J. Griffiths: Might I put one point which is of some importance to the Secretary of State? This ex-Chief was tried and was acquitted and it is of the utmost importance in Kenya that all the Africans should be taught to respect and look up to law and order. Does not this case tend to create the impression among them that almost immediately after acquittal this man was detained? Is not the Minister apprehensive that this might have a bad effect on the view which Africans take of law and order because of the coincidence of these two things?
    Mr. Lyttelton: No, the threat to law and order is coming from the Mau Mau terrorists.
    Mr. Griffiths: I appreciate that, but here is a man who was tried and acquitted, and is it not of the utmost importance that all Africans should look up to and respect the forces of law and order and the judicial procedure? In view of the coincidence of these matters, will not the right hon. Gentleman look at this again, because it tends to create an impression that although a man is acquitted nevertheless he is detained immediately afterwards?
    Mr. Lyttelton: No, I am afraid I cannot give the right hon. Member a sympathetic answer. To be acquitted of murder is not any reason why, for other causes, a man should not be detained.

    Wages and Labour Advisory Boards
    Mr. H. Hyndasked the Secretary of State for the Colonies the functions and composition of the Wages Advisory Board and the Labour Advisory Board, respectively, in Kenya.
    Mr. Lyttelton: The Wages Advisory Board advises the Kenya Government on wages and conditions of employment. It consists of three independent members, one of whom is chairman, two representatives of employers and two of employees. The Labour Advisory Board advises the Kenya Government generally on all matters of labour policy and legislation. It consists of a chairman and 14 members, of whom three represent commerce, six agriculture and five the interests of employees.
    Mr. Hynd: Is the Secretary of State satisfied that there is not some overlapping between these two bodies and that their functions might not usefully be combined?
    Mr. Lyttelton: There may be some overlapping, but where there is I think it is on the whole desirable because the spheres of the two boards axe complementary, although they are different, and they are both serving a useful purpose.

    Jomo Kenyatta (Trial Report)
    Mr. Rankinasked the Secretary of State for the Colonies his reasons for refusing to publish a full report of the trial of Jomo Kenyatta.
    Mr. Lyttelton: The publication of either a full report or a full summary of the trial of Jomo Kenyatta would involve a vast amount of work which I am not prepared to ask the Kenya Government to undertake.
    Mr. Rankin: While recognising that, may I ask the Minister if it would be possible for him to place a transcript of the proceedings of the trial in the Library of the House?
    Mr. Lyttelton: I do not think that would help hon. Members. I think the trial lasted for 56 days. But if it would be a help to the hon. Member it would be possible to make available copies of the "East African Standard" for the period of the trial. I understand that paper carried a fairly full report, and I will see that copies are placed in the Library.

    Situation and Plans
    Mr. J. Johnsonasked the Secretary of State for the Colonies what further plans for the constitutional advance of Kenya he is contemplating.
    Mr. Haleasked the Secretary of State for the Colonies what economic reforms have been instituted in Kenya since October, 1952; and what further reforms are now contemplated.
    Mr. Fenner Brockwayasked the Secretary of State for the Colonies if he will make a statement regarding the situation in Kenya, with particular reference to the destruction of the African settlements near Nairobi, the arrest of their 6,000 inhabitants for screening, the deportation to the Kikuyu reserve of those not detained, and the extension to Nairobi of the order to shoot to kill Africans who resist arrest or attempt to escape.
    Mr. Lyttelton: With permission, I will deal with these Questions in a statement after Questions.

  CENTRAL AFRICAN FEDERATION
  Mr. Hector Hughesasked the Secretary of State for the Colonies his latest information as to the numbers of non-European people in each of the territories of Northern Rhodesia and Nyasaland who are, respectively, in favour of and against the proposed scheme of Central African Federation for those territories.
  Mr. Lyttelton: I have nothing to add to the reply I gave to the hon. and learned Member's Question on 4th March.
  Mr. Hughes: Can the Minister say, as many of these people have expressed themselves against federation, whether anything is being done to explain to them what federation means, or is it the intention of the Government to force federation on people who do not understand it?
  Mr. Lyttelton: Every measure I can think of has been taken to explain the nature of federation to the population of these three territories. It is sometimes a little difficult to explain the difference, for example, between federation and amalgamation, for there is no word in the language to explain it, but at the same time we are doing everything we can.
  Mr. Hector Hughesasked the Secretary of State for the Colonies his
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  immediate policy regarding the proposed federation of Southern Rhodesia, Northern Rhodesia and Nyasaland, having regard to the results of the recent elections in Southern Rhodesia and Nyasaland.
  Mr. Lyttelton: The hon. and learned Gentleman probably has in mind the recent debate in the Legislative Council in Nyasaland and the referendum in Southern Rhodesia. The federal scheme has now been approved by both Houses of Parliament here and, in view of the result of the referendum in Southern Rhodesia and the debates in the Northern Territories, Her Majesty's Government have tabled a Bill seeking Parliamentary authority to promulgate a federal constitution for these Territories.
  Mr. Hughes: Does not the right hon. Gentleman realise that the success or otherwise of federation will depend upon whether the Africans understand it and are reconciled to it or not? Is he not doing anything to explain federation to them and to reconcile them to it with a view to making it a success?
  Mr. Lyttelton: That is not the Question on the Order Paper. I have already answered the hon. and learned Member on this point and perhaps I might repeat that we are doing everything we can. In fact, those previously opposed to federation are now urging all the people affected to co-operate in making it a success.
  Mr. Stokes: May I ask the Colonial Secretary whether "Doing everything we can" means that Her Majesty's local representatives all over the Colonies are doing all they possibly can to make it quite clear what the benefits of federation are?
  Mr. Lyttelton: Yes, Sir. If I might add to the right hon. Member's question, they are trying to counteract the propaganda of Congress, which seeks to show to the Africans that their land tenure is at stake. We are doing everything we can. There was a Question on the Paper which has not been called about increases in broadcasts and so forth.
  Mr. Speaker: May I make an appeal to the House? We are going very slowly and, if each individual Question

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  is argued at length, it is unfair to hon. Members who have Questions later on the Paper.
  Mr. Braineasked the Secretary of State for the Colonies what representations he has received to the effect that provision should be made for Africans to make an appeal to the United Nations or the International Court of Justice in connection with Federation proposals.
  Mr. Lyttelton: None, Sir. There is, of course, no provision in the United Nations Charter, the Statute of the International Court or any international instrument whereby the United Nations or the International Court would be entitled to discuss such an appeal. In particular there is no right of petition by any person or organisation to the United Nations in relation to the affairs of these territories.
  Mr. Braine: Would my right hon. Friend take steps to ensure that there is no misconception in the Central African territories which would encourage Africans to believe that the decision of Her Majesty's Government regarding federation could be overridden by a super-national authority?
  Mr. Lyttelton: I am taking steps to ensure that the position is widely understood.
  Mr. J. Griffiths: May I ask whether Her Majesty's Government have received a petition praying that the Africans may be heard at the Bar of this House, or, alternatively by a Select Committee of this House or by a joint Select Committee of both Houses, and whether any reply has been made to it?
  Mr. Lyttelton: That hardly arises from the Question on the Order Paper, but I am aware that a letter or a petition has been addressed, I think, to the Lord Chancellor or to some other Minister on this point. But I could not add anything to that at the moment.
  Mr. Griffiths: It is reported to us, Mr. Speaker, that a petition has been presented to you and to the Lord Chancellor. May I ask of you to whom we should address Questions to find out what, if any, reply will be made?
  Mr. Speaker: So far as the order of the matter is concerned, Petitions to this House are governed by strict rules and
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  only hon. Members can actually present Petitions through me. If I received a communication of that sort I should forward it to Her Majesty's Ministers with whom matters of policy lie, rather than with me. As a rule Petitions can be presented only by hon. Members with, I think, the exception of the Lord Mayor and the Sheriffs of London, who have the right also to present Petitions.
  Mr. Griffiths: In a matter of this kind where there might perhaps be misunderstanding, and a Petition might be presented to you on the assumption that the petitioners had the right to present it, would you undertake that a reply is sent to those responsible?
  Mr. Speaker: I will certainly undertake to do that.
  Mr. Snow: Where it can be demonstrated that there is an undertaking or contract between the Crown direct and the chiefs in question, is there not a right to appeal to the Speaker of the House of Commons?
  Mr. Speaker: Only hon. Members can do that. If an hon. Member presented a Petition which is in order it would receive attention.
  Mr. Snow: If I may repeat myself. If it can be shown that there is a direct contract or treaty between the Crown and the chiefs in question, is not there a right of appeal?
  Mr. Lyttelton: May I say that it is extremely difficult for Her Majesty's Ministers to answer questions which do not bear any relation to the Questions on the Order Paper.
  Mr. Snow: We are not asking the right hon. Gentleman, we are asking Mr. Speaker.
  Mr. Speaker: I think I have answered the question.
  Mr. Benn: May I ask for your guidance, Mr. Speaker? Is not your function to report to the House communications of this kind made direct to you? On certain occasions you do report to the House communications sent to you, such as condolences on the death of the Sovereign and so on. Is it not difficult, if a petition is addressed to you, for hon. Members to know how to take it further if you do not yourself report it to the House?
  Mr. Speaker: I receive a great number of communications and were I to present them all to the House we should never do any proper business. I have a discretion in the matter, though if it concerns a matter of policy which is a matter for Her Majesty's Ministers to pronounce upon and for the House to approve or disapprove I forward it to the Minister so that appropriate action may be taken.
  Mr. Philips Priceasked the Secretary of State for the Colonies what steps are being taken to reassure the African population of Northern Rhodesia and Nyasaland that, under the federation scheme, their territories and tribal rights will be respected and that progress will be made in eliminating such colour discrimination as exists to-day in these Colonies.
  Mr. Lyttelton: Government spokesmen at all levels are emphasising that the agreed Federal Scheme provides that the constitution will contain the fullest safeguards for African land. They are pointing out that these safeguards cannot be overthrown by the Federal or Territorial Governments but are under the special protection of the Secretary of State and her Majesty's Government. Tribal rights, being matters for the Territorial Governments, will remain as secure as they are to-day. Colour discrimination unfortunately cannot be removed by a constitutional instrument but the wider field opened up by Federation should promote partnership and co-operation between the races.
  Mr. Philips Price: In view of the extreme importance of obtaining the cooperation of the African population in Central African federation, is it not right to remove the great fears which they have of racial discrimination?
  Mr. Lyttelton: As I have said in reply to other questions, we are doing everything we can to make the position under federation clear to all those who will be affected.

  WEST INDIES

    Trinidad (Caura Dam Scheme)
    Mr. T. Reidasked the Secretary of State for the Colonies if he is aware that the execution of the Caura Waterworks
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    scheme for Trinidad has been unsatisfactorily managed; and if he will make a statement.
    Mr. Lyttelton: Major works on the Caura Dam scheme were suspended in March, 1948, owing to the financial position of the Trinidad Government at that time. The scheme was estimated to cost £1,400,000 over a third of which had then been expended. The project has since been put on care and maintenance: but provision for its completion is included in the Trinidad five-year economic programme. A commission of inquiry was appointed in 1950 to inquire into certain irregularities in the scheme, and its report was recently published. This disclosed shortcomings in the supervision and control of the scheme, particularly in the purchase of materials and heavy equipment, and the supply of transport. Disciplinary action has been taken against three of the officers involved.
    Mr. Reid: Have the funds for this scheme come from the Colonial Development and Welfare Fund or from the revenue of the Colony itself?
    Mr. Lyttelton: I am not sure that I have the information readily available, but I shall be glad to supply it to the hon. Member.

    St. Lucia (Vienx Fort, Development)
    Mr. Tilneyasked the Secretary of State for the Colonies what plans there are for the redevelopment of the Vieux Fort area of St. Lucia formerly used by the United States of America as an air and army base.
    Mr. Lyttelton: A team of experts who visited St. Lucia have recommended that grants be made from Colonial Development and Welfare funds to help develop this area, which they considered suitable for rearing livestock and dairy farming. These recommendations will be taken into account by the Development Commissioner whom we are now trying to find for St. Lucia.

    Economic Development (Tax Relief)
    Mr. R. Robinsonasked the Secretary of State for the Colonies which Colonies in the West Indies give taxation

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    relief in order to encourage new agricultural and industrial enterprise; and what measure of success is being produced by this policy.
    Mr. Lyttelton: Laws to encourage new enterprises by the grant of income tax and customs duty concessions have been enacted in Barbados, British Guiana, British Honduras, Jamaica, the Leeward Islands, Trinidad, Grenada, St. Lucia and St. Vincent. A number of enterprises have taken advantage of these concessions, but the legislation is too recent for a useful assessment of its value.
    Mr. Robinson: Is my right hon. Friend aware that if concessions are made by Colonial Governments to the British taxpayers and then they accrue in fact to the United Kingdom Treasury, the whole purpose of them is lost, and will he make representations to his right hon. Friend?
    Mr. Lyttelton: This is a very difficult question which I cannot reply to shortly.

    Trade and Timber Missions
    Mr. R. Robinsonasked the Secretary of State for the Colonies whether he has yet decided to publish the reports submitted to him by the trade mission and the timber mission both of which recently visited the West Indies.
    Mr. Lyttelton: I am still awaiting replies from some of the West Indian Governments which were consulted about publication.
    Mr. Robinson: In view of the fact that these trade missions returned to this country last year will my right hon. Friend do all he can to expedite publication of their reports?
    Mr. Lyttelton: Yes, Sir, but I must not publish them until I have the concurrence of all the Governments concerned.

    Sea Island Cotton
    Mr. R. Robinsonasked the Secretary of State for the Colonies whether he will take steps to encourage the sale of Sea Island cotton produced in the West Indies.
    Mr. Lyttelton: My Department maintains close contact with the West Indian Sea Island Cotton Association, which is responsible for promoting sales of this cotton. Expansion of demand for the high quality articles made of Sea Island
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    cotton is not easy at the present time, particularly when competing grades of cotton are selling at more favourable prices.
    Mr. Shinwell: May I ask the Minister, arising out of these Questions, which affect economic development in the West Indies, whether he does not realise that there is little prospect of sound economic development unless some effort is made to improve the transport facilities, which are in a shocking and inadequate condition?
    Mr. Lyttelton: I do not think the question of transport is one which concerns this particular matter of Sea Island cotton.
    Mr. Shinwell: Does not my supplementary question arise out of the subject of economic development, whether it concerns the encouragement of Sea Island cotton or anything else? The right hon. Gentleman must really do something about this.

  NORTHERN RHODESIA

    Firearms (Licences)
    Mr. Alportasked the Secretary of State for the Colonies what regulations now exist with regard to the carrying of firearms by Africans in Northern Rhodesia; how many arms licences have been issued to Africans during the last 12 months; and what is the licence fee.
    Mr. Lyttelton: Both Europeans and Africans must possess annual licences as prescribed in the Arms and Ammunition Ordinance. The number of firearms licensed to Africans in 1952 was 46,940, a very large number of which are muzzle loaders whose main use is ceremonial, or bird scaring. The licence fee varies from 2s. 6d. to 5s. per weapon with a maximum of 10s. for any total number of arms.

    Ndola Airport (Colour Bar)
    Mr. Sorensenasked the Secretary of State for the Colonies, in view of the colour discrimination operating at the Ndola airport in Northern Rhodesia, if he will make representations to the Northern Rhodesian Government to secure such a modification of the existing practice as will avoid offence to educated Africans.
    Mr. Lyttelton: The Government of Northern Rhodesia is considering arrangements which, it hopes, will be satisfactory to all communities.
    Mr. Sorensen: Is the right hon. Gentleman aware that meanwhile considerable humiliation has been imposed upon educated Africans in refusing them lavatory and toilet facilities that are available to Europeans? While there may be justification in the case of some types of Africans, there is no justification for this discrimination between Europeans and educated Africans for lavatory and toilet facilities.
    Mr. Lyttelton: The arrangements which the North Rhodesian Government are considering arise from an incident to which the hon. Member has referred.
    Mr. Noel-Baker: Will the right hon. Gentleman use every opportunity to bring home to the authorities in Northern Rhodesia the great importance of effectively getting rid of the colour bar?
    Mr. Lyttelton: I think that the Northern Rhodesian Government are fully aware of these questions.

  NIGERIA

    Ministerial Appointments (Letter)
    Mr. N. Macphersonasked the Secretary of State for the Colonies whether he is aware of the decision of the Eastern Region Parliamentary Committee of the party led by Dr. Azikiwe in Nigeria that Ministers belonging to the party must sign an undated letter of resignation before appointment, to be kept by a person who is not a member of the Eastern Region House of Assembly; and what steps he is taking to safeguard the electorate against this undemocratic practice.
    Mr. Lyttelton: I am informed that the National Executive Committee of this party did require such letters to be furnished by those whom it nominated to replace the present Ministers in the Eastern Region. These letters were to be kept for use should the nominees fail to obey the party dictates, but in fact none of these nominees has been appointed to office. I hope that the
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    House will join me in condemning this threat to democratic Parliamentary Government in that Region. The only effective safeguard against it lies in the sense of responsibility of members of the Regional Legislature and electorate and I propose to ask the Governor to give this Question and answer wide publicity in Nigeria.
    Mr. J. Griffiths: As one responsible for bringing this constitution into operation, may I ask to be able to join in making an appeal to our friends in Nigeria, who are embarking on a very great scheme of self-government and Ministerial responsibility, that in these matters they would be well advised to follow the good practice obtaining in this country?
    Mr. Lyttelton: I should like to thank the right hon. Member for that.

    Criminal Code Prosecutions
    Mr. J. Johnsonasked the Secretary of State for the Colonies on what charges Dr. Nwafur Abyssinia Orizu, Eastern Regional Secretary of the National Council of Nigeria and the Cameroons and his brother Joseph Orizu have been brought to trial in Nigeria.
    Mr. Lyttelton: The brothers Orizu have been charged under the Criminal Code of Nigeria with conspiring to defraud persons who might be induced to deposit money with them as agents for a body known as the American Council on African Education Incorporated, and with stealing from such persons.
    Mr. J. Johnson: Can the Minister tell us why this Dr. Orizu has only now been hauled before the courts, because I gather he has been doing this since, I think, 1948? Is not it somewhat disgraceful that it has taken so long to investigate this case of defrauding parents and students?
    Mr. Lyttelton: I cannot answer that question without notice. I might hazard that the evidence may have taken some time to collect, but if the hon. Member will put down a Question, I shall be glad to answer it.

    Abeokuta Water Rate
    Mr. Sorensenasked the Secretary of State for the Colonies in view of the imprisonment of women in Abeokuta and

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    the seizure of their goods because of nonpayment of the water rate, what action has been taken to deal with the problem and the grievances of the women.
    Mr. Lyttelton: This is a matter for the Western Regional Government of Nigeria. My information is that the collection of water rate in Abeokuta has been proceeding smoothly, and that the number of defaulters against whom court actions have been taken represents only a small proportion of the total number of persons who have paid it without any pressure from the Native Authority.
    Mr. Sorensen: Can the Secretary of State say how many of these women have been imprisoned or are in prison now for non-payment of water rate? In view of this position, will not the right hon. Gentleman make some representation to the Western Regional Government to consider this matter, in view of the very great grievance that is felt in the area?
    Mr. Lyttelton: My information is that a very small number have been punished. I think the hon. Member will realise that in the case of these advanced constitutions, the occasions when Her Majesty's Government should intervene must be strictly limited.

  GOLD COAST (TEMA DEVELOPMENT CORPORATION)
  Mr. N. Macphersonasked the Secretary of State for the Colonies the composition of the Tema Development Corporation; to whom it is responsible; and how it is to be financed.
  Mr. Lyttelton: The Corporation, which is expected to be set up within the next few months, will consist of a chairman, a managing director and eight members appointed with the approval of the Governor-in-Council by the Minister of Local Government and Housing, to whom the Corporation will be responsible. It will be financed by grants and loans from the Gold Coast Government.

  MALAYA AND SINGAPORE

    Tin Mining Industry (Wage Negotiating Machinery)
    Mr. Awberyasked the Secretary of State for the Colonies what steps he is taking to establish wage negotiating
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    machinery for the 40,000 workers in the tin mining industry of Malaya.
    Mr. Lyttelton: It is the policy of the Government of the Federation to improve the machinery of collective bargaining in the tin mining industry by encouraging the growth of sound trade unions.
    Mr. Awbery: Is the Minister aware that even if we destroyed the bandits and won the war in Malaya, if we lose the confidence of the people in the tin mines and on the plantations we shall have lost Malaya? In order to create confidence and to maintain it, it is necessary to have a wage negotiating machine that will give the men confidence that they will get a square deal. Will the Minister take the initiative in establishing this machine in the tin mines of Malaya?
    Mr. Lyttelton: In reply to the hon. Member's Second Reading speech on this matter, may I say—[HON. MEMBERS: "Cheap!"]—that the Government can only provide the machinery for the setting up of trade unions. It rests with the employees themselves to make use of the machinery.
    Mr. Awbery: May I ask that the Minister, if he cannot answer a supplementary question, will not be insulting?
    Mr. Lyttelton: I did answer the question. All the Government can do is to try to provide the machinery, and that they have done.
    Mr. Awbery: Will the Government take the initiative and encourage the setting up of the machinery in the tin mines of Malaya?
    Mr. Lyttelton: The Government have set up the machinery. They cannot themselves form the trade unions. They have provided the necessary machinery but they must let the movement take place spontaneously.

    Postal Clerks (Pay Dispute)
    Mr. Awberyasked the Secretary of State for the Colonies in view of the fact that the postal clerks of Singapore were claiming 44 months' back-pay and the recent award of arbitration proceedings conducted by Mr. Yong awarded 28 months, whether he will take steps to bring about speedier negotiations to obviate such long periods of retrospective

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    pay, and to deal with the outstanding difficulties not specifically dealt with by the arbitration court.
    Mr. Lyttelton: I agree that delays in negotiations are undesirable, especially if they have the consequences suggested. The Government of Singapore are fully alive to this and I see no need to intervene.
    Mr. Awbery: Is the Minister aware that the main cause of the strikes in Malaya, and we have had quite a number during the past 12 months, is the delay caused by the prolongation of the negotiations, particularly in Government Departments, and will he take steps to see that these negotiations are not prolonged?
    Mr. Lyttelton: I agree it is undesirable that the negotiations should be so prolonged. But the hon. Member is probably aware that the award of back pay in the case to which he refers is not due to the length of the negotiations but to the fact that the union wanted retrospective effect to August, 1949, on which date the Federal Government had made concessions to similar workers.

  GAMBIA (DAMAGE BY ANIMALS)
  Mr. Sorensenasked the Secretary of State for the Colonies what steps have been taken to deal with the increased losses in Gambia caused by pigs, monkeys and baboons: how far the carcasses of pigs slaughtered are destroyed locally; and how far they are exported.
  Mr. Lyttelton: When I was in the Gambia last year, there seemed some danger that the baboons and pigs were taking over the administration of some parts of the Protectorate from the Colonial Service. I am happy to state that as a result of the Gambia Government's campaign for the destruction of baboons and other animal marauders, the danger of a change in the administration has been averted, and there is now a significant decrease in the losses of crops and foodstuffs. Over 50,000 baboons, 26,000 destructive monkeys and 25,000 wild pig had been killed by the end of last year. The campaign continues. The carcasses of wild pig are destroyed locally. The Mohammedans
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  of the Gambia Protectorate do not eat pig, and export is not practicable.
  Mr. Sorensen: Is the Secretary of State aware that there are, in fact, statements to the effect that some of the Mohammedans who are unable themselves to eat the pigs are trading in them? Will the right hon. Gentleman make further inquiries about this?
  Mr. Shinwell: Is all this part of the cold war?

  SOUTH-EAST ASIA (PAMPHLET)
  Mr. F. Macleanasked the Secretary of State for the Colonies whether the official pamphlet published by the British Commissioner-General in South-East Asia under the title, "Healing Thoughts," represents the policy of Her Majesty's Government.
  Mr. Lyttelton: I understand that the pamphlet contains a review by the Commissioner General for South-East Asia of relations between the peoples of the West and those of Southern Asia. It is not a statement of Government policy.
  Mr. Maclean: Can my right hon. Friend say what action he proposes to take in order to make this clear?
  Mr. Lyttelton: I have not yet seen the pamphlet. As soon as I receive it, I will make inquiries and see what action is appropriate.
  Mr. J. Griffiths: As the Press report of the pamphlet seems to indicate a wide expression of very good sense opinion, will the right hon. Gentleman see that copies are made available in the Library?
  Mr. Lyttelton: I will certainly put copies in the Library.

  ROYAL NAVY

    Dartmouth College (Cadet Entry)
    Dr. Kingasked the First Lord of the Admiralty how many boys from secondary grammar schools, and how many boys from independent and direct-grant schools, passed the recent written examination for the Royal Naval College, Dartmouth; and how many of each group were selected for cadetships by the interviewing board.
    The Parliamentary and Financial Secretary to the Admiralty (Commander Allan Noble): Forty boys from secondary grammar schools and 46 from independent and direct grant schools passed the written examination in the competition for the entry in May, 1953, of naval cadets at age 16. The interview board passed 17 and 34 boys, respectively, from these groups of schools.
    Dr. King: I congratulate the public school boys on their success. Is the Minister aware, however, that many of us are concerned about the comparative failure of grammar school boys to satisfy an interviewing panel that they, too, contain the qualities necessary in young officers? Does not the Minister think that the time has come either to reform grammar school education or to change the interviewing panel?
    Commander Noble: I ask the hon. Member to await the report of the Committee which my right hon. Friend has set up to examine this subject. I have, however, some information which might interest the hon. Member about this entry. Of the first five successful candidates for the executive branch in the present examination, three—the first, fourth and fifth—were grammar school boys. Of the candidates who were successful both in the written examination and at the interview, the four with the highest interview marks came from grammar schools.
    Mr. Niall Macpherson: To get this matter in perspective, can my hon. and gallant Friend state the total intake?
    Commander Noble: I think my hon. Friend will find the intake from the figures I have given.
    Mr. Hamilton: Will the Minister circulate in the OFFICIAL REPORT the names of the members of the interviewing board.
    Commander Noble: I will consider that, but I think that the names of the interviewing board have been given to the House before.
    Mr. Ede: Without revealing the individuals involved, but by some means by which the order can be indicated, could the hon. and gallant Gentleman publish a list showing the actual marks obtained by each candidate in each part of the examination?
    Commander Noble: I will certainly consider that, but these are the sort of points that would be best discussed when the report comes before hon. Members.
    Brigadier Raynerasked the First Lord of the Admiralty when the report on cadet entry to Dartmouth College will be published.
    Commander Noble: My right hon. Friend has decided to publish this report: publication will take place as soon as possible.

    Destroyer, Newport (Coronation Visit)
    Mr. Peter Freemanasked the First Lord of the Admiralty whether he will arrange for ships of Her Majesty's Fleet to visit Newport during the Coronation festivities.
    Commander Noble: Arrangements are being made for Her Majesty's Ship "Aisne," a destroyer, to visit Newport from 29th May to 4th June.

    Coronation Naval Review
    Mr. Benceasked the First Lord of the Admiralty (1) the number of ships chartered for the accommodation for guests of Her Majesty's Government for the Naval Review on 15th and 16th June; and the cost of chartering;
    (2) the estimated cost of providing transport for guests of Her Majesty's Government to the Naval Review at Spithead on 15th and 16th June;
    (3) the estimated cost of providing accommodation for the guests of Her Majesty's Government on board Her Majesty's ships at the Naval Review at Spithead on 15th and 16th June.
    Commander Noble: Three liners are being chartered for the accommodation of guests of Her Majesty's Government for the Naval Review on 15th June. A number of guests will also be accommodated in an aircraft carrier and certain other of Her Majesty's Ships. It is not normal to give the details for which the hon. Member asks, but the total for these items will be about £43,000.
    Mr. Bence: Will the hon. and gallant Gentleman tell us whether these liners have been drawn out of normal trade or whether they were laid up? Would he not

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    agree that this seems to be a travesty of social values when we are giving free accommodation and free transport at this time and then putting on a charge on surgical instruments for sick people?
    Commander Noble: The three liners in question were chartered out of service. I think I am right in saying that, but I will confirm it. With regard to the hon. Gentleman's other Question, I do not think that that is at all the view of the House, or, indeed, the view of his colleagues, because the response to my right hon. Friend's invitation to come to the Review has been considerable.

    Royal Yacht "Britannia"
    Mr. Emrys Hughesasked the First Lord of the Admiralty when the "Britannia," recently launched in Clyde-bank, is to be completed; and what would be the estimated cost of making the necessary alterations to make the vessel into a hospital ship.
    Commander Noble: The "Britannia" is due to be completed by the end of this year. The cost of her conversion into a hospital ship is estimated to be between £160,000 and £200,000 at the present levels of costs.
    Mr. Hughes: Would the Minister say if this sum is in addition to the £1,800,000 which is already estimated to be the cost of this royal yacht? Has his attention been drawn to the fact that President Eisenhower has just laid his yacht aside on the grounds that it is a useless symbol of luxury, and will he consider handing over this yacht to the hospital authorities in order that the sick may be taken care of?
    Commander Noble: The answer to the first part of the supplementary question is, "Yes, Sir." With regard to the second part, I think the House will agree that the position here is very different to that in America. This yacht is to enable Her Majesty to travel vast distances to visit the Commonwealth and Empire, and I think that Her Majesty should have a yacht in accordance with our traditions as a maritime nation.
    Mr. Shinwell: Without making any comment on the merits of the Question, do I understand from the hon. and gallant Gentleman's reply that it is the intention of Her Majesty to use this yacht
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    "Britannia" for the purpose of visiting the Commonwealth? Is it not the case that, if Her Majesty does go to the Commonwealth, she will use a warship?
    Commander Noble: The purpose of this yacht is to enable Her Majesty to travel in the Commonwealth and Empire.

  FOUR-POWER TALKS
  Mr. A. Hendersonasked the Prime Minister whether he will make a further statement on the holding of informal talks at the highest level, in view of the recent official Soviet statement that they are prepared to enter into serious businesslike discussions.
  The Prime Minister (Sir Winston Churchill): I have read the editorial which appeared in "Pravda" on 25th of April. I should be very glad to learn that informal talks could be held at the highest level and that they would lead to "serious businesslike discussions." I may be able to deal with these issues more fully in a debate on foreign affairs in the near future. I do not wish to anticipate any statement which I may make on that occasion.

  LONDON TELEPHONE DIRECTORY
  Sir Edward Keelingasked the Assistant Postmaster-General if he is aware of the inconvenience to telephone subscribers in London and its vicinity, especially private subscribers, of a telephone directory occupying four large volumes; and what changes he is making.
  The Assistant Postmaster-General (Mr. David Gammans): For some time past, the Post Office has been faced with the problem of what to do about the London Telephone Directory. There are now four volumes weighing almost 17 lb. with well over a million subscribers. A fifth volume would soon be required. Quite clearly, something had to be done. Instead of continuing with this cumbersome arrangement, it has been decided as from the 1st January, 1954, to restrict the four volumes to the London Postal Area, that is, that part of London where there is a letter and a number in the postal address. This will, of course, mean that the four volumes will be smaller and more-convenient to handle.

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  The outer districts of the old London directory area, which stretch from Welwyn in the North to Reigate in the South and from Gravesend in the East to Uxbridge in the West will be divided up into five county areas—Surrey, Kent, Essex, West Middlesex, and Hertfordshire and North Middlesex, each with its own directory. Each subscriber will, of course, have free of charge the directory in which his name appears and any of the other areas for which he may apply. Business subscribers in the county areas will, without application, get the four London postal area directories as well.
  This arrangement will not only, in my noble Friend's opinion, be a considerable convenience to subscribers, but will save about £250,000 a year. It does not in the least affect the telephone service given, i.e. subscribers who now dial from one part of the area to another will continue to do so, nor does it change in any way the present charges for calls or the rental charges.
  Sir E. Keeling: Can my hon. Friend say how the weight of the new directory for the London postal district will compare with the present weight of 17 lb. of the Greater London directory; and could he also say how much easier it will be to find a name? For instance, how many Smiths will there be, compared with the 6,000 in the present directory?
  Mr. Gammans: The weight of the four London volumes will be roughly half what it is at present. There are now 41 pages of Smiths, and there will be about half that number in the four new volumes.
  Mr. W. R. Williams: While appreciating that the size of the directory is a matter which gives concern, can the Minister say, having regard to the affinity of business interests and so on in the whole of this area, what effect it will have on the staffing of the Directory Inquiries service in the London exchanges?
  Mr. Gammans: Roughly half the inquiries now made are for numbers and names which are already in the directory, but which people do not find because it is too bulky. It is true that we are re-arranging the Directory Inquiries service, and I do not anticipate any difficulty on that score.

  TELEVISION

    Wenvoe Station
    Dr. Kingasked the Assistant Postmaster-General if he will take steps to raise the output strength of Wenvoe station before Coronation Day.
    Mr. Gammans: The television transmitter at Wenvoe has been working since last December at the full output strength planned by the B.B.C., which the Corporation inform me gives the maximum coverage possible from this station.

    Sports Advisory Committee
    Miss Burtonasked the Assistant Postmaster-General if he will now give a definite date when the Sports Television Advisory Committee will be reconvened.
    Mr. Gammans: My noble Friend has written to the Chairman of this Committee on the general question of its future activities, and I will advise the hon. Member of the outcome.
    Miss Burton: Is the Assistant Postmaster-General aware that this Committee has been anxious for a long time whether or not it is to be re-convened, and if it would not serve a useful purpose if that were to be the case?
    Mr. Gammans: Yes, I can give the hon. Lady that assurance.

  URGENT LETTERS (OVERSEAS TRANSMISSION)
  Sir E. Keelingasked the Assistant Postmaster-General whether he will suggest to the Universal Postal Union an international arrangement whereby urgent letters for conveyance by air to another country may be handed in at an air terminal in the same way that urgent letters may be handed in at an air terminal for conveyance to another part of Great Britain.
  Mr. Gammans: I am making inquiry into this matter, and will write to my hon. Friend shortly.
  Sir E. Keeling: I am much obliged.

  ROYAL AIR FORCE

    Personal Case
    Mr. E. Johnsonasked the Undersecretary of State for Air on what grounds 4018853 Leading Aircraftsman Chester was discharged from the Royal Air Force.
    The Under-Secretary of State for Air (Mr. George Ward): After representations about this airman's personal difficulties had been made to me by the hon. Member for Clayton (Mr. H. Thorneycroft) and my hon. Friend the Member for Blackley (Mr. E. Johnson), L.A.C. Chester was discharged on the grounds of "Services no longer required." This heading is used in cases of discharge which do not readily fall under any other heading in Section 652 of Queen's Regulations. However, after further consideration of all the circumstances, it has been decided to alter this entry in L.A.C. Chester's Certificate of Service to read "Free as an indulgence at own request." If he will return his certificate, I shall arrange for the alteration to be made.
    Mr. E. Johnsonasked the Undersecretary of State for Air on what grounds the officer commanding, No. 1 Wing, O.L.H.S., Royal Air Force, Lytham, refused to write more than the word "Nil" on the page provided for "Additional Information and Recommendation for Employment" on the Royal Air Force Form 856 issued to 4018853 Leading Aircraftsman Chester on his discharge from the Royal Air Force.
    Mr. Ward: I understand that when he was being discharged L.A.C. Chester refused an offer to have this page of his certificate of service completed by his parent unit in Germany. If the airman has now changed his mind, perhaps he would say so when he returns his certificate of service to have the entry on page 2 altered.
    Mr. Johnson: Is my hon. Friend aware that I have a sworn statement by Mr. Chester to the effect that his commanding officer sent a warrant officer to him with the message that, if he insisted on a reference being given, he would write something which would prevent him from
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    ever getting employment; and that he further said that he should not have gone bothering a Member of Parliament and causing trouble, but ought to have gone on with his service?
    Mr. Ward: I know nothing about that, but if my hon. Friend will write to me, I will certainly look into it.

    Airfields (Cultivation)
    Mr. Rentonasked the Under-Secretary of State for Air what steps he is taking to ensure that grass growing between runways and land that can be cultivated on Royal Air Force aerodromes is put to the fullest possible agricultural use.
    Mr. Ward: During last winter, the Air Ministry, in conjunction with the Ministry of Agriculture, carried out an individual examination of the agricultural use being made of every airfield under its control. The airfields in active use by the Royal Air Force comprise some 170,000 acres, of which about half cannot be cultivated for one reason or another—for example because they are covered by concrete runways. Some agricultural use is made of virtually all the remaining 85,000 acres and my noble Friend has the possibility of intensifying this agricultural use constantly in mind.
    Mr. Renton: Is my hon. Friend aware of the possibilities of developing commercially the drying of the grass which grows inevitably in the strips between runways on aerodromes? Will he say what conclusions he has reached upon that matter?
    Mr. Ward: Yes, we have examined that matter recently, and, as a result, flying restrictions have been modified where possible to permit a reduction of the width of the grass safety margin to perimeter tracks and runways.
    Colonel Gomme-Duncan: May I ask whether in connection with aerodromes in Scotland the hon. Gentleman will consult the Secretary of State for Scotland on this agricultural matter?
    Mr. Ward: Yes, Sir. We have worked very closely with the Department of Agriculture in Scotland..

KENYA (SITUATION AND PLANS)
Mr. Lyttelton: I will now with permission answer Questions Nos. 32, 33 and 36.
First, the plans of the military and police in dealing with Mau Mau, secondly the plans for dealing with the advancement of Africans, the economic future and the expansion of Kenya's natural resources, and, thirdly, I wish to give a very short account of recent events.
The security forces are faced with three main problems: first, the armed gangs, operating in the Rift Valley Province and in several districts in the Central Province; second, thugs or assassins carrying out the murder of informants, police officers, and loyal citizens in Nairobi City; and, third, mass attacks on loyalist Kikuyu in the reserves.
The restoration of law and order remains primarily the responsibility of the police and its reserve supported by the military forces and by the Home Guard. The control of all operations in the Colony remains with the Governor. To enable him to see that decisions on all aspects of the emergency are taken and carried out speedily, the Governor has set up an Emergency Committee, under his Chairmanship, composed of the Chief Secretary, the Members for Finance and Agriculture, the G.O.C., East Africa Command, General Hinde and Mr. Blundell.
He has also given General Hinde, who now has the title of Director of Operations, authority over all officers of Government in carrying out the Governor's policy for dealing with the emergency. Every step is being taken to protect loyal Kikuyu and for this purpose district officers are organising increasing numbers of Home Guards, in the reserves, on the farm and in the forest areas, which must play an important part in this protection.
I now turn to the wider outlook in my second heading. If Kenya cannot meet all the additional costs which these measures involve from her own resources, I shall be ready to discuss with the Chancellor of the Exchequer the question of financial assistance from Her Majesty's Government. It would, of course, be for the Kenya Government to establish their needs but any grants made by Her
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Majesty's Government would not be on onerous terms or such as to hamper proper development, including the provision of social services.
In addition, it has been decided, with the concurrence of the Chancellor, that in order to promote further development, the Colonial Development and Welfare money allocated to the Kenya Government should be increased by £500,000 against suitable schemes.
As the House knows, the Governor has set up a Committee on African Advancement over which the Governor himself presides, which is considering a wide range of problems. These include African wages and incentives; African housing in town and country; financial assistance to African traders and farmers; land for African settlement; compulsory African education in urban areas; elementary technical education for Africans; African apprenticeship schemes; development and financing of African local government; level of African pensions, and research schemes in African areas. The fact that the Committee is reviewing these subjects does not mean that no action has already been taken by the Government.
The Governor, with my approval, announced on 10th April that as soon as the present acute period of the emergency was over and the situation permitted it, constitutional talks would be held within a few months. In the meantime, there would be no constitutional changes or increase in the number of portfolios held by non-officials.
I now turn to a short account of recent events. Members of a newly established so-called Central Council of Mau Mau were recently arrested. Police investigations revealed that after other leaders had been detained, a group of Africans (all but one being Kikuyu) had established a so-called Central Council to direct Mau Mau both in the city and in a number of districts throughout the Central Province. They set out to direct the campaign of terror particularly in the reserves. About 10 days ago the Kenya police arrested 15 members of this Central group and seized documents.
There is strong evidence that the Uplands massacre was planned by this group, and 260 Africans have now been accused of those murders. The first trial,

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involving 26 accused, began on 13th April, and the hearing will last three to four weeks. A second trial involving 73 accused was due to begin yesterday, Tuesday, and about 18 further trials will follow. This illustrates the strain on both the police and the administration of justice.
Other operations of importance were the clearance of the Mathari and Kario-Bangi areas near Nairobi. The evacuation of these areas had been ordered by the Supreme Court. Gangs of armed thugs were known to be using these areas. Twelve recent murders have been traced to them as well as numerous attempted murders and robberies with violence. There was evidence that a Mau Mau "court" had been functioning in Kario-Bangi and sentencing loyal Africans to death. In this area, last Friday, 6,000 people were held for questioning, and 530 of these detained.
The police and the Administration are finding alternative shelter for those who are not wanted for crimes or are not required for further screening. I propose to pay an early visit to Kenya to consult with the Governor and again view the situation at first hand. I hope I may express the deep sympathy of the House over the murder of two members of the Meloncelli family, but I cannot supplement the Press accounts of this terrible crime.
Mr. J. Griffiths: While associating ourselves with the sympathy expressed by the Secretary of State for the Colonies in his last reference, may I ask him two questions? First, I think it is right to set up the emergency committee and to associate the leaders of the Europeans with it, but would it not be advisable and desirable also to associate with that committee a representative of the Africans and of the Asians in the Legislative Council? Is it not desirable to maintain and to symbolise in this committee the racial unity which is so important in Kenya?
My second question is with regard to the further sum to be allocated from the Colonial Development and Welfare Fund. Can the right hon. Gentleman say whether that is for specific objects, and, if so, will he give some details?
Mr. Lyttelton: I will answer the second question first. I said in my statement
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that it was against specific schemes, though as this has only recently been done I cannot give the right hon. Gentleman details. The £500,000 has to be against specific schemes of which I should be glad to give details when I have them.
In answer to the right hon. Gentleman's second question, it is, of course, highly desirable that in the emergency all races should be associated. That has not been possible at this juncture with regard to this emergency committee. [HON. MEMBERS: "Why not?"] Because suitable representatives cannot be found at this moment. But the Government of Kenya have this very much in mind, and I can assure the right hon. Gentleman that there are going to be no further additions to the non-official portfolios until the Inter-Racial Conference which he promised—and I stand by that promise—has been held.
Mr. Brockway: I wish to ask the right hon. Gentleman two questions. First, will he make an effort to secure the cooperation of African and Asian leaders who have the trust of their communities? Does the right hon. Gentleman really mean to say that there is neither an African nor an Asian Member of the Legislative Council who might be brought on to the emergency committee?
My second question is whether the right hon. Gentleman will now consider, and more particularly when he goes to Kenya, whether it is desirable to continue policies which are only driving more Africans into sympathy with the Mau Mau movement? Will he particularly consider the points which I have put in my Question No. 36 today? For instance, houses are being destroyed as collective punishment. Is it not the case that in the neighbourhood of Nairobi 6,000 houses in an African settlement have been destroyed and the population—
Mr. Alport: On a point of order. Have you not asked the House to be as brief as possible with supplementary questions, Sir? Hon. Members on this side forwent their supplementary questions, although some of them would like to speak on this subject. When a number of hon. Members want to ask supplementary questions is it not possible to keep them as short as possible?
Mr. Speaker: It is a very reasonable request that supplementary questions

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should be short and not made the occasion for long statements.
Mr. Brockway: The points to which I referred were in my Question to the right hon. Gentleman, and he ignored them.
Mr. Lyttelton: The hon. Member has asked a number of supplementary questions. In regard to the 6,000 houses, I have already explained the reasons. The Supreme Court had ordered evacuation of this area and the houses, of course, were cleared. The reason why they were cleared is that this was a centre from which the assassins were trying to operate. The hon. Gentleman has also suggested that the policy being pursued in Kenya is driving more and more Kikuyu into the arms of Mau Mau. There is absolutely no justification whatever for that statement. If there was a scintilla of truth in it, how does the hon. Gentleman explain the ever-increasing number of Home Guard?
Mr. Nicholson: My right hon. Friend said that there would be a grant-in-aid from the Treasury which would not be upon onerous terms. Does that mean there will be no strings attached?
Mr. Lyttelton: I meant that the terms would be such as not to hamper the Kenya Government in dealing with the emergency.
Mr. Hale: Will the right hon. Gentleman please reconsider his statement that there is no African or Asian in Kenya upon whom the Government can rely to participate in the emergency committee? Does he not realise that this is an affront to the great Commonwealth of Nations? As he knows, there are many distinguished Indians in Kenya. Would he not correct Ms statement at once, and give me an answer to Question No. 33, in which I asked him what economic reforms had been instituted in Kenya since October, 1952, and what further reforms were contemplated? Has any step been taken to give a subsidy on posho or, if not, is any step to be taken?
Mr. J. Griffiths: May I support my hon. Friend in asking the Secretary of State to correct his statement, as I am
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sure he would not like a wrong impression to go out? It is vital to get the co-operation of Africans and Indians. Will he reconsider the matter?
Mr. Lyttelton: It is not for me to reconsider it. This emergency committee is an entirely advisory committee and is concerned only with the course of operations. It is advising the Government, and it has not found two representatives willing to serve. I will certainly look into the matter when I get to Kenya. I cannot do anything at present.
Mr. J. Johnson: Will the right hon. Gentleman kindly answer my Question No. 32? Is there any chance of the Minister thinking again and convening again the Inter-Racial Conference of which Sir Alfred Vincent was Chairman? Would this not be a helpful and hopeful gesture to loyal Africans who are backing us up in the fight against Mau Mau?
Mr. Lyttelton: The hon. Gentleman has had repeated assurances from me that as soon as I am satisfied there is a reasonable chance of the Inter-Racial Conference reaching results it will be convened. He surely must know that in the present state of affairs in Kenya the convening of such a conference could only lead to frustration and failure. That is what I have in mind.
Mr. Noel-Baker: While everybody welcomes this extra £500,000, will the right hon. Gentleman bear in mind, apart from the present emergency, the need for development of all kinds, which means that the Kenya Government must, in the near future, require very large sums of money. If he should propose the granting of interest-free loans, the right hon. Gentleman will have full support from this side of the House.
Mr. Lyttelton: The right hon. Gentleman is not doing full justice to my statement, in which I said that the £500,000 is from the Colonial Development and Welfare Fund. He will remember that I also referred to grants-in-aid, for which the Kenya Government will be required to establish their need, and it will not be granted on onerous terms.

BRITISH ARMAMENTS INSPECTION (GENERAL SPEIDEL)
Mr. Ivor Owen Thomas(by Private Notice) asked the Prime Minister whether he is aware that General Hans Speidel, former Chief of Staff to General Rommel and now German representative on the Military Committee of the European Defence Community, will be among military representatives for E.D.C., N.A.T.O., and Commonwealth countries who are to be shown Britain's armaments strength next week; that at the invitation of the Minister of Defence, he will be among those who are to tour armament factories and Army centres and camps and to whom defence secrets will be disclosed; and whether the Prime Minister will make a statement on the matter.
The Prime Minister: Representatives of other Commonwealth countries, of the North Atlantic Treaty Powers and of the Interim Commission of the European Defence Community have been invited to attend special demonstrations which are to take place during the next fortnight in certain Army establishments in this country and at the Royal Aircraft Establishment at Farnborough. The representatives of the European Defence Community will include Herr Doktor Speidel (who is the German representative on the Military Committee of the Interim Commission).
I do not know any reason why the former Chief of Staff of General Rommel should be under any exceptional disability. [HON. MEMBERS: "Oh."] On the contrary, in the height of the war, I paid my tribute to General Rommel's outstanding military gifts and I am bound to say now, in time of peace, that I also regard his resistance to the Hitler tyranny, which cost him his life, as an additional distinction to his memory. I hope that this is the kind of statement which the hon. Member would wish me to make.
Mr. Thomas: While thanking the Prime Minister for his reply, may I ask whether he would not agree that it is rather an affront to the men who fought on the North African coast against the Rommel Army, which was assisted by General Hans Speidel, who was doubtless a member of the German officer class which made itself the willing partner of the Nazi regime? Is it not a bit out of place for the Prime Minister himself to pay tribute to such a person?
The Prime Minister: I only said now, in peace, the same kind of thing that I said in the middle of the war. If the hon. Member's line were taken there would be no peace possible between these great branches of the human family. This keeping alive of hatred is one of the worst injuries that can be done to the peace of the world, and any popularity gained thereby is shame to the Member who attempts to gather it.
Mr. Shinwell: Would the Prime Minister be good enough not to display unnecessary excitement over this? Would he realise that this has nothing to do with hate of the Germans? Will he address himself to this simple question: is it wise, is it in the interest of security, with which he is obviously concerned, as he must be, that this ex-Nazi should be permitted an inspection of modern British arms at this time? Is the right hon. Gentleman aware that whatever complaint he may have made against the late Labour Government on matters of this sort—and he made many—at the very least we never permitted ex-Nazi generals or ex-enemies to view British arms?
The Prime Minister: This is a direct execution of the policy of creating N.A.T.O. and supporting the E.D.C. movement which right hon. Gentlemen opposite have to their credit, I think. This particular officer, Speidel, who has now left the regular army but has been chosen to be the representative on the international committee which forms the foundation of our attempt to build up a Western front under E.D.C. and N.A.T.O., is a man who has, I believe, for a long time past, enjoyed the confidence of British and other allied military officers. He has attended our manœuvres in Germany. It is no use the right hon. Gentleman shaking his head. I am telling him. In Germany, this officer is a much respected man.
As to his being an ex-Nazi, there are many people in Germany who were Nazis to support their country, but who did not associate themselves with the crimes of the Nazi regime. I believe it is a great factor in the peace of the world to separate those who were the active and vigorous servants and supporters of Hitler and his crimes and tyrannies from those who tried to keep the honour of the German name clear from those charges. And here is a man who was the

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intimate friend and supporter of General Rommel, who gave his life in resisting one of the wickedest régimes that has ever brought misery on the human race.
Mr. Shinwell: Apart from all this verbiage into which the right hon. Gentleman has unnecessarily descended—
The Prime Minister: The right hon. Gentleman does not like it anyhow.
Mr. Shinwell: Is the right hon. Gentleman aware that there are many things that he says which I dislike—and with very good reason. But will he address himself to this question? Is he aware that the West German Government are not yet members of N.A.T.O.? Is he also aware that the West German Government, of whom this gentleman is presumably a representative, have not yet definitely decided to enter the European Defence Community? Would it not be wiser to wait until the West German Government have decided to become members of the European Defence Community and make their contribution to Western defence, with which we are primarily concerned, before permitting this man to view modern British arms?
The Prime Minister: This is the interim committee. There has been a very long delay in establishing E.D.C. and also in bringing into being that German element in E.D.C. without which no pretence can be made of defending Western Europe; and this interim committee has been set on foot by the very organisations which were brought into being at the time of the late Government and for which at that time, though he has gone back on much of it since, the right hon. Gentleman the Member for Easington (Mr. Shinwell) had much credit.
Mr. Shinwell: What have I gone back on?
The Prime Minister: On a great many things. There was the two years' military service for instance; but, we are all quite ready to recognise that the right hon. Gentleman had special and local reasons for his change of policy on that. I do not know what he has to say about this, because it arises absolutely from the policy of the late Government and is strongly supported by Her Majesty's present advisers.
Mr. Attlee: Is the Prime Minister not aware that in all approaches to the matter of German rearmament, hon. Members on both sides of the House I think realised that there was always the danger of resurgent German militarism, and therefore conditions were laid down with regard to the integration of German forces with some European force? That has not yet been achieved. I should have thought it premature, when we do not know what line the Germans may take on rearmament, or whether they are coming into E.D.C. at all, to invite a German general, whatever his past record, to see all our most secret things in this country.
The Prime Minister: All our most secret things in this country! The inspections that are to be permitted to different countries in the N.A.T.O. alliance all arise out of the normal and, I think, healthy, working of the very bodies to the creation of which the right hon. Gentleman has the honour of having contributed. That is all that is happening. It is not a suggestion which, I may say, emanates from the political Government of this country. It is out of the workings of these institutions that the proposal has been made, and not only for this country but for other countries in the N.A.T.O. alliance. Unless one wants to bring everything to a standstill one should certainly support the interim committee arrangements.
I may say that I think it is more than four years ago that I urged that there should be created a German Army, and the right hon. Gentleman the Leader of the Opposition said it was the most irresponsible thing ever said. But a year later he proposed it himself and I am the heir of decisions he took. Some were very good decisions.
Mr. Attlee: The right hon. Gentleman does not seem to realise—
Sir H. Williams: On a point of order. As the period fixed for the Ballot for Notices of Motions has now been exceeded by 29 minutes, do you not think, Mr. Speaker, that we ought to have the Ballot so that Private Members should not be deprived of their opportunities in the forthcoming debate?
Mr. Speaker: It had occurred to me that we are having a debate on foreign

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affairs very shortly and that perhaps the wider issues now being raised might be discussed on that occasion; but I believe that the right hon. Gentleman the Leader of the Opposition wished to ask a further question.
Mr. Attlee: I want to ask the Prime Minister whether he realises that the German Government are not in N.A.T.O. at the present time. It is all right to say that this is done by N.A.T.O., and, obviously, it arises out of it, but the German Government are not part of N.A.T.O.
The Prime Minister: That is quite true; but great anxiety has been caused to all those people who are working for the development of E.D.C. by long delays in trying to get the different Governments to agree—immense delays and no progress being made. Consequently, the sense of emergency has led them to create this interim committee, and I am quite sure that full good faith will be maintained in their visits over here by those who have so carefully been selected after great and close association with our leading officers and those of our allies.

RAILWAY TUNNEL COLLAPSE, SWINTON
Mr. Proctor(by Private Notice) asked the Minister of Transport whether he has any statement to make regarding the collapse of a railway tunnel in Swinton, Manchester, and the consequent collapse of three houses in Temple Down, Swinton, near Manchester.
The Parliamentary Secretary to the Ministry of Transport (Mr. Gurney Braithwaite): Yes, Sir. About 5.30 a.m. on Tuesday, 28th April, a short length of the Clifton Hall double line tunnel, near Swinton, collapsed and the ground above it caved in destroying two houses and damaging a third. Five persons were buried in the debris of the houses, and I regret to say that all of them lost their lives; two others were rescued with only slight injuries. The tunnel, which was opened to traffic in 1850, had been closed temporarily for repairs.
An inquiry will be opened in public by an inspecting officer of railways on Friday, 8th May, and the House will
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appreciate that I cannot make any further statement at present. The whole House will, I am sure, wish to be associated with an expression of deep sympathy for the relatives and friends of those who lost their lives and with those who were injured.
Mr. Proctor: While thanking the hon. Gentleman for his reply—I am sure the whole House will associate itself with him in the expression of sympathy—I should like to ask whether he will make every effort to see that the necessary emergency action is taken to prevent any further collapse of the tunnel, and whether he will urge his colleagues to see that all possible assistance is rendered to those who suffered in this disaster?
Mr. Braithwaite: I can give affirmative answers to both those supplementary questions.

BALLOT FOR NOTICES OF MOTIONS
The House proceeded to Ballot—
Mr. Speaker: Sir Herbert Williams.
Sir W. Darling: On a point of order. My hon. Friend the Member for Croydon, East (Sir H. Williams) left me just now to keep an appointment at 4 o'clock, but I can communicate his Resolution to the House.
Hon. Members: No.
Mr. Speaker: Has the hon. Member for Edinburgh, South (Sir W. Darling) authorisation from the hon. Member for Croydon, East (Sir H. Williams)?
Sir W. Darling: No. Sir, but my hon. Friend said that he was leaving and asked whether I would speak for him if his name was called in the Ballot. He gave me no other authorisation.
Mr. Speaker: We will proceed to the next Ballot.
Lieut.-Colonel Elliot: On a point of order. I submit that that is authorisation. [HON. MEMBERS: "NO."] If my hon. Friend the Member for Croydon, East (Sir H. Williams) left the House and asked my hon. Friend the Member for Edinburgh, South (Sir W. Darling) to move his Resolution for him, that is authorisation. If my name were called

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in the Ballot I would certainly consider it authorisation if a deputy acted for me, and if he did not I would consider that he had failed in his duty.
Mr. Speaker: I hope the House will forgive me, but because of the noise I could not properly hear what the hon. Member for Edinburgh, South said. Do I understand that the hon. Member for Croydon, East asked the hon. Member for Edinburgh, South to speak in his place on this matter?
Sir W. Darling: No, he did not.
Mr. Speaker: What did he say?
Sir W. Darling: Perhaps I may explain what happened, Sir. My hon. Friend was sitting next to me and he protested against the prolonged discussion on the matter raised just now with the Prime Minister. On leaving the Chamber he said to me, "I am in for the Ballot, but I will miss it."
Mr. Speaker: The hon. Member for Croydon, East was quite right.
Later—
Mr. Nabarro: On a point of order. May I ask for your guidance, Mr. Speaker, in connection with the absence of my hon. Friend the Member for Croydon, East (Sir H. Williams), who was obliged to leave the Chamber to keep an urgent appointment with the Lord Great Chamberlain, who could not be kept waiting. I would ask you, Mr. Speaker, to recall that two weeks ago those of my hon. Friends and I who had their names down for the Ballot for Notices of Motions were still sitting in our places at 20 minutes to five, having waited an hour and 10 minutes for the Ballot to take place. Is it possible to institute machinery to investigate the possibility of an alternative method of carrying out the Ballot, so that hon. Members may take their chance in the draw at a specified time without being kept in the Chamber for a period of up to 1¼ hours, thereby missing other important engagements?
Mr. Pannell: Before you reply to that, Mr. Speaker, may I recall to the House that on a previous occasion I was in the same difficulty with my hon. Friend the Member for The Wrekin (Mr. I. O. Thomas). On that ocasion you gave a
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Ruling that if a Member, prior to his departure from the Chamber, asked another Member quite specifically to submit the matter which he wished to raise you would give way to that hon. Member. On that occasion I was not able to do it, and my hon. Friend the Member for The Wrekin suffered in the same way as the hon. Member for Croydon, East (Sir H. Williams). There is nothing of a party nature in this matter.
Mr. Speaker: We cannot debate this matter now, but the hon. Member for Leeds, West (Mr. Pannell) is quite right. That is the procedure of the House, and that is why I was so particular in asking the hon. Member for Edinburgh, South what the true position was. I may say that our proceedings are based generally upon the idea that hon. Members are continuously in their places in this House.

ROUGH GRAZING LAND (CULTIVATION)
Mr. Crouch: I beg to give notice that on Friday, 15th May, I shall call attention to the urgent need of a policy to bring 2 million acres of rough grazing land into cultivation at the earliest possible moment, and move a Resolution.
HOME DEFENCE (VOLUNTARY SUPPORT)
Brigadier Prior-Palmer: I beg to give notice that on Friday, 15th May, I shall call attention to the necessity for enlisting the maximum voluntary support for all measures connected with the defence of the home front, and move a Resolution.

DECIMAL SYSTEM
Mr. Follick: I beg to give notice that on Friday, 15th May, I shall call attention to the importance of the decimal system in schools and commerce, and move a Resolution.
Mr. S. Silverman: On a point of order. Having regard to the results of the Ballot and to the frequency with which it now happens that Members who have been fortunate on one occasion continue to be fortunate on later occasions, would it be possible to amend our Standing Orders to provide that any Member who was lucky in such a Ballot should not be entitled to take part in subsequent Ballots for that Session?
Mr. Speaker: I should not like to give a Ruling on that matter without deep consideration.
Mr. Follick: In answer to my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman), I should like to say that as this is my last Parliament the sequence of luck is not likely to recur.

BUSINESS OF THE HOUSE (SUPPLY)
Ordered,
That this day Business other than the Business of Supply may be taken before Ten o'clock.—[Mr. Buchan-Hepburn.]

ORDERS OF THE DAY
  SUPPLY
  [12TH ALLOTTED DAY]

  CIVIL ESTIMATES AND ESTIMATES FOR REVENUE DEPARTMENTS, 1953–54.
  Order for Committee read.
  Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."—[Mr. Heath.]

INDUSTRIAL OUTPUT
4.10 p.m.
Mr. Cledwyn Hughes: I beg to move, to leave out from "That" to the end of the Question, and to add instead thereof:
"this House notes with deep concern that industrial output in Great Britain, which rose substantially between 1945 and 1951, suffered a serious fall in 1952, and deplores the policies of Her Majesty's Government which are largely responsible for this fall and also for its failure to take effective remedial measures."
The Amendment deals with a subject which is of fundamental importance to our country. There is no doubt that industrial production is the key to our national prosperity and to our prestige and standing in a world of increasing and perhaps ruthless competition, If we cannot produce a sufficiency of the right goods and sell them at the right prices and in the right places, then our days as a leading world nation are numbered. That would be a terrible blow, not only to this country, not only to our standard of living here, but a blow also to the prospects of world peace and of a return to sanity among the nations.
All this is common ground between us. In the recent Budget debates, Front Bench speakers on both sides of the House agreed that increased production was a vital necessity. Where we disagree is upon the methods a Government should adopt to gain the desired end. The Amendment refers to the Labour Government's work between 1945 and 1951, and I want to make a very brief reference to it because it forms a background to the problems which we are discussing today. In that period between

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1945 and 1951, in spite of immense difficulties, which, incidentally, some elements are only too ready to minimise, our output increased from year to year. We had the problem of demobilisation to contend with, we had to convert industry from a war footing to a peace footing, and, perhaps most important of all, we had to rebuild the morale of our people which had been stricken by a great world war.
The Labour Party succeeded in doing all those things and in doing much more. They succeeded although leaders of the party opposite made speeches in this country and overseas belittling this people's efforts. I think it was the Prime Minister who referred to us as a nation of "Weary Willies and Tired Tims." I am proud and glad to be able to think today that since the last. Election no leader of this party has made speeches in foreign countries belittling this nation's efforts. At that time, even if the Conservative Party refused to recognise what this country achieved under the leadership of the Labour Party, generous tributes were paid in other countries, particularly in the United States of America, by such people as Mr. Paul Hoffman, M. Paul Reynaud and by other national leaders.
What are the facts? In 1951, the level of total industrial production was 34 per cent. higher than in 1946. Every year from 1945 to 1951 there was a substantial percentage increase over the previous year. Our successes can be measured in human terms as well, because we succeeded—I think this was a great work—in injecting new confidence and hope into our basic industries; and that was something very remarkable if we remember the plight into which our basic industries had fallen before the war.
Before the war, if we asked an agricultural worker in Anglesey or anywhere in the country, or a coal miner in South Wales, what work he would advise his son to enter, for example, he would say, "He should not follow me on the land or into the pit. He must find something with better prospects and with a better future." That was the situation in our basic industries, and one of the greatest things the Labour Government did was to remove the stigma from our basic industries of agriculture and coal. It is
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perhaps worth recording that the most important feature in the coal industry recently has been the success in increasing the labour force. By the middle of last year the total labour force was over 704,000, and there was an increasing flow of young recruits.
Again, in the same period of 1945 to 1951, productivity rose. In 1948, 1949 and 1950 it rose at an average rate of 7 per cent. per annum. It must not be overlooked that in very many places men were working—and in fact are still working—with obsolete machinery and in many places under unsatisfactory conditions of work. Increased production, rising productivity and full employment—those were the objectives which the Labour Government kept constantly in mind.
What is the position today after 18 months of Conservative administration? This is the crux of my Amendment; that in 1952, for the first time since the war, industrial production fell by nearly 3 per cent. The nation's total output fell by 1 per cent., which is equivalent to about £100 million at 1951 prices. If production had continued to rise after 1951 at the same rate as it rose between 1945 and 1951, the nation would today be £500 million better off, which is about £10 for every man, woman and child in the country.
What are the causes of the decline? There were, and there are, external influences which account in part for the decline—and here it is worth noting that the party opposite never gave us credit for any external influences when we were in power; but in large measure, I submit, the drop was due largely to this Government's policy. Exports fell partly because of import restrictions imposed by Commonwealth countries as a result of a lead given by this Conservative Government.
In volume of exports, there was a fall of 6 per cent. in 1952 compared with 1951. The immediate explanation of the decline is in stock changes. In 1951 the total volume of stocks and work in progress increased by about £450 million but in 1952, although some kinds of stocks, including some imported goods, continued to rise, there were serious falls, and over the whole year investments in stocks fell by about £550 million compared with the previous year.

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Our stocks have been dissipated. It is not at all certain that stocks were used in the proper fashion in relation to our export drive. Certainly we cannot make good those stocks today without gravely worsening our balance of payments problem. What if war broke out? What good is an atom bomb, what good is the finest army and finest navy in the world, if this country has depleted its stocks?
The Economic Secretary to the Treasury (Mr. R. Maudling): The difference in stocks does not represent a depletion of stocks. The difference is in the rate of accumulation. Over 1952 as a whole, stocks remained pretty well level.
Mr. Hughes: Certainly, but as far as work-in-progress stocks are concerned, there was considerable depletion.
The most serious drop in output occurred in textiles and clothing, printing and paper and in the metal-using industry; but it is significant that there was an increase in the production of coal, gas and electricity—nationalised industries. Is not it ironic—
Mr. Gerald Nabarro Mr. Gerald Nabarro (Kidderminster) rose—
Mr. Hughes: The hon. Gentleman has the whole day before him. Perhaps he will be fortunate enough to be called to make a speech. It is ironic that the industries which were nationalised in the face of bitter opposition from the Conservative Party are today sustaining the overall production figures of the country.
The Chancellor of the Exchequer fully realises the perilous position. His eyes are open, and that makes his responsibility far greater. He calls his Budget an incentive Budget to industry. By his tax concessions, by the re-introduction of the initial allowance of 20 per cent. on capital expenditure, and by the Purchase Tax concessions and the abolition of the Excess Profits Levy in January, 1954, he hopes to stimulate production. Those are his hopes. Will those measures do the trick? Will they achieve the desired end? That is what we must face today. Will these measures stimulate the leaders of industry?
We hear enough about the workers and how they should work harder. One hon. Member opposite has been telling
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the Chancellor that he should stump the country exhorting the workers to work harder. I have not heard him exhorting the leaders of industry to think harder.
Mr. Cyril Osborne Mr. Cyril Osborne (Louth) rose—
Mr. Hughes: The hon. Member for Louth (Mr. Osborne) was in the Library all day yesterday preparing his speech. I hope that he will have an opportunity to make it later. I do not believe that the Budget will have the desired tonic effect. Will increased profits be ploughed back into industry? Will there be substantial re-equipment? It is worth recalling that in every year from 1945 to 1951 there was an increase in capital investment. In 1952 there was a decrease of 3 per cent. in investment, including housing. That means that if housing increased—and the Government say that it did—then investment in plant, machinery, and factories decreased by far more than 3 per cent.
There is no assurance that there will be a re-equipment of industry on the necessary scale. The most that the Government can do is to express a pious hope that there will be investment in the coming year. Many industrialists will do their best, and they will make the grade, but others will just plod along as they did between 1920 and 1939. The President of the Board of Trade, on 20th April, made a most important point when he said:
"… though some companies possess the cash they lack the willingness to re-equip."— [OFFICIAL REPORT, 20th April, 1953; Vol. 514. c. 669.]
They lack the willingness to re-equip at a time when it is absolutely essential in the interests of the nation that they should re-equip.
Because they fail in their duty are the workers to be blamed? In any case, it is the workers who would suffer if there was a trade recession. The Government cannot blame the workers. Neither can they indict the Labour Party although they would like very much to do so. The Labour Party, when they were in power, showed the way by ensuring the investment of capital in those industries which it was vital to encourage. After all, capital investment should, to a certain point, be selective and should be related to the realities of our economic life. My

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right hon. Friend the Member for Leeds, South (Mr. Gaitskell), in his speech on 15th April, made a most constructive suggestion to the Chancellor. He advised him to give higher initial allowances to industries which should be encouraged in the national interest. The industrial outlook for Britain is a bleak one. The Government boast that they have restored confidence in sterling, but they certainly have not given confidence in the future of this country.
I mention the agricultural industry because probably this is the most important basic industry in Britain. Again under the Labour Party, agricultural production was stimulated between 1945 and 1951. It increased progressively every year. Today the upward trend has stopped, the upward curve has flattened out. Milk production is down. There are ominous signs of decline and decay. In his Budget speech the Chancellor of the Exchequer said that he had started "the process of freeing agriculture." What did he mean? It would be interesting to know.
The party opposite freed agriculture between 1920 and 1939. That was a process of freeing agriculture and doing away with controls. We are more dependent upon agriculture than ever we were before, yet today, when there is a call for increased production, thousands of agricultural workers are leaving the land. What is the incentive to keep them on the land? There must be an incentive. What is it? Can the Economic Secretary to the Treasury tell us what the incentive is. We must keep the workers there. We must keep up the labour force on the land if food production is to increase. Is the Budget an incentive to a man earning £5 14s. a week? We know perfectly well there is no incentive at all.
On this question of agriculture we must get our priorities right. The Ministry of Agriculture is as important as the War Office or the Foreign Office. But the Minister of Agriculture is not in the Cabinet. My right hon. Friend the Member for Don Valley (Mr. T. Williams), who is highly esteemed by the farming community, had a seat in the Cabinet. Agriculture was placed high on the list by the Labour Government. Today not only has the Minister declined in status, the whole industry is declining. But this is an industry which even now produces
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more in value than the railways and the coal mines put together.
Mr. Charles Ian Orr-Ewing: Is not it true to say that, although the numbers are somewhat down, the output per man is up owing to the re-equipment and mechanisation of agriculture?
Mr. Hughes: I am grateful to the hon. Gentleman for making that point. It enables me to make another, which is that the high rate of interest which the present Government have imposed makes it extremely difficult for farmers to re-equip. That is the problem. I speak of my own area. I do not know what the situation is in the hon. Gentleman's constituency.
Mr. I. Mikardo: All the farmers in Hendon are doing very well.
Mr. Hughes: Farmers in North Wales, especially hill farmers, are not able to modernise their farms because of the high rate of interest imposed by the Chancellor, not only that, but the credit restrictions imposed make it difficult for the farmers to carry on.
Another factor which will have a most serious effect upon production is the parsimonious way in which the Government are treating industrial and scientific research. The administrators of the Department of Scientific and Industrial Research are complaining that work at research stations is suffering from lack of funds. Their annual report for 1951 to 1952 says that:
"Basic research is hardly worth considering if the effort that can be devoted to it is insufficient to secure steady progress."
It goes on to say:
"Few, if any, of the research associations have incomes large enough to deal with all that needs doing."
This really does disclose a very serious state of affairs, because one of the things that this country needs, and which it is the responsibility of the Department of Scientific and Industrial Research to compile, is a geological survey of Great Britain. We do not know what mineral deposits we have in this country. I know that in Anglesey there are deposits of copper and of coal, but I do not know the extent of the deposits. There is no geological survey to which to refer. When

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the Department of Scientific and Industrial Research prepared its plans after the end of the last war it estimated that 33,000 square miles of Great Britain had not been surveyed on a proper scale: a proper scale means six inches to the mile. At the present rate of progress it will take over 100 years for the survey to be completed.
That is not the case in the Soviet Union; it is not the case in the United States. There they proceed apace with geological surveys, and are spending vast sums on them, although surveys of that kind would be of greater value to us here than they are to those vast countries. I ask the Government to look at this matter as one of urgency, and to realise that many of the raw materials for which we are today paying dollars may well be under the rich soil of Britain.
I come to what I believe to be the most important consideration of all in this matter of production. Before we can have increased production we must have the full confidence and trust of the workers in all spheres of industry. We know that today competition in the world is getting fiercer, that Germany and Japan are now very much in the field again. However, in inventive genius, craftsmanship and hard work under the right leadership, there is no country that can beat this country of ours.
I indict this Government for their failure to lead the whole nation. They lead a section of the nation, but they have failed to lead the whole nation. I indict the Government for gradually undermining the Welfare State. The burden in this country today is once more being placed on the shoulders of those least able to bear it. Anyone who mixes with the ordinary working people of this country will realise that at once. There is no shadow of doubt about it at all. That is not the way to secure the maximum co-operation of the workers of this country, stricken by two world wars day, when a Labour Government are and a series of depressions for which the party opposite were largely responsible. Production in this country will go up one back in power, and the sooner that day dawns the better it will be, not only for Britain but for the world.
4.35 p.m.
Mr. George Thomas: I beg to second the Amendment.
My hon. Friend the Member for Anglesey (Mr. C. Hughes) has earned the thanks of the House for bringing our attention to what is one of the major subjects that confront us as a people at the present time. It is perfectly clear that my hon. Friend has been at considerable pains to gather his facts and to present them to the House in proper fashion. We are suffering today from the hangover of the economic upset that inevitably follows in the trail of total war, and it is as well for both sides of the House to appreciate that there is still a long path for Britain to tread, and an uphill path at that, before we shall have recovered completely from all the cost and all the strain of protecting the freedom of the world as we did for those six years.
I like to think that there is not an hon. Member of this House who is not anxious to see the economic independence of this country. We can see it at Question time when hon. Members on either side of the House get hot under the collar because we are refused trade with America through the Chief Joseph Dam project and through the use of our Comet planes. We are tired of being pushed around. We are used to playing a proper part amongst the leading Powers of the world, and I refuse to accept the defeatist mentality that we must remain a second-rate world Power because the war exhausted us.
It may be unfortunate but it is undoubtedly true that the moral and political influence of nations today depends on their economic resources. My hon. Friend rightly paid tribute to the spirit of the British people in the years from 1945 to 1951, when by sheer self-sacrifice, by the bearing of heavy burdens and austerity conditions, we saw our production figures climb steadily year after year. We saw our export figures reach record heights at a time when hon. and right hon. Gentlemen opposite were sneering at "Austerity Cripps," and were using the expressions my hon. Friend referred to, the "Weary Willies and the Tired Tims." That was when our production figures were climbing.
What would the Prime Minister say today, if he were sitting on this side of the House, and not over there, when our production figures are down, when our

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industrial output is falling, when our exports are dwindling? One believes that the Prime Minister would be expressing much greater concern than he is doing in his speeches these days.
The party opposite have been in power for nearly two years, and the time has arrived when we can judge them by their results. The day is past when they could lay the blame for anything that went wrong upon our party by saying that we were in office at the time it started to go wrong. In two years, with two Budgets, the party opposite have had the opportunity to put their economic policy into operation. I notice that the United Nations' estimate, after two years of Tory government in this country, is that the United Kingdom's production dropped in 1952 more than that of any country in Europe except Denmark, compared with the previous two years. The industralised countries increased their production as a whole by 9.6 per cent.
Let us look at some of our industries where that decline has set in. Production in the metal using industries declined by 0.4 per cent., in the chemical and allied trades by 1.6 per cent., in textiles and clothing by 14.6 per cent., in paper and printing by 15.6 per cent. and in other manufacturing industries by 9.2 per cent.
Mr. Nabarro: I am sure that the hon. Gentleman wishes to present the picture in correct balance. He has cited us a number of industries which show a decline in production. Would he now give us the increases in production in 1952 compared with 1951 for, firstly, coal, secondly, steel, thirdly, agriculture and fourthly, building? They are the four major basic industries, and in all of them production increased.
Mr. Thomas: I am grateful to the hon. Gentleman for assisting me with my speech. If he had as much patience as he has wind he would have realised that I was about to come to the credit side.
As my hon. Friend has pointed out, it is indeed a notable feature that the basic industries, where there is real improvement to be registered, are the nationalised industries, with the—
Mr. Nabarro: What about agriculture?
Mr. Thomas: Do be patient—with the exception of agriculture.
Mr. Nabarro: What about building?
Mr. Thomas: If the hon. Gentleman had as much sense as he makes noise he would make a notable addition to our discussion this afternoon, but it is very difficult when he just keeps interrupting.
Even with agriculture—if I may take it out of the context in which I intended to deal with it—there was an increase last year, it is true—it was one-third of the increase of the previous year—but 22,000 farm workers fled from the English and Welsh countryside as from the plague last year. They uprooted their families. Why, in the centre of Wales we are worried by the movement away of our people; and the same applies in rural England.
The policy of the Government has led to farmers having to pay 6 per cent. on loans for the re-equipment of their farms. If we are to increase our agricultural output we must modernise our farms. With manpower declining, our only hope lies in a more efficient method of farming. We know where the trouble lies. The Chancellor of the Exchequer has damaged our national interest by the increased Bank rate, which lays exceptionally heavily upon the farming community. The Government have given up control over the lending of money. Perhaps "control" is a strong word to use, but the Government ought to make sure that the commercial banks help the farmers instead of being biased against them.
Mr. Nabarro: It depends what they do.
Mr. Thomas: Our friend is here again.
Mr. Deputy-Speaker (Sir Charles MacAndrew): It is very disorderly for hon. Members to interrupt during a speech.
Mr. Thomas: The Government have followed faithfully the classical Tory policy which was pursued between the wars. Economic controls have been thrown away. The Welfare State has not been attacked: it is being destroyed. The Old Britain is being returned.
Let us examine some of the statistics which are available for us in the Library of the House. From 15th October, 1951, to February of this year the registered unemployed in this country increased by 64 per cent.—by 185,700. We are so grateful that the catastrophic figures of

2173
unemployment in the years between the wars have not come back that we tend to forget the significance of these figures. If a man is looking for a job, to him it is as much a catastrophe as if there were a million unemployed. There has been a 64 per cent. increase in registered unemployed since the Government have had the reins of power in their hands. Small wonder that our production has fallen.
In what industries is production falling? In 1952, in the china and earthenware industry, which is a vital part of our export trade, the number of employed fell by 8,000; in the glass industry, which also plays an important part in our export trade, the number fell by 16,000; in manufacturing industries as a whole the number fell by 123,000. There are increases. The number of employed in the distributive trades increased by 23,000. The non-productive trades are increasing, but the productive trades are decreasing. The red light of danger is over our industries when these figures are borne in mind. The chemical and allied trades industry suffered the loss of 10,000 workers in the course of the year.
Mr. H. A. Price: I believe that the figures the hon. Gentleman has just quoted are accurate, but he has sought to present them as depicting a process which began in October, 1951. Would he not agree that this process in fact began in June, 1951, four months before this Government was elected to power?
Mr. Thomas: It is very hard to place the date and say that in June, 1951, the decline started. The hon. Gentleman's party has been in power for nearly two years.
Mr. Nabarro: Eighteen months.
Mr. Thomas: Very well, 18 months, if they are afraid to claim any longer.
Mr. Mikardo: It seems longer.
Mr. Thomas: Their economic policy is now taking effect. The decline has become much more serious. I hope that the hon. Member for Lewisham, West (Mr. H. A. Price) will succeed in catching Mr. Speaker's eye, and will be able to make his own contribution.
Not only have our overall figures fallen, but productivity per man has fallen, which is a serious aspect indeed. Natur-
2174
ally we look for reasons. If the Parliamentary Secretary to the Ministry of Food were here he might recall the halcyon days when he was in opposition, and used to say that people had not enough to eat so they could not produce. Before coming here I looked through the Digest of Statistics to see what had happened to the foodstuffs of our working people. I find that in 1952 the Government succeeded in reducing the total consumption of butter, cheese, milk and cooking fats. May be that has played its part, if we accept the dictum of the Parliamentary Secretary to the Ministry of Food.
I ask the Financial Secretary, when he replies to this debate, to deal with the question of productivity per man. This reflects hidden unemployment as well. It reflects the short-time working which is becoming a normal feature for thousands of our fellow workers in this country. The Welfare State principle of social security for the workers has been reversed, and social insecurity has once again become the spur for production which this Government is using. If we are to avoid disaster the present economic trends have to be reversed.
For the first time since 1945 we are losing the battle for economic recovery. It is a fortunate thing that production is not ultimately and absolutely dependent on the numbers employed in industry. We were recently reminded by one of my hon. Friends that America produces half the world's goods with 7 per cent. of the population of the world. Our hope, therefore, quite clearly lies partly in the redeployment of our labour and capital resources. It lies even more in a planned capital investment scheme for the modernisation of our industries.
Thirdly, it lies in a concentrated emphasis on industrial and scientific research. I submit that in these fields the Government have a squalid record. They have let the nation down with regard to planned capital investment, with regard to the proper use of our manpower in industry, allowing, without apparent concern, increases in the non-productive and non-vital industries without any effort to encourage people to go into the vital industries; and they have, at the same time, shown themselves indifferent to the question of scientific research.
Mr. Raymond Gower: The hon. Gentleman had been extolling the virtues of careful planning and strict control. He then pointed out how the Americans, with a far smaller labour force were producing so much. Is not there a discrepancy in his argument, because they do not practice very strict controls?
Mr. Thomas: I have been trying to make the point so clear that even the hon. Gentleman could follow it. America has her industries modernised. Her industrial effort began nearly 100 years after ours. Our equipment in the greater part dates from the last century and it is clear that the Americans have, therefore, a tremendous advantage.
In his first Budget, the Chancellor of the Exchequer took a lunge at our capital investment. Last year, as a result of his first Budget, the capital outlay on plant and machinery fell by 2½ per cent. and on vehicles, ships and aircraft by 12½ per cent. This at a time when we can only hold our place in the world if we increase the output of our industries and, therefore, the capital that we invest.
As for scientific and industrial research, the Chancellor, answering my hon. Friend the Member for Newton (Mr. Lee) yesterday, smilingly told us that one in 2,500 of our people are so engaged. This old country cannot hope to compete with America and other Powers unless we concentrate on the development of new ideas, on experimentation in new technological methods, and we must have a higher proportion of our people engaged in industrial and scientific research.
Our people have the talent and they have the spirit—the spirit that built the Comet abounds among our young people in this country. I hope that the Government will, even at this stage, realise that it is national suicide not to be spending more on research in industry. My hon. Friend, talking about stocks, addressed to the House the question: "What will be the position if war comes?" I want to ask the House what, if real peace is established, will be the position—when trade will flow freely between East and West and when we shall compete not only with America, Germany and Japan but also with Russia and China in the markets of the world.
It is a painful commentary on our times that the talk of ending rearmament
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fills many people with a dread of unemployment. Our economy, in my opinion, has become top-heavy. We are too dependent on the armament industry, and the markets of the world are being lost to us. We shall not solve our problems of the peace, when it is established, by allowing every financier and speculator to have his head and put his money where he likes. Whether the Government like it or not, they will have to exercise control over the financiers and the speculators who dabble in industry if the national interest is to be forwarded.
Before I resume my seat, I should like to refer to what was said by the hon. Member for Louth (Mr. Osborne), who made an eloquent speech—his speeches are always eloquent—during the Budget debate, begging the Chancellor to stump the country appealing for more hard work. I am not here to pretend that the workers of this country must not work hard if we are to survive. I believe that every man ought to be going all out to help this nation, but exhortations, like patriotism, are not enough. Anybody can make that appeal. What is needed are incentives to the right people. Unfortunately, today the farther we go from the factory bench or the coal-face the greater is the incentive given by the Government. That is one of the indictments which, I believe, may fairly be laid against them.
We need new ideas and new methods, particularly in industrial research, and a firmer control over the allocation of raw materials. Given a national plan and given a sense of fair play towards the workers of this country, I am confident that, great as has been our past as a nation, our future can be even greater. Standing as we do, as a bridge between East and West, we have a key position in the world.
We can prove that with a planned economy, combined with the maximum political liberty, we can provide a standard of life for our people which will rival any in the world. But we cannot muddle our way through to that. We need controls; we need planning, and the Government, if they have not the courage to assume control and leadership, ought to get out—and quickly.
5.2 p.m.
Mr. William Shepherd: We have listened with interest and attention to two speeches in rather contrasting styles from the hon. Member for Anglesey (Mr. C. Hughes) and the hon. Member for Cardiff, West (Mr. G. Thomas). They have given us much information, some of it accurate and some very inaccurate. Before I deal with the main points of my speech I want to deal with one or two points of inaccuracy which are important for the House to bear in mind.
The statement has been made by the hon. Member for Cardiff, West that with only 7 per cent. of the world's population the United States of America succeeds in producing over half the world's goods.
Mr. G. Thomas: That is a quotation.
Mr. Shepherd: That is an inaccurate statement. It is true to say that the United States produce half, or slightly over half, the world's goods if one excludes the vast territories of the Soviet Union, but if one includes them the figure is something like 34 per cent. As that inaccurate statement has been bandied about the House more than once I take leave to correct it now.
Both hon. Members talked about the need to spend more money on research. I doubt very much whether we are going to get much advantage from spending more money on research than we do at present. It is open to serious argument whether we are, in fact, spending too much money on research, because we have not got and cannot get the proper application of our present knowledge. I should be much happier to see part of the money which is now being devoted to research—fundamental or applied—being devoted to improving the means by which that research can be applied in industry. There is a very great danger in swallowing this idea of research and going ahead irrespective of its real technical value to industry.
Mr. Frederick Lee: The results of (research are first-class and well worth paying for. Is it not a fact that it is the adaptation of that research to industry in Britain which lags far behind the present standard of research itself?
Mr. Shepherd: That is the point.
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Another point of inaccuracy is the impression created by some hon. Members that the whole economy of the Western world is geared to the rearmament programme, and that as soon as that programme is cut down in some part we may be faced with a serious slump. It is true that there are dangers inherent in the immediate reduction of the amount of armament production, and I hope that this Government are studying the methods that will have to be adopted to produce a buffer between the present state of affairs and one which might arise if, as the hon. Member for Cardiff, West, says, peace breaks out.
But it is important to get this problem in its true perspective, and the easiest way to do that is to see what percentage of our total steel production goes into rearmament. It is about 5 per cent. It is not a tremendous amount and it should not be beyond the wit of an intelligent Government and a nation with a purpose to bridge the gap between 95 per cent and 100 per cent. I do not share the gloom which some people effect over this point.
Mr. Austen Albu: Surely the danger lies not in a reduction of armament expenditure by this country but the reduction of economic activity in the United States, and its world-wide effects.
Mr. Shepherd: The same position applies there. We can turn to the fact that in 1944 and 1945 the economists said that there must be fearful unemployment in the United States. It did not arise. While I do not say that there is no danger, roughly the same proportion of steel consumption in the United States goes into rearmament as it does here. There is a great tendency to overestimate the danger.
Listening to the two hon. Members who initiated this debate it was very difficult to imagine that we have just emerged from a position of disaster into much calmer waters. One would have thought that the flood was just upon us, and that instead of the situation being immeasurably better than it was 18 months ago, in terms of economic security, we are really in a worse position. It is perfectly true—whatever hon. Members opposite may say—that the world has confidence in sterling. At the moment we are paying our way and we

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have the prospect of a more stable and healthy economy than we have had since the war ended.
I do not deny the achievements of the past, or what has happened under the Labour Government. For many years I have said that we ought to be proud of the achievements of the British people in the post-war years.
Mr. William Hamilton: Tell that to the Prime Minister.
Mr. Shepherd: No nation has shouldered a greater burden or done more in the interests of a free society than we have. I say, without any reservation, that a great deal of the credit lies with the workers. In a society such as was arranged by the right hon. Member for Bishop Auckland (Mr. Dalton) both workers and employers are tempted to be less effective than they might be. In the circumstances, our people—the workers and the industrialists—have done a magnificent job of which we can be proud, whether it has been done under a Labour Government or the present Conservative Government.
I am not saying that because the situation has become a little easier we are by any means out of the wood. We do not want gloom or panic, but this country built up its industrial strength and population in conditions very different from those we know today, and since 1913 we have suffered a continuous deterioration in our economic circumstances. Only the greatest effort from all sections of the community can ensure our survival in years to come.
That is why I am glad to see that the trade union movement is realising that there are more important things than industrial strife and party warfare. I appeal to hon. Members opposite to take a little of the party bias out of their consideration of what has happened in the last year. I know that a reduction in production is an unfortunate thing, and I should have been very happy if I could have talked this afternoon about a wonderful increase in production under the Conservative Government. But I am fully satisfied that this reduction in production was not only essential to the British economy but vital to our ultimate stability.
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I am convinced that what happened was inevitable; that it has, in the main, been desirable, and that this country is much better off economically and from the point of view of stability.
Mr. Hamilton: Let us have another decrease.
Mr. Shepherd: The hon. Member for Fife, West (Mr. Hamilton) has never yet made an intelligent contribution in this House, and if he were the sole occupant of those benches I should not proceed with my argument.
Mr. H. Rhodes: After the hon. Gentleman has given us that little homily, may I ask him this question? If it were inevitable, would he not agree that it was expedited by the attitude of so many industrialists who, during the last 12 months, have evaded their responsibility by converting themselves into holding companies and, as a consequence, have not obtained the production which they might have obtained?
Mr. Shepherd: I know that the hon. Member feels very strongly about that and I agree with his view, but I would not pretend that that financial manoeuvre has had any significant effect upon the production capacity of this country.
I want to tell the House why I think this reduction in production has had not a harmful but a salutory effect upon the nation. We all praise what we did from 1945 but we cannot ignore certain facts which obtained during those years. First, there was an intense demand from all parts of the world for our manufactures. Countries like Japan and Germany were relatively out of production. During those years we had an immense increase in the demand for our exports, which went up to 175, taking 1937 as 100— and 175 was a figure which in 1946 and. 1947 I confess I never imagined they would reach.
A good deal of that increase in exports was unreal, and that is particularly true of the exports in 1950 and 1951. Let us face this fact quite firmly, because it is no good talking about increased production in this country and leaving out of account the export possibilities. One can talk about increasing production as an. automatic process in the United States if one wishes, but one cannot talk about increased production in the United

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Kingdom without bearing in mind the necessity and possibility of selling overseas.
What happened in those last years? There was panic buying in 1950 and 1951, particularly from the sterling area. Australia, earning unprecedented sums from the sales of wool, was importing almost twice as much as her current earnings for 1950 and 1951. It is my case, which we must face quite frankly, that some of those production increases were on the basis of what were obviously phoney exports. Even last year we reduced the sterling balances by £400 million—£400 million of sales which, but for the credits, we might not have had.
I therefore suggest that it is a good thing for the economy of this country that we have got down to a more realistic basis and that people are now buying from us what they can afford to buy.
Mr. Osborne: And what they can pay for.
Mr. Shepherd: We have no longer this phoney basis for our economy. Hon. Members opposite are making a lot of this decline in production—and in some ways I do not blame them—but I hope they will take this point about the need to get down to a realistic basis and to face the fact that this change—although in the textile industry it was much more vicious than I should have liked to see, and although the change was not as evenly spread as we should have liked to see—was essential economically to the ultimate welfare of the nation.
Before I come to certain other improvements, I want to answer one point which the hon. Member for Anglesey constantly made, which is that the British Government's import cuts were responsible for the fall in exports. That is not true at all. The main source of fall in our exports was the sterling area, and Her Majesty's Government made a special point of not cutting imports from the sterling area. It is, therefore, a very improper argument to say that we were responsible for the fall in exports by cutting imports from the sterling area.
May I ask the House to consider one or two of the advantages which arise from this new state of affairs in our industry? First, for the first time since
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the end of the war, many of our industries can concentrate on quality. This is a most important point to the United Kingdom. I do not say that there was a substantial fall in the last four or five years, but some of the out-turn of our industry—and I include the cotton textile-industry, with which I am concerned—has not been as good in the post-war years as it was before the war.
That is a matter of vital concern because if we are selling, as we are, to a large extent on quality, the maintenance of a high standard is of great importance. That is so even with the engineering industry. The chance for this country once more to re-establish itself as a quality producer is to my mind something of great value to the community.
Secondly, despite what has been said by the right hon. Member for Leeds, South (Mr. Gaitskell), we have brought about a redistribution of the labour force. It has not been as sweeping as some people would like, but we cannot turn cinema usherettes into skilled mechanics overnight. That is impossible. When I hear people say we should switch our industries from making textiles to making complicated machine tools, I realise that they do not know what they are talking about. We have to have a certain measure of skilled labour in order to do these things.
Despite that, we have effected a considerable change. We have lower employment figures in the textile industry—wool and cotton—and there have also been significant changes in the engineering industry, disguised, if I may say so, by the figures themselves, but significant changes nevertheless and changes which are to the benefit of the country. In the textile industry there have been reductions in labour. What is the effect of those reductions? On the whole, people cannot get back the staff they want and they will be more efficient as a consequence. We shall, therefore, get from those industries a higher level of productivity than we have had before.
We have improved the situation in the engineering industry very much more from the national point of view than the figures indicate.
Mr. Donald Chapman: Would the hon. Gentleman, explain that?
Mr. Shepherd: I would not make such a bald statement to the House without justifying it in some way, even though I may not entirely satisfy the hon. Member for Northfield (Mr. Chapman). Included in the figures for the engineering industry are those people who make a lot of light consumer goods. As the hon. Member for Northfield probably knows, in the last 12 months there has been a tendency to drain people from the light consumer side of the industry, where the demand has fallen away, to the heavy engineering industries, where we urgently need men for goods which are in special demand. Even in the engineering industry, therefore, although the broad figures do not convey the impression, there has been a substantial and I hope a beneficial change in the employment structure.
I would not for a moment suggest that all these changes have done other than improve our general situation. We are now upon a relatively—and I say relatively, because it can only be relative in the United Kingdom—sound foundation, and we can build up, in response to genuine demand overseas, the export trade and, indeed, our own home consumption. As one very big textile manufacturer said to me a little while ago, we have got our second wind now. I think it is true to say that the nation as a whole industrially has got its second wind, which is a better and more lasting wind than was the original one.
In conclusion, may I make a brief reference to the general position in the country? I do not share the gloom with which people want to surround us. If I did I would not be giving it much public utterance because I do not think that the general spreading of gloom is in the public interest. But I do not think the nation is in a deplorable position. There are certain fiscal and other changes I would make if I had the opportunity, but we cannot discuss those this afternoon. There are many real advantages this nation enjoys.
We have the access to colonial markets and a more realistic view in the Commonwealth markets of what our needs are. Despite what has been said, we have a very considerable income from invisible exports, and if we are able to cut down the vast amount of Government expenditure and military expenditure overseas
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those invisible earnings will make a very real contribution towards buying the foodstuffs and raw materials we need.
Without doubt, we have the most skilled working population in the world. If they are given the right lead I am sure they will do even better than they have done up to now. There are men slacking in the workshops and employers on the golf courses. We want to stop employers going on the golf courses on Wednesday afternoons and the man who slacks in the workshop and does not pull his weight. But only 10 per cent. at the very most of those in the industry do not pull their weight, and that probably is also true of employers. We have the right kind of people and, what is more, the trade union movement is recognising, I think for the first time in history, where its real purposes lie, and is measuring up to a noble extent to the responsibilities which face it.
Mr. Mikardo: They criticised the Chancellor.
Mr. Shepherd: I have no doubt that they criticised the Chancellor and I do not blame them for criticising him. We do not expect from the trade union movement, as do hon. Members opposite, an implicit obedience. We want them not only to have the semblance but the reality of independence. We do not mind if they criticise us.
Mr. Mikardo: It would not matter if the hon. Member did mind.
Mr. Shepherd: We, like most human beings, are much the better for criticism.
Above all, I think our chances today are better than we assess them because we do not realise how much more competitive British industry has become in the past 10 years.
Mr. George Darling Mr. George Darling (Sheffield, Hillsborough) indicated dissent.
Mr. Shepherd: The hon. Member shakes his head, but I am talking of British prices now compared with prices of other nations before the war. We see in most industries, although of course there are exceptions, that our position from the point of view of competition is much better than it has been for the last 15 years.
Mr. Albu: That is due to increased productivity under the Labour Government.
Mr. G. Darling: I probably gave the hon. Member a wrong impression by shaking my head. I was not thinking of the British position in relation to other countries but of competition within this country.
Mr. Shepherd: I was not saying that there was more competition in this country than there had been for the last 15 years. I am glad that the hon. Member wants to see more competition. I hope that that desire will extend to a desire to do away with State monopolies. Our capacity to produce economically and competitively is greater today than at any time, perhaps, since 1913. If we can improve our efficiency and apply the results of our research to our industries we have a great prospect in the future as an industrial nation, and there is no cause for gloom and despondency.
Certainly the Government are doing their part. We are setting up a new kind of society in which we believe that free enterprise, vigour and competition can go hand in hand with social equality and a fair deal for the people of this country. I believe that that is the kind of country we want to work for. I am very pleased with what has happened up to now, I am quite satisfied that we can build on this foundation, and I hope that hon. Members opposite will realise that the situation, so far as production is concerned, is not what it appears and will take out of the question before us the unfortunate suggestion of party bias.
5.25 p.m.
Mr. Maurice Edelman: The hon. Member for Cheadle (Mr. Shepherd), at the outset of his speech, referred to my hon. Friend the Member for Fife, West (Mr. Hamilton) in the most offensive terms. I do not propose to follow him in that method of debate. I merely wish to combat the smug complacency in which he developed the paradox that a reduction in output in this country during the last year was good for the country. That is really teaching the workers an economic lesson with a vengeance.
I wish the hon. Gentleman would come to Coventry to develop that argument to the motor workers who were declared redundant at the end of the year. I wish he had gone to Birmingham to tell that story to engineers. I wish he had gone to Middlesbrough to tell that story to the
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shipyard workers. Then he might have got an answer which would have been more complete and expressive than any answer I can offer him in this Chamber.
The hon. Member did his own Government rather less than justice because in the last month or so, as no doubt will be stated by one of the Parliamentary Secretaries when he replies to the debate, output actually increased. The level of production went up to something like 120. I mention that so that the House will not be misled by that apparent improvement because it has come about owing to seasonal causes and the stimulus to production given by the Coronation. It has come about for a variety of accidental reasons which are not likely to reproduce themselves in the course of the year.
Bearing in mind that much of the recent spurt in output is due to seasonal causes—for example, the increase in production of motor cars is due to the fact that after the Budget people started buying again and to the fact that the motor industry has resumed its pre-war seasonal pattern—we should not draw any wrong or false conclusion from the fact that the index of production has lately risen.
Mr. Shepherd: The hon. Member is quite in error in saying that the Budget had an effect on this, because the figures do not apply to the period after the Budget.
Mr. Edelman: I was arguing the point quite clearly. I am sorry that the hon. Member has not grasped it. Production has lately risen and is continuing to rise for seasonal reasons.
We have, however, to face the more serious fact that 1953 will be a year of very great economic danger for the country. It will be a year of economic danger not simply because, throughout the whole of Western Europe, there has been a pause in production. Indeed, there has been that pause though I do not wish to lay all the blame for it on the Government. There has been a pause simply because there is throughout the whole of Europe a moment of anxiety when manufacturers are uncertain of the future outlook. Consumers who have stocked up and bought in anticipation of the market continuing to rise have suddenly developed anxieties and stopped buying. The result is that throughout the Western world, economically speaking, we find that

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people are holding their breath and wondering what is to happen.
The most important factor we all have to take into account in assessing the future course of production in this country is what America will do. There, we see very ominous signs. There, we see the whole of the manufacturing community demonstrating a fear of what might be the consequences of peace. We see the whole of the industrial community recasting their plans in the expectation that there may be developments in the international situation. Because of that there is no little apprehension and anxiety through America and also a communicated feeling of apprehension and anxiety in the Western world.
Not long ago a French politician said that when America sneezes Europe gets pneumonia. He meant that if there is an economic malady in America it immediately communicates itself to the rest of the world, and that is demonstrably true. Let us look at American industry. At present, one out of every six is engaged, directly or indirectly, in the arms industry. Take the five leading motor manufacturers; not one of them has less than 14 per cent. of his business occupied in armament contracts, and in one significant case the proportion rises to 30 per cent. That is a very substantial quantity.
If we turn to the aircraft industry we find that the amount of American resources of men and materials devoted to arms production is even greater. It is over 90 per cent. It is clear that if, as a result of the recent developments in the international scene, the American arms programme is to be curtailed or, as Mr. Charles Wilson said, it is to be concentrated, there will be a very substantial diversion from the American arms industry in some other direction.
One might argue that that happened to some extent after the war, when there was a considerable consumer demand in America which took up the slack of the demobilisation of the American arms industry; and that the purchasing power of the American consumer was sufficient to maintain full employment and to provide prosperity in America. But the situation is now substantially different. Today, there is not the same availability of consumer credit to take up the resources of which the arms industry
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may divest itself. For example, it has been stated, regarding the electrical industry and domestic and household equipment, that of all the households in America wired up for the use of that equipment, over 80 per cent. are actually fully possessed of the equipment which this industry is capable of offering. To that fact may be added the fact that, as a result of American Governmental policy in the last year or so, there has been a wide extension of credit facilities; with the result that most American families today own something on the hire-purchase system for which they are still paying—
Mr. Frank Tomney: They own everything.
Mr. Edelman: They own a substantial quantity of their household goods under that procedure. If we consider that, we can see how difficult it is to imagine a diversion from the American armaments industry of substantial quantities of materials and resources into the American home. We have, therefore, to consider what will happen to that surplus capacity which will be turned away from defence work.
President Eisenhower recently suggested that if we entered into a peaceful world climate it would be possible to use this surplus productive power to wage a war against want and poverty. But the ordinary American manufacturer will not wait until that ideal condition is realised. He will get out of his difficulties as quickly as possible. The holder of stocks and commodities, when he sees the price of commodities is falling, will try to unload as quickly as possible. Those who have large credit arrangements outstanding will endeavour to call in their credit as quickly as they can.
Taking all in all, it is clear that America is today at a turning point, where she must decide in what way her domestic markets may be protected and. secondly, in what way she will enter the competitive markets of the world.
Mr. Osborne: The hon. Member is so reasonable in his statements that surely he is not suggesting that the American businessman will call in his credits suddenly, or get rid of his stocks suddenly, and bankrupt himself and the customers on

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which he depends. The American businessman is reasonable enough to do it carefully in order to preserve his own business.
Mr. Edelman: I hope I am not flattering the hon. Gentleman or myself, but because we are dealing with this problem and putting forward a reasonable method by which these things should be done, it does not necessarily follow that individual businessmen, whether American or British, will have the same general concern as we in our approach may have for the long-term prosperity of either America or this country.
After all, the hon. Member for Louth (Mr. Osborne) need only cast his mind back to the time of the great depression in America. He will recall that it was then a case not merely—or rather not at all—of reasonable planning for America as a whole. It was a condition of panic, in which stockholders got rid of their stock and businessmen did what they could to salvage what they could from a disastrous situation. It is precisely to guard against such a situation that we, who have some responsibility in this matter, ought to try to foretell what might happen and put forward our proposals for a way in which it might be dealt with.
First and foremost, I would say that if we are to maintain production in this country we must be absolutely sure that we have such an understanding with the United States that the traditional Republican policy of raising high tariffs against foreign competitors in times of difficulty will not be rashly applied. We have already seen some danger signals. No one knows the reality about the Chief Joseph Dam contract. We in this country are not fully appraised of the situation in which that tender was rejected. But it is significant that Mr. Charles Wilson, the United States Minister of Defence, is, at the best, in close association with General Motors and is, therefore, very much in the confidence—I do not say that in the pejorative sense—of the American business community. It is significant that it was on his ultimate advice that the American Cabinet decided to turn down the tender of the British Electrical Company.
Mr. Mikardo: It was all a carve up.
Mr. Edelman: That indicates what may possibly be the American policy. I hope we shall put our point of view as strongly and effectively as possible—not only for the sake of this country, but for the sake of the United States and the friendship which exists between us—to prevent that sort of thing from developing any further.
There is great danger that if this traditional form of defence against foreign competitors were applied to other industries, say, for example, to the motor industry, it would make it almost impossible for Great Britain to bridge the dollar gap. That is absolutely certain. We are able at present to congratulate the motor industry on the fact that in the last few months sales of cars to the United States have increased. That reflects great credit on all concerned. But if, suddenly, the United States decided to demobilize—if I may use the term—that part of the motor industry, or part of that part of the motor industry now engaged on defence work, it is clear it would prove extremely difficult for us to continue the sale of cars to America. If, of course, they were to raise their tariff barriers it might well be impossible. Consequently, it is at this moment that we must, above all, strive to co-ordinate our economic programme with that of the United States.
I do not want to take up too much time, but I will try briefly to put forward a few constructive suggestions for what we might do both in relation to the United States in this coming year and also in relation to our own resources and for our own economy in order to raise production and productivity. I am told that the other day, when Mr. Taft was asked what he thought of the slogan, "Trade, not aid," he said he was in favour of the second part of that slogan. It may well be that he is opposed to aid, but it is possible that he is equally opposed to trade. Therefore, we have an obligation, and perhaps the Economic Secretary will inform his right hon. Friend the Chancellor of the Exchequer of the view of some hon. Members on this side.
We have an obligation to bring to the attention of the United States Treasury the fact that we are, above all, concerned to trade with the United States and that we wish to arrive at a condition in which there will not be discrimination either by them against us or by us against them. If the Eisenhower Plan were to become

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a reality, and if part of the present arms investment were transferred and made an investment in the backward areas of the world, I hope that that investment would be so made that it would be non-discriminatory and that we would be able to benefit from the production of that investment—I speak now from the trade point of view—on the same terms as the United States.
I hope that in talking about the United States and the American programme I will not seem to have given the Chancellor of the Exchequer a clean bill of health or exculpated the Government from some responsibility for the general decline in production which took place at the beginning of this year. If there is one specific thing which the Chancellor could do, and do tomorrow, to give a real fillip to production and to make it easier for our industry to compete, it would be now, at this point, to end his deflationary policy and turn towards a policy of controlled reflation.
The party opposite have often claimed to be the friend of the little man, and looking at one or two of them opposite I can well believe that. At the same time, one of the most striking things in the year and a half of Conservative rule has been the hardship which the small business man has suffered as a result of the Government's deflationary policy.
Despite the various major factories and groupings of factories throughout the country, Britain's industrial strength rests to a great extent on the medium and small manufacturer. These people have been very hardly hit by the Chancellor's deflationary policy, the change in the Bank rate, his restriction of credit and his unwillingness to provide facilities. That is where the Chancellor could do something concrete to give a fillip to production, which would be felt not, perhaps, in a matter of days, but certainly within a matter of weeks.
Hon. Members opposite talk about the need for everyone to do a full day's work. Although I disagree with the hon. Member for Louth on many things, I should like to pay a qualified tribute to him. He has spoken very bravely and correctly about the industrial needs of the country and said that in the national interest everybody must work harder. I wish,
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however, that he had added, and had told his right hon. Friend the Chancellor, that if we want a worker to work harder, he must be guaranteed that as a result of his hard week's work he will, at the end of the week, get not only a living wage, but a wage which corresponds with the realities of the cost of living.
If the hon. Member for Louth casts his mind back to the labour troubles at the beginning of the 1920s, he will realise that they arose not from unemployment, but because the workers simply could not make ends meet; they arose because wages were inadequate to meet the high cost of living. Consequently, although today we may have relatively full employment, I predict that unless the Chancellor takes steps to reverse his wholly iniquitous policy of steadily cutting the food subsidies, we will have labour troubles, which, I am sure, all of us would deplore. None of us wants to see the consequences which I unhappily predict will flow from the policy which the Chancellor has undertaken.
Some of the solutions of the decline in productivity are beyond our control, and some are well within our control. Nevertheless the Government, and the Chancellor in particular, have upon themselves a high responsibility not to regard the present deterioration in our domestic and in the world situation with that smug self-satisfaction which appears to inflict some hon. Members opposite. I hope that that will not be so, and that the criticisms which have been levelled at the right hon. Gentleman from this side, and which, no doubt, will be levelled at him during the debate from the other side also, will have the effect which we all wish of increasing the nation's productivity.
5.46 p.m.
Mr. Arthur Holt: I listened with great interest to the lucid and vigorous speech of the hon. Member for Anglesey (Mr. C. Hughes) and was charmed, as usual, by the speech of the hon. Member for Cardiff, West (Mr. G. Thomas). Those two speeches, together with the speech which we have just heard from the hon. Member for Coventry, North (Mr. Edelman), have taken the usual orthodox planning line which now is a regular feature of Socialist Party speeches on any form of economics and trade. No doubt in the ensuing years,

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as they try to work out their new policy, they will find something better, and no doubt they will eventually turn, as, I believe, they are sincerely interested in obtaining the true, real and complete fruits of the labour of the workers for themselves, to a proper Liberal economy.
The hon. Member for Anglesey referred to the Socialist injection of new hope into basic industries. I shall not proceed in detail to show that there was, of course, a terrific pent-up demand for all kinds of goods after the war, and with an inflationary situation, which they allowed to continue, naturally there was a steady growth of production. I should not have thought that even in their heart of hearts they would have claimed that that was a result of their planning actions.
Mr. Mikardo: Productivity has nothing to do with demand.
Mr. Holt: I do not want to go into productivity now. I wish to refer to the question of a geological survey. It has been mentioned several times in the House by the right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan). It was mentioned again by the hon. Member for Anglesey, who used words to the effect that Russia and America were spending huge sums of money on such a survey and that it would benefit the United Kingdom far more even than the other two countries, to spend a large sum of money in this country.
Members may say what they like about capitalist enterprise, but over the last 150 years it has not been entirely numb on this matter; surveys have been taken over many parts of the world. I do not know in detail the geological structure of these islands, but I have no doubt that there are very sound reasons why a lot of money has not been spent for this purpose. It may be that some money has been spent. I do not want to—
Mr. James Johnson Mr. James Johnson (Rugby) rose—
Mr. Holt: I do not want to argue about it; let me continue for a moment. Before hon. Members suggest that this Government or anyone else should spend large sums of money, they should say what justification there is for doing so. If, in fact, nothing is found, and one has spent £10 or £100 million—thousands of millions, if the hon. Gentleman likes—such a survey never could be justified.
Mr. Johnson: In all fairness to my right hon. Friend the Member for Ebbw Vale (Mr. Bevan), may I say that he never asked for a geological survey, because we have the finest geological survey in the world. What he asked for was a geophysical survey, and there is a world of difference between the two.
Mr. Nabarro: If the hon. Gentleman will permit me, may I say that it is the fact that, in the last 200 years, there has been an almost continuous geological survey going on in this country, and the right hon. Gentleman who is sitting on the Front Opposition Bench will confirm that. I think that all the opencast coal mining surveys which are carried on in regard to boring and drilling are based on this geological survey which we have already in existence.
Mr. Holt: The hon. Gentleman would agree then, that there is no need for such a service?
Mr. Johnson: What about the geophysical survey?
Mr. Holt: I am not going into that. I understand that the purpose of it is to find out what resources we have.
A further point made by the hon. Member for Anglesey was that if we cannot produce and sell sufficiently the right goods in the right places and at the right prices our days were numbered, or some such phrase. I entirely agree with him, but I would say that this country, to a certain extent, was not doing that during the period when the Labour Government were in office. It is a natural result that we shall not get the right goods to the right places and at the right prices if we have inflation in our economy, and, anyhow, in my opinion, the amorous attachment which the Labour Party have for physical controls diverts goods from their normal channels.
Mr. Alfred Robens: Into the right places.
Mr. Holt: The hon. Member for Anglesey also remarked about the industrial outlook being bleak, and the hon. Member for Coventry, North also said that 1953 is a year of great danger. In one sense, I agree with him; in another sense, I do not.
Mr. Mikardo: A proper Liberal sentiment.
Mr. Holt: I am not one of those people who sees everything in black and white, and I think the Socialist Party have been making a great mistake in pretending that they can. So far as industry in this country is concerned, there is a great deal that is right with British industry, and I strongly deplore the action of those who are constantly crying stinking fish about British industry, whether it be the workers, the management or the entrepreneur.
To put it another way, I think that our situation can be described by looking at this country as a huge trading company, which is extremely productive, has a lot of customers, but is short of finance. It has a lot of debtors and creditors, things go just a little the wrong way, with a few bad debts, with the result that that company, although a huge one with a productive capacity which is very efficient, is in a very difficult situation. To that extent, I would agree with the hon. Gentleman. I think that next year, and for several years, our position will be dangerous, but, in all fairness, I do not think it is dangerous because of a lack of quality or a lack of competitive ability in Britain industry.
As for the policies referred to in this Motion, which have been pursued by the Government in the last 12 or 18 months, it is my view and the view of my party, that, in general, the Government's economic approach has been the correct one. We may have some disagreement about some of their other policies, and we may even disagree on some details of their economic policy, but, in general, we approve of it. I think that the tighter money policy has brought a greater sense of reality to a large section of British industry. There are, it is true, some people whose sense of reality is not yet apparent, but, when their order books come back to more normal proportions, and when they feel that they have to struggle for orders, they will get that extra keenness in their work.
In supporting this view, I should like to quote from the "Manchester Guardian Survey" which was published a few months ago. One of its articles says this:
"The main effect of the tougher monetary policy seems to have been a widespread trimming and redistribution of stocks. A more general effect (though not caused by financial stringency alone) is that managements have started to impose economy. Easy
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spending is being reduced in factories and stores, in administration and 'trimmings.' There is great scope for that. Some plans for the less than essential capital expenditure are being postponed."
Later, it says:
"Whatever the reasons, a more competitive attitude is beginning to gain ground. Prices and profit margins are being challenged"—
let the Socialist Party note that—
"at home as well as abroad. There are some signs that price rings are becoming ineffective."
That is perfectly true. I can only speak of the industry that I know, but, undoubtedly, I have seen evidence of that. It goes on:
"Costs are coming under serious review and pressure. On the side of labour, a more serious attitude to work and better understanding of production problems are widely reported. Many managements expect productivity to rise quickly as soon as a recovery of demand justifies full capacity working."
That last sentence is a qualifying phrase.
From the comparatively small section of British industry of which I have any knowledge, I can say that my own impressions are entirely those of the "Manchester Guardian Survey," and I think that the Government's economic policy has been well justified on those grounds. The hon. Member for Coventry, North made some comments about what the hon. Member for Cheadle (Mr. Shepherd) would get if he spoke to the Coventry motor car business or the shipbuilders of Middlesbrough. It often happens that, when one says things that are unpalatable and unpleasant, the people who are immediately affected adversely by certain conditions, though one tries to explain them and say that, in the long run, they will be for the general good, do not like it, and one "gets the bird." I do not think we should suggest that, because of that, the policy is necessarily wrong.
Mr. Edelman: The point I was making was that the principle enunciated by the hon. Member for Cheadle, namely, that a drop in production was good for the workers, was in itself a bad principle, and that, if he went to enunciate that bad principle to the workers in Coventry, he might get what the hon. Gentleman refers to as "the bird."
Mr. Holt: I must say that I did not understand the hon. Member for Cheadle to mean it in the narrow sense expressed by the hon. Member for Coventry, North. I took him to mean that

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as a result of these policies and of stopping inflation there was a reduction in production, but that the policies as a whole were good. Therefore, it could be said that the actual reduction of production is good, but I think that is taking the argument to an absurd length.
To take my point about this country being a huge trading concern, if it runs with too little finance and has bad debts and gets into difficulty, then it has to reduce its standard of activity to such an extent that it can carry on with the capital at its disposal. People who run down British industry and say that we in this country are not competitive should give more figures to prove their case. Just because particular goods sent to Africa, let us say, are not of the highest quality, are we to understand that the whole standard of British industry has dropped in quality?
What are the facts of the matter? The pithead price of British steam coal in February this year was 57s. 6d. a ton. The price of the same type of coal in France was 96s. a ton, in Belgium 100s. a ton, and in Germany 85s. a ton.
In a recent bulletin circulated to hon. Members by the Iron and Steel Federation, the price of steel angles in the United Kingdom is given as £28, in the U.S.A. as £36, in Germany as £41, in France as £36 and in Belgium as £31. I have no doubt that hon. Members also received the other day a copy of a pamphlet issued by the cement industry which shows that British cement is the cheapest in the world.
Mr. Robens: With great respect, the hon. Member is quoting two commodities of which there is a world shortage, and regarding which the question of competitive price does not arise. If he will return to the commodities to which my hon. Friend referred he will find that in various cases Britain is being outpriced.
Mr. Holt: I do not understand why just because there is a world shortage that is some peculiar reason for British products being the lowest priced.
Mr. Robens: The position I am trying to put to the hon. Gentleman is this. Although Durham coking coal is the lowest priced, we cannot sell more of it than is mined. The truth is that not sufficient is mined for our own use, let alone for export.
Mr. Holt: The right hon. Gentleman implies that because we are receiving the lowest price for commodities of which there is a world shortage we are not getting the best price which other countries are getting. That is a very serious state of affairs and one which should be put right as quickly as possible.
There is the case of the electrical equipment for America, and at the moment there is a lot of discussion on the Simpson Bill. Complaints have been made of British bicycles sweeping the American market and "stifling" it. It is also said that British shipping has sufficient business on its order book to keep it going until 1956. The chief complaints about British industries are not that they are not competitive, but that, on the whole, their prices are too low and their delivery dates too long. Germany is getting more ships to build because they cannot be built in British shipyards, and the same kind of thing applies to other industries.
The hon. Member for Kidderminster (Mr. Nabarro) commented recently about the National Coal Board buying engineering machinery from Germany. That action was defended on the grounds that they could get the machinery from Germany quicker than it could be obtained in this country where it would take something like 18 months to deliver. My argument is that British industry is competitive and that we have little to fear on those grounds. I am concerned that every inducement should be given to British industry to become even more competitive. Policies of this kind cannot force more production out of this country; they can only provide incentives and rewards, and, indeed, penalties. I would like to see the continuation of the policy whereby the screw is turned harder on inefficiency while efficiency is rewarded.
Mr. Nabarro: How?
Mr. Holt: I will come to that.
I consider that a natural developments this would be a gradual freeing of trade. I know that the hon. Member for Kidderminster is in favour of various protectionist fallacies, but there is no doubt that they induce inefficiency. They put up the cost of the goods made in this country. We want to get to the position where all British goods can stand on their own feet in the world market, and

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in the difficult circumstances of the moment we should not be producing anything which can only survive because of protective tariffs.
I can see no reason why the tariffs which we have imposed at the moment should not be examined with a view to their gradual reduction and removal, even though it may be necessary for the time being, owing to our financial difficulties, to keep on such things as licences and quotas. The point is that as we are able to increase quotas and lift licences the goods coming into this country should be priced as low as possible.
In this respect, I welcome the initiative of the President of the Board of Trade in setting up the committee under the chairmanship of Sir Henry Wilson Smith to look into the question of the tariffs on machinery imports into this country. I hope this will be the beginning of a number of other investigations of this kind. Where home produced goods are competitive, tariffs serve no useful purpose; they only tend to put up prices. On the other hand, where the home producer is uncompetitive, the nation's resources are diverted by tariffs from their most beneficial use.
If the Government will let their thoughts run on these lines there will be a real chance of increasing productivity in this country. We should work along the lines of the things that we can make best and most efficiently and that the world wants. The ultimate result entirely depends upon the people. Neither this Government nor any other Government can do much more than free the channels of trade and produce the right types of inducement.
It is argued that much of the initiative and vigour went out of this country from the early part of this century. There seems to be evidence that after a long period of prosperity we were taken aback by the industrial growth of other countries. I cannot see why we cannot recover from it. It finally depends upon the people. If the people decide that they want a high standard of living and are willing to work for it, then by vigour and enterprise—I am sure we have the brains—undoubtedly, in the next few years, we can put this country on a very firm foundation.
6.12 p.m.
Mr. Charles Ian Orr-Ewing: I am glad to follow the hon. Member for Bolton, West (Mr. Holt). I hope he will excuse me if I refer rather more to the terms of the Amendment and to the manner in which it was moved. I had hoped that we were to have a constructive and non-political debate, but it was kicked off in a highly contentious manner.
It was claimed by the hon. Member for Anglesey (Mr. C. Hughes) that our industrial output had fallen because of a change of Government. If the majority of Members of this House try to be objective, and succeed, they will agree that the post-war years were totally artificial. There was an enormous pent-up demand, not only in this country but in the whole of Western Europe and the industrialised world. There was an additional factor that we had immense loans from America. There was the United States Loan, Marshall Aid, and E.R.P., amounting to an average of £300 million each year, more than double the present rate, so that we had not the same need to earn our raw materials as we have today. There was also a run-down of our sterling balances, which even today is continuing and is distorting the picture.
We are now realising that we have to stand on our own feet. I was recently in Switzerland, and it was alarming to observe the extent to which the Germans had pushed British cars out of that market. In the years immediately after the war one could claim that 80 per cent. of the cars were British. There was an immense amount of good feeling towards British cars and manufacturers, but I regret to say that we have almost lost that market. Now, about 80 per cent. of the cars are German. That change has been achieved by the most meticulous and thorough selling processes by the German nation. What has occurred in Switzerland must occur in other countries. We have to look to our future if we are to maintain a stable level of employment such as we all desire.
It is almost a bromide today to say that unless we export we die, but it does no harm to repeat it in this House. Sometimes we tend to be rather academic and unrealistic. The terms of the Amendment suggest that because our total industrial output has fallen that is entirely

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unhealthy. I agree with my hon. Friend who said that it is not totally unhealthy. What is important is not the total volume of our production but that we should produce things for which the world asks. I would like to have seen some export incentive given in the Budget. It is much more trouble to export a thing than to sell it in the home market, because overheads go up and we have to secure orders in the face of very severe competition.
Many of our markets today are rather feather-bedded. I should like to have seen some definite incentive offered to people who are prepared to go out for the more difficult export markets. I am sure that consideration must have been given to this point. If we are unable to find a foolproof method of introducing an export incentive then the overall method offered by the Budget is the next best. Industry will not only try to equip itself by the use of the initial allowances but about 16 million people will pay less Income Tax and will have added incentive to earn more.
With one point none of us disagrees. It is that if we are to maintain keen prices we cannot afford to have a large measure of unemployment. We must keep employment at a high and stable level. We must have a marginal measure of flexibility but I think hon. Members will agree that it is wholly good that some 32,000 extra people have joined the aircraft industry, and there have been increases in other important industries in the last year.
Mr. Robens: Would the hon. Member care to answer this question: what does he suggest should be the extent of this flexibility in terms of a percentage proportion of the working population?
Mr. Orr-Ewing: I am sorry, but I am not so wise as to be able to say at any one moment what that measure of flexibility should be. I do not accept the yardstick of the right hon. Member for Leeds, South (Mr. Gaitskell), who quoted a "full employment standard" when 3 per cent. were unemployed. That means 642,000 people unemployed. Some slow shift is desirable if we are to help our export markets.
Sir William Darling: Would my hon. Friend not agree that it would be more easy to arrive at a calculation if we analysed the industries
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of the country? It might be that 5 per cent. in the distributive trades would be adequate, whereas 3 per cent. in the engineering trades might be inadequate.
Mr. Orr-Ewing: That is an interesting suggestion, but I can hardly think that the statistics could be obtained without industry being overloaded with the need to compile extra forms.
We have been told that our stocks are lower and our work in progress is lower. We have been assured from the Treasury Bench that the country's overall stocks are about the same. If in an industrial country our stocks and work in progress are lower, in many cases that is wholly healthy. I believe it arises from the point that within the last year and a half our supplies of raw materials and semifinished products have become easier, and there is no longer the need to order 18 months or two years ahead, which placed a great financial burden upon industry. It took about two years to get delivery. It is very good that today work in progress and the cost of our stocks has moved to lower levels.
Mr. Mikardo: I am trying to follow the hon. Gentleman, but he has seemed to me in the last two or three minutes to be arguing two ways. One argument was that our work in progress has not fallen, and the other was that it was healthy that our work in progress had fallen. Would he tell the House which of those two arguments he prefers?
Mr. Orr-Ewing: I am sorry if I did not make myself clear, and I am grateful to the hon. Member for drawing me on this point. We have the assurance from the Government Front Bench that overall stocks have not fallen, but if one consults any industrial balance sheet today one will see that stocks held by different companies and the work in progress of those companies are in general less than they were a year ago. I think that that is a healthy sign.
In the last few years this country has had a bad name for the unpunctuality of its deliveries, and our greatest challenge is to make sure that we not only deliver to the standard of British quality, which has been always high, but that we can guarantee prompt delivery and beat our competitors anywhere in the world. This Amendment is almost wholly political

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and I am afraid that it was introduced in a highly contentious political speech. I sincerely hope that the House will reject it.
6.21 p.m.
Mr. A. G. Bottomley: My hon. Friends the Member for Anglesey (Mr. C. Hughes) and the Member for Cardiff, West (Mr. G. Thomas) are to be congratulated upon initiating this debate today. It is to be regretted that the Government have not seen fit to find time to discuss his important matter. I do not want to follow the hon. Member for Hendon, North (Mr. C. I. Orr-Ewing) except to say that his whole argument is fallacious, for the reason that he himself would be the first to admit that during the period of office of the Labour Government coal stocks were lower than they are at present.
The reason for that is that there was full employment then, and that is not the case today. Therefore, it does not follow that if stocks are high or are low that state of affairs is a true indication of production effort. I cannot remember details at the moment, but I am sure that my right hon. Friend the Member for Blyth (Mr. Robens) will be able to show that the stocks are lower than before and will be able to give figures to support that contention.
Mr. C. I. Orr-Ewing: Surely the right hon. Gentleman is not arguing that there is unemployment today. I quoted the figure given by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) to the United Nations Assembly, when he said that his full employment standard for this country was 3 per cent. unemployed, which works out at 640,000 unemployed. That figure is infinitely less today and to the joy of everybody the figures for both full-time unemployment and for short-time work has fallen materially in the last year.
Mr. Bottomley: I do not accept the hon. Member's contention. I think that there is a great deal of hidden unemployment, but I do not want to be led astray into a discussion on that subject. I want to show that there is a difference between the policy of the Government and the policy pursued by this side of the House.
The hon. Member for Bolton, West (Mr. Holt) said that Socialists always talk
2204
about a planned economy. It is right that we should do that. We believe in it. When the party opposite were in Opposition they constantly attacked us because we believed in that policy. They believe in unfettered private enterprise. They believe in a competition which says, "Let those who can make a profit in any way do so." The country generally now suffers in this matter of production mainly because we are not getting the lead that we had in the earlier years.
Public opinion does not yet understand this problem as it should do. The late Sit Stafford Cripps did his best to educate public opinion to the necessity for increased production. I have a high regard for the present Chancellor of the Exchequer, but he has set that education of public opinion into reverse because he has said in this House, by his Budget statement, that all is well, while everybody here knows that the situation facing the country is a difficult one. We leave things to the trained economists and financial jugglers and the country is profoundly ignorant of the bad situation that will face it as time goes on.
When I was in office I had an opportunity of looking at industry in general. Some sections of it were extremely good and in a planned economy they played their full part. But I remember one case, in 1945, of an industry which, before the war, co-operated with an American firm in producing machinery and exchanging "know-how" and by that means procured the best machinery possible for mutual use. That arrangement was interrupted during the war.
After the war the Americans, with some generosity, said that they would like to come over and talk to the responsible people in that firm because in the intervening years the Americans had achieved a higher standard and wished the British firm to benefit from sharing that knowledge. The American industrialist arrived in the North of England in the early evening but he was not received on arrival. He telephoned to ask whether he could see the people concerned. He was told, "Yes, come along but not before nine o'clock in the morning." Is that the way to increase production? We should do all we can to see that a British industrialist of that kind is spurred on to do better for himself and thereby for his country.

2205
The nationalisation of the coal industry is now accepted by all. Nobody would dispute its necessity. No doubt many hon. Members have been down coal mines. I went down one before the war. The floor was uneven and the roof low and the face was one-and-a-half miles from the pit shaft. I was tired before I got to the face. I said, "It appears to me that you would get more coal if you provided transport to get the men to the face, because then they would be less tired, and if you had some coal cutting machinery." The manager who accompanied me said, "You are quite right and I have told the directors many times, but they said, 'We are making a profit.'" That is the trouble. We have concentrated on profit and not on service for the good of the country.
Nobody can dispute that after 1945 production increased because of a planned economy. I could give figures, but I am sure that nobody would dispute that production generally rose each year. It is only with the advent of the present Government that it is beginning to fall. The Prime Minister, who used to make many statements in the House condemning our country, spoke the truth in January, 1952, when, addressing the United States Congress within a month or two of the General Election, he said that production in Britain had risen continuously since the end of the war. He could not claim the credit for the present Government. The very fact that it is now beginning to fall indicates that the policy now followed is not the right one.
I suggest that unless the Government are prepared to take more and not less interest in production generally—which will mean interfering with industry by control and other means—our economy will suffer. I do not want to give the impression that I am attacking the employer side of the industry alone. I would be the last man not to admit that the workers' side is not perfect. But the fact is that the workers have not put their full weight into the effort at times because they have not been sufficiently educated to an appreciation of the position of the country and also because of the fear of unemployment. Is it likely that with the fear of unemployment facing them again they will make their best effort?
Mr. Shepherd: Does the right hon. Gentleman not regard the statement made by his right hon. Friend the Member for Blyth (Mr. Robens) as a considerable cause of the feeling to which the hon. Member objects?
Mr. Bottomley: No, I think not; but my right hon. Friend will no doubt speak later and answer for himself. However much one may try to improve their conditions, if one is to leave with the workers the impression that they are only wage slaves, they cannot be encouraged to increase production. I am reminded of a Japanese industrialist who, before the war, came to the Clyde to buy ships. About two o'clock the works hooter sounded. People were scampering and rushing to work. The industrialist from Japan said, "I do not want to buy any ships. How much is the hooter?"
It is an intolerable indignity that a free citizen—a worker—should have to depend for his livelihood upon some overseer or some person who is not really interested except to the extent that he gets a profit from industry. We have to give the workers an opportunity of joining in and having their say in production matters. I know that we have joint production committees, where the workers are allowed to talk about canteen facilities and such things, but that is not enough. The worker must be given an opportunity of talking about management generally. He has to be shown that upon the success of production in a given factory depends his very standard of life and the social conditions which he wants to enjoy. Unless we can put that over we shall fail in our objective.
The only proposition I have to make-is that we have far too many Ministries dealing with production and industry generally. We have the Ministry of Supply, the Board of Trade and the Ministry of Labour, all dealing with this subject—and the Ministry of Materials comes into it.
Mr. Nabarro: Scrap it.
Mr. Bottomley: That is what I was coming to. I believe it is the intention of the Government to scrap that Ministry, but I suggest not that it should be scrapped, but that there should be co-ordination of all these different Ministries which are connected with

2207
industry. They should be focused in one particular Department. It might be worth seeing whether a Ministry of Industry could serve a useful purpose.
I make that suggestion in the belief that it would be possible to focus attention and influence public opinion by that one Ministry stating what is required in industry. The managements and workers should be concentrating upon what is good for industry and not only what they will get out of it. It would result in a better economy and better conditions for the country generally.
6.32 p.m.
Captain Richard Pilkington: Like my hon. Friend the Member for Hendon, North (Mr. C. I. Orr-Ewing), I very much regret that so much political partiality was introduced by the hon. Member for Anglesey (Mr. C. Hughes). I should have thought that the problem we are discussing was vital enough to have raised this subject above party considerations. To the extent that non-party considerations have been put forward by some hon. Members opposite, I am glad.
I want to say a word about the speech of the right hon. Member for Rochester and Chatham (Mr. Bottomley). Like some of his hon. Friends he made a great deal of what he claims, rightly in many respects, was the success we achieved, from 1946 to 1951, in production. But hon. Members opposite are very wrong when they arrogate the whole of the praise for that achievement to their own doings. I have heard most of the speeches made by hon. Members opposite in this debate, and I do not remember one of them mentioning anything about the tremendous advantage which their Government enjoyed in having to deal with a sellers' market. They know that that sellers' market has passed and that we are now dealing with the far more difficult circumstance of a buyers' market.
Mr. Bottomley: I would remind the hon. and gallant Member that we had import restrictions at that time, and in many cases they were much more severe than they are today.
Captain Pilkington: That may be so, but it does not alter the fundamental importance of the different kind of market with which we now have to deal.
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The other point made by the right hon. Member for Rochester and Chatham was the importance of making employees realise the urgency of the problem with which we are dealing. I am in entire accord with that. It is absolutely vital that all those in responsible positions today should concentrate as much as they can in explaining to all concerned the "why" of the industrial crisis with which we are confronted, and suggesting the "how" of overcoming that crisis.
There is, however, a more deep-rooted and long-standing malaise with which we have to deal. It is an unfortunate fact that ever since the early years of this century production per man-year has been falling far behind that of the United States. The position now—in the middle of the century—is that production per man-year in the United States is about double what it is here. It is a curious fact—and one to which I do not attach undue importance, but which I think I am justified in mentioning in view of the phrasing used by the hon. Member for Anglesey in his Amendment—that that deterioration in our position as compared with that of the United States has been coincident with the rise of the party opposite and their teachings.
Since the hon. Member for Anglesey referred to the fall in production since this Government came into office, I am justified in referring to the fact that productivity has deteriorated, comparatively, as the party opposite have attained more power.
Mr. Mikardo: I am enjoying the non-partisan speech which the hon. and gallant Member is making. Would he be good enough to let me know in advance when he is next going to make a partisan speech? I should love to hear him.
Captain Pilkington: I am sorry if the hon. Member does not think that we should answer the attacks made upon us by hon. Members opposite.
Although, as I said, I do not attach too much significance to the fact which I have just mentioned, there is a very great need for a reversal of the general trend towards increased restrictive practices, which has grown up for a variety of reasons over the last few decades. I am glad that one or two hon. Members opposite have mentioned it. A scientific

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and technical approach to the problem, which can be shared by employer and employee in the industrial world today, will make an immense difference in the production per man-year. If only we can get rid of the old sense of the need for some sort of restriction the whole trend can speedily be reversed, provided that all concerned work together.
We have to take into account the fact that major happenings in this half century have hit us more hardly, in an economic sense, than any other Western nation. We are the only Western nation which, in both major wars which this world has undergone, has fought from the first week to the last day. Although we saved ourselves and our soul as a nation we paid and are paying a most grievous material price.
The situation with which we are confronted today is a challenge to every aspect of our industry—to the employer and the employee, to the office and the factory and to the people who try to sell our goods abroad. If there is a general co-operation, above and beyond our party sparring we can make a vital change in our economy. Reduced to its simplest terms, the situation is that every producer has to try to make that little more at home and sell that little more abroad. Surely that is common ground and something in which we can all of us co-operate.
6.40 p.m.
Mr. George Darling: The hon. and gallant Member for Poole (Captain Pilkington) and the hon. Member for Hendon, North (Mr. C. I. Orr-Ewing) complained of the partisan speech made by my hon. Friend the Member for Anglesey (Mr. C. Hughes) in opening the debate. The Tories complain of partisan speeches about the economic affairs of the nation coming from the Labour Party only when they are in power. It reminds me of an incident during the last General Election when two dear oldish Tory ladies were leaving one of my meetings and were heard by the stewards to say, "Wasn't it terrible? Just political all the way through. Not like Mr. Churchill, who is trying to keep politics out of this election." That is typical of the Tory approach to partisanship in these things.
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I seriously ask hon. Members opposite who take that line whether they wish us completely to forget the speeches made by their hon. Friends, and sometimes by themselves, when they were on these benches and the Labour Party were in their place from 1945 to 1950.
Mr. Mikardo: "Weary Willies and Tired Tims."
Mr. Darling: If they looked up their speeches they would find that partisanship is not a crime that comes to our door alone. However, I am not going to make a partisan speech. I want to say one thing to the Liberal Party.
Mr. Mikardo: It has gone.
Mr. Darling: There was the fantastic idea of the hon. Member for Bolton, West (Mr. Holt) that we should stop boring in the ground in this country in order to find what is there, as there might be things which would be very useful to our economy, because, so the argument went on, if we continued boring into the ground and did not find anything we should be wasting our money. That kind of fantastic idea is largely responsible for what has happened in the past in this country when people have been afraid to spend money in order to develop our economy. If we had not gone on with the borings we should not have found the field of potash in North Yorkshire, which is going to be very important, and many of the new coal seams which can be developed.
Mr. Nabarro: Surely the Chancellor of the Exchequer has recognised the importance of the point which the hon. Gentleman is making in reintroducing initial allowances—10 per cent. for industrial buildings and 20 per cent. for plant and machinery, but 40 per cent. for mining explorations?
Mr. Darling: I was not criticising the right hon. Gentleman; I was having a word with the absent Liberal Party.
I do not want to follow my hon. Friends or hon. Gentlemen opposite in discussing the fiscal and other causes which may be said to be responsible for the decline in our industrial output since the Government came into office. My hon. Friends have covered those points very effectively. I want to ask the Government and their very competent spokesman, the Economic Secretary, what is to be done to raise

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our industrial output from this point onwards, not only to the level which was reached before the Government came into office to reduce it, but to much higher levels. Unless we can reach a much higher level of industrial production, all talk about improving our standards of living will be just nonsense.
I shall not quote figures, but I will merely state that our industrial production was far too low even before the present Government came into office, for it was not enough to make us self-supporting, to provide a national prosperity which was really sufficient to cover our welfare schemes and all the other desirable things that we either had or wanted, that is, without high taxation. Much of the complaint of the Tory Party about the present very high level of taxation is misdirected. It might well be argued that the level of taxation is not absolutely too high but that the taxation is too heavy a burden because our incomes are too low, and that we should be directing our attention to the improvement of our income, which means improving the efficiency of British industry; for there is far too much of British industry which is inefficient, backward, unprogressive and completely poverty-stricken in ideas.
The Chancellor has now decided, as the hon. Member for Kidderminster (Mr. Nabarro) has reminded us, to give industry some relief from taxation. With the proposals for initial allowances and the taxation reliefs, this is hoped to be an incentive Budget, an incentive to industry to be more forthcoming and more expanding. I trust that the Chancellor's hopes will be fulfilled, but what is the Government going to do with the firms who do not take advantage of the concessions and do nothing to get their industries moving?
Reading "Time" magazine in the Library a little while ago, I noticed a comment by a Midlands industrialist upon the so-called incentive Budget. He welcomed the Chancellor's concessions, and then went on:
"We have had life too easy… There has been a safety-first attitude… Every year I"—
that is, the manager of the concern—
"send a manager to the United States or the Continent to look for the best machinery for the job we do … but many of us are in a
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rut and will not follow the lead. A new outlook is needed."
I agree with those views. We have to separate the sheep from the goats, the inefficient firms from those which are efficient and strive for greater efficiency. We must separate the enterprising firms from the backward firms; we ought not to treat them all alike either in the matter of fiscal concessions or in any other way.
For some years now successive Governments and politicians, economists and the more intelligent industrial leaders have been trying to get the rest of industry interested in how to improve production, and they have been following a policy of persuasion. Selected teams have visited the United States under the auspices of the Anglo-American Council on Productivity. We have had excellent informative reports but, in spite of all the conferences, all the reports, all the discussions and the rest of it, we still have far too many backward firms who are not taking the slightest interest in all the work that is being done for them. If persuasion has failed to do the job—I think it has—what are the Government going to do with the firms which are not doing their proper job and are not making themselves efficient and progressive?
There are, of course, many very good firms in British industry which are efficient, which do install modern machines, which are willing to spend money on new equipment and which have excellent labour relations, but they are few and far between. In the general run of British industry, the majority of firms are not enterprising enough, and their labour relations are often lamentable. Backward management has somehow to be compelled to be efficient; I believe that persuasion in dealing with backward firms has failed.
If they are to face up to the real problems of our industrial backwardness, the Tory Party have a very tough problem to face, because the widespread inefficiency in British industry is clearly a denial of one of their basic principles, a denial of the idea that competition will drive firms to be progressive, to take risks and to be enterprising. The real reason why private industry is not as progressive as it ought to be and is not really expanding today is the absence of some compelling force, whether it is free competition or Government intervention of some kind.

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I disagree with my right hon. Friend the Member for Rochester and Chatham (Mr. Bottomley) when he says that the party opposite believe in free competition. For far too many years the party opposite have allowed price rings and monopoly and restrictive practices, of all kinds, to grow up which are now bedevilling British industry. If they really believe in free competition this is the time when they ought to tell us how they propose to restore free competition to British industry.
In my view, the way to deal with this lack of efficiency in so much of British industry, with this lack of drive and enterprise, is to have more Government intervention. If we had time I could describe how that job could be done, but I do not expect the party opposite to agree. Therefore, I am entitled to ask them what they propose to do. I hope that the Economic Secretary to the Treasury will tell us, because he is a believer in free competition, how the Government propose to restore free competition to British industry, which has far too many trade agreements of a restrictive character, far too many price rings, quota schemes and monopolistic practices. I could give a number of examples—in fact I have jotted them down—of backwardness that I have seen in my visits to British industry, but that would be an abuse of the arrangements for this debate.
I want to continue with a reference to the trade union aspect which has been raised on this side of the House, and which is raised by hon. Gentlemen opposite, not in this House but when they are speaking outside and there are no people there to argue with them. Some hon. Members opposite frequently talk about trade union restrictions and try to put some, if not the whole, of the blame on the rise of the Labour movement, as did the hon. and gallant member for Poole. There may be trade union restrictions here and there—I do not know—but it must be remembered that the trade unions during the last few years have shown that they are far more willing to accept new ideas and methods, new equipment and machinery than many of the black sheep among the employers. It must also be borne in mind when we discuss this matter that the trade unions did not
2214
create our industrial system. They have had to adjust themselves to it.
In the past the main job of the trade unions was unfortunately to defend the very low standards and the very low incomes that the workers had. It may be that they might have paid more attention then to the positive job which I believe the trade unions have to do—to act as the spur, the driving force, to make management more efficient. But their defensive job was very difficult, especially in the inter-war years. In spite of all that dark history the unions and the workmen have shown a willingness in recent years to accept new ideas and new methods. The trouble is that they have had so little encouragement in so many of our industries from the management.
I could take examples from the motor industry, where some organisations have been progressive and go-ahead, not only putting in new machines and equipment at great cost but in making sure that they had the right kind of working arrangements with their men and the trade unions so that the equipment they installed would be properly used, and they would have the co-operation of all in the difficulties which are encountered. But there is a motor firm which is involved in a legal inquiry which I cannot talk about, though I do not think I should be out of order in suggesting that the Austin Motor Company has shown very little sign of that co-operation. Consequently, bad labour relations have led to great difficulties.
I am confident that every sensible and progressive employer who has fixed up the right kind of association and cooperation with his workers would agree with what I have said—that, given the right approach, the co-operation is there and can be properly used for the development of our industry. We must get the facts right, and I mention this in order to refer to the leading article in "The Times" this morning, which has got the facts of the engineering wages case wrong. In its conclusion, that leading article asks the engineering unions to revise their wages system.
The Minister of Labour and his Parliamentary Secretary know the history of this matter. The request for a new wages system came from the unions in 1946. It was a Ministry of Labour court of inquiry which asked the employers

2215
to go into consultation, to get on with this job of devising a new wages system, because the old systems of piece-work prices are an inhibition on progress and development. To blame the trade unions for not requesting a new system is at variance with the facts. The unions wanted a new wages system. It is a reactionary body, the Engineering and Allied Employers National Federation, which is standing in the way of progress in this matter. It is one of those monopolistic bodies—I use the term advisedly—which are doing so much damage to our industry in the sense that they stand in the way of development.
The Government must deal with the question of whether these employers' associations, if they work, as the Engineering and Allied Employers Association is working, to stop a new wages system coming into operation, should have action taken to deal with them. I ask again how the Government propose to make our industrial system more prosperous. I ask quite seriously what they propose to do to remove all these vestiges of monopoly and restrictive practices which exist, and to restore real competition in private industry.
Those are the crucial questions in this debate. Perhaps hon. Members can get a lot of satisfaction for themselves in discussing just what happened between 1945 and 1951 and what happened during the last 18 months; but we ought to be concentrating our attention on what will happen from now onwards. This is the crucial matter, but just as I am certain that night follows day I am absolutely sure that the Government have no answer to these questions.
6.58 p.m.
The Economic Secretary to the Treasury (Mr. R. Maudling): The last time I rose at this Box with the remark that I hoped it would be convenient for the House if I rose at a comparatively early stage in the debate, certain unfortunate consequences followed; but I want to repeat that remark today to make it clear that I assume that the debate will continue and that many hon. Gentlemen on both sides intend to take part. I believe that it is a convention on these occasions for the Government point of view to be put by an intervention in the course of the debate.
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Already, there have been a number of most interesting and serious speeches from both sides of the House. In the course of my main remarks I should like to deal with the general arguments. Perhaps I can start by dealing with one or two points. I wish to congratulate the hon. Member for Anglesey (Mr. C. Hughes) I had the good fortune, when he made his maiden speech, to congratulate him then on an excellent speech about some local problems affecting Anglesey. I congratulate him both on his fortune in having the luck of the Ballot and also on raising this very important question.
I cannot, however, accept the main tenor of his argument, which was that throughout the years of Labour Government until the General Election of 1951 production was steadily rising and that, with the change-over of Government, there was an almost dramatic change and there followed a fall in production. That just is not so. In fact, production was rising until the end of 1950. It started to flatten out at the beginning of 1951, and, broadly speaking, from the beginning of 1951 until now—with the exception of an abrupt dip in the summer of 1952—the general level of production was about stationary. It is true that the rise has not continued, but there has not been this dramatic change from rise to fall.
Many of the occurrences and many of the developments in production in 1952, as I hope to try to show later, largely originate from the developments in 1951. Developments in production very often follow at a considerable distance after changes in the level of demand which call for that production; but I should like to develop that point later.
The hon. Gentleman the Member for Anglesey referred again to this question of stocks. I should like to make clear what was the movement of stocks in 1952. Our calculations are that, contrasted with 1951, when there was a substantial increase in both the physical volume and in the value of stocks and work in progress, or inventories, to use the American phrase, in 1952 the level of stocks and work in progress, the level of inventories, remained about stable. That is the position. There was a definite change in the rate of accumulation, but there was not an absolute fall in the level of industry.
Mr. Hugh Gaitskell: But what about stocks?
Mr. Maudling: So far as stocks are concerned, the recorded stocks of imported commodities show a certain increase. I think the right hon. Gentleman knows that definite figures are not published, but stocks in the pipeline overseas fell by about £100 million. The increase in recorded stocks of imported commodities is equivalent to the major part of that £100 million; not the whole of it; but it shows that the general picture, taking stocks in the pipeline and recorded stocks at home, was one of very little reduction.
Mr. Gaitskell: Surely the hon. Gentleman will not question the fact that as the stocks and the purchases and sales, in calculating the balance of payments, are on the basis of figures struck as soon as stocks are in the possession of our own British citizens, there was, in fact, a decline in that sense of £100 million in 1952 against an increase of £450 million in 1951?
Mr. Maudling: What I was trying to point out was that the right hon. Gentleman must set against the decline of £100 million, with which I quite agree, an increase in the level of stocks held. The figures are never given, for reasons that I do not understand, but it comes to this: that not the whole of the £100 million but a substantial part of the £100 million was offset, and, taking the whole stock position, there was only a slight reduction over the year as a whole, counting in recorded stocks and work in progress—the inventories.
Mr. Gaitskell: Can we get this perfectly clear? Would the hon. Gentleman agree that there was a decline of £550 million of investment in stocks as compared with 1951?
Mr. Maudling: Yes. That is the point I was making. Any change in the rate of investment in stocks did not mean a decline in the level of stocks. I pointed out that we did not continue the 1951 process of buying stocks. I think we have argued that matter before. That was a contribution to the balance of payments.
The hon. Gentleman the Member for Cardiff, West (Mr. G. Thomas), to whom I listened with great interest, said that the gross fixed investment declined in 1952.
2218
There was a slight decline in gross fixed investment that year, it is quite true, but I must point out to him that one of the reasons for that undoubtedly was the abolition of initial allowances. When the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) abolished initial allowances in 1951 he made it quite clear that it was his plan to reduce the demand for investment at home in 1952. When the hon. Gentleman talks about fixed investment in 1952 it is only right to bring into relationship with it the policy of the Budget of 1951. I think that is a fair point.
My hon. Friend the Member for Cheadle (Mr. Shepherd) made a very serious and thoughtful speech, in which he dwelt upon what is an important point, the nature of production, and the way in which a high level of production does not of itself, irrespective of the nature of that production, necessarily produce a solution to our main economic problems. I want to say a little more about that later.
The hon. Gentleman the Member for Coventry, North (Mr. Edelman) raised a number of points, with some of which I disagree, but on two of them I think we are in agreement. He stressed the importance of making it clear to the American Government that we believe in trade, not aid, and that that trade must be a two-way process; that we can expand trade only if both parties to the bargain try to achieve an expansionist policy. He also said that we should make it quite clear that we are aiming at the development of non-discriminatory and multilateral trade. I do not think there is any disagreement between us about that.
The hon. Member mentioned our concern about the Chief Joseph Dam, but I cannot add to what was said about that by the President of the Board of Trade in the Budget debate, when my right hon. Friend clearly stated that we have made it plain to the American authorities on several occasions that we regard this whole matter as one of very great concern not only to ourselves but to other countries in Western Europe as well.
Another point the hon. Member made was that we should go in for a policy of controlled reflation. I must say I hate these words "inflation, deflation, disinflation, reflation." Whether disinflation means the same thing as

2219
deflation I am not quite sure. As I understood the hon. Gentleman, he meant, by controlled reflation, a deliberate policy of expanding purchasing power, whereas the policy hitherto, of disinflation has been to reduce purchasing power. He said that whereas that had been our policy, we should now set about an expansion of purchasing power. But that is the whole theory that underlies my right hon. Friend's Budget. The time has come, with a certain slack in the economy, deliberately to increase purchasing power. I think that we are to that extent in agreement on our objectives.
Mr. Edelman: Will the hon. Gentleman refer specifically to the Bank rate? I was referring to reducing it as one means of encouraging the economy.
Mr. Maudling: It is true that one way to enable people to spend more money is to enable them to borrow more money. Another way is to reduce the amount we take away from them in the form of taxation. My right hon. Friend has chosen the latter step, but, as he made clear in his Budget speech, the point about our monetary policy is that it is a flexible policy. I am sure he will always bear in mind the considerations the hon. Gentleman was putting forward.
The right hon. Gentleman the Member for Rochester and Chatham (Mr. Bottomley) and my hon. and gallant Friend the Member for Poole (Captain Pilkington) both dealt with the very important matter of maintaining good relations in industry and of impressing so far as we can on everyone in industry the importance both of an increase in production and of efficiency in industry. Upon increasing production and efficiency depends the standard of living of everyone engaged in industry and of everyone else in this country.
There was a contrast between their speeches and that of the hon. Gentleman the Member for Hillsborough (Mr. G. Darling), who cast a dreadful atmosphere of gloom, of almost inspissated gloom, over the debate, talking about our industry being backward, and about lamentable industrial relations over a wide range of industry. It is just not true to suggest that a wide range of British industry is so terribly
2220
backward. If it were we should not be able to maintain our position in a competitive world as we do, and we should not have such new things as our Comets and our new fabrics. Can it really be said of this country, with its great trade union movement, that over a wide range of industry industrial relations are lamentable? I really think that the hon. Gentleman went a little too far.
Mr. G. Darling: When I was talking about labour relations I was not talking about the wages and conditions of the workers but about the urgency of the workers playing a part in the management and development of industry generally throughout industry. As to that, very little has been done.
Mr. Maudling: That puts the hon. Gentleman's point of view in a rather different light. On the matter of general consultation in industry I do not think there is any disagreement between the two sides of the House. The hon. Gentleman seems to think that we should weed out inefficient firms by some form of Government control. How Government controls can be used to weed out inefficient firms I do not know.
Mr. Darling: I did not say that.
Mr. Maudling: That was the implication of what the hon. Gentleman said. I am sorry if I misunderstood him.
Our belief is that it is by competition that the efficient firms will expand and the less efficient firms will contract, and, if necessary, disappear altogether. If the hon. Gentleman asks me how we can contribute to the development of competition in this country I would say that under his right hon. Friend's regime there was a time of considerable inflation and the problem was that it was too easy to make profits. Under a policy of disinflation it is more difficult to make profits and industry is becoming all the time more competitive. I agree, the more competitive it can become, the better, but I do think he should not underrate the difference in the whole atmosphere and feeling in industry which has arisen from a different monetary policy and a different economic climate.
The Amendment refers to 1952 and the course of production in that year. Looking at the year 1952 as a whole throughout world economy, I think it was un-

2221
doubtedly a year of substantial change. The post-war boom, which continued for several years—and to which, surely we must attribute a very large measure of the demand for our products and the possibility of maintaining full employment which we enjoyed in the years 1945 to 1950—was given a final fillip by the outbreak of the Korean war. This was a final and, in some ways, more disarranging and disturbing effect than it had already had. The Korean war prolonged the post-war inflation. There followed after the Korean war a remarkable contraction in world economic activity. There was for the first time a real disinflationary development throughout the world, particularly, as the House is well aware, in the textile industries.
In 1952, we were facing quite new conditions. The ending of the post-war boom, the disappearance of the post-war sellers' market, the world trade recession in textiles and some other consumer trades, were all new developments. The main feature of 1952—and I think it is worth referring to this again, as did my hon. Friend the Member for Cheadle—was the change in our overseas payments and the revolution in the position of sterling. From a position—as was often pointed out in the House—where we were losing our reserves at a rapid rate at the end of 1951, when sterling was by no means as strong as it should have been, by the end of 1952 we had reached a position when our reserves were built up—not high enough yet, by a long way—and where confidence had been restored to a remarkable degree, as is evidenced by the day-to-day quotations of the £ sterling against the dollar in international markets. All that was the first problem we had to face in the guidance and direction of our economy in 1952.
It may be said by hon. Members opposite, "That is all very well, but there have been crises before. Reserves have run down before, the tide has turned and they have gone up again. But production has always continued to increase." An argument might be made, for example, from 1949 when the reserves were running down and were turned upwards again as a result of devaluation. A point I have made before is that devaluation is not a thing we can go on doing. Devaluation was the weapon used by the Labour Government in 1949 to meet a crisis of
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this kind. Having been used in 1949, it could not be used again in 1951–52.
In an economy like ours, which is so dependent on international trade and on our ability to pay for our essential imports, it is impossible, in deflationary conditions in the rest of the world, to maintain an inflationary demand in the home market, a fixed rate of exchange and the necessary level of reserves. One cannot simultaneously maintain all those three things—an inflationary level of home demand, a fixed rate of exchange and a necessary level of reserves. One must give. In 1949 what gave was the rate of exchange. In 1949, these difficulties were met by the Labour Government, and sensibly met, by devaluation. But on this occasion that particular device could not be used, so what had to be done was to cure the internal inflation. That is the main difference between the way in which we solved the crisis of 1951–52 and the crisis of 1949.
I turn again to a point I tried to make in my Budget speech, and which the hon. Member for Reading, South (Mr. Mikardo) found, I am afraid, rather obvious. I fear I must refer to it again. It is that we must not assume that the level of production in itself is the main indication of the health of our economy. If we make that assumption we are liable to run into very great dangers. If we go on producing the wrong things, as we may well do, with too high a level of home demand, our economy can be fully employed and our production index can continue to rise, and yet our international financial position can be deteriorating rapidly. That may be obvious, but I do want to stress it once again.
At present, for example, it would be true to say that a substantial increase in production not accompanied by an equivalent increase in exports might be very dangerous to our home position, because of the increased cost of imports which would be involved. Those are the sorts of considerations we must bear in mind. There can be no doubt, surely, in the light of recent experience, that an excessive home demand is a very considerable menace to the balance of payments. It may mean a diversion to the home market of goods which should go on the export market. These are constant difficulties, constant hamperings and constant obstacles placed in the way of our export trade.

2223
It was necessary, therefore, in the conditions of 1952, in the changing state of world economy, with greater flexibility and greater adaptability, to reduce the load of inflation, to reduce the pressure of excessive demand which kept our economy too rigid, and which prevented a sufficiently quick change and switch of resources from one purpose to another. In an inflationary world one can maintain a high level of internal demand, perhaps, but in a world where conditions are changing and moving towards disinflation we must adapt ourselves and readjust our economy to meet those conditions.
One of the inevitable results of a change in the type of production is some immediate short-fall in the total level of production. When switching over from home production to exports, when trying to switch the emphasis from light consumer goods to heavy capital goods, those switches, those changes and developments, must necessarily mean a pause, perhaps a fall in the total level of production while the change over is taking place. I am sure that that is clear to the House, and I am sure that there would be general agreement with that proposition. That was one of the features of 1952. Inevitably, the need to adapt our economy meant that it was not so easy, not so possible, to maintain a rising level of production, which obviously we should all like to see.
On the question of the switch of resources in 1952, I should like to say a word or two about the movement of manpower, to which some reference has been made today, and to which the right hon. Member for Leeds, South (Mr. Gaitskell) referred in the course of his Budget speech, I thought with considerable effect. The changes in our total distribution of manpower are a little misleading if we look only at the movement between industry and industry and do not look, as my hon. Friend the Member for Cheadle pointed out, at the changes within particular industries.
In the engineering industry there was a very considerable switch over of employment between one part of that industry and another. For example, in 1952, aircraft manufacturing gained nearly 30,000 employees, iron and steel melting and rolling gained 7,300, the
2224
railways, which, in 1951, had lost over 6,000 people, gained 2,500. All these were definite changes within the engineering industry, which are somewhat masked by the total figures, which merely give the position of the industry as a whole.
Another comment—I thought a very effective point—made by the right hon. Gentleman was that one of the categories in our labour statistics which shows an increase was that of financial, professional and miscellaneous. I have inquired into this, and I am sure hon. Members will be delighted to know that the net increase is largely accounted for by the medical and teaching professions.
Turning to the actual movement of production in 1952, I think we should distinguish between the different types of industry, taking, first, the four basic industries of coal, steel, agriculture and building, all of which showed an increase.
Mr. G. Thomas: Agriculture?
Mr. Maudling: Agriculture showed an increase.
Mr. Thomas: In manpower?
Mr. Maudling: I am sorry not to have made myself clear. I have turned from manpower to the level of production.
The interesting thing about agriculture is that the level of manpower fell but the level of total output increased, which is a great tribute to the agricultural industry. That does suggest that the remarks of hon. Gentlemen about the difficulties of farmers in obtaining credit are not entirely valid. It is true that the interest rates have risen, but I should like to point out that, in spite of what the hon. Member for Cardiff, West (Mr. G. Thomas) said, the banks have been asked to pay special attention to the needs of agriculture in organising their advances, and our opinion is that no credit-worthy farmer who applies for credit to the banks fails to get it.
Concerning agriculture, we also believe that the changes in the Budget—the initial allowance and the standard rate changes—will be of considerable help to the farming industry. The fact remains that despite the fall of 22,000 people in the total number employed in the agricultural industry in 1952, there was an increase in production of quite a substantial amount.

2225
Incidentally, the agricultural industry is not included in the index of industrial production.
The same applies to coal, where there was an increase in production. There the increase in manpower was much greater than the increase in production. As I think hon. Members have said, while we had an entry of new entrants into the mining industry there has to be a period of training before there is any noticeable increase in production.
Steel was an industry which showed a substantial increase in production in 1952. We are told by hon. Members opposite that the frightening threat of being denationalised would demoralise the whole industry, but there has been a substantially increased output of steel, largely as a result of bringing in new furnace plant which started long before the industry was nationalised, under private enterprise, which we are so often told was unenterprising. There, we have the four major basic industries all showing an increase.
Mr. G. Thomas: When the hon. Gentleman refers to agriculture and to the increase, which is welcomed by all and to which I referred in my speech earlier today, would he not agree that there is a dangerous sign there that the increase curve has begun to flatten out? It is only one-third of the increase that we had last year. Is that not a dangerous sign?
Mr. Maudling: My impression is that the signs are encouraging for the agricultural industry. Recent signs are encouraging as a result of the way in which production is moving. I am told that there is definite evidence of growing efficient increased production which is coincidental with the substantial reduction in manpower.
There is a wide range of industry in which little change has taken place between 1951 and 1952. In engineering generally, I think that the hon. Member for Cardiff, West agrees that the fall in production was 0.4 per cent., which, over a year, is probably neither here nor there. The production of vehicles, despite what we have heard on some occasions, as between 1952 and 1951, shows practically no change at all. There is a wide range of industry in which there is no change.
I now come to the industries which show a major decline. These are the
2226
textile and consumer goods industries. I think it is generally agreed that the weight of decline in production in 1952 was in the consumer goods industry. These are the facts about production in 1952—that the basic industries showed an increase, in a wide range of industries the level remained about stable—and a certain range of industries, particularly textile and consumer goods, showed a substantial decrease. What were the direct causes of these movements in the level of production?
First, there was the shortage of steel in the first half of 1952. In many of these things the level of output in a given period is determined by the level of output of raw materials some months beforehand. In 1951, there was a substantial decrease in the level of steel output. The total tonnage of crude steel fell substantially in 1951. That was largely due to shipping difficulties in importing ore and in obtaining scrap from Germany. I am not attributing guilt or blame. I am only stating the facts.
In 1951, a substantial decline in steel production was clearly shown in the production figures of the engineering industry, particularly in the first part of that year. That was one of the reasons why in the first part of 1952 we were not able in the engineering industries to take up some of the slack in our exports created by the decline in textile exports. The shortage of steel production in 1951 has been countered by the very encouraging and satisfactory increase in steel production in the second part of 1952, but it still makes itself felt to some extent in capital goods output because of the long cycle of production and particularly because of the difficulty of ship plates which continues to remain one of very close concern to the Government. We recognise the importance of helping the shipbuilding industry in the growing competitive conditions which they have to face, and we are trying to help them in the supply of shipbuilding plates.
Mr. Frederick Willey: Would the hon. Gentleman say rather more about this industry, because the position is deteriorating? Last quarter's figures, just received this morning, are not only substantially less than those of the preceding quarter but less than those of the corresponding quarter last year. Although we have the steel

2227
we have the disturbing situation that output is still falling.
Mr. Maudling: I should not like to enter into any further detail about that industry, which may be considered beyond my own province. I think that the position in the shipbuilding industry and the difficulty of obtaining orders is very closely associated with the steel plate situation because, if one has not the raw materials one cannot quote an early delivery date.
The next reason for the decline in production must, of course, be sought in the decline of demand. If demand declines production declines, and in the case of many industries, chiefly textiles, the effects are spread over a considerable area. In 1952, there was a substantial decline in the export demand for British products. This was a result of the general disinflationary movement throughout the world and the general reaction from the post Korean war boom which was felt by a number of countries throughout the world which reduced imports because of balance of payments difficulties.
The balance of payments difficulties were general and widespread in 1952, and this lead to a restriction on British exports and British production of the kind introduced in Australia, which has since to some extent been relaxed. The particular decline in export demand was in the textile industry. Here, I think, when hon. Members quote comparisons with other countries they should observe how much our economy, in comparison with others, depends on exports, and how much we depend on textile exports which felt more than any other commodities the decline in world markets.
I have here some figures which I think are of interest and which show the relative decline in the value of textile exports and of all exports. In 1952, by comparison with 1951, our exports fell in value by 1 per cent., while our textile exports fell by 29 per cent. In France, textile exports fell by 26 per cent. and all exports by 5 per cent. Japanese textile exports fell by 35 per cent. and all their exports by 7 per cent. Thus, other countries which, like ourselves, depend fairly heavily on textile exports, also suffered a very heavy decline in
2228
exports demand, in export trade and in consequent production for export in the course of 1952.
Mr. Mikardo: None of those European countries suffered an overall decline in production as we did. What the hon. Gentleman has to explain is this: he is making all sorts of elaborate excuses for the 1952 failure—the end of the postwar Korean boom and all the rest of it, and a recession in world demand—but all other manufacturing countries had the same problem and faced the same situation and all other manufacturing countries increased their overall output. Britain's overall output decreased. How does the hon. Gentleman explain that?
Mr. Maudling: I do not think that the hon. Member is entirely accurate in his statement that all other countries increased their production. He cannot have been listening to the point which I was making, in any case, for I was pointing out the considerable dependence of this country upon textile exports. Our dependence on textile exports means that the prospects of success or failure of our textile trade has a greater effect on the total volume of production than the export successes or failures of other countries who depend less heavily upon them. I am always in trouble with the hon. Member for Reading, South; according to him, I am either saying things which are obvious or saying things which are too obscure.
Mr. Mikardo: If they are not obscure they are wrong.
Mr. Maudling: The decline in the textile trade and production throughout the world meant that countries producing raw cotton—Pakistan, Brazil, Egypt and Turkey, for instance—all ran into very considerable difficulties and all reduced their purchases from this country. An example was the supply of textile machinery from Lancashire to Brazil. We all see the effect which this development in textile trade had on reducing production in Lancashire.
In analysing the reasons for the drop in production in 1952 I turn to the question of home demand—home demand for household goods, textile goods, consumer goods and so on, in which area of our economy the main fall in production

2229
occurred. Here, we can trace the decline in production from the decline in personal consumption. If we look at the figures in the Digest of Statistics, and if we compare personal consumption in 1952 with personal consumption in 1951, at constant prices, we find that there was a decline of about £90 million, practically wholly accounted for by a decline in personal consumption of household goods, textiles, clothing and footwear.
Mr. Mikardo: Why? They could not afford them.
Mr. Maudling: I am delighted that the hon. Member makes this point, because if there was a decline in 1952 there was a much greater decline comparing 1951 with 1950. That is my whole point and I am obliged to him for making it for me. In fact, the decline in production of textiles in 1952 is the result of a decline in the consumption of textiles and clothing which started in the middle or slightly before the middle of 1951. Hon. Members opposite try to throw the blame upon us for the decline in production of these articles. They should observe that the decline in consumption started when they were in power.
To sum up my comments on the movement of production during this period, the fact is that, so far from what hon. Members opposite try to make out in this Amendment and in other speeches, there has been no sudden change with the change of Government from a rising level of production to a falling level of production. At the beginning of 1951 production was tailing off. I have some figures here which show the level of production and the movement of the index of production, adjusted for seasonal variations. They show that at the beginning of 1951 it was 118; it remained at 118 for the next two quarters; and it has now gone back to 116 after a short decline in the middle of 1952.
Over the period as a whole there is no substantial decline, but a steady level with a dip in the middle of 1952. That dip in 1952 is largely attributable to a decline in the production of consumer goods, that decline in the production of consumer goods stemming directly from the decline in consumption which took place before the General Election.
Having dealt with that wholly unfounded suggestion and having shown
2230
figures in authoritative documents, I want to turn now to the question of what we ought to do. [HON. MEMBERS: "Oh."] The Amendment draws attention to the drop in industrial output and
"notes with deep concern that industrial output in Great Britain, which rose substantially between 1945 and 1951, suffered a serious fall in 1952. …"
I thought I was entitled to take some time in pointing out that that is wholly inaccurate—or, shall I say, misleading.
I turn to what we have to do now. Obviously, the object must be to stimulate and increase production but not, at the same time, to run into the danger of further inflation and a further undermining of our balance of payments position and of the confidence in sterling which we have achieved. We must steer a pretty narrow course between the danger of allowing too much slack in the economy and the danger of creating a balance of payments crisis through inflation.
I will take, first of all, the position abroad, to which the right hon. Member for Leeds, South has referred. I will deal with the question of making sterling scarce, but not too scarce, because I think that is a most important point. Our objective, in 1952, has been very largely to make sterling scarce, because only by making a currency adequately scarce can we maintain its exchange value. One of the reasons for the faltering or falling confidence in sterling under the previous administration on some occasions is, in our opinion, that they made sterling too widely and too readily available.
On the other hand, as the right hon. Gentleman said, it is perfectly true that we can proceed to make sterling too scarce, which is just the same process as over-reducing your purchasing power at home, whereby we merely waste resources without doing anything to help economic stability. That is why we have taken certain steps to relax, for example, the exchange control over the granting of credit by British exporters, in which sphere my right hon. Friend the Chancellor of the Exchequer recently announced considerable relaxation. We think that will help considerably to promote trade and to achieve our objective.
In the Organisation for European Economic Co-operation, we have taken a very bold step by increasing our imports

2231
from Europe, in order to contribute to the general development of trade, at a time when we have a very large outstanding debt with O.E.E.C. and at a time when we are still by no means in a very large and comfortable surplus with them. In the course of the Budget debate the right hon. Member for Leeds, South suggested that we were pursuing a restrictionist policy in world trade. I do not think that that is a fair comment. We are trying to do everything we can to extend international trade. That is one of the main reasons why we have relaxed our restrictions against O.E.E.C. countries. There is, however, a limit to the extent to which we can go.
Mr. Gaitskell: I am delighted to find that the hon. Gentleman agrees with my warning on this point. But in the case of O.E.E.C. the essential point is to get more credit into the system, and I was criticising the Government for not pressing for that more urgently in O.E.E.C. itself.
Mr. Maudling: I had not appreciated that that was the criticism and I should like to consider it. We are sometimes urged to extend credits to overseas countries who are short of sterling to enable our exporters to sell them goods, but there is a definite limit to the amount of credit which this country can afford to extend. There is a limit to the amount of money which we can invest abroad at present. After all, the granting of credit and investment abroad are the same thing.
At the Commonwealth Conference we agreed, as a cardinal principle of the Commonwealth communiqué, that investments should be concentrated as far as possible on projects designed to improve the balance of payments position of the sterling area as a whole. While I sympathise with the desire which is often expressed—"How advantageous it would be if we could have large credits extended to other countries to enable them to buy our goods"—there are limits to what we can do, particularly when the credit competes directly with British alternative investment policies in the Commonwealth.
I turn to what we can do at home to increase production. I am glad that the right hon. Member for Leeds, South is here, because I want to clear up a point
2232
with him which I did not quite understand in his attitude to the Budget proposals.
Mr. Rhodes: Never mind that. Let us see what the Government want to do.
Mr. Maudling: I should have thought that the Chancellor's Budget proposals made perfectly clear not only what we want to do, but what we are doing. First of all, I want to ask the right hon. Gentleman a question. Hon. Members opposite often imply that the Chancellor is being too optimistic, that the situation is much graver than is recognised on this side of the House and that the Budget, as a consequence, may be too optimistic and too soft. I presume that the right hon. Gentleman means that too much is being given to consumption. A passage in the speech of the right hon. Member seemed to say that. He said:
"I should have thought that with the state of the economy as a whole the prime need, apart from expanding exports, was an expansion in investment. I do not know and I want to know, does he think we can afford more consumption as well?"—[OFFICIAL REPORT, 15th April, 1953; Vol. 514, c. 228–9.]
If he is doubtful whether it is right to afford more consumption at the moment why are he and his hon. Friends constantly urging the Chancellor to distribute more to those who have—I think the usual phrase is—the greatest "propensity to consume"? They cannot have it both ways and, while arguing that the Budget is too soft and that the Chancellor should not reduce his surplus too much, at the same time maintain that he should give more to people who would be enabled to consume more.
Mr. Gaitskell: I am glad that the hon. Gentleman has raised this matter. I was asking whether the Chancellor desired to increase consumption and, if so, by how much compared with any increase in investment. In so far as he does desire to increase consumption we believe that it should have been done by distributing benefits to people in a much fairer manner than in fact the Government have done it.
Mr. Maudling: I take it, then, that the right hon. Member does agree that it is right to aim at increased consumption. I hope he agrees on that, because I should like to know if we are at one on that point.
Mr. Gaitskell: Yes.
Mr. Maudling: So far as the amount going into consumption and the amount going into investment is concerned, here is where we differ from the right hon. Member and his Friends. We do not believe the Government can plan these things with exactitude and say that there shall be so much increase in investment and so much in consumption, or no increase in consumption. We cannot expect to increase investment without, at the same time, allowing an increase in consumption. I thought there was point in making that clear. We hope there will be some increase in consumption and, with the certain amount of slack which exists, it is possible to envisage greater expenditure on consumption without a return to inflation because there is the idle capacity which can be called in to match the spending power.
The way in which the Government tackle the problem of production is to reduce taxation in such a way as to stimulate investment and savings. We believe that by restoring the initial allowances, with which the right hon. Member agrees, in announcing the termination of the Excess Profits Levy and making an immediate reduction in the standard rate of Income Tax, we are reducing the total burden of taxation and giving financial facilities to people to invest. We believe this is a good way of stimulating savings.
My right hon. Friend the Chancellor has made it clear that he believes that our policy on personal incomes should be one of restraint and the Government continue to attach great importance to this. An hon. Member opposite asked what we intend to do about it, but his answer was to be found in the Budget. The Chancellor has deliberately budgeted for a surplus of about £150 million less than it would have been had he continued taxation at the present rate and that is a definite stimulus, on a scale which the right hon. Member thinks is the right scale, by which additional purchasing power can be released. Surely that is the way in which the Government can influence the level of production. It is industry which does the producing and in a private enterprise economy the Government have to encourage production at the highest possible level consonant with avoiding a return to the balance of payment difficulties which we inherited in 1951.
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I have endeavoured, in the course of my remarks—I apologise for their length—to deal with the erroneous contention that there has been any dramatic change in the level of industrial production. The principle which the Government adopt in facing the situation is, where there is a certain slack, to afford the opportunity, by a reduction in taxation, for industry to invest in new plant and machinery and thus increase our efficiency and the possibilities of winning and holding further export markets.
7.44 p.m.
Mr. Alfred Robens: We have listened, as we always do, with great interest to the speech delivered by the Economic Secretary to the Treasury. He has been good enough to take us through the Digest of Statistics and explain them all to us in great detail. Most of us look at the Digest with great interest and we have generally reached our conclusions on the statistics which have been made available to us. Finally, when he was challenged to deal with the Amendment before us, which after all
"deplores the policies of Her Majesty's Government which are largely responsible for this fall and also for its failure to take effective remedial measures"
he blandly asserts that the Government are relying on the Budget to meet the criticism contained in the Amendment and that industry must do the rest on its own. There must be no interference with free enterprise, there must be no interference with the capitalist system, and everything will be all right if things are allowed to work out for themselves.
I am bound to remind the hon. Gentleman that when the Chancellor introduced his first Budget he described it as an incentive Budget which was going to boost production. It did nothing of the kind. It is not a bit of use going through the Digest of Statistics and explaining what they all mean. When all that has been done it still remains a fact that there has been an alarming fall in production, which must alarm the hon. Gentlemen as it does everyone else. There has been an alarming fall in production since the introduction of that Budget, which was designed as an incentive Budget. The only answer that the Government have to the problem which they have created for themselves is to introduce another Budget

2235
and say, "Well we are relying on this one."
The economic arguments which have taken place between my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and the Chancellor and the Economic Secretary have shown a complete cleavage of view on this question of an inflationary or deflationary policy and the line which should be taken. I will not pursue the matter further because many other hon. Members wish to speak and I think that as this is really a Private Members' day those of us on the Front Benches ought to take as little time as possible. But I cannot help making this one remark. The Economic Secretary said that the Budget was designed to pump more spending power into the economy. I notice that "The Times" today says:
"the purpose of the reliefs was to stimulate effort, enterprise and efficiency, and the consequent increase in purchasing power was an undesirable and risky by-product."
I do not know whether the Economic Secretary agrees with that or not; it is not the usual sort of leading article supporting a Socialist policy. Clearly "The Times" does not accept the view of the Economic Secretary as to the effects of the Budget. I was also a little alarmed—I hope I shall not misquote the hon. Gentleman—to hear him say that a little unemployment to get the right people in the right industries is not wholly undesirable. I am paraphrasing what he said in reference to the egnineering industry and the 30,000 switched over in the aircraft industry, which was because of the decline in certain other branches of the engineering industry. I gather he said that that was not wholly undesirable.
Mr. Maudling: To the best of my recollection I did not say anything of the kind. I was not talking of desirability but inevitability. I think the right hon. Member for Blyth (Mr. Robens) himself pointed out in a letter to "The Times," or in a speech, that when there is a change from defence to exports there must be a temporary reduction in the total level of production. I was pointing out not that it was desirable, but that it was inevitable.
Mr. Robens: Certainly, but the position about the engineering industry is a
2236
dangerous one, and figures given recently show that there has been a very big change in the industry. Quite frankly, I do not accept the view that in order to man up our aircraft industry we must necessarily run down some other part of the engineering industry, on which this nation will depend more and more in the future. It would be better to build it up and not merely make a switch within it and get no total overall increase in production.
I welcome this Amendment, so well introduced by my hon. Friend the Member for Anglesey (Mr. C. Hughes) and seconded by my hon. Friend the Member for Cardiff, West (Mr. G. Thomas). I was a little surprised that some hon. Members opposite who talked about the debate being non-partisan and the necessity for adopting a non-partisan attitude to this Amendment, should then proceed to be as partisan as they possibly could. None of us want to be partisan about what is a very important thing for this country, and a very grievous thing at the present time.
But we must not, in the guise of being non-partisan, stop criticising the Government. Surely it should not be taken that the Opposition's function is to say to the Government, "We do not want to be political on this matter. All you are doing is absolutely right." We do not agree that it is, and we put our views forward. I am bound to say that if hon. Members opposite will look through the columns of HANSARD from 1945 to 1951 they may find a few speeches which could be termed partisan.
I wish to deal with a matter referred to by the hon. Member for Hendon, North (Mr. C. I. Orr-Ewing), who also happens to be the Parliamentary Private Secretary to the Minister of Labour. We do not expect from him quite the kind of statement which he made today when he attributed to my right hon. Friend the Member for Leeds, South the fact that he had said that 3 per cent. of unemployment was about the right level for full employment in this country. If I am misquoting the hon. Gentleman I am prepared to give way. I am paraphrasing what he said.
This was said once before by his master, the Minister of Labour, and after a statement by my right hon. Friend the Member for Leeds, South he withdrew

2237
that imputation. I refer hon. Members to the statement of my right hon. Friend on 11th November, 1952, when he said:
"A full employment standard was called for in a Resolution of the Economic and Social Council, which we warmly supported, and it indicated the standard at which very energetic action should be taken by the Government. The part I wish to quote is—"
and my right hon. Friend then quoted the following statement made to the United Nations Organisation:
"It must be stressed that the choice of this standard does not mean that the Government would allow unemployment to reach 3 per cent. before taking vigorous counter action. It will be a continuing objective of the Government's policy to counter any unfavourable trend in employment and to take special measures to deal with those areas in which unemployment has persisted at a comparatively high level."—[OFFICIAL REPORT, 11th November, 1952; Vol. 507, c. 789.]
For the purposes of the record I wish to ask hon. Members to note that if they will consult the OFFICIAL REPORT of 22nd March, 1951, they will find, in c. 319, the full and complete statement, which is too lengthy for me to read, that was sent to the Secretary-General of the United Nations. I hope, therefore, that after this we shall not hear hon. Members imputing to my right hon. Friend the suggestion that he has said that 3 per cent. unemployment is about the right level at which we can say we have full employment in this country.
Hon. Gentlemen have said many times in this House, and their friends have said outside, that we need the flexibility of a pool of unemployed persons. That has been said on more than one occasion—
Mr. C. I. Orr-Ewing Mr. C. I. Orr-Ewing indicated dissent.
Mr. Robens: It may not be so in the case of the hon. Member for Hendon, North but if he will read his speech in HANSARD tomorrow he will find he has come perilously near to it. This afternoon he said that we needed flexibility, and when I asked what percentage of the working population he was prepared to go up to he turned to something—
Mr. C. I. Orr-Ewing: I am sorry if I distorted the right hon. Gentleman's words, but I did use the term "full employment standard" and I quoted 3 per cent. I agree with everything the right hon. Gentleman said I quoted about his right hon. Friend the Member for Leeds South (Mr. Gaitskell), but I cannot agree
2238
that I in any way suggested a percentage of unemployment flexibility. I hope that the right hon. Gentleman will agree that some flexibility is necessary if people are to be able to go to better jobs and we are to obtain the export industries we all desire.
Mr. Robens: That is what I said time and again. We on this side of the House do not accept any figure of unemployment as being necessary for flexibility. We do not subscribe to the view that we must have some unemployment in order to obtain flexibility. We do not suggest that at all.
Mr. Nabarro: As a former Minister of Labour, the right hon. Gentleman must be reasonable about this. On whatever day the count is taken there must be some persons who are going from one job to another and that number of persons over the whole country is probably more than 100,000. What, in his view, is the figure?
Mr. Robens: Of course there is bound to be flexibility in the sense that on any given day everybody will not automatically be at work. But that is very different from saying that we need a pool of unemployed persons to create that flexibility.
Mr. C. I. Orr-Ewing: Who said that?
Mr. Robens: Hon. Gentlemen in speeches in this House, have said that.
I must say that during the whole of my period of office, and of that of my predecessors, our problem was not one of finding jobs for people, because the number of vacancies was nearly always twice as many as the number of persons unemployed. Today the problem of the Parliamentary Secretary and of the Minister of Labour is that the number of vacancies is half the number of people unemployed; and therefore we now have a hard core of persons who are unemployed and for whom there are no jobs at all, which is not a question of flexibility.
The Parliamentary Secretary to the Ministry of Labour (Mr. Harold Watkinson): The last time that the right hon. Gentleman the Member for Blyth (Mr. Robens) and I spoke in a debate dealing with full employment I made it plain—and I had the maximum authority of the Government behind me—that Her

2239
Majesty's Government complied with the policy of full employment. They are carrying on the policy of full employment. Whatever may be said—and I am afraid that hon. Members and probably some right hon. Gentlemen sometimes say things in the country which are capable of being misrepresented—I wish to make it plain that it is the policy of Her Majesty's Government to carry on with a full employment policy. We believe that we can, and we shall do so, and we do not depart from that policy by one iota.
Mr. Robens: I accept what the hon. Gentleman says, but I am bound to say again that when speeches like this are made it causes some anxiety in the minds of workers—
Mr. C. I. Orr-Ewing: I think it important for the record to say that I have read through my speech and I did not mention unemployment. The right hon. Gentleman has tried to twist my words and asked what unemployment I wanted. I said some flexibility was needed for people going to new jobs. One does not need to be unemployed when going from one job to another. I never suggested that an unemployment pool was the answer.
Mr. Robens: I will allow the House to be the judge of that without pursuing the matter further.
This Amendment deplores the policy of the Government, and is asking, or drawing attention to the fact, that there has been a failure to take effective remedial measures to deal with the question of industrial production. This country is faced at the moment not only with great competition, but I believe that it is faced today, and in the years immediately ahead, with the greatest competitive struggle for markets which has ever faced us in our industrial history. It should be well known to all workers and employers that the economic survival of this country and of our standard of living depends on winning this great battle.
All the warnings of the late Sir Stafford Cripps are as true today as when he uttered them. It is a great pity that those warnings were jeered at by hon. Members opposite from time to time, and that they were not echoed when they were being made.
Mr. C. I. Orr-Ewing: That is not true.
Mr. Robens: I remember the present Prime Minister, pink with indignation, calling Sir Stafford Cripps from this very Box a Minister of misery and woe. In fact, Sir Stafford Cripps was years before the event saying precisely what we are saying in this debate today.
Why shall we have to face the most intense competition of all time? It is because we have reached a new stage, and the element that will make our task harder is the fact that in Japan and Germany we have two great industrial countries, with enormous industrial capacity, which have now emerged from the destruction and chaos of war and are beginning to go right ahead with their productivity.
Mr. Osborne: The right hon. Gentleman is saying such obviously wise words that I want to ask him this. Surely, the changing circumstances that are causing us to have to face this tremendous competition from abroad have nothing to do with the colour of the party which is in office in this country. The circumstances would have changed just the same had the right hon. Member and his colleagues still been on this side of the House.
Mr. Robens: I accept at once that these conditions would have arisen today irrespective of what party is in office. For six years when we were in office we said the same thing, but hon. Members opposite denied it and talked of Labour inefficiency, and so on. What we must not do is to minimise the enormous task with which the emergence of Japan and Germany as great industrial nations will confront us.
Just think of Japan, with a population of nearly 90 million. In 1934, she exported to Asia 54 per cent. of her total exports. The British Empire markets took 25 per cent. Take the case of textiles. The Economic Secretary said tonight how heavily dependent we were upon our textile exports. Comparing 1928–29 with 1937–38, the United Kingdom percentage of total world exports in textiles declined from 44 per cent. to 26 per cent.; and Japanese textile exports rose from 19 per cent. to 39 per cent. That is fairly well known, but for the purpose of the point I am making we ought to remember what happened before the war.

2241
But that was not all. There was a whole range of goods in respect of which uneasiness was being caused in this country—wool, rayon, and certain iron and steel products, such as wire, cutlery, bicycles, electric fans and things of that kind. In the case of rayon, the Japanese increased their exports between 1930 and 1933 by 200 million yards, and with her low costs she ran away in this field with all the then new export trade. That is only a brief account, but it is a picture of what happened before the war when there was Japanese industrial competition.
What has happened since the war? If we take the industrial production in Japan in 1948 as being 100, at the end of 1950 it reached 165, at the end of 1951 it reached 243 and at the end of 1952 it reached 256. The point is that Japan is cut off from her traditional markets of Asia, and the 54 per cent. that formerly she was exporting in Asia must go to our markets—in the Middle East, Europe, India, Africa and even in this country itself.
Look at Germany. We need not worry about the pre-war picture, but let us consider her industrial production. Again taking 1948 as 100, by the end of 1950 her industrial production had reached 193; at the end of 1951, 238; and at the end of 1952 it was 264—going up in both cases while ours went down. Where did Germany have her traditional market? It was in Eastern Europe. Now that that market is closed to her, she will export her surplus goods into the markets which were known as the normal British traditional markets. So that we shall be faced in the next years with this enormous production, concentrated in the markets that are left of what is termed the free world, in the very markets in which we have established ourselves and upon which we rely for our normal export trade.
My hon. Friend the Member for Coventry, North (Mr. Edelman) made an interesting point when referring to American industry in noting that one in six of the workers in America are employed directly or indirectly on armaments. Therefore, whatever happens in that field will also have an enormous effect upon what happens here. Therefore, although I paint a grim picture, I believe it is a true picture, and the sooner we realise the enormous task with which we are faced the better it will be for all of us.
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The sooner the Government face up to that and realise that we cannot meet it with the kind of system that ran quite happily at the end of the last century and the beginning of the present century; the sooner they realise that there must be the application of new ideas and methods, that the Government must come into this sphere much more than they are prepared to do, and that the free enterprise capitalist system cannot by itself solve the problem; and the sooner the Government produce a plan and create the atmosphere in which we can deal with this problem, the sooner they will meet the situation. I believe, however, that they neither want to choose any other method nor have the capacity to do so, even if they had the desire.
There are three major approaches to these problems. Two of them are long-term and one of them is immediate and is really the subject of this debate. The first approach is, of course, the settlement of international problems, which would then enable the free flow of world trade. Obviously, there would be great difficulties for a time if there was a quick international settlement. With the great change-over from defence and armaments, the opening up of world trade would take some time, but when we did get the free flow of trade there would be the opportunity for utilising all that the industrial nations could produce. That is a long-term approach.
Second, of course, there is the plan that was produced by the Labour Government and was put to the United Nations: that is, the development of the backward areas of the world. We did our own work in connection with that in relation to the Colombo Plan and with great schemes like the Volta Dam. If we can raise the standard of living of the natives of the backward areas of the world by as little as 1 per cent. per year, many of our problems about the disposal of our goods for export, together with the problems of other industrial nations, would be solved. We all live by taking in one another's washing, and as the backward areas developed and additional capital and consumer goods were required, it would, if done on a big enough scale, demand all the industrial production of which the industrial nations were capable. That, too, is long term.
The third approach, of course, is to put our own industrial house in order, be-

2243
cause we have this enormous competition to meet. We have to produce goods of high quality and they must be at the right price, because price is a factor that helps considerably in the question of sales. What is the Government's function in all that? The function of the Government of the day is to accept responsibility for creating the climate or the atmosphere in which this can be done, "this" being the putting of our own industrial house in order.
Last year, production dropped by 3 per cent. I remember when the Prime Minister was standing at this Box when in Opposition, and when, under a Labour Administration, production had risen year after year, he charged us with clogging and stultifying the country's production. I should like to hear the right hon. Gentleman explain or describe what he thinks of a 3 per cent. reduction in production now, after the words he used in talking about increases in production over six years.
One of the factors which I believe has had a good deal to do with pricing us out of markets is the incentive Budget of the Government that was produced last year. We warned the Government about this, and the T.U.C. warned them, but, because their masters outside this House insisted upon cuts in Government spending in order to get 6d. knocked off the Income Tax, they slashed the food subsidies. The amount involved was probably small when we look at the whole expenditure of the Government, but the result has been enormous. The reason for that is that as soon as we put up the prices of commodities artificially in that way, we get demands for wage advances, and demands for wage advances do two things. Before they are granted, they cause great unsettlement among the workers within industry, and, when they are granted, the cost of the wage advance must go on the price of the goods. Therefore, I say that cutting the food subsidies last year was a stupid and foolish thing to do, and that it has been a contributory cause of our decline in production, for the reasons I have explained.
The Economic Secretary said that, of course, exports in all other countries had declined. Well, of course, they did, but the United Nations' reports show that the
2244
total exports of all O.E.E.C. countries were 6 per cent. in volume above 1950, whereas, in the United Kingdom, the volume was 5 per cent. lower. In other words, the United Kingdom exports showed a disproportionate reduction among those of O.E.E.C. countries. What was the result of that? The result was a rise in unemployment. It started the hard core which I described earlier, and placed on short-time working over 100,000 operatives, to take a sample covering only one-fifth of our manufacturing industries; the latest figures are 112,000—concealed unemployment.
The hon. Member for Cheadle (Mr. Shepherd) this afternoon said that that was good for the workers. I could not follow or understand how the chap who goes to the Labour Exchange to sign on and is told that there is no job for him can conceivably feel that it is a good thing. Perhaps if the hon. Member for Cheadle had been here, he might have risen to explain exactly what he meant. The fact is that uncertainty in employment does not create the right conditions for any increase in productivity.
We are told that what we want to do is to get rid of all restrictive practices, but we will never get rid of them if the workers feel that, as a result of getting rid of restrictive practices on their side, they will only join the unemployment queue. It is a mistake for hon. Gentlemen to go on talking about flexibility, which means a pool of unemployment, and then expect increased production. I know that what is termed over-full employment creates a lot of troubles. I know that quite well, but it is better to deal with the problems created by what is known as over-full employment than to have to face these problems of underemployment, which result in lost production and places us, economically, in a very much worse position.
We require to have not only increased production overall, but increased productivity, because that is the only way in which we can get prices down without lowering the standards of the people engaged in industry, and the only way to get increased productivity is to have much more efficient management in many sectors of industry. I will admit immediately that there are many sectors of industry which have very efficient management, but, overall, the Anglo-American Produc-

2245
tivity Council reports show that in this country management is not as efficient as it is in America. All the evidence is there.
Therefore, to get efficient management, there must be new techniques and there must also be very much better relations within the factories between workers and management. That is absolutely essential. How can we get better co-operation? We shall get it between workers and management when management first make it quite clear that they regard the worker as a partner in the industry and take him fully into their confidence, and when they devise, in their own way, in every single factory and workshop in this country, the kind of machine that makes the man in the most humble job feel that he is really part of the firm.
The unions and the employers' federations have got everything done nicely on national and district levels. What is wanted is for them to get together in the factories to get this co-operation, but I believe that it also demands Government action. I plead with the Government, through the Ministry of Labour, to do all they can, because unless we get this close co-operation we shall never get the increase in productivity that is absolutely essential.
What else will give us increased productivity? The other factor that will do it is when the worker, after all his efforts in getting rid of restrictive practices, is really working hard and feels that he is being treated with fairness and justice and is getting a square deal. Once he feels that he is not getting a square deal, the co-operation ceases.
In his closing remarks, the Economic Secretary said he relied upon the Budget to do this job. Does he really say that the last Budget has given the impression to millions of workers that they have had a square deal? Does he, for example, accept the situation in which the Government, with great largesse, have been giving money out so that 270,000 people in this country receiving over £2,000 a year got between them, in total, tax reliefs amounting to £22 million—while nine million workers who get less than £10 a week also got £22 million? Does he think that the workers in the factories think that is a fair share of the national cake? I will tell him that they do not think that nine million people sharing
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£22 million make a fair comparison with 270,000 people, who are really well blessed with this world's goods, also getting £22 million in tax relief.
Therefore, I say, that the Budget has failed lamentably to produce the kind of result that I know the Economic Secretary wants. The T.U.C., whom the Prime Minister is now leaning over backwards to appease, have said this:
"It seems from the distribution of these concessions that the biggest increase in production is expected from people with large incomes—not from the millions of wage earners who pay little or no Income Tax."
The Budget upon which the Government rely will not give a sense of justice and fair play to the millions of people who work very hard in all sorts of disagreeable jobs. Therefore, it will not lead to this increased co-operation which I feel is so vitally necessary.
I will go so far as to say that in all my experience as a trade union official, and. for a short period, as Minister of Labour, and of being engaged in industrial disputes of all kinds from the age of 24, I have never been associated with any industrial dispute which could not have been settled round a table before it began by intelligent people with common sense. There is no problem arising in industry that cannot be solved in a common sense way, but that does not mean that the employer is always right.
Mr. Osborne: Or the other side either.
Mr. Robens: Yes. But in these matters it is the employer who holds the economic power and who must be prepared to make the greatest gesture. Therefore, I suggest to the Economic Secretary that he cannot rely upon this Budget, because it does not meet the situation.
Mr. Nabarro: It goes a long way towards it.
Mr. Robens: The hon. Gentleman is entitled to his opinion, but it does not meet the situation. And later on more increases in the price of food will take place as a result of the further £30 million cut. Meat also must go up in price because £35 a ton more is toeing paid by the Government for Argentine meat than was paid by the Labour Government. I suppose that the £30 million which is being taken away from the farmers in respect of their feedingstuffs subsidies will have

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to go on the price of their commodities, too. Therefore, prices must inevitably go up again in the next few months.
I will tell the hon. Gentleman what will happen then. The trade unions will make applications for wage increases which will either be granted or we shall have industrial dislocation.
Mr. Watkinson Mr. Watkinson indicated dissent.
Mr. Robens: The Parliamentary Secretary shakes his head. I say that there is always industrial dislocation when men put in wage claims and when months pass before those claims are settled. I know that is so because of my experience. The men are unsettled and uneasy and they do not work at their best under these conditions. Therefore, I accuse the hon. Gentleman and his colleagues of producing a further un-settlement in the industrial life of this country through the Budget they have produced, which cannot lead to increased production.
I have already spoken too long, and, therefore, I will not pursue many of the other things I wanted to say. However, there is one thing I must say because I think it is important, and again shows the fallacy of the Government's policy. The Economic Secretary said that what was important in production was to produce the right things. Nobody would disagree with that. We must produce the things that other people want to buy, and unless we do that we are heading for bankruptcy. But we must also produce the things that other countries cannot make as easily.
Although we depend so much on textiles we shall really have to face the fact that unless the purchasing power of the people abroad who buy textiles is increased they will make textiles for themselves much more cheaply, and will manage with less textiles. Textiles can be made in the cottage. It is easy. That being so, we must concentrate not only on the right things, but on the things in respect of which we have a lead and in which fields other countries would find it difficult to follow us. There is going to be a great switch and change in our whole pattern of employment.
Mr. Osborne: Flexibility.
Mr. Robens: Hon. Members opposite say that the capitalist system will do this. It will do nothing of the kind. If the capitalists found it was more profitable to make ice cream freezers than to construct power stations they would make ice cream freezers.
Mr. Holt: The right hon. Gentleman made the important point that we must make the things which people will buy. That being so, it does not matter whether we make ice cream freezers or machinery. If our customers want ice cream freezers, then we must make them.
Mr. Robens: We listened to a long speech by the hon. Gentleman without understanding anything he said. I think I had better leave his interjection to the House rather than pursue it.
What are the things we have to do? We must make things which people want, but we must also concentrate on the things in which we have a lead. In other words, we now have to sell brains rather than brawn. That is how the pattern is changing. We must develop the application of atomic energy research to industry. We are leaders in that, and it will have a very great export market. We must develop such things as the Comet, jet propulsion, and all sorts of new inventions and ideas which are now being developed by the scientific use of the brains of this country.
If we are to do that—and I believe it to be essential—the pattern will have to be changed over the next few years. That means that this country must have more scientists, technicians, research workers, laboratory assistants, etc. The Ministry of Education has dealt the greatest blow possible against producing those people by putting children of five years of age in primary school classes of 40, 50 and 60. This Government, through its educational policy, has dealt the worst possible blow to our econmic recovery over the next 25 years, because the people which this country needs cannot be produced by the educational policy pursued at the present time.
The whole distribution is wrong and will have to be changed. Under this Government there were 32,000 fewer people in basic industries at the end of February, 1953, and 112,000 fewer in the manufacturing industries, than at the end of

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1951. Does that not worry hon. Gentlemen opposite? It would worry me if I were responsible. There is nothing in the Government's policy so far disclosed that meets these grave production policies with which the nation is faced. They have abandoned a planned economy, but it is only under a planned economy, with the careful use of the whole of our national resources, that we can win this battle.
The Government have abandoned a planned economy and have geared up the whole nation to the free enterprise system, with profit as the main motive of production. That is why we put down the Amendment. We do not believe that in view of the problems with which the nation is faced the policy of the Government as enunciated will meet the position. The problem that we shall have to face when we come into power is to clear up the mess that hon. and right hon. Gentlemen opposite are making.
8.29 p.m.
Mr. Cyril Osborne: The right hon. Member for Blyth (Mr. Robens) said at the beginning of his speech that this was, in its way, a Back Benchers' day and he regretted that Front Benchers should take so much time. I wish he had remembered at the end of his speech what he said at the beginning because it took him 50 minutes to say what some of us on the back benches think he could have said in half the time.
Mr. Robens: I was subjected to an enormous amount of interruption.
Mr. Osborne: Even then the right hon. Gentleman did not get through all his notes. With one or two of the things he said I agree. The most important was that this country faces the greatest economic competition in our long history and that the gravity of the situation is greater than most hon. Members on either side of the House realise.
He also told us that on this side we did not accept the warnings of Sir Stafford Cripps when things were very difficult. I would remind the right hon. Gentleman about his own leaders. The right hon. Member for Lewisham, South (Mr. H. Morrison) talked about "recovery corner" and his right hon. Friend the Member for Bishop Auckland (Mr. Dalton) talked about things "with a song in his heart." They were preaching a totally different
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economic doctrine from the late Sir Stafford Cripps. If the warnings were not taken on this side of the House as they ought to have been—in parenthesis I think I can say that I am one of the few men on either side who did take them—there were leading Members on that side of the House who would not take notice of those warnings either.
The right hon. Gentleman alleged that the Budget taking 6d. off the Income Tax was stupid because it would cause-wage demands which would dislocate production again. I ask him to remember that between 1945 and 1950 there were wage increases almost every year, with Socialist Chancellors in charge of Budgets at the time.
Mr. Robens: The wage increases went with increases of production. Wage levels kept pace with the increases in the cost of living, which is not happening now.
Mr. Osborne: The right hon. Gentleman said that wage increases that he is fostering and encouraging by his speech would result from the taking off of 6d. from the Income Tax. The retort to the right hon. Gentleman is that there were increases in wages every year when the Socialist Government were in power.
I am sorry that the hon. Member for Coventry, North (Mr. Edelman) is not in his place. I liked his speech the best of the lot. He said that there had been a pause in production throughout Europe in the last two years and he did not blame the Government for it. He said—and this again brings back the memory of Sir Stafford Cripps's warning to us all—that America had now almost undue influence in the rest of the free world economy. Hon. Gentlemen opposite will remember that in 1949 the American economy had a setback of 5 per cent., which was sufficient to compel us to devalue the £ sterling and to cause an immense crisis in this country. The Socialist Government, with a 200 majority, could do nothing to stop it.
The Amendment says two things. The first is that industrial output fell last year, and it regrets it. That is obviously true. It is no use arguing against it. Of course industrial output fell, and it is a thing that we all regret. The second thing that the Amendment says is that that was largely the fault of Her Majesty's Gov-

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ernment. That is completely and utterly untrue, and I should like to demonstrate that to the House.
Mr. A. Woodburn: Before the hon. Gentleman does that, may I ask, since he says that the statement in the Amendment is untrue, whether he is aware that the Chancellor of the Exchequer said that his credit policy last year had had effects that he had not foreseen?
Mr. Osborne: It is true that to some extent the Chancellor's deflationary policy is responsible, but it is not wholly responsible. I want to demonstrate that world factors caused that setback.
Before I do that, I want to make the clear point that increased production of itself will not get us out of our trouble. We have to produce better goods at lower prices. The one problem before us today is not merely to increase output but to secure the greater efficiency that will produce lower costs. It must be obvious to all hon. Members who are engaged in industry that it is useless to make goods which are so dear that one cannot sell them. Merely to increase production to such an extent that prices are so high that people cannot buy the goods produced will not get us out of the mess.
I should like to give three examples at home—and if we cannot buy things at home how much less they will be bought abroad. Before nationalisation of the coal industry the best Derby Brights cost 79s. per ton in Central London. Today they cost 126s. 5d. If that rate of increase continues poor people will not be able to buy coal. We on this side of the House are rejoicing that more and more houses are being built, but I can foresee that in 10 years' time there may be thousands of council houses standing empty because people cannot afford to pay the excessive rents. We want cheaper and better goods and services.
Lastly, there is the cost of transport. Train and bus fares have gone up so much that many workers cannot afford to take their children to the seaside for a holiday. I bring these three examples forward to show that the answer to our problems is not so much the increasing of output as the bringing of our prices down and the quality of our goods up.
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Following a line taken by the right hon. Member for Blyth, I should like to remind hon. Members of the position which we should face if the Korean talks resulted in general peace. We should then face such a difficult time in world markets that to survive we should have to pull together in a way in which we have never before pulled together industrially. In the textile industry, in which I have some interest and take some part, we were faced with severe competition from Japan from time to time before the war. The Japanese textile industry has been re-equipped by American money. As the right hon. Member for Blyth said, their natural markets have gone for the time being. The American taxpayer will refuse to subsidise Japan any longer and Japan will have to earn her own living in competition with Lancashire and Yorkshire textile exports in the Far East.
It is not only the employers who ought to be told of these facts. We ought to tell the workers too. [An HON. MEMBER: "They know it."] The German mechanical industry is progressing to a point at which we shall find it very difficult to meet German competition, as we are finding it difficult to meet at the moment in South America. Markets which were ours in Chile, Peru, Brazil and the Argentine are being lost even today. The German people have been hardened in war and are prepared to work, and are working, in a way in which no other people in Western Europe are working. I feel in my bones that in the textile industry Italy and France will come into the international markets with their goods and we shall have the gravest difficulty in selling what we produce.
Another consideration which haunts me from the point of view of international competition is that during the last 12 years Russia has been building a new economy east of the Urals. We have no knowledge what that economy is. In a few years' time she may be in a position to flood world markets with consumer goods at subsidised prices that will make it impossible for us to live against her.
But the greatest competition will come from America. In the last 10 years American productive capacity has doubled. The new Administration are pledged to cut their taxes and, above all, they are determined that America shall

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never again have 17 million unemployed. The exports from the American economy are largely the cream off the milk they get from their huge domestic market. They could afford to sell more cheaply and to cut their prices. We are going to have a terrific time fighting against American competition in the future.
I think it was the hon. Member for Coventry, North who quoted Senator Taft, as reported in the "Economist" last week, when he was asked about "trade, not aid." He said, cryptically, that he believed in the second half of the phrase. He had no comment to make about trade. In my opinion it shows the toughness that may one day show itself in the international market, and with which it will be terrifically difficult for us to compete.
In "The Times" yesterday there was another straw which showed the way the wind is blowing in the American industrial mind. The Chairman of the Goodrich Company, who is going to Copenhagen as the United States delegate to the Rubber Conference, said that he had no sympathy for an international control of rubber. He wanted rubber to have open competition and to find its own level. What an immense contrast with the policy of his fellow-countrymen who are running the international wheat market.
I should like to give the House some figures which I found rather startling. Two years ago rubber was 4s. 3d. a 1b.; today it is 1s. 8d. Two years ago we were buying wheat from America at 1.80 dollars a bushel; today we are being asked 2.05 dollars for it. If the price of wheat had. through international competition, fallen in the same way that rubber has done it would be 85 cents a bushel today, but we are being asked to pay 2.05 dollars.
I am by no means anti-American; I am very much the other way, but we have to face the fact that when the Korean war is over and the American economy gets into full gear again, unless our goods are of the finest quality and are offered at the keenest prices, we shall have no hope of survival, and the whole Welfare State upon which hon. Members on both sides of the House pride themselves so much will disappear completely and utterly. No Government of any colour will be able to maintain it. Hon. Members must face
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the fact that it is out of the profits of industry that the Welfare State is maintained, and if industry ceases to make a profit the Welfare State must go. No party politics can restore it if the economic system ceases to function properly.
I want to deal with the political side of this Amendment, which I rather regret. The Amendment says that the fall in production in 1952 was due to the action of the Government. On page 39 of the Economic Survey—which we have all seen—the biggest fall was shown as being in clothing and textiles. The other large fall was in paper and printing. But for those two falls there would have been no fall in the total industrial production.
Is it true, as hon. Gentlemen opposite have said, that it was this Government's fault that the fall in textiles and clothing occurred in 1952? The right hon. Member for Blyth, who is an intelligent man and knows his work, knows that it is not true. He knows that his hon. Friends have been talking arrant nonsense. When the "Economic Survey of Europe in 1951" was issued by the United Nations it was sent out with a Press summary—it was issued on 3rd February, 1952—which said of this problem:
" The Survey"—
it was for 1951—
"next discusses the textile raw materials situation in Western Europe, describing the sharp break in cotton and wool prices in March"—
that is, March, 1951—
"as the outstanding event of 1951 in the textile field and the harbinger of the textile crisis which developed later in the year."
That is before this Government came to power.
Before the General Election the United Nations said that the crisis was here. The summary goes on:
"Retail sales, which in most Western European countries started to decline in the spring, remained at a very low level during the summer. The opening of the autumn season did not change the picture and in the third quarter of 1951, the Survey says, the textile crisis had spread to the whole of Western Europe."
If we are to accept this evidence from the United Nations, this was a world problem which had not only started when the last Administration was in power but had reached its height just as the Labour Party went from power. I do not blame them for it because, obviously, it was not their fault; it was a world movement.

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In the same way, the right hon. Gentleman knows full well that it is nonsense to blame this Government for that setback in textiles.
If I may produce more supporting evidence from the United Nations, in a Report of 25th May, 1952, they said:
"The main reason for the levelling off in total industrial output"—
this is very much what we are now discussing—
"was the continuing slump in the textile and clothing industries and in other branches producing durable consumer goods."
Then followed these figures:
"Bulletin tables show that within a year textile production fell from the previous quarterly peaks by about 20 per cent. in Belgium and Denmark, by 10 to 15 per cent. in Italy, the Netherlands, Norway and Sweden, by 7 per cent. in the United Kingdom and Finland, 4 per cent. in France and 2 per cent. in Western Germany."
Mr. Ivor Owen Thomas: So what?
Mr. Osborne: I should have thought that even the hon. Member would have understood that. It shows that it was a world-wide crisis which caused the fall in textile production, that it was not the fault of this Government because they were not in power, and that it was the fall in the textile production which was largely responsible for the 3 per cent. reduction in 1952.
Several Hon. Members Several Hon. Members rose—
Mr. Osborne: I cannot give way; I am trying to make my speech as short as possible. I am trying to make the point that what Governments can do about world economic affairs is strictly limited, no matter what party is in power, but there are some things that a Government ought to do, and there are two things which I believe this Government should try to do. They should try to get increased net productivity rather than increased gross industrial production.
The first thing that the Government ought to do—and I hope that the right hon. Gentleman the Member for Blyth will support this—is to get both sides of industry together to see that wherever possible we have the system of double-shift working in all our modern plants. It costs a lot of money these days to build a modern factory. It costs even
2256
more to fill it with up-to-date machinery. It is a shocking waste of our national capital to build these vast factories, fill them full of expensive machinery, and then see that machinery worked for only one shift per day five days per week for 50 weeks in the year.
The quickest and surest way of getting down our costs of production is, wherever possible—and I know full well it is not possible in every industry—to go on to the double-shift system. It is remarkable to see the difference in the overheads in a factory where for a period there is only single-shift working and then for a similar period double-shift working. Therefore, I urge upon the Government that the first thing to do is to get both sides of industry together to see if they will adopt the double-shift system.
Mr. I. O. Thomas: What about the night shift?
Mr. Dryden Brook: Many are doing it.
Mr. Osborne: I know. It is happening in one of my factories, but it is not the universal practice, and I am asking that wherever possible it should be done.
The second thing I think the Government ought to do, although the right hon. Member for Blyth may not be with me so much in this suggestion, is in regard to the deployment of our national labour force. I think that a good deal of it is wastefully employed. The total working population is 23,280,000 people. There are three industries that are really producing wealth. They are what I call the prime wealth producers. They do not between them employ one half of the total working population. Agriculture employs 1,047,000; mining 877,000; manufacturing 8,699,000. There are too few men and women in our industrial organisations who are producing what I call primary wealth.
Contrast those figures with these: transport employs 1,726,000, as against 877,000 in mining. In the distributive trades we employ no fewer than 2,627,000. I believe that our national distributive overheads are far too high, and that something ought to be done about it. In the last classification there are professional, financial and miscellaneous services employing 3,941,000—far too many. We have far too many people doing what I call fancy jobs. We have far too many

2257
hangers-on in our economic machine, and there are far too many people talking and too few people doing things—and that applies to both sides of the House.
Mr. Nabarro: And taking far too long as well.
Mr. Osborne: I believe that the overheads that the exporting industries have to carry are too high. If the Government can do something along the two lines I have suggested to get our industrial efficiency higher and to get our costs down, I feel sure that that will help us in the only way that the Government can help us.
Mr. I. O. Thomas: How can they?
Mr. Osborne: They will not do it in the way the hon. Gentleman's party tried to do it.
Mr. I. O. Thomas: Give us a clue.
Mr. Osborne: They will not do it in the way hon. and right hon. Gentlemen opposite tried to do it by growing groundnuts in East Africa.
My final word is this. We shall not cure our economic problems by playing party politics, from either one side of the House or the other. The influence of politics over economics is very strictly limited. If, for a while, we could only forget the questions of ins and outs and face the immense difficulties ahead of us, I think that within the next 12 months we could have a better position in the country, in the factories and in all the productive units. Only then, only under such circumstances, shall we have a hope of overcoming the great difficulties with which I believe we are faced.
8.56 p.m.
Mr. Frank Tomney: I shall not attempt to follow all the arguments of the hon. Member for Louth (Mr. Osborne), but there are three points on which I want to comment, because they concern the ordinary productive worker in industry, the ordinary housewife and the ordinary man in the street. He mentioned Derby Brights—coal produced by the coalminer costing 126s. a ton, and he gave the comparable figures before the war. But before the war the miner producing those Derby Brights was paid only 30s. to 35s. a week
2258
for a full working week. Today, his conditions are far different.
The hon. Gentleman also said he thought that in six, seven, eight or nine years' time there would be thousands of council houses standing empty. I hope there are, but I do not think so. I say that for one reason alone, that each year we need 300,000 new houses, without taking into consideration slum clearance and new building. He then said that because transport costs had increased so much people could not afford to take their children to the seaside for a holiday.
I would remind the hon. Gentleman that a great part of those increased transport costs is reflected in wages. That is as it should be, because before the war the transport and railway worker was one of the lowest paid workers in the country manning productive industry, and if he is getting his just reward today he is only getting what he is justly entitled to. I will not follow the hon. Gentleman in his arguments any further, because I want to leave as much time as I can for my hon. Friend the Member for Reading, South (Mr. Mikardo). I would only add that I have sat here all day trying to catch Mr. Speaker's eye.
This debate has been remarkable for certainly one thing. The answer to the production problem concerns the destiny of our nation and its economic life, yet the Government benches have been empty all day long. What conclusion can we draw from that? Throughout the day the Opposition benches have been occupied by many times the number of Members on the Government benches, and we are entitled to ask whether hon. and right hon. Members opposite have the real interests of our people at heart. Do they really care about the destiny of the nation? They had better make up their minds to care, because if they do not, within a few years we shall run into trouble.
We know that since the war, despite the efforts made by various Governments, management and industry have not succeeded in bringing the country back on to firm economic grounds. The economic factors which determine our productive effort and our standard of living are well known. The political considerations

2259
of world policies, which have determined that almost all civilised countries must devote a great part of their national resources to preparations for national defence, are regrettable but necessary. Indeed, it is true to say that, had it not been for the world economic climate the world could today have been approaching a productive E1 Dorado.
What we must look at, in this country particularly, are the basic problems. The question which concerns us most is what will be Britain's position in the future as an exporting nation, and how we are to harness our great industrial skills to our economic resources in order to provide full employment. The whole crux of this problem is that today our population is increasing faster than our food production and the manufacturing industries are increasing faster than the supplies of raw materials. These factors make this country extremely vulnerable, especially with the marked shift in price relations between primary products and secondary manufactured goods. Primary products, taken as a whole, tend to get relatively dearer.
We can understand that our foreign competitiors, especially Germany and Japan, mentioned by the right hon. Member for Blyth (Mr. Robens), depend less on foreign trade earnings than we do to the extent of 15 and 12 per cent. Both are countries with much the same size populations as we have and with the same problems of feeding and of raw materials. Great Britain is vulnerable to sudden changes in world trade by way of slumps and booms, and both are equally dangerous to us, slumps because they put up the demand for export goods and booms because they drive up the prices of raw materials and food. In times of slump, with world unemployment and falling incomes people can do without cars and radios and even without the new machinery we offer. In boom times with the rise in incomes people bid lavishly for food and raw materials and outbid us.
Where the House is divided on this matter is that the policy of the Government and the policy of the Labour Party conflict. We believe in planned economy. It is hard to determine, at least in regard to freeing the nationalised industries, where the Tory Party stand if they do
2260
not intend to denationalise coal, electricity, gas and one or two more of the nationalised industries.
During 1945–50, it is true to say that we had a sellers' market and we not only fixed our production targets but we exceeded them and those of almost every other nation. At the same time, we realised that if Great Britain was to survive in a 20th century economy she must now make radical changes in her processes of production, research and technology. To that end it was necessary to do certain things, some of which have been referred to by my right hon. Friend the Member for Blyth. But all of them were a long-term policy which would have given us results when we needed them and when world competition became more acute.
As a nation of 50 million people in a small island we have to export to live. Having no material resources within our own borders except coal we have to purchase from abroad. We have to purchase large quantities of our food. We are more severely up against it than any other nation in the world and we have to do something about it, particularly in regard to research and technical education.
We decided, for the first time, to capitalise the brains and ability of the people, to buy insurance for the future—which was wise Government and wise planning. We have not yet reaped the full fruit of those plans. We also realised that too many people were working on the wrong jobs. The world was changing; we needed a new deployment of our industry and manpower and we needed newer industries. The industries with which we started the industrial revolution, such as textiles, and the crafts which could be acquired in those industries, had been acquired overseas by Japan, by India, by France, by South Africa, by South America, where labour was so much cheaper that they could always outbid us for contracts.
The concentration therefore had to be upon those skills which we had inherited, chiefly engineering skills, in order to build up over the years an ever-increasing capacity to manufacture. Let it not be forgotten that we had had the lead in engineering since the beginning of this century and that the demand for engineering products and capital goods has been

2261
growing every year since then, sometimes as much as by 50 per cent. We dissipated that lead in the 1920's through unemployment. There was no capital investment in the big industries or the mines. We completely ran down in the years up to and including 1939.
We had to recover the position in which we could not only hold our own but manufacture and sell those goods in which our peculiar skills and crafts entitle us to expect a long lead in world markets. We did that in several directions. Perhaps the most outstanding was the development of supersonic aircraft, jet aircraft and the electronic industry, and those newer skills which have given us such a commanding lead. Not only have they given us a commanding lead in those products but they also give us more in cash value per £ per ton than other manufacturers. For instance, a jet aircraft will realise as much as £20,000 per ton of materials used and a motor car will realise about £600.
Those are the kind of industries which our background entitles us to develop and into which our developed skills can be poured. But that can be done only by a process of investing not only in the industries but in the children who later will supply them. Other countries, such as New Zealand, Australia, South Africa and South America, have all been developing in these years their secondary industries. They have begun to manufacture for themselves those goods which we formerly exported to them. That is why the textile industry in Lancashire has taken such a knock and why the outlook for textiles in the future is not very bright. I can never see the Lancashire textile industry recovering to the pre-1914 level.
That affects not only textiles but bleaching, finishing and printing; it affects the whole county, whose entire capital is sunk in one industry. We cannot suddenly transform these people into industrialists but the effort must be made. Some of these areas have been designated as development areas, which is all to the good.
We cannot get on with this job too quickly because Great Britain depends for more than 30 per cent. of her total national income upon foreign trade. The two industrial giants, the U.S.A. and the U.S.S.R., produce most of their raw materials within their own borders. The U.S.A. depends for only 5 per cent. of
2262
its income on foreign trade and perhaps the U.S.S.R. depends upon it for considerably less.
What has not been mentioned in the debate is something which concerns us more here than anywhere else. I will not say that our industries have been fully extended or that our people have been fully extended, but in regard to available sources of raw materials we are in a very bad state indeed. It is possible with the substitution of synthetic production that now the age of metal is passing we can turn over to an age of oxides, silicates, carbides and nitrates which will follow the metal age.
We can only do that by harnessing this scientific revolution and becoming the exporters of these raw materials. We are well equipped to do this and have started on the right lines. All this is part of the policy laid down by my party when they formed the Government and I am proud that it was carried on through those years and built the solid foundations which the present Government have inherited.
I should like to see added to the Treasury a raw materials department—
Lieut.-Colonel W. H. Bromley-Davenport: On a point of order, must the hon. Member read every single word of what he has to say?
Mr. Tomney: When the hon. and gallant Member interrupted me—and it is the first time he has come into the Chamber—I was saying that I should like to see the Treasury institute a raw materials department to take care of the manufacture and synthetic production of new raw materials. I can only hope that in doing so they make a start with the hon. and gallant Member.
Mr. Frederick Messer: He is synthetic himself.
Mr. Tomney: I do not want to speak much longer as my hon. Friend the Member for Reading, South is to wind up the debate for this side.
There is no doubt the trade unions are willing, as they have always been, to cooperate fully in helping forward production. Trade unions as such now have a vested interest in full employment. They have grown to huge proportions and there is nothing which dissipates the funds of

2263
trade unions more than out of work benefits and benefits which have to be paid when industry runs down. In the United States it is not unusual for some trade unions even to enlist and volunteer the help of technical experts to help industry and I want to see that sort of help given in Great Britain. Co-operation from the trade unions will be forthcoming, but only on the basis of the men employed in industry who do the actual producing having a full share of the new wealth created.
9.14 p.m.
Mr. I. Mikardo: I have listened with intense and close interest to every word of this debate today and there have been many times during the course of it when I felt, as I am sure many other hon. Members must have felt, that the shadow of Sir Stafford Cripps was hovering over our deliberations. It seemed to me that in a large number of the serious and thoughtful speeches we have had there were many echoes of Sir Stafford Cripps. I could not help contrasting the tacit tributes paid today to his memory by hon. Gentlemen opposite with the way in which they derided him when he was responsible for handling the economic affairs of the nation at an extremely difficult time.
It was very significant that today there was very little criticism of the economic behaviour of the Labour Government between 1945 and 1951. Indeed, somewhat to the surprise of all of us, the hon. Member for Cheadle (Mr. Shepherd) said he wanted to pay a tribute to the economic work of the two Labour Governments. A number of hon. Gentlemen opposite must be suffering from severe bouts of indigestion engendered by their need to swallow many of the words they uttered in the six years between 1945 and 1951.
One or two of the more economically naive gentry on the other side of the House continued to trot out a few of the old fallacies, and indeed one or two syllogisms. There were certain differences of opinion between hon. Members opposite. The hon. Member for Cheadle and the hon. Member for Hendon, North (Mr. C. I. Orr-Ewing) spent a long time arguing, through some abstruse metaphysical lucubrations, which I could not
2264
quite follow, that in the end it is a good thing if production goes down and that the present Government could take great credit from that fact. The Economic Secretary to the Treasury succeeded in proving that the Government's own Economic Survey was wrong, and that production had not gone down, and, therefore, the Government could not take any credit on that account.
One or two hon. Members trotted out the hoary fallacy that high output and high productivity during the period of office of the Labour Government was due to external factors like a buoyant world demand; thus showing conclusively that they do not understand the relationship between production and productivity, because productivity, except marginally, is not connected with demand. Nothing they said about changes in demand between 1950, 1951 and 1952—and goodness knows they said a good deal and said it many times—can in the least begin to explain why production and productivity went up consistently year after year throughout the whole period of the Labour Government's term of office, and then fell, for the first time for 15 years, in the first year of a Conservative Government. That is the one overriding factor at the back of this debate from which hon. Gentlemen opposite simply cannot escape.
There is another fallacy of the same ilk which we have heard from one or two hon. Gentlemen opposite, that the enormous upsurge in both production and productivity between 1945 and 1951 was due to a number of general causes, including external aid—United States aid. One has only to look at 1951 and 1952. In 1952, with the present Government in power, as the Chancellor of the Exchequer told us in his Budget speech, we received 30 times as much United States aid as in 1951. In 1951, British production went up. In 1952, it went down. How, therefore, can they possibly say that any of the rise in production under a Labour Government was due to external aid when, in the first year of a Conservative Government, they multiply the external aid 30 times, and still succeed in getting the first fall in production for 15 years?
Then there was the Economic Secretary, with that wonderful sleight of hand performance which he did today. I

2265
thought he was very good to us today, much better than during the Budget debate, when he got up very didactically and read us a lecture. He must have forgotten which one it was and thought that he was addressing the day school of a branch of the Young Conservatives in between the tea dance in the afternoon and social soiree in the evening.
The hon. Gentleman was much better today. He started by setting out to explain why production had fallen under a Government of Conservative undoc-trinaire practical business men, but he was so carried away, so mesmerised by himself, one eye looking inwards and one eye looking outwards simultaneously, that he finished up by explaining that production had not fallen at all.
I would refer the hon. Member for Barnet (Mr. Maudling) to the Economic Secretary to the Treasury. He would learn a great deal from him, because, of course, the Economic Secretary to the Treasury must have some responsibility for the Economic Survey, which was published a few weeks ago; and in order to demesmerise the hon. Gentleman, I repeat what his Economic Survey said. It said that in 1952, by comparison with 1951, overall output was down 1 per cent., industrial output was down 3 per cent., manufacturing output was down 4 per cent. and overall productivity was down 1 per cent.
Let us start from that point. I take my figures from a great authority: the Economic Secretary to the Treasury. The hon. Member for Barnet, who mesmerised himself this afternoon into nearly believing, and certainly convincing his hon. Friend the Member for Louth (Mr. Osborne)—it is not difficult to convince him of anything—into nearly believing, that production had not fallen after all, must go back and read his Economic Survey—I am sure he wrote most of it, because it is rather well written—all over again.
Mr. Osborne Mr. Osborne rose—
Mr. Mikardo: I am sorry not to give way. The hon. Gentleman did not give way once in his long speech and I promised to finish in time for a second Front Bench speech from the Government in this Private Members' day. Therefore, I want to be economical in my time.
2266
Hon. Members opposite can talk themselves black and blue in the face, but they will not talk themselves away from the short facts. The short facts are that from 1945 to 1951, both production and productivity rose each year over the previous year by a figure very much higher than we had ever been able to achieve at any previous time in our history. That is a fact, and hon. Members opposite know it, and they ought to rejoice in it.
For most of that period, British national output rose each year more than three times as fast as the average rise during periods when Conservative Governments were in office—5 per cent., 6 per cent., 7 per cent., or 8 per cent. each year—and all over the world people took note of this. I travelled a good deal in those days and had many proud moments—and one could have—when asked by people abroad, Socialists and anti-Socialists, business men, trade union leaders, Conservatives, Liberals and all sorts, "How are you chaps in Britain doing this? Why is it that you are managing so much better than other countries in recovering from the after effects of the war?"
One tried to tell those people, and one had many proud moments in acceding to the universal admiration and envy of the whole world at the productive achievement of the British people in those years. But the admiration was not quite universal. Everybody paid tribute to the British nation for its productive achievements in those years, except the Conservative Party of Great Britain, which was very busy in and out of the country in denigrating British achievements. It was, after all, in a year of very great rise of industrial output that the present Prime Minister said that the mainspring of British industry was broken.
Mr. Jack Jones: "Weary Willies and Tired Tims."
Mr. Mikardo: It was in the year when British output and productivity increased more than in any other that he described the workers of this country as "Weary Willies and Tired Tims." Nobody took any notice of it, so it did not matter, and, in any case, they gave him the lie by producing more and more.
All this cannot just be coincidence. I ask hon. Gentlemen opposite, not for a

2267
reaction at this moment, because that is bound to be an automatic reaction, conditioned by the atmosphere of the House, but I ask them whether, in the still watches of tonight, just before they fall off to sleep, when they are perhaps nearer to the eternal, ineffable truth than at any other time, they think this is a coincidence?
Here we were, in 1946 and 1947, British industry ground down beneath the iron heel of "incompetent Socialist bureaucracy," and production went up; in 1948 and 1949, when British workers were "Weary Willies and Tired Tims," production went up; in 1950 and 1951, when "the mainspring of British industry was broken," production went up; and in 1952, at long last, with a Government of undoctrinaire, competent Conservative businessmen, production goes down. Anybody who believes that to be a coincidence will believe anything.
I wonder whether the House has re-called when, before 1952, was the last time when production in this country fell below that of the previous year? It was in 1938–15 years ago—and what is funny about 1938? Why, it was the last peacetime year in which we had a Conservative Government.
Mr. Jones: Munich.
Mr. Mikardo: From 1938 to 1952, the years in which we did not have any peace-time Conservative Governments, production went up, and, in the two years in which we had, it went down. There is something here which is much more than coincidence.
May I now say a few words about my view of the particular reasons why we got this stagnation in British industry—because that is what is was—in 1952? I do not pretend to cover all the causes, but I hope to say a word or two from the standpoint of one who is not an academic economist, like the Economic Secretary, but who gets what he knows from going round and doing a bit of work in one or two factories. The hon. Member for Bolton, West (Mr. Holt) who appears to be the President of the Board of Trade in the Liberal Party's "Shadow Cabinet"—and I do not want to be disrespectful but I should think that that would be sufficient grounds for ensuring
2268
that it stays a "Shadow Cabinet"—said that we had to look upon the nation as a single enterprise, and I quite agree with him, because the business of increasing production in the nation depends on exactly the same methods and factors as the business of increasing production in an individual factory.
We have to get together the three Ms—materials, machines and men with a high morale—and the reason why production went down in 1952, instead of, as was the case, going up between 1945 and 1951, is that this Government fell down on these three Ms. During the years of the Labour Government, broadly speaking, we managed to maintain a smooth flow of materials to the shops. Ther were one or two let-downs—coal in 1947 and sulphur in 1950—but, by and large, we made a job if it. There was a greater level of industrial investment than had ever been done before in the history of this nation, but the second m—the men—were the important factor.
In those years after the war we all went round saying to the workers, "You need not worry now. You do not have to worry that if you put your backs into it you will work yourselves out of a job." We all said that, Conservatives, Socialists, trade union and trade association leaders alike. Sir Stafford Cripps, above all, said it. We said, "In the old days you used to worry about working too hard because you knew that if you did you might work a colleague or even yourself out of a job. It is all right now. Here is a Labour Government and we have full employment. You do not have to worry."
For a couple of years they did not believe us. If one said that in a factory the men would say, "That is all very well, but I remember 1919 and 1920. We had a post-war boom then which collapsed and I was out of work for four years." But two or three years after the war—I would hestitate to put a time to it—at the end of 1947 and the beginning of 1948, one could detect a subtle change in the moral atmosphere in a great many of our factories. The men were beginning to say, "Maybe these people have got something. Perhaps this full employment has come to stay. Perhaps it is true that we can take off our coats and roll up our sleeves, and not be in danger of working ourselves out of a job."

2269
Almost everybody I talked to who had the experience of going round factories during that period noticed this phenomenon. It was most marked, and it was that which was the main cause of the upsurge in output and productivity in 1948, 1949 and 1950. It was the nascent confidence of the workers in the permanence of full employment. Where are we now? In 1952 working progress shrunk.
I took no part in the delicate argument between the Economic Secretary and my hon. Friend the Member for Leeds, South (Mr. Gaitskell), but I went round factories and saw people paying 6 per cent. who were not too anxious to have too much stock on their shelves. This was especially so in the case of the small man whom hon. Members opposite are to protect. The big firms do not cut down their inventories. They have plenty of money and can borrow millions more in the City. But it is much harder for the small man to borrow £500 from his bank.
Sir W. Darling: No.
Mr. Mikardo: The hon. Gentleman ought really to have given us the benefit of his undoubted knowledge on this subject somewhat earlier today. It is the small firms who have been hit.
Mr. Watkinson Mr. Watkinson indicated assent.
Mr. Mikardo: I see that the Parliamentary Secretary agrees that it is the small firms who have been the hardest hit by high interest rates and credit restrictions. The cut in capital investment last year was idiotic by all standards, especially at a time when we are asking for increased productivity. At a time when Germany and Japan, as has been said, are coming into competition, for us to invest in industrial equipment last year less than half what the West Germans invested in their industry was a piece of economic and industrial lunacy.
I am sorry that that nascent belief in the permanence of full employment has gone. The sleeves are being rolled down and the coats are being put on. Who will blame the workers when they see in their own towns more unemployment and fewer vacancies, not as a famous Conservative once said, 11 men queueing for 10 jobs, but 20 men queueing for 10 jobs, twice as many unemployed as
2270
vacancies. Above all, when they see in their own towns and factories the growth of short time, which is the greatest threat to the future employment of the country, how can we blame them for saying, "It is not right that we should take off our coats and roll up our sleeves." I do not approve of their attitude, but I understand it and if I depended upon working in a factory to earn £8 or £9 a week, I would share it as well. Hon. Gentlemen opposite have made this rod for their own backs by the policy of the Treasury during the last 18 months.
In addition to the general problem of the falling level of production and productivity there is the question of the direction. The Economic Secretary and others have said that it is no good making things unless they are the right things and are things which we want basically at home or for export. The one thing that the policy of the present Government does not do is any sort of qualitative selection. There is no item in the Government's policy which will ensure that money will be invested in this industry and not in that.
The other day, the Economic Secretary talked about "a flexible weapon." I listened to him saying that we had to create the right economic result with a flexible weapon. [An HON. MEMBER: "Not a cosh."] Why "weapon"? We usually use weapons to smash things and not to build them up. And "flexible." How can we ever be sure, even if we grant the Economic Secretary the word "tool" instead of "weapon," that it will do the job that we want to do, to make the cut where we want to make it and put the extra on where we want to put it, if our tools are not firm but are flexible?
I can imagine the hon. Gentleman going home and being told, "When you have finished your lunch hang up a picture of that lovely gentleman in his new robes in the front parlour," and of his saying, in reply, "Yes, I will do so as soon as I have found a flexible hammer and some indiarubber nails." The hon. Gentleman could not put the nails into the wall with that tool, or the nails into the place where he wanted them to go.
That is why we had 23,000 more workers in the distributive trades last year and 20,000 fewer in agriculture. In 1952 there were more bookies' runners and more stock jobbers' runners—which

2271
are roughly the same thing—and fewer people growing grain and vegetables on British farms, than there had been for many years. That is what happens when we use flexible weapons. They cut the wrong things. They cut agricultural labour instead of cutting spivs.
That is why my hon. Friends the Members for Anglesey (Mr. C. Hughes) and Cardiff, West (Mr. G. Thomas) did right to bring this subject to our notice. That is why it was right to draw attention not merely to the anxiety which we all feel—if hon. Gentlemen opposite do not feel anxiety they ought to—about this stagnation in British industry, after six wonderful years, but to the fact that there is nothing in Government policy which indicates the least hope of a reversal of that trend.
I hope that the House will record a strong vote in favour of the Amendment and give the Government something to think about.
9.39 p.m.
The Parliamentary Secretary to the Ministry of Labour (Mr. Harold Watkinson): I am sure the House is grateful to the two hon. Gentlemen, as the hon. Member for Reading, South (Mr. Mikardo) has just said, for raising this matter. I do not disagree with the hon. Member, or with the right hon. Member for Blyth (Mr. Robens) when they say that this is the most important subject we could discuss in this House. All our future depends upon our success or failure to face this immense problem of earning our living in an increasingly competitive and difficult world.
But in this problem of productive efficiency and productivity there are really two problems. One is an economic problem and one is a human problem. As to the economic problem, I certainly would not presume to try to add or subtract anything from the very able review given to the House this afternoon by my hon. Friend the Economic Secretary to the Treasury. Therefore I am not proposing to deal with the economic side. As somebody who was not educated at the London School of Economics, I always listen with fascinated attention to these economic arguments, and I am always impressed by how badly I was brought up, because I very soon find myself out of my depth.
Mr. Messer: So do we.
Mr. Watkinson: I am also very fascinated when I listen to the hon. Member for Reading, South (Mr. Mikardo), because we all know his great interest in these economic matters. What he has said rather supports my contention that sometimes statistics can prove anything, because my hon. Friend the Member for Buckinghamshire, South (Mr. R. Bell) was kind enough to remind me of a debate on re-armament which took place on 23rd July, 1951, when we on this side of the House were in Opposition. On that occasion I addressed some remarks to the House on productivity. Here I think that it is only fair to say that in the last Paliament—which is the only one of which I can speak from practical knowledge—a great many of us, then on the Opposition side of the House, were constantly raising these matters of productivity in a reasonable, constructive way.
I should like to quote two things which the hon. Member for Reading, South said in that debate in which he followed me. He was talking, first of all, about short time and the danger of short time in factories. This was in July, 1951, when we on this side were not in office. He said:
"In cities like Coventry or Luton, as soon as one factory goes on short time, this chilliness in the factory climate spreads over the whole system and people begin to say, 'We had better not go all out in case we create short time.'"
That is still true and the hon. Member said it again today. But I would remind him that he also said it when his own Government were in command. He also said something else, which puts his remarks today about productivity in the correct perspective.
He talked about the figures of productivity. He gave the figures for 1950, showing a steady rise in productivity over that year. Then he came to 1951, and he said that:
"In 1951, the figure for the first four months, from January to April, is 143. That is the first drop. The curve is now going down. In 1950, quarter by quarter, the trend was up. up and up. In 1951, it is going down. We may not like that, but we have to deal with the facts as they are."—[OFFICIAL REPORT, 23rd July, 1951; Vol. 491, c. 80–81.]
That entirely proves the point I myself made in the Budget debate of that year—that in the beginning of 1951 we had

2273
already passed the peak of productivity, and the years of high taxation, with their limiting effect on efficiency, had begun to show their inevitable results.
Mr. Mikardo: I do not complain of the passages which the hon. Gentleman has quoted, but he must agree that output in 1951 as a whole was 3 per cent. more than in 1950, and that in 1952 it fell.
Mr. Watkinson: I quite agree, but that was not at all the point which I was making. The point which I was making was that at that time in 1951 the curve of productivity had already started on its downward course, and I notice that the hon. Member does not deny it.
Having said my little piece on statistics and economics, I want to come to the human problem, because I hope that in this House we shall never forget that it is the men and women in industry who produce the economic life-blood on which our survival depends, and not the statisticians, valuable though they are. I agree entirely with the right hon. Member for Blyth (Mr. Robens) that our great problem today is to get these industrial facts on to the floor of the shop. If we do not do that all the hopes we are building in connection with the new British Productivity Council must fail.
Nobody today wants to try to convert either the trade union leaders or the leaders of industry; they know the facts much better than we do. The problem is to get these facts on to the floor of the shop. If what we say or do in this House results in people in industry getting the wrong impression about the economic facts of life, however hard the British Productivity Council or any other body tries we shall fail in our endeavours. I was, I believe, right, therefore, in saying that this is a human problem, and I want to deal with one or two of the points which I think are hampering the ideal of improving productivity and efficiency.
The Opposition here are in some difficulty because they are bound by their past statements and policy. I should like to congratulate the right hon. Member for Blyth on his speech. Nobody could put more clearly or more factually the exact problem facing us. Among other things, he said that one of the greatest barriers to greater production was the fear of working oneself out of a job. How right he was. But if hon. and right hon.
2274
Members belonging to the Socialist Party go about the country talking about one million unemployed and the great fear of unemployment which is coming upon us at any moment—at a time when the figures every month are showing the normal seasonal rate of decrease—what are they doing but encouraging a fear on the floor of the shop that people are working themselves out of their jobs?
There is a strange anomaly here. In this House hon. and right hon. Gentlemen press the Government to do all they can to increase productivity, but outside it, unwittingly—I do not say they do it deliberately—they say the very thing which makes it almost impossible for it to happen, or at any rate to happen at the rate we should like. I want to repeat with all the force at my command—because it is necessary that it should be said—that we believe in a policy of full employment. Our whole national policy is directed towards maintaining full employment, and we believe that if we had not carried out the remedial measures and economic changes which have been so brilliantly conceived by my right hon. Friend the Chancellor of the Exchequer we should have had well over one million unemployed now. We have avoided that by our direct policy and actions.
I want to define what full employment means in a competitive world.
Mr. Robens: Before the hon. Gentleman leaves the point about the one million unemployed, would he now give a categorical assurance that by reason of the policy pursued by this Government while they are in power the figure will never reach one million?
Mr. Watkinson: I was just coming to that very point. I was endeavouring to define the present Government's view of full employment, and I was going to say that full employment is not a political divine right that can be guaranteed by any political party. It is a privilege.
Mr. Mikardo: It is a right.
Mr. Watkinson: Perhaps I may be allowed to finish my definition. The Government's policy, in all its aspects, is aimed at maintaining full employment, but we must look at it not as something that comes like pennies from heaven but as something to be worked for, which we

2275
can have only if we earn it by our efficiency and our output.
I am trying to stress this fact not as a political argument but in order to carry out my purpose, in the few minutes which remain, of straightening out a few of the facts without creating too much division about them, in an endeavour to do some good in the place where this country is really going to stand or fall—on the floor of the shop in the factory. I repeat that, in our conception, full employment is something which has to be achieved by the efficiency, output and energy of management and men, and it is the Government's responsibility to create the conditions in which that effieciency may be most easily and most quickly achieved.
Mr. David J. Pryde: Are we to take it that the Conservative Party has altered its policy in regard to unemployment? Is it not a fact that on 3rd November, 1949, when we were debating the Profits Tax Bill, a Member of the present Government's Front Bench advocated unemployment? Is it not true that he was asked by Labour Party back-benchers how much, and that we were told:
"It cannot be helped … half a million if you like."—[OFFICIAL REPORT, 3rd November, 1949; Vol. 469, c. 730.]
Mr. Watkinson: I thank the hon. Member for his intervention, but I was not in the House at that time, and I have just enunciated as clearly and as plainly as I can the policy of Her Majesty's Government.
I now come to the next point made by the right hon. Gentleman. How true it was when he said that price is the great factor today in holding our export markets. So it is, but what is the easiest way in which we might price ourselves out of the world's export markets? It is by having continuing rounds of wage increases which are not related to efficiency and output. I am sure I carry the House with me on that. I am sorry if the hon. Member for Reading, South thinks that that is an elementary matter of economics, but perhaps it is better to be plain and simple about these things and make sure they are understood. The easiest way for us to destroy our competitive position today is to have successive rounds of
2276
wage increases which are entirely unrelated to output or efficiency.
The right hon. Gentleman the Member for Blyth went on to talk about last year's Budget and said that the cuts in food subsidies brought in their train an inevitable round of wage increases. That is true, but let me make it plain that that round of wage increases is now over. [HON. MEMBERS: "No."] The round of wage increases in 1952 was completed by the recent award for the coalmining industry. [HON. MEMBERS: "No."] Yes, indeed, and now we arc faced with another year and with another set of conferences in trade and industry. I am not saying for a moment that this matter will not come up again. I am only saying—any hon. Member can look it up for himself—that we finished the last financial year with wages just leading by a very short head over the increased cost of living. We have balanced up.
Now we start again. That is the normal process of our industrial bargaining system. All I want to point out is that we start again in this year in an entirely different situation. The interim index of the cost of living has risen by only two points since last June, and that has not happened before in the whole history of the index. This is a very different situation from that which has obtained in the last few years, when the index was generally rising all the time.
Mr. Robens: The hon. Gentleman and his hon. Friends came into power very largely because they told the country that they would reduce the cost of living. Now they are boasting that it has not gone up as much as it did before.
Mr. Watkinson: Yes, and we also said that before we could reduce it we had to stop the catastrophic rise in the cost of living, and that we have done. All I am pointing out in this context is that wages this year have to be viewed against the different background of far more competition abroad and against an index which has been more stable than ever in its history.
There is something else that I want to make plain. It is important that I should do so because the leading article in "The Times" today was rather misquoted by the hon. Member for Hillsborough (Mr. G. Darling). This may be called my

2277
second elementary point in economics. What I want to make plain is that the change that we must bring about in our industrial affairs is to relate earnings to output. That is what "The Times" said in its very interesting and able leading article today. I agree that it did discuss the wages structure in the engineering industry, but the point I am bringing to the notice of the House is the conclusion of "The Times" leading article, which said:
"However undesirable a general wage increase, there is generally a case for increased payments related strictly to increased output."
It could not have put the Government's policy better.
We maintain that in these circumstances, with a Budget that puts on no new taxes for the first time since the war, wage increases should be related to increased output. I am not going to argue the economic side of the Budget, but, at least, it brought some benefit to 30 million people, which is quite a lot of people, and, at least, it imposed no new taxes. I have already discussed the interim index. I would point out as well that the Budget made no deliberate cuts in the food subsidies. All that makes up an entirely different background against which wage negotiations this year must be conducted.
Mr. G. Darling: I am sure the hon. Gentleman does not want to be unfair. My criticism of "The Times" article was that in referring to the wages structure of the engineering industry "The Times" got its facts wrong. It is the employers who stopped a new system being introduced.
Mr. Watkinson: I agree that the main portion of the leading article dealt with the wages structure in the engineering industry, and I do not comment on that. I apologise if I misunderstood the hon. Gentleman, but I rather thought he drew the conclusion that the whole of the leading article dealt with the wages structure of that industry, and I wanted to remind the House of the article's conclusion, and say that it is certainly the policy of the Government that we ask for reasonable basic wage restraint, and I think that my right hon. Friend the Chancellor has done his best to create the conditions in which we may ask for that reasonable restraint. But having done that, we say that as far
2278
as earnings are related to output and efficiency then the sky is the limit. And why not? That is in the national interest.
Mr. Robens: That was Sir Stafford Cripps's view.
Mr. Watkinson: I was always a great admirer of Sir Stafford Cripps. He was a brave man who said brave things in difficult times. Let us make that quite plain. If I enunciate some of his policy that does not make it wrong.
The great problem in front of us in industrial relations is to see how we can sensibly and fairly link earnings with output and efficiency. It is difficult in some industries such as the railways, that do not produce anything, but there there are systems of merit rating and so on which should be examined. However, these details are not for me. They are for bargaining in the normal process of industrial relations. I am only saying that our policy is that earnings should be related to output and efficiency.
Mr. Jack Jones: Will the hon. Gentleman answer this question as one who has always paid a wage which was definitely related to output? Would he tell the House how he expects a particular industry in which wages are definitely paid in relation to output to increase its productivity when the Government are taking away by Act of Parliament 3½ per cent. for the shareholders and handing the industry back to private enterprise?
Mr. Watkinson: The hon. Gentleman was not listening to the Economic Secretary when he quoted the fact that one of the four industries in which there has been increased productivity this year was the steel industry, to which the hon. Gentleman was referring.
Mr. Jack Jones: Now the Government are going to hand it back.
Mr. Watkinson: I sum up by saying that in the view of the Government there is an economic problem and a human problem relating to productivity, and, from the standpoint of my Ministry, I should say that perhaps the human problem is the most important. In the National Joint Advisory Council and other forms of joint consultation we shall try to take the steps that are necessary to get that human upsurge of efficiency and pro-

2279
ductivity which we believe can achieve the national targets which we have set for ourselves. We can get productivity rising again, but we can do it only if hon. Members on both sides of the House will try to see that the true facts are presented
in the country and to those working in industry.
Question put, "That the words proposed to be left out stand part of the Question."
The House divided: Ayes. 263: Noes, 242.

Division No. 162.]

AYES

[10.0 p.m.

Aitken, W. T.

Duncan, Capt. J. A. L.

Lock wood, Lt.-Col. J. C.

Allan, R. A. (Paddington, S.)

Eccles, Rt. Hon. D. M.

Longden, Gilbert

Alport, C. J. M.

Erroll, F. J.

Low, A. R. W.

Amery, Julian (Preston, N.)

Fell, A.

Lucas, Sir Jocelyn (Portsmouth, S.)

Amory, Heathcoat (Tiverton)

Finlay, Graeme

Lucas, P. B. (Brentford)

Anstruther-Gray, Major W. J.

Fisher, Nigel

Lucas-Tooth, Sir Hugh

Arbutnnot, John

Fleetwood-Hesketh, R. F.

McAdden, S. J.

Ashton, H. (Chelmsford)

Fletchor-Cooke, C.

McCallum, Major D.

Assheton, Rt. Hon. R. (Blackburn, W.)

Ford, Mrs. Patricia

McCorquodale, Rt. Hon. M. S.

Aster, Hon. J. J.

Fort, R.

Macdonald, Sir Peter

Baldock, Lt.-Cmdr. J. M.

Foster, John

Mackeson, Brig. H. R.

Banks, Col. C.

Fraser, Hon. Hugh (Stone)

McKibbin, A. J.

Barber, Anthony

Galbraith, T. G. D. (Hillhead)

Mackie, J. H. (Galloway)

Barlow, Sir John

Gammans, L. D.

Maclay, Rt. Hon. John

Beach, Maj. Hicks

Godber, J. B.

Maclean, Fitzroy

Beamish, Maj. Tufton

Gomme-Duncan, Col. A.

Macleod, Rt. Hon. Iain (Enfield, W.)

Bell, Philip (Bolton, E.)

Gough, C. F. H.

MacLeod, John (Ross and Cromarty)

Bell, Ronald (Bucks, S.)

Cower, H. R.

Macpherson, Niall (Dumfries)

Bennett, F. M. (Reading, N.)

Graham, Sir Fergus

Maitland, Cmdr. J. F. W. (Herncastle)

Bennett, Dr. Reginald (Gosport)

Gridley, Sir Arnold

Maitland, Patrick (Lanark)

Bennett, William (Woodside)

Grimston, Sir Robert (Westbury)

Markham, Major S. F.

Bevins, J. R. (Toxteth)

Hall, John (Wycombe)

Marlowe, A. A. H.

Birch, Nigel

Harden, J. R. E.

Marples, A. E.

Bishop, F. P.

Hare, Hon. J. H.

Marshall, Douglas (Bodmin)

Black, C. W

Harris, Reader (Heston)

Maude, Angus

Boothby, R. J. G.

Harrison, Col. J. H. (Eye)

Maudling, R.

Bossom, A. C.

Harvey, Air Cdre. A. V. (Macclesfield)

Maydon, Lt.-Comdr. S. L. C.

Bewen, E. R.

Harvey, Ian (Harrow, E.)

Mellor, Sir John

Boyd-Carpenter, J. A.

Hay, John

Molson, A. H. E.

Boyle, Sir Edward

Heald, Sir Lionel

Monckton, Rt. Hon. Sir Walter

Braine, B. R.

Heath, Edward

Moore, Lt.-Col. Sir Thomas

Braithwaite, Sir Albert (Harrow, W.)

Higgs, J. M. C.

Morrison, John (Salisbury)

Braithwaite, Lt.-Cdr. G. (Bristol, N. W.)

Hill, Dr. Charles (Luton)

Mott-Radclyffe, C. E.

Bromley-Davenport, Lt.-Col. W. H.

Hill, Mrs. E. (Wythenshawe)

Nabarro, G. D. N.

Brooke, Henry (Hampstead)

Hinchingbrooke, Viscount

Nicholls, Harmar

Brooman-White, R. C.

Hirst, Geoffrey

Nicholson, Godfrey (Farnham)

Browne, Jack (Govan)

Holland-Martin, C. J.

Nicolson, Nigel (Bournemouth, E.)

Buchan-Hepburn, Rt. Hon. P. G. T.

Hollis, M. C.

Nield, Basil (Chester)

Bullard, D. G.

Holmes, Sir Stanley (Harwich)

Noble, Cmdr. A. H. P.

Bullus, Wing Commander E. E.

Holt, A. F.

Nugent, G. R. H.

Burden, F. F. A.

Hope, Lord John

Nutting, Anthony

Butcher, Sir Herbert

Hornsby-Smith, Miss M. P.

O'Neill, Phelim (Co. Antrim, N.)

Campbell, Sir David

Horobin, I. M.

Ormsby-Gore, Hon. W. D.

Carr, Robert

Horsbrugh, Rt. Hon. Florence

Orr, Capt. L. P. S.

Cary, Sir Robert

Howard, Hon. Greville (St. Ives)

Orr-Ewing, Charles Ian (Hendon, N.)

Channon, H.

Hudson, Sir Austin (Lewisham, N.)

Orr-Ewing, Sir Ian (Weston-super-Mare)

Churchill, Rt. Hon. Sir Winston

Hudson, W. R. A. (Hull, N.)

Osborne, C.

Clarke, Col. Ralph (East Grinstead)

Hulbert, Wing Cdr. N. J.

Partridge, E.

Clarke, Brig. Terence (Portsmouth, W.)

Hurd, A. R.

Peake, Rt. Hon. O.

Clyde, Rt. Hon. J. L.

Hutchinson, Sir Geoffrey (Ilford, N.)

Perkins, W. R. D.

Cole, Norman

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Peto, Brig. C. H. M.

Colegate, W. A.

Hylton-Foster, H. B. H.

Pickthorn, K. W. M.

Conant, Maj. R. J. E.

Jenkins, Robert (Dulwich)

Pilkington, Capt R. A

Cooper, Sqn. Ldr. Albert

Jennings, R.

Pitman, I. J.

Craddock, Beresford (Spelthorne)

Johnson, Eric (Blackley)

Powell, J. Enoch

Crookshank, Capt. Rt. Hon. H. F. C.

Johnson, Howard (Kemptown)

Price, Henry (Lewisham, W.)

Crosthwaite-Eyre, Col. O. E.

Jones, A. (Hall Green)

Prior-Palmer, Brig. O. L.

Crouch, R. F.

Joynson-Hicks, Hon. L. W

Profumo, J. D.

Crowder, Sir John (Finchley)

Keeling, Sir Edward

Raikes, Sir Victor

Crowder, Petre (Ruislip—Northwood)

Kerr, H. W.

Rayner, Brig. R.

Darling, Sir William (Edinburgh, S.)

Lambert, Hon. G.

Redmayne, M.

Davidson, Viscountess

Lambton, Viscount

Rees-Davies, W. R.

Deedes, W. F.

Law, Rt. Hon. R. K.

Remnant, Hon. P.

Digby, S. Wingfield

Legge-Bourke, Maj. E. A. H.

Renton, D. L. M.

Dodds-Parker, A. D.

Legh, Hon. Peter (Petersfield)

Roberts, Peter (Heeley)

Donaldson, Cmdr. C. E. McA.

Lindsay, Martin

Robinson, Roland (Blackpool, S.)

Donner, P. W.

Linstead, H. N.

Rodgers, John (Sevenoaks)

Doughty, C. J. A.

Llewellyn, D. T.

Roper, Sir Harold

Drayson, G. B.

Lloyd, Rt. Hon. G. (King's Norton)

Ropner, Col. Sir Leonard

Drowe, C.

Lloyd, Maj. Sir Guy (Renfrew, E.)

Russell, R. S.

Dugdale, Rt. Hon. Sir T. (Richmond)

Lloyd, Rt. Hon. Selwyn (Wirral)

Ryder, Capt. R. E. D.

Salter, Rt. Hon. Sir Arthur

Teeling, W.

Ward, Hon. George (Worcester)

Sum, R. Donald

Thomas, Leslie (Canterbury)

Ward, Miss I. (Tynemouth)

Scott-Miller, Cmdr. R.

Thomas, P. J. M. (Conway)

Waterhouse, Capt. Rt. Hon. C.

Shepherd, William

Thompson, Kenneth (Walton)

Watkinson, H. A.

Simon, J. E. S. (Middlesbrough, W.)

Thompson, Lt.-Cdr. R. (Croydon, W.)

Webbe, Sir H. (London & Westminster)

Smithers, Peter (Winchester)

Thorneycroft, Rt. Hn. Peter (Monmouth)

Wellwood, W.

Smithers, Sir Waldron (Orpington)

Thornton-Kemsley, Col. C. N.

Williams, Rt. Hon. Charles (Torquay)

Smyth, Brig. J. G. (Norwood)

Tilney, John

Williams, Gerald (Tonbridge)

Soames, Capt. C.

Touche, Sir Gordon

Williams, Sir Herbert (Croydon, E.)

Speir, R. M.

Turner, H. F. L.

Williams, R. Dudley (Exeter)

Stanley, Capt. Hon. Richard

Tweedsmuir, Lady.

Wills, G.

Stevens, G. P.

Vane, W. M. F.

Wilson, Geoffrey (Truro)

Steward, W. A. (Woolwich, W.)

Vaughan-Morgan, J. K

Wood, Hon. R.

Stewart, Henderson (Fife, E.)

Vospor, D. F.

York, C.

Stoddart-Scott, Col. M.

Wade, D. W.

Strauss, Henry (Norwich, S.)

Wakefield, Edward (Derbyshire, W.)

TELLERS FOR THE AYES:

Sutcliffe, Sir Harold

Wakefield, Sir Wavell (St. Marylebone)

Mr. Studholme and Mr. Kaberry.

Taylor, William (Bradford, N.)

Walker-Smith, D. C.

NOES

Albu, A. H.

Freeman, John (Watford)

Manuel, A. C.

Allen, Scholefield (Crewe)

Gaitskell, Rt. Hon. H. T. N.

Marquand, Rt. Hon. H. A.

Awbery, S. S.

Gibson, C. W.

Mason, Roy

Bacon, Miss Alice

Glanville, James

Mayhew, C. P.

Barnes, Rt. Hon. A. J.

Gooch, E. G.

Mellish, J. R.

Bartley, P.

Gordon-Walker, Rt. Hon. P. C.

Messer, F.

Bellenger, Rt. Hon. F. J.

Greenwood, Anthony (Rossendale)

Mikardo, Ian

Benee, C. R.

Grenfell, Rt. Hon. D. R.

Mitchison, G. R.

Bern, Hon. Wedgwood

Griffiths, David (Rother Valley)

Monslow, W.

Benson, G.

Griffiths, Rt. Hon. James (Llanelly)

Moody, A. S.

Beswick, F.

Griffiths, William (Exchange)

Morgan, Dr. H. B. W.

Bevan, Rt. Hon. A. (Ebbw Vale)

Hale, Leslie

Morley, R.

Bing, G. H. C.

Hall, Rt. Hon. Glenvil (Colne Valley)

Morris, Percy (Swansea, W.)

Blackburn, F.

Hamilton, W. W.

Morrison, Rt. Hon. H. (Lewisham, S)

Blenkinsop, A.

Harman, W.

Mort, D. L.

Blyton, W. R.

Hargreaves, A.

Moyle, A.

Bottomley, Rt. Hon. A. G.

Harrison, J. (Nottingham, E.)

Mulley, F. W.

Bowden, H. W.

Hastings, S.

Murray, J. D.

Bowles, F. G.

Hayman, F. H.

Nally, W.

Braddock, Mrs. Elizabeth

Healey, Denis (Leeds, S.E.)

Neal, Harold (Bolsover)

Brockway, A. F.

Henderson, Rt. Hon. A. (Rowley Regis)

Noel-Baker, Rt. Hon. P. J

Brook, Dryden (Halifax)

Herbison, Miss M.

Oldfield, W. H.

Broughton, Dr. A. D. D.

Hobson, C. R.

Oliver, G. H.

Brown, Rt. Hon. George (Belper)

Holman, P.

Orbach, M.

Brown, Thomas (Ince)

Holmes, Horace (Hemsworth)

Oswald, T.

Burton, Miss F. E.

Houghton, Douglas

Padley, W. E.

Butler, Herbert (Hackney, S.)

Hudson, James (Ealing, N.)

Paget, R. T.

Callaghan, L. J.

Hughes, Cledwyn (Anglesey)

Paling, Rt. Hon. W. (Dearne Valley)

Carmichael, J.

Hughes, Emrys (S. Ayrshire)

Paling, Will T. (Dewsbury)

Castle, Mrs. B. A.

Hughes, Hector (Aberdeen, N.)

Palmer, A. M. F.

Champion, A. J.

Hynd, H. (Accrington)

Pannell, Charles

Chapman, W. D.

Hynd, J. B. (Attercliffe)

Pargiter, G. A.

Chetwynd, G. R

Irving, W. J. (Wood Green)

Parker, J.

Clunie, J.

Isaacs, Rt. Hon. G. A.

Paton, J.

Coldrick, W.

Janner, B.

Peart, T. F.

Collick, P. H.

Jay, Rt. Hon. D. P. T.

Plummet, Sir Leslie

Craddock, George (Bradford, S.)

Jeger, Dr. Santo (St. Pancras, S.)

Popplewell, E.

Crosland, C. A. R.

Johnson, James (Rugby)

Porter, G.

Cullen, Mrs. A.

Johnston, Douglas (Paisley)

Price, Joseph T. (Westhoughton)

Dalton, Rt. Hon. H.

Jones, David (Hartlepool)

Price, Philips (Gloucestershire, W.)

Darling, George (Hillsborough)

Jones, Jack (Rotherham)

Proctor, W. T.

Davies, Harold (Leek)

Jones, T. W. (Merioneth)

Pryde, D. J.

Davies, Stephen (Merthyr)

Keenan, W.

Rankin, John

de Freitas, Geoffrey

Kenyon, C.

Reeves, J.

Deer, G.

Key, Rt. Hon. C. W.

Reid, Thomas (Swindon)

Delargy, H. J.

King, Dr. H. M.

Reid, William (Camlachie)

Dodds, N. N.

Lee, Frederick (Newton)

Rhodes, H.

Donnelly, D. L.

Lee, Miss Jennie (Cannock)

Richards, R.

Driberg, T. E. N.

Lever, Harold (Cheetham)

Robens, Rt. Hon. A.

Ede, Rt. Hon. J. C

Lever, Leslie (Ardwick)

Roberts, Albert (Normanton)

Edelman, M.

Lewis, Arthur

Roberts, Goronwy (Caernarvon)

Edwards, John (Brighouse)

Lindgren, G. S.

Robinson, Kenneth (St. Pancras, N.)

Edwards, Rt. Hon. Ness (Caerphilly)

Lipton, Lt.-Col. M.

Rogers, George (Kensington, N.)

Edwards, W. J. (Stepney)

Logan, D. G.

Ross, William

Evans, Edward (Lowestoft)

MacColl, J. E.

Royle, C.

Evans, Stanley (Wednesbury)

McGhee, H. G.

Shackleton, E. A. A.

Fernyhough, E.

McGovern, J.

Shawcross, Rt. Hon. Sir Hartley

Fienburgh, W.

McInnes, J.

Shinwell, Rt. Hon. E.

Finch, H. J.

McLeavy, F.

Short, E. W.

Fletcher, Eric (Islington, E.)

MacMillan, M. K. (Western Isles)

Silverman, Julius (Erdington)

Follick, M.

MacPherson, Malcolm (Stirling)

Silverman, Sydney (Nelson)

Foot, M. M.

Mallalieu, E. L. (Brigg)

Simmons, C. J. (Brierley Hill)

Forman, J. C.

Mallalieu, J. P. W. (Huddersfield, E.)

Skeffington, A. M.

Fraser, Thomas (Hamilton)

Mann, Mrs. Jean

Slater, Mrs. H. (Stoke-on-Trent)

2282

2283

Smith, Norman (Nottingham, S.)

Thorneycroft, Harry (Clayton)

Wilcock, Group Capt. C. A. B.

Snow, J. W.

Thurtle, Ernest

Wilkins, W. A.

Sorensen, R. W

Timmons, J.

Willey, F. T.

Sparks, J. A.

Tomney, F.

Williams, David (Neath)

Stewart, Michael (Fulham, E.)

Turner-Samuels, M.

Williams, Rev. Llywelyn (Abertillery)

Stokes, Rt. Hon. R. R.

Ungoed-Thomas, Sir Lynn

Williams, Ronald (Wigan)

Strachey, Rt. Hon. J.

Usborne, H. C.

Williams, W. R. (Droylsden)

Stross, Dr. Barnett

Viant, S. P.

Williams, W. T. (Hammersmith, S.)

Summerskill, Rt. Hon. E.

Wallace, H. W.

Winterbottom, Ian (Nottingham, C.)

Swingler, S. T.

Weitzman, D.

Winterbottom, Richard (Brightside)

Sylvester, G. O.

Wells, Percy (Faversham)

Woodburn, R. Hon. A.

Taylor, Bernard (Mansfield)

Walls, William (Walsall)

Wyatt, W. L.

Taylor, John (West Lothian)

West, D. G.

Yates, V. F.

Thomas, David (Aberdare)

Wheatley, Rt. Hon. John

Younger, Rt. Hon. K.

Thomas, George (Cardiff)

Wheeldon, W. E.

Thomas, Iorwerth (Rhondda, W.)

White, Henry (Derbyshire, N. E.)

TELLERS FOR THE NOES:

Thomas, Ivor Owen (Wrekrn)

Whiteley, Rt. Hon. W.

Mr. Pearson and Mr. Arthur Allen.

Thomson, George (Dundee, E.)

Wigg, George

Resolution agreed to.

Main Question again proposed.
It being after Ten o'clock, the debate stood adjourned.
Committee Tomorrow.

UNIVERSITY OF ST. ANDREWS [MONEY]
Resolution reported,
That, for the purposes of any Act of the present Session to make provision for the re-organisation of University education in St. Andrews and Dundee, to amend the constitution of the University of St. Andrews, of University College, Dundee, and of other bodies or institutions concerned, and for purposes connected with the matters aforesaid, it is expedient to authorise the payment out of moneys provided by Parliament, to an amount approved by the Treasury of all expenses incurred in the execution of the said Act by the Commissioners appointed thereunder, including such remuneration as the Treasury may determine to be payable to persons employed by the said Commissioners.

HOSPITAL PAY-BEDS
10.12 p.m.
Mr. A. Blenkinsop: I beg to move,
That an humble Address be presented to Her Majesty praying that the National Health Service (Pay-Bed Accommodation in Hospitals, etc.) Regulations, 1953 (S.I., 1953, No. 420), dated 12th March, 1953, a copy of which was laid before this House on 13th March, be annulled.
It appears to us that there has been a change of policy on the part of the Government in relation to hospitals and pay-beds in hospitals, a change of policy which we deeply oppose. It is extremely difficult for anyone to make any sense of the very complex Regulations against which we pray. One might have hoped that the Government, who often complained about the form of wording of
2284
regulations made in the past, would have done their best to improve the intelligibility of this document, but they have not done so.
Nevertheless, it is clear that the broad effect of the Regulations is, first of all, to confirm the recent increases in charges for amenity beds, provision for which was made in a regulation last year. Secondly, the Regulations reduce pay-bed charges by sums which will vary from one part of the country to another, and, indeed, from one hospital to another, according to the very complex calculations which have to be made; and I sympathise with all those on hospital staffs who have had the job of trying to calculate the new charges which apply to pay-beds under the Regulations. As far as I can find out, the general effect of the Regulations will be that a reduction of something between 5 per cent. and 10 per cent. will be effected in the charges for pay beds. Thirdly, the Regulations provide for an increase in the maximum fees which can be charged by specialists giving treatment in pay-beds to their private patients.
Some may say, "What is wrong with those three changes?" First of all, I think my hon. Friends have been alive to the fact that private pay-beds have always been an anomaly in a Health Service which has tried to ensure a single standard of service for everyone, irrespective of whether they have money with which to pay for special facilities. As we all know, there have always been complaints—I am sure hon. Members opposite must know this as well as we do—from those who have been told that they have to wait three or six months, or even longer, for an operation or for treatment, whereas those who have been able to afford to pay for a pay bed have been able to get treatment straight away.

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Even where there may be good reasons for this it has, nevertheless, always been felt—and understandably felt—as a very real grievance by vast numbers of people, many more than perhaps have been affected by the problem themselves. We agree that it was necessary, in the initial stages when this provision was made and the National Health Service was introduced to ensure that specialists should be broadly spread throughout the hospitals in the service and initially provision of pay beds was certainly necessary.
These Regulations are designed to ensure that there shall be an increased use of pay-beds—otherwise they mean nothing. It means that it is desired that there shall be an increase in the use of pay-beds and, therefore, there will be an increase in the sense of injustice among those who find themselves pushed further back in the queue for free treatment.
Secondly, these Regulations undoubtedly add to the specially favoured position of the part-time specialist in hospitals as against the full-time specialist. I do not think there can be any question about that. The Regulations are designed to ensure that he shall have more beds at his disposal and provides for additional maximum fees. Therefore, he wins all along the line. Yet I should have thought there was general agreement that it is the part-time specialist whose service needs to be examined with some care in the Health Service.
If there is room for cutting down expenditure it may well be that it is in this field. I think there is a great deal of agreement that it is the full-time specialist, who on the whole, gives the most economical service in the Health Service. There is not much doubt that the part-time specialist, with the addition of his private fees and a great deal of sessional fees and special rates for travelling allowances, and so on, can build up a very large income. There has always been a great deal of anxiety about this position, but these Regulations make the position worse, not better.
No doubt I shall be told that the Regulations are designed to reduce the cost of pay-beds, that they are too costly, that it is to ensure that they are fully used as we know they are not being fully used at present and that if they are more fully used hospitals will get more money—and we all want that. That
2286
is all very well, but why are these unused pay-beds not being used, as we intended they should be, for patients receiving free treatment? It is perfectly clear from the evidence we have—I am sure the Minister has much more that will no doubt bring out the same factors—that very large numbers of these pay-beds are being sterilised for the use of specialists and are not being made available for ordinary National Health Service patients.
I gather that in one area, in Stoke, for example, 55 per cent.—more than half—of the pay-beds of that management committee are unoccupied. The figures I have had from the area I know best in my own district on Tyneside suggest a comparable figure. Therefore, our argument is that we should face up to the fact that pay-beds are not being fully used.
The Regulations are really an excuse for the Minister to avoid finding the extra funds that the hospital needs to provide a full and adequate service. In fact, for a small and doubtful financial benefit the Minister is encouraging the extension of a two-level service, a service of one quality for those who can afford to pay more and a service at the lower standard for those who cannot afford to pay so much. That is why we urge that the Regulations shall be annulled and we hope that hon. Members on both sides will support us.
10.22 p.m.
Mr. Frederick Messer: I beg to second the Motion.
I regret very much that it has been necessary to move this Prayer. My hon. Friend, in his brief speech, could not explain the very difficult words used and although I do not intend to take very long I propose to bore the House by reading one paragraph. I ask anyone who has not had the benefit of advice from a lawyer to tell me just what that paragraph means. It is paragraph 6, on page 2 of the Regulations:
Where the standard daily charge is determined under paragraph (1) of the last preceding regulation: —
(a) If an in-patient occupying pay-bed accommodation makes arrangements under sub-section (2) of section five of the Act for treatment as a private patient by a consultant or senior hospital medical or dental officer, there shall be added to the standard daily

2287
charge an amount representing the estimated average daily cost per in-patient in such accommodation of remunerating the medical and dental officers (other than consultants and senior hospital medical and dental officers) employed by the Regional Hospital Board or Board of Governors exclusively for the treatment of patients accommodated in the pay-bed accommodation of the hospital and of paying the due proportion of the remuneration of medical and dental officers (inclusive of consultants and senior hospital medical and dental officers who are whole time officers but exclusive of other consultants, senior hospital medical and dental officers) employed for part of their time, not being, in the opinion of the Board or Committee, an insignificant part, for the treatment of patients accommodated in the pay-bed accommodation.
I defy any layman to tell me just what that means.
When an important change is being made, the House ought to have an explanation. We shall be discussing this from the standpoint of what we believe it to mean; but surely, when dealing with important work such as is concerned with the National Health Service, the House ought to be in a position to know what it is doing. I contend that it is not in a position tonight to know what it is doing; I can only surmise what is to happen.
As far as Section 5 of the Act is concerned, dealing with the type of private patient who is called upon to pay the full cost, the Regulations will attempt to reduce from that full cost certain services that the patient will not receive. When the paragraph to which I have referred speaks of
"an insignificant part, for the treatment of patients …"
what are we to understand by "insignificant part"? The House really ought to be better informed than by merely reading the Regulations. In the Explanatory Note, which comprises one paragraph, we get the words:
"The object of the changes is to rectify certain anomalies—".
what are those anomalies?—
"and to ensure that irrelevant items are excluded from the calculation."
I oppose the Regulations principally because of the opportunity I am afforded of expressing my point of view on what has happened in respect of pay beds. When the Bill was originally introduced in the House, many sup-
2288
porters of the Government felt that this was a rather dangerous thing, but we believed that it would be justified as an experiment. We have had five years now of the National Health Service, and I assert that as a consequence of this provision there have been empty beds in hospitals and people waiting to get into beds who have not been able to do so.
I know that that is not entirely the responsibility of any one unit of administration. Indeed, I rather think that what the Regulations will do is to improve the position of the specialists. In my opinion, the specialists have already not done too badly out of the Service. If there was anybody who wanted assistance, it was some of those who got it from the Danckwerts award. When the Act came into force, the general practitioners who had big private practices and small panel practices lost their private patients and were unable to get a big panel. I should think that the specialists were not the people who were in need of any increase.
When I apply myself to these questions, the test that I always first apply is to ask what will be the effect upon the patient. I suggest that this will not have a good effect upon the patient. It will in all probability make it more difficult for patients to get into hospital. An added incentive will be given to the specialist to get his private patients into the beds in the hospital, and he will be given the incentive to exercise his influence to say, "I want that bed," and that bed will remain empty until the patient he wants to put in it gets there.
What financial advantage is there to the Service? What will happen is that there will be a reduction in the amount paid by the patient, but there will be an increase which the specialist can draw. That is not the way in which we should handle a problem of this kind. I promised that I should not take up very much time, though one is tempted to continue. I do not think that that would be fair. If I were to talk for an hour I do not think I should be able to be more convincing than if I were to conclude by saying that when we apply the test of whether or not this benefits the patients the House will vote against these Regulations.
10.30 p.m.
Mr. Somerville Hastings: I want to speak about the part of these Regulations which applies to what are known as the Section 5 beds—those beds for which the patient pays the cost of accommodation in addition to the doctor's fee. The result of the Regulations will be to reduce slightly the cost to the patient in most cases. There may be an increased demand for these pay-beds. If there is, that will increase the cost of the National Health Service. Strange as it may seem, in many cases these are the most expensive beds to the nation. That is because, so that there may be all this accommodation available, many of the beds—sometimes almost half—are kept vacant.
I know that this is not what the Minister wants. He wants them used for ordinary patients when they are not occupied by paying patients, but the doctors think otherwise (and they are on the spot. The doctors know that only when they can get a patient into hospital at once, instead of having to wait for three or four months, can they maintain and increase their private practices. I have had some experience of these beds. Before the appointed day I had experience of them for 15 or 20 years as a surgeon. I have also been in one as a patient.
I am a member of the pay-beds subcommittee of one of the four boards into which Greater London is divided—the North-East Metropolitan Regional Hospital Board. On 25th March this subcommittee met. We had before us an account of the use of all the 174 pay-beds, the Section 5 beds, in the region for the six months ended on 31st December, 1952. I have analysed the manner in which they were used, and I find that 37 per cent. only were used for paying patients, the average daily occupation being 65.
What about the beds which were not used? I have analysed these also and find that 59 out of 109 beds were used for ordinary patients. In other words, a little more than a third of the beds were used by paying patients and only about one half of the remainder were used for other patients. I say that there is great misuse of these beds. They are not used for ordinary patients as they should be when they are not wanted by paying
2290
patients. I suggest that the better the service provided in the Health Service, the more the beds there are used, and the less the waiting period the more pressure there will be by the doctors to keep empty the pay-beds so as to maintain the position that the patient can get into pay-beds quicker than into the ordinary beds.
The Regulations are the most complicated and difficult that I have ever seen. As a hospital administrator—and I am a member of two boards—we find that these beds, in the past, have given a great deal of trouble. I remember that on one board we spent almost the whole of one meeting wrangling with the doctors. They thought we were charging the patients too much. We, as administrators, kept to the terms of the Regulations under which we were working. That happens frequently, and I suggest that these Regulations, with their many doubtful and undetermined points, will increase those difficulties.
The Minister does give us some help. He gives us a list of suggestions for items that should be included in the estimate of cost. It is perfectly right to include "travelling expenses of medical staff and patients." Then he suggests "patients' clothing." I have been an occupant of pay-beds in hospital, and I remember when I went down to the X-Ray department they took off my pyjamas because they had buttons and put on me a nondescript article with tapes. I suppose that was "patients' clothing." When I went to the operating theatre it was in some white socks that reached nearly to my middle. I should include that as "patients' clothing."
Another suggestion deals with "medical records." I cannot conceive any decent hospital where a proper record is not kept for every patient. It would be exceedingly bad for the morale and training of the nurses and the junior doctors if they were not kept. The financial position of patients may change, too. One day they may be able to pay for a pay-bed, and may enter hospital for treatment later and be unable to pay. What a disaster if there is no record. The first thing a surgeon does when he sees a previous operation has taken place, on the abdomen for instance, is to find out what was the nature of the operation.
The Minister of Health (Mr. Iain Macleod): The hon. Gentleman will agree that the document he is reading from, which is not the Regulations, but the accompanying guidance to hospitals, says that the cost of patients' records is not to be excluded from the charge if the hospital looks after private patients' records.
Mr. Hastings: That is perfectly true and I ought to have mentioned it. My point is that no hospital worth its name will not take records of all its patients.
The last suggestion concerns the almoner's department. I agree that this department is mostly used by non-paying patients, but in some cases it does extra work, such as ordering by telephone ambulances or the car service which may be required by paying patients as well as non-paying patients.
I think that these are disastrous Regulations; and one of the greatest disasters about them is that they have an indefinite character, so that we who have to administer the Minister's hospitals will have to spend—I will not say waste—much of our time wrangling with doctors and others concerned before we determine what the right charge should be for paying patients.
10.41 p.m.
Mr. Aneurin Bevan: I think that I should be expressing the point of view of hon. Members in all quarters of the House if I say that we are not anxious to have a protracted debate on these Regulations but rather to have a fairly early Division so as to enable hon. Members to get to their homes at a reasonable hour. But that is not to say that we do not attach the greatest importance to this Prayer; the reason we do not seek a long debate is that the position is clear; the issue is narrow. However, as the Minister was not responsible for the Act in the first instance, perhaps I might deal briefly with how the provisions of this scheme arose.
When I had discussions with the Royal Colleges of Surgeons, Physicians, and Obstetricians, their representatives put it to me that it was extremely undesirable that a specialist should not have private patients in hospitals; for otherwise, there would be a direct encouragement to go to nursing homes and it was then represented by the best representatives of the
2292
profession that a specialist could do his best work at the hospital; that nursing homes were not desirable institutions to encourage. With that view, having some knowledge of them, I heartily agreed; although I would say that there are many specialists who seem to have a predilection towards advising patients to get into nursing homes.
It has never seemed to me that whatever was to be said for the private profit-making motive it was a good thing for patients who went to the nursing home, because the nursing home had an interest in keeping down the cost, which was often to the detriment of the patient. So, whatever hon. Members opposite may think of profit motives as incentives, they are not desirable in so far as they keep nurses away from the bed of the patient in the nursing home. There is instance after instance where well-to-do people, acting under the advice of specialists, have allowed themselves to be maltreated in nursing homes, and I was willing to accept the view of the Royal Colleges that nursing homes were not institutions to be encouraged; and I agreed that the tools of the specialist's craft are to be found in the general hospital.
The full range of instruments and facilities are all there. Therefore, specialists should be at the hospital, where these facilities are available, and their patients should be there, too. I was told that if one wished to keep the specialists at the hospital, one must allow them to have their private patients there. I was extremely reluctant to agree, because I saw in it a very grave breach of the general scheme. I saw in it a great danger—and I am bound to speak on this matter quite frankly.
The medical profession is not entirely exempt from commercialism, and here I think I am speaking on behalf of the whole population, no matter to which political party they belong. It is a very great mistake to believe that there is on this matter a party division, because if hon. Members opposite had been able to read the correspondence which I have seen from ardent Conservatives, who complained bitterly of the treatment they had had at the hands of specialists who had thus exploited them, they would realise that here we are speaking on behalf of the whole population.

2293
What happens is this. Once we give the specialist the opportunity of having private patients in the hospitals, he has a commercial vested interest in increasing the number of private patients, which is exactly what happens. In fact, the very reason why the right hon. Gentleman brings forward his Regulations is itself conclusive evidence that hospital administration is being brought far too much under the influence of the commercialism of the specialist, because the very fact that there are empty beds is itself evidence of maladministration by the authorities. They ought not to be empty.
There is really no justification, under proper administration, for a waiting list at a hospital and empty beds in that hospital. I think there is no hon. Member in any part of the House who would defend that situation, but the empty beds are kept there in order that specialists may be able to offer their patients who can afford to pay a bed at once. I do not want to use superlatives, but, of course, it can become, in some respects, a very evil racket indeed.
An hon. Member told me this afternoon that a few months ago he fell ill, and that his doctor said he thought he had appendicitis and called in a specialist. The specialist conferred with his doctor, and agreed that he had acute appendicitis and that the appendix ought to be removed. The wife of the hon. Member, anxious about his welfare, immediately agreed that he should be taken to a nursing home, because the specialist assured her that the last vacant bed in the hospital nearby had gone, and so the hon. Member went into the nursing home. Eventually, he had the operation, for which he paid 52 guineas, and—[Laughter.] I do not know what there is to grin at in this, because I should have thought there is nothing worse than to play upon the anxieties of relatives in these circumstances merely to get a fat fee. I should have thought it was very bad indeed. Altogether, this simple operation cost the hon. Member 100 guineas. That is shocking, when, at the same time, we have evidence that there are empty beds.
It was never intended by me that pay-bed blocks should be a physical part of the hospital. What was always intended was that there should be pay-beds, but
2294
that the pay-bed block should always be available to free patients if other patients were not there. In other words, it was never intended that there should be in the hospital a division between one part of the hospital and another—one part where there were private patients and another part where there were public patients.
It was always intended that the hospital should be a homogeneity and that public patients should have access to all the beds of the hospital if there were any beds available. Therefore, we have here a situation which I consider a reproach to the scheme. Indeed, I am bound to say, speaking after some experience and with a full sense of responsibility, that there are members of the medical profession who have not proved themselves worthy of the responsibility with which they were entrusted.
Sir Ian Orr-Ewing: They have not got the opportunity.
Mr. Bevan: There is no single piece of social machinery in Great Britain where the profession handling it has more self-government than in the National Health Service. The hon. Member does not really know what he is talking about, because throughout this Service there are on the governing bodies of the teaching hospitals, on regional hospital boards and on hospital management committees, doctors appointed by the Minister. What many of them have done is to use the influence they possess, which is very considerable in hospitals, to deny beds to patients in order to make them available for their private patients.
As my hon. Friend the Parliamentary Secretary pointed out—[HON. MEMBERS: "He is not the Parliamentary Secretary."] It was a lapsus linguae on my part, which shows how undesirable it is to change sides in the House. The fact is, as my hon. Friend pointed out, that this has caused a great deal of anxiety in the medical profession. In the "Daily Telegraph" of Thursday, 26th March, there was a long article, written by a consulting physician, in which he pointed out that the extra facilities granted to the part-time specialist—because that is the person to whom we are referring—is causing a great deal of heart-burning among the full-time specialists upon

2295
which, as a general rule, the hospital service mainly depends.
These Regulations, instead of narrowing the gulf between the status of the part-time specialist and the full-time specialist rather widens it. The part-time specialist has very considerable Income Tax reliefs that the full-time specialist has not got, and, therefore, it was always my view—and I submit this view to hon. Members not in any party spirit at all—that this was a feature of the Health Service that ought to be kept to a minimum by administrative action with a view to its eventual elimination.
Mr. Philip Bell: I am most anxious to follow the right hon. Gentleman's point. Do I understand that the sterilised beds, about which, I must say, we have heard with some alarm, are primarily due—50 per cent., 70 per cent.—to the dishonesty of doctors or to administration?
Mr. Bevan: I said, quite simply and bluntly, that the specialists use their influence in hospital administration to keep beds idle in private pay-bed blocks in order to have them immediately available for their fee paying patients.
Mr. Bell: That is dishonesty.
Mr. Bevan: I am being quite frank. I think everybody will agree that if a bed is available it ought not to be kept idle if there is a patient on the waiting list.
Mr. Bell: I agree.
Mr. Bevan: Then the hon. Member is agreed. We could spend a great deal of time giving figures. Thirty, 40, 50 or 70 per cent. of the beds in the pay-bed blocks are not occupied at the same time as there are waiting lists at the hospitals. Therefore, the conclusion one reaches is this: either the hospital administration is not doing its job—and one of the reasons for having this debate is to focus attention on the fact they ought to do their job—or the specialist is able to exert undue influence over the administration in order to try to get beds for himself.
There is only one more thing I should like to say. The Regulations are extremely complicated. I looked up the original Regulations made in 1948. I am bound to say that, although I made very many Regulations very hurriedly before 5th July, 1948, I made them in
2296
much simpler language than the right hon. Gentleman has been able to discover in his amending Regulations. What he does, as I understand, is to exclude from calculating the cost to the pay-bed block, the general medical services of the hospital so that the private bed patient may have to pay his own medical costs. What the right hon. Gentleman is doing, in other words, is converting the pay-bed block into a nursing home, because he is excluding the pay-bed block from the normal overhead charges of the medical supplies of the hospital.
I consider that to be entirely unfair and, indeed, is formalising and regularising a division in this service which we are so anxious to avoid. The right hon. Gentleman is increasing the operating fees for the specialists. I do not understand why he is doing that. They may say that the cost-of-living is going up. What is the use of putting the cost to the private patient down and then putting up the cost of the operation? All that is doing is transferring money from the patient's pocket to the specialist's pocket and taking it from the State. The only person to benefit is the specialist. Not even the patient benefits.
I said at the beginning that we were anxious that this debate should not be protracted. We have tried to state our case in moderate language. I think I should be expressing the view of everyone in the House, and certainly of anxious people in many parts of the country, when I say that this feature of the Health Service, which we regard as undesirable, ought not to be used to deny to English people access to the hospitals of Great Britain when they need it.
10.57 p.m.
The Minister of Health (Mr. Iain Macleod): I entirely agree with the right hon. Member for Ebbw Vale (Mr. Bevan) that this is an important matter and that it has been discussed, although fairly briefly, in a very temperate spirit. Perhaps I may, in the time-honoured words, greet the right hon. Gentleman the Member for Ebbw Vale—as this is the first occasion since I became Minister of Health a year ago, in which he has intervened in a health debate—by saying that he has shown considerable knowledge of his subject and that I look forward to hearing him again. [HON. MEMBERS: "Come off it."]

2297
These Regulations do three things. They consolidate the amenity Regulations passed last year. They amend the assessing of charges for Section 5 beds, and they make certain alterations in professional fees. In so doing, they annul the 1948 Regulations made by the right hon. Gentleman.
There are several small points on which I had intended to dwell for a moment, but they were not mentioned from the other side of the House. I do not propose to make them tonight, except to point out, because it has a certain relevance to something I shall say later, that the Schedule attached to these Regulations remains broadly the same as that attached to the 1948 Regulations with the addition of certain new operations and procedures, for example, the development of the fitting of contact lenses.
I want to come straight away to a matter of more substance—the question of arrangements for admissions and undertakings to pay. I want to make my position absolutely clear. I hope it is made clear because some doubt was expressed about it when the hon. Member for Barking (Mr. Hastings) referred to this matter. I have recently sent out, in conjunction with the Regulations, guidance to hospitals. But let us stress again—and there is no dispute in the House about this—that, first of all, if the primary desire of a patient is for privacy and it is a non-serious case he should have his attention drawn to amenity beds if such exist in the hospital. Secondly, if his need for admission is urgent on medical grounds, he has a right to be admitted and there is again no need for the whole charges to be paid.
Thirdly, if he desires a Section 5 bed, it must be made absolutely clear to him, and there must be undertakings given in writing, that he understands in full the implications of what he is doing, because it is here that most of the difficulties arise. At a time of stress it is natural enough for somebody not to bother too much about what he is told or what is on a form put in front of him. But if hon. Members have cases in which the proviso to Section 5 (1) of the 1946 Act is, in their view, not being operated I hope that they will let me know and I will undertake straight away to look into them.
Mr. Bevan: The right hon. Gentleman does not need the information from us. He has it himself, for if there are unoccupied beds in pay blocks during the year, or considerable parts of the year, and there is a waiting list at that hospital that is in itself evidence that the administration is not good.
Mr. Macleod: We will go into that question in a minute. I can quote the right hon. Gentleman against himself on this issue in the proceedings on the National Health Service Bill.
These Regulations supersede the 1948 Regulations, but what is important is that both of them stem, and have to stem, from the 1946 Act. That is the authority for these Regulations and the authority for the right hon. Gentleman's. The important words are these:
".… such charges as may be determined in the prescribed manner, being charges designed to cover the whole cost of the accommodation and services provided for the patient at the hospital, …."
If they do not do that, not only are these Regulations toad, as has been urged from the other side, but they are ultra vires as well.
My case, of course, is not only that these Regulations do carry out the 1946 Act, but that the right hon. Gentleman's did not. I say, straight away, that I had always thought that it was a remarkable achievement on the part of the Department to bring in in 1948 the mass of Regulations which they had to bring in to get the Health Service going. But no one expected the Health Service to spring fully armed from those Regulations and many of the Regulations have been found inadequate in detail.
That is precisely why the Regulations which we are now considering are very much more complicated—and I concede that point—than were the 1946 Regulations. It is only by making them more complicated that I can achieve not only the fairness to Section 5 patients which I want to achieve but which it is a statutory duty for me to do under the 1946 Act.
It follows that I have to exclude, if I can, irrelevant items from the calculation. It was on this point that the hon. Member for Barking made some observations. But I should like to be absolutely clear on one point in answer to the hon. Mem-

2299
ber for Newcastle-upon-Tyne, East (Mr. Blenkinsop). The object of the Regulations is not to reduce the charge to private patients. It may well be that it will have that result, but that is a different point. The object of these Regulations is to carry out fairly the 1946 Act—[Laughter]—certainly it is. There are two methods of costing and there was some confusion among hon. Members opposite about them; one where the separate block can be costed, and secondly, when we have to estimate. It is in the second case that the difficulties arise, because there is virtually no problem in these Regulations if separate costing can be achieved.
The kernel of what I want to say to the House is that the 1948 Regulations themselves laid down that the standard daily charge, plus an average daily cost per in-patient representing medical care plus various percentages was to be the amount charged. It has been found that that Regulation was trebly unfair, and these are the anomalies referred to in the Explanatory Note. The percentages now are to be added to a sum which excludes the cost of paying medical staff instead of, as under the 1946 Regulations, to a charge which included it, and. therefore, there was an increase in the 1948 Regulations which was unfair to the private patient.
Secondly, they have been shown to be unfair, because certain services were included which have little or no reference to the private block. Thirdly, they have been found to be unfair because the percentages have been found to be too high. Some calculation had to be made by the right hon. Gentleman in 1948 and I am told that the basis for these figures, in the light of experience in the emergency medical service and elsewhere was that they represented the additional cost of the private bed over a public bed.
When these pay-bed Regulations were being revised, and the revision was asked for as early as the first part of 1949, the financial officers of the hospital authorities said that in their view, and in the light of experience, these percentages were too high; but the lower figure has not been altered because, of course, the more beds there are in private accommodation the more it approximates to a ward. Therefore, in the view of those
2300
who advise me the right percentages would be the ones indicated in the new Regulations for the second part of the costing.
The hon. Member for Tottenham (Mr. Messer) read out Regulation 6 (1, a) and I agree that it is couched in horrifying terms. The hon. Member said that no layman could understand it. I do not know whether he will understand my explanation, but I will try in a sentence or two to tell him what the words mean. In that Regulation we are talking about the pay-blocks separately costed and we have fixed a standard daily charge which relates only to accommodation. We therefore have to add something for the appropriate amount of medical care.
It is calculated that we do not add anything for the specialist part of the service, because the patient, by employing his own specialist, takes care of that; but it is right that the private patient should pay an appropriate amount for the time of the house officers and others who give their time in the private block, unless the amount is triflng. On the point which the hon. Member also raised about an insignificant amount, I have said in the notice I have given to the hospitals that I take that to be one hour a week. I do not know if that explanation from a layman is clear, but at least it is clearer than the Regulations I am laying before the House.
I turn to the question of new fees. These have been unaltered since 1948 and, as I said, the profession suggested very early in the scheme in 1949, that alterations should be made. The right hon. Member did not agree that the detailed schedules should be abandoned and I do not dissent from that at all. But he did say that they should be examined to see if any amendments were desirable. That was in 1949. What has happened since is that that examination has taken place, that we have consulted—I have consulted and my predecessors have consulted—our various consultant officers in the specialities. They have consulted the appropriate people in the professions and the new figures before the House represent fairly general agreement in this field.
I will take one example. In Regulation 11 boards and committees may, exceptionally, allow an increase from 75 guineas to 125 guineas. Let me take the example (c) in which, if the patient requires an operation on the heart or the

2301
excision of a tumour of the brain, or various operations of that sort, that becomes a reason for increasing the fees from 75 to 125 guineas. What has happened is that in these fields of surgery new techniques have been developed both of diagnosis and of treatment which require the attention of a whole team of specialists in these most complicated operations.
It therefore follows that in these sort of operations, if we did not have this sort of extension, we would find that the more complicated an operation is the more difficult it is to achieve; the more consultants needed to carry it out the less the fee would be that they would obtain. It seems perfectly clear to me that in those exceptional circumstances—and it must be only at the discretion of the boards and committees—a considerable increase is justified.
The right hon. Member said it was a strange thing that at the same time that we were putting forward measures which will here and there probably reduce the charges where there is not separate costing, we were increasing the fees. The answer is, of course, that hospital charges reflect actual costs, whereas medical fees have been subject to rigid ceilings and have not been altered since 1948, in spite of the fact that medical technique has developed enormously since then.
I will give one or two figures to the House. The number of Section 5 beds at the latest count, in February this year, was 6,113 or 1.2 per cent. of all staffed beds. The number of Section 4 beds was 1.3 per cent. It follows, therefore, that 97.5 per cent. of all beds in the Service are absolutely free and indeed a high proportion, as has been said, of the beds that are nominally pay-beds are in fact occupied by people under the proviso to Section 5. Those figures compared with the end of 1950 show that there has been in 1951 and 1952 a decrease of 4.5 per cent. in the Section 5 beds and an increase of 13 per cent. in the Section 4 beds, while the Section 3 beds—the free staffed beds—have increased by no fewer than 18,156, or 4.1 per cent. In view of those figures no one can conceivably say that the present Government have taken advantage, or will take advantage, of Section 5 of the Act to multiply the number of pay-beds beyond what was conceived in the original Act.
2302
The last point I want to put before the House is this: it has been said that this is a new policy, and in some respects one in favour of the specialists. I am bound to say that the best witnesses to call into the box on that are the specialists themselves. [HON. MEMBERS: "Oh."] Certainly, and in the "British Medical Journal" of 28th March their joint committee comments on these Regulations and my attitude towards them. I regret to say that there is no word of approval for me throughout their comments.
My part in these Regulations has been confined to this. The specialists came to me and they said, "We should like to abandon the detailed schedule." I said, "No, I cannot agree." So did the right hon. Gentleman before me. They said that they did not want a detailed price ceiling but a few general ceilings, and the specialists would adjust their amounts to the paying capacity of the patients. [HON. MEMBERS: "Oh."] I am sure that every hon. Member has personal knowledge of how generous the medical profession can be in that sort of service. I said, "Whatever might happen in the future, the time is not ripe for that."
The third point they made was that they would like a reduction straight away in the case of pay-beds. I said, "That cannot be done without new legislation, and I see no prospect of that at all." These three points were the only ones on which I interfered in these Regulations, which have been prepared by the consultative officers of my Department. I took precisely the same line in this matter but, frankly, for different reasons as the right hon. Gentleman took a year or two before.
I understand that we are to have a vote on these Regulations. We are not going to vote on the merits of the case, because such arguments as the Opposition have marshalled have gone like froth. We are voting for the very good Parliamentary reason which we all understand, that everybody has been brought here to vote and we are jolly well going to. It is most important that the right hon. Gentleman the Member for South Shields (Mr. Ede) should catch his train to Epsom.
Mr. Ede: I have made other arrangements in case I could not.
Mr. Macleod: Very well; I am finishing in a moment.
The only reason for the vote is because these Regulations are not the 1948 Regulations. That has offended the right hon. Gentleman the Member for Ebbw Vale. [HON. MEMBERS: "Oh."] Certainly, it has. Indeed, he takes such a proprietorial attitude towards the Health Service that he thought tonight that he was Minister of Health. He knows perfectly well that if we divide tonight—if we do divide; I suppose we will—it is because these Regulations will strictly carry out the 1946 Act in a fairer manner than it was possible to do—and I make no party point out of it—under Regulations that had to be guesses at the beginning of the scheme. It is on that point that we are to vote tonight, and I must say quite frankly to the right hon. Gentleman that tonight he has, as he has done before, been tilting at windmills.
Mr. Blenkinsop: Could the right hon. Gentleman say what proposals he
intends to bring forward to deal with the empty beds, which is a matter of anxiety to hon. Members on both sides of the House? We are anxious to know what proposals he has in mind to ensure that these empty beds are used for ordinary patients in the hospitals.
Mr. Macleod: I cannot go very far on that tonight without being out of order. As a matter of fact, I have called for a special report on the question of the occupancy of these beds.
Mr. John Baird: What, another report?
Mr. Macleod: There was no report before.
Mr. Bevan: That is not correct.
Mr. Macleod: As soon as I have the details—and they are almost complete—I shall be happy to discuss the matter when it is in order.
Question put.
The House divided: Ayes, 233; Noes, 261.

Division No. 163.]

AYES

[11.20 p.m.

Adams, Richard

de Freitas, Geoffrey

Holman, P.

Albu, A. H.

Deer, G.

Holmes, Horace (Hemsworth)

Allen, Arthur (Bosworlh)

Delargy, H. J.

Houghton, Douglas

Allen, Soholefield (Crewe)

Dodds, N. N.

Hudson, James (Ealing, N.)

Awbery, S. S.

Donnelly, D. L.

Hughes, Cledwyn (Anglesey)

Bacon, Mist Alice

Dugdale, Rt. Hon. John (W. Bromwich)

Hughes, Emrys (S. Ayrshire)

Baird, J.

Ede, Rt. Hon. J. C.

Hughes, Hector (Aberdeen, N.)

Barnes, Rt. Hon. A. J.

Edelman, M.

Hynd, H. (Accrington)

Bartley, P.

Edwards, John (Brighouse)

Hynd, J. B. (Attercliffe)

Bence, C. R.

Edwards, Rt. Hon. Ness (Caerphilly)

Irvine, A. J. (Edge Hill)

Benn, Hon. Wedgwood

Edwards, W. J. (Stepney)

Isaacs, Rt. Hon. G. A.

Benson, G.

Evans, Albert (Islington, S. W.)

Janner, B.

Beswick, F.

Evans, Edward (Lowestoft)

Jay, Rt. Hon. D. P. T.

Bevan, Rt. Hon. A. (Ebbw Vale)

Fernyhough, E.

Jeger, George (Goole)

Bing, G. H. C.

Fienburgh, W.

Jeger, Dr. Santo (St. Pancras, S.)

Blackburn, F.

Finch, H. J.

Johnson, James (Rugby)

Blenkinsop, A.

Fletcher, Eric (Islington, E.)

Johnston, Douglas (Paisley)

Blyton, W. R.

Follick, M.

Jones, David (Hartlepool)

Boardman, H.

Foot, M. M.

Jones, Jack (Rotherham)

Bottomley, Rt. Hon. A. G.

Forman, J. C.

Jones, T. W. (Merioneth)

Bowles, F. G.

Fraser, Thomas (Hamilton)

Keenan, W.

Braddock, Mrs. Elizabeth

Freeman, Peter (Newport)

Kenyon, C.

Brockway, A. F.

Gaitskell, Rt. Hon. H. T. N

King, Dr. H. M.

Brook, Dryden (Halifax)

Gibson, C. W.

Lee, Frederick (Newton)

Broughton, Dr. A. D. D.

Glanville, James

Lee, Miss Jennie (Cannock)

Brown, Thomas (Ince)

Gooch, E. G.

Lever, Harold (Cheetham)

Burke, W. A.

Gordon Walker, Rt. Hon. P. C.

Lever, Leslie (Ardwick)

Burton, Miss F. E.

Greenwood, Anthony (Rossendale)

Lewis, Arthur

Butler, Herbert (Hackney, S.)

Grenfell, Rt. Hon. D. R.

Lipton, Lt.-Col. M.

Callaghan, L. J.

Griffiths, David (Rother Valley)

Logan, D. G.

Carmichael, J.

Griffiths, Rt. Hon. James (Llanelly)

MacColl, J. E.

Castle, Mrs. B. A.

Griffiths, William (Exchange)

McGhee, H. G.

Champion, A. J.

Hale, Leslie

McGovern, J.

Chapman, W. D.

Hall, Rt. Hon. Glenvil (Colne Valley)

McInnes, J.

Chetwynd, G. R

Hamilton, W. W.

McLeavy, F.

Clunie, J.

Hannan, W.

MacMillan, M. K. (Western Isles)

Coldrick, W.

Hargreaves, A.

MacPherson, Malcolm (Stirling)

Collick, P. H.

Harrison, J. (Nottingham, E.)

Mallalieu, E. L. (Brigg)

Craddock, George (Bradford, S.)

Hastings, S.

Mallalieu, J. P. W. (Huddersfield, E.)

Cullen, Mrs. A.

Hayman, F. H.

Mann, Mrs. Jean

Dalton, Rt. Hon. H.

Healey, Denis (Leeds, S. E.)

Manuel, A. C.

Davies, Ernest (Enfield, E.)

Henderson, Rt. Hon. A. (Rowley Regis)

Marquand, Rt. Hon. H. A.

Davies, Harold (Leek)

Herbison, Miss M.

Mason, Roy

Davies, Stephen (Merthyr)

Hewitson, Capt. M.

Mayhew, C. P.

Mellish, R. J

Reid, Thomas (Swindon)

Timmons, J.

Messer, F.

Reid William (Camlachie)

Tomney, F.

Mikardo, Ian

Rhodes, H.

Turner-Samuels, M.

Mitchison, G. R.

Roberts, Albert (Normanton)

Ungoed-Thomas, Sir Lynn

Monslow W.

Roberts, Goronwy (Caernarvon)

Usborne, H. C.

Moody, A. S.

Robinson, Kenneth (St. Pancras, N)

Viant, S. P.

Morris, Percy (Swansea, W.)

Rogers, George (Kensington, N.)

Wallace, H. W.

Mort, D. L.

Ross, William

Weitzman, D.

Moyle, A.

Royle, C.

Wells, Percy (Faversham)

Mulley, F. W.

Shackleton, E. A. A.

Wells, William (Walsall)

Murray, J. D.

Shawcross, Rt. Hon. Sir Hartley

West, D. G.

Neal, Harold (Bolsover)

Short, E. W.

Wheatley, Rt. Hon. John

Noel-Baker, Rt. Hon. P. J.

Silverman, Julius (Erdington)

Wheeldon, W. E.

Oldfield, W. H.

Silverman, Sydney (Nelson)

White, Mrs. Eirene (E. Flint)

Oliver G. H.

Simmons, C. J. (Brierley Hill)

White, Henry (Derbyshire, N.E.)

Orbach, M.

Skeffington, A. M.

Whiteley, Rt. Hon. W.

Oswald, T.

Slater, Mrs. H. (Stoke-on-Trent)

Wigg, George

Padley, W. E.

Smith, Norman (Nottingham, S.)

Wilcock, Group Capt. C. A. B.

Paget, R. T.

Snow, J. W.

Willey, F. T.

Paling, Rt. Hon. W. (Dearne Valley)

Sorensen, R. W.

Williams, David (Neath)

Palmer, A. M. F.

Sparks, J. A.

Williams, Rev. Llywelyn (Abertillery)

Pannell, Charles

Stewart, Michael (Fulhum, E.)

Williams, Ronald (Wigan)

Parker, J

Strachey, Rt. Hon. J.

Williams, W. R. (Droylsden)

Pearson, A.

Strauss, Rt. Hon. George (Vauxhall)

Williams, W. T. (Hammersmith, S.)

Peart, T. F.

Stross, Dr. Barnett

Wilson, Rt. Hon. Harold (Huyton)

Plummer, Sir Leslie

Summerskill, Rt. Hon. E.

Winterbottom, Ian (Nottingham, C.)

Popplewell, E.

Swingler, S. T.

Winterbottom, Richard (Brightside)

Porter, G.

Sylvester, G. O.

Woodburn, Rt. Hon. A.

Price, Joseph T. (Westhoughton)

Taylor, Bernard (Mansfield)

Wyatt, W. L.

Price, Philips (Gloucestershire, W.)

Taylor, John (West Lothian)

Yates, V. F.

Proctor, W. T.

Thomas, David (Aberdare)

Younger, Rt. Hon. K

Pryde, D. J.

Thomas, George (Cardiff)

Pursey, Cmdr. H

Thomas, Iorwerth (Rhondda, W.)

TELLERS FOR THE AYES:

Rankin, John

Thomas, Ivor Owen (Wrekin)

Mr. Bowden and Mr. Wilkins

Reeves, J.

Thomson, George (Dundee, E.)

NOES

Aitken, W. T.

Clyde, Rt. Hon. J. L.

Halt, John (Wycombe)

Allan, R. A. (Paddington, S.)

Cole, Norman

Harden, J. R. E.

Alport, C. J. M.

Colegate, W. A.

Harris, Frederic (Croydon, N.)

Amery, Julian (Preston, N.)

Conant, Maj. R. J. E.

Harris, Reader (Helton)

Amory, Heathcoat (Tiverton)

Cooper, Sqn. Ldr. Albert

Harrison, Col. J. H. (Eye)

Anstruther-Gray, Major W. J.

Craddock, Beresford (Spelthorne)

Harvey, Air Cdre. A. V. (Macclesfield)

Arbuthnot, John

Cranborne, Viscount

Harvey, Ian (Harrow, E.)

Ashton, H. (Chelmsford)

Crookshank, Capt. Rt. Hon. H. F. C.

Hay, John

Assheton, Rt. Hon. R. (Blackburn, W.)

Crosthwaite-Eyre, Col. O. E.

Heald, Sir Lionel

Astor, Hon. J. J.

Crouch, R. F.

Higgs, J. M. C.

Baldock, Lt.-Cmdr. J. M.

Crowder, Sir John (Finchley)

Hill, Dr. Charles (Luton)

Baldwin, A. E.

Crowder, Petre (Ruislip—Northwood)

Hill, Mrs. E. (Wythenshawe)

Banks, Col. C.

Darling, Sir William (Edinburgh, S.)

Hinchingbrooke, Viscount

Barber, Anthony

Davidson, Viscountess

Hirst, Geoffrey

Barlow, Sir John

Deedes, W. F.

Holland-Martin, C. J

Beach, Maj. Hicks

Digby, S. Wingfield

Hollis, M. C.

Beamish, Maj. Tufton

Dodds-Parker, A. D.

Holmes, Sir Stanley (Harwich)

Bell, Philip (Bofton, E.)

Donaldson, Cmdr. C. E. McA.

Holt, A. F.

Bennett, F. M. (Reading, N.)

Donner, P, W.

Hope, Lord John

Bennett, Dr. Reginald (Gosport)

Doughty, C. J. A.

Hornsby-Smith, Miss M. P.

Bennett, William (Woodside)

Drayson, G. B.

Horobin, I. M.

Bevins, J. R. (Toxteth)

Drewe, C.

Horsbrugh, Rt. Hon. Florence

Birch, Nigel

Dugdale, Rt. Hon. Sir T. (Richmond)

Howard, Hon. Greville (St. Ives)

Bishop, F. P.

Duncan, Capt. J. A. L.

Hudson, W. R. A. (Hull, N.)

Black, C. W.

Eccles, Rt. Hon. D. M.

Hulbert, Wing Cdr. N. J.

Boothby, R. J. G.

Elliot, Rt. Hon. W. E.

Hurd, A. R.

Bossom, A. C.

Erroll, F. J.

Hutchinson, Sir Geoffrey (Ilford, N.)

Boyd-Carpenter, J. A.

Fell, A.

Hutchison, Lt.-Com. Clark (E'b'rgh W.)

Boyle, Sir Edward

Finlay, Graeme

Hylton-Foster, H. B. H.

Braine, B. R.

Fisher, Nigel

Jenkins, Robert (Dulwich)

Braithwaite, Sir Albert (Harrow, W.)

Fleetwood-Hesketh, R. F.

Jennings, R.

Braithwaite, Lt.-Cdr. G. (Bristol, N.W.)

Fletcher-Cooke, C.

Johnson, Eric (Blackley)

Bromley-Davenport, Lt.-Col. W. H.

Ford, Mrs. Patricia

Johnson, Howard (Kemptown)

Brooke, Henry (Hampstead)

Fort, R.

Jones, A. (Hall Green)

Brooman-While, R. C.

Foster, John

Kaberry, D.

Browne, Jack (Govan)

Fraser, Hon. Hugh (Stone)

Keeling, Sir Edward

Buchan-Hepburn, Rt. Hon. P. G. T.

Galbraith, T. G. O. (Billhead)

Kerr, H. W.

Bullard, D. G.

Gammans, L. D.

Lambert, Hon. G.

Bullus, Wing Commander E. E.

Garner-Evans, E. H.

Lambton, Viscount

Burden, F. F. A.

George, Rt. Hon. Maj. G. Lloyd

Law, Rt. Hon. R. K.

Butcher, Sir Herbert

Godber, J. B.

Legge-Bourke, Maj. E. A. H.

Campbell, Sir David

Gomma-Duncan, Col. A.

Legh, Hon. Peter (Petersfield)

Carr, Robert

Gough, C. F. H.

Lindsay, Martin

Cary, Sir Robert

Gower, H. R.

Linstead, H. N.

Channon, H.

Graham, Sir Fergus

Llewellyn, D. T.

Churchill, Rt. Hon. Sir Winston

Gridley, Sir Arnold

Lloyd, Maj. Sir Guy (Renfrew, E.)

Clarke, Col. Ralph (East Grinstead)

Grimston, Sir Robert (Westbury)

Lloyd, Rt. Hon. Selwyn (Wirral)

2306

2307

Lockwood, Lt.-Col. J. C.

Ormsby-Gore, Hen. W. D.

Stewart, Henderson (Fife, E.)

Longden, Gilbert

Orr, Capt. L. P. S.

Stoddart-Scott, Col. M.

Low, A. R. W.

Orr-Ewing, Charles Ian (Hendon, N.)

Strauss, Henry (Norwich, S.)

Lucas, Sir Jocelyn (Portsmouth, S.)

Orr-Ewing, Sir Ian (Weston-super-Mare)

Studholme, H. G.

Lucas-Tooth, Sir Hugh

Osborne, C.

Summers, G. S.

McAdden, S. J.

Partridge, E.

Sutcliffe, Sir Harold

McCallum, Major D.

Peaks, Rt. Hon. O.

Taylor, William (Bradford, N.)

McCorquodale, Rt. Hon. M. S.

Perkins, W. R. D.

Teeling, W.

Macdonald, Sir Peter

Pete, Brig. C. H. M.

Thomas, Rt. Hon. J. P. L. (Hereford)

Mackeson, Brig. H. R.

Peyton, J. W. W.

Thomas, Leslie (Canterbury)

McKibbin, A. J.

Pickthorn, K. W. M.

Thomas, P. J. M. (Conway)

Mackie, J. H. (Galloway)

Pilkington, Capt. R. A.

Thompson, Kenneth (Walton)

Maclay, Rt. Hon. John

Pitman, I. J.

Thompson, Lt.-Cdr. R. (Croydon, W.)

Maclean, Fitzroy

Powell, J. Enoch

Thorneycroft, Rt. Hn. Peter (Monmouth)

Macleod, Rt. Hon. Iain (Enfield, W.)

Price, Henry (Lewisham, W.)

Thornton-Kemsley, Col. C. N.

MacLeod, John (Ross and Cromarty)

Prior-Palmer, Brig. O. L.

Tilney, John

Macpherson, Niall (Dumfries)

Raikes, Sir Victor

Touche, Sir Gordon

Maitland, Comdr. J. F. W. (Horncastle)

Rayner, Brig. R.

Turner, H. F. L.

Maitland, Patrick (Lanark)

Redmayne, M.

Tweedsmuir, Lady

Markham, Major S. F.

Rees-Davies, W. R.

Vane, W. M. F.

Marlowe, A. A. H.

Remnant, Hon. P.

Vaughan-Morgan, J. K.

Marples, A. E.

Renton, D. L. M.

Wakefield, Edward (Derbyshire, W.)

Marshall, Douglas (Bodmin)

Roberts, Peter (Heeley)

Wakefield, Sir Wavell (St. Marylebone)

Maude, Angus

Robinson, Roland (Blackpool, S.)

Walker-Smith, D. C.

Maudling, R.

Rodgers, John (Sevenoaks)

Ward, Hon. George (Worcester)

Maydon, Lt-Comdr. S. L. C.

Roper, Sir Harold

Ward, Miss I. (Tynemouth)

Mellor, Sir John

Ropner, Col. Sir Leonard

Waterhouse, Capt. Rt. Hon. C.

Molson, A. H. E.

Russell, R. S.

Watkinson, H. A.

Moore, Lt.-Col. Sir Thomas

Ryder, Capt. R. E. D.

Webbe, Sir H. (London & Westminster)

Morrison, John (Salisbury)

Salter, Rt. Hon. Sir Arthur

Wellwood, W.

Mott-Radclyffe, C. E.

Scott, R. Donald

Williams, Rt. Hon. Charles (Torquay)

Nabarro, G. D. N.

Scott-Miller, Cmdr. R.

Williams, Gerald (Tonbridge)

Nicholls, Harmar

Shepherd, William

Williams, Sir Herbert (Croydon, E.)

Nicholson, Godfrey (Farnham)

Simon, J. E. S. (Middlesbrough, W.)

Williams, R. Dudley (Exeter)

Nicolson, Nigel (Bournemouth, E.)

Smithers, Peter (Winchester)

Wills, G.

Nield, Basil (Chester)

Smithers, Sir Waldron (Orpington)

Wilson, Geoffrey (Truro)

Noble, Cmdr. A. H. P.

Soames, Capt. C.

Wood, Hon. R.

Nugent, G. R. H.

Speir, R. M.

York, C.

Nutting, Anthony

Stanley, Capt. Hon. Richard

Odey, G. W.

Stevens, G. P.

TELLERS FOR THE NOES:

O'Neill, Phelim (Co. Antrim, N.)

Steward, W. A. (Woolwich, W.)

Mr. Heath and Mr. Vosper.

Question put, and agreed to.

HIGH STREET, LINLITHGOW (WIDENING)
Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Drewe.]
11.30 p.m.
Mr. John Taylor: It is one of the most attractive and remarkable features of this House that there is always something new; during most of today we have been discussing economic affairs affecting all the world, while during the last hour and a half we have been concerned with a domestic matter affecting most of the people of this country. Now, for a few minutes, I would turn to a matter concerning only about a hundred yards of the surface of this island.
The subject which I would bring to the attention of the House is the state of part of the High Street of the Royal and ancient borough of Linlithgow. This is a famous thoroughfare, crammed with history, but tonight I am not concerned with its past, but with its present and future. Linlithgow's High Street is part of the busy and important highway, A.9, which, in turn, is part of the grand trunk
2308
road from London to John o'Groats. Practically all the traffic, passenger and freight, proceeding north to south, and vice versa which goes via the Great North Road, or any other road on the eastern side of this island, passes along this High Street.
There are two alternative routes; one by way of the Edinburgh—Glasgow road, A.8, but this involves such a long detour that few vehicles take it. The other is by the ferry at Queensferry, but this involves delays and expense and inconvenience, and it is not at all suitable and is not used by heavy traffic or by buses. Therefore, practically all the heavy traffic uses the route A.9, and passes along Linlithgow High Street. For about half the length of that street, there is a wide and gracious highway. Then, suddendly, at Linlithgow Cross, it narrows to a mere lane, only 19 ft. wide.
That is the width between the red line on the carpet, on which the Parliamentary Secretary's feet now are, and the back of this bench; I measured it this morning. That is the width of this part of the main traffic route between London and John o'Groats, and it is the narrowest part of the whole of that route. Six

2309
thousand vehicles a day pass through this bottleneck, and nearly half are lorries and buses, and other heavy vehicles.
I agree that there is one other part almost as narrow in all that long highway, and that is in the town of Falkirk; but there, it is possible to have a one-way street. In Linlithgow, there is no alternative thoroughfare to make possible a one-way route. Because of the main railway line, which runs parallel to the immediate south, and the historic Linlithgow Loch on the immediate north, there is no other way through the town, and the congestion in this busy main thoroughfare can be imagined. Sometimes, long lanes of traffic pile up, frequent traffic tangles develop, and they are indeed very difficult to unravel. I have had some photographs taken showing the narrowest part of the street which is the subject of this debate. Have I your permission, Mr. Speaker, to pass these photographs to the Parliamentary Secretary?
Mr. Speaker: Yes; I see no objection.
Mr. Taylor: Perhaps the Parliamentary Secretary will look at them as I enumerate them. Great care was taken by an amateur photographer in obtaining these photographs so that they should show the street at the times when there was no traffic, in order to depict how narrow is this part of the north-south artery.
The picture marked A shows the High Street at its narrowest point, looking westwards. It will be seen that there is barely room for two normal-sized lorries to pass each other, and it will also be noticed that the four-feet wide pavement at that point creates a highly dangerous situation for pedestrians. I ask the hon. Gentleman if he will take special note of the nature of the property on the right-hand side of the picture. The tenement house, No. 142, High Street, is very old, decrepit property, in which three families are living in a state of almost indescribable squalor. I draw special attention to it because I want to refer to the property affected by a proposed widening scheme.
The next picture, marked B, is taken from a point a little further westwards, looking towards the east. It shows that, when cars are parked at the side of the street, ordinary lorries of the type which regularly pass along this road cannot do so without overhanging the pavement, which
2310
really is an intolerable and highly dangerous circumstance. The pictures marked C and D show the backs of the property. I imagine that the hon. Gentleman may be mentioning the fact that the widening scheme will involve the demolition of property occupied. If he will look at the pictures showing the back of the property, he will see the nature of it, and I think he will agree that it will be a blessing when that property is demolished and the people are removed to more sound and healthy houses.
They show that the property is in a condition so decrepit and unsound that some if it is in danger of falling down unless the demolition squad gets busy fairly soon. The property is actually beyond repair, and, in the circumstances, it is not reasonable to expect anyone to spend money on it. It is true that one or two houses and shops are in reasonable condition, but, in the main, the affected part as a whole is inconvenient, without any particular historic value, an eyesore and a menace to public safety.
Pictures E and F show that a vennel and a wynd—and the hon. Gentleman, who spent some time on the banks of the Firth of Forth, will know those expressions—decant on to the street at its narrowest point, one on one side and one on the other, and indicate the danger, particularly to children. The pictures also show the devices which have had to be resorted to for lighting this main trunk road, which has no room for lamp standards. This busy traffic-congested street is so narrow that repairs to the surface can only be undertaken at night during one month of the year, from mid-June to mid-July. A widening scheme has been actively discussed for 20 years. In 1938 it was approved as a priority by the then Minister of Transport, but it had to be postponed owing to the war.
There is on the stocks an ambitious bypass plan to provide a new road clear of the town on the north of the loch, but this is a very heavy cost operation not likely to be undertaken for many years to come. And, even supposing it was undertaken within the foreseeable future, the large number of buses which use the area, and the shopping and local traffic, would still use the High Street. It really is unthinkable that the present congested and dangerous position should remain in perpetuity. Indeed, from my point of

2311
view and that of the town council it is unthinkable that it should remain as it is for many more months to come.
A low cost widening scheme for the narrowest part of this street has been prepared. It provides for the demolition of the property, mostly sub-standard, on the north side of the street at its narrowest part. It provides for a carriage way 30 ft. wide as against the present 19 ft., plus a border on each side of that carriage way of 5 ft. wide, and for a footpath 10 ft. wide, a total width of 60 ft.
The few families that would be evacuated by the demolition thus caused could be re-housed almost immediately by the town council. The council are willing, and indeed very anxious, to do this as soon as approval to go ahead with the scheme is given. In fact, they would empty the old houses immediately but for the fact that the owners might re-let them or because they might be taken over by squatters, and thus the council would be no further forward. The council will provide new houses as soon as the scheme is under way.
The new scheme is a partial one to widen the street at its most congested point between the historic house known as the Spanish Ambassador's House and the vennel. It has been approved by every authority concerned. The Linlith-gow Town Council are desperately anxious that it should go ahead and thus relieve them of a continued anxiety. The West Lothian County Council have given the scheme their full support. It is approved as an urgently needed road improvement by the Ministry's divisional road engineer for Scotland.
On 16th July, 1952, the right hon. and gallant Member for Pollok (Commander Galbraith), writing to me in his capacity of Joint Under-Secretary of State for Scotland, said:
"It is clear that funds will not be available to allow the work to be started this year,"—
that is, 1952—
"but consideration is being given to the possibility of starting work in 1953 on a stretch most urgently in need of widening, that is, that part of the High Street lying between the vennel and the Ambassador's House."
So far as I can see, it remains only for the Ministry to give its sanction to enable this badly needed scheme to proceed. I, together with some of my col-
2312
leagues and other important people in Scotland, met the hon. Gentleman's right hon. Friend yesterday on the subject of the Forth Road Bridge, a matter upon which he and I have been concerned in a previous Adjournment debate, and I apologise for the second time for keeping him up so late.
I am aware that the stumbling block is a financial one. I am aware, too, the Minister is working on a financial shoestring. I know he is being worried by local authorities to cancel the cuts in maintenance grants and to maintain the grants ceiling for the current financial year at its already very low level. But the Ministry has certain rules for road repairs and road improvement schemes. The important one is that, if they are essential for public safety, the schemes are approved. I would be in terrible difficulty to point in all Britain, using that yardstick alone, to a place where alterations were more urgent and essential than at this spot on this important highway.
I plead with the Minister not to give me just another refusal to this request. I plead with him, at least, to receive reports from the authorities—I know he has already had some—from his own staff, or from any independent observer. I wish, and extend to him this invitation very heartily, that he would come with me and have a look at this place. I know that he would be at once convinced that something must be done about this in its desperately-needed plan at this dangerous spot. I hope that this plea will not go unheard, but will receive the sympathy it deserves.
11.47 p.m.
Mr. A. Woodburn: My hon. Friend's constituency lies between my home and my constituency. As he has pointed out, while he is raising this as a matter for Linlithgow itself, it is a matter of one of the main highways of this country. My hon. Friend has put forward a very strong plea for urgent treatment of this particular bottleneck. The Parliamentary Secretary will have an idea of what the position is, if I tell him it is almost as bad as South Queensferry from the point of view of wriggling around corners. There is a bad corner before one enters this narrow part and it makes it a very awkward journey altogether.

2313
It is true that the Forth Road Bridge would relieve part, but not the whole of this congestion, because there will still be a great deal of traffic if one goes by Stirling through Falkirk and other points. There are other bottlenecks in that area which require urgent attention from a safety point of view. There is also a very narrow bridge on the highway coming from the south to Falkirk. The Parliamentary Secretary is already concerned with a scheme for a roundabout in another dangerous spot on the way to the Kincardine Bridge. It is the way to Stirling and to the north via Edinburgh. It is a matter of some importance which should receive attention.
From my own observations, I should not think there would be much loss of property involved in a scheme at the spot we are now discussing, and that Linlithgow would specify the property to get rid of this dangerous spot. It is true there have not been a great many accidents there, but the worst places are where no accidents occur. Everybody has to crawl so carefully that they proceed safely and there is no temptation to take any risks. It is a bad place for drivers and holds up transport passing through the town. I should say it is especially dangerous for children to be playing about the footpath when vehicles have to pass each other at this narrow place. I add my plea to that of my hon. Friend that the Minister of Transport should give very sympathetic consideration to this improvement, even if he cannot agree to the start of a new scheme.
The Chancellor has intimated that there was still great pressure on capital investment last year. If I understood him aright, he is most sympathetic to anything that will relieve capital investment, and I know how the Parliamentary Secretary's Ministry has perhaps made the greatest sacrifice in the last seven years in the sphere of capital investment austerity. I hope that if the Government have any slack for which they can allow, his Ministry will receive early attention and that one of the places to which the hon. Gentleman will give attention will be this bottleneck which my hon. Friend has mentioned. At Falkirk there is also a narrow place on this traffic route but the spot with which this debate is concerned is important because it is on the way to Falkirk, Grangemouth, Kincardine Bridge and Stirling, and is on the way from the east to the west.
11.51 p.m.
The Parliamentary Secretary to the Ministry of Transport (Mr. Gurney Braithwaite): The hon. Member for West Lothian (Mr. J. Taylor) has put his case with such moderation that when he was speaking the thought crossed my mind that he might have gained access to my room and seen the notes of my reply, because he touched upon many of the points which I had intended to place before the House. He said that this scheme had been under consideration since 1938. That is perfectly true. It is an old problem which probably caused some discomfort and anxiety to the right hon. Gentleman the Member for East Stirling (Mr. Woodburn) as Secretary of State for Scotland during the six years when, no doubt, the same kind of stringency was placed on road work as is placed now. So there is no party point here.
I want to spend my time in talking about the present situation and in saying what I think is the practical course to adopt. High Street, Linlithgow, is on trunk road A.9, carrying through traffic from Edinburgh to Stirling. I was obliged to the hon. Member for West Lothian for the photographs which he passed across the Table and for his invitation to pay a visit to the site. Unlike many of the occasions on which I stand at this Box talking about road schemes on the Motion for the Adjournment and otherwise, I have not had to arm myself with information obtained from studying a map, for during the Recess I attended a conference in Stirling and passed through Linlithgow on my way from the airport. Admittedly it was during the hours of darkness when traffic was light, but I saw the narrowness of the street. I looked for that particularly because the hon. Member had been in touch with my Department.
It is also the main street of the town and is closely built up on each side. The width of the street is 28 feet, with a 17 ft. 6 in. carriageway at the narrowest point. I find that there have been 38 accidents in the past five years, involving nine persons injured and no deaths. The long-term solution to the problem—and the hon. Member realises how long-term it is—is a by-pass about four miles in length. An Order under Section 1 (2) of the Trunk Roads Act is under con-

2315
sideration but has not yet been made. The estimated cost of the scheme is over £500,000 and I fear that it will be many years before that work can foe carried out. Incidentally, there are objectors to the proposed layout.
Another plan is to widen High Street to 60 feet, with a 30 foot carriageway over a length of 380 yards from The Cross to the Swan Tavern, at an estimated cost of £74,052; with yet another alternative for a reduced length of 215 yards from The Cross to a point 50 yards east of Lion Well Wynd. The estimated cost of this reduced scheme is £31,126, of which £18,000 is for land and £5,400 for the demolition of property to which the hon. Member for West Lothian referred. I gather from the hon. Member that the problem of alternative accommodation would not be difficult. I understand that some 45 houses and 12 shops are involved. I feel that the Town Council should be able to arrange this, but there does not seem to me to be much point in demolishing property until such time as the road work can be carried out.
Unfortunately there are no funds available in the current year for any general programme of major improvements on trunk roads, but this scheme ranks high on the list of work to be carried out so soon as funds are available. I do not think we need to wait for that. My right hon. Friend wrote to the hon. Member for West Lothian on 10th November and had to couch his letter in very discouraging terms. I am not able to make any promises tonight as to when the work may be commenced, but I can say that we
2316
will carefully consider whether it is possible to begin the necessary acquisition of land this year for the Linlithgow scheme, so that when the time comes and there is, so to speak, a "green light" for major road improvements, we shall be able to start immediately.
There may be some difficulty over the inhabited property, and rehousing and demolition will be required. Demolition is, of course, part of the road work and cannot be embarked upon until the actual road scheme can be put in hand. These are obvious difficulties at the moment, but I would say to the hon. Member, because I never like Adjournment debates to end in a complete vacuum, that in spite of these obvious difficulties, we should like to see how far we can go, in consultation with the local authority, along the lines I have indicated, and to do it immediately.
Mr. J. Taylor: The existing highway is now due for repairs which will be carried out within a month. It might be worth while considering the cost of those repairs as useless expenditure if we are to have a widening scheme.
Mr. Braithwaite: I think that strengthens the case for consultation with the local authority on all aspects of the problem. I shall be glad at any time to discuss this matter in detail with the hon. Gentleman, and if he cares to bring officials of the local authority to the Ministry to discuss it, I shall be only too glad to do so.
Adjourned accordingly at Two Minutes to Twelve o'Clock.

  KENYA (BROADCASTING TO AFRICANS)
  KENYA (BROADCASTING TO AFRICANS)
  NORTHERN RHODESIA (AFRICAN SHOPPERS)
  NORTHERN RHODESIA (AFRICAN SHOPPERS)
  MALAYA EMERGENCY (HIGH COMMISSIONER'S STAFF)
  MALAYA EMERGENCY (HIGH COMMISSIONER'S STAFF)
  POSTAL FACILITIES, BRIGHTON
  POSTAL FACILITIES, BRIGHTON
  WIRELESS AND TELEVISION (DEVELOPMENT)
  WIRELESS AND TELEVISION (DEVELOPMENT)
CIVIL AVIATION
  Services to Cyprus (Applications)
  Services to Cyprus (Applications)
  British Airworthiness Certificate (United States Recognition)
  British Airworthiness Certificate (United States Recognition)
  AUSTRIAN PEACE TREATY
  AUSTRIAN PEACE TREATY
  KOREA (ARMISTICE NEGOTIATIONS)
  KOREA (ARMISTICE NEGOTIATIONS)
  ICELANDIC FISHERIES DISPUTE
  ICELANDIC FISHERIES DISPUTE
  U.N. STATUS OF REFUGEES CONVENTION (RATIFICATION)
  U.N. STATUS OF REFUGEES CONVENTION (RATIFICATION)
MINISTRY OF FOOD
  Sugar (Rationing Administration)
  Sugar (Rationing Administration)
  Meat Ration
  Meat Ration
  Bread (Price)
  Bread (Price)
  Non-Agenised Flour
  Non-Agenised Flour
  Wheat Supplies
  Wheat Supplies
  Sweets (Increased Production)
  Sweets (Increased Production)
  Harvest Rations
  Harvest Rations
AGRICULTURE
  Swine Fever (Statistics)
  Swine Fever (Statistics)
  Calf Certification, Kent (Arrears)
  Calf Certification, Kent (Arrears)
  Bird Damage
  Bird Damage
  Poultry Diseases
  Poultry Diseases
  Myxamatosis
  Myxamatosis
ROYAL NAVY
  Re-employed Officers
  Re-employed Officers
  Nuclear Energy (Propulsion Developments)
  Nuclear Energy (Propulsion Developments)
  LAND TAX REDEMPTION MONEY
  LAND TAX REDEMPTION MONEY
  HIGH COURT ACTIONS (GOVERNMENT DEPARTMENTS)
  HIGH COURT ACTIONS (GOVERNMENT DEPARTMENTS)
  SCHOOL PENCILS AND BOOKS, SCOTLAND (COST)
  SCHOOL PENCILS AND BOOKS, SCOTLAND (COST)

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
Several Lords—Took the Oath.
The Lord Marley—Sat first in Parliament after the death of his father.

MILFORD DOCKS BILL
2.36 p.m.
Read 3a, with the Amendments.
THE CHAIRMAN OF COMMITTEES (THE EARL OF DROGHEDA): My Lords, the promoters desire to make a small Amendment to this Bill. I can assure your Lordships that it is purely a drafting Amendment, and I beg to move that it be agreed to.
Moved, That the Amendment be agreed to.—(The Earl of Drogheda.)
On Question, Motion agreed to.
Bill passed and returned to the Commons.

BUSINESS OF THE HOUSE
THE EARL OF ONSLOW: My Lords, there is rather a long list of speakers for the debate to-day, and my noble friend the Leader of the House, who unfortunately is unable to be present at the moment, has asked me to say that it is thought best that we should sit through dinner this evening. But should it appear by 5.30 p.m. that the debate is likely to run much longer than we now expect, perhaps it would be for the convenience of the House if it were then ascertained, through the usual channels, whether that arrangement should be altered.

THE LONDON TELEPHONE DIRECTORY
2.39 p.m.
LORD O'HAGAN: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what steps they propose to take to deal with the growing size and unwieldiness of the London Telephone Directory.]
THE POSTMASTER GENERAL (EARL DE LA WARR): My Lords, I am most grateful to the noble Lord for asking this Question, because there is no doubt that the present London Telephone Directory is becoming increasingly unwieldy. Up to 1931 one volume only was necessary; since then it has grown to four. With the growth of the telephone service we should, if we left things as they are, soon need five volumes. There is, indeed, no reason why that should be the end of it, when we consider the number of people who are still without a telephone. I have been considering this problem for some time, and if it is not tackled now it will become more and more difficult in the future.
The main problem has been to devise a new basis for the directory which will be easily understood by the public. At the present moment, we have one large directory in four parts, covering a region which extends from Welwyn, in the North, to Reigate, in the South; and from Gravesend, in the East, to Uxbridge, in the West. This includes some districts which have little or no relationship with what you and I think of colloquially as London. We have looked at various alternatives, and have come to the conclusion that the best basis is to have a separate directory for what we call the London Postal Area. Quite briefly, this means the area where addresses include letters and numbers, such as S.W.3 and N.W.11 and so on. Outside that central area, there will be individual volumes for those parts of the Home Counties which are now in the London Telephone Book, and in which the name of the county forms part of the postal address—that is, there will be an Outer London (Surrey) Directory, an Outer London (Kent) Directory, an Outer London (Essex) Directory, an Outer London

55
(Herts and North Middlesex) Directory, and an Outer London (West Middlesex) Directory. The Directory for the London Postal Area will still be in four parts, but, of course, very much smaller than the present volumes, and very much easier to handle. We propose to make these changes as from January 1, 1954. Each subscriber will be given the directory in which his name appears, and any others that he asks for, free of charge. The London Postal Area Directory will be distributed to all business subscribers, without their having to apply for it, in the London fringe areas which are now to have a London County Directory.
On the whole, I believe that this arrangement will be generally welcomed by subscribers, but in a matter which concerns so many people some may well feel that they would have liked something different. I feel sure, however, that we shall receive their help and understanding when they realise the problems we have had to face, and the very real endeavour we have made to formulate a scheme that will be to the advantage of the service as a whole. We know that residential subscribers do not use the telephone directory very often—not nearly so often, in fact, as some people may think—and that many keep their own list of telephone numbers, as a matter of convenience. This helps not only them but us. But an efficient directory inquiry service is, of course, very important. We have been looking at this problem, too, and improvements will be introduced at the same time as the directory changes. Incidentally, noble Lords will be interested to know that, although this scheme has been considered on its merits, it will save well over £250,000 a year. I should add that the directory changes do not in the least affect the telephone service given, and subscribers who now dial from one part of London to another will continue to do so; nor are the present charges for calls and rentals being altered in any way. This is purely a question of the London Telephone Directory.
THE EARL OF LISTOWEL: My Lords, perhaps I may be allowed to congratulate the noble Earl and his Department on reducing the size of the London Telephone Directory. I find that the
56
present four volumes take up an enormous amount of room in my small flat, and I am sure that many other Londoners will be equally grateful. I wonder whether, in considering this problem, the noble Earl has also considered the possibility of reducing the number of volumes from four to, say, three. It seems to me that that is a step which might conceivably be taken in the future.
EARL DE LA WARR: My Lords, I thank the noble Earl for what he has said. I certainly have considered the reduction of the number of volumes from four to three. I confess that I was strongly in favour of this proposal, but I was persuaded—and I think rightly— that if we did that, with the growth of the telephone service, we might, in two or three years' time, find ourselves in the position of having to increase the number again. I feel that the change would be tiresome to the public, which has got used to the colours of the existing directories and the division A-D, E-K, L-R, S-Z, and, on the whole, I feel that it is better to retain the old way.
LORD STRABOLGI: May I ask the noble Earl a question arising out of his interesting statement? Would he state how many outer London directories there will be? What will be the position of a subscriber in an outer London directory district? Will he get all the outer London directories or only the London one, as well as his own? And what is to be the procedure?
EARL DE LA WARR: My Lords, I gave the names of five outer London areas, and that will be the number. What we are doing is to make an automatic distribution to business subscribers in all the outer areas, who will receive the Central London Directory without asking for it, and on request they can get all the other outer London directories. Residential subscribers in any of these areas can ask for and receive free of charge the directories of all the other areas. The noble Lord also asked me another question, and perhaps he will repeat it.
LORD STRABOLGI: I asked, what is the position of a subscriber in, say, Uxbridge. Will he get the other outer London directories, or only his own? Can he get the whole nine?
EARL DE LA WARR: Yes, my Lords, he can get all the London directories, on request. We are setting out the procedure in the next London Telephone Directory that is circulated, to help subscribers to see how to apply.
LORD BARNBY: I should like to ask the noble Earl a question with particular regard to the main London area directory. Doubtless his advisers have considered, before they came to a conclusion, that the New York-Manhattan telephone directory, which is in two volumes, must contain far more names than the four volumes of the London directory. It is difficult to see why the reduction in the number of volumes suggested by the noble Earl, Lord Listowel, cannot be carried out. I think that might be a convenience, and it appears to be possible in New York to make do with two volumes.
EARL DE LA WARR: My Lords, I am informed that actually Manhattan has its own directory. I know that there are different ways of doing this, but I am sure that most people, when they consider how cumbersome these volumes are, and how very large a volume it would make if we tried to do the whole thing in one, will prefer the smaller books. But it is really a matter of opinion.
LORD HAMPTON: My Lords, I should like to congratulate the noble Earl on what I consider a very necessary reform. May I ask him whether it is the intention to have copies of the Central London Directory, as it will be then, in all the kiosks in the outer London area? I think that would be necessary.
EARL DE LA WARR: My Lords, the answer is: certainly in the majority of kiosks, and I think, possibly in all, but particularly those in what I call the fringes.

ABERDEEN HARBOUR ORDER CONFIRMATION BILL
2.48 p.m.
Considered on Report (according to Order).

THE ECONOMIC SITUATION
2.49 p.m.
LORD PETHICK-LAWRENCE LORD PETHICK-LAWRENCE rose to call attention to the Economic Situation; and to move for Papers. The noble Lord said: My Lords, a few days ago I was talking to a lady who voted Conservative at the last General Election. She said to me something of this sort: "Mr. Butler has restored the solvency of the country and re-established its credit at home and abroad. Under his financial leadership our people have won through to a position in which he feels justified in an all-round reduction in taxation. Instead of thanking God for Mr. Butler, and praising the people for their courage and enterprise, why do the leaders of the Labour Party go about trying to undermine our new-found confidence by casting unworthy doubts upon the reality of the transformation? "I take those remarks as the text of my speech, and I think that your Lordships will see that to some extent I shall supply an answer in what I have to say to-day. I propose, first of all, to state the facts; after that I propose to examine the causal antecedents; and, finally, I propose to discuss the right policy for us to pursue in the future. Before I come to all that, however, there are two preliminary observations that I should like to make. One is to point out that Mr. Butler himself would not, I think, accept as true the rosy and complacent view of the matter taken by the lady I have mentioned. To do him only justice, he has never attempted to conceal the true facts. The other observation is this: that no one is entitled to form an opinion as to future policy unless he has tried to understand what has happened, and why it has happened.
Let me now come to the facts. It is my intention to give those facts correctly and objectively. I would ask your Lordships to believe that, should I fail in that, it will not be through conscious misrepresentation, but due to my own limitations; for the facts are not easy to come by. When I was a little boy and went to my first "prep" school I was accounted rather good at sums, and that reputation has clung to me during my life. But I am bound to confess that I have found the very abundance of the

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statistical fare supplied to us an embarrassment of riches which has been inclined to produce mental indigestion. However, I will do my best. The first fact is that in the course of the year there has been an increase in the gold and dollar reserves of the sterling area amounting in all to some £120 million, after taking into account the American aid to us of almost exactly that figure, and taking into account, also, the interest that we have to pay every year to America on the 1946 Loan of some £1,500 million. This figure of £120 million surplus is to be compared with a deficit of some £500 million in the previous year. So that there has been an improvement from one year to the other of no less than £600 million.
The second important fact is that on current account during the year the United Kingdom had a positive balance of the sum of £170 million, exclusive of American aid, with the rest of the world. That compares with a deficit of £400million in the previous year, and represents an improvement of something like £600 million. The third fact is that to-day the pound sterling stands, in exchange with the dollar, close to the upper limit of the gold points, and therefore the prospect of sterling holding its own may be regarded as quite satisfactory. These are extremely healthy facts, and they are all of the utmost importance. I say, quite unreservedly, that Mr. Butler and the people of this country are entitled to the highest congratulation. For without such recovery we should have been to-day in imminent peril of bankruptcy, if not of starvation. Nevertheless, before we give way to unrestricted satisfaction, we have to remember that these criteria are not the only ones by which to measure national prosperity. I am sure that everyone here recognises that a man's personal balance at the bank is not necessarily the only means of measuring his financial position; and what is true of an individual is equally true of a nation. Accordingly, we are entitled to, and must, apply other criteria before we can satisfy ourselves that this situation is thoroughly to our liking. Therefore I give a further list of facts which have also to be taken into account.
The outcome of last year's Budget was a shortfall of some £420 million, con-
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trasted with the estimate, so that the overall deficit, instead of being quite small, is probably over £450 million—that is, taking into account the under-the-line as well as the over-the-line figures. Next, the total industrial production of this country fell by some 3 per cent. during last year. This was the first year since 1945 that it had not shown an increase, and in most years a substantial increase. Moreover, as Mr. Butler had estimated that production would increase by some £250 million in the year, the deficit as against the estimate amounted to at least £300 million, and probably substantially more. I quote that particularly, because I remember at one time asking the noble Viscount, Lord Swinton, who was answering for the Government, what estimates he could give me for the following year. The noble Viscount said that he was not prepared to give any estimates; that the Government were shy of producing estimates, because they might be falsified. But he said that he would give me one estimate, which was that production would increase by £250 million. I can only say that he was unfortunate in his example of the one thing that the Government could prophesy, because on that certainly they have not been as successful as the noble Viscount hoped.
I come now to the next important fact, and it is one to which I would direct your Lordships' special attention, namely, the stocks of the country—I do not mean stocks and shares, but stocks in the sense of physical items of production and of use. Taking into account the stocks actually obtained, and those in the pipeline, there was a decline in stocks of some £100 million this year, as against an increase of no less than £450 million in the year before, a drop of £550 million between one year and the next. And that does not take into account the drop in fixed capital, which on a certain statement—and I will go further into that later—was something like £35 million. The next item is unemployment, which rose during the year from some 350,000 to 430,000, an increase of 80,000 in the course of the year. Finally, I come to the question of exports, where there has been not a considerable but a slight decrease in value, although by volume the total exports have fallen by no less than

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6 per cent., the rise in price having nearly, but not quite, covered the reduction in quantity. None of these second group facts is pleasant to contemplate, and I do not think I am exaggerating when I say that if the same trends were to continue unchecked into the future, they would seriously threaten the stability, and even the livelihood, of our people. I do not think this statement of facts will be seriously disputed, because I have taken them—I hope correctly—mainly from official publications.
I turn now to the second part of my speech, which is to be an analysis of the cause of the eight facts which I have enumerated. Here, of course, we are on much more debatable ground. Indiscriminate supporters of Mr. Butler are inclined to attribute all his success to his wise policy, and all his failures to malign chance. Equally indiscriminative critics are inclined to reverse the explanations. Mr. Butler himself, if I understand him rightly, claims a large, if not the whole, share of the credit for the pleasant facts, and argues that the unpalatable facts are to a great extent temporary and a measure of the success achieved, beyond his expectations, of his main objective. I do not find myself in agreement with any of these hypotheses. In my view, there are three main causes, not entirely mutually exclusive, of the good facts. These are: first, the drastic cuts in the volume of imports; secondly, the great change in our favour of the terms of trade; and, thirdly, the change in policy with regard to stockpiling, both by the Government and by individuals and companies.
As to the first point, the import outs, I do not think there is any real controversy. It was an essential though regrettable step which any Chancellor of the Exchequer would have been bound to adopt and put into practice. As to the second point, the favourable turn in the terms of trade—which probably accounted for no less than £330 million of improvement to us—this, in my view, was an international fact brought about by the lessening of demand in the world as a whole, notably, of course, by the United States of America who, in the previous period, or shortly before it, had spent vast sums on stockpiling. With regard to the lessening of demand for
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raw materials, I am quite willing to concede to Mr. Butler that the British slackening of demand was an ancillary factor in this fall.
Now as to the third point, the reduction of stockpiling, I think that is a matter which has not been fully considered by the great bulk of the people, particularly those outside the two Chambers of Parliament. I recommend anybody who wants to understand the facts accurately to read Command Paper 8803, the Preliminary Estimates of National income and Expenditure, 1948–52. There the facts are set out in considerable detail, and it will be seen that, whereas in the previous year—what is called 1951—the physical stocks of the Central Government, of companies and public corporations, and individual incomes, increased by no less than £465,000,000, in the year just ended they were reduced by £100,000,000. That appears on page 8 of the Command Paper; it is the item of £565,000,000 to which I referred earlier in my speech.
What I should like your Lordships to appreciate is that the main difference between 1951 and 1952 was that in 1951, a year when there was an immense demand for the country to be ready for all emergencies, and to be well stocked up in every important respect, the Government of the day spent great sums upon stockpiling. Owing partly to their providence in so doing, but also largely to the major change in the world situation, that stockpiling became unnecessary in the following year, and the incoming Government, though it found itself burdened down by the great drain of gold and dollars, found at the same time this very helpful condition of the stocks of the country. They decided, in view of that situation, to reverse the process. They did not make any large addition to the stocks taken as a whole, and they even allowed a reduction. Throughout the country individuals pursued the same course. Therefore, in one year we were turning gold into commodities; and in the next we were, to a large extent, reversing the process and turning commodities into gold. That may be a slight exaggeration in the second case, because we were not turning them into gold; but we were not adding to the stockpile—in fact, we were, to some extent, reducing it. That is a much truer representation of the facts

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than the one which is current in popular imagination.
I am quite willing to concede to Mr. Butler, and to the other advocates of dear money, that dear money played some part—though I do not think a part comparable with those of the other causes—is disinflation and in producing the satisfactory results of the first three facts of my catalogue. And I will add this: that because it is an old-fashioned policy which has been resurrected, no doubt it had some psychological effect on people who have long memories and who believe that substantial steps were being taken to resurrect the credit of this country. I concede all that to Mr. Butler and his advocates. I have dealt with this subject of dear money on many occasions in your Lordships' House and I have no intention of wearying your Lordships with a further long talk on it to-day. I will, however, say that, in my opinion, other methods and other remedies less deleterious to our economy could have been used to produce equally, or at any rate nearly equally, good results.
Dear money undoubtedly played a major part in turning back the tide of production, so that instead of increasing, as it had been during the whole post-war period up till then (and as Mr. Butler estimated it would continue to do in 1952), it actually declined, thereby creating unemployment and helping to create the Budgetary shortfall. I do not want to exaggerate: I am not saying that it was the whole cause; I know that there were other causes. I am, however, saying that it made a considerable contribution to these misfortunes. It also helped to reduce our exports by putting up the cost of manufacture and thereby to that extent pricing us out of the export markets. Moreover, it is to-day increasing the expenses of local authorities, and thereby contributing to the increase in rates which is taking place all over the country. I leave the matter there: I will not pursue it any further at the present time.
The main cause, however, of the Budgetary shortfall I would attribute partly to the fall in invisible items, notably due to the loss of the Persian oilfields, and partly to over-optimistic estimating. With regard to the latter point, I hasten to add that I am not blaming Mr. Butler and the Treasury for wrong estimates because,
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obviously, the many and grave international upheavals, and the uncertainty of the effects of the new financial policy, were bound to have results that it would have been difficult for anyone entirely to foresee. I am now in a position to sum up my conclusions with regard to the causes in the past by saying that in the year just ended there has been a very important improvement in certain respects and a serious setback in others. Changing world conditions have played a much larger part in both of these than most people recognise. Dear money may have helped to solve some problems, but it has created serious new ones in their place.
I turn now to the future. Here every economist and financier, including Mr. Butler and all of us who are taking part in this debate to-day, are confronted with a question mark. The economy of this country is not self-contained: it depends on the world as a whole. Some turn in the international kaleidoscope may at any moment throw our estimates into confusion. We may be on the threshold of an end to the Korean war and also of the cold war with the Soviet Union. The noble Lord, Lord Macpherson of Drumochter, has his name down to a Motion on the Paper which contains the expression "if peace 'breaks out'. "It may, my Lords. But, equally, it may not. Things may even—though we all fervently hope not—grow worse. A recession may start on the other side of the Atlantic, causing slump and unemployment in America, which may be exported to this country. We have to take now the action that seems best in the light of the facts and expectations that we have to-day. But before the year is out, we may find ourselves required to make great changes because of the changes that have taken place in the political, financial and economic scene of the world.
In the light of this fact, Mr. Butler's Budget seems to me to be somewhat inflationary. If I understand him aright, this is a risk which he is prepared to run, partly because his policy of dear money is deflationary and partly because he anticipates other deflationary tendencies. It seems to me rather a leap in the dark, but in certain eventualities it may be justified by the results. On the other hand, if other eventualities occur, it may give us a very bad bump. Personally, whilst I would agree that a home-originated recession can be and should

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be met by a measure of inflation, I am very doubtful whether a modicum of inflation here is the correct antidote to a recession imported from across the water. It might not merely fail to redress the balance; it might do a great amount of harm.
I turn now to other aspects of Mr. Butler's Budget. I do not propose to-day to discuss the distribution of the tax reliefs. Possibly some other speakers may care to do so. I will, however, say this: that I am heartily glad—and I think the view is shared by my noble friends on these Benches—that what is known as E.P.L. is to go. I am always opposed to those 100 per cent. taxes, which, by taking away all incentive to economy, promote extravagance and abuses of all kinds. It would appear to me that Mr. Butler, having thrown over in his Budget last year the rash promises of the noble Lord, Lord Woolton, has plucked up courage to throw over this year those of his own leader in another place. The exceptional qualities of the Prime Minister are known to most of us and we are all, on whichever side of the House we sit, appreciative of the honour recently conferred upon him by the Sovereign; but in spite of his many endearing traits, he can at times be an enfant terrible to his colleagues.
Before sitting down, I want to say one word more, and that will be about convertibility. Having been born in the third quarter of the nineteenth century. I have a nostalgia for convertible currencies, free travel and free trade; but I am afraid that none of these fits into the modern world as it is constituted at present. In the days of the nineteenth century, when we were the great creditor nation of the world, we opened our ports wide to the commerce of the world. The United States takes an entirely different view. Her Legislature is dominated by sellers rather than buyers, and by manufacturers rather than consumers. Senator Taft is alleged to have said recently, when confronted with our slogan, "Trade, not aid, "that he believed in the last two words but not in the first. We cannot dictate to our great and friendly neighbour her trade policy, and, while we acknowledge her great generosity to ourselves and our sister nations of Europe, we cannot count upon this aid from year to year. We cannot even
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ensure, as we saw in the recent case, that one of our firms submitting the lowest tender will get that tender accepted.
Those being the facts, I beg Her Majesty's Government not to embark on experiments of greater convertibility while the storms of economic instability are still raging, and while our own gallant ship is not fully recovered from the battering it received at a time when we in this country were fighting alone for the freedom of the world. I beg to move for Papers.
3.24 p.m.
VISCOUNT SAMUEL: My Lords, I do not propose to pursue the controversy between the noble Lord who has just spoken and the Conservative lady with whom he has been arguing, a controversy which to-day he has carried a stage further. Since I am not speaking on behalf either of the Government From Bench or of the official Opposition, I am exempt from any duty of making an analytical and statistical survey of the Budget, its causes and its effects, such as the noble Lord has undertaken to-day out of the fullness of a lifetime of knowledge of these subjects. I propose to deal with a few outstanding points, and with due regard to brevity. In spite of the arguments and the illustrations of the noble Lord, Lord Pethick-Lawrence, on the whole, viewing the subject with a serenely impartial eye, I am inclined to agree with the Conservative lady rather than with him as to the Budget. It seems to me, in the main, and in the hard circumstances of the time, an excellent Budget. There are no new taxes; some old taxes have been reduced; the high tide of taxation is on the turn. But this Budget is only a beginning. It is not to be accepted with unlimited enthusiasm. The boons that are conferred are substantial in themselves but relatively small. There have been important reliefs to industry in various particulars which should be an encouragement to production and to the export trade.
With regard to the standard rate of income tax, which must be the central feature of any Budget—for income tax alone brings in now about £2,000 million a year—the figure of 9s. 6d. in the pound, which has been maintained for so many years after the end of the war, is a monstrous figure; and the reduction of 6d., though it is very welcome, is little

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more than what an Irish orator once called a "fleabite in the ocean." The cost of it, out of the £2,000 million, is only, the Chancellor of the Exchequer tells us, about £134 million. A 9s. income tax leaves no margin for any possible emergency that may arise. The tax cannot be raised very appreciably above that figure. During the war the nation accepted such taxation. It said to the Government, "Tax us as much as you like, only save the country"; and no matter how high the income tax was put, no matter how high the surtax was raised, and all the other and many indirect taxations, the country accepted it as a matter of duty. But now I think public opinion is different: it is becoming impatient at this very high level of taxation in times of peace. The Chancellor of the Exchequer himself, in his Budget speech, used these words (OFFICIAL REPORT, Commons, Vol. 514 (No. 87). col. 51):
"No one would deny that the burden of taxation to-day is too heavy, both on industry and on individuals, and that it drags down initiative and enterprise."
Those are very significant words, coming from a Chancellor of the Exchequer. He said:
"…the burden…is too heavy, both on industry and on individuals, and that it drags down initiative and enterprise."
That must be a great evil to our national welfare.
The Chancellor of the Exchequer went on to mention one fact to which I have referred year after year, whenever I have had an opportunity of speaking on these questions:
"In recent years high taxation has been used as the instrument for warding off inflation."
There, I think, and I have always held, that our financial policy has been on wrong lines. It has been misled by many of the economists. The policy of what is called "mopping up" the surplus spending power creates as much inflation as it prevents. It is reflected in prices. It tends to raise the cost of living, and thereby causes increases in costs of production, through higher wages, without benefit to the workers, and so reduces the value of the pound. The money which is taken by the State in this way is not sterilised. It is not, in fact, withdrawn from expendi-
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ture among the community, because it goes to the Government and it is spent, maybe on defence, maybe on social welfare. It may be advisable expenditure or not advisable, necessary or not; but in the long run it uses up materials and labour, and whether it is done by the State or by the multitude of the people the effect, so far, is in itself inflationary. And when Mr. Butler spoke of "the instrument for warding off inflation," he added, "and what a blunt instrument it is!" The Exchequer is now beginning, to realise that that policy is wrong. At a time of extreme emergency, and for a very short period, there may be no alternative; but in the long run there are many alternatives.
For my own part, I have never believed that high taxation and high prices can conduce to the welfare of the individual or to the prosperity of the nation. The right course is to handle this matter through a monetary policy—control of credits and the like; through restriction of imports, if again there arises a time of extreme emergency, when immediate action is needed, and there is no alternative to that course; but, above all, through persuading the nation to undertake voluntary savings. That, in the long run, is the best of all the methods of combating inflation. I do not see the noble Lord, Lord Mackintosh, in his place today. He has been for ten years Chairman of the National Savings Committee. I think that the House and the country owe a great debt of gratitude to him and to his colleagues for the work which they have done and which has not received nearly sufficient recognition. It has been said, quite rightly, that the pun is the lowest form of humour, and that among puns the play upon names is the worst. Therefore nothing would induce me to suggest to your Lordships who might be thought the most fitting one among us to be Chairman of a Committee which is appealing to the nation to put by money for a rainy day. But I will say this: that the noble Lord, Lord Mackintosh, and his colleagues have achieved great results.
The present total of savings is no less than £6,000 million, which has been achieved largely through the work of 170,000 savings groups, having a total membership of nearly 7,000,000. That is a massive achievement, and one which as much, perhaps, as any other single

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cause, has helped to save the situation so far as the stability of the pound sterling is concerned. For many years past there has been a hard battle of the pound—it suffered a great defeat with devaluation in 1949; but now, while I will not say that the battle of the pound has been won, certainly it is being won; and there is a better prospect than there has been for many a long year past of its becoming as secure and stable as in the days of old. Let me turn from the Budget and currency to say a few words with regard to exports.
LORD PAKENHAM: Before the noble Viscount passes to that topic, can he give us a broad idea as to how to reduce taxation?
VISCOUNT SAMUEL: By economies. I am coming to that in connection with defence a little later, but mainly by economies of one kind or another. And one hopes there will be a more buoyant revenue before long, if the world becomes more at peace and if the effects of the large new plants that are now being erected are felt and export is on a larger scale. I am not going to suggest any sweeping, particular economies in various points. I always rather regret that the noble Lord and his colleagues in the Labour Party, whenever anybody presses them for a reduction in taxation, say "What do you propose?" I certainly do not propose groundnuts schemes in Tanganyika or poultry farms in Gambia. If the noble Lord challenges me I would say that I was not proposing to use those particular means.
LORD PAKENHAM: I thought the noble Viscount said that the pun is the lowest form of humour.
VISCOUNT SAMUEL: I do not see any objection to that from the point of view of humour. I am sorry that the noble Lord should be so sensitive—no offence was meant.
With regard to exports, it is still not realised in many quarters that the encouragement of exports must involve the welcoming of imports. Some of my noble friends and others outside this House still will not realise that what is one man's export is another man's import, and that every cargo of goods that puts out to sea is an export when it leaves and an import when it arrives. One cannot stop
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importing and increase exporting. A lady acquaintance of mine said not long ago, when we were discussing the subject of matrimony in general, that her view was that every woman ought to marry, and no man. Well, that cannot be done; similarly you cannot have an export trade without an import trade.
The noble Lord who has just spoken said in the course of his speech that our difficulty in that regard arises largely from the protectionist spirit in the United States, and he very properly pointed out the disadvantages of that policy as affecting our own economy. But I think I ought to draw the attention of your Lordships to a remarkable statement which appeared in The Times two or three days ago, quoting the introductory words of a Proclamation issued by President Eisenhower to his countrymen. It is of great importance, and it reads as follows:
"President Eisenhower yesterday proclaimed the week beginning May 17 as 'World Trade Week'."
This was the introduction to the proclamation:
"Whereas it is the policy of this Government to foster mutual understanding and friendship among nations; and whereas world trade, freely conducted by private enterprise, increases material well-being and develops friendly intercourse among free peoples; and whereas international trade among the nations of the free world adds to the economic strength upon which their common defence is based; and whereas increased international exchange of goods, services, and capital promises better economic utilisation of the world's resources and higher standards of living; and whereas expanded world trade advances the ideal of unity among all mankind and strengthens the foundation for lasting peace and prosperity…"—
and there, I am sorry to say, the report ends in a series of dots. It does not go on to say how all this is to be achieved. But, at all events, there is a marked contrast between that, as a statement of policy from the head of the United States Government and of a Republican Party Administration, and anything that has come from the other side of the Atlantic for more than a generation past.
As the noble Lord mentioned, it is true that recently there has been in Seattle a test case that has attracted a good deal of public attention. It related to a contract for electrical equipment, by which 1,000,000 dollars could be saved if the corporation concerned got its transformers from England instead of from America. The matter is not yet

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decided; it is still under consideration. But the feeling here is, of course, that, in the interests of the economy of the world and in pursuance of the admirable principles laid down by President Eisenhower, it would be right for that contract to be given to the British company.
I do not know whether the noble Lord, Lord Balfour of Inchrye, who, I see, is going to speak later in the debate, will deal with this matter. I shall be very interested to know whether he thinks that the town of Seattle ought to accept the British offer or ought to adhere to the principle of "Buy American." Whichever is the view he takes to-day, I should like to know whether he would accept the same principle in the converse case. Supposing that in this country there were a municipal corporation which could make a saving of £250,000 by accepting a contract from America, ought it to accept it or ought it to be exhorted to "Buy British"? The noble Lord and I used to cross swords in another place twenty years ago when that was a leading national issue, and at that time I resigned from the Government of the day, together with all the representatives of the Liberal Party, because that Government had determined to introduce for the first time in the modern world an all-round protective tariff in this country, together with a protectionist barrier around the whole of the Colonial Empire. We resigned on that. I thought then, I have thought ever since, and I think to-day, that that action was right. But it is interesting to see that the world is moving in our direction, and now even from a Republican President of the United States we have those principles proclaimed in the clearest and most emphatic terms.
Within the past fortnight we have had in this House three successive debates that have covered the main issues of national and international policy. On April 15 we had a debate on Defence, opened by the noble and gallant Earl, the Minister of Defence. On April 23 we had a debate on foreign policy, and to-day we have this discussion on economic policy. All three are connected and cannot be separated by any rigid line, for the economic situation clearly depends very largely upon what we do in matters of defence, and defence depends wholly
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upon the course of international policy. When saying that, I am sure your Lordships would wish me at this moment to express our deep concern that the Secretary of State for Foreign Affairs is at present laid aside by illness, and our anxiety that that illness has not been taking a wholly satisfactory course. Most earnestly do we hope from our hearts that his recovery will be speedy and complete.
In these days momentous events are taking shape which must affect our whole economic situation. They began with the sudden change of tone and method in Russia, by the release of the fifteen doctors who had been sentenced on preposterous accusations, and, even more significant than that release, by the formal repudiation by the present leaders in the Kremlin of the methods of trial which had secured conviction in that case and, therefore, presumably, in other similar cases in Russia in recent years. That repudiation and that condemnation show, to my mind, that we have there new men of great courage, and it looks as though they are prepared to discard the deadly doctrine that the end justifies the means, which must be the destruction of Communism as it has been the destruction of every cause, political or religious, which has embraced it in the course of history.
President Eisenhower seized his opportunity with admirable promptitude. He delivered that great oration, wise in substance and magnificent in presentation, which has been acclaimed all over the world. And another significant thing has happened: that oration has been printed in full and broadcast to all the Russian people. That is the first time that the deadly secretiveness has been cast aside in that country. We have had now a Russian reply, semi-official but nevertheless authoritative, which shows a marked change from all previous communications, when one takes into account not only its contents but its tone. That has been received here and throughout the world with relief and hope. Let not the new and hopeful initiative be spoilt, the impetus dissipated, by interminable bargainings on matters of detail. Let East and West come quickly to terms on the main issues outstanding, shake themselves free from this long nightmare and step out together into the light of day.
3.47 p.m.
THE PAYMASTER GENERAL (LORD CHERWELL): My Lords, it is customary at this time of the year, after the publication of the Economic Survey and the Budget proposals, for this House to discuss the economic situation. Every year, I think, between 1946 and 1951, I rashly took it upon myself to open this debate. The House will be relieved that last year and this year the task has fallen on the more capable shoulders of the noble Lord, Lord Pethick-Lawrence. I am sure that all who listened to his extremely interesting and balanced speech must have been grateful to him for putting the story before us and giving us an opportunity of discussing it. I think that we on this side of the House, and certainly even some noble Lords on the other side, must have echoed his nostalgic reminiscences and his desire to return to the situation as it used to be when he and I were young.
The House, I think, will also agree that it is a good thing to link with the general economic debate the special aspect brought out by Lord Macpherson's Motion. Couched in the terms in which he has tabled it, it is, perhaps, somewhat narrow, though we may hope it is especially relevant on account of recent events, as the noble Viscount, Lord Samuel, pointed out. The fact is, of course, that many of the problems which he has mentioned would arise not only in the very happy event of peace "breaking out" as he calls it; many very similar difficulties would beset us in the unhappy event of a recession in America. The real question, it seems to me, in its general form, is whether the Government are making plans to cope with a sudden change in economic conditions brought about by changes outside our control. I think that Lord Macpherson's point is only one special case of this. Not yet having heard his speech, I will say no more than that the Government are acutely aware of the existence of these problems and attach the greatest importance to them. There is no denying that they raise very difficult questions, and for some time now we have been making a special study of them.
I am always pleased to hear the noble Viscount, Lord Samuel, speak, especially from that Bench which is so near to Socialist Lords. To hear a whiff of realism introduced from his corner is
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always agreeable. I cannot help sometimes thinking of the noble Viscount as a sort of political baby-sitter, seeing that noble Lords on the neighbouring Benches do not burn their tongues on half-baked theories. He may even perhaps nurse them to political puberty and convert them ultimately, by his own less arid creed, to the views we hold on this side of the House. I am sure we all sympathise and agree with his desire to reduce expenditure and taxation. We are doing our best, and always shall do our best, to keep public expenditure to a minimum; but, of course, there is no denying that only major changes of policy can effect a major reduction of public expenditure. I hope he may be right and it may he possible to make such changes in a voluntary way. I am sure we shall all weigh most carefully what he has said. I will not enter into the very complicated argument about inflation, for that would take an economics and philosophy seminar most of one term to resolve; but it is an interesting topic, and if anyone wanted to go into that academic aspect of things I am certain it would be very rewarding.
I am sure the whole House will rejoice—and the noble Lord, Lord Pethick-Lawrence, led the way in this—in the amazing improvement in the country's economic position during the last year. To realise the real extent of the change, it is necessary to recall the position eighteen months ago. It was only on taking office that we discovered to our surprise, and I may say horror, what an appalling state of affairs confronted us. Who would have thought that a Government whose gold and dollar reserves at the time of the election campaign were flowing out at the rate of something like 10 per cent. per month, would not have thought it necessary or relevant to mention this vital fact to the electorate? The only warning given was in a speech at the Mansion House on October 3, in which the loss in the third quarter of the year was minimised. It was due, we were told, to "significant temporary and seasonal factors." The then Chancellor of the Exchequer judged, admittedly "only in the roughest terms," that the "deficit due to underlying influences would have been rather less than half the figures announced. "This was "not nearly so serious as the third quarter

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dollar deficit would imply." In fact, in the following quarter the deficit was over 50 per cent, larger, not half as large. Either the Chancellor was unduly optimistic or singularly ill-informed.
As soon as we took office we realised that, unless emergency action was taken, in a very few months our reserves would reach a point at which confidence in the future of sterling would evaporate, a run on the pound would occur and we should completely lose control of events. It is not really relevant to argue that we had stocks and not gold, because the financial world looks at the gold reserves and not at the stock position; and we really might have reached a most disastrous state if we had not been enabled to stay the outflow of the gold and dollar reserves. That was the heritage—I may say "mess"—which was left us by the previous Government. Immediate action had to be taken. Clearly this would not be very popular. To redress the balance when you are spending much more than you are earning is always unpleasant. I cannot refrain from remarking that it was a great pity that this action was not taken before. If the measures taken by our Chancellor of the Exchequer when we took office had been applied three months earlier, our reserves would probably be a good many hundred million dollars higher than they are. Still, it is perhaps too optimistic to expect a Socialist Government, having discovered a disastrous economic situation and decided on a General Election, to take such unpopular measures and to expose publicly the condition of the country's finances while the electorate were still considering which way to vote.
Well, measures were taken in time, but only just in time. Imports were cut. Commonwealth Finance Ministers were invited to a conference at which they agreed on the need to take painful steps in their own countries in order to safeguard the sterling area's position. The bank rate was raised. Reluctantly, some delay in completing the defence programme was accepted, and food subsidies were reduced. The state of our finances began to improve. The stern measures revived the world's confidence in sterling. It may be that that was a psychological effect, as the noble Lord, Lord Pethick-Lawrence, said. But there is no doubt
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that to-day the transferable sterling rate, which had dropped to 2.35 dollars to the pound, is about 2.76 dollars, very nearly the normal rate of 2.80.
The import cuts, which of course could not take effect for some months, began to improve the trade balance. In the second half of 1952 even the visible trade deficit had almost disappeared, a situation unprecedented in recent years. The O.E.E.C. countries showed sympathetic understanding of the position and refrained from attempting to impose counter-restrictions, so that towards the middle of the year we were able to begin to draw down the huge debit which had been run up with Europe. Though we still owe some £200 million to O.E.E.C., we have been able recently to earn a moderate surplus and have felt able to go some way towards liberalising our trade with these neighbouring countries. Partly as a result of our cuts in imports and partly as a result of changes in the world situation, the terms of trade began to move in our favour. Raw materials became cheaper, and, partly because of this, but mainly because of the reduction in volume, the cost of our imports fell from nearly £3,500 million in the year 1951 to nearly £2,930 million in 1952.
I think we are in fair agreement as regards the facts. The noble Lord, Lord Pethick-Lawrence, has endeavoured to explore to what extent these changes, which have had such a heartening effect, are due to purposeful Government intervention. He was by no means unfair on this, but I think we can claim rather more credit than he gives us. In the first place, the decision not to go on building up Government stocks at the same rate as in 1951 was an act of the Government which made a difference of many millions to our trade balance. To this we must add the calculated result of raising the bank rate. Clearly, this made it less attractive to hold large volumes of stock and probably helped to reduce the inventory volume in private hands. No one can call that fortuitous. Again, we had the direct decisions to reduce imports for consumption. These import cuts made a large difference to our balance of payments, and no one can deny that the Government were responsible for that. Then we had the sterling area import reductions, which were essential if the dollar gap was to be closed. Naturally

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the United Kingdom Government could not impose these, or even recommend them specifically; but no one can deny that the Government's action in calling the Finance Ministers of the Commonwealth together to discuss the deplorable situation had something to do with the very useful decisions taken in the various Commonwealth Parliaments. If they have resulted in a reduction of United Kingdom exports to some of the Commonwealth countries, we may regret it, but we have no right to complain.
In somewhat milder terms than some of our critics, the noble Lord, Lord Pethick-Lawrence, has endeavoured to show that much of the improvement in our position is due to an improvement in the terms of trade, and therefore may be regarded partly as fortuitous. Naturally, we recognise the importance of this factor and admit that conditions abroad play a large part in deciding at what price we can get our imports compared with the price we can charge for our exports. In the days when the terms of trade were getting worse, the Socialists always endeavoured to represent them as an act of God. I sometimes ventured to doubt whether this was altogether true. Some factors, of course, cannot be governed by Whitehall. But, like the noble Lord, Lord Pethick-Lawrence, I still have some belief in the old law of supply and demand. And when our imports were cut I cannot imagine that this did not have some effect in reducing prices.
LORD PETHICK-LAWRENCE: I said that.
LORD CHERWELL: I agree. The noble Lord has been much milder than some of our critics in his description of events. Whoever is to be praised or blamed, no one can deny that the balance of payments has greatly improved. As Lord Pethick-Lawrence said, the gold and dollar reserves during the last twelve months have gone up by 466million dollars, despite our having had to pay 181 million dollars in December, partly by way of interest and partly as repayment on the dollar loans made to the previous Government As the noble Lord pointed out, the balance of payments has risen from £402 million against us to £170 million on the right side. Great play has been made—not in this House—with the fact that in some published figures
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American defence aid was reckoned in the balance of payments. I have not, therefore, taken credit for it in the figures I have used. But I feel it is a little childish to think that a book-keeping figure like that can affect realities. Certainly it is not very gracious of the Socialist Party, whose balance of payments during their years in office was on the average (apart from 1950) £250 million a year on the wrong side of the ledger, to shake their heads and look glum simply because in some table or other £120 million of defence aid was added to the £170 million I have already mentioned.
The noble Lord, Lord Pethick-Lawrence, gave the impression that the improvement in our position had been achieved partly by running down stocks. The whole question of stocks is much more complicated arid difficult than is sometimes realised. As a matter of fact, so far as stocks in this country are concerned, there is no truth in the suggestion—and I think the noble Lord, Lord Pethick-Lawrence, admitted that. The volume of stocks to-day is much the same as when we took office. True, there are rather fewer stocks abroad and on the sea at any given time—it may be £100 million worth—but this is simply a result of the reduced volume of our imports. In any event, this is negligible compared to the total of stocks and work in progress, which is of the order of £7,000 million.
I do not know how many noble Lords realise how large this quantity is. It consists in the main of goods in process of being turned from raw materials to finished products. When people talk glibly of running down or building up stocks, it is well to remember that a change of plus or minus 1 per cent. may amount to £140 million, and nobody can claim to estimate the stocks with any accuracy. The fact is that stocks were being built up at a rate of £400 million to £500 million a year in 1951 and that we have not continued to build them up. They have reached a sufficiently high figure. We have, it is true, £100 million less afloat, so that an additional £500million of goods became available for other purposes in 1952. But that does not mean that we have run down our stocks in hand. The noble Lord, Lord Pethick-Lawrence, is good at sums, but

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so are other people. I wish to make it plain that you must not confuse the differential coefficient with the variable. The rate of build-up has gone to zero, but the amount of stocks has remained.
LORD PETHICK-LAWRENCE: As I think the noble Lord is rather criticising what I said, I should like to make my point perfectly clear. I did not say that we had run down stocks, except to the amount of £100 million, which I believe is correct. I did not criticise the Government for not increasing stocks, because I said that the world situation had changed, and they might well be justified in that point of view. What I did say was that when you are comparing the finances of one year with another, you are entitled to take into consideration the fact that whereas in 1951 we spent, with general approval, several hundred million pounds in building up stocks, it was no longer necessary to do that in 1952.
LORD CHERWELL: I am glad to hear the noble Lord make the matter so clear, but many of his colleagues outside this House have certainly taken the opposite view.
The noble Lord, quite naturally, is disturbed because national output in 1952 was a few per cent. down on 1951. It depends how you measure that, of course; I do not make it 3 per cent., but something more like 1 per cent., if all goods and services are taken into account. But naturally we regret this as much as he does. However, I should point out that it was higher than in any Socialist year before 1951. The main reasons why it was down are obvious. In their last two years of office the Socialist Government were so busy scrapping about steel nationalisation that they ignored the shortage of steel scrap that was developing. When there is a shortage of steel, all the vast engineering industries are hit, and I think it remarkable, in the circumstances, that no more damage was done. The other great shortfall was in consumer goods, especially textiles. When at the beginning of the Korean war the United States, and later the United Kingdom, went into the market, prices of wool and cotton rose, and so in consequence did the price of textiles. The panic buying which had set in when the war in Korea broke out gave way to sales resistance. And this natural reaction
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was magnified by Dr. Dalton's crusade advising all housewives to cease buying. These, I think, are the two main factors which reduced production in 1952.
The fact that the Chancellor's estimates for last year's revenue were not fulfilled is in the main a natural result of this fall in production. Taxes on profits and income tax were below the forecast figure, and Customs and Excise were down. There were one or two minor items, such as death duties, which yielded £23 million less than had been anticipated. Part of this was due undoubtedly to the lower value of securities on the Stock Exchange owing to the higher bank rate. But it is a fact that there were fewer deaths, perhaps because life is more worth living under a Conservative Government. Incidentally, it is rather amusing to think that the Socialists, who always insist that we put the interests of the capitalists first, should complain about this fall in Stock Exchange values. During their régime of planned inflation they used to boast of the high value of stocks and shares on the Stock Exchange, and claim that it was due to the confidence felt by finance in Socialist economics. That there was no such confidence was painfully brought home to them when they launched out into convertibility.
We have been challenged, not so much here as outside, about unemployment. It is quite true that early last year rising unemployment in the textile trade in Lancashire caused some anxiety. This unemployment was due partly to the aftermath of the Dalton crusade, partly to the high cost of textile raw materials in the previous year. As noble Lords know, the Government took immediate action. Orders for the Services were placed before the goods were really required, and some £20 million worth of textiles were ordered. In addition, the purchase tax was reduced by a quarter, and I am sure we are all pleased to note that the position has now eased considerably.
But it should be observed that though there are black spots in various regions, unemployment on the whole is less than 2 per cent. In fact, during our period of office the percentage of unemployment has been little different from the average during the Socialist régime from 1946 onward—at most only a small fraction of 1 per cent. of the labour force. And, at any rate, this Government have at no

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time let unemployment run up to some 2½ as the Socialist Government did in February, 1947, when one of their Ministers managed, despite repeated warnings, to let the country run out of coal.
The noble Lord, Lord Pethick-Lawrence, was disturbed, quite properly, by the fall in the volume of exports. Naturally, we all deplore this. But I might point out that the value of our non-sterling exports has been well maintained. The fall is almost entirely in the sterling area. It is a fall from a very high level which could not possibly have continued, for it was based on the inflated incomes enjoyed by many primary producers at the height of the price boom which followed the Korean war. Moreover, the Finance Ministers' Conference had agreed that Commonwealth countries should endeavour to reduce imports, and it was naturally difficult for some of them to discriminate in favour of sterling and against dollar imports. They could hardly have balanced their accounts without some reduction in imports from Britain. Anyhow, export prices went up by 5 per cent., so that the fall was partly compensated.
Then there is the question of investment. Here again, it is difficult to get an exact measure for investment. All sorts of unsuspected difficulties in definition arise—for instance, should the increased value of stocks in hand when prices rise be counted as investment, and vice versa? There are all sorts of forms of investment, and it is difficult to draw the line between non-productive and productive investment, about which we are mainly concerned. In 1952 we spent £625 million in investment in manufacturing industry, as against £585 million in 1951. It is quite true that prices rose to an even greater extent, so that the actual volume was no higher—perhaps even a little down. But, on the other hand, we built 240,000 houses in 1952, as against 195,000 in 1951, which I do not think the Opposition will condemn, even if they do not approve. Again, our balance of payments, as has been mentioned, improved by £570 million. That is also a form of investment and, in a sense, the most profitable form. So I do not think there is much to complain about on the score of investment. On the other hand, we fully
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realise the importance of improving our productive capacity and, indeed, many aspects of the Budget are calculated to achieve this end.
I have read carefully the ebullitions of many Opposition economic pundits outside this House about the Budget. I even forced myself to look at the television screen when former Chancellor of the Exchequer explained to the public with such amiable condescension his objections to this year's Budget. What has struck me is how little criticism there has been about the fundamental economic premise of the Budget—namely, that production should be stimulated to some extent by an easing of the burdens upon the nation. The noble Lord, Lord Pethick-Lawrence, himself agreed that this might be the right course. Of course, as he said, and as the noble Viscount, Lord Samuel, mentioned, international events may alter all our forecasts. The whole of the future can be judged only in the light of these happenings abroad.
I cannot altogether agree with the noble Lord, Lord Pethick-Lawrence, who, I think, feels that the Budget may be too inflationary. He is probably on the Conservative wing of his Party, if I may use that adjective without offence. Another leading Socialist has implied that the Budget is too deflationary; but as his opinions tend to oscillate somewhat violently from Right to Left, and as he seems to be in one of his Left-wing phases, I will not quote him against the noble Lord. But the word "inflationary" may have various meanings. Nobody would like to start on a motor-journey unless the tyres had been inflated to the correct pressure. On the other hand, no one would like to go up in a balloon which is inflated until it bursts. It is quite true that the degree of inflation or deflation at which we should aim is a vital aspect of economic strategy, and the whole question is whether the Chancellor's judgment in this matter has been right. My difficulty about the plea that the Budget is too soft is this. Socialist critics have complained that we are already suffering from a certain degree of unemployment, open and concealed. A tougher Budget would have created more unemployment. No doubt that is one way of solving financial problems, but we Conservatives do not believe in it We do not think it right to reduce

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imports by making people destitute so that they cannot buy. We are too well aware of the misery and despair caused by unemployment even to consider such a method of attacking the problem.
But if these arguments do not carry conviction, I would point out that, quite apart from the moral aspect, unemployment is economically wasteful. We believe that there is scope for increasing production and productivity. We believe that it is possible to expand our economy. We do not believe that the right solution is to throw up the sponge and cut down the standard of living of the people. I think in that we have the approval of the noble Viscount, Lord Samuel. We recognise, of course, the difficulty of ensuring the optimum level of output—of ensuring as high a level of employment and output as possible without jeopardising our balance of payments, without causing prices to rise and without innumerable controls and resulting bottlenecks. These things are not easy, and the Socialists' endeavours to strike a balance were certainly not uniformly successful during their term of office in preventing periodic crises.
All these questions were matters for anxious consideration by the Chancellor. As I have said, there has been singularly little criticism of the conclusion he reached. He hopes, and surely we must all hope, that production will rise sufficiently to meet the reliefs he has given in the years ahead. When we are dealing with figures measured in thousands of millions, and have reserves of gold and dollars measured in hundreds of millions of pounds, of course nobody can foretell the future. We agree entirely that the situation must be watched carefully, and that we must be prepared to take emergency action should events make this necessary. But I hope that the House will agree, as I think the country does, that the time has come to take a somewhat more optimistic view of the situation and not to play too much for safety, with the certainty of increasing unemployment and depressing the standard of life of the people. Unkind people might say that this difficult economic question is too recondite to gain or lose votes, and that it is for that reason that the Opposition have not bothered to criticise this particular aspect of the Budget. I prefer,
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as usual, to take the charitable view. My belief is that the reason they have not given tongue is that they consider the Chancellor's judgment on how much remission should be allowed is roughly correct.
Not only have Opposition speakers accepted the fundamental premise of the Budget; they have even accepted in considerable part the methods which are proposed for achieving this. Indeed, at times, they seemed hard put to it to find something about which to complain. At first the Daily Herald objected that this was a vote-catching election Budget. But in the same issue they had great headlines saying, "Bonus for the Rich." After some days—ittakes some little time for logical fallacies to become apparent to protagonists of Socialism—they saw that these two criticisms were mutually contradictory. Following the Prime Minister's remark at Glasgow that no immediate Election was in contemplation, I think the general line now is that this is a wicked Budget, an immoral Budget, which will be most unpopular with the great majority of the unhappy electors who have benefited by it. The Socialist ethic, as we know, is that the pleasure caused by any benefit a man may receive himself is far outweighed by the anguish of knowing that somebody else has received a greater advantage.
May I examine what the Budget has really done? The initial allowances for depreciation have been restored. Has anybody complained about that? The only objection I have heard is that we might have gone further. A term has been set to the operation of the Excess Profits Levy. The noble Lord, Lord Pethick-Lawrence, made mention of that fact, but the Socialist jibe is that it ought never to have been introduced. Purchase tax has been reduced. Surely the Opposition cannot complain about that. All that they have been able to do is to pick upon certain items like mink coats, and object that these, amongst all the thousands of other things, will in future be cheaper. As mink coats do not seem to be within the reach of anybody except the film stars—whose activities appear to be the main concern of many Socialists, judging by the space accorded to them in their favourite newspapers—this does not seem to be a very grievous matter. The fact that purchase tax has been reduced by a quarter throughout the

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whole range, so that all the articles upon which it is levied have become cheaper, is seldom mentioned, and still less welcomed, by the Opposition.
After all, quite a number of people will be helped by these reductions. Sixty million pounds a year less than before will now be paid by the citizens of this country, and half of this at least is in the least luxurious categories on which purchase tax is lowest and which, therefore, affect the ordinary citizen most. It will not all be spent on mink coats. In fact by far the largest part of the relief is given on articles bought by every class in the community. Is that such a bad thing? "Ah," say the Opposition, "these reliefs should have been selective. "I cannot help suspecting that one of their main objections to this all-round cut is that it deprives them of opportunities for obstruction whilst they argue the merits and demerits of each individual item. But offering opportunities to waste Parliamentary time is really not the aim, or should not be the aim, of any Government. It is true that the reduction in purchase tax does, of course, give benefit to some trades producing less essential goods; but some of these were in danger of being driven out of business by tie high rates of taxation—as Socialists representing the constituencies concerned have not been slow to point out. Had this been allowed to happen, we should have lost for ever many important forms of craftsmanship which have a valuable role to play in the export trade.
Then we have the all-round reduction of 6d. on all the rates of income tax—the "fleabite in the ocean" to which the noble Viscount referred. 'This helps 30,000,000 people or so, and must benefit some member or members of at least three families out of four—I am speaking of families in the ordinary human sense, and not as what the statisticians call "spending units." Apparently the Socialists think this is a wicked thing to do. The fact that the people are allowed to keep a little more of what they earn may positively encourage them to greater efforts. It is wonderful to see how this relief to more than half the nation has counteracted the violent centrifugal tendencies in the Socialist Party. Far be it from me to analyse the origin of these repulsive forces, but I am sure many observers must have been pleased to see
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the lion of Ebbw Vale lying down between the lambs of Lewisham and Leeds.
The late Chancellor of the Exchequer—and the noble Lord, Lord Pethick-Lawrence, has been eminently fair in this—seems to feel very strongly about these income tax reliefs. He even showed viewers a little table on the television screen to reinforce his case. "How terrible it is," he said, "to think that a bachelor with £500 a year should be relieved of £7 a year in income tax, whereas a married man with two children gains only 1d. a week!" He entirely refrained from telling his immense audience that the bachelor, who used to pay £63 a year, still pays £56 a year or over £1 a week, whereas a married man with two children who paid 6d. a week now pays only 5d. I confess that I was shocked by this. To omit to mention such vital facts and deliberately to give a misleading impression is difficult to reconcile with the high standard of frankness and honesty which we in this House are accustomed to take for granted.
Here, perhaps, I may turn aside for a moment to mention a great difference between the Socialist approach and mine on this matter. They seem to think that nobody has a right to anything he earns, but that he ought to he grateful for anything that the tax gatherer allows him to keep. A priori, in my view, a man's income, honestly come by, is his own. The lamentable thing is that he must be asked to contribute so much to meet the needs of the community. If the community can do with less, then it is only right and proper that people should be asked to contribute less. But to say that there is some law of nature by which the demands on everyone ought to be reduced by the same amount is utterly illogical. As was pointed out the other day somewhere, it is as though when a wedding is postponed and the wedding presents are returned, the man who had given no present should claim a share of the value of the presents which had been given by the others.
As I have said, this is intended to be an incentive Budget. Its object is to increase production. And this must be borne in mind when criticising its proposals. What the Opposition seem to deny is that people must be offered some reward for extra effort and extra risk.

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But they cannot alter the fact that this country depends for its standard of life on the goods we can import in return for our exports. To sell these exports we must be in the van of industrial progress, and our people must be prepared to take big risks in exploiting new foreign markets. But they will take these risks and make the extra efforts required only if they are offered some reward for success. I know that noble Lords opposite deplore this. Everybody, they think, ought to work his hardest for the good of the community.
But whether they like it or not, that is not the average man's way. They themselves admit that Pay-As-You-Earn has led to reduction in people's readiness to work overtime. Surely they do not claim that the moral outlook of the richer classes is so much superior to that of the wage-earner that they are likely to make extra effort and to risk more of their money if they are denied any hope of increased reward. People who say that Conservatives are immoral because they try to provide incentives for the managerial and investing classes to increase production and exports merely show how short-sighted they are. We have just as much compassion for the poor as Socialists have, if not more, but we are not carried away by emotional claptrap. We realise that the best way of improving the lot, not only of the ordinary man but of the aged and infirm, is to make sure that the economic position of the country is sound so that the welfare services need not suffer.
Nor do we object in principle to a reasonable redistribution of wealth through taxation. No one proposes, or suggests, that we should go back to the time a hundred years ago when a good many people had an income a thousand times as great as the average. But to-day the number of people whose income after tax is fifteen times the average can be counted in scores. If doctrinaire egalitarianism prevails, and rewards for risk and effort are reduced still more, both the quantity and quality of the country's production will inevitably fall. Already we have reached the stage when it would be quite impossible for a man, whatever his capacity, to build up a great concern like Morris Motors on whose exports to-day we so greatly depend. The mass
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of the people will lose far more if enterprise is stifled than they could ever gain by redistribution of the small amount of wealth left to the few exceptional individuals who create it.
I have endeavoured to give the House a rapid, if, unhappily, not very brief, review of the general economic situation as it appears to us. It has been described with somewhat different emphasis by Socialist speakers elsewhere. When in office it will be noticed the previous Socialist Government claimed that any improvement in our economic situation was the result of their far-sighted, carefully calculated measures. Any worsening was attributed to world causes. Today, perhaps understandably, their approach is different. Improvements are attributed to world causes; if anything should go wrong, I am sure that it would be put down to the action of the Conservative Government. This does not surprise me, or even shock me, as a physicist, for the principle of relativity asserts that the description of events depends upon the circumstances of the observer. And this principle apparently holds throughout the whole of nature, whether it is in defining the four-dimensional interval between two coincidences in the world of physics or in defining responsibility for the dollar gap in the world of economics.
If our description of trends and causes differs, there can be no difference in our description of the economic situation as a whole. Nobody can, or will wish to, deny that there has been a notable improvement. And at that we shall all rejoice. I think most of us realise, however, that the position is still precarious; that the battle is not yet finally won. America is now such a preponderating element in world economy that a recession there could have most painful repercussions everywhere. If the Americans were to reduce materially the volume of their sterling imports or the prices paid for them, and at the same time to intensify their sales efforts abroad, the dollar gap would widen once more and the results would be grave. I am sure that the whole House will agree with me when I say that we must nowhere relax our efforts. Only if we all do our best, only if we work as a team, can we win through. And I am sure that that is the intention on all sides of the House.
4.34 p.m.
VISCOUNT WAVERLEY: My Lords, my noble friend Lord Cherwell, by the speech which he has just delivered, has relieved me from any necessity to comment in detail upon the Budget; in any case, I had no intention of inflicting a lengthy speech upon your Lordships. But there are a few observations, mainly of a general character, which I should like to contribute to this debate. The noble Lord, Lord Pethick-Lawrence, in his interesting opening speech, did not find it necessary, for the purpose of the review which he gave to the House, to go further back than, I think, the beginning of the last financial year. I, on the other hand, feel that, in order to understand aright the circumstances in which we find ourselves to-day, it is desirable to cast our minds back at least to the middle of 1945, when a Socialist Government was returned to power in this country, for the first time in our history. We had then just emerged from a long and ruinous war. Not only had we suffered grave material damage in this country and elsewhere, but we had lost the greater part of our most valuable overseas investments.
In those circumstances, it might have been thought that a lengthy period of sacrifice and effort on the part of die whole community was needed to restore our economy. Circumstances, however, conspired to create, I suggest, a wholly false sense of well-being. I wish to make it clear that in what I am about to say I am only trying to be realistic; I have no desire whatever to appear censorious. We were all anxious at that time to find relief wherever we could from the stress and strain of the war. The Government, flushed with their success at the polls, were naturally eager to improve living standards and to develop the Welfare State, of which the foundations had already been laid. The emphasis, therefore, at that time was all on higher pay, shorter hours, holidays with pay, family allowances and so on. External aid, for which we should feel undying gratitude to our friends on the other side of the Atlantic and elsewhere, the existence of a sellers' market, and subsidies, all helped to obscure the economic implications of the situation in which we found ourselves. There was little or no reference at that time in any quarter, I think, to the crying need for greater production, and the
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result of it all was to create an illusion, a dangerous illusion, of prosperity without effort. That could not go on. Events marched to a crisis with the devaluation of sterling, by which temporary relief was obtained at the cost of creating new long-term problems. That devaluation was an expedient which cannot be repeated without risk of the complete break-up of the sterling area. We are not only the bankers, we are the trustees for the other units in the sterling area, and it is surely not difficult to understand the inherent instability of a system under which the value of an inconvertible currency is maintained by a system of controls operated by a number of wholly independent agencies.
I have no desire to pursue that topic in detail, even if I were qualified to do so, but I would venture to commend to the attention of noble Lords an article in last month's issue of the National and English Review by Sir Frederick Leith Ross, a man of very great experience in finance and public affairs. I do not agree with everything that he says in that article, but in regard to the situation throughout the sterling area, and the problem of convertibility, I think there is much in the article which we should all do well to study. I would only for the moment emphasise my conviction that convertibility is the goal towards which our economic policy should be directed. It is a goal which I recognise can only be approached gradually. It is one which I must say will not be attained without a marked increase in the productive effort of the community, and I trust (I hope that in saying this I shall cause no offence in any quarter) that Opposition leaders will recognise the responsibility that rests upon them in this matter. I do not think that when they were in office they gave wholehearted support to the late Sir Stafford Cripps when, somewhat belatedly, he began to stress the vital importance of increased productive effort and increased productivity, which is net quite the same thing, because we have to sell our goods on competitive terms.
VISCOUNT HALL: I should like to ask the noble Lord whether he can give a single instance of any occasion from 1945 to the present time when the Labour Party and the Trades Union Congress have not stressed the importance of increasing production.
VISCOUNT WAVERLEY: My Lords, I do not want to be controversial, but that very question has been put to me before, and I have been at some considerable pains to study pronouncements from responsible quarters in the Labour Party. I say that it is my belief that at that time far from sufficient emphasis was laid—and I am not trying to be censorious; I can understand the situation perfectly—upon the vital need for greater productivity. When one compares what was said on that subject with what was said upon ways of improving living standards, I think the justification for what I have said will be recognised. But if I am wrong, if indeed the Socialist leaders are so wholeheartedly in favour of doing everything possible to encourage greater production throughout the country, so much the better.
In that connection, it has been said already, in particular by the noble Viscount, Lord Samuel, that there is necessity for obtaining some material relief from the crushing burden of taxation, apart altogether from the question whether there is any moral justification for taxation on the levels to which we have had to submit in recent years. There I emphatically agree with the noble Viscount: when survival is at stake anything is justifiable; but if it is merely a question of effecting some degree of redistribution of wealth and the carrying out of some rather airy conceptions of "fair shares," or whatever it may be called, I must seriously question the justification for depriving people, to the extent to which they have now had to accustom themselves, of the produce of their own enterprise and effort. It seems to me, and I have said this once before, that what we have found in recent years in the matter of taxation might justify the description of legalised brigandage, altogether apart from the fact that such levels of taxation, as pointed out by the noble Viscount and others, sap enterprise and initiative, and discourage the thrift and savings on which the renewal and development of the capital equipment of the community depend. Therefore, for my part, I welcome the reliefs announced by the Chancellor of the Exchequer.
So far as purchase tax is concerned, I have always regarded that as, in essence, a bad tax. While I was still Chancellor
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of the Exchequer I said that I looked forward to the time when it would be whittled down to a luxury tax bringing in revenue of perhaps £100 million a year, as against a current yield of £300 million. I should like to see that tax disappear, apart from its possible uses over a limited field as a luxury tax, and with its disappearance I should like to see—I make no secret of this—the elimination of the subsidies, except in those cases where there is some special social justification for them. It seems to me that the maintenance of the existing system of subsidies is inconsistent with the preservation of the spirit of sturdy self-reliance which has been characteristic of our people in the past. I would go so far as to say that I sometimes think we have been in some danger of creating a generation of parasites.
Now, My Lords, the Chancellor, by the measures he announced in his Budget speech, has gone some way to restore an element of flexibility in our economy. As the noble Viscount, Lord Samuel, said, we cannot safely go on without some margin of taxable capacity, something on which we could draw to meet another emergency, if, unhappily, it ever came upon us. The rewards of those engaged in productive industry, in whatever capacity, must not be allowed to run ahead of productive efficiency. I believe that, properly viewed, the task before us is by no means hopeless. It seems to me that an all-round improvement in productive efficiency of no more than 5 per cent., if it could be achieved—and there are means known to all of us by which progress can be made—would make all the difference in the world. I therefore welcome the message of encouragement which the Chancellor has given. I have asked myself, as no doubt many noble Lords and others have asked themselves, whether, in what he has done, he has taken an undue risk. I do not think so—for this reason. I have been struck, as many noble Lords must have been, by the divergencies in the results disclosed at the end of the year from the original estimates. In the case of many items for which estimates were given there has been, in fact, a divergence of an order of magnitude quite comparable to the sums of money involved in the individual reliefs which the Chancellor of the

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Exchequer has given. In these circumstances, it seems to me that it is extravagant and rather foolish to criticise the Chancellor on the ground that in what he has done he has been taking an undue risk. In this matter, psychology is quite as important as economics; and even if the economics of a Budget are held to be questionable in some respects, if the psychology is right the Budget may be justified a hundred times over.
I welcome also the forward outlook of the Chancellor in his Budget. The annual Budget and the annual Appropriation Bill are essential features of our fiscal system, but nowadays, in budgeting, when a Budget is not merely an incident in the economic life of the nation but is itself an important instrument of economic policy, it is most important that there should be a forward view, extending beyond the limits of a single financial year, in the framing of policy. There again, it seems to me that the Chancellor of the Exchequer was absolutely right in giving a message of hope, and in putting squarely on the shoulders of the community as a whole the responsibility for justifying, by their efforts in the future, the concessions that have been given already and the further concessions which, if all goes well may be looked forward to in future years.
Finally, my Lords, I am sorry that by speaking now I forgo the pleasure of hearing what my noble friend and colleague Lord Macpherson may have to say in regard to the Motion which appears on the Paper in his name. In that connection, I would just say that, should circumstances arise creating a difficult economic and employment situation, there is contained in a Paper entitled Employment Policy, which was produced during the war by the Coalition Government, a complete study of the whole problem, with conclusions upon which all sections of Mr. Churchill's Government at that time were entirely agreed.
LORD SILKIN: May I ask the noble Viscount whether he would say that the conclusions arrived at in that Paper are, broadly speaking, valid to-day?
VISCOUNT WAVERLEY: I would say that, to a large extent, they are valid. At any rate, I would say with confidence that they merit study to-day in the light of any further experience that we may have gained in the meantime.
4.52 p.m.
VISCOUNT HALL: My Lords, we have listened to four remarkable speeches, and I am sure that I am expressing the views of my colleagues on this side of the House in saying that we are always ready to listen to a speech made by the noble Viscount, Lord Waverley. That does not signify for a moment that we agree with everything that he said; but we know that with his vast experience, his knowledge and his deep sincerity, he believes in everything he says, and we are grateful to him for the speech which he made this afternoon. Of course it is always a pleasure to listen to a speech by the "young man," the Leader of the Liberal Party. Indeed, it is remarkable that the two opening speeches to which we listened to-day were made by noble Lords who have long passed the age of three score years and ten. I should like to think that at any time in my life I could have made a speech which was so clear, so penetrating, and so useful, as the two speeches which were made by the two noble Lords on this side of the House.
I wish I could say the same of the speech of the noble Lord, Lord Cherwell. I really thought that his speech should have been delivered. I will not say centuries ago, but in the early days of the growth of the Socialist movement. It was a speech that really should have been prepared not for the next Conservative conference but for the last one. However, it was not delivered to but tried out upon your Lordships to see whether it was suitable for the next Tory conference. I strongly object to the aspersion which he made in regard to the integrity of Mr. Gaitskell. He implied that, when he was Chancellor of the Exchequer, Mr. Gaitskell failed to disclose to the House the financial condition of the country. I should like the noble Lord to reply to this straight question: is that what he means?
LORD CHERWELL: Neither Mr. Gaitskell nor any noble Lord in this House, so far as I know, disclosed to the country that our gold and dollar reserves were running down at the rate of 10 per cent. a month. I do not know whether noble Lords opposite knew it. Did they know it? If so, why did they not state it in their Election speeches? If they did not know it, how can they say that we ought to have known it?
VISCOUNT HALL: It is evident that the noble Lord is endeavouring to dodge the issue somewhat, and I should like to draw his attention to the speech which was made in another place on November 7, 1951, by the present Chancellor of the Exchequer. He was referring to a speech made by Mr. Gaitskell at the Mansion House on October 3 of that year, and this is what he said (OFFICIAL REPORT, Commons, Vol. 493, col. 191):
"Those who listened to him could not have doubted that whatever Government were returned to power an ugly situation would be bequeathed to them. In fact, the worsening has continued over the last weeks."
Later in his speech Mr. Butler said of Mr. Gaitskell (col. 192):
"In his speech at the Mansion House my predecessor, on the best information then available to him, attributed much of the loss in the third quarter to abnormal and non-recurring factors. So far as the third quarter was concerned, those estimates were roughly correct, but some of the factors which we thought were exceptional have continued to operate. With the fuller information now available, and with the clearer view of 1952 which we can now take, our latest estimates reveal an underlying balance of payments even worse…"
Mr. Gaitskell in his speech replied (col. 210):
"The right honourable Gentleman was good enough to quote from some of the speeches I had made in recent weeks and I am grateful to him, because he, at least, did not pretend for one moment that we had failed to disclose the situation."
That is the position.
LORD CHERWELL: No doubt my right honourable friend the Chancellor of the Exchequer is an extremely kind and charitable man. The fact of the matter is that in the third quarter of 1951 the gold and dollar deficit was 598 million dollars. Mr. Gaitskell, in his Mansion House speech, said that he thought only half of this was due to underlying causes—in other words, the deficit ought to have been about 300 million in the following quarter; in fact it was over 900 million. As I said, either he did not know about this, or he was unduly optimistic, or he was singularly ill-informed.
SEVERAL NOBLE LORDS: Withdraw!
VISCOUNT HALL: Well, my Lords, it is very evident that Mr. Butler is, at any rate, truthful and honest. I do not pretend—
THE LORD PRESIDENT OF THE COUNCIL (THE MARQUESS OF SALISBURY): I hope the noble Viscount is not implying that my noble friend Lord Cherwell is neither truthful nor honest! There may be differences of opinion on this matter, but that implication might be drawn from the noble Viscount's remark. I am sure it is not one that the noble Viscount would wish to draw.
VISCOUNT HALL: Only in the same proportion that the noble Lord opposite seems to regard Mr. Hugh Gaitskell as untruthful and dishonest.
LORD CHERWELL: I did not say he was untruthful or dishonest; I said he was unduly optimistic or singularly ill-informed.
VISCOUNT HALL: But the noble Lord said that Mr. Gaitskell did not disclose the situation to the nation, which is not in accordance with the statement made by Mr. Butler.
My Lords, I do not wish to pursue that matter any further. In view of the fact that my noble friend Lord Pethick-Lawrence and other noble Lords who have spoken have dealt fully with the Budget, I am going to deal only with that matter to which the noble Lord, Lord Cherwell, towards the end of his speech referred, as also did Lord Waverley during the whole course of his speech. Whatever a Budget is—indeed, before a Budget can be made—the background of that Budget must be production and exports. In the short time during which I am going to address your Lordships, I propose to deal with those two points.
First of all, I thought the noble Viscount, Lord Waverley, was not quite so fair as he might have been with regard to the efforts which have been made during the whole of the period from 1945 till the present time by the leading members of the Labour Party and, in the main, by members of the Trades Union Congress. At no time—and I have followed this matter closely—could it be said that they have relaxed in any way whatsoever their efforts in relation to the question of production. One cannot deny the fact that their efforts were somewhat successful from 1945 until 1952. During that period of six years there was a gradual increase in production—indeed, the increase was at a rate greater than

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that shown in any other country in Europe. I am not suggesting that it was as great as the increase in production in America, but it was a steeper increase than occurred in any other country in Europe. It is only as the result of the return of a Conservative Government in 1952 that for the first time since the end of the war we have had a reduction in production. Such a reduction—
VISCOUNT WAVERLEY: I have been wondering whether, in the opinion of the noble Viscount, the efforts which, as he has said, were made over a long period of time from the quarters he has mentioned to inculcate economic lessons, including the necessity for increased production, have exhausted themselves during the short period when a Conservative Government has been in office, or whether it is not rather that what has come to an end is the sellers' market and the demand for supplies of all kinds stimulated by the shortages and the destruction resulting from the war.
VISCOUNT HALL: I grant the noble Viscount that point. I shall be coming to that matter during the course of my speech. I had hoped to be able to make a non-controversial speech upon this matter. It is the fact that there has been this reduction in production which is regarded by everyone as serious, and so far as I know every effort will be made by the leaders of our Party to remedy it—indeed, they endorsed what was said by the President of the Board of Trade in another place last week as to the need for increased production. But it is not only a question of a reduction in production; there is a reduction in the numbers of persons employed, and a reduction in exports. Indeed, it can be said that there is even a reduction in the standard of living of the people.
That is brought out in the Economic Survey which was issued by the Government. Last year less money was spent on food than in 1951 or in 1950. Only on Monday in another place the Minister of Food said that the consumption of butter in this country last year was down by 5 per cent. And I do not want to mention only butter; I include fats and food generally. There was a reduction in the consumption of vitamins by which our nourishment is now measured. The reduction was very small but there
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certainly was a reduction. I am not suggesting for a moment that it has made much difference to the lives of the people, with the exception of the many hard-hit individuals whose incomes are below the income tax level and who, unfortunately, will get no benefit out of the reduction in taxes. I do not know to what extent high prices and purchase tax are responsible for the falling off of last year. In household goods alone, the reduction last year amounted to something like £50 million, as compared with the figures for 1951, and £87 million compared with the figures for 1950. So far as textiles are concerned, the reduction was £25 million last year, compared with production in 1951, and £113 million compared with production in 1950. Those figures are rather striking.
As I have mentioned, year after year from 1946, production increased, but last year there was this sharp reversal. Conditions were different in other countries in Europe, it is true. In Denmark and Norway there was a decline in production of 4 per cent., in Sweden, 2 per cent., and there was no change in the United States. In Western Germany, production rose by 7 per cent., in France by 4 per cent., and in Canada by 3 per cent., compared with the figures for 1951. The reduction in production in this country, small as it is, is one of the vital matters to which the Government and the people should give their closest attention. I thought that the Economic Secretary in another place rather minimised the importance of this reduction, and that the noble Lord, Lord Cherwell, did the same this afternoon. A Report compiled by some economists was issued recently and in it they suggested that at this time production is some 10 per cent. below what it would have been if the increase of the last two years had continued. The report said that if we had had this 10 per cent. increase, there would be an increase in our national income of about £500 million. I am not attributing blame at all. I am simply referring to the losses sustained as a result of the reduction in production.
I was much concerned the other day to read a report in one of the financial papers which indicated that N.A.T.O. was ready to place an order for the purchase of some 150 million dollars' worth of ammunition—this was in March of this year—but when the tenders were received

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it was found that the tenders from this country were 10 per cent. above tenders received from the Continent, and the order was held up for some time. Fortunately, I understand that, as a result of negotiations, the order has now been placed in this country. I wonder whether the Government themselves are aware of the fact that a buyers' market, and not a sellers' market, exists at the present time. If those who desire to make purchases ask for tenders, then those who tender must watch their pricing at the beginning, otherwise they are ruled out. Here is one example of over 150 million dollars' worth of goods, the order for which was held up because the price quoted by the Government of this country was 10 per cent. higher than the price quoted by private concerns on the Continent. I am happy to think that nothing is likely to interfere with the £53,500,000 order for the off-shore purchase from British manufacturers of fighters for N.A.T.O., and other orders which, I understand, are forthcoming. That is all I am going to say about production now, but later in my speech I shall come to the need for increasing our coal production.
In addition to the fall in production, for the first time for more than five years we have had a fall in our export trade, a fall of no less than 6 per cent. in volume last year, compared with 1951. The situation was described by the President of the Board of Trade recently as one in which he had to face considerable difficulty. A little later he said, "We might have done worse, but we must do a good deal better." But he gave no indication of the prospect of an increase in future or, indeed, this year. We have now received the Board of Trade returns for the first quarter of this year, and these cannot be compared favourably with the figures for the first quarter of 1952. It is true that in comparison with the last quarter of 1952, there is only a small reduction, but in comparison with the first quarter of 1952 there is a reduction in value of more than £100 million in our exports.
What is more disquieting than anything else is that of the £100 million reduction, £97½ million is in articles wholly or mainly manufactured, and nearly 50 per cent. in the metal manufacturing industries, such as machinery
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and parts, vehicles, including locomotives, and ships. In aircraft there was an increase of £3 million, but in all other branches of engineering, some of which have had super-priority, there was a reduction in the first quarter of this year as compared with the first quarter of last year. Now to-day we are informed that there is likely to be a steady decrease in shipbuilding. At the present time there is a decrease in shipbuilding activity which is causing concern. Shipping under construction is down by 137,000 tons, and is 6 per cent. less than the tonnage under construction in March last year. Whilst it is true that the shipbuilders have a very good order book, there is always such a thing as cancellation, and in the last half of last year orders were down from 800,000 tons to 300,000 tons, a reduction of about 500,000 tons in the placing of shipbuilding orders in the course of one year.
When all this happens at a time of increased defence orders, I wonder what is going to happen when the defence orders begin to tail off? I am not going to trespass on the remarks of my noble friend, and I shall be interested to hear what he has to say in relation to this matter. Even with increasing defence orders and aid, which cannot continue, great efforts are still needed to increase production and expand our exports. I repeat that this is the most important task facing the Government and industry at the present time. Some of the difficulties are clearly brought out in paragraph 110 of the Economic Survey which states that:
"While some expansion in world demand may be looked for over a period of years, this cannot be relied upon to provide the rapid increase in export earnings which the United Kingdom needs to achieve. In order to pay our way and obtain the necessary imports, we shall have to increase our share in the non-sterling markets, particularly in Canada, the United States and Latin American countries, where our share is smaller than before the war and where the United States has clearly increased her share."
Last year we increased our exports to the non-sterling countries by £30 million, but in the first quarter of this year there was a reduction of 4 per cent. in exports to non-sterling countries. The Government and industry must be on their tiptoes if we are to win this battle of exports. I thought that the Government were not as forthcoming as they might have been in stating in the Economic Survey their

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policy toward exports. They said that the policy of Her Majesty's Government is to create the economic conditions which will encourage an expansion of production for export and will clear the way abroad for selling it, but the actual job of expanding exports can be undertaken only by industry itself.
Government assistance, my Lords, should be given at every possible stage—I do not mean assistance in money, but encouragment in every way. I was surprised to hear the other day that the Government were to dismiss the superintending trade consuls in the United States. In fact, I understand that these men have been dismissed. They have done a first-class job of work, and if our dollar trade is to be expanded, this is just the time when their services are required. I should like to ask the Government who or what organisation is to do their work, or is this part of our selling organisation to disappear and no one to take its place? This action seems to refute the claim that the Government want additional trade in the non-sterling area.
I was pleased to note that the Government have now removed the ban which was imposed a year ago upon export credits, that exporters are to have a greater measure of freedom to extend credits to overseas buyers, and that the machinery is to be speeded up so that decisions can be made more quickly. Though this Department has been in existence for more than thirty years, and has done excellent work, I agree with the Report of the Select Committee on Estimates that its work is not sufficiently well known to manufacturers, both large and small. I hope that the noble Earl who is to reply will convey to the Board of Trade the desire that greater publicity should be given to the work of this Department.
One of the pleasing features in the March quarter returns was that coal exports had increased to 3,300,000 tons—bringing in some £15½ million—one million tons more than last year, and two million more than 1951. If coal exports could continue at the rate of that quarter, it would mean exports annually of 13 million tons, to a value of over £60 million, which would be a great help at the present time. Unfortunately, output is rather disappointing. This year the miners are taking their extra week's
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holiday, and this, with Coronation Day and the extra Leap Year day last year, means that there will be a reduction of something like eight working days for the miners this year as compared with last year. The only way in which a reduction in output can be avoided will be by producing an extra 7 million or 8million tons of coal during the course of the forty-nine or fifty working weeks, which means an increase of something like 150,000 tons of coal a week. At the present time the increased output is working out at only something like 30,000 tons a week, which is only one-fifth of the requirement. If that goes on, it means that this year there will be a reduction of something like 5 million tons on the output of last year. The economic consequences of such a reduction in output are, I think, too terrible to contemplate. It is rather surprising that, with something like 13,000 more men in the pits, compared with this time last year, and with the number at the coalface increased to over 300,000, which is the highest for some time, increased production is not forthcoming.
There are real grounds for anxiety, as will be seen from the fact that the National Coal Board and the National Union of Mineworkers are conducting a nation-wide production and efficiency campaign, and are informing the miners of the nation's requirements of coal as part of that campaign. Only on Saturday last the 115,000 miners and officials in the South Wales coalfield received a letter, jointly signed by the representatives of the National Coal Board and the Miners' Federation, drawing their attention to the urgency of greater efficiency and increased output. I hope that that letter will be effective, for so far, judged by results, the campaign has been disappointing, particularly in my own area of South Wales. It is distressing to those of us who have been so long and so closely associated with what was the most important coalfield in this country to know that during this postwar period both numbers and output are lower than they have been for the last seventy years.
During my lifetime I have seen in that coalfield a rise in production from about 20 million tons to 50 million tons, arid a fall from 50 million tons to about 23 million tons. The reduction at the present time is caused largely by a reduction of

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some 30,000 miners, but the majority of the miners in South Wales—who are amongst some of the best miners in the country, indeed, in the world—do not realise that their output per man-shift worked is the lowest of all the divisions in the country. This is somewhat disconcerting. The mines are mechanised. Most noble Lords know my views about a completely mechanised pit, or indeed, about a completely mechanised industry, particularly where you have thick seams. It is imposible to abolish the mechanised mine, but some of the men who have been trained in the old way of working, and are anxious to stay on, would do so if the Coal Board would pay some attention to the need for having some districts and some collieries not mechanised. If that were done it would secure the return of men who have long since left the collieries because they would not do mechanised work.
The majority of miners, all of whom believe in nationalisation, are anxious that it should be a great success. It can be said at the present time that the miners are better off than ever they were: they have a five-day week; if they work on Saturday it is at a special request, for which they are paid overtime. They have a fortnight's holiday; they have their welfare schemes; they have their pithead baths—indeed, they would not revert to the old system under any conditions. But now they should realise that they, with the Coal Board, are the trustees of the nation's greatest material asset. The nation willingly gave to the miners and said that they should have what they have got. There is now no employer to take from them what might be regarded (as was so often said) as part of their wages. There are no royalty owners taking royalties, other than the State: the industry and the royalties are owned by the State. The State has placed the industry in the hands of the miners and the Coal Board, and I am sure that the majority of the miners will not let the State down.
I should like to suggest to the Coal Board that possibly something more should be done in bringing home to the miners their greater responsibility. It is true that these small pit committees are doing excellent work. The other day I saw a report from Lancashire, where output has greatly increased. I wish that
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we could see some of these productivity units or teams, not working in the confines of one division, but being sent out, say, from the worst division to the best division, from the best division to the worst division, and to the medium divisions, thereby having an exchange of workpeople for a short period. That is the only way in which you can get a better understanding of the problems which are likely to arise. I hope that the National Coal Board will do something about that. One thing the miners always respect is a good frank talk about conditions; they like strong leadership, not only at the centre but also in the divisions. I hope that we are building up a partnership between the miners and the Coal Board which will see to it that this asset, now owned by the State, will provide not only a sufficient supply of coal for the domestic requirements, without rationing, but all that is necessary for the industrialists and, indeed, a substantial amount for export. When that is achieved, it can be truly said that the miners have appreciated the great effort that the nation has made to enable them to enjoy the conditions which they enjoy at the present time.
5.30 p.m.
LORD BRAND: My Lords, all your Lordships will have been impressed by the speech of the noble Viscount who has just spoken. It would be impertinent of me to say that I hope the Coal Board will pay great attention to what he has said. I hope the miners also will get to know what he has said, and somehow that his words will be spread among them.
I should like to say a few words about this question which has been referred to several times to-day, of the fall in production of exports, the increase in unemployment, and so on, during 1952. I remember well the crisis which began in 1929 and went on until 1933. What happened then was that prices began to fall. One country would get into balance of payments difficulties, as we have done recently, and would cut its imports. That inevitably resulted in some other country cutting its imports; and it went so far, if my recollection is right, that, by this reciprocal cutting of imports all round the world, in two or three years international trade fell to one-third of what it

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had been in the boom year of 1929, with a consequent immense fall in production, an immense fall in employment in all countries and, indeed, great depression.
I think the Opposition take the view, which is quite reasonable, that a great deal of the trouble that they left to the Conservative Government was due to conditions outside this country—the Korean crisis and all that followed from it. But it follows from that that they should recognise that a good deal of the unfortunate development in 1952 is also due to the crisis they left to the Conservative Government. All agree that our imports had to be drastically cut, and it is the drastic cut in our imports which, in my opinion, has to a considerable extent led directly to a considerable cut in our exports. Imports have fallen by 10 per cent. because we made them fall, and exports have fallen by 6 per cent. I should regard that as very much the consequence of the first step that we had to take. If imports greatly fall and exports fall, then certainly you will get a reduction in production, and some increase in unemployment. Therefore I regard these developments as being caused by the monetary policy, but only to a slight extent, and, in the main, by world conditions.
LORD PAKENHAM: Does that apply both ways—to the good factors and the bad?
LORD BRAND: Well, the monetary policy certainly had a good effect, and, of course, the difference in the terms of trade had a very good effect. I should hesitate to say that it had three-quarters of the effect, but certainly the terms of trade had a very great effect, and I think everybody admits it.
I hesitate to intervene, so to speak, between noble Viscounts of the eminence of Lord Waverley and Lord Hall. I should put Lord Waverley's point about what happened between 1945 and 1951 slightly differently. I should say that the Government during those years did not regard the external problem as nearly so important as the internal problem. They allowed the internal problem to have much too great an influence, and now, I believe, from what I read in the debates in another place, they are coming to see the vital importance of the external problem and to realise the necessity of putting that first.
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I shall be very brief in my remarks on the Budget itself, because a great deal has been said already and time is getting on. The Chancellor was faced with a most difficult moment of uncertainty—uncertainty as to international politics; uncertainty as to the new American Administration's policy, and uncertainty, indeed, on what is going to happen in the United States. There is a good deal of feeling that there may be a turn in that country. I do not think that it is justified. I am sure that if there is any deflationary movement, the United States Administration will take every conceivable step to stop it, if they can. I was talking yesterday to an American who has great responsibilities. He said: "As soon as they see—or even before, if they can—the 'bubble on the boom,' they will take the most drastic action, even in the way of large reductions of taxation and so forth." I think we can take it that everything will be done there to keep things in balance.
Owing to all these uncertainties, the Chancellor had to, as they say in the City, "take a view." He took a view, as I understand, that effective demand might be less during 1953 than was justified by our productive resources; and, therefore, he plumped for a policy which might be regarded as somewhat inflationary rather than risk any deflationary policy. Of course, if our long-term savings are too small for our capital demands and particularly for the huge uncovered deficit below the line, and if the Government are driven to increase the short-term debt in order to meet these demands, then banking liquidity will be increased, and that may start some increase in inflationary conditions. If we have inflation, and other countries are going through a deflationary period, then the outlook for our exports is going to be even poorer than any noble Lord has suggested.
One thing is clear, and that is that taxation is now so oppressive that it is no longer an instrument of any use in combating inflation. I could not agree more than I do with the noble Viscount, Lord Samuel, that that is, and will prove to be, the root of our difficulties. I have plagued your Lordships with that view very often, and I hive seen my noble friend Lord Pakenham immediately rise like a fish to a hook—I hope it was a hook—and ask the question which he asked the noble Viscount, Lord Samuel,

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this afternoon. I have said to him before that if taxation is really too high economically, then it is no good asking, "Can you or can you not reduce it?" or "How will you reduce it?" it will be reduced. It will be reduced in the end, if you do not reduce it in any other way (for instance by much greater production which is what one hopes will happen), then by another devaluation. If the burden is too big, that is what will happen; the donkey will kick off by devaluation some part of its burden.
As to the different tax changes, I will say only that it is so highly important that our industries should be kept modern and should have funds for that purpose, that I should have preferred that all taxation remissions had gone in relief of industry, rather than so largely to the individual tax-payer. I should like to see the complete abolition of the undistributed profits tax and a reduction also in the distributed profits tax. I am aware that this would at once raise a cry of "Shareholders!" "Why should the shareholders be so well treated?" would be the cry. But if that argument should be put forward, the answer is that if all agree that British industry must be prosperous yet demand that shareholders and risk-capital savers must be punished more than any other class, we shall find ourselves in a complete dilemma. I should have thought that the shareholder was sufficiently dealt with now by income-tax, surtax and death duties. If you want to kill both him and the community together, put on in addition profits taxes sufficient to deny industry the funds which it ought to have. For these reasons I should like to see taxes on industry lightened, even though no remission were made to the ordinary individual members of the community.
As I say, I feel that the Opposition now are recognising our external problem to a greater extent than when they were in power. Nevertheless, the debates in another place, which I have read carefully, surprised me greatly. They seemed to show in a clear light a fundamental difference in the policies of the Parties. One policy is the Chancellor's of relying as far as possible on the free energies of the population, with the Government concentrating on the enormously important function of maintaining a stable
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balance of payments framework and ultimately reaching convertibility. That is the road which the present Government, as I understand it, intends to follow. Then there is the policy which (I am judging only from the debates in another place on this subject) the Opposition leaders appear now to favour—that is, further and further extension of Government control over competitive industry itself.
In various speeches in another place Opposition leaders have mentioned their wish that the Government should have a more positive policy. I did not gather what the positive policy they advocated was, but I suppose I am right in thinking that Mr. Gaitskell indicated what he himself meant by it in certain articles which he wrote in the Star newspaper, from which, if I may, I will make one quotation. He wrote:
"It is no accident that the industries where investment is going ahead most steadily and smoothly are the nationalised industries where the Government can guide and control and long-term plans can be made and carried out without the corroding influence of fear and uncertainty."
I may say that the speech we have just heard from the noble Viscount, Lord Hall, can be looked at as a rider to that statement and to put a somewhat different light on it. But, of course, it is quite easy for a Government smoothly and easily to have large loans made for nationalised industries, if the savings are there.
The great problem we have is not to produce but to sell our goods abroad, and that, I think, is a task which Government is not fitted to carry out. If Government is going to be a carpetbagger all over the world and sell a thousand and one articles abroad, I think we are going to get into great difficulties. Mr. Gaitskell went on:
"I do not say that this alone is a sufficient argument for wholesale nationalisation. But I do not believe that we shall get industrial investment on the scale and in the directions that the nation requires without far more State participation, initiative and influence. That is the lesson which I believe experience will teach us even more vividly in the next few years."
I do not know whether the Opposition really intend to back this policy completely and if so what their reasons are. One might think it is merely to keep up what one may call political momentum. Is it because the Labour Party thinks

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it must have momentum, and, if it can think of nothing else, is going to nationalise the first industry it sees? Or is it because Labour leaders believe that now that they have made private savings more or less non-existent the Government must provide all capital? Is it that they see the enormous difficulties produced by over-much taxation and are nervous about the available savings of the community, and that, therefore, since there will not be enough savings for industry, they had better take over industries and finance them themselves? But the State, of course, has no capital of its own, and if it does so act it must get the money required from the public, either by Government loans or by increasing savings—in other words, either by more taxation to increase them, or by inflationary borrowing and ultimately a lower standard of life.
It seems to me, from the speeches in the other place, that the Labour Party are on the way to going beyond being Keynesian and becoming much more Marxist, if they really intend greatly to increase the nationalised sphere of industry. It is interesting to note that Keynes, for whom, I think, Mr. Gaitskell has a great admiration, said in his last book:
"It is not the ownership of the instruments of production which it is important for the State to assume."
In other words, there is no need to nationalise to gain Keynesian objectives. Perhaps, as I am quoting Keynes, and as I have read a recent article by Mr. Gaitskell in the Political Quarterly claiming that "equality" was one of the main economic aims of the Labour Party, I may quote what he said on that subject in 1936. Lord Keynes wrote:
"For my own part I believe there is social and psychological justification for significant inequalities of incomes and wealth, hut not for such large disparities as exist to-day."
That was in 1936. I do not know what he would say to-day. I think he would say that those disparities have now been removed.
Since Mr. Gaitskell urges constant increase in the direct intervention of the State, I should like to quote briefly a recent book by an economist—one of the very foremost economists of the United States—whom perhaps the noble Lord, Lord Pakenhamknows—Professor Jacob Viner of Princeton University and formerly of Chicago University,
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who has just published a book containing lectures that he gave at the National University of Brazil in Rio, at their invitation. What he says is so pertinent to some problems that perhaps I may be allowed to read these extracts:
"There is one proposition, however, which will underlie all of this lecture, and which I regard as both theoretically plausible and as overwhelmingly verified by experience. Direct controls, because by their nature they involve the total or partial substitution of government decisions for the different decisions which the market would make if direct controls did not stand in the way, are inherently contagious: each new set of direct controls in a particular sector of the economy tends to make necessary the establishment of supporting or protective direct controls in the neighbouring sectors if the first set of controls is not to be evaded."
And then he goes on—and perhaps the noble Lord will listen to this—
LORD PAKENHAM: Yes.
LORD BRAND: —and says:
"In modern experience, central economic planning has not only universally involved some measure of price inflation but has also involved relative inflation as compared to the free-market economies. I know of no exception to either of these two propositions, and this association of central economic planning with inflation is probably not merely an historical accident."
He goes on to say that, as soon as a Government gets into foreign trade itself, then all foreign trade becomes a matter not of trade but of diplomacy, just as, for instance, when we monopolise meat control here and the British Government buy all meat in the Argentine, then it is not the private meat producers in the Argentine who come into the bargain on that side, but the Argentine Government. You then get two Governments bargaining, not about price but about diplomatic matters. That would increase proportionately, in my opinion, under greater State control of competitive industry. The last quotation I will make is this:
"… the repeated occurrence of balance of payments deficits is itself to a large extent a by-product of national economic planning. I believe investigation would show, moreover, that here also there is a marked tendency in practice for national economic planning to lead to autarky."
It is, however, not with Marxist countries that we shall trade and compete, but with the freer countries—the United States, Canada, Switzerland,

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Japan, and I include even Germany. Germany at present is largely a country of controls, due to the consequences of the war, but I have no doubt that their great exporting industries will not be in the hands, ultimately, of the State. Therefore, I fear that if the Opposition again get a chance of pursuing further this policy which is now being advocated in another place, and clearly from the Press reports is being actively canvassed elsewhere—not, however, so much in trade union circles, I think—they will take any strength from this country to return to a stable balance of payments and to convertibility, or to enjoy a higher and stable standard of living.
5.55 p.m.
LORD MACPHERSON OF DRUMOCHTER LORD MACPHERSON OF DRUMOCHTER had a Notice on the Order Paper to ask Her Majesty's Government whether, if peace "breaks out," they have made plans to deal with the economic repercussions which will follow; and to move for Papers. The noble Lord said: My Lords, the Motion before your Lordships proposed by my noble friend Lord Pethick-Lawrence calls attention to the economic situation. I wish to deal with one particular aspect of the situation which is to-day causing people in industry and commerce much concern and uncertainty—that is, the economic repercussions which will follow a sudden change towards peace. So, with the permission of your Lordships, and of my noble friend who has introduced the first Motion on the Order Paper, I am addressing myself to the terms of the Motion standing in my name, which I do not propose to move. Clearly, it has a close relation to the economic situation, and I hope that the course I am taking will be for the general convenience of your Lordships, and will not preclude the Minister who is to reply from answering my questions on the subject.
This is not the first time that this subject has been raised, and while it is generally agreed that it is a matter for some concern, I am sure that the country and industry would be relieved to know what steps the Government are actually taking to deal with the problem. The apparent change in Russia's attitude to the free world which we have witnessed
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in recent weeks is probably the most important development in world affairs since the end of the Second World War. However we may care to appraise these happenings, there is certainly evidence that the prospects of the end of the war in Korea, and consequently the possibility of settlement of our differences with Russia, are better now than they were before the death of Stalin. In the excellent speech that we had this afternoon from the noble Viscount, Lord Samuel, we heard him express similar sentiments, The Prime Minister, speaking in Glasgow just ten days ago, said:
"New men have obtained supreme power in Moscow, and their words and gestures and even…their actions seem to betoken a change of mood."
May I express the hope that this change of outlook or attitude by Russia will not be stifled by too chilled a reception, but that any gesture or approach they may make to us which has in it the possibility of a sincere attempt to deal with the differences between our two countries will be received gladly and frankly? I agree, too, with the noble Viscount, Lord Samuel, that I hope there will not be undue delay. In that connection, I may remind your Lordships of the words in the Gospel of St. Matthew, the fifth chapter, the twenty-fifth verse, where it says:
"Agree with thine adversary quickly, whiles thou art in the way with him."
The prospect of peace has it problems, as well as its hopes, for mankind. It is an ironical fact that war and rearmament are good for trade, and that hopes of peace send prices down and unemployment figures up. We have already seen what happened to commodity prices like tin, rubber, lead, zinc, and so on, and the great slump which took place on the New York Stock Exchange quite recently at the mere proposal to exchange a few hundred sick and wounded prisoners of war. That is just a foretaste of what will happen when the real peace comes. I remember what happened after the First World War—the great trade recession, the millions of unemployed and the despair and disillusionment which swept our country. Are we again to witness the bread lines of 1920–21 or the public soup kitchens at the street corners? Are we again to witness the decline of the morale of our people as a result of idleness and unemployment? Are we going to make half-hearted attempts to deal with the

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problem, too late and too little, after the rot has set in? It has always been the same ever since the Napoleonic wars: each war is followed by a trade depression.
There has been a great deal of reference this afternoon to what happened after the Second World War, but even in 1918, both here and in the United States of America, signs of a depression were already visible. Of course, during the early post-war years in this country since 1945 we had the good fortune to have a Labour Government in power and in charge of our affairs, and the situation was largely held in check by Mr. Attlee and his colleagues, with their controlled economy and their policy of full employment. Nevertheless, the world economic situation was deteriorating. Further disintegration was stopped by the outbreak of war in Korea, followed by a rise in prices and general business prosperity.
This time there is another aspect of the problem to be considered—that is, what will happen in America and its repercussions in this country. I was in the United States a little over a year ago, and the impression I formed was that the position of American industry then was very much like the position in England in 1940–41, with every other factory engaged in some kind of war work, and on all hands full employment on their colossal rearmament programme Have the Government given consideration to what will happen in America when rearmament orders stop and the stockpiles of essential raw materials have to be unloaded on to the market? America has a much-boosted free economy their traditional capacity for boom and slump is well known, and I fear the most serious repercussions on our economy if the matter is left unplanned and things are allowed to take their course. Our American friends are not too keen on planning; they think planning, especially planning which deals with their national economy, smacks of Socialism, and the American business man hates Socialism like the very devil. What happens in America is of the greatest concern to Great Britain, not only inside our own country but because of its possible effects on our overseas markets.
During the last few weeks, people in all countries, and nowhere more than in this war-weary land of ours, have had their
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imagination stirred by evidence that at long last it may be possible one day to see world peace. It is something which men of our generation practically know nothing about. Most of us in this House have spent the greater part of our lives working and striving and sacrificing to pay for old wars or preparing for new ones. We can hardly contemplate the measure of happiness and prosperity which will be ours if all the wealth and brains and effort which in the past have been spent on war and preparing for war are devoted to peaceful and productive purposes. I am reminded of the words of Longfellow:
"Were half the power that fills the world with terror,
Were half the wealth bestowed on camps and courts,
Given to redeem the human mind from error,
There were no need of arsenals or forts."
I submit that it is every bit as important to plan for peace as it has been to plan for war. What a tragedy it would be if after the great effort we have made to prevent the free countries of the world from being engulfed by Russian Communism, Communism should come after all, as a result of unemployment, distress and misery, through our failure to prepare for peace!
I have no doubt, my Lords, that these matters have occurred to Her Majesty's Government, but many of us are concerned to know what plans the Government are making to deal with the situation. There can surely be no strategic or security considerations involved in planning for peace. And we can get on with these plans without letting up by one iota the other great tasks that we have on hand under the United Nations and as a member of the North Atlantic Treaty Organisation. We should like to know who is going to be responsible in the Government for those plans. To whom can we look for some report on what progress is being made in this matter? Are the Government planning to have discussions with representatives of trade and commerce, in order that plans may be prepared in advance to deal with this matter? Can we be informed what arrangements the Government are making for discussions with the United States of America, and the Governments of other free nations, so that there can be made the joint plans which are so necessary if the world is to be saved from

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a repetition of what has happened to us so often in the past? I appeal to Her Majesty's Government to plan and make sure that, when peace comes, its blessings will be enjoyed by our people, and that they will not be mocked of their heritage by our unpreparedness and neglect to tide over the vital interim period of transition from a war economy to a peace economy.
6.7 p.m.
LORD RENNELL: My Lords, I shall not detain you long, if only for the reason that the noble Lord, Lord Brand, has said a great deal of what I had planned to say, and I find myself in complete agreement with him. There are one or two points that I should like to take up, especially from Lord Pethick-Lawrence's opening speech, and from what your Lordships have just heard from the noble Lord, Lord Macpherson. In the first place, I should like to support Lord Pethick-Lawrence's plea for some simplification of the Papers relating to our economic situation which appear at this time of the year. The fare is indeed indigestible, and, moreover, is contained in a number of courses, some of which overlap—rather like mixing fish and joint on the same plate.
My complaint is not so much about the information provided as about the form in which it is provided. We have an annual Financial Statement, which appears just before the Budget; we have a Paper entitled Preliminary Estimates for National Income and Expenditure; we have the Economic Survey, and we have another Paper on The Balance of Payments. I believe that it would be possible to combine these Papers and the tables in them in one Paper instead of having three different documents which do not always appear simultaneously and which, on certain points, are extremely difficult to reconcile. While on that point, I should like to make one further plea in connection with the showing of the figures of our national economic situation and financial situation by asking the noble Earl who is to reply to this debate whether it would not be possible now for the Chancellor of the Exchequer to present full Budget Estimates and Budget Accounts in what is known as the alternative form which has been adopted for some years past in the Financial Statement.
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This it not entirely a technical subject, and it has a considerable bearing on the figures which are being discussed by your Lordships this afternoon. As your Lordships are aware, at the end of the Financial Statement there are two sets of tables showing the Estimates of the previous year and the out-turn, in what is called the conventional form of accounts. On the opposite page the same figures are totalled under the alternative classification. I think it has long since been recognised that the old conventional form of issuing Budget figures and Estimates is outmoded by modern practice. Whilst the alternative classification is by no means perfect, it represents a great improvement on the form in which figures were formerly shown. The alternative classification has by now become sufficiently familiar to people who study such things for it to become now the standard classification, with the old conventional form shown side by side with it for some years to come, until it passes into oblivion.
My Lords, as it appears to me, and as is very important so far as other people's opinion abroad about this country is concerned, under the alternative classification, the annual current in-and-out payments on what might be called the current account on the Budget—that is, the over-the-line accounts—produce a considerably more favourable picture of our true Budget position than does the old form of accounts. As your Lordships know, the Budget figures above the line for the financial year which has just closed show a surplus of £80 million; but taken in with the below-the-line account, they show a substantial deficit. In point of fact, under the revised form of accounts the surplus is very considerably larger, because a number of items which formerly appeared above the line have been transferred below, being figures of expenditure which have to be met either out of surplus on the current account or have to be borrowed. In other words they are really in the nature of capital expenditure. I believe that our Budget position abroad (and I have recently come back from America and Canada) would have been regarded considerably more favourably if the alternative classification had been in common use, where the annual incomings and outgoings on current account were very much larger.

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My reason for bringing up that rather technical point is that the economic position of this country depends not only on what we do but on what other people think we are doing. To a great extent the present strength of sterling is a reflection of the opinion held by other people abroad of our efforts. That opinion can be measured only in figures. The figures which are available—as I claim, the standard figures—are not a true reflection of our position, which in fact is rather better. I must say that my sympathies are largely with the lady acquaintance of the noble Lord, Lord Pethick-Lawrence, who I am glad to see associates with such sensible people. I rather wonder whether a service is always done by some acquaintances of the noble Lord, Lord Pethick-Lawrence (not the noble Lord himself), in their criticism of the figures of our effort and of our financial situation. That is especially true in respect of the effect abroad; it matters less in this country. I can only hope that the noble Lord, Lord Pethick-Lawrence, will continue to move in those same circles, because I noticed, in what he said, that he appears to have changed slightly over the last two or three years in regard to some of the doctrines which he himself held.
I remember a considerable controversy that I had with him about two years ago in your Lordships' House on rates of interest and rates of money—a subject which he brought up again to-day. I thought he was much less unfavourably impressed by the policy of tightening money and the effect that it had. In fact, he referred only to one point as a really definite black mark—namely, the effect that it had on production costs. The noble Lord, Lord Brand, also referred to that point. There is little doubt in my own mind that the cost of money has had some effect on production; but whatever bad effect it has had has been wholly outweighed by the deflationary effect and its effect on the general financial position. Above all, it has had a very considerable effect abroad, in making people there feel that we are taking things seriously enough to put ourselves and our trade in this country under the disadvantage of having to pay more for our capital and our current funds. But if that has had some effect on pro-
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ductivity, it has obviously had very little.
On the other hand, it has had a much more important effect, and one which I had not heard referred to this afternoon in your Lordships' House. Lord Cherwell and Lord Pethick-Lawrence dealt with figures of stocks that were being carried here. By and large, it appears to be true that stocks have not decreased in the country as a whole, though the rate at which they are being brought in has, as Lord Cherwell rightly said, decreased, because a level had been reached at which a further increase appeared to be unnecessary. But what is very nearly as important is that the cost of money in this country has encouraged people who hold stocks to dis-hoard them and let them out. Coupled with the removal of controls on so many of the primary articles required in manufacture, this has led to dis-hoarding of stocks on a very considerable scale. There is in fact practically no manufacturing concern in this country to-day that has not, in some form or another, dis-hoarded stocks. They have been induced to do that, partly by the cost of carrying them, but also largely by the knowledge that, with the removal of controls and the reorganisation of future markets, they had got into the position of being able to buy what they wanted when they wanted it, instead of having to take up stocks when they could and putting them in their backyard and carrying them on bank overdrafts.
I cannot give the figures this afternoon, because it would take too long, but if your Lordships will follow the course of commodity prices in, for instance, base metals, you will find that, with the exception of copper and various other absolutely key commodities, the reorganisation of open markets has been directly responsible for a decline in prices. A decline in prices of raw materials may, as many of your Lordships have said, have either an adverse or a beneficial effect in this country. Inasmuch as the raw materials produced within the sterling area go to the United States, and they pay less for them, it is, of course, an adverse factor. On the other hand, the figures in these documents which have been published show perfectly clearly that the terms of trade have been more favourable—and that during a period of sharply faking commodity prices. In other words,

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while prices were falling trade has been more favourable to us. We have had to pay less for commodities which we import; our customers in the sterling area who buy them have had to pay less too, but we have obtained higher prices for exports. Putting it another way, the period of falling commodity prices in which we are now—and which, as I see it, is likely to continue—is not having an adverse effect on our terms of trade.
That brings me to the subject which was raised by the noble Lord, Lord Macpherson. Of course, it is true that a recession on a considerable scale in the United States would have a profound effect on our economy and on the economy of practically every other country in the world, except, possibly, those countries behind the Iron Curtain. It is equally true, as the noble Lord, Lord Pethick-Lawrence, has said—in considerable contradiction to the views which many of his colleagues used to hold a short time ago—that ours is not an isolated economy; it is an economy which is as dependent on world conditions as is the economy of any other country; even the economy of the United States is dependent on world conditions. We cannot isolate ourselves by planned internal economy, by nationalisation, or by any of the other dogmas to which we have been treated over the last six or seven years. It was a common doctrine a few years ago that we could isolate ourselves from the impact of other countries. That is manifestly untrue; it has been shown to be so; and it is not a dogma which Lord Pethick-Lawrence has ever held. So I particularly welcome what he said this afternoon.
LORD MACPHERSON OF DRUMOCHTER: Before the noble Lord leaves that subject, would he not admit that any serious fall in commodity prices, especially in respect of primary purchases from overseas countries, must have serious repercussions on our export business, so much of which is done with primary producers overseas?
LORD RENNELL: All I know at the moment is that the fall in commodity prices, which has been considerable over the last eighteen months, has had the effect of improving our terms of trade up to date.
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To continue with the subject which the noble Lord raised—which is the impact of the American economic situation on ourselves—and his inquiries about what steps had been taken or are being envisaged if a slump takes place. May I say that I think the noble Lord takes an unduly pessimistic view in what he says will happen in the United States—and he will, perhaps, allow me to correct his statement to What "might" happen in the United States, unless he sets up as being an infallible prophet. I think he is, to some extent, under a misapprehension which is fairly common in this country and is really innate in the series of articles which recently appeared in the Economist. It is a supposition widely held in this country that the United States during the last period of intensive rearmament has so developed its economy as to have what used to be spoken of as both guns and butter. In other words, they have developed their capital equipment to provide for practically full consumption of consumer goods in the United States at the present time, and have also developed capital equipment to produce armaments. That is only partially true. On the other hand, it is said that we in this country, owing to our more limited resources, have had to stint ourselves in capital development to provide for rearmament and have had to keep consumption very tightly screwed down.
The second premise may be true; the first premise is not, I submit, true. It is true that American production has provided for the ordinary consumer goods required from day to day. It is also abundantly true, as anyone who has travelled in the United States or knows anything about conditions there knows full well, that capital expenditure on public works, housing and suchlike, in the United States, has been very tightly held in check during this period of rearmament. And there are, as is well known, tremendous arrears of work requiring to be done in the United States to-day. School housing, for instance, is years in arrears. The same is true of hospital accommodation. Road building and road improvements are many years in arrears. And I am wondering whether the noble Lord is not under a misapprehension in his view of what will happen if rearmament is slowed down or substantially stopped over a period of

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time—no one is going to suggest, of course, that it can be stopped from one day to another. There is so much work still left to be done that can take up all the capital equipment which had been devoted to other production, and still require more. In other words, in regard to the slump which the noble Lord said will take place, and which I say might take place, there are a number of factors to consider—or perhaps I should say that there are a number of factors in the American situation which make it, in my view, improbable, rather than otherwise, that a big recession will occur in the United States.
Such being the case, so far as we are concerned the impact of more peaceful conditions—the "outbreak of peace" to which the noble Lord referred—or the gradual advent of more sensible ideas in the countries behind the Iron Curtain about what are the right relationships between the nations of the world, enabling us also to slow down on our rearmament programme, will immediately present us with several possibilities. One possibility is to use the capital we have got not for the building of war factories and the creation of more armaments, but for those many things which everyone in this country knows ought to be done and which we have not been able to afford. Secondly, the release of American capital for foreign investment is at the present moment proving a considerable problem to the United States. It is not true that the United States has unlimited capital resources that can develop the whole world. It has become increasingly difficult in the United States to persuade people to find the money to carry out the development overseas which they would like to do. But the change over of expenditure, the change over of production from war to peace conditions, is one which, in my opinion, can take place in the United States, and, above all, here, without the development of the difficulties which the noble Lord has at the back of his mind.
There is, however, one extremely limiting factor so far as we are concerned—and it is one to which Lord Brand has referred on many occasions in this House and to which I also have referred in the same context. That is the acute shortage of new capital created in this country. I do not want to pick out difficulties; far be it from me to do that—there are
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so many people in the world to-day engaged in trying to pick out difficulties—but it is really a little worrying to find these very guarded statements in the White Papers. For instance, in the Economic Survey, on page 50 it is written that:
"Last year, though the evidence is uncertain, personal savings appear to have increased; and it is to be hoped that this improvement will be maintained."
That is pretty guarded. They do not display undue optimism. I will not go into the figures of savings: they are all very arguable, as the noble Lord, Lord Pakenham, knows. The figures published are usually residual figures, which change from quarter to quarter. But there is one other set of figures to which I wish to draw your Lordships' attention. They are in the other White Paper, The Preliminary Estimates of National Income and Expenditure. On page 7, in the third table, is the aggregate account of company earnings, taxation and savings. The table shows that after certain sums are paid out in dividends and certain provisions for taxation are made, there is left in the aggregate a balance of £1,319 million for 1952, which is substantially lower than the balance for 1951 and approximately the same as it was for 1950. That is the balance which corporations have, by way of accumulated depreciation funds and moneys not paid out, to re-equip themselves and modernise their plant. That is a dismally low figure.
All the figures of savings and the creation of capital give grounds for a great deal of anxiety. These funds cart obviously be increased by decreases in taxation, but what is needed is that the productivity of the country and the creation of capital should be steadily increased, because without that I find it difficult to see (and I know my noble friend Lord Brand agrees) how we are going to be in a position to finance expenditure which we know has to take place in this country and in those countries overseas for which we are directly responsible. A concession on depreciation was given by the Chancellor of the Exchequer. I will not go into that at this hour of the night. The Chancellor gave back again the allowance for depreciation on plant and machinery in early years. I should like to say one thing which I think needs saying. The extended initial

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depreciation is of value only so long as it remains. If it is withdrawn again after a couple of years, it has no effect except to provide a loan from the Treasury to companies for a brief period to pay for more plant. It is only if depreciation allowances for corporations are increased that modernisation and extension of plant become possible out of the corporations' own resources.
I agree entirely with the noble Lord, Lord Brand: I should prefer to see tax remissions given to companies and corporations rather than to individuals, and I hope that such further concessions as may become possible next year will be granted in that direction. It is obvious already, and nowhere so obvious as in the shipping trade, that the present depreciation allowances are totally inadequate. The depreciation allowed on ships is totally inadequate to keep our Merchant Service going. I think I am right in saying that the rate of depreciation of ships is 6¼ per cent. on values when the ships were built. By no stretch of the imagination can a ship be built on that scale of depreciation before the ship whose place it is to take falls to pieces. It is in that direction that the next concessions and relief must be given, and without that relief I do not see how industry in this country can get into the state of productivity in which we should all like to see it.
6.34 p.m.
LORD ARCHIBALD: My Lords, in the comparatively few years during which I have had the honour to be a Member of your Lordships' House, I have taken a particular interest in the debates on economic affairs which we have had from time to time. I think noble Lords will agree that they generally find the House at its best then, and the speeches, though not devoid of Party political content, at least, in contrast with other occasions, tend to minimise the Party political flavour. It was the more disappointing, therefore, that we should have had this afternoon from the Government's first spokesman such an extraordinary speech as that to which we listened from the noble Lord, Lord Cherwell. It covered a great deal of ground, but it was surprising for one omission: there was no reference to economies in Government expenditure. This was particularly surprising because the noble Viscount,
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Lord Samuel, had made reference to this question. It was one of the features of last year's Budget that expenditure was up by £200 million over the Estimates, and the Estimates for the year which we have just started show an expenditure of £108 million over last year's Estimates. I suggest that if these figures had been put forward by a Socialist Chancellor of the Exchequer we should have had denunciations of his extravagance, and I hope some reference is going to be made to that point. I do not propose to refer further to the speech of the noble Lord, Lord Cherwell, except to say, on his reminding us that the Prime Minister in Glasgow had reassured us that there would not be an early General Election, that if rumours of an early General Election become rife again, we must attribute them to the fact that the noble Lord's speech this afternoon can most charitably be described as electioneering, although probably not electioneering of a very high order.
In an interesting speech, the noble Lord, Lord Brand, said he thought that, on the whole, the monetary policy had had a good effect. I want to look for a moment at the monetary policy with reference to one industry. In general terms, what was the expected result of the Chancellor's action in raising the bank rate? We have had many references this afternoon to the falling off in production. in exports, and in trade and industry generally, which I do not want to exaggerate; but surely the whole point and purpose of raising the bank rate was to cause a decline in trade and industry. If it was not going to do that, it had no other purpose. I think the Chancellor has himself indicated that, and to my mind it was clearly implied in the speech of the Economic Secretary to the Treasury in another place during the Budget debate. The purpose of an increased bank rate is surely to restrict trade and industry and reduce employment. That is not something new. Noble Lords will probably remember the evidence of the late Lord Norman, then Mr. Montagu Norman, before the Macmillan Commission on Trade and Industry. In reply to questions by the late Lord Keynes (then Mr. Keynes), Mr.Montagu Norman made it clear that an important consequence of a high bank rate, and a quite deliberate intention in certain circumstances, was the creation of unemployment.

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That has not changed. I am not saying—and I hope there will be no misunderstanding about this—that the raising of the bank rate was designed to create mass unemployment; but it was designed to create such a recession as would make it a deflationary instrument. I do not think there can be any controversy about that. Mycriticism of it is that it is a blind and completely undiscriminating instrument for the purpose. Further, I do not think the good effects that have been attributed to it really flow from it at all, hut flow from the other part of the policy which accompanied it—namely, the instructions from the Chancellor and from the Treasury to the banks as to the directions in which they should give advances and the directions in which they should limit advances. It is true, of course, that between November, 1951, and February, 1953, the dates for which returns have been made, there has been a switch of advances from the less useful to the more useful industries—that is, with one exception, to which I will refer in a moment. My point is that that switch of advances has not been brought about by the high bank rate, but as a result of the instructions given to the banks as to the credit policy they were to pursue, and that these beneficial results could have been obtained just as well without the dear money policy which is in operation.
We are all too painfully familiar with the other unfortunate results of the dear money policy, such as the increased cost of servicing the National Debt, but there is one other result to which I think no reference has been made this afternoon. As we know, for the past year there has been a drop in invisible earnings of some £85 million, which includes £30 million for the increased interest payment on sterling balances in London. The noble Viscount, Lord Samuel, in reply to a point made by the noble Lord, Lord Pakenham, said that among the things he would not do if he were a Chancellor striving for economy would be to embark on such a scheme as the groundnuts scheme. I think I am right in saying that the total losses on that scheme were of the order of £36 million. The dear money policy is costing us £30 million a year on these sterling balances in London, and there is not, to offset it, the social advantages to the native population of
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Africa which flowed from the groundnuts scheme. I believe that the only justification for the high bank rate which has been made in this House, in this debate or in previous debates, was its psychological effect at the time, in creating a sense of shock and urgency. It is too late to argue whether that is true or not, but, at any rate, it no longer holds good, and I would suggest that the justification for a high bank rate no longer obtains.
I want to carry that general argument over to one particular industry which is of tremendous importance to the economic affairs of the country, although it has not been mentioned this afternoon—namely, the agricultural industry. In connection with the flow of bank balances, I mentioned that advances to useful industries have in the main increased, with one exception, and the exception is agriculture. The amount for agriculture and fishing has gone down, I believe, by something like £2 million. Unfortunately, one cannot take agriculture by itself, and it may well be that it is rather more than a £2 million drop in the case of agriculture and an increase in the case of the fishing industry. In addition, the figures of the Agricultural Mortgage Corporation, which have just been published, show that advances during the past year have gone down by £460,000, while at the end of the year advances approved, but not yet made—waiting for legal formalities, and so on—have gone down by no less than £1,360,000. So that on bank loans and loans by the Agricultural Mortgage Corporation alone there is a drop of something of the nature of £4 million in the capital available for agriculture. That. I suggest, is a matter of great importance. We want an expanded agricultural production in this country. To expand agricultural production, as everyone knows, means more capital in. agriculture, and more, finance on which to base the expansion. How it can be expected that agricultural production will increase, when the flow of money available is decreasing, it is difficult to see.
I believe that a far greater amount of new capital is required in agriculture than is generally recognised. Anyone who is looking for a farm, particularly to buy, and visits, as I did a few years ago, a considerable number of farms on the

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market, cannot but be struck by the obsolete nature of the farm buildings in this country, with a few honourable exceptions where new buildings have been put up recently. In most cases, even where the buildings have been maintained in good condition—and that is not by any means always the case—they are generally a hundred or more years old, and, however good they may have been for their original purpose, they are quite unsuited to modern mechanised farming methods: they are wasteful of labour, and they tend, because of their obsolete lay-out and construction, to nullify to a great extent the mechanisation which has been carried out. I should think that probably hundreds of millions of pounds, possibly anything up to £1,000 million, of new capital is required to equip British agriculture with the type of buildings needed for modern conditions.
But farmers are not borrowing, either from the bank or from the Agricultural Mortgage Corporation, as they were a few years ago. Why is that? It is because the margin in farming just will not carry a 6 per cent. money rate. I suggest that, with the need for increased production in this country, and with the need, in particular, for increased agricultural production, there is a strong case for cheaper money being made available. I am not making the proposition that there should be cheap money for farmers only. I believe that you would take a burden off industry, off the service of the National Debt, and off the cost of interest on sterling balances in London by a cheaper money policy, and I hope that there may be some indication that the high bank rate and dear money is not to be a permanent feature of the policy of the Government.
6.50 p.m.
LORD BALFOUR OF INCHRYE: My Lords, your Lordships have had a debate which has been adorned by many authoritative speeches. All speakers, including the noble Lord, Lord Pethick-Lawrence, have paid tribute to the achievements of the Chancellor of the Exchequer. Full credit was given to the Chancellor for the improved position, but nevertheless I refer to The Times leader following the Commonwealth Conference, which said this:
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"There has been no sort of public admission that further unpopular measures, in addition to those taken during the past year, will be needed. But it can scarcely be contended that the measures already taken will be adequate for the long-term purpose."
It is on the long-term purpose that I should like to address your Lordships for a few moments. I would remark that hardly a word has been said in four hours' debate on the subject of the British Commonwealth and the recent Commonwealth Conference, the results of which showed the lines upon which Her Majesty's Government are thinking and wish to act. Our economic future, whatever may be the state of the world, must be linked to that of the Commonwealth and Colonial Empire, because a combination which produces four-fifths of the world's nickel, one-quarter of the copper, whose sterling area members produce three-quarters of the world's tea, half the wool, rubber and chrome, nearly half the tin, two-thirds of the manganese, a third of the world's hard hemps, a quarter of the coal and sugar, and various other primary requirements that I will not stipulate, cannot be ignored, either by the sterling or by the dollar world.
The Foreign Secretary, Mr. Eden, whose bad health we all deplore, and whose recovery we all hope for, and the Chancellor of the Exchequer, have both declared that there is "no intention of creating a Commonwealth economic bloc." This issue was summarised by the Chancellor of the Exchequer when he said (OFFICIAL REPORT, Commons, Vol. 510, col. 1683)—and I think he put it very clearly:
"The question was whether we should look outward or inward, whether we should aim at autarchy, self-sufficiency or whatever we like to call it, or multilateralism or widening of trade, whether we should look for the solution of our problems in restrictions or in expansion through freer trade and commerce."
That was the question as put by the Chancellor of the Exchequer. Britain is now pledged by her leaders to work in favour of no restricted, favoured sterling Commonwealth-Western Europe trading area, but for freer trade and towards world free trade. This must carry with it the abolition of quotas, the drastic reduction, if not the abolition, of tariffs and eventually preferences, and, of course, the eventual convertibility of currencies. Your Lordships are always kind

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to noble Lords who do not take the conventional view, and I claim your indulgence when I say that I believe this policy may fail and is likely to break down in two directions.
First, is the American co-operation, essential to the success of this multilateral policy, likely to be forthcoming to the required degree? Will the Republican Party turn away from concentration on maintaining a balanced, self-sufficient, self-stimulating policy, and abolish or haul clown tariffs to allow us to close our dollar gap by the United States absorption of our exports? So far there has been little but words in that direction which are hopeful to Mr. Butler's policy. The noble Viscount, Lord Samuel, react us President Eisenhower's World Trade Week Declaration. The same week that President Eisenhower was making those fine statements, you can read the report in the Financial Times on the House of Representatives' Committee's hearings on the Simpson Reciprocal Trade Act Extension Bill. You can read the evidence of Mr. Strackbein, who is chairman of the newly formed Committee of Industry, Agriculture and Labour, and also chairman of the National Labour Management Council on Foreign Trade Policy, advocating higher and tighter U.S. tariffs and supported by numerous industrial witnesses. That is action; the other is words. Protectionist symptoms are, t think, expressed in the refusal of the British electrical tender and, I believe, to some extent in the atmosphere surrounding the resistance to the granting of certificates of airworthiness for our Comet aircraft.
The noble Viscount, Lord Samuel, asked me whether I approved of the refusal by the American authorities of the British electrical tender, which was lowest. Of course I do not approve of that refusal while there is a Government who are pledged to all the fine words which the noble Viscount read out in President Eisenhower's World Trade Week Declaration. If a Government are not pledged to multilateralism, dim I think—although I should regret it—that they are perfectly free to take what particular line they want. The noble Viscount, Lord Samuel, then asked rue what I should think if a tender submitted to a public authority in Britain from a foreign country was considerably
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lower. Quite frankly, if the margin was not too great, I should wish to see a British tender accepted, in preference to the slightly lower foreign one.
VISCOUNT SAMUEL: But suppose the margin was great, as in the case of America?
LORD BALFOUR OF INCHRYE: I think that is a hypothetical question, because we pride ourselves—and the noble Viscount has made many speeches on this subject—on our ability to compete in the world markets and to produce better and cheaper goods than anyone else. Supposing there were great unemployment in the British motor car industry, would the noble Viscount and his Party advocate the purchase of foreign motor cars for public authority use at a considerably lower price than British cars? I should like to ask the noble Viscount a question. I am sure he will not mind—a Roland for his Oliver. Supposing that there were unemployment in Coventry, and the London County Council wished to buy 1,000 motor cars, would he support their buying French Renaults or German Volkswagens?
VISCOUNT SAMUEL: That would not be a purely economic question—it would be a kind of philanthropic question. Similarly, in strategic cases, where you want to secure the production of a particular foodstuff, you might, in particular cases, prevent foreign imports from coming in. But I am dealing, by and large, with the whole system of trade. These are exceptional cases. In ordinary cases, where there is no unemployment, if the import showed a very considerable margin would the noble Lord, on grounds of principle, refuse it because of the plea of "Buy British," and if so, why should not the Americans use the plea of "Buy American"?
LORD BALFOUR OF INCHRYE: I believe that the Americans are perfectly at liberty to use the plea "Buy American" if they are not at the same time paying lip service to multilateralism, in the way that President Eisenhower is doing in his declaration. However, as the noble Viscount said, we could quote exceptional cases to each other, and we will not detain your Lordships on that. I think there is no difference between us, that all the symptoms of action on the

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other side are not towards a wholehearted acceptance of the Butler conception of multilateralism. President Eisenhower's words may be, but the actions so far are not; and it is, I believe, because the American Republican Party will not accept in full the Butler plan that I believe we may be disappointed in our expectations. I think it is more likely, as peace develops, that the primary commodity prices and metal prices will fall, and consequently we shall see a bigger deficiency in our dollar position.
I was very interested in the speech of the noble Lord, Lord Macpherson. I believe that if the United States cannot absorb fully and quickly the dislocation of turnover from arms to peace production, we may see some temporary recession in the United States; and a recession in the United States means that they will become less willing importers and more ardent exporters. It is interesting to look at the actual results of a recession in the United States on the American imports from the sterling area and from this country. Mr. J. M. Cassells, director of American Economic Co-operative Administration Special Mission to the United Kingdom, in 1951, in his book Three American Recessions 1929–30, 1937–38 and 1948–49 shows that after one year of recession, the total consumption of imports declined by 4 per cent. Imports from the United Kingdom declined by 33 per cent. and imports from overseas sterling areas declined by 34 per cent. In the recession of 1929–30, after three years of depression, United States consumption declined by 37 per cent. but their imports from the United Kingdom had declined by 77 per cent.
The second direction where I think Her Majesty's Government's policy is likely to break down is the open door trade policy with adherence to G.A.T.T. and subsidiary agreements, which leaves our domestic and Colonial markets exposed to a steadily increasing Japanese and German competition. The whole trend of Mr. Butler's policy is to accept this risk in the alleged greater interests of multilateral world trade stimulation. But the products which are coming on to the world's markets in increasing quantities are made by nations that do not carry the overheads of a Welfare State and which have standards of life that we would not accept in this country. In the
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face of this threat, we should have either to lower our own standard of life or give a measure of protection to our home and Commonwealth trade against outside competition.
There is nothing immoral in this idea of discrimination in favour of trade with our own Colonies and Dominions. I would pray in aid Professor Lionel Robbins. In Lloyds Bank Review of January of this year, Professor Robbins says:
"In a world in which high tariffs and other obstacles to trade are imposed by almost every nation, there is certainly no need to feel more guilty than the rest at arrangements which, if they restrict trade in certain directions, release it in others. And if the canons of international good behaviour are held to permit the formation of customs unions, there are few arguments in principle against the extension of preference. Each case must be judged on its merits and in relation to our general interest—which includes, of course, the maintenance of the political solidarity of the Commonwealth and the Western Alliance."
Hence, my regret at the Commonwealth decision not to present a united front in favour of restoring economic liberties and shedding the shackles of G.A.T.T. and subsidiary agreements. It is true that the Commonwealth Economic Conference communiqué says that the effect of the support of members of the Commonwealth is to make possible some approach to the other contracting parties and to ease relations in certain directions. That passage is very indefinite, and I should like to hear from the Government at some time what is actually being done in the particular direction mentioned.
Nevertheless, I believe the Government are entitled to full credit in that it did succeed in preserving unity at that Conference, even at the cost of surrendering some of our hopes and some of the Government's principles. I believe that the Government's great achievement is in getting the Dominions to concentrate capital investment on producing things which are essentially aimed at closing the dollar gap. I would regard this last Conference, as an interim conference; and whether following that Conference we continue along the lines which Mr. Butler took to Washington depends upon America's views and America's actions.
My final word is this. If the Butler plan is not embraced fully in Washington, we may soon find ourselves marching

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along an alternative road of primary concentration on the sterling areas, the British Commonwealth and Western Europe. I believe that the revival of world trade has nothing to fear from such a policy. Always in the past an increase in Imperial trade has carried with it an increase in world trade. If America does not travel along the road of multilateralism for which Mr. Butler hopes, I believe Britain will travel along the alternative road, with full partnership of those who hesitated at the last Conference but who will be with us at the next Conference and thereafter along that alternative road.
7.7 p.m.
THE EARL OF PERTH: My Lords, in economic affairs I am a great believer in the individual and in individual initiative. To me, one of the most important developments in the last year in the economic field has been the fact that the Government have encouraged individual judgment and individual choice. Of course, in these days the broad economic policy must depend on Government control and direction; but I believe that wherever possible their aim should be to build a framework in which the individual can act. It is riot for the Government to act on its own account.
Having made this short economic confession of faith, I want to turn to a particular subject—increased savings. I speak of savings where the individual particularly is concerned. I noted with satisfaction that the noble Viscount, Lord Samuel, and the noble Lord, Lord Rennell, touched on this question, because, of course, savings are vital to the well-being of this country and, indeed, for the well-being of our Commonwealth. They are needed here for industrial re-equipment and so for the cheaper production of goods. In the Commonwealth savings are needed for the development of the output of primary products. Furthermore, an increase in savings at home will do great things for our trade balance, and it will also help to provide funds for capital equipment investment in the Commonwealth.
Lately, fresh encouragement has been given by the Government for industry to save, and something has been done for the individual. I believe there is a great opportunity for more to be done to encourage the individual worker to save. It is, indeed, from the worker and his
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earnings that we must hope for improved savings. He needs an incentive to save—for example, life insurance for his wife and children, recourse to a building society for a house or a particular luxury, such as a television set, if he wants it very much. I remember seeing the other day some figures which showed that 40 per cent. of the television sets in this country are owned by workers who earn less than £8 per week. That shows that, given an incentive, there is a possibility of saving being effected.
To-day, there is good prospect of a stable pound and a halt in the cost of living, and therefore I think this is an appropriate moment to make a real savings drive. This drive could be varied to suit and attract all tastes: for example, for those who like to have a go at the football pools, I suggest some form of premium bonds. Many people look on premium bonds as a terrible form or gambling, but I believe that we could so arrange things that there was no risk of people losing their capital; the most that, they would forgo would be the interest, and that would revert to the lucky people who drew in the premium drawings. Or, again, I believe that those who want a house might be given special encouragement and help in approaching building societies. There may be others who would like to invest in industry. There are many who do not know how to do it and it is not made at all easy.
That brings me to a particular point which I should like to call the mechanism of saving. In the U.S.A., an immense success attended a movement which is known as the "open-ended trusts" and, further, great success has attended company schemes for enabling employees to buy shares in the companies in which they work. We have seen various suggestions at home that such things as the penny share units should be developed. Again, I believe that the question of distributing shares, or other types of saving, should be carefully considered. For example, I think we might use such things as the chain stores; or the banks or the post offices might be persuaded to sell new wares. The Government themselves should, I believe, consider whether there is any direct action they can take to encourage saving: for instance, whether they could not

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do something to simplify the tax procedure for the small investor, or whether it really is worth while making these investigations of savings accounts. Then again, I believe that the Capital Issues Committee has some sort of ban on the investment trust movement which prevents it from making new share issues.
I have, I think, dwelt long enough on this subject. I hope that I have shown that savings are of great importance, that it is important to make a new savings drive and that there are many new ideas which should he explored in connection with this drive. The field is a wide and fertile one. I should like to make a specific suggestion—namely, that the Government should consider setting up a Working Party or Committee—call it what you will—to go into the whole of this question and to see whether and how we can encourage new savings. This body should invite suggestions from all corners, and the more imaginative and novel the suggestions, the better. In due course, the body would recommend to the Government which avenues offered the most promise, and the Government, in their turn, having decided which should be followed, should then leave subsequent action to the individual and individual initiative. That, I think, is where I started, so it is an appropriate moment to end.
7.15 p.m.
LORD BARNBY: My Lords, the two Motions on the Paper afford a sufficiently wide scope for dealing with both financial and economic thoughts. The financial ones have been dealt with. On the economic side, which includes the employment question, there has been a massive review from a great number of speakers. With your Lordships' indulgence, I will address myself particularly to one aspect of that overall question of employment and appropriate production in the country.
The Commonwealth Conference, which took place in the spring of this year, was followed by a Report which included the recommendation that it would be wise if the United Kingdom re-aligned its total production so that it concentrated less on exportable goods that could be easily produced by other countries, and transferred that productive effort to the type
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of capital goods which are so much in demand throughout the world, not only in the Commonwealth but in other countries. Anyone who has recently been in Australia—and I am sure the noble Lord, Lord Rennell, if he were in the House at the moment would agree with me, because he has recently returned from Australia—knows that the position to-day is the same as it was last year: Australia badly needs capital goods of all kinds for expansion, but this country is unable to supply them in time, even though the price may be right. The point, therefore, is that certain industries, hitherto contributing generously to export, should be substituted for others also capable of exporting. This, of course, would involve a great change-over of plant and employment.
Let me give textiles as an illustration: they have been mentioned. I suppose that the production in an area like Lancashire of capital goods of high engineering character, in place of cotton textiles, which have to be run with dollar-imported raw material, must be right; but that involves considerable fluidity of labour. How is this to be implemented? I raise this point to-day. While one cannot expect an answer on this point now from the noble Earl who is to reply for the Government, I hope that he will see fit to report in the proper quarter that it would be helpful if those industries which are so threatened could be given an early indication of what is in mind. Another angle to that is that a great deal of the plant of this country is of considerable age, and the logical thing would be to concentrate on the operation of effective plant and put to the hammer the less modern plant. That involves multi-shift operation, and that is the point which I hope the noble Earl will commend to the proper quarter; that some encouragement be given to industrialists to see how this desirable course is to be worked out.
Another angle to this question is its effect on textile industries. The noble Lord, Lord Cherwell, made reference to the unemployment which occurred in the textile industries in the severe recession of last year. I wonder how, in the ensuring that at all hazards there shall be full employment, there is going to be a plan dealing with the curious situation in industries which are subject to fashion

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changes or seasonal purchase. That is something on which those engaged in the industry would welcome guidance.
There was recently appointed a Committee to deal with the question of migration from this country. Doubtless that Committee will review the whole question, but there is one point in particular that I wish to raise, that of the impounded funds of migrants to Canada. I think that further consideration might be given to relaxing the restrictions on withdrawals by migrants. In urging consideration of that, I would draw the noble Earl's attention to the statement in another place last week that the permitted investment—that is, new investments authorised by the Bank of England—in Canada in 1953 amounted to £7½ million sterling. That is an encouraging indication of a new outlook by the Government. In that connection, I would ask the noble Earl whether he will urge on the Treasury, the Bank of England or Exchange Control, that consideration should now be given to permitting United Kingdom holders of dollar securities, particularly if they are other than common shares—that is to say, if they are bonds or preference shares—the privilege of switching from one investment to another and not to obligate repatriation or forced sale in Canada.
I appreciated the speech of the noble Lord, Lord Balfour of Inchrye. I think he made an extremely good point in suggesting that those who thought the United States are going rapidly to reduce their tariffs are mistaken. Moreover, I have a suspicion that if, as he suggested, there was a big inflow of goods purchased from countries with low wage costs (I do not call Japan a country with a low standard of living just because they can live on rice, whereas we live on meat), there would be a demand for safeguards, just as previously there was a need to give protection to British labour by the Safeguarding of Industries Act, when cheap French labour followed the devaluation of the franc. We all admire courage in this House, but I particularly admired the noble Earl, Lord Perth, in recommending premium bonds. I have a vivid recollection of a similar recommendation in another place after the First Great. War, when Horatio Bottomley was the leading proponent. I followed him and admired his courage, and the country admired his courage.
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There is another matter with which I wish to deal, the question of purchase tax on textiles. There is no need to elaborate this matter, as recent letters in The Times make clear what is wanted. Why should textiles have been singled out not to receive any part of the reductions which the Government have given? It would not be proper for anyone connected with the textile trades to sit down without registering emphatic disappointment with the Chancellor of the Exchequer for singling them out for omission from any relief. And when that view is supported by no less an authority than an ex-Chancellor of the Exchequer, the noble Viscount, Lord Waverley, I wholeheartedly commend it to the consideration of my noble friend who is to reply.
7.27 p.m.
LORD MONKSWELL: My Lords, for some years past I have been greatly alarmed by the way this country is living on capital. I have followed the debate this afternoon with great interest. A certain number of noble Lords have touched on the subject, but I have not gathered very much from what they have said about it. To my mind, it is difficult not to deplore the way in which the facts which control financial policy are ignored. I am afraid I must begin with a few rather simple facts. Civilisation is due to and depends upon work; work produces capital, and the continuance of civilisation depends on more work, powerfully aided by capital. For maintaining any kind of real civilisation capital is absolutely necessary. Men and women will work to accumulate capital for themselves, and even more for their own children, but have little desire to do so for the benefit of the tax-collector. It follows that any capital tax, more particularly death duties, are the strongest possible deterrent to the accumulation of capital. On the other hand, the vast majority of people have a violent objection to seeing other people better off than themselves and are easily persuaded to use the political power they may have to plunder these others. In fact they are doing all they can to make impossible the accumulation of capital by the thrifty, who obviously are in a better position to do it than anyone else, if allowed to do so.
For centuries, capital was accumulated in this way; and, owing to the freedom from invasion enjoyed by this country

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and the comparative absence of civil war and internal disturbance, Great Britain probably became the richest country. In order to continue thus, capital must continue to be available and at least sufficient to maintain and develop our assets. I need not go at length into our present failure to save such capital. Every democracy lives in a state of constant danger lest the poorer majority should use its political power to plunder the savings of the past and so greatly to discourage future savings as to prevent them from coming into existence. To such an extent is this danger ignored that the great majority of voters, if they think at all (which is not very much as a rule), will cheerfully accept the view that thrift is nothing but a form of selfishness which may properly he hindered by the whole power of the State.
If ever there was a country where this danger is imminent, it is the United Kingdom at the present time, with its rapidly increasing, over-crowded population, with rapidly increasing social service subsidies, and with apparently an almost complete indifference to the dangers which threaten us. There is hardly a shareholders' meeting where the chairman does not point out the difficulty of securing capital sufficient to maintain, let alone increase, the productivity of his business. The demands of the tax collector are so enormous and overwhelming. The raiding of capital goes far beyond what is taken in death duties. Income tax, surtax, purchase tax, Customs and Excise are all now coming largely out of capital. Neither must it be forgotten that inflation is also a tax on capital. We are at the present time just keeping our heads above water by living on our reserves—and our reserves are the thrift of former generations. Up to now it has been possible to satisfy the tax collector by selling out capital for cash, which is the only form of wealth which can be used for Government expenditure. It is of no use for the tax collector to seize a house or factory or a street; he must wait until it has been sold for cash. Who is going to buy it when he knows it may be taken from him without compensation? A person is much more likely to spend his money on his own enjoyment and to show the tax collector an empty purse. I imagine this aspect of the matter
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must have occurred to the Treasury. It would be interesting to hear how long they think it will be possible to go on selling out capital for cash.
The Government's lack of knowledge and interest in questions of this kind appears to me to be staggering. On February 3 last I asked them for an estimate of how much capital was sold out and paid away in taxation in each of the years after 1945. I was blandly told that they did not know. I then tried the Bank of England; they did not know either. Another interesting subject is the Government's policy of starving the country in order to provide luxuries broadcast. I will not attempt to examine the social services in detail, but it is obvious that the provision of an adequate amount of meat is of far more importance than any social service. The absence of meat is at the present time having a most disastrous effect upon the power and will of our people to work.
As for the redistribution of wealth, I think it may safely be said that the more is redistributed the less there will be. What is wanted is much more investment, and that cannot occur until there is more capital to invest. More capital can come only from more thrift, and thrift is the one thing that our present system of taxation is seeking to destroy. Ignorant prejudice against owners of capital is an enemy as formidable as Hitler or Stalin. Of course some big capitalists spend thousands a year onthemselves—it is their incentive. But for every pound they have spent on themselves they have provided one hundred pounds in reproductive enterprise that enables the country to live.
7.34 p.m.
LORD PAKENHAM: My Lords, it would be possible to feel that this debate has been somewhat disjointed, and yet to appreciate that every contribution to it was highly informed and of a deeply felt character. I know that I am not expected to speak for very long, and therefore a number of noble Lords who are still with us will forgive me if I do not refer to them in detail, particularly my colleagues Lord Macpherson and Lord Archibald, who made contributions which I believe will be studied for a very long time to come. May I say to the noble Lord, Lord Balfour, how strongly I agree with him about the Comet? I am not

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quite clear myself about all the points, but I share his feeling about the atmosphere. I know the noble Lord is a brave man, but I hope that it will not be counted as courageous in this House to proclaim a Commonwealth point of view. It will he a bad day if that ever happened. I hope that general sentiments such as those of the noble Lord, whatever their applications, are shared by all of us in this House and that no one will venture to refer to the Commonwealth as a monopoly of any one section. I am not quite sure whether the noble Earl, Lord Perth, voiced a more courageous standpoint when he dealt with savings in a particular way. Whilst I do not agree with him on all his points, I will say that I agree absolutely about the need for hacking up the Savings Movement.
I think that everybody must feel that the noble Lord, Lord Pethick-Lawrence, presented the facts in a most fair-minded way. I do not think that has been questioned anywhere, nor do I think that any of the individual facts which he laid before us have been challenged. The only fact that perhaps I would add to those mentioned by him and the noble Viscount, Lord Hall, is a rather gloomy fact—I mention it really by way of application to something said by the noble Lord, Lord Brand, who I think has left us. We must realise that on the production side our share of world trade has been going down. It is not just a question of our own exports declining but, according to the figures quoted by the late Financial Secretary, Mr. Jay, in another place—figures which he quoted from a famous Bank Review—the United Kingdom's share in world exports has declined from 22.2 per cent. in 1951 to 18.4 per cent. in the third quarter of 1952. He argues there that that really does not give any ground for complacency. I realise that we on this side must never fall into the position of taking pleasure in our country's misfortunes; that, I think, is the most unfortunate rile that any Opposition could ever occupy. When we lay these facts before the House, it is in no spirit of that kind, but to explain to the Government the great difficulties which we think confront them and our country at this moment.
I will not say much about the speech of the noble Lord, Lord Cherwell. Of course, I was glad to see him back at
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the Box. But he has been dealt with so firmly and justifiably by my noble friend Viscount Hall that it is not for me to add to his castigation. I felt that his general point of view was perhaps not dissimilar from one which I came across to-day in an article in the current number of the Readers' Digest. The article is called, "Comrade Lindemann's Conscience"—which is, obviously, a very live topic in the House at the moment. I am very glad to welcome the noble Lord as a comrade—I hasten to say, if he will accept that description. At the end of the article entitled "Comrade Lindemann's Conscience," there appears this passage:
"In a comfortable restaurant…Lindemann, his helpers and his ex-victims"—
I take it that his helpers are his colleagues in the Government and his ex-victims are the civil servants whom he probed so thoroughly—
"were celebrating. The spare, usually shy young man raised his glass. 'We shall have to use other methods in the future,' he said. 'But I think we can do it again'."
That, I think, would describe the speech of the noble Lord this afternoon with a certain amount of fairness.
There are some things that the Government have done this year which I hope they will continue to do again. The improvement in the trade balance is something which we cannot learn of too often. But they have made some mistakes, and, certainly, some things have gone very wrong. Whether we should have done better it is impossible to say. Perhaps noble Lords will allow me to proceed, through general issues, to make a few remarks in reply to the noble Viscount, Lord Samuel, who, unfortunately, has had to leave the Chamber, as he courteously explained to me. It will be recalled that Lord Samuel was saying that we must bring down taxation. I rose, mildly and, I hope, deferentially enough, to ask whether he could indicate in the broadest outline how this was to be achieved. He tuned on me with all that mature vehemence which comes to him so easily and replied in effect: "Groundnuts to you!"—and that was really all the answer I received. I shall have some hesitation about tackling the potentate again. But I really was very glad to see him in such spirits. We often describe him as being as young as any of us, and I am bound to say that, in

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view of that answer, which would not have done injustice to a prize student at a preparatory school. I feel he is the most youthful of all of us.
The noble Viscount said that we want to bring down taxation. There, I am sure, we are entirely at one. But, as the noble Lord, Lord Cherwell, explained very clearly, it is very much easier to say that than to do it. When in opposition the present Government—and it is rather the way of Oppositions—declared, in various ways and at various moments, that if they were returned to office they would eliminate a great deal of waste. I do not think anyone can say that now that they have been returned they have been able to discover and eliminate very much waste. They are abolishing my old Ministry, and if I had been there it might have eliminated waste. But, as things are at the present time, I do not know if any great advantage is secured. I said in the debate on Defence, and I think the House will agree, that the present Government have discovered that our Defence arrangements were far better than they had supposed when they had only the information open to an Opposition.
Another method of cutting taxation would be to bring about some large reduction in the services provided, but Lord Cherwell has indicated, and, I hope, firmly indicated, that that is not in the minds of the Government. I will deal with that topic in a wider context later in my speech. I think we can take it that, without severe slashing of the Welfare State, which is not in the minds of the Government, there are no substantial economies to be effected in that direction. Another way of reducing taxation is to adopt what might be called a more optimistic attitude to the Budget problems and say that we do not need quite such a large surplus as we thought, or that we might, in certain circumstances, find a deficit perfectly legitimate. For myself, and, I believe, for my colleagues, it is right to say that I do not think many of us wish to quarrel with what Mr. Butler has done. I do not think that on the issue of a surplus any of us are prepared to set ourselves up as being able to point to a wiser decision than he has made. Finally, there is the question of the levy. That, in its turn, arises from production, and that is a matter which is
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very much in the minds of the Chancellor of the Exchequer and of the noble Lord, Lord Cherwell, who described this as "an incentive Budget." I am afraid I have not had time to look it up, so I do not know whether last year's Budget was described at the time as an "incentive Budget" or not. Perhaps it was, but with not quite the same blowing of trumpets. I think it was treated generally as being a new approach to the whole question of incentives.
The Times, which was not very kind to anyone in this connection, recently informed its readers that:
"The verdict on the strategy of Mr. Butler's first Budget a year ago was that it necessarily sacrificed the future to the present in that while it allowed for consumption to be substantially maintained, the incentive to invest in industry was not only not increased but positively reduced."
It went on to say that most Budgets since the war have shown the same kind of tendencies. So The Times, looking back to the Budget of last year, regards it as an anti-incentive Budget. I do not think that we need differ from that verdict to-day. If the Government are saying that this is an incentive Budget, we can say that we hope it will add incentives; but the Government's past record does not inspire much confidence in my mind or in the mind of the paper which, along with the Daily Herald, is my favourite journal—The Times.
The noble Lord, Lord Brand, is not here so I will not follow up his point about undistributed profits. But I will say this—and here I speak for myself. Assuming that a certain amount is to be raised by taxing incomes, it has to be distributed between various income brackets, rich and poor. In a way, I sympathise with the idea that there should be less distributed in the way of profits, and more undistributed. If one could think of some method of bringing that about, it would have my sympathy and that of all of us. But that is not to say that I agree with Lord Brand that it is better to remove the tax on undistributed profits than to remove the purchase tax. I am not suggesting that for a moment.
I think that the only other large factor which affects production is the question of the monetary weapon. That is a very difficult instrument to use. At one

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moment we have something called "inflation," and at another moment something called "deflation." I think it is true to say that no one in this House, and indeed no one in the other place, has ever defined inflation to anyone else's satisfaction. I think the best definition of inflation and deflation was given by the late Mr. Ernest Bevin, who was loved by so many of us in this House. He said that inflation was the state of a Cabinet Minister returning home after making a successful speech at a dinner, and deflation was the state of the same man after he had awakened his wife to tell her about it. I think that goes as close to a definition as anything which the economists have been able to find.
As regards the monetary weapon, I would echo almost every word that has fallen—and quite a few have fallen, though not to-day—from the lips of Lord Pethick-Lawrence on that subject, at various times since the Election. We can only hope that the Government will use it more flexibly in the corning year than they have been able to use it in the past year. No one can tell how far these improvements and these deteriorations which we have seen in the last year can be attributed to the monetary weapon. I think that Lord Brand was inclined to say—I may have misunderstood him, of course—that a larger share of the improvements was due to the monetary weapon than of the things that have gone wrong. That is a matter of personal opinion. I think we must all feel that the monetary weapon has assisted materially to improve trade balances. But it has also played its part in bringing down production. So it has had a bad effect and a good effect. We must all hope that it will be used with more uniform success in the times that lie ahead of us.
I do not want to spend an unduly long time upon these matters, but I should like to deal with a fundamental issue which was raised by the noble Viscount, Lord Waverley. Lord Waverley stated a very frank and a very whole-hearted point of view. Incidentally, it was the point of view of an extremely able and distinguished public servant. I am sorry that he has now left the Chamber. I would have told him that I was going to reply to him had I known that he was going to be called away. I took down, more or less correctly, I hope—though
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there may be a word or two wrong—one key sentence in his speech. He said that if it was merely a question of the redistribution of wealth, he did not see any justification for depriving people, to the extent to which we have recently grown accustomed, of the results of their own exertions. I think that was the substance of what he said. In my opinion, that was a frank Conservative point of view. A good many years ago I remember reading in a leading article in The Times words which stuck in my mind. They put the noble Viscount's Feint of view in different words, but while The Times gave the practical viewpoint, the noble Viscount, Lord Waverley, combines the moral and the practical points of view. He thought that this was "legalised brigandage." The sentence that I recall reading in The Times leader was to this effect:
"Unfortunately, work is like heat. It is only when it is unequally distributed that it performs what the physicists call work."
That summarises the classical case for a larger inequality of wealth.
The noble Viscount seemed to be looking at this question not only from the practical point of view of a system that will increase the national income, also from the point of view that something is being taken away that belongs to a man. It is almost like taking away part of a man when you tax hint beyond a certain point. I will not trouble the House with personal reminiscences, but I am bound to say that if a certain part of my income is taken away and used for the benefit of others in very great distress, I certainly do not feel that a wrong has been done. One cannot dogmatise, and I certainly do not stand for the principle of absolute and complete equality, but I certainly say that we have to consider in every case the common good and the benefit of the community as a whole. I repudiate absolutely the point of view of the noble Viscount, Lord Waverley, who feels that a degree of redistribution of wealth is in a moral sense "legalised brigandage."
Since morals have come into the discussion, I must say that I feel there was something utterly immoral, not in the men who worked it, but in the pre-war system. After all, it is quite wrong to think that everybody who possesses a large income has earned it or earned all of it. Most

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people obtain it by inheritance. And even if we take someone who has made all his money by possessing a large business, I would not agree that in some deep, moral sense he is entitled to all of it, whether or not his workpeople live in poor conditions. There is bound to be a difference between the two sides of the House on this question. We cannot conceal it. We all know it. We work together and at times of danger live more closely together, but we cannot hide the difference. The noble Viscount, Lord Waverley, has put his view and I have put ours.
The noble Lord, Lord Brand, asked whether we were moving away from the doctrines of Keynes towards the doctrines of Marx. Speaking for myself, we have no use for Marxism whatever on these Benches. But we do not believe that Keynes said the last word on economics. He was one of the most brilliant men of our century, but, as my noble friend Lord Pethick-Lawrence and others of my noble friends will no doubt point out, the Labour Party existed long before Keynes had any connection with active politics, and we take our stand on what is ordinarily called Christian ethics. That is our deep conviction, while fully conscious that there are Christians as good as ourselves among noble Lords opposite and outside in all Parties in the country. It is not enough to proclaim high-sounding doctrines. If, in fact, our system were reducing the standard of living, dragging down the life of this country, even if it were not just on paper, obviously there would be a serious case to be made out and we could not ignore it.
After taking part in so many debates circling round the central issue. I should like to point out what seems to me a fundamental difference of opinion between us and some noble Lords opposite, though not perhaps all. We believe that Britain was governed much better after the war than before the war. We believe that if we compare the present system under which we are being governed, even though it is being operated by Tories, it is still vastly superior to the system we had before the war. Then we found an atrocious waste of resources, and surely the atrocity was still more on the human than on the material side. Since the war we all—I am speaking not only
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for the Labour Party, but for the community—have accepted a new responsibility for the material existence of our people as a whole. In particular, the Government of the day have accepted the responsibility of seeing that a minimum standard of life is accepted and applied. I hope that does not mean that we on this side are complacent, that we think that all that would have to be done when we come back into office (and we certainly will) is to ask ourselves what we did last time and do it again. A lot of things went wrong, as they do in Governments. Problems have changed and appreciations of the situation grow deeper, one would hope, as the years pass. Certainly we have a lot to learn, as have all those who are human or live. But I suggest that in recent years right up to the present time the course mapped out by considerations of justice has tended to coincide with considerations of efficiency, although at times we may find the two paths diverging. I believe that is still the case, though noble Lords may produce an example of something that has moved away from social equality and yet benefits the community. On any occasion they do that, they must make out a strong case for anything which promotes social inequality before we are ready to believe that it will benefit the whole community.
In concluding, I would express our opinion about the record of the present Government and of Mr. Butler in these matters by saying that it is too early yet to say that the present Government and Mr. Butler have failed, and equally it is far too early to say that they have succeeded. We wish them well, not only because it is our duty to wish them well, but because we believe Mr. Butler and his colleagues carry a very heavy burden and are patriotic and brave public men. I would say to the noble Earl who is to reply, that we are grateful to him and the other noble Lords for listening to us and we hope they will benefit by our advice. I implore the noble Earl to have regard to the fact that we will never, never, never contemplate a return to that evil system which poisoned the whole life of our country before the war, and I beg him to take heed and let his colleagues know that we will oppose tooth and nail anything which seems to restore those terrible evils of the past.
7.58 p.m.
THE EARL OF SELKIRK: My Lords, in many ways we have had a remarkable debate, first, because it is the first general economic debate that the House has had for twelve months, and it is a long time since the House has gone so long without examining closely the economic position; and, secondly, because we have had no criticism of the Budget. If I may call to mind some of the rather more heated debates we had last year, I think it is a remarkable change that in this debate we have had hardly any criticism of the Budget, except from my noble friend Lord Barnby, who complained that there was no relief from purchase tax on textiles, although, in fact, that was given last September.
LORD PAKENHAM: I hope the noble Earl will not build too much on that. When we come to the Finance Bill, I fear that he may be somewhat disappointed. For the purposes of argument, he must assume that the general criticisms made elsewhere on behalf of our Party are those which will be made from these Benches.
THE EARL. OF SELKIRK: I am not asking the noble Lord to accept anything. I am saying that noble Lords did not criticise the Budget to-day, and that was all I intended to convey.
Let us go back twelve months. What were the two things in our minds? One was inflationary pressure, and the other the balance of payments. Those two matters have been solved in the last twelve months period, and that is lie outstanding contribution which Mr. Butler has made to this country. If I may for a moment criticise the extremely interesting speech of the noble Lord, Lord Pethick-Lawrence, I do not think he emphasised adequately the static state of retail prices over the last nine months. I thought he underrated a little the extreme importance which that necessarily plays in our affairs.
LORD PETHICK-LAWRENCE: When the noble Earl comes to read my speech, I think he will find that I used superlative adjectives to describe the importance of clearing up that unhappy position.
THE EARL OF SELKIRK: I thought the noble Lord was referring to the balance
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of payments, and not to the inflationary position in this country. Of course, I accept readily what he says. Mr. Gaitskell tells us that this has teen achieved with no effort and no sacrifice. Could there be a finer testimony to sound administration?
We in this country, as the noble Viscount, Lord Waverley, has said, are not only the bankers but also the trustees of the sterling area. Just as in the past they have often come to our help, so it is right that we should recognise that in this achievement all parts of the sterling area play a full part. That includes not only primary producing countries, but manufacturing countries, also. It is in their interest to produce stability. I would say to the noble Lord, Lord Balfour of Inchrye, that the remarkable thing about the Economic Conference was the measure of agreement reached in the main aim of freeing trade, including the movement towards freeing exchange of currency. I suggest to the noble Lord that in the association of Commonwealth countries there is nothing more important, whatever the policy may be, than that they should agree in the direction in which they are going. That still remains of importance at the present time. If I may say so, with respect, to the noble Lord, Lord Archibald, who made some comments on the dear money policy, I do not think he can calculate the advantage to this country of seeing the retail prices remain virtually static for nine months, when in the two previous years the movement was something of the order of twenty points. The advantages of that, both to the individual and the nation, can hardly be calculated.
The noble Lord, Lord Macpherson, asked what would happen if peace "broke out." I feel that the noble Lord seemed a little anxious about the dangers of peace. One of the disconcerting things of recent years has been that, although there has been a high level of stable employment inside countries, there have been violent lurches in economic relations outside countries. In other words, the mere maintenance of a stable economy inside a country is not enough to prevent difficult crises from taking place outside. To be quite frank, we have been faced with such a crisis every two years for the last five or six years. It is only fortunate that we have not had them

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inside this country, too. I think it is wrong that we should hesitate in any way, in what I may call this distracted world, to regard peace as an inestimable blessing in every way. At the same time, I do not think we should "count our chickens before they are hatched," because, however favourable the auguries may be, it will be a long time before anything like the cold war can be said to have come to an end. There is nothing at the moment to suggest that the free world can relax its defences—indeed, that was repeated last week in the N.A.T.O. meeting. This is really a Foreign Office and not an economic point, but I am emphasising it to show that we must approach this from a strictly practical angle, and we must maintain our defences for the time being. However, I recognise the force and importance of making sure that this matter is considered, whether it he a slackening or a recession of trade due to political or any other reasons.
I was glad that the noble Viscount, Lord Waverley, and the noble Lord, Lord Rennell, referred to the position of the United States. It would be utterly wrong to pretend that the United States is not fully alive to precisely this problem. This is exactly the propaganda which has been thrown against her for a long time by the Communists: that her prosperity depends almost entirely on rearmament. It so happened that when I was in New York last summer the representative of the United States thought fit to reply to that charge in the Economic and Social Council. He gave a long list of a variety of instruments in what I might describe as the economic armoury, which were available to the United States in the event of difficulties arising from a slackening of arms pressure. I feel that we must not go too far in saying that the United States will not take the most active steps to ensure her own interests, apart from those overseas.
I recognise that no responsible Government could possibly fail to give this matter proper attention. The noble Lord may rest assured that the Chancellor of the Exchequer, with his particular responsibility for external financial policy, has these various possibilities very much in mind. They are of concern to our friends on the Continent, also, and the last meeting of the Organisation for
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European Economic Co-operation paid some attention to the general question of maintaining stability in world trade. It is clear that the closest international cooperation will be called for in dealing with the kind of problem to which the noble Lord has properly drawn our attention to-day. However, our freedom of action in this country is necessarily limited, in the last resort, by the overriding necessity of balancing our overseas payments. I should here make the point that all the pressure which we are bringing to bear, and which the noble Lord's Government brought to bear, on export trade is bound to be felt in anything of this sort. So that, in so far as there are developments overseas, they will obviously be assisted in this matter. I would emphasise that this is not a kind of closed economy on which we can take any textbook decisions. The essence of meeting any situation which may arise is co-operation and an understanding of the problems elsewhere. I am sure the noble Lord will agree that nothing would be worse than to be highly prepared for entirely the wrong situation. It is impossible to anticipate just how the situation will arise, or to assume that the present situation will end anything like as suddenly as the recent world war did.
A good deal of emphasis in this debate has been laid on the question of savings. This aspect was mentioned by the noble Viscount, Lord Waverley, and the noble Lord, Lord Rennell; and the noble Earl, Lord Perth, also spoke at some length about it. We recognise that it is a matter of the greatest consequence, both in regard to small savings and to the broad savings in the country. I am inclined to think that the position is not quite so bad as the noble Lord, Lord Rennell, said. Table 18 of the Economic Survey shows the resources available to companies for adding to financial assets or reducing indebtedness of something of the order of £800 million in 1952. This is money which is not actually used for investment. Table 5, of the Estimates of National Income, suggests that there has been a considerable increase in personal balances. I should not like to say whether or not the figure given is accurate, but it indicates that there has been a considerable increase. And this is in spite of the fact that the balances of savings reported by the National

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Savings Movement are down by £80million. The explanation may be that considerable sums have been withdrawn and invested elsewhere, possibly in building societies or even on the Stock Exchange, in some form or another.
We would contend—and I think there is great support for this argument—that this Budget does a good deal to encourage saving. In the first place, the standard rate of income tax, which the noble Viscount, Lord Samuel, described as the centre of our taxation system, is reduced. I do not think there can be any question that that itself provides incentive, particularly for corporate institutions. There are the initial allowances, which are a direct and positive encouragement to savings; and, of course, there is the general reduction in cost. But far more important than all those is stability in value. There is nothing which makes a greater contribution or encouragement to savings than maintaining a stability of value. I should like to thank the noble Earl, Lord Perth, for his many suggestions for encouraging savings from the small man. There are, of course, difficulties, but anything which can make savings more attractive is of great value.
I will not say very much on the stock side, which has been raised by the noble Lord, Lord Pethick-Lawrence. Bluntly, I think the position is this. At the end of the year there was no fall in stocks and works in progress, except in regard to a very small percentage of those held overseas. Therefore, while there has been no build-up, the actual stocks are about the same at the end of the year as they were at the beginning.
I should like to pass for one moment to the general situation in which we find ourselves. As a result of two world wars we are a debtor nation, and we have considerable liabilities overseas both, shall I say, in sterling balances and dollar balances, and, indeed, in Europe. But what is vital is the amount of our turnover in export trade, which may be running at something like £8,000 million or £9,000 million, visible and invisible exports of all kinds. I agree with the point made by the noble Lord, Lord Pakenham, that one of the most serious aspects is that our trade to-day is tending to be less than it was.
LORD PAKENHAM: The noble Earl is so interesting that I hesitate to interrupt. My figures were admittedly for the end of last year. That is still the position, is it?
THE EARL OF SELKIRK: In matters of world trade the position is difficult to bring up to date. I am speaking of 1951, which figures are the latest available, so far as I know. The position is more serious to-day, in that we have passed from a seller's market into a buyers' market. We are meeting extensive Japanese and German competition—particularly the latter—and, of course, we have at the present time very little economic aid and we have to pay interest on, and repay in dollars, what we borrowed at an earlier date. Therefore, the position we have to face to-day is indeed a critical one, and I am glad that this point has been brought up, particularly by the noble Viscount, Lord Hall.
May I give one or two illustrations? Before the war we were the largest exporter of manufactured goods. To-day, the United States has drawn level with us in this field, and only for one short moment since the war have we actually held our pre-war share of manufactured exports. Japan. which in 1948 had only one-tenth of her pre-war exports of manufactured goods, now has nearly half; and Western Germany, which in 1948 had one-eight of her pre-war exports, has now, although she has not regained her pre-war share, a volume of exports 35 per cent. above her pre-war level. In textiles, the United States exports before the war were one-seventh of those of the United Kingdom. To-day, they are about one half; while, of course, Japan has nothing lie regained her prewar level. In chemicals, Germany was leading the world before the war, followed by ourselves. To-day it is the United States, followed by ourselves, with Germany rapidly overhauling us. I give this picture to emphasise the extreme and intense vigorous competition into which we must enter if we are to maintain our position. It is for that reason that the need for incentives is emphasised in the Budget.
Having looked at the difficulties we face, let us now look at the advantages. Of course, as the noble Viscount, Lord Samuel, said, everyone who sells also buys, and everyone who goes into the

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export market naturally wants to get something out of it, otherwise he would not go into it. That of itself is something not entirely of a disadvantage. I am glad to say that the picture of production is tending to improve. We fully recognise how unsatisfactory it is, but it is beginning to improve. The noble Viscount, Lord Hall, quoted the exports for the first quarter of this year as being less than those for the first quarter of last year. That need not be taken too seriously, because the exports for the first quarter of last year were exceedingly high, and higher than it is believed could possibly be maintained.
May I turn for one moment to the general question of production? Production was actually flattening out in the Spring of 1951. These movements are very slow, and we must not necessarily expect things to develop too quickly. It is at least encouraging that the curve is now going up. Particularly after what the noble Lord, Lord Archibald said, I should like to turn to what I think is one of the most important of all industries, and that is agriculture. I am glad to say that the results of agriculture are very encouraging. We have every reason to believe that our aim of 160 per cent. of pre-war production, which was announced in April, 1952, will be achieved. What we do know is that since 1951, production has gone up from 141 per cent. to what is now a provisional figure of 150 per cent. of the pre-war level; and recent reports indicate that that increase should be fully maintained this year. What is particularly encouraging is that the British farmers appear to have achieved a higher rate of increase than has any other country in the world. I think that is something of which we can be rightly proud. The Budget brings certain advantages to the farmer not only in income tax but also in initial allowances. What is undoubtedly of great importance is the opportunity given to those unfortunate farmers who had to have their herds slaughtered because of foot-and-mouth disease to elect to be taken on the "herd basis. "I believe, too, that while some of the farming population were a little reluctant at first, they are gradually becoming appreciative of the advantages of a free economy.
I am sorry that the noble Viscount, Lord Hall, has gone He made a most
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important speech this afternoon, and we were delighted to hear it. I am glad to say that I agreed entirely with what he said. Although the results in coal have been somewhat disappointing, the most recent reports are more encouraging. I would emphasise that the Government attach the greatest importance, and hang high hopes, on the movement made by the National Coal Board on the one side and the National Union of Mineworkers on the other: led by Sir Hubert Houldsworth on the one side and Mr. Arthur Horner on the other. This is the first time that anything of that character has been carried out, and we have great hopes that it may achieve considerable results.
The position in regard to steel is encouraging. The rate of production in the early part of the year was higher than it had ever been before, and we hope to have an output of 17,500,000 tons by the end of the year, which should be enough to meet all essential requirements for defence and export. A very remarkable development in oil has been made. Considerable investments have been made in refineries in this country, giving an increased production of 40 per cent. in refined oil. This is of enormous credit to the industry as such. The textile industry is still on the way to recovery. The recovery in wool is almost complete, and rayon is doing well. The recovery in cotton has been slower; in the first week of March production was still about 21 per cent. below the level of 1951.
I will not detain your Lordships much longer but perhaps I might just say this: that we regard this as a time of great opportunity, because things are changing abroad and one does not necessarily know which way they will go. We have this advantage: that there is an adequate supply of raw material and that the only limit to production is demand. That means everything that is comprised in the word "salesmanship": price, quality, and date of delivery. In this atmosphere I am sure it is right for the Government to decide to do less and make the private citizen do more; and it is for this reason that we have freed many markets: the markets in lead, zinc, fertilisers and other commodities. I was much struck by what the noble Lord, Lord Brand, said, that controls can be contagious. That is extremely dangerous. But I hope that freedom also will be contagious. We

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believe that this freer market will give flexibility and adaptability and that it will also bring stability to the buyer. We do not in any way object to long-term contracts but we do think that bulk buying has not brought stability. I am not saying that there are not cases where it should do so. But, at any rate, we do not object to long-term contracts when they tit special circumstances. Where, however, as so often happens, the agreed price varies widely from world prices, then either the producer or the consumer is dissatisfied. Each case has its own special requirements.
Freedom brings responsibility with it. We wished to make this an incentive Budget as definitely and clearly as possible. Of course this Budget is a risk: every Budget is. However, I am sure it will succeed if production is geared to a higher level. That must be the emphasis. I suggest that this Budget has brought light and hope to millions in this country. Many items have been de-rationed and others will follow. We have succeeded in carrying a heavy burden of defence expenditure, but we have reduced taxation while at the same time preserving the essential social services—housing, education and health—the Estimates for which have been increased in this year. I suggest that this is a tremendous achievement, and it may well mark the turning point in the economic history of this country.
8.24 p.m.
LORD PETHICK-LAWRENCE: My Lords, at this late hour, I am sure I shall be serving the general convenience if I make my few remarks brief. We have listened to a most courteous and informative speech, for which we on this side of the House are very grateful. I certainly share, and all noble Lords on these Benches share, the wish expressed by the noble Earl who wound up for the Government for the prosperity of the country in the forthcoming year. I remember well that when I was Financial Secretary to the Treasury, my chief Mr. Philip Snowden (as he then was) had introduced a most controversial Budget. In accordance with the annual custom, a very wealthy Member of the House of Commons, Mr. Samuel Samuel, gave a Budget dinner at which members of the Opposition and of the Government, all
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the leading financial persons in the House and in the City of London, were present. So far from controversy, we had a most delightful evening; and we drank only one toast. That toast was "The Public Purse". With those remarks, I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

  TAXATION ON COLONIAL OPERATING COMPANIES
  TAXATION ON COLONIAL OPERATING COMPANIES