Sitting of 15 April 1959

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  UNITED NATIONS

    Permanent Force
    Mr. A. Hendersonasked the Secretary of State for Foreign Affairs to what extent it is the policy of Her Majesty's Government to support the establishment of a United Nations Permanent Force, as distinct from a United Nations Stand-by Force.
    The Secretary of State for Foreign Affairs (Mr. Selwyn Lloyd): As has been stated in the House on a number of occasions, Her Majesty's Government support the principle of a United Nations Permanent Force. The establishment of such a force would require a wide measure of agreement. That does not at present exist. Meanwhile, we support the ideas of the United Nations Secretary-General for a Stand-by Force.
    Mr. Henderson: Pending further examination of this proposal for a United Nations Permanent Force, will the Secretary of State consider studying, or asking his Department to study, the possibility of a small, individually recruited force as a nucleus to be supplemented by a stand-by contingent from members of the United Nations?
    Mr. Lloyd: I will certainly study the suggestion of the right hon. and learned Gentleman.
    Mr. Usborne: In view of the fact that a permanent United Nations police force would obviously require bases of its own under the ownership of the United Nations, would this country be prepared to provide same territory and hand it over to the United Nations as a United Nations base?
    Mr. Lloyd: I think that the hon. Gentleman is more likely to get his objective achieved if he will postpone consideration of that kind of practical matter until the scheme is a little nearer fruition.

    Special Fund
    Mr. Osborneasked the Secretary of State for Foreign Affairs how much Mr. Paul Hoffman recently officially requested from him for the United Nations Special Fund; how much he was promised; and if he will make a statement.
    Mr. Selwyn Lloyd: I regret that I did not myself see Mr. Hoffman because I was in Washington. He had a number of conversations with other Ministers. These were of an informal nature, and he made no official requests to Her Majesty's Government. I have no statement to make at present about the Special Fund.
    Mr. Osborne: Will my right hon. and learned Friend use his influence with the Treasury to try to get it to give a little more to this fund, because it is to be used for accelerating the economic development of the less-developed countries, and this is of vital importance to the peace of the world? Since Mr. Paul Hoffman has said that the amount for which the fund is already asking is mere peanuts, will my right hon. and learned Friend do what he can to see that the Treasury look at this question with a favourable eye?
    Mr. Lloyd: We have already offered. I believe, the equivalent of 1 million dollars, but the governing council of this Special Fund has not yet approved any projects. We must see how it works out in practice.

    Algerian Refugees
    Mr. Youngerasked the Secretary of State for Foreign Affairs what contribution Her Majesty's Government will make in response to the special appeal of the United Nations' High Commissioner for Refugees for a relief fund to aid Algerian refugees in Tunisia and Morocco.
    Mr. Selwyn Lloyd: This matter is under consideration.
    Mr. Younger: Is it not a fact that the United States Government have made some contribution to this appeal and can

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    the Minister assure us that Her Majesty's Government will make a contribution fairly soon?
    Mr. Lloyd: The matter is under consideration.

  NUCLEAR TESTS
  Mr. A. Hendersonasked the Secretary of State for Foreign Affairs (1) to what extent it is now the policy of Her Majesty's Government that the personnel of all control posts established for the purpose of enforcing any agreement for the discontinuance of nuclear tests should not include representatives of the country in which such posts are situated;
  (2) to what extent it is now the policy of Her Majesty's Government that the personnel of teams inspecting suspected nuclear explosion sites should not be composed of nationals from the country being inspected accompanied by foreign observers.
  Mr. Selwyn Lloyd: The composition of the personnel at control posts and of inspection teams is under negotiation at Geneva. I did, however, discuss the matter at some length both in Moscow and in Washington. I believe that this is one of the matters upon which it will be possible to reach agreement, and I hope that the right hon. and learned Gentleman will be willing to leave it at that for the time being.

  NILE WATERS
  Mr. Philips Priceasked the Secretary of State for Foreign Affairs whether, in view of the importance of the co-operation of Ethiopia in the solution of the problem of sharing surplus Nile waters, he will approach the Government of that country with a view to securing its cooperation in summoning a conference of all States directly interested in Nile waters to consider this problem.
  Mr. Selwyn Lloyd: Her Majesty's Government are fully aware of the importance of an equitable settlement of the problem of the Nile waters which safeguards the interests of all users. The House may be aware that there have recently been some preliminary contacts
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  betweeen the two major users. I will naturally consider in what ways Her Majesty's Government might help at the appropriate time.

  ANGLO-SOVIET CULTURAL AGREEMENT
  Mr. Osborneasked the Secretary of State for Foreign Affairs why the Anglo- Soviet cultural agreement was recently signed without agreement being reached to end the jamming by Moscow of the British Broadcasting Corporation's Russian language broadcasts, or to provide for increased sales of British newspapers and periodicals being allowed inside Russia.
  Mr. Selwyn Lloyd: The agreement mentioned by my hon. Friend was the result of negotiations on a programme of Anglo-Soviet exchanges for 1959–60 between the Soviet Relations Committee of the British Council and the Soviet State Committee for Cultural Relations with Foreign Countries. Such matters as the jamming of broadcasts and the circulation of newspapers in the Soviet Union are subjects for inter-governmental discussion and as such were outside the scope of these particular negotiations.
  Mr. Osborne: Since improved relations between Russia and ourselves depend upon a better understanding of each other's situation between the two countries, is not the jamming of the Russian-language broadcasts of the B.B.C. the central problem? Have the Russian Government given reasons why they still refuse to allow B.B.C. broadcasts to be received in their country?
  Mr. Lloyd: I agree with my hon. Friend about the importance of this matter, but one of the satisfactory features of the recent agreement was that it was agreed that representatives of the two Governments would meet at intervals to discuss these matters. I think that the point which my hon. Friend has mentioned is a very suitable matter for discussion at the first meeting.
  Mr. Emrys Hughes: In view of the fact that the Prime Minister paid such a glowing tribute to the Soviet Union and referred to Russia as the promised land in a speech at the British Embassy,

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  which the right hon. and learned Gentleman will remember, is there any need to have discussions about this jamming business?
  Mr. Lloyd: Without accepting the accuracy of the preliminary part of the hon. Gentleman's suggestion, I rather gather that he supports my hon. Friend the Member for Louth (Mr. Osborne).

  EUROPEAN SECURITY
  Mr. Shinwellasked the Secretary of State for Foreign Affairs (1) what communication he has received from the German Federal Government with regard to their intention not to press at present for the reunification of East with West Germany;
  (2) What communication he has received from the German Federal Government with regard to the return of former territories now under Polish administration.
  Mr. Swinglerasked the Secretary of State for Foreign Affairs (1) on what dates and in what form precise proposals for a frozen or thinned-out zone in Central Europe have been made by Her Majesty's Government to the other members of the North Atlantic Treaty Organisation;
  (2) when he expects to be able to announce results from the further study of the possibilities of increasing security by some method of limitation of forces and weapons in an agreed area of Europe, referred to in the Anglo-Soviet Prime Ministers' communiqué of 3rd March;
  (3) to what extent, at the recent meeting of the North Atlantic Treaty Organisation's Foreign Ministers, consideration was given to proposals for increasing security by the limitation of forces and weapons in an agreed area of Europe.
  Mr. Harold Daviesasked the Secretary of State for Foreign Affairs what proposals for disengagement and disarmament in Central Europe were put forward by Her Majesty's Government at the recent North Atlantic Treaty Organisation meeting.
  Mr. Warbeyasked the Secretary of State for Foreign Affairs (1) what discussions took place at the
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  recent Western Foreign Ministers' Conference on British proposals for disengagement, thinning-out, freezing or equalisation of forces in an agreed part of Europe;
  (2) what progress has been made with the study of the possibility of increasing security by some method of limitation of forces and weapons, both conventional and nuclear, in an agreed area of Europe referred to in the Anglo-Soviet communiqué of 3rd March.
  Mr. S. Silvermanasked the Secretary of State for Foreign Affairs (1) whether he will, as a compromise between the Franco-German demand for a controlled armaments zone stretching from the Atlantic to the Urals, and the British plan for a narrow zone, propose to the Foreign Ministers' Conference a policy of disengagement and controlled disarmament and withdrawal of foreign forces in an area covering West arid East Germany, Poland, Czechoslovakia and Hungary;
  (2) to what extent he is prepared to insist at the Foreign Ministers' Conference that an agreement on disengagement and the Rapacki Plan is preferable to the continuation of the existing situation.
  Mr. Bevanasked the Secretary of State for Foreign Affairs, in view of the statement in the communiqusé issue at the conclusion of the talks between the Prime Minister and Mr. Khrushchev relating to the desirability of further study of the possibilities of increasing security by some method of limitation of forces and weapons, both conventional and nuclear, in an agreed area of Europe, coupled with an appropriate system of inspection, what proposals were in consequence made to Dr. Adenauer; and what response was received.
  Mr. Selwyn Lloyd: The Western Allies are preparing for important negotiations with the Soviet Union. In the course of these preparations many aspects of the problems of Germany and European security are under review. But these discussions are confidential and, to be of value, must remain so. Therefore, I think it is wiser for me not to say whether or not there have been communications between the Governments concerned on particular topics, or to reveal

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  the extent to which or the form in which particular ideas have been formulated and discussed. We are seeking agreement with our Allies on how to handle these negotiations in such a way as to achieve our objectives of reducing tension and preserving peace and security in Europe, whilst safeguarding the position of the people of West Berlin. I have, of course, taken careful note of the points made in all these Questions, but I hope that the right hon. and hon. Members will not press me further.
  Mr. Shinwell: As regards Questions No. 8 and No. 9, while appreciating the need for these discussions remaining confidential, may I ask the right hon. and learned Gentleman whether he agrees that it is desirable that hon. and right hon. Gentlemen should be advised of the actual position of the German Federal Government in relation to some of these matters? For example, are not we in this country displaying rather more enthusiasm for German re-unification than is apparently shown by the Germans themselves? Is there not a difference of opinion in Germany itself on that issue?
  As regards Question No. 9— [HON. MEMBERS: "Oh."]—if all these Questions are taken together, we are entitled to ask questions. In any event, so long as you, Mr. Speaker, do not shout me down, nobody on the other side will. As regards Question No. 9, may we be assured that we shall not be involved in any dispute which concerns the return of the former German territories from Poland?
  Mr. Lloyd: I quite understand the right hon. Gentleman's desire for more information on some of these matters, but the difficulty is that many of them are matters for negotiation. It is true that there are differences of opinion. There are differences of opinion between Governments and there are differences within countries on the importance to be attached to some of the matters. However, the right hon. Gentleman made the point for me when he said that it was important that these negotiations should remain confidential, and I think that in those circumstances it is better for me not to make further comment, except that I agree upon the importance of the matters to which the right hon. Gentleman has drawn attention.
  Mr. Swingler: Has not the Foreign Secretary noted that in his television
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  broadcast Dr. Adenauer stated that the British Government had not put forward any precise proposals concerning a neutral, thinned-out, or frozen zone in Europe? As the head of one of the Governments concerned in the negotiations has made this assertion, are not we entitled to know whether that assertion is accurate and whether the British Government have put forward precise proposals? As there is controversy about this, are not we entitled to know something about the nature of the proposals?
  Mr. Lloyd: The hon. Gentleman is seeking to draw me away from the position which I have taken up. I think that it would be unwise for me to indicate to what extent plans have been precisely formulated. While matters are in course of confidential discussions between Governments, it would be wrong for me in public to reveal our position.
  Mr. Bevan: Is that the case? Why are there more inhibitions upon the Foreign Secretary of Great Britain than upon the Chancellor of Germany or upon the President of France? Why is the right hon. and learned Gentleman so much more reticent than they about this matter? Dr. Adenauer's statement was very precise. Has not the right hon. and learned Gentleman's attention been called to this:
  "Well, I have just now once again had a very careful check made on whether Great Britain has ever made a precise proposal—and one can only discuss precise proposals. I have established that this theme has always been mentioned in only a very vague manner, so that discussion of it was not at all possible"?
  Last night the right hon. and learned Gentleman— [HON. MEMBERS: "Speech."] There are many Questions on the Order Paper on this matter and they have been taken together, so, with all respect, I think that we might be permitted to ask extended supplementary questions. I have a Question which was included. We have had an omnibus reply about the Oder-Neisse line and dis-engagement in Europe. Last night, the right hon. and learned Gentleman was asked on the radio by his interrogator:
  "But how about this plan for a freezing of forces … doesn't that exist any more then?"
  The right hon. and learned Gentleman replied:
  "Oh, it is certainly an idea."
  Hon. Members: Question.
  Mr. Bevan: I am asking a question. I am asking the right hon. and learned Gentleman to clarify the position.
  Sir H. Studholme: On a point of order. Is it in order for the right hon. Gentleman to read out supplementary questions?
  Mr. Speaker: A short quotation is always allowed.
  Mr. Bevan: I think that I have sinned less than any other Member in the House in that matter. The Foreign Secretary said:
  "Oh, it is certainly an idea."
  Not very ambitious—
  "It isn't in fact an idea for the freezing of forces"
  Mr. Osborne: On a point of order. The right hon. Gentleman claimed that it was in order to debate this matter— and he used the word "debate ". Is it in order to have a debate on Questions? Is it fair to those with later Questions?
  Mr. Speaker: There is no Question before the House in the sense that that would lead to a debate. An hon. Member is entitled to ask a Question for information. I hope that this exchange will not degenerate into a debate, particularly in view of the attitude taken by the Foreign Secretary, that it would be unwise for him to say anything. If we can get on, we might get Answers to some other Questions.
  Mr. Bevan: Further to that point of order.
  Mr. Shinwell: On a point of order. You have just observed, Mr. Speaker, that we are entitled to ask Questions for the purpose of eliciting information. That is precisely what I endeavoured to do, but the right hon. and learned Gentleman declined to give me any. What am I to do?
  Mr. Speaker: A Minister is always entitled to refuse to answer Questions. That is something over which I have no control. As we have many Questions on the Order Paper, some of which may receive Answers, I suggest that the more speedily we get over this, the better.
  Mr. Bevan: Many Questions were listed by the right hon. and learned Gentleman in his comprehensive reply. With all
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  respect, it is not in the slightest relevant if the right hon. and learned Gentleman says that he would not like to give the information. We are still entitled to try to get it. I ask him how it comes about that Dr. Adenauer states that no precise proposals were made and the right hon. and learned Gentleman says that proposals were made. Last night on the radio he took away all the significance from the Prime Minister's visit to Bonn.
  Mr. Lloyd: I am not very clear what the supplementary question is. The idea of agreed zones in which there would be inspection and controls of armaments remains a proposition which Her Majesty's Government think of great value. The right hon. Gentleman did not continue to quote me. I said that exactly in what relationship to other proposals that would be put forward remained to be discussed and agreed. What I am concerned with is the success of these negotiations. If the right hon. Gentleman is equally concerned, he will understand the impossibility of revealing confidential discussions with Allies.
  Mr. Warbey: Does the right hon. and learned Gentleman's reply to my right hon. Friend mean that the Government have completely thrown over the idea of any reduction of forces on both sides in Central Europe as a part of an agreement? If so, how can he possibly hope that there will be any agreed settlement when the conferences come along?
  Mr. Lloyd: The hon. Gentleman asked me whether I had thrown over the idea of reductions. I have certainly not thrown over the idea.
  Mr. H. Morrison: Is not it the case that the two sectors of Germany have an elementary right to unification? Is not it wrong that anybody should stand in the way of uniting the two parts of the country? Was not the question of the frontier between Poland and Western Germany deliberately left over for the peace conference?
  Mr. Lloyd: The right hon. Gentleman is absolutely right. He will remember the declaration of the Federal Government. They undertook never to have recourse to force to achieve the reunification of Germany.
  Mr. Ellis Smith: Germany caused two world wars.
  Dame Florence Horsbrugh: Is my right hon. and learned Friend aware that the enormous majority of people in this House and outside wish only for the success of this conference, and applaud the Foreign Secretary's decision in taking no risk of giving away any information before the start of negotiations?
  Mr. S. Silverman: Does the right hon. arid learned Gentleman realise that although nobody is asking him to give away in advance whatever he may conceive to be the course of the negotiations, or his detailed contributions to them, there is nevertheless a difference between that and denying to our people any knowledge whatever of what is going to be said in their name at a most important juncture of human affairs?
  With regard to Question No. 24, will the Foreign Secretary say whether it is still the Government's view that it would be a good thing if Soviet forces withdrew from East Germany, Poland, Czechoslovakia and Hungary, but that there is no hope whatever of getting such a withdrawal unless the other principle which the Government have put forward is also followed, namely, that no such changes shall take place which alter the balance of military forces on one side or the other?
  Mr. Lloyd: Her Majesty's Government's policy on that point has repeatedly been made clear. It was made clear in the last foreign affairs debate and in December. There is no question of concealing from the people of this country our view on that matter.
  Mr. Harold Davies: I appreciate the Foreign Secretary's desire not to make completely public his proposals, but the question before the House is a simple one. Have proposals been made? Has the Minister considered, or will he consider, the proposals suggested by the German Social Democrats concerning the possibility of federation between East and West Germany in a transition period? Since he desires to keep the temper of peace, will he suggest to the N.A.T.O. generals that they should not make belligerent statements while negotiations are going on?
  Mr. Lloyd: I am all for a reduction of belligerent statements while negotiations are proceeding, or at any time. As for the question of the precise proposals
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  that have been made, I wish the House would understand that we are still in the process of preparation. No decisions have been reached.
  Mr. Davies: That is what we wanted to know.
  Mr. Lloyd: The Working Group met and produced a report. An agreed directive was given to it by the four Foreign Ministers to do further work, and in Paris, on 28th April; we will review the Working Group's work and make decisions as to our future attitude. To go into negotiations saying, "This is our first position; if you will not have it, this is our second position; we are a little uncertain about the position of our Allies on this point, so do not ask about that; if you will not have that, this is our third position ", would be utterly futile.

  PASSPORTS
  Dame Irene Wardasked the Secretary of State for Foreign Affairs on what grounds he has announced a 100 per cent. increase in the charge for passport renewals.
  Mr. Selwyn Lloyd: This question was dealt with fully in the reply which my hon. Friend gave to the hon. Member for Enfield, East (Mr. Ernest Davies) on 13th April. I have nothing to add.
  Dame Irene Ward: Is my right hon. and learned Friend aware that that Answer was entirely and absolutely unacceptable to the vast number of people interested in extending travel as widely as possible? Will the Foreign Secretary's decision involve an Order in Council, or any Parliamentary procedure which will enable a vote of the House to take place? If not, may I give notice that I shall raise the matter at the earliest possible moment on the Adjournment?
  Hon. Members: Answer.
  Dame Irene Ward: On a point of order.
  Mr. Speaker: The hon. Lady has given notice that she will raise the matter on the Adjournment.
  Dame Irene Ward: I have not given notice that I wish to raise this matter on the Adjournment but, in order to make it doubly sure, may I give notice that I will raise the matter on the Adjournment

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  and, at the same time, have private conversations with my right hon. and learned Friend?

  GERMANY

    Nuclear Weapons
    Mr. Warbeyasked the Secretary of State for Foreign Affairs what decisions were taken at the recent council meeting of the North Atlantic Treaty Organisation regarding the arming of West German forces with nuclear weapons.
    Mr. Selwyn Lloyd: The position remains as set out in my answer to the right hon. Member for Ebbw Vale (Mr. Bevan) on 2nd December last and in the reply given by my right hon. Friend the Prime Minister to the hon. Member on 9th April.
    Mr. Warbey: Can the Foreign Secretary confirm the disturbing reports that the arming of German forces with nuclear weapons is being speeded up so that in the event of a freeze of nuclear weapons being agreed upon at a later date Western Germany will already qualify as a member of the nuclear arms club?
    Mr. Lloyd: I should like to have particulars of any reports before I comment upon them, but if the hon. Member will study the reply given to the right hon. Member for Ebbw Vale (Mr. Bevan) on 2nd December, he will see that there is no idea of the Federal German Republic becoming a member of what he calls the nuclear club.

    Unification
    Mr. Zilliacusasked the Secretary of State for Foreign Affairs whether he will, at his talks with the French Prime and Foreign Ministers, propose a joint endorsement by the two Governments of President de Gaulle's recent declaration that the unification of Germany must be accompanied by that country's acceptance and international recognition of its existing frontiers.
    Mr. Selwyn Lloyd: These talks are now concluded.
    Mr. Zilliacus: Would not the right hon. and learned Gentleman state now that, in view of the length of time that has passed, it is too late to reopen the question of the German eastern frontier
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    and that the present frontier is the only basis on which there can be unification of Germany by agreement?
    Mr. Lloyd: That supplementary question and others like it were dealt with in my reply to Question No. 8.

  JORDAN (GRANTS AND LOANS)
  Mr. Liptonasked the Secretary of State for Foreign Affairs how much money has been granted and loaned to the Government of Jordan since 1945; and how much of the amount loaned has been repaid.
  Mr. Selwyn Lloyd: As this Answer includes a number of figures I will, with permission, circulate it in the OFFICIA1 REPORT.
  Mr. Lipton: As the figures will no doubt show that a very considerable sum is involved, either by way of gift or loan, can the Foreign Secretary say whether, in his opinion, this country and our taxpayers have had value for the money given to Jordan? Will he also say whether the visit of the Jordanian Prime Minister is connected with any further demand for money from the British Exchequer?
  Mr. Lloyd: I am glad that the hon. Member has asked me that question because it enables me to inform him that we have in fact agreed to give a grant in aid of £2 million to the Jordanian Government for the financial year ending 31st March, 1960, and an interest-free development loan of £500,000 towards the desert road project. Whether or not the money is well spent is a matter of opinion, but we have traditionally had certain links of friendship with Jordan and in my view we are right to extend this aid.
  Mr. Bevan: Is it not rather extraordinary that a decision to make a further grant of £2 million, and a development loan of £500,000 should be incidentally made known to the House as a result of a supplementary question?
  Mr. Lloyd: The hon. Member asked me whether any further aid would be given. If it were not for the fact that I believe this is being announced later today in the Jordanian Parliament, I

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  would not have dealt with the matter by way of a supplementary answer.
  Following is the information:
  The money paid to Jordan since 1945 falls under three main heads:
  First, the subsidy paid in accordance with the terms of the Anglo-Jordan Treaty of 1946, amounting to a total of £72,144,966 (£61,022,018 of which was paid from the Foreign Office Vote and the remaining £11,122,948 from the War Office Vote);
  Secondly, contributions in respect of Palestine pensions which, up to March, 1958, amount to £1,805,749;
  Thirdly, a grant in aid, amounting to £1 million, paid in the Financial Year 1958–59. The total amount lent to the Government of Jordan is £8,650,000, which represents the sum total of the series of development loans made since 1949. Of this amount, £133,333 6s. 8d. has so far been repaid.

  NUCLEAR TESTS (GENEVA CONFERENCE)
  Mr. Frank Allaunasked the Secretary of State for Foreign Affairs if he will make a statement on progress made at the Geneva Conference on nuclear test explosions.
  Mr. Bevanasked the Secretary of State for Foreign Affairs if he will arrange for the publication of a White Paper dealing with the progress made and the issues still outstanding at the Geneva Conference on the Discontinuance of Nuclear Tests.
  Mr. Beswickasked the Secretary of State for Foreign Affairs if he is now in a position to make a further statement about the progress of the Geneva Conference on the suspension of nuclear tests.
  Mr. Selwyn Lloyd: I apologise for the length of this reply, but I know that the House is interested in this matter.
  The Conference resumed on 13th April. Her Majesty's Government's aim is still an agreement to discontinue all tests under effective international control. We hope, therefore, that the Union of Soviet Socialist Republics will withdraw their insistence on a comprehensive veto in the Control Commission, particularly on procedures for on-site inspection, and also their refusal to join in discussing technical problems involved in the detection of high altitude and underground tests.
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  We have, however, also put forward an alternative position. We have said that. if the Soviet Union cannot bring itself to take the steps necessary to make a comprehensive ban possible, we support the proposal to approach a comprehensive ban by stages. The first stage would consist of a ban on tests from the earth's surface up to fifty kilometres and underwater tests. Such an agreement could be policed by the controls on which agreement at present seems feasible. It would only require land and ship control posts and aircraft flights. On-site inspections would not be necessary. We could continue without interruption efforts to work on the technical problems in detecting tests underground and at very high altitudes. As soon as satisfactory control provisions to cover these points had been agreed and incorporated in the treaty, tests in these environments would also be forbidden.
  We would much prefer a comprehensive agreement, but if that is not possible then the alternative would be a step forward.
  In the period before the Easter Recess the Conference agreed three further articles including one on the duration of the treaty and since the Recess a further article on amendments to the treaty has been agreed. For the present I regret that it is not practicable to issue a White Paper.
  Mr. Allaun: Will the Foreign Secretary state whether, if agreement is reached on stopping atmospheric tests as a first step, the West would then agree to negotiate on stopping underground and stratospheric tests as well? Secondly, does not he think this an ideal occasion for limited unilateral action as a means of setting an example to dispel the suspicion which exists?
  Mr. Lloyd: Regarding the first part of the hon. Gentleman's supplementary question, I think it is implicit in my Answer that we do envisage such negotiations proceeding, with certain technical discussions on the problems involved. Regarding the second part of his supplementary question, I do not think the time has yet arrived for that. We still hope the Russians will accept a proposal for a comprehensive ban. Then there is the alternative suggestion to be considered; and, when we have the Soviet reaction to

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  that, there arises the matter to which the hon. Gentleman referred.
  Mr. Beswick: Is not it a fact that the Foreign Secretary and the Government could have a comprehensive ban tomorrow if they wished, and that the difficulty is that they are requesting unlimited inspection on what is, after all, a very limited amount of disarmament, namely, the suspension of nuclear tests? Can the right hon. and learned Gentleman say why the proposals to which the Soviet Union have already agreed, for inspections throughout the country with non-Russian observers at those inspections, are not considered acceptable by the Government?
  Mr. Lloyd: We have not asked for, unlimited inspection. The position of the Soviet Union is that there should be a Soviet veto on whether a complaint is made and also whether any inspection on an alleged complaint takes place. As far as any control system is concerned, I should have thought that quite an impossible situation to accept. With regard to the latter matter to which the hon. Gentleman referred, I dealt with that in my Answer to the right hon. and learned Member for Rowley Regis and Tipton (Mr. A. Henderson) earlier today.
  Viscount Hinchingbrooke: Is the link, which is very necessary from the British point of view, between the suspension of nuclear tests and conventional disarmament being fully maintained in Geneva?
  Mr. Lloyd: This is a question of stopping tests and we have never accepted that as being actual disarmament. I agree with my noble Friend that, given a measure of disarmament, it is important to keep the link between conventional and nuclear disarmament.
  Mr. Bevan: The right hon. Gentleman has said he did not think it was wise to issue a White Paper at this stage. He will remember that last year he seemed rather to favour that idea. Now we cannot get it. I am sure he will appreciate the difficulty which we are in all the time. Is it the fact that when he says "we " he means the Western Powers and that the Russians are " they "—" They say that "—whereas, of course, there are all kinds of rumours to the effect that
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  there is not complete unanimity between the Western approaches to this matter and that resistance to progress is not always entirely on the Russian side?
  Mr. Lloyd: I should very much like to issue a White Paper, but it is rather the same position that we had when the Sub-Committee on Disarmament met privately and kept its own records. If one side publishes, all will think they are entitled to; so that difficulty is inherent in this method of negotiation.

  IRAQ (SUPPLY OF ARMS)
  Mr. Healeyasked the Secretary of State for Foreign Affairs what arrangements he has made to co-ordinate British and Soviet supplies of arms to the Iraqi Government under obligations to which Her Majesty's Government are a party.
  Mr. Selwyn Lloyd: I am not clear what obligations the hon. Member has in mind, but in any case the Answer is that no such arrangements have been made.
  Mr. Healey: Does not the Foreign Secretary feel that, instead of competing with the Soviet Government for first place as the arsenal of Communism in the Middle East, it would be wiser to reach agreement with it about limiting arms deliveries to all the countries in this very unsettled area?
  Mr. Lloyd: I do not accept the inference in the hon. Gentleman's supplementary question. Regarding the Question on the Order Paper, I do not think that either the Soviet Union or Iraq would welcome such an arrangement; and that sort of agreement, without the consent of Iraq, is just a way of affronting nationalist sentiment.

  MALAYA (COMMONWEALTH FORCES)
  Mr. Harold Daviesasked the Secretary of State for Foreign Affairs what decisions were taken at the recent South-East Asia Treaty Organisation Conference concerning the use of Commonwealth forces stationed in Malaya for the purposes of the South East Asia Treaty Organisation; and what representations he has received from the Government of the Federated Malay States on these decisions.
  Mr. Selwyn Lloyd: No such decisions were reached and no representations have been made by the Malayan Government.
  Mr. Davies: I welcome that reply. May I ask the Minister to assure the House that the British Government at least will take no lead in introducing nuclear or atomic weapons into South-East Asia?
  Mr. Lloyd: That is a different question. I do not know of any plan to do anything of the sort. I have answered the Question that is on the Order Paper. If the hon. Gentleman puts down another Question I will try to answer it.
  Mr. Davies: While agreeing that at this juncture there may not be any such plan, may 1 say that there are rumours in influential quarters in South-East Asia that this idea exists and that pressure is being brought on Laos to join S.E.A.T.0.—[HON. MEMBERS: " Question.") —and this can—
  Mr. Speaker: Order. The hon. Member seems to be making a number of statements. I have not yet heard his question.
  Mr. Lloyd: If I am correct in detecting a question in the latter part of the hon. Gentleman's observations, I would reply that there is no question at all of any pressure being brought to bear on Laos to join S.E.A.T.O. at the present time.

  MIDDLE EAST (U.N. CHARTER OBLIGATIONS)
  Mr. Harold Daviesasked the Secretary of State for Foreign Affairs whether, in his talks on the Middle East with the French Prime Minister and Foreign Secretary, he will propose the issue of a joint declaration affirming strict respect for the obligations of the United Nations Charter concerning non-interference in the internal affairs of other States, and, in particular. opposition to any policy of intervention, direct or indirect, political or military, in the internal affairs of Iraq.
  Mr. Selwyn Lloyd: These talks were concluded yesterday.
  Whether or not such a declaration would have been desirable, it would certainly be unnecessary in view of the terms of the United Nations resolution
  1022
  unanimously carried on 21st August, 1958. That remains our policy. I am sending a copy of the resolution to the hon. Member and I draw his attention in particular to paragraphs 1 and 2.
  Mr. Davies: Without, I hope, getting out of order on this occasion, may I ask the Foreign Secretary whether he would think it worth while to produce a White Paper on British Government policy in the Middle East in view of the complete change of policy since the days of the first Bagdad Pact?
  Mr. Lloyd: I will certainly consider that suggestion.
  Mr. Zilliacusasked the Secretary of State for Foreign Affairs whether, in view of the present situation in Iraq and Iran, and in the relations between the former and Egypt, he will press for the conclusion of an agreement between the four great Powers who are permanent members of the Security Council to implement the obligations of the United Nations Charter concerning non-interference in the internal affairs of other countries, joint action to control the traffic in arms, keep the peace and give economic and technical aid to Middle Eastern countries, and an abandonment of the policy of recruiting States in this area into military alliances with any of the great Powers.
  Mr. Selwyn Lloyd: I would refer the hon. Member to the Answer which I have given to Question No. 23. I am sending him a copy of that resolution. The Union of Soviet Socialist Republics also voted for it. So far as economic and technical aid is concerned, we would welcome any scheme for that which has the support of the States in the area.
  Mr. Zilliacus: As well as expressing my gratification for that reply, may I ask whether the right hon. and learned Gentleman will give an assurance that this means that there will be no repetition of the Jordan policy in case of internal disorders in either Iraq or Iran under the Bagdad Pact or any other agreement?
  Mr. Osborne: Or in Tibet?
  Mr. Lloyd: That is a very different question from the one on the Order Paper. But our policy on that is as decided unanimously in the resolution to which I have referred.

  UNITED KINGDOM AND FRANCE
  Mr. S. Silvermanasked the Secretary of State for Foreign Affairs what suggestions have been made by the French Government concerning a modification of the French position in regard to British policies in Europe, in exchange for some form of British support or at least acquiescence towards French policies in North Africa.
  Mr. Selwyn Lloyd: None, Sir.
  Mr. Silverman: Will the right hon. and learned Gentleman assure the House that the Government will at no time enter into any such dishonourable bargains?
  Mr. Lloyd: I have dealt with the Question on the Order Paper which asked whether any suggestion has been made. I do not think it right to expect me to deal with a hypothetical question.

  SUMMIT CONFERENCE
  Mr. Zilliacusasked the Secretary of State for Foreign Affairs whether he will give an assurance that the Government supports the early holding of a Summit Conference regardless of the outcome of the impending Foreign Ministers' Conference.
  Mr. Selwyn Lloyd: Her Majesty's Government's Note of 26th March stated their position clearly. I repeat the words used:
  "The purpose of the Foreign Ministers' meeting should be to reach positive agreements over as wide a field as possible, and in any case to narrow the differences between the respective points of view and to prepare constructive proposals for consideration by a conference of Heads of Government later in the summer. On this understanding and as soon as developments in the Foreign Ministers' meeting warrant holding a Summit Conference, Her Majesty's Government will be glad to participate in such a conference. The date, place and agenda for such a conference will be proposed by the meeting of Foreign Ministers."
  Mr. Zilliacus: Does that reply mean that there will be a Summit Conference whether the amount of agreement reached at the Foreign Ministers' Conference is considerable, small or negligible?
  Mr. Lloyd: This formulation was carefully worked out. I think that my right hon. Friend the Prime Minister has
  1024
  already answered a supplementary question very much similar in form to that just put by the hon. Gentleman. I have nothing to add to what my right hon. Friend said.

  TIBET
  Mr. Youngerasked the Secretary of State for Foreign Affairs whether he is now in a position to make a statement about refugees attempting to leave Tibet, in the light of official information available to him from first-hand witnesses.
  Mr. Philips Priceasked the Secretary of State for Foreign Affairs what official information is now available to him from first-hand witnesses of recent events in Tibet; and whether, in view of the fact that under the Anglo-Russian Convention of 1907 Chinese suzerainty over Tibet was recognised on condition that China respected Tibetan autonomy, he will now reconsider the whole matter and the question whether Chinese suzerainty in future should be recognised there at all.
  Mr. Selwyn Lloyd: I am not in a position to make a statement about refugees. As hon. Members know, communications are extremely difficult in the part of India where the Dalai Lama and his party are. I share the general feeling of deep concern with regard to what has been happening in Tibet, and about Tibetan autonomy. I am sure that the whole House sympathises with the Tibetan people in their present troubles. With regard to the juridical point, I have nothing to add.
  Mr. Younger: While I appreciate the great difficulty of getting exact information, may I ask the right hon. and learned Gentleman whether he would agree that it is almost certain that there will be some refugees, possibly not large numbers? Is he contemplating any discussions to ensure that these refugees will be received and that possibly, and if necessary, they will become an international responsibility?
  Mr. Lloyd: We have been in touch with the Indian Government on this matter. I prefer to add nothing to my reply.
  Mr. Philips Price: Would not our non-recognition of Chinese sovereignty over

  1025
  Tibet be of some assistance to a future Tibetan Government?
  Mr. Lloyd: That may be so.
  Sir H. Studholme: Is my right hon. and learned Friend aware how glad the people of this country will be that he has expressed the concern which is felt at the brutal act of aggression by the Chinese on a small and peace-loving State? Would it not be a very good thing for the world to realise how fortunate the world was during the time of the Pax Britannica, when Britain acted as the policeman of the world— [HON. MEMBERS: "Suez."] —and was in a position to prevent such acts of aggression from happening?
  Mr. Lloyd: There is a great deal in what my hon. Friend says.
  Mr. Bevan: Is the right hon. and learned Gentleman aware that in the very perplexing and difficult situation that exists in that part of the world, where precise information is difficult to obtain, we, on this side of the House, feel that we can tentatively support the position taken up by the Indian Government who have much more knowledge of the situation than we have?
  Mr. Lloyd: It bears a marked similarity to our own.

  SOUTH EAST ASIA (ECONOMIC AID)
  Mr. Rankinasked the Secretary of State for Foreign Affairs why the Council of Ministers at the recent meeting of the South East Asia Treaty Organisation in New Zealand rejected the appeal of the Asian members for increased economic aid.
  Mr. Selwyn Lloyd: It is not correct to say that the Council of Ministers "rejected the appeal "of the Asian members for increased economic aid. I would refer the hon. Member to the relevant sections of the communiqué issued after the Council meeting, a copy of which I am placing in the Library of the House. This enumerates a considerable number of fields in which action is being taken or is under consideration. Her Majesty's Government were very glad to be able to announce at the meeting that they would make a contribution of £50,000
  1026
  towards the South East Asia Treaty Organisation Graduate School of Engineering which is due to open in Bangkok in September of this year. I would, however, like to remind the House that Her Majesty's Government's primary instrument of economic aid in the area is the Colombo Plan.
  Mr. Rankin: May I take it from that Answer that the matter is still under consideration and that the right hon. and learned Gentleman may reconsider what has been done, in view of the fact that the small Asian countries feel that more economic aid is necessary if they are to resist the economic offensive which is being waged by the Communist countries against them? Will the Minister keep that point in mind in reconsidering the decision which has been taken?
  Mr. Lloyd: In view of that supplementary question, I will, with the permission of the House, say that, under the Colombo Plan Technical Co-operation Scheme, by Export Credits Guarantee Department Section III credits, and by loans from the United Kingdom sterling subscription to the International Bank, our grants of United Kingdom aid to S.E.A.T.O. countries, up to 31st December last year, were more than £16 million. That does not include a further credit to Pakistan, signed on 27th February this year, under the Commonwealth Assistance loan plan.

  EMPLOYMENT

    Remploy Factory, Coventry
    Miss Burtonasked the Minister of Labour the number of persons under Section 2 of the Unemployed Disabled Register coming within the catchment area of, and awaiting admission to, the Remploy factory, Coventry.
    The Parliamentary Secretary to the Ministry of Labour and National Service (Mr. Richard Wood): There are at present eight such persons considered suitable by my officers for submission for employment at this factory. Two of these have been accepted by Remploy and are awaiting a vacancy.
    Miss Burton: Will the Parliamentary Secretary comment on the fact that when I visited the Remploy factory last month the area liaison officer told me he could

    1027
    not possibly take on more people, because of the lack of work from the Government to the factory?
    Mr. Wood: I may be able to give more helpful information in answer to the hon. Lady's next Question.
    Miss Burtonasked the Minister of Labour the present number of disabled people employed at the Remploy factory, Coventry; what number would normally be employed; and what would be the maximum which could be accommodated if sufficient work were available.
    Mr. Wood: Fifty-nine are at present employed. The average number employed over the last five years is seventy-one. The answer to the last part of the Question is eighty-five.
    Miss Burton: Could the Parliamentary Secretary comment on this fact? Is it not true that last year Government contracts to Remploy factories in general dropped considerably? Would his right hon. Friend take up the matter with the Minister of Supply, because we in Coventry are very deeply concerned about this matter?
    Mr. Wood: All I can say to the hon. Lady is that my right hon. Friend is having discussions very much on this point. The particular factory in Coventry is one, as the hon. Lady knows, which does preservation, identification and packing, and it is finding orders difficult to obtain. It is on trying to stimulate orders for Remploy that my right hon. Friend's discussions are concentrated.

    Travel Expenses
    Mr. Spriggsasked the Minister of Labour under what circumstances he is prepared to assist with the travel expenses of unemployed workers who, upon their own initiative find employment at varying distances from their home towns; and if he will give sympathetic consideration to the case of Mr. D. Makin, details of which have been sent to him by the hon. Member for St. Helens.
    The Minister of Labour and National Service (Mr. lain Macleod): Daily travelling expenses are not payable under the Ministry's transfer schemes. These schemes are designed to help unemployed workers for whom no work is available in their home areas to transfer to employ-
    1028
    ment elsewhere by contributing to the extra cost of maintaining a home in one district and living in another.
    I have written to the hon. Member about the particular case of Mr. D. Makin.
    Mr. Spriggs: Is the Minister aware that the individual to whom he referred in reply to me was out of work for twelve weeks with no chance of getting employment in St. Helens and that he moved out to Partington? I think it is generally understood that a wages grade man who has been out of work for twelve weeks cannot afford to pay travelling expenses and that, where it is possible for him to go home, it is in the interests of those for whom he is responsible that he should be able to get home. [HON. MEMBERS: "Speech."] I should like to appeal [HON. MEMBERS: "Question.]—may I ask the Minister if he is aware that in these cases, particularly where married men and widowed mothers are concerned, it is essential that assistance should be given?
    Mr. Macleod: If the hon. Member reflects on the matter, he will see that for the Government to take on the burden of paying a contribution towards daily travelling expenses would be quite impossible. The Greater London area alone is a travel-to-work area in which 10 million people would be involved. In the particular case he mentioned this man could have been eligible for lodging allowance, but he preferred to make the sort of arrangements outlined by the hon. Member. I made this point in my letter to the hon. Member.

    Cokemen, Easington
    Mr. Shinwellasked the Minister of Labour how many men described as coke-men in the Easington Parliamentary area have been made redundant in recent months and to what extent, when offered work elsewhere, they are provided with financial assistance to enable them to meet expenses.
    Mr. Iain Macleod: Three hundred and ninety-eight men have been displaced since May last from the Horden and Shotton coking plants. It is not known how many of them live in the Easington Parliamentary division. I understand that all of them have been offered alternative employment by the National Coal Board which has provided special transport at

    1029
    a charge of 6s. 0d. weekly for those now working at the Fishburn and Trimdon plants. Men who refused the alternative employment and cannot obtain other local work may benefit from my Department's temporary transfer scheme if they accept jobs beyond daily travelling distance of their homes.
    Mr. Shinwell: Will the right hon. Gentleman look into the matter again because, according to my information, a large number of men who have been disemployed have not been able to find alternative employment and this is rather a serious matter?
    Mr. Macleod: I shall certainly look into the matter again. The figures are as I gave them in my main Answer. The other figures are that forty of the men concerned refused the offer of alternative employment and twenty-two of those were registered in Easington and the other areas, so the vast majority have obtained work. If the right hon. Member thinks my figures are in dispute, of course I shall look at them again.

  NATIONAL SERVICE

    Non-graduate Research Workers
    Mr. Blenkinsopasked the Minister of Labour whether he will agree to the continued deferment from national service of non-graduate nuclear research workers in Newcastle-upon-Tyne whose efforts to get higher qualifications would otherwise be prevented.
    Mr. Iain Macleod: No, Sir. There are already arrangements whereby craft and student apprentices may be granted deferment to obtain certain qualifications, and I cannot see my way to extending them either generally or in the particular case of non-graduate research workers.
    Mr. Blenkinsop: Does not the right hon. Gentleman recognise that while there has been some deferment in this case. it is most unfair to practise discrimination against any graduate who is attempting to qualify further in a field of great importance to the country?
    Mr. Macleod: It is of particular importance in the last months of National Service that we should try to be fair between one person and another. It is
    1030
    true that a non-graduate can be an important member of a research team, and in these cases facilities are given for both apprenticeship deferment in suitable cases and for post-apprenticeship deferment, during which higher certificates can be obtained.
    Mr. Blenkinsop: Will the right hon. Gentleman at least consider the possibility of even further deferment where it can be shown that further qualifications are being sought?
    Mr. Macleod: That is precisely the object of post-apprenticeship deferment. I am always prepared to see whether there can he further relaxation, and of course I will look into this matter.

    Personal Case
    Mr. Blenkinsopasked the Minister of Labour whether he will give special consideration to claims for exemption from, or postponement of, National Service for those who, as in the case of Mr. Foden of Newcastle-upon-Tyne, about whom representations have been made, have served in the Merchant Navy and worked in the mines and who have strong compassionate grounds for taking other civilian work.
    Mr. Iain Macleod: Men who leave employment, for which they have been granted indefinite deferment while still liable for National Service, as contemplated by Mr. Foden, must expect to be called up. They have however the right to apply for postponement of call-up on the grounds of exceptional hardship. Such applications are carefully considered by the statutory authorities appointed for the purpose.
    Mr. Blenkinsop: Does not the Minister feel that this is rather a cat-and-mouse business? Will he not agree that it is very much more important at the present moment that this man should be able to take work of real importance outside the coal industry rather than to insist that he should either remain in the coal industry or go into the Forces?
    Mr. Macleod: No. If I took it upon myself to decide in advance whether or not there was a case on compassionate grounds for this man, I, as Minister of Labour, would be taking the place of the statutory authorities appointed by this House. That would be quite wrong.

    Hardship Cases
    Mr. Frank Allaunasked the Minister of Labour (1) if he will exempt from National Service the sons of widowed mothers living alone or with young children;
    (2) If he will exempt from National Service men who are married with a young child or children.
    Mr. Iain Macleod: I have no power to exempt men from their liability under the National Service Acts. Any man may apply for his call-up to be postponed on the grounds that it would cause exceptional hardship, and I can assure the hon. Member that such applications from men in the circumstances mentioned are very sympathetically considered.
    Mr. Allaun: Is it not utterly wrong that application for postponement on hardship grounds are being turned down even though the widows are elderly, unwell and in a highly nervous state? Particularly in view of the increased numbers of recruits, will the Minister reconsider the question of exempting entirely these two categories?
    Mr. Macleod: No. I have said I have no power to exempt them. If the hon. Member or any other hon. Member wishes to bring to my notice one or two individual cases, I shall consider them, but in fact the number of applications for deferment on hardship grounds has been going up steeply since I amended the Regulation a little time ago. I doubt if this is a very real problem. I think that in almost all these cases deferment has been granted.
    Mr. Lee: Is it a fact that there is now a reservoir of people to be called up which is bigger than the requirements of the Forces? If that is so, will the Minister consider bringing before the House new categories which he will agree could be deferred?
    Mr. Macleod: I doubt if in fact we are in that position. It is only a month ago that the Minister of Defence and I came to the conclusion that we could reasonably allow our last reserve, the fourth quarter of 1939, to be assured that they would not be called up. We have not sufficient numbers in hand to meet the suggestion made by the hon. Member.
    Mr. Gower: Will my right hon. Friend pay particular attention to the position
    1032
    of unemployed sea-going men because, in spite of the assurance he gave me some time ago, it seems that some of them are being made available for military service although they are ready to go to sea but cannot obtain ships?
    Mr. Macleod: I think I had better refer the hon. Member to my supplementary answer. If he likes to bring a special case to my notice, I shall consider it.
    Mr. Allaun: On a point of order. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter on the Adjournment.

  THE PRIME MINISTER AND LORD MONTGOMERY
  Mr. Liptonasked the Prime Minister whether he will make a statement on his official discussions with Lord Montgomery on Wednesday last.
  The Secretary of State to the Home Department and Lord Privy Seal (Mr. R. A. Butler): I have been asked to reply.
  The term "official discussions" is not applicable to the private talk which my right hon. Friend had with Lord Montgomery. On this I have no statement to make.
  Mr. Lipton: Will the right hon. Gentleman please explain why a private, personal, unofficial visit by Lord Montgomery to Russia should require a forty-five minute conference at No.10 Downing Street with the Prime Minister and the Foreign Secretary? Who was advising whom? Is it not rather naïve to expect Mr. Khrushchev, Dr. Adenauer and General de Gaulle still to regard this visit as a completely private, independent visit?
  Mr. Butler: No, Sir. Not when the full facts are known. [HON. MEMBERS: "When will that be?"] Field Marshal Montgomery mentioned to the Prime Minister his wish to go to Moscow, and my right hon. Friend the Prime Minister said that as a private person Lord Montgomery was entitled to go wherever he liked. Before going to Moscow, the Field Marshal had the courtesy to suggest that he might have a conversation with my right hon. Friend the Prime Minister, which he did, and the Prime

  1033
  Minister was able to give him some very valuable advice upon his forthcoming visit to Moscow.
  Mr. Bevan: Are we, therefore, to understand that the Prime Minister is convinced that Lord Montgomery is going to Russia as a private citizen, and is Lord Montgomery equally convinced?
  Mr. Butler: I can only answer in this House for my right hon. Friend.
  Mr. Nabarro: Has my right hon. Friend observed that Mr. Jimmy Edwards has gone to Moscow? Can my right hon. Friend say whether the Prime Minister had a private conversation to brief Mr. Jimmy Edwards before he departed?
  Mr. Butler: I am not aware whether my right hon. Friend had a conversation with Mr. Jimmy Edwards or not. No doubt if Mr. Jimmy Edwards had sought advice we should have been glad to give it to him.
  Mr. H. Morrison: In view of the very large and varied number of people who are going to Moscow with the hope of having conversations with Mr. Khrushchev, is not there a real danger that Mr. Khrushchev will get utterly confused?
  Mr. Butler: From my personal acquaintanceship with Mr. Khrushchev, I think he is quite capable of looking after himself.

BUSINESS OF THE HOUSE
Proceedings of the Committee on Income Tax (Repayment of Post-War Credits) [Money] exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House)—[Mr. R. A. Butler]
ORDERS OF THE DAY

  WAYS AND MEANS [7th April]
  Resolutions reported.
  Resolutions read a Second time.
  Question, That this House doth agree with the Committee in the said Resolution, put forthwith on each Resolution, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions). and agreed to.
  [For particulars of Resolutions, see OFFICIAL REPORT, 7th April, 1959; Vol. 603, c. 65–74.]

  FINANCE (EXCHEQUER ADVANCES)
  Resolution reported;
  That, for the purposes of any Act of the present Session relating to Finance, it is expedient to authorise such increase in the sums which, under section forty-two of the Finance Act, 1956, are authorised or required to be issued out of the Consolidated Fund, raised by borrowing, or paid into the Exchequer, as may be attributable to any provision of the said Act of the present Session continuing the power to make advances under that section and increasing to sixteen hundred and twenty million pounds the aggregate amount of the advances that may be made thereunder.
  Resolution agreed to.

  FINANCE (IMPORT DUTY RÉLIEFS)
  Resolution reported;
  That for the purposes of any Act of the present Session relating to Finance it is expedient to authorise such increases in the sums which, under section five of the Import Duties Act, 1958—

  (a) are payable out of moneys provided by Parliament on account of expenses of government departments; or

  (b) are payable into the Exchequer on account of fees received by government departments;

  as may result from extending the powers conferred by subsections (1) and (4) of that section so as to make provision for relieving from import duty herrings imported for conversion into fish meal and oil or bought for that purpose after importation.
  Resolution agreed to.

  WAYS AND MEANS [13th April]
  Resolution reported;
  WAYS AND MEANS [13th April]

    AMENDMENT OF THE LAW
    That it is expedient to amend the law with respect to the national debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description and amendments reducing generally, for all goods to which it applies, any rate of tax which is not altered in pursuance of some other Resolution of the Committee of Ways and Means.
    Resolution read a Second time.
    Question, That this House doth agree with the Committee in the said Resolution, put forthwith, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions), and agreed to.
    Bill ordered to be brought in upon the, said Resolution and upon the other Resolutions reported from the Committee of Ways and Means and the Resolutions reported from the Committees on Finance (Exchequer Advances) and Finance (Import Duty Reliefs) and agreed to this day, by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Maudling, Mr. Simon, and Mr. Erroll.

  FINANCE
  Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance, presented accordingly and read the First time to be read a Second time upon Monday next and to be printed [Bill 96].

  INCOME TAX (REPAYMENT OF POST-WAR CREDITS) BILL
  Order for Second Reading read.
  3.36 p.m.
  The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory): I beg to move, That the Bill be now read a Second time.
  This Bill carries into effect the proposals made in my Budget speech relating to Income Tax post-war credits. It is, I hope, a Bill which will command general approval on both sides of the
  1036
  House. I would remind the House that the reason for dealing with this matter to a separate Bill, rather than in the Finance Bill, is to enable us to start making payments as early as possible. I shall deal with the history only very briefly.
  Hon. Members will remember that these credits were introduced in 1941. They represented the extra tax payable by reason of a reduction in the earned income allowance and in the personal allowances made in that year's Budget. The intention was that they should be repaid, in the words of the 1941 Finance Act,
  "…so soon as may be after the termination of hostilities".
  Since then two steps towards repayment have been taken in the years since the war. The first was taken by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), when he made provision in the Finance Acts, 1946 and 1947, for the credits to be claimed by men when they reached the age of 65 and women when they reached the age of 60. In 1954, my right hon. Friend the Lord Privy Seal provided for the repayment of the credits which had belonged to a deceased person on the date when their holder would have reached the qualifying age had he lived.
  The total amount of the credits originally created is estimated at about £765 million. Of this amount, £25 million was set off against tax arrears in 1946 and £310 million has been repaid, so the amount still outstanding is about £430 million. The present rate of repayment is about £18 million a year and if nothing further were done it would be very many years before the credits were completely repaid. The reason which has hitherto led successive Chancellors of the Exchequer of both parties to take the view that faster releases were impracticable was, in brief, the prevalence of inflation. A situation in which, about fourteen years after the end of the war, more than half the total amount of credits originally created is still outstanding is, however, one about which none of us, I think, can feel at ease.
  The delay in repaying what is naturally. and, I think, rightly, thought of as the credit-holder's own money is particularly deplored by all of us in cases where the credit-holder is suffering hardship, and there has developed a feeling on both

  1037
  sides of the House that something should be done to meet this position.
  I am glad, therefore, that this year the financial and economic situation makes it possible to launch a comprehensive attack on this front. Indeed, we are fortunate that not only is it now possible for me to speed up this payment, but it fits into the pattern of a limited encouragement to the expansion of the economy to do so. The sooner these credits can be finally disposed of the better we shall all be pleased, but, clearly, the rate at which this can happen must depend on the state of the general economy as it develops in the future.
  The Bill takes general power to prescribe qualifications for repayments by regulation. This power will provide a useful weapon in our general armoury for counteracting the tendencies in the economy to swing between the extremes of boom and slump. As I explained in my Budget speech, I propose to accelerate repayment in three ways. In the first place, I propose to reduce by two years the ages at which credits can be claimed. This will mean that the qualifying ages w II become 63 for men and 58 for women. That will cost about £35 million in the current year. I should, of course, have been delighted if I had felt able to pay for even more than that now, but the sum which I have mentioned is very substantial and I felt that I could not go further than that at present.
  Secondly, I propose that the credits in all cases shall be repayable on the death of the holder. This will secure repayment for a large class whose claims many hon. Members have pressed on grounds of hardship, namely, widows who have inherited their deceased husbands' post-war credits. The cost of that proposal will be £34 million for the current year.
  Thirdly, I propose that repayment should be made to certain clearly defined hardship cases. The idea of dealing specially with hardship cases has been canvassed from the very outset of the scheme, but has hitherto always been rejected for quite serious reasons. There is, first, the problem of definition. We must find an objective definition of hardship, which, I think, inevitably has to be a definition which is already applied in other directions, since the Inland Revenue is itself neither fitted nor staffed to test the
  1038
  qualifications of applicants on the grounds of hardship.
  There is, secondly, the problem of equity. Whatever definition of hardship is chosen, there will always be some persons who fall just outside it and who may be suffering more hardship than some of those who qualify. It is not an easy matter to administer a scheme which, by its nature, must be discriminatory between people who are all sufferers in one way or another from misfortune.
  After much thought, however, I have come to the conclusion—and I think that the whole House will agree with me—that it is right to make a start in this difficult business even though the scheme which I am proposing is bound to involve discrimination of the kind which I have mentioned. I have selected three categories of hardship which are capable of precise and objective definition and each of which, I feel sure, will be generally accepted as meriting special treatment.
  I should perhaps again remind the House of the classes which will qualify under these proposals. The first class is persons who, for a continuous period of 12 weeks ending after 7th April, have been receiving National Assistance. The second class is persons who, after 7th April, are named in a register of blind persons required under Statute to be kept by a local authority. This will not include persons who are partially blind. The third class is persons who, after 7th April, are receiving constant attendance allowance or unemployability supplement under the war pensions Instruments, the Industrial Injuries Acts or the Industrial Diseases (Benefits) Acts, or who would have been in receipt of unemployability supplement if they had not claimed an alternative benefit instead, or who would have been in receipt of constant attendance allowance but for being a hospital in-patient.
  Hon. Members will see that in all these cases the Inland Revenue will be able to obtain a certificate from the responsible authority—the National Assistance Board or the Ministry of Pensions and National Insurance, or whoever it may be—that the claimant satisfies the conditions laid down. The cost of repayment to claimants in these classes will be about £2 million this year.
  The provisions to authorise the payments which I have just described are to

  1039
  be found in Clause 1. The Bill gives the Treasury power to make regulations prescribing the classes to be paid. The original legislation introducing the postwar credits did not permit the Treasury to discriminate between classes of claimants in making repayments and provision therefore had to be made in the Finance Acts for the repayments which have so far been possible and have been made. Under the Bill the classes qualifying for repayment can be extended at short notice whenever the Government decide that an extension is possible and desirable. The regulations will be laid before the House and can be prayed against under the negative Resolution procedure.
  I should perhaps explain at this stage the nature of the arrangements which have been made for making repayments to these classes. Very large numbers of claim forms have to be printed and distributed to many thousands of post offices throughout the country. These forms are at present being printed, and applicants will be able to obtain them from post offices on Monday, 4th May. Claims can then be made to the Inland Revenue from then on. Although no doubt the Bill will not have become law by then, Clause 1 (4) will validate all such claims.
  Regulations will be made immediately the Bill has become law and, if the timetable at which I am aiming has been maintained, I hope that they will authorise payment from 1st June. Hon. Members will forgive me if I repeat something which I mentioned in my Budget speech. I hope that they will understand if, in these circumstances, I ask them not to press for any immediate extension or alteration of the classes who are to receive payment.
  Had we waited until the Bill had become law before getting on with the drafting and printing of these forms, the whole programme would have been delayed and many people would have had to wait weeks or perhaps months longer for their money. Nor could we at this stage make changes in the plan without involving a good deal of serious delay in starting payments. I can, however, give an assurance that I will certainly consider any suggestions which are put forward either n the course of the de-
  1040
  bate on the Bill or elsewhere for future action further ahead.
  As I have already explained, the form in which the Bill is drawn makes it possible for further classes to be added by regulation if this is shown to be possible and desirable. It would, however, not be practicable to make any additions to the qualifying classes until after the mass of the new claims under these proposals have been dealt with.
  Mrs. Jean Mann: How many persons are likely to be affected by these proposals?
  Mr. Amory: I estimate that perhaps as many as 1,400,000 people may become entitled to claim under these proposals. That will be in addition to approximately 300,000 claimants who will be covered by the normal one year's payment which would be made apart from these proposals. That is a total of 1,700,000.
  Dr. Horace King: Will the Chancellor make it clear that the post-war credits due to the widows of holders who died previous to the passing of the Bill will come automatically into the provisions of the Bill?
  Mr. Amory: The widow of someone who died previous to the passing of the Bill will, under these proposals, become entitled straight away to the post-war credits belonging to her late husband.
  Mr. George Chetwynd: They will have to apply on the forms that are being issued?
  Mr. Amory: They will have to apply on the forms which are being issued, but a widow would not become automatically entitled to her own post-war credit if she had one.
  Mrs. E. M. Braddock: Does that include not only the widow, but the next-of-kin?
  Mr. Amory: Yes. All that includes whoever is the beneficial owner of the credits under the dispositions of the deceased.
  This will entail a tremendous amount of work and a good deal of overtime in Inland Revenue offices and it is as much as they can be reasonably expected to cope with at present. I think that it will be three or four months before they

  1041
  have broken the back of the new job, and I am sure that it will be understood generally that they cannot pay off everyone at once and will only be hindered if claimants write to them pressing for prior attention. We should get into a muddle if that happened.
  This might be a convenient moment to refer to one or two alternative suggestions which have been made to me for repayment of post-war credits. Broadly, these fall into two main categories. First, there have been various proposals for repaying a part of every credit. The objections to those suggestions are almost entirely administrative. It will be a large enough operation to deal with the 1,400,000 claims I have mentioned which we expect this year in addition to the normal 300,000, but a repayment of part of every credit would involve checking claims from everyone who holds any credit, and there are well over 11 million holders. We should have to repeat this enormous operation as each successive slice of the credits became due for repayment.
  That objection applies to the suggestion made by the right hon. Member for Bishop Auckland that repayments should be made one year at a time, that is to say, taking 1941 credits first, then 1942 credits, then 1943 credits, then 1944 credits, and so on. The Inland Revenue simply could not undertake that task with their existing staff, or anything approaching their existing staff.
  Secondly, there have been suggestions which, in different ways, mean converting post-war credits into some ordinary form of savings security— by turning them, for instance, into Post Office Savings Bank deposits, or Premium Savings Bonds, or making them a type of marketable security. I have examined a number of ideas of that kind, but have found none which did not involve inflationary effects comparable to those which would result from complete repayment. The impossibility of dealing with all the claims within a reasonably short period, even a year or two, would also apply.
  I will not examine those proposals in any further detail at this stage, but I am sure that when my hon. and learned Friend the Financial Secretary winds up the debate he will deal with any questions which may have been raised in the course of the debate about alternative methods which could have been adopted.
  1042
  These proposals for accelerating repayment mark the first stage in a determined attack upon the post-war credit problem, but they will still leave a great deal to be done. Even after this operation and the normal annual repayment, during which about £89 million in all will be repaid this year, there will be about £340 million outstanding.
  I thought it right that those who are not receiving repayment at once—by " at once " I mean in the next few months—should receive interest on their credits when they qualify. This interest will not be paid year by year, but will be added to the sum of the credits when payment is made. The interest will be at the same rate as on Post Office Savings Bank deposits, namely, 24 per cent., and will be compounded with what is called yearly rests.
  Mr. Gordon Walker: What does that mean?
  Mr. Amory: I believe that "yearly rests "means that interest is not paid on the interest accruing during the year. If that is not so, I will find out and inform the right hon. Member.
  Mr. Cyril Osborne: What is the estimated total of the interest which will be added to the capital which has to be repaid?
  Mr. Amory: I cannot say that, because it depends how quickly the remaining post-war credits are paid off over the years. The estimate is that it will amount to practically nothing in the first year or two. If post-war credits have not been paid off by 1980—I hope that they will have been—by that time it will have amounted to about £7 million a year. I hope that post-war credits will have been disposed of before then. That £ 7 million a year is the annual rate, not the total. I am unable to give my hon. Friend the Member for Louth (Mr. Osborne) the total figure, because it will depend on the period.
  Mr. Osborne: If total repayment is not completed until 1980, there are twenty years to go. Twenty times £ 7 million make £ 140 million.
  Mr. Amory: No. My hon. Friend has got it wrong. They will be very small sums indeed in the early years, but they will increase. It is impossible to state what the total amount will be until one

  1043
  knows how large the annual repayments will be each year. It will not amount to any such sum as my hon. Friend has mentioned, I hope.
  The interest will not be liable to either Income Tax or Surtax. Credit holders will, therefore, be in much the same position, rather better actually, as if they had been able to claim now and had put the proceeds in their Post Office Savings Bank accounts and had allowed them to accumulate there. Clause 2, therefore, provides that interest shall be payable as from the beginning of October next.
  The Bill deals also, in Clause 3, with the special position of building societies. This is rather complicated. There is a long-standing arrangement under which building societies are taxed on so much of their profits as goes to pay interest on shares and deposits, not at the full standard rate of tax, like other incorporated bodies, but at a composite rate.
  This composite rate represents an estimate of the average rate at which the shareholders and depositors would be liable to tax on their interest if their personal circumstances were taken into account. The reduced allowances were taken into account in fixing the composite rate in the war years. But to put building societies into the same position as individual taxpayers the Inland Revenue worked out what the composite rate would have been if those reductions in the allowances had not been put into effect.
  One of my predecessors, Sir Kingsley Wood, gave an undertaking hat tax at the difference between the two composite rates on the appropriate amount would be regarded as post-war credit due to each society which was a party to the composite rate arrangements. The time has come when it is proper to give statutory sanction to that undertaking so that building societies will have a legal right to their credits. I cannot undertake at present actually to repay building societies any of these credits, but power is taken under the Bill to provide by regulations for repayment in the future. When they receive repayment, the building societies will get interest on the same basis as individuals.
  There is one other point which I ought to mention. When the certificates were first issued to individual taxpayers, they
  1044
  were often sent out before the full demand for tax for that year had been paid, so that the taxpayers could have some concrete evidence of what they would ultimately be entitled to receive. The amount shown necessarily recorded the credit which would be due if the full tax due from the taxpayer were paid. In the great majority of cases, of course, the full tax has been paid and no difficulty arises, but in a very small minority it will have happened, for some reason or other, that the whole of the tax for that year will not have been paid.
  In those cases it sometimes happens, therefore, that the full amount shown on the post-war credit certificate turns out not to be due. I realise that that occasionally causes disappointments and I have had Questions about that. But. clearly, the State cannot be expected to repay money which it has never received.
  Mr. J. T. Price: Like other hon. Members, I have had problems of this kind put to me by constituents who have waited for many years to qualify and who have then found that an adjustment has been made by withholding or withdrawal of certain debits for the year in which the credit arose. I had hoped that in bringing forward this legislation we could have had a firm undertaking that evidence would be available as to the tax situation in that year. That is especially important with working-class taxpayers subject to P.A.Y.E. who rarely have documentary evidence of their tax position and of drawbacks going back twenty years. It is a serious source of annoyance to those people who have brought these cases to my attention.
  Mr. Amory: I know, and I well remember the hon. Member raising these Questions with me. I have sympathy with that view and I have considered whether we could check the whole of the outstanding post-war credits so that people could know the position. However, for the administrative reasons which I have mentioned, that is not possible. If someone asks that it should be checked, that can be done. I agree about the problem, but I cannot see a solution. Perhaps it is something which we can discuss later.
  To sum up the main object of the Bill, it provides a means of enabling me to carry out my immediate proposals for

  1045
  accelerated payments, but it goes beyond that. It also provides machinery, as 1 mentioned in my Budget speech, under which extensions of the classes can be made quickly and easily as soon as ever it proves economically and financially possible to do so.
  Mr. Osborne: My right hon. Friend said that £89 million would be paid off this year. but that there would still remain £340 million to be paid off. He then expressed the hope that all would be paid by 1980. Is it not fair to assume that conditions in the next four years will be as good as those of this year? If £89 million is paid off each year, the whole lot will be paid off in four years.
  Mr. Amory: I leave my hon. Friend to make his own calculations. I cannot commit myself to anything more than that to which I am already committed. I should be very disappointed if the conditions in the country were to remain such that it would be impossible to complete repayment before 1980.
  Mr. Harold Wilson: Is not this one of the reflationary devices of the Budget, due to the fact that more slack in the economy has developed than the Government forecast a year ago, as shown by the Minister of Labour's own estimates of unemployment a year ago? If the hon. Member for Louth (Mr. Osborne) is right, would it not mean, on the Government's own assumptions, that the Chancellor would have to assume a continuing level of unemployment, more than he would want to foresee?
  Mr. Amory: I am neither supporting nor rejecting my hon. Friend's calculations. I repeat what I said earlier. The impediment to faster repayment of these credits in the past has been the problem of inflation. If we can keep the economy free of inflation, as we must, then I hope that at any rate considerably faster progress with the repayment of post-war credits will be possible in the years ahead than has been possible in the years since the war.
  As I said, the Bill provides machinery under which further extensions of classes can be made quickly and easily as soon as ever it proves economically and financially possible to do so. I hope that the payment of interest would also help those who are not being repaid this year to await their turn with greater patience.
  Mr. Raymond Gower: Earlier in his speech, my right hon. Friend made a brief reference to suggestions about transferability. Is it not possible in a modified form to institute the right to transfer these credits, which would impose no obligation on the Treasury to bring forward an earlier date of payment? In other words, a person holding £100 worth of credits might well prefer to negotiate that for an immediate payment of £80 or £90, rather than wait several years before receiving £100.
  Mr. Amory: That is a matter which I hope we shall pursue and discuss later, but the difficulties which stand in the way of that suggestion are administrative. It would be very difficult to launch a scheme of that kind section by section and it is administratively impossible to check on £11 million worth of post-war credits over a short period.
  A second reason is that almost any scheme of that kind, for transferability. would raise the problem of inflationary effects if it were to apply to all outstanding credits. I shall listen with interest to anything my hon. Friend says on this subject and my hon. and learned Friend the Financial Secretary will answer any questions which arise. I see the advantage of that kind of solution, but nothing that I am proposing stands in the way of such a step if it later becomes feasible.
  I commend the Bill to the House as a serious and practical attempt to grapple with a problem which has been causing all of us increasing anxiety as the years have passed.
  4.10 p.m.
  Mr. Gordon Walker: It is a pleasure to debate with the Chancellor in the relative calm between two storms—the acerbities of the Budget debate which we have just finished and the relentless fight on old-age pensions which we are about to begin.
  The Chancellor has explained that this is a separate Bill which he mentioned in his Budget speech, hut, of course, he is also arguing that he did not mention the old-age pensioners in his Budget statement because that would need a separate Bill. I really cannot follow the logic of that. If it was wrong to mention old- age pensioners because that would need a separate Bill, then it was wrong to

  1047
  mention post-war credits, because this, too, needs a separate Bill; but that was the argument which the Chancellor used. I will not pursue this, but it just shows the hollow arguments to which the Chancellor has been driven by his conscience on this matter of pensions.
  We do not oppose this Bill; indeed, we welcome it. One question that we will have to consider is whether more can be done, and we will approach this aspect of the problem with great responsibility. We must also question whether more should not have been done earlier. The state of post-war credits is really a scandal. It is almost a public default that so much is outstanding, and will be outstanding even after this Bill is passed —about £340 million.
  It is true that the circumstances which Lord Keynes foresaw when the country would need some injection of purchasing power did not arise until they were, in part, artificially induced by the policy of the present Government, but, undoubtedly, more could have been done to repay post-war credits if the Chancellor had decided to expand last year, instead of postponing expansion until this year, because he could have done last year what he has said in very similar circumstances it is right to do this year.
  We would certainly prefer the proposal put forward by my right hon. Friend the Leader of the Opposition, that each year the age for repayment should be lowered by one year. If that had been done when my right hon. Friend suggested it, it would have had the advantage that we would now be four years on in the processing. There is the further advantage that we would have embarked upon a steady and automatic system of repayment which certainly could be speeded up at any time, if need be, and which would have given everybody in the country the knowledge of a minimum entitlement of which they could take note in making their future plans.
  There is a great deal to be said for a steady and automatic rate and system of repayment which could be set at a safe level and which could be speeded up at any time by the machinery which we are now enacting. I should like to take up a point made in an intervention by my hon. Friend the Member for Westhoughton (Mr. J. T. Price). The Chancellor has said that there may be draw-
  1048
  backs, in effect, if the tax in a particular year was not paid, so that the holder would get less than the original credit stated.
  Mr. Amory: I think that I actually said, if the amount of tax assessed in a particular year had not, in fact, been paid by the taxpayer.
  Mr. Gordon Walker: In other words. for that reason, the holder of the credit would receive less than the amount he was expecting to receive, which is on the face of the credit document. There would be a drawback. There is something in the point that the Chancellor made that the State cannot be expected to repay what it has never received, but there is also an argument that the State should be expected to pay what is implied on the face of a document which it has itself issued.
  There is something to be said for this argument, too, and I suggest that the right hon. Gentleman should not take that argument too far, because the State does repay a great deal of tax which it has never received to dividend strippers in between the times when we block up the loopholes. [Interruption.] certainly, that is the whole essence of dividend stripping, that one claims and gets from the State tax which the State has never received. Therefore, I say that the Chancellor should not press that argument too far.
  We are glad that the Chancellor is to pay interest at the present Post Office Savings Bank rate on the credits still outstanding, but I deeply regret that he said that this is not to be grossed up -in Surtax. The Chancellor dealt with this matter extremely cavalierly. It certainly should be grossed up for Surtax, because it would not affect most people. Most people have only small amounts to come back, as they are not large taxpayers, but there will be some very rich people who get very large interest on the post-war credits paid back to them, and surely enough has been done already in this Budget for very rich people.
  The Chancellor said that people would get interest on the outstanding post-war credits as if, I think he said, they had merely allowed the money to remain in the Post Office Savings Bank and accumulate, but that is not true. If one leaves money in the Post Office Savings Bank, one gets the first £15 of interest

  1049
  Income Tax free, and it is then grossed up for Surtax, so that what the Chancellor said is not true.
  Mr. Amory: What the right hon. Gentleman says is true for the Surtax payer. That is why I said "at least as well off."
  Mr. Gordon Walker: The right hon. Gentleman may well have put in a qualification, but he rather swallowed it up in the delivery of his words. I do not want to play up that particular sentence, but to get to the real principle involved here, because it is a principle which was clearly, if somewhat flamboyantly, stated by the present Prime Minister when he was Chancellor of the Exchequer. I hope that the right hon. Gentleman will very carefully consider this principle as it was laid down by his right hon. Friend when he was his predecessor at the Treasury.
  Mr. Gower: Does not the right hon. Gentleman think that, as the State has kept these sums of money so long and deprived people of them, it would be pettifogging that any more tax should be paid on them?
  Mr. Gordon Walker: I hope that the hon. Member will suspend judgment until he has heard what his right hon. Friend the Prime Minister said on this very matter. Charges of this kind were made against him from his own side, with references to pettifogging small amounts, but the same principle is involved here. On 17th April, 1956, the Chancellor of the Exchequer, now the Prime Minister, flatly said:
  "… this interest, grossed up by reference to Income Tax at the standard rate, will be chargeable to Surtax."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 877.]
  After that, many of the right hon. Gentleman's supporters, as the hon. Member for Barry has been saying, attacked it as being pettifogging and one thing and another.
  During the Committee stage of the Finance Bill, the present Prime Minister, then the Chancellor of the Exchequer, stated the principle, which is a very important principle, in very clear terms. First. he dismissed the argument that only relatively small sums would be involved. I hope that we shall not have that argument put up, because the Prime Minister completely rejected the validity of the
  1050
  amount involved when dealing with a matter of important principle like this. What he said was:
  "We have not extended this concession"—
  and he used the word " concession ", which we have been upbraided for using, and went on—
  "to cover Surtax. I will be frank about it. It is really very simple. It is not because I think there would be queues of excited tycoons standing outside the post offices wishing to invest, say, £300 to save £2 10s. or so a year on their Surtaxable income."
  He said that it would be a matter of the principle involved, and he did not think that people would make a rush to get the benefits.
  The right hon. Gentleman went on to state in clear terms a principle which is just as valid in 1959 as it was in 1956:
  "It is because this proposal conforms to the principle which has been followed in the past, which I think it is right to follow now."
  The Chancellor has come, for some reason or other, to a decision that a principle which it was right to follow in 1956 it is wrong to follow in 1959, but the Prime Minister went on, in the speech from which 1 have quoted, to illustrate this principle. He said:
  "Let us take the mathematical computation. Everyone will receive Income Tax exemption on £15. The £15 will not be taken into account at all in computing Income Tax liability. Supposing, for the mathematical point, that a man paid tax at 8s. 6d., the 2½ per cent, tax free would mean a 4½ per cent. return, subject to tax. But if we were to make the Surtax concession, then for a payer at the top rate, to illustrate the argument, the 2½ per cent. tax free would be equal to 33½ per cent. gross return, and I should have difficulty in granting a tax exemption on that scale."—[OFFICIAL REPORT, 7th June, 1956; Vol. 553, c. 1441.]
  I hope that the present Chancellor will find some difficulty in granting a tax exemption on that scale.
  Mr. Gower: Does the right hon. Gentleman make no distinction between money freely invested by people of their own volition and money withheld rather reprehensibly— as he said in his opening remarks—by successive Governments?
  Mr. Gordon Walker: I believe that it was somewhat reprehensible to withhold it, but I do not think that we should give Surtax payers 30 per cent. interest when we are not able to do the same for people further down the scale.

  1051
  I hope that the Financial Secretary, who is very courteous and resourceful, will give us some figures corresponding to those given by the Prime Minister in 1956, at the prevailing standard rate of tax after the Budget proposals, and at the top Surtax rate. We want to know what the gross return to payers at the top rate would be if the 2½ per cent. interest on these post-war credits was not grossed up for Surtax. In other words, what is the gross return corresponding to the 33½ per cent. which the Prime Minister—then the Chancellor—said would have been the consequence of not grossing it up for Surtax.
  Mr. John Arbuthnot: Will the right hon. Gentleman bear in mind the depreciation which has taken place in the value of the £ during the last thirteen years, during which successive Governments have held these post-war credits in their maws?
  Mr. Gordon Walker: That consideration applies to people getting 2½ per cent. tax free just as much as to those getting 33½ per cent. tax free. That is no argument for giving a 33½ per cent. tax rebate to certain rich people, who have already been sufficiently benefited this year. They have had enough, and they should not be greedy and try to get these extra and very unjust special allowances.
  The Chancellor talked about the 2½ per cent. interest and rejected the idea that, now that we are paying upon these post-war credits the same rate as the Post Office Savings Bank is paying, it strengthens the argument for creating deposits from these credits in the Post Office Savings Bank until we can speed up repayment. If we created deposits in the Post Office Savings Bank instead of paying in cash, more would be saved. People would get their credits in their Post Office Savings Book and not by way of a cheque which they could cash. It would then be safer to pay out more.
  Now that the Chancellor is paying the same rate as is paid by the Post Office Savings Bank only a simple transaction is necessary. Moreover, this was the original intention. I have been looking up the speech made by Sir Kingsley Wood on 7th April, 1941, when he said that the extra tax to he paid by any individual due to the decrease in personal allowances would be
  1052
  "offset after the war by a credit which will then be given in his favour in the Post Office Savings Bank."—[OFFICIAL REPORT, 7th April, 1941; Vol. 370, c. 1329.]
  That was the pledge given by the Government in 1941, and although such pledges are not absolutely binding there is much to be said for trying to carry out a pledge given in clear terms by a previous Government, and I should have thought that this was a sensible and reasonable thing to do. It would enable us to make a rather faster rate of repayment without a corresponding risk of inflation.
  We are very glad to have been told that any post-war credits rebate will be disregarded for the purpose of National Assistance, and we are grateful to the right hon. Gentleman for his courageous decision about hardship cases. We realise that it is difficult for a Chancellor to make such a decision, because there is great official pressure upon him, and powerful arguments are put forward about the difficulty of drawing lines. We are grateful to him for his personal resolution in standing up to the sort of pressure that must inevitably have come upon him.
  We will scrutinise carefully his proposals with regard to hardship cases and we shall have some suggestions to make. But we realise that we have to draw lines if this sort of proposal is to be carried out at all, but we shall not seek to embarrass him by improper attempts to extend those lines. He said that this was making a start, and we shall make suggestions only of serious weight. We shall not take advantage of his proposals; otherwise no Chancellor will ever take any steps to deal with hardship cases.
  It has been drawn to my attention that cases of grave hardship are involved among those who are in receipt of sickness benefit, but who occasionally are able to do short periods of work. They slightly recover, and work for a month or six weeks, and then have to stop and once again apply for sickness benefit. It may not be possible to classify these cases very clearly, but great hardship is undoubtedly involved, and we ought to try to find some way to certify these people. This will have to be a decision external to the Inland Revenue, but if the right hon. Gentleman could find some way of doing it and of meeting the other points which my hon. Friends will suggest, we should be grateful.

  1053
  There is one feature of the Bill which I do not like. Under it we are to have the power to pay out large sums of money by way of regulations. This means that the financial control exercised by the House is slipping away. The Government can already make alterations in the Purchase Tax by executive action, and now, under the terms of the Bill, they will be able to pay out large sums of income in post-war credits, in effect, by orders and regulations. If this process continues, and if the Conservatives ever win another election, we shall be able to have a post-election Budget without the Government needing to come to the House of Commons. That is going a little too far.
  At any rate, there should be an affirmative Resolution. It is disrespectful to the House that the Government should be able to make large payments subject only to annulment on a Prayer. There is a distinction between regulations needed to extend our power to deal with cases of hardship which would not involve vast sums of money and would be useful and important from the human point of view, if implemented quickly—and regulations providing for the payment of large sums of money, which we believe should be done by way of affirmative Resolution.
  I am also doubtful whether this payment should be financed by below-the line borrowing. That does not apply to the interest, but the repayment of postwar credits will be carried out by borrowing below the line. This is not a real capital payment; no capital asset is being created in return for the money borrowed. Some will be saved—I hope that a good deal will be saved—but a good deal of Income Tax remission is also saved, and that fact is not used as an argument for financing Income Tax reliefs by below the-line borrowing.
  We cannot argue that because some post-war credits will be saved they are a form of capital and it is, therefore, right to pay for them by borrowing. It would be more honest for the Government to have made this an above-the-line item of Government expenditure, to be met by taxes. It would not have made any difference to the balance, but it would have made the above-the-line figures much more honest. The surplus would have been £233 million instead of £364 million.
  1054
  We are not opposing the Bill, although I would have preferred a system of automatic regular repayment which would Rive an immediate right, to which everybody entitled to post-war credits could count upon, and which could be speeded up if necessary by regulations or, as I would prefer, by brief Bills. That is the right way to deal with the payment of large sums of money. The House would always facilitate the passage of such Bills, as it will facilitate the passage of this one.
  4.30 p.m.
  Mr. John Arbuthnot: May I begin by dealing with one or two points raised by the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker). He said that the Chancellor should have tackled the problem of repaying post-war credits by speeding up by one year, each year, the amount repaid. The difficulty about doing that is that it would not give my right hon. Friend the manœuvrability to inject further purchasing power into the economy at a specific time.
  Mr. Gordon Walker: It could he speeded up.
  Mr. Arbuthnot: Speeding up might give a definite increased rate of injection which would be permanent while postwar credits remained and might produce more purchasing power at a time that would he embarrassing to my right hon. Friend.
  Mr. H. Wilson: Does the hon. Member realise that one reason why the Chancellor cannot go further this year than he might want to is the administrative difficulty of injecting a greater number of years of repayment? If the Chancellor proceeded on the lines suggested by my right hon. Friend, he could have doubled the basis on which he proceeded this year.
  Mr. Arbuthnot: It was not a speedup in any single year that the right hon. Gentleman the Member for Smethwick wanted. He was suggesting an automatic rate of speed-up year by year.
  Mr. Gordon Walker: I said that it could be supplemented by a method of speeding up in any way that was proper.
  Mr. Arbuthnot: That is an acceleration on an acceleration.
  Mr. Gordon Walker: Why not?
  Mr. Arbuthnot: It may be that that amount of money being pumped into the economy would prove embarrassing and create inflation.
  I was distressed to hear the right hon. Gentleman suggesting that it was wicked and anti-social to he a Surtax payer. The more Surtax payers we have in the country, and the more people we can encourage to create the productive capacity that makes them Surtax payers, the better it will be for all sections of the community. This attack on Surtax payers, as if they were evil, is completely unwarranted.
  Mr. J. T. Price: Surely it is not being suggested that all people who are fortunate enough to pay Surtax are the only ones who make any contribution to the productive capacity of this country. I thought that a lot of them were " spivs " who did not do any useful work to the contribution of the economy, and I think that I can prove that.
  Mr. Arbuthnot: I cannot enlarge upon the hon. Members' acquaintance with "spivs ". What I was suggesting was that Surtax payers were people who ought to be encouraged, and not discouraged.
  I agree with the right hon. Gentleman when he said that more would be saved out of the money that the Chancellor intends to remit this year, and in future years, if it was paid out not in cash but in Post Office Savings Bank accounts or some other form of security. I hope that it will not add too much to the administrative difficulties if my right hon. Friend the Chancellor of the Exchequer finds it possible to do something like that.
  This is a very happy occasion. It is an occasion when the Government and their predecessors, after a long period of being unable to do anything about postwar credits, have found that they can do something fairly substantial towards meeting the obligations which were incurred more than thirteen years ago. During that period £430 million worth of post-war credits has been outstanding. It is not only the fact that that sum has been outstanding for so long, but that it has been outstanding during a period of inflation when the value of the money contributed by people—admittedly, compulsorily—has been steadily depreciating in purchasing power.
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  None of the suggestions that I am about to make must be allowed to detract at all from the sincere congratulations from all sides of the House to my right hon. Friend for the courageous way in which he has tackled the problem now. The reduction by two years in the qualifying age from 60 to 58, and the remission to widows on the death of a holder, will be immensely valuable. I am particularly glad that my right hon. Friend has overcome the administrative difficulties that were no doubt presented to him when he put forward the idea that those in receipt of constant attendance allowance and unemployability supplement should receive special treatment. All of us find when we have consultation periods or "surgeries ", or whatever one calls them, that there are cases of hardship in which, from the point of view of human values, one wants to do something to help if it is possible.
  My right hon. Friend has taken two particularly deserving sections of the community to whom to give special help. We are also glad that my right hon. Friend has taken the power in the Bill to extend at short notice the rate of repayment whenever the Government feel that it is possible to do so without damage to the economy.
  My right hon. Friend was good enough to give me an opening, if I may put it that way, when he said he would welcome any suggestions for future action. From time to time in the past I have urged not only on him but upon his predecessors that the problem of post-war credits might be solved by stamping the post-war credit with the date at which the present holder of it reaches the age when it would be repayable and then make that post-war credit a negotiable instrument repayable on that date. This plea has been resisted consistently on the ground that if somebody aged, say, 45, whose post-war credit would not become payable until he reached the age of 65, wanted to sell his post-war credit, it would have to be sold at a substantial discount and this would give the impression that the Government were trying to penalise the holder of such a credit and run away from their responsibility.
  Now that my right hon. Friend is prepared to give interest at 2½ per cent. tax free on post-war credits, the figure of discount would not be so great, if there

  1057
  were a discount at all. I hope that my right hon. Friend will bear in mind that that might be a possible way of helping to reduce the burden on people who are suffering particular hardship and need their post-war credits but do not come within the categories he has defined.
  Another idea that I feel is attractive is this. There is £430 million outstanding in post-war credits. This year the Chancellor is prepared to do without revenue on this account of £89 million. The maximum that anybody can hold in Premium Savings Bonds at the present time is £500. The maximum number of post-war credits in the hands of any individual is about £300. If the ceiling of Premium Bonds were raised from £500 to £800 and all post-war credits were transferred into Premium Bonds the sum of money that the Chancellor would be likely to have to find would not have been any more than the £89 million which he is prepared to do without this year. In that way, the post-war credits problem could have been solved in one fell swoop.
  My right hon. Friend scouted that idea, because he said that to put post-war credits into Premium Bonds or into the Post Office Savings Bank involved inflationary effects similar to those that would flow from complete conversion. That is an argument which I find difficult to follow. As I see the matter. the man who now holds post-war credits has those credits frozen in his hands. If he sells them, somebody buys them. Just as the money becomes free to him, so the same amount of money becomes frozen in the hands of whoever eventually buys it. I should like my hon. and learned Friend the Financial Secretary, when he replies, to give the reasons why it is believed that when money is frozen in one person's hands and freed in somebody else's hands, that should of itself be as inflationary as if the post-war credits were repaid in full in cash right away. That is a matter which I do not understand and I do not believe that that would be the effect of it.
  Having made those suggestions, I should like once again to say to my right hon. Friend the Chancellor and to all those who have been working on this problem with him in the Treasury how much we, on all sides, welcome what he has done and how much we thank him for it. More power to his elbow in the further steps that he proposes to take. I
  1058
  hope that he will be able to take them rapidly.
  4.43 p.m.
  Mr. Glenvil Hall: I am one of the dwindling band of Members of the House who heard Sir Kingsley Wood make his Budget speech on 7th April, 1941. It is interesting, in a minor way, to note that he made his pronouncement about post-war credits on the same day, although, of course, in a different year, as the present Chancellor of the Exchequer made his Budget statement last week.
  I always thought—I thought at the time and experience has confirmed my view—that it was a great mistake on the part of the former Chancellor to suggest post-war credits. At that time, the whole nation, practically without exception, was willing to bear extra taxation if it would further the war and bring us eventual victory. Sir Kingsley Wood did it, I am sure—indeed, he said so—with the best intentions in the world, namely, that remembering the immediate years after 1914–18 it might be that a certain amount of unemployment and dislocation would follow the war and post-war credits would, therefore, come in very handy to the great mass of the people immediately the war ended. As we know, the electorate had a good deal more sense than to return the Conservatives in 1945 and we had a Labour Government coming into power, the result being that the conditions which some people feared did not occur.
  From what I have heard, and even heard today in this debate so far as it has gone, except for the speech of the Chancellor of the Exchequer, we do not seem to realise the difficulties which face the Treasury in attempting to pay out these sums. It must be remembered, first, that these post-war credits accrued during war years, when the population was largely on the move. I should imagine that quite a considerable number of the 11 million people who still, after this year's payments are made, have the expectation of payment to come, will to a substantial extent, have had dealings with more than one Inland Revenue Inspector. That being so, the certificates which they hold are not all on the records of one tax office. It is a considerable job for the Inland Revenue, in addition to its other work, to sort out and calculate

  1059
  the amounts which are due to people who still have these post-war credits to come. This should be remembered when we make suggestions, very properly, to the Chancellor of the Exchequer.
  I was also a Member of the House in 1946, when the first tentative efforts were made to start repayment of these credits. The then Chancellor of the Exchequer, my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), decided to make payment to men at 65 and women at 60 years of age. There is a letter in The Times today questioning why there should be this difference between the sexes. The reason, of course, was that my right hon. Friend took the ages at which people became entitled to an old-age pension. Now, however, there is no reason why the Chancellor, since he is making a start to lower the qualifying years below pension age, should not level up the sexes and give men full equality with women.
  Mr. Amory: Does the right hon. Member not think that, as a bachelor, I should be putting myself into great danger if I adopted his suggestion?
  Mr. Hall: I hardly think so. The Chancellor has now reached an almost impregnable position with both sexes, particularly with the fair sex. Therefore, anything that he might do would, I think, be accepted by them without harm to himself.
  I should like to say one or two things about hardship. Throughout the years since the war, Member after Member, on both sides, has tried to get the Chancellor of the day to pay post-war credits to various categories of people who were suffering hardship. Up to now, successive Chancellors have taken the view that it was quite impossible to define hardship with any degree of fairness as between one type and another.
  The Chancellor, very daringly, has made a start. Some of his categories are excellent—for example, the blind. I take it that not only those who are blind now, but those who may later become blind, will immediately qualify for post-war credits if they are entitled to them. We can easily distinguish also people who are in receipt of unemployability allowance. No question arises with them. They will be entitled to their credits and
  1060
  one will know exactly who they are. The same is true of people who receive constant attendance allowances. Here again, there is no difficulty about knowing with whom we are dealing. It is easy to ascertain who these people are and to judge of their entitlement.
  It is not so easy, however—perhaps the Financial Secretary to the Treasury will deal with this point when he replies—to define those who have been in receipt of National Assistance for 12 weeks as from 7th April. I am not sure, and perhaps later we may have this point cleared up, whether it is only those who have been on for the 12 weeks immediately following the seventh, or people who from now onwards will have been on National Assistance for any 12 weeks in succession. Then, too, does not this difficulty arise, that they cannot apply till after the twelfth week? It may well be that when they do apply it will take some time for them to get payment of their credits and by that time they may have ceased to be drawing National Assistance.
  Old-age pensioners who draw National Assistance are easy to discover, but a man who is unemployed, who has been unemployed for 12 weeks, may quite definitely get work in the thirteenth or fourteenth week. Does that mean that the fact that he has been out for 12 weeks drawing National Assistance will entitle him, willy-nilly, to his post-war credit?
  One or two Members have suggested that those who are not going to draw their post-war credits under the Bill should be given some sort of negotiable instrument which they may, I imagine, sell, or deposit with a bank, or in some other way turn, if they wish, into immediate cash. The difficulty here, as I see it, is that nobody knows what these post-war credits will be worth. Obviously, for someone who is to deal in these credits it will be a gamble. He will say to the person who wants to turn his postwar credit instrument into cash, "I do not know when some Chancellor of the Exchequer will pay this. It may not be for twenty years. Therefore, the discount will be fairly substantial". We must avoid, if we can, letting a situation of that kind arise.
  My right hon. Friend the Member for Smethwick (Mr. Gordon Walker) quoted Sir Kingsley Wood as saying, in his

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  Budget speech, that at the end of the war holders of post-war credits would have the amount put in the Post Office Savings Bank for them. Sir Kingsley did say that in his Budget speech, but in the Finance Bill which followed nothing of the kind was said. All that was indicated there was, as I think the Chancellor of the Exchequer told us when he opened this debate, that they would be repaid as soon as might be after the end of the war.
  Let me refer to two other points. The first is death duties. Will widows who will now he able to draw the post-war credits of their late husbands have a demand for any death duties which may be payable? Will the estate be reopened and an assessment made? I think that we should be informed so that these widows shall know what the position will be. The second is this, and here I speak under correction. I am under the impression that the certificates which were issued to individuals at the time by the local Income Tax offices bore a notification to the effect that they were provisional only and should not be taken as an indication that payment for that amount would be made. If this is correct, then, if I may say so to my hon. Friend the Member for Westhoughton (Mr. J. T. Price), it does largely destroy the claim that those certificates should be taken at their face value even if the people who receive them afterwards had part of them set-off against tax arrears.
  Finally, may I say that I welcome the Bill? The Chancellor of the Exchequer is to be congratulated on making a real attempt at getting rid of this burden which has not only appeared to many people insoluble, but has caused the post-bags of Members year by year to be inflated by letters from those who felt in some way that the State was not playing fair with them. Here we have, at long last, a plan to liquidate more quickly the substantial amount still outstanding. I congratulate the Chancellor on the Bill.
  4.56 p.m.
  Mr. J. Grimond: I, too, am very glad indeed that the Chancellor has made a start with the repayment of the post-war credits. The situation has been something of a scandal. I think that many people were under the
  1062
  impression that the Government were going to repay these credits long since and as the years went by, and this was not done even for those who were needy and suffering hardship, there grew irritation because the Government had not met an obligation and because people were entitled to something on which they were unable to get their hands. I believe, too, it was a reflection on the standing of the British Government themselves.
  I am also glad that the Chancellor of the Exchequer has been brave enough to make exceptions. It seems to me that one of the things we have to fight against in politics is the view that if Johnny has any jam for tea everybody else must have some jam, too, so that it gets spread so thin it is no good to anyone.
  I do not share the rather gloomy forebodings expressed by the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) about the Chancellor's future. It seems to me than he has shown an almost feminine intuition in knowing that the country will willingly put up with the illogicalities, and, therefore, I do not despair of his getting married some time in future.
  I also agree with the right hon. Gentleman the Member for Colne Valley that the Bill, particularly with the process of the exceptions, will throw a very heavy burden on the Inland Revenue, and I think that we would all join with the Chancellor in expressing our thanks to the Inland Revenue because it is to tackle this rather delicate and difficult job.
  I do not know how far the right hon. Gentleman was right in what he said about the certificates, but I think that its position is obscure to many people. I believe that they are only a sort of conditional warning that something might be done and were not definite promises to pay, though they have often been considered as such.
  In the debate on the Budget I raised a question which has been raised this afternoon already, whether these post-war credits are to be made negotiable. I hope that I shall be given some credit for scrupulous consistency in raising it again. There have been two objections put against making them negotiable. One's inflation. Candidly, I do not quite see why. It seems to me that the argument of the hon. Member for Dover (Mr. Arbuthnot) is a sound argument, that if

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  they are genuinely negotiable, that is to say, that the buyer has to pay some cash out of his savings, there is really a transference of these credits from one man to another; and I would not have thought that necessarily any extra money or credit was injected in the system. I quite see that if they were put in anything like Post Office Savings Bank deposits, of course there might be, or would be. But if they are genuinely negotiable securities I do not see why that should be so, unless you assume that a great deal more money is necessarily spent by the seller.
  The second objection, that this would be administratively difficult, I can see. But, nevertheless, while I grant that the Chancellor cannot be expected to do anything about it in this Bill, I hope that a substantial promise to look closely into this in the coming year will be given. There are ways whereby, on the face of it, this might be done. There is, for instance, the possibility that the credits could be grouped by various times of repayment and this would mean that people would know when to expect to receive their cash.
  There is another way of making it possible for people to transfer out of post-war credits into some form of ordinary Government stock which would be repayable at some definite date. There is the possibility of stamping the date of repayment on them, again as suggested by the hon. Member for Dover. I can see administrative difficulties, but I should have thought that now that the Chancellor has embarked upon this admittedly tricky business of repayment he should feel more comfortable about going forward on this kind of line. Presumably, he now hopes to continue the process. Indeed, he has said so. He is also now paying interest and, therefore, post-war credits are more like ordinary Government securities.
  The suggestion that people might part with them for very little and that might damage the Government's credit is not a very strong objection. For better or worse, many people have burned their fingers rather severely through buying Government securities which have fallen in value. This will not be anything new in post-war experience for any man or woman, though that may not be an argument for perpetuating it.
  Mr. A. E. Hunter: Would there not be a danger that a person who was heavily in debt and was hard-pressed for money might sell post-war credits at half their value?
  Mr. Grimond: That would apply to anything. It might apply to that person's savings or to his house. I do not think that the Government can now be expected to be in the position of perpetual trustees for all the 11 million people who hold post-war credits. I hope, therefore, that the Chancellor will look at the possibility of some gradual scheme by which they can be dated and made transferable.
  I do not want to press for other extensions. The Chancellor's request that we should not plead our favourite hard cases is reasonable. We should thank him for the present concessions and withhold our fire for later in the year, when he may bring forward further proposals. The right hon. Member for Smethwick (Mr. Gordon Walker) raised the question whether it is proper that disbursements of this sort should be merely approved by Parliament subject to the negative Resolution procedure. So much is improper that this tiny impropriety is a very small illegitimate baby indeed. The Chancellor, for example, is the main factor in putting up interest rates, and that can be done without consulting the House at all. The time is coming when we must look at the whole question of the control of expenditure by the House of Commons.
  Mr. Glenvil Hall: The raising and lowering of interest rates is done by the Chancellor through the authority of an Act of Parliament.
  Mr. Grimond: Yes, but the movement up and down is not discussed by Parliament, and the interest rate is an important economic instrument. This, as I have said, is a minor impropriety and I think that we can well leave this power to the present Chancellor, for whom we have such respect, subject to the need for an overall review of the control of expenditure.
  I re-echo the Chancellor's words from his Budget speech last year, that this sort of thing should never be allowed to occur again. I agree with the right hon. Member for Colne Valley that these post-war credits. no doubt introduced with the

  1065
  best intentions, were a mistake and that they have given people a wrong impression about their rights and about the status of these certificates. The Government took from people what they should not have taken—
  Mr. Glenvil Hall: The Chancellor at the time raised £250 million, of which he said that £150 million would be repaid at the end of the war.
  Mr. Grimond: Quite, and that he was unable to do. It is a queer way of financing at the best of times. It might well have been overlooked in a world war, but it is time that we got away from what I might call " gimmick " finance and got on to a sound basis which can be maintained. It can be maintained only if we have sonic confidence that we are not again to have a galloping inflation.
  5.5 p.m.
  Mr. Raymond Gower: I think that my right hon. Friend the Chancellor will be satisfied that the Bill is accepted on both sides of the House as an excellent Measure. He will also have derived the impression that in the minds of most people the history of post-war credits cannot be regarded as very happy or particularly creditable to anybody who has been associated with the country's administration in the post-war period.
  I am very happy about the proposals to repay post-war credits by lowering the qualifying ages. I am satisfied with my right hon. Friend's explanation of the extent to which he is able to do that at present. I am also pleased that he has taken the power to extend and accelerate the process. Another method which my right hon. Friend is adopting is perhaps somewhat more controversial, namely, the repayment of credits in certain cases of hardship. I well remember asking at Question Time some months ago about the possibility of repayment of these credits in cases where a person had been in receipt of National Assistance continuously for twelve months. Obviously, I then had in view the fact that if a person had received assistance for such a long period he could be regarded as a person chronically in need of National Assistance. My right hon. Friend has gone much further and has shortened the qualifying period to twelve weeks for the person who is continuously in receipt of National Assistance.
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  If my right hon. Friend has been able to do that, I would respectfully suggest to him that cases where a person has been in receipt of National Assistance for long periods are not the only hardship cases that come to the notice of the National Assistance Board. Could not my right hon. Friend contemplate extending this category to cover cases where a certificate is given by the National Assistance Board that the case is one of substantial hardship? The Board is well equipped and experienced in judging hardship. I am sure that the hon. Member for Sowerby (Mr. Houghton) would agree that one of the Board's major functions is to assess and judge hardship. If the Board is prepared to give a certificate that a case is one of definite and substantial hardship, would my right hon. Friend be prepared to include that category of cases with the others experimentally in this first stage? I imagine that the House will accept the other categories which my right hon. Friend has suggested— blind persons, persons in receipt of a constant attendance allowance, and persons receiving unemployability supplements.
  The repayment of post-war credits to the dependants of deceased holders is a decided step forward. It will remove a great sense of grievance. I am sure that many hon. Member have had experience of cases where a person has died and his widow and dependents have had to wait for a long time for these credits. I understand that in all cases these persons will now receive payment as quickly as the technical and administrative arrangements can be completed.
  I should like to develop what was said in an interjection by the hon. Member for Westhoughton (Mr. J. T. Price). The possibility of substantial drawbacks for tax unpaid, of which people at the moment may not be aware, is a matter for serious concern. I have come across cases where, under the prevailing practice, widows have qualified for repayment and have made their claims and then, to their consternation, have found that as much as one-third of the sum due has been withheld for alleged unpaid tax because the husband apparently had not paid some proportion of his tax back in 1942.
  Obviously, this can be a matter of grievance and of doubt, and whilst I appreciate the remark made by my right

  1067
  hon. Friend that he would deem it impossible for the Revenue to make payments for tax not received, does he not feel that after such a long lapse of time, and where very small amounts are involved, it would be proper for, perhaps, a different view to be taken of these cases than would normally be taken?
  As the right hon. Member for Smethwick (Mr. Gordon Walker) pointed out, all these people have for many years held a certificate which is virtually a promise to pay by the State. While it is true, perhaps, that the certificate was a promise to pay £100, and while, on the other side, there may have been a tax liability of say, £20, cannot my right hon. Friend set against that the fact that during all these years not only has the security tended to depreciate in value but that the people concerned have received none of the interest which is now to be introduced for the first time?
  Mr. Douglas Houghton: In making this suggestion, would the hon. Gentleman care to tell the House what he would do about past cases where these deductions have been made from post-war credits? Would he make adjustments for them or would he wipe them out?
  Mr. Gower: There is always the difficulty that if one attempts to rectify present and future grievances one is faced with claims about past grievances. I doubt whether what the hon. Gentleman has said would be possible, and, indeed, whether it would be desirable. On the other hand, I do not see why because grievances have been involved in past cases we should thereby be prohibited from lessening the grievances of the future.
  Mr. Glenvil Hall: What about the people who honoured their obligations and who have no arrears? Is anything to be done for them?
  Mr. Gower: I appreciate the difficulty of these cases, but I reiterate that the people to whom I am referring have not, in most cases, been aware of any deficiencies of tax. In the majority of cases their husbands or fathers died, probably, in the immediate post-war years. For something like fourteen years they have held a document which, on the face of it, will entitle them some day to a payment
  1068
  of £X, and now, suddenly and without warning, they find that that is not the case.
  I am setting against the fact that there may or may not have been certain small arrears, firstly, the fact that all the time these people have been deprived of the payment which they expected to receive at the end of the war; secondly, the fact that the security has depreciated in value, and, thirdly, that they have not received any interest on the money outstanding. I hope that a sympathetic view can be taken of these cases, as, in fact, I think has been done in some cases in the past where the amounts involved were very small. I am asking for the assurance that this will be done in the future.
  Then we come to the question of the Chancellor's problem in the future. I hope that my right hon. Friend will examine the possibility, to which I referred in an interjection, to which the hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Dover (Mr. Arbuthnot) referred and which I have previously raised at Question Time, as have other hon. Members, of solving a lot of his future problems by making post-war credits in some form or other negotiable or transferable. I cannot see why, if someone has a post-war credit and if under some new regulation he will know that its repayment by the State will not be later than a certain date—that is all he wants to know; at present, of course, the date is uncertain— he should not be allowed to sell it for a monetary consideration.
  If my right hon. Friend could accept the suggestion made by my hon. Friend the Member for Dover that a final date of payment should be given, then the holder of the post-war credit would know that there was a final date. My right hon. Friend could introduce the necessary Amendment to the Bill to make the document transferable. I cannot see why, if the holder sells a post-war credit for a monetary consideration which another person has saved or earned, that should lead to serious inflation. Surely, the additional money that will be circulated by the person who sells the post-war credit will be offset to some extent by the less amount of money available to the previous owner.
  Mr. Chetwynd: Surely that is quite wrong, because the person who is selling is only doing so because he wants to

  1069
  spend the money whereas the person buying his security is buying it because he does not want to spend the money. Therefore, there is additional money being spent.
  Mr. Gower: That may or may not be so. It would be the case, of course, if everyone decided to sell immediately. My right hon. Friend implied that there was the danger of inflation, but surely that is not necessarily the case. The Treasury obligation to pay would not be increased. That is the advantage which might appeal to my right hon. Friend. The fact that the transfer is made does not make the Treasury have to pay increased amounts at an earlier date. I hope. therefore, that my right hon. Friend will consider the matter.
  I appreciate to some degree the point made by the hon. Member for Stockton-on-Tees (Mr. Chetwynd). but I cannot believe that what I have suggested would be as inflationary as if all post-war credits were paid by the State on a certain date. I believe that the additional amount of money created in this way would have a far smaller effect than would be involved if all the credits were to be repaid by the Treasury.
  In summary. what is now proposed is a long awaited step in the right direction. It is the first stage in a process that must necessarily take a much longer time. 1 am sure that my right hon. Friend knows that the Bill is not only obviously approved by the House but is a Measure which will give modest, and in some cases great, satisfaction to the many of those people who have waited so long and patiently for what they conceive to be due to them.
  5.17 p.m.
  Mr. George Chetwynd: I am sorry that the Chancellor is leaving the Chamber because I was going to say something kind about him. In view of some of the harsher things said about the right hon. Gentleman on other parts of the Budget last week, I think it would be pleasant for him to hear some nice things said about him today.
  The right hon. Gentleman will recall that in Northallerton there is a public house named after him called "The Jolly Minister," where last week its customers were drinking his health in reduced price
  1070
  beer. I am sure that there are many who wish something to be done about postwar credits who will also pay him a tribute when the time comes. Having said that, I do not mind if the right hon. Gentleman wishes to leave us.
  We know, of course, that the present Chancellor and any Chancellor looks upon post-war credits as part of his normal financial machinery, and the fact that the right hon. Gentleman has been able to pay out so much this year is part of his general attack on under consumption and stagnation of production. The repayments are part of the process of pump priming in order to get industrial activity moving once again. Post-war credits are a long-standing source of annoyance and complaint, and people will feel very much happier that at long last the matter is being tackled in a dynamic way.
  I want to deal with the four main proposals put forward by the right hon. Gentleman for dealing with the post-war credit problem. First, the ages have been lowered to 63 for men and 58 for women, which will cost £35 million. 1 can see the administrative easiness in doing this. but I am not sure that it is right. When my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) made it 65 and 60, that could be justified on clear social grounds, but now we are moving out of that bracket and it is purely an arbitrary decision whether the matter should be dealt with year by year or two years at a time or in some other way completely.
  The Chancellor could well have decided to repay post-war credits to those whose names begin with A, B or C. That would have satisfied both the Chancellor and myself, but my hon. Friend the Member for Manchester, Gorton (Mr. Zilliacus) would have been very dissatisfied. On the other hand, the Chancellor could have chosen to pay post-war credit-holders in all the marginal Conservative constituencies, which might have been a very attractive method from the Chancellor's point of view. The Chancellor, however, has chosen the 63-58 process. and no doubt the intention is that next year it may be possible to lower the ages to 60 and 56.
  I now come to the question of payments on death. We all recognise that widows in general are perhaps one of the

  1071
  most hardest hit sections of the community. Anything that we can do for them, therefore, will be welcome. What the Chancellor is doing, however, is making the tragedy of death the means of everybody receiving the money, whether they need it or not. Some widows may not be in financial need. It may be that the descendants of the original post-war credit holder may be very well off. This is not a compassionate or hardship method, although I recognise that many widows can come under the hardship Clause later. Not all widows are needy, and I appeal to those who do not need the money to invest it in some form of National Savings and not to use it for increasing consumption if it is not necessary.
  I should like to mention another point on hardship. I think that it is right that the Chancellor should have taken this decision, even if it creates difficulties for him and even if there are marginal cases which we shall have to bring to his notice from time to time. Over the past years, I have been as assiduous as any hon. Member in trying to get a concession on the grounds of hardship. I have never believed the story put out by the Treasury that it was impossible. I remember a speech which I made in the Budget debate of 1954, when I said that if one wills the end, one can will the means. When the Chancellor directs that a way must be found, a way is found. I think that most people will recognise that the Chancellor's solution is as just as possible in the circumstances.
  I now turn to the category of people who are to be paid their post-war credits when they have been in receipt of twelve weeks' continuous National Assistance from the introduction of the Budget. Why cannot it be when they have received twelve weeks' continuous National Assistance even before the Budget? I should have thought that the fact that a person was in receipt of twelve weeks' National Assistance would show that he was in a position of destitution. Why cannot the Chancellor extend the proposal to perhaps any twelve weeks in a given six months? There may be cases in which a person just qualifies for assistance in one week but does not qualify in the next week. If a person is in receipt of National Assistance for twelve weeks it means that he is on the
  1072
  borderline of subsistence and comes within the hardship category. I realise that this proposal cannot be carried out in this Bill, but I hope that it will be borne in mind on a later occasion.
  Blind persons come within a clearly defined category which we all agree is deserving of receiving the post-war credit. May we know how many people are concerned? There must be a few who were in a position during the war years to be earning sufficient money to be entitled to the post-war credit in any case. The amounts that they will get will be very small. If we could have some figures on that point, again it would be helpful.
  Also, how many people in receipt of constant attendance allowances and unemployment supplement will be dealt with under the provisions? The Chancellor has budgeted for £2 'million to be spent in this direction. Obviously, that by itself means that there are not many people in these categories, but I think that they are being dealt with in the right way. As the debate has proceeded, I have been trying to think of any other clearly defined category of hardship which we could ask to be brought in. I cannot think of a ready-made class of persons on the spur of the moment. I can think of individuals, but the Chancellor is not in a position to deal with individual cases. I only wish he were and that he could let the National Assistance boards handle this matter on an individual basis. However, I realise his difficulties and I accept the categories which he has specified for the time being.
  The other point with which I want to deal concerns the 2½ per cent. interest. I suggested that interest should be paid in the Budget debate on 6th April, 1954. One of the points which comes to my mind is, could not the interest be made payable before the date proposed? I suppose that the objection is that the people who have been paid out would have to receive their entitlement also, and it is, therefore, much better to start with a clean slate from October this year.
  The alternative method of payment which I favour and which I have mentioned to the Financial Secretary during Question Time is repayment by bands of income as paid in year by year. To take the outstanding amounts for 1941–42, the figure as at 31st March, 1958, was £84 million. In 1942–43 £101 million, in

  1073
  1943–44 only £25 million, because some money was taken back and set off against Income Tax due for the year, in 1944–45 £128 million, and in 1945–-46 £110 m Ilion. The Chancellor this year is giving back £89 million. He could have chosen to give everyone entitled to postwar credit for 1941–42 all that they were entitled to and still have a few million pounds for special hardship cases. On the other hand, he could have got rid of the year 1943–44 by taking it out altogether. I suppose that the argument is that this means that there would have to be four or five bites at the cherry, with all the consequent administrative difficulties, expense, and delay.
  I believe that administrative difficulties should not be regarded when dealing with equity. I am sure it is better that everybody should get something on a clearly recognised basis such as the one I have suggested rather than that a few should receive the lot in an arbitrary fashion. In spite of the difficulties. I think that the money should be paid out year by year or that the Chancellor should pay what he feels he can afford. All those entitled to post-war credits would get something in that way. They may not get the whole lot, but they would get something.
  At present, one-third of the population over 25 years of age holds post-war credits. If someone who was 18 in 1941 is entitled to the post-war credit, at the present rate, unless something else is done, it will be 1986 before that person is repaid. Obviously that is too long to wait. If a person was 20 in 1941, it would be 1984 before he is repaid. In any case, it will be a long time before those people see their money back. Naturally, the longer they have to wait, the more resentful they will become, especially when they see other people being repaid in full. I hope that in future the Chancellor will consider that point and bear in mind that the administrative difficulties may not be as great as he has been led to believe.
  By this form of payment we would have a greater guarantee that the recipient will get something like the true value of his money. Already he has lost one-third, or even more of the value of his post-war credits. Could the Chancellor guarantee that, when repaid, the credits will have the same purchasing power as they have to-day? In other
  1074
  words, could he undertake to guarantee the post-war credit against a fall in the value of money? It can be done in the case of superannuation, pensions and the like, and we owe it to the post-war credit holder that he should get the full value, regardless of any fall in the value of money—
  Mr. Walter Monslow: Would not that be discriminating? Would not my hon. Friend say that there ought to be retrospective payment in respect of those credits now to be paid?
  Mr. Chetwynd: I would be happy if it were to start from now on. It would be something, and the sins of the Government in this matter cannot be carried too far back.
  The National Assistance Board will play a very important part in these repayments. I have already spoken to the staff at my local office, and they are quite prepared to work as much overtime as necessary in order to get the scheme in full working order. By now, some directive could have been sent to the National Assistance officers telling them to list those likely to have the necessary twelve weeks on National Assistance so that the necessary forms could be given to them. Further, instead of putting the forms only in the Post Office, it would be a convenience if some could be sent to the National Assistance Board officers who, in turn, could give them to those known to them to be likely to be on assistance for quite a time. Could we also have some idea of the number of people to be dealt with through the National Assistance Board?
  Then there is the certificate itself. Only last weekend I had occasion to try to help a widow, who had only recently lost her husband, to sort out his financial affairs. She had been looking all over the place for his post-war credit certificates, but could not find them. I explained that I believed the certificate was not necessary to secure repayment— that it is only an indication that the money is there, and that somewhere in the recesses of the Treasury there is a record of the amount due to each holder. It should be made quite clear that even if the certificate cannot be found a check is kept elsewhere, and the amounts due can be paid without the certificate. That knowledge would allay a great deal of anxiety.

  1075
  There is a great attraction in paying out the money due in the form of National Savings Certificates. The onus would then be on the person to go to the trouble of cashing those certificates. Many who did not need the money urgently would not take that trouble. I am sure that if payment were made in National Savings Certificates instead of by cheque, money order or whatever it may be, a large amount would remain in the National Savings Movement.
  I hope that the Chancellor's timetable will be accurate. We certainly do not want to delay the Bill, either in the Committee stage or in its later stages. We want it to go through very quickly so that by the beginning of June— which, I believe, is the target date—the Chancellor can start paying out this money.
  The right hon. Gentleman has taken power to act by regulation in future, and we have all been gaily assuming that he has in mind beneficial powers. I should like him to assure the House that, in future regulations, he will not take back what he has conceded now. In other words, I hope that he will not be driven to restricting the categories—taking out the widows, or putting up the ages again —and that the future changes will be improvements, and not changes for the worse.
  Can he give us some idea of his future intentions? Assuming that he has the money and that our economic position is such that he needs to put that money back into public use, does he think of lowering the age year by year and of increasing the categories of hardship and compassionate cases? Finally, I hope that he will not close his mind to a general payment on the lines that I indicated earlier.
  5.35 p.m.
  Mr. Norman Cole: I should like to thank and congratulate my right hon. Friend for his statement on this subject in his Budget, and also for this Bill, and I am sure that those thanks and congratulations will be echoed by the many people who will be affected in the not-too distant future by these repayments. I particularly thank my right hon. Friend for lowering the qualifying ages. He is taking powers, we presume, to lower those ages again in the future, and I hope that he will not
  1076
  be too slow in doing so. Payment of interest from the latter part of this year will give great satisfaction to those who have felt some degree of grievance because they have not been able to encash their post-war credits or put them to other uses.
  The Budget statement and this Bill have brought post-war credits really to light, and these concessions have brought them to favourable light. It must be understood that public attention will now be focussed, perhaps more than at any other time since the war, on post-war credits. I am sure that many people are now looking up their certificates, and even though they know that they will not get the money in the near future, they can at least comfort themselves with the thought that things are on the move, and that they have money coming to them.
  That brings me to something that concerns me very much. I am sure that nine-tenths of those affected—perhaps 99 out of every 100—have no idea that the amount shown on the certificate may not be absolutely 100 per cent. exact. Although this has been mentioned in the House on various occasions, I think that only a small proportion of people have caught up with that fact. There will be many disappointments, and the more quickly the post-war credits are paid the sooner will the disappointment be felt.
  The certificate is a piece of paper which has all the marks of an authentic document. To many people who do not pay much attention to financial matters it is as good as a Treasury or a bank note. Nevertheless, many holders will find that the amount shown is not the amount due.
  I realise what a wonderful job the Inland Revenue staff do, both in this and in other directions, and I appreciate that they cannot check every post-war credit now extant. That would be quite impossible, and would, indeed, hold back the payments that we wish to see made as quickly as possible. But the Inland Revenue Department send, annually, an income return form to every taxpayer, together with very helpful notes on how to fill it up. The Inland Revenue authorities also have to write to taxpayers on various matters.
  I suggest to the Financial Secretary that the Inland Revenue Department could print slips—which could be put in

  1077
  a prominent position at the top of a letter, say, or on the return form—pointing out that the amount of post-war credit shown on the certificate may not be correct, and that if the taxpayer returns it to the Department it will be checked and, if necessary, corrected.
  I believe that many people would return their post-war credits for this purpose. Although it would not eliminate all the potential disappointment, it would alert people to possible inaccuracies and give them an opportunity for checking their credits. Moreover, if they did nothing in this respect, and in due course found that the amount was different, they would be less disappointed because they would know that they had been given a chance to find out the correct amount. I hope, therefore, that my right hon. Friend will provide something of this nature. The only additional work involved will be in respect of people who return the certificates to be checked. In any case, the Inland Revenue will have to explain, when the time comes for repayment, that the amount is not correct, so it would be better to do this as soon as possible.
  This point has emerged with some force during the debate and it is important because there are many people who have little or no knowledge of Income Tax, even though they pay through P.A.Y.E. The more we can do to enlighten them and avoid disappointment, the better. Even if the difference is that between £27 and £35, it may mean a great deal to them.
  I congratulate my right hon. Friend on the action he is taking in respect of cases of hardship and payment to the widow on the death of the holder. With great respect to the hon. Gentleman the Member for Stockton-on-Tees (Mr. Chetwynd), I do not think it matters whether the widow has large or small means, because it is a good thing to make this concession when the holder of a post-war credit passes away. As regards the other concessions to those in receipt of constant attendance or unemployability allowances, and those who have been twelve weeks on National Assistance, I hope my right hon. Friend will look upon those cases as generously as possible, and also I hope he will consider any other cases of hardship which may occur to him or be put to him by hon. Members.
  1078
  The question of transferability has been much canvassed in the last few months, and its possible inflationary effect has been referred to today. The hon. Member for Stockton-on-Tees suggested that those who sold a post-war credit would be doing so because they needed the money, and that those who bought them would be doing so from funds in hand. and that therefore this might lead to inflation, because the seller of the credit would spend the money. That does not follow necessarily. The seller might want to use the money to start a business, to increase his business or to increase the stock in his business. Again, he may want to use it for his home or for his family. The only possible degree of inflation which might flow from transferability should be weighed against the greater virtue of allowing people to get something which, after many years. is more than a frozen piece of paper, and which they can take to a bank or can discount with some other reputable authority. My right hon. Friend has added to the force of this argument by making the post-war credits for the first time carry interest free of tax.
  The point that no one knows when this security will be redeemed is not a valid one. We know the maximum date. We know that the respective ages of 58 and 63 will not be made higher so it is up to the persons who are buying and selling the credits to work out between them a fair average price in the economic atmosphere of the time, and I think we can leave it to the common sense of our people to reach a fair bargain. Not everyone will want to sell his post-war credits. Many people will leave them as they are, but the facilities for transferability should be available, and so I urge my right hon. Friend and the Treasury to do something on these lines. If it is necessary for the certificates to be certified for the buyer, even that is not impossible.
  The concessions of my right hon. Friend will involve a considerable amount of work for the various staffs of the Inland Revenue, so this may be the right moment at which to pay a tribute to all those dealing with taxation. I want to pay my personal tribute to the courtesy and help the' give in the face of increasing work. It should be put on record in this House that we appreciate their work to implement our decisions. Finally, may

  1079
  I repeat my thanks and congratulations to my right hon. Friend. Like the hon. Member for Stockton-on-Tees, I hope that the Bill will get through the House quickly, so that the people who are entitled to repayment will receive it at the earliest possible moment.
  5.48 p.m.
  Mr. A. E. Hunter: We can all join with the hon. Gentleman the Member for Bedfordshire, South (Mr. Cole) in thanking the Inland Revenue in advance for the great amount of work in which they will be involved in paying out post-war credits and in answering any queries which may arise. I am pleased that my hon. Friend the Member for Sowerby (Mr. Houghton) is sitting on our Front Bench, because he is an expert not only on post-war credits but on all Income Tax problems and the Inland Revenue staff. I hope that he will have many more opportunities in the not too distant future to speak from the Front Bench.
  I am glad to have an opportunity to speak in this debate on the Second Reading of the Bill. The Chancellor of the Exchequer has been in office not much more than a year and, in this matter, he seems to be a more sympathetic man than his predecessors. I have had correspondence with the right hon. Gentleman about post-war credits in hardship and disablement cases, and in his replies to me he has shown that he is sympathetic to the points put by me on behalf of my constituents.
  Although I thank the Chancellor for making an honest attempt to start to meet the obligations and promises made by this country during the war, I think the holders of post-war credits have been treated badly. They have been the forgotten men and women of Great Britain. Since my election to Parliament, I have, in response to requests from my constituents, raised the matter of post-war credits in the House on a number of occasions. Other hon. Members have done the same. I am very glad that the Chancellor has at last made an attempt to deal with the matter.
  Post-war credits were compulsorily deducted from people's wages and salaries between 1941 and 1944. People were not asked to lend as in the National Savings Movement. Through the Income
  1080
  Tax system, these amounts were taken from their wages weekly or from their salaries monthly. They had no say in the matter. The arrangement was decided upon by the House. The Government, therefore, in paying out post-war credits, are not giving a bonus or a free give away; they are merely paying out what is due to the men and women from whose incomes the deductions were made during the war.
  In 1945, at the conclusion of the Second World War, the economic state of the country being what it was, people understood that the money could not be paid out. There were millions of men to be released from the Services, there was a lack of raw materials, the export trade had to be built up, there were no consumer goods in the shops and stores, and it was clear that all that money in postwar credits could not be paid out in the early years after 1945. But the Labour Government made a start by paying out post-war credits to men at 65 and women at 60. Since then, very little has been done, and, during the last eight years, there has been a very strong feeling in the country that the whole matter has been consistently shelved. There has been deep feeling on this subject.
  The loss of purchasing power is something which the Government should consider. I recently put some questions to the Chancellor about this which were answered by the Financial Secretary. 1 asked what the purchasing power of £100 of post-war credits deducted in 1942 now was, and the Financial Secretary said that the figure was £52 16s. One hundred pounds deducted in 1943 is now worth £54 14s. One hundred pounds deducted in 1944 is now worth £56. One can see, therefore, that the purchasing power of post-war credits has fallen by nearly 50 per cent., and this is not to the credit of the Government.
  The Chancellor is lowering the age of repayment for men to 63 and for women to 58. I wish that he had gone further. I feel that he should have taken a bolder step and reduced the ages to 60 and 55 respectively.
  I want now to say a word about the proposal to pay 2½ per cent. interest to holders of post-war credits which remain unpaid after 1st October. This step has

  1081
  been taken very late. To be logical, as in dealing with other claims arising out of the war, the Chancellor should date the interest back to 1942, 1943 and 1944. If a man lost a house during the war and received compensation, he very rightly had 2½ per cent. interest on the money until he was pa id. If he lost goods, fixtures or chattels, lie had 2½ per cent. interest from the date of the damage. The money in post-war credits was compulsorily deducted from wages or salaries, and the payment of interest is making a very late start indeed. 16 or 17 years afterwards. I hope, therefore, that the Chancellor will look at the matter of interest again. People have a strong and logical claim for interest dating from the time when the money was deducted from their wages and salaries.
  Many hardship cases have been raised in the House from time to time, and I am glad that the Chancellor intends now to repay post-war credits to blind persons, to disabled persons and the next of kin of holders who, unfortunately, have died. I hope that he will go further where there is genuine distress. I know that these matters are not simple and it will not be easy for the Inland Revenue to deal with them. I feel certain, nevertheless, that in cases of real hardship or distress the Chancellor can count upon the very competent officials of the National Assistance Board giving all possible help to the Inland Revenue, so that, without delay, post-war credits may be paid on hardship grounds to those who need them.
  It has been said that the deduction of post-war credits should not have been done and should never he done again. Of course, we hope that circumstances will never arise again when it is necessary to do it. No one wants another war. If a second scheme is ever tried, people will be very suspicious of it. Although 1 appreciate that in the post-war years both Governments have had to face big problems in housing, exports and consumer goods, I feel that to allow the matter to go on for 16 or 17 years is quite wrong. As I have said, the Labour Government made a start at a very difficult time in 1946, one year after the war, by repaying credits to men and women at the ages of 65 and 60. It has taken this Government twelve years to make another move.
  After taking this very late step, the Chancellor will, I hope, press ahead so
  1082
  that all holders of post-war credits will be paid. I hope particularly that cases of hardship and disabled persons will be dealt with without delay. I am very pleased to support the Second Reading of the Bill, and I hope that it will be improved during the Committee stage.
  5.57 p.m.
  Mr. Ray Mawby: My principal reason for intervening is that the hon. Member for Stockton-on-Tees (Mr. Chetwynd) referred to me when making some of his calculations. He spoke about young men who would not draw their post-war credits until 1984. I congratulate my right hon. Friend and thank him for the fact that I shall draw my postwar credits in 1985 instead of in 1987.
  It should be pointed out, I think, that many of us at the time aged eighteen and nineteen—I am sure that my case is not a solitary one—were serving apprenticeships in industry and, as can readily be imagined, the money earned in the ordinary apprenticeship did not really bring one's post-war credits to a very high level. Nevertheless, many apprentices as well as other people, in engineering particularly, were at that time working extremely long hours in trying to make sure that our war effort was successful. We are now to have our post-war credits repaid two years earlier. I am not much of a mathematician, but taking into account the compound interest which is to be paid on my small amount, I think that by 1985 —so long as George Orwell's prophecy does not prove true—I should have a fairly considerable amount to draw.
  I believe that this is the first time that a Chancellor of the Exchequer has made " an honest woman " of the post-war credit. The whole arrangement for taking money from taxpayers, with a promise to pay at some time in the future, with no date fixed whatever, was certainly something which had to be regulated and put right at the earliest possible moment. Now, at least, we can see that the payment of these post-war credits has been put on a proper basis and people as young as myself do not mind waiting in the queue so long as they will carry reasonable interest rates.
  My right hon. Friend has selected all the groups of needy people which can be recognised, and that is as far as he can be asked to go. To request that he should deal with particular cases would

  1083
  be to impose too great a burden upon him and prevent the speedy payment to those who are in need. The Ministry of Pensions and National Service and other Departments can easily calculate the number of those people who will fall into such groups. I congratulate my right hon. Friend on putting the payment of these credits on to a proper basis.
  I am concerned about them being made negotiable. I agree with what was said by the hon. Member for Stockton-on-Tees. A person who is in debt might be tempted to sell his post-war credits cheaply, or might use them as security against extra credit to obtain goods, which might cause a certain amount of inflation. I should like to warn my right hon. Friend about the dangers which would arise were these credits made negotiable. I welcome the Bill and I think it a good Measure.
  6.3 p.m.
  Mr. Donald Wade: I wish to put a question to the Minister about the transferability of post-war credits. I support what was said by my hon. Friend the Member for Orkney and Shetland (Mr. Grimond), but I do not intend to go over the ground which he traversed. I welcome the Bill. I am glad that the Government have taken some steps towards repaying post-war credits.
  I wish to know the grounds on which the Government object to any method of transferability regarding these credits—unless, of course, the Government change their mind on that matter during the course of this debate. Is it because it is considered not a good idea that holders of post-war credits should be allowed to dispose of them? That is a paternalistic view. Or is it because the result might be inflationary, or because of administrative difficulties? I am not impressed with the first two reasons which I have suggested.
  I can see that there may be administrative difficulties. But it would be practicable in my opinion, after post-war credit certificates had been checked, for the holders to take them to the Post Office, together with a birth certificate, and have the date when they would become due stamped upon them. After that, I do not see why a holder should not be allowed to dispose of his post-war credits if he wishes. I ask, therefore, on what grounds do the Government object to
  1084
  the idea of transferability. Has there been a careful review of the administrative problems, and, if so, what conclusions were reached?
  6.5 p.m.
  Mr. Douglas Houghton: This has been an agreeable debate and the Chancellor of the Exchequer must be well satisfied with the way in which the Bill has been received by the House. Later on. when the right hon. Gentleman is facing storms of criticism for having given away too much or too little, or having given away money in all the wrong directions, it may be a comfort to him to allow his mind to dwell on this day. It is obvious that hon. Members are well satisfied with the Bill and that has allowed them to be drawn away from the Chamber in order to attend to the many other pressing tasks which right hon. and hon. Gentlemen have to perform.
  The Bill is purely and simply an enabling Measure, as we all recognise. It will leave great power in the hands of the Government to pay out in future, by regulations and under such conditions as they may prescribe, a great deal more of the money held in post-war credits. For that reason alone the Bill is significant, if not historic. My right hon. Friend the Member for Smethwick (Mr. Gordon Walker) suggested a change in the method of authorising additional expenditure under the Bill, and that is a matter which we can discuss in more detail during the Committee stage.
  I wish to look back for a few moments. There have been references to the conditions under which post-war credits were created. The other day I was looking up some of the original documents connected with a proposal made by the late Mr. John Maynard Keynes, as he then was, in The Times of 14th, 15th and 28th November, 1939, when he put forward his plan for financing the war out of what he called, quiet bluntly, " compulsory savings ". His idea was to have stoppages from wages. He called it, "deferred pay ". When we are looking at the question of repayment on account of hardship today, it is interesting to recall that he not only proposed that 2½ per cent. interest should be paid on this deferred pay but made provision for the repay-

  1085
  ment of the capital sum on account of hardship which he said could be paid
  "in any case approved by his friendly society or in the case of the Post Office Savings Bank, by a local committee, as, for example, to meet illness, unemployment, or special family expenses."
  One might boggle at the number of committees, tribunals and referees necessary to apply those conditions for repayment on account of hardship. He said:
  "In general, the deposits are not intended to be used until after the war, when they would he released by a series of instalments at dates, not unduly delayed, to be fixed by the Government. Meanwhile they should not reckon in calculations arising out of the Means Test or eligibility for old-age pensions or the Capital Levy."
  We have not had to take account of post-war credits in connection with a capital levy, but his references to the means test are apposite today. He had this in mind:
  "The appropriate time for the ultimate release of the deposits will have arrived at the onset of the first post-war slump."
  It might even be suggested that that is where we are now. At all events, we have been anxious recently on account of a recession, and the keynote of the Chancellor's Budget is expansion.
  Mr. Keynes had in mind that repayment would avoid the necessity for raising other loans to pay for unemployment, or for public works, and the like, as a means of preventing unemployment. Those are echoes from the past, and the origins of post-war credits. Sir Kingsley Wood, when Chancellor of the Exchequer, adopted the main idea through the machinery of taxation. That is how postwar credits, as we have them today, came into existence.
  Both parties have been in power in the years since the war and both have hesitated to release large sums of accumulated post-war credits in an economic situation where there was danger of inflation. It should, however, be said that my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) broke the ice of post-war credits by beginning repayment in 1947 to those who reached the pensionable ages of 65 for men and 60 for women. I would remind the House that well over £200 million had already been repaid under the conditions laid down by my right hon. Friend before the Lord Privy Seal made the next move in 1954 to repay, in the
  1086
  case of deceased holders, on the 65th or 60th anniversary, as the case might he, of the birth of a deceased holder. Previously it had been the widow, or whoever inherited the credit, who had to stand the test of age in order to secure repayment. By far the biggest block of post-war credits has been repaid under the initial release of credits for those who reach pensionable age.
  It should not be overlooked that the disparity of age for repayment of postwar credits gives many wives a grievance. Wives have a lot of post-war credits wrapped up with those of their husbands. Married women workers during the war had post-war credits, too. They were given an opportunity for a while to ask for their own post-war credits to be separated from those of their husbands. When they were asked to do so they did not know that repayment would be made to men at 65 and to women at 60.
  I bring their grievance forward at this late hour because some wives would certainly have asked for their post-war credits to be separated had they known that they would have been entitled to cash them five years sooner than their husbands. Unless there was some compelling reason at that time, women, being so considerate towards their husbands, were loth to ask for the separation of post-war credits in the absence of a strong financial reason for doing so. Separation might have caused domestic misunderstanding. The husband might have asked, "Why do you want your post-war credits separated from mine, my dear? Are you thinking of leaving me or of becoming economically independent?" That might have spoiled a long and affectionate association.
  It is too late to do anything about that now, and I do not suggest that wives should be allowed to separate their postwar credits in order to qualify for earlier repayment. It was one of the matters which arose when my right hon. Friend the Member for Bishop Auckland decided upon the pensionable age, and it is not without interest that my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) raised this matter in his speech. If the ages for repayment are now to be equalised, that can only be done by bringing the age for men down from 65 to 60, which my right hon.

  1087
  Friend the Member for Colne Valley suggested, and which I commend to the Chancellor for his further consideration.
  Now I come to the present. What is to be done? What is being done now? There has been much discussion on whether the age basis should be continued. My hon. Friend the Member for Stockton-on-Tees (Mr. Chetwynd), in a well-informed and interesting speech, put forward alternative ideas which are held by him in common with other hon. Members. However, repayment by reference to age has become rather established by tradition in the last decade. The basis was set by my right hon. Friend the Member for Bishop Auckland.
  There was a special significance about repayment at pensionable age. I was attracted by it as being very sensible and appropriate as a kind of retirement gratuity. When a person reached the pensionable age there was a lump sum for him when he would be giving up full-time work and going into retirement. It had a sentimental as well as an economic appeal. My hon. Friend the Member for Stockton-on-Tees suggested that once we got away from pensionable age we cut adrift from any moorings and that the age could then be anything. It would be quite arbitrary after that and we should just have to decide on what steps downward we would take.
  Although I have had many other ideas under consideration at different times, like many other hon. Gentlemen, I must recall that the Trades Union Congress has repeatedly expressed itself in favour of a gradual reduction of the age of repayment and has not given support to alternative methods. I believe that the Labour Party is on record as desiring reduction in the age limit for repayment of post-war credits. I am not certain about the Conservative Party. I know it gives its Ministers a rough time now and again. I believe that one Minister had a rough house at a Conservative conference on this very question of postwar credits. Whether the Conservative ladies did any more than wave their umbrellas frantically and aggressively, and whether they defined anything in the midst of their indignation, I do not remember. I think the Minister came away with a firm impression that a lot of people at the conference wanted
  1088
  earlier repayment of post-war credits. I will leave it at that.
  There are pitfalls in some of the alternatives, such as transferability. If post-war credits are converted into negotiable stock, are we not really depriving the Chancellor of the Exchequer of any further opportunity of outright repayment? If the stock is to be dated it must presumably bear, as the hon. Member for Dover (Mr. Arbuthnot) suggested, the date upon which the credit will mature, by reference to existing conditions. I suggest it would make it extremely difficult for the Chancellor, after having done that, to announce lower ages for repayment in future.
  If he were to do such a thing, there might be considerable speculation and traffic in post-war credits just before a Budget if a lot of people thought the Chancellor was about to reduce the ages and that, therefore, credits which they held would mature sooner than had been anticipated. Having bought them at a discount because of the length of time anticipated before repayment, they might make a capital gain on the eventual maturity of the post-war credits at a date earlier than expected. That is a very big drawback to the suggestion.
  Mr. Arbuthnot: I was not suggesting that there should be a further reduction in dates once the post-war credits were negotiable. Once the Chancellor felt he had more money at his disposal, other competitors would come into the field and would be satisfied.
  Mr. Houghton: I fully understand the position of the hon. Member. It may become a choice in the minds of postwar credit holders between having their credits turned into a negotiable instrument they might be able to dispose of only at a discount, and relying on this and future Governments accelerating outright repayment of the credits they hold. I should not venture to judge what the majority opinion of post-war credit holders would be.
  Since these credits came into existence, many people holding them have been growing older. [Laughter.] My hon. Friends seem to be amused. There seems to be some merriment at my glimpse of the obvious, but there is a point in what I am saying. These people

  1089
  are getting nearer to the date of repayment by age, not only to the new ages, but to the ages which were fixed before. That might confuse the method of outright payment rather than conversion into a negotiable instrument.
  In whatever circumstances post-war credits were converted into negotiable instruments, it would be necessary to protect a lot of people from selling their credits at throw-away prices. There would be some sharks getting to work in this field unless there were stringent conditions of transfer only through recognised discount houses, or by other means, which would he a protection against the exploitation of many people who are ignorant of these matters.
  Various other suggestions have been made as to what should be done when repaying the money. The hon. Member for Dover suggested that the money might be transferred into Premium Bonds. Here I must allow to emerge the Nonconformist conscience of many constituents of Sowerby who, on moral grounds, would resent such a transfer. They would wish to withdraw immediately and a great deal of unnecessary clerking would be involved. I do not suggest that their moral indignation would lead those people to renounce their post-war credit claims, but they would want them repaid as soon as possible.
  My hon. Friend the Member for Stockton-on-Tees made another interesting suggestion which was that they should be transferred into National Savings Certificates. Thereby there would be discouragement against turning them into cash and spending them. It was intended originally that the post-war credits should go into an investment account. At no time, I understand, was a proposal made that they would be paid out in cash. Obviously in changing years, however, there are different attitudes.
  We must be careful about placing unnecessary clerical work on Government Departments which might result if money is put into National Savings Certificates and a lot of people go to post offices to ask for applications for withdrawal. There have been other suggestions made in the debate which, no doubt, the Chancellor will consider. I suggest to him that he ought now to set his course so that there will be a general understanding of what
  1090
  is to happen about post-war credits. If he is convinced that age is the best method, he and later Chancellors ought to stick to age rather than that we should have the uncertainty of an alternative way of discharging the obligations of the State in future.
  The right hon. Gentleman, under regulations to be issued in connection with the Bill, is bringing down the ages from 65 to 63 for men, and from 60 to 58 for women. Could he have gone further now? He has raised the question of administrative difficulties and I shall refer to that in a moment, but I think he could have laid down a programme. He could have said that it would be two years now and one next year and made a programme for repayment which would have given a reasonable measure of assurance for the next few years.
  The hon. Member for Dover said that would give the Chancellor no room for manoeuvrability and that inflationary tendencies might develop. Surely, if there is anything in the Budget at all, it must be the beginning of an expansion which is to last for some time. Is it the underlying suggestion of the hon. Member for Dover that after this boost to increased production and expansion of the economy we are likely to be thrown back into inflation?
  Mr. Arbuthnot: Excessive wage demands might create inflation any time.
  Mr. Houghton: The Chancellor of the Exchequer has not based his Budget on the assumption that wage demands will hit it sideways within the next few months. I know what the Chancellor is waiting to say. He is waiting to utter the conventional warning that if they are too big, or come too quickly, they might injure the economy. He wants to remind the House—I do it for him, if he will allow me of the several utterances he made in the course of his Budget statement to that effect. It is curious that large tax reductions—amounting to many more millions than are involved in these post-war credits—are expansionist, whereas repayments of post-war credits are possibly inflationary. I am at a loss to understand why there should be that distinction between what is released by reduced taxation and what is released by repayment of post-war credits.

  1091
  I want to deal for a moment with the very troublesome question of arrears. Cases have arisen in the experience of a number of hon. Members, on both sides of the House, in which people have gone to draw their post-war credits and have been shocked to find that a tax arrear, which they had either forgotten or never knew about, has been set off against the money to be repaid. It is more grievous still when that occurs in the case of a widow who has not been able to find her way around her husband's papers and might find it a painful experience to have to try. Such people are most distressed. I have had experience of some very moving cases in which this has occurred. The widow has been absolutely helpless in contesting the Revenue view that some tax arrear of 1942 was never paid.
  Although the Inland Revenue did its best to satisfy claimants that arrears did exist and went into them in detail, obviously claimants could not feel fully convinced that that was so. Widows have said to me, when told that arrears of tax would be deducted from post-war credits, that their husbands had told them that should anything happen to them they would have their post-war credits, and then they found that they were so much less. Cannot the right hon. Gentleman make a generous gesture in this matter?
  I know that this would offend the principles of equity in relation to those who have had their credits in the past, but I remember the then Chancellor of the Exchequer, Sir Stafford Cripps, making a clean sweep of all Income Tax arrears which were being demanded from men who had served in the Forces during the war. He must have used powers given to him by the Income Tax Act to sweep away some millions of arrears of tax. The decision took effect at midnight on one fixed date, and those who had paid their arrears the previous day could not ask for them back. It was arbitrary, but Sir Stafford Cripps decided to do that in order to get a contented body of returning men and women from the Forces who had tax arrears charged against them and who, like the post-war credit holders, had little means of ascertaining the correctness of what they were asked to pay.
  Mr. Gower: The hon. Gentleman was somewhat critical when I put forward that point of view.
  Mr. Houghton: I was not critical. 1 was merely asking the hon. Member what view he had on this question of past cases.
  The hon. Member for Bedfordshire, South (Mr. Cole) made another interesting suggestion. He suggested that if these arrears are to stand against post-war credits, the sooner people know about them the better, and that they should not be saved up until they or their widows claim the money. I entirely agree with that suggestion. He did, however, suggest that an announcement should be made in the various tax returns, and so forth, asking those who wish to have their postwar credits checked up to write in and ask for that to be done, but many of those who have post-war credits probably do not get Income Tax forms these days, and they would not be fully covered on this ground.
  A more practical way is that the Inland Revenue itself should notify those holders where tax arrears are believed to exist. As I understand it, that information is on the record now and anyone claiming a post-war credit now will be told at once that an arrear stands against him. Can the holders not be informed in advance of claiming their credits that there are arrears standing against them, so that that can be cleared up without further delay and not left for another five, ten or fifteen years when it would be too late for the details to be gone into with any clarity or accuracy.
  Mr. Cole: The suggestion which the hon. Gentleman has just made brings us back to the point made by my right hon. Friend that it would mean the Inland Revenue checking all post-war credit holders to find out whether there were arrears against them. I imagine that would be a tremendous task. I think that they are in files and not in ledgers. My suggestion was that the Inland Revenue should say, "If there is any doubt, come to us and we will check up."
  Mr. Houghton: I would not recommend people in doubt to rush to the Inland Revenue to have their doubts confirmed or dispelled because 99 per cent. would be dispelled and there would be no need for that at all. We must not exaggerate the number of cases involved.
  There is no difficulty in doing what I suggest except the amount of work

  1093
  involved. I think that taxpayers who are later to be confronted with tax arrears ought to be given the opportunity of going into them without further delay. Many of these arrears took place when, as my right hon. Friend the Member for Come Valley said, workers were moving about the country from war work to war work, and in some cases were concerned with as many as five to a dozen different tax offices during the course of the war. It has been a most intricate job to bring all the credits and the tax liabilities together into a central office.
  That brings me to the question of administration. I am very grateful to the hon. Member for Bedfordshire, South for the tribute which he paid to the staff of the Inland Revenue. I feel that it is a little bogus my being at this Box today because, as the House knows, I am the Secretary of the Inland Revenue Staff Federation and it is the members of that organisation who will have to do this work. It makes me doubly grateful to be here and listen to a tribute to the staff of a department with which I have, in this way, been connected for thirty-seven years. These are very big problems of administration. There are a million hours of work in what the Chancellor has decided to do in the repayment of postwar credits.
  That work has to be done mostly on overtime. It will have to be done, as the previous payment of post-war credits was done, during the months when the weather, we hope, will be getting better and brighter and when the staff are not quite so reconciled to working very long hours. This work will be done to timetable, cheerfully and efficiently. I suggest to the Chancellor that he ought now to make more permanent provision for future operations for the repayment of post-war credits.
  Several times during the Chancellor's speech he suggested to the House that he was inhibited from taking certain alternative courses or pursuing his present course more freely on account of administrative difficulties. That I can fully confirm. Had the Chancellor decided to repay five years of post-war credits this time instead of two, the work would have to be staggered. It could not have been completed to the timetable on which this work can be completed.
  1094
  That leads me to suggest that, unless there is some kind of post-war credit staff reserve, he will never be free to do anything on a substantial scale. The day may come when he will wish to do more than he is doing now. In any case, there will be a higher normal level of repayment of post-war credits in future if the Chancellor or any successor contemplates reducing the age limit and it will help if he has the staff to deal with one or two years extra each year or every two years. Something can then be done.
  When the quinquennial repayment for property took place, the staff had to be imported in order that the job could he done when it reached its peak. This is a question of administration and one to which the Chancellor should pay attention. He must put his Somerset House in order to enable it to respond to what the House and the country requires in the matter. As my hon. Friend the Member for Stockton-on-Tees said, administration should not be allowed to stand in the way of whatever the economic situation, social justice or the will of the House may require and in order to do that he must certainly put the Inland Revenue in a better position to do the job that it is now.
  There are two points of detail with which I should like the Financial Secretary to deal. Nothing has been said about the normal application for the refund of post-war credits, that is to say, those who now in the next days and weeks will be reaching the age of 65 for men and 60 for women. The Chancellor, in his opening speech, rather counselled everyone to wait and not press around, and he suggested that anyone now coming for repayment in the ordinary way would get repayment without waiting. I think that should be made clear and I hope that the Financial Secretary will be able to confirm it.
  The second point has been referred to by several hon. Members and it concerns the period of twelve weeks of National Assistance..1 understand that those who will be entitled to hardship repayment who have been on National Assistance for twelve weeks will be those whose continuous period of National Assistance ended from 7th April.
  Mr. Amory: Ended after 7th April.
  Mr. Houghton: In other words, those who had been on National Assistance for

  1095
  eleven weeks before Budget day and had their twelfth week on National Assistance in Budget week will qualify for repayment on hardship grounds. I think that that puts the position beyond peradventure. There was a belief in some quarters that in order to qualify the continuous period of twelve weeks on National Assistance must be wholly after Budget day.
  We welcome the Bill. It has had a very warm welcome from both sides of the House. We shall watch the conditions which are laid down in the regulations when they are brought before the House and the progress of the work, and we sincerely hope that whoever holds office as Chancellor of the Exchequer in future years will be able to make further bold steps forward to discharge what the hon. Member for Preston, South (Mr. Green), in a speech last week, referred to as a " moral obligation ". I cannot do better than end on the words which the hon. Member used, which were:
  "I am delighted that it is this Government that has taken the first step towards doing it, although I accept at the same time that the Opposition would have done the same in the same circumstances. I do not think that this is a terrific party point between us. It is a moral commitment that is being met, and the whole House can take pride in it."—[OFFICIAL REPORT, 8th April, 1959: Vol. 603. c. 328.]
  6.42 p.m.
  The Financial Secretary to the Treasury (Mr. J. E. S. Simon): My right hon. Friend is very grateful for the kind welcome which the House has given the Bill and for the very agreeable things which hon. Members have said about him personally. It was the French finance minister Colbert—one of that small band of great finance Ministers which my right hon. Friend is rapidly qualifying to join—who said that the art of taxation lies in so plucking the goose as to get the maximum amount of feathers with the minimum amount of hissing. There is no question but that post-war credits in recent years have provoked a great deal of hissing—indeed, more than is healthy. It is not much exaggeration to say that they have been poisoning relations between the public and the Government, and that is dangerous, particularly in a democracy.
  I do not think that anyone except an outright masochist enjoys being taxed. But people do reconcile themselves to their fiscal burden provided that they feel that
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  the system, however onerous, is equitable —fair as between one taxpayer and another, and fairly administered by authority.
  There is no question but that the treatment of post-war credits since the war has caused widespread resentment. We all know the reason for the slow rate of repayment. But the creditor not only regarded the credit as his own money, withheld from him by the Government without even any interest being paid on it; in addition, he naturally blamed successive Governments for the inflationary conditions which until now have prevented any accelerated repayment. In short, he regarded the whole thing as a swindle—as the right hon. Member for Smethwick (Mr. Gordon Walker) said, "almost a public default."
  Such an attitude, it seems to me, is bound adversely to affect a citizen's general bearing towards the State and the political community. It is with those thoughts in mind that the House has welcomed so wholeheartedly this Bill and the comprehensive process of dealing with the problem which it represents.
  Before I discuss points which have been made on the Bill, there is one comment which I should make in answer to the hon. Member for Sowerby (Mr. Houghton), whose great wealth of experience is so valuable to the House, particularly on this kind of occasion. The normal applicants for post-war credits—those applying at the age of 65 for men and 60 for women—are not affected by the Bill. They do not have to wait until 4th May. They will make their application to the Inland Revenue in the usual way and will be repaid in the usual way.
  I ought also to say a word or two about the alternatives to the scheme which have been suggested in the debate. The hon. Member for Stockton-on-Tees (Mr. Chetwynd) put forward a scheme for the repayment to everybody of a whole year's credits in the first year, and then successively over the years which the credits represent. I hope that he will allow me to say that it seemed to hon. Members on these benches a very well informed and constructive speech. I thought that he was very much better employed here making that speech than irrupting into my constituency with the kind of border warfare from which I have been suffering last week, if I may judge from my local newspaper.
  Mr. Chetwynd: I hope that my activities last week are far more successful than my activities today appear to have been.
  Mr. Simon: The hon. Member answered himself in his own speech when he said that his scheme would mean taking four or five bites at the same cherry. A number of hon. Members have paid a tribute to the Inland Revenue's administration of this scheme, and have recognised generously the burden which it places on the Inland Revenue, and the ready way in which the Inland Revenue is assuming the burden. The right hon. Member for Colne Valley (Mr. Glenvil Hall), who was himself a Financial Secretary to the Treasury, the hon. Member for Orkney and Shetland (Mr. Grimond), my hon. Friend the Member for Bedfordshire, South (Mr. Cole), the hon. Member for Feltham (Mr. Hunter), and the hon. Member for Sowerby have all paid tribute to the Inland Revenue. As the Minister immediately responsible for the Inland Revenue, I am grateful for what has been said, and I pay my own tribute.
  It is against that background that we have to measure the difference between the scheme put forward by the hon. Member for Stockton-on-Tees and my right hon. Friend's scheme. Our scheme involves the investigation of about 1·4 million post-war credits. The hon. Member for Sowerby described what that will mean in overtime working during the summer by the Inland Revenue. In addition, the Inland Revenue must get this out of the way before the autumn pressure in connection with the ordinary seasonal preparation of next year's tax affairs.
  Under the hon. Member's suggestion we should have to investigate every one of the 11 or 12 million credits which are outstanding. Nor would that be the end of it. Under the scheme initiated by the right hon. Member for Bishop Auckland (Mr. Dalton)—which we are no more than extending—once a creditor has been repaid he is removed from the books of the Inland Revenue. Under the other scheme, as the hon. Member himself recognised, the creditor might well remain on the books of the Inland Revenue, and 11 or 12 million credits would have to be investigated all over again at the time of the repayment of the next year's
  1098
  credits. Therefore, it seemed to me, as I think that it seemed to most hon. Members, a very wasteful way of dealing with the problem.
  Further, as the hon. Member for Sowerby suggested, there is a great deal more to be said for the idea of a progressive reduction in the qualifying age than the hon. Member for Stockton-on-Tees would allow. It is true, as the hon. Member said, that the original ages of 65 for men and 60 for women had a particular appropriateness, as those were and are the retiring ages, and, therefore, the credits would be especially welcome at that time. But in a situation in which repayment cannot be made to everybody at once, it seems only reasonable that, subject to the hardship cases, the oldest should be repaid first. After all, what we should like to see would be that those who paid the extra tax in the war years should get the money back while they still have some years left in which to enjoy it. The best way of achieving this is to give priority to those whose expectation of life is likely to be shortest. Therefore, it seems to me, both on principle and because of the enormous administrative advantage, that the present scheme, as extended by my right hon. Friend, is considerably preferable.
  A number of hon. Members—my hon. Friend the Member for Dover (Mr. Arbuthnot), the hon. Member for Orkney and Shetland, my hon. Friend the Member for Barry (Mr. Gower), my hon. Friend the Member for Bedfordshire, South and the hon. Member for Huddersfield, West (Mr. Wade) —canvassed and advocated the idea of conversion into negotiable securities.
  To appreciate the full implications of this suggestion one would want to see a concrete scheme fully worked out. My right hon. Friend is not prepared at this stage to rule out all possibility of such a scheme for the future. Indeed, as he suggested, he will carefully consider all the suggestions put forward today.
  I think it right to indicate a number of very serious objections that there are to such a proposal. First, in spite of what has been said by a number of hon. Members, such a scheme would have an inflationary tendency, for the reasons given by the hon. Member for Stockton-on-Tees and my hon. Friend the Member

  1099
  for Totnes (Mr. Mawby). As the hon. Member for Stockton-on-Tees said, many of the holders would sell their credits because they wanted the money to spend. I do not say that all of them would, but many would. The buyers would be likely to be people seeking a means of investing their capital, and who would have invested it in other ways—perhaps in other Government securities—if this means had not been available. As my hon. Friend the Member for Totnes said, such a scheme has an inflationary tendency also in that the negotiable instrument could be used as a means of getting security for an advance. There fore, a scheme for conversion into negotiable securities could be considered only in a situation where some such reflationary measure was called for. In such a situation it seems to me that repayment in cash would be just as appropriate and much more straightforward.
  Secondly, it would not be possible to prevent sales of the securities at unreasonably low prices to speculators trading on the ignorance of the creditors. I know that my hon. Friend the. Member for Dover envisaged that objection and his scheme, which was completely thought out, ended at the point where a date was put on the security. So the next objection does not apply to the scheme put forward by him, but I think that it applies to the scheme put forward by other hon. Members. If after the transaction the repayment of the credits was substantially accelerated, the original creditor would feel considerable resentment. Indeed, it might very seriously inhibit the freedom of action of the Chancellor in deciding whether to accelerate payment.
  Thirdly, as the hon. Member for Sowerby pointed out, purchase of the security at a discount would result in a tax-free appreciation to the purchaser.
  Fourthly, since interest is now to be paid on the credits free of Income and Surtax, it would not be desirable to allow, say, high Surtax payers to buy up appreciable quantities of the credits. The same argument would apply, to a lesser degree, even if the interest were free of Income Tax but not Surtax.
  Fifthly, and perhaps most cogently, to make the credits negotiable securities would mean that they would have to be
  1100
  checked by the Inland Revenue, as on repayment. Certainly, until the transactions contemplated by my right hon. Friend's proposals have been disposed of, there could not be any question of undertaking such a task. Indeed, to put on the Inland Revenue the burden of checking the credits of all those who might want to realise them at a discount would involve very considerable additions to the staff.
  Those seem to me to be serious objections, although my right hon. Friend has not closed his mind on the subject.
  My hon. Friend the Member for Dover suggested also that the post-war credits should be converted into Premium Bonds. Premium Bonds are repayable on demand, so that again would amount to a general release of the credits, with consequent inflationary effects. It would involve again a very heavy administrative burden on the Inland Revenue. Further, as the hon. Member for Sowerby very entertainingly pointed out, some creditors might possibly have a conscientious objection to holding Premium Bonds. So some alternative security would have to be made available. There is another, and I think even more fundamental, objection, namely that Premium Bonds pay an effective rate of 4 per cent., whereas we do not propose under our scheme to pay more than 2½ per cent.
  The suggestion was made for payment of the credits when repaid into the Post Office Savings Bank. As the right hon. Member for Colne Valley reminded us, that was the original intention in Sir Kingsley Wood's Budget speech, although it was not reflected in the Finance Bill. Anybody can pay his credit, when he receives it, into an account in the Post Office Savings Bank. We propose to send out with the repayment a form telling the creditor who has been repaid how he can invest in National Savings. I hope that the House will feel that that meets the point that has been made.
  I come to the very difficult question of the disappointment caused to a certain number of creditors when they find that the amount which they are to be repaid is not the total shown on the front of the certificate. The hon. Member for Sowerby was quite right when he said that we must not exaggerate the number involved. There are very few of them, although they come particularly and

  1101
  indeed poignantly to our notice when we have to deal with our constituents on this question.
  Post-war credit certificates were issued by Inspectors of Taxes as soon as possible after the liability had been computed. The House will remember that the first two years of the post-war credit scheme were before P.A.Y.E. was introduced. Collection, therefore, did not begin until after the liability had been computed. That meant that certificates were often issued before collection had been completed. The certificates therefore included—I have one here—as the right hon. Gentleman the Member for Colne Valley quite rightly reminded us, a statement that the right to the credit depended upon payment of tax. I have the words here:
  "The right to post-war credit depends on the payment of the full amount of Income Tax due for the year."
  The object of issuing the certificates early was psychologically important during the war—to bring home to taxpayers the fact that the credits really existed. I know the difficulties in these cases. As my right hon. Friend said, one cannot really repay what has never been paid, and there are the past cases where it is almost impossible to re-open the transaction. And one has to consider the people who did pay their taxes in the year. My right hon. Friend is very sympathetic with this problem and will carefully consider the various suggestions made in this debate as to how it might be dealt with.
  The loss of the post-war credit certificate is not, of course, fatal to the claim. The claim form that we are proposing to send out, and which will be in the post offices after 4th May, tells people what to do if they have lost their certificates—
  Mr. Chetwynd: Could the form, when available, please be sent to hon. Members?
  Mr. Simon: I will certainly consider that.
  Mr. Houghton: If copies were available in the post office in this House we could got them in the ordinary way, whether or not we qualify for repayment.
  Mr. Simon: If I may say so, with respect, that seems to be the sensible way.
  1102
  I now come to the scheme itself and. first of all, to payment on death. The right hon. Member for Colne Valley asked about the liability to Estate Duty of post-war credits that are paid on death. I can assure the House that post-war credits are not now and will not be subject to Estate Duty. The position has always been that they shall be liable neither to Estate Duty nor to any other form of tax, and nothing in the Bill changes that.
  Next, my right hon. Friend proposes to lower the ages. I would point out that repayment on death is equivalent in money to lowering the age for two years—
  Mr. Wade: I would not like the public to misunderstand this point about Estate Duty liability. Where a post-war credit becomes due and death occurs before payment is made, I suppose that that credit will have to be treated as part of the Estate as the payment has not arisen out of the death?
  Mr. Simon: I would not like to give a snap answer, but on general principles, I should think that that would be so.
  The right hon. Gentleman the Member for Smethwick suggested that there should be automatic lowering of the age by one year annually, and the hon. Member for Sowerby said that we should have laid down a programme. That seems to me to be open to serious objections. There is nothing to prevent any future Chancellor annually lowering the age by one year, but I think that it would be objectionable if my right hon. Friend were to commit any future Chancellor. As I say, there is nothing to prevent the gradual lowering of the age, but the present system does retain the flexibility that might, in certain economic circumstances, be desirable.
  I now come to the hardship cases. My right hon. Friend is very grateful to the response made by the whole House to his plea that he should not be pressed to extend the classes for this year. I was very encouraged by the fact that two hon. Members who have particularly devoted thought to this matter—the hon. Member for Stockton-on-Tees and my hon. Friend the Member for Totnes—said that they could not think of any other clearly definable class that might have been put in this year. We will, of course, consider any suggestion that has

  1103
  been made to us to see whether there is any other class which is clearly definable by objective standards, although I think that those suggested by the right hon. Gentleman the Member for Smethwick would be very difficult to administer.
  The question of National Assistance, on which there were clearly considerable misapprehensions, has been completely cleared up by the hon. Member for Sowerby. But perhaps it should come from this Box that those who will qualify under the National Assistance head are people who, for a continuous period of twelve weeks ending after 7th April have been receiving National Assistance. It matters not if the great bulk of the period was before the Budget. Provided that this continuous period leads into the period after the Budget, those people qualify. We will also consider the point made by the hon. Member for Stockton-on-Tees about sending the forms to the National Assistance officers.
  I find it very difficult to say how many blind people and those having constant attendance will qualify. The average credit is under £50, and we estimate a figure of £2 million under all these heads, which will give the House a general idea of the number who might qualify. Under all these heads, I have in mind a figure of about 100,000.
  The question of interest was really the one controversial matter, although it was not taken up by any speaker other than the right hon. Member for Smethwick. He said that the interest should be free of Income Tax but should not be free of Surtax. The real argument against charging Surtax is an administrative one. The cost of collection would not repay the revenue that would be derived. Therefore, unless one does regard Surtax as a penalty, as something imposed just to larn " the creditor to be a toad," every argument goes against charging Surtax on the interest—
  Mr. Glenvil Hall: Is not another reason for doing what the Treasury suggests that the interest will accrue year by year and will be paid finally only when the credit is paid; and that it is very unfair to the Surtax payer to have it all piled on then?
  Mr. Simon: I am much obliged to the right hon. Gentleman, who has great experience of these matters. That is exactly what I had in mind.
  1104
  The analogy here is much closer to the Savings Certificate than to the Savings Bank deposit. In the case of the Savings Bank, the interest is declared annually and, therefore, for tax purposes comes into the gross income, and there is no reason why Surtax should not be charged on it. In the case of Savings Certificates, where the interest accrues from year to year and is only paid out at the end, it would mean that all the Surtax assessments, for many years past, possibly, would have to be reopened. I must say that that seems to me to be an almost conclusive argument against trying to charge Surtax on these comparatively small sums that are involved.
  Mr. Gordon Walker: What would be the effective rate to the Surtax payer?
  Mr. Simon: If the right hon. Gentleman will put that Question down, I will try to answer it, but I will certainly have the information for the Committee Stage.
  The hon. Member for Feitham wanted to see the interest back-dated to 1945. Again, that is not feasible on administrative grounds. These are quite small sums of interest, and it would mean the reopening of all the credits that have been repaid—many millions of them—in all these years.
  The final point that was made on our proposals was on legislation by Statutory Instrument, and particularly by negative Resolution, and was made by the right hon. Gentleman himself and by the hon. Member for Orkney and Shetland. It is in accordance with precedent in this type of Bill to proceed by negative Resolution. This is a Bill which releases money rather than imposes taxation. But my right hon. Friend will reconsider the matter in the light of what has been said, and perhaps we can discuss the matter again on the Committee stage.
  I am grateful for the very helpful suggestions that have been made and for the very pleasant way in which this Bill has been received. I believe that my right hon. Friend's proposals are a salve which will take the sting and poison out of this long-running sore. They deal with the problem comprehensively. They accelerate the rate of repayment, repaying in this year alone over one-fifth of the outstanding credits. They give increased hope of future repayment, provided, as the hon. Member for Orkney and Shetland reminded us, we do not again return

  1105
  to inflationary conditions. They provide for repayment in a number of cases of hardship where the withholding of the credit has particularly affronted the public conscience. And, perhaps most important of all, by the payment of interest on outstanding credits, they make the whole transaction again respectable. I therefore unhesitatingly commend the Bill to the House.
  Question put and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Mr. Finlay.]
  Committee upon Monday next.

  INCOME TAX (REPAYMENT OF POST-WAR CREDITS) [MONEY]
  [Queen's Recommendation signified.]
  Considered in Committee under Standing Order No. 84 (Money Committees).
  [Sir CHARLES MACANDREW in the Chair]
  Resolved,
  That, for the purposes of any Act of the present Session to make further provision for the repayment of post-war credits (including credits to building societies), it is expedient to authorise—

  (a)the payment out of the Consolidated Fund of sums required for making payments under that Act (including payments of interest);

  (b) the raising of money for the purpose of providing or replacing sums issued out of the Consolidated Fund under that Act otherwise than in respect of interest;

  (c)the payment out of moneys provided by Parliament of any increase attributable to that Act in any administrative expenses defrayed out of such moneys. — [Mr. Simon.]

  Resolution to be reported.
  Report to be received Tomorrow.

  INCOME TAX (REPAYMENT OF POST-WAR CREDITS) [MONEY]

    ADJOURNMENT
    Resolved, That this House do now adjourn.—[Mr. Finlay.]
    Adjourned accordingly at a quarter past Seven o'clock.

  GERMANY (NAZI WAR CRIMINALS)
  GERMANY (NAZI WAR CRIMINALS)
EMPLOYMENT
  Wednesbury
  Wednesbury
  Hertfordshire
  Hertfordshire
NATIONAL SERVICE
  Discharged Service Men
  Discharged Service Men
ROYAL NAVY
  Firm, Coventry (Contracts)
  Firm, Coventry (Contracts)
  N.A.T.O. Base, Stornoway
  N.A.T.O. Base, Stornoway
  National Service Men (Releases)
  National Service Men (Releases)
  Armament Depot, Charlesfield
  Armament Depot, Charlesfield
  H.M.S. "Eagle" and "Ark Royal" (Fires)
  H.M.S. "Eagle" and "Ark Royal" (Fires)
  Naval Ordnance Design and Inspection Pool
  Naval Ordnance Design and Inspection Pool
BRITISH ARMY
  Rifleman T. Williams (Discharge)
  Rifleman T. Williams (Discharge)
  Suez Contractors (Employees)
  Suez Contractors (Employees)
  Captain Farrow
  Captain Farrow
  Travel Costs (Funerals)
  Travel Costs (Funerals)
  Barracks, London
  Barracks, London
POST OFFICE
  Head Office, Stockton-on-Tees
  Head Office, Stockton-on-Tees
WIRELESS AND TELEVISION
  Programmes
  Programmes
  B.B.C. Equipment, Scotland
  B.B.C. Equipment, Scotland
ROYAL AIR FORCE
  National Service Men (Releases)
  National Service Men (Releases)
  Aircraft Noise (Supersonic Flights)
  Aircraft Noise (Supersonic Flights)
  Pucklechurch Station
  Pucklechurch Station
  The Royal Family (Air Travel)
  The Royal Family (Air Travel)
RAILWAYS
  Modernisation Programme (Report)
  Modernisation Programme (Report)
CIVIL AVIATION
  B.O.A.C. (World Service)
  B.O.A.C. (World Service)
  Boeing 707 Aircraft (London Airport)
  Boeing 707 Aircraft (London Airport)
  Helicopter Stations
  Helicopter Stations
  London Airport (Noise Barriers)
  London Airport (Noise Barriers)
ROADS
  Oxford By-pass
  Oxford By-pass
  Cromwell Road Extension
  Cromwell Road Extension
  Great West Road (Speed Limit)
  Great West Road (Speed Limit)
  Improvements, Gloucestershire
  Improvements, Gloucestershire
  London-Birmingham Motorway
  London-Birmingham Motorway
TRANSPORT
  Goods and Public Service Vehicles, Eastern Region
  Goods and Public Service Vehicles, Eastern Region
  EASTERN TRAFFIC AREA
  EASTERN TRAFFIC AREA
  Abandoned Cars
  Abandoned Cars
SHIPPING
  s.s. "Queen Mary" and "Queen Elizabeth"
  s.s. "Queen Mary" and "Queen Elizabeth"
MINISTRY OF DEFENCE
  Working Population and Metal-Using Industries
  Working Population and Metal-Using Industries
  Overseas Service Hospitals (Civilian Treatment)
  Overseas Service Hospitals (Civilian Treatment)
  Jebel Akhdar Operations
  Jebel Akhdar Operations
AGRICULTURE, FISHERIES AND FOOD
  Fishing Vessels (Grants)
  Fishing Vessels (Grants)
HOME DEPARTMENT
  Police Appeals Act
  Police Appeals Act
SCOTLAND
  Road Diversions, Birkwood Bridge and Blackwood
  Road Diversions, Birkwood Bridge and Blackwood
  Fort William-Mallaig Road (Weight Restrictions)
  Fort William-Mallaig Road (Weight Restrictions)

Preamble
The House met at two of the clock, The LORD CHAIRMAN On the Woolsack.
Prayers—Read by the Lord Bishop of Manchester

LORD ROOTES
Sir William Edward Rootes, G.B.E., having been created Baron Rootes, of Ramsbury in the County of Wiltshire—Was (in the usual manner) introduced.
LORD PLOWDEN
Sir Edwin Noel Auguste Plowden, K.C.B., K.B.E., having been created Baron Plowden, of Plowden in the County of Salop, for life—Was (in the usual manner) introduced.

TRADE WITH CHINA
2.26 p.m.
VISCOUNT ELIBANK: My Lords, I beg to ask Her Majesty's Government the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, having regard to the statement by the Chancellor of the Exchequer on April 7 that "a steady increase year by year in our export trade is the first and essential prerequisite of a sound and expanding home economy and must be our paramount aim", they will further that aim by taking such steps at an early date as have in view the ending of the embargo on the export to China of all goods which are demonstrably not of a war-like character.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE): My Lords, it is, of course, the aim of Her Majesty's Government to give the fullest opportunity for exports. The international list of goods under embargo, which applies equally to the Soviet bloc as it does to China, is kept under constant review, both by Her
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Majesty's Government and by the fourteen other member Governments of the Co-ordinating Committee ("Cocom"). It is naturally the aim of Her Majesty's Government to ensure that only items of strategic significance remain on the list.
VISCOUNT ELIBANK: My Lords, arising out of that Answer of the noble Marquess, for which I beg to thank him, is he aware that the present Paris procedure means that British business has less voice in deciding what articles may or may not be exported to China than its competitors; and does this not bear hardest on British firms which are interested in producing new techniques?
THE MARQUESS OF LANSDOWNE: My Lords, as the noble Viscount is aware, there are fourteen other countries involved in this voluntary agreement into which Her Majesty's Government have entered; and clearly, where there are fifteen countries concerned, it is unlikely that we should have a list with which each member, individually, would be entirely in agreement.
VISCOUNT ELIBANK: With great respect to the noble Marquess, that does not answer my question about the disabilities suffered by British firms who are pioneering these new techniques and who are ahead of their foreign competitors.
THE MARQUESS OF LANSDOWNE: My Lords, on many occasions Her Majesty's Government have answered similar questions put to them by the noble Viscount. The one consideration, as the noble Viscount is perfectly well aware, is whether or no the items have strategic significance. That is the one guiding principle; and none other.
LORD HENDERSON: My Lords, may I ask whether the strategic items are under continuous review; and, as they pass from being of strategic value, can they be removed from the list? Or have we to wait—I think the last reduction was last year, if I remember aright—a year, or two years, before the list is further reduced?
THE MARQUESS OF LANSDOWNE: As I said in my original Answer, the list is constantly under review, and as items may become obsolescent they are in fact removed from the list. But I should warn the noble Lord that it may also be that items sometimes have to be added.
LORD WILMOT OF SELMESTON: My Lords, will the noble Marquess bear in mind that it has happened frequently in the past that, while items are on the embargo list here, they are, in fact, supplied from Germany and elsewhere, which is not very satisfactory?
THE MARQUESS OF LANSDOWNE: My Lords, I say at once that Her Majesty's Government have no reason to believe that the other members of the Committee are not fully fulfilling the terms of the agreement.
LORD WILMOT OF SELMESTON: I must ask the noble Marquess to realise that that cannot be wholly true, as I know of companies which have brought instances to his notice; and not only have they been admitted, but after that steps have been taken to remove those items from the embargo list.
VISCOUNT ELIBANK: My Lords, with reference to what the noble Marquess just said, is he not aware that in this House last year I drew attention to the fact that the West German Government had crashed through the embargo in respect of factory whaling ships?
THE MARQUESS OF LANSDOWNE: My Lords, both my colleagues and I are fully aware of all the observations made by the noble Viscount on this subject.
LORD REA: My Lords, I wonder whether the noble Marquess would elucidate one point? I gather from what he has said that the Government are in favour of taking out of this list all items not of strategic significance. Would he say that our other colleagues in the Consultative Committee are of the same view and are also striving towards that end?
THE MARQUESS OF LANSDOWNE: My Lords, I think that the noble Lord is aware that some of our fellow members are slightly more cautious than others in their approach to this matter.

THE ECONOMIC SITUATION
2.31 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, I expect that it has been occasionally the experience of most of your Lordships, as it has been mine, to drive in a car whose chauffeur has recklessly pursued his path and driven on the horn and the brake. One arrives at one's
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journey's end somewhat shaken in body and agitated in mind, in consequence of the jerks which have been inflicted upon one in course of transit by the driver of the car. That is my feeling with regard to the financial policy of the successive Tory Governments which have been in charge of the finances of this country during the last seven and a half years.
Let me take, as one illustration, the bank rate. I happened to look it up only yesterday, and I see that there have been no fewer than fourteen changes in the bank rate in the course of the last seven and a half years, running from 2 to 7 per cent., backwards and forwards—to my thinking, very detrimental to the stable industrial and economic life of this country. Let me give some of the consequences of that fact. Take, in the first place, the additional cost to the Exchequer. For the last two or three years, or for part of that time, we have had a very high bank rate and in consequence of that Treasury Bills have needed a much larger rate of interest than they did in times gone by. Reckoning at, say, only a 2 per cent. difference over the period I speak of, we find that this has cost the Exchequer £200 million to £300 million.
That is far from all the consequences. During the same period, no fewer than six new funding issues have been made. Some people think that the Government have funded too much; I do not know about that, but that is the opinion of some people. In the aggregate, there have been funded loans to a total face value of some £2,500 million, at rates from 4 and 4½ per cent. up to 5¾ per cent., extending some into the middle 'sixties some into the middle 'seventies, and one at least, into the 'eighties. If we take the additional cost to the Exchequer of this high rate of interest over the whole period during which the loans will be unredeemed, we find that it will cost something like £500 million, owing to the bank rate which the Government sanctioned and which over a long period of time has been above the normal level. Taking these two items together, we find that the cost of the Government's financial policy to this country has been something like £705 million, which is a very considerable sum, even in these spacious days.
But that has been only one aspect of the situation. A still graver consequence,

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in my view, has been the stagnation which the Government have allowed to exist in the industrial activities of this country. What I am saying is not my personal view, but is directly found in the Economic Survey published shortly before the Budget. Noble Lords who care to have the reference will find it on page 12. They will find that in the course of the last four years, reckoning 1955 at 105, the industrial activity for the successive years has been respectively, 106, 107 and 106. So that practically the whole industrial productivity of this country has remained stationary during all those four years. I think that that is a very serious indictment of the way the financial and economic policy of this country has been carried out. As I say, this is not my statement. The situation is one which the Government Paper not only acknowledges but states fairly and openly. This is a very serious matter, partly because it means that we have fallen behind other countries and partly because it bodes ill for the future. If we have not kept up, it will be a very serious matter for us.
Let us see some of the consequences. In the first place, it is a waste of the capital and skill of industrialists, and it is a waste of our coal supply. We spent immense efforts to persuade the coal miners to work extra time in order to produce what was thought to be required for the needs of the country; but now that they have produced it, it is running to waste, and in consequence the miners are losing their jobs. With this stagnation of industry has come unemployment and under-employment, and these bring both a great deal of human misery and the loss of valuable production. Honest pairs of hands with good British heads behind them are not made use of and run to waste.
I certainly should not for one moment dream of suggesting that the Tory Governments who have ruled this country over the last seven and a half years have deliberately worked to produce unemployment. That would be quite untrue. If any Government did work for unemployment, it would be not only wicked but also very foolish, because, clearly, the electoral chances of any such Government would be gravely endangered by such an action. But that does not mean to say that there are not some people who have not been glad to see a certain amount of unemployment. In my
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opinion, and in the opinion of a large number of people, it is certainly true that the policies, financial and economic, which the Government pursue have been one of the direct causes of the unemployment that exists in the country at the present time.
I shall be told, of course, that something had to be done to stop inflation. I have always told your Lordships that there are few people who detest inflation more than I do, and I recognise that some serious step had to be taken to deal with it. I hope that inflation has been checked, and that it has been scotched, although I shall give reasons later for some apprehension lest it should be found that it has not been finally scotched. But even granting for a moment that it has been, I refuse to believe that, in dealing with this evil, it is absolutely necessary to empty out the baby with the bath—which is what the Government have done in bringing about stagnation, at great cost to the Exchequer, at the cost of great human misery, and at the grave danger of letting this country fall behind other nations of the world who did not deal with this evil in this way.
The question of inflation brings me to the price level. This is a complicated subject. We all know that prices (and when I speak of "prices" I mean the purchasing power of the pound, not in terms of international currency but here at home) rose considerably, both during the period of office of the Labour Government—I make no attempt to hide that—and during the seven and a half years of Tory Government; and under the Labour Government, of course, it even went so far, in one case, as devaluation of the pound. I am facing all the facts. But having done that, I must point out one big fact that I doubt whether this House, or the public at large, has really grasped at all: that the circumstances of these two periods were entirely different.
During the period of office of the Labour Government world prices were, if anything, going up; and, in particular, in the latter period of the Labour Government there was a catastrophic rise in the price of raw materials owing to the war in the East. But during the period of the Tory Government there have been two tremendous changes downwards in the price of imports, amounting in effect to several hundred million pounds a year;

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and it is largely to those two tremendous changes that such successes as the Tory Governments have carried through in the realm of finance are due. Let me read to your Lordships from page 24 of the Economic Survey, where it says:
"The volume of imports in 1958 as a whole was almost the same as in 1957; in the first three-quarters of 1958 it was slightly lower than in the corresponding period of 1957 but in the fourth quarter of 1958 it was higher than a year earlier. Thus all the decline in expenditure on imports from 1957 to 1958 was the result of the fall in prices; on average import prices were 8 per cent. lower in 1958 than in 1957."
Eight per cent. lower in 1958 than in 1957 is a very large reduction; and, as I have already said, it amounted to a matter of several hundred million pounds a year.
What, in fact, did the Government do about these great windfall changes that no one would have expected. Well, they successfully neutralised them; and they did this in two ways. First of all, they took the opportunity at that time of cutting down, and, generally speaking, cutting off altogether, the subsidies on the necessaries of life, so that there was no apparent change in the retail prices of commodities owing to this large reduction in the world prices of imports. In the second place, they made rent conditions free, which put up the rents of a large number of people and meant that the cost of living index went up on that account, and cancelled out the reductions that would have taken place if the fall in import prices had been allowed to operate alone. I am not arguing to-day whether those actions were right or wrong. To some extent, they may have been wise, though we all know, of course, that a certain number of bad and greedy landlords took advantage of them to an exorbitant extent. I am only pointing out that what would have been a drop in the cost of living index was neutralised by the deliberate action of the Government.
The question arises and it is an important question: What is going to happen in the future? The extract I have just read out speaks of a comparison between 1957 and 1958. The Economic Survey says that the continued fall has ceased, and that prices are about stationary. I believe that there is some evidence that prices may be turning upwards again, although at this stage it is too early to
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judge. However, there is a considerable prospect that they may do so, because when the demand for raw materials increases—and in other ways—it may well be that the raw material producing countries, who have had a bad time during all these years, may demand and may be able to secure higher prices, which will affect our economy and increase our price level.
Personally, I should not call such an increase inflationary, because I do not consider that it arises from inflationary causes. But I think it might well set about an inflationary spiral, because, if such a thing occurs, the workers, and, naturally, the trade union leaders who fight for them, will urge that the prices of the necessaries of life are going up, and therefore the workers are entitled to higher wages to meet those increased costs. That may be reflected in the demands of employers, and prices may begin an inflationary spiral. That is one of the reasons why I think that, although we may have checked inflation, we cannot be entirely sure—I do not think one can be—that it may not arise again.
There is another point I should like to mention in dealing with Tory finance over the last seven and a half years. Mr. Butler introduced investment allowances—I do not remember exactly how many years ago it was. But after they had been running for a comparatively short time the present Prime Minister, when he was Chancellor of the Exchequer, took them all off again. It was very disconcerting to industry to have that chopping and changing about. Not only that, but in the Budget of 1955 Mr. Butler, as Chancellor of the Exchequer, made large cuts in taxation—I think between £150 million and £200 million. That was in his April Budget. He had an Autumn Budget in the same year, when he put on £140 million in taxation. He did not put it on to the same people to whom he had given relief, but to entirely different people. If I may use a Churchillian phrase of understatement, I would say that it is a curious coincidence that a General Election happened in between those two events.
That brings me to the present Budget. There are two main features in this Budget which it is my business to discuss this afternoon. The first main feature is the enormous cuts which the Chancellor

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of the Exchequer has seen fit to make in his Budget proposals. When they were first announced there was an idea that they were something less than £300 million, but that would be an understatement, because if you add together the income tax relief, the purchase tax relief, the beer tax cut and the post-war credits proposals, you get far more than £300 million—I think you get about £365 million. I was reading an article last Sunday in Shonfield's financial column in the Observer, and he puts the figure much higher than that. He points out that that computation takes no account of the investment allowances which he thinks will work out at something like £130 million, and no account of the large extra expenditures which the Government are promising in the nationalised industries and which are now paid for out of the under-the-line expenditure in the public accounts. I am not saying they are right or wrong. The only point is, what is really the figure of reduction, and what is the figure which is going to be left of the shortage in meeting the requirements of both the above-the-line and the below-the-line expenditure contemplated by the Government. Of course that is considerable.
I am an unrepentant Keynes-ite. I supported Maynard Keynes all through, and afterwards as Lord Keynes, and in a time of unemployment and stagnation I am never ashamed of supporting a considerable deficit in order to re-stimulate the economy and start work going. Therefore, neither I nor my colleagues here nor our friends in another place have taken any very firm attitude with regard to that. What they have said, and what I repeat, is that it would have been better if some of this had been begun a little earlier. I remember the years after the First World War. A deflationary policy was started then, and a high bank rate, and all the rest of it, was held to for a very long period. By the time it was released it was too late, and the economy of the country had largely gone to wrack and ruin. Looking back at it—it may be with hindsight—I think the Government have waited rather long to give this stimulus to industry. I know the Chancellor has said that he did not feel that the time was quite safe; he thought that some part of the bug of inflation was still hanging about. But personally I think he left it very late.
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However that may be—it is easy to be wise after the event—it is a very large sum, and I think we all hope devoutly that it is not too large and that we shall not see a situation in the autumn, or whenever it may be, when we shall have to restore some of the cuts that have been made.
With regard to that matter, I should like to say that neither I nor my colleagues in another place have attempted to create any attitude of alarm or fear in the minds of the world as a whole with regard to the prospects brought about by this Budget. We none of us can fore-see what the Election will bring about, and I think it is not our business to cry "stinking fish" of our own country. Where it comes to a belief in the stability of the pound and that sort of thing, we have to be rather careful that we do not introduce our Party differences too much into the matter, because, after all, we are all British and we do not want to see our pound called in danger on Party lines. The noble Viscount, Lord Hailsham, can have his usual fun at the expense of our Party on internal matters, and it does not very much matter. We shall not always agree with him, and we shall not always think he is fair, but that does not matter. But I believe he will share with me the view that we must not endanger the future solvency of our country by introducing Party political warfare into such a serious and important subject.
That brings me to the last point about which I want to speak, and that is the distribution of such economic stimulus as the Chancellor had to give away among the different personages to whom he might have given it. It might surprise some Members on the other side of the House to know that I. for my part, and, I think, the great bulk of my colleagues in the Labour Party, are of the opinion that this may well be the time to make some reduction in income tax. I do not know whether noble Lords realise that the largest single reduction in income tax since the war was made by a Labour Chancellor of the Exchequer. I recognise fully that in a free community, with free enterprise in which people sell their labour and their time and invest their money, they must have a reward which is adequate to bring their labour and money into the market, and if you take too large a slice away it is not good for the economic health of the nation.
I agree with this also, which may surprise noble Lords opposite. I recognise that when you give reductions in income tax it is obvious that the well-to-do people who pay the larger amounts of income tax will get a much greater relief than the people who pay very little or no income tax at all. Even more than that, it may well prove to be—and I shall give your Lordships the figures as I have worked them out—that the vast majority of the income tax relief has gone to one class in this country. I have taken the dividing figure—which is the one the Government have chosen in their super-annuation allowances proposals—of £15 a week as a sort of dividing line between a man of more or less working-class position and the more or less well-to-do. According to my rough calculation—I may be wrong in detail, but broadly speaking I think I am right—one-third of the whole relief goes to people whose income is under £15 a week, and two-thirds to people whose income is over £15 a week, although the former class number about 15 million of income tax payers and the other class number between 4 and 5 million. I do not take any exception to that, because it is inevitable; it is impossible to do anything else. What I do say to the Government—and this is the point—is this: that if you are going to make a substantial reduction in income tax which is bound to benefit the wealthier section of the community, if you want the workers of the country to feel that they have been given a fair deal you have to make a corresponding reduction in the taxation of those people. It is because I do not think that the Chancellor of the Exchequer has done that that I think his distribution of the stimulus to the economy which he has given to individuals is unjust.
In order to complete the picture let us look at the other things. First of all, there is the repayment of post-war credits. I am all in favour of that, and so are all my Party, without exception. But there again I should imagine—I cannot tell; probably it is a matter of income tax which was collected some years ago—that the majority of the benefit will go to the comparatively well-to-do. If it is not so, I am glad. I have not seen any figures. Possibly in the course of the debate, or later, the Government will have some figures from which they will
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be able to tell how that advantage will be distributed. But, as I say, I think that probably the greater part will go in the same way as the income tax reliefs.
Then we come to purchase tax. Here I think the Chancellor missed a great opportunity. He should have recognised that there are certain household necessities, things which are taxed at the present time, which he should have freed from taxation. Instead of that, he has focused nearly all his relief on articles of luxury and things of that kind; and I venture to suggest that in doing so he did not have "fair do's" with the poorer section of the community. I take no exception (I do not think any others of my Party do) to the industrial investment allowances, but they certainly do not go, as such, to the workers of this country.
For these reasons, my Lords, I feel that the Chancellor of the Exchequer has missed an opportunity. He has a reputation, quite well-deserved, for fairness and playing straight. I think he has been a little too much influenced to produce a Budget which will go down well in the Tory Party in accordance with Tory procedure—a thoroughly good Tory Budget. It is a temptation to many Chancellors of the Exchequer, and perhaps it is a tribute to the present incumbent of the office that some of us thought he might rise above that purely Party attitude. There are quite a number of small points of income tax procedure to which I think the Chancellor might have paid his attention. There are many matters that need to be remedied, and I feel that while he was altering the income tax he might have tackled some of those. I have always taken the Treasury view about the aggregation of the incomes of husband and wife for the purpose of taxation on investment income, but I think the time has come where a slightly different attitude could be taken where the incomes of husband and wife are earned incomes. It seems to me that the reasons why it is necessary to aggregate them where the income is investment income do not apply in the case of earned income. I think that is one of the points the Chancellor of the Exchequer might look at in future years.
I want to sum up what I have said. I take exception to the financial and economic policy of the Tory Governments of the last seven and a half years, first of

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all because I think they have been jerking; they have put things on and taken things off, to the detriment to the stability of the economy of the country. Consequent upon that we have had this period of four years of stagnation, without any advance, in the teeth of the advance of other parts of the world. That, I think, has been a disastrous thing for the British economy. Then a great amount of money has been wasted by having to pay these high rates of interest on various sections of the loan, something like £750 million in the aggregate, a very large sum to waste, as the Government have done. I agree, of course, that that is the gross sum; there may be some rebate on it by taxation, but that is not the point.
Finally, I think that the Budget is a thoroughly typical Tory Budget, and that it will be so recognised when it comes to be analysed in detail by the workers of this country. If we want stability in this country, as I think we all do, on both sides of the House, we must not only be fair, we must appear to be fair. I do not think this Budget either is or appears to be fair between different classes of the community; and if, as a consequence, the Government do not command the allegiance of the leaders of the working folk of this country, it will be because they will feel, "Well, when the Tories are in they are going to get for their people what they think is to their advantage. We are going to use our influence, when our time comes, to get what we think is right for ourselves." That is not a very good spirit, but I believe that it is the effect which the Tory finance over the last years will have on the working people of this country. My Lords, I beg to move for Papers.
3.8 p.m.
LORD GRANTCHESTER: My Lords, it is always an honour and pleasure to follow the noble Lord, Lord Pethick-Lawrence. I do not share his belief in the efficacy of planning on a grand scale. No doubt it is true that if we knew enough and knew it soon enough, which really means in advance, the economy could be planned satisfactorily; but that can never be while freedom of choice is left to millions of individuals. I am sure that, with his kindly disposition, in practice the noble Lord himself would not go far in repressing what I may call the innate
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instincts of the individual to seek his own way, although he might deplore the perverseness of the individual in making planning from the top impossible. But this is how I believe men are made, and I am not prepared to see them conditioned to conformity. I believe variety gives colour to life and preserves the human spirit from degenerating into a mere machine. I am prepared to let human variation determine the pattern of the economy and not try to lay down any general pattern to be imposed. That is the difference between us in outlook. Some love to see order planned. I am a rebel and I think order must come from a synthesis of individual choices.
In these days we are treated to innumerable statistics and economic surveys by experts of international organisations such as the United Nations, by the experts of regional organisations such as the Organisation for European Economic Co-operation, quite apart from Her Majesty's Government's surveys and White Papers. It is an eye-opener to-day to walk through the rooms where books of statistics are displayed by the various organisations which are responsible for their preparation. The inevitable result of all this is to create the impression that there should be, and can be, direction of the economy—in other words, to promote interventionism. Unfortunately, many who reject the thesis of Socialism are affected by the impressive productions of these costly organisations, so that the simple processes of daily life have come to be discussed not in terms of human need but in terms of factory production.
In listening to the Chancellor of the Exchequer last week, one had the impression that the Treasury has been almost persuaded that the citizens live for the benefit of the factories rather than that the factory exists to supply the needs of the citizen. It took the Chancellor some two hours of elaborate economic theory and analysis to justify what at any rate the more simple-minded among us would have thought evident: that those who impose taxation have to justify it to the citizen who is called upon to pay; and that to take it without so doing is, to put it, in plain English, without any economic niceties, nothing but extortion.
I agree with the Chancellor that the first priority to-day in the list of possible

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tax reductions is income tax. Incidentally, I think it is a fact that to-day some seven-eighths of the working population of this country pay income tax, which I regard as a sign of material prosperity and progress—and a very welcome one. I suggest that the emphasis to-day—I would commend this thought to the trade unions—should be, not so much on wage increases as on tax decreases. This would give greater rewards to workers without adding to the costs of production which may hamper sales and so restrict employment.
Increased reward is effective as an incentive only if that increased reward can be used to satisfy the personal ambitions of those who do the extra work. Personal ambitions vary greatly, and extra effort seems to me to be largely made to obtain what are often called luxuries. That is why I do not believe in discrimination against what some people call luxuries. The noble Lord. Lord Pethick-Lawrence, used the word "luxuries" as if they were something different from necessities. They may be. But it is only when we get into the field of luxury—that is, to what is not strictly necessary for material subsistence—that we enter the field of culture. Let us be clear that the greater the field of desire and the greater the opportunity to indulge it, the higher will be the level of production and employment. No other basis is dependable. In short, production must be determined by the choices of individuals and not dictated ex cathedrâ.
That is why I criticise discriminatory investment allowances. Employment ultimately rests upon demand, and the only method, even in these days, of anticipating demand is by the correct guesses of individual manufacturers. I therefore want to get rid of discrimination and secure a forward look all round by an adequate and sensible system of depreciation allowances. In my view, depreciation allowances should apply not only to machinery and to industrial buildings but to every form of structure. This is the only method by which, in a rapidly changing world, our equipment and buildings will be kept up to date.
If I have been somewhat critical of the compilation of statistics and surveys in the form in which they are written, I should also like to say that I think there
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is a gap which needs to be filled in constructive thinking about the position of this country in the world, and the rôle that it may play politically and commercially in the future. At the moment the economic position is very encouraging. Her Majesty's Government are entitled to their share of the credit, as are also all those citizens who have contributed to the results which we are reviewing in the course of this debate. But I think we all have a feeling that the position in which we find ourselves is somewhat precarious. We have a feeling that the prosperity which we are enjoying is not sufficiently firmly grounded; that there are too many factors operating in the world at large which may have a sudden adverse effect upon our economy.
The Government have been exploring, and are still exploring, some method of association with the countries which, by the Treaty of Rome, are establishing in Europe a Common Market. Her Majesty's Government have been engaging in talks with Commonwealth countries. They have joined in recent discussions in Stockholm with European countries outside the six in the Common Market. They have had talks and lodged protests with the United States Government over discrimination against our exports. I do not believe in Governments indulging in trade, but it is the duty of a Government to try to keep open the channels of trade. There is therefore every justification for the discussions which Her Majesty's Government have been having all round the world on this matter of keeping open the channels of trade. But these talks have, I think, brought out conflicting considerations, both commercial and political. For instance, entry into the Common Market would involve the acceptance of a common tariff without the right to alter it without the unanimous agreement of the other parties to the Treaty of Rome.
The Common Market countries are developing a philosophical and political association, as well as a commercial market. It is apparent, or I think it should be apparent, that if we wish to pursue trade negotiations with the countries of the Common Market we must accept the basic philosophy of the Treaty of Rome (this was said at a recent meeting in Paris of the Economic Committee), with an overall federal constitution in the distance, 50 years ahead

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maybe, but probably much nearer than we think. Discussions with the United States have on many occasions during visits of the Prime Minister, stressed interdependence. "Interdependence" is one of the words which is very frequently heard to-day, particularly in our relations with the United States.
Interdependence must involve overall political control, if it is to be continued as a long-term policy. So I should like, therefore, to see more evidence of thinking on these problems. What kind of association do we envisage between this country and other parts of the world? What choices are open to us at this moment, some of which may gradually be closed? Could we not have, from Her Majesty's Government, a White Paper on these wider aspects of our position in the world?
I believe that this country is somewhat dangerously poised at the moment. Her Majesty's Government have resisted sonic of the dangerous siren songs for more restrictions, but there is still the danger of shipwreck on a European Scylla or an American Charybdis. The European discussions at the moment are bogged down largely because the French and Germans are concentrating their thoughts on a different objective from that of Her Majesty's Government. After talks which I have had recently in many circles in Paris I am sure that it is desirable that the British Government should take some new initiative, if possible on a completely different level. The position in the trade negotiations is so difficult, and has given rise to such feeling, that some new approach outside those commercial considerations is desirable. I should like the British Government to propose the institution of a common European citizenship (additional, of course, to existing national citizenship), or, at least to support the idea. I feel that we must do something to convince Europeans that we do feel ourselves part of Europe and value the inheritance of the European tradition which we share. This proposal would open up for consideration many relevant matters which have not yet been sufficiently studied.
In this country every citizen enjoys, as we well know, the protection of Habeas Corpus; we have a police force which is almost unique in its methods; we enjoy a high standard of administration and of
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commercial probity; we have a tradition of separation from politics in the domains of justice and military command. How fortunate we in this country are is not always sufficiently appreciated. A proposal to institute a common and additional citizenship in Europe would give the opportunity to raise these questions in European discussions, and I believe that we should all consider that this should be a condition precedent to any closer political association. Progress in harmonisation—if I may use one of the latest fashionable words—in this field might well prove a most useful approach. It is a pity that we have not had in this House a discussion on the Council of Europe before the meeting which is to take place next week. If Her Majesty's Government think anything of this kind of approach perhaps we might be able to make a contribution to the discussions which are to take place next week in Strasbourg.
On the commercial side, the Common Market countries have set themselves a term of twelve to fifteen years, at the end of which all restrictions between them are to be eliminated. I have indicated that, in my view, the position of this country is somewhat precarious, and that we have to make a decision determining our relationship with other nations. I would commend to the earnest consideration of Her Majesty's Government one way in which I believe this country could stand on a firm foundation and hold its own with a maximum of good will and friendship from the rest of the world. That is, by giving this country the status and footing of an open and free port. I should like to see this country give notice of its intention, say within five years, subject to negotiation in the meantime with the Commonwealth, to end all barriers to trade with this country.
Her Majesty's Government have taken some courageous steps in legislating against restrictive practices. which are making our traders more self-reliant. I believe that, with the ability and ingenuity of our people, we could play a very important part through the action I have indicated in the expansion of world trade. One thing is necessary, but I think this is possible of achievement within a very short period; that is, that the pound should become again, in every way, as good a medium of exchange as the dollar; that is that it should be as

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freely convertible as the dollar. For this, the confidence of the world in the future of this country is essential, together with a general outlook here of greater self-reliance and independence as our standards of life rise. In a position such as I have envisaged our attitude would be no less European than the keenest Europeans, and we should at the same time avoid any discrimination against any country in the world.
There is another matter to which I do not think sufficient consideration is being given. There is a great deal of talk about helping the less developed territories of the world. If forced labour is to be ruled out as a method, development can be brought about only by the same process as raised the standard of living in Europe in the last century. Investment in these less developed territories is necessary, but it cannot be demanded: it must be attracted. A German society for the protection of foreign investments has been instituted, under the direction of Mr. Abs, chairman of the Deutschbank; and an American Society has recently been formed. I believe that, basically, the people of this country believe most profoundly in private enterprise. In the study which I should like to see issued as a White Paper I should hope to see the story told of private investment by this country in less developed territories; and the conditions which would make it possible for private investment to take place should be clearly laid down. Investment is not encouraged by a proneness to indulge in confiscation, or even nationalisation.
Lastly, and not least important, may I say one word about expenditure in the public sector? I entirely agree with the method of the right honourable gentleman the Chancellor of the Exchequer, in the presentation of the Accounts, in the separation of capital from income. But as he has made clear, he is left with a deficit on Capital Account of some £721 million which has to be met by borrowing. Whether our position will be undermined, and inflationary trends again started, will depend upon how this money for capital expenditure is raised. If this money is not raised by the Government in the market, as in my opinion it should be, it is vitally important that the expenditure be balanced by the saving of individual citizens and not by an increase in the money
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supply. If it is not found out of savings we shall again be landed in the throes of inflation.
My Lords, I am afraid that I have dealt at some length with general matters, so I will not refer to specific choices which the Chancellor of the Exchequer has made for other reductions in taxation—after all, there is room for different opinions about which relief will give the greatest advantage. But I am a little surprised that when it is desirable—as is admitted by all to-day—to attract the small investor into industrial investment, a reduction in the stamp duty has not been made. Perhaps this omission could be reconsidered.
3.30 p.m.
THE LORD PRESIDENT OF THE COUNCIL (VISCOUNT HAILSHAM): My Lords, we have certainly listened to two very interesting speeches. I feel that they present a difficulty to me in the duty which I must fulfil by answering them. It would be almost impossible, in the time available, to answer both, because they dealt with such different subject matter; indeed, if I answered each in detail I think I should fail to say anything constructive myself. I should like, however, to say this to the noble Lord, Lord Grantchester. I was greatly interested in the various remarks which he has made. He gave me this morning some inkling of some of the things which he intended to say, and I considered very carefully to what extent I should in the time be able to assemble some coherent thoughts by way of reply. I came to the conclusion that to some of his more interesting suggestions it would probably be a mistake for me to attempt anything so ambitious.
He raised, for instance, the most interesting suggestion of a common citizenship for Europe. I personally think that this is a very interesting suggestion, and it is one upon which I expect many of us have reflected at some time in our lives. I feel that the common citizenship of the Commonwealth provides some kind of precedent. It might also present a certain number of legal difficulties, as I imagine that we should wish to retain some special relationship with Commonwealth countries. Perhaps, therefore, the noble Lord will forgive me if I say that, while the last thing I wish to do is to discount the value of what he has just been saying, remembering that I am

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replying on behalf of the Government, I think I should be unwise either without reflection to endorse, or without further reflection to condemn, any of these most interesting suggestions.
I doubt whether it would be possible unilaterally (and I understand that he meant, as regards Europe, unilaterally) to declare Great Britain an open country to the exports of the world. In most negotiations I believe that unilaterally giving away one's points of bargaining in advance of negotiation is probably a mistake; and although the noble Lord, quite reasonably, reflected upon the necessity of negotiation with the Commonwealth, whose position would have to be safeguarded in any such action, and who might well object to the loss of the advantageous position which they possess by Treaty at the present time, I feel that to encourage him to believe that unilateral action of this kind would be possible within five years would probably be an error on my part.
I therefore turn, after thanking the noble Lord, Lord Grantchester, for what has certainly been an interesting and an imaginative contribution to our discussion, back to the speech of the noble Lord, Lord Pethick-Lawrence, who has put down this Motion for discussion. I think it is convenient for the House that the noble Lord has put down a Motion drawing attention to the economic situation a week after the Budget, since it enables the House to examine my right honourable friend's general proposals while the matter is still topical, rather than wait until shortly before the Summer Recess when the Finance Bill comes to us for approval. I would wish partly to follow the noble Lord's intention, as I understood it, of putting the Budget in some kind of economic context and partly to discuss the proposals contained in it and the criticisms which he and others have made of it.
My Lords, the noble Lord began with a motoring analogy, which he took up again in his peroration. He compared the Government in their economic policy to a driver who excites the noble Lord's alarm by driving perpetually on his horn and on his brakes, a process which the noble Lord described at the end of his speech as jerky. The noble Lord is an exact contemporary of my father's, and I am bound to say that, reflecting upon
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his quality as a driver, I was wondering how expert a driver the noble Lord is himself. My father's one contribution to the art of driving was to drive a "T" model Ford in 1914 backwards against a lamp-post, and to leave my mother to get it off the lamp-post. He never drove again.
Living, as I know he does, in the salubrious neighbourhood of Lincoln's Inn, it may be that the noble Lord has not the same opportunities of driving a sports car over the modern roads of this country as the younger generation have. But if he sits down at the wheel of his Magnette, or whatever it is that he favours, I think he will notice something about driving in modern traffic conditions. I think he will notice that sometimes he has to put the wheel over to the right and sometimes he has to put the wheel over to the left, and that occasionally the lights hold him up for a time and then he will have to touch the brake. Then there are times when he will want to go faster afterwards, and he will touch the accelerator.
I think that if the noble Lord has a passenger, who I am sure will be anything but alarmed at these proceedings, which he will regard as a perfectly normal process of modern driving, the noble Lord would be entitled to resent it if he said, "This is a most inconsistent policy which the noble Lord is following at the wheel. He is putting his foot on the accelerator and then on the brakes, and then moving the steering wheel to the right, and now to the left. There have been no fewer than fourteen changes of direction in the last ten minutes." That is what a person might say, and I think that the noble Lord would be entitled to reply, "My friend, you know nothing whatever about the problems of modern driving." There is, therefore, a good deal of sense in the kind of analogy that the noble Lord was drawing, but I think that he was drawing exactly the wrong moral from what he said.
I would start, therefore, by taking up the thread of the argument where I attempted to drop it at the end of our last economic debate. That was a debate about unemployment: it took place before the publication of the March figures of unemployment, which showed such a welcome drop of, 58,000 in the numbers unemployed. But there again we had this allegation of the alleged

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stagnation in our economy. I ventured to tell the noble Lord then that he was not really applying his mind to the real issue in the case, and I venture to repeat that statement now. Our country depends, by and large, upon the volume of world trade for its level of industrial prosperity—to what extent I want to discuss in a moment. For the last eighteen months or two years, perhaps a little longer, the world has been going through a recession, a recession which I think it is legitimate to say was more serious than the recession in 1949 which led to a devaluation of the pound. Of course there will be some degree of industrial recession in this country reflecting it; and it really does not help the noble Lord's case to attribute the whole of that to the Government.
The question under discussion is whether or not the Government have taken appropriate measures to deal with it. I was particularly glad to note from the noble Lord's speech that he frankly conceded that no Tory Government has worked for unemployment. I must point out to him that on this issue he is a Dr. Jekyll, but that in his Party there are plenty of Mr. Hydes. Indeed, what he has said so generously this afternoon is in striking contrast to a speech which I remember was made on the last occasion—I think from the noble Lord, Lord Stonham, who does not happen to be here to-day. I remember the phrase he used; that the unemployment figures had been "planned, predicted and achieved" by the Government. That has been wholly repudiated from his Front Bench this afternoon—and very grateful I was for it.
My Lords, to-day's debate enables us to take the deployment of the Government's policy a stage further. Our policy is to foster full employment and to create an atmosphere of confidence and expansion, now that, as we believe, we have created the conditions in which these policies are practicable. It is in the context of that policy that the Budget proposals should be seen. When we last debated economics both my noble friend Lord Dundee and I myself pointed out how disastrous it would be, as we believed, in the context of world recession, to attempt, as I think my noble friend put it, to run the industrial economy of the country "flat out". That
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would be disastrous, partly because it is impossible, as we believe, to run a modern industrial economy "flat out". that sense, without losing either flexibility or efficiency, or more probably both; but also because, in a context of world trade such as that upon which we depend, it is vital to maintain a competitive situation sufficient at least to maintan our foreign investment programme—if that is thought to be a good thing, which I know noble Lords would agree that it is—and sufficient to pay for the import content of the goods we produce for our home market: and not least, also, because, of course, our industrial economy does not present a static pattern but contains structural features where certain industries are becoming obsolescent and therefore inevitably present the appearance of a contracting use of an industrial capacity.
At that stage we could not, of course, anticipate the Budget proposals; but, quite clearly, none of that is to say that expansion is not in itself intrinsically desirable, especially when it can be established, as, at any rate in our view, it can, that a substantial amount of unused industrial capacity in the country is available, and that conditions exist which render it possible to stimulate the home market to some extent to avail itself of it.
I ventured to say last summer that we were a Cabinet of economic expansionists. I have said this several times in this House, and my right honourable friend said it in another place on the occasion of his previous Budget, in the spring of 1958. My Lords, now that we have created the conditions for expansion—that is, now that we have been able to take the opportunity, admittedly offered to us by an improvement in the terms of trade, to create an unusually favourable balance of payments and what I think we can claim to be relative price stability—we can move forward again along the road of expansion, as we have always said we proposed to. We do not believe that our caution is something to criticise. We remember the debates in this House when we were repeatedly assured, and when we accepted, that inflation was the enemy against which we must then fight, and we regarded our measures against inflation not as the enemies of expansion but as the necessary prelude to the expansion which is now taking place, as we always said that it would.

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It was not of course possible then to anticipate the Budget, but the corollary of what we then said is that it is possible now to take up the slack in our industrial potential by stimulating home demand to the extent that our balance of payments position is sufficiently strong to pay for the imported raw material content of our increased production, and to the extent that the price level can be held sufficiently stable to prevent inflation resulting from increased production. This was what my right honourable friend meant when he warned the House in another place, and the country, that everything really depends—this Budget depends, and much else besides—upon our ability to remain competitive in the world markets; and much that we have ventured to do in this Budget would prove, I believe, to be an error of judgment if it should turn out that it was not possible to do this.
These are the objects which my right honourable friend's proposals are designed to achieve, and I was very glad to notice that the noble Lord, Lord Pethick-Lawrence, declared himself to be an unrepentant Keynesian—if that is the noun of which the late Lord Keynes is the eponymous hero. The Budget, as I understand it, despite the noble Lord's criticisms, was conceived on the lines of what I suppose may now be called the classical theories of the late Lord Keynes. They are at once the consequence and the reward of the measures of 1957 which enabled us to restore confidence in the pound and to fortify the balance of payments. Therefore, my right honourable friend has thought it legitimate to inject into the economy, let us say, about £360 million—I do not want to enter into the particular matter which the noble Lord raised—either by way of tax relief or by way of increased repayment of post-war credits.
Of course, one result—I think it was the noble Lord, Lord Pethick-Lawrence, who referred to this, but it may also have been the noble Lord, Lord Grantchester—is that the so-called overall deficit has risen to the figure of £721 million. But I think your Lordships will all agree that this figure is not, in a true sense, a deficit at all. It is a measure of the extent to which investment must be paid for by borrowings; and it is not inflationary so long as—and I would say, with the noble Lord, Lord Grantchester, only so long as—the borrowings necessary to meet it are
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covered by genuine savings of one sort or another. On the other hand, the £360 million injected into the economy will, we should hope, affect our imports by nothing much worse than £60 million to £70 million. Moreover, as my right honourable friend the Paymaster General pointed out in another place, the multiplier effect on the economy, as it is called in the jargon of the economists will be such, it is hoped, that the actual improvement created will be somewhat more than the amount actually injected.
I would therefore say that the Budget is an assignment with full employment rather than, as has been suggested, an assignment with a General Election. It will, I think, prove to be a popular Budget; and, unlike the noble Lord, I would say that it is a just Budget. I would not agree that it is an electioneering Budget, if by that is meant a Budget which makes tax reliefs which are unjustifiable in the light of economic conditions simply for the purpose of buying popularity. I would not myself accept the implied view of some critics that the Government is under an obligation to make itself as unpopular as possible before a General Election, when the success of its policy genuinely justifies tax reliefs to be made.
Indeed, I could not help being struck by the great similarity between my right honourable friend's Budget proposals, especially in the case of tax reliefs, and those indicated by a Gallup Poll which was published by the News Chronicle on the morning of the Tuesday on which my right honourable friend made his Budget speech. The outstanding feature of this poll was that there was no very significant difference in the order of preference for relief between the supporters of the Labour Party and Conservative supporters, which, I think, sheds a curious light upon the criticism of the noble Lord, Lord Pethick-Lawrence, that this was a typically Tory disposition of the reliefs. The only difference of real significance in the order of preference between the two sides in the country was that whereas only 15 per cent. of Conservative Party supporters supported a reduction in the beer tax, not less than 28 per cent. of Labour supporters did so. The Party opposite ought to be grateful for our consideration.

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The two leading preferences were, first, purchase tax, for which 70 per cent. of Conservative and 68 per cent, of Labour supporters voted, and, secondly, income tax, for which 75 per cent. of Conservative and 60 per cent. of Labour supporters voted. I was glad to notice that the noble Lord expressly said that he was in favour of this reduction in income tax, though he thought it ought to have been compensated by some unspecified measures in some other field. In that he was following a more enlightened and progressive view that his colleague in another place, Mr. Jay, who, when this point was put to him by an honourable friend of mine and he was asked whether the Party opposite intended to oppose tax reliefs, said [OFFICIAL REPORT (Commons), Vol. 603 (No. 89), col. 397]:
"And I am telling the right honourable gentleman that at present we do not think that that part of it"—
I take it, of the Budget—
"was necessary".
What the view of the Labour Party is now, especially in the light of the strong preference of their supporters in the country for such relief, we must leave to time alone to show—that is to say, if time succeeds in showing it.
To sum up this part of what I have to say, the Budget is seen in context as part of a logically developing policy the purpose of which is economic expansion and social and cultural advance. It is rendered possible by the preceding steps, whose objects were to correct inflation and create a favourable balance of payments. The object of the present measures is full employment, and the selected means are tax reliefs and a beginning to the discharge by the Government of the long outstanding obligations of successive administrations to redeem post-war credits. From the absence of criticism on either side of your Lordships' House, I take it that this is something which is generally welcome.
Now may I deal with some of the criticisms which have been made? Following G. K. Chesterton, the first point I should like to make is the comparative absence of really fundamental or effective criticism. On the whole, I would say that it has been accepted that the economic policy underlying the
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Budget is sound, and that an injection into the economy of the order of £360 million is about right. If this is so, the only criticisms which merit attention are those directed to the particular reliefs in fact given.
I would say, by way of general comment, that I do not think that it is right to ask any Chancellor of the Exchequer in any one year to give something to everybody. If he did so, or were to attempt to do so, he would give nothing of any particular significance to anybody. What I think he must do is to pursue over a series of Budgets an economic policy by which every year one or two or perhaps several injustices or wrongs or evils of excessive taxation or economic difficulty can be eliminated. It will be remembered that this is the ninth successive Budget of Conservative Chancellors. Eight of them have reduced taxation by varying amounts.
I know that almost any generalisation one makes about eight Budgets, each of which amounts to a sum of the order of £5,000 million, is apt to be misleading, but I would say that, broadly speaking, in recent years we have dealt largely with allowances by way of relief. We thought that this year there were no tax reliefs of more general benefit to the taxpayer or so urgent as relief of purchase tax and income tax. That was borne out strongly by the feeling of the Gallup Poll which I have mentioned. I am not an unmixed admirer of this new form of cephology. Sometimes it seems to show that one is going up and sometimes it seems to show that one is going down. Personally, I am more interested in what is right and wrong than in what is popular or unpopular. But, at least, in matters of tax relief such a poll might be expected to give some indication of where the shoe is pinching; and the popularity of purchase tax and income tax as subjects for relief, in that order, is established by that poll. I think that, on the whole, this disposes of the argument which was directed to the omission by my right honourable friend to deal with particular grievances, both those which were made by the noble Lord and those made by members of my own Party and by other people.
LORD PETHICK-LAWRENCE: My Lords, of course, the relief of purchase tax is rather an omnibus expression. I

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imagine that the people who wanted relief did not contemplate that nearly all the relief would be concentrated on the semi-luxury articles in the higher categories. What I imagine they were thinking of was relief of purchase tax on home utensils and clothing in the lower categories, which have not been relieved at all.
VISCOUNT HAILSHAM: My Lords, I think that the noble Lord is just as about as old-fashioned about this matter as about his driving. I was about to deal with that point in a moment. After every Budget, after the preliminary congratulations, a chorus of complaint is generally heard. For instance, many people are disappointed that we did not abolish Schedule A. I do not suppose that they include noble Lords opposite. It would be quite wrong for me, speaking for the Treasury, to suggest that this is a proposal that has ever been accepted in principle. I think it is quite enough to say that this year it could have been accepted only at the expense of the general rate, from the reduction in which Schedule A taxpayers benefit no less than any other, or at the expense of the reduction in purchase tax or repayment of post-war credits. This is broadly true also of the suggestions relating to petrol tax and entertainments duty. No doubt these suggestions are all meritorious. I accept the philosophy of the noble Lord, Lord Grantchester, that taxation has to be justified, otherwise it is extortion, but this year that relief could be given to taxpayers only at the expense of other reliefs. And we believe that we have chosen rightly.
I would also protest, I hope in a good-natured way, against the view that the lowest rate of purchase tax should have qualified for relief but not the higher rates. This is the view pressed upon us by the noble Lord, Lord Pethick-Lawrence. I always find myself up against immense practical and philosophic difficulties when I try to draw a distinction between luxury and necessity. I myself need neither lipstick nor cigarettes nor beer, but other people appear not to be able to live without them. I strongly dissent from the view, which apparently is held by the noble Lord, that in the modern world the various articles covered by the higher rates of duty are things to be permanently excluded from the wants of the wage-earning population.
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On this point I take a directly opposite view from that of the noble Lord. I do not regard a motor car as something which the wage-earner should not have or which should be regarded as an absolute luxury. In fact, one family in four in the country owns a motor car. Again, if the noble Lord will join me in the fellowship of the road one week-end, and consent to be driven, sometimes moving my steering wheel to the right and sometimes to the left, I shall be able to show him that the people who use these things are, by and large, very ordinary people, who would be profoundly surprised had they been able to attend your Lordships' House this afternoon and hear the noble Lord describe them as "well-to-do".
The same I would say is true of television sets (all these are in the highest category), wireless sets, gramophone records and also lipstick. In the streets of this city there are many people not well-to-do who wear lipstick; and, let me assure the noble Lord, Lord Pethick-Lawrence—I have to talk to him as to a father, because he knows very well he was at school with my father—who actually have to wear lipstick in order to present a decent appearance at the office in the morning. Hitherto they have had to pay 60 per cent. tax. But they are not necessarily well-to-do. Nor does the fact that the noble Lord does not use it himself necessarily mean that it is not a necessity.
The same is true of the washing machine, the refrigerator, the spin-dryer, the vacuum cleaner, the camera, the electric blanket, even the umbrella and the photographic film. Those are characteristic items in the second bracket of 30 per cent. tax with which my right honourable friend proposes to deal. It is a fanciful picture that the wage-earners do not use these things, or the carpet square, the canteen of cutlery, the carpet-sweeper, the hand-wringer, the saucepan, the linoleum and the wallpaper in the next category to enjoy the benefit of my right honourable friend's tax relief. We do not think that these are necessarily things which should be penalised by an extortionate rate of taxation in the average working class budget, or which should be put out of the reach—and this is the implication of the noble Lord's argument—of any but the very rich to afford.

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By a property-owning democracy we on this side of the House mean a democracy in which ordinary fathers, mothers and children own property, valuable articles costing a good deal of money; and although the purchase tax may be a necessary evil as a revenue producer, we do not share the view apparently held by the noble Lord and by the Party opposite, that it should be allowed to continue as an engine of policy, the effect, if not the purpose, of which is to keep the wage-earner in a perpetual state of envy of luxuries which he is unable to afford. Neither do I personally subscribe to the view, also apparently held by the Party opposite, that at present wage-rates the 5 per cent. rate on a wide range of goods which is not affected constitutes an unbearably heavy burden of expenditure if taxation has to be raised. On the contrary, I would say that the fact that it does not constitute a significant factor in the cost of living is proved by its minute effect on the cost of living index.
This leads me in parenthesis to deal with one misconception about the cost of living index which appeared in connection with the beer tax reduction in two prominent and otherwise well-informed newspapers. Their argument appeared to be that if a reduction in the beer tax reduced the cost of living index so significantly, then there was something wrong with the cost of living index and it ought to be altered. But, my Lords, the cost of living index is not a moral judgment. The cost of living index is a mirror held up to the habits of society. If beer, cinemas or television sets enter into the index, they do so only to the extent that people actually enjoy the delights these things offer; and if my right honourable friend reduced the beer duty it was not because he desired to make a moral judgment or to enter into a cooking of the statistics, but because he thought that this indirect tax affecting statistically more than half the adult population at the rate of 150 per cent. was neither just to the taxpayer nor, in the long run, of benefit to the revenue.
LORD WILMOT OF SELMESTON: My Lords, the noble Viscount will forgive me for interrupting. Before he leaves this interesting point of beer and the index, both fascinating topics, in my view, would he not agree that if the index is not adjusted frequently to conform to the
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changing habits of the nation the mirror becomes a distorting mirror?
VISCOUNT HAILSHAM: Yes; but that is what the apparatus for arranging the index and the panels of arbitrators are designed to provide. I do not think it is possible to suggest—it may be that the noble Lord's experience is different from mine—that on this subject of beer the cost of living index is a distorting mirror. On the contrary, I believe it is a beverage which is enjoyed by many millions of people, although not so much by me.
While the noble Lord did not expressly touch on it, I hope I may come at last to the most considerable, and what at first sight might be considered the most plausible, but also, I personally would say, the least reputable, of the criticisms levelled against my right honourable friend's Budget. One Opposition speaker, who I think enjoys to indulge in hyperbole more than in restraint, went so far as to describe my right honourable friend on this topic as having a "heart of stone". He said that the Chancellor must have a heart of stone" in refusing, inappropriately as I shall endeavour to show, to make the Budget a vehicle for a direct increase in the retirement pension, "in a year", he added for good measure, "in which it would have been so easy to do so".
I wish to deal with this criticism. It is perfectly true that this year tax reliefs and other benefits amounting to £360 million have been granted, and it is also true that the Budget itself has contained no general increase in the retirement pension. But I would say this. One reason, at least, for that is that we put the old-age pensioner at the head and not at the base of the queue. It is true, as our critics say, that it was far more difficult economically for us to increase personal incomes last year than it is now. That is why it was all the more impressive, as a tribute to our action in the matter, that we chose last year to put the retirement benefit at an all-time high, at the height of the economic crisis, at the height of inflation and in the midst of the measures of September, 1957. I would not accept the view which this speaker held, apparently, that the particular circumstances of the year are necessarily relevant to the subject. An increase in the general rate of the retirement pension must not be related to the circumstances of a particular year,

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because it is a permanent increase. If you once allow this doctrine to get abroad. as this Labour spokesman would have done, that in a year—
LORD PETHICK-LAWRENCE: My Lords, perhaps I may interrupt the noble Viscount. He keeps talking about "this Labour spokesman". I do not know who he is, if he is a Member of the other place, or whether the noble Viscount is quoting from the debate. I would remind the noble Viscount that he is going beyond the Rules of Order of the House. We cannot follow these particular people; we are not responsible for what they say; and we do not even know, in the context, what they have said. I want to draw the attention of the noble Viscount to that point, because, though we do not disagree with what is said in the other place by our people, we cannot be responsible for all that they say.
VISCOUNT HAILSHAM: I can understand the noble Lord being somewhat diffident in this matter, because as the noble Lord will do me the credit of saying, I was careful not to quote more than a single phrase. The speaker was, in fact, a Member of the other place: it was Mr. Patrick Gordon Walker, who was speaking officially for the Labour Party. I think there is a limit to this Jekyll and Hyde act which can reasonably be played in this House.
LORD PETHICK-LAWRENCE: My Lords, I cannot let the noble Viscount get away with that. We must stick to the Rules of Order in this House, and the only exception which is permitted in this House is a statement by a member of the Government. We are entitled to quote statements made by a member of the Government in another place, because they are the policy of the Government in this House, and all the Government are responsible together for statements of any one Minister. But the noble Viscount has erred on several occasions to-day. I have not risen before because I did not want to object unduly. The noble Viscount was having his bit of fun against our Party, and I am quite ready to listen to that. But if he is going on quoting from Member's speeches in another place, that is specifically forbidden.
VISCOUNT HAILSHAM: The noble Lord has got his Rules of Order wrong. But I do not want this debate to degener-
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ate into an argument about what the Rules of Order are. I am quite clear about this point. It is perfectly legitimate to refer to the attitude of the Party opposite, and that I am entitled to do by citing examples. What I have not done, and what I have been careful not to do, is to quote from a speech. I told the noble Lord, as a matter of courtesy, that I was referring to a particular man, but up to that moment I had referred to nobody. I was careful not to quote from the speech.
LORD WILMOT OF SELMESTON: My Lords, I think this is really important, because the noble Viscount has already referred to one Member of the House of Commons by name, Mr. Jay. I read Mr. Jay's speech this morning. I am sure that inadvertently and without intention the noble Viscount has given an entirely false impression of what Mr. Jay really said by taking a sentence out of its context—a very tempting thing to do. I have not read recently the speech of Mr. Gordon Walker, but I know him very well, and I doubt very much whether he seriously charged the present Chancellor of the Exchequer with having a heart of stone. Was it not a quotation he was making?
VISCOUNT HAILSHAM: The noble Lord is quite mistaken and he has not been listening to what I was saying. I never suggested that Mr. Jay said that. He did not say it. In fact, I gave the name of the speaker who did say it.
LORD WILMOT OF SELMESTON: The noble Viscount quoted Mr. Jay.
VISCOUNT HAILSHAM: The noble Lord must not take up the time of the House—
SEVERAL NOBLE LORDS: Order, order!
LORD WILMOT OF SELMESTON: I insist on taking up the time of the House, if the House will allow me, if the noble Viscount not only misquotes a Member of the House of Commons who is not here, but misquotes me when I am here. I said that earlier in his speech the noble Viscount referred to a statement by Mr. Jay, and so he did.
VISCOUNT HAILSHAM: I understood the noble Lord to be saying—and I think that he will find that he did, no doubt

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inadvertently, when he reads Hansard tomorrow: I do not want to waste time on this business—that I had named Mr. Jay as the person who had used a particular phrase.
SEVERAL NOBLE LORDS: No.
VISCOUNT HAILSHAM: I repudiated that. I did not in fact say so, and I am now glad to learn from the noble Lord that I must have misunderstood him when I thought he had said that that was what I had in fact done. I hope the noble Lord will not take offence when I suggest that the House is concerned with economic affairs. I hope he will forgive me if I say that I do not wish to take up the time of the House on this particular matter, which I hope is now cleared up in a perfectly amicable manner between us.
What I was drawing attention to was the attitude generally of the Party opposite, as evinced by its speakers. I have to view the matter in this way because it was such a conspicuous omission from the noble Lord's speech this afternoon. This has been the gravamen of the criticism of the Budget in the country. But nothing has been more remarkable (as is often the case) in the noble Lord's speech this afternoon than that he, with a greater wisdom than is often evinced by his Party, did not think fit to mention it at all. What I was venturing to say was that, so far from having a bad record on this matter, the subject matter of complaint arises from the fact that the Government have put the retirement pensioner not at the base of the queue but at the head, by providing, in the height of our economic difficulties at the beginning of 1958, and in the midst of the measures of 1957, a retirement pension which, in terms of absolute worth, is 10s. 7d. higher for a single man than it was when the Conservative Government first took office in 1951, and 14s. 4d. higher for a married couple.
It has sometimes been represented that this Budget has electioneering content in it. But I would say this seriously to the Party opposite: the only crude, reckless, cynical electioneering that has been indulged in in connection with this Budget is this "pensioneering" campaign. If we are to talk in terms of this kind of thing, I must tell noble Lords that a
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number of people in the country are getting a little disgusted when they see the ruthless exploitation successively of the anxieties of the tenant over the Rent Act, the anxieties of the unemployed when the unemployment figures were rising, and now the attempt to exploit, in the interests of Party politics, a sympathy which is well-nigh universal for the difficulties of old age.
Let us examine in a little more detail the merits of this criticism. The object of the Budget is to inject, as we have agreed, £360 million into the economy of the country and so to help full employment. Let me ask the Opposition this question. The cost of raising the retirement pension by 10s. is, with consequentials, in round figures, £200 million. That is approximately the same amount as the value of the relief on income tax. I do not think I was misquoting a particular speaker. I do not want to revert to that, because it is impossible for a consistent speaker to justify the relief of income tax and at the same time to demand extra expenditure of £200 million. But I should be glad to hear what noble Lords opposite think about it.
Do they seriously suggest that the sum of £200 million should be raised by borrowing? I think they obviously do not. Nobody seriously pretends that matters like retirement pension can reasonably be financed out of borrowing. Pensions can be paid, reputably, only by taxation or by contributions. If, therefore, their criticism of this Budget is that it contains no provision for increasing the pension, which do they advocate: an increase in the contribution to the amount of £200 million, which must ex hvpothesi be raised largely through the wage-earning class (called, I think, by Mr. Harold Wilson a poll tax), or a decision not to reduce the income tax? One of the two it must be, and I think we are at least entitled to know. But whichever of those two the answer is, unless it were to be done, in effect, by borrowing (which I do not believe is suggested) the net injection into the economy would be nil, and the object of a Budget which is to inject £360 million into the economy would be frustrated.
I should be misleading the House if I were to leave the matter there. We have, not once but three times, raised the amount of the general retirement pension: in 1952, in 1955, and again in 1958.

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Our promise is to keep the general level continuously under review; that promise is contained in the White Paper, in paragraph 34, and was repeated in another place by my right honourable friend. That is not the only thing we have done for the problems of old age. We have made successive reductions of taxation and particular remissions for the old. In 1953, age relief was raised from £500 to £600; in 1957 it was raised to £700, and again in 1958 to £800. The 1957 Budget introduced the age exemption, which provided that single people over 65 did not pay tax unless their income was over £250 a year, and married people would not be taxed until their income was over £400 a year if either were over 65. The following year the 1958 Budget raised the age exemption figures to £275 for a single person and to £440 for a married couple.
I would remind the House that the subject of a general increase in the retirement pension level has been dealt with in the Report of the Phillips Committee (I think it was called) on The Economic and Financial Problems of the Provision for Old Age. In paragraph 215 of that Report, which was presented in 1954, the Committee reported as follows:
"On the whole, the conclusion we have reached is that there cannot be any stereotyped formula for fixing the level of benefit and changes should not be made except at infrequent intervals and unless there are compelling reasons; when they are made their nature and amount should be decided on a balance of a number of considerations, in particular the following:

(1) The change in the cost of living, due regard being had to the circumstances giving rise to it and the likelihood of its continuance;

(2) the extent to which pensioners have recourse to National Assistance, this being broadly indicative of the relation between the pension rate and the cost of subsistence

(3) the amount of the additional contribution required by an increase in pension rates and of the increase in the future charge on the Exchequer."

I am wondering which of those considerations noble Lords opposite feel inclined to rely upon in the present case: because all we have said is that in 1958 we raised the pension to an all-time high, and we are still keeping the subject, as we are bound to do, under the terms of our White Paper, continuously under review. I am wondering whether, except
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in the atmosphere of electioneering, any possible fault can be found with that.
In view of the noble Lord's criticisms, I ask myself, by contrast, what would have been the main features of a Socialist Budget if that Party had had the power to impose one at the present time. It is difficult to say. What I have tried to do is to cost out the various commitments which from time to time they have made—in the hope, I suppose, of getting additional support in the country—and see how much it would cost. It is extremely difficult to do so, because the commitments are very largely open-ended; but the advice I received at the end was that if I said £1,000 million a year I should be under-estimating rather than overestimating. So startling was this figure, when I published it the other day, that a sub-editor, who was not familiar with it, changed the figure to £100 million, because he thought it was too much.
It is, of course, a matter of speculation. By contrast, the noble Lord, Lord Grantchester, says he does not believe in the kind of planning to which the noble Lord is adhering, but I am bound to say that I do not believe there is anything planned in Labour economic proposals. I think it is a mixture of concessions to extremists on their own side and attempts to buy popularity. By contrast, I believe that our own proposals stand justified as part of a coherent scheme. They are based on confidence in our currency, stable prices, levels of wages, income and incentive rising in proportion to national production and productivity, industrial expansion under free enterprise, and equality of opportunity based on an expanding educational system. I believe that, in a sense, every economic policy, this or any other, is truly an assignment both with history and with a General Election; and, for my part, I do not fear the verdict of either history or the people upon the proposals which I am this afternoon endeavouring to defend.
4.25 p.m.
VISCOUNT BRUCE OF MELBOURNE: My Lords, I welcome very greatly the initiative of the noble Lord, Lord Pethick-Lawrence, in putting down this Motion. He has done it several times in the past and I think it is invaluable that somebody should now and again bring us down to a serious consideration in

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this House of what is I consider the most vital subject we could have under review. The Motion is to call attention to the economic situation. That subject is vital, and I sincerely hope that we shall have a serious discussion, getting down to what are the fundamentals of the situation and obtaining the views of the Members of your Lordships House. I admit that the Budget is a very important thing, but, after all, the Budget is only incidental to the general economic situation, and, frankly, I am not particularly thrilled at the way the debate seems to be running towards a Party fight on the subject of what should or should not have been in the Budget. I am much more interested that we should consider the economic position of the country and express our views upon it.
I have felt impelled to intervene in this debate because over the past few years I have made numbers of speeches in this House and outside in which I have taken a distinctly gloomy view of the financial and economic position of this country. I venture to say that there were some grounds for the anxieties I then expressed, because your Lordships will remember that the pound sterling over those years has been in repeated danger; our balance of payments has time and again caused us grave alarm, and our vital exports have looked as though they were imperilled. I suggest that nobody could be very happy about the economy when we were going through circumstances of that kind. I have no regrets that I uttered those pessimistic thoughts.
But I am particularly happy today that I can regard the position as very much better and that my anxieties are greatly lessened. For the first time for many years inflation has been halted. It is an ever-present danger. We have to watch it; we have to ensure that it does not really raise its head again. For the moment it has been halted. The retail price index has shown a rise of only 2 per cent., despite an increase in incomes larger than the increase in output. We may hope that now we have a steady economy. But I trust we shall never forget how vital it is to watch it and make sure inflation does not again raise its ugly head. Our balance of payments position is the best since the war. Our export performance is certainly showing a grati-
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fying resilience, and the pound sterling has now gained sufficient international strength to enable a considerable measure of convertibility to be introduced. That is a very big change in the last eighteen months.
Governments are always inclined to attribute to the sterling merit of their policies any improvement in conditions. That is not solely the case; but I think a tribute has to be paid to the Government for the policies, firm and decisive, they have pursued, and the action they took when at the end of 1957 the pound sterling was seriously menaced. We must also give great credit to the monetary mechanism which was put into operation and the manner in which it was used and controlled during the recession at the beginning of 1958. We have to give credit for both those things without going the whole hog and saying that the Government's policy has saved the nation or anything of that sort.
The position that has arisen in the last few months is somewhat strange, and I suggest to the Government that the people must be a little puzzled and that nothing could be better than to put out a short, concise and clear exposition of what has happened and why. What I think confuses the minds of the people is that ever since the war we have been told to export and to save. Up to the middle of last year the policy of restriction applied to practically everything. Credit stringency was rigidly enforced; hire purchase facilities were restricted and investment was curtailed by the spirited activity of the Capital Issues Committee. Then, suddenly, all this changes and we are told that we have now moved into an expansionist period. It would not be a bad idea if the people could know exactly why. Credit and hire purchase limitation has practically gone. Investments have been freed from crippling restraint. All this amounts to a pretty startling reversal of form, a volte face, of which I think the ordinary citizen is entitled to an explanation, so that he may judge for himself whether or not it is a wise and a sound move.
As I see it, this complete change of atmosphere occurred last year, when suddenly, for the first half of 1958, we had a surplus in our balance of trade of no less than £327 million. But we have to bear in mind that the entire reason for that

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almost absolutely miraculous change was the fall in world prices of our imports. They went down by no less than 8 per cent. and, as the noble Lord who moved the Motion has explained to us, that meant a tremendous figure of saving to the nation. As against that 8 per cent. fall in the price of our imports of primary products, the fall in the price level of the goods that we exported over the same period amounted to only 1 per cent. We should do well to keep those facts in our minds when we see the gratifying position that we have reached in our balance of trade.
It is inevitable that the price of our imports will rise. The noble Viscount, Lord Hailsham, quoted the very figure that I was going to use—namely, £60 million to £70 million. But that is on the basis of stable prices—that there is no change. It is almost inevitable that we shall have a rise in the price of the primary products which we import. And it is eminently to be desired. It will add to the cost of our imports, and we have to remember that we can meet it only by exporting more—I will say a word on that in a moment—but it is an excellent thing that the primary producing countries should recover. This move to expansion in Britain will he one contribution to it, because we shall take more of their products and, as I say, it is almost inevitable that that will be at an enhanced price.
Here, that result is brought about by a reversal of policy, by the creation of a greater demand in the home market, and also by the stimulation of the Budget. Having said that I do not want to have a discussion on the Budget, I will not say why I think that it contributes something. I believe that all these things are a timely stimulus to expansion. It is a good thing for this country at the present time, because if we can get a little expansion it ought to lead to the utilisation of a certain amount of plant and machinery which to-day is not in production, and that utilisation should in its turn lead to the absorption of our ever-to-be-deplored margin of unemployed. I believe that a stimulus to and a strengthening of the home market as a base for our great exporting industries is going to help those industries in the ever-increasing world competition which they are encountering.
For all those reasons, I think that the start of an expansionist movement is
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right; it is well timed, and it should be of the greatest help to the economy. But we have to remember that if that is going to happen—if we are going to get an expansion—our imports will cost more. Then we shall have to earn more, which calls for efficiency in our exporting industries. We have to save more, and we have to take to heart the words of the Chancellor, that we cannot afford to go off on a spending spree at the present moment. The whole position is much better and we have every reason to feel encouraged, but I cannot see the slightest ground for the almost foolish optimism that appears to prevail in so many circles that we have overcome every difficulty and that we are going forward into a period of unparalleled prosperity. We may do so; but it is going to depend entirely on our own efforts and how we conduct ourselves over the next few years.
There is one emphatic warning that I want to give—I have given it indirectly already: namely, that I do not believe that in the recently issued Economic Survey nearly enough attention has been paid to the consequences to our balance of payments of expansion which I believe is quite inevitable and in some respects most desirable. Those are the things which I suggest we are up against in the short term. I believe that there are compensating factors, but they will not operate very quickly. Take the position of the primary exporting countries. Why the strength of those countries is so important to ourselves is that they are great and valuable markets for our exports. But they have been through a serious period, during which they have had to impose restrictions. They have had to eat into their gold and dollar reserves, and it will be some time before they can recover the purchasing power that they have lost in the recent depression in primary products. We are up against that, and there are certain other factors that will also be troublesome.
World competition to-day is about as intense as anything could be. The United States of America is, to my mind, up against one of the most difficult problems that any nation has ever faced. She cannot contemplate the idea of unemployment, yet her problem in regard to exports is getting greater and greater every day. She must export to an extent

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of which she never dreamed before the war. That need has been caused by the great industrial expansion. She has to export or she will suffer unemployment. I believe that in the next few months the United States of America is going to add to the other strains under which we are now in finding markets. So unquestionably we have to show the greatest possible efficiency in our exports, or we shall not be able to face this increasing burden that we are likely to be up against.
I believe that we can do it, but (I am afraid that this is rather like reverting to King Charles's head), as I have said here and everywhere, not all the economists in the world, nor all the industrial efficiency in the world, will ever solve this problem until this gets into the minds of the general mass of the people of this country; until they understand what we are up against—how all the things for which they have striven, all the improvements in wages, conditions and social welfare, everything, could be imperilled unless we manage to show that efficiency which will retain our position in world markets and give us the exports that will enable us to pay for our imports. I admit that I have said that before, but I say it again because I believe it is most vital. If we can get over to the people, and if they can once understand, how everything they hold dear may be imperilled unless we in this country get on with the job, I believe that we can create an atmosphere in which it will be possible for us to accomplish anything.
There is little more that I want to add, except that there is one danger of which I will speak: and this concerns Governments and Government action. It concerns the situation that is growing up in Europe. There are these six nations joined together, and there is at present no provision for any co-operation with the rest of the nations of Europe or anyone outside. I believe that that will constitute a real menace, unless something can be done to meet the position. I cannot reconcile that what are almost trading negotiations between blocs of nations can in any way be reconciled with that for which we have all been striving ever since the war—free, open, multilateral trade. This European situation, if it goes forward as it is doing, can, I believe, create
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a tremendous problem, particularly for this country; for inside that little group they will, as a result (and from their point of view it is a very desirable result), increase their competitive power in the markets of the world to the detriment and serious discomfort of this country. I have no doubt that Her Majesty's Government are taking every possible step, and are alert to this danger; but I utter a word of warning that, so far as we are concerned, that can be a very critical situation.
I want to try to summarise the position as I see it, both as to the short term and the long term. I believe that the short-term position is going to be frightfully difficult, for the reasons that I have given: the intense competition that there is in the world to-day; the slow growth of world trade; the time lag that there must be in sorting out the European trouble that I have indicated, and the time that it will take for the primary producing countries to recover in their economy so that they can take more from us. All those things are going to make the short-term position very difficult. I believe, none the less, that we can hold our own during the short term if we can get that efficiency of which I believe we are more capable than any country in the world. About the long-term position I am much more optimistic, because I believe that the problem of the primary producing countries will be sorted out. The world cannot afford to have the economies of the great primary producing countries in a position where they cannot go on producing and expanding, as they must in the interests of the whole world. I believe that the situation in Europe will be sorted out, that everyone will see the danger and that, in the end, everybody will behave sensibly.
The other factor which I believe is of tremendous importance is the enormous investment that is going on now for the development of new resources, particularly in the backward countries. The United States of America, the World Bank and the International Finance Corporation are all pouring out money to a great extent for development in these backward countries. We in this country last year managed to save enough to invest £200 million abroad. We have commitments to some of the Commonwealth countries. It is essential that we should go on doing

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that: it is our traditional rôle. But we must remember that we can go on doing so only if we save; we must not go into what the right honourable gentleman the Chancellor of the Exchequer described as a "spending spree". I believe that by all those means world trade will be expanded. All those things together will bring about the one vital necessity, an expansion of world trade. In that world trade lies our great opportunity as an exporting country. An increase in world trade will give us our chance, and it all depends upon ourselves whether or not we are efficient enough to get our fair share of that growth of trade so that we in these islands can be prosperous.
I have only one other word—and this, again, is a little like "King Charles's head." Some three and a half years ago in this House I drew attention to the Paley Report on raw materials. That Report, which was prepared by technicians for the President of the United States of America, showed with the utmost clarity that inevitably owing to the great industrial developments during the war the world was going to be short of the raw materials needed if that vast expansion was to be maintained and even stimulated. It showed that, from being a great exporter of raw materials, the United States of America had become a deficit country in raw materials. The Report went on to point out that it was vital in the interests of all the great industrial countries that the necessary supplies of raw materials should be forthcoming, but that unless action were taken it was almost certain that there would be shortage.
I ventured to suggest in this House, three and a half years ago, that we should take a survey of all the resources of the Commonwealth and Empire and ascertain how far we were in a position to develop and meet that need. As a result, Her Majesty's Government accepted the idea, and the Commonwealth Economic Committee have produced a Report. It is a tremendous tome, far too voluminous and going into far too much detail. I believe, however, that it would be an admirable thing (it could quite easily be done and would not take very long, as all the information is available) to get a small group of experts on to the question of examining what, over the next ten years, are likely to be the shortages of raw
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material in the world, in the sterling area and in the British Commonwealth; and then to examine this Report, which would give all the details showing how far there is likely to be a demand for any raw materials we have in our resources in the British Empire and how far they could be economically developed.
Three and a half years is a long time. The idea was accepted then, but all that has happened is the publication of the volume I have mentioned, which would stagger anyone who tried to start sorting the thing out. So I would again make this appeal: that here is an opportunity of making a very considerable contribution to our own prosperity, and, in doing so, to the general wellbeing of the world, and I hope that some action will definitely be taken now that the necessary material is available. I apologise for wearying the House at length, particularly for bringing up my couple of "King Charles's heads", but I have discovered that if only one goes on saying something long enough, and by some miracle one happens to be right, sometimes something happens.
4.52 p.m.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, I must say at once how much I welcome the speech of the noble Viscount, Lord Bruce of Melbourne. He is quite right; he has said some of the things before, hut they have always been said at the right time and in the right spirit. Again to-day he has drawn attention to one or two particular factors which I had in my head before getting up to speak this afternoon, and before I turn back to the general debate which we had already begun I should like to say a word or two about some of the matters which the noble Viscount, Lord Bruce of Melbourne, has mentioned.
May I take his last point first, the possibility of actual shortages in certain raw materials. Of course, to the ordinary man in the street it seems almost like a suggestion out of Alice in Wonderland to think that that might be so. One's mind goes back to what has taken place since the end of the war in 1918: the huge stocks of rubber, and the gambling down in Mincing Lane in 1919 and 1920; then the restriction on the tapping of trees and output; and then the matter, on the other side, of synthetic rubber coming on to the

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market and disturbing this primary product of an important area. We had the setting up of the almost world-wide corporation to restrict from time to time the output of tin, one of the most valuable of our raw materials; and perhaps the one raw material on which we have experienced greatest hardship from time to time has been primeval lead. Nevertheless, the fact that we might be in very grave danger from a shortage of raw materials would lead me to start off (speaking, as it were, "off the cuff" and directly after the noble Viscount) by saying that I myself should very much welcome, and I think my colleagues would, the kind of inquiry he has suggested.
Next may I say to the noble Viscount that he took this afternoon a line which again has been very much in our minds, because in the last eighteen months or two years we have had one or two difficult situations arising between this country and certain members of the Commonwealth as a result of what has happened. It is a great pity (leaving out what are the future possibilities of the European Common Market) that we had to come to an upsetting kind of feeling between New Zealand and Australia and ourselves because of this mishandling of the situation in relation to surplus exports, at below cost of production, of butter from Finland, Sweden and Holland, with a very severe reaction in New Zealand upon what they might be able to import of our finished goods in return because of the drop in their market here.
Apropos what the noble Viscount has been saying, there is not the slightest doubt that this country of ours, with this great interest which he stressed for exporting goods if we are to keep the kind of population we have, and the United States can, between them, very largely control the kind of organised demand that exists and the price for the raw materials from the primary producing countries of the world. Certainly they have a very big effect upon it. We can look not only at raw materials but at essential food products, which become part of our raw materials for our productive industry. We can consider the grave mistake, in my view, that was made in 1951 and 1952 of refusing to go on with our membership of the International Wheat Agreement, for example—a
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mistake about which I want to say at once to the Government that I think they have at long last done quite right to make some approach at coming back to the previous position. That mistake has no doubt had a very serious effect upon places abroad and upon our own agricultural industry.
I should like to say to the noble Viscount. Lord Bruce of Melbourne, that perhaps two things stand out in my mind in regard to the Dominion side of these primary producing countries. I did not happen to meet him in Australia in 1926, when I was out there, because he was then on a visit to this country; but I did see local conditions in the course of a three months' study of them. On my way out I went through Canada, and I remember the dire condition to which her great wheat-producing areas in the mid-West of Canada had been brought down because of our complete lack of planning in this country as to what we ought to do, with wheat down to 27 cents a bushel, and the Canadians unable to buy back finished goods from this country in exchange. I mention that as an example.
If in the very different and changing circumstances of the future we are to be able to live in the sort of world in which we live to-day,it seems tome we must have a real plan on this matter. And we must see in that plan that the primary producer, in whatever part of the world he is, not only receives a proper price for his products, but receives, in fact, a price which will enable him, in return, to purchase our manufactured goods. I hope very much that the noble Viscount. Lord Bruce of Melbourne, will press his request for an inquiry into the question of raw materials: perhaps the Government may listen to him, even if they do not listen to me, and see that something in that direction is done.
We had a long opening stanza in the speech of the noble Viscount, Lord Hailsham, in which he was very humorous and endeavoured to play off the reference of my noble friend Lord Pothick-Lawrence to the stop-and-start jerkiness of the Government's policy. The noble Viscount went off on rather curious asides, which did not seem to me quite to meet the bill; although when he was talking about going for a drive and sometimes turning to the left and

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sometimes turning to the right, I had a shrewd idea that the expression of confidence which he made at the end of his speech is not yet likely to be fulfilled, and that perhaps someone else will be driving and taking a real turn to the Left in the very near future.
The reason for our debate to-day, as the noble Viscount, Lord Bruce of Melbourne, has pointed out, is to consider the economic position. My noble friend Lord Pethick-Lawrence always uses this phrase, because the Budget of a British Chancellor of the Exchequer has such an important bearing upon our economic position; and it is that which we are discussing this afternoon. In relation to that economic position let me say this: that none of the noble Lords on these Benches is any less than pleased with the fact that things are a little easier than they have been in the last two years. None of us feels any less pleasure than do members of those Parties who support the Government at the fact that unemployment is at the moment being reduced. Nobody who has had to grow up in a working-class family himself and who has had to see the effects of unemployment on all the families around him can ever take any different view about unemployment than that, whatever may be the motives sometimes attributed to those of us who have, since those days, transferred our activities into political channels.
We are very pleased that, so far, there is that much improvement. I shall come to deal with the social effect of the disribution of the Budget in a few minutes, but I am bound to say that the general economic situation arising out of the Budget is by no means yet secure. I sympathise entirely with the noble Viscount, Lord Bruce of Melbourne, in the phrase that he used just now, when he said that he could not understand the almost foolish optimism which prevails. We all want to be optimistic about the situation and to do our best to see that those conditions prevail; but the noble Viscount, Lord Bruce of Melbourne, with all his experience of the City and the Commonwealth, said he could not understand the almost foolish optimism as to the promise contained in the present condition of affairs. I think he is right.
It seems to me exceedingly strange to hear the noble Viscount, Lord Hailsham,
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speak of the conditions which the Government have created in order to make a Budget of this kind possible. When I look back over the years of 1951 up to 1959, and to all the different financial crises which we have been through—not under a wicked Labour or Socialist Government, but under a Conservative Government since 1951—I wonder which of their special actions has been most responsible for creating the conditions for expansion and for the optimism that there is now. There was the crisis of 1952; there was the crisis of 1955; and there was a hint at another one in 1956, but it actually happened in 1957. One would imagine that we had come out of the crisis of 1957 all cleat: but is that so? My noble friend Lord Pethick-Lawrence this afternoon, in his remarkably able speech, such as he always delivers to us, referred to the windfalls that had come to the Government in the shape of falling import prices; and the noble Viscount, Lord Bruce of Melbourne, correctly assessed them this afternoon as being a reduction of at least 8 per cent. That has been a very considerable factor.
When one looks at the reason for the crisis of 1957, one begins to understand why those who do not hold the Government's political views question very much their policy. What was the cause of the 1957 crisis? It surely was not any action on the part of the Labour Party. It is attributed to the Conservative Government by the Engineering Employers' Federation that, when they were seeking to be really tough and to resist altogether, even to the point of a general lockout, the demands for more wages, the Government who, all the time up till then, had supported them, at least in spirit, felt that, with the results of the Suez venture, they could not then face the results of an engineering strike. You were in a dire economic situation because of the Suez adventure. You were losing all the business; you lost the great Egyptian trade; you had the grave reduction in the actual shipments of oil; you had the damage to your pipelines, which had to be repaired; and you had the resultant effects upon almost every department of your productive industry because they could not get on with the job or get their exports going. That was in 1957. You also had costs to industry going up in the way

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of the price of fuel, both for transport and for other types of power production, and these increases have never yet been much relieved by the Government.
When he looks at the settlement we have just made with Egypt and sees what the total loss to the country is, the ordinary man in the street begins to wonder what really has happened to the economy that makes it suddenly possible for the Tory Government to produce a Budget in which they will hand out about £370 million this year and, in a full year, something well over £400 million. If this is the way you, as a Government, go about creating the conditions for throwing about this money at this sort of rate as an expansionist policy, then it is beyond the belief and the understanding of the ordinary working man in the factory and in the street; and perhaps it would be just as well if you were to follow the advice of the noble Viscount, Lord Bruce of Melbourne, and tried to get something over to the workmen of the country explaining what it is all about. Certainly, in those conditions, when one hears of all these very large sums which are suddenly made available for distribution after such a period of stringency, in which our unemployment went up to 621,000 in December-January, it is not surprising that it is thought that the handing out of these sums cannot be altogether divorced from the idea that an Election cannot be long delayed.
Then we come to the question whether it is all sound. Perhaps I shall be accused of rocking the boat a little with what I am going to say, but I do not say it from that point of view at all; it is simply because I want the country to be cautious in this particular matter. As my noble friend pointed out, no one wishes to criticise the steps that have been taken to bring some relief to those who are paying taxation, although I would go so far as to say that while the rate of tax you have been paying in the past may have a good deal to do with any flat rate reduction, nevertheless, before you choose what you take off your taxation, you should have due regard to what is the situation of the people at the other end of the scale. It is perfectly true that taxpayers with incomes below £900 a year, if they have families, have been very largely exempted by previous allowances
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made by Governments of both Parties, but you have to remember that those people also are facing the increased cost of living and that they should have some share of the relief to be given out in a particular Budget if it can be shown that over £400 million is there for distribution in a full year.
To take some figures which I have got from to-day's issue of a good capitalist paper, the Financial Tmes— and the noble Viscount knows that I often quote from it—it will be seen what I mean. A working class family, apart from the reduction of tax upon beer if they are beer drinkers, will get almost nothing from this Budget. Here are the facts. Where the gross income is £1,000, the gain to a single man under this Budget will be £19 in a year, and the gain to a married man with two children will be £8 in a year. When we come to the man with £15,000 a year, we find that the gain to him in this Budget, if he is single is £494 a year and if he is married £481 a year. Of course, the working man is sufficiently up to date with certain facts, and he knows quite well that it is only two and a half years ago that the Government brought in an important measure for surtax payers; they distributed £34 million a year just to that one class, and this Budget is again giving a great increase to the people in that sphere of taxation. As my noble friend said, if you are having a flat rate reduction in income tax it is bound to have effects of that kind.
Then it is quite reasonable to ask that some similar benefits should be accorded at the other end of the scale: either better educational grants or better allowances—perhaps family allowances, and certainly not excluding benefits to the old-age pensioners. The Chancellor of the Exchequer said the other day that he certainly did not rule this out of his mind; but the singular thing is that we all got the impression from reading the reports of his Budget speech that he had failed to mention them at all. So perhaps it looks as if this campaign in the country and Parliment for the old-age pensioners has not been without effect, at least in bringing it back to his mind; and that there is something to be said for some immediate relief for the old-age pensioners. I know that that will have to come about by special legislation, by reason of the changes in our practice in

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the last few years; and I hope that when that legislation comes it will be before the Election, for the sake of the Conservative Government, because it would do them a lot of good. And I hope that the stimulus we have tried to give them in this matter may accrue especially to the benefit of the old-age pensioners themselves.
I come now to the danger arising out of the actual distribution of the surplus which the Chancellor of the Exchequer has and must, on the basis of his Budget, hope to get. Apart from the distribution of reliefs, there have been two main criticisms. The first is with regard to the possibilities that might arise in the balance of trade this year. My noble friend Lord Pethick-Lawrence spoke of the great benefit of the windfall due to the drop in import prices. I am not an expert economist, but I have been connected a good deal with trade for the last fifty years, and my recollection is that whenever there is a fortuitous drop in world prices of the commodities we import we get a great deal of benefit for about eighteen months or two years. A great deal of the drop in prices of raw materials comes while we are actually completing orders already in hand, and that helps a great deal to increase the amount we can afford to put aside from these contracts and put in the business. But it nearly always catches up with us in the other direction, and when prices begin to go the other way we find that we have to deliver contracts to the same countries at amended prices, which have to be raised according to the change in the market. often before we can see the increase in price coming on.
There is always a rise and fall between our producing and exporting industries and the importing of raw materials, and very largely one compensates the other. We are bound to get these periods of fluctuation, and optimistically to give too much away in one Budget seems to take no notice of the experience of our producers and exporters throughout the whole history of this country as it has built itself up as a commercial nation. Therefore I think that the Economist is right when it draws attention to the fact that this distribution of the surplus is rather gambling with the position in the Autumn of 1959. What about the balance of trade figures then? Are we likely to be able to maintain the
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same balance of trade and have the same surplus that has been the fortunate possession of the Chancellor of the Exchequer in the last twelve months?
This seems to me to be fundamentally important. When we consider the distribution for expansionist purposes, such as investment allowances and the stimulation of the right kind of consumption so as to create demand, I think it could have been done on a lesser sum than £300 million, leaving in hand a sum to offset any possible recession in our balance of trade in the autumn. I throw this point out for your Lordships' consideration because I consider it important.
My noble friend dealt with the general position above and below the line in the Budget, and concluded that the deficit overall is likely to be £721 million. But I think that Mr. Norman Crump was right in pointing out in the Sunday Times last Sunday that we should remember that, whatever the Budget may be, Supplementary Estimates become the bane of Treasury Ministers' existence and of the Government's existence. We shall get Supplementary Estimates as surely as we are debating here to-day. Mr. Norman Crump puts the likely overall deficit at £821 million. It is true that about £500 million would be set off by money that must be borrowed for development purposes, and for the nationalised industries and other purposes; and the noble Viscount, Lord Hailsham, is entitled to say that we have to look at other things in order to try to meet that situation. I see my noble friend Lord Mackintosh of Halifax in his place. He must be thinking along similar lines. But when he looks at the figure of £821 million I wonder how much he feels he ought to raise in extra national savings in order to be sure that there will not be a recession in our balance of trade and another crisis and run on the pound. No Party wants that to happen. Therefore I think that we should pay special attention to this matter, to see, so far as we can, that we keep up our export trade and deal with investment allowances and the expansionist policy in general, so as to avoid a recession in our balance of payments this autumn. This is going to be crucial.
If there is not to be any set-off against this large distribution to the wealthier

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class, no one should complain if somebody goes on a Labour platform and says that the Government have not quite understood the finest sentiments in what we call "the Song of the Peaceful Revolution", the Magnificat:
"He hath put down the mighty from their seat: and hath exalted the humble and meek.
He hath filled the hungry with good things: and the rich he hath sent empty away."
The Party opposite must not mind if Labour speakers say that there is always a tendency to think of the rich first and put the less rich in a secondary position. If we take the sum total of reliefs in the last eight Budgets, referred to by the noble Viscount, Lord Hailsham, I think he will find that, while there has been some relief all round, the general tendency has been to give special relief to those who have been admittedly heavily taxed in war time but who can still well afford to live upon what they have left. The people who during war time were left with no more than 6d. in the pound for free, untaxed spending money are to-day enjoying, as a result of Conservative remission of taxation to the rich, something like 3s. 4d. in the pound; that is, six or seven times as much as they got in 1945.
I think we can approve the policy of the Chancellor of the Exchequer in so far as it wisely brings in some measures such as the investment allowances to stimulate industry, although we think it might have been done a few months before; nevertheless, it has been done, and to that part of it we wish success. We are glad that there has been some variation in the standard rates of purchase tax, but we think that this could have been far more widely extended. I would say to the noble Viscount, Lord Hailsham, that I hope that when he is telling his Cabinet colleagues of the sort of debate we have had he will not think that there is an easy feeling in the workers' minds in general about this failure to deal with the low-tax elements in the purchase tax field, because there is a strong suspicion among the workers that the Government are gradually shifting the burden of taxation from the wealthy people by reductions in direct taxation and spreading it among people in indirect taxation.
There is no comparison, of course, between the general share of tax revenue produced for the Exchequer from direct and indirect taxation
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to-day with that which was in existence up to, say, the First World War and the years that followed. There was always a strong argument against the undue exploitation of indirect tax for the maintenance of the State's requirements. There is a great fear of the way in which the Conservative Government have handled the matter: first, by their getting rid of help such as subsidies on bread and commodities like that, and then by their treatment of the social services. In their failure to go right down in regard to purchase tax, there is a general fear in the working class that what they are working for is a more permanent sales tax. From the point of view of the officials who have to run the scheme, that is the best and easiest way, and that is the kind of system which will satisfy the demands of many traders, because they would not have the violent changes in the values of their stocks, up and down, resulting from changes in the rates of purchase tax on the present basis. I hope, speaking personally, that we shall never have to resort to a general sales tax, and that it will be the policy of whatever Government is in office to get rid of purchase tax, as a whole, as soon as possible. Having regard to the amount of relief that has now already been given in direct taxation to the more wealthy sections of the community, I should think it is high time that a bold effort was made to get rid of purchase tax altogether.
I do not want to take up more time in this debate. All I can say is that I am sure that there is no Member of this House who does not hope that the present doubts and fears which some people have about the lasting stability of the economic position will not be brought to a realisation, but that we shall go on to a far more confident situation. We have come back to a position which years ago, apparently, Mr. Harold Macmillan used himself to see. I have the quotation here, it is rather amusing, and I hope that it may do some good. It is something that has been sent to me, but it does not give the name of the journal from which it comes. It says:
"The slack- incompetence of an unplanned economy must give place to the disciplined efficiency of rational organisation and control.' This is a quotation from a dissertation on Britain's task. which was described as 'A compilation from notes made during the Christmas recess', and it appeared under a chapter cross-heading of 'Expansion'. Was the author (a) Mr. Harold Wilson. (b) Mr. Harry Pollitt, or (c) Mr. Harold Macmillan?"

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I can set the noble Viscount's mind at rest by telling him that it was Mr. Harold Macmillan, in the days when he used to hold rather different views about industrial and economic matters than he perhaps has to hold as the head of the present Cabinet. Nevertheless, we believe that if the Government will consent to adopt a rôle of continuous moiety of control, of the kind we have constantly been recommending, we shall not only have our fears removed about the stability of the present more favourable position, but we shall see expanding employment; we shall see no reason to cavil, as from what he said this afternoon the noble Viscount's friends seem to have cavilled, about running industry flat out. There is no reason why industry should not be able to provide continuous full employment under a properly planned economy.
5.27 p.m.
VISCOUNT MACKINTOSH OF HALIFAX: My Lords, your Lordships will be glad to know that my contribution to this debate will not take long. In fact, when it comes to national finance and economy, I am afraid that I have a one-track mind—and none of your Lordships will find it difficult to guess what that track is. I want to speak for a short time about the contribution which the National Savings Movement has been able to make during the last year and what we hope to be able to do in the coming year.
First of all, I should like to take this opportunity of expressing the thanks of the Savings Movement for the generous terms in which the Chancellor of the Exchequer referred to the Movement in his Budget speech in another place. He referred to our £325 million net savings for last year as "A golden year", and I have taken steps to bring his appreciative reference to our 300,000 voluntary workers everywhere. As a matter of fact, during the sixteen years that it has been my pleasure and privilege to he Chairman of the Savings Movement I have worked under nine Chancellors of the Exchequer, which goes to prove that the job of Chairman of the National Savings Movement is must less precarious than that of Chancellor of the Exchequer. Every one of these Chancellors, without exception—and they include members of all Parties—has been sympathetic and helpful to the Movement. But, everything considered, the last year was our most satisfactory year.
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The Chancellor of the Exchequer said, again in his Budget speech [OFFICIAL REPORT, Commons, Vol. 603 (No. 87), col. 36]:
"It is very heartening to see such a fine response to a combination of enthusiastic salesmanship and what are rightly regarded as attractive terms for these savings securities."
I often say that the National Savings Movement is the sales department for the Treasury: the Treasury make the goods, and we do our best to sell them. And as a business man I know that it makes all the difference to the salesmen if they have the right goods. It is always a friendly tug-of-war between the manufacturing side and the sales side, each wishing to get the best terms for their particular interest.
National Savings securities have always had a great deal to recommend them for the small saver. In the past years we have been able to say: "Well, your money is safe; you can get it back whenever you want; and the country needs it." But this year we have been able to say all those things and to add, "You cannot get a better investment anywhere." We have never been able to point to that combination before. I know that some people are inclined to think that the terms have been a little too good; but that is not so. As a Yorkshireman, I would say they have been "just about reet". I am reminded of the story (which I am sure is a chestnut to most of your Lordships, but it fits in here) about a rather cheeseparing farmer who sent free beer down to the harvest workers. One said to the other, "This beer is just right." The other said, "How do you make that out?" The first replied, "Well, if it had been any better we shouldn't have had it, and if it had been any worse we couldn't have supped it." I feel that our savings last year were just right: if they had been any less attractive, by only a fraction of 1 per cent., we should not have sold them, and instead of helping the country to the tune of £325 million we might only have broken even, so narrow is the margin between success and failure. The proof of the pudding is in the eating, and £325 million was a substantial contribution to the country's needs. I like to think that our success had something to do with the very substantial concessions which the Chancellor

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of the Exchequer was able to make in his Budget.
Looking to the coming year, in winding up the debate only two days ago in another place the Chancellor of the Exchequer said [OFFICIAL REPORT (Commons), Vol. 603 (No. 91), col. 763]:
"While it may be rash to expect National Savings to do as as they did last year, there is no reason to suppose that they will not produce another very good figure."
I hope that we shall go most of the way, provided that the terms of our securities remain reasonably competitive. The News Chronicle said two days ago, after discussing the problems facing the Government in raising enough money to meet all their capital requirements:
"Certainly there will be no time for the National Savings Movement to rest upon their oars. The country will need all and more than the £300 million of small savings which the devoted band of helpers garnered last year."
I assure your Lordships that we have no intention of resting upon our oars.
The Chancellor of the Exchequer attaches great importance to an increased level of capital investment in the public sector—electricity, railways, roads et cetera. This increased capital development will need to be backed by more savings if there is to be no risk of renewed inflation. I hope that the Savings Movement will be able to produce at least one-third of the overall deficit of £720 million, and after hearing the noble Viscount, Lord Alexander of Hillsborough, I feel that perhaps we had better add on another £100 million, just to make sure.
In conclusion, may I suggest one practical way in which some noble Lords present may be able to help us? A most valuable and difficult part of our work is to increase savings out of income week by week. Most industrial concerns in the country have savings groups. Between 3 million and 4 million workers are in savings groups in industry, and among them they collect over £100 million a year. They play a key part in our work. Just at the present, probably because of the recession in certain industries, we are finding it particularly difficult to increase savings in industry. Noble Lords who are employers or directors of companies could help us, and the country, very considerably by co-operating with the Movement in setting up facilities for their work
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people, where they do not already exist and by increasing facilities where they do. We are planning a savings drive this winter in industry, with particular emphasis on young people in industry, apprentices and the like, where the habit of money management could be of the greatest value to them now and to the country in the days ahead.
I have mentioned employers in this House, but a successful savings group in business is achieved only when we have the support of those organised employers and of organised labour. So my remarks in this respect apply to noble Lords in all parts of the House. One of the best things about my job is that through the years both sides of industry and politics have been our friends. This makes my job, I often think, one of the best in the country. I would say to all noble Lords: if you can help us in this drive for more savings in industry, it is one of the best ways possible of ensuring that part of the concessions given in the Budget finds its way back into savings. I feel that the country at this time is particularly fortunate that there should be money enough for a good bit of spending and a good bit of saving at the same time. Long may that situation continue!
5.35 p.m.
LORD SHACKLETON: My Lords, I should like to follow the lead which the noble Viscount, Lord Bruce of Melbourne, gave in his speech, that we should not descend too much into arguments between the Parties regarding the Budget. It was not my intention originally to say much about the Budget, but the speech of the noble Viscount, Lord Hailsham, will prompt me, I am afraid, to refer to some of, I think, the wrong remarks—to use a mild word—that he made in the course of his speech.
Generally, I should like to take my theme from the speech of the noble Viscount, Lord Bruce of Melbourne, because he made clear that there is no occasion for complacency, and it is rather depressing, in our present situation, where the fundamentals of our economic situation have not changed significantly this year compared with previous years, to detect such an atmosphere in the speech of the chief Government spokesman in the House to-day. Whatever cause has led to the improved position of this country in regard to its balance of payments and

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its reserves, it is significant that the Government themselves may claim credit for not losing the gains that came to us, but they certainly cannot claim credit for bringing them to us. The noble Viscount, Lord Bruce of Melbourne, referred to a gain in the balance of trade of £336 million. The actual figure of our visible trade was a favourable trade balance of £189 million. But, as noble Lords know, if the imports had been revalued at the prices that were prevailing the previous year it would have been an adverse visible balance of about £120 million. We find that while imports are about level, our exports are down by 3 per cent. This, of course, is part of the dilemma of the vicious circle which faces all Governments. And, let us face it, no Government in this country has really succeeded in solving it.
The Chancellor of the Exchequer, in looking to the future, is looking to a state of affairs when he hopes that there will be a recovery in commodity prices, making it possible for the commodity-producing countries to buy more by their exports and, at the same time, making it inevitable that we shall then have to pay more for those commodities. A little later in the few remarks I hope to make I should like to address myself to the particular problem of how we ought to deal with the matter. I think it is difficult to find any single solution. One thing is apparent: there are no grounds whatsoever for anything other than the most temporary satisfaction. Certainly we can be satisfied that we are not in the middle of a balance-of-payments crisis; but then, traditionally, this is the off-year. There is always a good year followed every two years by an off-year when we may be faced again by a difficult situation. It is likely that by the time the autumn conies round (and the Chancellor of the Exchequer himself foreshadowed it) we may be in a situation which, though I hope it will not be as serious as that a little more than a year ago, we shall see a decline in our reserves and in our position in regard to our balance of payments. We may find ourselves in a serious position economically.
The cost of living has levelled out, and in that sense inflation has been brought under control. I had better make again the point that it would be surprising if it had not: there was such a remarkable drop in commodity prices, in the prices of
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the raw materials that we import. But certainly the price situation has been relatively stable. At the same time we have seen an increase in expenditure; and the retail trade, as was the case in America during the recession there, has continued to progress. Even if we could not use the term "boom" conditions, there has been a net increase in turnover throughout practically the whole of the distributive trades, particularly in the retail business. There is a falling off in certain pockets in areas where there is more unemployment, but overall it has not been a bad trading year.
So far as the prospects of the coming year are concerned I should say that they are pretty similar to those of last year. I hope that the Government will not follow the advice of the noble Viscount. Lord Alexander of Hillsborough, and take off purchase tax too quickly. Speaking as a trader, I can say that it has cost my firm £20,000 this year and £50,000 last year; we should rather see reductions spread over a number of years. The only other point I want to make at this stage is that, although there has been this net increase in consumption, although the price level has remained steady, we see a situation in which production has not gone up at all. Without wishing to pursue the Government in too political a direction, I think there is no doubt that some of this level has been attained through a decline in consumption in certain sections of the community; and quite clearly it is among those who are suffering unemployment and among those who are also suffering from short-time working—because overall the country has not done so badly. There are these local pockets where the consumption has unquestionably gone down.
I should like to turn now to the question of production, which is, after all, the most important issue in the economic situation. The noble and learned Viscount the Lord President of the Council made, if I heard him aright, a most extraordinary statement—it was rather difficult to follow him, because he was sliding around rather fast. I apologise for making these remarks in his absence; I did warn him, but I understand that he has an important engagement on Government business. He made a remark, the gist of which was, if I understood him rightly, that we should hope to get more expansion of production, provided that it did not lead

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to inflation. I simply do not know what he means, because if there is one thing that does not lead to inflation it is increased production. It may lead to a balance-of-payments crisis, because of the importation of more raw materials; but it does not lead to increased inflation.
The danger of the present situation is the relative stagnation—and I apologise for using the word—of this country in terms of production. It may be distressing for the Government to have repeated to them some of the facts and figures which were emphasised in another place, but this country has been standing still for the last three years. We may say that this is a pleasant change in comparison to the trade cycles in the past, where production went right down; that at least we can be happy that it has remained level. But in comparison to other countries production has failed to advance and still shows no real signs of advancing. The figures of increased productivity in other European countries, and particularly the Soviet Union, are of a kind that ought to give us very serious cause for anxiety.
I would direct my main remarks to what I believe is the most important economic course for investigation and for action—that is, the question of investment; and here we do find a situation which is rather depressing. We find that during the last year (the Economic Survey makes it extremely clear) investment in the publicly owned sectors of industry has tended to fall off. Investment in the private sector has only slightly increased but has declined in the manufacturing industries, and we have a forecast that in the course of the next year investment in manufacturing industry is likely to decline further.
The Government are certainly now, rather belatedly—for I think even some of them realise that it would have been better done six months ago—turning the tap on very vigorously in the public sector. We may argue about whether some of the investment they are encouraging in the public sector is right, but there is going to be a 10 per cent. increase in the public sector, and that is wholly to be desired and should unquestionably be useful from the standpoint of this country's economy. But it is unfortunate that they have waited so long, and I question now whether, in the absence of a
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strong response from the private sector, they ought not to increase further the investment rate in the public sector of the economy. Now, it surely must be agreed, is the time when we ought to be building more houses, more roads, more schools. When we look at the figures we do not find the increases striking.
I appreciate that it is very difficult to turn the tap on quickly, and here again my criticism of the Government is that they turned it off much too vigorously before. They were obsessed with the fear of inflation and over-investment, and now it is difficult to turn it on as it should be done. We find. too, that some of the investment is not going into quite such important fields, from the economy's point of view, as we should like. Obviously it is satisfactory that new shops, new supermarkets and new offices are going up. More competition, certainly in the retail trades, does the country no harm at all. But what we want is more production, and it is there that, so far, we do not see the signs of the improvement that we should like.
It is against this background that we have to look at the Government's Budget. Even if the noble and learned Viscount, Lord Hailsham, were here, I should not propose to add up the various suggestions for reductions in taxation which have come from his side of the political fence. It is a matter which he enjoys indulging in, but it has little significance. What we have to decide is whether the Government's proposals are calculated to produce the increased production that is necessary in as dangerous a situation economically as the country has been in. It has eased at the moment, but until we get this increased production, until we can compete and match up the efforts of other countries, our situation will continue to be as dangerous as ever it has been. I question whether the concessions which have been made in the field of income tax are calculated to achieve this particular aim. I am not sure what particular economic purpose they are intended to serve—whether these concessions are intended to be of a kind that will be spent in order to encourage more consumption and therefore increase demand. If that is so, I would say that there are more certain and effective ways of distributing this money either by reductions in

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national insurance contributions or by giving it to the old age pensioners—though I do not propose to follow that line. Or is it intended that the money should be saved?
The Government have given very little indication of what they expect the individual citizen to do in this matter. In a sense, this particular proposal, acceptable, as it is, to those of us who benefit considerably from it, is not one, other than in a general psychological climate of optimism, that directly contributes in the way that a more firm direction of investment and planning of investment does to the strengthening of the economy.
I must now turn, in particular, to the remarks of the noble Viscount, Lord Hailsham, with regard to an honourable friend of mine, Mr. Jay. I found his remarks and his attempt to get out of the position into which he got himself (I should use stronger words if he were here) altogether unworthy. He quotes from what Mr. Jay said, and he quoted previously what the Paymaster General had said. I should like to repeat this because, now that it has come before this House and we have broken our rules, we may as well see that justice is done. The Paymaster General said [OFFICIAL REPORT, Commons, Vol. 603 (No. 89); cot. 397]:
"I also asked"—
Mr. Jay—
"whether the party opposite intended to oppose relief in Income Tax."
At this point the noble Viscount, Lord Hailsham, quoted Mr. Jay. He said:
"And I am telling the right honourable Gentleman that at present we do not think that part of it was necessary."
It is quite clear that the intention of the noble Viscount was to give the impression that the Labour Party were opposed to income tax relief. If we look at the context of the speech we find that it was not related to income tax relief but was concerned with company profits. It did not at all relate to the relief of personal income. I do not propose to follow the whole of this argument through, and whether it would be better to give such income tax relief in the form of earned income relief or relief in respect of children. But it certainly was, I think, an unworthy observation by the noble Viscount. I am sorry he is not here so
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that he could perhaps withdraw his remarks.
I should like to end on this point. We find ourselves just as much in the vicious circle of inflation, deflation, balance-of-payments crises, balance-of-payments surpluses. I must confess that I do not know how we get out of it, Nor, I believe, do the Government. It has been the contention of those of us who believe more in planning than does the noble Lord, Lord Grantchester, that at least we ought to try to get some priorities into our national economic affairs. I believe that up to a point the Government are trying to do that, but they have dismantled some of the instruments by which that planning can be done. The gaining of freedom for which they have claimed credit is certainly not reflected at the moment in a healthy and buoyant economy, and I would urge that the Government should consider, as certainly a future Labour Government will have to consider, whether or not a time may not come when we shall have to restore some of those controls, particularly over Capital investment, and particularly to ensure that we get the production that is necessary if this country is to pay its way in the world; if it is to keep up with the Russians, the Americans, the Germans and the Norwegians, and with all the rest whose economy is going ahead, and is to play its part not only in bringing a good living standard to our own people but in preserving the peace of the world.
5.54 p.m.
LORD BALFOUR OF INCHRYE: My Lords, there is only one aspect of the economic position which I would ask your Lordships to consider for a moment. Before doing that I must say that I feel very sorry for any Chancellor of the Exchequer who before a Budget is beset by representations from those who feel that they should obtain relief and who is abused afterwards by those who have not obtained relief. I feel sorry for the present poor Chancellor of the Exchequer. I have read the debates in another place; I have listened to the debate here to-day, and I have listed for the benefit of your Lordships some of the reliefs which the Chancellor of the Exchequer was told he should have given.
It is said that he ought further to have reduced purchase tax; he ought to have abolished entertainments tax on cinemas;

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he ought to have reduced the diesel oil tax oa passenger vehicles, reduced the petrol duty, reduced the stamp duty, abolished prescription charges in regard to the National Health Service, abolished the charges for teeth and spectacles in the same Service, increased the earned income allowance, increased family allowances, given higher pension benefits, granted higher unemployment benefits, increased State scholarships and restored the housing subsidy. That is a formidable list for any Chancellor of the Exchequer to have to consider. I have tried to think what, in the mind of the ordinary citizen, would be the definition of an ideal Budget. I submit to your Lordships that it would be a Budget which consisted of a series of reliefs for all, on a tax system that pressed on none. That seems to me to be the ideal which might satisfy the ordinary citizen. But I believe that in this Budget the Chancellor of the Exchequer has acted pretty fairly, and that it will obtain general assent from the great mass of the population of this country.
The one aspect that I should like to submit to your Lordships for consideration is that no Government and no Party policy can, of itself, order good trade for the country or give full employment. It can only create the climate and conditions in which industry can achieve this objective. I want to refer to one passage in the speech in another place of the President of the Board of Trade, when he was speaking of Britain's world trade position. He said:
"I ought perhaps to tell the Leader of the Liberal Party that we on this side of the Committee are not free traders, if that means the unilateral removal of tariffs and quotas."
Britain's economic policy is at present based upon a firm belief in nondiscrimination in world trade, coupled with the determination that, irrespective of anything that others may do, we as Britons will set an example to that end. F am not parading before your Lordships this afternoon the old issues of free trade or protectionism. It is not a time for those dogmas; we can leave those aside. But I believe that we have to look empirically at two questions.
The first is: how far, and for how long, can we maintain this purity of intention and purity of action in the face of the policies and actions of increasing discrimination that we see around us in the world to-day? Even the most ardent
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advocate of international multilateralism cannot say that the past year has been a happy one for the advance of liberalisation, if you look either at Europe or the United States, as I will show your Lordships in a moment. The second question that I would submit to your Lordships is: has the time come when we must think again about steadfastly refusing to make any move ourselves, in spite of discriminatory provocation? And, are we not, by so refusing, deliberately impeding the attainment of the fullest employment for our people over the next short-term period of a year or two years?
In his most interesting speech Lord Grantchester said that there were many factors ranging the economic world to-day which might work against our economy in an inevitable way. I believe that the existence of the growing discrimination against Britain is one of those factors. It is true that our dollar trade with America is up by 23 per cent., but in other directions discrimination is increasing in a dangerous manner. Take shipping. Maritime flag discrimination against this country is a matter of increasing seriousness. Forty per cent. of the shipping which now sails under flags of convenience is owned by the United States of America. In 1910, half the shipping in the world was registered in the United Kingdom. It has been going down ever since and today Liberia, which ten years ago had one ship, challenges Britain for first place with some 11 million gross tons. By the end of 1958 Liberia, Panama and Honduras had nearly 16 million tons of shipping registered with them. British shipping enjoys no kind of protection in world trade, not even within our own boundaries. Of the sixty-four countries with whom Britain trades, no fewer than forty have practised, in the past five years, some form or other of flag discrimination—bilateral treaties, reserving cargoes, preferential treatment in taxation, pilotage fees, berthing and so on. This is deliberate discrimination against this country. How long can we stand, as it were, on the dockside surrounded by unemployed seamen and see this happening and say that this is the right policy to stick to, irrespective of what other nations are doing?
We know the facts about the refusal of tenders in America on the grounds of

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defence and I need only mention them to your Lordships. We protest, but I guess that those needs will be reserved to the United States in the future under pressure from United States industry seeking to preserve those particular contracts for themselves. Then there are the woollen goods tariffs in the United States. In 1958 our exports were £2½ million down, and they are still dropping. We know of the quotas which have been introduced on base metals and oils.
Turn for a moment to Europe. Common Market discrimination against this country at the present time is very real. Last year 16 per cent. of our exports went to Common Market countries and this discrimination is going to hit us very hard. The European Free Trade Area project seems to be dead. It is unacceptable to us in the form in which Europe might consider it acceptable and it is unacceptable to them in a form in which we might offer it; so we now see arising a new economic menace to this country in the form of exclusion or partial exclusion of our goods, or through our goods being exported at grave disadvantage as compared with those of other countries.
Meanwhile the absorption of the labour in this country from what I would call partially expendable industries (in the eyes of the Government) like the cotton industry, into new industries, is checked. Opportunities for employment are lost because people cannot swing into these new industries which are being penalised through discrimination against this country, in disregard of the view of the right honourable gentleman the President of the Board of Trade that men should he able to go out of old industries into the new ones. That is being definitely halted at the present time and I believe it is one of the causes of the pockets of unemployment that we see.
Unemployment is, to all of us, a terrible problem, social and political. I see in your Lordships' House those who were in another place with me in the 1930s and if we had anything on our conscience for those years it is that we were so near the picture and never realised the tragedy that was going on around us. We must all accept a degree of responsibility and regret for those days, for there is about employment a
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dignity, a decency and an integrity which a man must maintain with his family and friends. It is something which I am sure all of us in all parts of the House will insist that we maintain.
Her Majesty's Government have accepted this policy of full employment, but I believe that in failing to give some consideration now to a degree of protection against this discrimination against our exports such as would enable us to check the growth of these pockets of unemployment they are not doing justice to their own policy. I believe we are liable to go too far and too fast unilaterally in liberalisation, although I am not against liberalisation of world trade. Surely the pace should be the pace of all rather than that Britain should be out in front, the pace-maker who exhausts his strength so that others may win when he is forced to drop out of the race. A move towards a reasonable degree of retaliation by us—I would call it perhaps not retaliation but adjustment of trading conditions—seems called for if over the next year or two we are to do justice to full employment. It is because of those words of the President of the Board of Trade, who seems to be going in the direction on which I addressed your Lordships for a few moments this afternoon, that I would ask you to support the view which I submit to the House to-day.
6.6 p.m.
LORD AMWELL: My Lords, I agree with the noble Viscount, Lord Bruce of Melbourne, that it is rather unfortunate that a debate on a Motion such as has been put upon the Paper should have consisted so much in a mere Party fight about the Budget. I believe that the question of the economic position of Britain, or, indeed, of the world, is one which is much more fundamental than the Budget. I remember the first Socialist Budget more than thirty years ago, when Mr. Philip Snowden took fourpence off tea. We spoke as if that had been the beginning of a social revolution. We have not had a social revolution since that time.
Important as Budget concessions and taxation are as a definite and immediate problem, those things do not really touch the question of the economic standing of the country. The question of Britain's economy goes much deeper than surface considerations which so often seem to be

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the basis of discussion of this question by others. The economy of Britain is what it is, and our prospects are what they are, not because of some fault or negligence in administration, not because one Budget stops expansion (whatever that might really mean), and not because one Budget is designed to stop expansion in order to save up for an electoral Budget next time. I really think that this House should be above that kind of nonsense. If we cannot be, we ought to be kicked out.
There is no argument there, because, after all, the question of whether or not a Government is acting rightly in its financial policy is one that can be debated on much more serious lines—and should be. Our economy and economic prospects are what they are because the assumptions on which all Parties rely really lack substance, and I want for a short time—I will not take longer than I can help—to challenge some of those assumptions, as one of the old school of Socialists who regrets the departure from Socialist principles. When, for instance, I hear a Socialist talk about "smashing other countries", as I heard just a few moments ago, it appalls me, and certainly confirms my feeling that we have gone a long way back from the old ideals which made the lovable Movement I joined very nearly sixty years ago.
I make no apology for endeavouring to get at the roots of the problem and I expect to find the roots where they should be: that is, in the land. Is it not remarkable that upon such a question as the position of British economy not a word has yet been said about the land of the country? The land of any healthy nation is the very basis of its economy. It should be the basis of its prosperity. In my own view (I want to be as modest as possible in the matter), among the many fallacies that are apparently accepted as axiomatic truth is the one that Britain cannot feed herself. All that we have been talking about is based upon that assumption. That is what we want foreign trade for; that is what we want all this export and smashing of other countries for, because we cannot feed ourselves. It is held to be quite unchallengeable. It has this amount of truth: if high-powered industrialism is our proper objective, our sole economic
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aim, then Britain certainly cannot feed herself. My case—and the case I should have liked to develop, but I must leave it for another time—is for a better balanced economy.
My noble friend Lord Chorley said in the debate yesterday that we had an excess population and excess industrialisation; we were over-populated and over-industrialised. If we are over-populated then we cannot be over-industrialised. The noble Viscount, Lord Elibank, in his Question that was answered this afternoon, quoted the Chancellor of the Exchequer to the following effect:
" … a steady increase year by year in our export trade is the first and essential prerequisite of a sound and expanding home economy and must he our paramount aim."
That is the kind of thing that I challenge. I do not think it ought to be our paramount aim. I think our paramount aim ought to be feeding the people and providing the necessaries and amenities of home life. That should be our paramount aim; and if it means we must have a vast industrialisation in the near future, I suppose with atomic power at the back of it, and if that has to be had because we are neglecting agriculture and because we are not using the facilities we have for production of food, I think that that is unsound economy. That is the kind of thing I want to say because the argument is petitio principii; it is begging the question.
I think it is a bad thing to be finally, if not exclusively, dependent upon this absurd process, a process of producing for export in order to buy food, in order to feed our people to produce for exports, and so on. I am not going to suggest an idealistic return to a simple life, or Rousseau's noble savage, or anything of that kind. I am not talking about 100 per cent. measures, but about trends and tendencies; and I think we are going in the wrong direction because we cannot and will not be able in the future to smash other nations and their trade. We must have a very different outlook, a more world co-operative outlook, upon the question of trade, and I want to say a word or two about that in a moment.
We now swear by mass production. Labour, Tory and Liberal have made the monster their god. Everything must go: joy in work, individuality in work, quality in work, beauty, sanity and, in a very fundamental sense, in my view, religion;

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and all because of an excuse which I regard to be a lie, that we cannot feed ourselves. If it could be shown that there is some truth in the statement, the question of Britain's economy takes on a very different aspect indeed. Remember this (and I think some of my Socialist friends ought to remember it too): mass production is for the masses. It was invented for them. The well-to-do would have nothing to do with mass production. They have the money to buy the best in production and quality, and the working class have not and never have had, and, if the present system continues, never will have. Let us be economic though the heavens fall !
But how far is it true that small production is uneconomic? I admit the necessity for mass production to a very substantial degree, and, of course, of foreign trade for certain definite purposes; but we take it for granted that small production is uneconomic. I should like just to give two personal illustrations of the fallacy involved in that, and I will give the reasons for the fallacy afterwards. I can go to a bootmaker near my office and pay ten or twelve guineas for a pair of shoes. They will be hand-stitched on the spot and made to measure wilt first-class materials. I can go on into Regent Street and buy a factory-produced pair for three guineas or so. But the quality pair will last me four or five times as long and they will be capable of repair many more times; that is one of the reasons for their lasting so long. I found that out when I was a subaltern in the front line, wearing shoes that had to undergo all that the front line meant in that war.
It will surprise many of my friends to know that mass production was condemned by Marx and Engels. They said that one man should master many jobs. That does not sound like the "closed shop", does it? I knew an agricultural worker, a cowman. He lived in a tied cottage; he knew a lot of jobs. He had turned his cottage into a modern residence, so far as circumstances would allow, even to building in a small electrical equipment. His bookcases were full of classics and "Who-dun-its", for he was a well-read man of catholic tastes, and the design of everything was good and of lasting value.
Let me disclose a secret. It is an axiom of the advertising profession, to
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which I belonged as a copywriter many years ago, that a thing costs five times as much to sell as it does to make. That is the standard of the advertising profession. It is not true of everything, of course, but relates to the average then and the average now of the standard article. That is why small production is uneconomic. If we are going to produce on a small scale for remote markets, of course it is uneconomic. But let me give an instance: a bar of household soap in those days, ex-factory at a halfpenny, sold at twopence-halfpenny. My cowman did not produce for sale. If he had produced for sale and remote markets he would have been in the bankruptcy court.
Consider an illustration nearer home to me. I had an acre of land behind a bungalow in London. Employing a little skilled labour, and enjoying a little spare time, I produced on that land all the fruit and vegetables my household could consume. I was not a trained agriculturist. I did not know any more than a cotton operative would know about agriculture or horticulture. But that is what happened—and for far less cost, in fact a little more than half the cost, of the same fruit and vegetables if had wanted to buy them in the shops round about, in a village or in any particular county. That is what I call "production for use". It is a cliché, but it is the best definition of Socialism I know, too; and I think that if that principle were just pressed to its logical conclusion we should find a better solution to the economic position of this country than anything I have heard this afternoon in our debate.
We had in that case a little non-profit-making society that obtained for us expert advice, arranged for some mutual exchange of products and superintended rotative use of small machinery. I opened some of its shows. That kind of thing happens all over the country. If you want to know what the expensive alternative to production for use is, go to Covent Garden at five o'clock or earlier—three or four o'clock—in the morning and see what it means. I know farmers who run their farms largely by a species of gentlemen's agreements, taking what supplies they want from each other with hardly a "by your leave", and employing labour for such things as hedging and ditching right through their separate farms. They settle accounts in

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a friendly way, over drinks at their local club.
I am trying to show there that the idea that small production cannot be carried on in this modern age is wrong: it can. If you get away from the terrific waste of the modern system of production and distribution, you can at least leave a margin, a field, for the better quality work, the handicraft work, and for the small cultivation of the land, which would do away with a great deal of the problem we face in regard to the question of our economic position. Voluntary decentralisation is not uneconomic; it is highly successful, within certain limits. Of course, production for markets more or less remote is likely to be very uneconomic. Small production cannot beat mass production on its own ground.
Let me give a potent illustration of what I am trying to say—I am sorry that the noble Viscount, Lord Alexander of Hillsborough, is not present, as I think he would appreciate the point. The co-operative societies represent a case in point. Here is a movement touching one family in every four: a quarter of the population. It owns and controls the means of production and distribution (that is a phrase I have heard before) and, on the face of it, ought to be a standing proof of socialism's superiority over capitalism, if such superiority there is. The only answer to that which I have ever heard made on behalf of the co-operative societies is that they are compelled to stock branded goods made by the big capitalist concerns. So are private trader firms: they have to do exactly the same thing. If co-operative societies are compelled to do that, it is because the members of the co-operative societies are not satisfied with the Co-operative Wholesale Society's products. That is all there is to that. But that is no answer whatever.
Take the Gaitskell Report. What does it suggest? It advises the co-operators to be more capitalistic, not less, to beat the private firms. That means, I suppose, smashing the private firms by adopting fiercer competitive methods. It virtually says, "Challenge them on their own ground." But it is not the function of the co-operative societies to beat the capitalists except by rallying people who believe in co-operation to their standards. Their business is to supply their members with
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what they need, and not to beat anyone. If there is sacrifice which is needed on the way—and I know some of the difficulties with which the co-operative societies are faced—then I say, "Make it". The pioneers of the Co-operative Society Movement and of the Labour Party made sacrifices in the earlier days. To-day everybody wants immediate cash dividends, and they think of the sacrifices as being done and as a piece of past history.
Even apart from that, my Lords, beating private enterprise is nonsense, for, if it comes to fierce competition, private enterprise is well able to take care of itself. In pre-inflationary days I made calculations on the price basis of the time showing that the Co-operative Movement could have supplied all its members with milk and bread free for the money it spent on dividends and political flummery. I know that that was a very impractical proposition; it was not intended to be very practical. I did not expect that such an idea would be taken up; but there was the fact. There is no idea of socialistic production for use at all; always the idea of dividends and profits and the success of the very capitalistic methods that we are supposed to condemn.
So we come back to this question of high industrialisation versus quality farming and co-operative manufacture—and I stress manufacture: not what Engels called, in scorn, "machino-facture", for the right purpose of a machine is not to break the back of the world market in mousetraps but to remove the necessity for backbreaking toil at home; just as the proper function of foreign trade is to effect the exchange of goods which each country can produce with the most advantage and facility as a true surplus, and not to produce a scramble and gamble. It should not be a question of fighting foreign countries for our very livelihood while we neglect our land.
There are groups of well-informed persons who flatly reject the doctrine that Britain cannot feed herself. Aldous Huxley estimates that our real economic requirement in mass production is one-third of our total production. That, according to him, is our real economic requirement. John Betjeman would put it at rather less; others at more. Laurence Easterbrook, a farming expert, points out that mass farming is bad farming, and

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that a good husbandman "mothers" his fields as children are mothered in a good home. He knows his crops, field by field, watching their growth, nurturing, cropping, and so on, at the right time. We prefer to pay five times to sell gadgets and gimmicks: that is one of the great virtues of our time.
But farming must be made to pay. Crops are raised for sale in markets more or less remote. There are chemicals available to poison food and rot soil. Sir Edward Mallenby, the President of the British Medical Research Council, says that there are 700 chemicals used in the production and manufacture of food, and he says that the majority of them have not been tested for their precise toxicological effects upon the human body. That is one of the prices we pay for the system which we all accept. We accept it, and call ourselves Socialists in accepting it. The Government have to subsidise farming to meet the multifarious charges of transport and middle costs, and to recompense for risks run in market fluctuations. My cowman avoided that, and I avoided it in my garden. The result was that I realised it was possible to make a much better use of the land of this country than we do; and I believe that first things ought to come first.
By "production for use", I do not mean the monstrous thing called "State capitalism". I believe it is reasonable and practical to have a field, at any rate as a foil to the complete mechanisation of life; a field where this smaller quality production exists, and where we do produce for ourselves and make the best of our own land and of our own country. That is the best thing we can do, so far as it is practicable to do it: although, of course, it depends upon the will of the community. But I do not ask for the moon. I am not putting up a case for what Marxists call a sudden jump from quantity to quality; that is to say, a revolutionary change due to the release of pent-up forces. All pioneers are Utopians., dialectical Marxists no less than others. We in the Labour movement are no exception to the rule—the dawn had to break; England had to arise from its slumbers—although we are rather less dialectical in our thinking. I am not impressed by the usual slick talk about
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"progress": I want to know what kind of progress. There was the progress of the Gadarene swine. We cannot put the clock back, we are told. I once said in this Chamber (sotto voce, but loud enough to shock some of my immediate neighbours), "Try another bloody war and see!" I do not apologise for the use of the word, because wars are bloody. Values are not altogether determined by almanacks, clocks, or railway timetables.
I agree that we cannot refuse to face the increasing automation of industry and materialisation of life. I merely do not wish to see these things conquer the soul of man completely by totality and surrender. I desire that there should be a field capable of expansion according to the people's will, in which freedom shall be at its maximum; and I do so because I realise that, with all our talk about democracy, it is impossible to have freedom, real democracy, in high con- centrations either of capital or of men. Rule by majority is all very well, but I no more believe in the divine right of majorities than I believe in the divine right of kings. Something more is needed. But if there is to be majority rule for convenience, and it is called democracy, let it be as decentralised as possible, so that it will involve the maximum number of people and thereby be more nearly democratic.
Now what about unemployment? I will not keep the House very much longer. The last thing I want to do is to speak about the question of finding work. I think we want to find happiness, to find the joy of life for all people, then think about work as a means of obtaining it. What about employment when nuclear power invades industry? We talk about super-production, and even professed Socialists join in the chorus of anticipation of the good time coming. But you cannot sell super-production when it becomes universal. Socialists ought to know that unrestricted production would bring the system of production for sale to an end. But, of course, there will not be unrestricted production, even with all the talk about atomic power making a heaven on earth for everyone. You are not going to sell your products if everybody else has the same atomic power available and can turn out surplus goods, as they will do. This is the sort of problem we should be debating.

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The question of unemployment calls to my mind my visits to South Wales during the great depression: the dreary rows of colliery cottages on the hillside and the queues of idle miners outside the exchanges. Those hills used to grow sheep that wandered down into the valleys and into the shops and houses. The idea that the working lives of these men should be spent in God's sunlight and air never occurred to the planners. It seemed to be assumed that growing food was harder and less interesting than digging coal, as it is assumed that agriculture and forestry cannot be so easy and attractive as steel-smelting and ship-wrighting. It was my noble friend Lord Lawson, who is not present at the moment, who said, with lyrical sincerity, that miners are intensely proud of their industry. With all respect to him and the miners, what is there to be proud of?—proud of being troglodytes for the whole of their working lives? Surely mining is one of those cases where the Marx-Engels doctrine of alternative work instead of extreme specialisation applies, if men are to be men.
I have mentioned the estimate of one-third high-power mass production in overall industry. If we are to go on to gain the whole world and lose our own souls, that cannot be helped. Take the cotton industry, that has just been mentioned. There we have a definite policy of contraction coming about. But how much contraction?—fifty per cent.? I do not think so much as that. What is the matter with the idea of half-time working —half time in the cotton mills and the rest of the time producing food? Probably the cotton workers know as much about it as I did, and I have told your Lordships what I was able to do in a small garden on the outskirts of London. Why not make this universal? The Government subsidise agriculture—and I have given the reasons: not for providing food for the people but for providing the waste that goes on intermediary between the producer and the remote market, the consumer. Why not subsidise the consumer for a change? Why not make it a question of training in order to get immediate results? Of coure, we shall not get immediate results; but that is where the subsidy comes in. I think that this is a better solution than taking vast numbers of workers by the scruff of their
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necks and putting them somewhere else and thinking that you have solved the problem of unemployment.
I think that here we have a practical example of the case I am trying to make out. We are neglecting the land. The fact that the subject has not been mentioned in this debate until I mentioned it justifies my complaint on this matter. There is supposed not to be sufficient land in this country. It is alleged that Britain is over-crowded, as my noble friend Lord Chorley said. I do not believe it. It is all relative, of course, and depends on what we are talking about, but still there is an acre of arable land, cultivated and uncultivated, available here for every man, woman and child. There are four acres upon the average per family. Compare this with the half acre per the much larger family in China. If we were suddenly to turn vegetarian, which I am not advocating—I am a good trencherman myself—it would be possible for us to feed ourselves on less than half that. It is a pity if the meat we demand cannot be produced on the rest. At any rate, there is virtue in the principle of first things first, and even without foreign meat we should not starve in an emergency.
It seems to me monumental folly, and extraordinary for Socialists, to put their faith in the possibility of any nation in a modern age conquering and retaining—or as the noble Lord, Lord Shackleton, said "smashing"—the rest of the world to maintain a monopoly of world markets. I submit that, more than anything else, the trouble with British economy is that it is ill-balanced in the face of that fact.
6.37 p.m.
BARONESS ELLIOT OF HARWOOD: My Lords, I rise with some trepidation to follow the noble Lord, Lord Amwell, because he has introduced into this debate a number of new subjects which have not been touched on before. I should like to say how much I agree with him on the fact that he is the first speaker to introduce the subject of agriculture into this debate on economics. Were the hour not so late, I should feel tempted to argue with him about his views on agriculture. I have had some experience as the farmer of a considerable amount of land. However, I think that would be out of order, and must be left to be debated perhaps at some future date. I would also say

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how much I agree with him that agriculture is a matter of the greatest importance in British economy. I am sure that there is nothing more unfortunate than to talk of "smashing" trading nations with whom we trade. We ourselves are a great trading nation. I did not hear the noble Lord use the word, though I am sure that he must have done so, otherwise the noble Lord, Lord Amwell, would not have quoted him; but I would say that it was a most unfortunate and unnecessary word to use.
I should like to thank the noble Lord, Lord Pethick-Lawrence, for introducing this debate and to say with what admiration I listened to his speech. His facility, his long years of experience, and his way of putting things made it an extraordinarily brilliant speech. I have listened to the whole of the debate and intervene only because I think that in most families in the modern world the housewife is considered to be a kind of Chancellor of the Exchequer, and that to-day there are many millions of housewives who are very grateful to the Chancellor of the Exchequer and for his Budget. I was not present in another place when he made his speech but, as millions did, I listened to him on the television. There is no doubt at all that his account of our present economy, and of our production and financial stability, was an encouraging one to many people.
After listening to the debate to-day and reading the debate in another place, it seems to me that some of the Opposition Members are also quite pleased that our financial position is as it is to-day. It seems to me that the quarrel (if there is a quarrel) between the Parties is not on the fact that there is a large surplus, but on how that surplus should be distributed. I feel that the all-important thing is to get the surplus. You cannot divide the proverbial political cake unless the cake is there, and it is to the Chancellor of the Exchequer that we owe the fact that there is a considerable amount of surplus which can be divided. I, for one—and I am sure there are many others who think as I do—feel indebted to him for that, and I want to say so.
We had from the noble Viscount. Lord Hailsham, an entertaining description, in which I followed him, and as to which I entirely agree with him, on the subject of the relief of purchase tax and the items
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chosen for relief on this occasion. Purchase tax, of course, is a very irksome tax. But what tax is not? It is always most agreeable when taxes are removed. I think the noble Viscount was quite right when he talked of the extraordinary number of people who use what in other periods of our lives would have been thought luxury things, and who to-day look on them as matters which enter into everybody's household budget. Possession of a washing machine, for instance, seems to me to be universal, although I do not myself have one. I was much taken aback the other day when one of my nephews said to me: "You cannot live without a washing machine". I have lived for a long time—much longer than I should like to admit to your Lordships—and I have never had one. But the young affirm that it is impossible to live without a washing machine, and I have no doubt that they are right, as so often those of us who are older find ourselves in the wrong. Millions of people have television sets—I, too, have one of those—and it is indeed agreeable to find that some purchase tax has been removed from them.
But the most interesting thing about purchase tax is the question of the motor car. Although motor cars are expensive. one is astonished at the number of people who have motor cars—and quite rightly; I agree with the noble Viscount, Lord Hailsham, on this—and look upon them as one of the important items in their lives. I think it is a good thing that we should have a reduction in the purchase tax on motor cars, which will beneficially affect millions of people. The matter of cosmetics and lipstick, which the noble Viscount raised, is again a matter which affects practically all families, as I am sure your Lordships will agree. So I think the selection of items for relief in connection with purchase tax has been undertaken with imagination, and I think these cuts will be appreciated by millions of people.
The matter of cuts in income tax is one which we all appreciate, and the fact that it now covers practically everyone in the country, if we include the P.A.Y.E. taxes, means that everyone has a chance of relief. When, again on the television, I saw Mr. Harold Wilson talking in terms of not relieving the lower income groups, he did not say, what is indeed true, that

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since a married man with two children and an income up to £12 a week does not pay tax, he cannot be relieved; and that for a man earning even up to £1,000 a year (which I think was the figure quoted by the noble Viscount, Lord Alexander of Hillsborough) there is a considerable reduction in taxation. All these reductions and all these assistances to families and salary owners in the country would not be possible but for the fact that the Chancellor of the Exchequer has made possible a Budget surplus.
I know that comparisons are odious, and in this House we do not make many political comparisons, but I cannot help thinking that we are entitled to claim some credit for, for instance, the enormous increase in the Savings Movement. I listened, as I am sure all your Lordships did, to the interesting speech of the noble Viscount, Lord Mackintosh of Halifax. I believe that to-day the Savings Movement is higher than it has ever been under any Government.
The number of people who to-day live in new houses, of children who work in new schools, and the success of our exports, all arise from the monetary policy that we have been discussing to-day. When we hear, as we did only last week, that the sales of British cars in the United States are higher than they have ever been before, surely this is not stagnation—a word that has been used once or twice in this debate. If, some ten years ago, anybody had suggested that we should sell British cars in the United States of America, the home of the mass-produced motor car and the birthplace of Mr. Henry Ford, on the scale that we do today, I wonder what would have been said of him. The old phrase about "carrying coals to Newcastle" would have been on everybody's lips. Yet it is a fact that to-day we are selling more motor cars in the United States than ever before.
I should like to make mention of the country in which I live, and particularly know, which plays a part in the United Kingdom economy—namely, Scotland. There the unemployment figures have been giving us much concern, but in February and March of this year there was three times the normal fall of unemployment figures in Scotland as compared with other parts of the country; and to-day the proportion of
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unemployed is down from 5·4 per cent. to 4·8 per cent. This is of great importance to us, and it will give us a chance to increase our production and improve our position. The help which has been given by the Government for the new steel strip mill in Lanarkshire is appreciated, as this will give employment to many thousands of people. Then the new factory building which has been going on in Scotland in the last year has provided new jobs for workers, and I believe that it will increase again this year. The new Forth Bridge, which if your Lordships travel North you will see is already beginning on each side of the Firth of Forth, will be of great assistance.
There is a new line which we have been taking in Scotland—and all this goes to our stability and the economy of the country—in encouraging the start of new firms and factories. There is one that I know of in particular in a small town on the Borders, where we are building a factory (and in this case "we" are the County Council of Roxburghshire) to let to an American firm, who are coming there to produce high-precision tools; and this will be the centre of their European market. That, I think, is enterprising, and we are able to do this because of our present stability in the country. In a further area, in the North, in the Burgh of Peterhead, there is another American factory starting up, and again this will help to bring new work to the people. All this shows that, at least in the United States, there is great faith in the stability and soundness of British economy. I make no apology for mentioning Scotland in particular, as Scottish affairs are an integral part of the economy of the United Kingdom, which is what we are discussing to-day.
We have had some discussion, too, about the old age pension rates, and about the difficulties and the challenge which has been made to the Government on the subject of old age pensions. I should like to support what the Chancellor of the Exchequer said in his television broadcast, and as the noble Viscount, Lord Hailsham, has said to-day, that it has never been customary for the Budget to be the time when these particular questions of retirement pension are introduced. When I listened to the Opposition on the television I wondered whether a Labour Chancellor of the Exchequer would have

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used the occasion to deal with this particular subject. I rather doubt it.
The aim of the Budget, and the aim to help old age pensioners, as well as everybody else, was put by the Chancellor of the Exchequer in his speech when he said [OFFICIAL REPORT, Commons, Vol. 603 (No. 87) col. 45]:
"The Committee will agree that no economic expansion is secure unless it is founded on a strong and stable currency. That is an article of faith and a basis for policy which we in the United Kingdom must always keep steadfastly before us."
When we think of helping all sections of the community, including old age pensioners, there is no way we can help them better than by maintaining and increaiing the value of the pound by which they and everyone else will benefit.
When I listened to the noble Lord, Lord Balfour of Inchrye, enumerate the number of taxes which various people have asked the Chancellor of the Exchequer to remove, I realised how difficult the task of any Chancellor must be. I suppose we all have our own hobby horse or "taxation horse", in which we are particularly interested, or a tax we want to get rid of. I myself have only one plea, which I hope on another occasion a Conservative Chancellor may be able to fulfil, and that is to abolish the remaining amount of cinema tax. That industry has had great competition from modern developments and is suffering to some extent from the competition. It is not only an entertainment but an art, and an art in which we in Britain, with British films, take a leading part. Finally, I feel grateful to the Chancellor of the Exchequer because I think—I believe one noble Lord said this—that the job of a Chancellor, and the job of a Government, is to provide an economic climate in which industry, agriculture, trade, and employment can increase and flourish for the benefit of all the nation. I believe that this Budget provides such a climate. I am grateful to the Chancellor, and I believe that the nation will be grateful too.
6.53 p.m.
LORD SHEPHERD: My Lords, I hope that the noble Lady will not think me discourteous if I do not follow her in her speech this evening. Time is getting on, and in view of the strength of the House this evening I think the sooner I
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sit down the better. Earlier this evening the noble Viscount, Lord Hailsham, had great fun at the expense of my noble friend Lord Pethick-Lawrence in regard to driving a car. My noble friend had described Government policy as being like driving a car on the hooter and the brakes. I am sure the House will be conscious of the fact that my noble friend did not refer to the driving wheel. The wheel, as we know, is the means of directing the vehicle in the direction in which the body wishes to go, and I believe that the reason why my noble friend left out all mention of the wheel was because it is Government policy, and the declared faith of the Conservative Party, to have no truck with controls and directions. I should like to tell a little story which I find similar to Tory economic policy. It is the story of a little child riding his two-wheeled bicycle round and round the garden. As he became more courageous he came round with his hands off the handlebars and said, "Look, Mummy, no hands." The next time he came round a very different look was on his face. He then said, "Look, Mummy, no teeth."
An example of Conservative policy which has brought us boom and slump over twenty or thirty years of recent history is one where we have a period of expansion and a period of regret—a period of expansion in 1954 and 1955, and then the regrets and difficulties of 1957. When one views the manoeuvres of Her Majesty's Government and the Conservative Party in recent weeks, one cannot help feeling that the Government are now steering their ship towards the General Election, laying a vast and frothy smoke-screen which, if looked at through the rose-tinted glasses of the last Budget, transforms the smoke-screen into a mirage of prosperity. It is true that when one looks at the balance sheet which was laid before Parliament last week, there are certain figures which prove very satisfactory. They have been mentioned on numerous occasions this afternoon, and one could hope from those figures that our economic difficulties are behind us and that we are on the verge of a period of expansion.
I should like to look briefly at those figures, and first of all at the trade balance. The noble Viscount, Lord Bruce of Melbourne, dealt fairly with this subject.The balance has been largely

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brought about not by reason of any remarkable increase in exports by this country, but by reason of the fall in the volume and value of imports, which has given us a considerable advantage, to the disadvantage of the primary producing countries. It is subject to debate whether. in the long-term, these advantages, gained to the disadvantage of the primary producing countries, will be for the benefit of this country, for we must remember that over 50 per cent. of our exports go to these primary producing countries.
Secondly, in regard to the growth of reserves, it would be interesting to know—I acknowledge that the reserves have grown—what percentage of the growth has been due to loans and grants made by our allies, special payments made to this country in the defence field and, in particular, the sale of national assets such as the Trinidad Oil and the shares of other United Kingdom companies. The fact that we acquire dollars for the sale of these assets may give us a more liquid position, but it does not make us any stronger, for we have sold an asset. I think that the House would welcome the flow of overseas capital, in particular that of the United States, into this country, but we should look carefully at all these transactions and every once and again take stock. According to the evening paper, we have acquired in three transactions—the Trinidad Oil, the British Aluminium and the proposed Timken deals—£220 million, which has come into our reserves. It has created more liquid assets; but is the country any better off for the sale of those assets?
The House, I am sure, will have read in this morning's paper about the proposal of the Timken Roller Bearing Company of America to acquire the remaining shareholding in the British Timken Company. The original suggestion, as I understand it from the report, was that there was to be an exchange of shares, but this was rejected by the Bank of England. Could the noble Earl in his reply this evening give us the reasons why this decision was made? It surely must give concern when there is a sale of a national asset. This company, I understand, is the biggest manufacturer of roller bearings in this country. Roller bearings play an important part in many kinds of machinery; they play an important part in exports. It is reported
724
in to-day's Daily Telegraph that no changes will be made in the British management, but the 1951 agreement—I presume that is the agreement between the two companies, under which both companies are free to sell and manufacture under the same mark in competition anywhere—will cease to operate. I think it is a very serious position if American capital is acquiring full control of a British company and, by a policy decision made in the United States, preventing that company from competing in our export markets. I think that the Treasury and the Government must look at these transactions very carefully.
The other point I wish to make is in regard to export trade. The noble Earl will remember that in the last economic debate I raised the difficulty of credit in the export trade. I said that exporters were finding great difficulty, increasing difficulty, in providing credit in overseas markets, and I asked whether the Government could persuade the Export Credits Guarantee Department to take a more lenient view in its demands that exporters should insure all their cargoes. The noble Earl was very good; he wrote and explained that if an exporter need insure for only a particular market the rate charged would be well over 5 or 6 per cent.
The political and financial risks involved in export trade are growing. Credit is being given very extensively by countries like Germany and the United States. To-day it is not a question purely of price and delivery; it is a question of giving credit. Many a manufacturer, many an exporter, perfectly willing to go into the export market is frightened of the political risks apart from the financial risks, and I can tell the noble Earl that there are a good number of confirming houses or credit houses who have been financing overseas shipments, particularly from Yorkshire, and who are seriously considering withdrawing from the export market because they find that they can use their money to far greater advantage in importing into this country and financing home trade. I would ask the noble Earl once again to see whether it is possible for the Export Credits Guarantee Department to take a broader view. Not all markets are difficult, but unfortunately the number of markets which

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are causing exporters concern is increasing, but we still must trade there.
My last point is on the same subject and that is on the question of freight rates. We are facing, as we know, great competition from Europe, not only in textiles but in steel, and exporters are finding that the high freight rates demanded by conference line steamers sailing from the United Kingdom are putting them at serious disadvantage with their Continental competitors. The Daily Telegraph this morning reported a case: if you send steel bars—which was a good British export—direct from London to Havana at agreed shipping conference prices the rate is £7 18s. a ton; yet between Hamburg and Havana the rate is £4 I5s. a ton. If you are quoting an overseas customer for steel, I would suggest that if your f.o.b. value was the same in Germany as it is in the United Kingdom you would lose your contract because of those freight rates. From London to South American ports the rate is £9 a ton, but from the Dutch and German ports the rate is £3 5s. a ton. This is a very serious matter. We well know that competing countries are subsidising their shipping; we well know that the cost of operating ships is very high; but if the freight rates remain high and kill exports, eventually we shall kill the shipping industry. I have no basic suggestion to make to the Government other than to ask them whether they will look into this position, because we know that the position of the shipping companies is difficult but we cannot allow a state of affairs to rule that if goods go out of British ports they go out at a disadvantage compared with those from the Continent.
We have had a very interesting debate. I thought myself that the most impressive speech, if I may say so, was that of the noble Viscount, Lord Bruce of Melbourne, at least as far as I was concerned. He is a man who is interested in export and overseas trade, and I thought he brought in an air of realism. We have to fight to maintain our position in the export markets. We shall not maintain it purely by stimulating production and by stimulating home consumption. We know that hire purchase plays a very important part in maintaining home consumption. Credit is of vital importance to our export trade. I must say that I
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was extremely disappointed that in his Budget the Chancellor of the Exchequer gave no indication that assistance or concessions would be granted to the industries who are striving for export trade. If we do not have exports we shall not be able to import the materials which we need to keep production high and give our people a decent standard of living.
7.10 p.m.
LORD BARNBY: My Lords, I wish to pay a high tribute to the noble Lord, Lord Shepherd who has just sat down. Much of what he has said will have appealed greatly to all who have heard him. He dealt realistically with most of the subjects, but I would particularly thank him for the manner in which he dealt with the export trade and the necessity for combating the arrangements made by other Governments to help their traders. Much has been clone by Her Majesty's Government but, as he has made clear to us, there is scope for much more.
Returning, as I did last week, from seven weeks in North America, I carried back with me, as anyone else would have clone, the happy realisation of a change in the climate of thought and the climate economically compared to that existing a year ago, or even six months ago, when I was there. There has been a complete change of atmosphere; the so-called recession is forgotten, and all thoughts are again on an expanding economy. That carries with it a progressive fall in unemployment. But, of course, there, as everywhere else, it is clear that a recession in trade has the ability to produce the same volume with a much reduced personnel—the same increased work load and, of course, with the advantage that has occurred in most places, of increased equipment and modernisation. If history is any guide, that must react throughout the world, and there is good reason to think that the tendency is now to an expanding economy and better employment.
To turn to the Budget here, surely the presentation of the Chancellor of the Exchequer will have heartened this country, and we seem to have grounds for hoping that the improvement will be a progressive one. It seems interesting that the statistics, particularly in North America, are proving that the recession of the past two years has come mainly

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from a de-stocking movement. As to the statistics in North America, in Canada they are very clear, and I would quote from the report from the Prudential Insurance Company of Canada that
"While the gross national product fell by 4 per cent. from the peak of the 1957 level to the bottom in 1958, the consumption of all goods and services fell by only 2 per cent."
That shows two things—how much sentiment enters into it, and how great is the need for good statistics.
I want particularly to refer to a point raised in this House in a debate two years ago, on the policy of the then Chancellor of the Exchequer of using monies raised by taxation from public companies and private individuals for the financing of nationalised industries below the line. The presentation of it by the Chancellor was not quite clear, and I hope that in reply the noble Earl (to whom I have given notice of this point) will give some clarification. The policy that was criticised was that of using a surplus for financing the expansion or losses of the nationalised industries. The policy then recommended appears to have been adopted, and now they are to be financed by the monies raised by the Exchequer. The noble Viscount, Lord Hailsham, reminded us that the sum needed to be raised was somewhere round about £720 million. I hope that the noble Earl, Lord Dundee, will be able to indicate that some, if not all, of the nationalised industries will be required to go direct to the market, like any other undertaking, and to show the public a record of their performance; and on the strength of that, but with State guarantee, will indicate the reasons why they want these large loans and what has been their record of profit or loss.
The noble Lord, Lord Balfour of Inchrye, dealt at length with discrimination; and with all he said I found myself in agreement. But it merits being referred to again. The angle of it that I particularly want to raise is prompted by thoughts of G.A.T.T., which has been so often denounced as being too rigid. I should like to quote the retiring Chairman of the Tariff Board of Canada, Mr. Hector Mackinnon who, after twenty years' experience, admits human fallibility and the fact that the bindings were too rigid. Indeed, I would add that a new outlook is needed altogether in relation to Com
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monwealth Preference. Returning to the subject of discrimination, one hears a lot about that with regard to the United States. Of course there are grounds for criticism. They do many barter deals which are discriminating, in finding means of disposing of agricultural surpluses, by payments in the currency of the buying countries. All those things are against the intentions of G.A.T.T. We have the restriction of zinc and lead, and recently of Canadian oil imports into Canada.
The export of automobiles from this country was referred to by the noble Baroness, Lady Elliot of Harwood, who reminded us of the high exports from this country to the United States of America. I am venturing to ask, in view of all this talk of discrimination all round the world, and our criticism of the United States: is it not about time that we removed the discrimination which prevents imports of American automobiles into this country? Surely our high exports are due to the fact that our wages are so much lower than theirs. I would add that we should import from United States only automobiles of rigidly limited size, because obviously some of their automobiles are not suitable for our roads.
In tariff-making, matters continually arise which show the need to recognise that the approach on tariffs on consumer goods where the labour content in relation to weight is high should be entirely different from the approach in regard to capital goods where the reverse is the case. That point has to be faced at some time. The existing arrangements are being upset by circumstances which have been often quoted and are known to all, but it seems that the capital goods industries have the greatest influence in the making of tariffs. It must be remembered that unemployment is high in the textile and other consumer goods industries, also.
I am glad that the noble Lord, Lord Amwell, referred to the cotton industry—and I would add that I have no personal interest in that industry—although I do not agree with his solution of putting cotton workers into agriculture, because I do not think that that would be very practicable. There is no doubt that the cotton industry is an example of where rationalisation is needed. May I quote

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from this morning's The Times? Mr. James Ewing, chairman of one of the large corporations in the textile industry said:
"There may have to be fundamental changes in the present horizontal structure, the way for which can be cleared in the first instance by cutting out excess capacity in each of the horizontal sections and operating the fewer units on a full capacity scale."
It is in that connection that I would refer with gratitude to the increase in investment allowances made by the right honourable gentleman the Chancellor of the Exchequer; but I am going to suggest that the Government's thoughts of giving general assistance to steel should be extended to textile industries also. There needs to be still larger subvention for buildings, because it is no good putting new equipment into old buildings. To get the highest advantage from new equipment it must be in the new, single-storey buildings.
I am glad that I find myself in the position of being followed by the noble Lord, Lord Wilmot of Selmeston, because he is well informed on all these matters; and he will, I hope, permit me to add that, in addition to efforts by the employers in bringing about modernisation in practice and performance in all ways, there must be recognition by the trade union organisations of the fact that restrictive practices should no longer be permitted to retard the abandonment of old-fashioned, single-shift operation. The installation of new equipment in new buildings must be accompanied by multi-shift operation, so that the greatest advantage of cheap costs may be acquired. There have been suggestions that these many proposals in the Budget may be either inflationary or the reverse. The trade Press seem to be confused about them, but those who follow Reader's Digest will perhaps not be in disagreement with its recent presentation: that inflation is like conception; there cannot be just a little of it.
Before I sit down, I should like to refer to another matter, raised by the noble Lord, Lord Shepherd. He seemed to have disquiet over, if not actual dislike of, United States interests acquiring businesses in this country. I am among those heretics who are satisfied that the more American money that comes into this country the better. We need the dollars; and we get the advantage of their progressive industrial practices. I
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would add this: the noble Lord mentioned that many of the companies buying into British markets have large Canadian subsidiaries. That must surely help to link together the United States of America, Canada and Britain, and it is for that reason particularly that I support it. Having come back from Canada, where the improvement has been less rapid than in the United States, I would say in conclusion that there is evidence of improvement, although unemployment is still regrettably high. There is an opportunity to prove whether an inflow of immigrants causes unemployment or whether, as has been proved over past time in the United States, the more bodies there are in a country the more work they will give rise to. I am among those who subscribe to that latter philosophy. Anyhow, I feel happy to conclude on the note that Canada, that part of the Commonwealth which has such brilliant ownership and endowment of raw materials, is also gaining and can contribute very largely, as she will, to our own expansion.
LORD SHEPHERD: My Lords, may I just put one matter straight? I was not in any way criticising the flow of American capital into this country. All I said was that we should look at it, and also that we should not "kid" ourselves that we were necessarily gaining by selling assets to America for liquid cash.
LORD BARNBY: My Lords, I thank the noble Lord for that explanation.
7.28 p.m.
LORD WILMOT OF SELMESTON: Following the noble Lord, Lord Barnby, I too, feel that we should all do all we can to assist in the modernisation and equipment of our great industries. But I would say, in passing, that it does not greatly help in the matter of which he spoke—and we both serve the same great industry—that there should be a very large number of people out of work. Half a million unemployed does not make that problem any easier. Also, as the noble Lord knows all too well, a major enemy in this field has been the tight monopoly of plant manufacture which has held back the development of the British cotton industry and, to a certain extent, the one in which we work.
It is getting late and we have had a long debate, and I am glad that we are

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bringing it to a close in the spirit in which it was opened by my noble friend Lord Pethick-Lawrence, with, if he will permit me to say so, such distinction, such wisdom and such charm.
The noble Viscount, Lord Hailsham, defended the Government's economic record and the Budget of last week on the grounds that it followed Keynesian principles. I am bound to say that I do not think it does; and it is because it does not follow those principles that we largely think that it is a poor record, of which I do not think many people can be proud. There is nothing in the Keynesian doctrine which requires the Government to wait while the economy decays to the point of half a million out of work before steps are taken to correct it. If what is being done now is right, it was certainly right six months ago; and surely the policy of the Government, if they accept the tenets of that very great man, is to feed the national economy with a steady diet of nourishment when it seems to be showing signs of languishing; not to wait until it is in a very bad way and then to administer pep pills, probably to be followed later on by tranquillisers, as we had on the last occasion this thing was done. That really is the gravamen of our complaint, and it has been stated so well already that I am not going to detain your Lordships by stating it all again.
But it is a fact that the Government have not only created very great hardship among a very large number of people by leaving the action so long, but have, let us face it, put in some jeopardy the success of the policy upon which they are now embarking, as they did last time. No one hopes more than we do that they will get through with it, and that we shall succeed in building up again our productivity and our prosperity. But they have taken some chances by leaving it so late and, I think, by administering the remedies in the wrong way. I should like to say just a word or two about this latter part of the reason why we cannot support the Government's view.
First, income tax. It is quite untrue to say that we on this side of the House are opposed to tax reductions, and I really must ask the noble Viscount, Lord Hailsham, not to quote the speeches of
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Members of the other place in this House without notice and then to base his attack upon the Opposition here on those quotations, because it is not fair. The speakers are not here to reply and we do not know what was said. It is particularly wrong, as in this case, when it was not only a misquotation but a complete travesty of what the honourable Member for Battersea really did say. I have obtained the House of Commons Hansard and looked up what he said, and I beg your Lordships to forgive me if I make this point, because it seems to me important.
The noble Viscount, Lord Hailsham, said that Mr. Jay, when asked by a Conservative Member whether he disapproved of income tax relief, replied that he did not think it was necessary, thus conveying to this House the impression that this honourable Member, a leading Member of the Labour Party Front Bench, and a brilliant and leading economist, had spoken for the Party when he said he was opposed to reliefs of income tax. Now what did he say? I am going to quote, very briefly, because that is all that is required. Mr. Jay was talking about the fact that the Government had collected another £200 million from the working people by way of an increase in the National Insurance contributions. He went on to ask, "Where is this money going to?" He said [OFFICIAL REPORT, Commons, Vol. 603 (No. 89), col. 397]:
"First, much the larger part—more than £100 million—goes to business profits and not directly to personal earned incomes at all. Large firms like I.C.I. and the Imperial Tobacco Company each get more than £1 million at once in Income Tax relief.
"The Paymaster-General kept asking us yesterday where, if we were to urge other reliefs, we would have raised less revenue in this Budget. I will tell him. We do not think it necessary to have granted this huge relief in business profits."
VISCOUNT HAILSHAM: No; it is "further relief to business profits".
LORD WILMOT OF SELMESTON: That is right. Then the Paymaster-General said:
"I also asked whether the Party opposite intended to oppose relief in Income Tax."
That was the intervention to which the noble Viscount referred, to which Mr. Jay replied:
"And I am telling the right hon. Gentleman that at present we do not think that that part of it was necessary."

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"That part" is the concession on company profits, nothing else.
VISCOUNT HAILSHAM: My Lords, no. I think the noble Lord is entirely wrong, and if he will read the next two sentences he will see that that is established.
LORD WILMOT OF SELMESTON: No; I do not agree.
VISCOUNT HAILSHAM: Well, read the next two sentences.
LORD WILMOT OF SELMESTON: The next sentence states that something under £100 million goes to personal income tax.
VISCOUNT HAILSHAM: Personal income tax.
LORD WILMOT OF SELMESTON: But the remark which was quoted in this House applied to the relief of profits tax, that part of it.
VISCOUNT HAILSHAM: No.
LORD WILMOT OF SELMESTON: Oh yes, if you read the whole speech.
VISCOUNT HAILSHAM: My Lords, it is perfectly plain. I am sorry to make a point of this, but the noble Lord said I deliberately brought this to the notice of the House with that intention. I did. I did so because I am quite satisfied that is what it means. I myself think it is a pity to quote actual words in this House, because, on the point of Order raised against me, I think it is a mistake, and contrary to the custom of this House, to quote ipsissima verba, as the noble Lord is doing. If the noble Lord will look at the context he will see, quite plainly, first of all that the question related to income tax and, secondly, that the answer related to income tax, because the next two sentences—the first of which he has quoted, and then under pressure from me—referred to income tax and nothing else, and expand the first sentence.
LORD WILMOT OF SELMESTON: My Lords, I do not agree. I agree with only one thing: that it is undesirable to quote speeches of the other place in this House. But it is much more undesirable to misquote them, and when they are misquoted somebody should rise and say,
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"The honourable gentleman in the other House did not say that". This I do.
VISCOUNT HAILSHAM: My Lords, may I say that the noble Lord has absolutely no right at all to say I misquoted anything. Rightly or wrongly—the noble Lord opposite contended it was contrary to the custom of the House—I read out both the question and the answer. The noble Lord is entitled to put his own interpretation on the answer, which I think is wholly wrong, and I reiterate what I said. But what he is not entitled to do is, when I did read out the words, rightly or wrongly, to say that I misquoted them. I did nothing of the kind.
LORD WILMOT OF SELMESTON: My Lords, I will read the words again:
"We do not think it necessary to have granted this huge further relief to business profits after last year's reduction in Profits Tax."
VISCOUNT HAILSHAM: My Lords. those are not the words I read; that is not the passage. The noble Lord is entitled to read those words, but those words are neither the words I read nor the passage I quoted. He is not entitled to accuse me of misquoting when I quoted correctly. If he desires to put his own interpretation on the words, and it is different from mine, then the House must judge between us it is a matter of opinion. He is not entitled to accuse me of misquoting, when I did nothing of the kind, and then to read out another passage which I did not quote in support of his present allegation.
LORD WILMOT OF SELMESTON: My Lords, as the noble Viscount says, the House must decide; but the House can decide only in the light of the written word when we read it to-morrow and compare it with the House of Commons Hansard. If I have made a mistake I shall apologise both to the noble Viscount and to the House. But at the moment I am convinced that—as I say, inadvertently; I am sure of that—the noble Viscount misrepresented the opinions of the honourable Member for Battersea; and on the basis of that he attacked this Party because he thought we all agreed with the view which he ascribed, I think quite wrongly, to the honourable Member for Battersea.

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My Lords, the fact is that we are not against remissions in taxation when those remissions are justified by the circumstances. What we disapprove of is the manner in which the reliefs have been granted. We think that there are better ways of relieving taxation than the ways the Chancellor has chosen; and we are entitled to have that view, and to express it and explain it. Now what do we think should be done? We think that, if the amount of income tax to be paid is to be reduced, it should be applied in such a way that, first of all, it gives the maximum impetus to the recovery of the economy of the country; and, secondly, that it relieves hardship where hardship is most cruelly felt. As a Conservative Member of the other House said [OFFICIAL REPORT, Commons, Vol. 603 (No. 88), col. 282], a distribution of these benefits to the lower ranges of taxpayers
"would exercise an incentive effect far greater than similar amounts of money devoted to concessions higher up in the income tax level."
That was Mr. Price, the Member for West Lewisham; and I think he is quite right. I say that for this reason; that we must face the fact that, although there is to us, in the circles in which we move, a general atmosphere of prosperity there is in fact a very large number of desperately poor people, people below the income tax levels who naturally get no relief from a reduction in the rate of income tax, and who have suffered grievously from the economic policy which the Government have pursued during the last few years.
LORD BALFOUR OF INCHRYE: My Lords, I do not usually interrupt, but if the noble Lord will kindly allow me, I should like to get one thing clear. Does he really mean that the Labour Party are against a reduction in the standard rate, but would prefer any tax reliefs to be given to the non-income tax payers and to other forms of income tax relief on the lower scale? Can one take it, therefore that they are against the flat standard relief? I think we ought to get that clear.
LORD WILMOT OF SELMESTON: I was just coming to that. I think it would have been better, if this amount was to be distributed, to have done it just as the noble Lord says: first, in the alteration of the allowances: child
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ren's allowances, family allowances, and allowances for people with dependants—because that is where the pressure of rising prices and rents has been felt most hardly among those who are liable to income tax.
LORD BALFOUR OF INCHRYE: Leaving the standard rate as it is?
LORD WILMOT OF SELMESTON: If necessary. If there is not enough to do both, I would rather leave the standard rate. I would first of all make my income tax concessions as far as necessary on the allowances.
Then, secondly, we have to consider an even poorer class of people who do not get the allowances at all because they are too poor to pay any income tax. There are some millions of such people. We are apt to forget them: to look at statistics and to forget about people. Prosperity shows itself—poverty hides away. I have been a Member of Parliament for three working-class London boroughs, and to this day there is deep distress and poverty among the people in those places and in the industrial towns. It is there, in my view, that there has been a mistake made in the Budget, in the way in which the purchase tax has been adjusted.
It is all very well for the noble Viscount to say that he does not know what luxuries are. It was a very amusing and enjoyable passage, and I hope we shall hear the like of it again: but I will give him some advice on how to deal with this difficulty. I would say: first make up your mind what are the real necessities, and deal with those: rent, clothes, household necessities—real necessities—notwashing machines, but real necessities.
VISCOUNT HAILSHAM: Saucepans.
LORD WILMOT OF SELMESTON: Saucepans, frying pans, soap, toothbrushes; all those things, and some of the things on the higher levels, I agree. They are the things that very poor people have to buy. These very poor people—let us face it—on nearly every article they buy in the hardware shop have to pay ld., 2d., or 4d. purchase tax. It is an unseen drain on their slender resources. Our case is that the Government would have been very much better advised, because in this there is both justice and

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wisdom, to use what reliefs were possible to relieve the poorest people first, both among the income tax payers by better allowances, and among the non-income tax payers by abolishing the tax on necessities.
Then there are the old-age pensioners. It is not exploiting a case to state it. The old-age pensioners are miserably poor. They find it very hard to buy the barest necessities of life. Many of them are a burden to earning people and their families with whom they live and by whom they have to be partially supported. I think something might have been done for them—because, after all, it is the Government's policy which has put them in such distress. The rise in rents and the rise in food prices has hit the old people, the children, and the large families with low wage-earners, most hardly.
I would draw your Lordships' attention to the Report of the National Food Survey Committee. There are some very disturbing facts in this document. I will not detain your Lordships with quotations, though I have them here at hand if they are wanted. However, this survey, which is a survey of what is happening to the diet of the nation, shows grave things: that, over the last few years, partly due to the rise in rents and partly due to the rise in food prices, the diet of big families is deteriorating in quality. They are getting less fruit; they are getting less milk—and it is this Government which cut the welfare milk and which put up the price of milk: they are getting fewer vegetables; and they are getting more stodge in the form of cheap starches. The bigger the family the lower the diet standard, and the older the children, up to school-leaving age, the less really good food they are getting. What is more, there is a progressive decline. Now that is the result of this economic policy; and I say that wisdom and justice require that any tax reliefs should first go towards the relief of this poverty, before it goes to provide luxuries which we certainly should like to see everybody enjoy.
My Lords, that is the basis of the case Which we make, and that is why we cannot support the Government's policy. I believe that there is not much justice in it: whether it will 'be popular or not other people will decide.
7.50 p.m.
THE MINISTER WITHOUT PORT FOLIO (THE EARL OF DUNDEE): My Lords, when your Lordships discussed the unemployment situation exactly five weeks ago, I suggested that you might want to have another economic debate after the Economic Survey for 1959 had been published and the Budget for 1959 had been introduced. Every year for the four or five years I have been in your Lordships' House I have had the pleasure of hearing the noble Lord, Lord Pethick-Lawrence, moving a Motion calling attention to the economic situation. On nearly every occasion I have followed him as a private Member at some time or another in the debate, and now that I am doing so from this Box I should like to congratulate him on his extraordinary memory and on his grasp of a subject which appears to be eternally fresh in his mind.
I think that the annual publication of the Economic Survey is one of the most valuable administrative innovations since the war. The Economic Survey for 1959 enables your Lordships to see a more detailed picture than would have been possible five weeks ago, both of the general state of world trade and of the conditions which must govern British economic policy during 1959. In world trade, international co-operation is certainly not so perfect as it might be, as many noble Lords have pointed out in the debate. In one way or another it is not at all perfect, but I think we should agree that since the war great advances have been made in co-operation between the free countries of the West, partly through organisations such as the International Monetary Fund and O.E.E.C., either subsidiary to or formed by the United Nations, and also, I think, through a greater understanding of economicson the part of the Governments of Western countries or at least on the part of the permanent officials whose advice the political leaders are accustomed to take.
Let us look at the recessions in world trade which have taken place since the war. If we look back at the American recessions of 1949 and 1954 in perspective, I think we shall find that they appear to be fairly trivial events. Even the recent recession, which began two years ago and which is still affecting us very considerably, is not to be compared for one

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moment with the great slumps in world trade which used to take place periodically before the war. When we talk about British economic policy in relation to world trade, I think that sometimes we are apt to forget that since the war all Western industrial countries have had substantially the same problems to face, the same basic problem of trying to combine industrial expansion, the continual increase of production and the raising of the standard of living, with something like stable prices and the avoidance of inflation.
I was a little surprised when the noble Lord, Lord Shackleton, who apologised for not being able to stay to the end of the debate, said that production cannot lead to inflation. Of course, economic production of goods for which there is a good demand cannot lead to inflation. The more goods you produce, the less inflation there will be. But wasteful production for which there is not a wide demand might have a great effect on the inflationary pressure on the available amount of goods and services. I think that to say, as a generality, that production cannot lead to inflation may induce the view that all we have to do is to start producing goods, whether there is a real demand for them or not, or whether it is possible to make an economic profit out of them or not, which would be about the most inflationary thing that we could do.
The noble Lord also spoke about the vicious circle of inflation and deflation. I do not think that that was a correct description of the post-war economic situation, because we have never had any deflation at all; what we have had is continual inflation. The vicious circle has been that of the wage-price spiral the whole time: prices going up, then wages going up, and the increase of wages leading to another increas of prices. That is the vicious circle which the Western industrial countries have had to contend with, though, of course, the consequences of inflation might be less serious in very large countries like the United States or Canada, which could almost be self-sufficient, if necessary, than in a country like ours where inflation might rapidly lead to a failure to acquire foreign currency, resulting in widespread unemployment and poverty because we could not pay for our food and raw materials. Nevertheless, there are serious
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disadvantages in inflation across the Atlantic, and the Americans have been almost as concerned about it as we have been since the war.
In 1957, the Americans decided that they had reached a point when they must try to stop inflation, even if the price which they had to pay for doing so might be some retrogression in the gigantic economic progress which they had been making. Accordingly, they took deflationary measures—or rather, anti-inflationary measures. Your Lordships will remember that after the consequent recession in America began, the Administration was under continual pressure from all kinds of opinion in the United States, pointing to the unemployment and to the falling off of production which had resulted, and was being urged to take reflationary measures, to reduce taxes, to remove credit restrictions and to incur large-scale public expenditure—all to pump more energy into the American economy. But the Administration, acting on the advice of their expert economic advisers, declined to take such action, believing that it would lead only to a renewal of inflation and that the American economy would be strong enough to recover without such aid.
Now it seems certain that the recession in America is coming to an end. How quickly recovery there will proceed we cannot say. I am sure that your Lordships were delighted to hear what the noble Lord, Lord Barnby, who has just come back from America had to say about everybody being confident that a new "boom" was approaching. But meanwhile it is certainly the fact that one result of this fairly long recession has been greatly to reduce American buying of raw materials, and that has resulted during the last year or two in a fall in commodity prices and in the products of primary producing countries.
As the noble Viscount, Lord Bruce of Melbourne, pointed out, that affects the British economy in two ways. First of all, it has the effect of greatly improving what are called our terms of trade, and we have to pay a good deal less for our raw materials—not that we want that to happen, or, at least, we do not want it to go too far, but it produces that incidental advantage, from our point of view—and it enables us temporarily to strengthen our foreign exchange position; and I think

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we have used that advantage to the best of our ability during the last year. But the other effect it has is that when these primary producing countries, many of which are in the British Commonwealth, are unable to get the prices they had previously been receiving for their raw materials, and are unable to sell so much of them, they cannot buy so much of our exports. That is a disadvantage to British trade. The noble Viscount, Lord Alexander of Hillsborough, rightly pointed out that the falling off in purchase of British exports does not come until quite a considerable time after the fall in the price of primary products in the producing countries.
The Government foresaw that. We always anticipated that the period during which our exports to the rest of the sterling area would be lowest would be at the beginning of this year; and during the first quarter of this year I think our exports to sterling countries have been lower than they have been for a long time, arid lower than they were at this time last year. On the other hand, that is. at least partially, offset by higher British exports to the United States. My noble friend Lord Balfour of Inchrye gave a figure of 23 per cent. as the increase, and that is an encouraging feature of the situation at a time when America has been going through this recession. But what we want to bring about is a rise in world-commodity prices—not an excessive rise, but a moderate one—which will both increase the prosperity of these primary producing countries and enable us to send more exports to them.
LORD PETHIECK-LAWRENCE: My Lords, I should like to understand clearly what the noble Earl is saying. Do we really want to see a rise in world-commodity prices? Does he not mean a rise in the price of world raw materials?
THE EARL OF DUNDEE: Raw materials are commodities. I am sorry if I used the wrong expression, but I think "commodity prices" is generally used to mean mainly raw material prices, as distinct from manufactured goods. We want to see a moderate rise in the price of raw materials for two reasons: commercially, because that will help our exports; and politically, because so many of these primary producing countries belong to the British Commonwealth, and it is to our political advantage that they
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should be strong and prosperous. We hope that as American economy, and consequently American buying, revives, and as our own productive power and purchasing power increases, more raw materials will be sold in better market conditions. At the same time, we are doing what we can to help the economy of the primary producing countries in such ways as through the International Monetary Fund. Your Lordships will remember a Bill a month or two ago which increased our contributions to the International Monetary Fund by £58 million in gold, largely with the object of enabling that Fund to help backward countries. The noble Viscount, Lord Bruce of Melbourne, has no doubt noted with satisfaction The results of the Montreal Conference, where we agreed not only to encourage private investment: in the Commonwealth, which has gone up considerably, but also to give Government loans to help the economy of other Commonwealth countries and since then, as your Lordships will find from the Economic Survey, £50 million in Government loans has been issued.
It seems likely—at least, we hope it will happen—that there is going to be, if not a rapid recovery, a recovery in world trade. Everything points to the fact that if that recovery comes, whether it is slow or fast, it is going to be, so far as we can see, on a less inflationary basis than world trade has been from 1945 to 1957. Everything points to the fact that if we are going to hold our position we have to pay the greatest attention to efficiency, because trade is going to be much keener and there will be more competition; we must engage in our export trade not only with greater efficiency but also with better salesmanship. If we do not do that, we shall fail not only in our duty to the world in general, but also in our duty to ourselves. For that reason, I think it is even more important that we should continue to avoid further inflation in our own domestic economy in Great Britain.
I have said that our problem is the same as that of other countries, only with the exception that it may be more important to us because the penalty for failure is greater for us than it would be for them. But how are we to achieve our object of expanding production without the continual danger of finding that no one wants to buy what we are producing

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and that we shall not be able to get foreign currency to buy what we need, which will lead rapidly to unemployment and widespread poverty? The Party opposite, I think, hold the view that we cannot have increased production combined with the avoidance of inflation unless we have a greater measure of control. The noble Lord, Lord Shepherd, said that the Conservative policy was to have no truck with any kind of control or direction. But that is really not so. The Conservative Party are not necessarily opposed to controls. We had to fight for a long time in the cause of fiscal controls and the right to protect our industries by quotas or by tariffs. And while we all agree that it is a good thing to increase the volume of world trade, as my noble friend Lord Balfour of Inchrye said in his speech, there are many circumstances in which it is right and necessary to protect British industries against unfair competition. With regard to industry, one control which we introduced long ago, but which we still maintain and apply, is the granting of industrial certificates which can be withheld in order to persuade industries to go into the development areas.
I was very glad that the noble Baroness, Lady Elliot of Harwood, spoke about the industrial position in Scotland, where there are such good hopes for progress. We are trying to do the same in other development areas and in areas which come under the recent Distribution of Industries Act. But that policy is not specifically directed to the present recession; it is a long-term policy designed to correct the employment situation in areas where there is too large a concentration of one or two industries and where it is desirable to create greater diversity. We should certainly recognise that in some circumstances, as, for instance, in a war or just after a war, it is necessary to have a certain number of controls. But we believe that in normal times controls over licensing and the allocation of materials are not at all likely to lead to the efficiency which is so essential if we are to survive and prosper and increase our share of world trade in present circumstances.
We also believe that controls of this kind would certainly not prevent the price-wage spiral. They certainly did not prevent it at the time they were applied. In
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fact, prices rose much more during the period of control than during the following period in which most of these controls had been dispensed with. There is, of course, one control which could prevent the wage-price spiral if it were possible to impose it in a free society, and that would be the control of wages. If you were able to control wages, you would clearly be able to control an inflationary rise in wages. But on other grounds I doubt whether the control of wages, either in a free society or in any society, would add to efficiency.
In our view the Government ought not to control either the allocation of materials or the level of wages. What the Government ought to do is to control monetary policy, and they ought to try to control that in such a way that it will not be worth the while of employers to grant an increase of wages which is inflationary in its effect. There is no reason why a trade union should not press for a rise in wages if there seems to be a good chance of getting one; and if the employer thinks that he can get back his money simply by putting up prices without increasing his efficiency, there is no reason why he should not grant the rise in wages. It is for the Government to apply a monetary policy which will make that not impossible but unlikely to be, profitable and, therefore, unlikely to be done. That has been our endeavour.
In the last few years we have had many failures, and no doubt we have made mistakes, although the criticism of our failures has seldom been well judged. We thought for a short time in 1954 that we had achieved price stability, but that hope was soon dashed. The wage-price spiral started rising again very rapidly in 1955, and at the end of that year we took what many people condemned as too severe measures to try to stop it. But those measures proved to be not nearly effective enough. It went on through 1956, when we took further measures to stop it, which were again ineffective, and the spiral continued at an equally great rate in 1957. By that time there were the international effects of the beginnings of the American recession, with world trade diminishing, and it became absolutely essential, if we were to avoid not just an ordinary crisis but a crisis which would lead rapidly to widespread unemployment in this country, that we should

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take more severe measures than any which we had hitherto taken. We did take such measures, which have in fact so far led to a more or less stable price level in this country. We have been strongly criticised for taking these measures, because it is said that we did so deliberately in order to produce industrial stagnation and unemployment.
We are told, now that we are in a position to adopt more expansionist measures, that we ought to have done so eighteen months ago. There has been a great deal of discussion in this debate about the car of the noble Lord, Lord Pet hick -Lawrence. Suppose that he was driving a car down a very steep hill with a bend in front of it, and he saw a bus conning round the bend towards him on the wrong side of the road: what he would probably do in those circumstances would be to put on the brake. What would he think if the noble Lord, Lord Wilmot of Selmeston, was sitting beside him and said, "What are you doing, putting on the brake? You are deliberately causing stagnation; you are deliberately trying to prevent me from getting to where I want to go. Take your foot off the brake and put it on the accelerator." The noble Lord, Lord Pethick-Lawrence, would say, "No, I must put my foot on the brake." He would.low the car down almost to a stop until he was past the bus, and probably keep the brake on to the bottom of the hill. 'Then he would take his foot off the brake and put it on the accelerator. That would not please the noble Lord, Lord Wilmot of Selmeston. "Aha ! ", the noble Lord would say, "you are converted to my view. You have come round to the Labour Party's policy of acceleration. If it is right to do it now, why was it not right to do it before?" That is exactly what the noble Lord, Lord Wilmot of Selmeston has just said: "Why was it not right to do it six months ago? If you had only taken my advice and put your foot on the accelerator when coming down the hill, you would by now have been half way up the next hill in front of us and much nearer where we want to get to."
LORD WILMOT OF SELMESTON: Since I have been made a passenger I would say, "There is a bus ahead. I think you ought to put the brake on now, otherwise it will be a little late."
THE EARL OF DUNDEE: That is exactly what the Government did in 1957. But the noble Lord does not agree that you would put on the brake, not in order to delay your progress but in order to avoid capsizing into the ditch or being hit by the bus. That is why we put the brake on in 1957 and why we are now in a position to take it off again. We are criticised for not having done so six months before, or even longer. What we are trying to do is to take as much reflationary action as we safely can without starting inflationary pressure all over again.
My noble friend Lord Hailsham has already dealt sufficiently with the Budget so far as it concerns the personal incidence of taxation. It is intended and, I think, well designed, to give as much impetus to our economy as can be safely done without a renewal of inflationary pressure. There are the investment allowances. Since there has been so much criticism of chopping and changing our policy, I should remind your Lordships that the Chancellor of the Exchequer said specifically in regard to these investment allowances that they may be only temporary. There may be conditions later on in which it may be right to take them off again, as was done in 1956. He warned everybody who was thinking whether they would make an investment now or later that if they did not make it now and take advantage of those allowances, they might find they had missed the bus.
Last year we decided to increase the public sector of expenditure by £160 million. We have removed the credit squeeze; we have abolished the restrictions on hire purchase; and we have reduced rates of interest—the bank rate from 7 per cent. to 4 per cent. But let me remind your Lordships that a 4 per cent. bank rate is still very high, and I would say to the noble Viscount, Lord Bruce of Melbourne, who was wondering whether we were not optimistic and inclined to go too far ahead, that 4 per cent. is not at all an inflationary bank rate to maintain, and that we are maintaining it at that rate out of prudence in order that excessive borrowing may not once more lead to inflationary pressure.
What we are trying to do is to administer our monetary and economic affairs as well as we can, in accordance with up-to-date twentieth century principles. We

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have long ago discarded the old gold standard, which worked very well in a great many ways and saved a great deal of trouble, certainly to politicians; if the gold standard were in force now it would relieve us of a great deal of bother, a great deal of work, and a great deal of argument with each other. But I am glad that we have got rid of it, because we ought to be able to do better with a managed currency; and, of course, as it is the political duty of Parliament and the Government to manage the currency, naturally it cannot be kept out of Party politics. At the same time I think we should do very much better, although we cannot avoid belonging to different Parties, if we could manage to look at these problems not so much through doctrinaire spectacles.
LORD GRANTCHESTER: May I ask the noble Earl a question? Is he quite sure that we are not on the virtual gold standard now, as we are related to the dollar and the dollar is related to gold and can be freely exchanged into gold?
THE EARL OF DUNDEE: If we had been on the gold standard the price level would not have risen 71 per cent. from 1945 to 1957; that is quite certain. But, as I was saying, I think we shall do far better if we do not look at these matters in a doctrinaire way. Although I have not had the opportunity of asking him, I think that the Prime Minister would probably not disown the quotation which was made this afternoon by the noble Viscount, Lord Alexander of Hillsborough, from one of the books which the Prime Minister wrote in the 1930s, because he has never been an individualist, and neither has the Conservative Party. We have always been sensible and practical, I think, in these matters, and are all willing to learn from our mistakes and to do better in future, in the light of our past experience. The more I look at these problems, the more convinced I am that if we relate them to out-of-date controversies between Socialism and individualism we shall hinder and not help ourselves to solve them.
8.25 p.m.
LORD PETHICK-LAWRENCE: My Lords, at this very late hour I have no intention of taking up any substantial part of your Lordships' time, but there are
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two or three little matters which I should like to deal with very briefly. First of all, I cannot help being a little sorry that my parable about the motor car has formed the subject of such a large amount of discussion, completely distorting the purpose I had.
THE EARL OF DUNDEE: It has fallen on good soil, not on stony ground.
LORD PETHICK - LAWRENCE: Secondly, I want to say, I hope, a rather healing word on the question about the point of order with regard to another place. I know that the noble and learned Viscount is a person of common sense and not failing in noblesse oblige. I would point out to him that it is just to avoid the sort of wrangle we had recently on this matter that this Rule of Order was made, because it makes it impossible for us here to go into the details of what a man said or did not say in another place.
VISCOUNT HAILSHAM: On the whole, I think I agree with the noble Lord. I have taken the trouble to find out what the true Rule is. It is that one must not quote the exact words, but one is allowed to refer to the purport of the speech.
LORD PETHICK-LAWRENCE: The point I was going to make was that, in the absence of the Leader of the House, I understand that the noble Viscount is himself practically the Leader of this House, and in the House I am sure he will realise that noblesse oblige would suggest to him that he should in future give the breach of the Rule a wide berth.
There are two or three other matters arising out of the speech of the noble Earl who has just sat down. First of all, he quoted to us from the United States. From an economic point of view, I should regard the experience of the United States rather by way of a warning than as an example. I think we know far more about economic things in this country than they do there. When the noble Earl asks us to take the American system as an example I disagree fundamentally, because I almost look upon them as a warning and not an example.
THE EARL OF DUNDEE: I do not think I held it up as an example. I merely referred to it in explaining what had happened.
LORD PETHICK-LAWRENCE: That may be; I do not want to go into it in detail.
The next thing I want to refer to, which I was rather surprised the noble Earl did not refer to, is the question put by the noble Lord, Lord Barnby. As the noble Earl did not do so, I should like to give an answer myself. Of course these under-the-line figures originally did not exist at all. In the old days, the Budget was simply a statement of receipts and payments, excluding altogether all forms of loans; but gradually it came to be realised that these various loans for capital purposes ought not to be entirely lost sight of when they were, in effect, paid for by the Treasury, in the first instance at any rate. That really is the position to-day.
We cannot altogether neglect these large payments by the Government merely because they are called loans instead of current payments. I have always thought that in recent times the line between the loans paid for by the Treasury and outside advances of capital for all sorts of purposes was getting thinner and thinner. The evidence of that now is that we have items constantly crossing the line from one side to the other. There was a time when the nationalised industries had to raise their money on the market, with a Government guarantee. Then some of them were brought into the actual picture of the Budget. On the other hand, in the olden days the Local Loans were a fund that was raised by the Treasury and used by the local authorities. They have been pushed out of the list and have gone over on to the market. This is a very large question, and there is no doubt that it is desirable that in ordinary times the revenue should produce some surplus out of current expenditure and income to go to assist the loan policy of the Government. I agree broadly with what the Government are doing in that matter.
There was one thing the noble Earl said that I thoroughly agreed with. He said it was not true that the Labour Party believed in all controls and that
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the Conservative Party did not believe in any controls at all. The Conservative Party believe in a lot of controls—financial control; at one time control of the banks; the control of the Capital Issues Committee and so on. He did not elaborate them, but admitted their existence; and that is exactly what I have felt for a long time. The line of distinction between the two Parties in this House is not "all control" or "no control", any more than "all nationalisation" or "no nationalisation". The Party on the other side believe in a certain amount of nationalisation; we believe in probably rather more nationalisation. We believe in a certain amount of control; the Government believe in a certain amount of control. Therefore, when one comes to face the facts, not as a tub-thumping politician on a street corner, but as sensible people inside this House, what we really differ about is the line to be drawn between one kind of control and another. We can say that here in this House. Outside, people can make extreme statements about their opponents if they like. I prefer to stick to the facts; that both sides here believe in a certain amount of control and differ only as to the precise controls which should be operated. With those few remarks I beg leave to withdraw my Motion.
Motion for Papers. by leave, withdrawn.

FACTORIES BILL
Brought from the Commons; read 1a, and to be printed.
ROYAL WANSTEAD SCHOOL BILL
Reported, with Amendments.

ALL SAINTS CHELSEA BILL
Reported, without amendment.
House adjourned at half-past eight o'clock.