Sitting of 27 July 1961

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  PORT OF LONDON BILL
  Lords Amendments considered and agreed to.
  POOLE CORPORATION BILL [Lords]
  Read the Third time and passed, with Amendments.
ORAL ANSWERS TO QUESTIONS
  AGRICULTURE, FISHERIES AND FOOD

    Polish Eggs
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food what was the total of eggs imported from Poland during the past twelve months; and what were the corresponding imports during each of the previous two years.
    The Minister of Agriculture, Fisheries and Food (Mr. Christopher Soames): In the year ended 30th June, 1961, 581,000 boxes of eggs were imported from Poland compared with 197,000 boxes in 1959–60 and 141,000 boxes in 1958–59.
    Mr. Farr: Is my right hon. Friend aware that these eggs, which sell in this country at about 2s. 6d. a dozen, sell in Poland at about 6s. a dozen? In view of the fact that imports of Polish eggs into this country have increased some ninety times since 1958–59, will my right hon. Friend take steps to control their import forthwith?
    Mr. Soames: I think that this has to be set against the total supplies available on the market. The total imports of Polish eggs this year, even at the higher figure, were only 1–7 per cent. of the total supplies available. As my hon. Friend will be aware, when an application was
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    made to my right hon. Friend by the National Farmers' Union and by the Egg Marketing Board, my right hon. Friend took the view that there was a margin of dumping in the price, but that the other two legs on which the application had to stand did not meet the necessary qualifications. He said that, had imports continued, they would have done. They have not continued to any great extent, and this week no boxes are being imported.
    Mr. Maxwell-Hyslop: Does my right hon. Friend's Answer imply that if there is an increase in the production of English eggs he accepts that as a reason for us importing still more foreign eggs, because he expressed his Answer in terms of the proportions to the total number of eggs available?
    Mr. Soames: Perhaps I expressed myself badly. The thing is that the total egg production is less this year. Imports are consequently up, and imports of Polish eggs form part of that increase.

    Butter (Descriptive Printing and Labels)
    Mr. Mathewasked the Minister of Agriculture, Fisheries and Food if he will take steps to prohibit descriptive printing and labels on butter which imply that wholly or partially imported butter is wholly home produced.
    Mr. Soames: It is already an offence under the Merchandise Marks Act, 1887, to apply to any goods a false description as to the place or country in which the goods are produced. In addition, the Food and Drugs Act, 1955, makes it an offence to label a food with a false description.
    Mr. Mathew: Is my right hon. Friend aware that I have studied with great care the Answer which he has given to certain of my hon. Friends on this matter? Will not he now cut through the whole bureaucratic and administrative tangle and take steps to make new regulations of a simple character which will give proper protection both to the British producer and to the consumer and avoid any chance of misleading the public or anybody else?
    Mr. Soames: I do not think that the situation today is very complicated inasmuch that it is open to anyone to

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    prosecute under the Merchandise Marks Act. It is a common informer Act and anyone can prosecute under it. That remedy is available in the courts.
    Mr. Darling: Is it not the fault of this now out-of-date legislation that the onus for taking legal action falls upon the customer, who probably does not want to get involved in legal proceedings? Should not there be a duty on the Minister to take action when anything of this type comes along?
    Mr. Soames: It need not be done only by the customer; the county council or the Milk Marketing Board can do it under the Merchandise Marks Act.

    Surplus Dairy Products (Under-Developed Countries)
    Mr. W. Hamiltonasked the Minister of Agriculture, Fisheries and Food what recent consultations he has had on the possibility of sending part of Great Britain's surplus dairy products, especially milk, to the under-developed countries of the world where malnutrition is widespread.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. W. M. F. Vane): None, Sir. This country is a large importer of dairy products. Milk in excess of current needs for our liquid market is already processed. Assistance by Her Majesty's Government to under-developed countries is made available in the form of grants, loans, technical assistance and educational and training facilities and not by way of contributions in kind.
    Mr. Hamilton: While I recognise the substance of the hon. Gentleman's Answer, may I ask whether he is aware that the trend in the country is towards the production of surpluses, particularly of milk? Does he not regard it as highly regrettable that we do not allow this production to be increased so that we are able to make some contribution towards helping millions of our friends in other parts of the world?
    Mr. Vane: The hon. Member's Question refers to milk. I think that he is confusing two things—the increase in production beyond the needs of the liquid market and the total need for dairy products. We are still a very long way from meeting all those needs.
    Mr. Peart: Is it not my hon. Friend's case that the Government ought to increase production all round, which has not been done, and then, if there are surpluses, to consider my hon. Friend's suggestion?
    Mr. Vane: That goes far beyond the Question. In all these things, costs of production and prices have also to be considered.

    Fowl Pest
    Sir A. Hurdasked the Minister of Agriculture, Fisheries and Food if he has now received the report of the Committee inquiring into the incidence and cost of fowl pest.
    Mr. Soames: No, Sir, I understand that the Committee is making excellent progress on this difficult study, but I doubt if its report will be ready before the end of the year.
    Sir A. Hurd: Does not my right hon. Friend agree that this has become a most urgent matter, that fowl pest, apparently in a sub-acute form, is very widely established, and that slaughtering the birds is costing the Exchequer between £3 million and £4 million a year and is not getting us anywhere? Should we not hasten the advice from this Committee and then take action fairly quickly?
    Mr. Soames: I am anxious to get the report as soon, as I can, but, as my hon. Friend knows, the Committee is taking evidence very widely, both in this country and abroad. I agree that the sooner we can get the report and reach any decision which may flow from it, the better.

    Farms (Sanitary Conveniences and Washing Facilities)
    Mr. Hiltonasked the Minister of Agriculture, Fisheries and Food if he will make a statement on the working of Section 3 of the Agriculture (Safety, Health and Welfare Provisions) Act, 1956, regarding the provision of suitable sanitary conveniences and washing facilities on farms.
    Mr. Vane: This Section empowers sanitary authorities to serve notices on employers of agricultural workers requiring them to provide suitable and

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    sufficient sanitary conveniences, and gives my right hon. Friend similar power to require the provision of washing facilities. A number of notices concerning lavatories have, I understand, been served by
    sanitary authorities. The Ministry's safety and wages inspectors are required to see that employers are providing satisfactory washing facilities and so far it has not been necessary for my right hon. Friend to serve any notices.
    Mr. Hilton: That is all very well and interesting. Is the hon. Gentleman aware that, despite those instructions, there are few farms with either sanitary facilities or washing arrangements for the farm workers? This is 1961 and the situation on the farms would not be tolerated in any other industry. Is it not time that the Minister got stuck into this matter to see that the Regulations are carried out? With many people who work on farms handling food, in the interests of hygiene and common sense alone is it not important that the Regulations should be carried out?
    Mr. Vane: The hon. Member does not give a fair picture. We now have improvements in piped water supply all over the countryside, even in the most remote areas, and the provision of proper washing and sanitary facilities is very much easier than it was a little time ago. I cannot speak for my right hon. Friend the Minister of Housing and Local Government, who has served a number of notices in certain cases, but we are hoping to secure compliance with these requirements without recourse to serving notices, except where it is clear that employers are making no attempt to comply. I am glad to say that no such cases have yet been reported.
    Mr. Peart: Despite what the hon. Gentleman said, legislation was provided. My hon. Friend represents agricultural workers through his union and he knows these conditions. All he is saying is that Where there are black spots, as there still are, the Government should see that they are cleared up. Why not action now?
    Mr. Vane: I tried to give the impression that we were making progress, which cannot be judged entirely by the number of notices served. I am glad to say that progress is being made all over the country.

    Agriculture Act, 1947 (Part IV)
    Mr. Godman Irvineasked the Minister of Agriculture, Fisheries and Food whether he is satisfied with the operation of Pant IV of the Agriculture Act, 1947, in giving smallholders, in present conditions, an opportunity of becoming farmers on their own account; and if he will make a statement of his policy on this matter.
    Mr. Soames: Under the Act, some 10,000 full-time holdings are provided by smallholdings authorities, most of the occupiers being former farm workers. These give a useful avenue of advancement for men of initiative. I have no proposals for amending the Act at this juncture.
    Mr. Irvine: Will not my right hon. Friend agree that the conditions prevailing today are very different from those when the scheme was set up? In those circumstances, would not he further agree that the time has come when it would do no harm for him to have a look at the basis on which these schemes are administered?
    Mr. Soames: The fact that there are 10,000 smallholdings across the country and that a hundred smallholders moved to farms from their holdings in the last year or so proves that, as they stand, smallholdings provide a valuable addition to our agricultural life.
    Mr. Wingfield Digby: Is my right hon. Friend aware that there is reluctance to move on to larger farms, even when they are offered, which is having the effect of preventing other people from below from moving into the smallholdings? Is he aware that this is becoming quite a problem?
    Mr. Soames: That is not the experience of which I am told by the smallholdings authorities. It is more the fact that the popularity of farming today is such that so few farms are coming on to the market for letting that it is hard for those on smallholdings to get farms.

    Food Distribution
    Mr. W. Hamiltonasked the Minister of Agriculture, Fisheries and Food if he is aware that food prices in Great Britain today are higher than in some Continental countries, despite the

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    fact that £250 millions a year in subsidies is paid to the farmers; and whether, in view of this fact, he will consider urgent action to investigate the system of food distribution in the United Kingdom.
    Mr. Soames: The results of these international comparisons of food prices depend very much on the choice of foods selected for comparison and on the allowances made far differences of quality and service. Generally speaking, food prices in Great Britain are relatively low and I see no need for an investigation of food distribution as a whole.
    Mr. Hamilton: Is the right hon. Gentleman aware that the argument continually used by the Government when we criticise farm support prices, namely, that food prices on the Continent are always cheaper than they are here, is flatly contradicted by the facts? Is it not condemnation of Governmental policy that the taxpayer has to foot a bill of £250 million a year, whilst many small farmers are living on less than the average industrial wage, and the consumer gets no benefit? If the taxpayer and the consumer and the farmer are not getting any benefit, can the right hon. Gentleman tell us who is?
    Mr. Soames: It is wrong to say that the consumer gets no benefit from the system, which was run by the previous as well as the present Government. It is and has been a great benefit to the country as a whole. We must also bear in mind that while the sum of £250 million is large, it represents only 5 per cent. of the total cost of food in the country as a whole.
    Mr. Nabarro: Does not my right hon. Friend agree that, with the sole exception of Norway, prices of all basic foodstuffs in the shops in Britain are lower than in any West European country? Can the House correctly interpret my right hon. Friend's speech yesterday at Llandilo in Carmarthenshire as being a firm assurance to the British farming community that he does not propose in any way to derogate or depart from the provisions of both the 1947 and the 1957 Agriculture Acts?
    Mr. Soames: It is very difficult to be too dogmatic about the prices of food in different countries, because of the differ-
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    ent types of foods, the different standards and the varying systems of distribution and so on. What my hon. Friend can read into my speech is that all the Government's assurances about the 1947 and the 1957 Agriculture Acts still remain.
    Mr. Peart: Will the right hon. Gentleman also inform his hon. Friend the Member for Kidderminster (Mr. Nabarro) that since the present Government came into power real farm incomes, especially for small farmers, have declined considerably?
    Mr. Nabarro: What is the relevance of that to this Question?

    Meat (Wholesale and Retail Prices)
    Mr. Darlingasked the Minister of Agriculture, Fisheries and Food if he will state the figures of wholesale and retail prices for the main cuts of beef, lamb and mutton given to him in his recent talks with representative meat traders.
    Mr. Soames: Retail meat prices are affected not only by wholesale prices but by many other factors such as the cut, the local preference for particular cuts, the type of service the butcher gives his customer and the butcher's constant overhead costs. One cannot, therefore, assess a representative figure of retail meat prices applicable to the country as a whole. Wholesale prices—on Smithfield Market—for sides but not cuts are published and are therefore freely available.
    Mr. Darling: One understands the difficulties, but only a week ago the Minister said that he had had discussions with the meat traders and was satisfied that they were attempting to reduce meat prices. No customer I know has seen any evidence of reduced prices, although the cost of cattle and the wholesale prices in Smithfield Market are falling. Would it not help enormously if the Minister gave us some evidence—the kind of evidence which apparently the traders gave him—so that he could make a satisfactory speech in the House on behalf of the traders?
    Mr. Soames: It is impossible to assess retail prices over the country. When the butchers' representatives came to see me the other day I made a great point of the fact—and they agreed—that there was a need to stimulate the consumption of

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    meat at this time when wholesale prices are low. One considerable firm which owns about 400 shops—and this answers the question about beef, lamb and mutton which the hon. Member asked—is charging prices, according to the cut and type of meat, from sirloin at the top down to the fore and at the bottom, which have decreased over the last two months by between 8 per cent. and 50 per cent.
    Mr. Kimball: Is my right hon. Friend satisfied with the part being played by the Fatstock Marketing Corporation? Surely the farmers' co-operative organisation ought to do something to increase the wholesale price of meat—the price paid to the farmers—rather than try to make a quick profit by joining the butchers' ring.
    Mr. Soames: I do not think that that is fair. Where the F.M.C. is concerned, what has been happening is that an unusually fast flow of beasts has been coming forward into the auction marts in the last few weeks, quite out of proportion to what happened in the same period in recent years.

    River Hull
    Commander Purseyasked the Minister of Agriculture, Fisheries and Food if he will state the progress made by the Hull and East Yorkshire River Board in causing deficient wharves on the River Hull to be raised to prevent flooding, in the four months since the serious flooding in Hull at the March equinoctial high tide; and what progress is expected to be made in the next two months before the September equinoctial high water spring tides.
    Mr. Vane: So far the Hull Corporation has served twenty-one notices on the owners of those wharves which do not measure up to the requirements of the Hull Corporation Act of 1925. I am given to understand that a further list is being prepared and that it is hoped to cover all deficient wharves before September.
    Commander Pursey: What information should I give to hundreds of my poor constituents who are flooded out about the time of the September equinoctial high tides? Should I advise hundreds of husbands to stay at home and
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    look after their houses and furniture, and so handicap trains, buses and other essential services? Does the Parliamentary Secretary think it funny for a shipyard worker to come home by the upstairs bedroom window and to find his wife and children paddling in 3 ft. of flood water in the kitchen? When are we going to stop that?
    Mr. Vane: The hon. and gallant Member's constituents would get a lot of formation if he let them have copies of the Answers to the 20-odd Questions which I have answered on this subject in the House over the last few weeks. I have tried to cover every aspect of the various points which he has raised.
    Commander Purseyasked the Minister of Agriculture, Fisheries and Food what action is to be taken by the Hull and East Yorkshire River Board to ensure that, in future, red flood warnings are given in Hull before flooding from the River Hull, and that amber warnings are not given in Hull for warnings intended to be restricted to other divisions; and which officer is to be the local technical officer responsible for the decision to issue a warning after consideration of local conditions of tide, wind and flood water.
    Mr. Vane: The Ministry is responsible for the east coast flood warning system. Flood warnings are given to the police and river boards and local flood warnings to the general public are issued by the police, after consultation with the river board, where necessary, about local conditions.
    Commander Pursey: Is the Minister aware that on the night when the false amber warning was given I was in Hull and on the river? Why should hundreds of my poor constituents be kept up after midnight, taking up their carpets and putting their furniture in boxes unnecessarily, for a false amber warning which should never have been given? Why cannot the title be given, if not the name, of the official responsible for giving the red warning, and stop false warnings in Hull, in view of the fact that no one in Hull knows who it is, not even the police, who have to promulgate the information?
    Mr. Vane: There could not be a red warning in the summer because the warning system does not operate in that

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    way during the summer months. Neither
    my right lion. Friend nor I can accept responsibility for rumours which may have been circulating in Hull. I sympathise with people who have been suffering from floods, and I recognise that when high water conditions are likely they feel a certain sense of alarm. But no warning was issued on that day, and I cannot accept responsibility for rumours.
    Mr. Paget: Are we not only not to have flood prevention but not even to have flood warnings during the period in which the affluent society is suspended?

    Horticulture Improvement Scheme
    Mr. Pymasked the Minister of Agriculture, Fisheries and Food the total number of applications for grant under the Horticulture Improvement Scheme: how many have been accepted: the total value of the liability for grant so far incurred; how many applications have been rejected; and how many applications are now awaiting a decision.
    Mr. Soames: The figures for which my hon. Friend asks are, to the end of June. 2,596 applications, 1,655 approvals, £854,942 grant liability, 256 rejections and 541 still under consideration.
    Mr. Pym: Is not this rather a disappointing response to the scheme? Is not my right hon. Friend aware that horticulturists find it rather more difficult than their agricultural colleagues to obtain loans due, I think, to lack of confidence? Is my right hon. Friend thinking of taking further steps to encourage higher productivity in this industry?
    Mr. Soames: The scheme has been running for little more than a year, and I do not agree that the figures which I have quoted are as unsatisfactory as my hon. Friend seems to think. I think that the scheme got off to an encouraging start. The difficulty is that with the smaller holdings not enough men can afford to put up two-thirds of the money to meet what is required after the one-third grant has been paid. I hope that more attention will be paid to this by the co-operatives.

    Bead and Flour (Committee's Report)
    Mr. Liptonasked the Minister of Agriculture, Fisheries and Food what action he will take on the Food Standards Committee's Report on Bread and Flour.
    Mr. Soames: I am hoping to circulate my proposals in the autumn.
    Mr. Lipton: Will the right hon. Gentleman bear in mind that it took some years for the Government to set up this Committee to make the investigation and that the Commmittee took another few years to finalise its Report? While we appreciate that the Government are in a bit of a mess at the moment, will not the Minister make up his mind to issue his final decision long before the autumn, because in the meantime this staple article of food is being chemically tampered with for the benefit of the millionaire milling combines.
    Mr. Soames: Comments were invited in the early part of this year and very many sets of comments were received from a number of manufacturers, local authorities, trade organisations and private individuals. We will get on with this as soon as we can, but it is a complicated, technical, and scientific subject.

  TRADE AND COMMERCE

    British Standards Institution (Consumer Services)
    Mr. Darlingasked the President of the Board of Trade if he is satisfied that the British Standards Institution's Consumer Services, covering advice, information, research, the adjustment of complaints and the provision of standards, are being properly and efficiently maintained; and if he will increase the grant he makes for these purposes.
    The President of the Board of Trade (Mr. Reginald Maudling): I understand that it is proving difficult to maintain all the services which the Consumer Advisory Council would wish to see performed, but I cannot consider a change in the present arrangements before I have the advice of the Committee on Consumer Protection.
    Mr. Darling: I am glad that the Minister recognises the good work which the Advisory Council is doing. I am sure that he appreciates that the Council is being handicapped in its work by lack of cash. Does he not agree that if we are to have a wage freeze, the Council can do a good job for people whose incomes are affected by the wage freeze by showing them how to get better value for their money and by helping to keep out of the market the traders who might be defrauding them if the Council were not doing this work?
    Mr. Maudling: I agree that it is an important matter but it is wiser to await the advice of the Committee before I take decision.

    Full Cream and Skim Milk Powder
    Sir C. Thornton-Kemsleyasked the President of the Board of Trade if the investigation into the Milk Marketing Board's application for anti-dumping duties on imported full cream and skim milk powder has yet been completed; and if he will make a statement.
    Mr. Maudling: No, Sir. This is by no means a straightforward case and I cannot say when a decision will be taken.

    Northern Region
    Mr. Shortasked the President of the Board of Trade what is the estimated natural increase in the insured population of the Northern Region up to the end of 1963; how many new jobs are in prospect; and how many redundancies are expected.
    Mr. Maudling: I understand that the information asked for in the first part of the Question is not available. The answer to the second part is that about 22,000 jobs are in prospect, of which about 1,000 will be in Cumberland and Westmorland. As regards the third part, I am informed by my right hon. Friend the Minister of Labour that he is aware of about 1,800 redundancies expected during the course of this year.
    Mr. Short: If the Government intend at long last to go in for planning, is it not surprising that this sort of information is not available? Is it not on this sort of information that the Govern-
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    ment's plans for the promotion of industry in the region should be based? Is the Minister aware that, according to my calculations, if the national increase in the insured population in the next two years is added to the number of redundancies it comes to nearly twice the number of jobs in prospect? What does the Minister intend to do about it?
    Mr. Maudling: Questions of population growth should be addressed to the Minister of Pensions and National Insurance. Unemployment in the Northern Region is down to 2 per cent. —26,000—and there are 22,000 jobs in prospect. I think that the position is not as bad as is sometimes suggested.
    Mr. Chetwynd: Over what period are the 22,000 jobs in prospect? Whose estimate has the Minister taken on this? In the past, highly optimistic forecasts have been given but have never been fulfilled.
    Mr. Maudling: I explained to the House recently that the estimates which we give are based on figures provided by firms applying for industrial development certificates. By and large, our experience is that they are pretty accurate, but we cannot guarantee the accuracy of any particular case.

    Tobacco Industry (Resale Price Maintenance)
    Mr. Gresham Cookeasked the President of the Board of Trade, in view of the fact that after four years of investigation the Monopolies Commission has reported that resale price maintenance does not operate against the public interest so far as the cigarette and tobacco industry is concerned, what steps he proposes to take to ensure that equally comprehensive consideration is given to the merits of resale price maintenance so far as concerns other industries affected by the inquiry which his own Department is making into this subject at the present time.
    Mr. Maudling: Resale price maintenance was only one of a large number of matters covered by this investigation. In any case, as my hon. Friend will remember, in the Monopolies Commission's Report an the tobacco industry, as well as the majority view, a minority view was expressed on the effects, as

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    regards public advantage, of resale price maintenance in this industry. When I have before me the results of the Departmental inquiry I shall be able to decide whether any further consideration needs to be given to this problem in respect of other industries.
    Mr. Gresham Cooke: Will my right hon. Friend give an assurance that no decision will be given on this extremely important and tendentious matter until the result of his inquiry has been considered by Parliament?
    Mr. Maudling: Any action on this matter would involve legislation, so it would certainly have to come before the House.
    Mr. Darling: Before we come to legislation, would the Minister care to give us his personal views on the minority observations?
    Mr. Maudling: Not at the present moment.

    Government-owned Factories, North-East
    Mr. Shortasked the President of the Board of Trade what plans he has for the disposal of Government-owned factories on the Team Valley Trading Estate and elsewhere in the North-East to private firms.
    Mr. Greyasked the President of the Board of Trade what plans he has for the disposal of Government-owned factories on the trading estates of Spennymoor and Dragonville, Durham, and elsewhere in the North-East, to private firms.
    Mr. Maudling: None at present. But the Government have always been, and will continue to be, ready to consider selling factories to suitable applicants.
    Mr. Short: Is the right hon. Gentleman aware that we are glad to have the assurance contained in the first part of his reply? Is he also aware that Government-owned factories have been a major element in absorbing redundancy in the North-East, and that if the Government dispose of them they will be throwing away one of the most useful weapons for dealing with redundancies?
    Mr. Maudling: We shall have to look at this matter very carefully, but if a
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    sitting tenant wishes to buy one of these Government-owned factories he is more likely to provide permanent than temporary employment.
    Mr. Grey: Is the Minister aware that any threat to Government-owned factories would be absolutely deplorable? In the past they have provided work for thousands of people in the North-East, and it would be disastrous to sell them to private enterprise. It would be turning the clock back thirty years.
    Mr. Maudling: We certainly would not take any action in this regard which was contrary to our general policy of trying to encourage employment in these areas.

    Trading Estates, North-East
    Mr. Randallasked the President of the Board of Trade the number of persons employed on the trading estates in the North-East; and the number of jobs in prospect.
    Mr. Maudling: Sixty-one thousand, three hundred and ten persons were employed in factories in the North-East administered by the Industrial Estates Management Corporation for England at the end of May; jobs in prospect for Government-financed factories total 7,500.
    Mr. Randall: Can the right hon. Gentleman give the figure or percentage of jobs in prospect for skilled workers? If the number of unskilled jobs is disproportionate to the number of skilled workers, how does this make a contribution to the solution of the very serious problem of the number of unskilled unemployed workers in the North-East?
    Mr. Maudling: I agree that the number of unskilled unemployed is a serious problem. I will try to obtain the figures if the hon. Member will put down a Question.
    Mr. Popplewell: When the right hon. Gentleman says that there are 7,000 jobs in prospect, what period does that cover? Over what period does he expect them to be filled? Is this part of the 22,000 that he mentioned earlier, when he evaded giving an answer when he was asked over what periods he expected these jobs to be filled?
    Mr. Maudling: The 7,500 are in respect of Government-financed factories in the North-East. One cannot be exactly certain about the time. The projects put forward in connection with industrial development certificates involving the building of factories may take a year or two. If I am asked to give an exact estimate of the amount of time I should prefer to have notice, in order to give the best figure.
    Mr. Jay: In view of the anxieties which are apparent from the Questions put about prospects in the North-East, can the Minister assure us that the Chancellor's statement on Tuesday does not mean that the operation of the Local Employment Act is now being suspended on the North-East Coast and in Wales?
    Mr. Maudling: My right hon. and learned Friend's statement did not involve any suspension or diminution of activities under the Local Employment Act.

    Factory Extension, Bristol (Industrial Development Certificate)
    Mr. D. Jonesasked the President of the Board of Trade whether he is aware that Jacksons Industries, Limited, proposes to close its Luton factory, where at least 1,100 people are employed, many of them of long service, with a view to extending its factory or that of its associated company Parnells Limited, at Yate, Bristol; and whether, in view of the hardship which will be caused to the Luton employees, he will refuse an industrial development certificate for the Bristol extension.
    Mr. Maudling: The application from Parnall (Yate) Limited for an industrial development certificate for the extension of its factory at Yate has been refused, in view of the employment position in the Bristol area.
    Mr. Jones: Is the Minister aware that the intense opposition to this proposed move comes from the official trade union movement, and is concentrated on the fact that some employees have had over forty years' experience, and have built these firms up, and that this opposition is greater because of their fear about the level of diversification of industry there? Will he see the people of this area, and hear their case?
    Mr. Maudling: In Luton the unemployment figure is only 0·5 per cent. and there are 500 registered outstanding vacancies. I would not agree with this firm going to Bristol, because of the shortage of labour there, but if it wanted to go to a development district where there was heavy unemployment that would be a different matter.

    Trade Fair Ship
    Mr. Teelingasked the President of the Board of Trade whether he will consider building, purchasing, or fitting out a ship, suitable to be used as a floating trade fair ship, similar to the one the Japanese are now using for international visits.
    Mr. Maudling: No, Sir. All our information goes to show, as far as the United Kingdom is concerned, both that the results to be obtained from such fairs are not worth the heavy expense involved and that industry prefers to participate in established trade fairs on land.
    Mr. Teeling: Will my right hon. Friend tell us whether he has discussed this matter with our embassy in Tokyo? Is he aware that the Japanese have fitted out ships of this kind and are having a tremendous success with them throughout the world?
    Mr. Maudling: We have a good deal of information about these ships, and have discussed them with our Exhibitions Advisory Committee. On the whole, however, the cost of providing space in a ship is about four times the cost for a land exhibition. My impression is that, although many people visit these ships, not a large amount of trade flows from those visits.

    Industrial Development Certificates
    Mr. Gresham Cookeasked the President of the Board of Trade whether, in view of the urgency of increasing exports and of providing inducements to industrialists to re-equip and reorganise their factories to this end where necessary, he will now arrange to reduce the difficulties which are imposed by his Department on various firms with a large export potential which have plans for rebuilding and modernising their factories on new sites.
    Mr. Maudling: Applications for industrial development certificates from firms wishing to modernise and re-equip their factories without additional labour requirements are considered sympathetically, as the statistics indicate. But I must also have regard to the consequential effects on the labour position in the district if rebuilding on a new site leaves the former building available for additional production.
    Mr. Gresham Cooke: Is my right hon. Friend aware that several cases have been brought to my notice of bad results coming from his inflexible policy over these I.D.Cs.? Is he aware that The Times had an article stating that investment could be distorted, and that there is a real risk that if a company does not get a new factory in the area of its choice it may go abroad?
    Mr. Maudling: I agree that there is a risk, but it must be faced. I do not accept the view of The Times on this point. It seems to me to be a good thing both economically and socially to try to guide industrial developments into areas where people are available for employment, rather than increasing the shortage of labour in other districts.
    Mr. Lawson: Is the Minister aware that he will have very strong support from hon. Members on this side of the House—and I am sure from many of his hon. Friends—if he sees to it that those parts of the country that most need development are given development? We are very much behind him in his efforts to see that this process of getting more and more industry into the south does not continue.
    Mr. Maudling: I propose to follow policies that best serve the economic as well as the social structure of the country.
    Mr. Hirst: Is my right hon. Friend aware that his approach to this subject in this context is a little academic, and that we must be prepared to back success if we are to get our export trade really going?
    Mr. Maudling: I agree about backing success, but it is not necessarily wise to let people extend industry in areas of labour shortage. They might get the people they wanted, but they might take
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    away people from other firms also engaged in export trade.
    Sir Harmar Nicholls: Will my right hon. Friend look again at the question of helping exports not only by removing difficulties at home but by giving tax concessions to that part of industry which engages in export?
    Mr. Maudling: I feel that that question is not for me.

    Tortoises (Import)
    Sir B. Jannerasked the President of the Board of Trade whether his attention has been called to the circumstances in which a large proportion of a consignment of tortoises imported into this country via Newhaven on 19th June arrived in a dead or dying condition; and, in view of this evidence of continuing cruelty, whether he will now consider taking steps to ban or control the importation of tortoises.
    Mr. Maudling: My attention has been drawn to the import of tortoises to which the hon. Member refers. I do not consider that it would be appropriate to use powers conferred on the Board of Trade under the Import, Export and Customs Powers (Defence) Act, 1939, in the manner he suggests.
    Sir B. Janner: Is the President of the Board of Trade aware that when 2.000 tortoises arrived in this country on that occasion 1,000 of them were either dead or dying; that when the crates were opened each crate was a wriggling mass of maggots—{HON. MEMBERS: "Reading."]—yes, I am reading from the report of the Royal Society for the Prevention of Cruelty to Animals—I think it rather important that we should have this information before us. Is the right hon. Gentleman aware that when some of these animals were lifted from the crates the bones fell out of the shells and others had crushed shells? Does the right hon. Gentleman realise that there is no action possible against anyone in this country with respect to these matters, and that every animal lover in the country would much prefer to be without tortoises than to have them come in this condition?
    Mr. Maudling: My point is that the powers conferred on me are for use for economic purposes and I do not

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    think that they could be used for other purposes.
    Mr. Jeger: Is it still intended that these tortoises should be used as the symbol of the Government's economic and financial policy?

    Anglo-Soviet Trade
    Sir C. Osborneasked the President of the Board of Trade what progress he has made in his talks with M. Patolichev, Russia's Minister of Foreign Trade, for the increase of Anglo-Soviet trade; since the Union of Soviet Socialist Republics enjoys a substantial favourable trade balance, what proposals they have made for reducing it by purchasing more British consumer goods; and if he will make a statement.
    Mr. Maudling: I had useful informal talks with Mr. Patolichev during his recent visit to this country. We considered further the proposals for the expansion of Anglo-Soviet trade which had been put forward by each side during the discussions held in Moscow at the time of the British Trade Fair.
    The detailed arrangements for trade in consumer goods during 1962 will not be negotiated until the autumn. However, as I told my hon. Friend on 8th June, it has been agreed that the aim should be to double the total value of the existing quotas on both sides.
    Sir C. Osborne: I wish my right hon. Friend good luck in his endeavour to double the trade both ways between Russia and this country. Will he bear in mind that last year we bought from Russia £75 million worth of goods but that they purchased only £53 million worth from us? Ought not that gap of £21 million to be filled with British consumer goods? We have the goods ready to export which they would like to have. Will my right hon. Friend press that point of view?
    Mr. Maudling: I am glad to say that the balance greatly improved in the first half of 1961. We must also remember that Russia spends large sums of money in the sterling area on sterling area raw materials. They are in fact buyers of sterling, and we must take that into account.
    Sir C. Osborne: But when they buy raw materials from the Commonwealth
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    that does not provide employment in this country. Are not we entitled to ask that a larger proportion of the sterling they earn by selling here should be spent on goods made in this country and so provide work for our people? Will my right hon. Friend look at this matter again?
    Mr. Maudling: I agree, and I am glad to say that that has been happening. In the first half of this year British imports were down compared with last year and British exports were substantially up.

    Local Employment Act (Grants)
    Mr. G. M. Thomsonasked the President of the Board of Trade if he will state the present average length of time between applications for grants by firms under the Local Employment Act being received and a decision being reached.
    Mr. Maudling: The interval between the first submission of an application and the final decision upon it averages between four and five months. The interval between receiving from the applicant all the information necessary to enable the Committee to investigate his case and the final decision on it averages less than two months. I do not consider that there is any avoidable delay.
    Mr. Thomson: Is the right hon. Gentleman aware that there are complaints from many different parts of the country about the length of time which elapses between a company making an application and a final decision being reached? In view of the absolute necessity to put some drive behind this programme in the development districts, will the right hon. Gentleman look at this again to make sure that there is no unnecessary delay?
    Mr. Maudling: I have looked at it many times and I am satisfied that there is no unavoidable delay. I know that there are complaints. If there were no complaints I should be worried. We are providing a substantial amount of public money and it is important that we make sure that the people obtaining it are likely to provide lasting employment.

    Barley
    Sir A. Hurdasked the President of the Board of Trade if the further discussions he has had with the Russians

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    and other shippers of barley to the United Kingdom market satisfy him that the forward contracts they have made at prices below the £20 a ton minimum will not seriously depress the barley market in the next few months, when the bulk of the home crop will be coming forward; and if he will make a statement.
    Mr. Maudling: I do not expect that sales under existing contracts will be more than the market can reasonably absorb.
    Sir A. Hurd: Is my right hon. Friend aware that the trade quotations are now being offered on Russian barley to be delivered in September and October at well below the £20 basic figure? Will he confirm that he is determined, either by agreement with the suppliers or by imposing an import duty, to stop the dumping of Russian barley?
    Mr. Maudling: I am satisfied with the arrangements we have come to. I hope to be able to give more information in a few days' time.
    Mr. Bullard: Is my right hon. Friend aware that the home crop is already beginning to be marketed, and not at a very good price. Although the actions he has taken are much appreciated, may I ask him to look at the whole question of the dumping of imports into this country and their effect on farm prices?
    Mr. Maudling: I agree with my hon. Friend that this is a big problem which certainly merits study.

    Government-Financed Factory, Stockton-on-Tees
    Mr. Chetwyndasked the President of the Board of Trade how many firms have shown an interest in the tenancy of the large empty Government-financed factory at Stockton-on-Tees since 18th April, 1961.
    Mr. Maudling: Three firms have shown an interest as possible occupiers of this factory since 18th April last.
    Mr. Chetwynd: Would the President of the Board of Trade say whether there is any real prospect of any firm taking over this very important factory, or is it to be a permanent memorial to the failure of this Government's planning?
    Mr. Maudling: I cannot say whether particular inquirers will or will not take the factory, but I repeat that there are important firms interested.

    Common Market
    Mr. Shinwellasked the President of the Board of Trade what assessment he has made of the consequences of British entry into the Common Market, with particular reference to an estimate of those countries, apart from the members of the Commonwealth and the European Free Trade Association, with which the United Kingdom would be precluded from entering into independent trading relations.
    Mr. Maudling: It would not be feasible to make an assessment of this kind in advance; the answer would depend upon such factors as changes in our own competitive power, the future level of the common tariff, and the commercial policy followed by the enlarged European Economic Community.
    Mr. Shinwell: Is that not a completely evasive reply? If the Government decide to accept the provisions of the Rome Treaty, that would preclude—apart from the E.F.T.A. countries and the Commonwealth countries—the United Kingdom engaging in independent trading relations. Why does not the right hon. Gentleman say that is so?
    Mr. Maudling: Simply because I thought everyone knew that.
    Mr. Shinwell: Are we to understand that the Government propose to enter into negotiations with the Six without having considered the consequences of their actions?
    Mr. Maudling: All I was saying was that it is impossible in advance to make an assessment. The countries concerned take about 25 per cent. of our export trade and against any loss there may be in joining the Community we have to put the positive side. We cannot make an assessment in advance of consequences of action of this kind.

    UNITED NATIONS (CHINA)
    Mr. P. Noel-Bakerasked the Prime Minister whether he will consult the Prime Ministers of the other members of the Commonwealth with a view to a

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    common initiative in favour of the seating of the Peking Government at the next session of the United Nations.
    The Prime Minister (Mr. Harold Macmillan): Her Majesty's Government are conscious of the complexity of this question on which differing views are held. We certainly expect to be in consultation with Commonwealth and other friendly Governments before this issue next comes before the United Nations.
    Mr. Noel-Baker: I thank the Prime Minister for that not unhelpful reply. Since the noble Lord the Foreign Secretary has now officially stated that the view of Her Majesty's Government is that the Government of Peking should be given its rightful seat in the Assembly of the United Nations and on the Security Council, and since India, Pakistan and Ceylon strongly share this view, would not a Commonwealth initiative be the best way to achieve the desired result?
    The Prime Minister: It is not for me to represent the views of other Commonwealth Governments, but on previous occasions they have been very different. I hope that progress will be made.
    Mr. Teeling: In view of the fact that Australia, New Zealand and, I believe, Canada, do not even recognise the Peking Government but the one at Formosa, would not it be extremely difficult for the Prime Minister to press this matter of seating Peking at the United Nations?
    The Prime Minister: As I said, it is a very complex matter.

    PORTUGAL (SUPPLY OF ARMS)
    Mr. Dribergasked the Prime Minister what types of arms and equipment are now being exported to Portugal because they are suitable only for use in the fulfilment of North Atlantic Treaty Organisation obligations.
    The Prime Minister: As the House has recently been reminded, it has been the practice of successive Governments not to reveal details of arms supplied to other Governments.
    Mr. Driberg: Is the right hon. Gentleman aware that this Quest ion arises out
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    of an assurance given to the House recently on behalf of the Government? Without detailing the equipment, can the right hon. Gentleman really assure us that there is no item of arms or equipment which could be used both for N.A.T.O. purposes and in Angola?
    The Prime Minister: There are, of course, many types of equipment. We are trying to operate this in such a way as to carry out the undertaking given to the House.
    Mr. Dugdale: Will the Prime Minister say what method there is of discovering that a weapon which could be used to kill the enemies of N.A.T.O. could not be used to kill Africans in Angola?
    The Prime Minister: May I take, as an example, the two frigates which have just been sold?
    Mr. Gaitskell: Would it not be both simpler and more honest to follow the example of the Norwegian Government and ban the export of arms and ammunition to Portugal?
    The Prime Minister: No, Sir. I have made a statement to the House and I should like to assure the House that we are carrying it out in the way I said.
    Mr. Paget: Can the right hon. Gentleman tell us into which category the napalm bomb falls?
    The Prime Minister: I should like notice of that question and whether they have ever been asked for or delivered.

    PRIVATE BILL PROCEDURE
    Mrs. Butlerasked the Prime Minister if he will move to appoint a Select Committee to consider revision of Private Bill Procedure and to report.
    The Prime Minister: No, Sir.
    Mrs. Butler: Is it not a negation of democracy that, on unopposed Bills, a Committee of one peer in another plaice can throw out a Clause after a few minutes' consideration when it has been examined in detail and approved by an all-party Committee in this House; and that there is no redress without the risk of losing the whole Bill?
    The Prime Minister: The Private Bill procedure was examined thoroughly in

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    1955 by a Joint Committee under the chairmanship of the right hon. Gentleman
    the Member for Colne Valley (Mr. Glenvil Hall). As recently as the summer of 1959 we had a report on the promotion of Private Bills from a Select Committee under the chairmanship of the late Lord Reading. I would observe that these Amendments were agreed to by the House a few days ago.
    Mr. Hector Hughes: Is the right hon. Gentleman aware that many valuable Private Members' Bills are killed by methods—
    Hon. Members: Oh.
    Mr. Speaker: Order. That is a different question.

    DOCTORS' REMUNERATION (REVIEW BODY)
    Mr. Pavittasked the Prime Minister when he expects to announce the names of the review body recommended by the Pilkington Commission to advise on doctors' remuneration; and if he will make a statement.
    The Prime Minister: It may be some little time yet before I can announce the composition of this body.
    Mr. Pavitt: Does the Prime Minister recall that the Pilkington Commission reported over a year and a half ago and the Government accepted its Report over a year ago? Does he further recall that when the Government had a head-on collision with the medical profession in 1956 and he had to intervene it was caused by similar dilatory action after the result of the Danckwerts award in 1951? Will the right hon. Gentleman ensure that quick action is taken to avoid a similar position arising?
    The Prime Minister: I hope that we shall be able to make progress. I must remind the hon. Member that the Pilkington Commission envisaged that the review body would go into action at relatively infrequent intervals, three years being mentioned as a minimum.
    Dame Irene Ward: While my right hon. Friend is considering the matter will he bear in mind that people supplementary to the medical profession are also in a difficult position and that all the Government's attention should not
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    be paid merely to the medical profession but to all those who serve the interests of the National Health Service? Could he say something about seeing that their position is also looked at independently by a review committee?
    The Prime Minister: Yes, but this question arises from the Pilkington Commission. I should like to make further inquiry before dealing with a wider matter.
    Mr. Gaitskell: Will the Prime Minister tell us whether doctors' remuneration is or is not affected by the wages and salaries freeze in the public sector which has been announced? If not, what is the reason for drawing a distinction between doctors and teachers?
    The Prime Minister: It is because it was envisaged that the review body would not go into action again except at infrequent intervals, three years being the minimum.
    Mr. Gaitskell: Will the Prime Minister answer the question? Are we to understand that distinctions are to be drawn between different professions in this way according to what is more or less an historical accident? Will he at least consider appointing a Commission to look into the question of teachers' remuneration so that satisfactory recruitment can be obtained?
    The Prime Minister: That is a rather different question. I have been asked what action we are taking under the Pilkington recommendations. I am sorry that we have not succeeded in getting an agreement on the body, but I have pointed out that, as it was not expected to go into action again for a considerable period, we should be able to complete the body in good time.

    UNITED NATIONS GENERAL ASSEMBLY
    Mr. A. Hendersonasked the Prime Minister whether he proposes to attend the September Session of the United Nations General Assembly as head of the United Kingdom delegation.
    The Prime Minister: I have made no decisions on this matter at present.
    Mr. Henderson: Will the Prime 'Minister bear in mind the importance

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    of his attending the September Session of the United Nations in view of the deterioration in the international situation? Would not even a short visit afford facilities for informal discussions with the Heads of other Governments, especially President Kennedy in Washington?
    The Prime Minister: This is a matter on which, if I thought it right, I should not hesitate to do as I did last year, but what will be the precise position at that time it is rather hard to tell. There may be other meetings of Heads of Governments concerned with the German and other questions.
    Mr. S. Silverman: Is it not the contention of the Government that there is an immediate and developing threat to peace over the Berlin situation? Is it necessary to wait until September to see whether it deteriorates further before the United Nations takes any cognisance of it?
    The Prime Minister: The Foreign Ministers of the countries mainly concerned are meeting, I think next week. They will no doubt consult together. I am asked whether I can go to the General Assembly. I cannot go to the General Assembly in August because it is not sitting then.

    COMMONWEALTH PRIME MINISTERS (DECLARATION ON DISARMAMENT)
    Mr. P. Noel-Bakerasked the Prime Minister what replies he has received from the Prime Ministers of the Commonwealth countries to his proposal that the declaration on disarmament, adopted at the recent Commonwealth Conference in London, should be circulated to members of the United Nations as a joint document sponsored by all the members of the Commonwealth.
    The Prime Minister: I am still in consultation with my colleagues in the Commonwealth about this matter.
    Mr. Noel-Baker: Since it is already many weeks since the Prime Minister said that consultations had begun, is there any special reason for the delay, as they all agreed on the declaration in London? Will it be circulated in time for the meeting of the United Nations Disarmament Commission in August?
    The Prime Minister: As the Commonwealth grows these things become rather lengthy, but I am hopeful that we have almost reached the end of our inquiries.

    BECHUANALAND (U.N. COMMITTEE ON SOUTH-WEST AFRICA)
    Mr. D. Footasked the Prime Minister whether he has received a letter, dated 17th July, 1961, addressed to him by Chief Hosea Kutako, the chief of the Herero people, with reference to the suspension by the British Government of visas for the United Nation's Committee on South-West Africa to enter Bechuanaland; and whether he will publish this letter, together with the terms of his reply.
    The Prime Minister: Yes, Sir. I have received such a letter. As it was described as an open letter, I assume that the sender will make such arrangements for publication as he wishes. I would see no objection to the publication of the reply when it is sent.
    Mr. Foot: Will the Prime Minister make clear in his reply whether Her Majesty's Government in this country approve or deplore the decision of the South African Government to keep the United Nations Committee out of South-West Africa?
    The Prime Minister: It is a fairly long letter and I am considering the terms of the reply.

    ECONOMIC PLANNING
    Mr. Emrys Hughesasked the Prime Minister in view of the urgent necessary for long-term planning of British Industry, as revealed by the recent decisions of Her Majesty's Government in relation to the economic situation, if he will now consider appointing a Minister for Economic Planning.
    The Prime Minister: No, Sir. Financial policy in all its forms is so closely bound up with the management of the economy that I do not think it would be useful to separate the economic planning and the financial functions of the Chancellor of the Exchequer. The Ministers chiefly concerned with economic affairs work very closely together and it would not help to add to their number.
    Mr. Hughes: Does not that Answer reveal that the Government are not really serious about the whole business of economic planning and that the Chancellor is already overworked? Is the Prime Minister aware that the Chancellor has been planning not in the interests of the nation but in the interests of the Surtax payers?
    The Prime Minister: In regard to the first part of the supplementary question, the Chancellor announced that he is consulting both sides of industry as to some improvement or alteration of the present procedure, but I still do not think that it would be wise to separate this entirely from the Treasury. I think any Minister who had experience would agree with me.
    Mr. Jay: Do the Prime Minister's answers mean that under the existing arrangements the Chancellor of the Exchequer is responsible for economic planning?
    The Prime Minister: Primarily, but he is assisted by the other Ministers, as the right hon. Member knows, who are particularly concerned with these affairs.
    Mr. Nabarro: Would my right hon. Friend agree that there is a widespread feeling in economic and financial circles that the growth of responsibilities of the Chancellor of the Exchequer has been so rapid in the post-war period that the present arrangement of Treasury Ministers, which leads to grave overburdening particularly in view of the meticulous detail with which many financial matters are now dealt with in this House, means that there ought to be serious consideration given to a reorganisation of all Treasury responsibilities?
    The Prime Minister: I quite agree that the enormous size and complexity compared with the problems thirty or forty years ago have increased the burden. I shall certainly consider whether an improvement can be made to handle it.
    Mr. Woodburn: Will the Prime Minister give a little study to the history of these supreme advisory committees, going back to Ramsay MacDonald's days, find what has happened to all the
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    others and see that the new one does something useful?
    The Prime Minister: That will be our hope.

  NATIONAL FINANCE

    Dated and Undated Government Stocks
    Mr. F. M. Bennettasked the Chancellor of the Exchequer (1) what are the total amounts now outstanding of dated and undated Government stocks, respectively;
    (2) what presently issued dated Government stocks will be outstanding on and after 1st January, 2000.
    The Economic Secretary to the Treasury (Mr. Anthony Barber): £12,197 million of dated stocks and £3,692 million of undated stocks were outstanding on 31st March, 1961. The following dated stocks have final redemption dates after 2000 A.D.: 3½ per cent. Funding Stock 1999–2004, 5½ per cent. Treasury Stock 2008–12, 2½ per cent. Treasury Stock 1986–2016.
    Mr. Bennett: Bearing those figures in mind, could my hon. Friend tell the House what would be the consequences referred to by his hon. Friend the other day which would flow from the fixing of a date for 3½ per cent. War Loan after the expiry of the dated stocks he has mentioned? What would be the cost to the Exchequer? Surely he should welcome a suggestion which might bring about a stabilisation of gilt-edged securities at a rather difficult time?
    Mr. Barber: I would hesitate to hazard a prediction about the problems of debt management forty years from now. There is nearly £11,000 million of stock maturing between now and then which will have to be re-financed and which ought to be taken into account.
    Mr. Bennett: I asked what the consequences would be provided this took place after, not before or during, the dates my hon. Friend mentioned. The fact that there are £11,000 million meanwhile is irrelevant to that question.
    Mr. Barber: I am saying that I cannot say now what the problems will be during the period between now and

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    2000 to which my hon. Friend referred. That obviously has a bearing on the matter. As the House will have appreciated, economic circumstances change rather quickly these days.

BUSINESS OF THE HOUSE
Mr. Gaitskell: May I ask the Leader of the House whether he will state the business of the House for next week?
The Secretary of State for the Home Department (Mr. R. A. Butler): Yes, Sir. The business for next week will be as follows:
MONDAY, 31ST JULY—Second Reading of the Consolidated Fund (Appropriation Bill.
A debate will take place on Foreign Affairs.
TUESDAY, 1ST AUGUST—Committee and remaining stages of the Consolidated Fund (Appropriation) Bill.
A debate will take place on Industrial Injuries, which it is thought may last for half a day, and be followed by any subjects which hon. Members may wish to raise.
WEDNESDAY, 2ND AUGUST—Debate On the Common Market on a Government Motion.
Further consideration of Lords Amendments to the Licensing Bill, if not already completed.
THURSDAY, 3RD AUGUST—Conclusion of the debate on the Common Market.
FRIDAY, 4TH AUGUST—Adjournment for the Summer Recess.
I will make a statement next week about the proposed date of our return after the Recess.
Mr. Gaitskell: Can the Leader of the House say when the Government Motion on the Common Market will be available?
Mr. Butler: I think probably on Monday.
Mr. S. Silverman: In view of the forthcoming debate on the Common Market Motion, which we are to have perhaps on Monday, can the right hon. Gentleman undertake that when the Lord Privy Seal goes to Geneva on Fri-
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day to consult our partners in E.F.T.A. he will not make any statement anticipating the statement which the Prime Minister is to make on Monday on the same subject, so that the House of Commons may know the Government's intentions before anybody else?
Mr. Butler: I think that we may rely on the discretion of my right hon. Friend. I will certainly draw his attention to the point raised by the hon. Gentleman, which undoubtedly reflects the views of the House.
Sir C. Osborne: The Leader of the House said that after the half-day debate on Tuesday any subject could be raised by hon. Members on the back benches on either side. Will the business that day be exempted business?
Mr. Butler: The Appropriation Bill is always exempted business.
Mr. Paget: Will the Leader of the House tall us how his right hon. Friend will consult his E.F.T.A. colleagues without telling them what our views are?
Mr. Butler: I said that we could rely on the discretion of my right hon. Friend.
Mr. H. Hynd: In view of the many facets of the Common Market problem, will the Leader of the House give an assurance that there will be a free vote on both sides on this question?
Mr. Butler: I said last week that the Government have a policy, and would support that policy in the Lobby.
Mr. Nabarro: Will my right hon. Friend bear in mind that many of my hon. Friends and I are looking forward with eager anticipation to a debate on the Motion on the Order Paper in the name of my right hon. Friend on House of Lords reform? Will he give the House an assurance that this important matter will not be squeezed out before the end of the Session, and that, were that to happen, he will undertake to put down the same Motion for the early days of next Session?
Mr. Butler: There simply will not be time to take this Motion before we adjourn and, therefore, we must take it later.
Mr. Mellish: Is there any hope of getting a statement before we go away for the Summer Recess, next week, on the conclusions of the negotiations which the Government had with the Prime Minister of Northern Ireland to help them out of their special economic difficulties, which are even worse than those of England, Wales and Scotland?
Mr. Butler: A special advisory committee has been set up under Sir Herbert Brittain to advise both Governments on the best way of proceeding. I do not think that its final report will be out before we adjourn. If there is any news to give the House, we will give it.
Mr. Emrys Hughes: Will the right hon. Gentleman say when we are to have a debate on civil defence? Is he aware that President Kennedy has just announced a large programme and a large sum of money for civil defence, including underground shelters? Is the Minister content that America is to have these measures of civil defence and that we are to have very little?
Mr. Butler: I cannot make a statement on policy at business time. All I can say is that it is obvious from my announcement about next week's business that there will be no opportunity for a general debate on civil defence.
Dame Irene Ward: May I ask my right hon. Friend whether Lord Radcliffe is to report before the House rises for the Recess, or are we to adjourn without knowing how our security, which is very important, is to be tightened up? Could I raise that on Tuesday?
Mr. Butler: Hon. Members are free to raise matters which are in order on the Appropriation Bill. I cannot make any further comment on my hon. Friend's intentions. I have not had information from Lord Radcliffe as to when he is to report.
Mr. Jeger: Can the right hon. Gentleman say where he is going for his holiday, and whether he intends to make any speeches?
Mr. Speaker: Attractive as holidays are, they are not business.

ORDERS OF THE DAY

  ECONOMIC SITUATION
  Order read for resuming adjourned debate on Amendment to Question [26th July]:
  That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for the purposes of upholding the strength of sterling improving the balance of payments and maintaining a sound basis for the continuing prosperity of the nation.—[Mr. Selwyn Lloyd.]
  Which Amendment was, to leave out from "House" to the end of the Question and to add instead thereof:
  "has no confidence in the policies of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July which, being most unfair in their incidence, are calculated to divide rather than to unite the nation, offer no long-term remedies for the weakness of the British economy and resemble in many respects those adopted by Her Majesty's Government in the past with such lamentable consequences for the country".—[Mr. H. Wilson.]
  Question again proposed, That the words proposed to be left out stand part of the Question.
  3.37 p.m.
  Mr. George Brown: There is, as was shown yesterday, a threefold charge against the Chancellor of the Exchequer in particular, and the Government in general. First, that in so far as he got the problem facing Britain right in his analysis when he referred to our lack of growth, our lack of competitiveness and our lack of productivity, his proposals are largely irrelevant, and, we think, almost wholly ill-conceived.
  Secondly, that to a large extent he has completely misconceived the problem. In consequence of that, his proposals, particularly the attack that he is making on the communal provision that we make for our life, will actually do harm to our position.
  Thirdly, that by the nature of the proposals he has made, both those which are positively in, and those that he has left out, he has failed, and notably failed, to create a climate in which there can be a call for national action. Indeed, it can be said that he has done the opposite.
  I will not waste time proving by reference to past documents—although that would be very easy—that over the

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  years, and particularly over the three years during which the Chancellor of the Exchequer said that we had been consistently running a balance of payments deficit the Prime Minister has regularly and continuously presented the country with a false appreciation of our position. The whole country knows this to be true. The right hon. Gentleman is sufficiently discredited, and there is nothing more that I need say on that subject.
  But so that hon. Gentlemen behind him do not think that they are not also tainted, I thought it as well to bring to the House one or two prospectuses on which they were returned at the General Election. I am only using documents used in 1959. There is a magnificent assortment if anyone wishes to go farther back. The first one I have, which hon. Gentlemen will no doubt recognise, is the one which says:
  "Conservative government means lower taxes for all"
  which, on the whole, is a little out.
  The next one is:
  "Homes or no homes".
  That question has now been answered. The Chancellor has stopped the homes. The third one is headed:
  "Fair shares for all".
  Then, in small print, which perhaps all hon. Members' constituents do not read, it says:
  "Sounds good, doesn't it? But it depends on what you mean by 'fair shares for all'."
  I can almost see the Prime Minister writing it.
  Then there is a little gramophone record which no doubt was played around the constituencies of right hon. and hon. Members opposite. It is headed on the cover:
  "An even better life by the Tories … for best results use only … at 33⅓ revolutions per minute."
  There, the Chancellor of the Exchequer is living up to the promises that he made.
  The fact is that the Government, on the basis of their speeches and their propaganda, lack any moral claim from which they can call the nation to action, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) said yesterday. I guess that never again in their lifetime will they be able to do it. They might hope that things will eventually im-
  612
  prove. No doubt the Prime Minister hopes that. He no doubt recalls that in 1957, two years before the last General Election, things looked bad for them, but things improved for them with the aid of these false prospectuses. They can hope that things will improve and that the nation will forget.
  Mr. Peter Tapsell rose—
  Mr. Brown: No, I do not intend to give way.
  They can hope that the nation will forget. They can hope to be able to distribute largesse before the next General Election, as they did before the last. They can hope for all these things, but if the nation's trouble is as deep-seated and long-term as the Chancellor has told us it is, whatever they get in the way of accidents like that this Treasury Bench can never hope to deal with it.
  There is no doubt that this time the people of our country really showed themselves to be tired of these recurrent crises and of the rather old and stale ways of dealing with them. There is evidence that the people were impressed, and were to some extent frightened, by the comparison between us and our rate of progress, if that is the right word, and Continental Europe and its rate. There is good evidence that our people are conscious that we have been "living it up" and of the consequences of doing so.
  I believe that our people were waiting before this Budget and would have accepted strong, and even tough, measures if there was some evidence that those measures were relevant and that their incidence as between one group and another was fair. The measures that they have now had presented to them, as is shown by every comment on them outside the House, as well as in the House, do not seem to be specially relevant and certainly do not seem to be fair in their incidence as between one group and another.
  As a result, there is a much greater sense of let-down among our people and, to some extent, a considerable sense of anger, since they feel that the opportunity has been so clearly taken to attack one group, namely, the wage and lower salary earners, instead of dealing with the problem and making us all

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  share the burden of it. I suggest to the House, politics apart, that we, this country, this Legislature, will pay a very heavy price for the fact that these two feelings have been put into the minds of our people.
  The Chancellor of the Exchequer outlined the problem facing us well enough, both in the previous economic debate and when he made his statement. The problem he outlined well enough is not new. He is not new in his job. He has had very nearly one year now to come to grips with it. He should by now have been able to offer the country a realistic national plan. He ought by now to have been able to offer an appreciation of the requirements which will face this country in the five years ahead. He ought to have been able to make a shot at matching our resources up to those requirements.
  In consequence, the Chancellor ought to have been able to establish the gap and lay down the priorities. He ought, therefore, to be able by now, if not before, to have called in industry—that means both sides of industry, management and labour—and the public authorities to ensure their effective participation in that plan. He ought to have been able to do this by now. He has not done it.
  Further, why did he not, in his statement, in view of his own analysis, show a willingness and an ability to control imports, obviously so very large a part of our trouble? There is no commentator outside the House who does not hold the President of the Board of Trade, whose proper decency is not taking part in this debate we all mark with respect, very largely responsible for the situation we are in, because of the enthusiasm with which he abolished our ability to control imports.
  Why did not the Chancellor put right the mistake his right hon. Friend made? Why did he not show himself willing to limit inessential and luxury building work, so many examples of which are all around us? It might have been too much of a political pill to expect him to swallow, but why did he not at least suspend the Surtax gifts he has promised to his wealthy supporters? Why did he not make a real move in on capital gains and other tax evasions, instead
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  of the tentative, half-hearted proposals he is making?
  I mention these things for no party reason, but—[HON. MEMBERS: "Oh."] Well, it is very often possible to get a party advantage out of the most obvious truth, and that is what will happen as a result of this debate. I mention them to echo something that my hon. Friend the Member for Southwark (Mr. Gunter) said last night. Had he done these things, or a number of them, he could so easily have set the climate for discipline and responsibility among our people. It is his failure to establish the prerequisite of the climate in which our people would be willing to exercise restraint and discipline that convicts the Treasury Bench of its culpability in this situation.
  Instead, we get a very sloppy halfway house to planning. It was exciting and impressive to hear the Chancellor say that planning was no longer a dirty word to him, but I gathered from the way in which he said it that he felt rather like the publishers of Lady Chatterley's Lover—not so dirty that he will not print it, but that he does not particularly want to use it any more often than he has to.
  We get a very half-hearted reference to a body called the N.A.C.P.I. I have no doubt that when the Chancellor mentioned the discussions he was to have with that body, some of his right hon. and hon. Friends behind him hardly knew what he was talking about, which is not surprising. This is not planning; this is not the way to plan. I know that body; I have been on it in former days, and I know its value and its limitations. That is not where planning is done, and it is not relevant to what is meant by planning. While the word may not be dirty to the right hon. and learned Gentleman any more, clearly, so far, it is not very well-known to him in its proper meaning.
  All we have had from the Chancellor is the same dreary old succession of measures, for some of which, in a different setting, maybe a short-term case could have been made, but a dreary succession of measures which, in this setting, are the only measures proposed, where there is no long-term setting in which to put them, and which, in this context, could do little good and might, as they have done in the past, do a very great deal of harm.

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  What have we had? First, the increase in the Bank Rate, which has been revised, presumably, to increase our competitiveness, but it is bound, inescapably, in some respects, to reduce our competitiveness. It is bound, because of the price it puts upon expansion, because of the price it puts on—is there anything wrong with the Economic Secretary, the hon. Member for Doncaster (Mr. Barber)? I listened to him last night, and he might perhaps now listen to the answer to what he said. It would be more intelligent than just sitting there grinning. [HON. MEMBERS: "Oh."] This is an old game, which I also play, so I know all about it.
  It is bound to discourage expansion, because of the price it puts on obtaining the credit with which to do it. It is bound to increase, some day, our long-term problem, because the hot money, the funk money, which it attracts here will go home again some day. When it goes home again, we shall, therefore, be faced with a much more serious problem than we are faced with now. It is bound to increase our payments across the exchanges, and that is one of our problems at the moment.
  It is bound to increase the Exchequer's present interest payments internally, and is bound to make it more expensive for us to do any of the communal services which we have to do. Every £1 that our local authorities and public authorities have to borrow for any of the social services they have to do will be more expensive after this than it was before this. To that extent, it cannot possibly increase our competitiveness but can only reduce it.
  We then get the so-called regulator. This is a newer name for an old device. What does it do? It increases the prices of essentials and inessentials indiscriminately, and its incidence falls proportionately more heavily upon essentials than it does on luxuries. For example, the effect of the regulator will be heavier on some foodstuffs, comparatively to what people spend on them, than it will be on television sets or motor cars or other luxuries.
  It falls very much heavier on old-age pensioners, on those with large families, and on those on small fixed incomes, who spend a higher proportion of their incomes on these things, than it will fall
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  on some better-off people, who spread their spending over a very much wider range of things. While doing that, and, therefore, while increasing the existing inequity in our country, it will fail to damp down demand.
  The point that the Chancellor was making was that it will take £200 million out of the demand. This rests on assumptions which, I think, are not provable, because the incidence of the increase is not big enough to deter buying. The claim that because
  we put 30s. extra on a television set at £69 we therefore take £69 out of the demand, which is the point of the claim, is ridiculous. The person who will pay £69 will still pay £70 cf0s. The argument that if we increase the price of a motor car costing £800 by £30, we have taken £800 out of the demand is nonsense. The person who will pay £800 will still pay £830. I will tell the Government what they have done.
  Sir Alexander Spearman: I wish the right hon. Gentleman would learn a little elementary economics.
  Mr. Brown: Well, what is the point?
  Sir A. Spearman: If more is spent on one thing, there is less to spend on others.
  Mr. Brown: The obvious retort to that that is that it is a pity the hon. Gentleman has never got beyond elementary economics, because my next point is that it does not deter the members of my union from buying, but that it is an absolutely invaluable pinprick, driving them to ask for more wages to finance the purchase. That is what happens. It is no good the hon. Gentleman shaking his head, because this is how it works. I listened yesterday to some dreadful nonsense from the other side of the House about how manual workers act, and it will not do right hon. and hon. Gentlemen opposite any harm today to listen to someone who has spent many years in that atmosphere.
  Sir A. Spearman rose—
  Mr. Brown: No, I have given way once.
  What will happen? If hon. Gentlemen opposite really believe—and I did not realise that this was the basis of their thought—that if one of my union

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  members has to fork out 30s. in extra tax for something costing £70, he will write it down in a little book and spend 30s. less on something else, they have got it absolutely wrong. That is not how it works. I assure the House that if the Government put this kind of marginal increase on everything he buys, what they will have done will be to produce an invaluable aid to all those who are making claims for additional wages. This is exactly what they will achieve, and, as a trade union official, I assure them that that is exactly what we shall have to contend with and pass on to them.
  Several Hon. Members rose—
  Hon. Members: Sit down.
  Sir Cyril Osborne: Is the right hon. Gentleman arguing—
  Hon. Members: Sit down.
  Mr. Julian Ridsdale rose—
  Mr. Speaker: The right hon. Gentleman has been good enough to give way. Perhaps he would now be good enough to indicate to whom he gave way.
  Mr. Brown: In view of the competitiveness of hon. Members opposite, I have now withdrawn the offer, Mr. Speaker.
  This action of the Government will be an invaluable pinprick to claims for higher wages, and every industrialist on the other side knows it.
  Mr. Ridsdale: Will the right hon. Gentleman give way?
  Mr. Brown: Sorry, but the hon. Gentleman has missed his chance.
  What I have just been saying referred to the regulator. What is the next thing that appears? It is this tremendous attack on what I call the communal services, the things that we provide for ourselves without primary regard to making profits out of them. I refer not only to the social services, like health, housing and education, all of which are attacked by the measures in this "Budget" and all of which will be reduced, but I am thinking also of the publicly-owned sector of industry which, for the most part, covers the essential services which we found could not
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  adequately be provided for the country on any other basis.
  I mentioned a prospectus entitled "Homes or no homes". How much does any hon. Member opposite believe that to handle the long-term situation which the Chancellor
  analysed we have to deny people wanting to buy pre-1919 houses the opportunity to borrow the money with which to do so? Does any hon. Member opposite believe that classes of 40 or more in our public education service must not be reduced, to satisfy the long-term needs which the Chancellor set out?
  I listened yesteday to the speech of the right hon. Member for Flint, West (Mr. Birch). I am sorry that he is not here now. I also heard the speech of the hon. Member for Bath (Sir J. Pitman), and I am sorry that he, too, is not here. I have never heard such nonsense as they spoke on this subject. Our problem is not that we have been providing too much communal service for each other. That cannot be said when our schools have classes of 40 and upwards. That is not the problem.
  Sir C. Osborne: The problem is exports.
  Mr. Brown: The problem is that we have not raised our production as high as our competitors [HON. MEMBERS: "Exports."] Had we raised our production, our competitive production, and increased our exports—[HON. MEMBERS: "Ah."]—we could have afforded all that we have been providing and more. When hon. Members opposite shout "Ah", they remind me of what I heard yesterday. They kept on talking about what we had not done—we had not exported enough, we had not done this, and we had not done that. But it is they who have been in power for ten years. It is ten years since we were in office and it is hon. Members opposite who have the responsibility, that set of tired and worn-out gentlemen.
  Several Hon. Members rose—
  Mr. Brown: I will not give way, because that will only take time from other speakers.
  The point I want to make is of tremendous importance. To cut back the provision of essential communal services, which is what the right hon. Member

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  for Flint, West would do, is exactly the wrong way round. If we cut back so that we can keep within the results of our stagnant economy, we accept stagnation, and that way we can only die. What we ought to say is what amount of communal provision we must maintain. We ought to do more. We ought to accept this as a challenge and see how we can raise productivity and raise output and direct it into export channels in order to be able to afford more of these things.
  The basic difference between hon. Members opposite and hon. Members on this side of the House is that, as in the 1930s they are stagnant-minded and would like to settle down on a lower level, a lower level of output and a lower level of communal provision, rather than make the effort to push it up.
  Sir C. Osborne: Rubbish.
  Mr. Brown: The hon. Member says "Rubbish," which is the most erudite word that he has ever used.
  How else can we explain the Chancellor's policy? How else can we explain the speech of the right hon. Member for Flint, West? The whole burden of his complaint was that we were doing more than we could afford, so we should cut back to what we could afford, not saying, as I would, "Let us afford more and find out how to do it".
  To cap all that, the Government then produced the wage freeze. If hon. Members opposite are in the mood to listen, let them hear me now. There is no worse way of trying to get a worker expansion-minded than to talk to him about holding back his wages. The moment he is conditioned to understanding that his wages are being held back—if one succeeds—so he will also be thinking in terms of holding back production. There is no way into the one without the other.
  The Prime Minister is to speak to us tonight, after a long interval. Will he explain how this wage freeze is to be achieved? I understand that, first, hints are to be dropped to arbitrators; secondly, that there is to be a call to private industry managers to fall into line; and thirdly, as we have seen from the Minister of Education, that there is to be active intervention in the actions of joint negotiating bodies.
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  What a way to get the workers interested in joint consultation with their employers! What a marvellous basis for going out to sell the idea that management and workers ought to cooperate when the first thing they are told when they do is that, if the Government do not like what they decide, they will step in and stop it.
  What will all this achieve in the private sector? It will introduce friction between management and men where friction does not now exist. Even where industrial relations are good enough for management and workers to get on, because the Government have called upon the management to act differently and the management loyally does friction will be produced in industrial relations where, hitherto, there has been none. My poor friend and comrade, Ted Hill, got into trouble for using some injudicious words. I must say that the Government are going out of their way to give his words effect and meaning and point.
  What is the use of increasing charges and costs in three Budgets this year—and this is the third? First, the Government increased taxation on the worker by increasing the cost of his National Insurance stamp. Then they taxed him when he was sick by increasing his health charges. Then they raised Purchase Tax and Excise duties. Incidentally, do not let us forget the action which the manufacturers took very quickly during the last two weeks. They put up the prices of everything, particularly beer and cigarettes, just before the Chancellor's announcement. All these measures, spread over three Budgets, have raised the cost of living to an extent which cannot be hidden.
  Having done that, manufacturers continue to advertise with all their power on television every night. We will be told how many more transistors, how many more television sets, how many more cosmetic outfits and how many different kinds of drink we could have, and should have, even at the increased prices. Prices have gone up and costs have increased, and then we have advertising like mad and Ministers still saying how good the situation is. Incidentally, by the time the Economic Secretary had finished speaking last night I was nearly convinced that we did not have a crisis!

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  What is the point of doing all that at the very moment when the workers are being asked either not to ask for a wage advance, or, if they ask for it, to do without it when it is refused? As any kind of argument, political or economic, it is absolutely barmy. This is not the climate we want. This is not the lesson we want to be drawn, and it cannot lead to the conclusion which we want to be reached.
  May I try to get the wage issue clear and to put the level of wages and wage advances into perspective? This, again, arises from the nonsense that was talked yesterday by hon. Gentlemen opposite. The idea that in Britain we have average earnings of around £15 per week, and that this is the amount which our union members take home each week, is absolute rubbish. A very large number of British workers do not take home £10 a week.
  Mr. William Yates: We do not believe the right hon. Gentleman.
  Mr. Brown: When hon. Gentlemen opposite say that they do not believe me, they do themselves discredit, not me. I urge them to go and check these facts for themselves. All the public services, agriculture, a very large part of the mining industry—[HON. MEMBERS: "Oh."]—yes, and railways, come under what I have just been saying. I can assure hon. Gentlemen opposite that if they say that they do not believe me, they have it all wrong.
  Mr. W. Yates: No.
  Mr. Brown: There is nothing one can do with the blind who will not see. I assure hon. Gentlemen opposite that they are supporting a wrong policy—perhaps their Ministers are as blind as they are —because they are being misled by the selective stuff that is being put around. This can be proven.
  But let me make it clear that the Chancellor did not hang it on the level of wages. He was wiser than the hon. Gentlemen behind him. He hung it on the increase an increase, he said, which exceeded our industrial output increase. But to do that the Chancellor took only one year—last year—and to show just how selective his figures were, had the right hon. and learned Gentleman taken two years instead of one he would have
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  arrived at the position where the increase in wages was less than the increase in industrial output, and quite notably so.
  The rate at which wages have been rising recently is less than that of our competitors and is notably less than that of Western Germany, which is so often urged against us. If one takes 1953 as being, for this purpose, 100, one finds that whereas our present hourly wage rates are 140, in Western Germany they are 163, Holland 155, Sweden 149 and only in Belgium are they near ours, at 138. If one also remembers that in many of those countries there are social wages paid by employers that here are borne on tax, the comparison would be even better from our point of view.
  I do not claim that our balance is right, or that there is not a problem. All I am saying is that the House should get the matter into perspective and understand that it is not the level of our take-home pay that is so very high. It is not the comparison between our wage rates compared with our competitors. It is that our production and productivity is worse than in these other countries.
  I now put an argument which, perhaps, everyone will not accept. We would be far better to realise that personal incomes at this low level are bound to rise. Workers on £8, £9, £10, or £11 a week cannot be asked not to want higher personal incomes. It is an absolute waste of time to argue that one can stop them rising. The thing to argue about is how one can relate the rise to productivity to ensure that it is paid out of increased earnings. [HON. MEMBERS: "Hear hear."]
  Hon. Gentleman opposite say "Hear, hear", but that is not what the Chancellor is doing by his policy. If he were to address himself to this question and create a climate to achieve it, we might be able to come nearer together. I will try to be as honest as was my right hon. Friend the Member for Huyton yesterday and try to put to the House—as my right hon. Friend did in the field of taxation and our balance of payments—my ideas.
  First, let us look at the Government's intended actions. Take teachers as an example—although do not let us think that they are the only example. There are also the firemen. If ever a body of men have an absolutely outstanding case

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  for a substantial increase in pay it is the firemen, who are being grotesquely treated. If they are to be interfered with in the middle of their wage claim, as have the teachers, there will be a very serious situation for this House to face within a short time.
  As for the teachers, I wonder just how proud are hon. Gentlemen opposite about what the Government are doing. I say straight out, as a trade union official, that the teachers were very ill-advised not to have accepted the Burnham award when it was made. But, had they accepted it, it would not have made any difference, because it would not have been ratified until today and, in any case, the Chancellor made his statement yesterday. Nevertheless, I urge hon. Members to think of their case and I put this to the Prime Minister in the hope that he is still approchable.
  I know a young girl—[HON. MEMBERS: "Oh."]—my daughter, and I hope that hon. Gentlemen opposite know their daughters, too—who, at the age of 22, and in teaching, has got a class next term of 40 children. She has five Ordinary level and two Advanced level certificates, the sort of person referred to on three occasions during the last week by the Minister of Education, in an offensive overtone, as a two-year trained teacher. That was not what was said to her when the Government were trying to get her into teaching. However, at 22, with five O levels and two A levels, her pay is £520.
  What would an industrialist pay for her? She gets no luncheon vouchers, or any of the "perks" paid by hon. Gentlemen opposite to workers in their offices. And, of course, her pay rises slowly, so slowly, up the scale. Compare that with a shorthand typist aged 18 or 19, let alone 22. Compare it with the executive grades in the Civil Service. I do not ask hon. Members to compare it with the teachers. Perhaps such a comparison would not be realistic. Let us make sensible comparisons, with commerce or industry. Can anyone say that the starting figure which has been agreed of £600 at age 22, with those qualifications, is unreasonable, or out of keeping with what is being paid outside? Yet this is what the Chancellor has instructed the Minister of Education to say to them.
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  What conclusion should the teachers draw? Should they leave teaching, at which they have worked so hard and for so long, and go into commerce? Should they lose their idealism? Hon. Members opposite must consider how we are to get the sort of nation that we all say we need in order to work our way out of the problems which we face. Thus, today, I put this to the Prime Minister. Both sides of industry met in their free negotiating body, as the Home Secretary was so proud to label it in 1944, when he told them that they could have full freedom to do what they thought best.
  They met, and both sides decided to reject the intervention of the Minister of Education. They decided to reject his attempts to tell them what the global sum should be. They decided to reject his attempt to tell them how to split it up. They decided to send forward the recommendation for the increase on which they had both agreed. This is a matter of tremendous importance for us. I ask the Prime Minister to be big enough to withdraw the announcement which his right hon. and learned Friend made yesterday. Let this deserving group of people have the increase which has been agreed.
  Although I feel strongly about that particular case, it is not that which worries me so much. I am more worried about the consequences of the principle involved. The Minister overrules a joint agreement. He interferes with a free negotiating body. Will other Ministers follow suit? If they do, where will it get us in industry? Does the Prime Minister realise what will happen? Once it is understood in industry that free negotiating machinery is no longer free, but is subject to arbitrary direction by the Government, whose hand does the Prime Minister think will be strengthened?
  Has it occurred to the right hon. Gentleman that it is no use appealing to responsible trade union officials to face their members fairly at the very moment when he is doing the other fellow's arguing for him? Does he understand that, if we are to overcome our present trouble, we must keep industry at work, we must get management and work-people co-operating together for new techniques, for productivity and for proper working during working hours? This requires mutual trust. It requires

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  a belief in each other's capacity to make an agreement and to honour it.
  Does not the Prime Minister realise that the policy of interfering with the results of negotiations can do nothing but prevent any of those ends being attained? It can only provoke industrial strife. It can only sow mistrust and it can only support those who say that joint negotiating machinery is the way in which the bosses tie the workers up for their own benefit—which is what is said.
  I beg the right hon. Gentleman to understand that, although the Government's policy may seem attractive to him for a short-term purpose, in the long term, as those of us who have been a long time in the business know, it can only undo everything which has been done since the Mond-Turner Committee after the 1926 General Strike began a new outlook in British industrial relations.
  It has been said—it was said yesterday by the right hon. Member for Flint, West and by the hon. Member for Bath—that trade unionists, the workers, bear a special responsibility in regard to restrictive practices, strikes and a lack of productivity. I do not accept that. I do not believe that it is true. If any hon. Gentleman opposite can show me an industrial concern with a notably bad record in industrial relations, he will, perhaps, be able to show me also an awkward union and some disaffected shop stewards, but I shall be able to show him a bad management. It is astonishing how bad at industrial relations and how bad at consultation many of our best firms are.
  Sir. C. Osborne: What about the London docks?
  Mr. Brown: I shall come to that.
  I shall not go into details, but I was recently in touch with a firm working on a national contract for one of our great atomic installations. I know the management very well. I know them to be good people. I was surprised at what I read in the chairman's speech. I asked him to come and see me. We had a talk about it, and he told me of the troubles that he had had with a certain union on a particular job. I asked him whether he had seen the secretary of the union. He had not. Had
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  he seen the president of the union? He had not. Had he seen any permanent official of the union? He had not. I asked him why. He said, "The employers' federation would not like me to see them direct". I replied, "For goodness' sake—how do you think that industrial relations work?". I arranged for him to see them. While this was not the only thing which was done, the subsequent history of the work was completely different from its previous history.
  Of course, we have men in our ranks who are awkward. Of course, there are particular industries where there is a tradition of resistance. But I am sure, also, that where management takes this aspect of management seriously we do not have the troubles that we have elsewhere.
  My hon. Friend the Member for East Ham, North (Mr. Prentice) and I recently visited a firm in Greenwich, G. A. Harvey & Co., a large firm in heavy engineering and heavy steel work right down to quite light work, which employs a very large number of people. It was quite astounding to find, in an industry not notable for good relations that this firm's productivity record was tremendously impressive and its record in industrial relations was outstanding. Also—mark this—at every level, from the training of apprentices to the training of the top ranks of management, there were first-class schemes. The firm took the whole thing seriously and spent a great deal of time and money on it.
  When I went round the works. I met the shop steward convenor. He did not come from what is called one of the responsible unions. He was a convenor and shop steward of the Electrical Trades Union. I said, rather jocularly, to this man, "What are you doing about educating the chairman?" I had been having quite an argument with him. The shop steward replied, "Nobody educates anybody here. We educate each other. We have," he said, "the best relations here. We have the best production record of any firm in south-east London".
  I could duplicate that type of case. Why do some firms in the car industry have a notably good record while other firms in the car industry have a notably

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  bad one? The answer is not that we have not responsibility, but that, in this matter, using men as using machines, the ultimate responsibility is on management, and, in fact, when things go sour, it is usually because management is not up to the job.
  If the House would like it, I will accept, just for the sake of carrying the argument a stage further, that the trade unions have a special responsibility. Let us accept that the workers have a special responsibility. How will we put things right? It must be the desire of all of us to put them right. Can we do it in the Chancellor's way, by putting a premium on conflict in industry, by destroying negotiating machinery, by making people restriction-minded instead of expansion-minded? We submit that that is not the way.
  A dynamic approach to economic growth in individual plants, in industry and in the nation as a whole, and to industrial co-operation, productivity and reduced costs requires self-discipline. All those things require self-restraint, because in a democracy one cannot impose discipline or restraints; there must be self-discipline and self-restraint.
  Mr. Tapsell: And in speeches, too.
  Mr. Brown: This calls for willing acceptance of and eager participation in the plans which the Government seek to put over, and to obtain that acceptance and participation requires an instinctive feeling by men that social justice is the aim of the country.
  In conclusion—I hope that that cheers up the hon. Member for Nottingham, West (Mr. Tapsell)—if our people are given, as they are not, fiscal and social policies which clearly indicate that the burdens and benefits will be fairly shared, we shall then have a climate which will lead to the Government having a consistent—that is very important —and realistic national industrial plan, with the priorities that they deduce we need and with the physical means of achieving them matching the resources with the requirements. If we have complete participation in consultation—I do not merely mean information after the event—between the Government and industry, between the two sides of industry and between the two sides of individual
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  undertakings, then I think that we shall be on the right road nationally instead of being on it in only isolated and outstanding cases.
  There would still be resistances, but we would have the climate in which to deal with them. Industrial statesmanship would be applauded and it would get its reward instead of seeming so often to be a way of not getting what one's union members think one ought to get for them. We should also have a wholly new national outlook. Our industrial scene would be transformed, because cynicism and unfairness would no longer be the keynote of our national policies.
  As I said at the beginning of my speech, the great cross of the Prime Minister is that he has fathered and campaigned for, and has succeeded in getting accepted, a very shoddy image. "Budgets" as unfair as this one fit in with the cynicism and shoddiness which his speeches have so often portrayed. It is because of that that all of which I have spoken cannot be achieved under his Administration.
  4.32 p.m.
  The Financial Secretary to the Treasury (Sir Edward Boyle): The right hon. Member for Belper (Mr. G. Brown) has raised a number of points to which I shall endeavour to reply. He said—hon. Members may have forgotten this point; it was made some time ago, at the outset of the right hon. Gentleman's remarks—that the regulator which my right hon. and learned Friend the Chancellor of the Exchequer has introduced falls comparatively heavier on foodstuffs than on television sets.
  In case that is taken up outside, I should put the record right straight away. As far as food goes, the regulator affects only the duties on sugar, tea, cocoa, coffee and chicory, all of which —[Interruption.] The approximate yield from the 10 per cent. surcharge on the items which I have mentioned will be very little over £1 million a year of the total sum of £210 million a year which will be brought in by the regulator.
  Mr. G. Brown: That was not the point that I made. I said that people on small fixed incomes, such as old-age pensioners, spend more on tea, sugar and other food than on television sets.
  Sir E. Boyle: I heard the right hon. Gentleman correctly, and I thought it right to get the figures on the record. Many hon. Members wish to take part in the debate and, therefore, I intend to confine myself to three subjects: first, the economic background to the measures which we are debating: secondly, the measures themselves and, thirdly, the long-term objectives of our economic policy.
  I do not think there can be much doubt about the background. Today, Britain is faced with the problem that her overseas balance of payments has been tending over a period of years to get worse. It has now reached a state in which strong remedial action has become essential. The main underlying factor of this deterioration has been simply that home demand has been increasing too fast relatively to our production. I do not wish to weary the House with a mass of figures, but I think that it is instructive to compare the figures for the financial year 1959–60 with those for 1960–61.
  Between those two years, total home demand, measured in real terms, rose by about £1,100 million, private consumption by about £425 million, public authorities' consumption of goods and services by about £125 million, fixed investments by about £300 million and investment in stocks by about £250 million. Against this total extra demand of £1,100 million, home production rose by only about £650 million.
  The gap between these two figures was filled, as was inevitable, by a large increase in the excess of imports over exports. In other words, there was a deterioration in our balance of payments on goods and services account, and this was a big factor—indeed, it was easily the main factor—in the worsening of our overall balance.
  Mr. Hugh Gaitskell: What period does that cover—1960?
  Sir E. Boyle: This is a comparison of the financial year 1959–60 in real terms with the financial year 1960–61. The final figures for 1960–61 were not available either at the time that my right hon. and learned Friend prepared his Budget speech, or when he delivered it.
  It is true that the balance of trade was better in the second quarter of this
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  year than in the first quarter. But I must make it clear to the House that, contrary to what some people outside have suggested, there was no reason to suppose that, in default of the Chancellor of the Exchequer's measures, the balance of payments situation would have righted itself by next year. On the contrary, all the indicators suggest that the pressure of home demand has been building up still further in recent months.
  In the first place, capital investment is still rising strongly. I hope that the Leader of the Opposition will not repeat tonight what he said during the Budget debate, namely, that manufacturing investment is now only at about the 1956 level. Even in 1960, manufacturing investment was running well above its previous peak level in 1957. As for the present year, fixed capital expenditure by industry continued to rise in the first quarter, when it was 10 per cent. above the previous year. The figures for deliveries of capital goods and for imports of machinery suggest a further rise in the second quarter. The forecast for this investment in 1961 is that there will be a 20 per cent. rise on 1960 as a whole.
  Secondly, consumption is also rising. Retail sales in the second quarter of this year were higher in real terms than in the first quarter. Car registrations in June were almost as high as in June, 1969, the highest figure so far recorded. Hire-purchase sales of cars have been high, and the hire-purchase debt, which was falling for twelve months after April, 1960, has now turned over to a rising trend. However, experience has shown that the best general indicators of the pressure of demand on productive resources are those provided by the statistics of the labour market, especially by the figures for unemployment and unfilled vacancies. There is no doubt that these figures reveal a very tight situation.
  In July, the unemployment percentage was only 1·2. In five of the ten regions of Great Britain, the unemployment percentage was below 1. Unfilled vacancies were well in excess of the number of unemployed, and there are labour shortages over by far the greater part of the country as a whole. [HON. MEMBERS: "Not in Scotland."] We had a debate on trade and industry in Scotland only

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  the other day and, therefore, I am justified in giving these figures for the country as a whole.
  Mr. Harold Wilson: In view of the figures which the Financial Secretary has given—the record increase in manufacturing investment and the chronic labour shortage which he has mentioned—I wonder whether he will answer the question which, I think, hon. Members on both sides of the House would like him to answer: why is it that production is no higher than it was a year ago?
  Sir E. Boyle: I think that the simplest answer to that question is this. In the second half of last year, consumer spending was fairly stable; it was not rising. The investment boom had not yet reached its peak. On the other hand, stock building was going up fairly rapidly. In the first half of this year, investment and consumption rose, but stock building did not. I do not wish to complicate the matter by referring to stock building further, but it is likely that it will start rising again. I have little doubt that we shall see a sizeable increase in production during the course of this year as a whole. Another point which we must not forget is the reduction in the standard hours of work in a good many industries.
  It would be grossly optimistic in the light of the figures, and quite irresponsible, for the Government to assume, in a situation such as the present one, that there would be no difficulty for our industry in meeting an increase in export demand should such an increase take place.
  I know that there are some sectors of industry where production has not risen since the spring of 1960, and even some where it has fallen. If we could have an increase in demand which was entirely concentrated on these particular sectors we should, no doubt, have a rapid response by way of increased production, without any pressure on the labour force of other industries. It would, however, be quite irresponsible for the Government to make this assumption. An increase of export demand is just as likely to come in a sector of our economy which is already stretched to its full capacity, or which, in order to expand its output, would need further supplies of labour which it cannot get.
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  I have no doubt that the present level of home demand is one which, over a period, is bound to impede the development of our export trade. If we are to restore our balance of payments to a healthy condition, there must be a substantial reduction in the domestic use of our resources relative to total home production. This is the primary object of the measures which my right hon. and learned Friend has brought forward.
  Now I come to the measures themselves. Quite clearly, for the reasons I have given, my right hon. and learned Friend had to bring about an effective restraint on total home demand. The only way to cope with the problem of excess demand is by limiting or curtailing the general level of purchasing power by one means or another. My right hon. and learned Friend has tried by these measures to spread the burden broadly between different sections of the cornmunity—[HON. MEMBERS: "Oh."] Certainly. I have a lot to say to hon. Members opposite about this—and between different industries. This does not mean that the measures are completely indiscriminate. On the contrary, my right hon. and learned Friend has attempted so far as possible to exempt capital investment in productive industry from the scope of his measures. The decision of my right hon. and learned Friend is reflected both in the fact that investment allowances have been preserved, and also in the terms of the request to the banks.
  The Leader of the Opposition complained on Tuesday that there was no measure
  "which seems likely in any way to increase productivity or exports of British industry".— [OFFICIAL REPORT, 25th July, 1961; Vol. 645, c. 235.]
  The decision of my right hon. and learned Friend to give this relative degree of priority to productive investment, in sharp contrast to what was done by the Leader of the Opposition in 1951[Interruption.]—and what the present Government did in 1956, I agree, must help our productive efficiency, not least because, if other claims on resources are held back, businessmen will be able to carry out their investment plans at a faster rate than would otherwise have been possible.
  There remains a broad field of expenditure, including a large portion of personal consumption, some kinds of private

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  commercial or property development and the field of public-sector expenditure, over which the effects of the measures will be widely spread. My right hon. and learned Friend has used both fiscal and monetary measures, and I do not see how it could be argued fairly that the Government have shown an undue degree of reliance on either type of measure. As I have pointed out on many occasions, they are much more likely to be successful when used in combination with each other.
  I want to say something, in particular, about the surcharge on Excise duties—what one might term the "Clause 9" regulator. The great advantage of this surcharge—against which hon. Members opposite did not vote on the Finance Bill; many of them actively supported the Passage of that Clause of the Bill—is that it curtails total demand by a considerable amount, but its impact is not concentrated on a particular range of industries. Nobody, on the one hand, could say that this is a niggling measure —that it both irritated people and, at the same time, was niggardly. It is not. A sure which withdraws purchasing power at an annual rate of £210 million cannot he called a niggling measure. It does not, however, have the same heavy incidence on Particular sectors of our economy as, for example, the severe restrictions on hire-purchase credit which have sometimes been used in the past.
  I want to answer the charge made by the Opposition that the Government have concentrated the burden of their measures on ordinary families in an unfair way. For a number of reasons, that charge is completely unjustified.
  Mr. James Dempsey: Nonsense.
  Sir E. Boyle: In the first place, despite the imposition of the regulator, the yield of progressive direct taxation will still be higher, as a proportion of our total tax revenue, during the financial year 1961–62 than it was in 1960–61.
  I believe I know what the right hon. Member for Huyton (Mr. H. Wilson) is about to say. If it is about the National Insurance contributions, which he has questioned sometimes before, do not let us forget that they go up this year by some £399 million, but that £200 million of that £300 million is represented by
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  the graduated contribution, which is not a flat rate and, therefore, not completely regressive. It simply is not true to say that under the present Government the direct taxpayer is not paying his full share of the cost of our social benefits.
  The second and more important point is that ordinary families have just as great an interest as anybody in hoping that we secure the national objectives at which the Government are aiming. They could not possibly be exempted from the evil consequences which would follow if we suffered a disaster in our overseas economic position [An HON. MEMBER: "They have suffered for it."] To those who are interrupting, let me say that those of us who remember what happened after the 1949 devaluation soon found that it had considerably bigger effects on prices than just on the price of bread, which was all that the late Sir Stafford Cripps spoke about in his broadcast.
  Mr. Harold Lever: Surely that is a valid argument for the total abolition of Income Tax and the placing of these burdens on small families who, of course, have a vital interest in the welfare of the country as a whole.
  Sir E. Boyle: The facts which I have been adducing show that the burden should be spread fairly as between general flat-rate taxation, on the one hand, and progressive direct taxation, on the other. That is exactly what the Government are doing, as the figures clearly show. This is not simply a party interest, because there is an overwhelming national interest in preserving the stability and international strength of our currency.
  Furthermore, the Government's measures are designed to preserve the stability of the internal value of money. Surely, this is a matter of great importance to ordinary families. Of course, those who are in a strong bargaining position have always been able to maintain, or even to improve, their relative position despite rising living costs. There are, however, many ordinary people among the rank and file of the retired and other pensioners, and other groups also, who are not able easily to raise their money incomes and for whom price stability is the greatest of all economic interests.

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  The Government's measures have as one of their principal objectives the creation of conditions for such stability. It is highly misleading to speak as though ordinary people had no interest in their success and could not, therefore, be asked to make their contributions towards that success.
  I turn for a few moments to Government expenditure. There is more misconception on the benches oppostie, and, to judge from this afternoon, misconception by the right hon. Member for Belper, over the state of the public sector under the present Government than over any other major topic. This is partly the result of right hon. and hon. Members opposite being taken in by their own headlines, and partly the result of what one can only call an unlucky accident, so far as clear thinking about British politics is concerned, namely, the publication of Professor Galbraith's book The Affluent Society. A good many of us, on whichever side of the House we may sit, may feel that there is force in Professor Galbraith's criticisms concerning the United States; but the concept we so often hear of "private affluence and public squalor", as applied to Great Britain today, simply does not begin to make sense.
  Today—I advise hon. Members opposite to listen to these figures, because they are striking—the public sector in Britain employs nearly 6 million people, almost one-quarter of the total working population of 24½ million people. The public sector does over 40 per cent. of total capital investment in this country. Most important of all, total public expenditure, that is, expenditure by central and local government and investment by nationalised industries, has been rising during recent years as a proportion of the gross national product. In 1957, the figure was just over 40 per cent.—40·1 per cent.; in 1958, it rose to 40·9 per cent.; in 1959, to 42·6 per cent. The figure for 1960 is not yet readily available, but I can tell the House that it is unlikely to be lower than the figure in 1959.
  I think that it is extremely important that we in the House should take a balanced view of this subject. As I said in the debate last year—I think that the
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  right hon. Gentleman the Member for Huyton was kind enough to quote me in the Guardian about this:
  "It is just no good thinking that we can, as a House of Commons, approve a major step forward in social reform, and ensue it, without the expenditure of a great deal of public money."—[OFFICIAL REPORT, 7th April, 1960; Vol. 621, c. 588.]
  I also agree with what was said by my hon. Friend the Member for Mitcham (Mr. R. Carr) on that occasion—he made a very helpful speech yesterday, and he probably remembers the debate to which I am referring—when he pointed out that there are certain sectors of expenditure Which, however affluent our society becomes, can never be undertaken by individuals. But the fact remains that the Government just cannot allow public expenditure as a whole to increase at a rate out of line with the development of our economic resources. As the Chancellor pointed out in his statement in Tuesday, unless public expenditure is brought into a proper relationship with the resources likely to be available in the long term, our chances of sound growth will be gravely prejudiced.
  The Chancellor spoke of reducing the rate for 1962–63 by about £175 million compared with what it would otherwise have been. This figure will be made up of two parts. £100 million is the contemplated reduction in the Estimates for 1962–63, compared with the forecast Estimates as submitted to the Treasury. These have come in at a figure, in real terms—that is to say, on the same pay and prices basis £225 million above the level of the 1961–62 Estimates. My right hon. and learned Friend has announced his intention to do his utmost to keep this increase to within £125 million, which would mean cuts in the forecast Estimates of £100 million. As for the £75 million, this is the amount by which the Government have reduced the proposals for investment expenditure by local authorities for the year 1962–63; as a result, the level of this expenditure will not be significantly higher than for the year 1961–62.
  In addition, my right hon. and learned Friend also referred to savings of £125 million below the line. The below-the-line figures for 1961–62 include £88 million for advances to steel companies and £39 million net for loans to house purchases. With the completion of the

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  steel loans and the suspension of the house purchase scheme, there will be no expenditure below the line under these heads for 1962–63.
  My right hon. and learned Friend believes that these decisions are the minimum which he could have taken in order to bring back the growth of public expenditure into line with the development of our resources. So far as investment is concerned, the Government's proposals will not involve any wasteful disruption in plans which are sound and justifiable in the long run. But I want to make it plain to the House that my right hon. and learned Friend regards the objective of keeping the growth of public expenditure in line with the development of our resources as a long-term objective of the highest importance, if we are to pay our way in the world and to maintain sterling as a strong international reserve currency.
  There is just one other aspect of Government expenditure to which I want to refer, and that is overseas aid. I think that the whole House was impressed when the Lord Privy Seal pointed out, in a recent debate, that during the last six years this country had given four times as much aid to underdeveloped countries as the Soviet Union. Indeed, the figures are impressive. Assistance to underdeveloped countries has risen from about £80 million in 1957–58 to about £180 million during the current year. I really do not think that there is anything to be ashamed of in our decision to see that that increase is contained, in view of our present balance of payments situation.
  Before I come on to the important subject of personal incomes, wages and salaries, I want briefly to amplify what my right hon. and learned Friend said on Tuesday about tax-free profits. First, let me make quite plain—I want to leave no doubts in the minds of any hon. Members about this—that this legislation will not be retrospective in its effect. Quite apart from the general objection to retrospection, I should have thought that such a procedure would be particularly hard to justify when the legislation can be described only in general and not in comprehensive terms. But I want to say something about the scope of this legislation.
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  So far as share transactions are concerned, it will cover any transaction which would popularly be described as "stagging" a new issue of shares; and also any transaction in which shares or securities are bought and sold within a short period. As for transactions in real property—I think that this is part of the proposal which perhaps people have been more puzzled about—transactions which cloak "trading" profits in capital form, the sort of case the Chancellor has in mind is that of an operator who is in substance dealing in property, but who forms a chain of companies, with suitably framed articles of association, through each of which he puts one transaction only.
  These examples are purely illustrative. My right hon. and learned Friend's review of this difficult field is not complete, but he has reached a definite conclusion that some action is necessary, and he has indicated the main fields which he intends to cover.
  Mr. H. Wilson: Since this is necessary, and since, quite obviously, we on this side of the House would offer the Government a very easy passage for legislation of this kind, and since the Prime Minister himself made an announcement in February, 1956, about which he did not legislate for several months, in connection with investment allowances, why does not the Chancellor come to the House and make proposals to legislate in the autumn? We would not call it an autumn Budget.
  Mr. Gerald Nabarro: How very kind.
  Mr. Wilson: We might call it a management Bill, anything he likes. Since this needs to be done, why should it not be done with retrospective effect to the day of the Chancellor's announcement?
  Sir E. Boyle: The Chancellor authorises me to say, in answer to the right hon. Gentleman, that he will bear that offer in mind.
  Mr. Nabarro: Would my hon. Friend permit one question from this side of the House? When he talks about "stagging" a new issue, has he in mind, also, catching the capital gain within a single Stock Exchange accounting period? Is that to be the limit of the catch of the gain, or is it to be based on a general capital gains tax which might then be extended,

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  from a single Stock Exchange period at the begining to further periods later? It is on that that we want an assurance.
  Sir E. Boyle: I would rather not say mor than I have done this afternoon except to say that, of course, what my hon. Friend has said will certainly be borne in mind.
  I come, lastly, to that part of the statement which referred to personal incomes. It is no use any of us in this House burking the fact that between the years 1959–60 and 1960–61, the total income arising from our productive system went up twice as much as the volume of production. The right hon. Gentleman said that if we go back another year we get a different picture. Well, may be; but I can only quote to the right hon. Gentleman what my hon. Friend the Economic Secretary said last night. Over the past ten years, wages and salaries per head have risen on the average by 6 per cent. a year—for ten years—while productivity has risen by only 2 per cent. To meet that situation such as occurred last year it has inevitably meant rising prices and the tendency for our international competitive strength to be eroded.
  In the field of personal incomes, as the Chancellor pointed out, there was an increase of about £1,450 million. Of course, not all this increase in incomes was devoted to increased consumer spending. Indeed, in this particular period there was a considerable increase in personal savings, I think connected to some extent with changes in the amount of borrowing on hire-purchase credit.
  Certainly, again, some of the increased income was taken away in taxes. But there was still a rise of about £650 million in consumer spending, and this would have been enough by itself to eat up practically all the increase in home production if there had been no rise in prices and no rise in imports. In fact, there were also other large demands on the available supplies of goods and services. I have already given the House the figures that show that additional home demands outside the field of consumption amounted to £675 million in real terms. In such a situation as this price increases and balance of payments trouble are the natural and inevitable result.
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  I do not want to appear to preach or exhort in any way, but it seems important for the House and the country to realise just how closely this problem of wage costs is bound up with the question of economic growth. If personal incomes of all kinds rise faster than the nation's real income, we are bound to get into balance of payments difficulties, and the Government of the day, of whichever party it may be, and whoever is Chancellor, will be bound to have to take restrictive action. In other words, unless we have restraint in personal incomes, the inevitable effect must be a lower rate of economic growth than we could otherwise have achieved.
  The object of my right hon. and learned Friend's policy measures is to deal with two prime and connected evils —the tendency for home demand to run too high in advance of home production, and the tendency for home incomes to increase much faster than home production. Once we have got rid of these evils we have to avoid letting them creep back. The measures which have been introduced must be regarded as the be ginning of a new phase in our way of conducting our economic affairs, and not just a series of short-lived devices to overcome a short-term emergency.
  A certain amount has been said this afternoon on the subject of teachers. There is no question of my right hon. and learned Friend's having, as it were, picked specially on teachers. The Government's offer means, in effect, a £42 million increase. That is an increase of 14·6 per cent. on the salary bill, or a rate of increase of almost 6½ per cent. per year over the period of the present Burnham awards. That would be a rate of rise entirely in line with other salary increases. My right hon. and learned Friend's action in this matter seems to me an entirely sensible way of proceeding, given the machinery with which we are working, under which there is no alternative open to him other than a flat acceptance or a flat rejection. From the point of view of that procedure, I cannot see that my right hon. and learned Friend can be accused of having picked on the teachers unfairly.
  I have said a great deal this afternoon about my right hon. and learned Friend's measures, because failure to solve our short-term problems could have very serious long-term consequences. I want

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  to emphasise as strongly as I can that there is no question of the Government's liking restrictive measures for their own sake. As the Chancellor said clearly in his statement, we want to see a steady growth in our economy, related as it must he to growth in exports.
  I want to refer once again, in this connection, to the question of economic planning. Like many of my hon. Friends, I have never objected either to the word or the thing, but the right hon. Member for Huyton does considerable damage to the cause of planning by his persistence in equating it with Socialist planning. I shall seek to justify that remark. Only yesterday he said:
  "No Conservative will give it"—
  a plan—
  "the backing it needs in terms of controls and an extension of public ownership in the key centres of the economy."—[OFFICIAL REPORT, 26th July. 1961; Vol. 645, c. 452.]
  That was good old Clause Four stuff. It is quite possible to be a planner without agreeing with the right hon. Gentleman about the need for any more nationalisation and without agreeing with him on the specific issue of building controls, which we have discussed so often, and to which I am sure he attaches disproportionate importance. If he believes that a belief in building controls makes a person a good planner, why should not that belief extend to controls over other forms of investment, which neither he nor any of his colleagues ever attempted to operate?
  The Government are often advised by the benches opposite to see what lessons they can learn from the French system of economic planning. So far as I am aware, there is no suggestion in France today that the success of the French plan depends either on an extension of public ownership or on the application of physical controls. [HON. MEMBERS: "Yes."] I do not think so. France has a public sector, just as we have, but to the best of my knowledge no one suggests that there should be an extension of public ownership or the application of physical controls.
  Mr. H. Wilson: Does the hon. Gentleman suggest that the Monnet Plan, hydro-electrics, nationalised railways, the nationalised motor car industry, which has been so successful in exports, the nationalised aircraft industry, and
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  now the development of national resources, in sulphur and natural gas, are all unrelated to public ownership?
  Sir E. Boyle: We have ourselves a public sector of considerable size, but I do not believe that most of those concerned with planning in France think that the success of their planning depends on the extension of the public sector.
  The point which my right hon. and learned Friend made yesterday was that he wanted to achieve, with the help of both sides of industry, a more purposeful approach to our economic problems. He envisaged a joint examination of the economic prospects of the country, stretching five or more years into the future, and covering both the growth of national production and the distribution of our resources between the main users —consumption, Government expenditure, investment, and so on.
  I do not propose to add to what my right hon. and learned Friend said, except to comment on one quite fair point made in a thoughtful leading article in the Guardian today. I would say, in passing, that my right hon. and learned Friend would, of course, agree that if industry is to have a firm measure by which to assess the adequacy of its own expansionary programmes there must at least be an agreed forecast of the rate of economic growth that is likely to he attainable over a given period.
  I want to reply to what has been said in the House, both last week and this, about materialism, and what the Leader of the Opposition described the other day as the devaluation of moral standards. It seems to me that there is a real problem here, and that one cannot conjure it away simply by using long and severe words. It is clearly very much easier to call for a national effort in wartime, or during the immediate postwar years, than it is to call for a similar effort sixteen years after the end of the war, and at a time when many millions of people enjoy greater freedom and opportunity than ever before.
  I do not think that the Leader of the Opposition ought to dissent from this, because he was one of the first people to draw attention to this problem and this feature of our national life. I was very much impressed at the time, as I am

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  sure were others, by the article that he wrote in Socialist Commentary, in July, 1955. He said:
  "I fancy that in the last year or two, more and more people are beginning to turn to their own personal affairs and to concentrate on their own material advancement. No doubt it has been
  stimulated by the end of post-war austerity, T.V., new gadgets, and so on. Call it if you like a growing Americanisation of outlook. I believe it is there, and it is no good moaning about it."
  The right hon. Gentleman went on to quote a letter from a member of the Manchester Labour League of Youth, who said:
  "My generation is living well and looking to the future where it appears the Tories are looking. Indeed, my ordinary working-class friends, engineers, clerks and the like, expect when they are older and married, they will enjoy such a consistently high standard of living as to be able to afford a house and a car."
  I have considerable sympathy with the author of that letter. Surely we can all agree, on whatever side we sit, that one of the prime objects of our economic policy ought to be to ensure that an ever larger number of our fellow citizens can enjoy those levels of freedom and opportunity which only a minority has enjoyed until very recently. This was the theme on which I fought my own election in 1959, and I do not regard myself as a culpable materialist for thinking that freedom and opportunity for other people are good things.
  I cannot see any reason why an opportunity State, in which freedom and wellbeing are becoming steadily advanced, should not also be a community marked by a spirit of idealism and national purpose. If we can achieve, over a term of years, steady expansion and a sound currency, we shall be in a position to ensure justice for all sections of our community and not only for those who are in the strongest position to advance their claims. We shall be in a far stronger position to aid those countries, especially within the Commonwealth, which most need our help, and, above all, we shall be able to play our full part as a member of the Western Alliance of free nations.
  It is with these wider aims in view, and not just with the present emergency in mind, that the Government ask for the support of the House and the country
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  in carrying through the measures which my right hon. and learned Friend has announced.
  5.10 p.m.
  Mr. Edward Short: The Financial Secretary came much nearer to the heart of this problem in his closing sentences than he did in any other part of his speech. I shall have something to say about the closing part of his speech later. He referred to Professor Galbraith's "Affluent Society" and said that he felt that Professor Galbraith's comments did not apply to this country. I hold quite a different view.
  One of the two topics about which I wish to speak is the so-called affluent society created by the Government. The hon. Member for Bath (Sir J. Pitman) said yesterday that he felt that the root of the trouble was the need for an honest currency. I feel that the root of the trouble is the need for an honest Government, and it is about the need for an honest Government that I want to speak.
  I have sat throughout most of this two-day debate, and I feel that it has been cluttered up, obscured and clouded by a lot of economic technicalities. I want to speak, quite simply, indeed almost starkly, about these two topics—the sort of society that the Government have created and the need for an honest Government.
  The Government have now been in office for nearly ten years. They won the 1951 election, I believe, because the country at the time was not prepared to face up squarely to the problems inherent in our post-war changed position. The country then preferred the glittering but fraudulent prospectus of the Tory Party election manifesto. It is a political phenomenon of our times that on two occasions since then the country has fallen for the same confidence trick. For example, the 1959 Conservative Party manifesto said:
  "The paraphernalia of controls have been swept away. We have cut taxes. We have stabilised the cost of living. We have shown that Conservative freedom works."
  Perhaps the best illustration of the potency of modern advertising is that the public should have fallen for this again in 1955 and again in 1959. After all,

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  nowadays good advertising can persuade anybody to buy an inferior article, whether it is toothpaste or a Prime Minister.
  Those three elections have put into office, and kept in office for a decade, a Government which has blatantly sacrificed the national interest in order to retain power. Today, ten years after the Government got into office and sixteen years after the war, we are in the middle of the most serious crisis since the war. It has not been caused by any external factors. There has been no American recession, no change in the terms of trade, no Korean war, no external factors whatever to cause our present crisis.
  Mr. H. Wilson: Except the Tory Government.
  Mr. Short: Except the Tory Government, as my right hon. Friend says, and they cannot escape responsibility for the present position caused by the impact of their policy on the nation.
  However much the Government try to wrap up their apologies in technicalities, and appeals for a bipartisan approach, as the hon. Gentleman did in his closing words, they cannot escape responsibilty for what is happening at this moment. If in October, 1963, when the next General Election is held, they claim again to have set the people free, let the people remember that they will have been set free from the mess into which the Government have got them. Let that not be forgotten.
  The party opposite talks a great deal
  about patriotism. When they make election speeches they drape the rostrum with the Union Jack and end the meeting by singing "Land of Hope and Glory". They claim a monopoly of patriotism, but in the past ten years the Government have cynically and selfishly manipulated the economy of this country —housing subsidies, taxes and everything else—in order to suit the interests of those who own the Conservative Party and whose tool the Conservative Party is. They are the men whose philosophy has been summed by in that infamous comment, "It's bad for sterling, but who cares,
  it's good business."
  The Government have manipulated the economy for a decade in order to serve their interests. It is high time that
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  this was said, and said clearly. In doing so they have created in Britain a society in which the spiv does better than anyone, a nation of Bingo players. Premium Bond-holders—that was the Prime Minister's only original idea—property speculators, take-over bids, and tax dodgers. The Chancellor told us about the best brains being put to work on this.
  This is the sort of society which the Government have created. They have created it simply because it is the sort of society in which the people who own the Conservative Party thrive. In this decade of power, they have created the most unwholesome atmosphere in Britain since the Restoration. They cannot escape responsibility for it. The crime and violence figures are the highest in the history of our country. Who dare say that it is not related to the way we have been governed in the past ten years, to the philosophy of the Government and the kind of inspiration they have provided?
  The Christian principle of interdependence has been almost completely usurped by the principle of "grab what you can." The manipulators and speculators do increasingly well at the expense of the hard-working, decent members of the community, in a society in which the Government give £80 million to the Surtax payers and £42 million to the teachers on whom the future of the country depends. That is the sort of society this Government have created. It is a society in which the people that I represent, most of whom live in slums, are bearing an increasingly disproportionate burden in order to relieve the well-to-do. They have had their National Insurance increased in recent weeks; 4d. a packet put on their cigarettes yesterday. But the Surtax payers get £80 million more. It is a society in which the Mr. Cottons and the Mr. Clores can, by putting through two telephone calls in a morning, earn more than a teacher earns in the whole of his working life.
  It is a debased, unwholesome society. I believe that the chief architect of it is the Prime Minister. I am sorry that the right hon. Gentleman has left the Chamber. His cynicism, amounting frequently to arrogance, has been seen by us all repeatedly during his years in office. Who cares if the Conservative Party diddles the Post Office? It does not matter; it is just a little incident.

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  Who cares? Who cares about the principle of Ministerial responsibility when a Minister is shown to be absolutely incompetent? Who cares about Ministerial responsibility today when the Government have a majority of 100? Who cares if the Home Secretary drops a colossal brick in Spain? Who cares about public protests when the Prime Minister pushes his relatives into the jobs? Who cares about all these things? The Prime Minister cannot complain now if he sees his cynicism reflected in the face of the nation and the people who run the economy.
  In my view, this Prime Minister has been an unmitigated disaster for Britain, and I am sure that history will show this. If he gets his way about the Common Market, he may well be an unmitigated disaster for the Commonwealth as well as for Britain. He has inspired a society over the last few years where it is praiseworthy to get something for nothing, where getting something which is not earned by service is the highest kind of endeavour.
  In my political philosophy, a society based on private property is unjust anyhow, but when it is based on private property which is acquired without service, as this society increasingly is, it is not only unjust but immoral as well. The Conservative Party now faces the acid test. If the Tories really want for a change to try honest government divorced completely from the fortunes of the Conservative Party, this man the Prime Minister must go. He is a national disaster. Britain cannot afford this Prime Minister any longer. The national well-being cannot any longer be subordinated to the demands of the Conservative Party, as it has been for the past ten years.
  The first essential, therefore, to put our national malady right, if it is to be cured, is to get rid of the principal carrier of the disease, its principal inspiration—the present Prime Minister. If the Tories want to put things right for Britain, the Prime Minister must go.
  The second essential, in my view, is not a dog's dinner of half-baked measures such as was announced by the Chancellor of the Exchequer the other day, which as my right hon. Friend so brilliantly said can only aggravate the
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  two specific problems at which they are aimed—inadequate exports and inadequate production. What we want is not that but a restoration of some sense of national purpose, some confidence that in this community of ours, in Britain, service to the community will be rewarded, and that anti-social conduct, just as much in the boardroom and on the Stock Exchange as in the back streets of Newcastle, will not be tolerated. It is not tolerated in the back streets of Newcastle, but it is tolerated on the Stock Exchange and in the boardroom.
  This calls for leadership of the highest order, which the present Prime Minister can never give because he has lost the right to give it. But it also calls for something else. It calls for a restoration of education from the debased position into which ten years of Tory rule has relegated it to a central position in the pattern of our national life. The harm done to the ethical and moral standards of Britain by a decade of "You've never had it so good" philosophy cannot be undone by a box of Treasury tricks, but it can be undone by the schools and their teachers, given the right sort of leadership and the right sort of inspiration at the top.
  I have always believed that a civilisation—as well as an individual—can be judged by its attitude towards its teachers. It is very significant that the only body of workers singled out for special treatment by the Government in the Chancellor's statement was the teachers, the people who perhaps alone can put Britain right. I think there is an over-whelming case for a revaluation of the importance and the role of education in our society, for two reasons: first, because it has a direct relevance to the efficiency and health of the economy; and, secondly, in restoring our debased standards. There is not only an overwhelming case for it, but if we do not make this revaluation of the place of education in our society we are doomed to ethical and, indeed, economic deterioration.
  How do the present Government evaluate education? I will give the House one or two figures. We pay an executive officer in the Civil Service £42,000 far a life's work. He is a man who sits an a high stool and manipulates

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  figures all day long; no doubt he performs a useful function. We pay a qualified teacher for a life's work £35,000, £7,000 less than an executive officer. We tell a qualified man teacher that he must work for seven years after qualification before he reaches the national average earnings. We pay a police constable, with his emoluments, on his maximum, £1,326 a year. We pay a qualified teacher on maximum salary £1,110 a year. If the chairman of the Building Societies Association is to be believed, the great majority of our teachers will never be able to own their own houses.
  The teachers have the whole nation behind them in asking for a reassessment of their role in society, but not the Government. The teachers rejected the provisional agreement of the Burnham Committee because it did not amount to that sort of re-assessment of their role in society. Now the Government reject even this provisional agreement, which amounts to £42 million against the £80 million which the Surtax payers are to get. Even this provisional agreement would leave the qualified teacher worse off than the police constable. Were the teachers responsible for the economic crisis? Did they squander their miserable salaries and upset the economy? Then why single them out for this special treatment?
  Nothing in the Chancellor's statement reveals more clearly and more starkly what is wrong with Britain than this deplorably mean little statement about the Burnham Committee. The debasing of the standards of the teachers is symptomatic of the debasing of our national life by the vicious, voracious Toryism under which we have lived for ten years.
  I believe that the purpose of government is to achieve human happiness. The Government believe that we can judge human happiness by counting the number of motor cars, refrigerators and television sets. This is the eternal fallacy. These things are important, and we want people to have them, but they have little to do with human happiness.
  Mr. R. Gresham Cooke: But the hon. Member has been
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  making an eloquent plea for higher-paid teachers?
  Mr. Denis Howell: You silly man. What about it? Do they not deserve it?
  Mr. Short: The Government's policy starts from the erroneous premise that it is this sort of society which satisfies people. I believe that human happiness can be measured only by the degree to which men and women feel that they are rendering some service to the community, and it is this which these ten years of Toryism has very nearly extinguished in Britain.
  To sum up, I believe that we need a national renaissance under a new and more honest leadership which will put Britain before the interests of party, a new leadership based upon an avowed and conscious effort to restore the old qualities of care for each other—especially for the under-privileged—service to the community and hard work.
  This debate, of course, has been an economists' picnic, but I believe the malady is fundamentally not economic at all. The maladjustments in out economy this time are basically on the plane of human behaviour and standards. I doubt very much, of course, whether the party opposite, which insists on reducing everything to terms of £ s. d., can appreciate this. But unless the country is prepared to appreciate it we are in for real trouble.
  It may well be, and I do not think that this is fanciful at all—this is my viewpoint—that if this sort of harsh, selfish society which is being created in this country continues to develop, the next generation will reject it and may well turn to Communism, which by then will have surpassed the West in many things. In the next generation Communism will be a really serious competitor for the allegiance of people throughout the world. In a generation from now this kind of capitalist society, this "grab-all-you-can" society, which the Government are creating will not any longer be an adequate alternative to Communism.
  Let the country remember that the Conservative Party governed the country for eighteen out of the twenty-one years between the two wars. That party caused untold hardship in those years

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  and led the country to the very brink of military disaster in 1940. The challenge twenty years from now, in the next generation of our children, will not be a military one. The challenge then will be economic and political. In my view, if the kind of rule which Britain has had for
  the last decade continues this country will be a Communist State within twenty-five years, because the next generation will reject this sort of society. This, I believe, is the long-term danger, the long-term perspective in which this crisis ought to be viewed. The country will neglect this aspect of it at its peril.
  5.33 p.m.
  Sir Alexander Spearman: The hon. Member for Newcastle-upon-Tyne, Central (Mr. Short) devoted a great deal of his speech to attacking the Prime Minister. That may be good or it may be bad party tactics.
  I wonder whether the hon. Gentleman thinks that the country as a whole believes that the Prime Minister was an unmitigated disaster when, so largely thanks to him, we recovered from the disaster of Suez?
  I wonder whether the country as a whole regarded my right hon. Friend as an unmitigated disaster when he so courageously and clearly expressed the views of this country about apartheid in South Africa, and when he has done so much, in conjunction with my right hon. Friend the Colonial Secretary, to find a liberal and peaceful solution in Central Africa.
  I wonder whether the country as a whole regards my right hon. Friend the Prime Minister as an unmitigated disaster when it looks at his wise handling of the international situation and his negotiations with Mr. Khrushchev and Mr. Kennedy.
  Before the speech of the hon. Member for Newcastle-upon-Tyne, Central, this debate was largely about inflation. One thing about inflation is that many of us mean quite different things by that word. Perhaps I should make it quite clear what I mean by it. I believe that inflation is a state where incomes increase more quickly than the goods to be bought. High prices are a consequence and not a cause of inflation. Another
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  thing about inflation is that although we all say that we disapprove of it, and oppose it, many people like it. Wages go up very well, profits go up very well and employment, of course, is always full.
  However, the price we have to pay for inflation is not only that the cost of living goes up—that is very bad and cruelly harsh on some—that the balance of payments position inevitably deteriorates, but that it creates the situation in which businesses tend to be inefficient. We are all quite determined that we never want to go back to the appalling deflationary period between the wars, with mass unemployment. But we have a lesson to learn from that. It is not always remembered that between 1932 and 1937 there was a greater increase in production in this country than there ever was before or has been since—a 41 per cent. increase in production.
  Many hon. Members opposite—and not only on the benches opposite—have complained about my right hon. and learned Friend's measures because they were the same old thing. They wanted something wonderful and new, a magic wand that would solve our problems. What I think that they really wanted was to have all the advantages of inflation with none of its disadvantages.
  I believe that there are only two ways of keeping prices stable. One is a great deal of free competition and the other a great deal of controls. Hon. Members opposite, I know, do not have the same aversion to controls that some of my hon. Friends have, but the controls that would keep prices stable in an inflationary situation are controls of wages and a direction of labour. Are hon. Members opposite prepared for that?
  I personally would much prefer competition, but it must be regulated competition so as to make sure that we do not get back into the position of wasting our resources. We must strike a balance between spending and the goads available. Some years ago this was put very clearly by the Leader of the Opposition. He said that if incomes go up more than production goes up then prices will rise. The truth is as simple as that. That was said by the Leader of
  the Opposition ten years ago, and the right
  hon. Member for Huyton

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  (Mr. H. Wilson) said very much the same yesterday. I congratulate him on having caught up with his Leader after ten years.
  Mr. H. Wilson: I said the same thing in 1951, but even after ten years the hon. Gentleman does not seem to have understood the simple point. It is that the right way to prevent prices rising is neither by competition nor by controls, although they may both have their part to play. The simple thing is to increase production, and that is what the Government's policy in the last few years has been designed to prevent.
  Sir A. Spearman: The right hon. Gentleman is very foreseeing; he foresaw what I was going to say. I was coming to the reasons for this position.
  The fact is that incomes have been gong up and that production has not been rising nearly as fast. I have not heard any suggestion from the hon. Members opposite since this debate began as to how they would effectively stop incomes rising. I have heard suggestions for increasing production. It is a matter of opinion whether they would succeed, but it is clear that with unemployment at only 1·2 per cent. they will not sensationally increase production immediately.
  The Opposition's criticisms of my right hon and learned Friend's measures—perhaps the right hon. Gentleman will agree with this—might be fairly summed up as irrelevant and unfair. I want to examine why incomes have been going up so fast and why production has not been going up equally fast. I want to try to show why I believe that my right hon. and learned Friend's measures are neither irrelevant nor unfair.
  Incomes really mean wages and salaries. I accept, of course, that a big increase in dividends can have a bad psychological effect, but as far as the inflationary situation is concerned dividends are only about one-tenth of wages and salaries. What is not always remembered is that half the dividends are not paid to private individuals, but to institutions, pension funds and such things. So the rise in incomes is largely due to increased wages and salaries.
  I believe that wages go up not because of aggressive tactics by the trade unions. I make no criticisms of them.
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  We have, for instance, seen the wages of domestic servants, who have no trade unions, going up more than most people's. I believe that workers, quite rightly and naturally, press for more wages when they think they will get them. That is only human nature. There may be some people who do not want more, but most of us, whether we ride about in a Rolls-Royce or, as I often do, on a push-bicycle—
  Mr. Arthur Lewis: What about the chairman of British Railways, with £24,000 a year?
  Sir A. Spearman: I do not think that that is entirely relevant.
  I was saying that, whether we drive about in expensive cars or ride on bicycles, it is human nature to try to get more if we can get it fairly and honestly. Employers do not resist giving wage increases if they know that they can put them on to the prices. Why should they go to the trouble and difficulty and disagreeableness of strikes when all they have to do is to pass the increases on in higher prices?
  It is always possible for employers to do that if demand is so great that the public will buy at the higher prices. I think that wages go up, not because costs rise but because the workers think that they can get increases and employers are willing to give them. Now my right hon. and learned Friend the Chancellor of the Exchequer is reducing demand, so that in future it will be very much more difficult for employers to raise their prices without losing sales. His measures should thus lead to much smaller increases in wages and keep those increases in proportion to the increase in production.
  I have said that I believe that my right hon. and learned Friend's remedy will slow down increases in wages so that they are in tine with increased production. I come now to production itself, and wish to suggest why it has not been rising as fast as we would all like to see. First, I believe that it is because there is more physical capacity in the country today than there is labour available. I want to quote from an article by Colin Clark in the Financial Times, on 17th July. He said:
  "Careful examination of the figures of industrial production … indicates that when the figure of unfilled vacancies is at one of its peaks—1947, 1951, 1955, and 1960—industrial

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  production is unable to expand further. Each employer, attempting to expand his production, in fact only succeeds by taking away labour from someone else."
  The second reason is one that I think is widely agreed on both sides of the House. Last night, we heard a most interesting speech about restrictive practices from the hon. Member for Southwark (Mr. Gunter). That aspect, of course, does not come within the Chancellor's measures, but in his statement my right hon. and learned Friend said that a determined attempt was needed to deal with restrictive practices, and I hope that he will keep his colleagues up to the mark in playing their share in this matter.
  Thirdly, I believe that production is not going ahead as well as it could because of the resources that have been wasted in investment in the nationalised industries. The National Coal Board has spent a vast amount of money trying to produce, and succeeding in producing, coal regardless of whether it is wanted, or whether it is economic to do so from certain mines. On the railways, a vast amount of money has been spent on capital investment which is not showing an adequate return.
  Finally, I accept the Chancellor's view that there are many concerns which are very efficient, but I have no doubt that there is a great deal of inefficiency and I believe that that is inevitable unless there is more competition. As I have said, by right hon. and learned Friend's measures must create more competition at home by reducing demand, and if he carries out the Government's intention of reducing tariffs then we will get more competition from abroad.
  Sir E. Boyle: We do attach importance to the nationalised industries attaining their financial targets. My right hon. and learned Friend the Chancellor of the Exchequer mentioned that on Tuesday. The point about efficiency and the efficient running of those industries has not been neglected by my right hon. and learned Friend.
  Sir A. Spearman: I am glad that my hon. Friend rose to say that, because I had omitted to say that the Chancellor had made it clear that the investment programmes of the nationalised industries are to be scrutinised far more carefully in future than in the past.
  Mr. Jack Jones: Why does the hon. Gentleman believe that too much money has been spent on the nationalised industries? Does not he agree that it would not have been necessary to spend such a large amount of money if the private owners of these industries had left them in decent condition?
  Sir A. Spearman: I do not want to go back too far. But I was a member of the Select Committee on the Nationalised Industries, and it is perfectly clear that a vast amount of money was spent on coal from mines which were uneconomic. The Coal Board was often not concerned with whether a mine development would be economic, but with whether it could produce coal.
  I am sure that the Chancellor's measures are in the right direction Whether they are sufficient or not it is difficult for someone without official information to judge. But I trust that the Government, when the measures begin to work and to hurt, will not prematurely stoke up the economy again.
  I said that I would try to show that these measures are not unfair. Some Members opposite, including the hon Member for Newcastle-upon-Tyne, Central, may well take the view that they are unfair. If they think that there should be no cuts on the less well off until the better off have been reduced to their level, then they are being unfair. If they think that there should be no inequality of incomes, then they are being unfair. There is presumably no inequality in Princetown, but it is not a very happy life there. I believe that everyone is to contribute to solving our economic troubles. If my right hon. and learned Friend's measures work, profits will be squeezed, particularly the profits of the inefficient. Everyone in the country will contribute.
  Mr. Short: Does the hon. Gentleman claim that there is a fair distribution of incomes in the country now, and that present incomes are related to the services which people render to the community?
  Sir A. Spearman: I think that the distribution of incomes should be that which will most create a general wealth in the country so that we can expand the social services and make the country richer. A Member opposite
  talks about Surtax. I

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  realise that to some hon. Members opposite Surtax concessions are just a jolly good weapon with which to attack the Government, and, therefore, they will take no interest in what I am going to say. But I am sure that some other hon. Members opposite, and some people outside the House, in the Socialist Party, are definitely disturbed at the Surtax concessions in the last Budget.
  I would ask those who are generally disturbed about them just to listen to what I have to say. If the Chancellor had made these concessions on general Surtax assessments of earned and unearned income alike, and if he had done so—and many of my hon. Friends would, I think, have liked it—because he thought that it was the Surtax payers' turn, that everyone had had a reduction except them, I could understand the point of view of those who disagree. But they must remember that, whether it was right or wrong, successful or not successful, the Chancellor's objective in granting these concessions was not to reward any particular section of the community. Concessions were given solely as an incentive to management.
  Before the concessions were made, a man who was earning £5,000 a year and who, by extra effort—and it might be a great deal of effort, an effort such as shortened his life—and so earned another £1,000, he kept £400 whereas, in America or Western Europe, he would, in similar circumstances, keep double.
  It may be that this will not succeed in getting more dynamic management, but that was the objective—
  Mr. A. Lewis: Is not the hon. Gentleman aware that the Chancellor himself admitted that out of the £83 million in Surtax concessions, about £17 million related to unearned income? If it was as the Chancellor said, how does that help the managerial class?
  Sir A. Spearman: Much as I admire my right hon. and learned Friend, I do not pretend to remember every word that he has spoken.
  These tax concessions were not aimed at rewarding any particular part of the community, but were meant as an incentive. It may be right or it may be wrong, but it gives no one any ground
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  whatsoever to try to stir up bitterness and discontent. Let us also remember that the money for the concessions will come from increased Profits Tax, so that those with unearned income will get that much less.
  The right hon. Member for Belper (Mr. G. Brown) allowed me to interrupt on whether taxes are inflationary, and I should now like to take up that point I am quite sure that taxes are not inflationary. Prices go up until there is a balance between demand and supply. If that balance is obtained by increasing taxation, no more incomes are created and the vicious circle is broken. But if prices go up because incomes are greater, there is a further increase on demand and the spiral continues indefinitely. There is no doubt that because incomes have been going up prices have increased by about £500 million. In the process, more incomes have been generated, so further pressure is put on prices.
  Turning to the long-term situation, if we are to continue to take a leading part in the world and if—and to me this is much more important—we are to maintain a high standard of living and full employment, we can do so only if our costs are in line with those of our competitors. Are we to continue to shelter high-cost industries behind tariffs? Are we, by subsidies, to keep in existence declining industries?
  Personally, I should like to use subsidies only to help people to get out of declining industries into prosperous industries. Here, I must mention some criticism of my right hon. Friends. As my right hon. Friend the Member for Flint, West (Mr. Birch) said yesterday, there has been altogether too great a tendency to back losers; to reinforce failure instead of reinforcing success. Are we to continue putting up our costs of production by refusing to buy cheap coal and gas? Are we to handicap our industries by forcing them to invest in places where costs are higher, in the supposed interest of the development areas?
  Are we to continue trying to take work to the workers? I am sure that there are cases where that is a good thing to do—I would be delighted if it were done in my constituency, provided that it was done nowhere else—but I do not

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  think that we can afford always to be taking work to the workers, and to be producing in high-cost districts when other countries do not do the same—
  Mr. Richard Marsh: Leaving out the moral principles which, in any case, are difficult to define, will the hon. Gentleman name the occasions on which he went to the Lobby and showed his courage?
  Sir A. Spearman: The hon. Gentleman has been here some little time now, and must know that party politics depend on supporting one's party even if one does not think it right—[HON. MEMBERS: "Oh."]—unless one thinks the occasion is so great that one would rather the Government fell. There have been occasions, I do not know whether this would apply to the hon. Gentleman, when I have voted against my party on a three-line Whip, but I shall not do it on every issue on which I disagree with the Government.
  I believe that after the war we were able to do all these uneconomic things. We were then so much richer than other countries that had been devastated. I do not think that we can do it now. If, today, by reducing tariff barriers we expose our industries to competition, and if, as I hope, we go into the Common Market, then I believe that some employers will lose profits and that some workers will have to change their jobs, but the go-ahead, expanding industries will gain opportunities and resources. I believe that only in that way can we continue to maintain our social services and expand them, and have a rising standard of living.
  5.57 p.m.
  Mr. Denis Howell: The speech of the hon. Member for Scarborough (Sir A. Spearman) typifies the tremendous gulf there is between the approaches of the two parties, not only to this present economic crisis but to the life of the nation as a whole. I must say that when the hon. Member spoke of supporting his party even when it was wrong, I compared that attitude with the behaviour of the Financial Secretary to the Treasury who, if I may say so without embarrassing him, has a great record of public decency in the conduct of his own affairs.
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  He had the courage to resign from the Government at the time of Suez, and not to behave as the hon. Gentleman applauds the Prime Minister for behaving—being the first to bring us into trouble and the last to take us out; to take the credit for getting us into the mess and then to take the credit for putting right the mess he himself created.
  Not only does the behaviour of the two hon. Gentlemen differ, but I also think that the hon. Member for Birmingham, Handsworth (Sir E. Boyle)—and I may get into trouble in Birmingham for saying so—has made the one realistic, moral and ethical speech in this debate from the other side of the House—
  Sir E. Boyle: In fairness, I think that if the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) reads the speeches that my hon. Friend the Member far Scarborough (Sir A. Spearman) made at the time of Suez, the hon. Member would think that he was going a little too far in his comment.
  Mr. Tapsell: And if the hon. Member is to relate his remarks to the behaviour of the Prime Minister, he might bear in mind that nobody showed greater integrity and independence of action during the 'thirties than did the Prime Minister in repeatedly attacking his own party.
  Mr. Howell: I am reminded of the philosopher who said that all power corrupts but absolute power corrupts absolutely, and that applies to the Prime Minister.
  I had not intended to refer to the Prime Minister. I hoped to refer to the moral and ethical standards of the nation and to relate them to the economic and Sociological problems of the day. I have a great respect for economists, but I am getting a little fed up with them in this debate. The House and the Government ought to listen more to sociologists, and to a little more sermonising. I am sorry that the right hon. Member for Flint, West (Mr. Birch) has left the Chamber. Yesterday he said some cynical things about moralising.
  I do not know why other hon. Members entered politics, but I did so because I thought that the nature of our society was an important factor in life; that the moral basis on which political parties based their actions was very important.

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  There is nothing wrong with moralising. What is wrong is not to suit one's actions to one's words. That is the difficulty in which the Government have placed us on almost every conceivable occasion.
  When the right hon. Member for Flint, West was Financial Secretary he had a unique opportunity to put into operation the long-term measures to solve our recurring crises which he now bemoans. What we remember about the right hon. Member for Flint, West after his service at the Treasury is that memorable phrase, "Nigel was very depressed on the grouse moors this morning". Nigel was very depressed in exactly the same sort of circumstances which we are discussing today—an economic crisis. He was not depressed over the debasing of human standards. He was depressed over the effect on the stock market of an economic crisis.
  We get the same sort of attitude from the hon. Member for Kidderminster (Mr. Nabarro). I am sorry that he, too, is not here. I have been waiting for two days to say this to him. Since I came into the House in 1955 I have heard him ask about 4,261 Questions complaining about the level of Purchase Tax, and I have read about 524 Motions which he signed. He pressed hon. Members on both sides to demand a reduction in the Purchase Tax on motor cars. He came to me and said, "You represent a motor car industry. Sign this." It was a tenable proposition, but what happened on Tuesday? When the Chancellor sat down after having put a 10 per cent. increase on Purchase Tax, the hon. Gentleman was one of the first to rise and say,
  "While congratulating my right hon. and learned Friend on his tough, resilient and realistic statement this afternoon …"—[OFFICIAL REPORT, 25th July, 1961; Vol. 645, c. 232.]
  What humbug and nonsense. I hope that the House will never again give way to the hon. Member for Kidderminster to put Questions about Purchase Tax. I know that in Kidderminster they have the Kidderminster Harriers. The hon. Gentleman has gone to see the Harriers this afternoon.
  Mr. Ellis Smith: Gone to the barber.
  Mr. Howell: Dealing with efficiency, I do not think that there is much difference between the two sides of the
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  House about the need for planning. We all seem to be planners. We all agree that we must have plans. In fact, the Budget is planning, but the difference between us is the type of planning we are to have, and the sociological basis of that planning.
  In my constituency there are some farsighted managements. There are some first-class firms. Part of our crisis, as my right hon. Friend the Member for Belper (Mr. G. Brown) pointed out today, is due to the failure of management to manage. One cannot ignore the fact that whenever there is an industrial dispute in the Midlands it is due to bad management. It is not the size of things which determine industrial disputes. I.C.I. and Lucas are virtually monopolies, but they do not have strikes, for the simple reason that industrially they behave properly. There is consultation all the way through. The workers are taken into the confidence of the management.
  The same considerations apply to productivity. It is no good hon. Gentlemen opposite blaming the workers for lack of production. I hazard a guess that in our production today well over half the workers have no control over their efficiency or speed of production. In the Midlands they are governed by the speed of the conveyor belt. The man putting wheels on a motor car has to start his operation when the conveyor belt reaches one point, and complete it when it gets to another point. He does not control the speed of the conveyor belt. He does not control the efficiency of the machine, or the machine-tool industry. What we hear from hon. Gentlemen opposite is absolute nonsense.
  I hope that the Government will do some of the things which hon. Gentlement opposite have been suggesting in the last few days, and start differentiating in our tax system by giving incentives to manufacturers who are doing the right kind of thing. I hope that we will get the trade union movement to agree to that also, and by greater efficiency bring down prices.
  Gamages are selling a Swedish refrigerator for £45. Wages in Sweden are higher than in this country. I am told that this Swedish refrigerator is first-class—I do not want to advertise it —and the Government ought to look at

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  how Sweden is able to produce a good machine like that at that price. Industry also ought to look at it.
  Does one get the impression that industry is on the ball? I am sorry that the hon. Member for Mitcham (Mr. R. Carr) has left the Chamber. He made a good speech yesterday. I was very interested in the Carr Report on apprenticeship training. The whole future of the country is bound up with it. If one makes inquiries into apprenticeship training, or group apprenticeship training, one finds that one or two firms have good apprenticeship training schemes and are delighted to show one around. But when I asked the Federation of British Industries in Birmingham to talk about apprenticeships and group apprenticeship training, it would not allow one of its representatives to talk to me. I was told that the matter would have to be referred to London.
  It is surprising that in the second half of the twentieth century the F.B.I. is not prepared to talk to a Member of Parliament about apprentices. It is, of course, entitled to adopt that attitude, but that is typical of industry today. The trouble is that the most efficient people in Birmingham are not represented on such bodies as the F.B.I. We have the situation that the top range of industry is not providing the leadership that it ought to provide.
  Dealing with the general social implications of what the Government are doing, I agree with my hon. Friend the Member for Newcastle-upon-Tyne, Central (Mr. Short) that one cannot possibly divorce the psychological reactions to what the Government are doing from the responsibility of the Government. During the last two days I have wondered how many times hon. Gentlemen opposite visit the schools in their constituencies, or look round their slums and talk to working people.
  The hon. Member for Twickenham (Mr. Gresham Cooke) earlier made rude noises about the teaching profession. I do not know whether he goes into the schools in his constituency. I do not know whether he spends any time talking to the teachers and the children. If he does, he ought to be concerned about
  664
  the situation, because the quality of the people going into the teaching profession is not as high as it ought to be. If we do not have top quality people going into the teaching profession, on what basis can we build our future prosperity?
  Mr. Gresham Cooke: We are all concerned about the teaching profession and we are all in favour of going forward. I was only pointing out that the teachers are having an advance of 14 per cent., or £42 million, and that is not a very bad advance.
  Mr. Howell: It is a very bad advance when compared with their lack of advance in preceding years. On
  any conceivable comparison teachers come out very badly. There are thirty-six schools in my division and I do my best to visit them all, as I did elsewhere when I was the Member for another division. The country owes a tremendous debt to teachers not only for what they do in school but for the time they put in absolutely voluntarily. Hardly any group of people in the country do more voluntary work than do the teachers. They organise sports on Saturdays, and cultural work of all kinds and trips abroad. I regret to say that all the character building that is done in the country can be said to be in the hands of the teaching profession.
  I hope that the teachers learn the political lessons from what is going on. Greatly as I admire their work, I feel when I meet them in Birmingham that they have completely divorced their moral outlook from a sensible realisation of politics. I hope that in future we shall have the teachers coming to a realisation of politics based on the values which they are trying to inculcate in the schools.
  The Chancellor of the Exchequer told us yesterday about sport and, picking it out of the air, as it were, as the sort of thing that was desirable but which he had to curtail, he mentioned the Report of the Wolfenden Committee on sport. Incidentally, he did not say "Sport and Recreation" which is its full title. Anyone who is concerned with psychological trends in this country must be concerned about the whole field of youth activity. I assure the House that the best interests of the country, as is the case with other countries, depend as much on sport activities as almost any other activity.

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  I would remind hon. Members of the young lad who won a bronze medal for diving at the last Olympic Games and who when he was training had to get up early every morning to catch a train from East Ham to Cardiff in order to practise in the only swimming bath in the country that measured up to Olympic standards. These facts became known to the nation after he had won his medal. We all basked in his reflected glory and delighted in what he had clone. Since then seven swimming baths have been built but not one of them comes up to Olympic standards. Now we are perpetuating and worsening the situation in sports activities.
  The point I want to make about the Government cutting back on youth work is very important. The hon. and gallant Member for Down, South (Captain Orr) appears to be laughing, but anyone who is concerned about the lack of facilities for the Youth Service can only deplore what the Chancellor did. Only a week ago the Economic Secretary was so concernad about youth that he said that he was consulting the Minister of Education to see whether there could be a debate on the subject, but within a week we find that there is to be no money to provide recreational facilities, Youth Service facilities and better youth clubs.
  What alternative has youth but to resort to the coffee bar, the dance hall and the street corner? The sort of speech which
  the Chancellor made yesterday and the sort of exception that he singled out mean that those who are concerned about the creative training of young people will remain disappointed for even longer. I hone that hon. Members opposite who will be supporting the Chancellor's proposals in the Lobby will not in future utter their nauseous humbug deploring the state of the nation's youth at party conferences when at the same time they are repressive in providing facilities for people to play games and follow healthy pursuits.
  The effect of the Government's proposals
  on the public services are absolutely alarming. I think of the problems in the Financial Secretary's constituency and in mine. I know that the hon. Gentleman would be the last person who wants to stop slum clearance. I spent the whole of my school life living in a back-to-back house in the hon. Gentleman's constituency. Those houses which
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  have neither bathroom nor kitchen are still there and people are living in them. We in Birmingham do our best to deal with the situation but that effort is now to be cut back for years. The Economic Secretary has said that public investment is to be held back over the long term.
  Let us consider the effect of these measures. This is all part of the problem of the lack of a moral approach among hon. Members opposite. Many young people are now trying to set up home. I regret to say that most of them voted Conservative at the last election. They took the ward of hon. Members opposite and they mortgaged their future for many years. They worked out what they could afford by way of interest rates and now they are faced with a terrible social problem. Not only is the Bank Rate going up, but year after year since they started to buy their homes there has been an increase in mortgage rates. Every time we run into an economic crisis it is the usury in our society that is elevated to the highest pinnacle. Local authority rates will also be going up, because local government finance is being put into an impossible position.
  The Financial Secretary said that the Chancellor did not say that one of the regulators was an alternative to the Bank Rate, but the right hon. and learned Gentleman certainly gave that impression and many of us thought that the regulator was a much more reasonable instrument than the blunt instrument of the Bank Rate. But, having got the Finance Bill on the Statute Book, the Chancellor comes with a weapon in each hand, the blunt bludgeon of the Bank Rate in one hand and the rapier of the regulator in the other. This is not the way to behave fairly by people who are trying to set up home.
  The best people in our society are trying to look after themselves, solve their own problems and raise their families, and they are being rapidly put in the hands of moneylenders, financiers and usurers. How can we ask the man who is buying his house and is struggling to pay for it, putting everything he has into building a home, not to ask for a rise when he now finds that all this will cost him 10s. or more a week?
  It typifies the inherent contradictions in our system when public services and education are cut back. In Birmingham

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  there were 17,773 live births in 1955. During the following few years, and especially in 1959–60, when the nation was told that we had never had it so good, the husbands in Birmingham seem to have got cracking. The birthrate in that year was 21,240. This is a phenomenal increase in the city's birthrate which worries the education authority beyond belief. Where will the authority have the schools in which to put these young people?
  I do not know what the Financial Secretary is saying to his hon. Friend the Member for Twickenham. I would remind the Financial Secretary that he represents a Birmingham constituency, as I do, and I do not think that he wants the primary classes in the schools in that city, which now number over forty pupils, to increase still further in size. But, with the phenomenal increase in the birthrate in Birmingham, if we retard the capital expenditure programme relating to education, and if we are not to encourage more people to enter the teaching profession, a serious crisis will face the education authorities of the city.
  The same applies to the hospital service, and one could discuss other public services which are similarly affected. I happen to be the chairman of a hospital management committee and I know that the Minister of Health was anxious that there should be a dramatic surge forward in our efforts to get rid of old hospitals. The right hon. Gentleman wrote to those people who are concerned with the management of hospitals, and I know that hundreds of people who are members of hospital management committees in various parts of the country spent many hours working out details. They were under the impression that this was the hour; that the great and glorious time was at hand when we should get rid of all our old and obsolete hospitals.
  We ask young girls who have entered the nursing profession to work for far too long for a remuneration which is far too small. They are the people who are bearing the burden of nursing the sick. We hear scornful comments from hon. Members opposite about the national average in wages, but in effect that means that we are asking young girls to nurse 30 or 40 patients throughout
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  the night, and the rates of pay which they receive are terrible. They should not be asked to work in such circumstances.
  Dr. Sheldon made a report to the Midland Regional Hospital Board which was so extravagant in its language—although so justified—that it received headlines in the national Press. All this work is to be held back now, and we are told that the pace at which the Health Service can go forward in the future represents only 2½ per cent. of our present progress. We cannot rebuild the hospitals of this country with such a programme. It would not be so bad if what the Chancellor referred to represented a pause, but the right hon. and learned Gentleman has made it clear that in respect of the public services this is not a pause but a long-term programme. It applies to education and to the Health Service and to everything else.
  In my view the present crisis demonstrates the complete failure of the capitalist society as epitomised by hon. Members opposite. Their sort of unequal planning is collapsing. In an island economy such as ours, where we have to be careful about imports and where we must stimulate exports, and where we must give priority to the right type of production, planning is needed by people who believe in the right sort of social and economic planning.
  I do not believe that hon. Members opposite wish to go out of their way to ruin the aspirations of many young married couples, but that is the effect of the policy which they support. I do not think that they want to create unemployment or short-term employment. But when they talk about over-employment in industry the natural consequence is the creation of unemployment, with all its effects upon individuals. Any one individual in this country is as important as another, and there is no reason why he should be put in economic jeopardy in order to extricate the Government from the economic mess in which they find themselves.
  I do not want to see the old folk continually over-burdened as they are. It does not give me any pleasure to go to the theatre, as I did the other night, and see a production like "Beyond the Fringe" in which there is a sketch of the Prime Minister, presented in a masterly

  669
  fashion by one of the actors. The man who impersonates the Prime Minister speaks of the right hon. Gentleman's tour round the world. He continually points at a model of the globe and he speaks in a halting and hesitant manner which is absolutely reminiscent of the Prime Minister. He says, "I have a letter here from a gentleman in Fife," and he produces a letter. The letter says, "I want to ask the Prime Minister—I have been a lifelong supporter of the Conservative Party—how I am to get on on £2 7s. 6d. a week. I am an old-age pensioner. What is the Conservative Party going to do for me? "Then the actor who is impersonating the Prime Minister tears up the letter and says, "As I was saying when I met Mr. Khrushchev in Moscow …" Nobody takes pleasure in that sort of thing—
  Viscount Hinchingbrooke: Surely it is funnier than that?
  Mr. Howell: It was very funny.
  Viscount Hinchingbrooke: The hon. Gentleman does not make it sound funny.
  Mr. Howell: It was very funny, and am happy to tell the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) that the night I was present the applause was led by his right hon. Friend the Minister of Transport, who was sitting in one of the boxes. That is how funny it was. I took careful note of the reaction of the Minister of Transport.
  But this skit underlines the tremendous crisis in the homes of thousands of old people in this country about which the noble Lord the Member for Dorset, South has no comprehension. I do not believe that hon. Members opposite wish to keep our old people in such a state—not even the noble Lord—but it is the inevitable consequence of Conservative policy, and what happens when we get rid of proper methods of distribution and collective bargaining. It represents the failure of Government policy in all fields of public service.
  I hope that we shall return to a Government who base their programme unashamedly—yes, unashamedly, as I would tell the right hon. Member for Flint. West—on moral and ethical foundations, and upon those features of social
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  justice to which the national will still respond today as it has done in the past. Our people will not respond—as they have plainly shown in the past and as they are showing today—when the actions of the Government do not conform with their words. The moral considerations of the Financial Secretary are not suited to the activities of this Government. The right hon. Member for Flint, West criticises the nation for moralising. There is something wrong in this Conservative day and age, says the right hon. Member for Flint, West, in a nation which wishes to try to moralise. What a depth of meaning there is in that.
  I hope that people will understand the true purpose of our society and the true purpose of our political parties. I hope that they will appreciate the social and ethical foundations upon which the Labour Party, at least, is based. When the nation realises that, it will not be taken in for a third time by the bogus acquisitive society programme of hon. Members opposite. Then we shall have a society led by a Government of the Labour Party whose policy is based on social justice for all the people of our country.
  6.28 p.m.
  Sir John Barlow: I do not propose to follow the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) very far. We have one thing in common, neither of us is
  an economist, and I think that the whole House would agree about that. The hon. Member blamed the management of industry in this country for not managing. That is a very easy statement to make and I regret that he did not offer any solution. It would be just as easy for me to refer to the failure of the workers to work in this country. There is an element of truth in both statements. But to make such a statement and leave it at that is not very helpful.
  The hon. Member criticised the F.B.I. for its lack of leadership. I have criticised the F.B.I. at various times and I may well do so again, but I wish to point out to the hon. Member that a large number of our most able businessmen devote a large portion of their time to the affairs of the F.B.I. and to industry as a whole. Without the F.B.I. the industry of this country would lack

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  a great deal of the leadership which at present it enjoys.
  I think that all hon. Members will agree with what the hon. Member for Small Heath had to say about the difficulties over the provision of athletic training facilities. We should like to see far greater facilities for all kinds of sport for the youth of the country. Great strides have been made in this respect in the last two years. I hope that much more progress will be made in the years to come. I know of the great interest in these matters of the hon. Member for Small Heath, and I appreciate it, but he should remember that Rome was not built in a day and that we cannot provide Olympic standards in a day. We are making good progress.
  I welcome the Chancellor's statement of yesterday. It may not deal with the situation sufficiently quickly, but, in view of the enormous amount of knowledge and information he has at his disposal, he is in a position to know. He showed very good reason why he did not make the statement sooner, at the time of the Budget. He has been criticised in all quarters of the House for not doing that, but it will be remembered that at the time of the Budget he took certain powers to meet this situation if he thought it necessary in the next few months, as has turned out to be the case.
  I must confess that I would have been much happier if 'he had met the situation a year or eighteen months ago. It appeared to me that this situation was bound to arise before very long. It is infinitely easier to stop a vehicle running down hill if one puts on the brakes early rather than late. I wonder whether the brakes are sufficiently severe at the moment and whether it might not need a little more braking of the vehicle a little later, which I think would be unfortunate and a pity.
  Most of the remedies which the
  Chancellor has suggested are of a traditional nature. The first, perhaps the most traditional, is the raising of the Bank Rate very substantially by 2 per cent.—which is most unusual in this country. In the circumstances it was probably necessary to do that, but I hope he realises that it can best be used only as a temporary measure. It will attract an enormous amount of what is called
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  "hot" money from abroad. It will be very useful to us for a short time, but it will be expensive and we know it will not remain here permanently. So the sooner Bank Rate can be reduced and that money let go, the better it will be for the country.

ROYAL ASSENT
6.30 p.m.
Message to attend the Lords Comissioners;
The House went:—and, having returned;
Mr. SPEAKER reported the Royal Assent to:

1. Rating and Valuation Act, 1961.

2. Companies (Floating Charges) (Scotland) Act, 1961.

3. Mock Auctions Act, 1961.

4. Land Drainage Act, 1961.

5. Covent Garden Market Act, 1961.

6. Rivers (Prevention of Pollution) Act, 1961.

7. Police Federation Act, 1961.

8. Army and Air Force Act, 1961.

9. North Atlantic Shipping Act, 1961.

10. Human Tissue Act, 1961.

11. Crown Estate Act, 1961.

12. Credit-Sale Agreements (Scotland) Act, 1961.

13. Trusts (Scotland) Act, 1961.

14. Crofters (Scotland) Act, 1961.

15. Eyemouth Harbour Order Confirmation Act, 1961.

16. Pier and Harbour Order (Exmouth) Confirmation Act, 1961.

17. Teesside Railless Traction Board (Additional Route) Order Confirmation Act, 1961.

18. British Transport Commission (No. 2) Order Confirmation Act, 1961.

19. British Transport Commission Act, 1961.

20. Middlesex County Council Act, 1961.

21. Shakespeare Birthplace, &c., Trust Act, 1961.

ECONOMIC SITUATION
Question again proposed, That the words proposed to be left out stand part of the Question.
Sir J. Barlow: I was expressing my view that the Bank Rate should be reduced as soon as possible in order to avoid our paying too much money overseas for the money which will be attracted by the especially high rate. There is another reason why the Bank Rate should be reduced as quickly as possible, and that is that undoubtedly it tends to increase the cost of production and of living. It increases all costs in Britain, which we can ill afford at present, apart from the fact that it is more expensive for the Government. I urge the Chancellor as soon as reasonably possible to reduce the Bank Rate to a more normal figure.
The Chancellor has asked the banks for a further special deposit of 1 per cent. They have already deposited a large amount of money, and it may well be that, it is necessary to lodge the extra 1 per cent., but as soon as possible it should be returned to the banks for the use of industry for the purpose for which it was intended. If the Chancellor has powers—and if not he may consider Whether it is worth taking them—he should ask for a similar 1 per cent. special deposit from the insurance companies, merchant banks and other money lenders who in recent years have taken so much business from the banks.
It is within the knowledge of all business people that in recent years many building companies and other business people, who have not found it possible or easy to get money from the bank, have obtained it from other sources in the City. It does not matter to the Chancellor where they get the money as long as they get it. His objective is to prevent people from getting as much credit as at present. His objective is to reduce it. For that reason I do not see why the banks should have to comply with the special rate of 1 per cent. when others in the same type of business do not have to do the same.
Many of us on this side of the House have a great dislike for controls and planning. We believe in a free society and freedom of industry, and we believe
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that industry flourishes much better in that state. But there are times when, if the state of the economy requires it, one should consider either controls or planning in a very limited way. I look upon them as dangerous weapons which should be used very sparingly, but I do not rule them out altogether.
I wonder whether they would be effective at present if applied to the vast amount of building which is going on. All of us know of various types of buildings which are going up. Some of us may think one type important; some of us may think another type important, but we are all agreed that not all of them should be undertaken in the next five years. A number of buildings are now going up which could just as well be built in five years' time. It is a great strain on the economy that they should all be put up in a very limited time. It is a great strain on the amount of labour available and the materials used. We are short of bricks. I am told that we are importing bricks, cement and other building materials. This should not be done in this country in its present economic position.
Last week the Leader of the Opposition referred to investment overseas not bringing home sufficient profits. My right hon. and learned Friend referred to the same matter yesterday. The Leader of the Opposition said:
"Can it have something to do with that change in tax law made by the present Minister of Aviation, when he positively encouraged business firms with subsidiaries abroad not to remit dividends home? That is the story of our trading activity in these last few years." —[OFFICIAL REPORT, 18th July, 1961; Vol. 644. c. 1071.]
There is some confusion of thought there. I think that the right hon. Gentleman was referring to the overseas trading corporation tax provided for in 1957. It will be remembered that at that time there were a substantial number of companies registered in London which were operating overseas. At that time the whole of their profits were taxed. Other companies operating in these overseas areas were foreign companies which were not taxed in a similar way. At that time, the local Income Tax was very much lower than British tax. I forget the actual figures, but a British registered company operating in Ceylon, for example, would at that time have had to bring all its profits home

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and bear the brunt of full British taxation, whereas had the profits been left in Ceylon they would have attracted local tax only, which might have been 20 per cent. at the time. If it was the policy of the company to develop further, it obviously had much more money with which to do so. If British companies had to bear the whole brunt of British taxation whilst foreign companies did not, it put British companies in a very much worse position. That was the main reason for doing it. It did not apply to subsidiary companies abroad. It applied only to British registered companies.
I turn, briefly, to exports, which is the vital problem we have to face. There is a vast amount of criticism for late delivery, bad delivery and non-delivery. I sometimes think that we hear all the worst and not the best. If someone delivers on time with the right quality, nobody hears anything more about it and there is a repetition of the order. If the delivery is late or of the wrong quality, very often a great deal is heard about it.
Since the war there has been such a change in the type of our exports that we must expect this. We should do everything we can to remedy those defects. The situation is not helped by the unofficial strike of tally clerks in the Port of London. All of us know that a large number of shipments were unavoidably delayed, not only in London but in every other port in the country, because ships were held up in London. Not only were the goods late, but many of them missed the season for which they were required and the orders for the next season were delayed or were non-existent because the first batch of goods arrived so late.
Have the Government considered sufficiently carefully the tremendous experience and knowledge which exists in Lancashire of the exporting of textiles in the good old days? This industry was probably the most highly specialised export industry in the world—and that is saying a great deal. When textiles were going regularly, easily and smoothly to every part of the world, there was a wonderful system of merchanting and exporting. A great deal of that knowledge is still available. It may not be easily come by, because
676
it has largely disappeared since the war, but many people still remember how it was all done. It was a vast and very efficient organisation.
I sometimes think that some salesmen who go abroad are unduly criticised. An intelligent firm which is large enough sends its own well-equipped and knowledgeable men overseas. If the firm is too small, it usually uses a well-established merchant firm which has particular interests in the commodity which the firm is handling. One of those two methods is usually the best way of doing it. It depends entirely on the type of business—whether it is consumable goods or big engineering goods. I urge the Government to seek the knowledge still existing in Lancashire, because it would be very valuable.
I was encouraged yesterday and today when the right hon. Member for Huyton (Mr. H. Wilson) and the right hon. Member for Belper (Mr. G. Brown) recognised that getting industry really productive and our exports going again is not a question of management or labour. It is the two working together. It seems strange that it is so difficult to work together in peace-time. We have done so repeatedly in war-time. I have even heard cynics suggest that we fight successfully for our country but are not prepared to work for our country. That may be the idea of the cynic, but there is an element of truth in it. We know that we have the best workmen in the world. We know that we have some of the best managements in the world. We think that a section of both of them are not playing their part and pulling their weight.
Three or four years ago the Government passed the Restrictive Practices Act. The Monopolies Act had already been on the Statute Book for some time. That in itself was largely a waste of time. There have been innumerable cases before the Restrictive Practices Court, but, on balance, comparatively little good has come from all this. I can think of only one possible case in which prices have been reduced as a result of the Court's findings.
Mr. William Shepherd: There has not been time enough yet.
Sir J. Barlow: There has been plenty of time. There is a good deal of restrictive practice in labour. Industry

677
cannot be run satisfactorily if there are such restrictive practices. Time is too short for me to go into the details, nor would it be a good thing to mention some of the details which are known. We all know that such practices exist.
It is our duty, as far as we can, to remove restrictive practices from both labour and management. We should then have a very much better climate in which to develop greater productivity. I am absolutely certain that until we get that climate of working for our mutual benefit we shall not solve our economic problems. At the present time, management and labour, or capital and labour, whichever we like to call it, are both wanting just too big a share of the slice of cake available, and, if we do not look out, there will be no cake available at all. It is up to us to solve these problems in order to hell) our export trade, and that will do much to help to improve the whole of our economic position at the present time.
7.1 p.m.
Mr. Ede: I want to deal with only one topic, and as I know a large number of hon. Members are anxious to take part in the debate I will make my remarks as brief as I can.
I desire to allude to the actions by the Chancellor of the Exchequer and the Minister of Education in their handling, as part of the problem we are discussing this evening, of certain recent transactions in the Burnham Committee. Yesterday morning I was at a meeting of the executive council of the County Councils' Association, which was making a funeral oration over my eight years Presidency of that body. In those circumstances, the trouble is that the corpse is always expected to make a few appropriate remarks from the coffin. I said that I rejoiced that at last I was recovering my liberty. The Prime Minister will remember one occasion when he came to a dinner of the Rural District Councils' Association during my presidency, when the president of the Association, our late friend and very valued colleague, Sir Arthur Colegate, gave him a most glowing testimonial and, when the right hon. Gentleman replied, he said, "Just fancy, if those remarks had only been made by the president of the County Councils' Association."
678
The meeting that morning took place in very difficult circumstances, for the members of the executive council of the County Councils' Association who serve on the Burnham Committee had been invited to receive a statement from the Minister of Education. The order of business was interrupted so that these members could be absent, and, on their return, they said that they had heard the Minister and, having heard him, they recommended the executive council to pass the recommendation, which the education committee of the Association had made, that the Association should accept and, so far as it could, should implement the recommendation of the Burnham Committee.
I am told—I learned it from my right hon. Friend the Member for Belper (Mr. G. Brown) earlier in this debate—that the Burnham Committee met this morning and that both sides had acted in accordance with that recommendation. Having been a member of the teaching profession for 63 years, I want to express my regret at this conflict between the Ministry and the Burnham Committee, in which the local authorities and the teachers equally and, I understand, unanimously joined.
I share some responsibility with the Home Secretary for having established the Burnham Committee on its present lines. I know the promises that were made to both sides of that Committee during its constitution. There may be one or two hon. Members left, including the Prime Minister, but I do not see many who will recollect that we were even defeated in Committee on the Clause that ultimately established the Burnham Committee. It was the subject of the most meticulous correspondence and conversation before we got it into this form. One of the things that we thought we had established was that this would be a joint negotiating body, making a recommendation to the Minister of Education of the day, on the way in which the scales of salaries for teachers in schools should be established and worked.
There has been a very great deal of controversy inside the teaching profession about this award or recommendation, and I had better call it a recommendation at this stage rather than an award. They were hoping that it was to be an award, and I must say that I

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think my colleagues in the teaching profession did not show their usual wisdom when they did not at once accept the offer that was made. After all £.47½ million on the table for division among 300,000 people needs no arguing about. I am reminded of the Roman Catholic Bishop who said to me about the Scurr Amendment when we were negotiating it 13 years before: "When I think of all the good Protestant money that was there for taking up and for 13 years we have not been able to touch it, I wonder whether some of my colleagues were divinely inspired in the action they took."
I think that what should have happened was that the teachers should have accepted it, and that they should have said: "We are surprised that it is so little and you must not be surprised if we come back at some time in the future." Instead of the rebuff which the authorities received, which might have justified them if they had not the interests of the service at heart, in following the wishes of the Ministers, the authorities have decided with the teachers to send the recommendation forward, and what will happen after the statement made by the Chancellor of the Exchequer remains to be seen. All I can say is that I believe that every penny of the money in that recommendation was deserved, and, what is more, in the present state of our economic affairs the one capital investment which we cannot afford to turn down is the investment in the character and the brains of the mass of the people in this country who have a hereditary skill in many industries which were subjected to severe strain through depression.
During the years when I sometimes listened to the present Prime Minister, when he sat on this side of the House—well at the back, so that he could address the people for whom his homilies were intended with the greatest effect—I could understand the skilled men and their wives who during those dreary years said, "Well, I am a miner "—or a shipwright, or a seaman—"and when I think of the time I have spent in learning the skill necessary for my trade and the reward I am now getting, I shall see to it that my boy never goes into that industry" We still feel the effects of that attitude.
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I am more perturbed about the details of what has been said by the Chancellor and by the Minister of Education than by the actual action. It is clear to anyone who has had any experience of administration what is now about to happen. The smallest details of
the scale of salaries for teachers will be settled by someone in the Treasury. I can think of nothing worse than that for the development of education.
I still hear that we are to concentrate on the technical and similar phases of education. I addressed the House recently on that subject, and I shall not repeat to this larger audience what I then said to the select few who listened to me then. Hon. Members know where to find my remarks if they are interested.
We do not find these people for science and the practical forms of education that it is admitted we need so badly when they are sixteen or eighteen years of age. We have to get the scientific type of mind, the understanding that skill of hand is as honourable as skill in the use of words or figures into the child at a very early age. The emphasis that these restrictions are to be imposed on primary or secondary school teachers shows that that elementary principle has not been accepted by the Government.
I am not in favour of paying high salaries to directors of studies dealing with youths of such talents and abilities as very often to enable them soon to get ahead of their teachers. My concern is with the teachers whose job it is to help the parents to spot the talents of the child they have in front of them and to see that the child gets the proper opportunity in life. That is the work that is done in the primary and secondary schools. I hope that when the Minister considers the letter that I understand he is to receive from the Burnham Committee, he will deal with the matter with what I have just said in mind. We need a vast reservoir of developing talent over the widest ranges of human practical activities if, in the years ahead, we are to be able to hold our own in the world on which we are entering.
I do not imagine that what we do on the Burnham Committee's recommendation will have much effect in Zurich this week or next—and I am going there next week to find out. We are here dealing with a capital investment, and I rejoice

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that the school-masters in the public schools have managed to persuade their poorer clientele among the parents that a good education is a sound capital investment for a boy. That is true in all walks of life.
After my experience since I went to the Board of Education in 1940, and my work with the present Home Secretary when I was there, and what we then did jointly, I very much regret that at this critical stage, when good relationships between school and Government are so important, there should have been this blundering into the negotiations between employers and employed. I agree with my right hon. Friend the Member for Belper (Mr. G. Brown) that far too many people are now saying, "Of course, arbitrators will be instructed," and there will be ether influences brought to bear.
After the years of depression, our workpeople served this country in the years of the war with a devotion that ought to have ensured for them an honoured place in any negotiations about our future social system. This conflict has been wantonly provoked by the Minister of Education who, I thought, was yesterday alluded to in far too flattering terms by my right hon. Friend the Member for Huyton (Mr. H. Wilson) —I hope that the Parliamentary Committee will consider whether my right hon. Friend should be allowed to pay such fulsome compliments to a political opponent.
I hope that reason and sound sense will yet prevail, for these children in the schools today, the children of the years of the highest birth rate in our history, are the most precious collection of assets we have ever had—and we only have them once. People say to me that the most important year of a boy's life is such-and-such a year. I believe that in 1961 the most important year in the lives of boys and girls is 1961, and if they do not get the full quantum of what they should receive during that period nothing given later on will ever enable us to build on the foundations that ought then to have been laid.
I have restricted myself to this one subject because I believe that it is so overwhelmingly important; that this House not arrive at the right conclusions in the crisis in which we now
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are unless it realises the gamble it is being asked to take with the brightest set of children the country has ever had.
7.20 p.m.
Mr. Joseph Hiley: Hon. Members on both sides will deplore and regret the postponement of the increases for teachers. Nevertheless, I suggest to hon. Gentlemen opposite—particularly the right hon. Gentleman the Member for South Shields (Mr. Ede)—that the best service this House can render to the teachers is to ensure that we are able at an early date to restore our economy to what it should be so that they may have their rise.
For almost as many years as I have spent weeks in this House I have been a producer and seller. A short while ago the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) complained that he had heard too much from economists, moralists and philosophers, but I speak from personal experience of production. I say that because it is surely production that affects this whole problem. I should explain that my experience has been exclusively in the wool and textile industry, which I mention for two reasons. Firstly, the textile industry takes exports for granted. My hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) referred to the cotton textile industry and how it had reached a high peak before the war. We still have that in the wool textile industry and, as a result, it is the second largest dollar earner in the United Kingdom and the sixth largest earner of exports. Thus we want no exhortation in the wool textile industry to export.
Secondly, even in times of high productivity and demand, the wool textile industry works on extremely narrow margins. Profits earned are small compared with the capital employed. But I do not think that that is anything to be proud of for those engaged in the industry. It is only out of profits that any industry can earn, including those who derive their livelihood from it, and can aid the economy of the country.
I have noticed in these debates—last week, yesterday and today—a curious emphasis on the part of hon. Gentlemen opposite on what my right hon. Friends on the Government Front Bench are doing about productivity. No one has

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a greater admiration far the Chancellor of the Exchequer or the President of the Board of Trade than have I, but, so far as I have been able to make out, neither of them, from training or experience, has had anything to do with productivity. Han. Gentlemen on the Opposition Front Bench have had even less experience. They have the same limitations, but, in addition, they have the dreadful disadvantage of believing—or saying that they believe, with varying degrees of fervour—that productivity would be best served by being put in the hands of public enterprise—a system which never has and never will succeed in a free society.
What sort of measures can we take to get us out of our troubles? We have spent a lot of time today and yesterday talking about these problems, but the position can be summed up in almost one sentence; we must increase our exports or, conversely, reduce imports. As hon. Gentlemen opposite were speaking I tried to discover what other proposals could be made in order to assist us in this quest.
The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) made one suggestion—the only practical suggestion he made in a long and amusing speech—that there should be some sort of fiscal aids given to exporters. That is, of course, nothing new. It has been discussed by my hon. Friends frequently, and both the President of the Board of Trade and the Chancellor of the Exchequer have explained that if we were to embark on devices of that kind we should find ourselves in difficulty with the various international agreements with which we are associated.
But since no less a person than the right hon. Member for Huyton mentioned this, I urge my right hon. Friends to look at the suggestion again because if it is possible, honourably, to give aid to those who are helping our export trade then it should be given. As I say, it would be a good thing for the Government to make special note of the suggestion to see if such aids could be given while, at the same time, conforming to our obligations under G.A.T.T. and other international agreements.
I can think of many more ways the Government could make it more difficult
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to export than I can think of ways to help exports. Government expenditure is the greatest, and there are others. Only in the last hour did we go to the House of Lords to witness the Queen's assent to the Rating and Valuation Bill. That Measure passed through the House and has added a burden upon industry. It went through almost without protest from hon. Gentlemen opposite and with very little protest from my hon. Friends. I mention this because that Measure is one of the things which will make it more difficult to export.
From my experience, I have found that the greatest difficulty—almost the only one so far as textiles are concerned—is high costs. If we could only get our goods at a lower price we could get the exports all right. This is where I must make a plea to hon. Gentlemen opposite, and to the country generally. There was a cartoon in the Daily Herald last week which depicted a balance. A man was sitting in one scale pan with a wage packet marked "wages" and in the pan on the other side was seated a tycoon with the words "profits and dividends." The suggestion was that one was the corollary of the other. That is simply not true, and I want hon. Gentlemen opposite who understand the problem to make people appreciate that it is untrue. The right hon. Gentleman the Leader of the Opposition made the same point last week, as did other hon. Gentlemen opposite.
The President of the Board of Trade answered the point the other day, but not sufficiently adequately. Wage costs are the first and usually the greatest part of the cost of any article. Profits come last, and in a competitive market they are often disregarded altogether, for they are sometimes sacrificed in order to secure business. But I urge hon. Members not to make any mistake about that. It is not a good thing that that should happen. It is bad for the country—and, of course, for the Chancellor, who gets most of the profits anyway—and it is also bad for those who are engaged in the industry. It must be clear that without profits industry would not be able to support, as it does, the whole of our national economy.
If hon. Gentlemen opposite complain that the wage earners are not able to share in these profits, may I suggest that we should find ways in which they are

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able to share in them? In fact, it is not true to say that they do not share. Hon. Members should bear in mind the fact that the money received by insurance companies for investment purposes comes largely from the wage earner. There are the substantial holdings in equity shares by trade unions, which means that those unions and those who depend on their pension funds are sharing and derive a good deal of benefit from the prosperity of industry. The Church and other worthy institutions are also taking advantage of this.
I should like the people of this country to go a bit further than that. I want them to have a personal interest in the ownership of shares. This is not easy, but it is less difficult than it was some time ago. The unit trust system which now seems to be operating successfully —the system by which, I understand, the trade unions are investing—is there for everybody to use to his advantage. Hon. Members opposite could do their friends a good service if they directed their minds into activities and investments of that kind.
I deplore in the average wage earner what I call the "Friday night and Saturday night" attitude. I believe that someone wrote a book or play with a similar title, but there is nothing quite so seamy in the suggestion which I have to make. Hon. Members will know that for generations—I do not criticise it—the wage earner waited for Friday night.
Mr. Jack Jones: Thursday.
Mr. Hiley: I am surprised that the hon. Member for Rotherham (Mr. Jack Jones) should not realise that in Yorkshire the money is usually paid out on Fridays. In any case, I am referring to the night when people draw the brass, as we say. They are waiting for it. The best of them make their proper allocations and what they put on one side is disposed of on Saturday night. If there is any left that can go to Sunday lunch.
Recently—I have evidence of this—high wages have sometimes acted as a disincentive to higher production. I am told that in the mining areas of the West Riding the principal cause of absenteeism on the Monday shift is the increased rate of wages available. The workers have not been able Ito "blue" it all on Saturday night and Sunday and they have to take time off on Monday to do it.
Mr. Jack Jones: Oh.
Mr. Hiley: Not very far from where the hon. Member for Rotherham lives, this has been going on for quite a time every Monday.
If we could persuade people to divert some of their money into investments for themselves we should get them to take a better and truer attitude towards investment and their own well being in the end. How much better that would be. How much better, too, if the £600 million spent on gambling every year were invested in that way rather than spent with the bookmakers.
I am convinced that this should be our duty. Let us try to instruct our people to take a more intelligent interest in the industrial well being of the nation. Let us not try to make political capital out of the temporary difficulties we face.
Mr. Denis Howell: What is the hon. Member doing?
Mr. Hiley: I am not trying to make a bit of party political capital out of it. I am talking to you as I should talk to the workpeople in my constituency. I have their respect and I believe they would believe what I say to them. I hope that you, too, will help them by making the same proposals.
Mr. Speaker: I think the hon. Gentleman had better address the Chair.
Mr. Hiley: I apologise, Mr. Speaker.
That is what we ought to do. If we could give people this direct interest in investment in industry, they could then take advantage of our industrial well being and of the profits when they come.
The Chancellor is to be congratulated on the steps he has taken. I hope that they will succeed quickly. The sooner they do the sooner shall we all return to a state of affairs which, we hope, will be of greater benefit to us all.
7.34 p.m.
Mr. Austen Albu: I hope that my hon. Friends will not mind if I do not bother to reply to the insulting remarks of the hon. Member for Pudsey (Mr. Hiley). As far as I could judge, they had nothing whatever to do with the very important subject of today's debate; in fact, they could only cause—if anyone read them or took any notice

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of them—extraordinary harm in industrial relations.
Most of us have been disappointed by a great many of the speeches we have heard, particularly those from the Treasury Bench, because we had been given to understand that for some reason or other—though why we should expect it from this Government I do not know—there would be evidence of a fresh approach to the long-term malaise of our economic system. After all, the problems have been with us for many years and it was hoped that there would be a fresh approach, particularly to the problems of planning. On this matter, however, we have heard practically nothing at all.
Nearly all the speeches have been directed to the short-term problem, principally directed towards squeezing down the standard of living of the people and taking advantage of the situation of certain groups of the population in order to deal with temporary difficulties. Indeed, when the Financial Secretary spoke today he did not make it at all clear why, with such a high rate of investment as he claimed had been taking place during the last few years—which I do not deny —it had been impossible to raise productivity or the level of exports. This, surely, is the important matter.
I am glad that "planning" is no longer a dirty word. Nevertheless, it is in danger of being smothered in soft soap. It is time we turned our attention to what we could possibly do and to what are the problems involved in the longer term planning of the economy, in which, I gather, the Government are at last beginning to take an interest.
Planning, at any rate in a society like ours, must be principally concerned with decisions about capital investment. In the last two or three years, I agree, the actual rate of investment has been not too bad, but the question is not as to the rate but as to the direction of the investment, the allocation of resources between different objectives. This is not, as hon. Members opposite seem to think, only a matter of the control of public investment.
None of us on this side denies—certainly my hon. Friend the Member for Southwark (Mr. Gunter) did not deny it last night—that the control of public in-
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vestment is an important part of the Government's duty. The true distinction, however, is not between public investment and private investment, hut between that investment which produces revenue directly, whether it be in manufacturing industry, in transport, in fuel and power or in the Post Office, and the social services which have to be supported by the rest of the economy and for which, after all, provision has to be made in the long-term investment plan. The balance has to be held. Part of our charge against the Government is that they do not hold the balance rightly between long-term investment for production purposes and investment for the social services, which, indirectly also contribute in the end to our productivity.
This leads to the conclusion that it is not good enough to plan just for this or that sector, for the social services or for the publicly-owned industries. What we need are long-term plans far the whole of the economy and for all industries.
The Plowden Committee, in what I thought was a very practical and sensible Report, recommended the development of long-term surveys of the national economy out of which could be derived programmes for investment in all sectors. The Committee pointed out that the techniques for this purpose are still not very advanced. I agree that that is so, but there is a good deal of work going on. Presumably, some work must be going on in the Government service, and work is being done also in certain universities and, for instance, in the National Institute of Economic and Social Research.
I draw attention, as the Guardian did, to the very useful experiments being carried out by Professor Stone at Cambridge, who is trying to build a model of the economy, in collaboration with industry, so as to take into account possible technical and market changes. He hopes, by the use of computer techniques, to be able to indicate the nature of the changes which will be required in the different factors of production and of our economy to achieve certain ends; in other words, for instance, to achieve a certain increase in our gross national product over a period of years. This is something well worth watching, and the Government ought to assist it.

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I cannot understand the Plowden Committee's recommendation that any results of such studies should not be published. It seems to me to be essentially in the nature of such studies that the results should be stated so that the people of the country, management, workers and everyone else, may be informed about exactly what they have to do in order to achieve the aims and objectives they desire. If they wish to achieve a certain increase in the standard of living, in our gross national product, it follows that there must be certain other things that have to be done. Surely the important thing is to publish these so that people can understand what is required of them. In fact I find a contradiction in the Plowden Report on this subject, for in paragraph 75 it is stated:
"Unless the issues of long-term expenditure priorities and policies can be discussed in Parliament and become the subject of public controversy, it will be difficult for Governments to carry public opinion with them."
One of the problems about the planning of investment is the danger of duplication of investment. A large proportion of industrial investment in advanced industrial countries is in a very small number of very large projects. This makes the danger of wasteful competition very great. We already recognise this in the steel industry. Perhaps hon. Members have seen the interesting paper by Sir Robert Shone of the Iron and Steel Board entitled "Economic Development of the United Kingdom Steel Industry." In it he said:
"In development just as in prices, conditions of large scale production make the assumptions of atomistic competition entirely unrealistic. The competition is real, but the traditional market disciplines of trial and error do not always lend themselves to solution when hundreds of millions of pounds are at stake at one time."
This is the problem of large-scale projects. It applies not only in the iron and steel industry, but in other industries—for instance, in the chemical industry, to which my hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) referred last night. Luckily, or unluckily, whichever way hon. Members may look at it, the degree of monopoly in this industry is so great that the danger of competition does not arise.
Mr. Jack Jones: Will my hon. Friend ask the Economic Secretary what the increase of 2 per cent. in the Bank Rate will put on the price of every ton of steel which is produced?
Mr. Albu: That is an important point, but it is not the one with which I am dealing.
The problem of wasteful competition applies also to the transport and fuel and power industries over which the Government have control and in respect of which they should have policies to ensure that wasteful investment does not take place.
I draw the Government's attention to the remarkable speech made by the hon. Member for Yeovil (Mr. Peyton) during the debate on shipping and shipbuilding. I used to consider that the hon. Member was a fairly orthodox Conservative, but he said that he thought that it was ridiculous that we should not have a plan for transport which included, not only shipping and coastal transport, but all forms of internal transport. The avoidance of wasteful competition in investment is particularly important when large-scale industry in this country is in severe competition with large-scale industry in other countries in the export market. It is for this reason that I find the Government's attitude towards civil aviation incredible. Why should they double investment in civil aviation when we already have two national airlines in severe competition in world markets for business? The licensing of independent airline operators is nothing more than a waste of our investment resources.
I turn to the motor industry. I am sure that in this country there are too many competing giants in the industry with the result that it is extremely weak compared with the motor industry particularly of America but increasingly of Europe. The same may apply to the heavy electrical engineering industry, although I realise that here I am treading on dangerous ground because it
has been examined by the Monopolies Commission. There is a danger of the dispersal of research and design resources now that the generating plants are getting bigger and especially since we are approaching the days of the even larger-scale plants involved in generation by nuclear power.
The truth of the matter is that in this country for most of the products which

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we manufacture there are more manufacturers for smaller markets than there are in other highly industrialised countries. In other words, we have far too many firms making far too few products. This raises very serious considerations. It raises the problem of what I like to call "private monopoly in one country". Hon. Members opposite have much greater inhibitions about dealing with this than we on this side have, but, whatever degree of Government control or intervention takes place in these industries which are involved in large-scale investment, this problem certainly emphasises the need for more long-term planning of all large-scale investment.
One of the handicaps to carrying out plans of large-scale investment is the mass of authorities which must often be consulted and appeased before a large-scale project can go ahead. It even impedes adequate research studies into some of the economic problems, such as in the transport of goods. I am told that in is almost impossible to get agreement about a study of the flow of freight from factory to ship because of the mass of authorities concerned with the problem. It is very urgent that some way to reduce the time taken to get projects accepted should be found. We cannot afford the luxury of long-drawn-out inquiries such as those which are carried on at present.
Unfortunately, the public's attitude to this problem has been made worse by the one-sided propaganda which has been carried out, particularly by hon. Members opposite who do not understand the problem, since the Crichel Down affair. We must get away from the idea that the private interest must always take precedence over the long-term public interest.
Because I have been speaking about planning of large-scale investment I do not wish hon. Members to think that I believe that we can rely for our exports in future on only a few large industries. What is needed is a far greater diversification of industries of medium and small size making goods at a high scientific and technical level. The problem is not merely one of increased productivity. Lt is a problem of advanced design and of a need for more scientific research and technological development. We cannot hope to maintain the
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standard of living which we have by continuing to sell cheap goods. We should be selling very high-priced goods. We should be discarding more and more the cheaper goods.
A number of changes in this direction have taken place since the war, but the trouble is that we all still have difficulty in adapting ourselves to our changed position in the world. I believe that it may well be that the final loss of our net earnings on invisible account which has finally come about may turn out to be a blessing in disguise if in the end it brings the realisation that this country can live only as a manufacturing nation and not as a nation of bankers and commodity traders. This will increasingly be the position in the years to come. The sooner we give up reliance on our old traditions of being bankers, insurers, commodity merchants and so on, the better. The future of our country lies not in the City but in our factories, and it is to them that we must give our attention.
It may well be that even the argument about the Common Market may, in the end, bring the realisation that for years the Commonwealth countries have been going their own economic way, increasing their own industrialisation, and excluding goods from this country, and that the dream of exchanging our manufactured goods for their commodities is being finally shattered. The problem in future may well be increasingly that of accepting their manufactured exports, and that is particularly so in the case of the simpler goods of the poorer countries, as we have seen in textiles and will in future see in other manufactured goods.
I believe that much more Government action is needed than we have heard about so far, or appears likely to take place, if we are to bring about the changes which are so badly needed. Much more action is needed to modernise those backward industries in which new techniques can make them competitive or to assist the contraction of those industries which must inevitably decline. I agree that there is no point in continuing to subsidise industries whose day is gone. But there are some industries in this country whose management is backward or whose industrial relations are bad which still could be

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highly advanced industries if they were to adopt modern techniques, modern research methods, and so on. It is these things which the Government must stimulate.
This applies, not only to industries, but to some areas of this country, particularly, I regret to say, to Scotland, as was shown by the debate in the Scottish Grand Committee the other day. No one can doubt the backwardness of Scotland. Something must be done if Scotland is to make its proper contribution to the future development of Great Britain.
The truth is that, compared with some of their competitors, too few firms have either the organisation or the flexibility which is needed for change. They do not employ sufficient professionally-trained staff capable of developing a sales strategy based on market research and the development of new products.
Unfortunately, this lack of economic thinking is to be found not only in industry. It is typical. I regret to say, of Government Departments as well. It is part of the price we pay for the tradition of amateurism, particularly in our administration, associated, as it frequently is, with nepotism in industry, to which my hon. Friend the Member for Southwark referred last night. This tradition of amateurism, no doubt, did us well in the last century and has certain advantages, but it is hopeless today in a society as technically developed and as economically advanced as ours ought to be and as our competitors' certainly are.
A good example of that attitude was the evidence given by a Treasury witness before the Select Committee on Nationalised Industries. He thought that in the study of the economic problems of the nationalised industries, to assist the Chairman the Committee needed somebody
"who is a bit of an economist (I do not mean a professional academic economist), but one who, at any rate, has spent much of his working life in economic affairs."
It is typical of the attitude that anybody with a classical or historical training is capable of undertaking any sort of professional work.
I am not arguing that an economist should make the decision any more than
that scientists or engineers should. What
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I am suggesting is that an objective and scientific study could be made of these problems of planning and of investment. This, surely, is a job for those with special training. They will not make the decisions. They will put the choices before Ministers, and Ministers must make the decisions. At present, however, I do not believe that a proper professional study is being made of the problems.
As other hon. Members have said, the problem of planning is certainly not a job for a large representative body of busy amateurs. My hon. Friends the Members for Southwark and Hillsborough and other hon. Members have referred to this. It is a job for full-time experts able to put their findings before those who will have to take the responsibility for the decisions and for ensuring that they are carried out.
If, however, these studies and their implications for policy are to be accepted objectively by the people, the Government must create a very different psychological climate. The measures that the Government are now introducing are not only unjust in their effect, but they are divisive and depressive. Such restrictive measures make the implementation of the changes which are so desperately necessary more difficult and must, therefore, defeat the long-term imperatives of our economy.
7.53 p.m.
Captain L. P. S. Orr: I have promised that in view of the great number of my hon. Friends who wish to sneak, I will be brief. I hope, therefore, that the hon. Member for Edmonton (Mr. Albu) will forgive me if I do not attempt to engage in the exciting task of disentangling from what he said the few gems of sense. One thing, however, which struck me in the hon. Member's speech was his remark that the future of the country lies with the factories and with the people who manage and work in them.
We are in some difficulty when thinking about long-term planning and the long-term future of the country because of the fact that this debate is taking place before next week's debate on the Common Market. It is a great pity that it is not the other way round, because it

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is extremely difficult to make an adequate assessment of our economic prospects until we know whether we are to seek closer co-operation with Europe. I should prefer to have heard the statement of my right hon. Friend the Prime Minister on the Common Market before hearing the financial statement of my right hon. and learned Friend the Chancellor of the Exchaquer, and it would have been better to have the debate on the Common Market before this debate today.
I have taken the trouble to ask a number of my friends in industry, people who either control or have important parts to play in large public companies, about their views on the Chancellor's speech yesterday and his statement on Monday. As one might expect, the replies were many, various and colourful. None the less, there are four comments that were common to all of them.
The first, although it was by no means given first in each case, was a recognition that there is a short-term crisis and a short-term balance of payments difficulty and that something had to be done. The replies showed that people were prepared to accept stringent measures for dealing with the Short-term crisis.
The second comment, which, although not the most important, was common to all the replies, was that while people accepted that the 10 per cent. surcharge was fairer than dealing with hire purchase and was fairer, spread over all industry, than movements in Purchase Tax, Which would fall heavily upon certain industries, the one thing they did not like was that the surcharge fell upon the petrol duty. It was pointed out that this was directly inflationary, as so many hon. Members have said, according to the side of the House on which they happened to sit, when the duty on petrol has been raised in the past, and that it would add to costs without contributing much towards the necessity for cutting down consumer expenditure.
The third point, and one Which was made by everybody, concerned the Common Market. When asked, "What would you have done as Chancellor of the Exchequer to encourage our export trade?" my friends replied, "How can we answer that before we know what is
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to be the economic future with regard to Europe?" They said that what was missing from the Chancellor's statement was any direct incentive to export. It is our export trade on which we shall depend and on which we must concentrate if we are to think about the country's economic welfare.
The statement of my right hon. and learned Friend the Chancellor can be looked at in two ways. It is either the medicine once again, or it is the dawn of something new. I see sufficient indications of new thinking in it to believe that it is the beginning of something new.
In the short term, the Chancellor's proposals are basically the medicine once again. We have the restriction of credit, the higher Bank Rate, action concerning the special deposits and the restriction of consumer demand. The methods are better and fairer. The second regulator is a much fairer weapon. The fact that investment allowances are not being touched is sensible. Broadly, however, everybody would admit that for the short-term crisis this is, as it must be, the medicine once again. The main point to make about the Chancellor's statement is that this medicine should not be given in an overdose. The particular restriction should not be kept on too long.
I suspect that the raising of the Bank Rate to 7 per cent. is rather too much.
Mr. Cyril Bence: Too much for Northern Ireland.
Captain Orr: I am coming to Northern Ireland.
It is rather too much, but certainly I think that neither restriction of credit nor special deposits, nor the restriction of consumer demand, should be kept on one moment longer than the short-term emergency requires.
The important thing, however, is the long-term question. The important thing for our country is what is going to happen if, as we expect, we get over this present crisis. The Chancellor has said that we are to have long-term planning, that we are going to try to look five years ahead and make our estimates and plans accordingly. I am not sure that that will be sufficient. It is a good thing to look at the future, to try to estimate what will happen and to try to make some plans,

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but I do not think that this is sufficient in itself.
It is important to try to get some reasonable national wages policy agreed between management and workers, agreed, broadly speaking, throughout the country, upon the basis that salaries and wages will not exceed the rate of productivity. If we can get that, it is important. Costs are very important to us. Some restriction of consumer demand where it is making too heavy a claim upon the goods and services which ought to go overseas is important.
These things in themselves, however, are not sufficient, and that is why I see something missing from my right hon. and learned Friend's thinking at the moment. British industry is not like a wet sponge. When it is squeezed it will not suddenly shoot out goods to export, as a wet sponge shoots out water. It does not necessarily follow, even if we keep costs down and restrict consumer demand at home, that we shall get our exports, unless there is sufficient sign of reward from so doing. It is possible to live within our income, but it is possible to live within our income and be very poor. It is quite possible that if we restrict too much we shall bring about a shrinking of industry, a shrinking of our total productive capacity, instead of doing what we want to do, and that is to expand it. Industry is not like a wet sponge. It is much more like a living heart. If we squeeze it too hard it may shrivel and die.
Therefore, there is missing some real incentive. One talks to one's friends in industry, and how often does one hear it said, "Why should I take all the trouble to travel about the world and stay in miserable hotels and so on, or employ other people to do so, if for so doing there is not going to be some real reward for myself or the people I employ?"
Some point has been made on the benches opposite about Surtax rates and the Surtax concessions. I think they are quite relevant in this debate. I think they show that there is right thinking, but I should like to see concessions in direct taxation not confined to Surtax payers but spread throughout all the people who are working in productive industry. I should not mind our making
a discrimination in favour of those working in the export trade. I think that
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suggestions for fiscal discrimination are good. I can see the difficulties. I can see the difficulty of inviting retaliation from other countries, but surely it must be possible to find some way of rewarding those who are directly engaged in export industry, and I believe that the way can be found through taxation.
It can be done by reducing direct
taxation, and if consumer demand has to be restrained, this is best done through indirect taxation. I believe people should have more and more incentive through keeping more and more of the money they actually earn; and if they cannot spend it, let them save it and use it for producing more capital, more machinery, more of the things which we require.
I want to say a brief word about the special position of Northern Ireland. The Chancellor did say that he had very much in mind the position both of Scotland and of Northern Ireland, and both are in a very special position. The people in Northern Ireland—and, I am sure, in Scotland—who enjoy so much of the wealth and prosperity of this country as a whole by being part of the United Kingdom are fully prepared to bear any stringency, any burdens, which may have to be borne, and we would not seek to contract out of our obligations, while still enjoying the benefits of the United Kingdom association, but our problem is a very special one, as has often been said in this House.
It is very special in that our economy does not suffer from overstrain. It does not suffer in any way from shortage of labour. Our problem is quite the reverse. Our problem requires an accelerator, not a brake—even now, even in these circumstances. I think that is well known in the House.
We recognise that we have already certain advantages. We are already cushioned against the regulator because the revenue from the surcharge of 10 per cent. accrues to the exchequer of Northern Ireland and can be used by the Northern Ireland Minister of Finance and under the discretion of the Northern Ireland Parliament to stimulate employment. So I would simply like to ask my hon. Friend the Financial Secretary whether he can confirm that there is no limit to the discretion of the Government of Northern Ireland in this respect. Perhaps he cannot reply to me now. Perhaps he may tell me the answer to

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that later. There is also the fact that the requirement for special deposits does not apply to our banks, or has not so far applied to our banks, and I should like confirmation of the fact that the extra call for special deposits will not be applied in Northern Ireland either.
The one thing which has given us some concern was the statement made by the Chancellor of the Exchequer about looking critically at the agricultural support, because agriculture in Ulster is of extreme importance to us. It is of very special importance to us, perhaps more so than to any other part of the country, because although our shipbuilding, our aircraft, and our great textile and other industries are important to our economy, our whole economy is based upon our principal industry, which is our agricultural industry. Therefore, I hope that in the context of looking critically at the level of agricultural support the Chancellor of the Exchequer will bear very carefully in mind the special position which agriculture plays in the economy of Northern Ireland and that he will consider sympathetically and carefully any view which may be put to him either by the Government of Northern Ireland or by the Ulster Farmers' Union on that point.
As the House may know, the Brittain Committee is having a look at the whole problem of how to promote better employment in Northern Ireland. I should like an assurance, if possible tonight from whoever winds up the debate, that any recommendation by the Brittain Committee will not be turned down or put aside simply because of the present economic difficulties and simply because of the Chancellor's announcement on Monday. The Chancellor will be remembered in history either as another restrictionist or as the most courageous and sensible Chancellor we have had since the war. I have sufficient faith in him and in the Government, and in our party in backing him loyally and with courage, to believe that that will be the case.
8.12 p.m.
Mr. Jack Jones: We have listened yesterday and today to a variety of speeches, and I do not propose to follow the hon. and gallant Member for Down, South (Captain Orr) into the
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troubles and trials which his part of Ireland is now experiencing. I assure him that we on this side of the House have a proud record of work done to help distressed areas. I assure him also that if there is anything in which it will be possible to support the Government in helping that distressed area we as Socialists and trade unionists will be happy to give that support.
We have heard one or two helpful speeches, one or two positively provocative speeches and some rather insulting speeches. The hon. Member for Pudsey (Mr. Hiley) complained bitterly about textile workers in his area "blueing" their money too fast on Friday nights. I intervened to say that they were paid on Thursday anyhow. The inference was that these workers smoked, gambled and drank too much and were a wicked lot, but no doubt later today the hon. Member, for the benefit of the revenue, will go into the Lobby and encourage those very same people to pay more for tobacco and beer and to encourage them in gambling.
Mr. Tapsell: The hon. Member is quite misrepresenting what my hon. Friend the Member for Pudsey (Mr. Hiley) said. On the contrary, my hon. Friend said that the best workers were careful to put aside their beer money in advance.
Mr. Jones: I was coming to that point. The best workers were those who did some saving, and but for the saving groups in industry, of which there are many thousands, the Chancellor would have been in much poorer shape than he is. This belittling and denigrating of those who enjoy a pint or cigarettes—as I do not—will not get the Chancellor very far in his aim to bring about increased production.
The question is one of exports. The hon. and gallant Member for Down, South said that if the man at the top was given more money exports would be increased, but he went on to say that even if prices were reduced he was not certain that we should capture the market. That is quite right. It is no use creating a surplus of goods unless we can sell them, and the only way to sell them is to provide customers with a better article at a cheaper price than our competitors.

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I should like to refer briefly to the industry about which I know a little. The steel industry is a progressive industry, but it has not progressed hard and fast enough in recent years. I had the privilege of following the right hon. Gentleman the Member for Woodford (Sir W. Churchill) in that great debate on the Iron and Steel Bill on 16th November, 1948. I said then:
"We are far behind some of our major competitors in such questions as oxygen induction … Then there is the vexed question of the right type of refractories …"—[OFFICIAL REPORT, 16th November, 1948; Vol. 458, c. 246.]
I showed how the adoption of oxygen induction and the right type of firebricks would bring about a tremendous increase in steel production.
I have no connection with the Soviet Government. No one has fought Communism more than I have or paid a bigger price either in this House or in Britain for it, but on Tuesday the Guardian carried a very fine article under the heading "Soviet Technology: Developments in Steelmaking" telling what has happened in Soviet Russia in the last twelve months. The Russians enlarged one blast furnace in the Chusovsk Works by 72 per cent. in 1960, and this one blast furnace has resulted in an additional productive capacity of 200,000 tons of pig iron per annum.
The same article refers to Soviet steel production and says:
"The Soviet steel industry is biased towards large open hearth furnaces."
Those are the furnaces on which I worked for forty years, and I know a little about them. They burn very hot. It is a searing place to work at, but it is a magnificent place because one is paid for what one produces. "If you make no steel you get no brass" is the saying there.
Twelve years ago I asked the Government of that day to pay attention to the use of new refractory magnesite bricks in the production of steel. I explained that we could produce those bricks from sea water, and that is cheap enough. I do not know how many million cubic yards of sea water there are, but there certainly are plenty. This country had one of the only two factories in the world making magnesite bricks. This
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was a development from the magnesium used in flares by the Royal Air Force when it did its magnificent job in winning victory over the Nazis. We could make these bricks in unlimited quantities if we cared.
This industry then belonged to the State, and when I was a Junior Minister at the Ministry of Supply we enlarged production to 400,000 tons per annum. That factory could now produce millions of tons of that type of brick at a very cheap rate. Is it doing it? No, that factory was sold to private enterprise. It was not sold in competition with the inferior silica firebrick manufacturers. It was sold to those manufacturers and still the steel owners have an interest in the production of an inferior type of article.
Russia thirty years ago was in a state of serfdom, but now that State is running rings round us. The Russians are putting up furnaces and the growth in their production, as the Guardian says, is phenomenal. They have outstripped even their own programme by the simple use of the raw materials at their hand. I referred earlier to oxygen induction furnaces. This method is being used in vessels which can produce 8,000 tons per vessel per week, but there is not one plant in the great Sheffield area where I was born which uses complete oxygen induction.
We are talking about it. We are thinking about it. We are going to do it. We are a nation of "going-to-doers". Once upon a time it was the Luddites. They got it in the neck, and rightly so. We now have the "stick-in-the-mudites" and they will get it in the neck, and rightly so. Would the hon. Member for Pudsey go to the workers and say, "I have £10 a week extra as a result of the Surtax concession, so you must work harder and as a reward you will pay 4d. more for a packet of cigarettes and a 1d. a pint more for your beer"? Is that logical? No one can tell me that you can impose that on the workers in industry. I will go with any hon. Member opposite to a meeting in my constituency and guarantee him a fair hearing, but I do not suggest that it will be so fair if at the end of a long speech he tells the worker, "You shall work harder because I myself as a result of what the Chancellor has done find myself with more money."

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The hon. and gallant Member for Down, South said, "If you cannot find something to spend money on, save it or plough it back." It is no use ploughing money back into modern industry unless we use the modern machinery and the modern plant now being erected. We are spending tens of millions in erecting new plant. The right hon. and learned Member for Middlesbrough, West (Sir J. Simon), the Solicitor-General, knows that there is a great new plant going up at Middlesbrough which will cost millions of pounds. I understand from those who work there and who will be responsible for its running that at the moment they cannot see any orders on the books to work it.
The Prime Minister smiled when I interjected at Question Time this afternoon to ask what the effect would be of the additional 2 per cent. on the money now being borrowed for the steel industry to put up this great new plant which it may not be called upon to work. It means that the price will be increased on every ton of steel being produced, and what will be the effect of the extra 2d. on oil on the present production of steel? It is no use the Government doing these things and then saying that that is the way to cure all our evils.
As the House knows, I work in my spare time, apart from a few hours spent in my beloved garden, in very close contact with the workers in the great plant in which I had the opportunity of working before the First World War. I know what these men are thinking and what they are already saying about this Budget. An hon. Friend said that he had met some of his friends this morning and the language they used was colourful. I suppose the air was blue. Even the "blues" will vote blue again, but they know that the Government are wrong. They know in their hearts that the Government are going the wrong way about it.
On the question of labour relations, I would ask every hon. Member opposite connected with industry and every trade union official on this side of the House to get going with a campaign which will stop this idea of telling the workers that it is not their business when times are good, and that when times are bad it is nobody else's business but that of the workers. Let us get the manage-
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ment and the trade union representatives together. Let the departmental manager be brought in. Let the men be brought into the confidence of a company and be told the state of the order book, why raw materials are costing more, what the expansion plans of the company are, and what the immediate and long distance future is likely to be. That is what wants doing. Not this airy-fairy idea of sliding up in a Jaguar, waving your hand and then going back again to golf or a cocktail party. That does not do any good. Everything possible must be done to bring the men into the confidence of the organisations.
When all is said and done, we can swear at the Government, and the Government have a perfect right to say "What would you do?" The answer is that if the Government continue as they have done we can do nothing. The people of this country are told, "You have never had it so good" so often, so loud and to such an extent that they have really begun to believe it, and nobody has told them that what they had had good, they have not yet paid for.
There are umpteen young couples now with great burdens round their necks. There are young couples who come to me when because of a slight recession the company has to knock off one shift, and say they cannot pay their mortgage or this or that. Some of these young couples have hire-purchase and similar commitments amounting to £6, £7 and £8 per week. A lot of these young couples today will, if they are not careful, find that they have mortgaged next year's unemployment benefit. That is the situation. An hon. Member opposite may smile because he can see the possibility of further employment next year. I say quite seriously —it sounds jocular, but it is true—that there are hundreds of thousands of young folk who are worried about the situation.
Do the Government want to get down to the task of gaining the confidence of the unions? People accuse the Opposition of being all for unofficial strikes. I said this in the shipping debate. Some people talk glibly about unofficial strikes being necessary. We should pay more attention to the steady, decent, honest, good things which trade union officials say about these matters. What the others suggest is not the way to get Britain out of trouble. We want our socks pulled

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up. That goes for management, men and politicians, too. They must have one intention, and that is to get into the markets of the world and solve our problems, thus making this country, what Almighty God wanted it to be—a place fit for everybody to live in and to have a decent standard of living.
8.28 p.m.
Mr. Peter Tapsell: The hon. Member for Rotherham (Mr. Jack Jones) always speaks to us with great sincerity. I thought, particularly towards the end of his speech, that he really was speaking for the whole House and nation.
I have listened to every speech which has been made during the two days of this debate, and I have, therefore, heard a great variety of views. There is one thing on which all hon. Members seem to agree, and that is that the economic situation falls into two parts—the short-term crisis and the long-term problem. The interesting thing is that, although many criticisms have been made about the short-term action which the Chancellor has taken, no constructive alternative suggestions have been put forward.
The right hon. Member for Huyton (Mr. H. Wilson), opening the debate for the Labour Party yesterday, made a number of interesting suggestions towards the end of his speech about what the Labour Party would do to grapple with the long-term problem. I was in considerable agreement with a number of his remarks, and I intend to comment on them later; but he made no constructive suggestions about what alternative policy could have been pursued for the short-term situation. The right hon. Member for Belper (Mr. G. Brown), who spoke at very great length today, said nothing at all himself, and was determined not to allow anybody else to interrupt him to say anything either.
I think that the country as a whole, even those parts of it which blame the Government for the present situation, will feel that in the position which now exists the Chancellor took the only action that really could have been taken. The Chancellor was right to concentrate on the short-term aspects of the problem. Whether his solutions for the long term are correct is open to greater doubt.
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The Chancellor's first task, clearly, was to save the £. I believe my right hon. and learned Friend has done that. He had to subordinate everything else to that end, and I fully support the drastic measures of self-discipline which he has imposed on our economy.
I want in most of my speech to deal with certain specific aspects of our long-term problem, but, first, I should like to say a few words an one or two general themes which have run through the debates of the last two days.
Hon. Members opposite—almost every one of them—have stressed the fact that this country now has too great a preoccupation with material values. As it happens, I agree with that. What rather surprises me is that that point of view is now so universally held on the Opposition benches. I always understood that Socialism was a materialist creed and that the Labour Party very largely came into being in order to raise the living standards of the workers as quickly as possible and as high as possible.
I make no apology whatsoever for the fact that the Conservative Party has succeeded in the aims which the Labour Party has always professed. Whatever the effect on our moral values may be, it is true that the great mass of the ordinary people of this county have in recent years enjoyed a higher standard of living than ever before. That was the main reason why I was returned for my constituency.
I consider the raising of living standards, which has always been the main object of the Labour Party, to be a thoroughly honourable aim, and I really am very surprised at the puritanical approach that many hon. Members opposite have adopted. In particular, I totally reject the view that many hon. Members have put, particularly the hon. Member for Newcastle-upon-Tyne, Central (Mr. Short) and the hon. Member for Birmingham, Small Heath (Mr. Denis Howell), in attacking the Prime Minister personally and suggesting that he was personally responsible in some way for lowering the moral standards of the nation by laying too much emphasis on the prosperity of the country.
If this concern with the material welfare of ordinary people was a late conversion on the part of the Prime Minister,

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there might be some force in that argument, but when one examines the Prime Minister's record over the last forty years and when one reads the speeches that he made when he was the hon. Member for Stockton-on-Tees between the wars and the book he wrote then, it is perfectly evident that one of the constant factors in his entire political thinking has been a determination to improve the living standards of ordinary people. I believe that we and the country should honour him for that. It is part of the tradition to which the Conservative Party has always adhered—and we look back to Disraeli's teaching—that the improvement of the condition of the people is one of the prime aims of Conservative policy. The fact that the Prime Minister throughout his career has consistently pursued this policy of making life pleasanter for ordinary people is nothing that could possibly be held against him.
Moreover, there has been a considerable re-writing of history, because, judged by the speeches of hon. Members opposite, one would think that the Labour Party fought the last General Election on a programme of increasing taxation and reducing social expenditure. But I recall, in my own modest little election campaign, that I spent much time explaining why we could not, as a nation, afford to pay for all the grandiose promises and bribes which the party opposite was putting forward.
It is, perhaps, interesting to note in passing that, while I had to tell my old-age pensioners at the time that I was not prepared to try to obtain their support by the bribe of a firm offer of an increase in pensions on a particular date, the Government have since raised the pension of married couples by more than the party opposite was promising to raise it as a bribe in the middle of the General Election campaign. There is no foundation whatever for suggesting that we fought and won the last General Election on a false prospectus.
I have said that I believe we are in some danger of becoming too materialistic in our attitude to life. Today, my hon. Friend the Financial Secretary to the Treasury quoted a very interesting article by the Leader of the Opposition in Socialist Commentary of, I think, July, 1955, which, I thought, in a non-partisan way admirably explained the reasons for
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this. Those reasons are nothing to do with the Prime Minister. But I believe —and we all accept this—that this country needs a shake-up. [HON. MEMBERS: "Hear, hear."] I think that both the trade unions and the managements need to be shaken up.
I believe that in this country there is an immense pent-up dynamism, particularly among the young people. One of the questions we should ask ourselves is why there has been this tremendous economic resurgence in Germany and France in recent years. One reason has been, I suggest, that both these countries have gone through a traumatic historical experience very recently.
In the case of Germany, following her crushing military defeat, the immense dynamism of the German people has been diverted almost entirely into commercial fields. In France, where the resurgence has been hardly less dramatic than in Germany, much of the drive has come from the shock of the collapse of French political institutions. We in this country must achieve a similar degree of resurgence and dynamism without the challenge of military defeat or political collapse. I believe we can do it.
My hon. Friend the Member for Worcester (Mr. Walker), in an extremely interesting speech yesterday, talked of the need for giving greater incentives, to children leaving secondary schools, to go into the right forms of industry. Much has to be done along those lines in the case of our universities also. Young men leaving the leading British universities—unlike those in the United States, Germany and France, who for years have gone into business—have looked primarily to occupations such as the Foreign Office, the Home Civil Service, the legal profession, the City to some extent, journalism and, more recently, even to television.
Only if they failed to gain entry into one of these occupations have the great majority turned, somewhat reluctantly, to business. I think that is an attitude which has got to be entirely transformed. It may be that the rewards have not been sufficiently great and that the prestige has not been sufficiently great. Precisely because of that I had no hesitation whatever in supporting the reform of Surtax which the Chancellor carried through in his Budget.

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As it happens, there are very few Surtax payers in my constituency, but I had no hesitation at the time of the Budget, and have no hesitation now, in telling my constituents that I believe it is very much in the national interest—and above all in the interests of those least able to make adequate provision for themselves—that the ablest and most vigorous members of our community should be set free and given the proper incentive to go out and make themselves and the whole community as rich as possible.
Mr. Richard Marsh: Is the hon. Member also prepared to tell his constituents that, while he believes it is quite justifiable and essential to give £85 million in Surtax reliefs, it would wreck the economy of the nation to spend £6 million on teachers' salaries?
Mr. Tapsell: As the hon. Member knows perfectly well, the Surtax concessions will not become operative until 1963. If the teachers, who are offered an increase of £42 million, are prepared to wait until 1963 to discuss the other £6 million, they might get a different answer.
Turning from the general to the specific, I say that our economic policy should have two basic aims, first, the securing of a surplus on our balance of payments and, secondly, the establishment of a firm foundation for rapid economic growth. In relation to exports, I agree with some of the remarks made by the right hon. Member for Huyton in his speech. I believe that the increase of our exports is the really vital factor on which everything else depends. It is impossible to get this leap forward in industrial production which we all so much want until we can increase our exports.
If we were to get the increase in industrial expansion first, we should merely aggravate the present balance of payments position. That is why there is this conflict between our long-term economic aim and the minimum short-term steps which have to be taken to deal with our existing situation. Faced with that very difficult conflict, the Chancellor has shown great skill and ingenuity in damping down the inflationary domestic pressures on the consumer side without doing anything to stop or impede industrial expansion.
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On the question of how we can best get our exports boosted I want to say a word about a suggestion made by the right hon. Member for Huyton when he referred to the turnover tax in Germany. A number of my hon. Friends have said that they are in considerable sympathy with that line of thought. I hope that the Government will very seriously examine the German system. Perhaps the French added value tax is even better, but I shall confine myself to the right hon. Member's suggestion. It may be that the turnover tax is not superior to Purchase Tax as a fiscal measure, but I believe that it has a very great psychological advantage. There is a direct relationship between the size of the tax bill which the industrialist has to meet and the amount of his activity which is going to the export drive.
I was also interested in the point made by my hon. Friend the Member for Worcester about the extent to which the German banking system has been harnessed to give particularly rapid and easy credit facilities for firms seeking to export. We should do well to examine that system. In my opinion the whole of the indirect taxation system of the country should also be reviewed with a view to stimulating exports.
The second aspect of our problem is the growth in the economy, and here my comments will be more controversial. I do not believe that it is the function of Government to dictate which are the growth industries, but the Government can and should help the market to discover as quickly as possible what they are. Above all, the Government should avoid propping up the decaying Galsworthian parts of our economy.
I have very little more time at my disposal, and I will not develop that argument further beyond saying that I think that the scheme which the Government put forward for the cotton industry was an example of the right sort of method of achieving this, and that the proposals which they put forward to help the Cunard shipping company was an example of the wrong sort of method. In general, we should do everything possible to concentrate our resources and talents on the growth industries. We must at all costs become competitive if we are to survive, and we must stop molly-coddling

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and feather-bedding our industry. I therefore very much welcome the Chancellor's statement that he hoped to reduce tariffs and that he would look again at agricultural support costs.
One of the most scarce of our materials is manpower. Unlike Germany, which can always draw on manpower from the east, and France, which can draw on manpower from the land, we are chronically short of labour and, as with an army in war time, we should deploy our labour force as efficiently as possible.
The payroll tax has been much criticised, and it has not been used, but I believe that the idea behind it was right. What is needed is a more substantial payroll tax, off-set by a reduction in Profits Tax. There is no case for a rise in the overall incidence of company taxation, but if there were a substantial payroll tax offset by a reduced Profits Tax, we should create a position in which employers who were employing less labour in relation to profits would pay less tax, whereas those who employed more labour in relation to profits would pay more tax. That would help to conomise in labour.
Hon. Members opposite appear to have become slightly impatient. They should bear in mind that I have sat through every speech in the two days of this debate. I have heard a great deal of nonsense from hon. Members opposite. I have listened with great patience—much greater patience than the electorate is likely to show when the Labour Party next offers itself to the country.
8.49 p.m.
Mr. Hugh Gaitskell: The Chancellor's proposals, which we are asked to endorse tonight, have had the worst Press of any statement made in an economic crisis at any time that I can recall. The criticism has been universal. It has not been confined by any means to Left-wing, or even near Left-wing, papers. I will quote a few of the things which have been said by other newspapers. The Daily Sketch said:
"The Government has in the same breath admitted that its theories are inadequate to control our economy and at the same time refused to change them. The Chancellor has failed in what should have been his main task: to convince everyone, big and small, that we are being enlisted in a great effort of national recovery."
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The Daily Mail said:
"The Chancellor's remedies are, in fact, very much the 'mixture as before', designed to cure a recurrent tummy-ache but not to get at the seat of the trouble. And once again the citizenry have to swallow most of the nasty draught."
The Daily Express said this, rather more moderately:
"It will not seem to the public a very effective method of dealing with the situation. About as useful as an aspirin tablet.… They will not approve of a financial statement composed of vague proposals, pious hopes, a continuing vast expenditure abroad, no fiscal measures against rich speculators—and an attack on two weak sections of the community."
The Provincial Press has been very much the same. The Birmingham Post said:
"Mr. Lloyd offers us Hamlet with all the corpses but no Prince. The long-term programme of major structural changes in the economy which we need so badly to cure the chronic failure of our exports and output to rise as fast as other countries' and the chronic tendency for our wages to outstrip our output is only hinted at.…
It is deplorable, though, that after ten years in office the Government has not yet reached the stage when it can offer us more than hints of these things. It is doubly deplorable, because while it finds out whether the hints can be translated into action, we must endure another dose of the old medicine which has never yet looked like putting the economy to rights."
The Eastern Daily Press said this:
"When the Chancellor released the Treasury secrets it was clear that the mountain had brought forth a mouse. The same old medicine is prescribed and the same old advice proffered and one doubts whether even the doctor believes in his own medicine."
Even the Chancellor of the Duchy of Lancaster, so experienced in these matters, who works so hard on behalf of the Government's publicity, could do nothing for the Chancellor of the Exchequer. Even the Chancellor of the Duchy of Lancaster failed, because the task was too great for him. Perhaps this explains the rumour recently reported in one newspaper that he is to be given an easier job and made Leader of the House of Commons.
The Chancellor of the Exchequer may be tempted to console himself with the martyr's crown. Standing there like St. Sebastian with the arrows pouring into him, he may comfort himself that he knows best, that the public are wrong, that he is right and that time will prove that he is right. I advise the right hon. and learned Gentleman to resist this

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temptation. To do so would be to fail to understand the importance, and to misjudge the nature, of the public reaction, because public opinion at this particular moment should matter to him a great deal. Our problems cannot be solved—he will at least agree with this—without the active co-operation of the nation. It is part of the job of the Government in deciding upon their measures to try to secure that co-operation. In this they have so far evidently failed entirely.
Why have they failed? It is not because the public are angry and disillusioned at being so disgracefully misled in recent years. Despite this, they would, in my opinion, have responded had the measures proposed seemed to them to match the needs of the moment, had they been fair and effective. In fact they are neither. Our Amendment sums the whole thing up very clearly and accurately. Indeed, one can say that most of the newspapers have followed exactly the lines we have adopted in it. We have said that the measures are unfair and, because they are unfair, will divide and not unite the nation. We have said that they make no contribution to the long-term problems of our economy. We have said that they are largely the mixture as before.
The measures differ in certain important respects. Some of them are immediate, hard and clear. Others are for the future, vague and soft, and there is a big difference between these measures—a difference which has been noted.
For instance, on the one side, there is the revenue surcharge with its added burden on indirect taxation which, for the most part, must fall and will fall with disproportionate effect upon those on lower incomes. On the other hand, there is the vague notion of extending the tax net to catch some possible capital profits in the future, unless the best brains in the country manage to get to work in time to evade it. On the one side, there is the immediate wage freeze on public servants, including the teachers, and, on the other, the vague request that salaries and wages in the private sector should not rise. On the one side, there is the stopping at once of the loans for the purchase of houses; on the other, the hope that dividends may not rise in the
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future. About the future, all the Chancellor could bring himself to say on this was:
"I do not consider that a further general increase in them in the coming year is justtfied."—[OFFICIAL REPORT, 25th July, 1961 Vol. 645, c. 222.]
I should think not, after an increase of 24 per cent. last year.
I suppose one can hardly expect a man who is so insensitive to public opinion as to declare that somebody with £5,000 a year is not rich unless he has substantial private means as well to understand how people will judge the contrasts in his latest measures.
The Chancellor, however, is not mainly or merely a poor judge of opinion. He is not very hot as a forecaster of economic development. He has been Chancellor just a year. Throughout all the earlier months of his stay at the Treasury this country was piling up a huge, massive deficit on its balance of payments and borrowing up to £900 million a year or thereabouts at short-term in order to meet this deficit and increase our reserves. It cannot be denied that it was in that time that the seeds of disaster were being sown. Did the Chancellor know? Did he mention it? Did he give us any warning? Did he say as the gold reserves went up that there was something "phoney" about this? Not a murmur, not a thing. As late as our debate on 6th February, 1961, he said about the Opposition Amendment:
"… the Opposition ship is firmly aground on the rock of despondency, as shown by the use of such words as"—
and he quoted from our Motion—
"'deep concern at the present grave balance of payments position'".
He went on to say:
"Such words go far beyond what is justified. They give a misleading impression both at home and abroad of the true nature of our position."—[OFFICIAL REPORT, 6th February, 1961; Vol. 634, c. 62.]
Now I come to the Budget. We all understand that when a Chancellor of the Exchequer surveys the economic situation and tries to calculate what developments are to take place in the ensuing financial year, he faced with an extremely difficult problem. We all know that, during that year, changes may take place in the outside world, and even the forecasts that are made without

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taking those changes into account are inevitably uncertain in their nature. That is why, in principle, when the first of the regulators was mentioned in his Budget statement, we did not oppose it as such. But what has happened? This is not matter of a long pause; it is barely three months since the Budget. Indeed, the indications that the. Chancellor was to make this sort of statement were given some weeks ago.
Has the international situation changed? The Chancellor rests has case partly on that, and partly on the political danger. All I can say is that I should have thought it was dangerous enough in April. Not a great deal has happened since then and, even if that were the case—if, indeed, there had been a sudden darkening of the scene—how could this justify the Chancellor's savage cuts on the British economy?
Is the balance of payments position worse than it was? That is not the Government's case. They tell us that it is improving; better in the second quarter than in the first, and better over the year than last year. Are the prospects in foreign markets worse? Will not the American recovery help us a little? If there has been any change at all in the economic situation in the world it has been in a direction favourable towards us. Is it just that there has been a much sharper run on the £ than the Chancellor anticipated? Could not he really have foreseen, when he saw all those short-term balances of that hot money piling up last year, that he might, perhaps, be in trouble this year?
We are told, and this is a comparatively new feature, enlarged upon by the Financial Secretary today, that incomes and spending have gone up much more than was anticipated. I must say that it is very surprising that a change of that kind, coming so soon, could not have been forecast. Had the Financial Secretary said to us, "Well, it is six months or nine months since the Budget, and all these changes have taken place," one could understand it, but to get the forecasting so wrong that such a change —essentially within the purview of the Government—should take place is really about as bad a piece of forecasting as one could imagine.
I will not at this moment argue whether the analysis which the Gover-
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ment now present is correct. There is an element of doubt about it—that is certain. Many experts believe that the economy is not nearly so overstrained as the Government appear to think. The National Institution of Social and Economic Research in its last published bulletin forecast that there was room for a rise of at least 3 per cent, or 4 per cent. this year, and in the Financial Times of either yesterday or today, Sir Roy Harrod, the well-known Conservative economist, takes the same line. However, I will not argue with the Government over that. Let us assume that there was bad forecasting; that the new analysis is right.
A very important question then arises. Had the Chancellor known in April what he knows now, what sort of a Budget would he have given us? Would he have given us—presumably he would—the changes made by the Revenue surcharge, only given to us in April because, after all, the Government boast that this is an especially sound measure because it affects so many people, and if it is sound on that account now it was presumably sound on that account in April?
Again, I wonder what the answer to this next question is. If the Chancellor would have made those changes then, would he have made the others? Would he have made the Surtax concessions in his April Budget had he known what he now knows? I should like the Prime Minister to answer that question. After all, he is an ex-Chancellor of the Exchequer. He and the present Chancellor of the Exchequer have laboured on together for many years, and no doubt he is fully in the confidence of the Chancellor of the Exchequer. I should like him to answer that question.
If he says that the Chancellor would not have made those concessions had he known what the economic situation was to be, then I must ask this question: Why did the Chancellor not announce the repeal of the concessions in his statement? After all, there was no great difficulty in doing this. He could have said exactly the same about this as he did about the proposed attempt to catch some of the capital gains—that it will be dealt with in next year's Budget—or he could even have said that he was introducing a Bill in the autumn to put it right.

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But if the right hon. and learned Gentleman says, and the country is entitled to an answer, "Yes, even if I had known what I now know about the economic situation of the country I would still have made those Surtax concessions", then we know something else. We know that it is in his mind—in the Government's mind—that it is a perfectly fair and natural thing to do to impose, on the one side, a 10 per cent. surcharge on a whole range of articles falling especially heavily on those with low incomes at a moment of crisis and, simultaneously, to give away £83 million to Surtax payers.
It is not only that. This is the third, not the second, Budget we have had, for one must bring in the health charges and the health contributions as well. The Chancellor laid great stress on the wage or income inflation. He pointed out the dangers of it. He said that we were running ahead of productivity, heavily overdrawing on the productivity account so that we must have a pause.
Assuming that the Chancellor is right, how is he going to get it? So far as the private sector is concerned the Government will request it. So far as the public sector is concerned they will impose it. Let us look at what this implies. A number of questions arise to which an answer must be given. Does this mean the suspension of all the agreed procedures and machinery for adjusting Civil Service pay in accordance with the principles laid down by the Priestley Commission and accepted by both sides of the Whitley Council? Is the principle of fair comparison to be put in cold storage? Are the Government going to interfere with the independence of the Civil Service Arbitration Tribunal to do this job and apply this principle?
And, outside the immediate area—and we know what the Government are doing so far as teachers are concerned—is this to apply to the firemen? Can we have an answer to that? Is it to apply to any changes in police pay that may still be made, to local government officers or to workers in the nationalised industries? Are the nationalised industry boards to be given directions by the Government to refuse all wage increases? These questions cannot be
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evaded. The country will require an answer to them, and soon.
However, before the Government answer let me remind them of what happened once before when the Government tried the same thing, when, in 1957, the then Minister of Health refused to endorse a 3 per cent. pay increase agreed upon by the Whitley Council. It was not a very successful operation. The Health Service employees imposed an overtime ban. Since they were not in dispute with the management they could not go to arbitration, so they submitted a fresh pay claim for a 5 per cent. increase—3 per cent. having been refused—which went to the Industrial Court and in August, 1958, the Industrial Court awarded them increases ranging from 4 per cent. to 20 per cent. That was not a very successful operation, and this is what the Guardian industrial correspondent said about it:
"The structure and spirit of industrial relations suffered untold damage from this in the Thorneycroft-Macleod era. No. 'wildcat' striker, with or without Mr. Ted Hill's approval, has ever shown greater disregard for the rules than did the Government in the case of the Health Service clerks."
Assuming that it does succeed, what do we have? We have a repetition of the last ten years, a growing disparity between earnings in the private sector and earnings in the public sector, because of which we have had no less than four Commissions to put the matter right. There has been the Priestley Commission on the Civil Service, the Willink Commission on the police, the Pilkington Commission on the doctors and the Guillebaud Committee on the railway workers. Is the same thing to happen all over again? How is it to be avoided if the Government persist in their policy? If there were a universal wage and salary freeze, then, obviously, there would be an argument for applying it, but, without such a policy, it becomes a piece of arbitrary discrimination which is economic nonsense and fatally unjust.
My right hon. Friend the Member for Belper (Mr. G. Brown) spoke about the teachers. I add one point only. The Chancellor of the Exchequer is very proud of the discrimination which, according to him, he is practising in favour of investment. Where does he draw the line? Is education investment or is it not? Does he want more teachers or does he not? Could there

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be a profession more closely related to the whole 'future efficiency and productivity of our country? How shall we achieve our aim if the teachers are treated as the Chancellor treated them yesterday and today? The right hon. and learned Gentleman has not merely done nothing to raise long-term productivity; by what he has done he is cutting at one of the chief roots from which it should spring.
As for wages in the private sector, does the Chancellor really expect that his appeals for restraint will be heard? Does he still believe it? I have some experience in this matter and I know something of the difficulties. I do not minimise them. We did have wage restraint for a limited time, after very exhaustive discussions between the Chancellor of the Exchequer, Sir Stafford Cripps, and the Trades Union Congress. But this is possible only if the climate is fair. Obviously, the climate at the moment is not fair.
I suppose that the Government do not really worry about getting agreement. They think that they will simply be able to impose restraint in the private sector. They want the employers to pick the quarrel and do their dirty work for them. I am not sure that the employers will do it. Will they then force the employers into it? They can, of course. They can cut back demand, they can squeeze profits and prospects so much that employers do not want the labour. But that can be done only by cutting
back production. This is the dilemma into which the Government's policy will run in the very near future.
I come now to the greatest weakness of the Government's case. They talk of wages and salaries. They should not. They should speak of labour costs, for it is labour costs which matter, and labour costs depend not only upon wages and salaries but upon productivity as well. Why—this is one of our principal criticisms—have the Government in their statements concentrated entirely on the one and not dealt with the other?
The error is even greater, for the curtailment of production which is
involved in the Government's policy is bound to decrease productivity. I should have thought that, by now, the experience of 1958 would have convinced them of this, for it is exactly what happened. Pro-
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duction flagged, earnings rose not by so much, and labour costs rose. After all these years, it is tragic that we should be making the same mistakes again.
The Chancellor of the Exchequer made a great deal of the way in which he is behaving differently from his predecessans. He was very sensitive to the criticism that it was the mixture as before. Has he behaved differently? A 7 per cent. bank rate: he cannot beat the Minister of Aviation on that. Special deposits: Lord Amory introduced them. A revenue surcharge: admittedly that is a new idea, but here we must not forget the attempts of the Home Secretary. After all, he did increase Purchase Tax on essential articles very substantially in the autumn of 1955. Housing loans—that is new because the policy is new, but, when all is said and done, under the Minister of Aviation mortgage rates went up, which made just the same difficulties for those buying their own homes. Wages in the public sector—that was not the right hon. and learned Gentleman's idea. That was the idea of the Minister of Aviation.
Let me deal with the one claim which the Chancellor of the Exchequer makes, namely, that he has protected investment. It is pretty feeble if all he can claim to have done is not to cut investment allowances. After all, the only person on the Government Front Bench at the moment who did not cut investment allowances is the Prime Minister. As for the instructions to the banks—and I was astonished to hear the Economic Secretary's reference to them—a close examination of them shows that they are precisely the same as the instructions given by Lord Amory in 1958 when he was relaxing the credit squeeze of that time.
The right hon. and learned Gentleman has spoken a great deal about growth. But all that he has claimed in respect of the long-term problem is that we are to have better control of public expenditure. This is the brilliant new idea of the Chancellor of the Exchequer. This, he says, is the really significant contribution which the Government can make, the great discovery which places him above his colleagues on that bench. He might have thought of the Prime Minister before he did this, because the Prime Minister certainly had no doubts about it. He was very concerned with public expenditure. We all remember his

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Budget speech in 1956, with that splendid passage about the picture of Mr. Gladstone. He said:
"I am told that some former Chancellors —I will not specify them—could not stand those eyes looking at them, day by day, reproachful and nostalgic."
That was just his usual way of getting at the Home Secretary. [Laughter.] Of course, he went on to say:
"the Government have decided that a review of all Government expenditure, civil and military, should be put in hand at once. It will be continuous and comprehensive. It is an essential part of the effort which the whole nation is asked to make this year."
Yet the Chancellor of the Exchequer today thinks that he is producing something new. The Prime Minister went on to say that he was determined that
"this economy drive should bring us, over the whole field, savings amounting to not less than £100 million …";
and he finished by saying:
"So much for Government saving."—[OFFICAL REPORT, 17th April, 1956: Vol. 551, c. 881–3.]
The Chancellor of the Exchequer talks a great deal about growth. He says that he is very concerned about it, but he has made no specific proposals to deal with it at all. What is the evidence? All that he has given us is a series of platitudes upon which even the Home Secretary could not improve. For instance, he has told us that much more effort is still needed in the training of skilled labour and that the shortage of skilled labour is one of the major bottlenecks in the economy of this country. That is all that he can produce.
The right hon. and learned Gentleman says that a determined effort is needed to deal with restrictive practices. What effort? The long-term policy is that increases in income must follow and not precede or outstrip increases in national productivity. Does the Chancellor call that a policy? It is a splendidly vague aspiration which puts him in the highest class for clichés among Ministers opposite.
Sir C. Osborne: What Stafford Cripps in 1949?
Mr. Gaitskell: But he did something about it as well.
We have offered a large number or specific suggestions in the course of this debate. Both my right hon. Friend the
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Member for Huyton (Mr. H. Wilson) and my right hon. Friend the Member for Belper, whose remarks on industrial relations today I thought tremendously impressive, have put forward a number. [Laughter.] The hon. Member opposite was not here during my right hon. Friend's speech otherwise he would not have laughed in that way. It was an extremely impressive passage in my right hon. Friend's speech.
What we complain about is the absolute lack of any specific measures. Surely, we could have supposed that the President of the Board of Trade was a little concerned that Volkswagen are driving us out of the American market and that the German motor industry is exporting as much as the whole of the rest of Western Europe, including ourselves, put together. Could not the right hon. Gentleman inquire into what has gone wrong in the motor industry and what has gone wrong in shipbuilding, with the latest information in The Times this morning about why we have had a fantasic increase in imports of textiles and clothes?
I do not say that these specific measures themselves will be enough, although they are essential. We need a new and a different climate. We need an end to complacency and to unfairness. This could be done. It is not a matter of reintroducing austerity, but a matter of seeing that when we earn our living we earn it and that our rewards are fair because they are related to efforts and contributions and not to the accident of birth, inheritance and luck.
I do not think that the Prime Minister or the Government can make this change
in climate, for neither the right hon. Gentleman's outlook nor his record suggest that this is possible. He has heard a good deal about the famous phrase "You have never had it so good" and he still goes on using it. He is loyal to his own phrases, at least. This is his great discovery. But is it a discovery? Barring wars, it has been happening year by year for at least a century in Britain. [HON. MEMBERS: "Oh."] Yes. It may be that in the deep depression of 1929 it was not true, although it would have been true about those who were at work. In 1937, however, when the Prime Minister was writing his famous book, Mr. Baldwin could certainly have told him in riposte. "You have never had it so good". All this is true and well known.

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It is factually correct, but a most dangerous basis for our future conduct and action.
Those are not my words. They are the words of Lord Amory, and it would be a good idea if the Prime Minister took them to heart. When we have enjoyed the benefit of nearly £1,000 million last year, because our imports are cheaper and our exports are dearer than in 1951 at the expense of millions of people in Asia, Africa and the Commonwealth, he might, perhaps, have thought it best to keep quiet on this subject. The Prime Minister must be a little tired of it. The gilded dolphin on which he rode in triumph through the election has become a dead albatross and it is hanging round his neck.
The other reason why the Prime Minister cannot succeed is his outlook. The Edwardian pose, the languid condescension and that love of tradition that leads him to defend an absurdity in the Admiralty because it has been going on for 300 years, are no good any more. It is not that it is unattractive. It is out of date. It is inappropriate today.
The Prime Minister is a fine actor. He has played many parts. He is a splendid showman; but when the showman is shown up the play is over, illusion is shattered, and it is time for the players to depart.
9.26 p.m.
The Prime Minister (Mr. Harold Macmillan)rose—
Mr. Julian Snow: For God's sake go.
The Prime Minister: We are now drawing to the end of a debate in which there have been a great number of views expressed on our problems, and yet, I think, a very large measure of agreement. [HON. MEMBERS: "Oh."] Everyone is agreed that our purpose must be to maintain a sufficient balance between what we earn by visible and invisible exports and what we have to pay out across the exchanges for imports, overseas investment, and aid.
The balance of payments has had a setback. The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) referred to a speech I made in September, 1959, about our balance of payments
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position. The balance of payments White Paper published in October, 1959, showed that for each of the three preceding six-month periods we had achieved a surplus on current account. Indeed, in each of those periods we had a surplus on visible trade, which is an unusual feature in the United Kingdom's balance of payments. The next balance of payments White Paper was published in March, 1960, and showed a deficit on visible trade and a much reduced surplus on current account during the second half of 1959. I suppose, using hindsight, one can make some kind of picture of this, but in September, 1959, I was perfectly entitled to say that the balance of payments was strong because the previous periods proved that to be so.
There are various reasons for the setback in the last two years. Overseas expenditure, on defence and aid, has gone up, and at the same time—this is really a new feature—there has been this sudden, serious, and even dramatic fall in the invisibles. The shipping earnings have fallen, partly because of the increased mercantilist policies being pursued by many Governments. The dividends from former overseas investments have fallen, partly due to the forced realisation in the war—[HON. MEMBERS: "Oh."]—of some of our foreign assets—
Sir Lynn Ungoed-Thomas: Which war?
The Prime Minister: —but partly through the process, which is still unfortunately continuing, of company nationalisation in various countries with or without adequate compensation. That is going on still in different countries. Socialism at home is bad enough, but Socialism abroad has dealt us grievous blows. Of course we have made tremendous and successful efforts to rebuild these assets. I saw a figure the other day which was an estimate that in the last ten years the foreign assets of this country have been rebuilt by some £3.000 million. That is no mean achievement, but these assets are not liquid. They are fixed, or at any rate not easily convertible into liquid form.
Again, there has been the lowering of the world price of oil. That is an interesting example of how planning can sometimes go wrong. After Suez every expert said that oil would go up in price

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and become scarce. I was urged from all parts of the House to take steps accordingly, but in fact the price has gone clown and supply has exceeded demand, and that, of course, has had a very bad effect upon our earnings from oil.
But, having regard to all these things, it is our exports upon which, as we all know, we have now to concentrate with even greater vigour. Exports, of course, have done pretty well. They are double pre-war in volume. They are 16 per cent. up in the last five years in volume, but there are now additional imports partly for the building up of stocks and partly because of the demand for the very high level of capital investment which has been encouraged by capital allowances and other encouragements to investments. I was very glad that my right hon. and learned Friend the Chancellor of the Exchequer resisted the temptation to follow the evil example which both the right hon. Gentleman the Leader of the Opposition and I showed him—for the Leader of the Opposition did the same.
We welcome this expansion. It will increase our future strength, but we must be careful in the short term not to injure it, and if we want to see a higher proportion of our national income invested—which we all do—we cannot escape the conclusion that a smaller proportion must be left to spend. Our object is not merely to steer the country through these immediate difficulties. It is to make it possible to develop long-term policies which, in the terms of the Motion, will maintain
"a sound basis for the continuing prosperity of the nation."
If it is supported by a combined national effort, as I believe it will be, I am sure that we will succeed.
After all, the mass of the people know quite well, and particularly the workers, that unchecked inflation would work against their interests. They know the effect that unchecked inflation would have on world trade and therefore on the level of employment and on living standards, on the elderly, the worker, the pensioner and on all the social services. They know full well who the victims are, and they are swayed not only by material considerations—because I believe that they wish to see this country play its full part in the world.
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In any case, the Government have a clear duty and a responsibility to put the facts of the situation before the country and to adopt the measures calculated to deal with it. We have a special responsibility to give a lead in restraint in our capacity as an employer, and we intend to discharge that duty. In industry as a whole we can but set an example. In a free society the Government cannot compel but only persuade, but if we do our part I am confident that the people of the country will not be backward in doing theirs. [HON. MEMBERS: "Resign."] Hon. and right hon. Members opposite might listen. We listened to them, but there it is, they are incapable of listening.
It has been complained in the debate that we are leaving untouched the profits made by speculators in shares and land, but the Chancellor of the Exchequer has announced that this is a matter which he will deal with not later than next year's Budget. [HON. MEMBERS: "Oh."] The reference to next year seems to excite a certain derision among hon. Members opposite but the Surtax remission which arouses their anger will not become effective until January, 1963.
Let me read to the House some rather sensible words about Surtax, which I read —[Interruption.]—they are good; you listen to them:
"Even if the starting level were raised to £5,000, the tax would still be discouraging people whom it was never intended to reach. People to whom £2,000 still sounds a lot of money should not be jealous: for the present state of affairs is harming the interests of the whole country."
It came in an admirable leading article, in an admirable paper, called the Daily Herald, a few months ago.
Finally, the House should keep it in mind that the cost of Surtax remission will be met, and more than met, by the increase in Profits Tax made in this year's Budget and last year's. Those increases will yield £140 million a year, compared with the full annual cost of the Surtax of £83 million. What we are doing, in fact, is to tax profits to pay for a much-needed incentive to the men whose work is the source of those profits, and that seems to me to combine both economic justice and good sense.
But hon. and right hon. Members opposite have been attacking in this debate and in the one before—with a

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great deal of rather synthetic indignation, I think—the policies and record of Her Majesty's Government. [Interruption.] That is all right. But we have a right to reply, if hon. Members opposite will be good enough to listen.
It is nearly ten years since the Opposition had any responsibility for conducting the affairs of the nation, and I hope they will forgive me for saying that the passage of time has somewhat distorted their view of the success which attended the policies which they then followed and which they still advocate. I know that the right hon. Member for Huyton does not like—
Mr. G. Brown: Do not keep pointing at me.
The Prime Minister: I know that the right hon. Member for Belper (Mr. G. Brown) does not like the right hon. Member for Huyton. I will not make any trouble for him, because he has enough already.
I know that the right hon. Member for Huyton does not like going back in reference to those days of the Socialist Utopia. He has a more robust motto today to guide his conduct. He brought it out yesterday in great style: "When you have lost your bearing, go back to your unit." Not, of course, in a military sense, but purely metaphorically. I think that he has followed this precept pretty successfully in the last few years. We are now asked to believe that the six years of Socialist Government were ones in which the economy moved out of the difficulties and dangers of war with a kind of easy, almost effortless regularity. The truth is that they were years of perpetual crises, of shortages, of high taxation, of soaring prices and of a Government torn, hopelessly divided and torn, by bitter strife.
The right hon. Gentleman asked in one of his speeches at the weekend, "Do they suppose we have no memories?" He asked that rhetorical question. Indeed, we have. But why should I appeal to my own memory or to the memories of my hon. Friends? Why gaze into the crystal when one can read the book—Lord Attlee's book, Lord Morrison's book, Lord Dalton's book—incidentally, it was Lord Dalton who took away Mr. Gladstone's portrait—and, I
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hope, soon Lord Shinwell's book? [Interruption.]
During these years we received from North America by way of special loans £2,000 million. [Interruption.] During the period of the Conservative Government, we have had to pay off £630 million in capital and interest. [Interruption.]
Mr. Speaker: Order. I cannot hear the jokes. What I would venture to say, perhaps rashly from the Chair, is that the House would be a poorer place if somebody did not shout sometimes, but, really, if there is so much noise that we cannot debate, I doubt whether we serve our own interest. Perhaps the House might think that we have an agreeable custom of proposing to censure the Government of the day from time to time, and perhaps when we do it is right that the Government of the day should be allowed to develop their case in reply.
The Prime Minister: Finally, when the crises came—the last was the worst —I will not say that they ran away but they walked out. [Interruption.]
Ten years have passed since then, and we have today a more prosperous nation than ever in our history, and more prosperous than one would have dared to predict ten years ago. It is shown in the wage packet, the real value of which, after allowing for all price increases, has risen by about one-third in the ten years. "Wasted years" the hon. Member for Huyton calls them but wages have gone up one-third in real value. It is shown in the variety of things which the wage packet will buy. It is shown in the record level of savings, in the housing figures, in the new schools and in the expanding services.
I understood that for many years it had been one of the aspirations of the Labour Party to see the material needs and comforts of life widely spread throughout the country. Now that we have done this, they accuse us of debauching society by producing an affluent State. I really think it is a little hard.
The right hon. Gentleman did not refer much tonight—as he referred to the other day—to the election campaign. My recollection of it is pretty vivid. I recall that the theme of the Socialist Party was that if the people voted for them the

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country would have it a lot better and a lot cheaper—bigger pensions and other cash benefits; vast, though unspecified, expenditure on roads, schools and hospitals; all this and lower taxes, too. Indeed, the spirit of the auction room so took hold of the Labour Party that the Leader of the Opposition announced that, in spite of these vast new expenditures, Income Tax would not be raised. He was out-bid by Mr. Morgan Phillips within twenty-four hours with a pledge —probably that was worth more—to cut the Purchase Tax by £90 million or £100 million.
All I remember is that when that came out I used these words, which I venture to quote:
"I say I want our party to win this election. Of course I do. But there is a price that I am not prepared to pay for victory. I will not enter into any kind of auction with the parties trying to outbid each other in this and every other sphere."
It was upon that basis that our campaign was successful. It was because we refused to be party to this dishonourable competition. Now, the right hon. Gentleman the Leader of the Opposition, as he brings out his reproaches, is fuller of humbug and more Pecksniffian than ever.
There is another point which, I am bound to say, I feel a little more sensitive about. I know that it is said by many people that this material prosperity has injured the morale, or has injured the discipline, of our people. Of course, that may be so. Of course, this is one of the risks we take, I do occasionally read letters and articles in the newspapers—those circulating among the well-to-do—lamenting the moral standards of the day which, it is said, flow from the fact that we have a more affluent society. But when I go about the world I do not see all these signs of degradation.
Mr. William Ross: It depends on where one goes.
The Prime Minister: I rather resent armchair critics who, after knocking back their third gin, turn to their neighbours and deplore the rising standards of living.
The right hon. Gentleman, in his own comparison, showed an extraordinary lack of understanding of what the period between the wars was like. He said that
730
this prosperity had always increased year by year. He should have lived with us on Tees-side thirty years ago. We have made more progress in ten years than we made in the forty years before, and all I would say is this: if I were asked, in order to improve the economic condition of the country, to try to revert to the old conditions of poverty and unemployment, then neither I nor my colleagues would have anything to do with it.
The proposals of my night hon. and learned Friend the Chancellor of the Exchequer have been fully debated, and I will not do more in the time that remains than touch upon salient points. As regards the short-term pressure on sterling, he has acted firmly by orthodox methods of proved efficacy—Bank Rate, special deposits, and monetary restraint. His other proposals affect longer-term policy.
First, military expenditure. Almost alone of the European countries in N.A.T.O., we carry heavy burdens not only in Europe but in the Far East and in the Middle East. We have recently had to take action in the Middle East to defend principles from which the whole world gains. We have to look again at this expenditure and see what reductions can be made, even if this involves some changes—and radical changes.
As regards N.A.T.O., changing conditions have made it inequitable for us to continue to pay these immense sums over the exchanges year after year. After all, it is worth remembering—we are always running ourselves down—that the total German surplus is the exact equivalent of what they receive for American and British expenditure in Germany.
After all, there have been some big changes in the European scene since N.A.T.O. was devised and we entered into W.E.U. obligations. Obviously, with the Berlin problem looming up, we ought not, and do not want, to raise this question until the spring, but it is only right that we should give due notice of the position that we intend to take, and I believe that our European allies will recognise its justice.
We must also put some restraint on the growth of aid. We dislike doing this, because aid is one of the biggest contributions that we can make to the peace

731
of the world. However, we have gone from £110 million to £180 million a year in these last three years, which is not a bad record.
Next comes direct encouragement of exports by various ways. Very interesting proposals have been put on both sides of the House for further measures which we might consider. But meanwhile a great deal bas been done, and I should like to pay tribute, because it is only fair to do so, to those devoted men who have worked on the Export Councils, both the European council and the one in America.
The Government have done a great deal to overhaul and improve the credit system for exports. We made a general reduction in premiums. We have introduced, just after the winter, various new guarantees including provision for the small exporter. Last year saw a marked increase in the use which traders were making of these facilities. The volume of orders covered rose by £48 million over the previous year, and during the last three months we saw a further increase of £28 million compared with the same period last year.
Another field in which Governmental action is needed and is being taken is in the expansion of the volume of world trade. We are not ashamed of our record in giving a lead in liberalisation. We hope that, as a result of the next round of negotiations in G.A.T.T., there will be a further reduction in tariffs to free the flow of world trade.
All these measures are, of course, vital, but we need something more. Much had to be done at once. I think I may best describe that—for the tutor must always bow to the master—in the words used by the Leader of the Opposition when he was Chancellor of the Exchequer. This is what he said:
"We also have to be sure that the problem of expanding our exports is not made more difficult by excessive monetary demand at home."
That demand comes from many sources, including Government services.
The proposals which my right hon.
and learned Friend has put forward for containing the growth of Government expenditure and keeping it in line with our resources are well conceived. They will have the full
732
support of the Government and I ask the House by its vote tonight to show that it shares the Government's determination to see this through. But none of the measures we have taken is, of course, I think we know that, a substitute for—although they may help—a greater effort to increase productivity and increase exports.
One can lay the blame where one will —on the Government, of course, on the employers, on the trade unions. The right hon. Member made a very interesting contribution today on that aspect. There are some people who feel that British industry is not bold enough; it is too eager to seize profits easily earned in the home market and not modern enough and not flexible enough. Others contend that the trade unions in recent years have lost control of the situation; that there are too many foolish disputes and strikes about nothing; too little flexibility; and that restrictive practices based on long departed conditions—conditions in this happy period of which the right hon. Gentleman reminded us when we had 2 million or 3 million unemployed, which he thought so splendid—[An HON. MEMBER: "And Tory Government."]—those restrictive practices are quite out-of-date today. It has been widely recognised that these obstacles exist and I accept that the Government must play their part in tackling them.
As regards the structure of our economy and guidance, what is ordinarily called planning, I have little to add to what my right hon. Friends have said yesterday and today. I can only say that I have nothing against planning. I once wrote a book about it. I was happy to see when I was reading it the other day that nearly everything I had recommended has since been done. However, if more is needed to meet changing conditions, it will have my support, but we must be sure that it is the kind of planning which suits our political and industrial habits and institutions.
I think, quite frankly, that if we were to ask any ordinary man or woman in the street, they would admit—for they know it to be true—the enormous gains which have been made in these ten years for everybody, but I think they would also agree that perhaps in the last year or the last eighteen months we have gone a bit too fast. We have tried to do a

733
bit too much. If that is so, we must pause, preserving the essentials which lead to growth and discarding for the moment the inessentials—and that is all that we have asked people to do, whether they draw salaries, wages or dividends. The managers and owners of businesses must make an extra effort themselves and must be prepared to see smaller profit margins and reduced dividends. Salary and wage earners must pause before they make another demand on wages, unless these can be shown to be the fruit of real increase in productivity.
There are some, I have no doubt, who might say that we could quite easily avoid our troubles and could easily get "in the black" if we gave up foreign aid and if we gave up those enormous miiltary commitments; if we abandoned all those, it could be said, there would be no problem, no threat of balance of payments. This is a possible solution. But this is not the future which I see for this country, and I am certain that it is not the future which this country sees for itself. We know in our hearts that we must continue to play a great part in the world, that it is our duty
to help those less well-placed than ourselves, that it is necessary for us to restore the balance of payments position, not just to spend more on ourselves but to increase, certainly to maintain, our aid outside.
The economic situation with which we are confronted must neither be minimised nor exaggerated. It is marginal but it is vital. To resolve our difficulties is well within our power. It requires common sense and a practical assessment of our own interests, what I call our duty to ourselves. It requires imagination and an honourable acceptance of our obligations to less happy peoples and our duty to our neighbours. It requires an effort of restraint and unity on a national scale. But I cannot believe that a nation which has survived such trials and such fearful dangers in the past will fail to rise to its duty today.
Question put, That the words proposed to be left out stand part of the Question:—
The House divided: Ayes 346, Noes 238.

Division No. 259.]

AYES

[9.59 p.m.

Agnew, Sir Peter

Bullard, Denys

Digby, Simon wingfield

Altken, W. T.

Bullus, Wing Commander Eric

Donaldson, Cmdr. C. E. M.

Allan, Robert (Paddington, S.)

Burden, F. A.

Doughty, Charles

Allason, James

Butcher, Sir Herbert

Drayson, G. B.

Amery, Rt. Hon. Jullan

Butler, Rt.Hn.R.A.(Saffron Walden)

du Cann, Edward

Arbuthnot, John

Campbell, Sir David (Belfast, S.)

Duncan, Sir James

Ashton, Sir Hubert

Campbell, Gordon (Moray & Nairn)

Eccles, Rt. Hon. Sir David

Atkins, Humphrey

Carr, Compton (Barons Court)

Eden, John

Balniel, Lord

Carr, Robert (Mitcham)

Elliot, Capt. Walter (Carshalton)

Barber, Anthony

Cary, Sir Robert

Elliott,R. W. (N wcstie-upon-Tyne,N.

Barlow, Sir John

Channon, H. P. G.

Emery, Peter

Barter, John

Chataway, Christopher

Emmet, Hon Mrs, Evelyn

Batsford, Brlan

Chichester-Clark, R.

Errington, Sir Eric

Baxter, Sir Beverley (Southgate)

Churchill, Rt. Hon. Sir Winston

Erroll, Rt. Hon. F. J.

Beamish, Col, Sir Tufton

Clark, Henry (Antrim, N.)

Farey-Jones, F. W.

Bell, Ronald

Clark, William (Nottingham, S.)

Farr, John

Bennett, F. M. (Torquay)

Clarke, Brig. Terence (Portsmth, W.)

Fell, Anthony

Bennett, Dr. Reginald (Gos & Fhm)

Cleaver, Leonard

Finlay, Graeme

Berkeley, Humphry

Cole, Norman

Fisher, Nigel

Bevins, Rt. Hon. Reginald

Cooke, Robert

Fletcher-Cooke, Charles

Bidgood, John C.

Cooper, A. E.

Foster, John

Biggs-Davison, John

Cooper-Key, Sir Neill

Fraser,Hn.Hugh (Stafford & Stone)

Bingham, R. M.

Cordeaux, Lt.-Col. J. K.

Fraser, Ian (Plymouth, Sutton)

Birch, Rt. Hon. Nigel

Cordle, John

Freeth, Denzil

Bishop, F. P.

Corfield, F. V.

Galbraith, Hon. T. G. D.

Black, Sir Cyril

Costain, A. P.

Gammans, Lady

Bossom, Clive

Coulson, J. M.

Gardner, Edward

Bourne-Arton, A.

Courtney, Cdr. Anthony

George, J. C. (Pollok)

Box, Donald

Craddock, Sir Beresford

Gibson-Watt, David

Boyd-Carpenter, Rt. Hon. John

Critchley, Julian

Glover, Sir Douglas

Boyle, Sir Edward

Crowder, F. P.

Glyn, Dr. Alan (Clapham)

Braine, Bernard

Cunningham, Knox

Glyn, Sir Richard (Dorset, N.)

Brewis, John

Curran, Charles

Godber, J, B.

Bromley-Davenport, Lt. -Col. Sir Walter

Currie, G. B. H.

Goodhart, Philip

Brooke, Rt- Hon. Henry

Dalkeith, Earl of

Goodhew, Victor

Brooman-White, R.

Dance, James

Gough, Frederick

Browne, Percy (Torrington)

d'Avigdor-Goldsmid, Sir Henry

Gower, Raymond

Bryan, Paul

Deedes, W. F.

Grant, Rt. Hon. William

Buck, Antony

de Ferranti, Basil

Grant-Ferris, Wg Cdr. R.

Green, Alan

Lucas-Tooth, Sir Hugh

Robinson, Sir Roland (Blackpool,S.)

Gresham Cooke, R.

McAdden, Stephen

Robson Brown, Sir William

Grlmston, Sir Robert

MacArthur, Ian

Rodgers, John (Sevenoaks)

Grosvenor, Lt.-Col. R. G.

McLaren, Martin

Roots, William

Gurden, Harold

McLaughlin, Mrs. Patricia

Ropner, Col. Sir Leonard

Hall, John (Wycombe)

Maclay, Rt. Hon. John

Royle, Anthony (Richmond, Surrey)

Hamilton, Michael (Wellingborough)

Maclean,SirFitzroy(Bute&N.Ayrs.)

Russell, Ronald

Hare, Rt. Hon. John

McLean, Nell (Inverness)

Sandys, Rt. Hon. Duncan

Harris, Frederic (Croydon, N.W.)

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

Scott-Hopkins, James

Harris, Reader (Heston)

McMaster, Stanley R.

Seymour, Leslie

Harrison, Brian (Maldon)

Macmillan,Rt.Hn.Harold(Bromley)

Sharpies, Richard

Harvey, Sir Arthur Vere (Macclesf'd)

Macmillan, Maurice (Halifax)

Shaw, M.

Harvey, John (Walthametow, E.)

Mcpherson, Niall (Dumfries)

Shepherd, William

Harvie Anderson, Miss

Maddan, Martin

Simon, Rt. Hon. Sir Jocelyn

Hastings, Stephen

Maginnis, John E.

Skeet, T. H. H.

Hay, John

Maitland, Sir John

Smith, Dudley(Br'ntf'rd & Chiswick)

Heald, Rt. Hon. Sir Lionel

Manningham-Buller, Rt. Hn. Sir R.

Smithers, Peter

Heath, Rt. Hon. Edward

Markham, Major Sir Frank

Smyth, Brig. Sir John (Norwood)

Henderson-Stewart, Sir James

Marlowe, Anthony

Soames, Rt. Hon. Christopher

Hendry, Forbes

Marples, Rt. Hon. Ernest

Spearman, Sir Alexander

Hicks Beach, Maj. W.

Marshall, Douglas

Speir, Rupert

Hlley, Joseph

Marten, Nell

Stanley, Hon. Richard

Hill,Dr. Rt. Hon. Charles (Luton)

Mathew, Robert (Honlton)

Stevens, Geoffrey

Hill, Mrs. Eveline (Wythenshawe)

Matthews, Gordon (Meriden)

Steward, Harold (Stockport, S.)

Hill, J. E. B. (S. Norfolk)

Maudling, Rt. Hon. Reginald

Stodart, J. A.

Hinchingbrooke, Viscount

Mawby, Ray

8toddart-Scott, Col. Sir Malcolm

Hirst, Geoffrey

Maxwell-Hyslop, R. J.

Storey, Sir Samuel

Hobson, John

Mills, Stratton

Studholme, Sir Henry

Hocking, Philip N.

Montgomery, Fergus

Sumner, Donald (Orpington)

Holland, Philip

Moore, Sir Thomas (Ayr)

Talbot, John E.

Hollingworth, John

More, Jasper (Ludlow)

Tapsell, Peter

Hope, Rt. Hon. Lord John

Morgan, William

Taylor, Sir Charles (Eastbourne)

Hopkins, Alan

Morrison, John

Taylor, Edwin (Bolton, E.)

Hornby, R. P.

Mott-Radclyffe, Sir Charles

Taylor, W. J. (Bradford, N.)

Homsby-Smith, Rt. Hon. Patricla

Nabarro, Gerald

Teeling, William

Howard, Hon. G. R. (St. Ives)

Neave, Airey

Temple, John M.

Howard, John (Southampton, Test)

Nicholls, Sir Harmar

Thatcher, Mrs. Margaret

Hughes Hallett, Vice-Admiral John

Nicholson,, Sir Godfrey

Thomas, Leslie (Canterbury)

Hughes-Young, Michael

Noble, Michael

Thomas, Peter (Conway)

Hurd, Sir Anthony

Nugent, Sir Richard

Thompson, Kenneth (Walton)

Hutchison, Michael Clark

Oakshott, Sir Hendrle

Thompson, Richard (Croydon, S.)

Iremonger, T. L.

Orr, Capt. L. P. S.

Thorneycroft, Rt. Hon. Peter

Irvine, Bryant Godman (Rye)

Orr-Ewing, C. Ian

Thornton-Kemstey, Sir Colin

Jackson, John

Osborn, John (Hallam)

Tiley, Arthur (Bradford, W.)

James, David

Osborne, Sir Cyril (Louth)

Turner, Colin

Jenkins, Robert (Dulwich)

Page, John (Harrow, West)

Turton, Rt. Hon. R. H.

Jennings, J. C.

Page, Graham (Crosby)

Tweedsmuir, Lady

Johnson, Dr. Donald (Carlisle)

Pannell, Norman (Kirkdale)

van Straubenzee, W. R.

Johnson, Eric (Blackley)

Partridge, E.

Vane, W. M. F.

Johnson Smith, Geoffrey

Pearson, Frank (Clitheroe)

Vaughan-Morgan, Rt. Hon. Sir John

Jones, Rt. Hn. Aubrey (Hall Green)

Peel, John

Vosper, Rt. Hon. Dennis

Joseph, Sir Keith

Perclval, lan

Wakefield, Sir Wavell (St. M'lebone)

Kaberry, Sir Donald

Peyton, John

Walder, David

Kerans, Cdr. J. S.

Pickthorn, Sir Kenneth

Walker, Peter

Kerby, Capt. Henry

Pike, Miss Mervyn

Walker-Smith, Rt. Hon. Sir Derek

Kerr, Sir Hamllton

Pilkington, Sir Richard

Wall, Patrick

Kershaw, Anthony

Pitman, Sir James

Ward, Dame Irene

Kimball, Marcus

Pitt, Miss Edith

Watkinson, Rt. Hon. Harold

Kirk, Peter

Pott, Percivall

Webster, David

Kitson, Timothy

Powell, Rt. Hon. J. Enoch

Wells, John (Maidstone)

Lagden, Godfrey

Price, David (Eastleigh)

Whitelaw, William

Lambton, Viscount

Price, H. A. (Lewisham, W.)

Williams, Dudley (Exeter)

Lancaster, Col. C. G.

Prior, J. M. L.

Williams, Paul (Sunderland, S.)

Langford-Holt, J.

Prior-Palmer, Brig. Sir Otho

Wills, Sir Gerald (Bridgwater)

Leather, E. H. C.

Profumo,, Rt. Hon. John

Wilson, Geoffrey (Truro)

Leavey, J. A.

Proudfoot, Wilfred

Wise, A. R.

Leburn, Gilmour

Pym, Francis

Wolrige-Gordon, Patrick

Legge-Bourke, Sir Harry

Quennell, Miss J. M.

Wood, Rt. Hon. Richard

Lewis, Kenneth (Rutland)

Ramsden, James

Woodhouse, C. M.

Lilley, F. J. P.

Rawlinson, Peter

Woodnutt, Mark

Lindsay, Martin

Redmayne, Rt. Hon. Martin

Woollam, John

Linstead, Sir Hugh

Rees, Hugh

Worsley, Marcus

Litchfield, Capt. John

Rees-Davies, W. R.

Yates, William (The Wrekin)

Lloyd, Rt.Hn.Geoffrey(Sut'nC'dfield)

Renton, David

Lloyd, Rt. Hon. Selwyn (Wirral)

Ridley, Hon. Nicholas

TELLERS FOR THE AYES:

Longden, Gilbert

Ridsdale, Julian

Mr. Edward Wakefield and

Loveys, Walter H.

Rippon, Geoffrey

Colonel Sir Harwood Harrison.

Low, Rt. Hon. Sir Toby

Roberts, Sir Peter (Heeley)

NOES

Abse, Leo

Allen, Scholefield (Crewe)

Baxter, William (Stirlingshire, W.)

Alnsley, William

Awbery, Stan

Bellenger, Rt. Hon. F. J.

Albu, Austen

Bacon, Miss Alice

Bence, Cyril

Allaun, Frank (Salford, E.)

Baird, John

Benson, Sir George

736

737

Blackburn, F.

Holman, Percy

Pentland, Norman

Blyton, William

Holt. Arthur

Plummer,, Sir Leslie

Boardman, H.

Houghton, Douglas

Popplewell, Ernest

Bowen, Roderic (Cardigan)

Howell, Charles A. (Perry Barr)

Prentice, R. E.

Bowles, Frank

Howell, Denis (Small Heath)

Probert, Arthur

Boyden, James

Hoy, James H.

Pursey, Cmdr. Harry

Braddock, Mrs. E. M.

Hughes, Cledwyn (Anglesey)

Randall, Harry

Brockway, A. Fenner

Hughes, Emrys (S. Ayrshire)

Rankin, John

Broughton, Dr. A. D. D.

Hughes, Hector (Aberdeen, N.)

Redhead, E. C.

Brown, Alan (Tottenham)

Hunter, A. E.

Reynolds, G. W.

Brown, Rt. Hon. George (Belper)

Hynd, H. (Accrington)

Rhodes, H.

Brown, Thomas (Ince)

Hynd, John (Attercliffe)

Roberts, Albert (Normanton)

Butler, Herbert (Hackney, C.)

Irvine, A. J. (Edge Hill)

Roberts, Goronwy (Caernarvon)

Butler, Mrs. Joyce (Wood Green)

Irving, Sydney (Dartford)

Robertson, John (Paisley)

Callaghan, James

Janner, Sir Barnett

Robinson, Kenneth (St. Pancras, N.)

Chapman, Donald

Jay, Rt. Hon. Douglas

Ross, William

Chetwynd, George

Jeger, George

Royle, Charles (Salford, West)

Cliffe, Michael

Jenkins, Roy (Stechford)

Shinwell, Rt. Hon. E.

Collick, Percy

Johnson, Carol (Lewisham, S)

Short, Edward

Corbet, Mrs. Freda

Jones, Rt. Hn. A. Creech(Wakefield)

Silverman, Julius (Aston)

Craddock, George (Bradford, S.)

Jones, Dan (Burnley)

Silverman, Sydney (Nelson)

Cronin, John

Jones, Elwyn (West Ham, S.)

Skeffington, Arthur

Crosland, Anthony

Jones, Jack (Rotherham)

Slater, Mrs. Harriet (Stoke, N.)

Crossman, R. H. S.

Jones, J. Idwal (Wrexham)

Slater, Joseph (Sedgefield)

Cullers, Mrs. Alice

Jones, T. W. (Merioneth)

Small, William

Darting, George

Kelley, Richard

Smith, Ellis (Stoke, S.)

Davies,Rt.Hn.Clement(Montgomery)

Kenyon, Clifford

Snow, Julian

Davies, G. Elfed (Rhondda, E.)

Key, Rt. Hon. C. W.

Sorensen, R. W.

Davies, Harold (Leek)

King, Dr. Horace

Soskice, Rt. Hon. Sir Frank

Davies, Ifor (Gower)

Lawson, George

Spriggs, Leslie

Davies, S. O. (Merthyr)

Ledger, Ron

Steele, Thomas

Deer, George

Lee, Frederick (Newton)

Stewart, Michael (Fulham)

Delargy, Hugh

Lee, Miss Jennie (Cannock)

Stonehouse, John

Dempsey, James

Lever, Harold (Cheetham)

Stones, William

Diamond, John

Lever, L. M. (Ardwick)

Strachey, Rt. Hon. John

Dodds, Norman

Lewis, Arthur (West Ham, N.)

Strauss, Rt. Hn. G. R. (Vauxhall)

Donnelly, Desmond

Lipton, Marcus

Stross,Dr.Barnett(Stoke-on-Trent,C.)

Driberg, Tom

Loughlin, Charles

Swain, Thomas

Dugdale, Rt. Hon. John

Mabon, Dr. J. Dickson

Swingler, Stephen

Ede, Rt. Hon. C.

McCann, John

Sylvester, George

Edelman, Maurice

MacColl, James

Symonds, J. B.

Edwards, Rt. Hon. Ness (Caerphilly)

Mclnnes, James

Taylor, Bernard (Mansfield)

Edwards, Robert (Bilston)

McKay, John (Wallsend)

Taylor, John (West Lothian)

Edwards, Walter (Stepney)

Mackie, John (Enfield, East)

Thomas, George (Cardiff, W.)

Evans, Albert

McLeavy, Frank

Thomas, lorwerth (Rhondda, W.)

Finch, Harold

MacPherson, Malcolm (Stirling)

Thompson,Dr. Alan (Dunfermlina)

Fitch, Alan

Mallalieu, E. L. (Brigg)

Thomson, G. M. (Dundee, E.)

Fletcher, Eric

Manuel, A. C.

Thornton, Ernest

Foot, Dingle (Ipswich)

Mapp, Charles

Tomney, Frank

Forman, J. C.

Marquand, Rt. Hon. H, A.

Ungoed-Thomas, Sir Lynn

Fraser, Thomas (Hamilton)

Marsh, Richard

Wainwright, Edwin

Gaitskell, Rt. Hon. Hugh

Mason, Roy

Warbey, William

Galpern, Sir Myer

Mayhew, Christopher

Watkins, Tudor

George, LadyMeganLloyd(Crmrthn)

Mellish, R. J.

Weitzman, David

Ginsburg, David

Mendelson, J. J.

Wells, Percy (Faversham)

Gordon Walker, Rt. Hon. P. C.

Milne, Edward J.

Wells, William (Walsall, N.)

Gourlay, Harry

Mitchison, G. R.

White, Mrs. Eirene

Greenwood, Anthony

Monslow, Walter

Whitlock, William

Grey, Charles

Moody, A. S.

Wigg, George

Griffiths, David (Rother Valley)

Morris, John

Wilcock, Group Capt. C. A. B.

Griffiths, Rt. Hon. James (Llanelly)

Moyle, Arthur

Wilkins, W. A.

Griffiths, W. (Exchange)

Mulley, Frederick

Willey, Frederick

Grimond, J.

Neal, Harold

Williams, D. J. (Neath)

Gunter, Ray

Noel-Baker,Rt.Hn.Philip(Derby,S.)

Williams, LI. (Abertillery)

Hale, Leslie (Oldham, W.)

Oliver, G. H.

Wiliams, W. R. (Openshaw)

Hall, Rt. Hn. Glenvil (Colne Valley)

Oram,, A. E.

Williams, W. T. (Warrington)

Hamilton, William (West Fife)

Oswald, Thomas

Willis, E. G. (Edinburgh, E.)

Hannan, William

Owen, Will

Wilson, Rt. Hon. Harold (Huyton)

Hart, Mrs. Judith

Paget, R. T.

Winterbottom, R. E.

Hayman, F. H.

Pannell, Charles (Leeds, W.)

Woodburn, Rt. Hon. A.

Healey, Denis

Pargiter, G. A.

Woof, Robert

Henderson,Rt.Hn.Arthur(RwlyRegls)

Parker, John

Wyatt, Woodrow

Herbison, Miss Margaret

Paton, John

Yates, Victor (Ladywood)

Hewitson, Capt. M.

Pavitt, Laurence

Zilliacus, K.

Hill, J. (Midlothian)

Pearson, Arthur (Pontypridd)

Hilton, A. V.

Peart, Frederick

TELLERS FOR THE NOES:

Mr. Bowden and Mr. Rogers.

Main Question put:—
The House divided: Ayes 346, Noes 236.

Division No. 260.]

AYES

[10.14 p.m.

Agnew, Sir Peter

Doughty, Charles

Iremonger, T. L.

Aitken, W. T.

Drayson, G. B.

Irvine, Bryant Godman (Rye)

Allan, Robert (Paddington, S.)

du Cann, Edward

Jackson, John

Allason, James

Duncan, Sir James

James, David

Amery, Rt. Hon. Julian

Eccles, Rt. Hon. Sir David

Jenkins, Robert (Dulwich)

Arbuthnot, John

Eden, John

Jennings, J. C

Ashton, Sir Hubert

Elliot, Capt. Walter (Carsnalton)

Johnson, Dr. Donald (Carlisle)

Atkins, Humphrey

Elliott, F.W.(Nwcstle-upon-Tyne, N.)

Johnson, Eric (Blackley)

Balniel, Lord

Emery, Peter

Johnson Smith, Geoffrey

Barber, Anthony

Emmet, Hon. Mrs. Evelyn

Jones, Rt. Hn. Aubrey (Hall Green)

Barlow, Sir John

Errington, Sir Eric

Joseph, Sir Keith

Barter, John

Erroll, Rt. Hon. F. J.

Kaberry, Sir Donald

Batsford, Brian

Farey-Jones, F. W.

Kerans, Cdr. J. S.

Beamish, Col. Sir Tufton

Farr, John

Kerby, Capt. Henry

Bell, Ronald

Fell, Anthony

Kerr, Sir Hamilton

Bennett, F. M. (Torquay)

Finlay, Graeme

Kershaw, Anthony

Bennett, Dr. Reginald (Gos & Fhm)

Fisher, Nigel

Kimball, Marcus

Berkeley, Humphry

Fletcher-Cooke, Charles

Kirk, Peter

Bevins, Rt. Hon. Reginald

Foster, John

Kitson, Timothy

Bidgood, John c.

Fraser, Hn. Hugh (Stafford A Stone)

Lagden, Godfrey

Biggs-Davison, John

Fraser, Ian (Plymouth, Sutton)

Lambton, viscount

Bingham, R. M.

Freeth, Denzll

Lancaster, Col. C. G.

Birch, Rt. Hon. Nigel

Calbraith, Hon. T. G. D.

Langford-Holt, J.

Bishop, F. P.

Gammans, Lady

Leather, E. H. C.

Black, Sir Cyril

Gardner, Edward

Leavey, J. A.

Bottom, Clive

George, J. C. (Pollok)

Leburn, Gilmour

Bourne-Arton, A.

Gibson-watt, David

Legge-Bourke, Sir Harry

Box, Donald

Glover, Sir Douglas

Lewis, Kenneth (Rutland)

Boyd-Carpenter, Rt. Hon. John

Glyn, Dr. Alan (Clapham)

Llliey, F. J. P.

Boyle, Sir Edward

Glyn, Sir Richard (Dorset, N.)

Lindsay, Martin

Braine, Bernard

Godber, J. B.

Linstead, Sir Hugh

Brewis, John

Goodhart, Philip

Litchfield, Capt. John

Bromley-Davenport, Lt.-Col.Sir Walter

Goodhew, Victor

Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)

Brooke, Rt. Hon. Henry

Gough, Frederick

Lloyd, Rt. Hon. Selwyn (Wirral)

Brooman-White, R.

Gower, Raymond

Longden, Gilbert

Browne, Percy (Torrington)

Grant, Rt. Hon. William

Loveys, Walter H.

Bryan, Paul

Grant-Ferris, Wg Cdr. R.

Low, Rt. Hon. Sir Toby

Buck, Antony

Green, Alan

Lucas, Sir Jocelyn

Bullard, Denys

Gresham Cooke, R.

Lucas-Tooth, Sir Hugh

Bullus, Wing Commander Eric

Grimston, Sir Robert

McAdden, Stephen

Burden, F. A.

Grosvenor, Lt.-Col. R. G.

MacArthur, Ian

Butcher, Sir Herbert

Gurden, Harold

McLaren, Martin

Butler, Rt. Hn. R. A. (Saffron Walden)

Hall, John (Wycombe)

McLaughlin, Mrs. Patricia

Campbell, Sir David (Belfast, S.)

Hamilton, Michael (Wellingborough)

Maclay, Rt. Hon. John

Campbell, Cordon (Moray & Nairn)

Hare, Rt. Hon. John

Maclean, Sir Fitzroy (Bute&N.Ayrs.)

Carr, Compton (Barons Court)

Harris, Frederic (Croydon, N.W.)

McLean, Neil (Inverness)

Carr, Robert (Mitcham)

Harris, Reader (Heston)

Macleod, Rt. Hn. Iain (Enfield, w.)

Cary, Sir Robert

Harrison, Brian (Maldon)

McMaster, Stanley R-

Channon, H. P. G.

Harvey, Sir Arthur Vere (Maoclesf'd)

Macmillan, Rt. Hn. Harold (Bromley)

Chataway, Christopher

Harvey, John (Walthamstow, E.)

Macmillan, Maurice (Halifax)

Chichester-Clark, R.

Harvey Anderson, Miss

Macpherson, Niall (Dumfries)

Churchill, Rt. Hon. Sir Winston

Hastings, Stephen

Maddan, Martin

Clark, Henry (Antrim, N.)

Hay, John

Maginnis, John E.

Clark, William (Nottingham, 8.)

Heald, Rt. Hon. Sir Lionel

Maitland, Sir John

Clarke, Brig. Terence (Portsmth, W.)

Heath, Rt. Hon. Edward

Manningham-Buller, Rt. Hn. Sir R.

Cleaver, Leonard

Henderson-Stewart, Sir James

Markham, Major Sir Frank

Cote, Norman

Hendry, Forbes

Marlowe, Anthony

Cooke, Robert

Hicks Beach, Mal. W.

Marples, Rt. Hon. Ernest

Cooper, A. E.

Hiley, Joseph

Marshall, Douglas

Cooper-Key, Sir Neill

Hill, Rt. Hon. Charles (Luton)

Marten, Neit

Cordeaux, Lt.-Col. J. K.

Hill, Mrs. Eveline (Wythenshawe)

Mathew, Robert (Honiton)

Cordle, John

Hill, J. E. B. (S. Norfolk)

Matthews, Gordon (Meriden)

Corfield, F. V.

Hinchingbrooke, Viscount

Maudling, Rt. Hon. Reginald

Costain, A. p.

Hirst, Geoffrey

Maxwell-Hyslop, R. J.

Coulson, J. M.

Hobson, John

Mawby, Ray

Courtney, Cdr. Anthony

Hocking, Philip N.

Montgomery, Fergus

Craddock, Sir Beresford

Holland. Philip

Mills, Stratton

Critchley, Julian

Hollingworth, John

Moore, Sir Thomas (Ayr)

Crowder, F. P.

Hope, Rt. Hon. Lord John

More, jasper (Ludlow)

Cunningham, Knox

Hopkins, Alan

Morgan, William

Curran, Charles

Hornby, R. P.

Morrison, John

Currie, G. B. H.

Hornsby-Smith, Rt. Hon. Patricia

Mott-Radclyffe, Sir Charles

Dalkeith, Earl of

Howard, Hon. G. R. (St. Ives)

Nabarro, Gerald

Dance, James

Howard, John (Southampton, Test)

Neave, Alrey

d'Avigdor-Goldsmid, Sir Henry

Hughes Hallett, Vice-Admiral John

Nicholls, Sir Harmar

Deedes, W. F.

Hughes-Young, Michael

Nicholson, Sir Codfrey

de Ferranti, Geoffrey

Hurd, Sir Anthony

Noble, Michael

Digby, Simon Wingfield

Hutchison, Michael Clark

Nugent, Sir Richard

Donaldson, Cmdr, C. E. M.

Oakshott, Sir Hendrie

Orr, Capt. L. P. S.

Robson Brown, Sir William

Thompson, Kenneth (Walton)

Orr-Ewing, C. Ian

Rodgers, John (Sevenoaks)

Thompson, Richard (Croydon, S.)

Osborn, John (Hallam)

Roots, William

Thorneyoroft, Rt. Hon. Peter

Osborne. Mr Cyril (Louth)

Ropner, Col Sir Leonard

Thornton-Kemsiey, Sir Colin

Page, John (Harrow, West)

Royle, Anthony (Richmond Surrey)

Tiley, Arthur (Bradford, W.)

Page, Graham (Crosby)

Russell, Ronald

Turner, Colln

Pannell, Norman (Kirkdale)

Sandys, Rt. Hon. Duncan

Turton, Rt. Hon. R. H.

Partridge, E,

Scott-Hopkins, James

Tweedsmuir, Lady

Pearson, Frank (Clitheroe)

Seymour, Leslie

van Straubenzee, W. R.

Peel, John

Sharples, Richard

Vane, W. M. F.

Peroival, Ian

Shaw, M.

vaughan-Morgan, Rt. Hon. Sir John

Peyton, John

Shepherd. William

Vosper, Rt. Hon. Dennis

Pickthorn, Sir Kenneth

Simon, Rt. Hon. Sir Jocelyn

Wakefield, Sir Wavell (St. M'lebone)

Pike, Miss Mervyn

Skeet, T. H. H.

Walder, David

Pilkington, Sir Richard

Smith, Dudley (Br'ntf'rd & Chiswick)

Walker, Peter

Pitman, Sir James

Smithers, Peter

Walker-Smith, Rt. Hon. Sir Derek

Pitt, Miss Ellith

Smyth, Brig. Sir John (Norwood)

Wall, Patrick

Pott, Percivall

Soames, Rt. Hon. Christopher

Ward, Dame Irene

Powell, Rt. Hon. J Enoch

Spearman, Sir Alexander

Watkinson, Rt. Hon. Harold

Price, David (Eastleigh)

Speir, Rupert

Webster, David

Price, H. A. (Lewisham, W)

Stanley, Hon. Richard

Wells, John (Maidstone)

Prior, J. M. L

Stevens, Geoffrey

Whitelaw, William

Prior-Palmer, Brig. Sir Otho

Steward, Harold (Stockport, S.)

Williams, Dudley (Exeter)

Profumo, Rt. Hon. John

Stodart, J. A.

Williams, Paul (Sunderland, S.)

Proudfoot, Wilfred

Stoddart-Scott, col. Sir Malcolm

Wills, Sir Gerald (Bridgwater)

Pym, Francis

Storey, Sir Samuel

Wilson, Geoffrey (Truro)

Quennell, Miss J. M.

Studholme, Sir Henry

Wise, A. R.

Ramsden, James

Sumner, Donald (Orpington)

Wolrige-Gordon, Patrick

Rawlinson, Peter

Talbot, John E.

Wood, Rt. Hon. Richard

Redmayne, Rt. Hon. Martin

Tapsell, Peter

Woodhouse, C. M.

Rees, Hughes

Taylor, Sir Charles (Eastbourne)

Woodnutt, Mark

Rees-Davies, w. R.

Taylor, Edwin (Bolton, E.)

Woollam, John

Renton, David

Taylor, W. J. (Bradford, N.)

Worsley, Marcus

Ridley, Hon Nicholas

Teeing, William

Yates, William (The Wrekin)

Ridsdale, Julian

Temple, John M.

Rippon, Geoffrey

Thatcher, Mrs. Margaret

TELLERS FOR THE AYES:

Roberts, Sir Peter (Heeley)

Thomas, Leslie (Canterbury)

Mr. Edward Wakefield and

Robinson, Sir Roland (Blackpool,S.)

Thomas, peter (Conway)

Colonel Sir Harwood Harrison.

NOES

Abse, Leo

Deer, George

Hewltson, Capt. M.

Ainsley, William

Delargy, Hugh

Hill, j. (Midlothian)

Albu, Austen

Dempsey, James

Hilton, A. V.

Allaun, Frank (Salford, E.)

Diamond, John

Holman, Percy

Allen, Scholefield (Crewe)

Dodds, Norman

Holt, Arthur

Awbery, Stan

Donnelly, Desmond

Houghton, Douglas

Bacon, Miss Alice

Driberg, Tom

Howell, Charles A. (Perry Barr)

Baird, John

Dugdale, Rt. Hon. John

Howell, Denis (Small Heath)

Baxter, William (Stirlingshire, W.)

Ede, Rt. Hon. C.

Hoy, James H.

Bellenger, Rt. Hon. F. J.

Edelman, Maurice

Hughes, Cledwyn (Anglesey)

Bence, Cyril

Edwards, Rt. Hon. Ness (Caerphilly)

Hughes, Emrys (S. Ayrshire)

Benson, Sir George

Edwards, Robert (Bllston)

Hughes, Hector (Aberdeen, N.)

Blackburn, F.

Edwards, Walter (Stepney)

Hunter, A E.

Blyton, William

Evans, Albert

Hynd, H. (Accrington)

Boardman, H.

Finch, Harold

Hynd, John (Attercliffe)

Bowen, Roderic (Cardigan)

Fitch, Alan

Irvine, A. J. (Edge Hill)

Bowles, Frank

Fletcher, Eric

Irving, Sydney (Dartford)

Boyden, James

Foot, Dingle (Ipswich)

Janner, Sir Barnett

Braddock, Mrs. E. M.

Forman, J. C.

Jay, Rt. Hon. Douglas

Brockway, A. Fenner

Fraser, Thomas (Hamilton)

Jeger, George

Broughton, Dr. A. D. D.

Gaitskell, Rt. Hon. Hugh

Jenkins, Roy (Stechford)

Brown, Alan (Tottenham)

Galpern, Sir Myer

Johnson, Carol (Lewisham, S.)

Brown, Rt. Hon. George (Belper)

George, LadyMeganLloyd (Crmrthn)

Jones, Rt. Hn. A. Creech(Wakefield)

Brown, Thomas (Ince)

Ginsburg, David

Jones, Dan (Burnley)

Butler, Herbert (Hackney, C.)

Gordon Walker, Rt. Hon. P. C.

Jones, Elwyn (West Ham, S.)

Butler, Mrs, Joyce (Wood Green)

Gourlay, Harry

Jones, Jack (Rotherham)

Callaghan, James

Greenwood, Anthony

Jones, J. Idwal (Wrexham)

Chapman, Donald

Jones, T. W. (Merioneth)

Chetwynd, George

Grey, Charles

Kelley Richard

Cliffe, Michael

Griffiths, David (Rother Valley)

Kenyon, Clifford

Collick, Percy

Griffiths, Rt- Hon. James (Llanelly)

Key, Rt. Hon. C. W.

Corbet, Mrs. Freda

Griffiths, W. (Exchange)

King, Dr. Horace

Craddock, George (Bradford, S.)

Grimond, J.

Lawson, George

Cronin, John

Gunter, Ray

Ledger, Ron

Crosland, Anthony

Hale, Leslie (Oldham, W.)

Lee, Frederick (Newton)

Crossman, R. H. S.

Hall, Rt. Hn. Glenvil (Colne Valley)

Lee, Miss Jennie (Cannock)

Cullen, Mrs. Alice

Hamilton, William (West Fife)

Lever, Harold (Cheetham)

Darling, George

Hannan, William

Lever, L. M. (Ardwick)

Davies, Rt. Hn. Clement (Montgomery)

Hart, Mrs. Judith

Lewis, Arthur (West Ham, N.)

Davies, C Elfed (Rhondda, E.)

Hayman, F. H.

Lipton, Marcus

Davies, Harold (Leek)

Healey, Denis

Loughlin, Charles

Davies, Ifor (Gower)

Henderson, Rt.Hn.Arthur(Rwly Regis)

Mabon, Dr. J. Dickson

Davies, S. O. (Merthyr)

Herbison, Miss Margaret

McCann, John

742

743

MacColl, James

Popplewell, Ernest

Sylvester, George

Mclnnes, James

Prentice, R. E.

Symonds, J. B.

McKay, John (Wallsend)

Probert, Arthur

Taylor, Bernard (Mansfield)

Mackie, John (Enfield, East)

Pursey, Cmdr. Harry

Taylor, John (West Lothian)

McLeavy, Frank

Randall, Harry

Thomas, George (Cardiff, W.)

MacPherson, Malcolm (Stirling)

Rankin, John

Thomas, lorwerth (Rhondda, W.)

Mallalieu, E. L. (Brigg)

Redhead, E. C

Thompson, Dr. Alan (Dunfernline)

Manuel, A. C.

Reynolds, G. W.

Thomson, G. M. (Dundee, E.)

Mapp, Charles

Rhodes, H

Thomson, Ernest

Marquand, Rt. Hon. H. A.

Roberts, Albert (Normanton)

Tommy, Frank

Marsh, Richard

Roberts, Goronwy (Caernarvon)

Ungood-Thomas, Sir Lynn

Mason, Roy

Robertson, John (Paisley)

Wainwright, Edwin

Mayhew, Christopher

Robinson, Kenneth (St. Paneras N.)

Warbey, William

Mellish, R. J.

Ross, William

Watkins, Tudor

Mendelson, J. J,

Royle, Charles (Salford, West)

Weitzman, David

Milne, Edward J.

Shinwell, Rt. Hon E.

Wells, Percy (Faveraham)

Mitchison, G. R.

Short, Edward

Wells, William (Walsalt, N.)

Monslow, Walter

Silverman, Julius (Aston)

White, Mrs. Eirene

Moody, A. S.

Silverman, Sydney (Nelson)

Whitlock, William

Morris, John

Skeffington, Arthur

Wigg, George

Moyle, Arthur

Slater, Mrs. Harrlot (Stoke, N.)

Witcock, Group Capt. C. A. B.

Mulley, Frederick

Slater, Joseph (Sedgefield)

Wilkins, W. A.

Neal, Harold

Smalt, William

Willey, Frederiok

Noel-Baker, Rt. Hn. Philip (Derby, S.)

Smith, Ellis (Stoke, S.)

Williams, D. J. (Neath)

Oram, A. E.

Snow, Julian

Williams, Lt. (Abertiliery)

Oswald, Thomas

Sorensen, R. W.

Williams, W. R. (Openshaw)

Owen, Will

Soskice, Rt. Hon. Sir Frank

Williams, W. T. (Warrington)

Paget, R. T.

Spriggs, Lestle

Willie, E. G. (Edinburgh, E.)

Pannell, Charles (Leeds, W.)

Steels, Thomas

Wilson, Rt. Hon. Harold (Huyton)

Pargiter, C. A.

Stewart, Michael (Fulham)

Wimerbottom, R E.

Parker, John

Stonehouse, John

Woodburn, Rt. Hon. A.

Paton, John

Stones, William

Woof, Robert

Pavitt, Laurence

Strachey, Rt. Hon. John

Wyatt, Woodrow

Pearson, Arthur (Pontypridd)

Strauss, Rt. Hon. G. R. (Vauxhall)

Yates, Victor (Ladywood)

Peart, Frederick

Strom, D r. Barnett (Stoke-on-Trent, C.)

Pentland, Norman

Swain, Thomas

TELLERS FOR THE NOES:

Plummer, Sir Leslie

Swingter, Stephen

Mr. Bowden and Mr. Rogers.

Resolved,
That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for
744
the purposes of upholding the strength of sterling, improving the balance of payments and maintaining a sound basis for the continuing prosperity of the nation.

CUSTOMS AND EXCISE DUTIES AND PURCHASE TAX
Motion made, and Question proposed,
That the Surcharge on Revenue Duties Order, 1961 (S.I., 1961, No. 1388), dated 24th July 1961, a copy of which was laid before this House on 25th July, be approved.—[Mr. Barber.]
Mr. H. Wilson: Despite the idolatory indicated by the cheers for the Prime Minister as he left the Chamber, does even this Government think that they can impose £200 million of additional taxation on the nod without an explanation from the Treasury Minister? May we have an explanation?
10.25 p.m.
The Economic Secretary to the Treasury (Mr. Anthony Barber): Yesterday afternoon the Leader of the Opposition said to Mr. Speaker that, in his view, this Order was clearly associated with the more general matters which we should be discussing in the two-day debate which has just ended. I aim sure that Mr. Speaker, in agreeing to that, was in fact agreeing to something which was for the general convenience of the House. However, the result was that when I wound up yesterday evening's proceedings I dealt with certain aspects of this surcharge and my hon. Friend the Financial Secretary this afternoon clarified certain other aspects of it. I do not wish this evening merely to repeat what has already been said, but I agree with the right hon. Member for Huyton (Mr. H. Wilson) that, perhaps, it would be useful if I made one or two observations on what is undoubtedly a very important measure.
The Order was made under section 9 of the Finance Act and it came into effect on Wednesday this week. As the House well knows, the Order provides for a 10 per cent. surcharge on a wide range of Customs and Excise duties. The House will remember that the principle behind this economic regulator was discussed at considerable length not long ago—during the debate on the Budget, on the Second Reading, during the Committee stage and again on Third Reading of the Finance Bill.
The Opposition, for what I hope they still consider to be sound reasons, did not vote against the Clause in the Bill giving this power, no doubt because they concluded that the principle involved was
746
a good one and that it was right that my right hon. and learned Friend should have power to operate the regulator during this yeas. I say "this year" because the power given by the Finance Bill operates only for a period of 12 months.
The method of calculating the surcharge will be simple. It will be paid along with the duty or tax at the normal time of payment. When an amount of tax or duty has become due and has been calculated in the normal way, 10 per cent. will be added to it. In other words, there will be no change in the rate. As the House has already agreed on the principle involved without a Division, the sole question which remains for consideration is whether the regulator should be used at this time.
The Chancellor of the Exchequer explained in his statement—and other Government spokesmen have since elaborated this—that the pressure of demand on the home market has increased and that if it were not for the measures which my right hon. and learned Friend has announced it would be likely to increase still more in the coming months. There could be no doubt that one significant effect of this would have been to discourage exports, and it was precisely in this sort of circumstance that, as far as my recollection of our debates goes, the House contemplated the use of this regulator.
It has been said that the Chancellor of the Exchequer should have known all about the pressure of demand at the time that he introduced his Budget. By now, however, we have had a good deal of new evidence that demand, both for investment and for consumer goods, is rising and is likely to rise more rapidly than could then have been foreseen. There can certainly be no doubt that personal incomes have continued to rise since the last quarter. As I reminded the House only yesterday, wage rates are up, employment is higher and the number of workers on short time has fallen. At the same time, hire-purchase lending which damped down consumption last year, has started to rise again significantly and the volume of sales for the second quarter as a whole has also risen.
The great advantage of a fiscal regulator of this kind is that it can be brought into operation at any time during the year between Budgets. The right hon.

747
Member for Huyton, if I understood him aright, suggested yesterday that the idea behind the regulator was that it would be used to replace monetary and other weapons. It was, however, made abundantly clear at the time that this was to be an additional means of regulating the economy which in appropriate circumstances might enable us to rely less on other methods.
Mr. H. Wilson: Apart from the fact that there is no time between Budgets these days for the use of any of these things, will the hon. Gentleman explain this? He is trying, not very successfully, to explain how much has changed since April, but will he tell us what has changed since 4th July, when we were on the Report stage of the Finance Bill? If at that time the Chancellor thought that £200 million additional taxation was needed, it was his duty to introduce it at the Report stage and not to use special procedures for getting money which he thought was then needed. What has happened since 4th July? Have things gone really wrong in the last fourteen days?
Mr. Barber: Had my right hon. and learned Friend been ready to declare to the House what his intentions were before the date on which he made his statement, he would have done so, but, as the right hon. Gentleman knows, from month to month and from week to week information comes in, not only about what has been happening in the immediate past, but which enables us to make forecasts for the future. The right hon. Gentleman raised an almost similar point on Report, when he asked my right hon. and learned Friend the Chancellor about the possible use of this economic regulator.
I was about to say that on this occation we have not taken action, for example, concerning hire purchase, but we might well have had to do so if it had not been for having available this means of influencing demand. Unlike hire-purchase restrictions, this means of regulating demand operates over a wide sector and will not, therefore, make its impact felt only on limited sections of industry. I have no doubt that this measure will make a significant contribution in the short term towards alleviating the economic troubles which now face the country.
748
The annual yield from the 10 per cent. surcharge is estimated to be £210 million, but it can be taken off or reduced at any time. I repeat that when the principle of this regulator was considered, there was no opposition to it. That being the case, I cannot think that any hon. Member who is prepared to face the facts of the present situation can honestly pretend that this is not an appropriate time for it to be used. In those circumstances, I hope that the House will endorse the decision of my right hon. and learned Friend.
10.33 p.m.
Mr. Douglas Jay: Despite the speech of the Economic Secretary, and, indeed, that of the Prime Minister an hour earlier, I am rather at a loss to understand the exact nature of the disaster which has befallen the country since the Report stage of the Finance Bill only three weeks ago and, even more, to understand the relevance of this Order to that disaster. Therefore, I ask the Government these few questions.
We are discussing an Order which will add £200 million to the country's taxation without any Committee or Report stage or old-fashioned formalities of that kind, and without even the presence of the Chancellor of the Exchequer in the House. The Government have told us throughout these three days that the aims of their economic policy are to maintain the stability of the currency, to increase productivity and to increase exports. The Order, by imposing higher Purchase Tax and higher taxation on tobacco, beer, petrol and other things, will raise the cost of living by 1½ points directly and immediately. That means that at one fell swoop by this Order we shall reduce the value of the £ by 1 per cent. or rather more. That is going to have these consequences.
Secondly, it is quite certain that as a result of this Order our industrial costs will rise. There are over 3 million workers—I believe, nearly 4 million—whose wage rates are directly linked with the cost of living index. Therefore, it is quite certain that they will rise as a result of the Order we are passing tonight. I also have no doubt that the next effect of the rise in the cost of living will be that after a great deal of industrial conflict provoked by this Government there

749
will be a corresponding rise in other wage rates throughout a very large section of industry. What is going to be the effect of that?
The Financial Secretary told us earlier today that it was all quite simple: he was damping down demand in order to restrain expansion of industry. Of course, if our costs rise on the one hand and we damp down on the other, it is quite certain that the effect of this policy, and this Order in particular, will be to produce stagnant production or even falling production for the next twelve months, and therefore consequently—I do not think the Economic Secretary can dispute this—the effect of these factors will be a rise in the cost of producing our exports in the months ahead.
Therefore, there really is no doubt that this Order and this policy are going to have three consequences. First, it will reduce the value of the currency. Secondly, it will restrain any increase in production. Thirdly, it will hamper our exports even more than they are hampered at the present time. So I just want to ask the Economic Secretary, what good does he think it is going to do to the economic position of this country?
10.37 p.m.
Mr. Ellis Smith: Having sat here for two days and heard the whole of the speeches, many of which, on both sides, were constructive and of a reasoned character, I want to place a few observations on record for all those who read HANSARD, particularly those in the north of England and in the industrial areas. I want to make it quite clear that I am not concerned about what is thought within a few yards of this assembly about what I am going to say. I am concerned with those of whom, ever since I came here, I have tried to be worthy.
I am more than ever determined to be worthy of the class to which I belong. I can go back to those I had the privilege to be born amongst and look them straight in the face, straight in the eyes, and say to them the things I say here. In my view it is of the utmost urgency to British democracy, and if the party which they built up is to retain their confidence, that it should have regard more and more to the fact that this is a democratic assembly—it was—and for us
750
to remember that the parties are elected on a democratic basis.
Having said that, I now, at this late house, do not want to attempt to make a long speech, but I want just to place a few observations on record. The observations are made first of all by Mr. Glover, secretary to the North Staffordshire Chamber of Cornmerce. They are about these proposals. He made them on behalf of the Chamber of Commerce. Those people are fundamentally opposed to us in this party politically. I am not complaining of that. If men oppose me openly and honestly, without hitting below the belt, I respect them. Therefore, I am making no complaint that they are opposed to us politically and that since 1931 have done the best they possibly could to keep us out of this place. But we have no need to complain about their activities. This is what they said about these measures:
"The new measures would do nothing to stimulate a fresh drive in the overseas markets "—
and that applies to these proposals—
"As usual the need for exports is paid lip-service and nothing more … Where are the dynamic measures aimed at healing the economic weakness in this country?"
That statement is made in an economic and geographical area which relatively has made a greater contribution to the export trade than many other areas. If the people there feel like that about these measures, that is a concrete example of how responsible people feel about proposals of this kind.
My final point is a terrible indictment of the principal Ministers concerned. We on this side of the House who have been in personal touch with the Financial Secretary and the Economic Secretary in different Departments have nothing but the greatest possible respect for them as individuals, but when it comes to their collective policy the position of both hon. Gentlemen is serious when viewed against the contents of a document from which I propose to quote. This is a confidential document issued by the Treasury. I do not normally believe in doing this kind of thing, but this matter is so serious and, I believe, will have such a serious effect in the country that I think that I am entitled to quote from the document so that the words may be placed on the record.

751
The document is the April, 1961 "Quarterly Bulletin, An Appreciation of the Economic Situation" prepared by the Treasury. It is because of its contents that I cannot understand why the Chancellor did not in his last Budget take action of the kind which he now proposes, if it was justified. Since no action was taken in the Budget, why did the right hon. and learned Gentleman agree to pay out the millions of pounds which he proposes to pay to the country's relatively well-placed people? I shall be brief in my remarks because I believe in playing the game by other people and I understand that it has been agreed that we should have a vote fairly early because that meets the convenience of hon. Members and the staff.
I should like to quote two extracts from the document. The first reads:
"The reserves rose in 1960, but the increase was only made possible by the inflow of short-term funds. In February there were signs that the inflow had stopped, and the reserves fell for the first time for twelve months. In March there was a much heavier fall."
My second quotation follows from that comment and shows how incorrect is the present policy:
"Basically, however, the situation will only"—
Mr. Deputy-Speaker: I am sorry to interrupt the hon. Member, but we are, of course, dealing with one Order and not the whole economic policy.
Mr. Ellis Smith: I agree. I have thought about that, because I wanted to keep myself in order. The Order is based upon the economic policy. I quoted from the document to emphasise how incorrect it is to make the Order when this Bulletin foreshadowed that it would not be necessary. The quotation reads:
"Basically, however, the situation will only mend if there is considerable improvement in the balance of trading transactions."
It goes on to show how the position then was serious. I wish to ask why no action was taken then. The position has improved in several respects, and therefore I shall oppose this Order.
10.45 p.m.
Mr. J. Grimond: The House of Commons originally grew up largely, if not entirely, to control taxation by the Executive. That was
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always felt to be one of its prime duties. Like many other hon. Members, I see the need for some new method of regulating the economy, but this is a different subject. I am wondering whether we should not at some time distinguish between measures which are taken to regulate the economy and those which are taken purely for fiscal purposes. I have often thought it anomalous that while we debate at some length comparatively minor Orders—
Mr. Deputy-Speaker: Order. We are not dealing with that point at the moment. That has been settled by the Finance Act. We are dealing with this particular Order alone.
Mr. Grimond: I appreciate that, Mr. Deputy-Speaker. But I think that we must be allowed to discuss the background to the Order. When he introduced the powers to make this Order, the Chancellor told the House that it constituted an important change in our fiscal methods, and so it would seem to be in order to make a few remarks about that now.
I have in mind that it is agreed that this Order is introduced purely as a regulator and it is said by the Government that they were unable to see when the Budget was brought in that there would be any need, or any certain need, to mop up the excess purchasing power in July of this year. It seems to me that this admission indicates that if the Government cannot tell this year that there was any certainty about the position in July, they are very unlikely to be able to say anything in any other year. In point of fact, nothing unusual has happened. If anything, economically things have got slightly easier since the Budget was introduced.
We are now faced with a situation in which the Government say that they cannot see ahead at all and cannot foretell for more than a month or two whether their economic and fiscal measures are right or wrong, and so they reserve the right to alter them. I do not intend to elaborate on that, but I think it would be agreed that it is their case that when things are difficult they must have large powers to introduce Orders at the shortest possible notice. That being so, I suggest that we should consider whether we should try to separate the fiscal need

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to raise money compared with the economical aspect by the introduction of this or further regulators.
In fact this regulator will fall with considerable severity on some industries which in no sense deserve it. They are not industries which are sucking in a great deal of demand in the home market, nor are they using labour which would be better employed elsewhere. It is purely fortuitous that they are having to bear this extra impost. If we are to have this sort of impost, I think that there is a great deal to be said for a general turnover tax rather than the kind of thing which we are now discussing—
Mr. Deputy-Speaker: Order. We cannot discuss that now.
Mr. Grimond: —and the range of Excise duties introduced for quite different purposes over the years with no idea that they would be the basis for this type of economic regulator. I appreciate that this is a narrow debate and I must come to a conclusion. We have this very important departure from the normal methods of dealing with our fiscal and economic policies, and I hope that over the next few months the Government will consider carefully whether this is the best form of regulator or whether they should keep regulators at all and there will be no—
Mr. Deputy-Speaker: Order. We are not now discussing the form of the regulator. That was dealt with by the Finance Act. We are now discussing a particular Order.
Mr. Grimond: I agree. All I wish to impress upon the Government is that if now they cannot see a few months ahead, they will have to find new methods of dealing with their financial problems.
10.50 p.m.
Mr. John Diamond: I want to make it perfectly clear that I regard the introduction of this Order at this time, having regard to the promises made by the Chancellor and the whole of the Government Front Bench on several occasions during the discussions on the Finance Bill, as a complete breach of faith with the House of Commons.
We were promised time and time again—I do not suppose that you, Mr. Deputy-
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Speaker, can help us much on this, but I love this place and wish it to be strong and to protect the rights of the people—that under no circumstances would an Order like this come on late at night for the ordinary sort of one and a half hours' discussion. I am prepared to wager a guinea to be given to any hospital that anyone cares to mention that the vote will take place within an hour and a half of the start of this debate at around 10.30 p.m. on a Thursday night. We all understand that the Whips plan it that way on a Thursday night so as to enable hon. Members to get back to their constituencies. There is no justification whatsoever for the Government to attempt to introduce this Order in this way. It is a clear breach of the promise repeatedly given, and I hurl that straight at the Government Front Bench.
Secondly, I wish to ask the Government a simple, straightforward question, if they are capable of giving the answer to it. When did the Chancellor decide to make this surcharge? It certainly could not have been during the early part of July because the right hon. and learned Gentleman told us on Report—around the 4th, 5th or 6th July—that he had not yet reached a decision. So that something less than three weeks ago he had not reached a decision. It is certainly a week ago that the right hon. and learned Gentleman reached a decision, because the whole country was told that he was going to make an announcement and everyone knew that it was going to concern this matter. Therefore, on what date did the Chancellor decide to introduce this Order?
The reason why I ask that question is quite simply to establish whether the Chancellor is a knave or a fool. Was he a knave in misleading the House by saying that he did not know when, in fact, he did, or was he a fool to say that we did not need this extra £200 million at that time but subsequently discovered that we did? I want to have that matter made perfectly clear.
My right hon. Friend the Member for Huyton (Mr. H. Wilson) has made it clear time and time again that he does not accuse the Government or the Chancellor of any lack of good faith; he only accuses them of being hopelessly incompetent.
Mr. H. Wilson: What I really said was that I did not accuse them of bad faith, only of lack of faith.
Mr. Diamond: I am sorry. My right hon. Friend made it clear that he did not accuse the Government of lack of good faith, but merely of gross incompetence. I do not know why my right hon. Friend should be so pernickety. The Chancellor and the Government have shown sufficient evidence of incompetence to make it perfectly clear that they are not worthy to carry on their job.
Mr. Charles A. Howell: I am very grateful to my hon. Friend for giving way, but I am wondering if he has overlooked one other possible aspect of the matter, that this may be another instance of the Conservative Government treating the House with the contempt that they are in the habit of showing towards it.
Mr. Diamond: I am asking the question. There is a simple answer. When was the decision made? We can base our judgment on the answer which is given. Why did the Government think it necessary to give a full week's warning of these arrangements when the whole justification for this kind of power was that it could be put into practice immediately? One of the main purposes for having the kind of power contained in this Order, we were told, was that it could be put into operation immediately. It would not therefore create a selling boom by warning the people that this kind of duty was coming on. The whole country has been warned. To achieve their deflationary purpose the Chancellor has set on foot a very substantial selling boom with everyone going to the shops buying everything from motor cars to bottles of whisky in order to anticipate the increase. Why did the Government think it necessary, against everything they told us, to give at least a week's warning that there would be this increase so that everyone could buy in anticipation of the increased rates of Purchase Tax?
The third thing I ask the Government to explain is the figures. The Chancellor told us, and I am reading exactly what he said:
"I wish to make it clear that, taking Purchase Tax, for example, the increase is equivalent to 10 per cent. of the existing rates … for goods now chargeable at 5 per rent. the increase would, in effect, raise the
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rate to 5½ per cent."—[OFFICIAL REPORT. 25th July, 1961; Vol. 645, c. 228.]
That seems straightforward and intelligible even to the hon. Member for Kidderminster (Mr. Nabarro).
Mr. Gerald Nabarro: One needs a slide rule to do it.
Mr. Diamond: Why does the Economic Secretary say, as he did yesterday, that this is not the effect, that we do not have a 5 per cent. tax? I ask because people have to work this out and have to know where they stand. People collecting the tax on behalf of the Revenue want to know what to do. The Chancellor said that the 5 per cent. is equivalent to 5½ per cent. and that was what we understood, but the Economic Secretary says it is not that but that we leave it at 5 per cent. Then, at the end of the day, instead of moving to 15 per cent., or 12½ per cent., we add 10 per cent. Does this not mean that it is borne in the same way as before? Who is right, the Economic Secretary or the Chancellor?
It is essential that we should have some accurate information on the figures. We have just had an example of the Prime Minister saying that the Chancellor's figures were wrong. The Prime Minister said that we had this balance of payments deficit for two years and the Chancellor said we had it for three years. The Prime Minister made his statement between the two and it would be necessary for the Prime Minister to be right. I do not mind whether the Prime Minister is wrong or right. I want to know whether the Chancellor is right. It is what the Chancellor said in reference to this Order that is essential for us to know tonight. The Economic Secretary told us something very vague and confusing. I invite him to make it clear.
The next thing I ask the Government is why they decided to put 10 per cent. on everything. The answer is not that that was the only power they had, because that is not so. They have power to put 10 per cent. on the whole of Customs and Excise and less than 10 per cent. on different categories of Purchase Tax. [Interruption.] I am glad to see these courtesies between the Economic Secretary and the Financial Secretary. I hope they will not think me discourteous if I repeat the question, because it is important.
Mr. Barber: I heard the hon. Member. It is possible to be courteous and to listen to my hon. Friend at the same time.
Mr. Diamond: I am glad to know that the hon. Gentleman listened to what I said, because I feel sure that we shall have an answer to the question of why the Government are using such a blunt instrument when there is a less blunt instrument available. The Government have chosen an instrument which will cause great hardship in many cases when it would have been possible to use an instrument which would alleviate to some extent, although only a limited extent, that hardship.
I am bound to limit the length of my remarks on such occasions as this because the debate has started late, in spite of the Government's promise that we should not have a late discussion. At this time of the day the normal methods of communication with the public who are affected by this Order are no longer available to us, and it is Thursday night and hon. Members have responsibilities in their constituencies tomorrow.
Mr. Nabarro: No.
Mr. Marcus Lipton: Will the hon. Member for Kidderminster (Mr. Nabarro) be here tomorrow?
Mr. Nabarro: Certainly.
Mr. Diamond: Will the Minister explain why it is necessary to apply the 10 per cent. to all the articles covered and why it is necessary for the figure to be as high as 10 per cent.? He has power under the Finance Act to use a lower figure than 10 per cent. Why has he gone the whole hog and chosen 10 per cent. when a much smaller figure would have been adequate? The figure of 10 per cent. has an inflationary effect of £130 million in the current year and will have an inflationary effect of £210 million in a full year. Much less than 10 per cent. would have been adequate had it not been for the increased inflationary pressure resulting from giving incentives to Surtax payers to spend now a great deal of what they will receive from the Government's promises of Surtax concessions next year.
Mr. Nabarro: On a point of order. Has it not been ruled that Surtax has
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nothing to do with the Order, and have we not spent two days debating general financial and fiscal matters, and could not the hon. Member for Gloucester (Mr. Diamond) be put into good order?
Mr. Deputy-Speaker: I know of no ruling on the subject, but obviously Surtax has nothing to do with the Order. I thought that the hon. Member for Gloucester (Mr. Diamond) was making only a passing reference to it and I was reluctant to interrupt him.
Mr. Diamond: I had hardly had the opportunity to make a passing reference, Mr. Deputy-Speaker, before you were assisted in the conduct of the business by hon. Members opposite. I have said that 10 per cent. is not necessary. How am I to develop that argument except by pointing out that the Government could have managed with a smaller figure than 10 per cent. had other things not been done—for example, if the incentive to spending by the Surtax payers had not been part of the Budget? We are in the difficulty that we cannot move an Amendment to the Order to reduce the figure to an appropriate figure—one which would be justified if the Surtax remissions were withdrawn. We can only vote against the Order. But we can make the point that the figure in the Order is too high, will cause great hardship and is justified in the Government's philosophy only because this deflationary effect is needed to counter the inflationary effect of the Surtax reliefs. In all these matters the Government have had bad faith. They are unjust in what they are doing. Their action in bringing a matter like this on at half-past ten at night ought to teach any hon. Member on this side who said, as I did, that this was the greatest challenge to the objectivity of an Opposition Member, never to trust the Tories again.
11.5 p.m.
Mr. Marcus Lipton: The House will be somewhat perturbed by the fact that my hon. Friend the Member for Gloucester (Mr. Diamond) has unfortunately had to curtail his remarks because of the way in which the Government have arranged the business. We are all glad that the hon. Member for Kidderminster (Mr. Nabarro) is leaving us, because that will be a very useful contribution to our discussions.
Mr. Nabarro: On the contrary.
Mr. Deputy-Speaker: Let us come back to the Order.
Mr. Nabarro: On the contrary, I came to consult my hon. Friend the Member for The Wrekin (Mr. W. Yates) who is authoritative in these matters.
Mr. Deputy-Speaker: That has nothing to do with the matter before the House.
Mr. Lipton: The country has come to a pretty pass if the hon. Member for Kidderminster has to consult the hon. Member for The Wrekin (Mr. W. Yates). I want to suggest this to the House very seriously. After listening to the eloquent speech of the Prime Minister a little while ago I was almost persuaded that there was no economic crisis at all and that, if there was a crisis, it was due to something or other that my right hon. Friend the Member for Huyton (Mr. H. Wilson) did or said in 1951. Anyhow, it seems necessary from the point of view of the Government, in order to create a condition of solvency and build up our export trade, for the general public to pay 10 per cent. more for spirits, beer, wine, tobacco, hydrocarbon oils, pool betting, and bookmakers' licences. We are told that, if we accept the Order, it will help us to maintain the balance of trade and the welfare of the £.
It is all a lot of eyewash. It has been proved very conclusively in our debates in the last two days that it is a lot of eyewash and makes no contribution whatsoever to the solution of our economic problems. The public will very soon realise that they are being, led up the garden path. As I said on a previous occasion, the people will realise that they have never been had so good. But if the Government want the Order they will steam-roller it through the House. I wish them the best of luck. It will not do them any good, because they will lose the next election anyhow and there will be a Labour Government to take over.
11.8 p.m.
Mr. Donald Chapman: My intervention will be limited to a few sentences. My hon. Friend the Member for Gloucester (Mr. Diamond) asked why the Government are using this power to levy a 10 per cent. increase on all items in the Purchase Tax schedules. The one question I want
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to ask is: why in heaven's name is this being used against the motor car industry at this moment? We are now in a situation where our exports are the worst for eight years. What the motor car industry needs at the moment and what the Midlands need in order to sustain employment throughout the remainder of the year is no feather-bedding but the chance for the time being not to have to put up its costs and further reduce its export drive by having even shorter runs in its production.
The result of the Order will be that people will postpone buying a new car. The already great disastrous slump in the industry this year will multiply in the remainder of the year. Costs will rise as a result of the fall in production, and exports will become less and less competitive in world markets. The Economic Secretary should explain why when industries which are exporting to their utmost are in difficulty they get, not a helping hand, not even the avoidance of the worst that the Government can offer, but another kick in the teeth.
The hon. Gentleman must explain this. It was perfectly open to the Government to be selective in these matters, and then to have talked to these industries and examined their difficulties in a completely fresh way. Why did they not do this? Why have they chosen, as I say, to create unemployment, rising costs and less exports in one of our greatest exporting industries?
11.12 p.m.
Sir Cyril Osborne: The confusion into which the Opposition have got themselves over this matter is exemplified by what the hon. Member for Birmingham, Northfield (Mr. Chapman) has just said; that because of this Order people who otherwise would have bought a motor car will no longer do so, and that will result in unemployment in his constituency. His right hon. Friend the Leader of the Opposition this afternoon said exactly the opposite—[HON. MEMBERS: "No"]—oh, yes, he did. He quoted the motor car costing £850, and asked would not the extra cost cause a person not to buy one. The answer he gave was "No." The confusion opposite is shown clearly, because the hon. Member has just contradicted everything said by his right hon. Friend, who spoke officially for the Opposition. That just

761
exemplifies how utterly confused the Opposition are over this Order, and how useless they would be if fate threw them back on to this side of the House.
11.15 p.m.
Mr. Barber: Perhaps the most convenient way of replying will be to take seriatim, and as quickly and briefly as I can, the points that have been raised. The right hon. Member for Battersea, North (Mr. Jay) referred again to the effect or this Order on the cost of living, which was really the same point as that raised yesterday by his right hon. Friend the Member for Huyton (Mr. H. Wilson).
All I would say is that at the time when we considered the principles behind this Order it was recognised, I think, by everyone who took an intelligent part in that debate that we should be likely to impose a surcharge at a time of excessive demand. Inevitably, if one does it at that time it will cause a rise in prices for the temporary period during which the surcharge operates. It is, however, only a temporary period and, indeed, without legislation it could not go beyond the end of August of next year, although it need not last as long as that.
The right hon. Gentleman's second point was that this would, in some way, raise costs and so hamper exports, but this particular form of taxation will not hurt exports nearly as much as would a general tax, because the tax does not apply directly to exports at all and, as the right hon. Gentleman knows, there are detailed provisions for dealing with matters of drawback.
The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) said that he wished to get something on the record. Well, he did. He quoted from what he called a confidential document issued by the Treasury. I think that he would be the first to agree that what he quoted was not new but had been given to the House—and, indeed, to the country—at much the same time as the issue of that particular document. At any rate, I know the document well—the quarterly bulletin, which is widely distributed—and I can tell him that I will, on my own responsibility, gladly show to him at any time any particular issue that he may wish to see.
Mr. Ellis Smith: That will be welcomed because many hon. Members have been refused it.
Mr. Barber: If the hon. Gentleman would like to see any particular copy, I will allow him to see it, because I know him well enough to know that he will, in future, treat it as confidential.
I was then asked two questions. Firstly, why was not something done in April in the Budget? All I can say is that a great deal was done. We provided a surplus above the line of £500 million, which was a very considerable surplus, and that was done simply because of the sort of factors which were brought to the attention of the House tonight. The second question was: why did we give the Surtax reliefs? I can only say again—and I do not want to weary the House—that they do not become effective until January, 1963.
The third speaker was the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) who made a speech distinguishing between the fiscal and economic reasons for the imposition of taxation. The hon. Gentleman said he thought that since the Budget things had got slightly easier. I suppose that, superficially, when looking at the increasing pressure of demand, one might assume that things have got easier. But that is a very superficial approach and I cannot believe that the hon. Gentleman would refer to things getting easier if he had in mind one of the most serious aspects of our present situation which has been one of the main causes for these measures; the continued pressure on sterling since the time of the Budget. It is inevitable, in the sort of situation in which we are now, that if one takes any measures they will be unpalatable, but they will be widely spread.
The hon. Gentleman the Member for Gloucester (Mr. Diamond) said that there had been a breach of faith, because a full debate was promised. I would only refer the hon. Gentleman to what was said by his right hon. Friend the Leader of the Opposition before the main debate started. It was suggested that it would be useful if we could debate these Orders in the context of the general debate. That arrangement was for the general convenience of the House.
I do not say this in any provocative spirit, because it would be for the general convenience of the House if this debate did not go on for too long—

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but I am happy to stay here, as is my hon. Friend the Financial Secretary, in order to answer any questions that are put to us.
The hon. Member for Gloucester then said that the Chancellor had said that the Surcharge would, in effect, increase the 5 per cent. rate to 5½ per cent, and that that conflicted with something that I had said last night, when I explained how it would work. If the hon. Gentleman will look at what my right hon. Friend said and what I said, he will see that there is absolutely no justification for saying that what my right hon. Friend said and what I said was inconsistent.
The point is that the trader will not have to bother himself with minute calculations. He will not have to raise the 5 per cent. rate to 5½ per cent. or the 12 per cent. rate to 13¾ per cent. or work out these minute calculations. He does one sum at the end of the day and adds 10 per cent. to the amount of tax due. This is important and I explained it yesterday because I realised that it is a matter of great interest.
Mr. Nabarro: It is so late at night that I will not argue on this point with my hon. Friend. I will just say to him that he is talking the most arrant nonsense.
Mr. Lipton: But the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) will vote for it, just the same.
Mr. Nabarro: On a single invoice comprising a large number of items, it is possible to take the 10 per cent, out. My hon. Friend is forgetting that a retailer sells these items individually, must put price tickets on them individually and must put them in his window. He must calculate and compute what these marginal increases are worth in terms of £s. d., and the dislocation caused by a system of this kind is just appalling.
Mr. Barber: I do not want to get involved with my hon Friend. If he will read again what I said last night—
Mr. Nabarro: I have read it in detail.
Mr. Barber: —if he does so he will find that what he is saying is—I will not say arrant nonsense—but certainly nonsense. I was talking about those people who pay the Purchase Tax, and what I
764
said was absolutely correct and consistent with what my right hon. Friend the Chancellor has said. Of course, it is true that when one comes to consider how the tax should be passed on, this impost must be treated in the same way as any other rise in cost. I think that my hon. Friend will agree—and I am glad that he has got a copy and is reading it again—that what I said was right.
Mr. Nabarro: The hon. Gentleman, or rather my hon. Friend—I have not fallen out so much with him yet—is quite wrong. I was consulting HANSARD for 18th July on a different matter entirely, and not his statement, which I read in bed at eight o'clock this morning. My hon. Friend should apologise for his wrong statement.
Mr. Barber: I have apologised frequently to my hon. Friend, but not on this occasion.
Mr. Diamond: The Economic Secretary was kind enough to reply to a question I asked. This is really a most vital matter. I do not want to be hostile about this, but the commercial world wants to know what it is to do, and what the Economic Secretary said was:
"The fact is that the rate of tax will be unaffected."— [OFFICIAL REPORT. 26th July, 1961; Vol. 645, c. 554.]
Every retailer must know that this is unrealistic. To any retailer an extra 10 per cent. of 50 per cent. is 5 per cent. He would be bankrupt if he did what the hon. Gentleman is saying.
Mr. Barber: If the hon. Gentleman will look at what I said he will see that I was clearly referring not to the retailer but to the person who pays the tax. The reason I was referring to that person was because there had been some misunderstanding as to the way in which he would have to calculate what was payable in respect of the surcharge. I can only say—and obviously I have considered this carefully—that what I said was correct and should be followed.
There was another point which the hon. Member for Gloucester raised which I will answer briefly. He asked why it had to be 10 per cent. all round and not 10 per cent. for some commodities and a lower percentage for others, and why not less than 10 per cent.? On the first point the answer is because there is no power—
Mr. Diamond: There is.
Mr. Barber: The hon. Gentleman says that there is power. I say there is not. Since he and others raised this point previously we have taken legal advice, and what I said on the previous occasion has been stated by those who know better than I do to be absolutely correct. If the hon. Gentleman still disagrees, we must differ. Why have we not chosen a percentage less than 10 per cent.? Here again it is purely a matter of judgment. All that we have been discussing during these past two days bears on this particular matter. In the Chancellor's judgement it was right to place the surcharge at the full rate of 10 per cent.
The hon. Member for Birmingham, Northfield (Mr. Chapman), asked by we could not exclude motor cars from the tax, because of their special position. The answer is that by law the 10 per cent. must apply to all articles subject to Purchase Tax.
Mr. H. Wilson: My hon. Friends have advanced many reasons for opposing this Order both in this debate and in our earlier debate. The Government have the impertinence to come along and ask for £200 million worth of additional taxation, by Order, so soon after the end of the proceedings on the Finance Bill, without even the presence of the Chancellor of the Exchequer to justify such a tremendous levy.
For all the reasons which we have given, for its effect on the cost of living, for its effect on the motor car industry and others, and for its effect on export costs, we intend to contest this Order tonight in the Lobby. I trust we may now come to a decision.
Question put:—
The House divided: Ayes 212, Noes 147.

Division No. 216.]

AYES

[11.25 p.m.

Agnew, Sir Peter

Elliot, Capt. Walter (Carshalton)

Jenkins, Robert (Dulwich)

Aitken. W. T.

Elliott, R. W. (Nwcstie-upon-Tyne, N.)

Johnson, Dr. Donald (Carlisle)

Allason, James

Emery, Peter

Johnson, Eric (Blackley)

Atkins, Humphrey

Errington, Sir Eric

Johnson Smith, Geoffrey

Barber, Anthony

Farey-Jones, F. W.

Joseph, Sir Keith

Barter, John

Farr, John

Kerans, Cdr. J. S.

Batsford, Brian

Finlay, Graeme

Kerr, Sir Hamilton

Bennett, Dr. Reginald (Gos & Fhm)

Fisher, Nigel

Kershaw, Anthony

Berkeley, Humphry

Fletcher-Cooke, Charles

Kimball, Marcus

Biggs-Davison, John

Fraser, Ian (Plymouth, Sutton)

Kirk, Peter

Bingham, R. M.

Gammans, Lady

Lancaster, Col. C. G.

Birch, Rt. Hon. Nigel

George, J. C. (Pollok)

Langford-Holt, J.

Bishop, F. P.

Glover, Sir Douglas

Leburn, Gilmour

Black, Sir Cyril

Glyn, Dr. Alan (Clapham)

Legge-Bourke, Sir Harry

Bourne-Arton, A.

Glyn, Sir Richard (Dorset, N.)

Lewis, Kenneth (Rutland)

Box, Donald

Godber, J. B.

Lindsay, Martin

Boyd-Carpenter, Rt. Hon. John

Goodhart, Philip

Linstead, Sir Hugh

Boyle, Sir Edward

Goodhew, Victor

Litchfield, Capt. John

Braine, Bernard

Gower, Raymond

Lloyd, Rt. Hon. Selwyn (Wirral)

Brooke, Rt. Hon. Henry

Grant, Rt. Hon. William

Loveys, Walter H.

Bryan, Paul

Grant-Ferris, Wg. Cdr. R.

Lucas-Tooth, Sir Hugh

Buck, Antony

Green, Alan

McLaren, Martin

Bullus, Wing Commander Eric

Gresham Cooke, R.

McLaughlin, Mrs. Patricia

Butler, Rt. Hn. R. A. (Saffron Walden)

Grimston, Sir Robert

Maclean, SirFitzroy(Bute&N.Ayrs.)

Carr, Compton (Barons Court)

Grosvenor, Lt.-Col. R. G.

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

Channon, H. P. G.

Hall, John (Wycombe)

McMaster, Stanley R.

Chataway, Christopher

Hamilton, Michael (Wellingborough)

Macmillan, Rt. Hn. Harold(Bromley)

Chichester-Clark, R.

Hare, Rt. Hon. John

Macmillan, Maurice (Halifax)

Clark, Henry (Antrim, N.)

Harris, Frederic (Croydon, N. W.)

Macpherson, Niall (Dumfries)

Clark, William (Nottingham, S.)

Harris, Reader (Heston)

Maddan, Martin

Clark, Brig. Terence (Portsmth, W.)

Harrison, Col. Sir Harwood (Eye)

Maginnis, John E.

Cleaver, Leonard

Harvey, Sir Athur Vere (Macciesf'd)

Maitland, Sir John

Cole, Norman

Harvey, John (Walthamstow, E.)

Manningham-Buller, Rt. Hn. Sir R.

Cooper, A. E.

Hastings, Stephen

Marten, Neill

Cooper-Key, Sir Neill

Hay, John

Matthews, Gordon (Meriden)

Cordle, John

Heald, Rt. Hon. Sir Lionel

Maxwell-Hyslop, R. J.

Corfield, F. V.

Hill, Dr. Rt. Hon. Charles (Luton)

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

Coulson, J. M.

Hinchingbrooke, Viscount

Mills, Stratton

Courtney, Cdr. Anthony

Hobson, John

Montgomery, Fergus

Crowder, F P.

Holland, Philip

More, Jasper (Ludlow)

Cunningham, Knox

Hollingworth, John

Morgan, William

Curran, Charles

Hopkins, Alan

Nabarro, Gerald

Currie, G. B. H.

Hornby, R. P.

Nicholls, Sir Harmar

Dance, James

Hornsby-Smith, Rt. Hon. Patricia

Noble, Michael

de Ferranti, Basil

Howard, Hon. G. R. (St. Ives)

Oakshott, Sir Hendrie

Digby, Simon Wingfield

Hughes-Young, Michael

Orr, Capt. L. P. S.

Drayson, G. B.

Iremonger, T. L.

Osborn, John (Hallam)

du Cann, Edward

Irvine, Bryant Godman (Rye)

Osbome, Sir Cyril (Louth)

Eden, John

Jackson, John

Page, John (Harrow, West)

Page, Graham (Crosby)

Scott-Hopkins, James

Wakefield, Edward (Derbyshire, W.)

Pannell, Norman (Kirkdale)

Sharpies, Richard

Wakefield, Sir Waved (St. M'lebone)

Pearson, Frank (Clitheroe)

Skeet, T. H. H.

Walder, David

Peel, John

Smith, Dudley (Br'ntf'rd & Chiswick)

Walker, Peter

Percival, Ian

Smlthers, Peter

Walker-Smith, Rt. Hon. Sir Derek

Pickthorn, sir Kenneth

Spearman, Sir Alexander

Wall, Patrick

Pitman, Sir James

Stanley, Hon. Richard

Ward, Dame Irene

Pitt, Miss Edith

Stevens, Geoffrey

Whitelaw, William

Pott, Percivall

Steward, Harold (Stockport, S.)

Williams, Dudley (Exeter)

Prior, J. M. L.

Studholme, Sir Henry

Williams, Paul (Sunderland, S.)

Pym, Francis

Sumner, Donald (Orpington)

Wills, Sir Gerald (Bridgwater)

Rawlinson, Peter

Talbot, John E.

Wilson, Geoffrey (Truro)

Redmayne, Rt. Hon. Martin

Tapsell, Peter

Wise, A. R.

Rees, Hugh

Taylor, Sir Charles (Eastbourne)

Wolridge-Gordon, Patrick

Renton, David

Temple, John M.

Wood, Rt. Hon. Richard

Ridley, Hon. Nicholas

Thatcher, Mrs. Margaret

Woodnutt, Mark

Ridsdale, Julian

Thomas, Peter (Conway)

Woollam, John

Rippon, Geoffrey

Thompson, Richard (Croydon, S.)

Worsley, Marcus

Roberts, Sir Peter (Heeley)

Turner, Colin

Yates, William (The Wrekin)

Robinson, Sir Roland (Blackpool, S.)

van Straubenzee, W. R.

Roots, William

Vane, W. M. F.

TELLERS FOR THE AYES

Ropner, Col, Sir Leonard

Vaughan-Morgan, Rt. Hon. Sir John

Mr. Gibson-Watt and

Russell, Ronald

Vosper, Rt. Hon. Dennis

Mr. J. E. B. Hill.

NOES

Abse, Leo

Hall, Rt. Hn. Glenvil (Colne Valley)

Pearson, Arthur (Pontypridd)

Ainsley, William

Hamilton, William (West Fife)

Peart, Frederick

Albu, Austen

Hannan, William

Plummer, Sir Leslie

Allaun, Frank (Salford, E.)

Hart, Mrs. Judith

Prentice, R. E.

Allen, Scholefield (Crewe)

Herblson, Miss Margaret

Probert, Arthur

Awbery, Stan

Holman, Percy

Pursey, Cmdr. Harry

Bacon, Miss Alice

Holt, Arthur

Randall, Harry

Baxter. William (Stirlingshire, W.)

Houghton, Douglas

Redhead, E. C.

Bowden, Herbert W. (Leics, S.W.)

Howell, Charles A. (Perry Bart)

Reynolds, G. W.

Bowen, Roderic (Cardigan)

Hughes, Cledwyn (Anglesey)

Roberts, Goronwy (Caernarvon)

Bowles, Frank

Hughes, Emrys (S. Ayrshire)

Robinson, Kenneth (St. Pancras, N.)

Boyden, James

Hunter, A. E.

Rogers, G. H. R. (Kensington, N.)

Brockway, A. Fenner

Hynd, John (Atterdiffe)

Silverman, Julius (Aston)

Brown, Rt. Hon. George (Belper)

Janner, Sir Barnett

Silverman, Sydney (Nelson)

Brown, Thomas (Ince)

Jay, Rt. Hon. Douglas

Slater, Mrs. Harriet (Stoke, N.)

Callaghan, James

Jenkins, Roy (Stechford)

Slater, Joseph (Sedgefield)

Chapman, Donald

Johnson, Carol (Lewisham, S.)

Smith, Ellis (Stoke, S.)

Chetwynd, George

Jones. Elwyn (West Ham, S.)

Sorensen, R. W.

Cliffe, Michael

Kenyon, Clifford

Soskice, Rt. Hon. Sir Frank

Corbet, Mrs. Freda

King, Dr. Horace

Stewart, Michael (Fulham)

Craddock, George (Bradford, S.)

Lawson, George

Stonehouse, John

Cronin, John

Ledger, Ron.

Stones, William

Crosland, Anthony

Lee, Frederick (Newton)

Stross, Dr.Barnett(Stoke-on-Trent,C.)

Crossman, R. H. S.

Lee, Miss Jennie (Cannock)

Swingler, Stephen

Davies, G. Elfed (Rhondda, E.)

Lever, L. M. (Ardwick)

Symonds, J. B.

Davies, Harold (Leek)

Lewis, Arthur (West Ham, N.)

Thomas, George (Cardiff, W.)

Davies, Ifor (Gower)

Lipton, Marcus

Thomas, Iorwerth (Rhondda, W.)

Delargy, Hugh

Loughlin, Charles

Thompson, Dr. Alan (Dunfermline)

Diamond, John

Mabon, Dr. J. Dickson

Thomson, G. M. (Dundee, E.)

Dodds, Norman

MacColl, James

Ungoed-Thomas, Sir Lynn

Driberg, Tom

Mclnnes, James

Wainwright, Edwin

Ede, Rt. Hon. C.

McKay, John (Wallsend)

Warbey, William

Edelman, Maurice

Mackie, John (Enfield, East)

Watkins, Tudor

Edwards, Rt. Hon, Ness (Caerphilly)

Mallalieu, E. L. (Brigg)

Weitzman, David

Edwards, Walter (Stepney)

Marquand, Rt. Hon. H. A.

Wells, William (Walsall, N.)

Evans, Albert

Marsh, Richard

White, Mrs. Eirene

Finch, Harold

Mellish, R. J.

Whltlock, William

Fitch, Alan

Mendelson, J. J.

Wigg, George

Fletcher, Eric

Milne, Edward J.

Wilcock, Group Capt. C. A. B.

Fool, Dingle (Ipswich)

Mitchison, G. R.

Wilkins, W. A.

Forman, J. C.

Monslow, Walter

Willey, Frederick

Gaitskell, Rt. Hon. Hugh

Morris, John

Williams, Ll. (Abertillery)

George, Lady MeganLloyd (Crmrthn)

Mulley, Frederick

Williams, W. R. (Openshaw)

Ginsburg, David

Neat, Harold

Wilson, Rt. Hon. Harold (Huyton)

Gordon Walker, Rt. Hon. P. C.

Oram, A. E.

Winterbottom, R. E.

Greenwood, Anthony

Paget, R. T.

Wyatt, Woodrow

Grey, Charles

Pannell, Charles (Leeds, W.)

Yates, Victor (Ladywood)

Griffiths, David (Rother Valley)

Pargiter, G. A.

Grimond, J.

Parker, John

TELLERS FOR THE NOES:

Hale, Leslie (Oldham, W.)

Pavitt, Laurence

Mr. Short and Mr. Irving

Resolved,
That the Surcharge on Revenue Duties Order. 1961 (S.I., 1961, No. 1388), dated 24th
768
July 1961, a copy of which was laid before this House on 25th July, be approved

EXCHEQUER ADVANCES
Motion made, and Question proposed.
That the Exchequer Advances (Limit) (No. 2) Order, 1961, dated 24th July, 1961, a copy of which was laid before this House on 25th July, be approved.—[Mr. Barber.]
11.35 p.m.
Mr. John Diamond: Do I gather that on this Order also we are not to have any explanation? After all, the Chancellor is here on this occasion. Are we not to be told anything about it?
The Economic Secretary to the Treasury (Mr. Barber): I explained it at considerable length yesterday in my opening remarks in the debate. Indeed, I thought, after explaining it for about ten minutes, that the House got very tired. I should perhaps just say that the reason why I decided that it would be as well to say something about the Order yesterday was that I thought it was right, as there had been a replacement Order, to explain to the House at the first available opportunity exactly why we had taken that particular course. Obviously, it was not for my right hon. and learned Friend, dealing in the context of more general matters, to do that, and I took the first opportunity to explain the Order fully to the House yesterday, as I think the hon. Member knows.
Question put and agreed to.

PURCHASE TAX (G. H. LINTON & CO.)
Motion made, and Question proposed.
That this House do now adjourn.—[Sir H. Harrison.]
11.37 p.m.
Mr. James Allason: The story I have to tell tonight is about a series of baffling confusions which the firm of G. H. Linton and Company, of Hemel Hempstead, had to suffer at the hands of Her Majesty's Customs and Excise for raising a claim against Purchase Tax on a product of the firm known as Dri-Wash. Dri-Wash cloth is impregnated with fluid, and it can be used to clean the hands of dirt, grease, inks, as well as leather goods, plastics, and other surfaces. Of the United Kingdom sales, 90 per cent. are to distributors concerned with the motoring industry and garages. This cloth gets dirty with use, but will continue to clean the hands of dirt and grease.
In 1952, the Customs were informed that the firm was to manufacture Dri-Wash cloths. It had a ruling in 1951 that Dri-Wash cloth would bear Purchase Tax at 66⅔per cent, under Group 5A, as if it were a textile article for domestic purposes. Under the Finance Act, 1952, a D scheme was introduced to exempt from tax cloth goods, amongst others, which did not exceed a certain tariff. In spite of this, the Customs confirmed in 1952 that Dri-Wash cloths would still be liable to tax at 66⅔ per cent. as textile cloths for domestic purposes under Group 5A.
After fruitless correspondence the firm appealed to the Chancellor of the Exchequer, who gave a ruling that
"In view of its value, the cloth does not bear Purchase Tax."
In 1954, Purchase Tax on textile articles was abolished, and in 1955 the D scheme was consequentially abolished, and all went well with the question of Purchase Tax for same time.
Then, in 1959, the firm brought out a new line, Dri-Wash tissues, using expendable paper tissues similarly impregnated, as an alternative to the Dri-Wash cloth. The Customs promptly claimed 50 per cent. tax on the tissues, leaving Dri-Wash cloth tax-free. They said that they were uncertain which category to classify them

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in,—whether as Group 31 toilet requisites, excluding face cloths, towels, paper towels and handkerchiefs, which bear tax at 50 per cent., or Group 32, toilet preparations. They then said, in another letter:
"It is wrong to assume that the Dri-Wash liquid is tax free, because it is part of the tax free Dri-Wash colth."
We see that Customs admit at this stage that the cloth is tax free, but believed the liquid to be taxable by itself.
In consequence, of this the formula for Dri-Wash liquid was submitted to Customs by the firm and in March, 1960, Customs wrote to the firm saying that
"… as a result of recent technical and legal advice".
liquid Dri-Wash was a soap substitute taxable at 25 per cent. Hence impregnated cloths were equally toilet preparations taxable at 25 per cent. as substitutes for toilet soap. Here we see Customs making a complete reversal of their previous decision that even if the liquid was taxable the Dri-Wash cloth was not.
At this stage, I was approached and I asked the Chancellor of the Exchequer to look into the matter. He wrote to me in May, 1960, saying that Customs had made an oversight in that there was an alternative liability to tax on Dri-Wash cloths as toilet articles—as against the Customs assessment as a textile article for domestic purposes—which had been overlooked until attention was drawn to it by a rival firm. The Chancellor said that the Customs ruling in 1952 was correct, but that the law was subsequently changed. He also mentioned that the Dri-Wash liquid contained the detergent Daz. This was a little surprising, because Customs claimed to have made a chemical analysis of Dri-Wash liquid. The firm promptly pointed out to Customs that the element of Daz was one part in 24,000.
Customs then recanted and ruled that Dri-Wash liquid was not a toilet preparation and so was untaxed, but they said that Dri-Wash cloths were toilet preparations and soap substitutes made up for sale as substitutes for toilet soap and were taxable at 25 per cent. Once again, Customs reversed their ruling but found a new category under which to claim tax. So far, therefore, Dri-Wash cloths had been classified first in 1952 as textile articles for domestic purposes under
772
Group 5, and, secondly, in March, 1960, as toilet preparations as substitutes for toilet soaps because they were impregnated with a taxable soap substitute. Thirdly, they were classified as toilet preparations as substitutes for toilet soap because they were impregnated with tax free liquid. That was in June, 1960.
At a later stage, my hon. Friend the Economic Secretary to the Treasury even suggested a fourth category. He suggested that if Dri-Wash cloth was not a toilet preparation as a substitute for toilet soap, it became just a toilet preparation taxable at 50 per cent. We therefore have four categories.
When the Chancellor wrote to me in 1960 he spoke of a complaint from a rival firm, but there can be no rival firm. This firm is absolutely unique. There are firms which sell tissues impregnated with spirits, which are taxable, and also travel packs, including a face cloth and soap. Here, the soap is taxable and the cloth is not. The Customs made a clear decision in 1952 that this was a taxable article for domestic purposes, Group 5. It has been claimed that the law has been changed. All that happened, in sequence, was that the D scheme was introduced to remove the tax on cheap textile articles. Then the tax on textile articles was removed altogether, and then the D scheme was abolished. But it was still subject to the Purchase Tax, if it was to be taxed at all, under Group 5.
It was only in 1960, on a complaint from a so-called rival firm producing an admittedly taxable article, that the Customs started seeking ways to change the tax liability. I claim that the liability cannot change without a legal decision and that the legal decision should come at the expense of the Customs and not the firm. If the firm is sued for tax under the new category in which the Customs has sought to put Dri-Wash cloths it would be put to a great expense to defend the case. Perhaps the trouble could be solved if my hon. Friend would produce the legal advice which the Customs claim that to have.
My complaint is that the firm is entitled to rely on the Customs ruling in 1952 unles there has been a change in the law, and from what I have said, it is clear that there has been no such change. Customs have acted in a most devious way in claiming to have made a chemical analysis when, clearly, they did not.

773
Customs have pursued this product with determination to and some way of making it taxable. When one way failed, they tried another. Will my hon. Friend consider one further point? Suppose a Dri-Wash cloth was marketed as a tax-free cloth together with a tax-free bottle of liquid, would that then become taxable?
11.47 p.m.
The Economic Secretary to the Treasury (Mr. Anthony Barber): I admire the perseverance of my hon. Friend the Member for Hemel Hempstead (Mr. Allason) in pursuing this matter in the interests of his constituent, but I think it is clear from what he said that the account which has been given to him by his constituent of what has happened falls somewhat short of the full story.
As my hon. Friend has explained, this debate arises out of a difference of view between the company G. H. Linton and Company, Limited, and the Customs and Excise about the Purchase Tax classification of some of the articles which the company makes. I must start at the beginning. The relevant group of the Purchase Tax Schedule is Group 32 which imposes a tax at the rate of 50 per cent. of the wholesale value on the generality of toilet preparations.
Mr. Allason: I can produce a copy of the Customs letter saying that it is Group 5.
Mr. Barber: I am trying to explain, if my hon. Friend will allow me, how matters have developed in the case of this company and I am quite prepared to bear responsibility for certain errors which have occurred. I am rather saddened by the fact that apparently there is no suggestion so far that the company has been wrong or unhelpful in any sense.
My point is that in fact and in law the relevant group is Group 32 which imposes a tax of 50 per cent. on toilet preparations. As my hon. Friend knows, there are some headings in the group under which a toilet preparation may qualify for a lower rate of tax at 25 per cent. One of these headings and, so far as I can see, the only one relevant to this matter, relates to:
"soap substitutes made up for sale as substitutes for toilet soap."
774
The situation in short is that if these articles are toilet preparations they are taxable at the rate of 50 per cent. unless they can be regarded as toilet soap substitutes, in which case the rate is 25 per cent. If they are not toilet preparations of course, as my hon. Friend indicated, they are not taxable at all.
There are three distinct classes of article. My hon. Friend has sent samples to me. The company markets them under several names, but I think it will be convenient if I refer to them all by the name my hon. Friend used, and call them Dri-Wash products, because that name accurately describes what they are for. The Dri-Wash tissues consist of small squares of paper tissue impregnated with a cleansing fluid. Dri-Wash cloths consist of pieces of cloth similarly impregnated and there is also a small bottle of Dri-Wash fluid, which can be obtained separately and used for re-impregnating the cloth. They are designed to enable travellers and other people to wash when no soap or water are available. I have examined a sample of the tissues and a bottle of the Dri-Wash fluid. As the statement on the packet which my hon. Friend sent me puts it, they are designed to give
"a wash in a wipe—anywhere, any time".
The packet states that they are pleasant and refreshing to the face and hands and contain glycerine leaving the skin soft and smooth. It is the contention of Her Majesty's Customs and Excise that these articles prepared for this purpose by impregnating paper tissues with special cleansing fluid are toilet preparations taxable as such.
Mr. Allason: Except for the one occasion when I mentioned tissues, I have been dealing with Dri-Wash cloths all the time. They are definitely used by motorists wiping dirty hands, making the cloth even more dirty, and are certainly not suitable for using on the face. My hon. Friend said that the relevant tax group is 32. I interrupted to say that I had a letter from the Customs. It is dated 16th May, 1952, and says:
"I beg to inform you that Dri-Wash cleaning cloth is liable to Purchase Tax at 66⅔ pe cent. under Group 5a."
Mr. Barber: I hope that my hon. Friend will allow me to give the other side, and there is another side, to this

775
account of the position. I should like to get on in the time available. I repeat that the present view of the Customs is that the relevant group is Group 32. I hope that my hon. Friend will agree that the paper tissues are toilet preparations and are taxable as such.
The Customs contend the same as regards the impregnated cloths whereas the company's contention is that neither the cloths nor the tissues are toilet preparations at all. That is the issue in this case. As my hon. Friend said, this issue has been the subject of long correspondence with him. I have written to him six times and the Financial Secretary has written once when I was away. The former Chancellor, Lord Amory, wrote to him in the early stages. In the correspondence I have tried to explain to my hon. Friend the reason for the Customs and Excise view that these cloths and tissues are taxable. In particular I did so in my letters of 10th March and 5th May this year. I do not think I have time left now to go over all the ground we have traversed in the correspondence which has passed between us, but there are some salient points I ought to pick out.
The company's impregnated cloths first came to the notice of Customs in 1952. The situation then was that, quite apart from their liability to tax as toilet preparations these articles were entitled to the relief from tax which applied generally to cloth under what was then known as the D Scheme. It may be surprising that the D Scheme had anything to do with the tax on toilet preparations but in fact that scheme provided relief from tax irrespective of the group of the tax schedule under which the chargeable article fell. So, rather fortuitously, these cloths were excused from payment of any tax at all. That was in accordance with the law as it was then.
Mr. Allason rose—
Mr. Barber: I hope that my hon. Friend will let me get on.
Mr. Allason: I still return to the same point, that Customs and Excise made the categorisation of Group 5a. I do not see how a cloth can be in two categories at once, both in Group 5a and also in Group 32.
Mr. Barber: It is quite irrelevant whether the cloths come within Group 5a or Group 32 or within any other group for the purpose of the application of the D Scheme. It makes no difference whatsoever. If my hon. Friend will look at the provisions of the D Scheme to see how it applied to these cloths he will reach the conclusion that the Purchase Tax schedule into which they fell is quite irrelevant.
Unfortunately, when the D Scheme came to an end in the autumn of 1955 the changed position of Dri-Wash cloths was overlooked by Customs and Excise; and for the next four years the company was able to sell these cloths tax free under a Customs ruling for which there was no longer any legal justification at all. I readily admit that Customs and Excise were at fault here, but, of course, the benefit of the error went to the company and, of course, there is absolutely no question of the Customs and Excise now seeking to recover any of the tax that ought to have been paid in those years.
In the autumn of 1959 the matter came again to the notice of Customs and Excise. They told the company, on the information that was then available to them, that as toilet preparations, the impregnated tissues were taxable at the rate of 50 per cent. The company objected to this and raised some points that needed further consideration.
The points to which I am now coming are very important. The Customs invited Mr. G. H. Linton to discuss the matter with them at their head office in London, but, unfortunately, he declined this invitation. In matters arising between companies and Customs this is very unusual, as I know from my experience at the Treasury. I am sorry to say that he also declined to give the Customs complete information about the position of the Dri-Wash fluid, notwithstanding assurances in writing that this would be treated as confidential. Most companies do not, of course, behave in this way.
It was by now clear to the Customs that they could not give a final ruling on the Dri-Wash fluid and the tissues without dealing also with the impregnated cloths, even though that might mean reversing the long-standing ruling under which these had been regarded as tax free. Before taking such a step the

777
Customs decided that they ought to consult their technical advisers in the Government Chemist's Laboratory as regards the composition of the Dri-Wash fluid and also their own legal advisers as regards the interpretation of the law in relation to all three products—fluid, tissues and cloths.
The advice Customs received was that all three products were properly to be regarded as toilet preparations, but that all three could be accepted at the lower rate of tax, namely, 25 per cent. as being substitutes for toilet soap. I must recall that at this stage the Customs and their advisers were working under the handicap that they had not been given a complete formulation of the impregnating fluid. I assume from the fact that this was not mentioned by my hon. Friend that he bad not been informed of these unusual circumstances.
Acting, however, on the information which they had been given and the advice which had been based upon it, the Customs and Excise wrote to the company on 14th March, 1960, and gave a formal ruling that all three types of product were taxable at 25 per cent. and that tax should, in future, be accounted for at that rate. The company, as it was entitled to, protested vigorously against these decisions, but it still remained unwilling to talk the matter over round the table with Customs and Excise.
A second invitation was sent to the company to have a meeting at Customs headquarters in a letter dated 31st March, 1960, and this was ignored. It was about that time that my hon. Friend was brought into the case. He was certainly not responsible for any of the things which happened before that. In correspondence with him, my right hon. Friend Lord Amory, my hon. Friend the Financial Secretary and I have tried to explain to him, and through him to the company, the reasons for the Customs and Excise decision. I think that, although the correspondence has been protracted, only one new substantial point has emerged from This was on 9th June, 1960, when the company gave the Customs a complete formulation of the Dri-Wash fluid and stated that no perfume was used in its manufacture.
On these new facts, the Customs consulted the Government Laboratory
778
again, which advised that the fluid could not be held, by reason of its composition alone, to be a toilet preparation. Its advice was that its composition resembled that of a household cleanser. This meant that the separate bottles of fluid, if sold by themselves, and without any clear implication in their get-up that they are intended for toilet use, could no longer be regarded as taxable. But the impregnated cloths and tissues, the get-up of which clearly implies that they are for toilet use, still remained taxable as toilet preparations, though the Customs continued to be willing to accept them at the lower rate as being substitutes for toilet soap. This minor modification of the Customs' position was notified to the firm on 6th July, 1960.
Since then the issues have been reduced to a straightforward difference of view between the two sides about the interpretation of the law. Are the cloths and tissues toilet preparations or are they not? When such a difference persists, there is ultimately only one way of resolving it—and that is by an action in the courts.
At one point in our correspondence my hon. Friend suggested that the Customs were conducting some kind of vendetta against the company. I think that perhaps there was a hint of that in some of his observations this evening. I assured him in a letter, and I repeat with great sincerity, that that is certainly not the case. I have looked into this matter with great care. I have made a frank admission that for a number of years Customs were wrong. They made a mistake. The company ought to have been taxed. I apologise for that mistake. On the other hand, it is to the advantage of the company and Customs will certainly not claim back tax. But certainly there is no vendetta against the company. The Customs have a duty to perform. They have to collect the taxes and duties which are due under the law, and it is only right that they should make proper inquiries, and if they believe that they can sustain their contention, that if necessary they should take it to the courts. I invited my hon. Friend to satisfy himself of the fact that there was no vendetta against the company by meeting the official at the Customs and Excise headquarters who has been

779
responsible for the handling of the case, but this invitation, too, did not come to fruition. I have myself made a very careful examination of the case and I am sure that there has been nothing improper in the action of Customs and Excise, although there was a mistake a number of years ago.
Mr. Allason: My hon. Friend speaks of a mistake by Customs in 1952. Was it a mistake that Customs decided that the appropriate group was Group 5a, and that it was confirmed by the Commissioners and by the Chancellor of the Exchequer that it was Group 5a? Ought it to have been Group 32 all along? I understood that once it was in Group 5a it remained there. I do not see how it can suddenly be changed without a legal ruling.
Mr. Barber: Before the D scheme relief applied the cloth would have been taxable under the old Group 5, which deals with textile articles, as well as under Group 32. If my hon. Friend will look at the notes on the Customs and Excise schedule he will see that an article could well be included in more than one group. In that case the higher tax should be applied. But the old Group 5 no longer exists. The mistake which the Customs made, and which I was frankly painting out, was that after the old D scheme was abolished they continued not to charge tax on these products, although it is clear, at any rate from the point of view of the Customs, that tax should have been charged on them.
This matter has now dragged on for well over a year, during which time the
780
company has not been paying a tax which the Customs consider is legally due from it. The Customs would be failing in their duty if they let that continue. As there is apparently no prospect whatever of reconciling the opposing views, there seems to be no alternative to putting the issue to the test in the courts. I am sorry that I should have to say this. I hope that there is still just a chance that the company will see the force of the Customs point of view, but if that is not so, I can see no alternative. I am sorry to have to put it to bluntly to my hon. Friend.
I should like to end on the note on which I started and say that I appreciate how much time and effort my hon. Friend has devoted to the affairs of this company. But I am bound to say, having given the matter, as I hope my hon. Friend will agree, fair and honest consideration, that I have reached the firm conclusion that in this case, the Customs are right in fact and in law in the contention which they are now maintaining, and have no alternative but to pursue their claim against the company.
Mr. Allason rose—
Mr. Speaker: The hon. Gentleman has already spoken to this Question.
The Question having been proposed after Ten o'clock on Thursday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
Adjourned at seven minutes past Twelve o'clock.

AGRICULTURE, FISHERIES AND FOOD
  Fenton Farm
  Fenton Farm
  Chemical Additives
  Chemical Additives
  Milk
  Milk
  Beef
  Beef
  Departmental Staff
  Departmental Staff
  Farms, North Staffs
  Farms, North Staffs
  Foreign Fishing Vessels
  Foreign Fishing Vessels
TRADE AND COMMERCE
  Anti-Dumping
  Anti-Dumping
  Japanese Radio Apparatus
  Japanese Radio Apparatus
  Film Industry (Common Market)
  Film Industry (Common Market)
  Paper Industry (Common Market)
  Paper Industry (Common Market)
  Portugal (Supply of Arms)
  Portugal (Supply of Arms)
  Common Market, E.F.T.A. and United States
  Common Market, E.F.T.A. and United States
  Local Employment Act (Applications)
  Local Employment Act (Applications)
NATIONAL FINANCE
  British Museum
  British Museum
  Travelling Expenses
  Travelling Expenses
  Schedules D and E (Expenses)
  Schedules D and E (Expenses)
  Civil Service (Late Entrants)
  Civil Service (Late Entrants)
  Smuggling (Watches)
  Smuggling (Watches)
  Payroll Tax (West Bromwich)
  Payroll Tax (West Bromwich)
  3½ Per Cent. War Loan
  3½ Per Cent. War Loan
  Provincial Theatres (Assistance)
  Provincial Theatres (Assistance)
  Archaeology (Report)
  Archaeology (Report)
  2½ per cent. Consols
  2½ per cent. Consols
  War Loan
  War Loan
HOME DEPARTMENT
  U.S.S.R. Visitors
  U.S.S.R. Visitors
  Remand Centre for Girls
  Remand Centre for Girls
  Swansea Gaol (Prisoner)
  Swansea Gaol (Prisoner)
  Police Motor Cycles (Noise)
  Police Motor Cycles (Noise)
  Commonwealth Criminals (Deportation)
  Commonwealth Criminals (Deportation)
  Departmental Staff
  Departmental Staff
  Traffic Wardens, London
  Traffic Wardens, London
  Children's Department (Report)
  Children's Department (Report)
NIGERIA
  Mutual Security
  Mutual Security
COMMONWEALTH RELATIONS
  Grants and Loans
  Grants and Loans
  Departmental Staff
  Departmental Staff
BECHUANALAND
  Okavango Swamps
  Okavango Swamps
SOUTH AFRICA
  Leuta Mahao
  Leuta Mahao
EDUCATION
  Classes (Size)
  Classes (Size)
  Agricultural Education, Wales
  Agricultural Education, Wales
  Training Colleges (Supplementary Courses)
  Training Colleges (Supplementary Courses)
  Teachers
  Teachers
  Departmental Staff
  Departmental Staff
MINISTRY OF POWER
  Kuwait (Investments)
  Kuwait (Investments)
  RULERS OF QATAR AND ABU DHABI (TALKS)
  RULERS OF QATAR AND ABU DHABI (TALKS)
  KUWAIT
  KUWAIT
SCIENCE
  Foot-and-Mouth Disease Research Institute
  Foot-and-Mouth Disease Research Institute
HOUSING
  Willesden
  Willesden
LOCAL GOVERNMENT
  Open Spaces, Willesden
  Open Spaces, Willesden
COLONIAL TERRITORIES
  Departmental Staff
  Departmental Staff
  Grants and Loans
  Grants and Loans
MINISTRY OF HEALTH
  Dentists, North Staffordshire
  Dentists, North Staffordshire
GOVERNMENT INFORMATION SERVICES
  Export Trade (Publications)
  Export Trade (Publications)
SCOTLAND
  Building Standards (Scotland) Regulations
  Building Standards (Scotland) Regulations

Preamble
The House met at a quarter before three of the clock, The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Chichester

LORD COUTANCHE
Sir Alexander Moncrieff Coutanche, Knight, having been created Baron coutanohe, of Saint Brelade, in the Island of Jersey—Was (in the usual manner) introduced.
The Marquess of Zetland—Sat first in Parliament after the death of his father.

EXPORTS TO CHINA AND SOVIET BLOC
3.2 p.m.
VISCOUNT ELIBANK: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the fact that this country is now short of some £200 million of exports to pay for all that it spends abroad, they will make it plain that they can no longer accept any embargoes on exports to China and the Soviet bloc except on munitions and items of direct military significance, thus removing restrictions which, directly and indirectly, gravely hamper our exports to these markets.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE): My Lords, as I informed the noble Viscount in my reply to his Question on April 25, United Kingdom exports to the Sino-Soviet bloc are only marginally affected by the small number of industrial items and materials on the Embargo List. The number of embargoed items is kept to the minimum consistent with our security, and, in consultation with our Allies, is under constant review in the
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light of current technological developments. Our trade with the Sino-Soviet bloc has been expanding steadily in recent years, and we hope this trend will continue. The 1960 figures show an increase of 25 per cent. over 1958. As I have told the noble Viscount, the principal limiting factor on our exports to the Sino-Soviet bloc is the amount of sterling available to them.
VISCOUNT ELIBANK: My Lords, I beg to thank the noble Marquess for his Answer. How can he say that the embargo has no limiting effect on the export trade, seeing that in the House of Commons on May 30 Mr. F. J. Erroll gave a table which showed that the spectacular increase in our exports to China from 1957 onwards from £10 to £32 million in 1960, was almost entirely in ferrous and non-ferrous metal products, special-purpose machine tools, and tractors, all of which were previously embargoed? May I ask this further question'? How long in the matter of the Chinese embargo are we to be tied to the overriding influence of America, which does no export trade with China at all but which, notoriously, is determined to put a brake on our export trade with that country?
THE MARQUESS OF LANSDOWNE: My Lords, I do not suppose that the noble Viscount did it deliberately, but he did not in fact repeat the words used. I said that our exports were "only marginally affected" I did not say that they were not affected at all. As to what the noble Viscount repeated of what my right honourable friend said in another place, it is perfectly true that the list of embargoed items is steadily decreasing. But as to whether we are in any way tied to American policy, of course, that is perfectly untrue. The members who subscribe to COCOM are the members of N.A.T.O., minus Iceland and plus Japan. These members together agree what items should and should not be on the embargo list; and the items which are on the embargo list are the items which it is the considered view of the members could endanger the security of the countries concerned.
VISCOUNT ELIBANK: My Lords, but even so, that reinforces my argument that it is for Great Britain to go all out to put an end to this embargo. With regard to America, the noble Marquess

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said it was perfectly untrue. But it is just common knowledge that America has an overriding influence in this matter.
THE MARQUESS OF LANSDOWNE: My Lords, the noble Viscount is very persistent. I think that I must remind him of this—he knows it just as well as I do, because he has studied the question—that in fact the limiting factor is shortage of sterling, and really there is nothing more to say on this matter.
BARONESS SUMMERSKILL: My Lords, in view of the noble Marquess's assurance on this matter, are we to understand that this very long list in the Journal of the Board of Trade for May is now quite out of date and that it has been substantially reduced? Can the noble Marquess tell us what things have been taken out of that list?
THE MARQUESS OF LANSDOWNE: My Lords, I cannot anticipate for the noble Baroness what will be taken out of the list, but I think I said on a previous occasion that items are taken out, and also added, according to technological developments. The list at the moment stands at 118 items. In the middle of August it will be published, but I cannot tell the noble Lady exactly what figure it will stand at then. I hope that is fairly clear.
VISCOUNT ELIBANK: My Lords, is the noble Marquess aware that the shortage of sterling is a wonderful slogan, but it is not the governing factor in the situation?

DRIFT-NETTING OF SALMON
VISCOUNT ELIBANK: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are now in a position to announce measures, legislative or otherwise, to put an end to drift-netting for salmon off the Tweed and other parts of the Scottish coast.]
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD CRAIGTON): My Lords, I can assure the noble Viscount
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that the Government's consideration of this matter is proceeding with all possible speed and that an announcement will be made very soon.
VISCOUNT ELIBANK: My Lords, can the noble Lord say what is holding up these negotiations? Is it that England is lagging behind Scotland in the matter? Another question I should like to ask is whether the noble Lord realises that, unless steps are taken to bring about the cessation of drift-netting for salmon, British salmon could become extinct within the course of a few decades? May I ask him this specific question? Would not regulations to control the marketing of salmon, involving a declaration of the source of supply, go a long way towards removing the incentive to fish for salmon outside the present legal limits? That is a definite suggestion.
LORD CRAIGTON: My Lords, I can assure the noble Viscount that in this, as in all important matters, our two countries are as one: there is no difference of opinion between Scotland and England. As regards the question of salmon being extinct in a few decades, that, of course, is a very important matter, though I doubt whether I would go so far as the noble Viscount. As regards the noble Viscount's third question, I think that he would be wise to await the announcement.
LORD FERRIER: My Lords, with all due respect to my noble friend Lord Craigton, "very soon" seems far too indefinite. Is it possible for him to give us something more specific?
LORD CRAIGTON: My Lords, I hope before the end of next week.

BARLEY PRICES
LORD WISE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government if, in view of the arrangements made for the importation of Russian and other barley, they are prepared to take steps to ensure that the price to be paid by purchasers of home-grown barley of this year's harvest will not be lower than the minimum for imported barley of similar feeding quality.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): My Lords, the action which the Government has recently taken on dumped or subsidised imports has already brought about a significant improvement in the market for home-grown barley. There is every reason to hope that the price of homegrown barley delivered to port mills will keep broadly in line with that of imported barley of similar quality, provided growers do not overload the market with supplies. This season, growers have an incentive to spread their sales more evenly throughout the year under the statutory arrangements which your Lordships approved on 26th June last.
LORD WISE: My Lords, while thanking the noble Earl for ibis reply, I am afraid that I must disagree with the suggestion that the price of barley has risen to any considerable extent. Is the noble Earl not aware that the price of feeding barley 'at the present moment is at least £2 a ton less than the price of imported barley of the same quality? If that is so, is it not a case of,exercising some sort of control over the prices of English barley so that the farmers should not suffer and the taxpayer should not suffer by having to pay high subsidies by reason of the low price of barley at the present time?
EARL WALDEGRAVE: My Lords I am not sure that I mule agree with the noble Lord about the price. My information is that at Mark Line on Monday, July 24, homegrown feed barley was being gold for £19 to £19 15s. per ton delivered to port This price is at least 30s. per ton higher than it was a month ago and 50s. more than seven weeks ago. When we are considering the prices of imported barley we must remember that they are generally quoted as at port c.i.f., and there is a 10 per cent. duty on top of that price. If, for instance. barley is quoted at £18 per ton c.i.f. at port, after a 10 per cent. duty £1 16s. has to be added to that.
LORD STONHAM: M Lords, can the noble Earl say whether, if prices of home-grown barley fall appreciably below the price of the Russian imports, the Government will take steps?—because it is unanswerable
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that if British barley prices fall too low, the taxpayer's subsidy will go up and the Chancellor will then say that the cost of farm support is too high.
EARL WALDEGRAVE: My Lords, any Government control over the market price for home-grown barley would require a major change in the Government's tree market policy and the system of agricultural support by deficiency payments which is associated with that policy.
VISCOUNT ALEXANDER or HILLSBOROUGH: My Lords, would not the noble Earl, from his knowledge of the matter and knowing 'the difficulty that farmers have had this last sowing season, when they have poured more barley in than they would have done if they had had a suitable winter growing season, agree 'that there ought 'to be some measure for keeping out foreign barley until what you have at home—and this will help your balance of payments—is properly absorbed in the British market?
EARL WALDEGRAVE: My Lords, 1 think we have really gone a long way in this. I would remind the noble Viscount of what my right honourable friend the President of the Board of Trade has done. He announced in another place on July 7 that he had been discussing this question of imports of barley with the suppliers, the exporting countries, and as a result of their assurances he was not going to impose at the present moment anti-dumping duties, but he had assurances that no new contracts would be made at a landed price of less than £20 a ton. That surely meets the position.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, I should have thought: that, if you were really watching your balance of payments and recognised what a powerful factor British agricultural products now are in the;balance of payments, if you had more available here, you could keep a lot of the other out.
LORD WISE: My Lords, may I point out to the noble Earl, in view of what he said about the present price of barley, that he was quoting Mincing Lane prices. But the farmer gets the price on the country market, which is sometimes very much less than the Mincing Lane price; and it is at present.
EARL WALDEGRAVE: My Lords, as the noble Lord will know, the Working Party on Feeding Barley on which the merchants, compounders and growers are represented, issue each Friday an indicated ex-farm value for home-grown feeding barley of fair average quality and 16 per cent. moisture content, and the present ex-farm price is 18s. 3d. per cwt. or £18 5s. 0d. per ton. If you compare that with your port price you will find that, allowing for delivery costs, it comes to very much the same thing, £19 or more per ton.

BUSINESS OF THE HOUSE
EARL ST. ALDWYN: My Lords, I should like to inform your Lordships that, in view of the number of speakers to-day, dinners will be available, but it would be a great help if your Lordships could warn in as early as possible.
GREAT OUSE WATER ER BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
BRITISH TRANSPORT COMMISSION (No. 2) ORDER CONFIRMATION BILL
Read 3a (according to Order), and passed.

THE ECONOMIC SITUATION
3.16 p.m.
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM)THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM) moved to resolve, That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for the purposes of upholding the strength of sterling. improving the balance of payments, and maintaining a sound basis for the continuing prosperity of the nation. The noble and learned Viscount said: My Lords, I rise to move the Motion standing in my name on the Order Paper. I do so with a great sense of responsibility and a considerable feeling of personal inadequacy to cover a matter of so great a moment. But I have never moved a Motion as to which I felt a greater confidence that the thing I am trying to do is something which it is our duty to perform.
It is only a few days since we held our debate upon the Finance Bill, and the arguments then used on both sides of the Chamber will be familiar in our memories. The statement made by my right honourable friend the Chancellor of the Exchequer is fresh in our minds and your Lordships will not expect me to rehearse it. Moreover, I feel certain that your Lordships would not wish the debate we are holding in our House to be simply a replica of the proceedings in another place. It may be that we have a distinctive and, in some ways, as important a task to perform, because it is, I think, all too easy in matters of this complexity to lose one's way in the thicket of facts and figures, to travel for hours in the rather dismal fog of Party and political recrimination, or to tread the well-known treadmill of economic argument.
But I am convinced that the thing which needs most to be said to-day is not something dark and mysterious, bidden in the recesses of a professorial mind, but something simpler—something that everybody knows to be true and everybody knows needs to be said. To me, at least, the issue is not economic; to me the issue is moral and political. It is not primarily a question of the pocket; it is primarily a question of the heart and head.
I begin with the moral imperative imposed upon us by the international situation. It was only last week that we held our debate on foreign affairs. We heard my noble friend describe the situation in which we were living as one of international anarchy—terrible words to be used by a responsible Minister of the Crown; and all the more terrible because they were generally acknowledged to be true. I have the conviction that we live and move in the context of tremendous events, in a critical phase in our history which will make demands upon the wisdom, the courage and the compassion of us all.
Do we wish that this country should have something to say in the events of the coming weeks and months? Can we leave foreign affairs simply to the foreigner? It is my conviction—I know it is the conviction of the House—that in this coming period of uncertainty and difficulty the voice of Britain should be distinctly and clearly heard—calm, wise, grave, moderate and moderating. Do

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we wish, or do we not, that this should be the case? For if we wish the end, we must also wish the means whereby the end can be obtained. I think that more than a little of the authority with which this country's voice will be heard will depend upon the mood, the resolution, with which the House, with which Parliament, with which the country, face the present proposals of Her Majesty's Government. If it were some great thing that the people were asked to do for their country, I think the volunteers would flock forward in their thousands. Men have died, they have fought, they have travelled the deserts, the seas and the air, to play the part of heroes. What is now asked is only a little thing, small in comparison.
We all know what hat; happened. We all know what requires to be done. We know—and the facts are beyond gainsaying—that over a period of years our national economy has grown annually by 2 per cent.; and the amount we have taken out of it in money incomes by 6 per cent. And the figures for the last few months show a rate of annual growth of 3 per cent. and 8 per cent. respectively. We all know that the demands of money incomes have been in excess of what the economy will bear, and have been at the expense, therefore, of one n o ther. We know that this cannot go on. Is this too great a thing for Britain to put right quickly? Is it too much to ask of a people that endured the years of war?
My Lords, in one set of circumstances it is not only too great a thing; it is impossible. If each ma n looks at his neighbours' burden and says, "This man's burden is lighter than my own. I will do nothing until it s shown to my satisfaction that his burden is made as heavy as mine", it is impossible. We shall wait, and we shall be devoured. A man never tries to be fairer than when he is dealing with his own family. But when one's child raises the cry, "It is not fair", one knows instinctively that, however unworthily, one must remind him of an old and more excellent doctrine than the exact equality of burdens. There has been a time in our history when to be in danger is to be in a position of honour; when the logic of events, strange whims of chance, or even the mistakes of one's superiors or comrades, have placed one in a position of
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added burden that has been considered a privilege to be eagerly embraced. And until, in the ordinary conduct of our economic affairs, we can recognise that this alone is the way upon which a modern society can endure, we shall find that it is too much to ask that people will bear what they need to bear in order to put an end to the situation in which we are now placed.
But, my Lords, it is not a great thing which is being asked of us. To talk of austerity is a misuse of language. In a country which enjoys a national income of £22,000 million a year, better distributed than it has ever been in the course of our history, to ask for a certain degree of personal restraint is not a high request to place before a great people. To talk of tightening our belts when we all know that the trouble is that we have let them out a couple of notches a year, and that that is the cause of our misfortune, is to be guilty of complete deception. The trouble is that we could put this thing right in six weeks if we wanted to, and if we were determined.
What picture do we want to present to the world by September or October of this year? A people angry, distracted, squabbling over matters of the pocket? A people driven to borrow on short-term and not prepared to put its house in order? My Lords, I refuse to believe that this, is the true spirit of the British people. Yet I think it would be absolutely wrong if we were to-day to join in the general orgy of self-depreciation and self-reproach by which this controversy has been marked. We have not devalued our moral standards in any part of this country. If we have a balance-of payments problem, as we have, it is of the order of £350 million a year. If you add the money which we are paying across the exchanges to keep our troops in different parts of the world, including Germany, to the money which we are paying across the exchanges to help those countries which are called underdeveloped, you get a deficit of about £350 million a year. If we cared to renegue upon our responsibilities or our moral obligations, we could enjoy all our "I'm all right Jackery" without the smallest degree of balance-of-payments problem, so long as the world lasted and did not fall about our ears.
I sometimes think that people are a little too ready to take Britain for granted. We have since the war deliberately set upon a course of action which in some ways makes our economic life more difficult. We have introduced and maintained a generous system of social security; we have pursued, even at risk, the persistent policy of full employment. Many of our problems would be easier if we did not care to carry these burdens. Is it too much to ask that we should set national efficiency as the third of our great national objectives?
My Lords, I refuse to believe that Britain is standing in the second place of the world's economy. I spent, as many of your Lordships may have done, some hours of recent weeks looking at the Soviet Exhibition. I do not wish to depreciate or to underestimate the achievements over 40 years of the Soviet Union. I sent the scientists from all the Councils for which I am responsible to look at what they have been doing, but the universal judgment is that we are not behind except in fields very closely connected with defence, which we have deliberately chosen not to enter. Our scientists and technologists are equal to the European, even to the American. But of course science and technology are not a substitute for good management, good labour relations or hard work; an honest facing of the facts of life.
I refuse to believe that Britain is not a good investment. No one has ever got rich by selling Britain short. I look about the world—Europe, America, South America, Asia and Africa—and there is no place where your money is going to be as safe. There is no country which is fundamentally more socially homogeneous, more technically capable, and ultimately more sure to possess an honoured part in the economy of the world.
My Lords, there is one more intimate thing that I hope your Lordships will allow me to say, and I know that the noble Lords opposite, although they will not agree with it, will bear with me. It has been said that the present situation is inconsistent with the prospectus, as it is called, whereby the present Government secured power at the last Election. I have never before spoken of it, but the fact is that I, as much as 'any other man after the Prime Minister, was
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responsible for fighting the last Election. It is not for me to say to what extent, if at all, I influenced the result, but I Should only like to tell the House this.
The whole campaign as I envisaged it, as I tried to carry it out in the speeches in the country and by any other means in my power, was built around this doctrine. It would have been easier, perhaps, to say to people, perhaps particularly in my own Party, that we promised great reductions in Government expenditure, immense prosperity, easy going and higher wages. What I did say was this. I said that this country needs investment; it needs schools; it needs roads; it needs hospitals; it needs an education service equal to the demands of the present age; and every penny of the capital we can put away to those purposes will be money well spent. But I added that we should need every penny that we can put away to carry out even the modest programme which we then promised; and I added that my one worry 'was lest we should have engaged in that respect to do too much.
My Lords, When I criticised the Party opposite, as we all at Election times criticise our opponents, it was not on the grounds that they did not want the same objectives: it was precisely because the programme which they had put forward, in addition to claiming to provide these things, which all are agreed are necessary, engaged also to purchase with public resources vast assets of existing industries and of houses, and to make vast personal payments by way of welfare services, adding Iv to a total expenditure which I was quite certain this country could not carry. And if anybody wants 'my candid opinion as to why we won, or why we won by the extent we did, I would tell him frankly that it was nothing I said, but that at a certain point the leaders of the Party opposite felt it possible to say that all they engaged to do would be done with a reduction of taxation and without any other cost to the economy.
Now, my Lords, we differ about these things, and I mention this fact not to resurrect old controversies but because I feel that if people say we won on a false prospectus my honour as a servant of the public in involved. Looking back, searching my conscience, there is not a word, I think, of what I said then that

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I would not say again. And if we are to work together, as I hope we may without offence to one another, noble Lords opposite will recognise that we must work together in the knowledge that both sides are sincere.
My Lords, the present situation demands three things. It demands a plan to contain our present inflationary tendencies—that is, a shore-term plan. It demands a plan to control Government expenditure within the size permitted by the growth in our economy. And it demands a much longer-term plan for the expansion of national efficiency, on the lines I tried to indicate some days ago in the Finance Bill debate. I use the words "national efficiency", rather than "national productivity", for one reason. We have to remember, of course, that the whole of what we can gain by way of a raised standard of living comes from the product of industry. But efficiency in administration, efficiency in the public service, efficiency in other services, is no less part of the campaign we must wage than the direct production of goods for the purposes of export, and those who contribute to it play as important a part in the national life as those who increase the national economy by their direct efforts.
Of those three plans each is a vital part. As I tried to indicate the other day, it will not be enough to contain our present tendency to inflation this time unless we make up our minds not to go back to the recurrent series of crises which have plagued a series of Governments since the war. But, equally, if we do not contain our present tendency to inflation it will be impossible to carry out the longer-term plan.
The third part of the plan, the need to contain Government expenditure itself, is a necessary part of the other two. We cannot carry the conviction we need to carry, when we say that in the private sector money incomes must not expand more rapidly than the national growth will permit, unless we contain public expenditure, too, within that limit. Nor can we contain present tendencies towards inflation unless we begin to put in that plan at once.
Here may I say something about the teachers? It was one of the happiest experiences of my life—though it was only for a very few months to he Minister of Education. I think I can say
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that my relations with the teaching profession were happy. I came to respect them, and I more than once enjoyed their hospitality and kindness. There was one thing I learned about them: their passionate desire that their vocation in life should be thought of as one of the great professions. Of course one wants to see such men and women adequately rewarded. It so happens that they, in common with very many other professional and industrial organisations, have a pay claim, the cost of which to the country out of public resources would be £100 million a year. And the cost of the tentative award would have amounted to £60 million a year. What would have become of our appeal in respect of money incomes if this had been allowed to go by without comment or without abridgement? How could people say that we were in earnest?
I would only say this, and I would wish to say no more; and I say it, I hope, without any desire to say anything in bad taste. I think I know the spirit of gratitude and generosity of the people of this country. If the teaching profession thought it right at this juncture in our history to say, "It is reasonable that some part of our claim should be moderated, as our contribution, as our part of the burden", they would win, I am absolutely certain, a position for their profession in the life of the country, a moral ascendancy, and a right of gratitude on the part of their fellow countrymen, which would stand them in good stead for maybe a generation to come. The opportunity is there, and I hope and believe that they will take it.
The important part of these proposals, from my point of view, is necessarily the long-term plan. I know, of course, that in a statement of the kind that my right honourable friend made in another place two days ago it is inevitably the short-term measures which get the headlines, the credit restrictions, the 10 per cent. regulator, the bank rate; and it is proper, of course, that these things should be hammered out in argument in another place. But I am afraid that the longer-term implications are by the like token disregarded. I should like to say a word about those, too, because they are there; they are not left out, and they are not less important, just because they occupy a less prominent place on the front pages of the newspapers.
It is not simply that various investment and depreciation allowances remain in the taxation structure; it is not simply that the investment programmes of the nationalised industries have not been attacked; it is not simply that in dealing with public expenditure a solid attempt is being made to preserve public investment to an extent not before attempted in crises of this kind. It is that the whole conception of the thing rests upon an appeal to 'the country, to industry—and to both sides of it—not merely in money incomes (those are crucial, and Ito those I will return) but in the setting of targets, a 3 per cent. annual increase for the gross national product, and a 6 per cent annual increase for exports, rendered absolutely necessary and of first-class importance by the loss of our invisible trade.
Those are the things, I hope upon which this House and the country, after the immediate debate is over, can fully co-operate and will concentrate. I cannot believe that either side of industry will venture to disregard the appeal to co-operate in these times.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, may I ask a question? I want to be quite clear, and what the noble Viscount is saying now is very important. Do I understand that the target that he thinks not impossible is this; to aim at 3 per cent. expansion in production as a whole and to expand exports out of that by 6 per cent.?
VISCOUNT HAILSHAM: I think those were the figures given by my right honourable friend, and that is what I intended to convey. The other thing that I wish to emphasise is that these things cannot be done by Government alone; they cannot be done by one side of industry alone. They demand the support of public opinion at every stage, and they will take place only after the careful discussion between the two sides of industry and the Government which my right honourable friend has in mind. May I just say this in passing, lest there should be any mistake about it? It has sometimes been said that our desire to contain public expenditure is an example of what has been called the classic bias of persons of my political complexion against it. May I assure the House that this is not so. It is simply the urgent
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necessity Ito contain all forms of expenditure within the rate of growth of the national product.
I turn now to the more immediate proposals: the rise in the bank rate, the credit restrictions, and the 10 per cent. regulator. I should like, if I may, to deal with just one general criticism which has been made of them and it has been made, I think, in all quarters and by persons of all political complexions. They have asked: are they not inflationary in themselves? The bank rate puts up perhaps rents, certainly rates of borrowing by local authorities and by private persons; the 10 per cent, impost (it is said) will add to the cost of a whole range of commodities, including fuel; credit restriction will make it more difficult to keep things going, perhaps, in exports—are not these things in their nature inflationary?
My Lords, I see the force of that argument, but may I just say this in answer to it? If we argue on those lines about short-term remedies, we accept defeat. If we once assume that what has happened is that too much money has been getting into the economy; if we concede, as it must be conceded, that the short-term remedy must be to take some part of it out; and if we concede that every time we increase the cost of anything or make things more difficult to buy we shall be greeted with a demand for more wages which must be met: then we had better not set about this business at all. It is because we refuse to concede that last proposition that we have confidence that the short-term part of the package will work. But in the end, everything depends upon the appeal with regard to money incomes. I say "money incomes" because I include profits and dividends with wages and salaries.
I do not want, at this stage of what I am afraid has been a longish speech, to engage noble Lords opposite in controversy on matters which have been debated before; but I should like, if I may, to say a word to them about tax-free profits and profits generally, not by way of substitution but by way of addition to what I said the other day. In a sense, we do not want to stop the man who exports, the man who improves efficiency, from earning profits, subject to his bearing the proper proportion of taxation. But, of course, one recognises

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that, in an economy with a tendency to inflation, paper values of assets will tend to rise unhealthily. The honest man who bought a house in 1946 on the fringes of London, to live in with his family, will find that that house is, at least on paper and if he cares to sell it, worth a good deal more than he paid for it. In a sense, that is a measure of the rise in prosperity of the country. In a sense, it is an unhealthy feature of an inflationary economy. In either case he has done nothing wrong, and indeed he has made no money—he has a paper profit on an asset he wishes to retain. Surely the only way to deal with that is to attack the malady and not the symptom —to attack inflation and not its consequences, so as to ensure a generally healthy level in the value of assets throughout the country.
But, of course, there are people who indulge in speculation just as there are people who indulge in horse-racing. I should like to say a word about the taxation of their gains. It is legitimate for noble Lords opposite to ask what is being done about that. Any source of money which can be taxed efficiently and without injustice is a legitimate source of inquiry when we are asking for sources of taxation to raise money for public purposes. There are people who go quickly in and come quickly out of a speculation, who cash in on the rise in paper values and turn it into money. Incidentally, they may do it by selling short as easily as by buying in advance. There is no reason why they should not be taxed, and my right honourable friend has promised that the resources of the Treasury will be devotee. to finding a way of doing it.
There is another point which I think it is vital to make. My father, who was, I think, one of the best lax lawyers of his day, maintained that people who carry on a business in the buying and selling of assets which other people treat as capital assets ought to have their profits taxed as much as people who carry on business in the sale of tobacco and cigarettes. It is purely confusing, so he said, to treat their working capital and their stock as different from the stock of any other business, simply because most people treat similar articles as capital and not as working capital. Their profits are profits, and he always maintained that, even under the existing
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tax law, they ought to be brought in. I was glad to hear my right honourable friend say the other day that he will try to find one way or another of ensuring that that will be so.
My Lords, I want to end on this note. The ultimate choice of this country is to combine on the definition of national efficiency, in the sense in which I have tried to explain it, or suffer the penalties of national frustration. I realise that in what I have said there is an element of what has come to be called, sometimes with scorn, "government by exhortation". But I maintain that exhortation is a necessary part of the machinery of modern government. It is resorted to by the free countries. It is resorted to—not less, but rather more—by countries which are not free. Exhortation is part of the business of leadership.
I notice on the Back Benches of this Chamber the noble and gallant Field-Marshal who led our armies at Alamein. He was backed by the terror of the battlefield, the power of court-martial, and all the forces and tradition of military discipline. One of the things which made him a great commander was that he realised that, with all these things, he would still not be able to achieve his military purpose without exhortation of the private soldier. What is needed in this country is the knowledge that each private soldier in the battle for national efficiency is carrying out a worthwhile national plan in his own part. What is needed is the belief that it is a privilege to serve in such an army and to bear burdens in such an army.
To end, what this country needs is a knowledge of the one economic truth which no man can forget except at his peril—so simple that a child can remember it, so true that a lifetime of experience cannot better it: it is the economic and moral truth that "Man does not live by bread alone." My Lords, without the recognition of that truth the people perish. I beg to move.
Moved to resolve, That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for the purposes of upholding the strength of sterling, improving the balance of payments, and maintaining a sound basis for the continuing prosperity of the nation.—(Viscount Hailsham.)
4.0 p.m.
LORD PETHICK-LAWRENCE LORD PETHICK-LAWRENCE moved, as an Amendment to the Resolution, to leave out all the words after "House", and insert:
"Considers that the proposals outlined by the Chancellor of the Exchequer on 25th July, dealing with the economic situation of this country, besides being unfair, disclose no constructive policy and are not calculated to secure the wholehearted co-operation of the nation."
The noble Lord said: My Lords, all of us listened with great interest to the speech of the noble Viscount, who has covered a very considerable ground and who has merited our attention in so doing. I should like to make it perfectly clear at the outset that I do not resent his introducing the moral aspect of this question, because I think that in the last resort the moral aspect is of great importance in considering the prospective value of one's duty to one's country, one's duty to oneself. In so far as the noble Viscount has stressed that aspect I certainly shall not take exception to what he has said.
But against that, I feel that in order to support this Motion he has to relate that moral aspect to the facts of the situation. Personally, I do not think that that part of his speech was in any sense proved. I do not consider he related the moral efforts he desired us to make with the facts of the statement which he has supported by his Motion. On the other hand, I do not think he has laid any claim that his Party has sustained the moral truth which he has ventured to put forward. The view in my Party as to what the attitude of his Party has been would be an entirely different one. Before I sit down, therefore, I propose to move an Amendment to his Motion, to leave out all the words after "this House" and insert the words that are on the Order Paper, which I expect most of your Lordships have read.
What I should like to do is this. I should like to put three questions. The first question is this: has there been, and is there still, in any sense a crisis? I should answer that question by "Yes" and "No". I would say "Yes" in the sense that there is a situation in this country which is of very serious import, and unless that situation is removed we
1104
are in a very bad way indeed. If the question were asked whether that crisis has arisen in the last few weeks or few months, I should answer, "No". I consider that such a crisis as there is has been going on for a very long time. I would say it owed its origin to the false attitude which has been put before the people of this country; and I would say, further, that we have been lulled to rest in this country by certain quite incorrect assumptions.
One of the things that have happened in the course of the last few years in this country is that we have profited on paper, and to some extent in reality, by the enormous change in the value in the terms of trade. We have succeeded in cashing in on entirely changed terms of trade between ourselves and the countries producing raw materials, with the result that, without knowing what has been happening, we have succeeded over the last few years in enriching ourselves and in meeting the balance of trade by means which were perfectly legitimate, no doubt, but which misled us into imagining that we had a permanently advancing situation. We had not. We had a situation which depended upon our gradually taking over the profits of some of these countries producing raw materials.
In the second place, we have deluded ourselves into thinking that a high bank rate enables us to have a profit which we can spend. Everybody who really thought about it carefully knew perfectly well that it was not an expendable profit because it consisted of "hot" money. "Hot" money came here because of the high bank rate, and if the bank rate was not further raised or if it fell we were going to suffer from the losses of money we had had the benefit of for a time. So for two reasons we were deluded into a state of selfsatisfaction—one owing to the change in the terms of trade and the other owing to the position of "hot" money—and into a belief that we were in a much better position than we were.
The crisis, or whatever you like to call it, that has now burst upon us is a sudden realisation of the true facts of the case. I have been preaching from these Benches, time and time again—and the noble Viscount is quite aware of it—that the situation was a very serious one and needed to be attended to carefully.

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The Government have waved it off on the grounds that we were going along quite satisfactorily and could afford to make all sorts of reductions in taxation. And now we have come to face the true facts. That is so far as the crisis is concerned.
The second question I want to ask is: what is there about these proposals which is really going to solve our difficulties and get us out of our difficulties? I was rather interested in the speech of the noble Viscount. He swept aside all of what he called the short-term remedies and said that the really important things were the long-term remedies. They have been so obscured by short-term remedies that up to the present time I am not very clear what precisely they are. I realise that the Chancellor of the Exchequer has not yielded to some of the things to which he might have yielded. Ore was to reduce the investment allowance. Then, again, one of his regulators way a proposal, as your Lordships know, to have a poll tax on all the labour in industry; and that has been so universally condemned, in-chiding condemnation by Members of his own Back Benches here, that he has very wisely got rid of it.
What is left? I am not very clear from the noble Viscount's speech precisely what is left. According to him, there is a great deal of real advantage to be obtained. But, on the short look at what has been done, it is a question of the old doctrine over again. I know very well that in America at the present time many people are taking what they call tranquillisers. We have been given tranquillisers for a long time past in this country and we have been put off from giving attention to the great gravity of the situation by its being pointed out that things were going fairly well. It seems to me that to a large extent these new proposals of the Chancellor of the Exchequer are—I will not say a lot of tranquillisers, but there is the same kind of (lope that we have been put off with all the time.
Take the question of: nigh bank rate. I do riot want to drag in high bank rate on every occasion, but the fact is that the Chancellor of the Exchequer said, and the noble Viscount admitted it, that to a certain extent the nigh bank rate has and inflationary effect. It tends to send up the value of prices; and, there-
1106
fore, so far from improving the immediate situation, making things better and making us more competitive, it is going to do the exact reverse. Putting up the bank rate, restricting credit and putting up prices here is all going to make us (at this time, at any rate) less competitive. Therefore, when I relate the noble Viscount's moral arguments, about which I am not complaining at all, to the facts which are in the Chancellor's speech, I find that they are at variance with one another. I understand the noble Viscount's point of view, but his arguments are to a large extent at variance with the facts as they are brought home to us.
As far as I can see, therefore, so far from making us more competitive and enabling us to get into the world and to expand, the proposals of the Chancellor are to a large extent of exactly the reverse character. They are going to make it harder for us to compete. By restricting credit and restricting enterprise, they are going to make us more stagnant than we were. I have preached in this House, time and again, that our progress, and productivity if you like, or the enterprise of this country, is far below that of practically all the advanced countries of the world, and I cannot see anything in the new scheme brought forward by the Chancellor of the Exchequer that is going to help. On the contrary, it is going to make us less competitive; it is going to increase our stagnation; it is going to do all the things which seem to me to be likely to frustrate British enterprise and stop us getting on with the job.
Let me take another thing. I have argued, and some of my colleagues in another place have argued, that we are lagging behind in the matter of planning. I see no forward step by the Chancellor of the Exchequer to set the economy in greater motion by planning. I see none of that. On the contrary, I see the same old dope, the same old quack: medicines put forward as those that have been in the offing all this time, and which, in my opinion, have not succeeded in their purpose.
That brings me to my last point, and it is one at which Members opposite will not be surprised. I think we are today in the position of having to face this business for a long time. We have

1107
got to stiffen the backs of the people of this country. We must make them realise that if they want to be a great nation they must be worthy of being a great nation. They must be prepared to make sacrifices, and they must pull themselves together and work harder. But you cannot do that all on one side. If you are going to do that, you must make an appeal to people all round.
Now the noble Viscount cannot get away from the fact that in the Budget as a whole an enormous reduction of taxation was made in respect of the earned-income surtax payers, and that has remained in the minds of the working people of this country as a very unfair division of release from taxation. The Chancellor of the Exchequer will not be able to make an effective appeal to the working people of this country so long as that remains the principal feature of the Budget that was introduced last April. The Government cannot expect to have a united people behind them while they limp under that cloud of unfair discrimination by way of relief to one certain class of the population and handicap on the other. I cannot see how the Government can get out of that. Nor can I see how the Chancellor of the Exchequer's proposals can be accepted in this country so long as they suffer from that lamentation.
I therefore shave no alternative but to move the Amendment which stands in my name on the Paper: first, because there is no relation between the moral precepts which the noble Viscount has put forward and the concrete proposals which the Chancellor of the Exchequer has laid down; and, secondly, because there is no relation between the principles of equality as shown by the taxation of different classes of people and the principles Which come to light from studying the Chancellor of the Exchequer's proposals both in the Budget and since. I beg to move.
Amendment moved—
Leave out all the words after ("House"), and insert—
("Considers that the proposals outlined by the Chancellor of the Exchequer on 25th July, dealing with the economic situation of this country, besides being unfair, disclose no constructive policy and are not calculated to secure the wholehearted co-operation of the nation.") —(Lord Pethick-Lawrence.)
4.18 p.m.
LORD REA: My Lords, we have got to the position where, although we are officially discussing the Amendment, we are in fact, of course, discussing the substantive Motion together with the Amendment. Your Lordships may know that in another place the Liberal Party put down a second Amendment to the Government's Motion which, in terms, was very similar to that of the official Opposition. My friends and I on these Benches have thought it unsuitable to weary your Lordships with any second Amendment from our Benches. Therefore, I think I may say that we are generally in support of the Amendment proposed by the Labour Party through the noble Lord, Lord Pethick-Lawrence. I do not think our own Amendment would have differed very much from it, though possibly in one slight verbal context. I see there is the rather archaic phrase that the proposals
"are not calculated to secure the wholehearted co-operation of the nation."
I should have thought that they were certainly calculated to secure the cooperation of the nation, but in my opinion the calculation was a bad one and they will not in fact do so.
My first reaction to the Chancellor's statement, and I think the reaction of my colleagues here, was one of surprise at the inadequacy and lack of attack in the statement which he made. In this House we have had a most interesting speech from the noble and learned Viscount the Leader of the House appealing to our moral and idealistic side. I must say that I found myself in almost complete agreement with him in everything he said. Oddly enough, I also found myself in agreement with the noble Lord, Lord Pethick-Lawrence, who really did not differ very much from the noble Viscount in principle. Where I feel that. I must to some extent criticise the Government side is that we have been told by Ministers and in the Press, and we have gathered from our own observations, that things are in a bad way—a very bad way. Statements of Ministers lately have indicated to us that something very drastic was going to be done, and that we were in a parlous state. This mountain brought forth a mouse, and it seems to me that this mouse was a Treasury-minded mouse, rather than a comprehensive mouse.

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I think the public were: keyed-up over the last week or ten days for something much more stringent from the Chancellor of the Exchequer. Most of us found his statement completely unfundamental and with no dynamic approach; there was nothing that one could find very inspiring about it. And worst still—though I do not attack it too severely—it had no positive aim. It was all a question of restriction, of restrictive practices, and of cutting them down. After all this cry of "Wolf, wolf!" from the Government, I feel that the public's confidence has been considerably sapped by what has in fact eventuated. I would suggest that there are two con elusions: either that the Government overrated the seriousness of the position—and after listening to the noble Lord, Lord Pethick-Lawrence, I think that unlikely—or, secondly, that although recognising the seriousness of the situation, they have not dealt with it in a really adequate way.
The Government talk of plans. The right honourable gentleman, the Chancellor of the Exchequer, specifically says that he is not afraid of the word plans"; but we on: his side of the 1-louse are—on the part of the Government—very much afraid of the word "plans". Surely, we elect a Government—we do not personally, but Governments are elected—on policy and manifesto—which is based on a general plan to go ahead. We are sometimes a little alarmed when we hear of three-year plans, five-year plans, plans which have not originally come into the programme of the Party concerned and which are very difficult to see through to the end, as the noble Lord. Lord Pethick-Lawrence, said.
As a very small instance of that, we found, only a few days. perhaps a week or so, ago, the Postmaster General's heart was bleeding for us because we were spending too much as telephone users, and instead of having to spend:3s. 6d. to speak from London to Newcastle, he made us tie great gift of enabling us to speak from John o' Groats to Land's End for two pence. It would be a very short conversation, but there it was; it was to help the telephone users; we needed assistance. Then, only this week, the Postmaster General came along again and said that he was very sorry, he could no: make ends meet,
1110
and the telephone users would have to pay more for rental, and there are now these increased charges in other ways. That is only a small example of the come-and-go, push-and-pull, policy which I think really underlines the fact that there is very much this wrong planning.
In the present matter which we are discussing it seems to me essential that we should not regard imports in general overall as "necessary evils". 'They are not an evil. Surely, they are only a complement to exports. If you have two children, one ailing, either by being puny or too tall and scraggy, and the other healthy, you do not suppress the ailing one because you do not like its looks. The trouble is, as the noble Lord has said, inflation itself; more money wanted all round without more production. I, for one, do not blame the trade unions alone for the raising of wage levels which has gone on all through; I would blame also the employers, who raise the prices of their products, with no related increase in quantity or quality, just to be in a position to give higher wages for the same production. It seems to me a wrong thinking on both sides of the fence in this matter. The Government surely could control the price of essentials.
But, instead of that, what are they doing? First, they are really keeping down wages in the categories 'which are in their control, leaving other wage bargaining as a sort of free-for-all. As the noble Lord, Lord Pethick-Lawrence, says, it is invidious how one part of the community is impinged upon by these suggestions and the other part is left alone. Secondly, the Government propose to balance the Budget by indiscriminate taxes—I think I can only call them indiscriminate—on production, regardless really of the poverty and hardship caused in the lowest income groups. I think it is the people with very small incomes who are going to be hit hardest by the present proposals.
My Lords, there are a number of speakers, and I do not propose to keep your Lordships, but I think it is my duty to suggest what I think might be done. Of course, the basic problem is always money, so if we had more money to encourage the export market and home production, it could be used in very many ways. I am reverting here to

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a very old hobby horse: that if only we would abandon the independent nuclear deterrent, we could have so many millions of pounds with which we could really do something, for the state of the British market. I think we can do that without loss of security, because our contribution in this nuclear matter is negligible. But I will not go into the details of that question. Also, there would be no loss of prestige, because if we could tackle our internal economy we could regain the lost leadership which we used to have in Europe and the world. I feel sincerely that in no short time we should easily have that power in this world of ours. Command in this world will lie really more with the economic than with the military power, as it always has in the past. By the saving of that great amount of money, we could encourage sound trade and build up good commerce, as far as the usual channels allow, and we could balance the opportunities, which are in such imbalance, between the underpaid and the overpaid. Also—and this has only been touched on, but doubtless will be touched on again—we could remunerate more adequately the teachers of this country, who I think all would agree are underpaid in such a great community.
Having mentioned that we shall need priority in the economic field as well as in the military field, I think we might all see that in the next generation we are going to need men with a great deal of expertise—what I think the noble Viscount called "scientists and technologists of the best quality". We shall not obtain scientists and technologists, or even humanitarians, of the best quality unless we provide teachers to teach them. I do not say for one moment that our present teaching staff are anything other than excellent and are producing excellent results, but unless we can keep up their living standards by giving them a comparable standard to that of other people who are going into science and other fields where reward is high, we are going to suffer very much when the next generation comes along.
Then I do think that we should abandon, in the moral and idealistic way (as the noble Viscount put it), the principle of punitive concentration of passing
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evils, trying to restrict by punishment, rather than looking wider, picking out what is good and encouraging it, fostering productivity and incentive—particularly incentive—by generosity and encouragement. I think the Government's watchword might be much more "Give, give, and give" to the good things, rather than taking away, restricting and disciplining those things which appear to them to be of less value. Therefore, I think our political approach as a country, and indeed as a Government, does need more spirituality; that is, a constructive and not a destructive policy in general.
My third point is that we should aim urgently to free all sorts of movement in the world, and that is not taken account of at all in the present statement of the Chancellor of the Exchequer. In fact the brake seems to be put on there more than ever. It is surely more urgent than ever that goods should circulate much more freely. Tariffs, trade barriers, protection—we have had those for thirty years, and during those thirty years members of all political Parties have said that they must be lowered and lowered, and then finally abolished. Yet we are still hanging back in this sort of work which I think needs urgently to be done.
Secondly, we should have a much freer movement of people. Mutual knowledge can be obtained only by mixing together various people of different countries. There should be an interchange. There should be an interchange of goodwill, an interchange of friendship, and particularly an interchange of young folk, so that they can see what their contemporaries in other countries are doing and where they are heading. We should mix much more freely. I would press the Government to take such steps as trying to get the institution of passports completely abandoned. Travel allowances are quite unnecessary these days, and all forms of difficulty and restriction everywhere for those who would like to mix with their follow-men of different nationalities should be done away with.
Thirdly, the Government should give much more attention to the dissemination of knowledge to other countries. In principle, that is agreed by the members of all Parties, but we live in a world where we still think that the British are

1113
a good people and the rest of the world knows it. I would subscribe perhaps to the first half of that, but not to the second. I think that cur information channels are quite inadequate. We should encourage the B.B.C. overseas broadcasts. We should got our message of goodwill, not only for goodwill but in order to sell our goods abroad, not only to Russia and China, 10 Portugal and Africa, but also to our friends in Europe and elsewhere.
I would say no more except that I think that this statement which we are considering is a bureaucratic and myopic Budget worthy perhaps more of a parish council than of a great Government such as we have, representing, not if I may say so, just timid Tory terrors but also, at least in theory, the lusty and dogged spirit of our whole nation, who, as your Lordships remember, rallied to a man to Churchill in the darkest desperate days and who I think to-day would rally to a Government of any political colour which offered them sufficient leadership and sufficient imagination in our present troubles.
4.32 p.m.
LORD BRAND: My Lords, I do not intend to discuss in detail the Chancellor of the Exchequer's proposals. I am going to deal, so far as I can. in a short time, with the question of inflation, from which we are suffering now and from which we have been suffering since the end of the last war, and which we should get rid of as soon as we possibly can. I support the Chancellor's proposals, in so far as he is trying to diminish the excess demand that exists in this country at this moment.
Inflation is derived from two sources —excess demand and the constant rise of wages and incomes. Clearly, we are now living beyond our means. Mr. Selwyn Lloyd gave figures for the year 1960–61 showing that wages and salaries had increased by £1,000 million in that year and that other personal incomes had increased by £450 million. On the other hand, national production had increased by only £650 million. Therefore, last year, on wages and it comes, we went to the bad to the tune of £800 million. That is certainly inflation. Evidently we are in a period of excess demand, which. as I say, is one of the causes of inflation.
We have been traveling on the road we are travelling now since the period of
1114
Sir Stafford Cripps. I do not know whether your Lordships saw a little chart that appeared in The Times a few days ago, showing the value of the pound over the years from 1938 to 1961. I have a copy of it here, and as your Lordships see, the value goes steadily down, practically without cease, whether under a Labour Government or under a Conservative Government, and now there has just begun a steeper fall, because we are so far exceeding our means.
Our weakness is well exemplified by some figures in a document recently sent to me, produced by the Action Committee of the United States of Europe (Common Market), of which Mr. Monnet is chairman. He has been a great friend of mine for many years and he sent me these figures, which I think I should quote. They represent the reserves and short-term liabilities at the end of December, 1960, of the United States of America, the European Community and the United Kingdom. The figures, which are expressed in dollars, are as follows. The U.S.A. has nearly 18,000 million dollars of reserves and nearly 19,000 million dollars of liabilities. The European Community has 15,500 million dollars of reserves and 2,000 million dollars of liabilities. The United Kingdom has 3,200 million dollars of reserves—one-fifth of what the European Community has—and nearly 11,000 million dollars of liabilities—more than five times the liabilities of the European Community. So we see the position into which this country has gradually fallen over the years in relation to the United States and to the European Community.
In 1950, the official gold and foreign currency reserves of the countries now in the European Community were 3,100 million dollars, and they are now 15,500 million dollars. At the end of 1950, ours were 3,700 million dollars as against what we have now, 3,200 million dollars. So we are in a state of extreme weakness compared to the European Community and of great weakness, too, in my opinion, compared to the United States. The chart in The Times shows us the inflation from which we are suffering, and at the moment the Government are trying to restore strength of the pound to a certain extent by cutting down too great demand. Our difficult position was not so apparent until the last year or two because, as all your

1115
Lordships know, the dollar was weak, and therefore a great deal of foreign money was sent here because for the time being the pound looked as strong as, perhaps even stronger than, the dollar. Now that the dollar has recovered to some extent, all this money is being taken away from us and we are having to make large borrowings from the International Monetary Fund for the purpose of strengthening the pound. But, of course those borrowings will have to be repaid. I am not quite sure for how long we have them—I think it is about two years—but they will have to be repaid shortly, and we must put our conditions right in that time.
My opinion is that our fundamental problem is inflation, and that is what we must do everything in our power to stop. We are increasing inflation at this moment, because our prices have gone up, due to excess demand here, and our sterling remains unaltered. Therefore it pays the foreigner to import here, because he gets higher prices and he converts those higher prices into sterling at, say, the same price that it was a year ago. On the other hand, we cannot export, because our prices are high here and our sterling remains high. If we devalued sterling, then the foreigner would find it more difficult to import here and we should find it easier to export. But I hope that we shall not contemplate devaluing at this moment and that we shall get out of our troubles.
Mr. Gaitskell, a few days ago, in what seemed to me to be otherwise a good speech, did not deal at all with the causes—that is, inflation—except to put the blame on the inefficiency and lack of enterprise of British industry. I think there is a more general cause, though I am all in favour of Mr. Gaitskell's idea of having a planning staff for industry, such as was set up in France after the war and did wonders for French industry. I consider that the fundamental cause of our troubles arises not from inefficiency so much as from inflation, and that inflation and rising prices come in the main from two causes. They come either from the cause which I have already mentioned, excessive demand—and that the Chancellor of the Exchequer is trying to cure—or from the constantly rising incomes, and particularly wages.
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The question is: how are these rising prices brought about? If any of your Lordships wants any light on this subject I would refer him to a large book recently published by the Organisation for European Economic Co-operation, whose Council about two years ago requested a group of independent experts from different countries to study this problem and report on their findings. The Report has now been published. It is a big Report of nearly 500 pages of small print, but most of these pages are taken up with accounts in detail of the conditions in the various European countries and in the United States. Any of your Lordships who care to read the book will find, in the first 75 pages, most of what you require for a good knowledge on this subject of rising prices. Each of the six economists came from a different country, and they were all eminent in their profession. Our representative was Professor Richard Kahn, of King's College, Cambridge, a very good economist, who is an executor of Lord Keynes' estate and not one who could be called at all a Right Wing economist.
With your Lordships' permission, and if I am in order, I should like to read a few paragraphs which appear in the conclusions of these eminent economists. The causes of rising prices which the group found significant were
"(a) Special or temporary causes such as bad harvests;
(b) Excess demand for goods and labour"—
which is what we are suffering from—
"(c) Excessive negotiated wage increases as an independent force;
(d)Monopolistic pricing."
From what they say later, the writers plainly thought that (b) and (c)—that is,"Excess demand for goods and labour, "and" excessively negotiated wage increases "—were the main causes of rising prices. Excess demand they took to be the volume of aggregate monetary demand which cannot be met at existing prices without exerting undue pressure on productive resources, partly from excessive Government expenditure—which we are suffering from here—partly from a consumption boom financed by banks, hire purchase companies and so on. Excess demands, as I say, exist in this country at this moment.
The writers of the book think that wage increases can be considered an independent cause or factor of price

1117
increases only when they are determined by negotiations between organised labour and groups, and employers; and that, of course, is what happens here. They point out that wage increases are accustomed to be generalised over a country, and that a money/wage illusion —and this I should like to emphasise—. is likely to be established leading to demands over and over again, though the gain in real incomes is inevitably equally upset by higher prices. They acid
"In our view this factor has been of particular importance in the U.S. and U.K."
Later on the Report says:
"All Members of the Group are agreed that excessive wage increases secured through negotiation have been a significant factor in the upward movement of prices."
Then they add:
"In the view of the majority of the Group the essential element to be stressed first of all is that the stabilisation authorities"—
that is, the Government—
"must have a wages policy for dealing with the problem of wages just as they must have monetary and fiscal policies for dealing with the problem of demand."
Most countries, they say, have not yet faced this fact squarely. They go on:
"We are fully aware that to do so requires a decision at the highest political level and a political understanding of the need for it."
They point out that
"In France the Government announced its wages policy in connection with the stabilisation programme initiated at the end of 1958…It is evident that the policy was deliberate and thought out, and that it was consistent with and an integral part of stabilisation aims."
That is what we want here. They repeat that,
"On the other hand, there is nothing significant that excessive wage increases have to offer because they are immediately followed by rising prices."
When the Report conies to their discussion in relation to the different European countries they end up as follows:
"On the strength of its record to date "—
in the United Kingdom, this is—
"the system of wage determination in the United Kingdom must be judged to have failed to respond satisfactorily to he new problems posed by full employment. It would be wrong. how ever,"—
and I hope this is true—
"to overlook the much greater awareness of the deficiencies of this system which has grown up on all sides in the last few years. Beginning
1118
in 1956, the Government has carried out a campaign to educate public opinion, the unions, and the employers, about the basic relations between wages, productivity, and prices, and there is evidence that this has led to some change in attitudes, but with the inadequate nature of the institutional arrangements in a number of industries, the weakness of the central bodes on both sides"—
that is, the trade unions, the T.U.C., the Government and industry—
"and the lack of any clearly defined norm for arbitrators to have as a guide when making awards, there can be no assurance that wage increases will in future be kept in line with the. growth potential of the economy "
I think your Lordships will agree that this is a fair description—even too favourable perhaps—of our circumstances.
The devil about inflation is that it feeds on itself. Supposing inflation is due to higher wages—too high for the country concerned—then prices rise, and then some industries and some speculators make large, sometimes very large, profits, the former out of increasing sales, the latter out of a capacity to foresee what vast fortunes can be made by clever speculators in an inflationary period. These profits are, of course, advertised in the newspapers, but no one advertises the plight of a far larger number of people who are made poorer and poorer by inflation because they do not know how to defend themselves against rising prices. It is the big profiteers and the receivers of big dividends who prosper out of the rise in prices, which infuriates labour in to demanding still hither wages which, if granted, increase prices again and provide still higher profits for certain sections; and so on ad infinitum. This process will go on until some Government is strong enough —as in Germany at the time when the Rentenmark was instituted by Dr. Schacht and the recent stabilisation in France—to bring the merry-go-round to an end. Our inflation has not gone anywhere near those of Germany and France, but it will increase as the rounds of wage rises increase and as prices continue to rise.
In such circumstances, the whole market, for a time at least, booms. Why should home industry bother too much about exports when there is a roaring bull market at home? Moreover, the same circumstances, so long as our exchange remains unaltered, offer a fine market for importers from abroad. It used Ito be France who could not manage

1119
its own affairs, and which went from bad to worse over the years. We thought that France could never put herself right. Now it is this country, and there seems no end to it. Perhaps we might get Mr. Rueff and Mr. Baumgartner (who put the exchange right in France) over here to teach us how we could do it.
My Lords, lour serious danger, as pointed out in the O.E.E.C. Report, is that our institutions are too weak. The T.U.C. does not control the unions, and it appears to the public that the unions often do not control themselves but are under the influence of the organised shop stewards who initiate many strikes. It cannot be right for a democracy that our destiny and our fate, financial and economic, should be determined, not by the Government and Parliament, but by shop stewards; that it should be they who determine whether we can or cannot control inflation, and whether, therefore, we are to go bankrupt or not. There must, however, be many leaders of trade unions, and also many leaders of industry, who wish to co-operate, who recognise the evils of the present situation, and who would be glad to set our country on an even keel again. This must be also what every Government and every Chancellor want. That this aim should be achieved is vital to our future.
4.56 p.m.
LORD BOOTHBY: My Lords. I must confess at the outset of my remarks that, unlike the Lord President, I do not feel any sense of personal inadequacy; I just feel a sense of personal despondency, because this has happened all too often before. This is the sixth balance of payments crisis since the war; and I remember that six times I have now gone down to the House of Commons after a tremendous Press campaign warning us against the dreadful things that awaited us and all the sufferings and sacrifices we should have to take and make; and then nothing much has happened at the end of it. We just get the same old rise in bank rate—that is about what it comes to—and we leave the House of Commons feeling a little sad at having been braced to make sacrifices and then not being called upon to do much. It does not hit the individual in the same way as it huts industry. Then everything gets better; the "hot" money comes back; and then it happens all over again.
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These proposals have, of course, little relevance to the basic long-term economic problems confronting this country. They are designed simply to get us through yet another balance of payments crisis—as I said, the sixth that has happened since the war. The method is the old one and, I think, the bad one, of attracting "hot" money to this country to see us round the corner. Many years ago Keynes wrote:
"Unless the aggregate of the new investments which individuals are free to make overseas is kept within the amount which our favourable trade balance is capable of looking after, we lose control over the domestic rate of interest."
This is precisely what has happened; hence the rise in the bank rate. I think we probably had to do it. But we had to do it only because once again we have lost control—because the balance of payments has gone wrong. I think it would have been better if the Government had taken far more strenuous steps to keep the balance of payments right, which they have never done. I think this policy will succeed in the short run: but at a very high cost, particularly from the long-term point of view.
Let us take a brief glance at three of the main proposals of the Chancellor. First of all, the 7 per cent. bank rate, which is generally regarded as a crisis rate, in conjunction with the 3 per cent. special deposits. This is the clumsiest economic weapon of all, because it hits the lot; and, on the whole and on balance, it hits the small man rather than the big man throughout industry. It will cause a diminution of productive investment in industry—it must do—and, therefore, deter economic growth at a moment when we desperately need it. It will also increase costs and rents, and decrease productivity.
What does it all really amount to? By raising the bank rate and the special deposits to the fantastic height they now are, you knock the whole national economy about, in the desperate hope that a reduction of imports will somehow or other, come about as a byproduct. I just do not believe that this is the way of doing it. This is using a sledge-hammer instead of a scalpel knife. In so doing you impose heavier burdens, not only upon the Exchequer, and on the taxpayer who has to pay higher rates of interest, but also upon

1121
local authorities throughout the country. There is not much hope for the export trade here. As I said in another place as long ago as February, 1953, trying to increase exports by repressing industrial development at home is a policy of desperation.
The second major proposal is a surcharge of 10 per cent. on Customs and Excise duties. While it varies, of course, on different items, the effect is to put up the cost-of-living index by 12 per cent. Nobody is going to tell me that this is going to make it easier to hold wages during the "pause" which is so strongly advocated by Her Majesty's Government. I say no more about that, but I must add one final word about the teachers, to whom the Lord President of the Council referred. I am the first to admit that they were foolish not to accept the Burnham award and have dom., with it. They would be in a better position to-day; in fact they would be "home". But to single out teachers of all people in this country to-day for special attention, and to say that you are not even going to implement the original award, and at the same moment give an £18 million subsidy to build a "Queen" liner for the Cunard Line, at a moment when the whole Atlantic passenger ship traffic is declining, does not seem to me to make any kind of sense at all.
My Lords, I have just come back from the other side of the Iron Curtain, and I can tell you that they are taking education very seriously; mote so than anything else. Everybody knows, some of your Lordships better than myself, of the tragic shortage of mathematical teachers, in particular, which, if it is allowed to continue, will have a disastrous effect upon technical training throughout this country. What a moment to single out teachers to make special sacrifices, when every other country in the world is plunging ahead in the fiord of educations I really do think that, from a psychological point of view alone, it is a disastrous mistake; and I beg the Government at least to put this one right, because I can see no end to the trouble. I do not think the teachers will go on strike; but I know they are disheartened, and the Government is making them more disheartened; and they are the last class in the whole community who should be made to feel disheartened at this moment.
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I am absolutely certain that the Lord President's appeal—fervent, eloquent, and made with great sincerity—for what he called a "certain degree of personal restraint" is very necessary; but I am going to ask him quite frankly, and somewhat brutally, what the Government have done to encourage this. They removed practically all discipline from the economic field from the moment when they started indulging in what used to be known—perhaps the Lord President has forgotten it—as "the dash for freedom"—Mr. Butler's "dash for freedom". I never supported it, I always thought it was a mistake. In fact what they did was to take all discipline away from the economic field; and in so doing deride the memory of Sir Stafford Cripps, who, when all is said and done, exercised a greater moral authority in time of peace over the people of this country than any Chancellor of the Exchequer since Gladstone. I think we ought not to forget it; it is true, and he was right.
Enough of this; let us just have a look at the record during the last ten years. First the Government removed all building licences. I am on the record here. I opposed it from the start. They then abandoned all effective control over the export of capital from this country. They made no attempt whatsoever to plan our industrial development in co-operation with leaders of industry and the trade unions. They set up no planning machinery of any sort or kind. Nor did they make any attempt. to stop the speculative boom in land which has now got completely out of hand, in fact out of control. Finally, they have completely failed to curb increases of national expenditure which we can no longer afford and which can only lead in themselves to inflation.
The result, my Lords, has been, and we had better face it, an orgy of completely reckless personal speculation—for example, in property shares and television shares—which has no parallel in the history of this country since the South Sea Bubble. In these cases one field for speculation was allowed to continue by the Government, and the other was actively created by the Government; and the Lord President comes down to this House and appeals for "a certain degree of personal

1123
restraint"!It will not do. I know the stand he took himself about television. I am only taking it as an example; but all this has been going on now for too long, and not the slightest attempt has been made to deal with it or curb it in any way.
There are one or two questions I should like to ask the noble Earl who is going to reply. How much capital does he think has gone out of this country during the last five or six years by way of the escape hatches of Kuwait, Bermuda, and Nassau? How much of the Overseas Trading Corporation surpluses abroad have not returned to this country in any shape or form? How much money has been wasted—and, I emphasise the word "wasted" because I am not a supporter of unilateral disarmament—on armaments over the past ten years, which we really cannot possibly afford? How much capital and labour has been employed, and is still being employed, on the construction of quite unnecessary buildings in this country—anyone can see it going on right the way from John o'Groats to Land's End—while slums continue? Lastly, do Her Majesty's Government really think that we can afford, at this juncture, to rebuild New York and Chicago; because that is what I gather Mr. Clore and Mr. Cotton are setting out to do? I am sure it is very desirable, but I should have thought that the United States themselves could have looked after that one.
My Lords, of course I blame the Treasury more than the Chancellor of the Exchequer. I blame the Treasury because for over 40 years it has been the most disastrous institution this country has ever had. In fact I often wonder how we have survived it. It is a miracle. Except in the two world wars, when Keynes was there, they have never had a new idea, still less a good one. And I am old enough to remember the 1920's, when Sir Winston Churchill said, without any great conviction:
"It is the orthodox Treasury dogma, steadfastly held. that whatever might be the political or social advantages, very little additional employment can, in fact, and as a general rule, be created by State borrowing and State expenditure."
We have since learnt the answer to that one; but if the Treasury could seriously hold it as "dogma", what cannot they
1124
believe? They can believe anything. They still boast that the only man who ever made them do what they did not want to do was Lloyd George; and that was before the First World War, when he had to hire an external Civil Service to get through the measures he wanted, 'because the opposition within the Treasury was so implacable. It is my chief regret, in a life full of regrets, that I was never given the opportunity of being Chancellor of the Exchequer. It would not have lasted long, but it would certainly have been fun while it did.
The noble Viscount, the Leader of the House, said that one of the advantages of this place is that there are some things one can say here that one cannot in another place, where there are, after all, votes to be considered. For example, one thing I should like to say is that this country is still riddled with restrictive practices, and they are not confined to one side of industry; both sides are equally to blame. The ship-building industry, my Lords, is dying at the 'present time; and this is due to the people inside the ship-building industry, and well they know it. They will not take any steps to put the situation right; and that is not the only industry to which this applies.
I often smile when I read some of the very pompous leading articles in our newspapers saying what a terrible thing restrictive practices are. They say how important it is that we should free the economy of them and shoulder our responsibilities. I often feel inclined—except that one has to keep in with the Press, so long as one is in public life—to 'write a letter saying, "Have a rook at your own office and see what the employment situation is, and see how many redundant people you are employing". Here is the reason for the recent closing dawn of newspapers; it is because the printing industry in this country is an absolute scandal, and none of the newspaper proprietors has the guts 10 stand up and say, "Enough of this nonsense!We have had enough", just as the shipbuilders should have said, "Enough of this!" long, long ago.
On this aspect I want to say one other thing—and it is splendid, and I feel relieved, that I do not have to ask for votes any more when I say it: I wonder

1125
how many jobs in this country to-day are being done by three men when one man would do. I should think the number is absolutely staggering. For that I.do not blame the trade unions entirely; I think the employers are also very much to blame, because it has all been too easy for them This is,something that ought to be said by somebody, somewhere—and I do not see why it should not just as well be said by Lord Boothby in the House of Lords as by anybody else—because we all know it is true. We have to face up to this problem, because it is not a comparable problem with our chief competitors in the world.
If I may, I should now like briefly to put forward a few proposals of my own, because purely negative criticism is an arid job, and rather pointless. I agree with what the noble Lord, Lord PethickLawrence, said. The noble Viscount the Lord President of the Council has the personal authority to make the moral appeal he made; but on the record of the Government, the facts as we know them and these particular proposals, I do not think the Government have any right to make any moral appeal of this kind. They have not shown the way by asking for, or imposing, any discipline upon industry.
If you ask me what I would do, I would say first that wages have to be related to productivity. One of our chief troubles is that we have not related wages to productivity. They have risen by 6 per cent. against a rise in productivity of less than 2 per cent. over the last two or three years. That is no good. But how can you get an agreed wages policy unless you have a plan, and bring into that plan the trade unions themselves—in fact both sides of industry? We want, as my friend Lionel Fraser said in an admirable letter to The Times the other day, Five-year Plan for Progress; because, as he truly said, there is no alternative to a coherent, long-term economic policy.
Going back to the recent trip I took in Eastern Europe, although they have failed in agriculture because neither the peasant system nor forcible collectivisation will do, they are making tremendous strides on the industrial front. Their productivity, and their gross annual national product, far exceeds ours in all of these countries. And why? Mainly because it is extremely well planned.
1126
But it is important not only for Communist and Socialist countries. As the noble Lord, Lord Brand said, they are doing it in France and doing it extremely well. M. Monnet started it; M. Massé is carrying it on. The results are achieved by influence rather than by coercion; and they are startling.
France has a planned economy not far short of, and in some respects better planned than, that of the countries east of the Iron Curtain. The whole staff of the planning organisation in France does not amount to more than 40 people, but they do very well. They have got 3,000 of the really important and influential industrialists together, and persuaded them to follow an agreed course. This is what we have to do. And I beg my noble friend to ask the Chancellor of the Exchequer to consider sending a small mission of inquiry over to Paris to see how they do it. And they may as well go on to Bonn, because Erhard is doing it, too. Both the economies of West Germany and France are infinitely better planned than ours—that is inevitable, because ours is not planned at all.
We shall then have to come to grips with the problem of international reserves. With our present reserves and liabilities we cannot carry on with sterling as the second major international currency of the world. I have, on this, at least, an unblemished record, because I did oppose the Bretton Woods Agreement. I opposed it on three grounds. First of all, because it put the onus of restoring equilibrium in international balances of payment on the debtor countries and not on the creditor countries, which it did; secondly, because it failed to provide adequate liquid reserves for the dollar and sterling, which is true; and thirdly, because it fixed exchanges at rates which were arbitrarily chosen, in a world of flux. I am one of those who doubt whether any democracy with a completely free economy can ever maintain, indefinitely, a fixed exchange. I am not sure it can be done, because it means that economic pressures which might otherwise be corrected by variations in the rate have to be met by infinitely more difficult methods, and sometimes impossible methods, such as a substantial all-round reduction in wages, which are almost impossible in a free-economy democracy.

1127
I think we should say to the International Monetary Fund before they meet this September, "Look here, there are the Bernstein proposals; they would help a great deal, but unless we can get more adequate liquid reserves, and unless we can avoid this agonising biennial balance-of-payments crisis, for which a 7 per cent. bank rate seems to be the only remedy, we shall have to let the pound not be devalued, but just go". I am not at all in favour of devaluing ever again to a fixed level, because that guess might be no better than the last one. A floating pound worked pretty well between 1931 and 1937, supported as it was by a powerful Exchange Equalisation Fund. I think that if we told them that we would let it find its own level again, if adequate liquid reserves are not provided, they might do something. I doubt whether we can maintain the pound, with our present wholly inadequate reserves, at this narrow fixed rate.
Thirdly, I would restore building licences. I would not do it on a big scale, but I would do it on a sufficient scale to stop the wasteful and extravagant building which is going on. We have had enough of that. Fourthly, I would reimpose some effective control over foreign investments, using a better method than that used in the past, which would not be difficult. Fifthly, and finally, I say that, since the quantitative control of investment is the core of any planning scheme, I would set up an organisation comparable to that which exists in France to direct investment into channels which, from the national point of view, are the most productive and most important, and away from wasteful channels. It can easily be done by some discrimination in the granting of investment allowances; and does not require any elaborate machinery. I would do it in consultation and collaboration with the industrialists and the trade unions. I know that I shall be accused of advocating physical controls, planning and socialism. I do not care what I am told, and I do not care what you call it. It may be physical controls, planning and socialism. But there is one thing that is amore important than any of these things, and that is sense.
Before I sit down, perhaps I may be allowed to detain your Lordships for a
1128
moment or two with a quotation from a very trenchant paragraph by a friend of mine, the outspoken, fearless and independent financial correspondent of the Spectator, Nicholas Davenport. because he succeeded last week in putting into one paragraph what I have been trying to say, and saying much less well, in the last twenty minutes. He wrote:
"If anyone should repent, it is the Government itself. It should confess that it has been pursuing idiotic economic policies, refusing to plan and direct the two sides of industry. refusing to apply a building control and so allowing the building and contracting industry to over-reach itself and force up wages, relying on higher rates of interest and credit restrictions to do the impossible act of balancing the economy, encouraging the wrong domestic investment by indiscriminate investment allowances, refusing to control our overseas investment and allowing foreign exchange we have earned to stay abroad instead of coming home, trying to protect sterling with 'hot money', that is, short-term foreign loans, expecting to boost exports by knocking the home trade in consumer durables, raising the price level at home by higher indirect taxes and dearer money and then complaining of the uncompetitive prices of British exports! This catalogue of ghastly mistakes is enough to make the nation rise up in anger and tell the Prime Minister that they have never had it so bad—in Government administration."
That is powerful stuff, but I think that if you read it in Hansard to-morrow you will agree there is more than an element of truth in it.
I am old enough to remember the day when Keynes described Snowden's proposals in the economic crisis of 1931 as "replete with folly and injustice". I am tempted to apply the same words to the present proposals of the Chancellor of the Exchequer, but I have too high a personal regard for him; and I certainly do not want him to share the fate of his predecessor, who also raised the bank rate to 7 per cent. and, so soon afterwards, became a "little local difficulty". I should not like the present Chancellor ever to become "a little local difficulty", especially if it came so near to an Election that he could not even be recalled as Minister of Works. I do not want to see him go; but I think he really must do a bit better than this.
The only reason that I can think of for what he has now done—I have searched my mind for the last 24 hours—is that, somehow or other, it is a prelude to our entry into the Common Market. I cannot see any other point

1129
in this exercise at all. We shall be dealing with this situation next week, so I will content myself with saying to-night that, in all the circumstances, and holding the views that I do, I do not think it would be possible for me to go into the Lobby in support of the Government to-night.
5.23 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I rise to support the vote of no confidence in the Government, and I think I can express some confidence that the noble Lord who has just spoken so energetically in support of our points of view will not merely not go into the Government Lobby but will surely join us in our protest when it comes to the vote.
We have already had an interesting debate; but I should like to say to the noble Viscount, Lord Hailsham, that I was disappointed with his speech in opening, not because I did not admire the language of it, because I did, or the presentation of his great and moral appeal, but because it did so little to show us what were the, Government's detailed proposals to deal with the present financial difficulties, and how far they were going to proceed on the basis of a short-term policy and to look for a long-term solution in order, as the noble Lord, Lord Boothby, said, to try to stop.a repetition of these steadily recurring crises in our economic and financial life.
I am sorry that the noble Lord, Lord Brand, has left the Chamber. As usual, he made a thoughtful and financially informed speech. But, somehow or another, speeches of that kind always seem to bring in somewhere the kind of statement which is less likely to obtain working-class response to the kind of appeal that the noble Viscount made. It sets up the difficulties of the shop steward, the large element of wages in rising costs and the inflationary tendencies. It always stresses things like that. Of course, the fact is that we, as a nation, have had the most extraordinary experiences in our lifetime. I do not suppose any nation which has occupied the pre-eminent position of ourselves over a number of decades ever had to face such a succession of crises as the First Great War and the Second Great War, to find in the end that, after
1130
fighting these two great and long campaigns, with huge human as well as monetary sacrifices, we had to try to readjust our own economic position and standards to meet the situation.
While I thoroughly agree with the facts stated by the noble Lord, Lord Boothby, about the planning efficiency of France and West Germany, Belgium and Italy, I must say that there is a marked contrast between the manner in which the Governments and the peoples of those countries are meeting their war costs compared with the manner in which we are meeting ours. In the whole of our economic problems, both after the first war and the last one, we as a nation have faced up to financial situations in a manner which I think is much to be admired, and we have now to go on in the future facing together difficulties which the others have discarded. I think we have to remember that.
Nevertheless, the noble Viscount must remember that in connection with any great calls to national unity for our self-defence and for the maintenance of our liberty, the working class of this country has taken its equal share at least with every part of the community. Nor is there any case in my memory in which the general electorate of the country have not taken their full share of responsibility whenever the country has been in great danger. The question is, of course, as to upon what basis you approach them and in respect of what sort of crisis.
When we look at the build-up of the campaign in the Press, to pre-Ministerial-statement speeches of what was going to happen over this economic crisis, then surely the whole of the nation was looking for the production of something quite out of comparison with the steps taken in the last three or four crises. Many of them say to-day, when you ask them what they think of the statement of the Chancellor of the Exchequer, that they regard it, in the circumstances, after that pre-statement campaign, as an anti-climax; that in the proposals which are made there is nothing really which is likely to be constructive or something upon which to build as a long-term policy so that industry can deal with the one thing essential in order to get our proper recovery. I asked particularly, because I wanted

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to be quite clear that I had not misread it in the newspapers or misheard it from the noble Viscount, Lord Hailsham, when he spoke about the recovery including a 3 per cent. increase in expanded production and that that was to cover an increase at the same time of 6 per cent. in our exports. I gather that my hearing of it was quite correct.
Let us look at that. The real problem is not the denying of this, that or the other within our community. The real problem which has been facing this country ever since this Government came in is that we have been falling back and back among all the other great industrial producing countries, especially in our rate of expansion of production. I do not need to bother the House with them, but I have all the details here; they speak for themselves. There is hardly a single producing country in the world which has not kept far ahead of us in our rate of expanded production, year by year. We have seen the speeches which have been made over and over again by my right honourable friend in another place, Mr. Harold Wilson, upon the sort of football league table, of which usually we were at the bottom or bottom but one. These are published every six months, and they show how we have been falling behind.
Of course, there is nothing yet in the proposals submitted by the Chancellor of the Exchequer of a really concrete character to show that the Government have in mind major plans that would make a real attempt at getting an expanded production overall and make quite sure that in that will be included a proper provision for the production of the goods which are most readily acceptable in the export market, upon which we still must depend if we are to be able to pay for the balance of our food and raw materials that we cannot produce in our own country.
It seems to me, therefore, that we have made a little step forward when it is mentioned in your Lordships' House (I think it was the noble Lord, Lord Rea, who said it) that the Chancellor of the Exchequer said that he was not afraid of the word "planning". I do not know whether the noble Lord, Lord Boothby, had taken note of that short phrase in the Chancellor of the Exchequer's
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speech. The Chancellor of the Exchequer is not afraid of it.
LORD MIDDLETON: He dare not do it.
VISCOUNT ALEXANDER OF HILLSBOROUGH: That is the whole point. I was going to say that he does not dare do it upon the kind of wholly national basis which we on this side of the House have always considered is necessary if you are to get a plan properly working.
Look at the position of the Labour Government from 1945 to 1951, with all its faults—and we all have faults in Government; no one can set up on the part of a Government and say, "We are perfect". We know that. If you look at the state of bankruptcy, with the failure to continue Lease-Lend in this country in 1945, and at the kind of conditions we were up against, you will see there is nothing like it in all our history. The national planning brought such an increased and expanded production that it put us on the map and enabled us to partake in what, I will quite agree, was a different type of foreign market from that of to-day. After the war there was a buying market, and if it had not been for the opportunities there were at that time out there, rather than a situation which is now turning things right the other way round, I do not quite know what we should have done. But it was an enormous advantage. We could not have done it if we had not planned nationally and controlled the direction of goods, commodities and raw materials, and had action to make sure how to reach our objectives. You could not find any other way to do it. The record will stand and I defy any economist to be able to disprove that that was the fact.
What we need now is a plan which will enable us to go steadily forward the other way. Remember, the Government have an enormous responsibility for the manner in which they have essayed to lead the people since 1945. In 1950, when we were meeting increasing difficulties because of the outbreak of troubles in Korea and finally the Korean war, what was the attitude of the Conservative Party? The attitude was, "Never mind about these great difficulties. Never mind about the cost on top of all your other troubles. Set the people

1133
free!". It was not a patriotic appeal for all the people to stay together. It was, "Set the people free!". My leader was quite right in another place when he made the rejoinder to the Prime Minister's comment the other night, "We did not devalue the pound", Mr. Gaitskell said [OFFICIAL REPORT, Commons, Vol. 644 (No. 150) col. 1082]:
"The right hon. Gentleman devalued something as else—he devalued our moral standards".
You have had ever since a pressure upon the Government, upon industry, upon finance itself, with the people having been promised that they must have it. Nothing must be in the way of the utmost pressure of salesmanship in the home market. So when the noble Lord, Lard Brand, talks about excessive demand, it is no use his thinking that that is simply because of some lapse of moral stature upon the part of the ordinary citizens of this country. It exists because of the policy which was brought in in 1951, and emphasised and stressed in 1953, against the views of men like the noble Lord, Lord Boothby, or the noble Viscount who has been making an appeal this afternoon. You had your Independent Television service set up, with all the racket which has been exposed in the Press about the manner in which it was done. There was pressure salesmanship to advertise, bringing in such enormous revenues that some men have made a 1,000 per cent. profit on what they originally put in. The pressure for sales means that every house, in certain classes of areas, must go on with the old game of "Keeping up with the Joneses". If somebody next door is listening to I.T.V. programmes and wants this spin dryer or this refrigerator or this television set, then we must have it too! All the pressure is on spending on the home market. an things which are not really, in every case, vitally necessary, although they may be great comforts and give a great sense of satisfaction in the heart and mind of the person concerned because he is not worse off than his next-door neighbour.
This responsibility lies with the policy of the Government. Although I very much admire the language of the moral appeal of the noble Viscount this afternoon, and I appreciate its sincerity. I have to point out that here we are in the same place that we were in in 1951, when the Government came in and said
1134
that things were much worse than they had expected. Yet they said, "Set the people free!" You have to-day, nearly ten years after, a fall in the European reserves of gold and other securities to a lower point than existed in October, 1951. This is the case that the Government have to answer. I have seen 'nothing yet, either in the statement of the Chancellor of the Exchequer or in the statements made so far in this House, that can satisfy me that what I am saying to your Lordships to-day is not a true statement of the facts of the situation.
Let us see what is going on at the present time. We have been suffering, apparently, from the great increase in imports. Of course, if we were getting a great increase in imports because there were going back the exports to pay for them it would be a very good thing—part of a general expanding economy. But, as I understand the figures, in 1960 imports increased by £500 million. I have not time to go into all the details, but when we look at some of the details they shock us. Let us take steel, one of the great bones of contention among the Parties because it was nationalised. This House of Lords gave warning when it was nationalised that they would denationalise it at the 'earliest possible moment. So they had to do it.
Let us look at steel in the year 1959–60—look at the import figures and you will find it confirmed. You will find that in 1959 you imported 40 million tons of steel; in 1960 100 million tons. I ought to qualify the word "steel"; it is iron and steel; I have taken the two together. There was an increase from 40 million to over 100 million tons. I was reading a trade comment the other day and I saw that it was improving a little in the early part of this year. The real reason why all that extra steel was coming in in 1960 was that the steel industry had failed to keep up with the requirements of that part of our basic industry for stuff being turned either out or in; and failed also to meet the demand even of our home users of it; and so they had to buy foreign steel and iron. Is that because it was nationalised for a year or two? Not on your life! There is one firm down in Wales, Richard Thomas & Baldwins, which is still under national ownership. That is the successful one. It had a plan behind

1135
it—a real plan. I use the case of steel only as an illustration.
On the question of planning, and the way you use your fuels, I take the case of electricity. We have had one or two debates on this matter before with the noble Lord, Lord Mills. Look at the extent to which the Government have launched expenditure after expenditure upon the building of nuclear power stations in this country as compared with the type of station which could have been built using our own, natural raw material of coal; and how, in other cases, they have given a preference to oil fuel, importing it, instead of the natural coal of this country. I am quite sure it must be sound sense to have, may be, a pilot scheme, or even two schemes, for demonstration of electricity production by nuclear power. It might even be worth while having a "check off" against coal with one or two oil-fired plants. But here we have our own, natural raw materials being left and neglected, while we produce electricity at a higher charge to the customers at large throughout the country. It is not good sense. And all the time we have had the feeling that perhaps the name of "nationalised" industry is really a dirty word to many people, just as it was said the other day, in the other place, that "planning" is often regarded as a dirty word.
VISCOUNT HAILSHAM: My Lords, I should like to assure the noble Viscount that that is not so. The nuclear power stations, of course, are based on nationalised industry no less than the conventional power stations.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I know. I am talking now only about the question of national planning at any time in relation to your overall plan. I say that if you had had a proper plan for using the raw material resources of your own, and had balanced that with your experiments in the proper way, you would not have spent anything like the money you have spent in those two fields to-day
But let us look at that part of the Chancellor's proposals which deals with defence. Take his statement during the early part of this week about defence. What a story that is! He says, "We are going to try to save money upon our overseas commitments". Some of
1136
the overseas commitments that used to be there are not there at all now. Practically the whole of our Naval station at Malta has gone. We have handed it over to a civilian dockyard company, which we hope will be successful in meeting the labour needs of the Maltese population. In many places we no longer have the commitments that we had.
But in general, in relation to the opening part of the noble Viscount's speech, when he appealed to us on the basis of the dangerous international situation, and bearing in mind the statement from the Foreign Office yesterday (these are my words, not his; I do not want to fasten on him anything he did not say) that there must be agreement with President Kennedy about our attitude to the general international situation, and also bearing in mind the examination which has been going on between Mr. Watkinson, the American Secretary of State, and General Norstad, as to what further call-up there will be, when I look at the state of our defences compared to January, 1950, when I handed over the office, I find the situation amazing.
What are the Government spending on defence? The fact is that we shall not have half the manpower forces in the defence of this country, whether abroad or at home, that we had in 1950—not one half; and we shall be paying £1,625 'million for them this financial year. I admire any proposal that may be made by the Chancellor of the Exchequer to get proper issues raised with reference to the cost of the maintenance of the troops we hold in Germany. That is a very good thing to do. But when you make a strong appeal to us, on a national and patriotic basis, about saving money here and there, and about our forces overseas, my reply is: have a look at the facts. They are extraordinary, and they have been getting worse and worse ever since the White Paper of 1957.
My Lords, those are the facts. If we take other proposals in the Chancellor's statement, what do we find? The noble Lord, Lord Boothby, has put the situation correctly. They will raise the cost of living at once by 1½ per cent.; and one cannot expect that the people engaged in industry, or the middle-class professions, Ito have that increased cost

1137
of living put upon them and not to want to be able Ito live properly. If they are Ito make a sacrifice, then surely they ought to be able to expect other people, in spheres different from theirs, higher up the scale of receipts, to make equally big sacrifices. It is not to be wondered at, I think, that the first reactions of some of the people on the industrial side in our Party were of concern.
I ask the noble Viscount to take note of what was decided yesterday by the trade unions, and their reaction to the proposals in general. They said they will be glad to consult with the Government and to co-operate, provided that what they are asked to do is to be on a fair basis. This afternoon the noble Viscount seemed to think that that was not quite good enough. I am going to read his words very carefully again tomorrow, to make sure. I do not want to do him an injustice on this point, but it looked as if he was adopting a rather high moral attitude to the workman Who says, "I ought not to be charged another 1½ per cent. on my cost of living if you are going to relieve surtax payers to the extent, among the highest incomes, of up to £3,000 a year benefit. I ought not to be expected to do that. But if you appeal to us"—this is what the trade unions are really saying— "to help and co-operate in anything that is required to be done nationally to restore our proper and sound position, we are with you if you will treat us as fairly as you treat your friends." That is not unreasonable.
VISCOUNT HAILSHAM: I am sorry to interrupt the noble Viscount, but I do not want there to be any misunderstanding about this. I was very careful indeed not to criticise anything that was said by the trade unions, or on their behalf. Indeed, I was rather encouraged, than otherwise, by the response they made to the Chancellor's appeal, and I hope I did not give the contrary impression. The only thing I did say was that if we are going to get on together in the future, as I hope we may, the offers of co-operation ought on both sides to be unconditional, and that we should try, if possible, not to make it a condition of our help to one another that somebody else's burden should be increased. It may well be a demand in the course of
1138
discussion, but to make help conditional makes it less easy to accept.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I am just checking up a quick pencil note which I made, and I am glad the noble Viscount makes it unnecessary for me to quote. But your Lordships see now the impression left upon my mind. I am glad to have the further explanation, but certainly there is a feeling on this side, and among my colleagues in the other place, that this emergency Budget—and that is what this really is—is unfair.
After all, this is not the beginning of the matter. A very large burden was put upon the ordinary people, who are now in industry and commerce, in the new charges for the Health and similar services—very heavy charges. Putting that on top of what they are now asked to suffer, it comes a bit hard to the ordinary workman when he now finds he is not going to get a packet of cigarettes, which even after the war he could buy for 2s., for less than 4s. 6d. These are big differences.
I see the noble and gallant Viscount, Lord Montgomery of Alamein, over there. I was wondering what would have been said, when he was leading that great and line Army in North Africa, if cigarettes had been anything like this price to the troops. That was a great part of the happiness and the unity of those fine men who served us in all the fields of war, that we struggled and struggled and struggled to keep them as well supplied as we possibly could. But the workman also likes that today, and I think he is entitled to it.
If this is a question of whether or not we are getting the proper amount of production for what is being paid, that is another matter. I think we should be quite frank: the overall figures seem to show that the production does not go up at the same rate as incomes go up. Is that entirely the fault of the worker? I do not think so. I would not say that there are not faults in the worker. You will never get a working force of 11 or 12 million and find that every one of those 11 or 12 million is pulling the same amount of weight on the rope. There is a very vast difference, too, in the quality of management, and a very vast difference in the actual industrial

1139
relationships in the different organisations.
I was very sorry to see that a late Member of our House, Lord McGowan, passed away a few days ago. It is 40 years ago since I first began to understand and to learn what it means to organise good industrial relations between a great organisation and the workpeople of the trade unions. If we reached anything like that standard universally throughout industry, I believe we should get better management and we should get a much better result from the general contribution the workers themselves would make.
I am satisfied that the Government have not yet made up their mind to deal with this situation effectively. The bank rate has been dealt with by my noble friend and by other speakers. The other taxes that are supposed to be put on will make very little difference. We want a long-term policy, as well as immediate steps to secure our gold reserves position. But on the showing made in the Chancellor's statement, and after that the appeal by the noble Viscount, which did not have in it very much more detail, I am bound to say that we must adhere to our decision to move a vote of no confidence.
5.55 p.m.
VISCOUNT RIDLEY: My Lords. I share with others a disappointment that the present proposals of the Government deal only with the temporary difficulty which we are in, and not with the long-term problem which I think is clearly recognised to be with us. I do not want to repeat again what has been said about the short-term corrections in the form of higher bank rates and control of credit, except to say that I think in the circumstances it may be necessary to use those. But one should never forget the appallingly difficult situation it creates when there are these continual chances in matters of that sort throughout the life of the country, and also the fact that those controls both slow up investment in capital goods and make them more ex pensive.
What I find difficult to understand is the other main proposal, which is the increase in purchase tax. I understand that to be intended to reduce purchasing power throughout the country. It implies
1140
that there is now excess demand almost everywhere. I am not absolutely sure whether that is a right diagnosis. I think it is self-evident that in the building and civil engineering trade there is far too much work going on. But it is by no means apparent that in every other industry there is the demand to keep factories and plant working hard. One sees figures showing the small number of unemployed and the larger number of vacancies, implying that there is a shortage of labour. That, of course, is not a uniform pattern throughout the country. At the same time one hears it said, and figures are published to show, that the output of the country is not rising as fast as it should. Does that necessarily mean that employers are holding on to labour which they cannot properly use? It always seems to me very doubtful that any firm would do that for any length of time or to any extent, beyond keeping men on for a decent interval so as not to put them out of work more quickly than they can help. It is not a cheap exercise; it is an expensive one.
I cannot help thinking that the very large increase in industrial capacity which has been made in this country by the building of new factories and new plants must have some effect on these figures, and that the shortage of labour must be related to the fact that there are more factories. So I wonder whether there is any need to reduce the purchasing power in the way that has been spoken of; and even, if that is necessary, I should doubt whether this purchase tax method is the right one. It is only reasonable to expect that men will want their wages put up so as not to reduce their standard of living and purchasing power, and I think that those demands will be difficult, if not impossible, to resist.
One would have thought that some more general method might be chosen—even, possibly, the not-too-good method of hire-purchase controls, which fall unevenly on special industries but more or less evenly on everybody throughout the community. Possibly there might even have been an extra Budget, with some alterations in tax to last for the next six months. I feel that the method which has been chosen can do nothing but add to, expenditure and add to costs through rising wages and in other ways.

1141
I can see nothing in these proposals that will help to get the balance of payments back into the right proportions for years ahead. This, I think, is the really disappointing thing. The only positive thing which the Chancellor has said, I think, is that he will control Government expenditure abroad; and there I think it is a matter of keeping it down to its present level rather than of reducing it. That means, among other things, if not reducing at least not increasing the aid which we are able to give to under-developed countries; and I think we are all in agreement that wd wish to see ourselves doing as much of that as we can. It may be that Government expenditure abroad will comedown a little, but I believe that the scale of that operation will never be enough to meet the difference that we have to meet in our trading exports and imports.
What I should hope to see would be some serious and rather detailed attempt by the Government in various ways to find the means of helping industry to reduce costs. I believe that that is the main problem now before us. I do not think it is universally true that reducing demand at home will necessarily mean that all firms in all kinds of industries will, as a result, have more to export abroad. I believe that it applies to some, but by no means to all, and certainly not to those who find that their costs will not allow them to compete abroad.
For that reason, I should have thought that the great objective of everybody in this country, led by the Government, would be to find ways and means of bringing down manufacturing costs. By this, I do not mean only bringing down costs and leaving the manufacturer with more money in his pocket; I mean bringing down prices as the result of reducing the costs. So much has happened in the last year or so, as a result of Government action of one sort and another, leading to increases in costs, that one begins to think that this is a point which has not been appreciated in Government circles. For many years high indirect taxes have pushed up costs; and they have pushed up wages and therefore costs again.
These periods of high bank rate have been expensive for the building of new plant, and in other ways. This increased bank rate has been made necessary by
1142
periodic crises. Recently (although this is a small point) we have had derating of industry abolished. It is now necessary to pay rates, which again increases costs. Then the Olean Air Act, also very necessary, and very good and desirable, means more capital expenditure, and more running expenditure with no return. We have had higher coal prices, and it is felt by many in industry that the recent readjustment of prices was done in such a way as to load them with more than their share of the proper cost of coal. We have had a fluctuating policy on hire purchase and other matters, which has made planning difficult for many firms. There have also been increases in pensions contributions. They are in themselves desirable, and I mention this matter only as one of the many things which, one after the other, have been adding to the original primary cost of manufacture. On top of all that, we had in the Budget an oil tax, which hits many of our basic and important industries very hard; and now, in this "little Budget", there is another 10 per cent. addition. This shows the sort of thing that happens without any specific policy. I do not believe that at any time these measures were intended to add to manufacturing costs. But they have done so.
I believe that it is time for a reassessment of matters of that sort. There is no doubt Whatever in my mind that, if prices could come down, we should find our conditions of living at home very much easier. It is possible that we could have a reassessment of the methods of taxing industry, and the methods of carrying these Charges. Would it not be much better to make it as cheap as possible to' manufacture whatever it is that you want to sell abroad by removing these various impositions, or by removing their incidence? Then the manufacturers or businesses, having succeeded in selling abroad or at home, would have no grounds of complaint if they were asked to pay taxes from the resultant profit. I believe that, if this were done, in the end more money would be available from which taxes could be paid.
Some people say they would like to see a special differential form of income tax, so that exporters could be given some encouragement that way. I do

1143
not believe that it is practical to do that, or that it would be fair. Because it might well be that a firm supplying a semi-manufactured product to another manufacturer, who then exported it, would make a saving in his costs but would not get the benefit of the specially adjusted system of export tax which he would in fact deserve.
We have a proposal for a five-year plan for investment policy, and I very much hope that the Government will pursue that policy on the lines the French and Germans are doing in the way described by the noble Lord, Lord Boothby. That planning system does, however, function mainly as a form of investment planning, by deciding what forms of industrial capacity are required in the future; and it cannot, I think, do very much specifically to affect our exporting position and our capacity to be able to compete with importers.
I should like to see the Government confer with all organisations in industry to find ways and means, first, of reducing the real original cost of manufacturing, which I think must be distinguished and specified. It is cost that matters. At the present time, there are some products one knows of which it would be possible to export to the Continent with hardly any profit if this marginal small percentage of saving could be made. One would like to see the Government confer about that and think about this sort of problem, and also think about some new method of taxation on industry, perhaps weighted to encourage employers to employ fewer people in relation to units produced. In that way, efficient firms would be favoured, in much the same way as the investment allowances now encourage firms to instal new plant; and by producing a system which would be a definite inducement to firms to produce more cheaply, they would become more efficient and better able to compete.
I think one must now support the Government in their general policy of trying to introduce temporary expedients. I would do so, except that I doubt either the need for or the rightness of increasing purchase tax at this time. I regret very much that we have heard of no plans to help make a permanent change in the trend of our balance of payments;
1144
but I believe it is by no means too late. I hope that, as the months go by, the Government will get down to the problem of seeing in what practical ways they can make it easier for firms to compete in export markets, and also to compete at home with importers. Whether or not we go into the Common Market, we have the problem of competing both as exporters and against importers here, and I think conditions must be such that we have a chance as a country of holding our own. One thing I would say is that industry in this country has made an enormous contribution by increasing the rate of exports since the war compared with what they were before the war. The increase has been very large indeed. What remains to be done in relation to that amount is relatively small, though it is no less important for that. I would urge the Government to spend some time in looking at this side of the problem.
6.10 p.m.
VISCOUNT BRUCE OF MELBOURNE: My Lords, it is with the greatest reluctance that I am claiming your Lordships' attention for a few minutes this afternoon. The reason for my reluctance is that I am going to say practically nothing that I have not said before. It seems to me that I have spent years now in declaring my apprehension that unless some Government could succeed in enlisting the general support of all sections of the people, apparently we were going to continue with this cycle of economic crisis every few months. However, long experience has taught me that if, by the Grace of God, you happen to be right, repetition in the end will ensure that something will be done about the matter with which you are concerned. Hence my speaking again to-day.
We are discussing to-day the speech of the Chancellor of the Exchequer on Tuesday last in another place. After that speech, my feeling was one of very great disappointment, and I think that that was shared fairly generally. I believe that we were all hoping for something dynamic, forceful and imaginative, that would stir the country and lead to a great effort to get us out of our present position and out of this recurring cycle of economic crises. I am afraid that the Chancellor's statement hardly measures up to our expectations.

1145
The statement indicates that the Chancellor is going to employ taxation and financial measures to meet the present situation. With that, I am not going to quarrel, on the basis that he had to do something on the short term and do it immediately. But we have all to recognise that what he is doing is simply something that may get us temporarily out of the crisis we are facing—something very temporary at that—whereas what we had hoped for was something much more constrictive and long term. To me there appears to be nothing in the Chancellor's statement that is going to make a contribution towards the vital needs of increasing production and reducing costs, in order to increase our competitive power, save what I think is called a "standstill" in wages. With regard to that, I am convinced that it will do the very opposite. It inevitably means an increase in prices. Can anyone believe that, in isolation, the wage-earner is going to sit down under that? It seems to be absolutely stupid even to imagine that that can happen, and I am quite convinced that we have to go much further and deeper into the problem.
I feel that the situation is much better expressed in a statement made by Sir James Turner (as he then was: he is now the noble Lord, Lord Netherthorpe, and a Member of your Lordships' House), when he was President of the National Farmers' Union. I have quoted this before, but it seems to me fundamental and I should like to quote it again:
"In my view the problem of inflation will never be solved, and this national economic disease will never be cured, unless and until someone tells the patient its real seriousness and what is certain to happen to him if a major operation is not performed, and performed skilfully and quickly.
It is my deep and sincere conviction that the truth, however unpalatable, needs to be laid bare to the people of the country. The war-time catch-phrase, 'Britain can take it', remains true to-day—but only if her people are told what they must take, and why."
That is another way of saying that the circumstances we are up against necessitate that the people should be told how serious they are and that their cooperation should be enlisted in a national effort to try to overcome our difficulties.
The first point is: Can we make the people understand? I am told that it is quite hopeless. I venture to suggest
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that it is nothing of the sort. The facts are relatively simple. Our national economy is exactly the same as every individual's economy. The individual can enjoy the things he can afford by what he earns and what he saves. The nation is exactly the same. Our earnings are what we get from our exports, visible and invisible, including insurance, shipping and similar things; and our savings are the returns we get from our capital invested abroad. These things are simple. I believe that the people could be made to see them and to understand.
Who is going to tell them? Obviously, it must be the Government and the leaders of industry on both sides, employers and trade union leaders. And the method of telling them must be to employ every conceivable aid—Press, radio and television. What we must tell them is that we really are in a desperate situation, and that, unless we can get out of it, their employment, their wages, their standard of living and their social services will inevitably go. I am convinced that those are the facts, and that we can put them into simple language. I agree that perhaps this is a little wearisome to your Lordships, because these facts are so simple to us, but even when I am listening to debates in your Lordships' House, the statement of the case begins to get so complicated that I begin to wonder where I am arid where I am going. Yet I think that it can be put so simply that people will understand.
The first point is that exports of manufactured goods are of vital necessity. The world market for manufactured goods is increasing, but so are the number of competitors we have up against us; and the hard facts are that in face of this competition, our proportion of the world market for manufactures is steadily decreasing. It fell without interruption from 1951 to 1961. Since 1953—that is, over the last seven years—it has fallen by 20 per cent. But, since 1953, Germany's share of the world market for manufactures has risen by about 42 per cent., Japan's share has risen by over 80 per cent., and France's share by some 8 per cent. All these countries were faced with exactly the same problems that we have, of maintaining their competitive power. But they have managed to do it primarily because their productivity has increased sufficiently to enable

1147
them to compete at a competitive price. Since 1953 Britain's export prices have risen by 10 per cent.; those of the United States by 7½ per cent., of West Germany by only 1 per cent., while Japanese and French export prices have actually fallen by over 5 per cent.
Those figures are very serious. They show clearly that our costs and prices have been rising faster than those of our competitors; that our productivity has been improving more slowly, and that the pattern of distribution of world trade has changed entirely. Surely those facts are so simple that they can be made clear to the people of this country and the people can be made to understand how serious is the position. That seriousness is brought out when you think of our balance of payments. Every householder can understand what is meant by the balance of payments: it is simply getting enough to pay for what you want. It is as simple as that.
As your Lordships well know, the balance of payments on current account of the United Kingdom was last year in deficit to the tune of £340 million, despite a slight move of the terms of trade in our favour. The actual overall deficit was, as stated by the Chancellor, almost £550 million, when you take into account the £200 million of our long-term investments abroad. Your Lordships will remember that the experts from the Treasury told the Radcliffe Committee that it was considered necessary as long ago as 1953 that we should have a surplus on current account of about £350 million—roughly the same as our deficit last year. Looking at last year's figures in perspective, therefore, we need to increase our current surplus by some £700 million in order to meet all our commitments, including building up our convertible currency reserves. I venture to say that even that is not so complicated that the public could not understand it and realise how serious the position is.
A further point is that, even if the people were convinced of the seriousness of the position, we should still have to get their acceptance of it; and they will have to put up with some very unpleasant things, having regard to the luxury we have lived in over the last few years. I have such faith in the British people
1148
that I am convinced that, if the situation were brought home to them, they would accept it, and would make an effort and self-discipline themselves. But they have to be convinced. And if we are to get their co-operation there is one vital necessity. Even if the people are convinced, it is imperative that in any remedial action not only must justice be done, but it must be apparent that it is being done.
In the Chancellor's statement great emphasis is laid on what I think is described as the "standstill" in wages, but it contains only a vague threat to capital. I say that it is absolutely essential, when you are dealing so definitely with wages, to deal with the position of capital. I do not propose to go into detail about what I would suggest should be done, if only for the reason that if I make any such suggestion it will become the subject of controversy and my fundamental point will disappear in it. And my fundamental point is that the people must be made to understand. That is the greatest task to which we have to set our hands.
There is one point, however, that I want to make on capital, and it is this. I protest at the idea, which to my mind is far too prevalent in this country, that there is something sacrosanct about capital. The United States and other countries have tackled the problem, and I do not accept the view that we are not capable of dealing with it. We have the brains, and we should do it. The point I am making is that there must be equal treatment as between wages and capital or we shall never get what I say is vital. I suggest that we should adopt the suggestion contained in the admirable letter of Mr. Lionel Fraser to The Times on June 27 last; namely, that the Government should formulate a coherent long-term economic policy. And the essential thing in that long-term policy is that it—and these are his words:
"will only succeed if it is understood and supported by the man in the street."
From the Chancellor's observations it would appear that his mind is running in the same direction. If it is, why does he not bring the plan down now? It is urgent beyond words. The Government have had many years to consult their experts and these various bodies,

1149
Surely by now they have in mind what their own financial and economic policy is. My plea is: for Heaven's sake! bring it down, and bring it down quickly, because the situation is pretty desperate.
House adjourned during pleasure.
House resumed.

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

Rating and Valuation,

Companies (Floating Charges) (Scotland),

Mock Auctions,

Land Drainage,

Covent Garden Market,

Rivers (Prevention of Pollution),

Police Federation,

Army and Air Force,

North Atlantic Shipping,

Human Tissue,

Crown Estate,

Credit-Sale Agreements (Scotland),

Trusts (Scotland),

Crofters (Scotland),

Eyemouth Harbour Order Confirmation,

Pier and Harbour Order (Exmouth) Confirmation,

Teesside Railless Traction Board (Additional Route) Order Confirmation,

British Transport Commission (No. 2) Order Confirmation,

British Transport Commission,

Middlesex County Council,

Shakespeare Birthplace, &c., Trust.

House adjourned during pleasure.
House resumed.

THE ECONOMIC SITUATION
6.46 p.m.
Debate resumed.
LORD PEDDIE: My Lords, we have had a long and interesting debate and I do not propose to detain the House too long. I recognise that the Opposition has a responsibility to challenge the Government on issues of moment, and that has been done from this side of the House most effectively. But I am certain that I speak for all on this side of the House when I say that the challenge on this particular issue is not made in any spirit or feeling of elation, for we are discussing matters and circumstances that affect the life and standards of our people. However, there are certain things that should be said, and have been said, in spite of the noble Viscount's appeal—and probably justifiable appeal—that in our consideration we should give emphasis to the moral issues rather than the purely economic. There are many economic aspects that demand the attention not only of this House but of the entire nation.
This is not a sudden crisis that appears with unexpected violence upon the nation; it comes as the inevitable climax to a long period of economic erosion, arising very largely out of the Government's unwillingness over the years to meet the facts of the situation. I recognise that the Government were possibly rendering a signal service in ma king the nation vividly aware of the circumstances of this crisis at this particular moment, and I believe that when the people a short time ago became aware of crisis conditions they were expectant rather than apprehensive, and they braced themselves for action. But instead of the clarion call which we all expected, we got a pathetic bleat; and that, one can only assume, was due either to a paucity of ideas or a cynical reluctance to face the facts of the situation.
The noble Lord, Lord Rea, offered a quotation when he said:
"The mountain was in labour and it brought forth a mouse".
I think the exact translation from Horace would be even more apt and more accurately fits the situation. It is, I believe:
"The mountains will be in labour; the birth will be a single laughable little mouse".

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That, to my mind, indicates the true circumstances of the situation as presented by Mr. Selwyn Lloyd. One remarkable characteristic of the whole circumstances surrounding the recent declaration of the Government is the fact that even the Press, which is normally on the side of the Government, joins in the universal condemnation of these proposals. My noble Leader has already indicated, as have other Members of your Lordships' House, that crisis conditions justify additional burdens upon the community. But it is appalling that to-day we have the same stale, unoriginal proposals, and, in addition, we have the most unfair spread of those proposals upon the community.
I believe that the Government can be condemned on two grounds: first, that they have allowed this situation to develop; and secondly, that they have rejected the outstanding opportunity to rally the nation to do all the things that the noble and learned Viscount called upon the nation to do. I recognise that no Government, no matter what its political complexion, carries a magic wand to create prosperity, but it can set an example; that was all that was expected of this Government. There is no legislation and no declaration which can translate poverty into terms of prosperity. We find little has been done by the Government in their present proposals—except possibly the penny on the pint of beer and the twopence more which the lady has to pay for her lipstick; I do not know what sort of contribution that will make.
The basic problem that confronts this country is, as has already been mentioned frequently in this debate, its capacity to produce. Our capacity to produce has a bearing on the problems of inflation mentioned so frequently to-day. It does not require economists to tell us that our prosperity depends upon the skill of our people and the efficiency of the tools that they employ. Therefore, the basic measurement of a country's efficiency can possibly be found in the proportion of the annual revue that is invested in new equipment. The Government can have some influence upon that; through the process of policy it can influence that particular trend. What do we find? Over the years, although the Govern-
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ment have been aware of the situation, between 1950 and 1958 this country invested about 14 per cent. of its national income in new equipment, a long way behind almost all of the progressive industrial nations.
That sluggish investment betrays itself in our industrial production. Between 1951 and 1960 our industrial production increased by 32 per cent. But look at the figures which are registered by other nations: France 76 per cent., West Germany 112 per cent., Italy 107 per cent. And the same picture is reflected in our export record. It can be said, in all sincerity, without any exaggeration, that after ten years of Tory Government, in comparison with other major industrial countries we are less well equipped to earn a good living in the world to-day than we were when the war ended. That is a statement of fact and it is no use blaming the workers and the trade unions or even the shop stewards. They do not make the decisions on investment policy and exports.
I know I could join with others in this House who would express condemnation of restrictive practices. They exist; they are to be deplored. But in the examination of restrictive practices it would be as well to examine the conditions out of which those restrictive practices are often born—frequently out of a justifiable suspicion that possibly the standards of those workers may be affected if those practices are not maintained. It is born out of a long experience, a hard, grim experience. I think the Government, by their own example, and the employers, can do much to allay the suspicion out of which these restrictive practices in so many cases were created. When we think of the relationship of workers and the trade unions to production, I refer your Lordships to a recent statement made by The Times, which said that Britain's failure to improve exports is due more to the apathy of management than to the shortcomings of workers. That is not my statement; it is a statement of The Times.
I would ask your Lordships to turn to another aspect of this question, and that is the human aspect. We have indicated our position relative to economic affairs, but I would say that we are no better off to-day in human terms. The human equivalent of a high level of

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industrial equipment is an expanding level of education. What do we spend on education? Three per cent. of our national income is spent on education, about the same proportion that was spent in 1938. Over the past 23 years we have seen a fantastic development in science and technology and new skills. A vast new body of knowledge has been made available to the community to-day; it is at the disposal of our nation. We can strengthen and develop the nation if we make use of it; but we can do so only by developing and stimulating our educational resources. Instead of that, we are jogging along at the same rate as we did a quarter of a century ago—indeed worse, because, as the noble Lord, Lord Boothby, pointed out, our attitude towards the teaching profession to-day is such that a further set-back will be given to our educational development. So much for the question of education in relation to this problem.
I turn now to the matter of profits and dividends, which have already been discussed. It is common knowledge that profits and dividends have risen far more rapidly than wages. But that is not all. For years now the public have been regaled with almost obscene stories of millions of pounds made in stock deals and in property and land speculation. And when an appeal is made for cooperation, what do we find? Recently there was a Budget which gave £83 million to surtax payers. I know justification for that was put forward in terms of offering higher remuneration to those in management and science who were deserving of greater salary awards, in view of our need for their services to-day. That may be something of an argument. But how does it justify that within that £83 million, £19 million was relief on unearned income? Where is the justification for that? A few months before, wage earners were subjected to a disguised tax of £65 million through increased health charges.
All this tends to illustrate the inevitable consequences of the policy of eat, drink and be merry, for to-morrow comes the next crisis, and the next and the next. The ordinary people of our nation have made no special study of the effects of capital investment, productivity and the like, but they do sense that there is
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something really rotten in the state of affairs to-day. I ask your Lordships what are they expected to do in this pattern of living set for them by the Government and the people who run industry and finance? When they read of easy money and speculation, when they are told that the glorified purpose of life seems to be that of making money, are they expected automatically to accept the suggestion of a cut in wages so that the speculative bubble can be blown even bigger? We have heard on many occasions the Conservatives accusing the Socialists of being doctrinaire. I am going to say as kindly as I can that I believe that the most bigoted and doctrinaire, people who have ever ruled Britain in this century are those who have been in power since 1951. Why? Because they have stuck blindly to that doctrinaire obstinacy of an idea that nations can prosper on the basis of the unrestricted, uncontrolled decisions of anonymous and socially irresponsible financiers.
The Government did away with physical controls. They destroyed the methods of regulating the economy except by the crude device of the bank rate and certain savage increases in taxation. The so-called purists have made the malady a deal worse. We have heard the challenge that the Tory Administration over the years has shattered all sense of national purpose and protection and has put a premium on individual and group selfishness. Surely the Government cannot be so inept as to have no policy at all. Rat I wonder whether they have a policy. Would they be inclined to indicate what it is? I am tempted to ask that because of a statement made in the Guardian, I think only yesterday. I pose this as a question. This is what was said:
"Could it he that, after all, Mr. Selwyn Lloyd intends to create a recession as the only way of containing the excessive wage demands which his policy will probably provoke?"
That is what the Guardian says. That is what creates suspicion in my mind.
Only serious planning can deal with the situation to-day. The bank rate increase and the credit squeeze could never reach the seat of the trouble. It would have been possible at least for the Chancellor to attack imports by imposing physical controls upon certain

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classes of luxury goods. During 1960 food imports into this country increased hardly at all, but finished manufactured goods increased by 38 per cent., a total of £150 million, much of it pure luxury goods. In my opinion, the Chancellor has over the past few days lost a great opportunity of making a new approach in an economic policy. Instead, his proposals are largely inflationary. His financial measures may protect sterling in the short run, but it will not be a lasting cure for the nation's ailments. To attack "hot" money, the bank rate goes up. How much longer are we to be dependent upon a bunch of faceless Continental financiers and, in the interim, impose serious additional burdens upon industry and added charges upon the community, all of which are reflected in a higher cost of living which must inevitably reflect itself in demands for higher wages?
The noble Viscount opposite made a most impassioned and eloquent appeal on the moral plane. It was almost an appeal for patriotism. I want to assure the Government and noble Lords opposite that there is as much patriotism on this side of the House as there is on the other. There is the same desperate desire to see that this nation indeed grows in strength and in stature. We have the resources, we have the men, we have the ability. We demand the leadership; we demand, instead of exhortation for co-operation, a demonstration of the only way we can go forward—on the basis of reasonable equality, without calling upon one section of the community for all the sacrifices. Let us go forward recognising that the only way that we can safely achieve progress is on a community basis, and not on a sense of complete class consciousness.
7.6 p.m.
LORD MOLSON: My Lords, we have reached another of the biennial balance of payments crises to which we have become accustomed ever since the war. I think it is necessary, first, to consider what the immediate cause of this present crisis is; then I should like to give my explanation of what is the long, predetermining cause of these constant crises, and in that way to join with those who are pressing upon the Government the need for a long-term policy.
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A number of noble Lords have criticised the Government because of changes in the bank rate and of policy. If we are going to seek to maintain a policy of high and stable employment without an excessive increase in prices, it is obviously necessary to alter the bank rate and in other ways to make the necessary modifications. Indeed, it is like a car being driven along the road: on some occasions it is desirable to use the accelerator and on other occasions the brake. What has gone wrong with the driving of this motor car is that the accelerator has been put down too hard and too late, and then the brake has been applied too savagely shortly afterwards.
I think that the actual cause of the present balance-of-payments crisis is the measures that were taken in 1958–59 and early 1960 by the Government, perhaps because of their excessive concern over a comparatively small rise in unemployment. I do not agree with the noble Lord, Lord Boothby, who says that what has happened is entirely due to taking off of controls by the Government. What in fact happened was that, with the best of intentions, the Government adopted all sorts of measures in order to put more purchasing power into the economy. I thought it was ill-advised at the time. I felt sure that it would result in a great over-burden of the building industry. Of course, that is what has happened. Roads and bridges are being built at a tremendous rate. The building industry has a programme of prisons, hospitals, barracks and housing, in addition to schools.
Then there was the Local Employment Act, 1960, which is now beginning to take effect, just at a time when there is over-full employment in this country. In the first twelve months of its operation £19 million was promised to industry; in the next twelve months it was £30 million. I hope that now steps will be taken to close down this inflationary activity, for it really cannot be said that at the present time there is any need for more purchasing power to be infused into the economy. To me that appears to be the short-term cause of the trouble.
But ever since the war we have been faced with inflation, the chronic disease from which we are suffering at the present time. The Times has drawn attention to

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the not steady, but continuous, decline in the purchasing value of the pound ever since the war. I believe that this is largely due to the fact that ever since the war wages have tended to increase in excess of the increase in production. Despite the fact that what I say may incur the censure of noble Lords opposite, I intend to say that I think the general system of wage settlements in this country is calculated to deal with the old situation of unemployment and low prices, and not with the modern problem of high employment and rising prices. The whole wage-fixing system is calculated to deal with a state of affairs which I am glad to think is now one of the past.
Take the case of wage boards. They were introduced by a Liberal Government before the First World War in order to deal with the appalling problem of setting wages in particular industries. Wage boards have now been carried on and applied in many industries where it cannot possibly be said that wages are low. I remember discussing with the late Ernest Bevin his catering wages legislation during the last war when a number of members of my Party were very hostile to the Bill which he introduced. He said at the time that he had no intention of using it for hoisting up wages but because he foresaw that after the war there was likely to be a period of unemployment and wages might fall, and he wanted to put in a floor to prevent them from being depressed. It was with that in mind that my friends and I gave him support at that time, despite the contrary view taken by a number of members of the Conservative Party. But although the catering wages legislation has been modified, and despite the fact that there is full employment in the catering industry and wages are high, we still have a wages board in that industry which really is based upon the legislation of, I think, 1911, which was intended to deal with an entirely different problem.
Then take the way that arbitration, which has been agreed to in so many industries, is now operating. It has become an escalator of wages. Unions now ask for double what they really expect to get; the matter is referred to arbitration; and it has become the accepted principle that some increase must be conceded every year. It is usually in the spring, but if the increase
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does not take place in the spring, then it usually takes place in the autumn. Wages are not raised merely as a result of an increase in the cost of living. At the time when my noble friend Lord Amory was Chancellor of the Exchequer, when the cost of living remained constant, there still was an increase in wages, largely brought about by the machinery of industrial negotiation and arbitration, which resulted during that time in a great increase in real wages and an increase in nominal wages Which was not balanced by a corresponding increase in production.
My Lords, I invite consideration of the anomalous position of the Minister of Labour at the present time. The doctrine of the Ministry of Labour is that they are under an obligation to hold the balance evenly between the two contesting sides. In a large measure the Minister of Labour in matters of industrial disputes regards himself as in a position analogous to the Attorney-General in the administration of justice. Although he is a member of the Government, he considers that he has a special obligation to take an independent line and to hold what he deems to be the balance evenly and to be impartial. In fact, we have this strange state of affairs: that when the Chancellor of the Exchequer is trying to adopt a particular economic line as regards the country as a whole, one of his Cabinet colleagues has a divided allegiance. One, in the speeches that he makes in the country, may express agreement with the policy of the Chancellor of the Exchequer; but when it comes to the actual administration of the conciliation machinery of his Department, he is precluded from bringing any pressure to bear in order to give effect to the Chancellor of the Exchequer's policy which may be to have stable wages.
I believe the solution to this problem would really he to take the conciliation machinery, the work of the Industrial Commissioner, away from the Department of Labour and put it under the Lord Chancellor. In that way one would have the feeling that there was an impartial body administered by the head of the Judicature who would be able to adopt the same attitude in dealing with that kind of matter as he would in any other kind of tribunal. But the Minister

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of Labour should be required, like all his other colleagues, to give in his Department, as well as in Parliament, support to the economic policy of the Chancellor of the Exchequer.
A lead in this direction is now being given—this is where I think it can be claimed that the Government are facing the realities of the situation—in that the Minister of Education for the first time is making it plain that it is impossible indefinitely to go on with the old Burnham machinery. There, for a long time, we have been accustomed to the representatives of two parties agreeing among themselves, and the Government, the Chancellor of the Exchequer, who pays so large of proportion of the cost of education, is called upon merely to pay its contribution regardless of what the settlement may be. To those who are criticising the Government for not having faced up to the realities of our present financial difficulty, I would say that here is a most encouraging indication that they are looking forward and realising that some alterations will have to be made.
I come now to the matter of the nationalised industries. I am not one of those, if there are any, who want to see any of the nationalised industries denationalised, but I am quite sure that in many respects none of us, either on that side of the House or on this side, has faced some of the economic consequences that have resulted from the policy of nationalisation. I think I am right in saying that something like 40 per cent. of the people of this country are now employed, directly or indirectly, by the Government, by the local authorities and by the nationalised industries. It seems to me to be quite impossible to allow the old idea of free negotiation between the employers and the employed to apply in the case of the nationalised industries. It seems to me that the sponsoring Minister—the Minister of Transport in the case of transport, the Minister of Fuel and Power in the case of the coal mines, and so on—must have an overriding authority in the matter of financial settlements.
The practice of the different Departments has not been uniform since nationalisation took place. The Minister of Transport has on many occasions, as
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is well known and has been publicly stated, indicated that he would deplore an increase in wages in the transport industries which is disproportionate to an increase in efficiency. In the case of the Ministry of Fuel and Power very much less effort has been made to exercise any such control. In the case of the electricity industry increases of wages and improvements in conditions took place without any regard to the difficulties of the similar but less fortunately placed industry, that which was producing gas. Gas, an older industry without the same natural ever-increasing demand that there was in the case of electricity, found it extremely difficult to compete with the more favourable conditions which the Electricity Board found itself able to agree to.
Once nationalisation has taken place and a monopoly has been created, it is no longer a matter of free negotiation between a private employer and his work-people, when he is obliged to compete with others. It is a case of a monopoly where, if wages are increased and generous pension schemes are provided automatically, the cost can be put on to the consumer. There has been no proper co-ordination of these pension schemes, which are merely one more example of the kind of burden which can result.
In his statement two days ago the Chancellor of the Exchequer indicated that he intends to try to exercise some restraint upon the nationalised industries. He intends that there shall be a standstill policy as regards wages for the present—indeed, for some time to come. The fact that he has declared his intention of doing so is, in my view, a great step forward. It is a recognition on the part of Government of the completely changed economic position which has resulted from the nationalisation of these great industries and services. But, of course, he will find that that does not go far enough. One of the great difficulties of the railways was that at a time when they were running at a loss they were losing labour to private industries—industries where working conditions were very much more agreeable than they were on the railways. In my late constituency, there was very unfair competition between the railways, who were trying to maintain their services, and a large, modern factory, well-heated, with

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something very much like air conditioning, and with all the amenities and attractions that can be provided by a modern, manufacturing industry.
How impossible it is to leave the private sector without any measure of influence upon its wages is again shown by what happens in the use of negotiations between U.S.D.A.W., the trade union representing those who work in shops, and the shopkeepers. There, a reduction in hours or an increase in wages has an immediate effect upon the cost of living, which can be passed on and is passed on. Actually, an increase in the wages of retail workers is likely to have a more immediate and, perhaps, a more serious effect upon the cost of living than an increase taking place in one of the basic industries, like coalmining.
All these things seem to me to indicate that we shall have to move in the direction of a national wages policy. All the machinery that we have at the present time—the Ministry of Labour itself, the whole system of negotiation, the general laissez-faire attitude with regard to wage negotiations, which many noble Lords on both sides of this House would regard as inevitable if we are to maintain a free economy—is leading directly along the path to an ever-increasing cost of living and an ever-declining value in the purchasing power of money.
What is needed is a new attitude on the part of the Government—and, as I have said, I think there are indications of this in the much firmer line which they are apparently taking with regard to those,who are directly or indirectly in their employment—and a changed attitude on the part of the trade unions. Inflation, if it goes on as it has been doing for the last twenty years, must have the most disastrous consequences. It will destroy our exports; it will destroy the desire to save, because the savings will be constantly losing their value; and it will, in itself, in the long run, destroy full employment. It is because I believe that these facts must be faced, and that they are the underlying cause of these ever-recurring balance-of-payments crises, that I think it is desirable that someone in your Lordships' House should express these views.
LORD CROOK: My Lords, I wonder whether the noble Lord, before he
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resumes his seat, would mind if I raised a point. I would not interrupt what I regard as a brilliant contribution to your Lordships' debate, whether I agree with it or not, to ask him, when he referred to the Chief Industrial Commissioner, quite what it was that he had in mind. As I understood it, he suggested that if the post of Chief Industrial Commissioner wore removed from the Ministry of Labour to the Department of the Lord Chancellor, that would free members of the Cabinet to look at industrial conditions in a rather better way than they can at the moment. What I could not understand was how the Lord Chancellor was more free from Cabinet control than the Minister of Labour. If I am under some misapprehension, perhaps the noble Lord would let me know.
LORD MOLSON: My Lords, I am obliged to the noble Lord, Lord Crook, for his question. Our Constitution is full of anomalies, and that the head of the Judicature should also be a member of the Cabinet is one of them. It goes back a long way; but I think it has been generally accepted that successive Lord Chancellors of all Parties have carried out their judicial work and their judicial administration completely free from Party affiliation. I think, therefore, that it would be far better for the Industrial Commissioner to be under the head of the Judicature, rather than to be under the Minister of Labour.
LORD CROOK: I am much obliged to the noble Lord.
7.28 p.m.
EARL ATTLEE: My Lords, I am not going to follow the noble Lord, Lord Molson, in his very bold raising of the question of industrial relations. It seems to me a little one-sided. He obviously wants control of wages. Does he also look for control of profits? How does he imagine that you must have a semi-judicial decision upon whether a wage should be a certain wage or whether the profits of the employer should he at a certain level? Really, the noble Lord must think again about the difference between justiciable and non-justiciable disputes. I do not think he contributes very much of a solution. However, I was not going especially to deal with that.

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I am reminded that it was just sixteen years ago that the Labour Party formed a Government, and that I was Prime Minister. I recall that at that time I received more condolences than congratulations. They said, "You have got an awful 'headache'." I gather that the Government have a "headache" to-day. But our heads were bloody and unbowed. The "headache" which the Government have got to-day is a very ordinary one—it is the headache of the morning after the night before. Because for the last ten years the Government have been engaged in steadily running down the standard of national duty in this country, and to-day we face a crisis with a country that has been debauched by every kind of Government action.
When we came into office we had one great asset. We had a nation that had been making sacrifices; that had been accustomed to seeing the national interest put before private interests, and accustomed to seeing people give service. And, to their honour, although tired, they carried that on for the next six years. We did not have to make many moral appeals for duty. People did it. For one thing, they had learnt the lesson in the war that you must have first things first; and, for another, they had learnt the lesson that you could get those things only by action, not by mere wishful thinking. They also knew that the Government in power were striving for social justice, and they felt that all the sacrifices they were asked to make affected all parts of the community.
Now the present Government have not done that. This present proposal is manifestly unjust. There has been no attempt whatever to hold the scales evenly between different sections of the community: they lean all the time towards the better-off people. But, worse than that, what is the good of their making a moral appeal when for ten years they have been running the country on the doctrine of getting money somehow—it does not matter how—with no emphasis on hard work, except for the workers, of course? There has been every kind of invitation to gamble over and over again. I know that the better section of the Conservative Party were opposed to commercial television. I do not say that commercial television is particularly bad, but it is an extra-
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ordinary thing, for a Government who recurrently ask people to abstain from unnecessary purchasing, to put the advertiser right into everybody's home; and there was not very much scrupulosity in the way that was done.
You have other things: every gamble you can have—premium bonds, betting houses, everything. There has been no attempt anywhere to raise the standard of public morality. On every possible occasion this Government have said, "We will not have a service for the nation, unless of course it does not pay. If we find any paying sector we will take it away from the nation and give it to private exploitation." That example is not lost on other people. We have a system of immense capital gains, of which we read in the paper every day; and there is no attempt to control that. They glorify these immensely rich people. Business deals of all kinds, takeover bids, speculation in building, inflated values—all these thing are the fruit of a Government that have never attempted to put any moral purpose before the public. I know that the Conservative Party sneered at Stafford Cripps. Stafford Cripps had to put on a number of unpleasant things that were absolutely necessary. I recall that people did not like it; that some goods could not be obtained because they were needed for exports. If it was necessary to export then, it is necessary now. The difference between us is that when we were in power we took steps to see that we did get our exports. It was essential to this country.
My late friend Aneurin Bevan once said a very true thing. He said that
"A sense of priorities is half the art of government".
When we look at the activities of this Government we see what their sense of priorities is. I suppose that nothing can illustrate that better than the attitude to education, which is quite characteristic. When the Tory Government came in they left the Minister of Education out of the Cabinet. Naturally. They did not think much of it. Now they have hit the teachers, an incredibly stupid thing to do. We have had many debates in this House in which speakers have stressed the need for having an adequate number of teachers. We have had educationists painting out the danger because our science teachers and

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our mathematicians were being led away by higher rewards from private industry. There was a shortage of teachers, but the Government disregarded that entirely. They do not consider the priorities, and what is of real value to this nation.
The action of any member of the Government seems to me to be very characteristic. When I was young, it was considered an honour to serve in the Government, whatever the colour of that Government. I cannot recall Minister after Minister leaving the Government because he could make more money in the City, or at the Bar. But that is just a reflection of the lower standards of this Government. Everything is done to glorify the people who contribute nothing to the nation—the financial manipulators and the rest. Now we are in this position, and the noble Viscount has been making an appeal to the country. He may do it. He is perhaps one of the few members of the Government who could do it, because I do not think the rest of the Government will be successful. They cannot do it by just preaching: they ought to give an example. But this Government have given no example whatever, no idea of service and sacrifice, which is what this country needs if it is to compete in the world to-day.
I have been much struck in the last two days by the fact that the Government seem to have attained general unity of opinion in one respect, and that is on the total inadequacy and futility of the proposals of the Chancellor of the Exchequer. In the last two days I have been to one or two social functions, and it is surprising to me how many people came up to me to talk and said exactly the same things, whether they were Conservatives or non-political. They all said exactly the name thing, and I am quite sure that if there were a free vote in your Lordships' House there would be very little approval of the Motion which the Government have placed on the Order Paper. People said to me that there is no idea of long-term policy in this; it is just a collection of the old expedients that we have had before. Businessmen say, "How can we do business with this constant use of an expedient, the raising of the bank rate?" We are getting it
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pretty constantly now. Every few months there is a change in the bank rate.
It reminds me very much of the devices of the late Mr. Whittaker Wright. He used to run a number of companies, and he had a certain amount of money. At a critical time, when the shareholders were meeting, he put that money into a particular company and showed it as doing well. Then, when he got over that awkward point, out it would go into another company. He was caught at last. This Government's action, which I understand is for "hot" money, is very much the same. A crisis comes up; "hot" money is carried over by a 7 per cent. bank rate, and the Government boast that they have cured our difficulties and overcome the balance-of-payments problem. Then, very soon, out goes this "hot" money again, and we have another financial crisis.
Really, my Lords, unless we can get something better than we are getting from the present Government, one is rather in despair for the future of this country. We have lost the moral leadership of the world which we had in 1945—yes, and in 1950 and afterwards. We have come down now to a pretty pitiable position when we are doing worse in every way than our late enemies, Germany, Italy and Japan. France, all those who fell in the war, we are told, are doing better than we are. We have to go, cap in hand, to our late enemies for a little bit of assistance—it is a pretty poor record. I should feel inclined to echo the famous words of the late Leo Amery: "You have sat here too long; in God's name, go!"
7.40 p.m.
LORD FERRIER: My Lords, I rise to oppose the Amendment, or to support the Motion—take it as you will. It is not my intention to make reference to the many and various points which have been raised by your Lordships in this long and interesting debate from the angle of economics pure and simple; but in view of the words of the noble Earl who has just spoken, I may make some references to capital gains and to surtax, and for this reason I do not propose to refer to other points which have already been mentioned. Therefore, I trust your Lordships will not regard the texture of my speech to be woven of trivia.

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I share some of the doubts which have been expressed by many noble Lords on both sides of the House at the steps which have been taken by the Chancellor of the Exchequer, but I know enough of affairs to be conscious of how easy it is to criticise when you have not to bear the responsibility. I am one who believes that the complexities, the uncertainties, and the imponderables of the situation at the moment are such that only time can show what will be the outcome. But there is one consideration—namely, the consideration of leadership, that leadership which is so necessary for united effort; and it is on this point that I should like to concentrate my contribution to this debate.
Besides the steps they have taken, cannot the Government do more to create, to promote, and to develop a sense of mission, a sense of unity, which one must confess is, in a measure, lacking? It is clear that we have to produce and to export to live. It is also clear to me that fiscal measures, whatever they may be, cannot alone improve our productivity unless there is a united effort on the part of the whole nation to strive to make our economy work, and to fight for our place in the trade of the world. This point has been nobly made by the Leader of the House in his opening speech on the Motion.
Now, what can we do to this end? I have listened to several debates in your Lordships' House when productivity has been the subject of our deliberations, and there is one factor which I believe has not received sufficient consideration. It is this. Accepting that co-operation in industry is essential, I feel that too little attention and too little credit have been given to direction—direction in our industry, and the importance of it. We have spoken too much of management—labour relations, and labour—management relations—and have perhaps tended to confuse management with direction. There has been talk of directors losing touch with the shop floor, and there have been some scornful references to "the race of professional directors Who play the game of musical chairs from one company to another". Here I quote from the noble Lord, Lord Lucas of Chilworth. I am sorry he is not in his place. I told him I might mention this,
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and I would not have mentioned it had not the noble Earl who has just spoken suggested that there is a certain amount of this sort of thing. This race of professional directors—and it exists—is a very small one in terms of numbers, but, by and large, a very valuable one. I think it is fair to say that nowadays a substantial proportion of company directors win their way to the board room through the normal executive chain, and that in the larger companies in particular the proportion of such directors is very high.
These executive directors have no limited hours of work. Their task is never done. Their job is a 24-hour one, and as I know them, they are dedicated men. They are pledged and are wedded to their work with incomes little above those of their immediate subordinates. The noble Lord, Lord Boothby, implied when he spoke that there were restrictive practices on both sides of industry. I am inclined to doubt that. I have yet to come across them, certainly on the management side, but it has become the fashion to disparage (as has been the case in this House only to-night), almost to deride, the place of management in industry.
Would it not contribute to this joint united effort which is so necessary if something more were done to put this right? It is to my mind wrong that, for instance, the words "working man" should be applied only to labour. We are all working men in industry, or we have no right to be there. And the working man is worthy of his hire. Take this question of surtax, which has been referred to over and over again in this debate. It is not the relief which is unfair. The position until the relief came was unfair. If there is any unfairness, it is that the relief has not gone far enough, and not gone anything like the distance it should have gone to match conditions to-day with the conditions when surtax was first applied. My Lords, I say that the working man is worthy of his hire, and I go wholeheartedly with the approach of the Government to the problem of the capital gains tax. The difficulties of assessing a gain fairly, as distinct from the rise in prices due to inflation, the problems of off-setting losses, and so on, render it much too complex, in my experience, to be reasonably operable in an economy

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liable to inflationary pressure. And surely we have heard enough to-night of the inflationary pressures which are upon us. Speaking for myself, I certainly look forward to the proposals of the Chancellor of the Exchequer forecasting, in some form or other, some effort to produce revenue from successful speculation. I think it is safe to say that all sides of the House would agree, though this is going to be difficult, that it is something that is going to be worth while.
To turn to the question of exports, which have also been mentioned, it brings me again to the problem of leadership, of the general spirit which should go behind our industrial effort. It brings me to the problem of rewarding successful exporters. This has been mentioned, and personally I am satisfied that, no matter how desirable, it is impossible to adjust taxation so as to provide direct rewards by tax relief. The least we can do is to assist in terms of moral support. For too long the public in this country have been tempted to think that selling overseas is all "beer and skittles". I refer not only to the peripatetic salesman—and his is a difficult task, which calls not only for great skill and expertise, which are often overlooked, but also for physical endurance—but also to the British business communities up and down the world. I feel that their contribution to our island's economy deserves more recognition. If we cannot do more to put this right financially—and I recognise that the tardy surtax relief may have gone some little way towards this—can we persuade the Press to give our overseas efforts and our representatives there a bit of a leg up, if they are not too busy with their own internal troubles?
My noble friend Lord Bessborough has asked me to make one point in connection with exports which he would have raised had he been here today, and he wishes me to apologise for his absence. He would have asked: Should not further thought be given, to finding positive ways and means of helping exporters? For example, one very pressing matter is the cost of obtaining finance. Now that the bank rate has been increased British exporters have to pay 4 per cent. more for their credit than do their competitors in Germany.
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This is hardly encouragement. Could not some means be devised by the Government of making finance available at reduced rates for approved export transactions? That would indeed be a positive incentive and a very great help to smaller exporters in particular.
THE EARL OF LONGFORD: My Lords, has the noble Earl studied what Mr. Harold Wilson had to say on that subject yesterday?
Loran FERRIER: My Lords, I am not in a position to say, because my noble friend handed me this as he hurried out in the course of the debate. Speaking for myself, I think there are various angles affecting this, but my noble friend asked me to say these words and I have said them I have no doubt that when he has studied the Record he will take note of what the noble Earl had to say.
In terms of worrying about the available personnel and the shortage of trained men and technicians, we must remember that the casualties of two bitter wars have heavily cut our resources of men as men alone, and that being the case, although we are short of leaders, anyway, we must battle on. My plea is that the steps which the Chancellor of the Exchequer has taken will go some small way in bringing the crisis home to us, but it is only by strenuous effort, by united and self-reliant effort that success can be obtained. I believe that greater recognition of the worthwhile nature of every side of industry would contribute to this end.
In conclusion, may I inquire whether there is any special stimulant which can be provided—exhortation was the word used by the noble Viscount who moved the original Motion—"gimmick", shall we say, such as the reference of the noble Viscount opposite to the noble and gallant Field Marshal who is not here? But would something like his double badge be possible? I know that the noble and learned Viscount, Lord Hail-sham, cannot ring his bell in this context, but might there not be some sort of equivalent if no time is lost in declaring that we are to have a decimal coinage and no time is going to be lost in introducing it? To do so, and to do so soon, I feel might go some way to providing the élan which we need so much for our attack upon the crisis.
7.54 p.m.
VISCOUNT AMORY: My Lords, greatly to my disappointment, I have missed parts of this debate and, to my particular sorrow, the early part of the able and eloquent speech from the noble Viscount the Leader of the House. I do not propose this evening to deploy my views on our general economic problems because I have done that to your Lordships on several occasions recently. I rise only to give unqualified support to the measures now proposed by my right honourable friend the Chancellor of the Exchequer.
These measures have received criticism in some quarters on the ground that, if these measures are necessary now, why were they not taken at the time of the Budget? In my opinion, there is no substance in that line of attack. The Chancellor's Budget this year was strongly disinflationary. He took powers at that time for these new regulators, and since then, the Chancellor has told us, fresh evidence has come to him that the excess demand we are suffering from now is likely to continue and may well become aggravated. Therefore my right honourable friend has used one of his regulators and other measures to increase the disinflationary effect of his Budget. And the measures that he has taken are not in conflict with the Budget, but are entirely in furtherance of his Budget policy.
There has been criticism from one or two noble Lords opposite that these measures are unfair. I must confess that I see no unfairness in them. The excess demand from which we are suffering arises on a very broad front of general spending on the part of almost the whole of the community, and the Chancellor of the Exchequer's measures are designed to have an impact on that same broad front. I yield to no one in my view of the importance of educational expenditure, but I thought that it was a little out of perspective to refer, as did one or two noble Lords, to the "cuts" on the teachers, because the increase that they are going to receive is going to amount, I understand, to £42 million a year, which means that they will receive an increase which goes further, I think considerably further, than any increase in the cost of living that has taken place since their last increase was given. They are, in fact,
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improving their position, and that £42 million is quite a significant allocation from our national resources.
One or two noble Lords have referred to the increase in the bank rate as if it were introduced solely for external reasons in connection with the flow of funds. But I would judge that that is not so, and that the Chancellor has introduced it for internal reasons, too. The use of the bank rate itself is a blunt weapon, as I have always acknowledged, but changes in the bank rate are certainly not without their effect, and recent experience has shown that increases in the bank rate make much less impact, fortunately, on industrial investment than on other forms of borrowing.
The Chancellor implied that he might have to exercise stricter control over new investment overseas. That has been rising rapidly over recent years, and I think we may well have to cut our coat there more according to our cloth and to impose some stricter limits than we have at present on new investment overseas.
The noble Earl, Lord Attlee, made one or two remarks which, if I may say so respectfully, because I have such a high personal regard for the noble Earl, were a little less than fair. He mentioned that the Conservative Party sneered at Sir Stafford Cripps. I think that he would have modified this if he had had more time. I do not think that that is the case. We often found ourselves in strong disagreement with Sir Stafford Cripps's policies, but we had a deep respect for his sincerity, his courage and his character—and I am sure that I am speaking generally for the Party there.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, if I may say so, we had constant sneering at Sir Stafford and his policy, which was labelled and sneered at under the term, "Austerity," whereas it was a real necessity for the economic position of the country.
VISCOUNT AMORY: I said that we often found ourselves in strong disagreement with his policy, but in no sense were we sneering at his sincerity or at his character.
The noble Earl, Lord Attlee, accused this Government of fostering gambling and extravagant living. I would make only one point there. The level of personal savings to-day is running about

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eight times as high as it was in 1951. The third point was that the noble Earl referred to Ministers who had left office to secure higher earnings in industry or commerce. I do not think the noble Earl was "having a go" at me there, but I have an interest to declare, and if I am guilty, in extenuation I can only say that I am coming back to Government service now.
EARL ATTLEE: I was not referring to the noble Viscount, and I know that he has taken up public service.
VISCOUNT AMORY: I would only say that I do not think his is a fair allegation. I agree with the noble Earl: of course it is an honour to be a member of Her Majesty's Administration, and I am certain that all my colleagues who are in Government to-day, if they were not in Government, would be securing a remuneration for their services much higher than they are now receiving.
LORD MORRISON OF LAMBETH: Not all of them.
VISCOUNT AMORY: I should judge that the measures which the Chancellor of the Exchequer has adopted, taken together, will in the short term be effective in halting the inflation which has been creeping back into our economy. What about the longer term? The first problem there is to recognise the nature of our malady. I found myself there in entire agreement with the analysis made both by my noble friend Lord Brand and by my noble friend Lord Molson. We are suffering from excess of internal demand, stemming largely (and this I think is a statement of fact, and not of view) from the fact that over a number of years wages have been rising faster than production. As a result, an excess of demand has come into existence, bringing with it too soft an economy with too little competition. That is the main reason why our export performance has, in its turn, lagged and been less dynamic than we should have liked to see it.
The long-term solution must be to get more competition going. How can that be done? I think there are three lines of attack there. First of all, in the short-term we should hold back strongly any excess demand that there may be in the economy—and my right honourable
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friend the Chancellor of the Exchequer is doing that. Secondly, we should cut any protective tariffs which are unjustifiably high. I am glad to know from several ministerial statements that it is the firm intention of the Government to negotiate—and I underline the word "negotiate"—substantial tariff reductions in the present G.A.T.T. discussions.
Thirdly, I think the remedy is to find a more sensible way of arriving at wage settlements. I am not going to say more about that this evening, because again I made some observations on it the other day. But I am sure my right honourable friend the Chancellor of the Exchequer would agree that we have not yet made any really effective progress in that direction; and until we do, the Chancellor of the Exchequer of the day will be forced to hold back demand far more drastically than he would if we had more sensible arrangements. Once again I find myself largely in agreement there with my noble friend Lord Molson. But, in substance, for our long-term solution we must got rid of our fat and introduce more competition into the economy by every means available. I would say, finally, that I find the Government's measures in the present circumstances realistic and correct. I believe that they will be effective in dealing with our short-term difficulties, and that they are to be commended and supported.
8.4 p.m.
LORD MORRISON OF LAMBETH: My Lords, it is always a pleasure to listen to the noble Viscount, Lord Amory, as we have done to-night. One feels almost relieved that he came to the support of the Government, because the Government have not had many supporters on their own side during this debate, and I am sure the Leader of the House will be grateful to him. The noble Viscount says that the Chancellor of the Exchequer is doing the right thing, and he supports the steps that he has taken. It might perhaps be retorted that these difficulties are not the product of the last five months, and possibly the noble Viscount might have taken those steps when he was Chancellor of the Exchequer, so that the difficulties of the present Chancellor of the Exchequer, if those steps had been effective (which I doubt), would have been so much lessened.

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I do not think the noble Viscount was quite "on the ball" when he was replying to my noble friend Lord Attlee about Sir Stafford Cripps and saying that the Conservative Party did not attack him. Of course they did. "Austerity Cripps!" was a Tory slogan; and they even said that his philosophy was, "Strength through misery". That went all around in those times. I do not complain about it too much; but if they regret that we are attacking the Government and the Chancellor of the Exchequer, they had better look back upon their own attacks on a Chancellor of the Exchequer who, whether one agreed with him or not, had moral courage and tried to see fair play as between the varying elements of the community.
We had a speech of high moral tone from the noble and learned Viscount the Leader of the House, and I make no complaint that it should be of high moral tone; I think that is good. But the difficulty he is in is that the moral plea which he made for all sections of the community to have public spirit in the service of our country, which in itself is very right, is in conflict with the record of the Government and the Conservative Party who have taught the very reverse. They have consistently taught the ordinary citizen, to "Look out for yourself", and, by implication, though not in words, "Never mind the country !", that the prosperity of the country depends upon the individual fighting for his own ends and his own material advantage. Moreover, the Government themselves at Elections have been appealing to materialistic considerations rather than to high moral qualities. Therefore I welcome the moral tone of the speech of the noble and learned Viscount the Leader of the House, and I hope that the Government will live up to the morals he has preached. But it is a little late in the day, in view of the past activities of the Conservative Party and of the Government.
It is certainly the case that the Government have a good many troubles on their hands, and as one who has had experience in Government, with others, I know what a trying time it must be for them. They have these economic troubles; they have the problem of Germany and Berlin vis-à-vis the Russians, and they have some other troubles, as well. I should
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think the life of Ministers is a bit of a strain at this time, and I can understand how they feel.
Let us look at the main high-lights of the statement made by the Chancellor of the Exchequer in another place last week. He says that we need more productive investment; that is to say, investment in productive industry. But the Labour Party have been urging this for years, with very little response on the part of Ministers. We have been urging that there should be more investment in useful and productive ways in industry, and less investment in ways which are not really advantageous to productive undertakings in industry. As I say, we have had little appreciation of our pleas, and little attention has been paid to them. The Government have been inactive in trying to divert investment into technical industries for technical processes for the purpose of increasing production. The Chancellor then went on to say that industry must become more competitive. Well, so far as exports are concerned, our industry is meeting plenty of competition; and, unfortunately, other countries are succeeding in the competitive battle for exports more than the British are, which is a great misfortune because exports are vital to us.
The Chancellor said he was not afraid of the word "planning". But here again the Conservative Party have scorned the word "planning" for years. They tried, with some success, to make a dirty word out of planning when the Labour Government were in power. The fact is not only that the planning we did got us through the transition from war to peace infinitely better than a predominantly Conservative Government got us through the transition from war to peace after the First World War, but that we did a better job in the economic field than the Conservative Party have done during the last ten years. We left them a heritage of a relatively orderly economic situation. We had our troubles and we had our crises. The wonder is that we did not have more, because we had come out of a very great world war, after a great deal of destruction in our own country and in other countries of the world. I say that we came through that period with considerable success, and left the Conservative Party foundations for which they ought to thank us.

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But they have not planned, and for evidence I would quote the useful report of the Plowden Working Group which has recently been published, in which they complain, lightly, but they do complain, that there has not been enough looking ahead in public expenditure. They say at the bottom of page 6:
"We would favour a reconstruction based on four elements"—
I will not quote all of them—
"A. Regular surveys should be made of public expenditure as a whole, over a period of years ahead, and in relation to prospective resources; decisions involving substantial future expenditure should be taken in the light of these surveys."
This Report declares that the Government have done no such thing, and it really is elementary that public expenditure should be planned over a period. Even in the more limited sphere of the London County Council we did it. We planned our financial policy for a period of three years up to the next election—and it can be done, and ought to be done, by the Government.
The Plowden Working Group go on to urge:
"The development and use by Government of long-term surveys of expenditure and resources is the core of our proposals."
That is sound, too. It is sound not only for the Government, but for political Parties when they are making their election programmes and committing themselves to public expenditure.
The Leader of the House said, and seemed proud of it, that the Government were budgeting for a 3 per cent. increase in the gross national product. But they do not say how they are going to secure this 3 per cent. increase. The next question is: is 3 per cent. enough? I am speaking from memory, will if I am wrong I can be corrected, but my recollection is that the Labour Government, coming after the destruction of war, increased production by somewhere round 6 per cent., and I have a feeling that it went even as high as 8 per cent. in one year. But 3 per cent. seems to me an extraordinarily modest figure and is less than is already being achieved by other countries, including countries in. Western Europe. I do not think this 3 per cent. is enough. Of the 3 per cent., they want to secure 6 per cent. for the export industries; but again the Chancellor said nothing about how that
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improvement of exports is to be achieved.
VISCOUNT HAILSHAM: My Lords, I think the noble Lord must get this right, because, it is important that we should understand each other about it. What quoted was the appeal of the Chancellor to both sides of industry to discuss targets, both for the increase in the gross national product and for exports, to be agreed between the two sides of industry. It may or may not be that these are sufficient. When they have been reached they may look further. The noble Lord said that the Chancellor did not say how it was to be achieved. He made it clear that he was asking both sides in industry to do the very thing that had been commended to us from the French economy; that is, to discuss it with him.
LORD MORRISON OF LAMBETH: My Lords, I have no objection to the Chancellor asking both sides of industry to consider how this can be done and to their giving him all the help they can, but it is not good enough for the Government, having got into this abysmal mess, to say, "Now let both sides of industry lift us out of our troubles." That is farming out the responsibility from a Government, which is responsible to Parliament, to both sides of industry. I have no objection to their making the appeal, and no objection to using these channels—it is right that they should. But the Government are cowardly. They have no mind of their own. They are not themselves producing policies or leads to both sides of industry which they can discuss. They merely say, "This is what we should like. Let both sides of industry solve the problem."
Let us consider our share of world industrial production. Take the year 1960, the index figure at 1953 being 100. By 1960, we were at 130, the United States was at 119, and Canada at 130. But Western Germany was not at our 130—it was at 180. France, which is not the easiest of countries to run economically, was not at our 130, but at 173. Italy, which used to be regarded as a rather backward country in economic matters, was at 182, as against our 130. Belgium was at 126, which is a little below us. The Netherlands was at 157, Sweden at 135 and Japan at 261. I am not quoting these figures with any pleasure, because they are depressing,

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and I love my country. I do not like our country to be behind in these economic efforts. I suggest that the Government need to elaborate, to think out, after careful consideration, a positive policy for the promotion of our export trade. Our export trade, next to the amount of production, is vital to the basic economy of our country. If we import, as we must, a good deal of food, raw materials and other things—we are probably importing some things we ought not to import, but we must import some things—inevitably the persons from whom we import expect to be paid for what they send. Therefore, unless our exports, direct, indirect, hidden and obvious, balance the imports, inevitably we shall be in trouble, not only on the balance of payments; it will also be injurious to the standing of sterling in the world.
The Government have not said what they are going to do to help exports forward, apart from this appeal to both sides of industry, which is all right. Is the Board of Trade lively enough, imaginative enough and constructive enough in promoting ideas for the increase of our export trade? Is it possible, by some taxation device, to encourage manufacturers to go for the export trade? Is enough research being done about foreign markets? I am told that when our motor manufacturers—who have done a fairly good job in exports over the years—began exporting to the United States, one of the things they forgot was spare parts and servicing. The Germans did not forget it when they exported. They put spare parts there, and they made the installation of the necessary servicing organisation. I am told that our people did not—they may be better now. But it is insanity to export articles such as motor cars unless the spare parts are available in the country to which the motor cars have gone and unless the servicing is there as well.
Now in all these things we have to take into account both production and the removal of restrictive practices, a policy with which I am in principle agreed. But the Government have to face the fact that behind the minds of the working people there are, unhappily, memories of the bad old days of the thirties, of unemployment; that the quicker you got a job finished the sooner
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you were out of work; which was true. Your Lordships should read a little book called, Ragged-Trousered Philanthropists to know how true it was. I do not want to rub it into the working people; to say "Remember this: don't do too much". I would not do it. But it is extraordinary how memories last from generation to generation about experiences of that sort. You get it in the mining industry, with people living in mining villages and those who go down the black hole into the pit. Society used not to care much about the miner and was pretty indifferent towards his very hard fate, and the remembrance of that passes from generation to generation.
I am mentioning these facts not in order that they shall remember still more, but because there needs to be some degree of understanding of the psychological processes behind the working-class mind when they are awkward. I am not saying that to excuse strikes. I do not like them. In particular, I do not like unofficial strikes, and I think as a whole they are indefensible. Some of the strikes are against the unions; some unofficial strikes are against the country, and, in some Communist minds, for the purpose of injuring the country. I do not like them. If there are going to be strikes they ought to be called by the unions, and some day the unions may have to face up possibly to expelling the minority of people who start these things for improper purposes.
Now it can be argued, and, indeed, I argued it at a Conference of the Labour Party, that if getting an increase in wages—and this has to be proved, mind you, in each case—results in an increase of prices, then it is like a cat chasing its own tail; there is nothing in it, and it is rather foolish. But if prices go up first, as they did, at any rate, earlier on, and wages try to catch them up, then that is a vicious circle the other way round. It is production that is necessary to keep prices at a reasonable level; it is production that is necessary to carry reasonable standards of life for the working people to which they are entitled. Therefore we again get back to production, Which is at the basis of everything. It is the basis not only of the economic well-being of the country in industry, but also of the

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social services, of the Defence service, of the costs of government, both national and local—all have to be carried by production. Therefore production is the vital thing, and I charge the Government with having been incompetent in stimulating production, even positively negligent in the steering of investment towards more production, and of not taking their responsibilities seriously in this vital respect.
Another psychological factor which affects working people is reading in newspapers of high dividends. These things usually appear on page 2 in the City notes, and I repeatedly read of companies which have increased their dividends by substantial amounts—sometimes a total dividend of 50 per cent. even 60 or 70 per cent., but 40 per cent. and 30 per cent. are fairly common. Now this is morally bad; this is what makes the task of the Leader of the House when he appeals for a high, national, public-spirited, moral feeling very difficult. The working man, when he reads these things, feels annoyed. And remember, my Lords, the working man and the working trade unionist usually has a wife, and if he does not get annoyed the chances are that "Mrs. Trade Unionist" will get more annoyed.
LORD FRASER OF NORTHCAPE: My Lords, may I interrupt the noble Lord for a moment? I believe that if we stopped all dividends we might add a Is, a week to wages in general.
LORD MORRISON OF LAMBETH: That is an excellent example of the moral bankruptcy that supporters of the Government show on this matter. The noble Lord quite legitimately says that if you divide all this up it would not make much difference. I am talking about the moral effect not only of high dividends, but of increasing dividends.
A NOBLE LORD: And expense accounts.
LORD MORRISON OF LAMBETH: Expense accounts, and dramatic increases of dividends. They used to say that if we had Socialism and everyone had an equal income—which, incidentally, we did not advocate, but that was thought by some—the total income of everybody would be "x", which was not much more than mast persons were getting, and that we should probably
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mess up the show in the process. These are not conclusive arguments, but I say that this recurrence of high and, in a number of cases, dramatically increasing dividends is bound to breed suspicion among the working class, and not only among the male working class but among their wives as well, because the wife can be an agitator—as every man knows she can, from time to time.
It is not that the case cannot be put. I remember going to a Labour Party Conference, I think it was at Margate round about 1946, or possibly 1947, and making a speech which I thought would have got me thrown through the roof of that Conference, because I imagined that the delegates would be so irritated by it. I argued this very point of wages and prices chasing each other and of the need to get rid of old ideas about production and working hard; I wanted the workers to work hard in private industry and still harder in publicly-owned industry, and not to regard publicly-owned industry as a kind of Utopia. I thought I should get into a terrible row, but, to my surprise, the speech was received with loud cheers and was a great success. But then those delegates, representing trade unions, constituency Labour Parties and others, knew that the Government were giving the working people a fair deal. They knew that we would keep the balance held fairly as between the well-to-do and the working classes. Therefore they said that that was a decent Government, a fair-minded Government, and they would take exhortation from that Government which they would not take from another.
It is not that I should want trade unionists to be hostile to a Conservative Government in an anti-social spirit. Indeed, when we were defeated and the Conservatives came in, one of the first pronouncements made by the Trades Union Congress through, I believe, Sir Vincent Towson, was that they would deal with any Government, irrespective of its Party colour.
The real reason that they have not been able to deal with this Government is that they feel that it is not holding the scales fairly and is not doing its job well and fairly. It is not until you can convince the working people and the trade union movement that the Government is being fair and equitable between the

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various classes of the community that you will get the answer to the moral appeal so eloquently put by the Leader of the House this afternoon; and I recommend that to the Government for consideration.
My Lords, the Chancellor of the Exchequer also said that he was now convinced, for the first time in the life of this Government I think, that certain people who were making profits that evaded taxation were doing wrong, and that he was going to put this matter right; he would tax certain tax-free profits. But when? Next year. He wants the wages standstill now, but when he comes to deal with these tax evasion people, next year—and possibly just before an Election because the Government relate many of their actions to the proximity or otherwise of an Election. This is the sort of thing also that spreads suspicion among the working people of the country and the conviction that they are not getting a fair deal.
The Chancellor also said [OFFICIAL REPORT, Commons, Vol. 645 (No. 155), col. 222]:
"Turning to wages and salaries, of course, increases in real wages and salaries are desirable, but only provided that national productivity increases sufficiently …"
With that fundamentally I do not quarrel, except that I think the Government must do more to promote national productivity. But he went on to say about wages and salaries:
"Where commitments have already been entered into, they should he met."
That brings me to the teachers. We are talking a lot about teachers, but they are not the only people who are going to he concerned in this; there are also other people who are concerned or may be concerned. The Government have a technical case. The Burnham Committee so far as the employers were concerned reached a conclusion in which they offered to the National Union of Teachers an increase in salaries. That was not accepted by the Union; they had a perfect right not to accept it and to ask for more if they wanted to. I think that perhaps they were squeezed by Left-wing elements in the N.U.T. I suspect the demonstrators outside the N.U.T. headquarters that morning to have been promoted a little by the Communist Party. And now, poor
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things, they have not even got what they were offered by the Burnham Committee. That shows how often Left-wing elements finish by coming out of Right-wing doors; it shows how careful you have to be with them.
But the Burnham Committee had offered this increase. The only "get-out" for the Government is that the teachers had not accepted. Looking hack I expect the N.U.T. wishes it had, and that is understandable. But the offer had been made by the Burnham Committee. It may be that the Ministry of Education had not "O.K.'d" it, but it is not often that the Ministry of Education do not "O.K." a Burnham Committee award. Now the Government come along and say, "You are not going to have the Burnham Committee award than was offered, let alone the further increase you want. We are going to cut that." To save what? What is it—£5½ million? Is it worth this moral offence against the great teaching profession for the sake of saving £5½ million? Is it not morally the case that the education authorities on the Burnham Committee were morally committed to the amount that they offered, and all the local authorities represented? And then the Government came along and say, "Because we had not yet 'O.K.'d' it, we are now going to make a cut in that."
The teacher is a delicate animal. I know them very well. They are an impartial lot in politics; as a matter of fact they get some sort of Parliamentary representation through all three political Parties, or they did. They do not shout about it too much; it is probably quite right. But they do. You cannot bring the National Union of Teachers into Party politics, because they think in their profession that they had better be out of it, and I am not going to quarrel with that. I once tried to get the London teachers into the London Labour Party, but it did not come off. We did pretty well at first, but I dropped it on moral grounds. There is much to be said for teachers being outside Party politics, and they are outside. But nobody can deny the public spirit of the teaching profession.
They are in a strong position. They hate the idea of a strike, even if they are striking. I do not like it either, and I wish they would not. They do not

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like it, but they feel that in the circumstances there is nothing else they can do, and there are only little strikes. They are having a little game so that Johnny can go home and come back next day, so it is not all that terrible. They do not like it; they are a decent lot. They feel they have had a raw deal, and in view of the training they have to undergo before becoming teachers I think they have had a raw deal. This is a mean thing on the part of Her Majesty's Government; it is contemptibly mean and fundamentally immoral, and the noble and learned Viscount the Leader of the House should not come here making speeches on morals When he is defending this act of immorality against a great and decent profession in our country. I am sorry to speak with heat about it, but I feel it. I think it is a most foolish thing to have done.
I rather like the Swedish system of settling wages, where all the unions put their demands up to the Swedish T.U.C. and all the employers put up their ideas (I think I am right) to the employers' confederation. The unions' federation might say to such-and-such a union, "We think you are asking for too much and that you are putting your industry in a more favourable position than it ought to be", and they may get it reduced somewhat. The employers may say the same about their offers. Behind it all is the State, with economic knowledge and so on, and they get these annual contracts settled amicably and without strikes. I am doubtful if the T.U.C. or the trade unions here would accept it, but I think there is a lot to be said for that. I do not like this "catch as catch can" in wage negotiations. I would rather see wages settled in the light of the national economy and in the light of what you are going to do about the national economy.
The next proposal of the Chancellor of the Exchequer is to cut national Government and local government expenditure in so far as it is wasteful expenditure or expenditure which we can do without for the time being. With that I do not quarrel, but if it is going to mean an attack upon public services which are necessary for the nation, and upon desirable local government things like housing, slum clearance,
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and schools where schools are bad and out-of-date, and so on, that can become a negative and reactionary thing, as it did in 1931. I remember the Tory London County Council just enjoyed itself as a result of the crisis message sent out by the National Government, and the silly people enjoyed themselves too much. They enjoyed themselves to such an extent that, though a penny rate in the County of London produced a quarter of a million pounds, they saved £12,500 by metaphorically snatching the prizes out of the schoolchildren's hands, poor little things; and that was a good moral issue on which to fight the next Election so far as we were concerned. It was contemptible, but they went thus far, and once you set some of these Tories, including municipal Tories, going you do not know where they are going to stop.
Moreover, the local authorities not only have to meet the pressure of the Government to cut their services, but the bank rate's going up from 5 per cent. to 7 per cent.—there may be a case for it—is going to hit local government and the building societies very hard, because a difference of 2 per cent. in the rate of interest can be a crippling burden on the local government services. So they themselves may have to cut in the hope that the bank rate will be reduced later on. The Chancellor of the Exchequer said, among other things, that the building industry is over-strained; and it is.
Again, as the noble Lord, Lord Boothby said, the Government shiver in horror at the mention of physical controls. They are one of the things you cannot do without. I do not want physical controls for the sake of them. The Labour Government did not. We scattered a good many of them before we had finished because they were no longer necessary. On the other hand, to avoid physical controls merely out of doctrinaire prejudice is silly. There is some building work going on which is not necessary; as a consequence, some building work which is necessary is not going on. That is because of a lack of some physical control in this industry.
Then the Chancellor goes on to speak of increasing purchase tax by one-tenth, together with some other increase in taxes. He says that this will reduce spending by £210 million a year. He does that now.

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In regard to a number of things subject to purchase tax, that does not matter much, because people can do without them. But it means an increase in the cost of living, and if something similar is not going to be done in regard to other classes in the community there is going to be a sense of injustice. It is all very well for him to say "I do not want any wage claims as a result of this." But, human nature being what it is, I have heard even from Conservative lips "Do not expect this, that or the other." Human nature being what it is, if the cost of living goes up, especially by the action of Government, it is going to be difficult to avoid some wage claims coining forward. The Government should watch the cost of living. Then the Government tell us they are going to draw from the International Monetary Fund. If it had been a Labour Government falling back on the International Monetary Fund, what a scream there would have been from the Conservative Party!
These, then, are the rough heads of the Chancellor's programme. Having heard them, will anybody say that these will of themselves increase production? Are these things designed to increase production? Is that the purpose of this budgetary change in Government policy? I may be ignorant; I am not a longhaired economist, and I speak with all modesty; but I cannot see that these steps are going to increase production. It seems to me that this "little Budget" is irrelevant to the question of increased production and to the question of increased exports. Therefore I do not think that the Government are doing their job. We have to keep up production. Production carries everything, and exports must carry imports. We need physical controls, not only for the things I have mentioned, but for a number of other items. In regard to imports, a tariff is not a scientific instrument for the purpose of discouraging imports. The Government know that there are some imports which the country does not need. They could impose a physical control and say, "We are not going to have them. That class of import is stopped for the time being." This could be said of a number of other items over which an adequate physical control could be imposed. I rather think over-building is one.
I will give the House an example,
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again from Sir Stafford Cripps, of the use of a physical control to stimulate exports. Again, it concerns the motor car industry. The home market was flourishing and the manufacturers were concentrating on the home market. Cripps wanted them to do their bit in relation to the export trade. At that time we had physical controls on steel, and he said, "Gentlemen, I will give you so much steel, but you will get that only if you do such-and-such a percentage of the export in motor cars". He got it. That was the use of a physical control which this Government do not like, in the name of "setting the people free"—which really means setting the well-to-do free.
The Government themselves have encouraged inflation. They stimulated commercial road transport for the purpose of damaging the railways, or, at any rate, with the effect of damaging the railways. They duplicated transport facilities, and that is inflationary. When they started up commercial television, as a result of direct pressure from advertising interests in another place—a miserable dozen Members—that meant investment in what was unnecessary; and that was inflation. Advertisements on commercial television are themselves calculated to stimulate the very consumer demand which the Chancellor says he wants to diminish. Who did it? The Government did it. I am not grumbling to the noble and learned Viscount about all this. I came to the House, before I was created a Member, and listened to the debate on that particular Bill. The noble Viscount made a first-class speech against the Bill, and he criticised the Government. I cannot expect him to do that now: that would not be fair. But then he did. And how right he was when he said that these advertisements on television would actually stimulate inflationary forces!
I turn to another present Minister of the Government, the Home Secretary, Mr. Butler. All Home Secretaries, past and present, have a little brotherly feeling because they have been through it. But Mr. Butler is perhaps more responsible than any single Minister for starting inflation. When this Government won their majority in 1951, he slashed food subsidies, although both he and Lord Woolton had denied immediately preceding the Election that they would do any such thing. But he slashed them

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in his very first Budget, and he knew that he was putting up the price of food. This is a matter of "freeing" things—Conservative "freedom", as they call it. But Conservative "anarchy", as it ought to be called, because they believe in anarchy. These are the polite anarchists.
Mr. Butler slashed these food subsidies knowing what he was doing, knowing that it would put up the price of food. And he also stopped our agreements with the Commonwealth countries for the bulk buying of food. When that occurred it was inevitable that the unions should start making wage claims. And here the inflationary spiral which we, as a Labour Government, had largely checked re-started. I am afraid that the present Leader of another place must carry a great responsibility for what has happened. Then land speculation is going on. That also is inflationary. Yet the Minister of Housing and Local Government defends this monstrous speculation in land values which is costing the country a great deal.
I am not happy to make all these criticisms; I am not enjoying it, but I must do my Parliamentary duty. All this is mild compared to what used to be said by the Tories al nut the Labour Government. They did not stop at criticism; they even went so far as deliberate and calculated untruth. But I am getting no pleasure out of it. I believe in the moral factor. I think the only thing that is going to save our country in the end is a decent form of government for the country—even one that demands sacrifices from the country; but the sacrifices asked must be equitable as between the various classes of the community.
The Conservative Party have done much at Elections by saying, "Vote for us and see what you will get out of it!", "You never had it so good!", "Conservative freedom pays!". They appeal not to the moral factor in politics but to the material factor in politics. They have done it and they are more responsible than anybody for the deterioration in the moral values of public and political affairs. I would sooner say, "Vote for us and join with us in pulling the country through its troubles! Be ready to work and be ready to be active!". I would rather say, "Vote for us, and let us all help our country!".
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This materialism in politics is not good. Never at an Election have I said, "Vote for me and see what you get out of it!". The emphasis has been rather the other way. There is too much materialism in politics—and, I admit, not in one Party alone; sometimes it is found in others, too. What we want is "fair do's"—a sense of justice and fairness between the various elements of the community; a sense on the part of working people that they are getting a fair deal. If we get that, then we can work together genuinely for the wellbeing of our country, and can help our country to play that great and worthy part in the world that we all want it to play.
8.51 p.m.
THE MINISTER WITHOUT PORT-FOLIO (THE EARL OF DUNDEE): My Lords, we have had a very long debate to which I have listened with the greatest pleasure for the last six hours. It does not often happen, I should think, that both Houses of Parliament have a debate upon an identical subject on the same day, and it will probably be interesting if we have the time to compare the two different results in tomorrow's Hansards. I thought that my noble friend Lord Boothby perhaps did a slight injustice to the other place when he said that if he had been there still he would have been much too frightened to say what he said about restrictive practices, because it might have lost votes. I do not believe it would have lost him any votes, and I am quite sure he would not have been afraid to say it.
Although this is a debate on a Vote of Censure, I think that, upon the whole, the majority of your Lordships who have been critical of the Government have made constructive and moderate speeches, among which I would include the speech of the noble Lord, Lord Morrison of Lambeth, to which we have just listened. I am sorry he did not enjoy making it, but I certainly enjoyed listening to it. The noble Earl, Lord Attlee, did have a little more fun, and indulged in a little more Party polemics. He told us that we were suffering from a headache which was in the nature of a hangover, whereas his headache when he was Prime Minister was of a far more virtuous kind. My Lords, to my great regret I was not a Member of Parliament when the noble Earl, Lord Attlee, was Prime Minister, and I always have

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great pleasure in listening to anything he says, whatever it may be, but I could not help remembering as he spoke that while he was Prime Minister there were two of these so-called financial crises. In the first, the noble Earl devalued the pound to 2.80 dollars; and, upon the second crisis, after a more rapid spiral of inflation in 1951 than we had ever experienced before or have ever experienced since, with great respect to the noble Lord, Lord Morrison of Lambeth, the noble Earl really did decide that he had sat there long enough and, in God's name, he went.
The noble Lord, Lord Morrison of Lambeth, has also accused us of being too materialistic and of trying to win Elections by saying to people, "Vote for us and see what you get". I did note with interest that neither he nor any other of his noble friends opposite made a reference to the Labour Party's Election appeal in the 1959 Election. Possibly, if the noble Lord, Lord Morrison of Lambeth, had had more to do with drawing up that I document, it might have been slightly different.
My Lords, I should like to confirm what my noble friend Lord Amory has said about Sir Stafford Cripps. I have never been conscious of any atmosphere of sneering against him. When I was a Member of the other place I was very fond of Sir Stafford Cripps, and he was very kind to me whenever I had any kind of occasion To be in contact with him. I wonder whether the Labour Party, which is just as good at controversy as we are, is not sometimes a little more sensitive about that sort of thing. As my noble friend Lord Amory said, you must criticise a man with whose policy you disagree, but it does not seem to me that calling a man by the name of "Austerity is half so derogatory as the things which any of us can hear from our Gallery, from the Labour "Shadow Chancellor", directed against the Government which is now in office. I really do feel it is untrue to suggest that we had anything but respect for the sincerity and character of Sir Stafford Cripps, although we did not always agree with his policies.
The noble Lord, Lord Pethick Lawrence, who moved the Amendment, asked whether there was really a crisis. He said that, if so, it had not arisen in
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the last few weeks, but had been there for a long time—and with that I would most respectfully and cordially agree. Indeed, I ventured to say in our debate last week that I thought that to describe these various attempts to redress our balance of payments or to fortify our reserves by the word "crises" was misleading, because the proper meaning of the word "crisis" is a decisive moment when either the patient gets worse and dies or gets better and recovers; and you cannot have more than one crisis in relation to the same set of conditions. But, as everybody uses the word, it would, of course, be pedantic for me not to use it too.
I think the essential thing is that we should recognise that the problem with which we are dealing is not the sort of problem which occurs overnight and then in the form of a crisis, but is an endemic problem which is going on all the time. The noble Lord also spoke about the terms of trade going in our favour, which they did in the 1950's, and he pointed out that this was a great advantage to us—which, of course, in some ways it was. But I thought that it would be right to remind the noble Lord that it was also a disadvantage to us in other ways. If the price of raw materials falls, as it has done in the last decade, the result is that the people who produce those raw materials cannot buy so many of our exports—and they come, very largely, from our own Colonies and Dominions. At the same time, of course, they need rather more aid than they would do if they had a good price for what they sell in the markets of the world. It also happens that this has an injurious effect upon our invisible exports. That is one of the reasons why they have gone down so much lately—because so many of our investments are in those countries which depend very largely on the export of primary commodities, and when the world prices of these commodities fall we do not earn so much revenue from our investments as we otherwise would.
But, my Lords, the fundamental difficulty of our post-war economy was put very well, I thought, by my noble friend Lord Brand. He said that our difficulty was not inefficiency but inflation; and I think it is very necessary to recognise that. There are, of course, a great many inefficiencies which we do want to

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get rid of, but they are not fundamental, as inflation is. Indeed, many of them are promoted, preserved and exaggerated by the existence of inflation which, as the noble Lord said, deprives a great many people of a motive to try and sell goods abroad because they think they have a nice, easy, comfortable home market. Important though it is to get rid of our various inefficiencies, the most important thing of all is to prevent the continuance or recurrence of inflation, which is itself an aggravating factor in promoting or increasing inefficiency.
My Lords, what we have got to do now is to restrain excess demand; and I think all of your Lordships have agreed with that, although with different amounts of emphasis. The purpose of raising the Bank rate is not to win support, help and aid from Swiss bankers or anyone else; it is to restrain excess demand because, although we all admit that it may have the effect of restraining some activities which are good for our economy, and which we do not want to restrain, it certainly has the effect of making people refrain from undertaking projects which are not essential and which are not necessary, and concentrating rather on those which are necessary.
As your Lordships are aware, the Chancellor has instructed banks, and the banks and insurance companies have agreed, to give priority in their advances to those projects which are necessary for sound productive purposes, particularly for export, and to give low priority or to reduce advances for unnecessary personal consumption. The bank rate, of course, must be considered here together with the special deposits and in the light of the general instructions which the Chancellor has given to the banks about the policy which should govern their advances. That has been one focus of criticism in this debate, the bank rate and the regulator No. 1, which I think we discussed very fully in our debate last week, and whose purpose is not to put up prices but, again, to check excess purchasing power.
Another criticism has been that the Chancellor's proposals are unfair; and the noble Lord, Lord Morrison of Lambeth, said a good deal about that. He did riot, I think, try to make any unfair Party points out of this. I thought he put it in a very reasonable way, the fact that some of the Chancellor's proposals
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might appear to be unfair, more for psychological reasons than for reasons connected with their real economic importance, as when he was interrupted by another noble Lord. I think it is very important, and I entirely agree with the noble Lord, that we must regard dividends in this connection in exactly the same way as we regard wages. It does not matter that dividends are a very small fraction of the amount distributed in wages. Any action we take, whether it is voluntary or not, to restrain excessive purchasing power must apply to dividends equally as to wages, and any kind of consultations which we may hope to take up must also have that in view.
The question has been asked several times, both to-day and last week: if you want a wages policy, ought you not to have a dividend policy to restrain excessive dividends? And I would unhesitatingly reply: Yes, they should be treated on exactly the same basis. I would remind the noble Lord, Lord Morrison of Lambeth, that last year my noble friend Lord Amory increased the profits tax from 10 per cent. to 122 per cent. in his Budget, not because he needed more revenue from a monetary point of view, but as a purely fiscal measure to restrain excessive purchasing power. This year, to restrain companies from increasing their dividends, the present Chancellor has increased it for exactly the same purpose from 122 per cent. to 15 per cent., so it has been increased by half as much again in two years, with the purpose of restraining excessive payments of dividends; that is to say, the profits tax has gone up by 50 per cent.
The action which has been taken is certainly more positive and more direct than any action which could possibly be taken in regard to wages. I entirely agree with what the noble Lord has said about the moral necessity of doing this, but I would equally defend it on purely economic grounds; that it is against the interests of the economy at the present time that dividends should be increased.
I think perhaps the main line of criticism in the debate, from both your Lordships who belong to the Party opposite and others, has been on the subject of planning. It has been said that we do not look far enough ahead in our monetary policy, in our fiscal policy, or in our in-

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dustrial policy. My Lords, many of your Lordships who have spoken are far more experienced in these matters than I am. I think perhaps the noble Lord, Lord Morrison of Lambeth, the noble Viscount, Lord Alexander of Hillsborough, and my noble friend Lord Amory would all agree how very difficult it is to forecast the probable turn of economic events twelve months ahead.
The noble Lord, Lord Morrison of Lambeth, suggested that my noble friend Lord Amory might with advantage have applied the measures, which are now being applied, a year ago, when he was Chancellor. I have not had a chance of discussing that point with my noble friend, but I daresay he might possibly agree that the Treasury last year did not estimate that excess spending power would grow as rapidly as it has done. Indeed, my right honourable friend the present Chancellor said as much in the debate yesterday.
It is very difficult to look ahead, and that is one reason why in this Budget we have introduced the power to use these regulators, as they are called. It is the first time we have enabled the Treasury and the Chancellor of the Exchequer to use an optional fiscal instrument at any time of the year, so that we may get away from the great handicap of having to wait for any changes in fiscal policy which the economic situation may in our opinion, or in the opinion of our economic advisers, require for another twelve months—that is, until the next Budget.
I should like to remind my noble friend Lord Boothby, and others who have been inclined (to think that we have never had any planning policy—and I would say this also to the noble Lord, Lord Morrison of Lambeth—that we have never, so far as I know, been frightened by the word "planning I do not see how you can have any policy at all without having a plan. The question is not whether you have a plan, but whether it is a good plan or a bad plan, and it seems to me that the controversies, which we sometimes engage in about economic matters, between the Party opposite and the Panty to which I belong, are not as to whether there should be a plan or not but whether the plan is good or bad.
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As many of your Lordships have said, we have this five-year plan now for regulating public expenditure, in accordance with what we expect to be the growth in the national productivity. The noble Lord, Lord Morrison of Lambeth, says that our measures would have the effect of cutting public expenditure, but that is not quite the case. We are not reducing it from what it is now; we are merely preventing it from increasing as fast as it would have done if we had not decided to moderate it within those limits. We are not reducing it.
As for roads, I remember that in the debate on the Address some of your Lordships seemed to think that we had no plan for roads; but that was one of the things for which we had a very full plan. We are, indeed, in the second year of a five-year road expansion programme which has been very carefully worked out, both in relation to our financial resources and to the needs of transport and of industry. It is not a five-year plan which ends at the end of five years. Every year a new plan is made adding on another year, so that it is like an unrolling carpet: you always have your plan made five years ahead. This roads plan has not been affected at all by the Chancellor's proposals; he has been careful to say that he is not touching it. Nor is he reducing the plans for the growth and expansion of our education which is, in the view of the Government, one of the higher priorities in long-term planning for our future economy.
As for industrial planning, that, of course, is a difficult and complicated matter. Planning does not necessarily mean the same thing as controls. My noble friend Lord Boothby pointed out that French planning is entirely voluntary and not imposed by the Government or by law. You can have planning which requires controls, and you can have planning which does not. In order to have a sensible plan, it is necessary to proceed on certain assumptions with regard to the probable increase of your production. Those assumptions need not necessarily be what you would like. The noble Lord thought that a 3 per cent. increase annually in our national production was a very unambitious aim. Possibly we may do better than that, but I should have thought it was more sensible to have a moderate estimate which is a little

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higher than the average increase in our production for the last ten years.
I do not want to go into the question of the "league tables" with which Lord Morrison of Lambeth dealt in some detail. It is true that in the last ten years our average increase in productivity per head was about 2 per cent. per annum, compared with about 5 per cent., in the case of Germany. It also happens to be almost exactly the same as the other industrial nations, whose Conditions are perhaps more comparable to ours, the United States and Canada, who I think are one decimal point different. All three of us come at the bottom of the "league table", about equal.
There are, as the noble Lord knows, many reasons for that, Germany, with her pre-war industries destroyed, started from scratch, and has had a continual influx of refugee labour from East Germany. She has also a very large agricultural population which, with agricultural improvements, is migrating very quickly into industry. So she has had a very quickly replenished and growing labour supply. I do not want to go into all the details. It may be that in other ways Germany is superior to us in her industrial organisation; but it is not correct to say that it is planned in the same way as the French economy is.
LORD BOOTHBY: My Lords, if I might interrupt the noble Earl for one moment, there is no doubt at all that their salesmanship, drive and organisation in this field is superior to ours at present.
THE EARL OF DUNDEE: That may be so, my Lords. But in this plan which the Chancellor is envisaging for industrial production and exports, his targets, so to speak, are an increase in productivity of 3 per cent. per annum, combined with an increase of 6 per cent. in exports. I think I should point out to your Lordships that the proportion of our productivity in this country which goes to export may be even more important than the growth of productivity itself. You might conceive of circumstances in which you would have a very large growth in productivity which would not, in the long run, really add to our wealth, because it might not be in essential things and might not enable us to sell what we have to sell abroad if we are to live and if we are going to hold our place as a great nation.
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The noble Lord, Lord Boothby, was very definite—more definite than many of your Lordships often are in these economic debates—about the kind of controls he wanted. He said that he wanted building controls; so also did the noble Lord, Lord Morrison of Lambeth. The noble Lord, Lord Morrison of Lambeth, said that they were anathema to the Conservative party, but that is not correct. I have often told your Lordships that we have no objection in principle to physical controls. The Chancellor said in his statement on Tuesday, after pointing out that demands on the building industry are growing rapidly and that some less essential forms of development should be postponed, which he proposed to do through the medium of credit policy:
"I do not rule out further measures if they appear necessary".
I do not know whether Lord Boothby agrees or not, but it is very difficult to decide which building is really unessential and which building is essential in the national interest. It requires a very big staff to do it, and their judgment is not always infallible. I do not think it necessarily follows that, because building at present is imposing too great a strain on the economy, therefore we must have some form of building control. It might well be better to try to correct the imbalance by fiscal or monetary methods; but we have not ruled out other methods if they should appear to be necessary.
The noble Lord, Lord Morrison of Lambeth, also declared himself more definitely than I have heard many of your Lordships declare yourselves lately about import controls. He thought that we should control or prohibit the import of things not essential. That is a thing we have often considered very carefully indeed, but the reason why we have not done it is because we think that if we did, other countries would retaliate by controlling their imports from us. Under international agreements we are gradually abolishing all these import quotas, but we are the country which would suffer most of all if this process were stopped and if everyone re-started controlling and establishing import quotas with other countries. That is the reason why we have not done so. It is not because we think it is morally wrong, but because in those circumstances it

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seems that it would do more harm than good. I thought the noble Lord, Lord Peddie, was a little out of date when he said that we had made a bonfire of controls. I think that it was Mr. Harold Wilson who used that phrase when he was President of the Board of Trade. It was he who made a bonfire of controls, and as the noble Lord, Lord Morrison of Lambeth, said, none of us likes physical controls for their own sake. It is simply a question of what is most expedient.
As for a positive policy for exports, your Lordships have already had a full debate on that question a month or two ago, and I think your Lordships are conversant with the very high quality of the services offered by the Board of Trade to those people who wish to take advantage of them. We know only too well of the failure of some exporters to do what is necessary to send the right kind of goods abroad and to take the trouble to find out what is needed and to be punctual in their delivery dates. But when the noble Lord talks about taxation devices to help exports, that is again a matter which we have always had under consideration; and again the reason why we have not done it is because other people would immediately retaliate. In our particular position as a country which depends so much upon our trade, we think we should probably suffer more than any other country if everyone began to subsidise their exports indirectly by means of remissions of taxation.
My Lords, with regard to the probable machinery of carrying out a planning policy, your Lordships have complained that our ideas on the subject appear to be vague. I do not want to say anything which might mislead your Lordships. I think it would be better if your Lordships would permit me to quote what my right honourable friend said yesterday on the subject [OFFICIAL REPORT, Commons, Vol. 645 (No. 156), col. 439]:
"I envisage a joint examination of the economic prospects of the country stretching five or more years into the future. It would cover the growth of national production and distribution of our resources between the main uses, consumption, Government expenditure, investment, and so on. Above all, it would try to establish what are the essential conditions for realising potential growth."
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He then went on to mention:
"the supply of labour and capital, secondly, the balance of payments conditions and the development of imports and exports, and, thirdly, the growth of incomes."
He went on:
"I want both sides of industry to share with the Government the task of relating plans to the resources likely to be available. When it is suggested that I have been vague, may I say that I have deliberately not been specific about machinery because, for the Government to lay that down beforehand is not, I think, the best way to get full co-operation."
I think that if your Lordships will reflect on that, you will come to agree with him that it would be undesirable for the Government to specify beforehand the exact form which consultation is to take. It would not be the right way to get the trade unions or the employers to co-operate, which is what we want them to do.
In one rather exaggerated phrase, the noble Lord, Lord Morrison of Lambeth, said that the Government had got into "an abysmal mess". My Lords, we are very far indeed from that. We have full employment; and we have the highest standard of living we have ever had in history. It has increased by more than 30 per cent., measured by real wage values, in the last ten years. The average wage is now about £15 3s., compared with about £7 16s. in 1950. The noble Lord also mentioned investments. Look how the investment figures have gone up in the present year! Personal savings are £1,500 million, compared with £200 million in 1950. Gross fixed investment last year was £4,074 million, compared with £1,733 million in 1950—which, allowing for the difference in money values, represents an increase of 63 per cent. And there has been a comparable increase in manufacturing investment.
We are in a very high state of prosperity, and it is from that state of prosperity that our problems arise, because we have not yet learned how to control our distribution; how not to anticipate our prosperity by spending now what we are going to earn in two or three years' time instead of being content to spend now what we earn now. That is what we have to regulate. It is not a question of starvation, or anything of that kind. It is a question of being able to maintain our political position and influence in the world, which we cannot do if we slip behind too far in

1201
the production and trading race. It is inflation that is the chief danger. That is why, now that the inflationary spiral has begun again, after two and a half years of price stability, it is so vital to our future position in the world that we should fight it now, as we are doing

CONTENTS

Alexander of Hillsborough, V.

Henderson, L.

Peddie, L.

Amwell, L.

Kilbracken, L.

Pethick-Lawrence, L.

Attlee, E.

Listowel, E.

Rea, L.

Boothby, L.

Longford, E.

Stamp, L.

Chorley, L.

Lucan, E. [Teller.]

Stonham, L. [Teller.]

Crook, L.

Monson, L.

Taylor, L.

Fraser of North Cape, L.

Morrison of Lambeth, L.

Terrington, L.

NOT-CONTENTS

Ailwyn, L.

Dundee, E.

Mills, L.

Albemarle, E.

Falmouth, V.

Molson, L.

Amory, V.

Ferrier, L.

Monsell, V.

Ampthill, L.

Fortescue, E.

Newall, L.

Ashton of Hyde, L.

Fraser of Lonsdale, L.

Newton, L. [Teller.]

Bathurst, E.

Geddes, L.

Perth, E.

Birdwood, L.

Goschen, V.

Reading, M.

Bossom, L.

Gosford, E.

Robins, L.

Brand, L.

Hailsham, V. (L. President.)

Rochdale, V.

Carrick, E.

Hastings, L.

St. Aldwyn, E. [Teller.]

Carrington, L.

Hawke, L.

St. Oswald, L.

Chesham, L.

Home, E.

Salisbury, M.

Coleraine, L.

Horsbrugh, B.

Sandys, L.

Colgrain, L.

Howe, E.

Savile, L.

Conesford, L.

Jellicoe, E.

Sinclair, L.

Congleton, L.

Kilmuir, V. (L. Chancellor.)

Soulbury, V.

Craigton, L.

Lansdowne, M.

Spens, L.

Crathorne, L.

MacAndrew, L.

Stuart of Findhorn, V.

Croft, L.

Margesson, V.

Tweedsmuir, L.

Crookshank, V.

Massereene and Ferrard, V.

Waldegrave, E.

Denham, L.

Merrivale, L.

Wolverton, L.

Devonshire, D.

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