Sitting of 7 November 1961

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
BILL PRESENTED
  GLASGOW CORPORATION (PARKING METERS) ORDER CONFIRMATION
  Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act, 1936, relating to Glasgow Corporation (Parking Meters), presented by Mr. Maclay (under Section 7 of the Act); and ordered to be considered upon Monday next and to be printed. [Bill 15.]
ORAL ANSWERS TO QUESTIONS
  TELEPHONE SERVICE

    Timed Telephone Calls
    Mr. Hector Hughesasked the Postmaster-General if he is aware that his new system of timed telephone calls is causing inconvenience in business and academic circles; and if he will so arrange it as to be more selective.
    The Assistant Postmaster-General (Miss Mervyn Pike): My right hon. Friend's information is that the overwhelming majority of telephone subscribers who have had experience of the new system —and especially business subscribers —prefer it to the old system. As regards local calls, which the hon. Member may have particularly in mind, my right hon. Friend has done what he can to meet criticisms by extending the time allowed for 2d. from six to twelve minutes after 6 p.m. every evening and all day Sunday.
    It is not technically possible to apply timing selectively to any particular class of subscriber.
    Mr. Hughes: While I appreciate the laudable desire of the Postmaster-General to restrict unduly long and,
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    possibly, expensive calls, is it beyond his wit to discover means of doing so without interfering with legitimate, constructive and, perhaps, affectionate conversation?
    Miss Pike: I should have thought that the new discipline imposed would have encouraged those very virtues which the hon. and learned Gentleman's constituents would particularly appreciate, namely, brevity and lucidity. They might, perhaps, get a new motto, "Save your breath and save your bawbees."
    Mr. W. R. Williams: Although it may be true that up to the present the reaction of some elements of the community and of subscribers has been favourable, is the hon. Lady aware that I am still getting many complaints from many sections of the community, and some from business people too, in regard to the difficulties which are occasioned? They feel that some further concessions might be made especially in cases where they have to have exchanges in order to deal with their calls. Will the hon. Lady have another look at that?
    Miss Pike: We have actually received very few complaints from business men.
    I think it is true to say that only about 2 per cent. of the complaints come from people who actually have experience of subscriber trunk dialling, but we shall always keep the whole position under review.

    Sporting Events (Direct Broadcasts to Hospitals)
    Mr. Speaker: Mr. Royle —Question No. 2.
    Mr. Allaun: On a point of order. May I draw your attention, Mr. Speaker, to something rather unusual? There are five Questions on the Order Paper today in connection with Question No. 2. Some of these appeared on the Order Paper as early as last Wednesday, but yesterday there was an Answer to a Written Question which had been put down after my hon. Friend's Question had appeared on Friday. It is not for me to say that it is a stooge Question, but it certainly looks like it. May I ask you, Mr. Speaker, whether there is not some redress for hon. Members about this kind of thing. May I ask whether there was any consultation between the Minister and the

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    hon. Member —a Conservative hon. Member —who put this Question down in his name, because it does not seem to me a strictly ethical thing to do?
    Mr. Speaker: I have not got the circumstances in mind. I will look at them, but prefer not to deal with the matter now.
    Mr. Woodburn: Is there any rule, Mr. Speaker. about the anticipation of Questions? If an hon. Member has a Question down, is it in order for another hon. Member to anticipate it?
    Mr. Speaker: It does not apply in ordinary circumstances, but if some concrete case arises I will rule about it. However, let us get on now.
    Mr. Hoy: Further to that point of order. I am sure, Mr. Speaker, that the House will be grateful to you for looking into the matter and perhaps, Sir, you will look into the point of where the Question came from which appeared on the Order Paper on Friday, a Question of such importance that the Postmaster-General produced a reply to it on Monday.
    Mr. Speaker: I will look into the matter.
    Mr. Ellis Smith: Further to that point of order. My hon. Friend, who has consulted me, Mr. Speaker, does not desire to cast any shadow of suspicion whatever on the officials of the House for whom we have the greatest possible respect —we have learned that from experience —but it is quite obvious that something has gone on behind the scenes, apart from the officials, and we are grateful to you, Mr. Speaker, for promising to look into the matter.
    Mr. Speaker: I must look into the matter before I can find out what has happened.
    Mr. W. R. Williams: Further to that point of order, Mr. Speaker. When you are being good enough to consider this question, might it be possible for you to consider at the same time the advisability of Ministers —not the Postmaster-General in particular, but all Ministers — using their discretion, because they are not bound to answer Written Questions on any particular day? When they have before them a number of important
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    Questions like this for answer in the following week, it might be better to postpone the Answer to a Written Question until the Oral Questions have been answered.
    Mr. Speaker: There are a number of important Questions to get on with today. Mr. Royle.
    Mr. C. Royleasked the Postmaster-General if he will take steps to reduce the rentals for direct broadcasts of sporting events to patients in hospitals as in the case of the broadcasts from Salford Rugby Football Club to Hope and Ladywell Hospitals, Salford.
    Mr. Hoyasked the Postmaster-General what decision he has reached regarding telephone charges to the hospitals football broadcast committees in Scotland.
    Mr. Darlingasked the Postmaster-General, whether he will reconsider his decision to raise the rental charges on telephone lines used by voluntary sports commentators to patients in hospitals and residents in institutions for the blind.
    Mr. Allaunasked the Postmaster-General if he is aware that the telephone rentals for direct broadcasts from Salford rugby ground to Hope and Lady-well hospitals have been raised from £32 last year to £61 this year; and if he will reconsider this and similar increases elsewhere.
    Mr. Fitchasked the Postmaster-General if he will reconsider his decision not to exempt football clubs, who rent private telephone circuits for the sole purpose of broadcasting football matches to hospitals, from the recently imposed additional rentals.
    The Postmaster-General (Mr. Reginald Bevins): In reply to my hon. Friend, the Member for Acton (Mr. Holland), I said that I was making some changes, the effect of which would be to moderate the increases substantially and would help the renters of hospital commentary circuits and similar networks. I have asked telephone managers to work out the details with the renters.
    Mr. Royle: Does not that Answer completely justify the point of order which has been raised by my hon. Friend? In the course of his reply to

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    me will the right hon. Gentleman give some explanation of what has already been done? May I say to him as courteously as I can that the reply which was given to his hon. Friend the Member for Acton (Mr. Holland) will give some satisfaction at least to the people who are responsible for the broadcasts and to those who receive them, but will he give us some more definite information? What sort of figure has he in mind? For example, in the Salford case it is a rise from £20 to £60. Can he indicate what the reduction will be as a result of what is going on?
    Mr. Bevins: First, I should like to make it clear that there was no collaboration of any kind between myself and my hon. Friend the Member for Acton (Mr. Holland). While I take the point made by the hon. Member for Manchester, Openshaw (Mr. W. R. Williams), I did feel that there was so much general interest in the matter that the Question ought to be answered at the earliest possible moment.
    With regard to the second part of the supplementary question asked by the hon. Member for Salford, West (Mr. C. Royle), I prefer at this moment not to give details of the moderated increases for the various hospitals, but I can say to the House clearly that the concession that I am making will cost the Post Office about £20,000 and that, on the average, the increases will be halved.
    Mr. Hoy: I will not refer to the other matter; the House can draw its own conclusions. Is the right hon. Gentleman aware that the proposed increase in the case of the hospital committee in Edinburgh is 60 per cent. —an increase in the charge from £403 to £671? Is the right hon. Gentleman aware that this money is raised by people's hard work to provide a service free of charge to those who are so unfortunate as to be in hospital? Would the Minister consider removing altogether this increase? When he talks about £20,000 for the whole country, surely he ought not to allow the reputation of the Post Office to be besmirched by a sum of this size?
    Mr. Bevins: When this matter was brought to my attention I naturally gave consideration to the possibility of waiving these increases together. Of
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    course, they are tied up with the increases which apply to private telephone circuits as a whole, and it would have been exceedingly difficult to have singled out certain classes for total exemption. I can tell the hon. Gentleman that in the case of the hospital in which he is interested the increase on the new basis will be relatively very modest indeed.
    Mr. Darling: So far as I can gather from a quick calculation, the right hon. Gentleman's increase will cost the Sheffield area about £120 a year. In these circumstances, does he not agree that the Government could very well make a contribution to this excellent voluntary service and that the cost, as my hon. Friend has said, would be very small indeed? This is a matter where surely the Government could be as forthcoming as the people who are called upon to make contributions to cover the cost. Is it impossible to separate the rental of a telephone line so as to keep it to the original charge?
    Mr. Bevins: I have already made it clear that I would have liked to have done what the hon. Member and various others have in mind, but it is really impracticable to do it in the case of various groups of private circuit renters.
    Mr. Allaun: May I repeat the plea for the complete waiving of these charges? If they can be reduced, surely they could be abolished. Is it not true that although the Post Office has made on average £5 million profit a year for the people of this country over the last twenty years, as a nationalised concern in contrast to a commercial company it exists to provide a service and not only a profit? Therefore, as in the case of remote farms which are provided with telephones, could not the Minister provide this service without any increase in charge?
    Mr. Bevins: I think I have already answered that question, but I should like to make it clear that on the basis of these moderated increases, the Post Office will lose on these services.
    Mr. Fitch: Can the right hon. Gentleman say whether he intends to draw up individual contracts with these sporting organisations concerned?
    Mr. Bevins: We shall have to revise arrangements with the renters of the service.
    Mr. W. R. Williams: I should like to ask two brief questions. First, when do these new rates come into operation, and secondly, will there be retrospection in regard to rebates to the people who have already paid?
    Mr. Bevins: The answer to the first supplementary question is that I have already instructed my telephone managers to approach the renters and discuss with them the best means of getting prices down to the lowest possible level. As to retrospection, that will apply back to the time of the last account.
    Mr. Royle: On a point of order. In view of the unsatisfactory nature of the reply, I wish to give notice that I shall try to raise the matter on the Adjournment.

    Burntwood Exchange, Staffordshire
    Mr. Snowasked the Postmaster-General on how many occasions within the last five years the telephone system operating on the Burntwood Exchange, Staffordshire, has been out of operation as a result of heavy rain storms.
    Mr. Bevins: In 1957, 1958, and again on 5th November, 1961, the Burntwood exchange was cut off for a few hours as a result of heavy rain storms. There have also been some occasions when individual subscribers' lines have been affected.
    Mr. Snow: There is a bad history of technical deficiency in this area. Is the Minister aware that residences and commercial enterprises recently have not had any telephone service for periods up to three days? Will he look into the matter?
    Mr. Bevins: Yes, I entirely agree with the hon. Gentleman and I am grateful to him for putting down this Question. The trouble is that the junction cables of this exchange are very vulnerable to heavy rain, but I assure the hon. Gentleman that I am having the whole position technically examined as a matter of urgency.

  POST OFFICE

    Sankey's Corner, Burntwood
    Mr. Snowasked the Postmaster-General whether he will investigate the need for a sub-post office at Sankey's
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    Corner, Burntwood, Staffordshire, in view of the increasing importance of this area and the fact that the two neighbouring sub-post offices are now inadequate simply by reason of their inconvenient position for this particular centre
    Miss Pike: My right hon. Friend has looked into this matter carefully; but the provision of sub-post offices in the district is up to the standard in other similar districts and he is sorry that he would not be justified in opening an additional office.
    Mr. Snow: Has that decision been reached in the light of the substantially increased number of houses in this area? What improved service has been offered by the hon. Lady's Department within the last six years?
    Miss Pike: We have looked into this question very carefully. There are about 500 houses forming a housing estate. This is, in fact, nearer to Chase Town which is about three-quarters of a mile away, joined by ribbon development to Sankey's Comer. In our judgment, these people will be better served by the present arrangement. We shall keep the whole position under general review.
    Mr. Snow: I hope so.

    Posting Arrangements, King's Lynn
    Mr. Bullardasked the Postmaster-General whether he will arrange for a later time for the acceptance of letters at King's Lynn General Post Office.
    Miss Pike: The posting arrangements at King's Lynn Post Office are being reviewed, and I shall be glad to look into any particular point which is troubling my hon. Friend if he will let me have details.
    Mr. Bullard: Will the Minister bear in mind that the latest time for general posting there is now, I am told, 4.45, which is a very early time indeed, and letters must be posted even earlier on Fridays in order to ensure general delivery the following morning? Will my hon. Friend endeavour to see that a much later arrangement for posting than this can be inaugurated.
    Miss Pike: We are looking into this, and I hope that we shall be able to meet the hon. Gentleman's point.

    Post Office Savings Bank (Centenary Celebrations)
    Mr. Tomneyasked the Postmaster-General (1) why the hon. Member for Hammersmith, North was not invited to the centenary celebration of the Post Office Savings Bank, on the occasion of the Queen Mother's visit;
    (2) on what date the official invitations to attend the centenary celebration of the Post Office Savings Bank were issued.
    Mr. Bevins: The invitations were issued on 3rd October. The intention, of course, was to invite the hon. Member in whose constituency the Savings Bank headquarters are situated. I am sorry to say that, as a result of appropriate consultations with the Hammersmith local authority, my hon. Friend the Member for Barons Court (Mr. Compton Carr) was invited instead of the hon. Member for Hammersmith, North (Mr. Tomney).
    This mistake was discovered when my hon. Friend spoke to the hon. Gentleman on the morning of the ceremony and subsequently informed my office. As the hon. Gentleman knows, I offered him my apologies immediately I knew of the situation.
    Mr. Tomney: While I accept the right hon. Gentleman's apologies on behalf of his Department, may I ask whether the Minister is aware that this fiasco could not have happened if the accepted conventions of the House of Commons and the courtesies which hon. Members usually extend beyond this Chamber, and which add to the dignity and status of Parliament, had been observed? Hon. Members do not, as a general rule, accept public engagements in the constituencies of other hon. Members. This matter caused a great deal of embarrassment to a lot of people.
    Mr. Speaker: The hon. Member's Question is out of order.
    Mr. Tomney: On a point of order. Could you possibly enlighten me as to why it is out of order?
    Mr. Speaker: I do not want to take up the time of the House now, if the hon. Member will forgive me. The short point is that you cannot in a
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    question criticise the conduct of an hon. Member of either House of Parliament, because that is a matter requiring a substantive Motion.
    Mr. Tomney: In which case it is bad luck because I really intended to put this matter right today. I think it is rather deplorable.
    Mr. Speaker: This is Question Time and my obligations to others require me to go on.
    Mr. W. R. Williams: May I ask the Postmaster-General whether there were consultations between his Department and the local authority concerned before this happened? How is it that, between the two of them, a mistake of this nature was possible?
    Mr. Bevins: My Department consulted the Hammersmith Town Hall as to who was the appropriate hon. Member. The Savings Bank headquarters is situated in the southern corner of the constituency of the hon. Member for Hammersmith, North (Mr. Tomney), and is within a few yards of Barons Court, but the area was a part of the former Hammersmith, South constituency which was taken into Hammersmith, North at the time of the redistribution in 1955.
    Mr. Tomney: Which makes matters rather worse, because Hammersmith Borough Council denies responsibility for this and has no knowledge of the right hon. Gentleman's Department ever contacting its department.
    Hon. Members: Answer.
    Mr. Bevins: I am perfectly prepared to answer. It is a fact, which I have confirmed, that this invitation was sent following personal consultations between my officials and the Hammersmith Town Hall.

    All-purpose Counter Services
    Mr. Skeetasked the Postmaster-General what reaction there has been from customers to the introduction of all-purpose counter services at post offices.
    Mr. Bevins: Public comment on all-purpose service, which has now been introduced at about 1,200 Crown Post

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    Offices, has been entirely favourable. The new system has been successful in reducing waiting time, and I am satisfied that customers in general prefer the new system to the old one.
    More offices are scheduled for conversion to the new system, and I should like to take the opportunity of saying how much I appreciate the co-operation of the staff in effecting the changeover.
    Mr. Skeet: As my right hon. Friend is gratified by public response so far, may I express the hope that he will accelerate conversions throughout the country? Can he give an indication of the number of conversions which are pending and say when he is prepared to extend this system to all offices in Willesden?
    Mr. Bevins: We have already dealt with 1,200 Crown post offices out of the total of 1,600 and I expect that we shall do about another 60 in the next two months.

    Special Stamps (Robert Burns)
    Mr. Emrys Hughesasked the Postmaster-General if, in view of the variety of types of new stamps that have been recently issued, he will now consider issuing a special Robert Burns stamp for Scotland.
    Miss Pike: No, Sir.
    Mr. Hughes: Yes, but is the hon. Lady aware that that reply will cause great annoyance to the Leader of the House? Is she aware that at the Conservative Party Conference the Leader of the House quoted eloquently from Robert Burns, "A man's a man for a' that" as illustrating the Conservative Party's colonial policy. If the hon. Lady has no consideration for Scotland, cannot she have some consideration for the feelings of the Leader of the House and the Colonies?
    Miss Pike: I share with the Leader of the House and the hon. Member a love for Robert Burns, and I can best answer him, I think, in the words which Burns wrote in "Verses addressed to John Rankine":
    "The breaking of ae point, tho' sma' Breaks a' thegither."
    Mr. Rankin: Can the hon. Lady quote what he said about John Rankine?
    Miss Pike: He said he was "a sonsie man".

    Postal Rates
    Mr. Fitchasked the Postmaster-General what plans he has for reducing postal rates.
    Miss Pike: None, Sir.
    Mr. Fitch: In view of the apparent lack of a plan to reduce the postal rates generally, will the hon. Lady have another look at the system which is operated in America?
    Miss Pike: I am advised that it is worse than ours.
    Mr. Bowles: May I ask the hon. Lady whether Christmas cards can be sent this year for 2d. instead of 2½d.? I think it would make a lot of difference.
    Miss Pike: No, Sir.

  WIRELESS AND TELEVISION

    Wales (Television Services)
    Mr. G. Thomasasked the Postmaster-General (1) why he has rejected the British Broadcasting Corporation's plans for the early development of television in Wales; and whether he will make a statement;
    (2) what proposals he has to enable the British Broadcasting Corporation's Welsh and West of England television services to be separated; and whether he will reconsider his refusal to allocate a Band III channel for a new transmitter at Wenvoe.
    Mr. Bevins: I have a great deal of sympathy for the B.B.C's plans for separating their Welsh and West of England Television Services. But the allocation of a Band III channel for a new transmitter at Wenvoe at this stage might prejudice any recommendations the Pilkington Committee may make on the long-term television plan for Wales, or, indeed, for developments in the United Kingdom as a whole. I must, therefore, wait for the Pilkington Committee's Report before considering the B.B.C's proposals further.

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    I have already authorised the B.B.C. to provide three new television stations in Wales —at Llandrindod Wells, Pembroke and Llanddona.
    Mr. Thomas: Yes, but is the Minister aware that those who are technically responsible for the B.B.C. hold the opinion that it is quite possible to go ahead without prejudicing the Pilkington Committee's Report? Is he further aware that it is unfair to the West Country and Wales to continue the present position? Since we may have to wait a long time for this Report, will the Minister show some urgency about the matter?
    Mr. Bevins: The fact of the matter is that the B.B.C.'s proposals for new stations at Wenvoe and Llangollen would both have required the uncommitted use of Band III channels. I consulted the Pilkington Committee when I received these proposals and that Committee was of the same view as I; that if we were to commit these channels to Wenvoe or Llangollen we might be frustrating wise plans for the future of television in Wales and the United Kingdom as a whole.
    Mr. Thomas: In view of the reply the Minister has given, I beg to give notice that I will raise the matter on the Adjournment at the earliest possible moment.

    Old People (Television Licences)
    Mr. Frank Allaunasked the Postmaster-General if he is aware that the commercial television companies made £26 million net profit last year; and if he will now introduce legislation requiring them to devote a part of this sum to providing the £4 annual television licence to old age pensioners or permanently disabled people living on their own.
    Miss Pike: At least part of the subject raised in the hon. Member's Question is within the terms of reference of the Committee on Broadcasting whose Report my right hon. Friend hopes to receive in the spring. Meanwhile, my right hon. Friend would be opposed, on general grounds, to subsidising licence holders.
    Mr. Allaun: Could the Minister arrange for the Pilkington Committee to receive evidence on this from the old age pensioners' associations? Does he
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    realise what a boon it is for old people living alone to have television? Is it not wrong that those who enjoy television the most are, as things are, the least able to afford to have it?
    Miss Pike: Anyone wishing to put evidence to the Pilkington Committee is at liberty to do so.

    Satellite Stations (Devon)
    Mr. P. Browneasked the Postmaster-General if he has now received the Stage III proposals for satellite stations from the British Broadcasting Corporation; and what plans are envisaged for North and West Devon to improve reception.
    Mr. Bevins: Yes, Sir. The B.B.C.'s Stage III proposals were received on 3rd November, and they are now being studied. I understand that the proposals include some provision for those parts of Devon where there is need for improvement, but it is too soon to say what may be possible.

    Colour Television
    Mr. Dempseyasked the Postmaster-General if, in view of the British Broadcasting Corporation's readiness to launch colour television, he will take the appropriate steps to have it implemented.
    Mr. Liptonasked the Postmaster-General whether he will ask the Pilkington Commission to make an interim report on the introduction of colour television; and when the final report is expected.
    Mr. Bevins: I am still of the view that decisions on future line standards must come before those on colour. Once lineage is settled progress in colour will be possible. Meanwhile, the B.B.C. is continuing with its experimental work.
    I hope to have the Report of the Pilkington Committee in the spring. I do not propose to ask the Committee for an interim report on colour.
    Mr. Dempsey: Is the Minister aware that the advent of some colour into the homes of this country might bring a little brightness into the lives of the people, especially when one considers the drab consequences of the decadent economic policy of the Government?

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    Will he take into consideration the fact that it will be necessary to consult the industry in general to ensure the peaceful transition to colour on the screens of sets throughout the country?
    Mr. Bevins: The answer to the second part of that supplementary question is, of course, yes. With regard to the first part, it would be absurd on economic grounds, and also deplorably unfair to the public, to start colour on a line system which may presently be out of date.
    Mr. Lipton: Why do the Government resort to every possible excuse or device to delay the introduction of colour television by way of the B.B.C.? Is it in response to the pressure of commercial interests?
    Mr. Bevins: The Government have no desire whatever to hold up the introduction of colour television in this country, but what we are determined to do is to see that when colour comes it comes on the right line standard.

  TECHNICAL CO-OPERATION

    Overseas Information Expenditure
    Mr. Mayhewasked the Secretary for Technical Co-operation why he proposes to cut overseas information expenditure; and what form the proposed cuts will take.
    The Secretary for Technical Cooperation (Mr. Dennis Vosper): My right hon. and learned Friend the Chancellor of the Exchequer said in his statement on 25th July that he looked for a saving of 10 per cent. in the financial year 1962–63 in overseas expenditure on diplomatic and various administrative services. It is too early to say exactly how information services overseas will be affected.
    Mr. Mayhew: Are we to understand that there are not to be cuts in these services?
    Mr. Vosper: Certain proposals are under consideration, but it is too early to say what in fact will be the nature of the saving.
    Mr. Mayhew: I congratulate the right hon. Gentleman on taking up his new responsibilities for overseas in-
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    formation. Is he aware that by announcing that there will be cuts he has made a very bad start? Will not he agree that, so far from cutting these services, which include things like the work of the British Council in underdeveloped countries, there is a strong case for expanding and developing them now?
    Mr. Vosper: I thank the hon. Member for his opening remark. As he knows —his sources of information are very reliable —there has been a very considerable expansion in overseas information services, but I do not think it impossible to provide some saving at the present time.
    Mr. John Hall: Would not my right hon. Friend agree that this is not the time to cut any expenditure on overseas and other information services and that, rather than cutting, we should be expanding the services?
    Mr. Vosper: Perhaps my hon. Friend does not realise that these savings apply only to expenditure overseas and not to the whole of the Vote on Government information services.

    British Broadcasting Corporation (Overseas Services)
    Mr. Mayhewasked the Secretary for Technical Co-operation if he will make a statement on the future of the British Broadcasting Corporation's services to foreign, commmonwealth and colonial countries.
    Mr. Vosper: The Departments concerned, in consultation with the B.B.C. have been making a comprehensive study of the whole question of external broadcasting. I will consider making a statement as soon as it has been possible to reach conclusions.
    Mr. Mayhew: I welcome that statement, so far as it goes. Is the Minister aware that we have been steadily falling behind other countries in the quantity and power of transmission of our overseas services? As I think the content is probably as good as any in the world, why cannot we develop this service instead of holding it back?
    Mr. Vosper: That is one of the things the working party has been considering, particularly the question of audibility. I

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    hope that the hon. Member will not have to wait too long before I am able to give him information about that.
    Mr. Kershaw: Do I understand my right hon. Friend to say that only services overseas would be cut and that there is no proposal at all to cut the services broadcast from this country to the other side of the Iron Curtain and elsewhere where they are so badly wanted?
    Mr. Vosper: The expenditure on Government overseas information services is partly at home in this country and partly across the exchanges. It is only that part across the exchanges which is subject to the 10 per cent. saving.

    Adult Education Facilities, Commonwealth Countries
    Mr. Boydenasked the Secretary for Technical Co-operation what plans he has for assisting in the improvement of adult education facilities in the Commonwealth countries in which Her Majesty's Government have responsibilities.
    Mr. Vosper: Social education, which comprises most forms of adult education, is an important item on the agenda for the Commonwealth Education Conference in Delhi next January. I hope that in the light of the discussions at the Conference I shall be able to give the House some further information on the plans we shall be making in this field.
    Mr. Boyden: More immediately, and after consultation with the Minister of Education, would not the right hon. Gentleman consider increasing grants to the British residential colleges where there are a great number of applications from the Commonwealth and the Colonial Territories? Would he further intensify the efforts to get in touch with students coming to England so that they can take advantage of adult educational facilities in England before going back to their own country to carry on the work there?
    Mr. Vosper: These are all matters which my Department will consider. But as the Delhi Conference has chosen to make this a major item on the agenda, I thought it right to put our proposals to that conference.
    Mr. Woodburn: Has the Minister consulted the Trades Union Congress educational organisation? Is he aware that if
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    we do not educate people coming into the trade unions abroad, the Russians will do it very effectively? Is it not a great contribution to peace that we should allow these people to come to this country to co-operate with our own trade unions and get the benefit of their experience rather than gather experience from Russia?
    Mr. Vosper: I shall have regard to what the right hon. Gentleman says.
    Mr. Mayhew: Will the Minister give a clear assurance that he will not cut the British Council's educational activities in the Commonwealth?
    Mr. Vosper: The hon. Gentleman's second question relates to something completely different from what he asked about earlier. The two questions are quite unrelated.

  NATIONAL FINANCE

    Personal Incomes
    Sir C. Osborneasked the Chancellor of the Exchequer what estimate he has made of the extra amount available to each adult person if all personal incomes over £2,000 per annum net were redistributed to all other adult persons.
    The Economic Secretary to the Treasury (Mr. Anthony Barber): The aggregate net income in excess of £2,000 each of all those whose net income after Income Tax and Surtax is £2,000 or more is estimated to be about £265 million. This would be sufficient, if confiscated and redistributed, to provide about £7 10s. 0d. a year or 2s. 10d. a week for every other adult member of the population.
    Sir C. Osborne: Since these figures make it clear that a general increase in incomes is not possible merely through (redistribution, would not it be better if the Treasury told the nation that if we want higher incomes we have to work harder, longer and more efficiently.
    Mr. Barber: I think that over the last few months my right hon. and learned Friend has said a good deal about the way in which to improve real living standards in this country. But I think it was valuable for my hon. Friend to elicit this Answer from me, especially when we bear in mind that in the last

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    financial year the increase in average male weekly earnings in the manufacturing industries was no less than 18s. 11d.
    Mr. Jay: But are these figures based on incomes of over £2,000 as returned to the Inland Revenue or on incomes actually received including capital gains?
    Mr. Barber: Obviously these figures are based on calculations made by the Inland Revenue. There would be no other way of doing it.

    Manufacturing Costs
    Sir C. Osborneasked the Chancellor of the Exchequer, in view of the fact that the Economic Survey, 1961, Command Paper No. 1334, page 27, states that direct labour and services together account for 62 per cent. of total manufacturing costs, what are the main items for the other 38 per cent. of the costs.
    Mr. Barber: The figure of 38 per cent. refers to the cost of materials and fuel.
    Sir C. Osborne: Since the Economic Survey said that the cost of materials fell last year and the cost of fuel is largely wages, can my right hon Friend say how long it will be before we have mass unemployment in this country if we continue to pay ourselves more wages for doing less work?
    Mr. Barber: With respect, I think that my hon. Friend has misunderstood the purport of the Survey. If he will look at the paragraph which precedes the one to which he referred, he will see that wages and salaries account for 46 per cent. of the whole of total costs in manufacturing industry; materials and fuel account for 38 per cent., and miscellaneous services, such as insurance and transport, for the remaining 16 per cent. In other words, it is direct labour and services which are referred to in the 62 per cent. of the total cost.
    Sir C. Osborne: Since the Economic Survey says that the cost of materials fell last year and therefore that section of the 38 per cent. was smaller, and fuel is largely wages, is not it clear that it is the wages factor in our cost of production which makes it more difficult to sell our goods abroad?
    Mr. Barber: There can be no doubt that wages and salaries form by far the
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    most important section of costs in manufacturing industry. Therefore, obviously this has a greater effect on costs and prices than any other item.

    Cost of Living
    Mr. Hector Hughesasked the Chancellor of the Exchequer what steps he has taken during the last two months to reduce the cost of living in Great Britain; and what further steps he proposes to take.
    Mr. Doddsasked the Chancellor of the Exchequer what proposals he has for bringing down the cost of living.
    The Chancellor of the Exchequer (Mr. Selwyn Lloyd): I am pursuing policies indicated in my statement of 25th July to improve our balance of payments to strengthen sterling, and to reduce inflationary pressures. The success of these policies is a condition precedent to price stability.
    Mr. Hughes: Does not the Chancellor of the Exchequer realise that his policy has been so misguided as to help the rich and injure the poor? Will he, therefore, take the advice of better and distinguished economists, such as the right hon. Member for Huyton (Mr. H. Wilson) and the right hon. Member for Battersea, North (Mr. Jay)?
    Mr. Lloyd: That is a very debatable and doubtful proposition, and I think that we are to have the opportunity of debating it later in the day.
    Mr. Dodds: In view of what the right hon. and learned Gentleman has said about the measures that he is introducing, will he tell the House whether he has confidence that they will reduce the cost of living in the next few months? If he cannot do that, will he explain the mystery that ten years ago it was said that his party would mend the hole in the purse? That hole is still open. When shall we see it closed, or will its closure take more than ten years?
    Mr. Lloyd: I believe that it is very necessary to get rid of the existing inflationary pressures. I also think that the essence of the problem is that we should work out a better relationship between increases in incomes and increases in production.
    Mr. Hughes: On a point of order. In view of the unsatisfactory nature of the reply, I will raise this matter on the Adjournment.

    International Monetary Fund
    Mr. Biggs-Davisonasked the Chancellor of the Exchequer how the currencies and amounts drawn from, and made available by, the International Monetary Fund compare with the currencies and amounts there deposited by the United Kingdom; what conditions were attached to such withdrawals and deposits; to what extent his economic measures and the Government's approach to the European Economic Community were connected therewith; and what recent changes have been made in International Monetary Fund rules and procedure.
    Mr. Selwyn Lloyd: As the Answer to my hon. Friend's Question is necessarily long, I will, with permission, circulate it in the OFFICIAL REPORT.
    Following is the Answer:
    The facilities granted to the United Kingdom by the Fund last August comprised: a drawing in nine currencies, totalling the equivalent of $1,500 million; and a one-year standby arrangement for the equivalent of $500 million. $280 million of the drawing has since been repaid, and the standby facilities were automatically increased by the same amount.
    Our subscription to the Fund is equivalent of $1,950 million. Of this $399 million was paid in gold; and the remainder in sterling, the bulk of which is re-lent to the United Kingdom until it is needed by the Fund. In addition, the United Kingdom has paid to the Fund, in accordance with the usual procedures, the sterling equivalent of the outstanding drawing; and this sum also is re-lent to the United Kingdom until it is needed.
    The drawing was conditional on an undertaking by the United Kingdom to comply with the Fund's normal repayment rules adopted in 1952. As I said in this House on 25th July, this means that the drawing must be repaid within three to five years. In addition, the facilities were granted after I had made my statement to this House on 25th July, and when making its decision the Fund
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    took into account the main lines of government policy as announced in that statement.
    The question of United Kingdom membership of the E.E.C. was not in any way considered in connection with the drawing.
    The only recent change in the Fund's rules and procedure relating to drawings has been the informal adoption of the practice that a country proposing to draw should discuss with the Fund the currencies in which the drawing should be taken, so as to ensure that it does not impose an undesirable burden on other countries.

    National Debt
    Mr. Biggs-Davisonasked the Chancellor of the Exchequer if he will lay a White Paper setting forth the origins, extent and particulars of the National Debt, and the functions of the National Debt Office.
    Mr. Barber: No, Sir. My hon. Friend will find that information on these subjects is available in existing publications.
    Mr. Biggs-Davison: I thank my hon. Friend for that reply. May I ask him whether the story is incorrect that, when Professor C. Northcote Parkinson approached the Treasury for information about the National Debt, which is of prime concern to all British taxpayers, it was unable to trace the owners of some £15,000 million of the National Debt? Has the Treasury been able to trace them since?
    Mr. Barber: That is a somewhat specific question arising out of the rather general one which appeared on the Order Paper. I will look into the point, but if my hon. Friend would like to pursue the matters which he has raised in his Question, I would be happy to send him a select bibliography.

    Loan Societies
    Mr. C. Johnsonasked the Chancellor of the Exchequer whether he is satisfied that the provisions which exist for the control of loan societies and their officers and the protection of their members under the Loan Societies Act, 1840. are adequate today, in view of the changes which have occurred since the

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    Act was passed; and if he will make a statement.
    Mr. Barber: Yes, Sir. I am satisfied that the provisions of the Loan Societies Act, 1840, are adequate in the present circumstances.
    Mr. Johnson: In view of the fact that the provisions of that Act were attuned to the era of the 1840s and that there has been no amending legislation since then, will the hon. Gentleman ask his right hon. and learned Friend the Chancellor of the Exchequer to reconsider the position in view of the limit provided by the Act of £15 on the amount of advance, which by present-day standards is an insignificant amount? Moreover, does not that restriction explain the decline in the registration of certified societies in recent years?
    Mr. Barber: There are, of course, very wide facilities now available to the community. I would only point out to the hon. Gentleman that there have been no complaints either from the members or from officers of certified societies as to the inadequacy of the 1840 Act or, indeed, about the existence of any abuses. If the hon. Gentleman has any specific point in mind, I shall be very happy to look into it.
    Mr. C. Johnsonasked the Chancellor of the Exchequer whether he will make provision to enable loan societies to be registered as friendly societies under the provisions of the Friendly Societies Act, 1896.
    Mr. Barber: No, Sir.
    Mr. Johnson: As the Treasury has power, which it has frequently exercised in the past, to extend the provisions of the Friendly Societies Act to such societies, but their extension to loan societies was limited to agricultural and horticultural societies as long ago as 1917, purely for war purposes, will the hon. Gentleman ask his right hon. and learned Friend to review the whole position, particularly as loan societies now have their rules approved by the Registrar of Friendly Societies and also submit their annual accounts to him?
    Mr. Barber: If I heard the hon. Member aright, the answer to his question is that we take the view that the Friendly
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    Societies Act, 1896, is not an appropriate Act to govern the operation of societies which have as their only object the lending of money to members. The hon. Member referred to the decision which was taken in 1917. From the information which I have gathered, I understand that it was not a decision taken solely because of the position during the First World War, but was taken also to prevent certain abuses and, consequently, that the principal reasons for the decision then taken still apply today. It is for that reason that I cannot accede to the hon. Member's request.

    Former Overseas Civil Servants (Compensation)
    Sir T. Beamishasked the Chancellor of the Exchequer (1) if he will give an assurance that officers who have resigned or retired from the Overseas Services and who accept pensionable employment in a Government Department after a period in temporary non-pensionable Government employment will not be required, in order to qualify for a pension, to repay any part of the lump sum of money given them to compensate for the interruption of their career on leaving the service of the overseas Government;
    (2) in what instances Her Majesty's Government are bearing part or all of the burden of paying lump sum compensation to officers formerly employed in Colonies or Trust Territories who have had their permanent careers interrupted by the granting of independence to the countries concerned.
    Mr. Barber: The lump sum compensation to which my hon. and gallant Friend is, I think, referring is payable under compensation schemes administered by the overseas Governments concerned and their terms may vary from territory to territory. In some circumstances, refunds of compensation may have to be made to the overseas Government if an officer subsequently obtains pensionable employment under the Crown. On the other hand, the Tanganyika compensation scheme —by way of example —does not require such officers to refund compensation provided there is a break between the last day of pensionable service under the

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    territorial Government and the first day of pensionable service in a United Kingdom Government Department.
    Although the administration of these compensation schemes and payment of compensation itself are the responsibility of the overseas Governments, Her Majesty's Government does in some cases contribute half the cost of compensation as a measure of financial aid. This applies only to compensation schemes introduced by territories after the conclusion of an agreement with the United Kingdom under the Overseas Service Aid Scheme.
    Sir T. Beamish: Is my hon. Friend aware that the principle which seems to be partly established in that reply to those two Questions is quite impossible to square with what he said in reply to an Adjournment debate last week, when we were discussing the case of a constituent of mine who, after twelve years, has been asked to refund the lump sum of £5,000 which he was given after the end of his service in Burma in order to qualify for a pension in his new job at the Colonial Office? Will my hon. Friend please look carefully again at this matter?
    Mr. Barber: I dealt with this matter at some length during the Adjournment debate. The two cases are not comparable. The compensation arrangements for ex-Indian civil servants to which my hon. and gallant Friend referred are the direct responsibility of Her Majesty's Government. Those of the former Colonial Territories, which are the subject of my hon. and gallant Friend's Question this afternoon, are the responsibility of the overseas Government concerned. The principle is that Her Majesty's Government should not both pay compensation to a displaced person and also provide him with permanent and pensionable employment.
    Sir T. Beamish: Is it not a fact that in practice this money is being paid by the British taxpayers, whatever the theory may be, and does not the question therefore need looking at again?
    Mr. Barber: As I tried to make clear in what was of necessity, I am afraid, a rather long original Answer, the responsibility for the administration of these schemes is that of the Government of the
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    dependent territory, but, of course, the United Kingdom Government have a general concern for the welfare of the Overseas Civil Service. I hope that when my hon. and gallant Friend reads the reply which I first gave he will consider it to be satisfactory.
    Mr. Glenvil Hall: The hon. Gentleman in his original reply, as I understood him, said that compensation is to be repaid if the employment is pensionable only. In an answer to a supplementary question by his hon. and gallant Friend he said it had to be permanent and pensionable. What does he mean?
    Mr. Barber: As I indicated, the position varies somewhat from territory to territory, but the general position is that refunds are required where pensionable employment is obtained under the Crown without a break in service or where the officer concerned is a former member of the United Kingdom Civil Service who is reinstated in a pensionable capacity within twelve months. If the right hon. Gentleman wishes to have an answer about any specific scheme relating to any individual and will put down a Question to the Colonial Secretary, I am sure that my right hon. Friend will be happy to answer it.
    Mr. Glenvil Hall: He knows very well that I have already put a number of Questions—
    Mr. Speaker: Order. I think we ought to go on now.

    BISHOPS (APPOINTMENT)
    Mr. Thorpeasked the Prime Minister whether he will introduce legislation to alter the system of appointment of bishops, in order to ensure free elections.
    The Prime Minister (Mr. Harold Macmillan): No, Sir.
    Mr. Thorpe: Would the Prime Minister agree that it is somewhat odd that a dean and chapiter are told that they have the right to elect a bishop, and by the next post they are told whom they must elect and that the man selected has been chosen by the Prime Minister, who need not even be a Christian? Does not the right hon. Gentleman think that the time

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    has come to loose his old on the bishops' apron strings and to allow free elections by the dean and chapter?
    The Prime Minister: No, Sir. The formalities of this go back to the Act of 1534. In this problem it would be wiser to see what the Church of England itself thinks. I understand that the Church Assembly is today considering whether it should request the archbishops to appoint a commission to consider the method of appointment to ecclesiastical offices. I much prefer to see whether that commission is appointed and what its views may be.
    Mr. G. Thomas: Will the Prime Minister bear in mind that there are people who believe that if the Church of England wants her complete freedom the best way to have it is by disestablishment, as in Wales?
    The Prime Minister: No doubt that aspect of the problem will be in the minds of all concerned.
    Mr. Fletcher: Will the Prime Minister bear in mind that the laity as well as the clergy have a great interest in this matter and that the present system has worked reasonably well for a long time? Will he also bear in mind that, whereas consultation is one thing, there is no reason to suppose that a new system of election of bishops will be likely to produce any better results than the present one?
    The Prime Minister: Of course, as the hon. Gentleman knows, consultation is carried on in every possible way we can make it effective. Meanwhile, I have been in communication with the new Archbishop of Canterbury. I have great confidence in his wisdom and knowledge, and I think that it would be much better to wait to see what the Church Assembly decides to do and to take into consideration any recommendation that any of its committees might make.

    EUROPEAN ECONOMIC COMMUNITY
    Mr. Wadeasked the Prime Minister whether he will set up a separate Department to deal with matters relating to negotiations between Britain and the Common Market countries.
    The Prime Minister: No, Sir.
    Mr. Wade: Will the Prime Minister agree that there is a danger of confusion and overlapping if a number of different Departments are concerned in these negotiations? Will the services of professional economists, scientists and business men be called in as well as civil servants during the course of these negotiations?
    The Prime Minister: The Question asks whether I will set up a separate Department. I think that that would add to the confusion and overlapping. What we have is our well-known system of committees at different levels, officials, Departments and Ministers, to try to guide negotiations so complicated as these. That is the main question. I do not think that the setting up of a new and separate Department would be the right way to deal with the matter.
    Sir D. Walker-Smithasked the Prime Minister, in view of the statements by the Lord Privy Seal and the Secretary of State for Commonwealth Relations in Paris and Brussels, respectively, concerning the United Kingdom's application to join the European Economic Community under Article 237 of the Treaty of Rome, if he will now give details of the political commitments involved in the application.
    The Prime Minister: As I explained in my statement to the House on 31st July, although the Treaty of Rome is concerned with economic matters it has an important political objective, namely, to promote unity and stability in Europe which is so essential a factor in the struggle for freedom and progress throughout the world. I dealt with this subject in some detail during the foreign affairs debate on 18th October.
    Sir D. Walker-Smith: Does not my right hon. Friend agree that no clear picture of the political implications emerges from a study of Ministerial speeches or a comparison of the two speeches named in the Question with those, for example, made in this House or at the Conservative Party Conference? Does my right hon. Friend not, therefore, think that he could render a signal service in this matter by making a clear and authoritative pronouncement

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    on the political implications for the guidance of the British people in the fateful decision that they may have to take?
    The Prime Minister: I tried to do that in my speech in the debate on 31st July, when the House reached its decision. If my right hon. and learned Friend will refer to it again, I think he will see that I set it out frankly and in some detail. The obligations under the Treaty of Rome are concerned with economic and social questions arising from them. There are no political obligations as such, but there are, as I said and explained in detail, political implications based upon the concept —and this is the term made clear in the Preamble of the Treaty —that the signatories are determined to establish the foundations of an ever-closer union among the European people.
    Mr. G. Brown: Is the Prime Minister aware that while he said all that on 31st July, it was subsequent to that that the Lord Privy Seal went to Brussels and made a speech which went very much further in accepting political implications? Does the Prime Minister not consider that the time has come for him to come clean in this House and in this country and either endorse here what the Lord Privy Seal said or tell the Six that the Lord Privy Seal was not speaking for him?
    The Prime Minister: No, Sir. The right hon. Gentleman raised this matter in the debate rather unsuccessfully and I think I answered it quite conclusively.
    Mr, Grimond: In his statement, the Prime Minister referred to a phrase by General de Gaulle, I'Europe des Patries. That implies a particular view of the political integration of Europe. As that phrase was used, may we take it that that view is held by the Government?
    The Prime Minister: Yes, Sir, but I think the position is perfectly clear. The Treaty which we are now discussing whether it is possible for us to enter — they are chiefly the economic problems which are concerned in this negotiation —deals with economic matters and social questions arising from economic agreements. Amy further problems of how and by what method the broad unity of Europe should be developed are
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    matters for separate negotiation and, if the time comes, for separate treaty.
    Mr. Mendelson: Would not the Prime Minister agree that, in view of the fact that so many widely differing reports have been published about what the Lord Privy Seal said on the political future of the European Economic Community, it would be in the best interests of the country and allow hon. Members to judge if he were now to publish at least that part which dealt with the political announcement made by the Lord Privy Seal?
    The Prime Minister: By far the best thing to do is to allow the negotiations to proceed. They are about to begin. They will be difficult, complicated and, no doubt, with all the best will in the world, somewhat protracted. We shall then see where we stand and whether there is an opportunity of making economic arrangements which are agreeable to us having regard to our obligations to the Commonwealth and to our own internal interests. That is the point which we are now working towards and I feel sure that it will be best in the general interest to let that negotiation proceed.

    CONGO (INDIAN TROOPS)
    Mr. Warbeyasked the Prime Minister what steps he took to secure adequate publicity for his message to Mr. Nehru of 28th September affirming that the British Government had given no support at any time to allegations of inhumane conduct by Indian troops in the Congo.
    The Prime Minister: I authorised an announcement on 28th September about a message that I had sent to Mr. Nehru. The arrangements for issuing the announcement were those normal for announcements of that kind.
    Mr. Warbey: Is the Prime Minister aware that these malicious reports about the activities of Indian troops in Katanga were given wide currency at the time on the B.B.C. and in the British Press? Is he further aware that the reports were put forward by hon. Members in this House and noble Lords in another place? Will the right hon. Gentleman now emphatically dissociate

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    the Government from the outrageous campaign carried on with the support of his own back benchers?
    The Prime Minister: No, Sir. The Government of this country, like the Government of India, under our free system, are not responsible for the newspapers or statements made by individuals. I was very glad that the Indian Ministry of External Affairs stated on 26th September that the Government of India welcomed the reiteration of British policy in the Congo in support of a united and independent Congo. I also issued round about the same time the statement to which the hon. Gentleman has called attention. In our free societies, that is all that falls to Prime Ministers to do. I issued a statement expressing the views of the Government. Mr. Nehru issued a statement about the same time expressing the views of his Government. I think that that was a very happy solution of the difficulty at the time.

    OVERSEAS TRANSPORT SERVICES
    Mr. Rankinasked the Prime Minister if he will instruct the Ministers of Transport and of Aviation to consider in which sphere of overseas transport a subsidy for public funds could be most advantageously applied in view of the transition now taking place from surface to air transport, and to report to him accordingly.
    The Prime Minister: No, Sir. I expect overseas transport services generally to operate without subsidies.
    Mr. Rankin: Does the Prime Minister deny that a transition is taking place from surface to air transport? Because of this, is he aware that those who are employed in shipbuilding and aviation are seriously concerned about their future? In view of that, unless the Prime Minister has a better idea —which, I assume, he may divulge to the House —would he not think it wise to ask the Ministers of Transport and Aviation to look into this business with a view to helping whichever industry most needs help?
    The Prime Minister: Of course, these questions are always being considered by the two Ministers concerned—
    Mr. Rankin: And co-ordinated?
    The Prime Minister: —and co-ordinated in the Cabinet generally, but I hope that these transport services, whether by air or sea, will be able, broadly speaking, to operate without subsidy.
    Mr. Rankin: Surely the Prime Minister is aware that we must depend less on hope and more on thinking about the future and trying to get both of these Ministers to co-ordinate the services.
    The Prime Minister: That is being done continuously, but I still repeat that I believe it will be possible, broadly speaking, to operate these services without a system of Government subsidy. It is much to our interest that this should not be regarded as the general structure of these services throughout the world.
    Mr. Strachey: Would not the Prime Minister agree that while it may not be a question of subsidy, there may be a real case for the investment of public money in the development of air transport in, for example, a supersonic airliner and that this may be of great importance for the whole future of the country in the ever-expanding aviation industry?
    The Prime Minister: Yes, Sir. Of course, all these are very much the questions under the general control of the Minister of Aviation.

    POLARIS SUBMARINE BASE, SCOTLAND
    Mr. Emrys Hughesasked the Prime Minister if he will consult with President Kennedy with a view to terminating the agreement he concluded with him about the establishment of a Polaris submarine base in Scotland.
    The Prime Minister: No. Sir.
    Mr. Hughes: Is the Prime Minister aware that since this agreement was concluded, President Kennedy has thought it necessary to initiate a plan for deep shelters against fall-out, including shelters for people engaged on work in connection with the Polaris submarine? Is the Prime Minister aware that the people of the west of Scotland are to have no such protection, and that his present plans

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    mean the maximum amount of danger with the minimum of protection to the people of this country?
    The Prime Minister: That is another question. What I am asked is whether this agreement should be terminated. I believe it to be in the interest of this country and of the free world that it should be continued.

BRITISH HONDURAS (HURRICANE)
The following Questions stood upon the Order Paper:
Mr. FISHER: To ask the Secretary of State for the Colonies if he will make a further statement about the hurricane damage at Belize, British Honduras.
Mr. MARQUAND: To ask the Secretary of State for the Colonies whether he will make a further statement about the extent of the loss of life and the damage done to property by the hurricane in British Honduras; and what further measures he proposes to take to send supplies to the sufferers and to enable them to reconstruct their dwellings and property.
The Secretary of State for the Colonies (Mr. Reginald Maudling): With permission I will now answer Questions Nos. 49 and 53 together.
It is clear that the devastation caused by the hurricane in British Honduras is widespread and very severe. Casualty lists have not yet been received but the latest available information is that the dead in Belize, the capital, will be more than 160, but there are 70 people known to be missing and it is feared that the final death roll may be a good deal higher.
In outlying districts also there has been heavy damage and casualties. In Stann Creek, destruction of life and property may be even greater than in Belize.
It is impossible for anyone to live in Belize at present and the work of establishing essential services such as shelter and supplies of food and drinking water is being carried out with the help of the naval and military forces which have been brought in by the Royal Navy and the Royal Air Force.
800
We have had the greatest assistance from the United States Navy, who sent two destroyers and an aircraft carrier together with doctors, nurses and other medical personnel.
I fear it will be some time before it will be possible to make any assessment of the damage to property and meanwhile I can only refer to what I said in reply to the right hon. Member for West Bromwich (Mr. Dugdale) on 1st November; in disasters of this kind a Colony like British Honduras will, naturally, look to the United Kingdom for help in reconstruction.
Co-ordination of supplies to cope with the immediate situation is in the hands of the Government of Jamaica, who tell us what they require from the United Kingdom. In all this we are in close touch with the Red Cross, who are rendering the greatest possible assistance.
Apart from military reinforcements, including Royal Engineers and medical personnel, we have despatched engineering and medical supplies, tarpaulins and other temporary roofing material. This will continue both by sea and air.
I should like to pay a special tribute to the Governor, Sir Colin Thornley, who was recovering from pneumonia when the hurricane struck. In spite of this he insisted on carrying on and has given a magnificent lead in all the relief operations.
Mr. Fisher: Would my right hon. Friend say whether there is any danger due to serious shortage of food and any danger to health due to the outbreak of epidemics? Those questions are about the short term. In the long term, has my right hon. Friend yet been able to give any consideration to the proposal that Belize should be rebuilt inland when the time comes?
Mr. Maudling: The medical situation is greatly improved with the arrival of medical supplies and personnel. The food situation, I think, today is better than it was, though is still worrying. In the long term, I think that the question of the removal of the capital needs careful study. It will take a little while before we can assess the position.
Mr. Marquand: Is the right hon. Gentleman aware that we receive with very much deepened regret the news he has just given to us about the damage

801
in Belize, since it seems to be even more serious than we concluded from the last announcement? Does he not think, in view of this really disastrous situation, that a visit by one of Her Majesty's Ministers —I will not necessarily suggest himself, since we realise how hard pressed he must be —would be helpful in the circumstances?
Is it true that the United States aid administration has contributed 300,000 dollars to relief of distress and that Her Majesty's Government have contributed so far £10,000? Would he not agree that while we greatly appreciate the instant and courageous and valuable aid rendered by the United States Government and their Navy, none the less we must make it absolutely clear that the major responsibility for the major reconstruction which is evidently necessary must rest upon the shoulders of Her Majesty's Government?
Would the right hon. Gentleman also care to say something about the part which he hopes the voluntary societies in this country can play? They are anxious to know what he wants from them.
Mr. Maudling: Yes. While the situation is still extremely confused, the greatest difficulty is the shortage of accommodation. If a visit by myself or any of my colleagues is likely to be of any help, of course it will be made straight away.
As for the voluntary bodies, we are grateful for their offers. I have asked the Governor whether there is anything they can do and as soon as he has answered I will pass the message on to them. The Americans have been a great help. Of course, they were in a position to help being near to the spot. Certainly, in the long run a very heavy financial responsibility will rest upon this country, as it rightly should. We made an initial contribution to the relief fund so as to get the fund started. I understand that an appeal is to be launched in the very near future.
Mr. J. Hynd: Have any contributions been made by any other member of the Commonwealth?
Mr. Maudling: Not as yet.
Mr. Gaitskell: Would the Colonial Secretary consider rather more seriously the suggestion made by my right hon.
802
Friend that a Minister should be sent out? This disaster is on a far greater scale than we at first imagined, and far greater, as far as I can recall, than any which has occurred in a British Colony for years. Would it not be, apart from the desirability of making sure that everything is all right, a very valuable gesture to the people of Honduras that a member of the Government should go out at once?
Mr. Maudling: I will certainly consider that suggestion very seriously. I am very grateful for it and for any suggestions. Frankly, though, I think that a visit by a Minister at the moment in present circumstances might be more of an embarrassment to the people on the spot, but if it should be helpful, of course we should be willing.
Sir J. Vaughan-Morgan: All of us who have visited the Colony in the last year, as I did, will want to be associated with the distress which is being expressed about what has happened —for the second time in six years —in this Colony, and also with the tribute which my right hon. Friend has paid to the Governor, for whom, as he was about to leave the Colony, this must be a terrible blow.
May I ask my right hon. Friend whether he will consider very seriously the suggestion made by my hon. Friend the Member for Surbiton (Mr. Fisher) that as soon as possible a commission should go out at once to help with what is essential, which is the rebuilding of the administrative capital on a far better site than it has been, alas, for two hundred years?
Mr. Maudling: Yes, we will certainly consider that very seriously.
Mr. C. Royle: May I also press the point made in the last part of the supplementary question by the hon. Member for Surbiton (Mr. Fisher)? Will it not be very necessary, in view of the constant recurring of these disasters, to take the capital at least more inland? Cannot consideration be given to that at once, in view of the dangers which still persist?
Mr. Maudling: I do not think that we can give consideration to that till we have considered it with the people on the spot, who are too busy at the moment

803
with the immediate work of rescue. As soon as they are in a position to talk about it we shall be very ready to do so.

HOUSE OF COMMONS (AMPLIFICATION SYSTEM)
Mr. Kershaw: On a point of order. Can you tell us, Mr. Speaker, what progress is being made with the microphones in the Chamber? Sitting in this part of the Chamber it was very difficult to hear what the Minister said. Furthermore, the microphones seem to put a harsh and unpleasant timbre to the voices of hon. Gentlemen which I know is not in all cases justified. When the House is not silent the rustle through the microphones is frightful to hear and far more than it was under the old system. If the new system cannot work, cannot we have the other one back?
Mr. Speaker: No one is more sympathetic to increased difficulty of hearing than myself. I am grateful to the hon. Member for Stroud (Mr. Kershaw). I could not tell from the kindly appearance at the time of hon. Members on my right that they were suffering in this way. I am sure that the hon. Member's words will have been noted by those who are concerned, and that if we do not notice an improvement soon further steps will be taken about it.

ORDERS OF THE DAY
  QUEEN'S SPEECH

    DEBATE ON THE ADDRESS
    [SIXTH DAY]
    Order read for resuming adjourned debate on Question —[31st October]
    That an humble Address be presented to Her Majesty, as follows: —
    Most Gracious Sovereign,
    We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament. — [Sir R. Robinson.]
    Question again proposed.

    ECONOMIC SITUATION
    Amendment proposed: At the end of the Question to add:
    "but humbly regret that the Gracious Speech contains no practical proposals directed to achieving sustained expansion of production without inflation, the necessary increase in our exports, and justice as between different sections of the community."—[Mr. Bowden.]
    3.43 p.m.
    Mr. Hugh Gaitskell: I rise to support the Amendment so ably moved by my hon. Friend the Member for Leicester, South-West (Mr. Bowden). This is the first general economic debate that we have had since July. There is one thing that one can say about the July crisis which is in its favour. It is that it blew away a whole collection of illusions which existed about the facts of our economic situation and the facts of our economic record over the past ten years. It also certainly blew away some illusions about the policies which had created that situation.
    It is now not denied in any quarter that the economic record of this country in those ten years was the worst, taken as a whole, of any advanced industrial country in the world. We were worst in respect of the expansion of exports. We were worst but one in expanding production. Our share of world trade fell steadily, and we were almost the worst in rising prices.

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    So far as the last two years are concerned, illusions have also gone. Nobody thinks now of 1960 as being a favourable year when everything was going well. We now understand that we were building up the largest deficit in our balance of payments for many years, and this was only cloaked and hidden from us through the increase in the gold reserves as a result of enormous borrowing at short-term. We now know quite well that over the ten years as a whole, while we have exported a good deal of capital and invested a good deal abroad, this has been balanced, nevertheless, by enormous borrowings at short-term which make sterling extremely vulnerable.
    We can now add to this the Chancellor's own confession in his famous reply at Leicester. I quote, first, what was originally said. He is said to have said:
    "I think that would take it as a criticism of myself. For a time, for a year or two, we had stable prices and I thought that the increase in personal incomes did not matter. That is a lesson we have learned. To that extent I must share the blame."
    Since when there has been an amendment to this; for "matter" read "materialise".
    But thinking this over and assuming that there will be no further amendments —a point on which we shall all be glad to hear from the Chancellor later —I do not really see that it makes a great deal of difference. The plain fact is that, while there is a certain charm in the Chancellor's openness and naivety, he did not realise why prices were stable in those two years from the middle of 1958 to the middle of 1960. Yet it would not have been very difficult for the Chancellor to have found out. It is set out very plainly in the last Report of the Council on Prices Productivity and Incomes.
    The explanation is given in that Report in terms, first, of the fact that basic material prices fell by 20 per cent. during that period, which, of course, was an enormous help to us. Secondly, that we had for the earlier part of the period an economic recession, and it is not difficult to keep prices stable if one damps down production enough. Thirdly, that when production was expanding it was taking up slack in circumstances where productivity almost always rises. But it is
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    worth quoting what the Council said in paragraph 24 of the its July Report about the present situation.
    "Thus the factors which caused prices to be fairly stable from about the beginning of 1958 are no longer at work. Import prices are unlikely to fall substantially in the near future. Taking up slack no longer offers a quick way of raising productivity. The normal post-war trend of the economy has been reestablished; money incomes have been rising faster than production and prices are bound to rise in consequence."
    It is a good thing that the Chancellor should have thus admitted his mistakes, but the delay that he went through in discovering what was wrong has been a rather expensive matter for the country as a whole. What he seems to have supposed was that during these two years inflation had been vanquished, but for the reasons given by the Council nothing of the kind had occurred; inflation was, because of special circumstances, simply absent for the time being.
    All this that has happened, and all these facts now known about the economic record of our country in the last ten years and especially the last two or three years should also have destroyed illusions about policies. We really ought to hear no more from hon. and right hon. Members opposite about the virtues of laissez-faire. It is time that they stopped talking about the necessity of decontrolling and about the advantages of having fewer controls. This does not seem to have got round to the Secretary of State for Scotland when he replied to the debate last night and came out with the astonishing claim that as the result of the decontrol of building all sorts of mysterious forces in pursuit of progress were let loose. We shall see a little later whether that is still the view of Her Majesty's Government.
    Not only shall we hope not to hear about the virtues of laissez-faire and fewer controls, but I hope, also, that we shall have no more nonsense about the economic advantages of redistributing wealth and income in favour of the rich so as to give them more incentives. I hope that we shall have a little less obsession with public expenditure as the cause of all our evils, and that we shall also have rather less rigid defence of the virtues of high interest rates as the way out of our difficulties.
    Possibly all this has begun to have some effect on the attitude of the Government. The Prime Minister, always

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    flexible in his attitude, was able to say at the Tory Party Conference:
    "In any event—in this Common Market or out of it —our economic policy must be dynamic, not static. It must change with changing conditions. Naturally, after the restraints of six years of war and six years of Socialism our first instinct in 1951 was to set ourselves free —free from the restrictions and controls inevitable to a seige economy."
    He went on, somewhat surprisingly:
    "We have only to look round the country to see the beneficial results of that broad policy. But freedom must not be made the excuse for licence. It must not mean waste, in efficiency or unwillingness to develop any of our resources to the maximum in an orderly and constructive way."
    That is, of course, the Prime Minister's method of telling the country that the previous policies have got us into a terrible mess and there must be a change of front.
    But has there really been much change of front? So far the reactions on the Government side have been largely negative, for the only definite measures put into operation of all those announced in July were the old familiar faces —high interest rates; the credit squeeze, perhaps a little tougher than usual; the imposition of more taxes, indirect taxes, of course; and borrowing on an even more massive scale than usual —£700 million from the International Monetary Fund.
    None of those measures was directed in any way to the real long-term problems facing the country. With regard to those problems, the Chancellor contented himself then, and, by and large, has contented himself ever since, with statements of intentions only. No doubt he will claim that the short-term measures are beginning to have some effect. I would not deny it. There is no great difficulty in damping down an economy if one really wants to do it. It is easy to depress production. One has only to do the sort of things that were done in July and in the autumn of 1957. It is easy.
    The results are certainly becoming apparent. Production, which had been rising for a few months in the earlier part of this year, now appears to have flattened off and is fairly stationary. To quote one or two industries, steel production is now only 77 per cent. of capacity. The position in shipbuilding
    808
    is extraordinarily disturbing. Tonnage under construction for registration abroad —that is, exports —amounts to 42 ships of 302,974 tons, a total which is 7,286 tons less than the last quarter. Tonnage being built abroad for registration in Great Britain and Northern Ireland has risen during the quarter from 693,000 tons to a record figure of 762,000.
    The following is a quotation from the Financial Times:
    "Britain, as a result, is shown by these figures to be a net importer of almost 460,000 tons of shipping —equivalent to one third of our yards' annual output in recent years."
    It is significant, too, that the production in our yards is exactly one third less than it was in the peak of the post-war period.
    The Federation of British Industries recently conducted an inquiry into the views of its members about production and its prospects. With regard to the level of output, whereas, in June, 38 per cent. of those asked considered that production was up compared with four months ago, the figure in October is down to 27, and the number of those who considered output to be down has increased from 13 per cent. to 20 per cent. There is the same story with length of order books. In June 28 per cent. were announcing longer order books, but in October there were only 17 per cent. In June, 23 per cent. were announcing shorter order books; in October, the proportion was 35 per cent.
    I do not think there is much doubt about the picture confronting the country. It is one of the tailing off of a slight industrial expansion. This is certainly in part the result of the Chancellor's measures. I say "in part" because there is reason to believe that some of this was going to happen anyhow. Once again, it looks rather as though the Government have proceeded to apply deflationary policies to an economy which was already moving in that direction.
    If the House would like any other figures, I can give those for industrial buildings. There a very striking decline is shown. The number of approvals — that is, the number of industrial development certificates issued —has fallen in the second and third quarters of this year compared with last year. In the

    809
    second quarter of last year the total was 1,024; in the second quarter of this year it was 639. In the third quarter of last year it was 764; in the third quarter of this year it was 596. In terms of area of factory space, something which is very familiar to the President of the Board of Trade, the figure for the 1961 second and third quarters is not much above half what it was last year. On top of that, today's figures for retail trade show that even there the tendency now is downwards.
    What about the balance of payments? There has been some improvement, but it was already beginning to appear even before July, and it was natural that it should, because after the very large volume of imports associated with restocking last year, we would expect to be able to save something on that account this year.
    There has been some rise in exports, but it is worth mentioning that the September exports, the last available, were lower than in any month this year except May and that the third quarter's exports were still only 1 per cent. above those for the first quarter of 1960 and the same as those for the second quarter of 1961. The Board of Trade Journal comments:
    "The general picture is, therefore, of little change during this year in the underlying trend of exports."
    —though, of course, the average is 4 per cent above last year. It is also necessary to draw attention to the fact that the share of our exports in world manufactures is also continuing to fall, from 16·8 to 16·1 per cent. between the first and second quarters.
    Once again, the inquiry by the Federation of British Industries shows gloomy results. The rate of new orders received for exports is down in October compared with June, and so is the amount of export orders on hand. The Chancellor referred the other day to the fact that there were better prospects ahead. I would not deny that. Indeed, I warmly welcome the fact that that is so. I agree with him that there is a greater opportunity for British exports at present than there has been for some months. But that has nothing to do with us. It is simply the result of favourable conditions generated by American recovery.
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    Even if one allows for that, and even if one allows for the decline in imports, the plain fact seems to be that we are not yet earning a surplus. We may perhaps just be balancing our trade and overseas payments. But we have to set against that the need, repeatedly urged upon us by the Government, to achieve a surplus of £400 million.
    The conclusion is inevitable: we are nowhere near our target of exports. I think that it is also an inevitable conclusion that to hope to reach this target by general monetary and budgetary measures is a dangerously false illusion. It is always possible to put right the balance of payments in the short period —indeed, I suppose, also in the long period —by cutting down production and reducing imports. No doubt, in doing so, the Government will squeeze out a certain amount of exports into the world markets, but it is not good enough to rescue the balance of payments at the expense of cutting back industrial expansion. There is no answer in that way, and the conclusion I draw —one which I believe that any sensible person must draw —is the need for specific measures for the long-term solution of our problems.
    The Gracious Speech had a curious reference to the "vigorous promotion" which was to be undertaken by the Government. We were told that the "vigorous promotion of exports" had already been announced. I must ask the Chancellor of the Exchequer to tell us what has been done. I cannot, for the life of me, find any specific measures in the Gracious Speech. Certainly, there is no lack of evidence of the need for more to be done. A survey of exports recently conducted by the Institute of Directors came to this conclusion, reported on 28th July in the Financial Times:
    "In most cases, the manufacturer's failure to export successfully was a function not of any external circumstances but of a general attitude towards exports. 'It is not that he cannot export, but simply that he does not want to …"
    Perhaps the most pronounced feature of this enquiry was the difference in the amount of interest exhibited in exporting and the conspicuously low proportion of managing directors who were really enthusiastic about, or were even interested in, this side of their business."
    That is a terrible indictment, and we want to know what the Government are doing about it. We want to know what

    811
    they are doing to change that atmosphere. There are any number of examples, published in newspapers in the last few months, which one could quote about this matter, and I shall take one or two. One was from the Secretary-Manager of the British Chamber of Commerce, in Switzerland, in a letter to The Times on 26th July last. This said:
    "But of paramount importance is to create the conviction of a real desire to sell the impression of a take-it-or-leave-it attitude prevails strongly in this country.
    Why? Because British firms are too often uncompetitive in price, too careless about strict adherence to delivery arrangements, too inclined to favour the home customer and treat the export field as the depository for surplus stock, and inelastic about their promotion methods."
    One could give other examples.
    The Chairman of the British Import Union, in Copenhagen, mentioned prices, design, and delivery dates and said:
    "Within the textile and clothing trade complaints about design are overwhelming. Many British firms go on offering Continental importers merchandise which is by them considered old-fashioned, and which is bought by a tiny minority in Western Europe."
    I will say this for the Government. They have set up the Export Council for Europe, and that Council certainly does not mince its words. In its September paper, "Further trading opportunities in Europe", this is what the Council had to say, after giving a number of specific complaints:
    "An image, far too widely accepted across the Channel, of a nation thinking and working in terms of the last century, devoid of initiative, inelastic in approach, and encompassed by restrictive price and transport regulations, needs to be dispelled and a new and truer picture substituted —of wideawake industrialists, controlling an efficient production structure, able and anxious to match new needs with new ideas."
    I can think of no better epitaph on this last decade of Tory rule.
    Other things are wrong. There is complacency. One example of that comes from the steel industry, particularly the Steel Company of Wales. This company has recently been putting out advertisements with attractive photographs of the Chancellor of the Exchequer. When I first saw them they were so attractive that I thought they must be political advertisements. Perhaps they were. But this one
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    went wrong. After boasting about exports in the year to the end of September, 1961, and quoting the amounts of the direct exports of tin plate, sheet steel and electrical steel from the company at £34¼ million, it described this increase as encouraging. But we have to compare with the previous year's, and then we find that the figure described as encouraging showed a fall on the previous year. Perhaps, after all, it was a political advertisement.
    We know the facts. I could go on for half-an-hour quoting similar statements about particular industries and things which are wrong. Many suggestions have been made. Are they being followed up? One suggestion is very simple —it is that we should insist on firms giving precise publicity to the proportion of their output which is exported. This would be a help. I think that they should be obliged to do it in their company reports. The more that we bring out the difference between different firms and their performances in this way, the better it will be.
    It is suggested that firms engaged in the export business should be given more preference in credit. I do not know how far the right hon. and learned Gentleman thinks that that is discharged by the instructions given to the banks a little time ago, but one still continues to get a lot of complaints from exporters on this score.
    Has he considered that, despite the expansion of the Export Credits Guarantee Department's capital —if that is the right word to use —there is still a great deal of complaint about high interest rates being paid by British exporters? It is even suggested in the Economist this week that there should be a special low rate of interest for exporters. That is an interesting suggestion, but I believe that it would be better to bring down interest rates altogether, for reasons which I shall explain later. Is there an instruction going to the employment exchanges to see that preference is given in the supply of skilled labour to those firms engaged in exports? What is being done about the proposal to set up co-operative selling agencies for small firms, a move which has worked well in one or two instances?
    Above all, what is needed here is not so much general measures of the kind

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    I have suggested —these certainly must be considered —but specific inquiries into individual industries. What the Chancellor and the President of the Board of Trade ought to be doing is asking, in every industry which has a poor export performance, what has gone wrong.
    It is not only a question of poor export performance either, but whether imports have risen sharply in these industries. The Government boast of their change of front. They are becoming keen on planning and are more partial to the measures adopted by Sir Stafford Cripps as President of the Board of Trade and as Chancellor of the Exchequer. I suggest that they could go one step further, and appoint, as he did, working parties for individual industries. I see no reason why they should oppose this, and I think that my right hon. Friend the Member for Huyton (Mr. H. Wilson) will agree with me that after the war these working parties did a very good job.
    Now the Government have come along with their proposals for planning, and we must consider what those proposals are. It is not so much a matter of not hearing what they say, but that the whole thing is wrapped in complete mystery. I ask: what are the Government's intentions? Of course, it is a splendid thing that they recognise the need for planning, even if it is a little odd after all the bitter attacks they made on us after the war.
    Naturally, they will explain all that away by saying that they are in favour of Conservative planning and not Socialist planning. Seriously, however, I believe that in this matter it would be as well if we dropped the "isms" altogether for the moment. Let us ask what we want to do. The answer is not in doubt. It is, through purposive planning, to achieve expansion and a growth in the economy.
    If we can agree on that, the next question is how we are to do it. A great deal has been said and written recently about the French experience. Speaking in July, I commended it as something which the Government should consider very seriously. So far as one can make out, what happens in France is that the planning machine, as it were, has discussions with industries and with firms about their probable and possible expansion of output and, after a good deal of argument, agrees with them
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    upon certain figures. Those figures are then co-ordinated with those of other industries to see that they match up properly. They are then written into a plan which, in due course, is published. I may say that that is almost precisely what the Labour Government did in the immediate post-war years, at which right hon. and hon. Members opposite mocked so much.
    Never mind that, I want to know what the Government are going to do now. Is it their intention that there should be such discussions by members of some planning staff with industries and with firms so that there can be agreement on the possible rate of expansion? The other day the Chancellor said that an expansion of 3 per cent. per annum was the best that he could hope for. Is he aware that the figure in the French new plan is not 3, but 5½ per cent. per annum increase in the gross national product, or 20 per cent. in four years? That is what the French expect to achieve.
    I anticipate the criticism—indeed, I make it myself —that one can put down any figures one likes, but that they do not necessarily give the expansion which one wants. However, the important thing is that, having worked out these figures —which may be technically difficult, but which does not present any insuperable obstacles —one has to face the question of how they are to be enforced. How is one to see that the figures are achieved?
    Different things can be done. One of them is through controls, and through controls because if there its a generally expansionist climate in the economy and a particular figure of investment for a particular sector is decided, one has to see that the other sectors do not go beyond the figures allotted to them. For example, supposing, as the French have done and as we on this side would very much wish to do, there were a bold and ambitious programme of municipal housing, supposing it became clear that it could not be achieved if private enterprise were allowed complete freedom to put up office buildings when and where liked, are the Government prepared, in that case, to introduce the necessary controls to prevent the office building from getting out of hand? That is a question which the Chancellor cannot evade, for it is something which is bound to come up.

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    There cannot be an effective plan without it being said what is to be built awl whether the building is to be in (the form of offices, houses, factories, or whatever it may be.
    The French have a number of important sanctions. They can and do strictly control access to the capital market. It so happens that, owing to the structure of French industry, very many fewer firms there can rely on themselves for their own finance, so they have to go to the market for it. In order to get to the, market, they have to get the permission and support of the Government. Does the Chancellor propose to follow up that idea? I repeat that we cannot do as much as the French in this way because our industry is different, but a good deal more could be done to tighten up access to the capital market and to use it as a sanction to ensure fulfilment of plans.
    The French also use other methods. For instance, they have an accelerated depreciation allowance for firms exporting more than 20 per cent. That is apparently allowed and nobody seems to compain about it. Have the Government considered that? I quote from an article in the Financial Times of 20th October which is relevant in this connection and which says:
    "The nationalised industries have a large degree of independence as a reward for conforming to the broad lines of the plan, while private industries … accept a good deal of State guidance in return for help with finance, raw material supplies, export campaigns and so on. But it is a fact that each year between one-third and two-fifths of all productive investment is made by nationalised industries, whose key positions were an important factor in getting the plan off the ground after the end of the war."
    So they were here, but the Government had better think very carefully about this.
    The article goes on:
    "In the last resort, a firm is free to go its own way if it disagrees with the planners. But it will generally find that it pays to rejoin the fold. The State can apply sanctions, for example, by refusing to let the firm in on the Government-sponsored loans raised on the market for key industries … or by withholding special tax privileges or by not giving investment grants through the Economic and Social Development Fund …
    "The smaller firms in manufacturing industry … do not fit easily into this picture. They are being given special attention at present. For example, 37 groups of small
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    firms have signed agreements with the State, under which they contract to carry out certain production objectives, in return for tax advantages and help in financing export promotion. M. Debre, the Prime Minister, has gone further —-too far, many industrialists say —by revealing that the Government is looking into the idea of nationalising firms which do not fulfil the objectives set for them by the Plan."
    Perhaps the Chancellor would like to give us his views on that. He cannot evade these vital questions.
    It is no use just agreeing on certain figures. I do not deny that that has some value. The publicity is good if only for the general atmosphere created. As the Council on Prices and Productivity said, the view that one is to have generally an expansion of 4 or 5 per cent. a year, or whatever the figure is, may be a help. But do not let us "kid" ourselves, for that will not carry us very far unless we put some teeth into the planning machine as well, that is to say, unless it has some powers to see that its objectives are carried out.
    Another problem which is closely associated with this is that of the shortage of skilled labour. I do not think that anybody denies that this is one of the main bottlenecks which will have to be got rid of if we are to have expansion. A general planning set-up is not needed to achieve this. It should have been dealt with long ago. The shortage of skilled labour is notorious, yet not enough apprenticeships by a long way are provided. As we all know very well, the position is that a few firms do an excellent job, but, unfortunately for them, they do not always keep the labour which they have trained.
    There is a further point to bear in mind in connection with this problem, which, as the Minister of Labour knows, will get worse in the next two years as the bulge gradually comes on to the labour market. What has the Chancellor done about this? This is a perfectly straightforward, clear-cut, problem, although I do not think that there is any easy solution to it. So far as I can make out, however, all that has happened has been the establishment of the Industrial Training Council which, however hard its members work, simply lacks the authority and power necessary to achieve results.
    In April, 1960, the then Minister of Labour announced that eight training

    817
    centres, formerly used for disabled persons, would now be available for training full-time craftsmen. After all these months, there are now precisely 132 boys in these eight training centres. That seems to be the height of the achievement.
    On top of that, we now have something else. The Minister of Labour plans to save £750,000 by closing down two Government centres in Nottingham and London for training unskilled and unemployed persons and by reducing the intake at 15 rehabilitation units for disabled persons. It is a scandal that, at a moment when we ought to be trying to increase the mobility of labour and its skill, this is the sort of stupid economy which is proposed.
    Incidentally, equally, the proposal to close down the Government Register of Scientific and Technical jobs is exceedingly mistaken. I do not know what the Minister of Labour thinks of his Estimates this year. I wonder whether he will be very proud of the fact that he is trying to save £750,000 in these ways while adding £500,000 for the administration of the Bill to control immigration.
    I turn to the other main problem with which the Chancellor is concerned, namely, that of incomes and productivity, of which we have heard so much from him before. I suppose that it would be fair to say that in going into so much detail as to all the planning involved, and what is necessary, I am perhaps moving rather far ahead of the Chancellor. He is still uncertain of how much support his proposals will receive. The Trades Union Congress is considering the matter. It has not yet given its reply. I am sure that the trade union leaders, who are able and patriotic men, will do what they think best for the country, but it is not surprising that they have been a little reluctant about this matter, in view of the way in which the Chancellor has treated them.
    There was no consultation with them before the pay pause policy was introduced. There was no discussion then about what should be done. We had a debate just before the Prorogation on the pay pause in the public sector, when my right hon. Friends both made what I thought were extraordinarily effective-
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    indeed, devastating —speeches. There was no effective reply from the Government. They simply cannot get away from the fact that they have broken these agreements and that they have simply asserted their right to disregard the solemn contracts they have made.
    I do not want to go over that ground again. I want to confine myself to the more general issue. The first question that we must ask ourselves is: are we concerned with a short-term or a long-term problem here, and with a short-term or a long-term policy? If it is simply a short-term policy that the Chancellor is putting forward, for the crisis only, does he really think that it is still necessary to continue with it? If, at the beginning, he had said, "The exchange position is profoundly dangerous. I am really worried about it. We need some desperate measures of a purely temporary character to see us through, but they will be enforced only for as long as the £ is in danger", he might have got a better understanding. He did not take that line. He has never cleared up what was the short-run and what was the long-run here. [An HON. MEMBER: "He does not know."] One of my hon. Friends said that he does not know. I dare say that that is so, but there are one or two leaks which are beginning to appear.
    The Minister of Labour confirmed a wages council award, but dated it from 2nd April. He avoided 1st April. The electricity supply authorities made an offer to apply after 1st April, as I understand it. Will the Chancellor tell us whether that is the date on which he has decided to bring this policy to an end?
    The right hon. and learned Gentleman really should ask himself a question on this. When he brings it to an end, as he is bound to do —even the Prime Minister said that the pay pause does not solve the problem —what will he have achieved? The private sector will have gone ahead. I do not know by how much, but it will have gone ahead by a certain amount. The public sector, because of the Government's action, will have lagged behind. Does the Chancellor really suppose that the public employees will not demand to catch up again? Does he really think that they will simply accept the new differentials which have been created as a result of

    819
    the right hon. and learned Gentleman's actions? Has not he learned enough from the experience of the last few years, with the succession of commissions and committees that we have had which have had to settle the pay of the civil servants and the police, the doctors and the dentists; and does not he think we ought to have one to settle the pay of the firemen as well?
    I cannot understand what advantage he thinks there is in prolonging this period. The great weakness of his attitude on this matter is not that he tells us that there is a problem —we know that there is a problem —'but that he has treated a long-run problem as though it was a short-run problem, and he has tackled that short-run problem in the most foolish way imaginable.
    The right hon. and learned Gentleman may ask me, "What should I have done?" or, "What should I do now?" I shall try to tell him. The first thing he must do is to recognise that this is a long-term problem and that it certainly cannot easily be solved. But the most important thing is not so much to impose restraints on incomes as to obtain higher productivity. If we are to get higher productivity we may as well take one recognised road towards it, and that is to reduce interest rates still further. He should have a fresh look at the interest rate policy.
    It is an absurd situation that this country should continue to have one of the highest interest rates in the world — fax higher than Germany, America, France, and almost every other industrial country. Why is this? It is simply because, year after year, we have had to borrow large sums at short term in order to protect the exchanges. This, again, in my view, has come about because of the effort we have made —and on the whole, knowing the difficulties, I think that it has been a great effort —to maintain ourselves as world bankers with totally inadequate reserves and an extremely uncertain balance of payments situation.
    That is a separate subject, which I do not propose to press further, but the latest figures, according to Mr. Conant, in an article in the Bankers' Magazine —and he is quite an expert in this field — show that the cost of the high interest rates on short-term borrowing, in terms
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    of our invisibles, has increased from £33 million in 1950 to £175 million in 1961. We can discount some of that if we like, but it seems clear that we are paying, on the balance of payments, about £100 million a year more as a result of the interest rate policy. Bearing that in mind, and remembering the restrictive effect it has at home, I suggest that it is time it was looked at.
    The second thing that the Chancellor must understand is that if he wants restraint on incomes he will get it only by agreement. The third thing is that people will agree only if they think that the general situation is fair, or that the Government are trying to make it so. Therefore, it follows automatically that we shall not succeed in this task unless our social policies are just, and seem to be just to the workers, whose help we seek to obtain.
    The trouble is that the Chancellor has not yet confessed quite enough. He has confessed his ignorance of the situation over the last two years, but he has not yet confessed the foolishness of the steps he took earlier in the year. It is a pity. He has had several opportunities of admitting that he did not understand how grave the problem was during the last Parliament, and that he would like to reconsider it. He can still do this. He can still cancel the Surtax concession. Does not he understand that failure to do this is a very grave obstacle to him in his effort to achieve what is far more important —for the Surtax payers as well —namely, steady expansion without inflation?
    The right hon. and learned Gentleman has talked about a capital gains tax. Will he explain to us why this was not mentioned in the Gracious Speech? Will he tell us when he will introduce it? Will it be before the Budget, or during the Budget? Is it to be expected then, or later? Can we have a little more light thrown on the question whether this is a serious attempt to redress the balance of taxation or just one of the little gimmicks with which he hopes to win some support?
    The next thing he must do if he wants support and assistance from the organised labour movement is to drop the arbitrary and unfair discrimination against public employees.
    I would make one other suggestion to him, which I think he and the Leader

    821
    of the House should consider very seriously. If they want to win over people to their point of view —and especially if they want to ask the people to do some things which are very difficult for them to do, and which it will not be easy for union leaders to persuade their members to support —they might consider offering the people something else which they want. It so happens that the people do want something else very badly. They want the full implementation of the Gowers Report. Why cannot that be done in this Parliament?
    The Government's record on this is scandalous. They faithfully promised last year that they would introduce legislation. Why have we not had it? If we are to have it, let them tell us, for heaven's sake. After all, they should try to put over what they can to the T.U.C. and the other people concerned.
    Three and a half months have elapsed since the Chancellor admitted the grave crisis facing the nation and announced what he proposed to do about it. The impression we received then has not been altered by anything which has happened since. It is an impression of a Government who are dimly conscious of the failure of their previous policies and how disastrous they have been for the country but who are only vaguely groping towards a new policy. They recognise that this new policy must involve the abandonment of many cherished nostrums which appeal to their party and the adoption of much that they have attacked and despised in the past. The trouble is that they cannot bring themselves to take the vital steps which alone make sense of the new start for which the Prime Minister has asked.
    The Chancellor admits that he did not understand what was happening in the last two years, but he is still not prepared to admit the mistakes he made as a consequence of that ignorance. We are confronted with a collection of aspirations and hopes without much meaning, such as, "There is a problem of incomes and productivity which somehow or other we must solve", or "We must have planning but it must be Conservative planning without controls".
    The Prime Minister, who, of course, is better at this sort of thing than anyone else, even finds it possible in one
    822
    and the same speech to promise everyone £1,000 a year and yet lament the gross materialism which so disfigures society today. How he imagines that anyone can be impressed by that sort of thing from him, of all people, the great architect of complacency and the materialistic outlook, I cannot imagine. One would have supposed that even he would realise that hypocrisy on this scale really can be a trifle nauseating.
    The Prime Minister makes a plea to us —he did it the other day in the first debate on the Gracious Speech —that
    "we should try to join together in this new approach with the hope of making it as effective as possible."—[OFFICIAL REPORT, 31st October, 1961; Vol. 648, c. 42.]
    That is a bit cool. He asks for our help in re-creating policies which he and his friends bitterly attacked and then destroyed. We will give him advice. We will tell him what we think he should do. I have been trying to do that this afternoon. But we cannot ensure his success, which is threatened not so much by our criticisms as by his own past, for people do not forget so easily. Having gulled them into complacency, you cannot galvanise them into action.
    Having deliberately pursued policies which appear to millions of people as monstrously unfair, you cannot expect people to respond kindly when they are asked to accept the status quo as an ideal distribution of wealth. Having done your best to stress, encourage and underline the supreme duty of the individual to look after himself, you will not get him easily to understand the need for considering the wants of others.
    There is a simpler way out for the right hon. Gentleman, the Chancellor and their right hon. and hon. Friends —to confess their failure and get out altogether.
    4.34 p.m.
    The Chancellor of the Exchequer (Mr.Selwyn Lloyd): When we consider the state of the economy, the dominant matter in our minds must be exports. The right hon. Gentleman the Leader of the Opposition devoted a good deal of the earlier part of his speech to exports. He referred to better prospects, although I do not think he said that our own exporters deserve some credit in this respect, which was rather unfair to them.

    823
    The work of the Export Councils for Europe, the Western Hemisphere and the Middle East has been very good, and much is being done by those bodies to promote exports. We have been having encouraging success in markets where competition is keen.
    Exports to the United States are now at a higher level than in the first half of the year, and in the three months ending 31st August there was a rise of 23 per cent. over the previous three months. Exports to Western Europe were more than £100 million in September, for the fourth month running, compared with a monthly average of about £85 million in 1960. It is quite true that these increases were, unfortunately, accompanied by poorer figures for the sterling area markets, but we have reason to believe that purchasing power will be improving in those markets and prospects will be better there also. On the assumption that there is no disaster in international relations, I think it looks as though world trade is in for a period of expansion and there is a great opportunity for exporters.
    The right hon. Gentleman posed the question whether the Government have done what they should or could do, remembering that we cannot force people overseas by Act of Parliament to buy our goods. I turn, first, to credit insurance. During the past year, my right hon. Friend the present Secretary of State for the Colonies and I undertook a major overhaul of the services offered to exporters by the Export Credits Guarantee Department. We are convinced that the services available to exporters here are as good as those provided by any other country. In fact, they are a reason for some complaint by other countries. Further, in the provision of credit, we have made it easier in some respects to raise finance for export. For example, the Bank of England, with our support, earlier this year introduced arrangements whereby banks, by discounting at the Bank of England, are able to treat as liquid assets the first 18 months of medium term credits advanced to exporters. The new Export Guarantees Bill, just introduced, increases the amount available for export guarantees under Section 2 of the Export Guarantees Act from £400 million to £800 million.
    824
    I turn, next, to help for the small exporter. In order to help the small firm with little or no experience in exporting, we introduced last April a new form of export credit cover for firms with a current export turn-over of less than £10,000 a year. These firms do not now have to cover their whole turnover with E.C.G.D., but they can get cover for transactions with individually approved buyers.
    As regards the general promotion of exports, the most recent figures show that the Board of Trade services in giving information and assistance to exporters in this country have doubled in volume this year compared with the same period last year. Full publicity is being given to the export effort. A great deal of trouble has been taken in relation to individual concerns, and the Board of Trade has carried out inquiries into the achievements of individual firms, he right hon. Gentleman referred to this. Also, in the current financial year, we are helping exporters by increased grants for trade fairs overseas.
    It is said —the right hon. Gentleman skated rather warily round this point — that we ought to give an incentive for exports by relieving exporters of direct taxation. To do that would be to act directly contrary to our international obligations, which we helped to frame and which, with some success, we have urged upon other countries. If we were to do that, other countries, we believe, would follow suit. We are vulnerable to retaliation because of our dependence upon exports, and I believe that our exports would suffer, not gain. If anyone knows of cases of relief of direct taxation on exporters in other countries, I should very much like to know about them so that representations may be made. I am speaking here about the relief of direct taxation.
    Mr. Harold Wilson: Does the right hon. and learned Gentleman agree that an accelerated depreciation allowance on direct taxation or an investment allowance such as we have pressed for in Finance Bill after Finance Bill would be contrary to our international obligations? If so, why has he not complained about the French having one?
    Mr. Lloyd: First, there is some uncertainty as to exactly what the French

    825
    procedure is, but in my view it would be contrary and a matter on which representations should be made —[HON. MEMBERS: "Why?"] One of the points about this is that I have found from experience that these allegations are frequently made but that when one tries to track them down one very often finds that the facts are quite different from what has been suggested. I shall come to a specific practice by one country, but relief from direct taxation is against the rules, and it is more in our interests to keep to the rules.
    Mr. Gerald Nabarro: As the Chancellor knows, my hon. Friends and I have continuously supported him in the matter of not giving a direct exports tax incentive, which is contrary to our international obligations, but an accelerated depreciation allowance, as suggested by the right hon. Member for Huyton (Mr. H. Wilson), is a different matter. Then we would still be giving the exporter a global sum in depreciation equal to the historical value of his assets, but concentrating it over a shorter period of years. That is what the French are doing with very great effect and success. Cannot we examine that matter promptly?
    Mr. Lloyd: I promise my hon. Friend the Member for Kidderminster (Mr. Nabarro) and the right hon. Member for Huyton (Mr. H. Wilson), who raised it, that the matter will be examined. I think the whole question of depreciation allowance is one which deserves examination, and, in fact, it is currently being done.
    I was dealing first with relief of direct taxation. Then it is said by some people that we ought to subsidise our exports. I do not think anyone really favours direct subsidy, because that also would be contrary to our obligations and would be a dangerous precedent. Then it is said, "If you do not subsidise exports you ought to subsidise credit rates for them. "Again, my view is that that would be contrary to our obligations. Again, if our competitors are doing that it is a matter for representation. I am not giving particulars of a case, but we have reason to believe that in one instance that is now being done, and that matter is being taken up. I think it is in our interests as a whole
    826
    to try to keep these rules universally observed rather than to join in breaking them ourselves.
    Thirdly, it is said that we ought to alter our system of taxation and bring in a turn-over tax in substitution for our present Purchase Tax. I think the right hon. Member for Huyton has suggested this; certainly he has raised it.
    Mr. H. Wilson: I must correct that. I made it perfectly plain on 25th July, that it would not be in substitution for Purchase Tax, because that would mean a sales tax. What I said was that the Government should consider a system of industrial turn-over tax on those items not currently covered by Purchase Tax, not in substitution for Purchase Tax.
    Mr. Lloyd: I was dealing with the suggestion that we should have a turnover tax on the German model. I think there are substantial pros and cons. The German turn-over tax is one levied at each stage of production of the finished article. It is criticised by the Germans themselves. To use a perfectly horrible word, it has led to "verticalisation" of industry so that the same concern carries out all the processes to avoid tax. I think this can have dangers. There is also the question of the effect on the cost of living. I should like to work out more precisely how it would affect the cost of living, but I am told that on a rough calculation on certain assumptions each 1 per cent. of the turn-over tax on the German model would mean 1 per cent. would be added to the cost of living. If there were a turn-over tax of 10 per cent. it would put the cost of living up 10 per cent. Although it would be an inducement for some to go into export, it might price others out of a market which they have already established. My view is that we should not follow that German precedent.
    I think there is room for improvement in our machinery for the provision of credit. My right hon. Friend the President of the Board of Trade and I are now examining whether there are opportunities for further action over the provision of credit and whether our arrangements for the various types of credit needed for various periods meet the requirements. When we are talking about terms of credit, it should be remembered that we want exports for which we are paid. That

    827
    is the object of the exercise. The more generous the credit terms —although it is quite true that we may have a better chance of getting an order —if they become the rule rather than the exception the balance of payments is not in fact helped in the long run.
    After considering these matters, I am perfectly certain that the most important ways to help exports are, first, to stop inflation and the rise in costs so that exporters can plan and quote on a stable basis, and secondly, to ensure that there is room in the economy for the needed expansion of exports.
    From those two aspects, I want to consider the present position. The right hon. Gentleman the Leader of the Opposition admitted that since 25th July confidence in sterling has been much improved. The capital outflow of the previous months has been reversed. The rate of exchange with the dollar is above parity. It has been possible to reduce Bank Rate from 7 per cent. to 6 per cent. Reserves have been strengthened and we have paid back £100 million of the I.M.F. drawing. [HON. MEMBERS: "Oh."] I should have thought that anyone would have drawn a modest measure of satisfaction from those facts if one were interested in the prosperity and standard of living of the country. Measures taken to reduce pressure of home demand have had some effect. The total advances by the London clearing banks after a large and prolonged rise fell by £220 million in August and September and by a further, although smaller sum, in October. There are indications in the statistics of retail sales that the rise in consumer expenditure was checked in the third quarter. There has also been a slight easing in the pressure of demand for labour.
    In my statement, on 25th July, I asked for the co-operation of the banks, building societies and insurance companies in restraining advances for personal consumption and also for finance of speculative building and other speculative projects, the purpose being to leave room for exports and productive industry. I am grateful for the help received from these institutions and ask for their continued co-operation. These actions have helped to curb inflation and to ensure that more resources are available for export.
    828
    I believe that the pause in the increase of personal incomes is also necessary. The right hon. Gentleman referred to it, and we discussed it at length a fortnight ago. Although people fulminate against it and abuse me to their hearts' content, they know that in fact it is right and that, if we did not have this pause, prices, wages and costs would go spiralling up-wards and in that process the poorest paid, those with the smallest incomes, would come off worst.
    With regard to the balance of payments, there has been—
    Mr. Gaitskell: I know what the Chancellor is going to say—
    Mr. Lloyd: The right hon. Member will allow me to make my speech in my own way. With regard to the balance of payments, there has been a steady improvement in the current balance. The excess of imports over exports for the first quarter averaged £64 million a month. For the second quarter it averaged £43 million a month, and in the third quarter £34 million a month. That is a satisfactory improvement, but it is not satisfactory enough, because —I agree with the right hon. Gentleman —our total earnings, both visible and invisible, are still a long way short of what is needed to finance our overseas expenditure even on a reduced basis and to finance our commitments for investment and aid.
    Therefore, we must continue with our present policies. We must continue to restrain home demand. That may seem a harsh doctrine, but my view is that nothing will frustrate the export drive more than the pull of the home market.
    I do not accept what the right hon. Gentleman said —that the danger at the moment is that we are moving into a deflationary phase. The advice given to me is that in the early part of next year there will be strong expansionary forces at work again. In the present situation, I think that we must realise that sound growth can come only from an expansion in exports.
    The second thing which we must do for the long term is help the balance of payments by curtailing Government expenditure overseas. This is not a very opportune time to discuss the reduction of overseas military expenditure, but as a deficit country we cannot afford to add

    829
    to the existing imbalance by payment of large sums across the exchanges to West Germany, a surplus country, for the maintenance of our troops. Other arrangements will have to be made in the next financial year, and that will be the responsibility of N.A.T.O.
    But both these methods, the restraint of home demand and the cutting down of Government expenditure overseas, are negative, and the third thing which we have to do is to attack the obstacles to growth. This is a positive task which has to be carried out by the Government and by both sides of industry together.
    I have been asked about my ideas on planning and about the progress which has been made in the talks with both sides of industry on this subject. I have seen representatives of the T.U.C. and of the employers' organisations each upon two occasions and the heads of the nationalised industries on one occasion. The objective which I had in mind was stated by me in the House on 26th July. Since the right hon. Gentleman referred to the matter, perhaps he will forgive my quoting what I then said:
    "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. That covers, first, 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. In other words, I want both sides of industry to share with the Government the task of relating plans to the resources likely to be available."—[OFFICIAL REPORT, 26th July, 1961; Vol. 644, c. 439.]
    As I have tried to put it to the representatives of both sides of industry, what I have in mind is a body which does not meet just to comment on decisions already taken. There must be genuine consultation and people, and particularly Government representatives, must not go there, with their minds made up, to announce decisions and just to hear comments.
    The second purpose is the examination of the problems involved in national economic development, of the forward plans for the various sectors of
    830
    the economy and for particular industries, and an examination, as I said, of the obstacles to sound growth. The organisation which I have in mind is a council not very large in size but a council which would consult, in the sense which I have indicated, which would examine and which would recommend and which would perhaps make declarations. But I do not think that the council would be able to take action in the spheres in which legislation is needed. There, executive action must rest with the Government of the day, the House of Commons and Parliament. But certainly there are other spheres —the right hon. Gentleman referred to one, technical training, for example —in which one would expect the deliberations of the council to lead to action.
    But the point would be that it would provide a great opportunity for both sides of industry to influence policy at the formative stage. I have stated that one of the objectives is the encouragement of sound growth and the removal of obstacles to it. In that connection, I think that the work of the staff of the council will be very important. It has been referred to as the office or the secretariat or the staff. I think that that staff must have a measure of autonomy, a life and vigour of its own, operating within lines generally approved by the council.
    There was a view held by some people in the beginning that the French Commission de Plan had nothing to do with the Government. In fact, it is a Government Department and works within the Government. Therefore, although one hopes that this staff will have a life of its own, it must work within lines generally laid down by the council. I have not yet had the final answer of the representatives of the Trades Union Congress to my proposals. I am very anxious to get on with this as quickly as possible. I think that they understand the urgency of the matter, and I hope that I shall get their answer as soon as possible. I do not want this to be another advisory committee or debating society. I want a body which will be effective at the policy-making stage.
    After all, in spite of the right hon. Gentleman's tale of woe today, the object

    831
    of this exercise is to continue the improvement in the standard of living of the past ten years. During the past ten years —the right hon. Gentleman will not dispute this —there has been a massive improvement to the extent of one-third in real terms of the average weekly earnings. A figure which was frequently quoted at me during the debates on the Finance Bill was that there are still 10 million people in this country, it was said, earning £10 a week or less. In fact, ½million of those are juveniles under 18 and 2½million are retired people. Even so, I compared the figures with those in 1951, and allowing for the change in the value of money I found that the number of people then in this category was 16 million, so that 6 million have moved across that line which is so often quoted. It is to continue that process which is the main object of the work of this body.
    The right hon. Gentleman twitted me at the beginning of his speech with the suggestion that I made many miscalculations during my Budget proposals.
    Mr. Nabarro: Not as many as he made.
    Mr. Lloyd: I am intrigued by the interest which has been displayed by him and by the right hon. Member for Huyton in what I said at Leicester. Of course, neither of them has ever admitted that he was wrong about anything. That is why they take this interest. The right hon. Member for Belper (Mr. G. Brown), the Deputy Leader of the Opposition, even dragged the matter into a debate on defence. I also see that for some strange reason it is described as an indiscretion for a Minister to admit that he has been wrong. That was not said by the right hon. Gentleman, but it was said over the week-end that I had committed an indiscretion by saying that I had been wrong about something.
    It is, however, of some slight importance what it was that I said I was wrong about, and there is a difference of opinion about that. There has been a very strong reaction to the idea that a reporter could have made a mistake or misheard what I said. I have never suggested that it was anything more than an unintentional mistake.
    However that may be, what I intended to convey in my answer to the question
    832
    and what I think I conveyed to most of my audience, was that in dealing with these recurrent crises the country is not master of all the circumstances. We cannot foretell what fluctuations there will be in international currencies. We cannot sell exports by passing laws here, and we cannot foresee the effect upon our export markets of international developments or troubles. Nor can we precisely forecast, in spite of all the superabundance of statistics, matters like growth in personal incomes, stock building and the like.
    At the beginning of April, I estimated that a surplus of £500 million above the line would exercise a sufficiently deflationary effect upon the economy and that on a reasonable prognosis we should get through 1961 without further deflationary measures. I did, however, ask for two additional powers if I should be wrong, the two surcharges, to be available in addition to the normal monetary weapons. In the event, I had to take further deflationary steps, using some of the monetary weapons and one of the two regulators.
    But who are the Opposition, who are right hon. and hon. Gentlemen opposite, to talk about miscalculation? At no time in the Budget debate did any of them suggest that I should take additional measures to squeeze credit and reduce demand. There was not one warning word about the danger of increases in personal incomes, wages and salaries from them. The Leader of the Opposition, speaking the other day, and referring to my remark about personal incomes, said that I might have thought about the increase in personal incomes before the Budget. I hate to remind him of what I said in my Budget speech.
    Mr. H. Wilson: What about Surtax?
    Mr. Lloyd: I will come to that. Having referred to the 2½ years before mid-1960, I said that the most recent wage round had provided increases going well beyond the rate of productivity increase and that the interval since the previous round had also been shortened. I said,
    "Such developments are bound to put pressure on costs and prices."
    I went on to say, as recorded at the foot of column 798 of the OFFICIAL REPORT,
    "There is reason to fear that the cost-inflationary process will speed up further. That,

    833
    I feel, is our principal menace at present, and one which it is impossible to exaggerate."— [OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 796–98.]
    To suggest that at the time of the Budget I was not concerned with this increase in personal incomes is ridiculous. The suggestion that 'I thought at that time that increases in personal incomes did not matter is a (palpable absurdity, as the quotation I have just made proves.
    What I said at Leicester last Saturday week was really what I said in the House of Commons on 23rd October. I have been criticised for it by the right hon. Gentleman today, but I was speaking of the general increase in personal incomes beyond what the increase in national production made reasonable. I said that I had thought that stability of consumer prices would make it easier to get restraint over increases in incomes. A great many other people have been proved to be wrong about that as well. I admit at once that there is something in the right hon. Gentleman's argument about import prices, but it is precisely because the period of stability did not lead to restraint in the sense in which I have described it that it is necessary for us to work out new methods of keeping a better relationship between increases in personal incomes and increases in production. These new methods must be worked out, or at all events a commencement must be made, during the period of the current pause.
    Towards the end of his speech the right hon. Gentleman said that what was wrong was that we had been unfair. He alleged that we were really asking only wage earners and salary earners for sacrifices. That is not true. Profits are falling. [HON. MEMBERS: "Oh."] I gave the figures on 23rd October. There has been a 7 per cent. fall in the first half of 1961 compared with the first half of 1960. There is in addition the increase of 2½ per cent. in the Profits Tax.
    With regard to my statement that I saw no reason for a general increase in dividends, that too is being regarded. I said on 25th July that I was satisfied in regard to what are called short-term gains that further legislation is necessary to bring certain transactions —for example, transactions on the Stock Exchange and in property, which are at present tax-free —within the existing tax system. I said that I would include this in next year's
    834
    Budget. On 23rd October I said that I would do this earlier if it proved practicable. The fact that it is not mentioned in the Gracious Speech is an unsound debating point. The right hon. Gentleman might have commented just as unfavourably on the fact that there is no reference in the Gracious Speech to a Finance Bill. The matter was specifically covered by what I said. We are at work on the details now. I warn hon. Members that they will find it an exceedingly complicated matter when they come to it, but the draftsmen are drafting as quickly as they can. I am not yet able to say when they will be able to complete their work and whether it will be possible to have a separate Bill before the Budget.
    Mr. H. Wilson: Will it be retrospective?
    Mr. Lloyd: The right hon. Gentleman must wait to see what is in the Bill. I shall not anticipate what will be in the Bill. It would be quite wrong and improper for me to attempt to do so.
    The final point which the right hon. Gentleman made was with regard to the Surtax concession. It has been referred to again and again. Tremendous efforts have been made by the Opposition to raise public indignation about this. I suspect that if I had taken no action about Surtax they would have criticised me for that. I ask the Opposition to listen to what the Daily Herald leading article said on 16th January.
    Mr. H. Wilson: I have heard it before.
    Mr. Lloyd: The right hon. Gentleman is going to hear it again. This was written when it was probably thought that I would not do anything about Surtax. The Daily Herald said:
    "And he —the Chancellor —would encourage able young men in industry, as well as performing a belated act of justice, if he ended the collection of Surtax on earnings as low as £2,000 a year. Surtax was meant to be a tax on the rich. But £2,000 a year is now equal to only £700 before the war. Even if the starting level were raised to £5,000 the tax would still be discouraging people whom it was never meant 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."
    That is a comprehensive, clear and convincing justification of what I have done.
    The Amendment cannot be sustained by reason. The only argument which the

    835
    Opposition can put forward is rather irrelevant interruptions.
    Mr. Gaitskell: There is one very important question which I put to the right hon. and learned Gentleman but which he has not answered. It is very relevant to all the discussions he is having with industry at the moment. How long does he expect his pay pause to continue and what is the relationship of this pay pause to what he apparently regards, and I think rightly regards, as the long-term problem of incomes and productivity?
    Mr. Lloyd: What I have said before with regard to the length of the pay pause is that I do not think that increases in personal incomes were justified this year and that when we have the figures for this year we should look at the situation again. This means taking a look at the situation early in the next year. I certainly am not going to commit myself to any date or time, because this is a matter of common sense. If we do not get acceptance of the pause and of the fact that personal incomes must not increase faster than the rate of increase in production, we shall price ourselves out of our markets and have great difficulty in sustaining our balance of payments. This is a matter of common sense which I believe is being generally accepted. I think that it represents the view of the country far more than the Amendment.
    5.7 p.m.
    Mr. J. Idwal Jones: Debates on the economic situation take place at such frequent intervals that they usually follow the same pattern. The pattern has already shown itself this afternoon. There is generally a complacent attitude towards the economy as it is but at the same time a certain measure of concern to justify the Chancellor of the Exchequer and the Government applying certain restraints.
    We have seen that happen this afternoon. We experienced it many years ago when the present Home Secretary was Chancellor of the Exchequer. He said very complacently that we could increase the national product and double the standard of living in twenty-five years, but at the same time he applied
    836
    restraints on the economy. Even the Prime Minister applied the same principle when he was Chancellor of the Exchequer. After selling the Trinidad Oil assets, after putting 1s. per item on prescriptions and after introducing Premium Bonds, he insisted that the economy at heart was really sound. This has been the general attitude of the Government for the past ten years. They say, on the one hand, that the economy is sound. On the other hand, they try to justify restraints on the economy.
    Last July, after we had the extraordinary experience of having virtually three Budgets in six months, the then President of the Board of Trade said this, which shows the complacency of the period:
    "Our reserves are not as inadequate as that, especially when you add the increased facilities available from the International Monetary Fund. We must not give the impression that we cannot meet our commitments and position as world bankers."—[OFFICIAL REPORT, 18th July, 1961; Vol. 644, c. 1083–4.]
    To me that is the crux of the situation.
    We are told that we must keep up appearances. The right hon. Member for Woodford (Sir W. Churchill), whom we are all glad to see here this afternoon, said in 1951 that the Conservatives had been returned to power to put the finances of this country on a sound financial basis after "six years of Socialist misrule." Yet, after ten years of continuous Conservative rule, this country, as the Chancellor admitted this afternoon, has become so dependent on the moods and whims of international speculators that we have lost our sovereignty over a large part of our domestic economy, and we are having to fall back on keeping up appearances. We must keep up appearances at all costs. We must continue with the paint, the powder, the clothing, and the glamour, even though it means starving the body which has to wear them. That has been the Government's policy for the last ten years, and we have been deluding ourselves that the international speculator was not able to discover the real weakness of our economy.
    The Chancellor, with the experience of his predecessor and his own, should have learned a lesson. To justify the wage pause, he said that our productivity had gone up by only £630 million

    837
    in the last year. Did he inquire into the reason why it had increased by only that sum? Was not the financial policy which has been pursued for the last ten years responsible for that small increase in our productivity?
    Let us follow the story further. In 1960 we had a balance of payments deficiency of £340 million. To meet our current requirements, we need a net surplus of £450 million, so the deficit was really £800 million. What did the Chancellor do to keep up appearances? He kept a high rate of interest and thereby attracted £700 million of hot money. The £ was artificially strengthened. It was given the appearance of strength, but it was weak.
    International speculators were not deluded. They saw the danger of devaluation, and withdrawals followed at an increasingly alarming rate. By July last £650 million had been withdrawn. What did the Chancellor do then? He raised the Bank Rate to 7 per cent. and fell back on the International Monetary Fund. He had a loan of £650 million at 2 per cent. Again, to keep up appearances, he decided to prematurely repay £100 million to the International Monetary Fund. What he actually did was to use dear money to pay back part of a cheap loan.
    When are the Chancellor and the Government going to face the fundamental contradiction underlying our problem today? When is the Chancellor going to face the fundamental contradiction of our economic affairs, the contradiction between the strength of the currency on one hand, and the strength of the economy on the other? We need a strong currency, but we also need a strong, healthy and growing economy. I think, and I am sure that every boy in school thinks, that the currency should be the handmaiden of the economy and a reflection of its strength.
    The picture we have had in the last decade is of a tug-of-war between our currency on the one hand, and our economy on the other. To strengthen the £, the economy is weakened; and, when the economy begins to assume a little more robustness, sterling weakens. There must be something wrong somewhere when the strengthening of the economy is inimical to the strengthening
    838
    of the currency. This is not a new phenomenon, and it is time we faced it.
    To strengthen the £ in the inter-war period 2 million people were kept unemployed for twenty years. After immeasurable suffering, after unprecedented dereliction of vast areas, the £ was no stronger, and no more proud, in 1939 than it was in 1925. The contradiction is there, and it is time that we faced it. Until it is faced —and the Chancellor referred to this in his speech this afternoon —the £ will be a gambling piece in the casino of international speculators, playing havoc with our economy.
    What is to be done? At last we hear sounds of movement. Something is going to happen. The Chancellor said on 23rd October, and repeated this afternoon:
    "I am engaged in discussions with both sides of industry about new machinery designed to help in the acceleration of the growth of the national economy. These are the most important domestic issues of the nineteen-sixties."
    But the Chancellor is ten years out of date. They were the most important domestic issues of the nineteen-fifties — the locust years of Conservative rule. All through the years we have not seen a shadow of a long-term policy of economic expansion. Whenever we on these benches have suggested national planning, we have been greeted with mocking laughter. Are we at long last to have a long-term policy?
    The wage pause and the Purchase Tax regulator are not parts of a long-term policy. They are measures designed to meet an emergency situation. With regard to long-term policy, the Chancellor said:
    "Any long-term policy will have to be addressed to securing restraint in income. — [OFFICIAL REPORT, 23 rd October, 1961; Vol. 646, c. 629–30.]
    I should have thought that the emphasis would have been on maximising the national output. Through over-reliance on the monetary instrument during the last ten years, the country has lost import orders, lost its competitive strength, created demands for higher incomes, caused less investment, and created stagnation. It is no use denying that.
    On page 6 of the Economic Survey for 1961 we read:
    "Exports in the last quarter of 1960 were no higher than in the last quarter of 1959. There was no net rise in industrial production in the last three quarters of 1960."

    839
    If that does not mean stagnation, what does it mean?
    Let us examine the matter a little more closely, and deal with invisible exports. During the last two years we have lost an income of £200 million from invisible exports. Two years ago our earnings were £200 million; now they are practically nil. Broadly speaking, since the end of the First World War this country has depended on invisible exports to balance her accounts. It was the wiping out of this source of income which created our difficulties in 1945, but we have had sixteen years in which to recover. Defeated nations have recovered, but the story of this country is that whilst two years ago we had an income of £200 million from invisible exports, today we have none. "A sober thought" was the only observation which the Minister of Labour could make a few weeks ago.
    Mr. John Harvey: Is the hon. Gentleman seriously saying that today we have no income from invisible exports?
    Mr. Jones: The hon. Gentleman ought to read the speeches made by Ministers in the last fortnight. He will find that what I am saying is justified. The hon. Gentleman should read the speeches of Ministers. If he does that I shall be satisfied. If it is a sober thought to the Minister of Labour, it should be a sober thought to hon. Members opposite.
    Coming to shipping, this was at one time a most lucrative source of income. We were well placed on the Western seaboard of Europe. Our ports were near the sea and our industrial areas were near the ports. What is the position now? It is logical to say that all ports are not always near the sea. I can see hon. Members opposite laughing, but it is true to say that some ports are near the sea whereas others are very distant from it. In this country we have our ports near the sea. In addition to that, we have our industrial areas near the sea. All that is conducive to shipping, but we have lost £50 million from our shipping. At one time shipping was a source of income whereas now it is becoming a liability.
    Turning to exports again, we hear a great deal about costs. We are told that if wages were stabilised or, better
    840
    still, reduced, our prices would become more competitive. But let us see. Speaking in the debate on 18th July, the then President of the Board of Trade said:
    "I do not think the effective level of industrial costs of this country and of our Continental competitors varies very much."
    If that is correct, then it disposes of the costs argument. The right hon. Gentleman went on to say:
    "Turning to exports, the fact is that we are doing a good job in exporting, but not just good enough by a noticeable margin."
    Fair enough. If costs are approximately on a par with our European competitors and if we are doing a fairly reasonable job in exporting, what can be wrong with our exports position? That is a very fair question. The then President of the Board of Trade tried to give the explanation. He said:
    "The best British businesses and the best British business men sell as hard, as well and as effectively as those of any country in the world, but, generally, one cannot help getting the impression from reports from overseas ports and visits to other countries that more consistent sales effort, more consistent follow-up, better after-sales services and more deliberate study of the needs of the customer are essential if we are to maximise our export effort."—[OFFICIAL REPORT, 18th July, 1961: Vol. 644, c. 1088–90.]
    What do we learn from that? We learn that there is a substantial section in the exports field which is doing a good job, but, at the same time, there is a substantial section which is not doing its best: it lacks consistent and persistent effort. In other words, the people concerned are dragging their feet.
    What does the Chancellor do? To this class of person he hands the Surtax reliefs as an incentive to bigger effort. The human nature of this class must be considered. Purchase Tax and the wages pause, on the one hand, but a promised handout to these people on the other. This is so true to pattern. In 1956 the present Home Secretary, then the Chancellor of the Exchequer, applied the same principle. On the one hand, he restricted hire purchase and, on the other, he handed nearly half the Budget surplus to industry. The Chancellor is applying old remedies which are really no remedies at all.
    The conflict between the £, on the one hand, and the economy on the other remains. In attempting to strengthen

    841
    the £ the right hon. and learned Gentleman is weakening the economy. It is no use denying this fundamental fact. Last Thursday the Bank Rate was reduced from 6½ to 6 per cent. The reaction of the Press was universally the same. One newspaper stated:
    "On the home front the lower rate will help industry which has been hampered by having to pay very high interest rates on its bank and other transactions."
    If a reduction of the Bank Rate helps industry in November, then the raising of the Bank Rate in July must have hampered industry.
    To continue the quotation:
    "Exporters in particular will welcome a return to slightly cheaper money. Many of their efforts have been frustrated through high interest rates on credit."
    If a reduction of the Bank Rate helps exporters in November, then the raising of the Bank Rate in July must have hampered exports. For ten years the Government have been relying unduly on the monetary weapon and they must not blame the chickens if they are coming home to roost.
    In conclusion, what is the position? As the Bulletin of the Bank of England puts it:
    "To sustain a satisfactory rate of economic growth and, at the same time, restore external balance, an increase in exports of some 10 per cent. per annum may well be required for two or three years, assuming no change in the terms of trade."
    We need an increase of 10 per cent, in exports immediately. Time is running out. Yet, as Mr. Samuel Brittan, the Economic Editor of the Observer, wrote on 15th October:
    "The number of industrialists who plan to cut their expenditure on new plant and equipment exceeds by a clear 10 per cent. margin the number who are planning increases."
    Again, the Economist on 7th October confirmed this point. It stated:
    "Investment inside the British economy has been showing advance signs of decline in 1962."
    This is no evidence of expansion in our productive capacity. This is no evidence of growth. On the contrary, it is evidence of continued contraction.
    The Government have been relying unduly on the monetary instrument all through the years, and now no less a figure than Lord Cromer has expressed his concern about this disproportionate
    842
    use of monetary measures. He has asked the following most pertinent question:
    "Have the money rates we have seen in this country in recent years been the most appropriate to achieve the rate of progress we would like to see?"
    Ten years of monetary policy and a lack of economic policy have been weighed in the balance and have been found wanting.
    5.28 p.m.
    Sir Arthur Vere Harvey: We have listened to the speech of the hon. Member for Wrexham (Mr. Idwal Jones) with much interest. I thought that he repeated much of what the Leader of the Opposition said earlier on. Quite frankly, I was very disappointed with the speech of the Leader of the Opposition. He used the word "scandalous" four or five times. He had nothing good to say about industry or about those involved in it. It is all very well to criticise, but one has to be fair in doing so. The right hon. Gentleman did not refer to the loss of invisible exports. I think that most of us know the reason why the net result from this source is diminishing. It used to be a great source of earning to Britain, but today it is very tough going, and we must make up leeway in that direction.
    In making his speech, my right hon. and learned Friend the Chancellor said that he would look into a number of things which the other member countries of G.A.T.T. are alleged to be doing. I would say with respect to my right hon. and learned Friend that this ought to have been done already. There have been several weeks during which to go into these matters. They are important, and I will refer to them as I proceed with my speech and try to put forward some evidence of what has been happening in France and Germany.
    This country's whole heritage and future depend on whether we can make and sell goods at a competitive price in the world market. If we fail to do that, everything —education and the welfare services —will go for six. The sooner we realise that the better. If other countries are cheating or chiselling, then we must have it out with them. I should like to be assured that we are not holding back in making representations to this end because of our application to join the Common Market. We should be absolutely frank about what was being done, because certain things are being done.

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    I believe that my right hon. and learned Friend's measures are fully understood by the people. I represent an average type of constituency, with two industrial boroughs, and I have had no real complaints about what has been done. If I have had any criticism, it is that it has not been done soon enough and that my right hon. and learned Friend has not done enough. I suggest that, even now, he should give a greater lead to industry as to what he really expects of it in regard to the pause.
    He has not compelled industrialists on the subject of wages and salaries, but problems arise where personnel are on service contracts. I am sure that if the Chancellor made a direct appeal to industry to stop giving increases in salaries and wages, in the same way as has been done in the public service, he would get a greater response. His present request has been very woolly; the appeal should be put more directly to industry so that those in it may know what is expected of them.
    Recent events have brought home to everyone the difficulties lying ahead, and the biggest difficulty is foreign competition. As we know, Britain has the skill and the "know-how". I think that our technical and ordinary educational system has given us something that other countries have not got, although they are catching up.
    The trouble is that for several years a number of industries have had a boom. The motor car industry is one example; with one or two short intervals it has enjoyed a boom period. The car firms have employed far more labour than they needed. They wanted a reserve of labour in case of expansion; these workers might well be taken out of that industry and put into the machine-tool industry, manufacturing goods for export.
    It is, of course, extraordinary how labour can flock to the Midlands when it is wanted regardless of lack of homes but that the moment when there is a shortage and cuts have to be made those people find difficulty in getting accommodation elsewhere. The high wages are very attractive —the men seem to make do then. There must be a comb-out in all industries.
    844
    For many decades Britain has obtained a great proportion of its exports on a quality basis —let us say, on a Rolls Royce basis —but that situation has changed enormously in the last five or six years. Other countries have caught up. Before the war, many of the manu-facured goods from Japan were rubbish, but today Japanese standards are extremely high. For instance, the Japanese optics industry is almost on a par with that in Germany, and other goods have to be produced to given standards.
    As we know, in Italy there is no planned economy, but I was in Milan three or four weeks ago —not having been there for 20 years —and I was staggered by what I saw in the way of new industries and the people's working conditions. I went round a textile mill —at, I think, half-past seven in the morning —that makes the most beautiful brocades one ever saw. I inquired what the women were being paid and found that it was not much less than women are being paid in Macclesfield today.
    The fact is that in Northern Italy today there is a shortage of labour. The Germans have training schools in Milan, and they pick out the best workers and send them to Germany. We really have something to fear from Italian exports. They lead in design of women's clothes, handbags, furniture and motor cars. The Italians, of course, did not have the problems that we had after the war —one accepts that —but we must look out for them as competitors.
    Our delivery dates are often quite deplorable. Exporters must realise that if they want business they must be competitive, not only in price and quality, but in delivery. The bulk of British exports is done by only a few firms, and the best way to get business is to go on the spot personally. Last June I was in Trinidad on business and asked one or two people there, "Do you see many British, executives out here trying to get business?" They replied, "Oh yes, we see them in January, February and March —when the climate is more agreeable." I do not want to be unfair here, but industrialists must realise that if they want orders they must go out and get them regardless of climate or conditions. I speak quite frankly about this, because I have myself seen examples of it.

    845
    Many small firms are unable to get out into the world to gat exports. Travel is a costly business and the smaller people just cannot afford it, but in London, Manchester and elsewhere there are still some good import-export houses which know their business and which can help materially in this respect.
    It has been said that nothing much more can be done about incentives for export. My right hon. and learned Friend may well be right, but with Bank Rate at 6 per cent. there is little need for other countries to give incentives —bat is the answer today. I understand that the Chancellor has had to have a high Bank Rate in recent months to get over his present difficulties, but we cannot constantly switch from ½ per cent. to 7 per cent. in a period of months.
    There is nothing more disturbing to industry than 'these fluctuations in Bank Rate, and I hope that when my right hon. and learned Friend has sorted out the present crisis we may have some continuity in our Bank Rate which, with the exception of Japan, is the highest in the world. How can the small man compete? He wants £10,000 to extend his factory. He gets what he wants from the bank manager but then finds that he has to pay several hundred pounds more in interest each year. That just cannot be done; we must get the Bank Rate down if we are to help exporters.
    Other countries are extremely clever at arranging incentives for their exporters —very clever, indeed. I am told that the Banque de France discounts bills at a fixed rate of 3 per cent. —I do not know whether my right hon. and learned Friend knows about that —when the official rate is, of course, well above that figure. Our banks charge exporters a minimum of 7 per cent. on the present Bank Rate of 6 per cent., which means that the French have an advantage of 4 per cent. there.
    I am sure that the high cost of borrowing encourages stagnation in capital investment, and if British firms do not invest in new plant we shall, in a very short space of time, find ourselves at a disadvantage with our competitors. I am not against a measure of planning. We on this side are often taunted by the Opposition about the word "planning", but one plans in industry, and I am sure that my right hon. and learned Friend is not against a measure of it.
    846
    I have been appalled in the last year or two to see the number of lush offices being built all over Britain. There is no doubt that new offices cost much more to run than the old ones. Some people think they are cheaper to run, but when the refrigeration and other services have been installed they cost very much more. I believe that if we had put a halt to building these skyscrapers and had put the money into well-designed factories producing goods we should have been better off. We should not be ashamed to call a halt even now; the people would understand if they were spoken to in that language.
    It is quite alarming to note how much building costs have increased in the last three years. Three years ago, one could build a factory in the Manchester area for 10 per cent. less than in Switzerland. Today, our building costs are 10 per cent. more than those in Switzerland, and we do not build our factories as well as the Swiss do, because of the climatic conditions. The people in the building trade have too many orders; they can pick and choose, and do as they like. That must be thinned out. We should stop some of this unnecessary building. Let us have it when we can afford it, but today let us get the money into industry and plant.
    What are the remedies? Incentives must be examined. We have a population of 52 million to house, feed and educate. We all want the Welfare State —it is accepted —but it is a very costly thing and must be paid for, though not by the Government's money. The Government have no money. The Welfare State has to be paid for by the taxpayers. There is no short-cut to a higher standard of living. It can only be done by hard work by both management and workers. I would say that, wherever it is possible, let us cut Government expenditure. I still believe that in certain cases it could be cut.
    I heard of a case recently where a fighter airfield, since the 1957 White Paper on Defence, had its runway lengthened at an enormous cost and the station in recent months was closed down. Anyone could have known, after the 1957 White Paper, that it was not necessary to extend the runways of fighter airfields. Are we to waste money like that which we badly need for other things?

    847
    The dilemma is: how can our home market be made to balance the export market? We must have a flourishing home market if we are to have exports. If we do what the Opposition so often ask us to do —extend our home market —we shall not get exports and we shall be overtaken again by inflation in a very short time. The difficulty of my right hon. Friend is to find a balance between the two —how far we should support the home market to enable us to proceed with exports.
    Concerning the under-developed countries, where we have to enlarge the grants and loans to those countries in need, let us tie these grants and loans to sterling. I should like to know how many grants and loans have been tied to sterling in the last twelve months. We cannot afford to do otherwise.
    Before our entry into the Common Market, assuming that it may take place, I suggest that the Government should have a critical review of all tariffs on raw materials. I know of several raw materials made in this country where there is a complete monopoly, and this, in turn, is preventing the smaller firms which have to buy these materials from exporting manufactured goods at a competitive price.
    I am sorry that the President of the Board of Trade is not in the Chamber, because I want to congratulate him on his new appointment. I think that we have an energetic young President of the Board of Trade who came up the hard way and had his apprenticeship in the shops. He has been in industry, and if anyone knows about the difficulties of getting exports, I think he does.
    Let us look into this question of raw materials. I personally sent a case to the Board of Trade three years ago of a British firm —I shall not mention names because I have an interest —with a complete monopoly. With the freeing of trade, the firm with which I am connected went abroad and bought its raw materials. It could pay 33½ per cent. import duty and still beat the other firm. It is very wrong that British £s should be converted into a foreign currency, and it is equally wrong that any one firm should have such a monopoly. Eventually, the Board of Trade reduced the duty by about 7 per cent. That has gone some way, but it is not enough. I
    848
    should like to see a thorough overhaul of all tariffs on raw materials.
    The Export Credits Guarantee Department has done an excellent job. The Chancellor said this afternoon that it was being encouraged to do even more. I do not think that the arrangements available are yet fully understood by all the firms concerned. They need publicising more and more. But the interest rates are too high.
    I come back again to the old bugbear of the interest rates. If one can get a long-term loan it is killed before one starts when one has to pay ½ per cent. or 7 per cent. In future, money will be required for something like 5 to 15 years if we are to be competitive. I know that we cannot accept all big orders on that duration of credit, but nevertheless we have to accept quite a large number of them because they will lead to other orders.
    I would ask my right hon. Friend to have a stern talk to everybody in industry. I have thought it over very carefully and I believe that a greater example could be set by management in industry to the highly paid workers, particularly in the home counties. One sees a great number of motor cars going up the Kingston by-pass or the Great West Road at a quarter to ten or ten o'clock in the morning. Where are they all going? I think that the boss ought to get to work at the same time as his workers.
    I see no reason why the boy who goes into a company as an office boy, drawing £7 a week, should arrive an hour later than the young man who has spent five years on the bench. It is time that we had a new approach to all these matters. If we get top management arriving at the time the other staff start work, I am sure that we shall get better results. Unless we tackle this problem, we are in for a difficult time. We have the skill, the "know-how", the ports and the facilities to do these things, and I believe that if the Government give a lead, encourage industry, and put this over in the right way, Britain can yet hold its own.
    5.46 p.m.
    Mr. H. Rhodes: I followed the speech of the hon. Member for Macclesfield (Sir A. V. Harvey) very closely, and I am with him

    849
    when he says that this country and the people in it can do the job, but they have to be properly led.
    Comparisons have been made across the Floor of the House about the way in which we are tackling this job and the way in which the French have tackled it. My right hon. Friend the Member for Leeds, South (Mr. Gait-skell) made several references to the planning authority in France. I would remind the House that in France they had a leader. Whether or not we agree with his politics or with his principles, which I personally do not, the truth was that when he gave the lead the French people followed. His first stipulation was that there should be collaboration between both sides of industry before any plan was put into effect. It was significant that the plan was introduced by a suggestion from the Government to industry that the lower-paid workers in industry should be given a rise of 4½ per cent. at the beginning of the working of the plan. It was also significant that the whole of the programme for education, including teachers' salaries, was put through, although the rest of the country was subjected to some austerity. For six months, the public of France was subjected to propaganda of all kinds before the plan was put into effect. The hoardings, for instance, had on them "You cannot consume more than you produce. You cannot buy more than you can sell. You cannot spend more than you receive." If one tried to do so, one would as an individual or a country be bankrupt.
    In France the political approach came first, and then came the economic. The trouble with us in this country is that we have no sort of patriotic focus at the moment which our people will follow, because during the last ten years the behaviour of successive Conservative Governments have made cynics of us all.
    The first job in cleaning up, ready for leadership and for the momentum that we must get, is to rid election programmes of the kind of thing that was put over to the country before the last election by the Tories. The country was hoaxed. I believe that the present troubles stem from the time when the
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    present Viscount Amory was put into the office of Chancellor of the Exchequer as a stooge, to win the election. The Bank Rate was 7 per cent. when the right hon. Member for Monmouth (Mr. Thorneycroft) was at the Treasury. Then came his resignation in the early part of 1958 and the taking up of the Chancellorship by Viscount Amory. We know the story. He was a "go" Chancellor. The previous Chancellor was a "stop" Chancellor. Before the right hon. Member for Monmouth we had the present Prime Minister as Chancellor. He was a "stop and go" man. Before the present Prime Minister was Chancellor we had the right hon. Gentleman who is now Home Secretary. He was all "go", and he went very quickly after his "pots and pans" Budget.
    Now we have a "stop" Chancellor — almost dead stop. It can be very serious. But I hope and pray —and we have the Leader of the House with us —that there will be no jiggery-pokery by way of giving a false stimulus to the economy of this country by methods designed to get votes at a future election, when an "ease" takes place. The cynics are looking for a "go" in the early part of next year. If the present Chancellor is in line with previous Chancellors, and he is a "stop" Chancellor, we can possibly look for his resignation round about next February or March. But I should be very sorry to see the present Chancellor competing for one of the seats below the Gangway which are reserved for resigned Ministers. I should like to see him having a bit of a go at "go". I think it is about time that we had a Chancellor who has done both stop and go, as during the last tern years we have had five Chancellors of the Exchequer.
    The hon. Member for Macclesfield (Sir A. V. Harvey) spoke about aids for exports in other countries, and I wish to make a brief reference to that subject before coming to my other points about productivity. The Sunday Telegraph of 5th November carried an article headed "German export subsidy works like clockwork". I will not read the article or elaborate on it, but if it could be handed to the Ministers at present on the Front Bench so that they could later examine the method of subsidy

    851
    mentioned in the article, I should be very pleased.
    The hon. Member for Macclesfield spoke of what people in industry in a small way had to suffer. I have seen this pattern for many years —a high Bank Rate, hire-purchase restrictions, cutting down stocks, damping down production, resulting in a reduction in imports. Then the business man, be he big or small, thinks in terms of his own commitments and tries to get out of a few of them. If he has got machinery on order through enthusiasm during the previous boom, he tries to postpone delivery or cancel it.
    It now takes the full strength of a boom to use all the capacity that we have installed, and this is the crux of our productivity troubles. The manufacturer, after he has made his arrangements and a credit squeeze is introduced, then concentrates on how to hold his labour force together —it is only natural —until the Chancellor relaxes so that there can be another spate of orders —or until the Chancellor relaxes at a time when it is necessary to win another General Election. The workpeople are not slow; in fact, they are as quick to sense what is afoot as the managing director, with his glum face, as he enters the works. Then we get workers' solidarity against redundancy. It is automatic. Then once again productivity is shelved.
    The Government begin their plans again for the stimulation of the economy, perhaps knowing that they have got to have full employment before they can win the next election. [Interruption.] I say to hon. Members opposite: "You gave us ' groundnuts' to some tune in years gone by, and I shall continue to put over what you said and what you did before the election in 1959". Out come the familiar gimmicks to send industrial activity soaring again, and confidence returns. New machines are ordered, mainly for more capacity, as a result of the enthusiasm and the confidence that a manufacturer gets at the crest of a boom.
    Beyond any doubt, what we need is to keep our investment constant. We should be aiming now at productivity investment —new machines for old to help us to produce goods cheaper.
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    I made a suggestion last July, and I follow it with another, concerning the chain of information and the ability of the central planning authority to take advantage of that information. May I illustrate what I mean with the industry with which I have been connected for many years? At the moment we make a monthly return to the authorities on sales in terms of square yards. There is a monthly return on the consumption of wool and a weekly return on labour turnover and machinery activity. Those reports are made to the central authority in the trade. To the Ministry of Labour we send a monthly return on the turnover of labour and a monthly return on hours worked and earnings.
    What is needed, in my opinion, is for this to be augmented by a return every two months of earnings in the industry, every month of orders in hand, every three months of the stocks held in the industry and every three months of the export performance. If I were the Chancellor of the Exchequer I should make individual industries responsible for their own figures and the assessing of their own productivity. I would not give that job to the office department of the planning authority, for the responsibility should definitely be on the shoulders of the industry.
    When the industry is bringing these figures forward to the planning authority the statistics will obviously be within the full knowledge of both sides of the industry. That method might obviate many mistakes that have been made in the past through ignorance concerning the economic facts of the industry. For instance, this year we had a reduction of two and a half hours. In theory that reduction should have represented an increase in wages of 5·8 per cent., but our experience has been that the increase has been of 9 per cent. in practice, which has had a serious effect on costs. If both sides of industry worked together in the preliminary stages of the reports to the central planning authority it would prevent mistakes being made.
    I hope that the Chancellor will have an opportunity to "go". I think that he is a better man where he is than he was when he was at the Foreign Office. He did not do so well this afternoon, but I am hoping that he will do better in the future. The country needs a

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    strong lead and the Government can expect bitter criticism until they give it.
    6.5 p.m.
    Mr. John Harvey: The right hon. Gentleman the Leader of the Opposition showed this afternoon that among the other things he has been doing, he has been reading the Economist reasonably well. The right hon. Gentleman, perhaps not surprisingly, quoted very selectively from it without, perhaps, making all the necessary acknowledgments.
    The hon. Gentleman the Member for Ashton-under-Lyne (Mr. Rhodes), on the other hand, has done some original thinking and talking this afternoon about which he deserves to be congratulated up to a point, although he will not expect me to agree with everything he said. I will try, however, to follow him in some of that original thinking because, really, one can go on quoting from articles in this or that newspaper or periodical, which we can all read. In our debates it is useful to try to contribute something from our own experience and knowledge and at least to give our own views on what may be wrong and what may need putting right.
    Sometimes in discussing all the various problems that face the nation we tend to lose sight of the fact that one of the greatest priorities of all is that of the allocation of manpower —the competition for manpower in all the different ways in which it is needed to keep our national life ticking over, let alone to build up the volume of productivity to the point we would all like to see.
    On Friday I listened to a number of hon. Members discussing primarily education problems and, understandably, there was a good deal of discussion about the need to expand the teaching force. None of us would dissent from that, but as we discuss something about which we have knowledge or feel keenly interested we tend to speak as though it is the subject requiring the greatest priority. We tend, sometimes, to forget that along with the necessary demand for more teachers goes the task of having to find them from somewhere.
    Therefore, when we are looking today at the sort of economy we need, surely one of the top priorities the Government
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    must consider —and one of the leading pieces of guidance we all need —is not only whether we are going to get the manpower we need but how we are to seek to allocate it in a free society in conditions where none of us would like to see labour ordered here or there but where, nevertheless, intelligent use of manpower is absolutely vital —more vital than ever before.
    This must be the top priority, and it follows that it does not necessarily mean that it is right for the Government to seek all the time to cut back public expenditure. Naturally it is difficult to let public expenditure rise in circumstances where economies of one sort or another seem to be as necessary as they are today. Some examination of the needs of the nation as a whole is imperative. It may be necessary to spend more, for instance, on the education services at the moment in order to give us the sort of educated people we shall need in the years to come —and I mean educated in the skills that we shall need.
    It may be right that service in certain sectors of the public service should be better rewarded than that in others. It may be that we ought to consider deliberately attracting people into those parts of the public service where they are most wanted. It may well be that we should spend more, as I have suggested, on education and more on the police force and the maintenance of law and order. It may well be that we should spend more on roads and on various forms of investment in the public sector. If we decide that this is necessary, right, proper and vital for our future, the Government should say, "Here we believe that there must be an increase of expenditure in the public sector". If we think it right and proper to pay larger salaries to attract the "Dr. Beedings" we should not be afraid to do so, if the end result is that which the nation needs and desires.
    In this context let me say that I regret, as I said a year ago, that even now the Government have still not faced the need to pay Ministers of the Crown the sort of salaries they ought to receive to do the jobs which they are expected to do and to bold their own in the onerous responsibilities that they face. I am sure that this cannot be

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    regarded as a party matter in this day and age.
    Having talked about some of the priorities, as I see them, I should like to detain the House for a short while in order to talk about the general economic situation. The hon. Member for Ashton-under-Lyne mentioned "stop and go" Chancellors and "stop" Chancellors. He hoped that the present Chancellor would be a "go" Chancellor. I hope so too. But one of the difficulties that we have had to face time and again since the war is that, every time the green light is given to the economy, expansion tends to take place here at home. Every time it is easy to move ahead, it is easiest to do so at home. I agree with the suggestion of the hon. Member for Ashton-under-Lyne that we need very much more than we have been able to do before to bring home to the nation the fact that, unless we can earn our bread and butter in the export markets of the world, the day must come when we can no longer sustain the sort of standard of living to which we have become accustomed and which we wish to preserve and to build up.
    When the hon. Member suggested that in future elections we might try to out out some of the more glowing promises for the future and come down to earth, I hope that he was not just criticising hon. Members on this side of the House. On balance the catalogue of promises made by a good many hon. Members opposite at election times, and by the Leader of the Opposition, was an expensive one. But I will not go into that now, because I do not think that we need to pursue that matter this afternoon. I agree with the hon. Gentleman that if we could all agree to be more realistic, the cynicism about politics which results in such things as a 29 per cent. poll in a ward by-election in the Borough of Walthamstow last week — the sort of cynicism which does the nation no good and public life no good —might begin to disappear. Somehow we must find a way to persuade the nation that one of our great problems relates to exports.
    The hon. Member for Wrexham (Mr. Idwal Jones) bemoaned the disappearance of the "invisibles" and suggested that
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    there were no invisible exports. The hon. Gentleman meant, of course, that on balance, net, we do not make the profit out of "invisibles" that we used to do. This is quite a separate problem. One of the greatest difficulties has been the rising economic nationalism of a good many countries for whom we once provided goods and services, such as shipping and insurance. One might take the case of India, for example, which so far as possible insists on shipping her own goods and doing her own insurance. I do not think that the hon. Member for Wrexham would seek to deny those countries that right. But if we accept that economic nationalism is something which has come to stay, particularly in the underdeveloped and under-privileged countries which are still fighting to get their economies on some sort of even keel, we must face the fact that invisibles will not be what they used to be; and this only accentuates the need to make other types of exports more what they should be.
    The Leader of the Opposition delivered a slashing attack on export practice, or the lack of it, but I have in this House, on two occasions in the past, referred to the Goodenough Committee which in 1929 presented a Report to Parliament making exactly the same condemnations of the British export trade which the right hon. Gentleman made this afternoon and which others of us have made from time to time. While I believe that the Government can and must do a lot, it is also important that British industrialists should ask themselves what they can do in the way of self-help.
    In the debate a year ago I pointed out that in Germany, for instance, they were running export clubs in many towns and cities. I suggested that it might not be a bad thing if some British cities were to form export clubs. Chambers of commerce and rotary clubs could run these export clubs and do something themselves about advertising the wares of their cities abroad. I am glad to say that during the last Recess I was invited by the Walthamstow Chamber of Commerce and by the Slough Chamber of Commerce to speak at the opening meetings of export clubs in those two towns. But there are greater cities with greater export reputations than those enjoyed by Walthamstow or Slough, though I am

    857
    sure that the hon. Member for Waltham-stow, West (Mr. Redhead) would agree with me that Walthamstow has a pretty good record in these matters. There are, however, other cities which could do something in this way to stir their own industries and industrialists to do something themselves about advertising their wares throughout the length and breadth of the world.
    Having said that, I believe that the Government must take some notice of the definite, not allegations, but evidence, which some of us could produce of practices in other countries which look suspiciously like export subsidising of one sort or another. It could be shipping companies which are willing to carry goods at lower freights than the British who have in general stuck to the rules of the conferences. We think that it is admirable for a nation such as ours to stick to playing cricket the right way. But we have to take a little notice when we feel that other countries are cheating perhaps so often that we are getting the worst of the deal too jolly often for our own good. I think that is happening at present, and I urge the Chancellor of the Exchequer and the President of the Board of Trade to take serious note of these matters.
    I think that the Chancellor should see how far he can go within the rules positively to encourage, by fiscal or other reasonable means, entry into the export markets. I see no harm in attempting to do that and, indeed, nothing but good. We must look at the minor irritations which sometimes tend to arise. The other day I could not help wondering when, after keeping in step with Western Europe —and there, after all, we are building up so much trade nowadays —in the matter of Summer Time for a good bit longer this year than ever before, in the end we still had to have all the inconvenience of change. What must it cost, for example, the airlines? What an upheaval there must be at London Airport. How much difficulty is created for those doing business with continental countries to have to remember that for some months in the year we must put in a last telephone call from London before five o'clock if we wish to contact people abroad if we hope to catch them in the office, although they are more likely to be there earlier than we are. All these things have to be taken into consideration.
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    How much longer will it be before we have a decision about the decimal system, whether with regard to coinage or weights and measures? My right hon. Friend the Minister of Transport said at Brighton that his Department was considering the question of which side of the road we should drive on. I have argued before — and I cannot help feeling that there must be a lot in it —that it must cost our motor car industry more to have to make two models of every type of car than it would if it had to make only one. How can we help ourselves if we want to do everything that a certain exalted gentleman exhorted us as a nation to do the other day and get going on building up our exports, looking positively ahead and not being afraid to plan?
    Finally, this is a national matter. It is all very well for the Leader of the Opposition to criticise exporting firms, executives and others for their lack of initiative. It is relevant to bear in mind that when the docks of London are closed by this unofficial strike or that unofficial strike for weeks, it plays havoc with our export trade. We lose orders, and we never see them again, because they go elsewhere. There is an urgent need for a closer understanding between both sides of industry. We must consider these real problems at every level and see how far, by intelligent forethought and intelligent co-operation, we can overcome them. To that extent, we all welcome the initiative that the Chancellor of the Exchequer has taken in seeking at least to bring about the first steps of a collaboration from which surely, if they are successful, all of us must necessarily benefit.
    6.22 p.m.
    Mr. Leslie Hale: The writer of the hymn who declared that one step was enough for him was not referring to the eleventh year of his activities. We have a standard form of speech from the Tory benches in which complaint is made about inactivity under every head. Hon. Members opposite say that something must be done quickly, that no steps have been taken and that no solutions have been found, winding up with the concluding sentence in which they say, "I desire to congratulate the Minister on his initiative, ability and discretion and the wisdom with which he spoke to the House." I except the

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    hon. Member for Macclesfield (Sir A. V. Harvey) from that general description, because he made a very serious contribution to which I want to refer.
    I should like to say a word or two about the Observer conflict to which my right hon. Friend the Leader of the Opposition, in his very brilliant speech, referred. I have some sympathy with the Chancellor of the Exchequer here, because it seems to me that the Treasury burst in and said, "We deny this statement on the ground that no Chancellor could say anything as daft as that." This is a triumph of present confidence over past experience. The case against the right hon. and learned Gentleman is that there is almost nothing foolish that that can be said about economic affairs that has not been said by one or other of the many Chancellors we have had in the last ten years or so.
    I hesitate to inflict an old story on the House, but it is sufficiently relevant to be put in an abbreviated form. It is the story of the new vicar who devoted his first sermon to anti-gambling. When it was finished, the verger said that it was a good sermon but that, unfortunately, the biggest donor to the Church was the local bookmaker, who was sitting in the front row. The vicar said, "I cannot adjust my views for a purpose like that, but I will make it clear that nothing personal was intended," and this he did. The two men shook hands at the back of the church. The bookmaker said, "Do not worry. It is a mighty poor sermon which does not hit me somewhere."
    It is a mighty poor economic statement which does not hit this Government somewhere. They have put forward every possible argument to justify every possible conflicting cause. There is a serious case against the Government. I agree with the hon. Member for Macclesfield about the necessity for leadership, of workers as well as of employers, but there is a sordid dishonesty about so many recent statements of the Government that is making a lot of us worry about the future of democracy. It is a sort of Gem and Magnet mentality to score over people by giving half answers. We have had half information and astute denials that are technically true because they have been so framed. We have had the sort
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    of evidence which the gunsmith gave against Sacco and Vanzetti. "Yes", it was said, "it is consistent with having been fired from this gun". No one spotted that he had not said that he thought it had been fired from the gun, because he did not think that it had and, in fact, knew that it had not. That sort of half truth is coming from the Government benches and it is a serious matter.
    We had a remarkable contribution yesterday. The hon. Member for The Wrekin (Mr. W. Yates) made an astonishing and very able and forceful speech at a rather unusual time, by virtue of the fact that he was on his feet at four o'clock last Friday. I wondered for a time whether he was giving us a piece of accomplished irony or whether it was unconscious irony. As I say, it was a very forceful speech. I should like to say to my hon. Friends that I cherish the way in which they applaud these demonstrations of independence, shouting "Vote against your party". I hope that I shall hear them repeat it upstairs on a future occasion.
    The hon. Member for The Wrekin said that it was time that we started an export drive, and why did not the Prime Minister take the initiative and launch a drive for more exports. Clearly he had forgotten that it had all happened last year and nobody noticed it. The Prime Minister launched an export drive. There was a mass meeting at Church House, of all places, about exports. There was probably also an appeal about exporting missionaries, and I am all in favour of that. More missionaries in Angola would do a lot of good. At Church House, the Prime Minister addressed the F.B.I., the A.B.C.C., the National Union of Manufacturers, and so on. I turned up Keesing's to find out what was the rousing appeal that the Prime Minister addressed to these assembled manufacturers who had left their exporting industries to come and learn a little more about Government policy.
    Mr. Nabarro: Exporting is fun.
    Mr. Hale: That is all right, but it is not relevant. On 18th July, 1960 —it was a little longer ago than I thought —the Prime Minister said —and I am quoting from the reputable Keesing, who

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    is engaged in a constant endeavour to be completely impartial about anything and not to put anything polemically; when he quotes from a speech he naturally picks out the most favourable bits from the speaker's point of view—
    "I do not propose a target … to be attained. I always think that this is rather a dangerous method. I am not going to suggest a figure which we must reach in order to be safe, or even an average annual rate of increase; or a race with other trading nations for a higher place in the league tables of world trade. When you come down to it the amount we must earn must and should be dictated by our needs. But these needs must grow if we are to play our part as a leading modern industrial society. Our exports are not just the achievement of the big industries, but the result of many individual efforts of a great number of firms, some big, some not so big, and some quite small …"
    After this rousing appeal, the right hon. Gentleman went on to say that there were some firms which were exporting a considerable amount and that they could export more; some firms were exporting less and therefore could export a bit more, and that some firms were not exporting at all and that if they considered the matter they might find that they could export. This was the initiation of a great Government to improve exports. What is the right hon. Gentleman doing?
    We have had these discussions over the years. We had them regularly on the Export Credits Guarantee Bill which used to pop up fairly frequently. The same points have been made time after time. The hon. Member for Macclesfield said that a good deal of labour was kept in reserve. I know that he has some connection with the aircraft industry, and I hope that he will forgive my saying that it is in that industry that a great deal of that is being done.
    Sir A. V. Harvey: I have no connection with the aircraft industry.
    Mr. Hale: I beg the hon. Gentleman's pardon: I thought that he had. What I have just said was in no way a criticism of him, and I think that he understands that. It is in the aircraft industry that the holding on to skilled labour is being done. The reason for this is that the industry can charge pretty well the whole of its costs to the Government under the system of Government buying and B.O.A.C buying. It is
    862
    pretty well insured against loss under the old system of cost —plus contracts. That is a matter for consideration.
    What information is available about colonial markets? What organisation does it? I happen to be a consultant director of a firm which has an interest in market research. It was looking into the whole question of how far it was desirable or necessary to consider the question of finding information about colonial markets. We were unable to find that any adequate information was available to the small manufacturer in relation to colonial markets —which is, of course, a question of colonial policy.
    Of course, the Chancellor of the Exchequer is always accurate in these statements. Nobody disputes the almost dumb accuracy of some of his statements. He says that if we give long-term credit we do not get the money quickly enough to balance our payments, and so it does not help us next year. Unless, however, we give long credits to undeveloped Colonial Territories, we cannot do trade with them. Other Governments are doing it, as the information shows.
    I do not know whether when the hon. Member for Macclesfield went to Trinidad he went to Caracas. If he had been to Caracas, he would have found there a few months ago an ambassador who had been a commercial attache who really was interested in developing trade, who was showing people how to do it and whose duties as an ambassador had a good deal of reflex in the British and American trading community in Venezuela and in developing trade and economic relations there. It can be done, How many of our embassies do it?
    Mr. Nabarro: Most of them.
    Mr. Hale: I do not believe it. My experience of British embassies in many parts is that they are shelters for political reaction. [HON. MEMBERS: "No."] If I am challenged about it, I will quote one or two examples. I do not want to go into the personal aspect, but there have been fairly classic examples.
    What are the Government doing about the Colonies? What are they doing about the independent territories in Africa? This is vital to the planning and development of export trade. A

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    country like Nigeria will have to face an immense amount of problems. It must have some sort of industrialisation to produce a taxable revenue. At the moment that the Nigerians develop an industry based on mining they will have inflation and urban inflation. They will have denudation—
    Mr. Nabarro: Will the hon. Member give way?
    Mr. Hale: No. The hon. Member might let me finish one sentence. [Interruption.] This is the first sentence I have said on this subject. I have started on Nigeria and I cannot stop halfway in a sentence on the borders of Nigeria, even for the hon. Member for Kidderminster (Mr. Nabarro).
    What I said was that if the Nigerians develop their industries they will have urban inflation. They will have denudation of agriculture. They must have consumer goods as a weapon against their own urban inflation. It is no use our thinking that we shall go on exporting those consumer goods for long to Nigeria. The Nigerians must make them themselves. They have their balance of payments problems, too, and in the end we must send machines to them. The planning of British industry in relation to African development must be the planned production of the sort of machines that produce machines and the sort of machines that produce consumer goods. The real needs of Africa—
    Mr. Nabarro: I would not like the hon. Member's allegation that British embassies abroad are shelters of political reaction to go in an entirely unqualified sense during this debate. I wrote to my right hon. Friend the President of the Board of Trade a matter of four or five weeks ago after a lengthy commercial and industrial tour in Western Europe with a special note of commendation on behalf of the commercial staff at no less than three British embassies. One was at Stockholm, the second at Copenhagen and the third in Luxembourg. That was from my own experience. It is quite wrong for the hon. Member to try to tar them all with the same brush.
    Mr. Hale: The hon. Member for Kidderminster is a shocker. I gave way to him as a matter of courtesy. I
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    usually have treated him with courtesy. He made a wholly unjustified attack and said that I tried to tar them all with the same brush. I started by pointing to a brilliant ambassador who was developing trade and said that I wished I saw more like him. The hon. Member then quoted as one of the three the same man who has been transferred to one of the places which he has mentioned. It is this blatant dishonesty of attitude to which I have been referring when the hon. Member was not in the Chamber, this same sort of attitude that one has to score.
    The hon. Member for Macclesfield talked about good relations in employment. How do hon. Members opposite expect to get good relations in the coalmining industry with the hon. Member for Kidderminster popping up and saying what he does time after time? We had the drivel on Friday in the debate on coal—
    Mr. Nabarro: Tuesday, 24th October.
    Mr. Hale: —on Tuesday 24th October, when the hon. Member was making an appeal for good household coal in Kidderminster, Stourbridge and all over that part of the world and, at the same time, making an appeal for permission to import poor quality coal. If the hon. Member knew anything about the coal industry, he would know that, in the main, we do not produce the one without the other and that what he said was a contradiction in terms.
    The hon. Member for Kidderminster then applauded the fact that there was a reduction of employment in the coal industry and said that this was the way to develop matters. Of course, he repudiated the whole policy of the Home Secretary who, on an earlier occasion, talked about doubling the standard of life within a limited number of years.
    Mr. Nabarro Mr. Nabarro rose—
    Mr. Hale: No, I will not give way.
    Mr. Nabarro: The hon. Member cannot have read the OFFICIAL REPORT.
    Mr. Hale: The hon. Member had at least 55 words of irrelevance on my first give-away and I do not propose to risk another.
    The hon. Member for Macclesfield made a sincere statement that faults in

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    industry are far from being on one side only. He suggested that the good employer can get good labour, or, at least, that the bad employer is not likely to get good labour. I happen to notice on the benches opposite the hon. Member for Morecambe and Lonsdale (Mr. de Ferranti), who is a considerable employer in my constituency. The firm with which his name is associated is, I should think, one of the largest employers in my constituency and one of the best respected.
    Most of the hon. Member's employees are members of a trade union that has come in for a fair amount of censure. We have a lot of active Communists in Oldham, some of them very nice and very able men. They put up a candidate against me one year and denounced me as a Right-wing Ernie Bevin devia-tionist. They offered to support me next time, and I said, "If you support me you do me harm. If you had done that last time instead of opposing me you would have lost me the seat." Since then we have had a reasonable understanding.
    The hon. Member for Morecambe and Lonsdale would, I think, confirm two things that are relevant in this matter. The firm is known as good employers. It is known to have rather exceptional privileges which it gives and which are not always to be expected. If a worker at Ferranti's is a member of a local government body they allow him time off to perform his local government duties, and he gets his money made up. A lot of firms in Oldham do not do that. It is a pity. It is the same with workers who are justices of the peace. Ferranti provides decent conditions, a decent canteen. With a militant union —a highly militant union —conscious of its rights, I do not think that far the seventeen years that I have been Member for Oldham there has been anything like a serious stoppage of labour at all.
    What is the result? I must confess that I have always had the view that John Hampden was a bit of a pest. People who are constantly arguing about their rights can be an infernal nuisance. But the result today is that because of the good labour relations in Oldham employers have good workers, and new firms feel that they have come to a place where they can have decent co-
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    operation between workers and employers, a decent sense of understanding and will not have any hostilities in industry. That is contributed to, and I am sure that the hon. Member will say so, by both sides. Possibly it is true to say —I hope it is true to say — that we are to have more expansion of employment in the very near future.
    I am glad to see the Chancellor here because I wanted to make reference to one or two observations of his. In particular, the Chancellor of the Exchequer made a very remarkable statement, I think on 10th January. He was speaking at Liverpool, to the Press as I understand it; certainly there was a large number of Press people there. I quote again from Keesing's. This is 10th January, 1961. These things are set out under a number of heads starting off with a most astonishing statement under the heading, "Causes of concern. The international situation":
    "No one can survey the international scene with much satisfaction."
    This rather recalls the attitude of the virtuous fiance who said: "I have got to break my engagement. I cannot marry that woman. She has been the victim of a savage rape". His friend said, "Good heavens, you don't say so. Who did it?" The virtuous fiance said, "I did".
    Now I am not selecting these quotations. I am giving the sentences under each head from Keesing's just as they are. I should not like to be thought to be selective. Then we get:
    "Of one thing I am certain. We can never be satisfied with staying in the same place."
    Well, of course, it depends where you are. If this was in reference to the Foreign Office one could understand it. The right hon. and learned Gentleman was there a long time.
    Mr. Selwyn Lloyd: The Leader of the Opposition might subscribe to it.
    Mr. Hale: What? I cannot hear.
    Next, the heading is, "Possibilities of Government action." The Pressmen have sharpened their pencils and are all agog waiting for it. He said:
    "You may say, we know all this, we've heard it all before. What we want to know is, what are the Government going to do about it. That is a fair question, although before answering it we must be clear as to what matters are

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    suitable for Government action. In the international field, it is a proper Government responsibility to take action … I do not believe in a complicated system of physical controls. I prefer monetary measures, i.e. restriction on credit and fiscal measures through the Budget, which hold back consumption. In the last Budget my predecessor did some things to restrict consumption, and during his last six months as Chancellor did quite a lot to restrict credit. On the whole these measures have fulfilled their purposes and slowed up the pressure of demand at home. I will relax these measures as and when I can in the interests of the economy as a whole."
    That is one statement of policy which most people will not think very profound or find particularly illuminating, but the Prime Minister made another statement. I cannot remember his exact words. They were said in Oldham in 1959, and to paraphrase and colloquialise them he said, roughly, "You can't shove 40 million nicker down the drain without doing some good for somebody." This was a slightly inaccurate figure, but one expects that. What has it done, anyhow?
    Then we got the present —I hardly know what he is at the moment —Colonial Secretary; he was the President of the Board of Trade a week or so ago —making a statement about Ford's. In point of fact, the debate took place the previous November. The present Colonial Secretary said that it is a jolly good thing to sell out to America. There are great advantages in this.
    If this is so, what on earth is the point of trying to balance the payments at all? Up to now we have always been told that foreign investments provided the basic balancing repayment which goes far to cover the gap, that it was the destruction of foreign investments in the First World War which led to the initiation of this series of crises —if they are a series of crises.
    It is at this stage that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) pops up in debate on the Common Market —I quote him from memory; I have HANSARD here, but I do not think he would suspect me of misinterpretation —and says, "We have a ' stop and go' system. We stop when we are reaching an inflationary situation and we go when we are reaching a high degree of unemployment." Then he added the words, "Carefully timed electorally." Well, I was a little surprised that the Chancellor did not reply to that one. The
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    noble Lord always speaks with integrity and with clarity, and this was as grave an allegation, after all, as could be levelled against anybody. The suggestion behind it is explicit, that measures are taken, and it is very convenient to have an economic crisis half-way through one's period of office.
    Indeed, the Chancellor today in one of the most amazing of his observations, and he has made some amazing ones, described the position like this. He said, "We are getting on like wildfire now. We have reduced the Bank Rate from 7 to 6 per cent." One would have thought that some criminal from beyond our borders had put it up to 7!"We are making progress; we are getting back to where we were before I started." It is surely a rather astonishing state of affairs.
    The right hon. Gentleman the Home Secretary, who told us that we were going to double the standard of living in twenty-five years, and has never told us how, is absent from this debate, but, of course, we are going to restrict consumption to expand the standard of living!
    Then, of course, the Chancellor has got this one. I had forgotten this one. This is the best of all —he says, "So you see, we budget for a surplus. We always budget for a large surplus to reduce the purchasing capacity." Where has the money gone to, because the argument seems to be that all that money is in our pockets somewhere?
    An hon. Member opposite was saying that £15,000 million was missing in the National Debt. He could not find it, he was saying only an hour or two ago. It reminds one of Francois Villon's "Snows of Autumn"—" Ou sont les neiges d'Antan?" What has happened to the surplus? Because the National Debt has gone up every year. Every time we have a surplus in our pockets we owe more money!
    Then the Minister says that having sold Ford's of Dagenham we will join United Europe with Ford's of Detroit having 99 per cent. of the German Ford's so that there can be all sorts of jiggery-pokery and organised local competition, and so on. The Minister said that it was a jolly good thing, and then we find that it leads, as it inevitably must, to an entry in the balance of payments, and the current month's deficit is

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    reduced by that amount. That is what happened to the £100 million and more which came from Detroit for taking over the Ford interests at Dagenham. It now means, of course, that the invisible exports are going the wrong way. A lot of things are going the wrong way.
    Finally, there seems to be a complete lack of efficient control. We have every Minister with his own ideas and recently every Minister has his own alias and alibi and they sleep two in a cell instead of three, and each answers for the other and vice versa, but there is nobody nowadays who is responsible for anything.
    I was told a story the other day, though I am not sure that I believe it. An industrialist said, "I have constantly to ring up Government headquarters"— he was in the advertising business —"and wherever they are, Chequers, or Drumnadrochit or Inverlochy, wherever the Government happen to be at the moment I have to ring them up. On this occasion instead of the normal, civilised, urbane and perhaps rather snooty voice the answer was a cheerful ' Mac, Mac and Mac speaking.' What was I to do? You have to play up on these occasions so I said, ' I want to speak to Mac' and I was told ' He is out to lunch '. I said 'What, at eleven o'clock?' and I was told ' Yes, but he is in South Dakota. President Kennedy sent for him on something urgent'.
    Then I asked to speak to Mac Minor —the Foreign Secretary. The reply was, ' He is on the telephone'. I asked, ' Will he be long?' The voice replied, ' He may be. He is talking to General de Gaulle. He has not said a word yet, but he has been on a long time. He is getting Home sweet Home.' I then asked, ' What about Mac Minimus — the Chancellor?' The voice replied, ' He is up in the attic with a wet towel round his head playing with his regulators.' I asked, ' What's wrong with those? ' and I was told, 'Some will not regulate and some are not regular'."
    My friend was a bit worried and he said, "Who can I speak to then?" The voice replied, "What about me?" "Who are you?" Well, I am the butler here. I do pretty well everything. I clean the carpets. I put reports in pigeon holes and pick up all the bricks Master Marples drops. Only a fortnight
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    ago he made the Atlantic into a one-way street." My friend said, "I frankly did not believe this. I felt like the man in Edgar Allen Poe:
    'Deep into that darkness peering, long I stood there wondering, fearing,
    Doubting, dreaming dreams no mortal ever dared to dream before
    But the silence was unbroken, and the darkness gave no token,
    And the only word there spoken …'"
    And then, my friend said, there was a word. Someone in the distance had left the television set on and the programme had changed and from the set there came a beautiful, pellucid voice like an archangel, somewhere between Enrico Caruso and Adam Faith, talking with all the dignity of a life peeress and all the authority of a retired Chief Whip and saying, repetitively, "Rab washes whiter, Rab washes whiter." I replied, "I know that is true anyhow because Mrs. Jones of Oswaldthwistle says so."
    6.53 p.m.
    Sir Harmar Nicholls: Without any doubt at all, the hon. Member for Oldham, West (Mr. Hale) is a most enlivening speaker. Everybody in the House enjoys his speeches and benefits, except the hon. Member who has to follow him. I had intended to make a most incisive and effective speech, but whatever I say now is bound to fall flat after the hon. Member's speech. It reminds me of the advertisement I saw in America which read, "Annual strawberry tea. Owing to changed conditions, prunes will be served instead."
    The hon. Member has spoken rather more slowly than usual, but his speech is none the worse for that. He had room enough in his old speed in the years gone by for slowing up, but I regret that he has also rather got out of touch, and I was astonished that he of all people had had to go back to 1960 to find a quotation from the Prime Minister to give to the House. That is not up to his old form. It shows that he is out of touch.
    It also shows that the hon. Member is a little out of touch when he refers to the embassies abroad as "shelters for political reactionaries". That charge might have stood some years ago, but I do not think that it can stand up today.

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    It is the exception rather than the rule that one does not find first-class commercial advice in our embassies throughout the world. I hope, therefore, that whilst the hon. Member has slowed down, it does not mean that he will not keep up-to-date so that we may go on enjoying his excellent speeches.
    I very much agree with the hon. Member in his compliments to my hon. Friend the Member for Macclesfield (Sir A. V. Harvey). I hope that my hon. Friend's thoughtful and useful contribution will be heeded by the Treasury Bench. I had hoped to say much of what my hon. Friend said so effectively, with ail the background of experience he has had for many years in industry.
    I should like to comment on one sentence used by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). His contributions are always practical and useful, but on consideration I am certain that he would not wish to stand on record his suggestion that the Viscount Amory was a "stooge" when he was Chancellor. Those of us who served in Ministries with the noble Lord can testify, and I think that this is recognised throughout the House, that if there was one Member of the House who did not ever deserve the title of "stooge" it was the noble Lord. I am sure that the hon. Member for Ashton-under-Lyne would not wish that to stand on record because, after consideration, I do not believe that that would be the (hon. Member's view either.
    I feel a little demoralised after the speech of the hon. Member for Oldham, West. He started by saying that there was something rather unclean about paying compliments to the Government, particularly if one sat on the Government benches, but I must pay a compliment to my right hon. and learned Friend the Chancellor of the Exchequer on one point because I want to criticise him on another point later.
    We all recognise the success —not big enough yet as he himself admitted — that has flowed from his first effort to expand our exports. He said that in the past three-quarters of this year we have seen the adverse balance of trade fall from £64 million to £33 million a month. That is a move in the right direction, and I know that it will be
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    welcomed by everyone in the House who recognises the importance of building our export trade. This is the outstanding matter on the agenda of the country's economy, and we should congratulate the Government on that success so far, at any rate.
    I should like to say how sad I am that the Treasury Bench is still not prepared to look with more sympathy at some form of export incentive. I am convinced that in the end we shall have to come to that. Whilst the export credits guarantee facilities show some effect and exhortations may sometimes produce results, I am certain that at the end of the day it must be made worthwhile in a practical way for the small and medium-sized industrialist to get into the export market. Far too few are playing their part now. I have quoted before, and it has not been denied, the research team report which said that 30 per cent. of our exports are done by 40 firms. When one realises that there are 8,000 members of the F.B.I., it can be seen that there is a great deal of leeway to be made up. I am convinced that it can be made up by the direct implementation of some form of export incentive.
    Perhaps I might say to my right hon. Friend the President of the Board of Trade, whom I should like to congratulate —he has had many congratulations —that we have great hopes of him. We know that he has some practical experience and plenty of vigour; indeed, he has Ministerial experience in the very field about which I am talking. He has been energetic and good as the Minister of State, and now that he is the big white chief in the Department I feel sure that we shall see some worth-while results.
    But I hope that my right hon. Friend will appreciate that we must be prepared to recognise the changed conditions of today. While I can well understand the efforts of the F.B.I. and the Government of the day saying, back in 1938, that we ought to maintain the status quo when our share of world exports was 23–24 per cent. —to have frozen it at that level would have been very satisfactory —our proportion has now fallen to 15–16 per cent., which is much too low. We cannot afford to stand pat on the conditions that we were rightly

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    advocating in 1938. What we have to face now is that many of our competitors —the ones which are really frightening us —have some form or another of export incentive. I believe that we must follow suit. Let us by all means do it through the front door and get the permission of G.A.T.T. Let us have it properly formalised and give proper notice. But the sooner we get down to deciding whether we are going to make it worth while for industrialists to export by giving them tax concessions to meet the extra costs involved in exporting, the better.
    That was the point made by my hon. Friend the Member for Macclesfield. He said that it was an expensive game going into the export market and that if we want the small and medium-sized firms to do it, we must see that they get the money from somewhere to cover the costs. I can think of no better way —because we want the exports —than using the fiscal weapon and giving them tax concessions to encourage them. When we try to encourage firms to go to areas of high unemployment, we give them inducements. When we want the cotton industry to consolidate itself, we spend money to encourage it to do so. We do not merely exhort and leave it all to those concerned. We recognise the practical fact that there is "no taste in nothing."
    I am certain that when we ask people to move from the home market to the export market there must be some definite incentive which can be easily recognised and is worth something to those concerned.
    Viscount Hinchingbrooke: Will my hon. Friend deal with a point which always worries me? There is no special virtue in exporting, surely; if there is a special virtue, it is one which applies equally to firms which avoid importing by manufacturing for the home market. Would he give the incentives that he suggests to people who save imports by manufacturing for the home market, because they are just as virtuous as the others?
    Sir H. Nicholls: If that could be shown to achieve the same object, I would support it. My hon. Friend says that there is no special virtue in exporting, but I believe that there is every virtue in so
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    doing. It is only by exporting that we can have the healthy trade balance that we must have. The reason why I am advocating an export incentive is that I think it can be done simply and in a practical way. But I can think of no practical way of adding to that my hon. Friend's suggestion.
    It is easy to recognise the part of a firm's business which goes into the export market and to distinguish what part of its profits comes from it. The certificate from the accountant who tells a firm what tax it shall pay on its total profits can also show the separation between export and home market business. I concentrate on the export incentive because I believe that this can be achieved in an easy and effective way.
    I now want to read an extract —it was not quoted by the hon. Member for Ashton-under-Lyne —from a Sunday Telegraph article last Sunday because I believe it should be on the record. The contributor said:
    "Last week I was shown authentic documents demonstrating beyond doubt that a Hamburg export merchant has been regularly paying a turn-over tax of 1 per cent, and successfully claiming back 5.8 per cent. from the tax authorities… The success of this and other German measures to help exporters is amply shown in that country's immensely strong balance of payments position… It is clear that this makes nonsense of the repeatedly heard British Ministerial argument that we cannot possibly introduce an export tax incentive of our own, because ' other countries would follow.'"
    It is known that this form of incentive is given in Germany, France, Italy and Australia. I do not believe that we can any longer accept the argument that our introduction of this incentive would mean that we should be opening up for ourselves prospects of having all sorts of competitors.
    I beg my right hon. Friend to look very sympathetically at this point. I ask him to consult the Federation of British Industries and ask it to recognise the altered conditions where our share of world exports has declined from 23 to 16 per cent. I raised this subject in the Budget and economic debate last year, and I make no apology for raising the same arguments now.
    Secondly, I appeal to the Conservative Party not to gain any wrong impressions from the Tory Party Conference at Brighton. I have formed the view that it is being assiduously spread

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    about in some quarters that the Tory Party Conference gave clear support to this country's entry into the Common Market without any question.
    Sir Douglas Glover: Nothing of the sort.
    Sir H. Nicholls: The Chairman of the Party Conference says "Nothing of the sort". This is precisely what I want to underline. The message from the Tory Party Conference was that we were prepared to wait until the negotiations which are now going on had produced sufficient evidence to enable us to make up our minds. I would say that 50 per cent. of the Tory Party are instinctively against the Common Market and the remainder are instinctively for it.
    Mr. Norman Pentland: Fifty per cent.?
    Sir H. Nicholls: Yes, 50 per cent. are instinctively against it and 50 per cent. are instinctively for it. But the British people are natural jurymen and are not prepared to bring in a verdict until they have heard the evidence, particularly when they can see that there is a good chance of the evidence soon being forthcoming. Rather than that the leaders of the Conservative Party should think that they had a blank cheque from the conference to go in without question, I would point out that the message from the conference was no more and no less than that we merely want to give ourselves time to weigh the evidence when the negotiations have produced it and then give our decision.
    I address my third point to the leaders of the two principal parties in the House. The one thing which is on trial today perhaps more than anything else in the domestic field is the standing of Parliament itself. It is the Parliamentary system itself which is on trial. If the exhortations to do with our export trade or anything else are to be given the weight by the country which they ought to have, we ought to have one or two other people in the House who are recognised as leaders by the people. I am not criticising the calibre, standing or ability of the 630 Members of Parliament here now. I think it is fair to say that those who have looked at the House of Commons since the 'twenties
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    will say that the general standard of ability, knowledge and, certainly, industry among Members of Parliament is higher now than it has ever been. There is certainly no criticism of the present membership in what I have to say.
    But when the people of the country think of leaders, they think in terms of people like Lord Fleck, the head of I.C.I., or Lord Nelson, the head of English-Electric, or Lord Rootes, the head of the Rootes Group. On the other side, they think of the great trade union leaders, such as Mr. Cousins and Sir William Tewson. But those people are not in the House. I believe that such leaders ought to be represented in the House of Commons. Their presence in such debates as this would enhance the message that goes out from Parliament. I believe that both sides of the House must use their party machines — because it is the party system under which we work —to ensure that those people are represented here.
    Such people used to be represented here. Going back into the really distant past, Drake and Raleigh were Members of this House. I do not think that they were great Parliamentarians, but their very presence in the House meant that the standing of Parliament was very much higher and the messages going out from it were treated with greater respect.
    By removing the rule against trade union leaders being members of this House and cutting out all the nonsense about a Member of this House not also running business when he knows he can do so, we would make a great contribution. Then we could try to inject new blood into the natural leadership here and I think that some of the messages we send out would be better received in the country.
    Export is the outstanding item on the domestic agendas today. I ask the Government not to have a closed mind on proposals for helping exports.
    Mr. Jack Jones: The hon. Member is always used to stating the facts. Can he tell us what trade union bars its leaders from coming here? There are leaders and general secretaries of trade unions who sit on these benches. Beyond that, the trade union leaders of today have a big job in hand. If they

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    came here they would have to leave the work they are doing in the industrial field. That would act tremendously against the export drive about which the hon. Member is speaking.
    Mr. Speaker: Order. I thought the hon. Baronet was coming to the end of his speech. Had that not been so, I should have been obliged to point out that the debate is limited to the question of adding certain words to the Motion.
    Sir H. Nicholls: I was coming to an end, but in making the comments I made it was certainly with no wish to disparage the excellent trade union hon. Members in this House nor the leaders in the country.
    I think this debate is the most timely one we have had. Unless in this Session of Parliament we can see the excellent trends which the Chancellor has announced today bringing our balance of trade into a healthier state and unless they are brought to satisfactory fruition this year, it will be too late. That is why I hope that both sides of the House can forget the "isms", as the Leader of the Opposition said, and together get down to seeing that we can use our opportunities to really good purpose.
    7.12 p.m.
    Mr. Arthur Holt: I do not disagree with the object which the hon. Member for Peterborough (Sir Harmar Nicholls) elucidated, namely, somehow or other to bring about more exports, not because there is any special merit in them, but merely because we require more to pay for our imports and also to provide far larger sums of capital development in the under-developed parts of the world. I am still mot impressed, however, by any of the arguments I have heard which advocate in some way or other subsidisation of exports.
    I do not think the hon. Member was right about the German rebate being any monetary assistance to German firms. It is only like not having to pay a purchase tax on a taxable article when it is exported. Perhaps the President of the Board of Trade will correct me, but I have looked into this before and, so far as I know, there is no monetary advantage given to the German firm by this so-called 6½ per cent, rebate on their tax. The problem exists whatever we try to
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    do in the way of providing extra monetary incentives for exports. If it is really effective —and there is no point in doing it if it is not —I cannot see how one could then stop other countries following the same kind of practice. That would start a vicious spiral, and I do not see that in the end we would have benefited from the practice. I do not think it is any use stimulating exports in any false and artificial way.
    I wish to address most of my remarks to the question of planning and wages policy. In what I thought in many ways an excellent and wide-ranging speech, if he will not think me presumptious for saying so, I was sorry that the Leader of the Opposition still did not seem to have moved away from many of the thoughts which have been current in the Labour Party for a long time. The difficulty about any comprehensive planning is that if it is to be successful it must not prevent enterprising people from doing things which the consumer wants but which the planner, because of some previous conception about what he wants, thinks do not fit in and so tries to stop them. Surely this is the great argument against licences for building. It is also, surely, the argument which finally demolished the Capital Issues Committee. It is no use trying to develop our thoughts on successful planning along those kind of lines. I was sorry that the Leader of the Opposition raised those ideas again as if they were still of value.
    The great difficulty about discussing this subject in a coherent way is that we are not examining some unsuccessful planning by the Government and saying how we might improve it. We are, in fact, discussing this against a complete absence of any coherent economic policy on the Government's part. It has been the most extraordinary shift from one expedient to another with the crowning fiasco of their decision to support the subsidisation of the Q.3. Then even the business men decided that this was not on and the Government were left in a most embarrassing situation.
    This has gone on for a long time. Before the debate I was looking up some of the details of Government economic policy. The economic position of the country is so perilous that I think people of whatever party would wish the Government of the day to succeed in an

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    economic policy which produced a good steady growth with the people getting the benefit of it and having full employment, steady prices —even, preferably, lower prices —and at last removing inflation. Efforts have been made at various times. The closing words of the Chancellor today were so like the words which were spoken by the present Prime Minister when he was Chancellor of the Exchequer in 1956. A White Paper at that time said that the situation was extremely serious and:
    "The solution lies in self-restraint in making wage claims and fixing profit margins and prices."
    Later that year, on 25th May, the Prime Minister, then Chancellor of the Exchequer, declared:
    "Another round of wage increases could not be repeated without disaster."
    He made an appeal for his price plateau.
    Hon. Members will also remember that as a result of that kind of appeal the engineering employers were encouraged to resist a wage demand which was being made on them at that time and the Government finally ratted on them. This is certainly what many engineering employers think. The usual round of 5 per cent. or 6 per cent. wage increases were given in the early part of 1957. The whole of that cycle was actually a repetition of what had gone on in previous years, even in the first year after this Government were returned, in 1951–52. Throughout the whole of these ten years, although they have varied a bit, wage increases have been roughly 6 per cent. over the whole field. Sometimes they have been more, sometimes less, yet we have not even had a 5 per cent. steady growth throughout the time. Could we possibly have absorbed those wage increases without inflation?
    I feel sure that everybody is agreed about the objective. But how to do it? It is not necessary for us to set up at first a very elaborate and complicated planning organisation. It is necessary to develop a special planning department of the Government, with extremely able people, and the Government should take them not only from the Civil Service but from the professions outside, universities and the Eke, in order to get the most expert group of people possible. They must try to work out a
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    coherent plan roughly on the basis of about 5 per cent. growth each year. If that is done, they provide the information for a council of the type described by the Chancellor of the Exchequer. I understand that in France this council is completely ineffective, and whether it will be any more effective in this country is in doubt. It is most important to get the professional side right first.
    Once this general level of development is decided the Government must get their own actions into line. They cannot go on providing money for capital development in uneconomic nationalised industries. Undoubtedly a lot of money has been wasted in that respect since the war. They must cut out the subsidisation of such things as the Q.3, but they must be very fair and frank with the contracting industries.
    For example, they have not been frank with the cotton textile industry. We have had the redundancy scheme to reduce the size of the industry, with the subsidisation of the purchase of new machinery for the redevelopment of the industry, as it were, but it is all in a climate in which very few people feel that the industry has a prosperous and expanding future unless a highly protected market is provided for it. It appears from what the Government have done so far that they have no intention of providing the cotton industry with a highly protected market, in which case there is no point in either the Government or the cotton industry spending a lot of money on new development.
    It is this kind of frankness to an industry in the position of the cotton industry —and this may apply to other industries such as shipping and tanning, which have been in difficulties recently — which is important. If the Government are prepared to protect them, which I think is very difficult, there may be some future for them, but if not, it is ridiculous for the Government to put money into them and to encourage industry to put money into them beyond that which any firm thinks economically wise.
    Having cleared the decks, as it were, with the Government pursuing an economic policy on capital development and subsidisation which makes sense, they must then also pursue a policy which will ensure that demand is not excessive.
    Sir A. V. Harvey: Is the hon. Member saying that the Government should have done nothing to help the cotton industry in its problems or should have allowed the industry to decay? Does he not agree that by modernising the plant and getting more than one-shift working the industry has at least been given a chance to hold its own with some competitors in high-quality goods?
    Mr. Holt: The hon. Member knows that some parts of the cotton industry are in difficulties again, particularly the spinning section. There were two parts of the redundancy scheme. If the first part —reducing the number of looms and the spindlage —were right, then before the Government decided to put money into building up the industry again and to encourage the employers to do likewise, they should have taken some view about the size of the market in which that industry could operate. That market is shrinking all the time, and the chance of the Government ever having to meet the responsibilities of providing money for machinery is not likely to come about, because that investment will not be made by many of the mills. Already some money has been wasted. But I do not wish to spend too much time on this subject.
    Having followed an economic policy which is designed to cut out uneconomic activities, the Government must next see that they follow a monetary policy which does not encourage an excessively high level of demand. A wages policy or planning is no substitution for this. Otherwise, all that will happen is that they will try to keep a sensible wages policy but there will be an excessive demand and employers will invite workers to go from one industry to another by offering rates higher than those already agreed.
    It is no good having an overall plan for economic growth unless side by side there is a wages policy which fits it. Where the Government have made a mistake, due largely to not taking action early enough, is that they have failed to appreciate the importance of not being involved in trying to damage, or break confidence in, negotiating machinery. They must keep their two jobs quite separate. The job of conciliation in the Ministry of Labour must be maintained,
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    and all the Minister's efforts must be used to recover from the damage already done and to build up again confidence in negotiating machinery and the fairness of the conciliation machinery in the Ministry of Labour. That must be one part of Government policy.
    The other must be the activities of the new planning department, whose job it must be to put before everybody who is concerned with wages and salaries their arguments about what they think the economy can stand. This must be a question of argument and of convincing people. There is no future in arbitrary action by the Government on this score. The views and advice of the planning department must be available to anyone conducting a court of inquiry or acting as arbitrator and in negotiations in the first place between employers and trade unions. These two jobs of the Ministry of Labour and the planning department must be kept clearly distinct. The object of this policy must be to build up a climate in which reason will prevail —and I do not see why this should be a hopeless objective in a democracy. If we cannot get reason to prevail, our democracy itself is at fault. It can prevail against the brute force which exists, and is used, in negotiating by groups of people who are in a strong position to hold the community to ransom.
    We must recognise that we can move out of the jungle of wage negotiation conducted on the basis of strong unions in a powerful position and strong employers in an equally powerful position only by pursuing a wages policy in which the facts of the situation are placed clearly before both parties and both agree to act on the figures. This will mean a major change of attitude, not only on the part of trade union leaders but also on the part of employers. No one can complain in present circumstances about a trade union leader going out for all that he can get. Up to now that has been his job. His own men would have no confidence in him if he did not try to do that. But in a climate of the type I have described he would have a quite different purpose. Once the educational process had gone far enough I do not see any reason why it should not be acceptable.
    This leaves one other important part of such a policy. The policy will not

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    succeed unless we are ready to accept by and large the present income structure in the country. The country and the Chancellor of the Exchequer must be prepared to accept it. It is no use setting up elaborate negotiating machinery for wages and asking men to act on the basis of reason and what the economy can stand —they are dealing with gross income —if the Chancellor of the Exchequer comes along at Budget time, when he is dealing with what amounts to net income, and suddenly completely changes the relationship between the incomes of executives and people on shop floors or between people in the lower income group and people in the medium income group, such as more highly skilled operatives. It just does not make sense.
    If we intend seriously to try to pursue a wages policy based on people receiving the same wage for working in similar conditions and with similar skills in any part of the country and if we want to achieve a proper relationship between the semi-skilled, the skilled and higher executives, it is no use the Chancellor of the Exchequer coming to the House of Commons on Budget Day and upsetting the whole relationship by making discriminatory tax alterations. Whether the House and the country are prepared to accept the present income structure is another question. Perhaps people will see such advantages in at last having a sane wages policy under a steady development plan that they will be prepared to accept it.
    The initiative is entirely in the hands of the Government. It is astounding how little and how rarely Governments use their tremendous power. If a Government produce a coherent policy, which makes sense and looks fair, for the steady regular development of the economy, and if they attempt to bring in a fair wages policy, I have not the slightest doubt that if they educate people properly they will win and get support for their policy, however much people in some sections of the economy object to it. So often Governments appear to have no confidence in their own ideas and prefer to let things drift. If we let things drift now we shall head for disaster.
    7.35 p.m.
    Sir Richard Glyn: It is a great pleasure for me to follow the hon. Member for Bolton, West (Mr. Holt), because I am in agreement with a number of his remarks. I wish he had said a little more about the Liberal Party's view on wages policy. He started by saying that he would say something about it, but he ended by saying that it should be fair. We all agree with that. I gather that he thought that it should be promoted by education, to use his word, and by persuasion and should be achieved by agreement. No one can disagree with those sentiments. So far as I can ascertain, in those countries where a successful wages policy has been worked out in the post-war period —a good example is in the shipyards in Sweden —there it has been done by agreement. It seems to work well. It would be of great benefit to some of our industries if a similar arrangement came into being here. However, this is not a subject on which I am particularly qualified to speak. It has been covered thoroughly by previous speakers.
    I now want to do something which has not been done recently. I want to refer to the words of the Amendment. I am very interested to note that the Amendment is in favour of
    "achieving sustained expansion of production without inflation".
    The word "inflation" has not been mentioned very much in the debate, although several hon. Members, including the hon. Member for Bolton, West, have spoken about prices. He very properly said that they should be kept steady, and with that sentiment everyone agrees. The Leader of the Opposition twice said that high prices made it very much harder to promote exports.
    Rising prices are at the bottom of a good deal of this country's troubles and I am convinced that they are at the bottom of a great deal of the injustice between different sections of the community, which is referred to in the last line of the Amendment. I hope that the right hon. Member for Huyton (Mr. H. Wilson) will deal with this aspect very fully when he winds up, because this sentiment has not been referred to by any Opposition Member.

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    I come from a constituency in an area where wages and incomes generally are very low. Four years ago when the survey of wage levels throughout Britain was held, Dorset and the surrounding counties which had little industry came out extremely low in the scale. They were very much below the national average and below the average of any similar area. That position still obtains. In some areas the minimum agricultural wage is a very low wage and farmers have to pay well above it and provide good accommodation to attract workers, but in other rural areas, such as parts of my constituency, there are people working at wage rates below the minimum agricultural wage rates. I mean people working in shops —both men and women —and in some cases working in offices.
    I will give only one example. Not long ago I was going into the case of a constituent whose employer —a firm —went into liquidation. This man, who was a milk roundsman, was working long hours for £7 15s. a week, which was rather less, in view of his family and rent, than he could have got from Public Assistance. He had been in the same job for ten years. When he took it in 1948 it was a very good job. He then received £6 10s., which was good money in those days and well above both the agricultural wage and the National Assistance rate. In those ten years he was overtaken not only by the agricultural wage but also by the National Assistance rate, because his wages had risen by only 25s. At the end of the ten years his employer went "bust" and the firm that followed found it impossible to continue to deliver milk in those areas. It was not any longer an economic possibility and many of my constituents had to fetch their milk, and this state of affairs still continues.
    I mention this case merely to show some of the hardship caused in rural areas by rising prices. The House hears much about the problems and hardships caused by unemployment in industrial areas, and we are all very sympathetic. However, I do not believe that hon. Members who represent industrial areas are fully aware of the great hardships associated with employment at low wages which are overtaken by rising
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    prices. That is the difficulty with which we so often have to contend.
    These workers who are doing a good job which is important to the community are being overtaken by rising prices, because the job they are doing will not carry anything like the wage increases which are associated with industrial areas and industrial jobs.
    This raises the question of justice referred to at the end of the Amendment, and I hope that the right hon. Member for Huyton will deal with this aspect of the matter which is very important in my constituency and in many other rural areas throughout the country.
    I think that this problem is shown in sharp relief if we think of ourselves not so much as receivers of incomes but as consumers of goods, because that is where the pinch comes. We are all consumers of goods and are affected when prices rise. Those whose incomes also rise do not notice the pinch so much, but those whose incomes rise slowly or not at all are severely pinched by this constant increase in prices which, because of inflation, has been going on since the end of the war. I hope that we will hear something about this from the Opposition speakers in support of the Amendment which, as I said, refers particularly to this problem.
    The problem is worse in some areas, such as the one I know, but it extends everywhere. There is a distinction between two different groups of households in Britain. There are the fortunate households whose incomes are going up faster than prices and who have the pleasant task of deciding each year on what new thing they will go in for —a television set if they have not got one, but most of them have, a new car, or a holiday abroad —but the other group has a different choice to make. People in that group have the unpleasant necessity of deciding year by year what they will give up —which economy they will make after last year's economy, which in turn followed the economy of the year before that. They are pinched by this inflation referred to in the Amendment, but not yet referred to in speeches from the benches opposite. This inflation causes not only great difficulty for the export trade, which is very important, but an enormous amount of

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    hardship to little people; people who are entitled to as much justice as anyone else. In my submission they are not at present getting it, partly because their difficulties are not sufficiently understood or sufficiently widely known.
    How can we ensure justice for these little people? This brings us to a crucial difficulty due to others not understanding their difficulties. I do not think that this aspect is sufficiently widely appreciated. We must face the fact that we now have perfectly democratic procedures which are used in wage negotiations without a thought of harming anybody but which in fact have the effect of forcing up prices and injuring these less fortunate under-privileged households. This point was, I think, covered by the hon. Member for Bolton, West when he spoke about the necessity for education.
    I did my best to present this problem in a letter which The Times published last month under the heading, "Consider the consumer". It was the longest letter I have ever had published, but I will read only a couple of paragraphs from it to explain the difficulty. I wrote:
    "No one questions the rights of employees to withhold their labour, nor the duty of Trades Union leaders to obtain the best possible terms for those they represent, but is there any justification for exercising these rights and duties without regard of the effect on the rest of the community?
    The Trade Unions achieved their privileged position at a time when wage and salary increases normally came out of profits, so that such increases were not inflationary, but merely transferred purchasing power from one group of people to another. For this reason, most Trades Unionists maintain that wage and salary negotiations concern only themselves and their employers. In modern conditions, however, wage and salary increases tend to be passed on to the consumers in the form of higher prices, fares, etc., because modern profit margins are incapable of absorbing more than a small proportion of the wage and salary increases agreed to year after year."
    I then set out the difference, as I saw it, between the fortunate households whose incomes were going up faster than prices, and the unfortunate consumers whose incomes were going up slower, or not at all, and concluded by saying:
    "In these circumstances, one may inquire of all concerned: ' Are these millions of less fortunate consumers to be written off as socially and economically, expendable merely because they are not organised for "collective bargaining"?'"
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    I then quoted from the Daily Mirror, which is not a strong Right-wing paper. I said:
    "Walter Reuther, the American Trades Union leader, told the British Trades Union Congress in 1957 that 'wage increases which result in price increases are wrong because they rob the customer.'"
    Those were his words. They are strong words, but I think they convey the idea, and I think that there is a great deal in them.
    Since 1957 millions of consumers have been adversely affected by these wage and salary increases which have put up prices. That is the difficulty. I do not say that the people who received them were not entitled to some increases but these increases were not balanced by production and were therefore inflationary and caused hardship.
    In a democracy I do not see how this difficulty can be got over other than by agreement and understanding, but if we are to do this we must promote understanding and knowledge of the problems, and a knowledge of the consequences which an action which seems logical and fair in an industrial area may have on a rural area where wages do not go up at the same rate. That is the problem we are up against, and it is not an easy one to deal with.
    I hope that I have raised this fairly and squarely, and I hope that the right hon. Gentleman who winds up for the Opposition will deal with those points in the Amendment which refer to the necessity for production without inflation and the necessity for justice for all sections of our community, because I believe that if hon. Gentlemen opposite grasp this nettle and use their undoubted influence to get this problem more widely understood we shall have much more chance of reducing these inflationary demands to the level of production and thereby avoid inflation, help our exports, and cut out a great deal of hardship for the less privileged families.
    7.49 p.m.
    Mr. William Stones: I know that a number of other hon. Members wish to take part in this debate. I shall therefore not take up time by attempting to deal specifically with arguments which have been adduced by hon. Gentlemen opposite, but I hope to deal in a general way with some of them.

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    I am interested in those parts of the Gracious Speech which refer to the proposals for maintaining a sound economy, overseas trade and the balance of payments.
    Similar statements appeared a year ago in the Gracious Speech. I do not complain about the similarity of the economic proposals in the two Speeches. In themselves they are quite good and no one could quarrel with them, because it is essential that we should seek to maintain a sound economy, high and stable employment, stability of prices and the balance of payments. The Ministers responsible for the preparation of the Queen's Speech are to be commended on their use of laudable words, but words are not enough.
    Despite the Chancellor's speech this afternoon, I am still quite sceptical about the ability of the Government and the responsible Ministers to give effect to those proposals in the Gracious Speech. My scepticism arises from certain facts that I believe will be quite readily understood. I know that the House does not like to be bored with a lot of statistics, but I must point out that in not one single year since the Tory Government took over has our national industrial production increased at a rate comparable with that of the six countries which form the European Economic Community. It has not even kept pace with that of the rest of the countries of the European Free Trade Association.
    Our share of world trade has gone down. Cmnd. 1506 shows that despite the fact that there has been some improvement in the balance of payments, in the first half of this year we were down by £83 million. These figures take into account both visible and invisible trade. It is very alarming to learn that our invisible trading, which in the past has helped us in no small measure to maintain our balance of payments, has fallen from £285 million in 1958 to £59 million in 1960 and to £25 million in the first half of 1961.
    These facts show quite clearly that we are seriously lagging behind other industrial nations in our share of world trade and in our industrial production. Tory spokesmen, of course, are putting forward the usual excuses for failure to keep in step with our major overseas competitors.
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    They mention high wages and strikes-official and unofficial. The cost of the Welfare State sometimes comes into their picture, as does the lack of incentives to industrialists because of high taxation.
    The facts are these. In certain competing countries, wages are increasing even more rapidly than in the United Kingdom. Those countries are catching up with our standards, and, in some cases, even surpassing them. As to strike action, the Prime Minister himself had to admit some twelve months ago that our record was comparable with that of any other country except Western Germany.
    We are told by the political and economic planning people that there is no evidence whatsoever to show that the Welfare State cost has had any significant effect on our economic problems. Neither is it true that the total amount of taxation expressed as a proportion of our national income is higher than that of any competing countries. In Western Germany, taxation accounts for 34 per cent. of the total national income; it accounts for slightly less than 30 per cent. here, and both France and Sweden are ahead of us in this respect.
    It might be said by advocates of our entry into the Common Market that the Six have advanced more rapidly than we have because of the Common Market itself. Again, the facts are that by far the greatest increase in world trading and industrial production occurred in the countries of the Six between 1950 and 1958, before the Common Market came into operation.
    The responsibility for the failure to measure up economically lies on the shoulders of the Government and of our industrialists. It lies with the Government for their doctrinaire refusal to plan our economy. In the time at my disposal I shall not start to justify planning, but I have here a broadsheet, issued by the Central Office of Information, showing conclusively that planning was very successful in the years following the war. It was successful then; it could be equally successful now. The industrialists can be blamed for their exploitation of a booming home market and a consequentially lesser drive in the export markets. It seems to them to be more profitable to deal at home than abroad.

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    I do not often quote from the Press, but I should like now to quote from an article in the Guardian on 19th October, dealing with German shipbuilding firms. It states:
    "In the last few months some German shipbuilding firms —those not associated with the steel industry —have been trying to purchase steel plates and sections in Britain where plates at any rate are up to 10 per cent. cheaper. They have come up against an unexpected difficulty. While they were able to place orders for sections, British steel companies were reluctant to sell any plates to Germany. It appears that there is a gentleman's agreement between British and German plate producers to leave each other's home markets alone."
    I believe that the Government are at last beginning to recognise that the remedial measures adopted in the last ten years to deal with recurring crises are merely temporary, and quite ineffective in the long run. The credit squeeze and high Bank Rate have been mentioned. Cutting back investment in industry may help slightly and temporarily, but, in the long run, it reduces our power to compete in the world markets. The cost of high Bank Rate to industry has been specifically mentioned today, but there is also its cost to the Government, both internally and on the foreign exchanges —not to mention higher cost to local authorities.
    The credit squeeze and the hire-purchase restrictions exercise a measure of restraint on home demand, but they do not release goods for export. Industries are running below capacity as a result of falling home demand. As a result, costs of production have gone up, again making it less possible for us to compete on favourable terms in the world markets. Further, the poor prospects in the home market have failed to attract investors. The whole thing simply cannot materially affect invisible earnings. These things actually reduce output and make matters much more difficult.
    I do not profess to be an expert economist, but when prices of imports are down and those of exports are up; when prices of primary products have fallen since 1951, and the prices of manufactured goods have gone up —-and I am told that such a situation is very favourable to a great manufacturing country like ours —I wonder why the United Kingdom cannot keep pace with other countries. How in the world can we expect to give effect to the proposals for economic advance contained in the Gracious Speech in the
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    face of facts which seem to me to indicate an inability on the part of the Government to do so?
    I read in the Press on Sunday that the Government intend to make drastic cuts in spending at home and abroad. No one will complain if that saving is effective as long as it is done without a corresponding cut in certain services. I think, in particular, of services designed to bring about more friendly relations with other countries which are likely to boost our exports.
    The Government should do everything possible to make available to our industralists information on other services that are likely to be of use to them in their efforts to regain and retain markets abroad. That has already been mentioned this afternoon. The measures to be adopted and provided are controversial, but, nevertheless, whatever is being done in that direction, I believe that the Government should endeavour to do even more. I believe, too, that the Government, if they are to give effect to the proposals, should give every encouragement to industrialists and investors to invest in the United Kingdom rather than in countries outside the Commonwealth. To do this there should be greater differentiation between the taxation on undistributed profits and on distributed profits where the investment of the undistributed profits takes place at home.
    It follows that in a capitalist society the profit motive is a very decisive factor. Industrialists and merchants will invest and manufacture and trade in industries which are the more profitable and which give a speedier and greater return on capital investment. Not all of them will take into account the economic welfare of the nation as a whole. I am not accusing all industrialists and capitalists of profit making irrespective of the good of the nation. When one reads of the shipbuilding abroad on British orders and the clamour for cheaper fuel, oil, methane and even coal from the United States and other countries without regard to our indigenous resources of coal, I am amazed at what appears to me to be an entire lack of regard for the nation's welfare.
    If we are to expand our economy and overseas trade and balance our trade

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    figures, we cannot rely on exhortations and appeals for balanced production, for restraint of importation of the less essential goods. Likewise, if we are to increase our production of goods for export and make a greater drive for overseas markets, exhortations and appeals will not bring about the desired results. There must be some measure of both physical and monetary control. I believe this is essential to the planning of our national economy.
    The economic planning council, which the Government propose to set up, will be absolutely futile, in my opinion, without such control. It should be made possible for credit to be given to the less efficient firms of this country dealing with goods for export to replace obsolete plant, because quite often it is the inefficient firms that are going along with obsolete plant. Credit should be given to them to replace such obsolete plant and to become more efficient. On the other hand, if credits are for less essential projects, they should be refused. It may be necessary to restrict the import of certain commodities, but I cannot see how this can be done without giving the proposed economic planning council these powers. These proposals will not meet with the approval of certain hon. Members opposite, but I believe them to be necessary.
    I turn to another paragraph in the Gracious Speech which tells us:
    "My Minister will continue to seek the co-operation of both sides industry in the better co-ordination of the national effort with a view to promoting faster economic growth …"
    Again, I regard this as quite laudable. But I tell the Government, in all sincerity, that if they follow up their present policy of wage pauses, interfering with the conciliation machinery and with arbitration to the detriment of the wage earners in industry, in administration and in the social services and, at the same time, make no effort to ensure equal sacrifices all round, they will again be doomed to failure. If the Government desire cooperation with the workers and there has to be sacrifice, there must be equality of sacrifice. Our trade unions —I speak as a trade unionist in constant touch with the trade unions at home —believe that, in general, the workers are of the opinion that they are the first that have to make sacrifices in an economic crisis and the
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    last to profit from a booming economy. They see the increased incomes from rents, interest, dividends, capital gains and particularly from land speculation without restraint while they are being asked to sacrifice in the best interests of the nation. In the face of this very deep feeling —and I assure the House that there is very deep feeling about it —how can the Government expect the necessary co-operation?
    We on this side of the House believe, as do hon. Members opposite, that we simply cannot go on spending more than we earn as a nation. We know that constant chasing after higher wages and better conditions without increased productivity will benefit nobody in the long run. There may well have to be restraint if we are to get out of the mess which the Tory Government have got us into, but let those who can afford the most make the greatest sacrifices and those who can afford the least make the lesser sacrifices. If the Government are sincere in their proposals as contained in the Gracious Speech, I ask them to consider what I have said. I have said this not as an expert but as a layman, but I believe that I am expressing here the thoughts and desires of millions of people throughout the country.
    8.9 p.m.
    Mr. R. W. Elliott: I am very pleased to follow the hon. Member for Consett (Mr. Stones) who has spoken with his usual sincerity and with a great deal of common sense. I agree with many of the comments he made. He and I cope from the same part of the country, the north-east of England, which had a great deal of unemployment in other days, so I share his desire for a lasting high level of employment such as we have at this time.
    I should like to suggest to him that the most sensible thing he said, and it has been said already today on both sides of the House, is that we cannot go on spending more than we earn and that restraint is necessary. I would, therefore, take issue with him in his criticism of the wage pause, which has been given such publicity, in that it is designed to cure the particular ill of spending more than we earn. It is far from the desire of this Government or this Chancellor or this party to interfere

    895
    with established wage negotiating machinery. It is merely a pause which is needed in order that production can catch up with expenditure. As to the point made by the hon. Member for Consett about equality of sacrifices, I agree wholeheartedly that we want equality of sacrifice, but it is just not true to say that our Surtax concession is in any way against the interest of equality of sacrifice.
    My right hon. and learned Friend today quoted from the Daily Herald which stated so wisely in a leader some time ago that our able and enterprising young men badly needed to be encouraged, that they were the last to be encouraged and, indeed, if they had not been they would have left this nation, to its detriment.
    I also agree with the hon. Member for Consett that exhortation is not enough, but I would suggest to him that exhortation has been somewhat successful in connection with our need for increased exports. The fact is that industry, both large and small, is realising that we must export more if we are to maintain and increase our standard of living. Perhaps this has not got through to the population as a whole, but I suggest that it is getting through to industry itself.
    During the summer Recess I took an opportunity to visit firms on Tyneside, which the hon. Member for Consett knows as well as I do, engaged in the export business. I tried to find out what industry was thinking about the need to increase our exports. I found, wherever I went, that whatever difficulties are being experienced with exports, there was a general appreciation of the national and regional organisation of the Board of Trade. The export services branch and the regional controllers are playing a valuable and most energetic part in giving advice, encouragement and assistance to industry, large and small, on Tyneside and, I have no doubt, throughout the country.
    I was assured by Tyneside industrialists that in the markets of the world our trade commissioners and our commercial diplomatic officers are forming a very much appreciated network. Difficulties being experienced by export-
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    ing firms varied, but were automatically greater with the smaller firms. The larger firm, with its extensive reserves and larger turn-over, is obviously better able to meet keen competition.
    I would say in answer to a great deal of pessimism expressed on the other side of the House, and occasionally on this side, too, that I found in the ranks of those on Tyneside engaged in exports a great deal of enthusiasm and pride of achievement; and those very valuable men in our economy today, the export managers of the larger firms, had a most refreshing confidence. I was told of new markets, of others extended and of many fresh fields to conquer. It is very encouraging to realise that there are many fresh fields to conquer for our manufacturing industry in particular. For so many of our products there are immeasurable opportunities, but the problems facing the exporting firms, and in particular the small exporters, are fairly constant and they are almost entirely financial.
    To establish what was described to me as close contact representation abroad costs a lot of money. Exporting is expensive. To get this contact absorbs an abnormally high percentage of profits from sales and represents a very heavy initial expense. I found, unfortunately, that so many small firms were deterred by this initial expense from exporting at all. The main expenses of the small exporter seem to be commission to foreign agents. Also there are customs duties, transport and packing charges, storage, display and advertising, and the heavy cost of the export surveys. I am aware that the export surveys are assisted by the Export Credits Guarantee Department, but I would suggest that more publicity might be given with advantage to this fact and that we might well consider an extension of assistance to the actual export survey.
    As has been said so many times during the debate, it is difficult to locate the point at which capital assistance is justified in exports. But I agree with a great deal of what my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) said. After talking during the past two months to a great number of people engaged in exporting, my opinion is that we need to give some

    897
    form of tax incentive. It is very necessary with all those engaged in exporting, but particularly with the smaller firms. I can assure my right hon. and learned Friend that the exporter on Tyneside is very quick to emphasise the advantages of his European competitors in this respect.
    If one presents the case against export assistance by any form of taxation easement by stating the unfair credit position of the component manufacturer, the direct exporter very quickly emphasises that the component manufacturer has nothing like the risk in his business that the direct exporter encounters. He has none of the export risks and expense. If one argues on the international agreement plane, which my right hon. and learned Friend mentioned this afternoon, the direct exporter quickly indicates quite a number of countries which are signatories to G.A.T.T. and which are at this time nevertheless managing to give very reasonable preferential conditions to their exporters.
    I found considerable support for the provision by the Government of trade centres to assist the smaller exporter. Such centres, if set up in strategic positions, particularly in Europe, could provide office, conference and information services. They could provide a great deal of encouragement to the smaller exporter and could do a great deal to reduce costs and to make the extension of our markets considerably less frightening. A pool of interpreters, typists and banking facilities could be of great assistance. It is obvious that to obtain the premises necessary for these centres would be extremely difficult in most cases. Location, getting somewhere within reasonable access to railways, airports and general transport facilities would present difficulties, but I should like the possibilities here to be considered. I believe that the Government should also consider extending the commercial and information departments of some of our embassies. On this point
    I disagree with the hon. Member for Oldham, West (Mr. Hale) in his criticism. In talking to exporters on Tyneside I found that, over and over again, they commended most warmly the information and commercial departments of our embassies, particularly, in Europe.
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    A further possibility for the smaller exporting firm is the formation of group sales organisations. Here, so far as I can see, there is great scope and considerable possibility of saving of costs. We seem to duplicate all forms of production. We seem to over-capitalise particular forms of production. In such things as advertising I am sure that a great deal could be co-ordinated. Exporting, especially for the smaller firms, is highly expensive, and I should like the Government further to consider giving as much encouragement as they can to the formation of such groups.
    A short while ago in Newcastle-upon-Tyne we held "Norway Week" when a trade delegation, led by King Olav himself and supported by cultural organisations, visited our city. This week did a great deal to further trade and friendship between our two countries. Such organised visits have immense possibilities and I commend this particular visit, which was initiated by the trading organisations of the Tyne.
    I am rather more optimistic than many hon. Members who have spoken today. I see considerable possibilities of expanding our export trade, but the Government must take a lead, must give more assistance than at present to assist the coordination of the efforts of smaller firms. The enthusiasm of those involved is immense. Everyone involved in the export trade with whom I talked looks forward to exploiting the very real possibilities which are before us in the world today. I look forward, in this coming Session of Parliament, to ever greater Government encouragement for this essential endeavour.
    8.22 p.m.
    Mr. Norman Pentland: At the beginning of his speech, the hon. Gentleman the Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott) spoke of the need for wage restraint and of how he was fully in support of the Government's pay pause. I have always said that if any Government expected the workers to indulge in wage restraint or pay pauses, that Government must first of all set an example. I will illustrate how, in my view, this Government have not set that example.
    I wish to concentrate my remarks on matters affecting the industrial scene, and

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    in this context I must quote a passage from the Gracious Speech which was quoted by my hon. Friend the Member for Consett (Mr. Stones). It reads:
    My Ministers will continue to seek the cooperation of both sides of industry in the better co-ordination of the national effort with a view to promoting faster economic growth, while maintaining stability in prices and a high and stable level of employment.
    The line in that passage which intrigues me is:
    "My Ministers will continue to seek the cooperation of both sides of industry …"
    I realise that this is a time-honoured formula for the Gracious Speech, but the operative word so far as I am concerned is "continue". What will they continue? What direction will the Government give? It is in the direction that probably the answer lies. I mention this passage because we have had no indication from the Chancellor today that their policies are in any way different from what my right hon. Friend the Leader of the Opposition said was not a change in anything substantial at all. Nothing has been forthcoming in that direction.
    I assume from the Chancellor's speech today that the Government wish to imply that their policies over the past ten years have encouraged first-class labour relationships. Indeed, the Chancellor said that he was delighted with the success of Tory policies over those years. More important, he declared that the Government wished to imply by the word "continue" that the economic policies which they have implemented in the past have been policies which have offered equal opportunities for equal demands from both shareholders and workers alike.
    We all know that nothing could be further from the truth, because time and again my hon. Friends have asked the Government, "How can one expect to have a free-for-all in profits and divi-dents and at the same time not expect a free-for-all in wages and salaries?" That has been put time and again, but to no avail.
    If the Government believe that the policies they have introduced over the years have offered equal opportunities to workers and shareholders alike, we are entitled to look back over the years. In my view, if any Government gets itself into economic difficulties —as this
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    one has done —and seeks the co-operation and sacrifice of the workers, the workers are entitled to judge the Government against the background of events leading up to the economic difficulties.
    I need not go far back. In 1958 wage and salary payments, in money terms, rose by only 3 per cent. or 7d. in the £. Indeed, the earnings of the manual workers rose barely 2 per cent. —only 4d. in the £. Meanwhile, rent, interest and dividend rates, even before tax, rose by 9 per cent. —or 1s. 9d. in the £, and share prices in 1958 rose by 25 per cent. In 1959 wages and salaries rose by 3½ per cent. —or 8d. in the £ —dividends before tax went up by 13 per cent. —2s. 7d. in the £ —and undistributed profits went up by 19 per cent. —3s. 10d. in the £.
    The evidence is there, and if hon. Gentlemen opposite care to go into the Library they can find the figures for themselves. The evidence is there to prove that in 1960 the rise in profits and dividends jumped quicker than before and dividends were rising four times faster than wages and salaries. So one can go on, because this is the familiar pattern which we have seen with this Government.
    I have quoted these figures because an hon. Member referred earlier to the former Chancellor of the Exchequer, Lord Amory, who was always presented by the Tory Party as being a fair-minded and sympathetic man. I have no doubt that he wanted to be that kind of man, and there is also no doubt that he was more sympathetic to shareholders than he was to workers. In the 1958 Budget —his Budget —companies got a tax bonus of £16 million a year lower Profits Tax and £23 million a year in higher depreciation allowances. They are crying out for this. Industrialists on the opposite side of the House are crying out for these very allowances.
    In 1959 £229 million was remitted in Income Tax, and again it can be proved that more than half of this went to those receiving dividends rather than to those earning wages and salaries. Therefore, every worker in the country fully realises that these concessions have been given year after year. In fact, we know full well that the whole objective of this Government's policy has been to shift back the country's wealth to the shareholders and profit earners and away from

    901
    the wage earners and salaried workers. That has been the whole objective of the Government's policy right through.
    Mr. J. Harvey Mr. J. Harvey rose—
    Mr. Pentland: Does anyone on the Government benches think that the workers of this country do not realise this? Does anyone think that the trade unionists in this country have not at some time or other had their attention drawn to the failure of the financial policy of the Government?
    Mr. Harvey: They still vote for us.
    Mr. Pentland: Come on.
    Mr. Harvey: Is the hon. Gentleman seriously arguing that the average worker in this country is worse off today as a result of the Government's policy?
    Mrs. Harriet Slater: Yes.
    Mr. Pentland: If the hon. Member for Walthamstow, East (Mr. J. Harvey) had been in the Chamber a short while ago, he would have heard one of his own hon. Friends complaining that a lower-paid worker in his constituency had not had a rise for, I think it was, five or six years. The hon. Gentleman was complaining that in ten years such workers had had a rise of only 25s.
    Mr. Harvey: That is the exception.
    Mr. Pentland: The hon. Member said that it was the agricultural workers.
    Mr. R. W. Elliott: Will the hon. Gentleman give way?
    Mr. Pentland: No.
    I know full well that it could be argued by right hon. and hon. Members opposite, "We have heard all this before. This is where we came in. So what are we to do about it? What is the T.U.C. to do about it?" That could be said by hon. Gentlemen opposite, but the simple answer is: what are the Government going to do about it themselves? At present they have given no indication or lead to the trade union movement of the country. It should be remembered that while the Opposition has continually tried to warn the Government that their economic policy, in the final analysis, would lead to the situation which we have today, the trade union movement has always said
    902
    when we have had Tory Governments that if the Government were prepared to alter their negative and unequal economic policies which have characterised their approach in the past, the movement would co-operate with the Government. But Tory Government have not been prepared to do this and that is why the T.U.C. cannot trust the present Government. It has never been able to trust Tory Governments in the past and, as a result of Government policy over the years, it finds itself in a position today where it cannot trust the present Tory Government.
    What amazes me is that the Chancellor fails to realise that his new policy or austerity programme —call it what we may —debars the trade union movement from going to the workers and saying, "Now is the time for us to co-operate with the Government." These policies leave the trade union movement no alternative. How in the world can the Chancellor or the Government expect the workers meekly to accept the impositions which the right hon. and learned Gentleman has imposed upon them over the past four years? Do not they realise that if the trade union movement were to accept the pay pause in present conditions, all it would be doing would be giving an invitation to the Government to carry on as before with their stupid economic policies once the present difficulties had been temporarily overcome? Nothing that has been said today from the Government or by the Chancellor can alter that fact. The sooner the Government face these facts and realise how the trade union movement is placed and how it is committed to the membership to fight against the policy being implemented by the Government, the better it will be for the Government and for the country.
    I wish finally to turn to a problem affecting my own part of the country, the North-East. I thought that the hon. Member for Newcastle-upon-Tyne, North would refer to this problem—
    Mr. Charles Grey: He is not interested.
    Mr. Pentland: Maybe he is not interested, I do not know.
    It also states in the Gracious Speech that the Government will seek to maintain a high and stable level of employment.

    903
    I was most disappointed to note that in the Gracious Speech there was no indication of any new thinking on the part of the Government as to how they would speed up the development of new industries in areas which continue to have a high and persistent rate of unemployment. The Prime Minister, in opening the debate on the Gracious Speech last Tuesday, seemed to be highly satisfied with the unemployment position. He spoke as though there were no black spots throughout the whole of Britain. We must therefore assume that the right hon. Gentleman was satisfied that the Local Employment Act was working satisfactorily and was overcoming all the problems and difficulties in the areas about which I am speaking. I cannot imagine that any hon. Member on this side is satisfied with the progress which has been made since this Act came into force, particularly those of us who come from regions which have a high and persistent rate of unemployment.
    When the Bill which became the Local Employment Act was introduced we were led to believe that it would not only deal with the present unemployment situation, but also anticipate future unemployment. It is having very little impression on the existing unemployment situation in the North-East. Nothing has been forthcoming to prove that eventually it will solve the long-term unemployment problem.
    At all times when I speak on these matters, it is the long-term problem in the North-East which worries and concerns me more than anything. It is well known to hon. Members that, in the main, the North-East depends on the basic industries of coal, shipbuilding and ship-repairing. It is just as well known to the House that today these industries are in a serious phase of contraction. The Minister of Power's recent statement has only further aggravated the problems in the Durham coalfields. There will be a further contraction in the Durham coalfield in the very near future. The decision concerning the importation of liquid methane has done nothing to ease the problems in the Durham coalfield. That is something to which the Government should give, full consideration.
    In Question after Question at Question Time, we have said to the Government,
    904
    "What are you prepared to do in realistic terms to avoid social hardship and unemployment among our people if the contraction in the basic industries continues?" We have not had a satisfactory answer to that question. We have had plenty of promises —jobs in the pipeline, and all that. The pipeline has a terrible habit of becoming blocked too many times for our fancy. The truth is that the Government have never carried out any intelligent research nor devised a plan which could, in the long run, bring industries to our area, which would solve the problem of unemployment as the contraction in the basic industries continued.
    Mr. R. W. Elliott: Would not the hon. Gentleman agree that there has been a quite steady flow of new industry to the North-East because of the Local Employment Act? We have even had one or two nice new factories in the past few months which have created quite a number of new jobs. Would not the hon. Gentleman further agree that the Team Valley Trading Estate and the North-East Trading Estates generally represent very intelligent thinking on behalf of Conservative Governments in other days of long-term unemployment in the area?
    Mr. Pentland: We want two or three Team Valley Trading Estates in the North-East. In regard to the hon. Member's other question, I accept that in the North-East we have hardworking, conscientious organisations that are doing everything in their power to attract industries to the area. In the main, however, the industries that they have attracted have been more or less light industries. With the density of employment which we so much desire, the great danger is that with a preponderance of light industries coming into areas like the North-East of England, in which we expect new industry to replace the contracting basic industries, those same light industries will take up valuable industrial sites, thus leaving few desirable sites for the heavy industry which is expected to come to those areas. The crux of the problem is that what it vitally needed in the North-East is more and more heavy industries.
    We have evidence to prove —this is part of the national problem —that some

    905
    parts of the country are becoming literally cluttered up with industry. In my view, there is danger of the country becoming industrially and economically unbalanced. Every hon. Member from the North-East who is here tonight knows full well that since 1951, tens of thousands of people have migrated from the North-East to those other parts of the country simply to find employment. Indeed, the outward migration from the North-East, particularly amongst our younger people, creates a serious situation, because it could jeopardise the industrial future of the north-east of England.
    In recent weeks, the Government have talked about a planned economy. I trust that they will put their talk into action. I ask them to bring forward an industrial plan for the North-East, because only then will we be satisfied that our long-term problems are at least being recognised in a realistic fashion by the Government. Only then will our people be able to look to the future with hope and confidence.
    8.43 p.m.
    Mr. Basil dc Ferranti: I do not think I should be exaggerating if I described the first part of the speech of the hon. Member for Chester-le-Street (Mr. Pentland) as being somewhat partisan.
    Mr. Ellis Smith: That is to his credit.
    Mr. de Ferranti: I accept that it is to his credit. In following the hon. Member, I should like to say that the growth rates that we have been able to achieve in the United Kingdom in the last ten years of approximately 2·7 per cent. have made it more difficult for trade unionists and trade union leaders to obtain their own members' support in any policy of moderating wage demands. We must nationally aim to achieve a higher rate of growth and in so doing make it less likely for the hon. Member for Chester-le-Street in five years' time to make the sort of speech he has made tonight.
    The Opposition Amendment has somewhat missed the bus. It states that the Government have no proposals. Here, however, the Government have made two of, perhaps, the most dramatic proposals ever made in this country. One is that we should join the Common
    906
    Market and the other that we should establish a National Economic Development Council, to which, I suppose, one can familiarly refer as N.E.D.
    In the debate on the Address a year ago, I urged that, in this highly technological age, we should try to understand the great importance of economies of scale in manufacturing. I made the somewhat sweeping statement, for which I apologised in advance, that
    "If we are to achieve any sort of increase in the rate of productivity which we should like to see, and achieve the level of exports which we must have to survive, we must have at least one company in each product as big or preferably bigger than any of its competitors overseas."—[OFFICIAL REPORT, 2nd November, I960; Vol. 629, c. 282.]
    I am proud that in my constituency there are the companies of Glaxo and I.C.I., which, I think everybody will accept, have done a magnificent job in helping to raise productivity and helping to solve the country's export problem.
    I urged, too, last year that the Board of Trade —I think I should have added the Government themselves —should be much better informed about the detailed problems of industry, all the sorts of little things which are incredibly important to a busines man but are tiny little problems to the Government, even information about what sort of subsidies our competitors overseas are giving. The Board of Trade appears to take not really very seriously these difficulties which we encounter.
    I then said that on the basis of this much better information the Government should do three things; first of all, that the Government should use the immense weight of their own purchasing power the central Government, the nationalised industries, and local authorities. Lord Plowden pointed out in the White Paper that this amounts to 40 per cent. of our gross national product. We could use that purchasing power in a more rational way to achieve a solution of our exports and of our rate of growth. I said also that we should also play it by ear, as the Americans say, and use schemes, as we did in the textile industry and as we did in the aircraft industry, and anything that appears to be sensible, such as the use of civil development contracts in those industries which are technologically lagging behind the Americans or the Russians or the Europeans.

    907
    However, I naively under-estimated last year the difficulty for any Government to achieve these sorts of things, because with the way we are organised at the moment there is no framework in which these myriad decisions can be made, and can be made towards a common objective.
    However, since last year we have made this great decision to join the European Economic Community. [HON. MEMBERS: "Not yet."] We have made this great decision to ask, if possible, subject to all the safeguards, to join the European Economic Community. I think that in some ways Governments are like people. We are what the Americans call crisis-orientated. That is to say, we only actually do anything when there is a crisis on. The prospect of joining the Common Market is a sort of self-induced crisis, to which we have got to respond. Because of this prospect, things have got to be done, and the things I mentioned last year must now be carefully considered. I believe that the establishment of a N.E.D. could well prove to be the framework which would enable the Government to achieve these desirable objects.
    I was fortunate enough last week to be able to spend a little time in Paris, which I greatly enjoyed. I learned a great deal. In particular I learned about the French methods of planning. I learned that their most effective work in their own planning was accomplished by nearly 250 working groups studying in detail the particular problems of industry. They were organised by twenty-five commissions.
    Industry is a very big thing. The hon. Member for Macclesfield (Sir A. V. Harvey) urged the Chancellor of the Exchequer to go to talk to everybody in industry. That would take him really a long time. If he is going effectively to be able to talk to everybody in industry he needs to have twenty-five commission and 250 working groups, really to enable him to do a proper job. Although perhaps it is jumping the gun a bit, so far as his proposals for N.E.D. go, I would urge him to consider very seriously the establishment of this type of working group, if a N.E.D. does, as I hope it will, begin to function.
    908
    As to the activities of the committee itself, which the Chancellor today said would be a small body, the really important decisions which will be effective in this field are very small decisions. They are detailed decisions as far as the Chancellor is concerned and the N.E.D. will tend to become rather like the conseil superieur in Paris, which does the rather grand launching of the whole plan and does not meet on a particularly regular basis. It is the office and the working parties and the commissions which really do the job. The N.E.D. should be there to see fair play.
    I also learned in Paris that a five per cent. growth rate is perfectly possible in this country and I think that we could work up to it in about three years' time. I believe now that we in the House of Commons should stop arguing whether planning is a good thing, that we should drop the "isms", as the Leader of the Opposition has said, and should now get on with arguing what the rate of growth could and should be. The Frenchmen said that before they decided which rate of growth to adopt they would have welcome a much greater degree of public debate of the pros and cons of the three different plans that they were considering. I believe that all of us who are interested in the future of the House of Commons should concern themselves with this now and should start informing ourselves now of the pros and cons of different rates of growth. We should stop arguing about planning and get on with arguing how we should achieve a 5 per cent. growth which would solve our problems, including those of the constituents of the hon. Member for Chester-le-Street.
    It was interesting to learn in Paris that the French regard exports as a problem which is now in the past. They say that they have achieved the solution to exports largely because of the success of modernisation encouraged by the working groups. I have no doubt that a large measure of their success was achieved by means of what I might call the "old boy network" established with the Commisariat at its centre. This enabled them to make sensible decisions to achieve the national objective. They made these decisions without any real use of the sanctions mentioned by the

    909
    Leader of the Opposition. They achieved them because everybody wanted to achieve them. I am confident that Conservative planning would ensure that the country would want to achieve and would be able to achieve a 5 per cent. growth rate without the use of sanctions, except that we would haye the most powerful sanction of all in that we must compete in the Common Market. We must do the sensible thing, and this perhaps is the most powerful sanction of all.
    My hon. Friend the Member for Macclesfield said that we should all get to work earlier and get to work at the same time as everybody else in the factory or office. I agree with him. But I think that the targets that could be set by an economic development organisation would do much to ensure that when we did get to our offices or factories we would all feel that that little extra work that we would then do could cure our export problems and enable us to double our standard of living in twelve years rather than in twenty-five.
    8.55 p.m.
    Mr. Harold Wilson: I am sure that the hon. Member for More cambe and Lonsdale (Mr. de Ferranti) will forgive me if I do not follow him in his recent journeyings, which must have been most invigorating. I am also sure that the House will understand if, instead of commenting on all the points which have been raised in the debate, I deal mainly with the speech which the Chancellor of the Exchequer made this afternoon.
    I think that most of us who heard the right hon. and learned Gentleman's speech thought that the most serious thing which emerged from it was the dangerous complacency which it revealed. I think the Chancellor actually believes that the measures which he took last July have been successful in strengthening sterling, and that he thinks that if only we will all listen to him and accept the pay pause, our problems will be solved, production will expand year by year and exports will be pouring out of the country.
    That is what the right hon. and learned Gentleman claimed. I use his exact words as I took them down. I am not a skilled shorthand writer, and I am sure he will forgive me if I did not take down his words accurately, but I
    910
    think it is fair to suggest that what he said was: "Confidence in sterling has been much improved"—
    Mr. G. R. Mitchison: Do not mention "matter".
    Mr. Wilson: —"the capital outflow of recent months has been reversed, the sterling rate is well above parity with the dollar, and we have paid back £100 million to the International Monetary Fund."
    This really is a dangerous illusion. Sterling is stronger today not because the Chancellor has done anything to revitalise the economy but because he borrowed £500 million and so convinced the speculators that sterling would not be devalued. Sterling is stronger because he put the Bank Rate up to the crippling level of 7 per cent. and attracted a lot of hot money that we did not need, cannot use and cannot afford, and which is a perpetual embarrassment to us and also extremely dangerous to us when it starts to leave.
    It was predictable that sterling would be stronger. Even before we had the July crisis, even before the Budget and even before we knew what the Chancellor was going to do, I said in a newspaper article, "Of course sterling will recover, for a time." About the same time I even predicted the present complacency. We have had this previously from the Chancellor's predecessors. In 1955 the present Home Secretary said, "Thank goodness we acted in time." That was two months before the crisis of July, 1955, and four months before the autumn Budget. Every one of the present Chancellor's predecessors has shown the same complacency. What we have not had from any of them —we have not had it from the Chancellor today —is any policy at all which will strengthen the economy and enable us to go forward with increased production year by year instead of just increased production one year in every four.
    The absolute bankruptcy of the Chancellor's approach to the matter today was a grievous disappointment to me. Last year I believed what the Press said about him when he was appointed. I have had occasion previously to quote in the House the tremendous build-up that he had —how he was keeping his own counsel but would produce new

    911
    methods and break the cycle of squeeze and ease, and all the rest of it. Yet here we are now. He has been at the Treasury for fifteen months and has presented two Budgets in three months, vast hand-outs in April, squeeze in July and panic measures to hold investment down at the very moment when the investment boom was tailing off and excess capacity was developing.
    I do not propose to waste the time of the House on what the Chancellor said or did not say at Leicester. I am sure that will be some relief to him. After all, for a Tory Chancellor to embark on a bout of Marxist self-criticism is, I think, rather endearing. Obviously, the right hon. and learned Gentleman was deeply affected by what was going on in Moscow at the time. He tells us that he was misreported. That is all right; we have all been misreported, I think. I was once, and I never heard the end of it from hon. Gentlemen opposite.
    Frankly, I take a charitable view of these things. But I remember a debate during the time of the Labour Government when my right hon. Friend the Member for Dundee, West (Mr. Strachey) made a remark about the Schuman Plan which led to the then Opposition spending half a day of Parliamentary time debating it. Of course, he had been misreported. I cannot remember the exact date, for I have not looked it up, but I think it was 8th July, 1950. What I do remember, however, is that the noble Lord the present Lord Chancellor, then Sir David Maxwell-Fyfe, came to this Dispatch Box and thundered about it. He said "Complaints of misreporting —they are a political niblick for getting one out of a bad lie." I am not going to say anything like that about the Chancellor of the Exchequer. It would be unworthy.
    The obvious lesson, of course, is that he should not be allowed out without his script writer. Obviously the Observer itself is open to criticism for taking any notice of what he says when his script writer is not there. There is one thing which the House should be concerned about. When the reporter concerned —a reporter known to many of us on both sides of the House as an honest, experienced, conscientious reporter of a very high standard —was summoned to
    912
    the Treasury, he was confronted with a phalanx not only of Treasury officials but of officials from the Conservative Central Office.
    We know, of course, that the Prime Minister has devalued public standards in this country, but I think this House must insist even on members of this shabby Administration learning to draw a sharp dividing line between Government information services on the one hand, and Conservative Party propaganda on the other. I know that is a distinction which will seem a little unreal and academic to the Prime Minster, but I hope that there are hon. Members opposite who will realise the importance of this being done.
    Whatever the Chancellor did or did not say about "materialising" and "matters"—
    Sir Cyril Osborne: The right hon. Member said that he was not going to discuss this.
    Mr. Wilson: Do not tempt me now. Whatever the Chancellor may have said on that point, he has not denied this particular gem. I hope that the hon. Member for Louth (Sir C. Osborne) will allow me to quote it. This is what the Chancellor has not denied that he said; this is not in dispute. [An HON. MEMBER: "In Leicester?"] Leicester is not a proscribed organisation. We can talk about Leicester if we want to do so, and what I am quoting is highly relevant to the general issue of this debate. It is something which the Chancellor has not denied he said, neither have the Treasury officials nor the Conservative Party Central Office denied it. The Chancellor said:
    "What I did not know was the extent of the uncertainty of international currencies and the extent of the lack of confidence."
    Why did the Chancellor not know this? Everyone else did. We warned him of it. I will give him the references: 2nd November, last year, column 192; 7th February this year, column 324, and 18th April, column 978. I may refer him also, now that he is learning to use the word "planning", to an article which I wrote in the New Statesman last March which warned him very clearly about the dangers to this country of a run on sterling in the summer. Everyone warned

    913
    him. Yet he could not see it. If he could not see that, he could not see a house end at five yards.
    What he is telling us is that his optimism last April when he perpetrated his Budget was due to the fact that he did not know the uncertainties of international currency. He was not putting forward a plea of not guilty, but one of diminished responsibility. Yet at that very time he had already borrowed — how much, £100 million, £200 million? —from European central bankers to cover the run on sterling and the withdrawal of hot money. Yet he could not see the danger to sterling at that time. Now he is asking us to trust him with the forward planning of the economy for five years ahead.
    I want to turn, as the Chancellor did this afternoon, to the export problem, the most immediately pressing problem of all. The Prime Minister, I thought, made a good point a week ago when he said that we can no longer count on invisibles to make any net contribution to our balance of payments but that the surplus which we need now must come from the surplus of exports over imports. The Prime Minister cannot be here tonight and has courteously explained to me that he cannot be present. If he were here, I would congratulate him on that dazzling revelation which enabled him to see so clearly what we have been telling him in debate after debate over two years. I think that he sees it now. What he may not see is what an admission he has made, because the whole Tory freedom, decontrol policy of the past ten years was put forward on the ground that it would increase our invisible earnings.
    The Liverpool Cotton Market, the other speculative commodity markets, the end of bulk buying and long-term contracts, all the measures which were so successful in destroying the links of Commonwealth trade, all these things were justified on the ground that they would help our invisible earnings; but as Tory freedom has increased, the invisibles have decreased, until they have reached vanishing point as a net contribution to our balance of payments.
    In the big debate which we had on the sterling area three years ago, the spokesmen for the City of London gave figures of how they were earning in the
    914
    City £125 million a year on invisibles. This was as a warning to anyone who might contemplate laying sacrilegious hands on the holy of holies by seeking to tax speculative gains on the Stock Exchange.
    I do not underrate some of the difficulties which we face on invisibles. We have been warning the Government about them for many years —for example, the shipping problem and the oil problem. I wish that the Government would sometimes come clean about the earnings of the oil industry. After all, the whole of our economic policy in some directions has been sacrificed to the interests of the oil companies for very many years. There have been large sums of investment by the oil companies in the markets of the world. Why are the Government so coy about publishing the details in their balance of payments figures? They publish details of almost every other industry we have. Why are they so coy about telling us what is happening in the oil world? I hope that the Chancellor will look into that.
    I do not underrate the effect on our invisibles of our overseas military expenditure. I do not want to repeat the debate which we had last week, but we have the Government insisting on the pretence of being an independent nuclear Power, with our kiloton bomb in a megaton world, at great cost. Now we have so impoverished ourselves in other ways that we have had to go to our allies for what they call a certificate of need to enable us to draw the N.A.T.O. dole. We have the Prime Minister with his insistence on a prestige defence policy, like a man who insists on flaunting an expensive pearl tie-pin when he cannot even afford to cover his basic commitments and to pay for his next meal.
    We all agree that the problem Is one of physical exports. We had the complacency of the highly selective figures quoted by the Chancellor this afternoon; his export figures gave the impression of a great boom in exports which we all know is not happening. The fact is that exports today are barely increasing and export orders are down. This is at a time when our exports barely cover our imports and when the House knows that we need a surplus of £30 million to £40 million every month

    915
    to cover our commitments abroad. I think that the Chancellor still stands by the old Treasury figure that we need a surplus on our visible trade of £450 million a year, in order to meet our essential investments, aid to underdeveloped areas and the rest. If that is so, the best that we have achieved this year is that our exports barely pay for our essential imports.
    There has been some improvement in the visible trade balance over the last year, because a year ago it was in deficit, but the improvement, such as it is, is due in the main to a reduction in the imports of raw materials through running down stocks and to the fact that industrial production was stagnant for a full twelve months. The Chancellor tells us today —we are glad to hear him still mouthing these phrases —'that the policy is steady expansion for the future. We must ask him what happens if we do expand and if our raw material imports increase to meet the needs of expanding production. In other words, can we only achieve a bare physical balance of exports with imports at a time when stocks are being run down and our imports are artificially restricted by the fact that production is not increasing?
    While I am on the question of imports I should draw attention to the fact that within our somewhat reduced import bill the imports of certain manufactured goods have been rising very sharply —clothing, footwear and, above all, capital goods. It is a very severe commentary on the vigour and competitiveness of British industry if all these additional manufactured imports are coming into this country. It certainly throws some doubt on the naive theory that all we have to do is to join the Common Market and a fresh cold wind of import competition will stimulate our industrialists into a posture of competitiveness, because they have not been stimulated yet by the sharp increase in imports of many manufactured goods.
    Turning from the present position, what plans did the Chancellor of the Exchequer offer to help exporters? He dealt rather perfunctorily with the question of taxation incentives, which in the debate have since been pressed on the Government by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes), the
    916
    hon. Baronet the Member for Peterborough (Sir Harmar Nicholls) and others. This afternoon my right hon. Friend the Leader of the Opposition mentioned the French system of accelerated depreciation allowances for export firms. The French system is very similar to the Amendment that we have regularly moved year after year to the Finance Bill in favour of a discriminatory investment allowance. Hon. Members opposite have with equal regularity but much less imagination voted, it down year by year.
    Now the Chancellor of the Exchequer is under pressure and he says, "Well, it will be looked at". If that is what he says this afternoon, why has it not been looked at already? Has he not got people to look at these things? Could he not have looked at it himself? The Financial Secretary has been over to Paris, as well as the hon. Member for Morecambe and Lonsdale. Did the Financial Secretary look into this question when he was there? Do all the ideas have to come from this side of the House? [Laughter.]Then there was the turnover tax.
    When I mentioned the idea of the turnover tax in July —the suggestion has been put forward on many occasions — the only spark of interest it struck on the Treasury Bench was in the Prime Minister, who is always quick to see a political occasion. It is the only type of occasion to which he is capable of rising. He spent the next ten minutes, as we all saw, making feverish notes on his pad, not to see whether the turnover tax with its incentive to exports could be examined but to see whether Tory Central Office could make full use of the fact that the Socialists were proposing a fresh tax and how useful it might be at the next General Election.
    The Chancellor of the Exchequer's speech this afternoon showed that the suggestion has not been taken seriously, despite the fact that all German banker-industrialists will state that the turnover tax, with its exemption for export, is the biggest single factor in the German export drive and the biggest single factor in their aggressiveness in overseas markets.
    I turn now to export finance. Two years ago, on 26th November, 1959, we debated the Radcliffe Report. On that occasion we put forward some radical

    917
    schemes for improving export finance. We proposed an export-import bank. I do not suppose this suggestion has ever been considered by the Government in the two years which have passed. We proposed favourable rates of interest for export finance. This afternoon the Chancellor of the Exchequer dismissed this proposal in the most perfunctory manner, thus remaining true to a good old Treasury motto —"Never do anything for the first time".
    Listening to the right hon. and learned Gentleman's speech of a fortnight ago and his speech this afternoon, one would think that the man endangering our export effort was a porter in a Government military hospital on £8 19s. a week recklessly and irresponsibly asking for the 2s. a week due to him under an agreement the Government signed. We get the impression that this is the man who is endangering our exports, whereas the man who is doing more than anyone else to sabotage our export drive is the Chancellor of the Exchequer because interest rates at 7 and 8 per cent. are making it impossible for exporters in capital goods to offer credit at rates comparable with those being offered by their competitors. Therefore, I seriously press on the Government this proposal for a two-tier interest rate structure with specially low rates for exporters.
    I turn now to the wider subject of interest rates, as the Chancellor did this afternoon. My right hon. Friend quoted today the devastating estimates —£100 million a year or more —of the effect of these panic level rates of interest on our overseas payments, quite apart from the effect on exports which I have mentioned. The House knows what these high interests rates mean for local authorities, for owner occupiers, and for small businesses. I should like to draw the attention of the House to what they mean for the taxpayer in terms of the burden placed on him with the annual National Debt charge at current rates of interest.
    The Chief Secretary to the Treasury is here tonight. It is his job to examine ways of minimising Government expenditure, and I am sure that he will be interested in these figures. If one looks at the National Debt charge this financial year, so far —that is rather less than seven months —it has cost the taxpayer
    918
    £50 million more than in the same period last year, and £74 million more than in the same period of 1959. I commend to the right hon. Gentleman the calculation that if he could save this £74 million by bringing interest rates down to a more tolerable level it would be enough to remove all the health charges, including the prescription charges, the greater part of the increase in National Insurance and National Health contributions, and to restore the general housing subsidy at the full rate on a local authority housing programme twice as big as the present one. That is what he would get if he could save £74 million which is the cost to the country of the present interest rates.
    I follow the Chancellor in referring to the pay pause. We are told that if we can hold wages for 24½ weeks longer —? until All Fools' Day —all our problems will be over. To achieve this, we will break agreements, bully civil servants and teachers, and go on doing this until 1st April and then, of course, that will be it. But, on their argument, as soon as the pay pause ends and the floodgates are opened, will the trouble not start again? Will there be two more Budgets next year and fresh measures to hold down production? If, as the Chancellor says, we need the pay pause to increase exports, what will happen to exports after 1st April?
    I understand that the Chairman of the Conservative Party is to reply to this debate. I should like to ask him this question. If the Chancellor says that it is wrong for incomes to increase more than current production, how do they justify winning the last election on a hire purchase boom, which, by definition, increased purchasing power far beyond even current incomes? Can we have the explanation to that one when the Chairman of the Conservative Party comes to wind up? The Chancellor, with his usual highly selective statistics, told us that wages were up this year and profits down, but does he deny that this year dividends have gone up far more than wages, despite his appeal?
    The other question which one must ask about all these deflationary measures relates to their timing. The right hon. and learned Gentleman, like the Minister of Aviation three years ago, chooses the very moment when we are moving into a deflationary position to introduce a credit

    919
    squeeze, a 7 per cent. Bank Rate, cuts in investment, and all the rest. The steel industry is working far below capacity, furnaces are closing down —if the Prime Minister were here he would like to know that this is happening even in Stockton — engineering orders are down, industrial investment is turning sharply downwards, and at this moment of time the Chancellor tightens the screw. We were told by him this afternoon that the purpose is to make more resources available for export, as though once furnaces are closed down export orders increase.
    If that is the argument of the right hon. and learned Gentleman, how does he explain the fact that some of his measures are closing down productive units in the steel industry, that orders cannot be found and that exports are not being helped by them? How does he explain the fact that according to the Federation of British Industries almost a record proportion of British firms in the manufacturing industries are today working below capacity?
    I want to turn now to the Chancellor's words about planning. He must not think us churlish, or unappreciative of what he is doing. There is, in fact, more rejoicing in the Kingdom of Heaven over one Tory that repenteth than over 90 and 9 just Socialists who believed in planning all the time. But he will forgive us for wanting to be sure: has he repented? Is it planning that he really believes in, or is it, like his long-deferred capital gains tax, just a bait aimed at getting the T.U.C. on the hook?
    From what he has said today it would appear that he has two ideas —and they are good ideas, although he has rather mixed them up. One is a machinery for co-ordinating the production targets of certain industries —and this is quite useful; the other, a council consisting of far-sighted men, like the Chancellor, who will sit there murmuring grave "Hear, hears" as the Chancellor unravels slanted documents designed to convince the trade union leaders round the table that we cannot afford a wage increase this year.
    Like my right hon. Friend, I do not underrate the importance of coordinating industrial targets. All of us have warned the House about the difficulties that arise when we have the
    920
    steel industry and the motor industry working on different estimates of the increase in national production and the coal and electricity industries told to work on plans differing from either. It is, therefore, very useful to co-ordinate plans of expansion, and I do not underestimate, any more than did my right hon. Friend, the importance on industrial planning within individual industries and firms of published Government intentions to raise industrial production by 3 per cent., 4 per cent., or 5 per cent. per annum. What has been called the "announcement effect" has been very important in a number of countries, and as long as they think that the Government will stick to it, it can be a powerful incentive to increased production and investment.
    Much has been said about the French system, and the House has been interested to hear the various accounts and explanations given of it. Certainly, to introduce the French system, as far as it goes, would be a vast improvement on the hiccupping rhythm that has passed for policy in this country for the last few years. But I hope that the Chancellor will not rely too much on the French pattern. In the first place, as my right hon. Friend said, some of the successes in the early years of the Monnet plan were achieved by a prodigious increase in investment and a dynamic expansion in the main publicly-owned industries —electricity, transport and so on —aided by the export successes of the nationalised Renault car concern and the nationalised Caravelle-producing firm in civil aviation. I do not know whether the right hon. and learned Gentleman intends to follow that example.
    Apart from that, the essence of the French plan —apart from a great deal more interference in industry than this Government would ever consider practicable or desirable —there was the fact that in a period of inflation and shortage of capital the planning authorities effectively controlled the capital market and the raising and application of capital to industry. It is right, however, to warn the House against the view that the so-called French "economic miracle" of the past two years has been achieved by the system of painless planning that the Chancellor has in mind. It has not.

    921
    It is the product of two things —two substantial devaluations in 18 months, and six per cent. to eight per cent. reduction in wage standards. I sometimes fear that that is what lies behind Ministers' enthusiasm for the Common Market.
    No, planning we must have but, as my right hon. Friend argued this afternoon it must be real planning, and right hon. Gentlemen had better realise from the start that this means controls and purposive measures to stimulate expansion in the key industries where expansion is needed. Planning without controls is as meaningless as a gearbox without teeth; one gets a lot of wheels running round, but nothing happens.
    Let me give an example —fuel policy. Three years ago we called for a national fuel policy, for a figure that the Government would honour for the size of the coal industry. Two hundred million tons was mentioned as a figure for the national indigenous coal industry to work to. This would have meant controlling fuel oil imports, and controlling other things as well, but the Government insisted on what they call freedom of choice —by which they meant, of course, a refusal to touch the profits of the oil companies —[Interruption.]Certainly —I would refer hon. Members to the speeches of the then Paymaster General.
    As a result of their policy we lost 150,000 miners from the industry, and we now face a problem in house coal supplies this winter —as we said three years ago would happen. We can give some other evils that will follow if the Government go in for this sort of planning. My right hon. Friend this afternoon mentioned the need, if we are to have a big increase in essential investment, for controlling the inessential investment in order to give the necessary degree of priority for what is wanted. Last week we had a White Paper setting out the limits which the Government are placing on essential capital investment in the public sector, the limits on the mines, the railways, electricity, hospitals, local authority housing and so on, but, of course, there is no White Paper setting the ceiling, the limits that the Government are setting, for speculative office blocks or luxury housing developments. The Chancellor had better realise, if he means business about planning, that we shall have to have much
    922
    more restrictive controls about inessential development.
    We shall have to have more measures than we have had or stimulating expansion of investment in essential industries. We shall need this whether in the private or in the public sector. In private industry we shall need tax incentives, discriminatory tax incentives, investment allowances favouring essential industries, such as exports, and a much more ruthless system of measuring the depreciation allowances so that virile expanding firms can charge more of their investment against profits and slothful, lethargic firms have to pay higher Profits Tax. It will mean restoring the dual rate of Profits Tax, a lower rate on profits ploughed back into new investment and a much higher rate on profits dissipated as dividends, it will mean protecting the firm which puts capital development before high dividends from the predatory attentions of the take-over bidder.
    And the other thing it means —and the House and the Chancellor must face this —is more public ownership, especially in the development of new industry based on science and on the exploitation of revolutionary inventions made by scientists in Government research establishments or universites.
    If we want to get the exports which all of us today agree are necessary, it will mean constructive changes in British industry. Most of us have given up hope of being the workshop of the world, but we can be its pilot and its tool room. Yet what is happening today with the country's technical manpower and automated machine tools?
    Year by year our imports and capital costs are rising, and year by year we are supplying a smaller proportion of the worlds exports of capital equipment of all kinds. That is why we tell the Chancellor that much more positive measures will be needed than anything he has contemplated if we are to get, as we need, a big increase in the productive capacity of those industries which can meet the requirements of world markets. We shall not get the necessary increase in exports —the President of the Board of Trade knows this —on the basis of an overspill from our brand of the affluent society, what I called last year, the candy floss economy. We are not going

    923
    to get the exports that we need from exporting candy floss machinery. We need to develop new industries where there is a good healthy demand. That is why sterling area trade is languishing under the present Government.
    I understand that the debate is to be wound up tonight by the Leader of the House. We welcome him in his first speech as Leader of the House in this debate. Disappointed as we are in the Chancellor, the Leader of the House brings a fresh mind —at any rate fairly fresh —to these problems. But the last time he spoke on economic subjects he said:
    "The truth is that both parties have sought earnestly since the end of the war for a continuation of stable prices with expansion. We believe that because we have secured our base first we are nearer fuller success than at any time since the war."—[OFFICIAL REPORT, 3rd November, 1958; Vol. 594, c. 736.]
    He made that speech three years ago. Does he still claim that that is all that has happened between then and now. The right hon. Gentleman —and this is one of the reasons why we welcome his incursion into the debate tonight —was many years ago given the credit, if that is the word, for the preparation of the Conservative Party's industrial charter. I think the actual salesman who launched it on the public was the Home Secretary, but we always understood that the Leader of the House played a leading part in it.
    The Chancellor of the Duchy of Lancaster (Mr. Iain Macleod)The Chancellor of the Duchy of Lancaster (Mr. Iain Macleod) indicated dissent.
    Mr. Wilson: Does the right hon. Gentleman repudiate it?
    Mr. MacleodI think the right hon. Gentleman is wrong. It is almost the only pamphlet in those five years that I had nothing to do with at all.
    Mr. Wilson: I must say that raises my appreciation of the right hon. Gentleman even more, because I do not think he could possibly have written this sentence:
    "We desire to state quite clearly…"—
    [Interruption.] Hon. Members opposite are here because they fought the election on the Industrial Charter. They had better not run away from it now.
    "We desire to state quite clearly that the official policy of the Conservative Party is in favour of trade unions."
    924
    It is a wonderful development and a wonderful admission for the right hon. Gentleman. They told us:
    "We propose to establish a series of standards in the field of industrial relations to which we are convinced employers must conform."
    I hope the right hon. Gentleman will tell us now whether he really stands by the decisions of the Government in the past three months under which, having said that they are going to lead the way in industry, under which they have broken these agreements to which they have set their hands —[HON. MEMBERS: "Oh."] I can understand the desire of hon. Members opposite not to be pinned down on this. The right hon. Gentleman the Chancellor of the Duchy of Lancaster, I hope, is going to begin by telling us tonight, as a former Minister of Labour, as a man who at any rate agreed with the document even if he did not write it, whether he stands by the decisions of the Government to break their solemnly pledged word on industrial agreements.
    9.32 p.m.
    The Chancellor of the Duchy of Lancaster (Mr. Iain Macleod): As the right hon. Member for Huyton (Mr. H. Wilson) has said, apart from a certain number of routine appearances at the Dispatch Box, this is my first occasion as Leader of the House to speak to the House. I am conscious that I am very junior in service to this House and, indeed, that I have only one qualification to be Leader of the House of Commons, but that perhaps is not a bad one, namely, that I have a very great affection for the House of Commons, and in all things I shall try as Leader of the House to serve the House.
    I have been asked a number of specific questions, particularly by the Leader of the Opposition, and the same questions earlier in the debate by the Deputy Leader, on measures which are in and are not in the Gracious Speech, and I should like to begin with some comments on that matter.
    First, on the question of government, the position here is that a Measure, the Offices Act, was passed in 1960 and becomes operative on 1st January, 1962. It is an enabling Measure under which Ministers could make regulations. There are certain policy matters in it,

    925
    like the question of fire precaution which we think is delegated to the wrong authority, with which we disagree. But the reason that has led us to say that we will not make regulations under this Act goes wider than that. It is because we are in the process of compiling an extremely complex and far-reaching Bill which will cover not only offices but shops and railway premises. There is provision in the Offices Act for consultation, quite rightly, with various organisations, and we 'think it would be wrong to start consultations on those regulations before the more comprehensive Measure is introduced.
    Mr. Richard Marsh: We are very grateful to the right hon. Gentleman for that, but is he not aware that during the debate on the Committee stage of the Offices Act there was a statement from the Government about the probability of introducing comprehensive legislation? It was made by the then Joint Under-Secretary of State for the Home Department and a date of operation of the Act was, in fact, suggested by the then Joint Under-Secretary. Is not this a rather transparent way out?
    Mr. Macleod: No. I agree that I would have liked, if possible and if this legislation had been far enough advanced, to see it in this Session. The Leader of the Opposition asked whether it would come in this Parliament and the answer is "Yes". It will come in the 1962–63 Session. It is not possible, for drafting reasons, for it to be produced earlier.
    The only other Bill to which I wish to refer —and on this the Leader of the Opposition made two perfectly courteous but very personal references to me —is the Commonwealth Immigrants Bill which, again, is closely concerned with the matters we are debating today. The right hon. Gentleman asked me in effect how I reconciled what I said about the brotherhood of man with this particular Bill. There is, here, a debating point and a point of substance.
    As far as the debating point is concerned, we can dismiss it, because if to believe in the brotherhood of man is incompatible with having restrictions, then overwhelmingly, as far as the latest polls are concerned, this country — including the Labour Party —would not
    926
    believe in the brotherhood of man. In the West Indies we know that there is no such freedom of movement.
    The point of substance is more important and on this I must give a frank answer to the Leader of the Opposition. I detest the necessity for it in this country. I say that frankly, but I believe it to be necessary and I believe that when we have examined it carefully it will commend itself to both sides of the House. I said almost a year ago, and no one challenged me then, that administrative methods alone were becoming no good because this country, with its prosperity, was like a magnet; traffic was so easy and it was so easy to come through a second country to this.
    I do not believe for a moment that this could be achieved by the imposition of any suggestion in relation to requirements for housing because that, as I am sure the House appreciates, would mean that the tap would be turned off altogether, for no local authority would give anyone unknown from another country a direct lift over the heads of those on their housing lists. So my position is, as I say to the House, that I believe that this Bill is necessary. I believe that the choice is only between doing it now or in a year's time when the pressure, I think, will have become extremely acute.
    There can be no question, as was suggested, of there being unseemly haste in this matter. We have taken years to decide it. No one has been closer to this problem than myself, other than perhaps the Home Secretary. I have seen this when I was Minister of Labour grow from something about which no figures and no problem existed into a problem that flared into the headlines with race riots in this country, of all countries, and I have seen it when I was Colonial Secretary. I came to the conclusion in the spring of this year, looking at those figures, that it was no longer possible to avoid such legislation. I thought that I would give that answer to the House and to the Leader of the Opposition.
    It is never very easy when replying to a debate to know to which speeches to reply. An illustration of this difficulty is that while I was away from the Chamber for a time one of my hon. Friends took a note of the speech of the hon. Gentleman the Member for Oldham, West (Mr. Hale). There are two points mentioned in this note.

    927
    Point one says "The sordid dishonesty of Government statements" and point two says, "Very witty speech indeed". I am sure that it was, but the hon. Member will realise that the information provided here is a little scanty for me to offer any real comment. Nor, frankly, do I think I can comment very helpfully on the speech that the right hon. Gentleman the Member for Huyton has just delivered. It was, as always, witty, cogent and polished —and polished —and polished —[Laughter.] He paid me the great compliment of saying that to this situation and to this debate I had brought a fresh mind. I wish that he would bring a fresh speech.
    Ten years ago when first as an hon. Member of this House I listened to a debate on the Address being wound up, it was wound up by Lord Crookshank, to whom the Leader of the Opposition paid a delightful tribute a short time ago. Always at twenty minutes to ten, Lord Crookshank used to pick up the Order Paper —or so it seems to me looking back over the years —and, looking at the Amendment that was before the House, he used to say, "Mr. Speaker, this is a very remarkable Amendment." And indeed, Mr. Speaker, so it is.
    There seems to be a pattern in this matter. If I remember rightly, ten years ago we were debating housing and also had a general debate on the Address. I think this a very suitable pattern which we might follow every tenth year. What I should like to do is to concentrate on the third part of the Amendment—
    Hon. Members: Say something.
    Mr. Macleod: —before the House. The third section of it, says:
    "and justice as between different sections of the community."
    I think this is really the heart of the Amendment and the heart of the debate. I know perfectly well that there are differences between the two sides of the House which are differences both of policy and of philosophy. I have no desire at all to do other than to acknowledge that and to try to answer this and to explain what, in my view, justice means to us.
    It has been said that Socialism is about equality, and that, I dare say, is
    928
    a fine creed which strikes many a chord in the hearts of hon. Members opposite. But I do not mind saying frankly that it finds no echo on this side of the House —[HON. MEMBERS: "Hear, hear."] If we went on to pick a phrase to put against that, against the phrase, "Socialism is about equality", I would say, "Conservatism is about opportunity". It is in these terms that I wish to examine this question of justice between the different sections of the community.
    Over and over again hon. Members have said that to have the changes in the provision for Surtax relief a year and a bit from now is repugnant to them, or, anyway, they think out of tune with what should be done at this time. I do not think that, and I propose to argue the case briefly, if I may. I think that this springs from an entirely out-dated approach by the Opposition to the sort of people who pay Surtax today. The main story in the home news in The Times of yesterday came from Lowestoft, where I am speaking on Friday. There is no need for hon. Members to come, but I am. It is headed:
    "Young trawler skippers in Surtax class."
    The article states:
    "To be paying surtax at the age of 22 is an achievement (or fate) rare even in the affluent Britain of today."
    We all know that if trawler skippers are earning money in the Surtax range—
    Mr. Rhodes: They earn it.
    Mr. Macleod: —they earn it, and good luck to them. They earn it the hard way. Everyone would admit that.
    The truth is that £2,000 today is, as the Chancellor of the Exchequer said this afternoon, worth no more than £700 before the war. The rates have remained unaltered for a very long time indeed, and although I can see an argument —indeed, I would subscribe to it —? for saying that, when my right hon. and learned Friend studies the question of exemptions, Surtax payers should be a long way down in the queue. I can see no argument whatever for saying that they should not be in the queue at all.
    We have heard a good deal today from the hon. Member for Chester-le-Street (Mr. Pentland) and other hon. Members

    929
    about earnings. The facts are these, and they are quite simple. From July, 1945, to October, 1951, the average weekly rate of earnings went up from £6 1s. 4d. to £8 6s. 0d., a rise of 37 per cent., but there was an increase of 40 per cent. in the cost of living which wiped it out. In the last ten years the rate has gone from £8 6s. 0d. to £15 1s. 4d., a rise of 80 per cent. as against a 35 per cent. increase in the cost of living.
    The leader of the Opposition was very anxious to interrupt my right hon. and learned Friend the Chancellor in the last few moments of his speech to ask him how long the pay pause was going to last. I cannot tell him that. What I can tell him is that, under the Socialist Government, it lasted six and quarter years. [HON. MEMBERS: "Not true."]
    My hon. Friend the Member for Macclesfield (Sir A. V. Harvey) made a speech to which many hon.. Members have referred, I think justly, with admiration. He asked two specific questions. The first was why the Chancellor of the Exchequer did not give to the private sector a lead comparable —he can do it only by exhortation, because he has no direct power —to that which he has given in the sector for which he has responsibility. I shall not weary the House with the quotation, although I have it here, but the answer is that he did that, and it is in his speech of 25th July, 1961,
    The other extremely interesting question which my hon. Friend asked was to what extent grants and loans abroad are tied to sterling. Multilateral loans cannot be tied, and the total amount of bilateral loans in 1960 was £125 million. Of that, £37½ million was formally tied, but a great deal more than that comes back in one way or another through trade to this country.
    There are strong arguments against a country in our position trying to tie the whole of our loan and grant aid. To give one example from my own experience, I know very well how, as Secretary of State for the Colonies, I was always anxious to ensure that those who were receiving the money in the Colonies should have the widest possible opportunity for spending it. That meant considerable freedom in choosing their sources of supply.
    930
    We have been told by hon. Members in this debate that we are engaged in an exercise to pull down the standards of the working classes. We were told officially from the Opposition Front Bench by the hon. Member for Sunderland, North (Mr. Willey) that one of the characteristics of a Conservative Government was the contempt they showed for the professional classes. What puzzled me as I listened to that speech was that if we are engaged on that exercise of attacking the working classes, if we have that contempt for the professional and the middle classes and if the peers of the realm, as is the position, do not vote, who are the 14 million people who vote Conservative? [Interruption.] I am told that we duped them. Very well. If we hoaxed them in 1959 at the General Election, did we hoax them again in 1961 at the local government elections? How is it that our machine is so efficient that we can actually hoax the individuals who are questioned in public opinion polls without knowing who those individuals will be?
    The truth of the matter is that the Socialist Party —and this can be seen in the speech of the right hon. Member for Caerphilly (Mr. Ness Edwards) and of the hon. Member for Newton (Mr. Lee), with their harking back to 1926 —does not realise the economic position in which the country is, nor does it realise —[Interruption.] It is not just 1926. That is a very long time ago.
    There has been full employment for twenty-two years. That means that practically nobody under the age of 40 knows the days to which hon. Members opposite refer over and over again. And not only 1926. To many hon. Members on this side, even 1946 is a long time ago, because on this side, since the 1945 ejection, no fewer than 284 Members have come to this House, and that is more than the whole of the Labour Party, the whole of the Liberal Party and the whole of the anti-party group put together.
    We are debating an official Amendment to the Address in reply to the Gracious Speech. [Interruption.] I fully acknowledge that I have made a number of party and partisan points. I have tried to answer the argument in the debate, perhaps not to the satisfaction of hon. Members opposite, but I have tried.

    931
    All the same, I should like to say this. There has been comment in speeches and in the newspapers that in some of the days of this debate, the benches have been deserted and there has been a lack of debating fire. It applied to the benches on both sides. I have seen a great deal of these debates, and I believe that there is a reason for this.
    The reason is simply that we all know perfectly well that in this coming Session it is not the Bills which we shall pass or shall not pass which are the really great issues which lie in front of us. With this every hon. Member will agree.
    We do not know if there are going to be successful negotiations over Berlin. We do not know even yet whether there will be negotiations over Berlin. We do not know whether there will be successful agreements on nuclear or disarmament tests, although we shall certainly strive to secure them. There are sores all over the world like the Congo and Angola that we hope will be healed in this year. But surely it is these matters, and the far graver one which lies behind them all, which matter most. The great issue which lies behind all our debates in this Session is, of course, what use mankind is going to make of the
    power that it has itself discovered to destroy mankind. It is this, I am certain, that is in the hearts of every hon. and right hon. Member.
    I am certain that this is the test for us as a House of Commons. I am certain that the House will be judged—[HON. MEMBERS: "Stop preaching."]—in the country, by the words which are used and actions which we take in relation to these great matters, rather than by the legislation which is adumbrated in the Queen's Speech.
    We have been discussing the question of justice between different sections of the community. I have acknowledged that the two sides of the House have a different approach, and I have tried to defend the point of view in which I believe. I am certain that these great issues to which I have referred are more in our minds than the legislation which is in front of us. I am certain that we on this side of the House have policies which will bring justice to all sections of the community in this country. I ask the House to support the Motion.
    Question put, That those words be there added:—
    The House divided: Ayes 233, Noes 341.

    Division No. 2.]

    AYES

    [10.0 p.m.

    Abse, Leo

    Davies, G. Elfed (Rhondda, E.)

    Griffiths, W. (Exchange)

    Ainsley, William

    Davies, Harold (Leek)

    Grimond, J.

    Albu, Austen

    Davies, Ifor (Gower)

    Gunter, Ray

    Allaun, Frank (Salford, E.)

    Davies, S. O. (Merthyr)

    Hale, Leslie (Oldham, w.)

    Allen, Scholefield (Crewe)

    Deer, George

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Awbery, Stan

    Delargy, Hugh

    Hamilton, William (West Fife)

    Bacon, Miss Alice

    Dempsey, James

    Hannan, William

    Baird, John

    Diamond, John

    Hart, Mrs. Judith

    Baxter, William (Stirlingshire, W.)

    Dodds, Norman

    Hayman, F. H.

    Bellenger, Rt. Hon. F. J.

    Donnelly, Desmond

    Henderson, Rt. Hn. Arthur (Rwly Regis)

    Bence, Cyril

    Driberg, Tom

    Hill, J. (Midlothian)

    Benson, Sir George

    Dugdale, Rt. Hon. John

    Hilton, A. V.

    Blackburn, F.

    Ede, Rt. Hon. C.

    Holman, Percy

    Blyton, William

    Edelman, Maurice

    Holt, Arthur

    Boardman, H.

    Edwards, Rt. Hon. Nees (Caerphilly)

    Houghton, Douglas

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

    Edwards, Robert (Bilston)

    Howell, Charles A. (Perry Barr)

    Bowies, Frank

    Edwards, Walter (Stepney)

    Hoy, James H.

    Boyden, James

    Evans, Albert

    Hughes, Emrys (S. Ayrshire)

    Braddock, Mrs. E. M.

    Fernyhough, E.

    Hughes, Hector (Aberdeen, N.)

    Brockway, A. Fenner

    Finch, Harold

    Hunter, A. E.

    Broughton, Dr. A. D. D.

    Fitch, Alan

    Hynd, H. (Accrington)

    Brown, Rt. Hon. George (Belper)

    Fletcher, Eric

    Hynd, John (Attercliffe)

    Butler, Herbert (Hackney, C.)

    Foot, Michael (Ebbw Vale)

    Irvine, A. J. (Edge Hill)

    Butler, Mrs. Joyce (Wood Green)

    Forman, J. c.

    Irving, Sydney (Dartford)

    Castle, Mrs. Barbara

    Fraser, Thomas (Hamilton)

    Janner, Sir Barnett

    Chapman, Donald

    Gaitskell, Rt. Hon. Hugh

    Jay, Rt. Hon. Douglas

    Chetwynd, George

    Calpern, Sir Myer

    Jeger, George

    Cliffe, Michael

    Ginsburg, David

    Jenkins, Roy (Stechford)

    Collick, Percy

    Gooch, E. G.

    Johnson, Carol (Lewisham, s.)

    Corbet, Mrs. Freda

    Gordon Walker, Rt. Hon. P. C.

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

    Craddock, George (Bradford, S.)

    Gourlay, Harry

    Jones, Dan (Burnley)

    Cronin, John

    Greenwood, Anthony

    Jones, Elwyn (West Ham, S.)

    Crosland, Anthony

    Grey, Charles

    Jones, Jack (Rotherham)

    Grossman, R. H. S.

    Griffiths, David (Rother Valley)

    Jones, J. Idwal (Wrexham)

    Darling, George

    Griffiths, Rt. Hon. James (Llanelly)

    Jones, T. W. (Merioneth)

    Kelley, Richard

    Oswald, Thomas

    Stewart, Michael (Fulham)

    Kenyon, Clifford

    Owen, Will

    Stonehouse, John

    Key, Rt. Hon. C. W.

    Padley, W. E.

    Stones, William

    King, Dr. Horace

    Paget, R. T.

    Strachey, Rt. Hon. John

    Lawson, George

    Pannell, Charles (Leeds, W.)

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

    Ledger, Ron

    Pargiter, G. A.

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

    Lee, Frederick (Newton)

    Parker, John

    Swain, Thomas

    Lee, Miss Jennie (Cannock)

    Paton, John

    Swingler, Stephen

    Lever, Harold (Cheetham)

    Pavitt, Laurence

    Symonds, J. B.

    Lever, L. M. (Ardwick)

    Pearson, Arthur (Pontypridd)

    Thomas, George (Cardiff, w.)

    Lewis, Arthur (West Ham, N.)

    Peart, Frederick

    Thomas, Iorwerth (Rhondda, W.)

    Lipton, Marcus

    Pentland, Norman

    Thornton, Ernest

    Logan, David

    Plummer, Sir Leslie

    Thorpe, Jeremy

    Loughlin, Charles

    Popplewell, Ernest

    Timmons, John

    McCann, John

    Prentice, R. E.

    Tomney, Frank

    MacColl, James

    Price, J. T. (Westhoughton)

    Ungoed-Thomas, Sir Lynn

    McInnes, James

    Probert, Arthur

    Wade, Donald

    McKay, John (Wallsend)

    Pursey, Cmdr. Harry

    Wainwright, Edwin

    Mackie, John (Enfield, East)

    Randall, Harry

    Warbey, William

    McLeavy, Frank

    Rankin, John

    Watkins, Tudor

    MacPherson, Malcolm (Stirling)

    Redhead, E. C.

    Weitzman, David

    Mallalieu, E. L. (Brigg)

    Reid, William

    Wells, Percy (Faversham)

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

    Reynolds, G. W.

    Wells, William (Walsall, N.)

    Manuel, A. C.

    Rhodes, H.

    White, Mrs. Eirene

    Mapp, Charles

    Roberts, Albert (Normanton)

    Whitlock, William

    Marquand, Rt. Hon. H. A.

    Roberts, Goronwy (Caernarvon)

    Wigg, George

    Marsh, Richard

    Robertson, John (Paisley)

    Wilcock, Group Capt. C. A. B.

    Mason, Roy

    Robinson, Kenneth (St. Pancras, N.)

    Wilkins, W. A.

    Mayhew, Christopher

    Ross, William

    Willey, Frederick

    Mellish, R. J.

    Royle, Charles (Salford, West)

    Williams, D. J. (Neath)

    Mendelson, J. J.

    Shinwell, Rt. Hon. E.

    Williams, Ll. (Abertillery)

    Millan, Bruce

    Short, Edward

    Williams, W. R. (Openshaw)

    Milne, Edward J.

    Silverman, Julius (Aston)

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

    Mitchison, G. R.

    Silverman, Sydney (Nelson)

    Wilson, Rt. Hon. Harold (Huyton)

    Monslow, Walter

    Skeffington, Arthur

    Winterbottom, R. E.

    Moody, A. S.

    Slater, Mrs. Harriet (Stoke, N.)

    Woodburn, Rt. Hon. A.

    Morris, John

    Slater, Joseph (Sedgefield)

    Woof, Robert

    Mort, D. L.

    Small, William

    Wyatt, Woodrow

    Moyle, Arthur

    Smith, Ellis (Stoke, S.)

    Yates, Victor (Ladywood)

    Mulley, Frederick

    Snow, Julian

    Zilliacus, K.

    Neal, Harold

    Sorensen, R. W.

    TELLERS FOR THE AYES:

    Noel-Baker, Francis (Swindon)

    Soskice, Rt. Hon. Sir Frank

    Mr. John Taylor and

    Oliver, G. H.

    Spriggs, Leslie

    Mr. G. H. R. Rogers.

    Oram, A. E.

    Steele, Thomas

    NOES

    Agnew, Sir Peter

    Browne, Percy (Torrington)

    Currie, G. B. H.

    Aitken, W. T.

    Bryan, Paul

    Dalkeith, Earl of

    Allan, Robert (Paddington, S.)

    Buck, Antony

    Dance, James

    Allason, James

    Bullard, Denye

    d'Avigdor-Goldsmid, Sir Henry

    Amery, Rt. Hon. Julian

    Bullus, Wing Commander Eric

    Deedes, W. F.

    Ashton, Sir Hubert

    Burden, F. A.

    de Ferranti, Basil

    Atkins, Humphrey

    Butcher, Sir Herbert

    Digby, Simon Wingfield

    Balniel, Lord

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

    Donaldson, Cmdr. C. E. M.

    Barber, Anthony

    Campbell, Sir David (Belfast, S.)

    Doughty, Charles

    Barlow, Sir John

    Campbell, Gordon (Moray & Nairn)

    Drayson, G B.

    Barter, John

    Carr, Compton (Barons Court)

    du Cann, Edward

    Batsford, Brian

    Carr, Robert (Mitcham)

    Duncan, Sir James

    Baxter, Sir Beverley (Southgate)

    Cary, Sir Robert

    Eccles, Rt. Hon. Sir David

    Beamish, Col. Sir Tufton

    Channon, H. P. G.

    Eden, John

    Bell, Ronald

    Chataway, Christopher

    Elliot, Capt. Walter (Carshalton)

    Bennett, F. M. (Torquay)

    Chichester-Clark, R.

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

    Bennett, Dr. Reginald (Gos & Fhm)

    Churchill, Rt. Hon. Sir Winston

    Emery, Peter

    Berkeley, Humphry

    Clark, Henry (Antrim, N.)

    Emmet, Hon. Mrs. Evelyn

    Bevins, Rt. Hon. Reginald

    Clark, William (Nottingham, S.)

    Errington, Sir Eric

    Bidgood, John c.

    Clarke, Brig. Terence (Portsmth, W.)

    Erroll, Rt. Hon. F. J.

    Biggs-Davjson, John

    Cleaver, Leonard

    Farey-Jones, F. W.

    Bingham, R. M.

    Cooke, Robert

    Farr, John

    Birch, Rt. Hon. Nigel

    Cooper, A. E.

    Fell, Anthony

    Bishop, F. P.

    Cooper-Key, Sir Neill

    Finlay, Graeme

    Black, Sir Cyril

    Cordeaux, Lt.-Col. J. K.

    Fisher, Nigel

    Bossom, Clive

    Cordle, John

    Fletcher-Cooke, Charles

    Bourne-Arton, A.

    Corfield, F. V.

    Forrest, George

    Box, Donald

    Costain, A. P.

    Foster, John

    Boyd-Carpenter, Rt. Hon. John

    Coulson, J. M.

    Fraser, Hn. Hugh (Stafford & Stone)

    Boyle, Sir Edward

    Courtney, Cdr. Anthony

    Fraser, Ian (Plymouth, Sutton)

    Braine, Bernard

    Craddock, Sir Beresford

    Freeth, Denzil

    Brewis, John

    Critohley, Julian

    Galbraith, Hon. T. G. D.

    Bromley-Davenport, Lt.-Col. Sir Walter

    Crosthwaite-Eyre, Col. Sir Oliver

    Gammans, Lady

    Brooke, Rt. Hon. Henry

    Crowder, F. P.

    Gardner, Edward

    Brooman-White, R.

    Cunningham, Knox

    Gibson-Watt, David

    Brown, Alan (Tottenham)

    Curran, Charles

    Glover, Sir Douglas

    934

    935

    Glyn, Dr. Alan (Clapham)

    Longden, Gilbert

    Ridley, Hon. Nicholas

    Glyn, Sir Richard (Dorset, N.)

    Loveys, Walter H.

    Ridsdale, Julian

    Goodhart, Philip

    Low, Rt. Hon. Sir Toby

    Rippon, Geoffrey

    Goodhew, Victor

    Lucas, Sir Jocelyn

    Roberts, Sir Peter (Heeley)

    Gough, Frederick

    Lucas-Tooth, Sir Hugh

    Robinson, Sir Roland (Blackpool, S.)

    Cower, Raymond

    McAdden, Stephen

    Robson Brown, Sir William

    Grant, Rt. Hon. William

    Mac Arthur, Ian

    Rodgers, John (Sevenoaks)

    Grant-Ferris, Wg. Cdr. R.

    McLaren, Martin

    Roots, William

    Green, Alan

    McLaughlin, Mrs. Patricia

    Ropner, Col. Sir Leonard

    Gresham Cooke, R.

    Maclay, Rt. Hon. John

    Royle, Anthony (Richmond, Surrey)

    Grimston, sir Robert

    Maclean, SirFitzroy(Bute&N.Ayrs.)

    Russell, Ronald

    Grosvenor, Lt.-Col. R. G.

    McLean, Neil (Inverness)

    St. Clair, M.

    Gurden, Harold

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

    Scott-Hopkins, James

    Hall, John (Wycombe)

    MacLeod, John (Ross & Cromarty)

    Seymour, Leslie

    Hamilton, Michael (Wellingborough)

    McMaster, Stanley R.

    Sharples, Richard

    Hare, Rt. Hon. John

    Macmillan, Maurice (Halifax)

    Shaw, M.

    Harris, Reader (Heston)

    Macpherson, Niall (Dumfries)

    Shepherd, William

    Harrison, Brian (Maldon)

    Maddan, Martin

    Simon, Rt. Hon. Sir Jocelyn

    Harvey, Sir Arthur Vere (Macolesf'd)

    Maginnis, John E.

    Skeet, T. H. H.

    Harvey, John (Walthamstow, E.)

    Maitland, Sir John

    Smith, Dudley (Br'ntf'd & Chiswiok)

    Harvie Anderson, Miss

    Manningham-Buller, Rt. Hn. Sir R.

    Smyth, Brig. Sir John (Norwood)

    Hastings, Stephen

    Markham, Major Sir Frank

    Soames, Rt. Hon. Christopher

    Hay, John

    Marlowe, Anthony

    Spearman, Sir Alexander

    Heald, Rt. Hon. Sir Lionel

    Marples, Rt. Hon. Ernest

    Speir, Rupert

    Henderson, John (Cathcart)

    Marshall, Douglas

    Stanley, Hon. Richard

    Hendry, Forbes

    Marten, Neil

    Stevens, Geoffrey

    Hicks Beach, Maj. W.

    Mathew, Robert (Honiton)

    Steward, Harold (Stockport, S.)

    Hiley, Joseph

    Matthews, Gordon (Meriden)

    Stodart, J. A.

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

    Maudling, Rt. Hon. Reginald

    Stoddart-Scott, Col. Sir Malcolm

    Hill, Mrs. Eveline (Wythenshawe)

    Mawby, Ray

    Storey, Sir Samuel

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

    Maxwell-Hyslop, R. J.

    Studholme, Sir Henry

    Hinchingbrooke, Viscount

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

    Summers, Sir Spencer (Aylesbury)

    Hirst, Geoffrey

    Mills, Stratton

    Talbot, John E.

    Hobson, John

    Montgomery, Fergus

    Tapsell, Peter

    Hocking, Philip N.

    Moore, Sir Thomas (Ayr)

    Taylor, Sir Charles (Eastbourne)

    Holland, Philip

    More, Jasper (Ludlow)

    Taylor, Edwin (Bolton, E.)

    Hollingworth, John

    Morgan, William

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

    Hope, Rt. Hon. Lord John

    Morrison, John

    Teeling, William

    Hopkins, Alan

    Mott-Radclyffe, Sir Charles

    Temple, John M.

    Hornby, R. P.

    Nabarro, Gerald

    Thatcher, Mrs. Margaret

    Hornsby-Smith, Rt. Hon. Patricia

    Neave, Alrey

    Thomas, Leslie (Canterbury)

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

    Nicholls, Sir Harmar

    Thomas, Peter (Conway)

    Howard, John (Southampton, Test)

    Nicholson, Sir Godfrey

    Thompson, Kenneth (Walton)

    Hughes Hallett, Vice-Admiral John

    Noble, Michael

    Thompson, Richard (Croydon, S.)

    Hughes-Young, Michael

    Nugent, Sir Richard

    Thornton-Kemsley, Sir Colin

    Hulbert, Sir Norman

    Oakshott, Sir Hendrle

    Tiley, Arthur (Bradford, W.)

    Hurd, Sir Anthony

    Orr, Capt. L. P. S.

    Tilney, John (Wavertree)

    Hutchison, Michael Clark

    Orr-Ewing, C. Ian

    Turner, Colin

    Iremonger, T. L.

    Osborn, John (Hallam)

    Turton, Rt. Hon. R. H.

    Irvine, Bryant Godman (Rye)

    Osborne, Sir Cyril (Louth)

    van Strauhenzee, W. R.

    James, David

    Page, John (Harrow, West)

    Vane, W. M. F.

    Jenkins, Robert (Dulwich)

    Page, Graham (Crosby)

    Vaughan-Morgan, Rt. Hon. Sir John

    Jennings, J. C.

    pannell, Norman (Kirkdale)

    Vickers, Miss Joan

    Johnson, Dr. Donald (Carlisle)

    Partridge, E.

    Vosper, Rt. Hon. Dennis

    Johnson, Eric (Blackley)

    Pearson, Frank (Clitheroe)

    Walder, David

    Johnson Smith, Geoffrey

    Peel, John

    Walker, Peter

    Joseph, Sir Keith

    Percival, Ian

    Walker-Smith, Rt. Hon. Sir Derek

    Kaberry, Sir Donald

    Peyton, John

    Walt, Patrick

    Kerans, Cdr. J. S.

    Pickthorn, Sir Kenneth

    Ward, Dame Irene

    Kerby, Capt. Henry

    Pike, Miss Mervyn

    Watkinson. Rt. Hon. Harold

    Kerr, Sir Hamilton

    Pilkington, Sir Richard

    Webster, David

    Kershaw, Anthony

    Pitman, Sir James

    Wells, John (Maidstone)

    Kimball, Marcus

    Pitt, Miss Edith

    Whitelaw, William

    Kirk, Peter

    Pott, Percivall

    Williams, Dudley (Exeter)

    Kitson, Timothy

    Powell, Rt. Hon. J. Enoch

    Williams, Paul (Sunderland, S.)

    Lagden, Godfrey

    Price, David (Eastleigh)

    Wills, Sir Gerald (Bridgwater)

    Lambton, Viscount

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

    Wilson, Geoffrey (Truro)

    Lancaster, Col. C. G.

    Prior, J. M. L.

    Wise, A. R.

    Leavey, J. A.

    Prior-Palmer, Brig. Sir Otho

    Wolrige-Gordon, Patrick

    Leburn, Gilmour

    Profumo, Rt. Hon. John

    Wood, Rt. Hon. Richard

    Legge-Bourke, Sir Harry

    Proudfoot, Wilfred

    Woodhouse, C. M.

    Lewis, Kenneth (Rutland)

    Pym, Francis

    Woodnutt, Mark

    Lilley, F. J. P.

    Quennell, Miss J. M.

    Woollam, John

    Lindsay, Martin

    Ramsden, James

    Worsley, Marcus

    Linstead, Sir Hugh

    Rawlinson, Peter

    Yates, William (The Wrekin)

    Litchfield, Capt. John

    Redmayne, Rt. Hon. Martin

    TELLERS FOR THE NOES:

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

    Rees, Hugh

    Mr. Edward Wakefield and

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Rees-Davies, W. R.

    Colonel Sir Harwood Harrison.

    Longbottom, Charles

    Renton, David

    Main Question put and agreed to.
    Resolved,
    That an humble Address be presented to Her Majesty, as follows: —
    Most Gracious Sovereign,
    We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.
    To be presented by Privy Councillors or Members of Her Majesty's Household.

    Committee to consider of the Supply to be granted to Her Majesty, Tomorrow. —[Mr. Redmayne.]
    WAYS AND MEANS
    Committee to consider of the Ways and Means for raising the Supply to be granted to Her Majesty, Tomorrow. — [Mr. Redmayne.]

W.D. SECURITY GUARD, GERMANY (MR. J. H. DONOVAN)
Motion made, and Question proposed, That this House do now adjourn. —[Mr. Gibson-Watt.]
10.12 p.m.
Captain L. P. S. Orr: It is perhaps not altogether beyond the traditions of this House that after debating the Loyal Address and having had the grand inquest of the nation we should turn to the question of a grievance of a humble citizen of this country who feels he has been aggrieved by the Executive. I refer to the case of a constituent of mine, Mr. J. H. Donovan of County Down.
The facts are very simple and are as follows. Mr. Donovan served for twenty-five years in Her Majesty's Forces as a Regular soldier. He finished his tour of duty in the Army, having reached the rank of warrant officer, Class II, R.Q.M.S., and left the Army with an exemplary character. Mr. Donovan then joined the Territorial Army, in which he served for three and a half years. After that he sought employment as a civilian employee of the War Office and served in Belfast, in
938
County Down, and was then posted to Cyprus, after which he returned to County Down, to Ballykinlar, again as a civilian employee.
His troubles started in April, 1960, when he applied for and received a job as a War Office security guard in Germany. He went to the headquarters of the British Army of the Rhine and subsequently to Bonn. It was when he got to Bonn to the Joint Service Liaison Organisation that his troubles began.
When he got there, after all these years of long service, in which no complaint had ever been made against him of any kind, he found that the conditions of service were very difficult and onerous, with long tours of duty and four men doing the work of six. Sometimes he had very long hours without a meal break. I have looked at his schedule of employment. Sometimes there were spells of duty as long as fourteen hours and occasionally as long as twenty-one hours in the twenty-eight hour period. The meals service was very inadequate.
The employment began to get him down. The culminating point was reached on 7th January, 1961, when, after a fourteen-hour spell of duty, which he finished at 9 a.m., he found that a meal had been left for him, after a twenty-five minute walk to his billet, but that it was uneatable.
His general health was deteriorating. He failed to turn up for duty that night; he was due at 9 p.m., but he was not there. What happened according to Mr. Donovan was that he felt so unwell that he went to Bonn to get some medical supplies and then on to Cologne, and eventually he failed to come on duty. A charge of absence without leave was made against him. He was notified of the charge, which was under three counts of absence without leave. He replied to the charge, giving his defence, which was that at that time in the winter, after the long hours of duty and the very difficult time he had been through, he had not felt well and had gone for medical supplies and then had failed to turn up for duty.
Under the terms of his employment he could have been dismissed for misconduct. In fact, he was not. The military authorities considered the evidence against him and considered the

939
letter which he wrote explaining why he had been absent. They said that they would not proceed with the charges, but they gave him one month's notice.
Had they charged him with misconduct and held a court of inquiry, he would have had an opportunity to defend himself against the charge and to give his reasons for being absent as a defence, but this did not happen. If he had been found guilty of misconduct he would have forfeited his passage money to the United Kingdom and his right to a month's notice. In fact, he was dismissed in the regular way and charges were not preferred against him. He received his passage money back to the United Kingdom, and that was the end of his service. This would perhaps have been bad enough. He might have felt at that stage that he had a grievance because he had not been heard in his defence. But what aggravated what happened was when he applied at the local National Insurance office, the employment exchange, in Downpatrick, County Down, for a job. While he was waiting for employment the Ministry of Labour in Northern Ireland inquired of the War Office whether he had been dismissed the service and if there was any reason for his dismissal from the service. The War Office replied to the Minister of Labour that Mr. Donovan had been dismissed for misconduct.
This, as the House will readily appreciate, in Mr. Donovan's view seriously prejudiced his whole future employment. His services had been terminated. He had not been found guilty of any offence. Yet the charge was held against him when he tried to get any employment in the public service. As he was a man who all his life had been employed with exemplary character in the public service, it was obvious to him — I think that he was justified in holding the view —that his whole future was prejudiced.
Accordingly he went to his solicitor. His solicitor came to me. I wrote to my hon. Friend the Parliamentary Secretary. In a letter to me dated 10th April my hon. Friend pointed out that Mr. Donovan had been
"discharged from temporary employment with the War Department in Germany following an investigation into his failure to report for duty … He was given a month's notice …"
940
My hon. Friend then said:
"I cannot find that the term ' misconduct' has been used by the War Department in connection with his discharge… As regards a testimonial from the War Office, Mr. Donovan wrote to you on 27th February, and on the same date the Civilian Establishment and Pay Officer in Germany despatched a testimonial to him."
I was not at all satisfied with my hon. Friend's answer, so I wrote two more letters to him. In my letter of 30th August I made these points, which I think are relevant. Absence from duty is not alone an offence on which a charge can be founded; in other words, it must be absence from duty which is voluntary and for which there is no good reason. The simple fact that a man has not been there is not sufficient evidence of misconduct. Mr. Donovan's letter in reply to these charges constituted what is, at any rate, prima facie, a reasonable defence.
It seems that the authorities concluded that he was guilty of the offence and treated his letter of explanation as if it were a plea in mitigation. I do not imply that there has been any bad faith on the part of either the War Office or any other authority. I fully accept that they thought they were being lenient to Mr. Donovan, but the result of not charging him, not bringing him to trial or before a court of inquiry, and not giving him an opportunity of defending himself, is that a miscarriage of justice has been perpetrated.
In a further letter my hon. Friend referred to the question of the War Office having used the term "misconduct". In his letter of 3rd August he said:
"In the light of what is said in the letter enclosed with your letter of the 28th April I have had further inquiries made, and I do find that in a form which was sent to Northern Ireland Command by the Ministry of Labour and National Service of Northern Ireland asking whether Mr. Donovan's discharge was due to unsatisfactory conduct of any kind, the Command answered that Mr. Donovan had been given one month's notice of discharge for misconduct in the shape of absence from duty, particulars of the absence being given. I am sorry that I misled you in my earlier letter."
I accept my hon. Friend's apology about that. I am certain that there was no intention of any kind to mislead me and that there was a genuine mistake. Nevertheless, I think my hon. Friend will agree that I was justified in the

941
suspicion I had at the time that perhaps someone in the War Office was slightly ashamed of what had happened and had perhaps failed to give my hon. Friend all the information that was due to him. However, I do not want to make a point of that.
My main point is that, according to any inquiries which any Government Department may have made of the War Office, Mr. Donovan was dismissed for misconduct. Either the War Office dismissed him for misconduct, in which case he should have had a trial of some sort and an opportunity of defending himself, or his service was terminated in the ordinary way because he was not required, or something like that. The War Office cannot have it both ways. If it was the latter, Mr. Donovan should receive a perfectly clear testimonial. He has a right not to be described as having been dismissed for misconduct, or having been dismissed because he was unsuitable.
The phrase "temperamentally unsuitable" has since been used by the War Office. It first appeared in a letter dated 3rd October. The War Office has maintained throughout that the charges against Mr. Donovan were established, and that he was not temperamentally suitable for the job. In fact, the charges against him have never been established. Charges have been made against him, but he has not had the opportunity of defending himself.
The charge of being temperamentally unsuitable is based on that one occasion when he was absent without leave. It is true that in the course of his absence he committed a minor currency offence. He cashed a cheque, but he did so after going to the police to see whether he could get any help about getting back to his barracks. He was then in a very confused state of mind, and a very tired man. He told me that on that occasion he felt as though he was suffering from battle fatigue. He cashed a cheque on a Northern Ireland Bank to pay for his taxi back to barracks. It was not a serious offence, but, because of that and his absence without leave on this one occasion, the War Office appear to
942
be basing a charge either on misconduct or on being temperamentally unsuitable.
The serious aspect of this is that Mr. Donovan's employment has since been prejudiced. On three occasions he has applied for a job. First, with the General Post Office in my constituency in Down-patrick, secondly with the Northern Ireland Civil Service, and thirdly with the Foreign Office in London where he applied for a job as a Chancellery guard. He was told by the Foreign Office that he could be reasonably certain of getting the job provided his references were all right. He later heard from the Foreign Office that the position had been filled. It was clear that the Foreign Office had taken up a reference and that the War Office either was not willing to give Mr. Donovan a reference, or said that he was temperamentally unsuitable, or something of that sort. At any rate, Mr. Donovan did not get the job.
After all these years in the public service, he is employed sorting mailbags with the General Post Office at Padding-ton Station. I think that he has a perfectly genuine grievance. I hope that my hon. Friend, when he replies, will not close the door upon seeing whether there is some way in which what Mr. Donovan, in my opinion rightly, considers to be a grievance can be remedied. He has, in effect, been denied justice. I accept fully that the authorities have acted in good faith. None the less, the injustice has been committed and my constituent is entitled to some form of redress. I am not suggesting quite how.
On the general question concerning the employment of civilian employees I suggest that there is need to look at the method of treating civilian employees who commit any act of misconduct or give unsatisfactory service because it seems to me that even when the authorities are acting in good faith and, as they think, fairly, injustices can arise. I wonder whether my hon. Friend, in addition to considering the particular case of my constituent, will look at the question as a whole.
The Under-Secretary of State for War (Mr. James Ramsden): I am grateful to my hon. and gallant Friend the Member for Down, South (Captain Orr) for the opportunity he gave me to discuss this

943
case with him at some length before he raised it on the Floor of the House. I hope now to satisfy him that Mr. Donovan has been fairly treated by the authorities from the start of this affair to the finish.
Mr. Donovan is an old soldier with a good record of service with the Royal Ulster Rifles. He finished up, as my hon. and gallant Friend said, as R.Q.M.S. in the regiment. After leaving the Army and having done various other jobs in the meantime, he applied in July, 1959, for service as security guard in the War Department in Germany, was selected by interview and took up his duties at Headquarters, Joint Services Liaison Organisation, at Bonn, in April, 1960.
The events with which we are concerned tonight started when, on 7th January, 1961, Mr. Donovan failed to report for duty at, I think, 11 o'clock — my hon. and gallant Friend said 9 o'clock —at night at the Joint Services Liaison Office at Bonn, where he was due to go on guard. Naturally, the authorities instituted inquiries into what happened to Mr. Donovan that night and, so far as I have been able to confirm it, this is the story.
At five minutes to twelve that night, Mr. Donovan, who was then in Cologne, some twenty miles away from Bonn, took a taxi to the station. When he got there, he found that he had not got enough money to pay the fare, so he went with the taxi driver to the police station. The police got hold of the proprietor of the taxi firm and asked whether he was prepared to take Mr. Donovan to Bonn, where, he had stated, he would be able to pay the fare by cheque, Bonn being where he had his quarters and where he was due to be on guard.
They went back to Bonn, the money was produced and then —we have all this on the evidence of the proprietor of the taxi firm —Mr. Donovan went back in the taxi to the place in Cologne from which he had been picked up. The taxi driver states that this journey ended shortly after 3 o'clock in the morning.
Mr. Donovan's explanation of why he failed to report for duty and his movements on the night in question boils down to the fact that owing to long
944
spells of duty and insufficient time for rest and recreation, coupled with some news from home about his wife's health, which had caused him acute anxiety, he had reached a stage of mental instability such that he did not know what he was doing. He said that on the Saturday morning, the day he was due to go on duty, he felt very ill and went into town to get some medicine, which made him sick and dizzy, with the result that he found himself in Cologne railway station, from where he wandered into a cinema and fell asleep. After that, he remembers setting off from Cologne to Bonn, where he intended to report for duty, and he recollects nothing more until he was awakened in his billet on the Sunday morning.
At this stage, there are two points on which I should comment. The first is Mr. Donovan's allegation that the hours he was being required to work were altogether unreasonable and, as such, provided an excuse for what subsequently happened. It is certainly true that he had been working long hours. He was on duty between 7 o'clock at night and 9 o'clock in the morning on both 5th and 6th January. The position was that there were three guards sharing the twenty-four hours run of duty between them. I have, however, no record of his having reported to his superiors that this was having a serious effect upon his health, or, indeed, of his having taken any steps to consult a doctor or ask for medical treatment, which was available to him and to the rest of his unit on the spot.
In so far as there is substance in Mr. Donovan's complaint about conditions which he says affected him in the way they did, as I shall presently try to make clear to my hon. and gallant Friend, this was taken fully into account in dealing with his case as a mitigating circumstance. The steps taken to deal with Mr. Donovan's absence from duty were as follows. On 11th January he was formally charged in writing with the three offences to which my hon. and gallant Friend has referred and which I will not repeat again here. The procedure followed is in accordance with the Civilian Staff Regulations, a copy of which I have here. The charges were accompanied in the same letter by supporting evidence, the gist of which I

945
have already given to the House. It dealt with his movements on the night in question.
Mr. Donovan's reply to the charges, to which I have already referred, was in essence a plea of mitigation. He did not deny them, but represented that his health had been put under an unfair strain and that this had led to long periods during which he was not accountable for his actions and, in fact, could not remember them. It was in the light of all this, including the plea of mitigation, that the competent authori-ies in B.A.O.R. considered the case and felt that although the charges had been established —Mr. Donovan, in fact, had not denied them in his letter — disciplinary action of the degree which would normally be appropriate should not be taken against him.
At the same time, they felt that his conduct, which was not denied by Mr. Donovan, had revealed his unsaiitabality for continued employment as a security guard. It was therefore decided that his services should be terminated by normal discharge after the requisite period of notice. This decision was made known to Mr. Donovan in writing by the chief of his organisation on 27th January, 1961.
My hon. and gallant Friend has queried the correctness of this procedure. He has said that in his view there ought to have been a court of inquiry and an opportunity given to the accused to make representations, and so on. It is true that the regulations provide that if in his written reply the employee disputes any allegation contained in the charge against him he is to be afforded such an opportunity to make representations. But Mr. Donovan had not disputed the charges made against him. His attention had been drawn to the regulations, and I at the moment know of no evidence that he asked to make representations orally.
Captain Orr: I am very sorry to interrupt my hon. Friend —I agree that I have not left him very long in which to reply —'but he keeps saying that Mr. Donovan did not dispute the charges. He did not dispute the absence, but he did dispute the fact that he was absent without leave under the regulations.
Mr. Ramsden: The charges were charges of being absent and that he failed to report for duty. He did not dispute the charges or that he had committed the somewhat technical offence in connection with the cheque. This is my point. Though attention had been drawn to the regulations, Mr. Donovan did not take the chance which is referred to in the regulations of making oral representations.
I must uphold the decision of the authorities that Mr. Donovan, on the evidence of the case, could no longer be considered as temperamentally suitable for employment as a security guard. He returned to the United Kingdom on 2nd February. He remained in the pay of the War Department up to and including 27th February, 1961, this following the terms on which it was decided to bring about his discharge. He received a testimonial to his services on 27th February and subsequently obtained employment in the Post Office.
My hon. and gallant Friend has represented in previous correspondence and tonight that we were at fault in that he would find difficulty in getting future employment, particularly in any Government Department, because it had been represented by the War Office to the Ministry of Labour in Northern Ireland that he had been discharged for misconduct. Mr. Donovan contended that if the War Office had given this information to the Ministry of Labour they would probably repeat it elsewhere and so prejudice his chance of obtaining Crown employment.
I should like to explain how this point cropped up. It is necessary for the Ministry of Labour's functions, in determining whether a man is eligible for unemployment benefit, that they should be given by his previous employers the reasons for his having left that employment, and there is a form for this purpose which has to be filled in. On this form the War Office put "misconduct", but I must stress two points. In the first place, it is difficult to see how we could have described What happened in terms other than misconduct, although we might have said "unsatisfactory conduct". Secondly, and this is the main point, this form is a document entirely confidential to the Ministry of Labour. I have been categorically assured that

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there was no question of it getting outside the files of the War Office and the Ministry of Labour and so prejudicing Mr. Donovan's chances of future employment as he feared it might. This is borne out by the event, because he eventually obtained employment with the Post Office and —I have checked on this —the Post Office had heard nothing of any question of misconduct on his part.
Captain Orr: What about the Foreign Office?
Mr. Ramsden: I have not checked with the Foreign Office. The information available to me is that he applied for a
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job in the Post Office almost as soon as he left War Office employment, and their inquiries occupied the five or six months intervening between then and the time that he was accepted by them. Reading between the lines of this case, and on all the evidence that I have been able to obtain, I am certain —
The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at eighteen minutes to Eleven o'clock.

POST OFFICE
  Sub-Office, Leicester
  Sub-Office, Leicester
TRADE AND COMMERCE
  Blyth
  Blyth
  European Economic Community
  European Economic Community
  Apples (Import)
  Apples (Import)
  North-East Scotland
  North-East Scotland
  G.A.T.T. (West Indies)
  G.A.T.T. (West Indies)
SCIENCE
  Radioactivity
  Radioactivity
  Torry Research Laboratory, Aberdeen
  Torry Research Laboratory, Aberdeen
  Milk Supplies (Cornwall)
  Milk Supplies (Cornwall)
NATIONAL FINANCE
  Surtax
  Surtax
  United Kingdom Debts
  United Kingdom Debts
  Wages and Salaries
  Wages and Salaries
  Social Services
  Social Services
HOUSING
  Slum Clearance, Lancashire
  Slum Clearance, Lancashire
  Improvement Grants (Salford)
  Improvement Grants (Salford)
  Unfit Houses
  Unfit Houses
SOUTHERN CAMEROONS
  British Trusteeship
  British Trusteeship
FIJI
  Burns Commission
  Burns Commission
TANGANYIKA
  Famine Relief
  Famine Relief
COLONIAL TERRITORIES
  Milk Supplies
  Milk Supplies
EAST AFRICA
  High Commission Staff
  High Commission Staff
KENYA
  State of Emergency (Ending)
  State of Emergency (Ending)
MALTA
  Constitution
  Constitution
MINISTRY OF WORKS
  Government Departments, Taunton (Central Office)
  Government Departments, Taunton (Central Office)
  BERLIN
  BERLIN
CHANCELLOR OF THE EXCHEQEUR
  (Press Article)
  (Press Article)
MINISTRY OF HEALTH
  Welfare Foods
  Welfare Foods
  Radioactivity
  Radioactivity
  Prescriptions
  Prescriptions

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Ely

UNLOADING OF CARS IN RESTRICTED AREA
2.35 p.m.
LORD SILKIN: 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 whether their attention has been drawn to the case of Clifford-Turner v. Waterman in which the Divisional Court, on the 24th October last, decided that it was an offence for a person to cause his car to wait outside his own house in a restricted area (even for five minutes) to enable him to deliver and collect a parcel; whether this decision would prevent a person returning home from a journey from taking his luggage out of his car; and whether they will amend the regulations so as to remove this great hardship which deprives residents in a restricted area of the effective use of their cars.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD CHESHAM): My Lords, I have read the newspaper reports of this case. The offence was committed on September 24, 1960. Subsequently the regulations have been amended to allow a vehicle to wait in a restricted street in a controlled parking zone—and I quote:
"for so long as may be necessary for the purpose of enabling any person to board or alight from the vehicle or to load thereon or unload therefrom his personal luggage."
The point which the noble Lord has raised is therefore already covered by the present regulations.
LORD SILKIN: My Lords, I am very comforted to hear that reply. Could the noble Lord tell me when that regulation was made?
LORD CHESHAM: My Lords, that regulation was made on May 20 this year.
LORD SALTOUN: My Lords, may I ask the noble Lord if it is not proved that the householder who has made and paid for the street has a Common Law right to draw up a vehicle at his door; and is it possible by regulation to take away that Common Law right?
LORD CHESHAM: My Lords, I thought that the regulation to which I referred seemed to indicate the householder had the right.

SOVIET NUCLEAR TESTS
LORD OGMORE: 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 whether they have considered making an application to the International Court for a declaration that the action of the Soviet Union in making their recent nuclear tests is a gross breach of human rights and an attack on the safety, well-being and future of the human race.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE): Yes, my Lords, this course of action has been considered. But to make application to the International Court would be fruitless because it is the firm policy of the Soviet Union not to submit to the Court's jurisdiction, and in the absence of such Soviet submission the Court would have no power to make a Declaration.
LORD OGMORE: My Lords, has the noble Marquess considered the possibility of moving under Article 96 of the Charter, under which the Assembly itself can apply to the Court, irrespective of whether or not the Soviet Union submits to it? And has his attention been drawn to the statement made by Mr. Khrushchev some time ago condemning the possibility of anyone starting up tests and branding anyone who started up tests as someone who would be handed down to the shame of future generations? Is this not the position the Soviet Union is now in?
THE MARQUESS OF LANSDOWNE: My Lords, I think that the reply I gave to the noble Lord's Question is complete. There really is nothing that can be done along the line that the noble Lord suggests. I should like notice of the suggestion he has added, and I should like to look into that.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, the last point made by the noble Lord, Lord Ogmore, had already been quoted by me in the House, during a debate. I never received an answer about that.
THE MARQUESS OF LANSDOWNE: But the noble Lord asked a Question.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Yes; but I mentioned it in a debate and drew attention to the fact that the Russians were making the excuse that in fact they were no longer bound by that because of the interposition of the tests made by France.

BRITISH HONDURAS HURRICANE DAMAGE
2.40 p.m.
THE EARL OF LISTOWEL: 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 whether they can state the amount of the damage to property caused by the recent hurricane in British Honduras, and whether they will give financial assistance towards the cost of reconstruction.]
THE MINISTER OF STATE FOR COLONIAL AFFAIRS (THE EARL OF PERTH): My Lords, it is now clear that the devastation caused by the hurricane in British Honduras is widespread and very severe. Casualty lists have not yet been received, but the latest available information is that the dead in Belize, the capital, will be more than 160. There are 70 people still known to be missing, however, and it is feared that the final death roll may be a good deal higher. In outlying districts also there has been heavy damage and casualties. In Stann Creek destruction of life and property may be even greater than in Belize.
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It is impossible for anyone to live in Belize at present, and the work of establishing essential services, such as shelter and supplies of food and drinking water, is being carried out with the help of the naval and military forces which have been brought in by the Royal Navy and the Royal Air Force. We have had the greatest assistance from the United States Navy, which sent two destroyers and an aircraft carrier, together with doctors, nurses and other medical personnel.
I fear that it will be a long time before it will be possible to make any assessment of the damage to property, and meanwhile I can only say that in disasters of this kind a Colony like British Honduras will naturally look to the United Kingdom for help in reconstruction.
Co-ordination of supplies to cope with the immediate situation is in the hands of the Government of Jamaica who tell us what they require from the United Kingdom. In all this we are in close touch with the Red Cross, which is rendering the greatest possible assistance. Apart from military reinforcements, including Royal Engineers and medical personnel, we have despatched engineering and medical supplies, tarpaulins and other temporary roofing material. This will continue, both by sea and by air.
THE EARL OF LISTOWEL: My Lords, I am most grateful to the noble Earl, as I am sure the House is, for his full statement about this catastrophe. I should like to ask him two supplementary questions. The first is whether he is satisfied that all possible steps have been taken to prevent the outbreak of epidemics; and the second is whether, in view of the fact that it seems most unlikely that it will be possible to reconstruct the capital, Belize, on the same site, he will consider the possibility, indeed the desirability, of the Government's aiding the Government of British Honduras to rebuild the capital on a satisfactory site. Furthermore, if the Government are willing to help in that way, could they announce their willingness as soon as possible, so as to give some comfort and encouragement to the Sorely striken people in British Honduras?
THE EARL OF PERTH: My Lords, in reply to the first part of the question I think one can say that one is fully satisfied, whether as to medical personnel or medical supplies, that all possible is being done. We rely, as we must rely, implicitly on the Jamaican Government to co-ordinate the needs and inform us what they want. In regard to the second part of the question, I think these are rather early days to try to give an answer, because, quite frankly, we do not know what is the degree of the damage or the situation in general. This is a matter which calls for a difficult decision and needs a great deal of thought; but it will be in our minds, as will everything else, in relation to what has happened.

BUSINESS OF THE HOUSE
EARL ST. ALDWYN: My Lords, for the convenience of your Lordships, dinners will be available tonight in the Restaurant; but I should be grateful if your Lordships would give as early notice as possible if you intend to dine.

LEAVE OF ABSENCE
EARL ST. ALDWYN: My Lords, on behalf of my noble friend Lord Hail-sham, I beg to move the Motion standing in his name.
Moved, That a Select Committee be appointed for the general supervision of arrangements relating to leave of absence and that the Lords following, with the Chairman of Committees, be named of the Committee:

E. Lucan,

E. St. Aldwyn.

L. Amulree.—(Earl St. Aldwyn.)

On Question, Motion agreed to.

SPECIAL ORDERS COMMITTEE
THE CHAIRMAN OF COMMITTEES (LORD MERTHYR): My Lords, I beg to move the Motion standing in my name.
Moved, That a Select Committee be appointed to consider all Special Orders of the present Session; and that the Lords following, with the Chairman of
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Committees, be named of the Committee:

D. Atholl.

M. Willingdon.

E. Buckinghamshire.

E. Iveagh.

E. Munster.

V. Soulbury.

L. Birdwood.

L. Blackford.

L. Cawley.

L. Crawshaw.

L. Faringdon.

L. Goddard.

L. Hughes.

L. Jessel.

L. MacAndrew.

L. Meston.

L. Morton of Henryton.

L. Shepherd.

L. Stonham.

L. Strang.

L. Taylor.

L. Terrington.—(Lord Merthyr.)

On Question, Motion agreed to.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
2.45 p.m.
Debate resumed (according to Order) on the Motion moved on Tuesday last by Lord Melchett—namely, That an humble Address be presented to Her Majesty as followeth:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
LORD LATHAM LORD LATHAM rose to move, as an Amendment to the Motion, to add at the end of the proposed Address:
"but humbly regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation".
The noble Lord said: My Lords, with the leave of the House I rise to move the Amendment standing in the name of my noble Leader. As is customary in your Lordships' House, the Amendment has been drawn in moderate terms, but I cannot promise that my remarks will

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not be more forceful and, indeed, abrasive where such is warranted, for as regards our financial and economic condition the gracious Speech is an affront to both Parliament and the nation. There is nothing in the Speech to show that the Government realise the grave sickness which besets and is rapidly enveloping the economy of this country. Nor are there any real, efficacious or positive measures proposed to restore the dynamic health of our economy.
There are, let me admit, a few inconsequential, hackneyed references to the stability of sterling, to the balance of payments and to the stability of prices—all, of course, new problems: I had almost said recent discoveries. But as regards the reference to the maintenance of the stability of prices, the claim that the Tory Governments have done this is really a bogus claim—in the terms used at the time by the late Jimmy Thomas in another place "it is 'umbug", leaving the aspirate for use another time. For during the ten inglorious years of Tory Government the pound has gone down in purchasing power from 20s. to 14s. 6d. There's stability for you!—almost as stable as the Chancellor's "off-the-cuff" statements at Party conferences.
The only positive measure specified in the gracious Speech is to raise the limits of the provision of the Export Credits Guarantee Department. The mountain has been in labour, with what a derisory and miserable result! What a failure of government!—so great a failure that it has gone to their heads. All the world knows that we are rattling into industrial and economic decline. All the world knows that—except, of course, the Chancellor of the Exchequer. In sorry truth we are a sick society as the result of ten years of "setting the people free". The Chancellor of the Exchequer on October 24 blandly said that there is no recession. Well, well! If that be so, what is all the ballyhoo about? Is our economy all fine and dandy? Was it never so good? If so, why the bother? Why the "little Budget"? Why the 10 per cent. increase in indirect taxation? Why the imposition of the wages and salaries pause? Why the increase of the bank rate to 7 per cent.? Why cut down public and social expenditure?
In view of the Chancellor's asseveration, let us briefly review the state of our economy. Unemployment is on the in-
218
crease. It is up by 48,500. The increase is double the normal increase. Vacancies are down by 39,000 as against the seasonal decrease of 13,500. There is no recession! I am sure that the 365,000 who are unemployed will be delighted to know that and maybe they will forgive the Chancellor. What volume of unemployment is it necessary to have before it is a recession—one million? Is that the sanction the Tories need to work a system of "setting the people free?". "Conservative freedom works", we are told; but the unemployed are not allowed to work—and the Chancellor of the Exchequer is "all right, Jack". Is increased production likely to flow from increased unemployment? Is that another nonsense of the Chancellor of the Exchequer? He had really better give up making statements "off the cuff".
Then, my Lords, if we turn to our overseas trade position we find no greater comfort. We had a huge trade deficit in 1960, largely flowing from the illusory prosperity fostered for the General Election of 1959; and we are adding to that deficit. It is true that in August the deficit went down from £82 million to £34 million, but this was not due to an increase of exports; it was due to a decrease of imports resulting from the fact that business people are de-stocking. Sooner or later they will have to restock, and then the deficit will go up and not down. The picture as regards our overseas trade generally is black indeed. World exports are up for the first half of this year by 5 per cent.: ours are up by 3 per cent. West Germany, Italy, Sweden and Switzerland are up 10 per cent.: we are up 3 per cent. The Government are resolved to take us to the bottom of the league in world trade. To our shame, as the cradle of shipbuilding, we are now importers of ships. What an outstanding achievement of Tory rule!
So, my Lords, there is no recession. In proof of that, let me refer to trade generally. Recently, there has been published the disturbing and, indeed, in some respects, frightening figures of the latest survey of trade trends done by the Federation of British Industries. What does this survey show? It shows that, with 51 per cent. of those replying to the inquiry, the present level of output is below capacity; 32 per cent. are down on new orders; 75 per cent. do not feel optimistic as to

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export prospects; 44 per cent. are authorising less capital expenditure on buildings this twelve months than in the previous twelve months, and 37 per cent. are authorising less on plant. That is a pretty bleak outlook, my Lords. As regards the machine tool industry, the trade association of that industry has said that home market orders in August were down by no less than 14 per cent. The result, of course, is that there will be a delay in modernising our industry. Business men will be apprehensive as to the demand for the products which the more capacious equipment can produce: they will be anxious as to whether new machinery will leave them with an excess capacity under the "Stop-go" freeze, "squeeze" and "pause" policies of the Government.
The Government seem to think that we can build up export trade by paralysing home trade. What is needed, of course, is a proper balance between them, and this calls for planning—real planning. I noticed the other day that the Cotton Reorganisation Scheme, promoted by the Government, and much vaunted in this House and in another place, has proved to be unsuccessful. Lord Rochdale, according to the Financial Times of October 21, said that the scheme had not achieved the results hoped for. That was an understatement according to another person who has acted as chairman of one of the committees under the Scheme and who said that new equipment bought under the Scheme is standing idle in some of the mills. Steel, even before the labour troubles occurred, was down to 77 per cent. of capacity. The export of cars from this country has declined in all the markets of the world in recent years, and there has been a catastrophic drop this year. And still, my Lords, according to the Chancellor, there is no recession.
Redundancy is rampant in the consumer durable trades, and is spreading to the consumer trades—but there is no recession! Everything is spanking—Conservative freedom works. That is why the Government are slashing social expenditure. That is why the Government are virtually tearing up wages and salary awards; treating them, my Lords, as scraps of paper. That is why the Government are denouncing the basis of
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comparability of wages and salaries as regards those employed in public employment, and why those workers are henceforth to be regarded as second-class workers, getting less wages and less salaries than their counterparts employed in the private sector of industry. They will, in the result, constitute a sort of depressed wages area, which means that there will be an exodus from public employment. Indeed, this movement from public employment has already reached serious dimensions as regards the railways and other forms of transport, and it is now spreading to local government.
So, my Lords, according to the Chancellor of the Exchequer, there is no recession. What ineffable ineptitude to launch, without notice, an attack upon our widespread machinery and procedures of negotiation and arbitration which have been built up over the past forty years, shattering with one body blow the feeling and belief in their equity and their justice, and destroying the sense of reliance upon them which has grown up among the workers! My Lords, we talk at times of the rule of law. What sort of rule of law is it that justifies a Government, as employer, suspending the operation of procedures to which, by signature, honour and long practice, they are bound? What a blunder!—the consequences of which we shall suffer these many years. And all, my Lords, to deal with a recession which we are told does not exist.
My Lords, all these facts and circumstances go to show how sick is our economy after ten years of Tory Government: crisis succeeding crisis, Chancellor succeeding Chancellor, each with his little crisis or his election. And sometimes one resigns. How he must now be chuckling in the silent watches of the night! The bank rate goes up to 7 per cent. True, it was recently reduced to 6, due to the flow into this country of "hot" money becoming almost an embarrassment of debt. The result of this increase is that our foreign exchange, it is estimated, will cost us £30 million more. There is, of course, a growing body of informed opinion which gravely doubts the efficacy of the bank rate as a monetary weapon for influencing or regulating our economy. It is really a vestigial specific appropriate to the day

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before yesterday, but no longer suitable to modern conditions. The "Old Lady of Threadneedle Street" is still wearing the intellectual bloomers of the "Gay 'Nineties"! It is encouraging to note that the new Governor of the Bank, at the Bankers' Dinner recently, himself expressed doubts as to the suitability of our money rates structure, or words to that effect. And well he might. Let him take courage and exchange the nether garment of the "Old Lady" for something more modern. I will not say a bikini, because that might go too far.
My Lords, faced with this deep-seated and growing malaise in our economy, what do the Government propose to do? As I have said, the gracious Speech is silent as to this. The Government will say, of course, that they have taken steps, and so they have—but mostly wrong stops, as I shall proceed to show. First, there is the restraint upon wages and salaries, coupled with the tearing up of negotiated awards, to which I have already referred. Some of my noble friends on this side will be addressing themselves to this matter in particular. I wish here to make one comment only upon one aspect, and an important aspect too; it is the relation of wages to productivity, and of profits to productivity.
Wages and salaries are always measured against productivity, but profits are never so measured, It is alleged, with gathering frequency, that increases of wages and salaries have exceeded increases of productivity. It is the pat answer of the amateur economists, and sometimes even of the professional economists. No one says that increased profits and dividends have exceeded productivity, or relates the one to the other. Why should not profits be kept in step with productivity, if wages are to be so kept? Moreover, the work-people cannot really determine the measure of productivity. Whether production shall be more or less; whether new methods should be used, new equipment installed; whether the firm should go out for export business, or rest in the comfort of the home market; whether prices should be lowered to increase sales, and therefore increase production: all these matters are not decided by the workpeople, but by the management in the board room. And I am not complaining at that, for management
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must manage, except that adequate consultation facilities should be available.
But if productivity is too slow in relation to wages cost, then it is the function of management to find out why and to remedy the matter. And the same should go, my Lords, for profit. After all, profits are costs—the cost of the money used in the business. Only when the workpeople and management are in real partnership can this test of productivity be fairly applied to wages, and then it should also apply to profits. At present, under the edict of the Chancellor of the Exchequer, a condition of wages increases is to be applied which the workers themselves cannot determine—namely, the level of productivity.
My Lords, there is another factor, and that is that the measure of productivity can be reduced by Government action, as it has in each of the three crises within recent years. Steps were deliberately taken to slow down production by reducing demand until capacity became under-used or unused. Moreover, the Chancellor has said that many of our industrialists, under cover of high tariffs and like protection—higher, I think, than in any other industrial country—have become sluggish, slack and complacent; that some industrialists have rested upon the ease and comfort of the expanding home market to the detriment of our export trade. According to the Chancellor, what is needed is a sharpening of competition to wake our managerial and directorial people up. That is a pretty unflattering indictment. The workpeople cannot be held responsible for this failure to increase production or to expand the export trade.
Moreover, unwise as their policy of pause may be, assuredly its application is even worse. Large numbers of workers' wages increases are suspended without option, but with dividends it is optional—how optional the following figures will show. Wages are under a diktat, and dividends are under "by your leave". Since the wages pause and .the appeal as to dividends, nearly 800 companies have made dividend announcements, and nearly 100 of those have raised the dividend. They have not kept it as it was or reduced it, but have raised it. According to The Times of

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November 1, taking the first full three months since the "little Budget", fifty-two companies have restricted payments and seven have promised to do so next time. Optional forsooth! Fifty-two companies out of hundreds of companies which within the period have declared dividends. So it is one thing for wages and salaries, and another thing for dividends.
Mr. Lloyd said at the Brighton Conference that the response to his request for dividend restriction had been considerable. Fifty-two companies have done so, and there are seven promises of "next time", out of 800 companies who have made dividend announcements. If this is "considerable", I should like to know what would be inconsiderable. Really, in the mouth of Mr. Lloyd words would seem to have lost their meaning. Does the Chancellor imagine that this discrimination as between wages and salaries and dividends is likely to be a fertile soil for the growth of the co-operation of the workers and trade unions in Government planning? Is this the kind of planning contemplated: plan the workers, but appeal to the employers?
Then there are the other so-called remedies: reduction of public expenditure, which includes, of course, social service expenditure; bingo halls in preference to houses or schools. And who has been appointed to control Government expenditure, which includes, as I have said, social expenditure? Who, if you please? None other than Mr. Brooke, former Minister of Housing and Local Government. No doubt the Prime Minister said to the Chancellor: "Mr. Brooke is just the boy for this job". He has all the qualifications of a hatchet man. Did he not pass the Rent Acts which have rendered hundreds of families homeless and delivered thousands to the extortion of excessive rents, with eviction as the alternative? The much-vaunted free market in housing, when this Bill was heralded, has meant freedom to walk the streets, children in arms, looking for somewhere to sleep.
According to a statement made in another place yesterday, before the Rent Acts commenced operation the London County Council had 1,200 homeless families on their hands. Now they have
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3,000, and the number is increasing. It cannot be doubted that this increase is largely due to the operation of the Rent Act, which was to provide a free market in housing. Did not Mr. Brooke stop the housing subsidy for general housing, and thus shut down the provision of housing for thousands of young couples and others desperately in need of it. Did he not repeal the provisions of the Town and Country Planning Act, 1947, which would have given to the nation the increase in the value of land which arises from public and social expenditure and development? Did he not throw the principles of Uthwatt out of the window and betray those who gave their lives for freedom, notwithstanding that the Tory Party was committed to the principles of Uthwatt and joined, as part of the Coalition, in issuing the White Paper entitled Land User?
He was the man who "sold the people down the river". And this is the main cause of the high land costs, assisted, as I have indicated, by the decontrol of houses. The homeless, roaming the streets of London and other big towns and cities, are tragic witnesses to the achievements of Mr. Brooke, now Chief Secretary of the Treasury, formerly Minister of Housing and Local Government. Who better fitted for this shabby job of cutting down social expenditure? Having made people homeless, who is better able to make them jobless? Because that is what will be the result of the reduction of Government expenditure. Workers will become redundant—which means workers will become unemployed.
Circulars issued by Mr. Brooke, when he was Minister of Housing and Local Government, and by the Minister of Education are dismaying proof of the intention to cut wherever they possibly can housing, education and other social service expenditure. One can reflect upon the incident of the Kingsmoor Marshalling Yard, where, because there had been increased production and the work was in advance of schedule, it was proposed to stop it. Could anything have been more inept than that? What an encouragement to increase production, to say to the workers, "If you do increase production and get in front of schedule, you will lose your jobs!"

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That was the situation as regards that marshalling yard a few weeks ago. It is true that, under pressure of public opinion, certain modifications of the previous decisions were made. But what a crazy business!
In his speech of the 2nd of this month, my noble friend Lord Silkin referred to the absence from the gracious Speech of any reference to housing. That is so. It is a tragic omission because it is a tragic problem, more tragic than anyone here can realise, more tragic than anyone who has not suffered the absence of a home or place of shelter can understand or appreciate. But if there is no mention of it in the gracious Speech, it is not that the Government are neglecting housing. By no means—they never do when it comes to cutting down.
On August 10, very soon after the announcement about the "little Budget", the Minister, who was then Mr. Brooke, issued a circular which enjoined upon the local authorities that the total number of houses put into contract by local authorities during 1962 should be reduced below recent levels. Recent levels are pretty low, owing to financial considerations and otherwise. But what does this mean? At the present time local authorities are engaged in practically no housing activities, except in regard to clearing slums, providing for the elderly and for overspill in certain cases. So, if the level of expenditure is to be reduced, it means that the level of slum clearance will be reduced; it means that the level of providing for the elderly will be reduced. In short, it means that the marginal activity which is now financially permissible to local authorities will be reduced below the present level. And the circular issued by the Minister of Education is to the like effect.
In the course of the debate, the noble Lord, Lord Strathclyde, referred, a little testily, if I may say so, to the figures of the cost of sites given by my noble friend. The noble Lord went on to say that the cost of a site per dwelling was no more, or was less, than the cost of the linoleum for covering the ground floor. It is just as well that we should get the cost of land in the proper perspective. Accordingly, I have obtained some figures. They are, not perhaps unnaturally, limited to London. May I
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recall en passant the statement in the Press recently that the Islington Metropolitan Borough Council contemplated building 28 flats in Upper Holloway until they learned from the district valuer that the price of the land was about £100,000 an acre, and accordingly they had to drop that scheme, however desirable and necessary it otherwise was.
To show the effect of the Rent Act, as well as the effect of the emasculation of the Town and Country Planning Act, 1947, on the values of land, let me give these figures of the average prices per acre paid by the London County Council in the three years from 1951 to 1953, which was before those events, and from 1958 to 1960, which was after these events. The average per acre before was £12,900; after it was £26,100. In the three years, 1951 to 1953, the London County Council had to buy land amounting to 9 acres at a price between £30,000 and £50,000 an acre. In the years 1958 to 1960, they had to pay those figures for 73 acres. In the first three years, they bought two acres at a cost of between £50,000 and £100,000 an acre, and in the years 1958 to 1960 they had to pay between £50,000 and £100,000 per acre for 28 acres. Who will question the crippling burden which the policy of the Government has produced as regards land and as regards rents and housing?
This difficulty is not confined to London. It is proportionately as onerous and as desperate in the provinces. Land has changed hands in Luton and elsewhere at fantastic figures in relation to its value some few years ago.
Accordingly, my Lords, in conclusion, I should like to repeat that there is nothing in the gracious Speech which measures up to this malady of the economic system and condition in this country. There is an abundance of soporific words, such as
"the vigorous promotion of exports".
So the Government increase the limit on export credit guarantees, which is mere "chicken feed." Indeed, the Minister has told us in the past that credit requirements were not a material factor in our loss of exports. What the Chancellor has said is that behind tariff walls some business men have been laggards and sluggards, and the outside business world has commented to the like effect.
Then the Government are to
"seek the co-operation of both sides of industry in the better co-ordination of the national effort.…"
This is what the Government call planning. But the Government do not believe in planning: they believe in "setting the people free." They tore up the planned co-ordination and integration of transport; they have refused to co-ordinate the national resources with national needs; they have enthroned the doctrine of "Set the people free!" and left the economy at the mercy of what the Prime Minister described, if I may say so, in his more enlightened days, as "the ethics of the casino."
My Lords, the economy of modern society must be planned and regulated; it cannot work satisfactorily otherwise. But it must be real planning. It must not be notional planning; not artificial planning as a pretence such as the present Government have given us, to be scrapped and jettisoned at any time to win an Election. The Governments of the last ten years have produced a state of affairs which can only be called a Bingo Society". That, my Lords, is the crowning achievement of ten years of Tory rule. It is high time it was ended, before it buries our national estate and patrimony under the debris of its own misdemeanours. I beg to move.
Moved, as an Amendment to the Motion, to add at the end of the proposed Address: "but humbly regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation".—(Lord Latham.)
3.23 p.m.
LORD LUCAS OF CHILWORTH: My Lords, if politics and economics did not get inextricably mixed up I doubt whether there is one of your Lordships in the House this afternoon who would not go into the Division Lobby later on in support of this Amendment: because, if I may be permitted to say so, I thought the noble Lord who has just sat down, as the leader of the Opposition in this debate, made a telling speech. With respect, I did not agree with a lot of but there is no doubt that he uttered some very harsh but firm truths. If we look back upon the Government's
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economic policy over the last ten years, there is little of which they can be proud.
Where have we arrived? After ten years of Conservative Party rule we have arrived at a state where the only economic policy the Government have devolved is increasing taxation and the manufacture of unemployment—now called by the rather more respectable name of the "creation of surplus capacity". I remember, when your Lordships used to be in what is now Her Majesty's Robing Room, the noble Lord, Lord Balfour of Burleigh, who was such a pillar in the economic debates of the House, using an expression which affrighted me. He said: "Of course, what we want in this country is a little, tiny, wee hit of unemployment." I remember those words so well; they have stuck in my mind ever since. This is the doctrine to-day: going back to the 'thirties and creating a surplus capacity to see if you cannot bring wages down by creating conditions where, instead of having two jobs for one man, the curse of over-full employment, you can now swing it the other way and have two men for one job. That is the state to which we have sunk.
If your Lordships look at the record over these last ten years, you will see the mistakes and miscalculations that have been made. The Chancellor of the Exchequer got into hot water through admitting that he might have had responsibility for some miscalculation. I commend him. Why should not a Chancellor of the Exchequer enjoy the refreshment of telling the truth now and again? I see nothing wrong in that. I thought it was commendable. What amused me, rather cynically, and slightly nauseatingly, was the posturings of the Treasury to try to prove that the Chancellor never said it, and that if he did he did not mean it. The ordinary people of this country have a far higher degree of intelligence than the Treasury ever give them credit for. They are well aware of the miscalculations that have been made, and of the fact that in the last ten years Government expenditure to cover up many of these miscalculations has increased by 90 per cent., to over £7,000 million, and that the cost of living has gone up by 85 per cent. Those are facts that cannot

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be controverted. Whether or not the gentleman whom the noble Lord, Lord Latham, called the "hatchet man" (shades of another gentleman with an axe!) will go about it the right way, I do not know. He has my good wishes, but my grave fears with regard to his failure.
Attentively as I listened to the noble Lord, Lord Latham—and I assure him that I did—and while I commend him upon his speech, it did not stir in me the slightest confidence that the Party on whose behalf he was speaking could do any better. All they would do, I fear, is to go about it in a different way. And I have the unhappy feeling that they would arrive at precisely the same end. I think that that accurately represents the dilemma of the ordinary citizen of this country. The ordinary citizen is punch-drunk with slogans and policies: slogans such as, "We shall double the standard of living in 25 years". And when half of that time has gone by we are now told that the real trouble is that our standard of living is too high. We are told to work harder and harder, and earn more money; and then taxation is increased to take it out of our pockets so that we cannot have the benefit of it. Indeed, one slogan I have heard given out—whether it will beguile or "begull" the public I do not know—is that in a reasonable length of time the average remuneration of the artisan worker will be £1,000 a year. When it gets to that stage, I think that £1,000 a year may well be worth about £250.
So, my Lords, this is the difficulty. The difficulty in which we find ourselves is that people in my position say, "A plague on both your houses!" We must find something to instil confidence into the people, because even the best friends of the present Government have lost confidence that their economic policy is going to pay. I say this to the noble Lord, Lord Mills, who is to reply to some part of this debate—the "rough stuff", I expect, will come later. What we must do is to prevent this country and the workers in this country—by "workers" I do not mean the lower grades of worker, but all the workers of this country—from losing faith and confidence in themselves. We are having a very difficult time, and the only thing
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I have noticed that the Government have done to rectify the present unbalance of our economy is to increase the bank rate, an action which is criticised upon all sides and has brought "hot" money into this country to an embarrassing extent.
The Government have had to bring the bank rate down, principally, I think, at the dictates of America; and they know very well that they will not stop "hot" money coming into this country while our rate of interest is the highest of any country in Europe. It must come down another 2 per cent. to stop the "hot" money coming in. What is going to happen then? In an article in the Observe, of a week ago, headed:
"The borrower's road to bankruptcy"
the Economic Editor of that paper wrote:
"Would you borrow money from someone who may ask for it back at very short notice in order to repay another creditor who is willing to wait for several years? And would the transaction appeal to you any more if you had to pay through the nose for the money you borrowed, while the creditor whom you rushed to repay was charging scarcely more than a nominal rate of interest? You might well believe that somebody who ran his affairs in this way deserved to be nearly bankrupt.
"Incredible though it may seem, this is exactly how the Treasury has been behaving this month. Huge sums of 'hot money' have been attracted to this country from abroad by our absurdly high Bank Rate; and it has just been announced that we are going to repay prematurely £100 million of the money we borrowed from the International Monetary Fund in the July crisis. The main purpose of this move is to mollify the Americans, who do not like to see British reserves rising at the expense of a rather shaky dollar. But has no one noticed that we are repaying a debt that we were not required to pay for another three to five years and are once again filling our reserves with 'hot money' which can leave this country within a matter of weeks? A few more such transactions and there will be little but 'hot money' in our reserves."
The only other prong in the Government's attack upon this unbalance is a wages pause, which is already getting a bit moth-eaten and will go, I should imagine, by all the signs and portents, about next April. In fact, one Minister of the Crown has just made a weighty pronouncement that we can expect to see its end before July next.
When bank rate is down to 4 per cent., as I think must happen, and when the wage pause is over, what happens then? Will the noble Lord, Lord Mills, tell me? Does the "rat race" start

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all over again? If the Government are afraid that unless they have a high bank rate spending will start by increased borrowing, what is going to happen then? Are we going to have another cycle of inflation and then another pause of some kind? With all the good will in the world, I cannot imagine—and I say this with great respect—that the modern Treasury have a clue as to how to rectify the economy of this country. Yet our economic difficulties and our policy are easy to state—they can be stated in one sentence. The greatest problem of this country, and the only answer to our economic difficulties, is to sell more of our goods abroad. Berlin is not a problem. We have no problem except that one thing: we shall have to increase these exports or starve.
How are we going to do this? Let us address ourselves to that problem. We are told authoritatively that we must increase them by 10 per cent.—a high figure, your Lordships will say, but I have heard a higher one quoted. Our invisibles have gone, and in this modern world I cannot see that they will come back again to any great extent. Yet they were our prop and our bolster in the inter-war years. What is the basic truth as regards our lack of exports? We have exhortations that our salesmanship abroad is bad—and maybe there is something in that—and that credit is not prolific enough; and there may also be some truth in that. But the fundamental basis is that our costs and prices are too high. Do not let us lose sight of that fact. Government spokesmen who parade around the country exhorting people to do better are just trailing red herrings.
Let us examine for one moment the Government policy as regards the cost to British industry and price. During the winter months, from September to Christmas, it has been a habit of mine all my life in industry to spend what is commonly known as "the knife and fork season" in going to dinners—dinners that are usually graced by Cabinet Ministers. Their utterances are illuminating. They all add up to what the Government call "policy". I was at a dinner the other night when the Minister of Transport told his audience—it was an audience of shipbuilders and shipowners
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—quite frankly that he would do nothing to stop the British shipowners from getting ships built abroad if they could get them built more cheaply. I found nothing wrong in that statement. But a day or two before the Board of Trade had denied the British steel industry the importation of cheap coal which would have allowed the steel industry to bring its costs and its prices down. In a simple way, I thought, "Where is the policy there?"
Then in the "little Budget" we had the amazing thing happen that the hydrocarbon oil duty was put up 2d., which has had the gravest effect upon those industries, the steel industry, the engineering industry and the chemical industry, which collectively embrace two-thirds of the total volume of our exports. I suppose if I asked the Chancellor why he did this he would say: "Well, I wanted the money to put up taxation receipts; and, after all, the coal industry could do with a bit of a boost "—because that is the only reason it was done. But then, immediately afterwards, we bring in natural gas, which is not going to reduce our costs; and now I hear we are going to shut down a large number of coalfields in Scotland. And all this, my Lords, on top of trying to push £18 million down the throat of the Cunard Company and losing £800 million that is now going to be written off by the process of a Bill that is going to be introduced into another place, the loss through imprudent and incompetent Government administration. This adds up to a policy which is to help the British producer get his costs right down underneath that of his competitor!
Now, my Lords, if we take the other side, I quite agree with the noble Lord, Lord Latham, that we have not got out of our system in industry in this country those terribly restrictive days in between the two wars—when a producer always wanted high prices on low output, when he wanted to make a lot out of a little, instead of a little out of a lot; and on the other side of industry the slogan was "Don't work too hard because you may work yourself out of a job". Restrictive practices got right into the being of British industry, and they have not yet got out. That is the trouble, and I say this deliberately, to see if I can court again the remark of the noble Lord, Lord Mills, because

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when I was speaking in a previous debate in your Lordships' House and I said something to the effect that one of the troubles is that managing directors of British industry become fossilised, he thought I was being very harsh; but, of course, I know that to talk of old age in your Lordships' House is heresy.
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM): No, just tactless.
LORD LUCAS OF CHILWORTH: It is about time somebody was tactless and that this was said, because it is true. You cannot expect to project British industry into the competition ruling at the present time when it is directed by men who were nurtured in these restrictive eras before the war.
I am very glad to see that after he has had the shock of the shelving of the replacement for the "Queen Mary" the chairman of the Cunard Company has had what I think they call a "shakeout" and a streamlining of his board. But their troubles go right through the whole of the British shipping industry, and one of the troubles is that it is antiquated. And not only is it antiquated, but it is stopping the bright brains from underneath from coming up to the top. Look at one of our greatest motor-car businesses, a concern that has risen through the brains of one man, Sir Leonard Lord, who has now decided at the age of 65 that it is time he stopped down to make way for younger men. In the shipping industry it is nearer 80 years of age; and that is one of the things we have got to cure.
Then I read in the papers of chairmen of companies whining and groaning about the diminution of margins. But is not that of the essence of private enterprise, together with competition and fiercely competitive market? Do they think they are going to maintain, in the time that is coming ahead, the margins they had in a 100 per cent. seller's market? If they want to learn something of the diminution of margins, let them wait until they get into the Common Market; then they will have something to learn, and they had better start their apprenticeship now. I was brought up in industry and taught always to make a little out of a lot. In other words, there is only one way: that
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is, to bring your prices down and to put your volume up. That is the thing we have to learn in the times that are coming ahead.
Now in a last word or two I should like to say that I believe your Lordships know—and I hope the noble Viscount the Leader of the House will take note of this, because I say it with sincerity—that one of the main obstacles in his generation and mine to the real and continued expansion of the high standard of living in this country is that our taxation system is archaic. That is one of the reasons; and it can be summed up, in perhaps what the noble Viscount will think is an over-generalisation, by: tax spending, yes; tax earnings, never. That, of course, one cannot quite do to-day, but what we must do is keep on thinking of what incentive we can give everybody to produce more. If any of your Lordships know a better incentive, an incentive to increase a man's prosperity and his mode and way of life, I should like to hear about it. We have to do that with exports. Do not tell me that we are the only country in this world who cannot find a method of giving the exporter an inducement, an incentive. We must do it. We cannot go on as we are, because all the time the Government have been maturing their policy it has not increased our exports one cent. Is that success or failure? And if you fail you have to try something else.
My Lords, I was talking just now about restrictive practices. Let me pay tribute to the Government for the courage they had in bringing in the Restrictive Trade Practices Act. That has done an enormous amount but, as I pointed out to the noble and learned Viscount who sits on the Woolsack—and he will remember our battle at arms when I was speaking from that Dispatch Box—you nullified considerably the good you did then by leaving in the individual price maintenance provisions. To-day, in spite of the magnificent work of the Restrictive Trade Practices Court, there are restrictive practices going on in industry in this country that are startling and alarming. And, my Lords, if you want to start with greater competitive freedom, start at home before

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you start abroad. To-day we have restrictive-minded producers, and two or three big ones in one industry can ruin the efforts of all.
I come finally to the Common Market, and I am not going to say much about it because I am not sure that the noble Lord, Lord Latham, did not bring this into his speech. I am convinced that the only hope this country has for economic salvation is to get into that Common Market as soon as it possibly can. To me, it is not a real world when people talk about a Commonwealth free trade market. If the Commonwealth will give us a free market into their countries I will start thinking about it. But I will not even start until they have done that—and I know that that is impossible. I would say this to the United Kingdom Government: please realise at long last that, after all the things you have done for all the countries in this world, black or white, right from the war and before the war, there comes a time when you should do something for the benefit of the United Kingdom citizen.
LORD AMWELL: My Lords, before the noble Lord sits down, may I add a point? I shall not take more than a moment. In all these debates upon the "export or perish" theme it is remarkable that the possibilities of British agriculture on scientific lines are never considered. Has the noble Lord considered the fact that an increase of 20 per cent., or 23 per cent., in agricultural production in this country would practically wipe out the whole of our adverse balance of payments? And has he considered the debate that took place at the last convention of the British Association for the Advancement of Science, in which it was shown that it was quite possible to increase, by direct and scientific methods, agricultural production in this country by 50 per cent.?
LORD LUCAS OF CHILWORTH: My Lords, I must confess that I have not. I study many things that scientists and economists say, but I come to the end of it all and I do not believe half of it.
3.54 p.m.
LORD MORRISON OF LAMBETH: My Lords, I rise to support the Amendment which has been so ably moved by my noble friend Lord Latham in a
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speech which, for clarity, penetration and understanding, I thought was very excellent indeed. I have listened to the noble Lord who has just sat down. I must say that when he rose I was a little apprehensive as to what he might say, in view of the fact that he has changed his geographical position in this House, but I am happy to say that, as a whole, it was a speech which suited us very well. He had a little dig at my noble friend Lord Latham; but what is the good of sitting on the Cross Benches if one does not have a tap at both sides of the House in the process of making one's speech? But, as a whole, his was an able speech indicting Government policy, and I think it was useful in general from our point of view. So, although the noble Lord has shifted his geographical position, he has not gone very far wrong and there is still hope for him as the days and weeks and months go on.
My Lords, we are debating the economic situation of the country, and I would emphasise once again that we are debating it after ten solid years of Conservative government. This is a Government which cannot say, "Well, give us a chance. We have only just come in after the Socialists were in power." They have had ten years since the Socialists were in power and, with respect, I think in view of the particular difficulties we had to meet, inevitably, following a great world war, we made a better job of handling the national economy than this Government have done. The Government have had ten years in which to ensure that the economic situation was good, and they have not done it. Crisis has followed upon crisis; difficulties have followed upon difficulties, and there is still no coherent Government national economic policy. And, what is worse, there is still no coherence of general view on the problem among the British people in the national interest. I wish there were.
When we read the gracious Speech of Her Majesty on the economic aspects, we find that really it makes no contribution either to the situation or to the intentions of Her Majesty's Government in economic affairs. It says:
"My Ministers will continue to direct their policies towards maintaining the stability of sterling."

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But it does not say how. It says:
"They will seek to strengthen the balance of payments by the measures already announced, including especially the vigorous promotion of exports"
But it does not say how. It says:
"My Ministers will continue to seek the co-operation of both sides of industry",
and it still does not say how. Then it says:
"They will seek to keep public expenditure within limits justified by the national resources. Continuing efforts wilt be made to secure a better relaionship between increases in incomes and in national productivity."
It is an excellent sentiment, but there is no indication as to how they are going to do it.
We have followed the debates in another place; we have followed the speeches of Ministers in the country at those dinners to which the noble Lord, Lord Lucas of Chilworth, has just referred. I have been to many of them in my time, but not to more than was necessary in the public interest. They can be very bad, time-wasting affairs, especially for hard-worked Ministers. But I have read the speeches made there; and still there is no clarity, no indication of how they are going to handle the problems and of what ought to be done, not even a clear indication to the public at large in all sections of society as to what their contribution to the easing of the national economic situation can be.
This, I say, is a failure of leadership; it is a failure of government. Because what are the Government paid for?—and in the aggregate they are paid quite a lot of money, especially now that they have started double-banking Ministers. If we do not look out, the House of Commons will have a majority of Ministers in it, which would be very bad constitutionally. They cost a lot of money. I am not saying that they are over-paid, but they are much better paid than when I was a Minister of the Crown. That is just too bad; it was my bad luck. But they are paid in order to examine and to seek to solve the national problems, and to give guidance and leadership to the country as a whole as to how the private individual in all classes and all sections can make a contribution to their solution; and the Ministers are not doing it. They are just not doing it. Ministers are not earning their keep. They ought to have their pay cut or stopped until
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they can do their job. Or, if they do not know how to do their job, they ought to resign—for which there is a lot to be said. Let us hope that the country would be sensible enough to return a better Government of another colour.
My Lords, the basic fact is that the only way the nation can live, the only way in which government can be successfully carried on, is on the basis of production. Economic production carries everything: it carries wages and salaries; it carries dividends; it carries the costs of government, including defence. All of it depends upon production. And economic production, when we consider it in relation to defence, is part of the military defence of the country and the free world, because if we are hard up, if we go broke, then we cannot afford to maintain adequate institutions of defence. That is why the Communists often promote disputes injurious to the economy of the country: they want our country to be economically weak just as they want the Communist countries to be economically strong. Therefore, the aggregate of production, the amount of production, is a vital consideration in all these matters, whether it be personal incomes of any sort, social services, education, the cost of government or defence. It is production which is at the basis of it all and without which we cannot get on.
But it is not only the amount of production which is important; it is also the cost of production. If our costs are unduly high, through bad organisation or bad management or whatever other reason, if that be so, then our prices are going to be higher, and that has two effects. One, it is damaging to us in the export trade, which is absolutely vital to us because of the balance of payments—and I agree with the noble Lord who has just sat down. One is worried about the invisibles; they used to be a material part of the balance of payments and they have much diminished. Therefore, the cost of production matters in relation to the export trade, and the Government ought to be actively interested in the cost of production. But it is also vitally important in relation to the cost of living, and the cost of living has all sorts of repercussions. The cost of living is high; it is much higher than it was years ago. None of us is proud of the fact that the pound to-day is worth only about one-

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third of what it was before the war. I am not making pleasure out of it; I hope I never will make happiness and pleasure out of the economic difficulties or sufferings of my country. I do not. I do not like this cost of living going up. It leaves everybody uncertain as to where they are. It leaves incentives to try to take more out of the economy than one puts into it.
Of course, the cost of living did go up, partly by the action of malice aforethought by the Conservative Government when they came in, when they slashed and cut the food subsidies. That was an arguable and controversial thing, but they did it deliberately; they stopped the collective importation of Commonwealth produce, and they knew that these things would increase the cost of living and increase prices. They knew it. They did it with malice aforethought. The inevitable consequence of that was that the trade unions put in applications for better wages, and the managing directors and the higher executives in industry put in applications for higher salaries, and they got them. Then the Government complained that the unions were inflating the economy; but the Government incited, almost compelled, the unions to put in applications for wage increases because the Government had deliberately increased the cost of living.
I am in favour of everybody, of whatever class or section of the community, making what contribution they can to the economic wellbeing of the nation. I want the employers to do it, the managements to do it; and I am a trade unionist and I want the trade unionists to do it, too. And, believe me, there is no fundamental lack of willingness on the part of the Trades Union Congress to play their part in these matters, as I am sure will be confirmed by my noble friend Lord Citrine. But they must be given a chance to do it; they must be given a fair opportunity to do it. Some years ago I sat for a few years on the Economic Committee of the Trades Union Congress as a co-opted member, and it was one of the happiest experiences of my life. I never met in politics a body of men who were so concerned about the wellbeing of the country, especially the wellbeing of the working people of the country, naturally—that
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is what they are for. But I heard them argue, and they never became abusive with each other, which can happen in politics even within the same Party. We have heard it on both sides of politics. They could argue, and they would talk and argue reasonably, rationally, until they had talked themselves into agreement. And, after several of these meetings, I thought, "My goodness! If this lot were the Cabinet of the United Kingdom the United Kingdom would not be badly served." They really were jolly good, and those men had the interests of the country at heart. So the good will is there; the willingness is there.
Nor have the Trades Union Congress taken the line that they would not co-operate with the Government because they were a Government of the wrong colour. Indeed, directly the Conservative Government were formed the T.U.C. issued a statement saying they would be willing to co-operate with that Government despite the fact that it was of another colour, provided the Government were co-operative with them. That was a pretty courageous thing to do soon after the defeat of the Labour Party at a General Election. But the Government have been sticky; the Government have been doctrinaire, dogmatic. The Government have been stick-in-the-mud; they have held to their dogmas. It is only within recent months that the Government have begun to use the word "planning", and even now that they have begun to use the word we do not know what they mean by it, and I do not think they know what they mean by it.
That brings me to another point. The Chancellor of the Exchequer has said that they are willing to set up a national planning authority with a sub-stratum of officers or other people doing the hard work under the National Planning Council, or whatever it is called. That is not a bad set-up. I would only say that in this body not only should there be civil servants but there should be some good and competent and broadminded economists from the universities and otherwise, and there should be some able trade unionist officers interested in economic affairs, who are to be found; I have heard them talk and argue in the Economic Committee.

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But what the Chancellor of the showing a willingness to co-operate. But Exchequer has not told us in any detail, so far as I know, is what the function of this body is to be, whether they are to be decisive or whether they can be over-ruled by the Government; and I am not dogmatising about that, because, after all, we have parliamentary Government. We do not know what its functions are; we do not know what its terms of reference are going to be, so far as I can recall. Well, my Lords, this is really terrible. It is difficult for the trade union leaders to pronounce upon their willingness or unwillingness to join any body which is so vaguely described, and you cannot blame them for being cautious and going back and wanting to think again. Therefore, I say that the Government must be willing to concede that the Government have a right and a duty in a broad way to plan, to inspire and to lead in the use and application of the economic resources of the country. They must not preach only to the trade unions the undesirability of wage increases—I follow their argument—but they must preach to the employers and, if necessary, compel the employers to be moderate in their dividends.
We read frequently in our newspapers that some body has declared this year a bigger dividend than they did last year; that some have declared a dividend of 20 per cent., 25 per cent. or even more. How is this going to affect the psychology and the mind of the average trade union workman? Do not forget that the average trade union workman in a large proportion of cases has a wife. Wives are influential people. They read the newspapers, too! This kind of thing is an incitement to the unions not to be as reasonable as even I would wish them to be in these matters.
But if we have a situation where the Government are really guiding the national economy right the way through —I do not call it bureaucratic regulation, mere regulation for the sake of regulation or control for the sake of control, which I would not wish; but control where it is necessary in the public interests, planning where it is desirable in the public interest, ensuring that there are going to be fair do's in personal incomes between the various classes of society—then we shall, I think, rightly get a response from the trade unions, an answer from the trade unions,
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showing a willingness to co-operate. But this is a two-way traffic. It cannot be a traffic that goes one way alone; it is a two-way traffic. The test of all these policies and the test of every section of the community is, really, what is good for the nation, the willingness to serve the national wellbeing that I want to operate among every class of the community.
We are to have a reply quite soon from the noble Lord, Lord Mills. I hope that he will not skate thinly and artistically over the surface, but that he will come to grips with the points that have been raised by my noble friend Lord Latham, by Lord Lucas of Chilworth, and by myself. After all, the noble Lord, Lord Mills, worked under me in war time as an officer in the Ministry of Supply. I put him in charge of machine tools, I think, which was a difficult element in war production. We were short of them. What did he have to do? It is true that there was a war on. But there is a war on now for the economic survival of our country. He had to plan the use of machine tools. He had to inspire and stimulate greater production of machine tools and even to import steel now and again in order to get them. But it was planning, it was organisation, which the noble Lord did well and competently—under my inspiration and guidance. But he did it well. He and I will never forget that we were in years past master and servant together—and, thank God, I was the master.
My Lords, I beg of the noble Lord, Lord Mills, to remember those days and to keep them in his heart and mind whilst he is replying, and not to be afraid of this idea of planning within legitimate limits, of controlling within legitimate limits. Let him give us rather more information than we have, unhappily, yet had from Her Majesty's Government, so that the whole country may know what is the problem and what are the Government's ideas for the solution of the undoubtedly serious economic problems with which our beloved country is faced.
4.15 p.m.
LORD GRANTCHESTER: My Lords, for those who are free from responsibility in Government the role of critic is easy, and noble Lords opposite know that I try to remember this. But there are

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times when a protest must be made. I agree largely with what the noble Lord, Lord Morrison of Lambeth, has said. Although with the noble Lord, Lord Lucas of Chilworth, I do not feel that the Amendment before the House is happily worded, and although I do not agree with some of the remedies which noble Lords on the Labour Benches are suggesting, I think the strongest protest is justified in the face of the pious platitudes which are contained in this statement of Government policy. These platitudes are calculated, if not designed, to lull a people, already suffering from frustration, into apathy and inertia. So on general grounds we shall register our protest from these Benches by supporting the Amendment.
In my view, this document strikes a completely wrong note. What is the impression it creates?—"Leave everything to your high-minded Government and all will be well. Your average wage, as the Prime Minister said recently, may to-day be £15 a week, but soon it will be £20". As we know, with such pronouncements, the qualifications put in by the speaker are usually forgotten by those who repeat them. In the gracious Speech there is no appeal to the individual citizen, no indication that only with his co-operation can any Government achieve very much. It is enough to make us feel that we should go out and sit down, make a nuisance of ourselves, demonstrate that we, as individuals, matter and should be taken into account.
Is there not much to be done? Why, then, not a call to work, to special effort to overcome some of our troubles?—for instance, the shortage of homes, particularly for those who have several children, a matter to which the noble Lords, Lord Silkin and Lord Latham, have referred in moving terms. Could we not come to believe, as the Germans are taught, that work makes life happy? Why not a decision to renounce voluntarily for a period, at any rate in the building trade, all restrictive practices and provide a little interest-free money, by subscription, in an effort to remove some of the sufferings caused by the existing shortage?
In spite of the wickedness of the world—when I say "wickedness", I
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mean the unkindness, man to man, and the envy, a lot of which is stirred up, perhaps without deliberately meaning to do so, by making comparisons between one man and another; nor must we forget that the professional classes, who are least heard, have suffered more in their standard of living since 1939 than have the wage-earners in industry—in spite of the meanness and the cruelty of man to man, without reason, there is much which is exciting and of absorbing interest to-day all around us. Cannot the Government tell us something which might generate a little enthusiasm that could be infectious, that could raise in us a little curiosity, or make us feel that we have a stake in the country and a part in what is going on? Some of the noble Lords from the Labour Benches, though not the noble Lord who has just sat down, were even more depressing than Her Majesty's Government in the gracious Speech.
Look, my Lords, at what we are told in this statement of policy: "East and West", "My Government are trying", et cetera, et cetera—the old story. Is it not time that we grew up and used words that mean something? Could anything be more uninspiring than "the West" as a description of what we value in life? In days gone by, the West was Christendom, and that meant something. And cannot we pluck some hope, even, from the East? Is there not an awakening, in some countries from sloth, in some countries from sleep or meditation? Is there not the flicker, and often more than a flicker, of light burning in some of the worst areas, in spite of persecution, that should put some of us to shame?
My Lords, could not the prospect of helping to build a comprehensive European Community be made a little exciting? What progress, may I ask, is being made in our schools with the teaching of a second language? How many are leaving our secondary schools with a working, conversational knowledge of Italian, of French, or of German, which is necessary if we are to play a part in the Common Market? I should like to congratulate the Lord Privy Seal on the success that he has had in his approach to the Community. In a very difficult atmosphere he seems to have convinced the doubters among

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the Six of our sincerity and good intentions. I hope he will be allowed to continue the negotiations without too much interference from the new "set-up" in the Cabinet Committee.
But surely what is exciting in this matter of the Common Market is the political implications—something which I think should be particularly interesting for the young to think about. Yet the political implications of the Common Market are being kept in the background, and the Government are keeping us quite in the dark on this matter. In the Preamble to the Treaty of Rome, the six signatory Powers state very clearly
"their determination to establish the basis of an ever-closer union between the peoples of Europe."
The union envisaged and the community to be created goes far beyond an economic adjustment, a commercial agreement. Professor Hallstein, the head of the Commission of the European Economic Community, wrote in June last:
"The political union of the six Member States is under active discussion."
And again:
"Economic integration must be seen as part of a wider process. It has not been conceived or put into practice as an aim in itself."
Here, surely, is something of great interest. The form union should take would make a very exciting study by the people of this country, and is something Which should be brought out into the open.
My Lords, the gracious Speech refers to the Government's efforts to secure
"better co-ordination of the national effort with a view to promoting faster economic growth…"
If we had been told a little more about this and about the Government's plans, as the noble Lord, Lord Morrison of Lambeth, has said, we might find this very interesting. In the view of the Labour Opposition, this paragraph heralds the conversion of the Government to their idea of "a planned economy". The remarkable upsurge in the French economy during the past four years is due, so they say, to planning. I think we need a little more information before that sort of statement is accepted. In general terms, I would agree that planning for oneself and for a business
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for which one is responsible is good; this is but sound sense: but planning for other people is usually bad.
Now the French method, as I understand it, is to allow the principal industries to work out their own plans, and then to get them together so that a number of individual plans may be looked at together. Any plan can, if necessary, be modified by those who have prepared it in the light of what others are planning to do and in the light of the wider information that becomes available in a general discussion. For instance, in this discussion it is possible to encourage some industries to seek a larger investment, and others to switch their plant to new, anticipated, demand. Finally, these individual plans are put together and called "the Plan". This sort of co-operation is useful and sensible. It enables a Government that sits in to lend a hand in certain developments where such assistance is considered by all to be generally beneficial or, at least, acceptable to all the industries represented. Done thus openly, the charge of discrimination, such as was made against some of the assistance offered to British industries by Her Majesty's Government, is avoided.
But what is most important in the French Plan, as I understand it, is that it is a co-operative build-up by those who have to implement it. It is certainly not "dirigism" or "unpredictable intervention" which, at all costs, these who believe in a free economy want to avoid. Such a preconcerted development plan appeals to a logical nation like the French, who, because they are, above all, individualists, would not allow any plan to be imposed upon them. But, when all this is said, the credit for the French recovery during the past four years is not due to the Plan, but rather to the existence of the basic conditions in which the plan can work. For example, there was the introduction of the new franc, a reduction in subsidies, and the policy of liberalisation of trade, which have established general confidence in the French economy.
The gracious Speech also mentions public expenditure, which
"is to be curtailed within limits justified by the national resources"—
whatever that means in pounds, shillings and pence. It seems to me extremely flexible in the way it may be

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interpreted. What has happened, may I ask, to the Committee set up by the Chancellor of the Exchequer to oversee and curtail Government expenditure? Reference is also made to maintaining the stability of sterling. In the past three or four months we have had to borrow no less than £850 million from the Bank of International Settlements and the International Monetary Fund, of which, I think, some £750 million is still outstanding, to maintain the position of sterling. Why keep the public ignorant of such facts and expect intelligent co-operation from our people? Why is there not a little more done to explain the seriousness of the country's position, when the Government know we are in a jam?
Bearing on this question of stability and sterling, I think there is a growing awareness of the danger inherent in the gold-exchange standard. It has since the war provided a sense of security which, with the weakness of the dollar, is now seen to be resting on an insecure foundation. I think the reason for the United States Treasury taking up a Swiss loan a few week ago was to get additional support for the dollar. This is very significant when you remember that the reserves of so many countries are held in dollars. What the resultant effect of a devaluation of the dollar would be is almost beyond thinking about.
The noble Lords, Lord Latham and Lord Lucas of Chilworth, referred to the menace of "hot" money. I wonder how much the flow of "hot" money is assisted by the misuse of aid which is given to some of the less industrialised countries. It would be interesting to know the sources of supply from which some of this "hot" money originates. There is fairly widespread agreement that there should be a return to some form of gold standard, but possibly not much agreement as to the basis on which it should be done. As Monsieur Rueff has suggested, this matter needs urgent consideration. Perhaps an internationally recognised standard could be worked out by O.E.C.D., and put into operation among members of O.E.C.D., who should be prepared to submit to the necessary discipline of a common standard.
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In concluding, I want to go back to the theme on which I started: what is it that is sapping the energy and initiative of so many of our people? I believe it is—as it always was—the great concentrations of power that take the "go" out of people, until the people are driven to fight back. There have always been "dragons" to kill. A crusade against dragons can be both inspiring and exciting. And what are the dragons of to-day? I think they are the ruthless taxation machine; the tyranny of some too-powerful trade union organisations, which, if not always in evidence, is there in the background; it is the pressure exercised upon the individual by powerful bodies, such as the National Farmers' Union and some multiple trading businesses in fields on which, owing to restrictions, the individual trader has not got a fair chance to compete and to survive in competition. I am sure that if the Government would watch a little more closely and take action against any abuse of power, from wherever it comes, whether exercised by their Ministries or by other organisations, we should remove much of the frustration which is holding this country back. Let Her Majesty's Government concentrate on creating the conditions in which each individual can—and, because he feels something in himself, is willing to—apply his energy, his enterprise and initiative to meet the growing demand of consumers, particularly those with low standards of living, in the knowledge that by so doing he is performing a valuable service to his neighbours.
4.38 p.m.
THE MINISTER WITHOUT PORTFOLIO (LORD MILLS): My Lords, just a week ago we had the pleasure of listening to the noble Lord, Lord Melchett, and the noble Lord, Lord Amherst of Hackney, who respectively moved and seconded the humble Address in reply to the gracious Speech from the Throne. To-day we have heard the noble Lord, Lord Latham, introducing the Amendment which appeared on the Order Paper in the name of the Leader of the Opposition, the noble Viscount, Lord Alexander of Hillsborough. When the noble Viscount addressed your Lordships on Wednesday last, he expressed the good will and the best wishes of this House

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to Her Royal Highness, Princess Margaret, and talked about the many services which she has rendered to the State. I am sure you would wish that our congratulations go out to Princess Margaret on the happy occasion of the birth of her son.
SEVERAL NOBLE LORDS: Hear, hear!
LORD MILLS: My Lords, I feel sorry for the noble Lord in his task of moving this Amendment. He had a very difficult job in trying to build up a picture of what he described as the "Bingo State". He used every illustration he could, whether it was typical or not typical—I will not say whether it was true or not true—without any regard at all to exaggeration. For example, he said that the orders taken by the machine tool industry in August had shown a reduction. What does he expect in August? Is it not the common experience of us all in all trades that we suffer a diminution in August? Most people are away in August.
LORD LATHAM: A reduction as compared with the previous August.
LORD MILLS: The noble Lord did not say that, and therefore people can draw the same conclusion as I did, that he was using an exaggeration to illustrate his point.
I was very sorry to hear his criticism of my right honourable friend Mr. Henry Brooke. I think that it was undeserved. Mr. Brooke is most sincere. He has carried out an increasing housing programme, in my view, with great skill. He has laid upon the authorities as the noble Lord said—but he said it to criticise Mr. Brooke—the task of dealing with slums and overspill. At the same time, he has reserved for them a considerable amount of housing. In total, housing continues to show progress. My noble friend Lord Lucas of Chilworth sent his good wishes to Mr. Brooke. I was grateful for that. But he criticised the Chancellor of the Exchequer. He said that the Chancellor should enjoy telling the truth now and again. I have never known the Chancellor of the Exchequer guilty of misleading anyone or of departing from the truth.
LORD LUCAS of CHILWORTH: My Lords, I am sorry if the noble Lord took that as what I said. What I said was in adulation, "Why should not the
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Chancellor enjoy the refreshment of speaking the truth now and again?"
LORD MILLS: My Lords, I can only suggest that the noble Lord should read the OFFICIAL REPORT when it is available to-morrow. The noble Lord, Lord Morrison of Lambeth, attacked all Ministers. I suppose we can put up with that. The noble Lord, Lord Grantchester, did not attack any Minister. He attacked the whole Conservative Party. And he warned us beforehand that he was going to vote for the Amendment.
The noble Lord, Lord Latham, in dealing with the Amendment, covered a wide field. "Is there no recession?" was the theme of his speech.
VISCOUNT ALEXANDER OF HILLSBOROUGH: A very good one.
LORD MILLS: It may have been a very good one, but there is no recession in the sense the noble Lord was trying to convey to the House. In other words, as I will endeavour to show the House, the Chancellor's moves are beginning to work. They are intended to work, and we should have been disappointed if they had not. They are not throwing men out of employment, as was alleged. They are having some effect where they are intended to have effect and making room for exports.
The noble Lord, Lord Lucas of Chilworth, said: "A plague on both your houses", but he did not suggest anything in place of both our houses. I did not gather whether the noble Lord was going to form another Party or whether, as someone said the other day, he was going to leave the people to choose between a Government which might not be popular—no Government is ever popular—or Socialism, which they dislike. The noble Lord said certain things which appealed to me. He said that the real problem is to sell more goods abroad. And I could not agree more. He talked about restrictive practices, which to some extent were preventing our doing that. He also said something about the British shipping industry which I should like to take up. He said that it was full of antiquated thinking. Well, there may be people in the shipping industry who are antiquated, and people who are antiquated in their thinking, but there are certain firms in

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the shipping industry of which the country can be proud—
LORD LUCAS OF CHILWORTH: Agreed.
LORD MILLS: —and I should not like it to go out that the shipping industry is effete and unable to compete, because it is not true. Among the shipbuilders are some very good firms indeed.
The noble Lord, Lord Lucas of Chilworth, and the noble Lord, Lord Grantchester, referred to the Common Market. I was glad to hear that both of them support our intention to see whether we can gain entry into the Common Market on acceptable terms. The negotiations start to-morrow. The Government are going into them in a positive spirit and with the intention, if we gain entry into the Common Market, of making it a success.
I was interested in the speech of the noble Lord, Lord Morrison of Lambeth. He made a speech which I thought was very helpful. I have always found the noble Lord helpful. As he said, I served under him during the war. We had some battles in which he stood behind me, and I am very appreciative.
LORD MORRISON of LAMBETH: My Lords, may I thank the noble Lord for that reference and say that I forgot to mention that I had another subordinate in the Ministry of Supply, one of the Parliamentary Secretaries, named Harold Macmillan, who has become Prime Minister and First Lord of the Treasury? I must say that "my boys" have done well for themselves.
LORD MILLS: My Lords, I do not deserve to be classed with the Prime Minister, and I am sure the noble Lord did not intend that. His speech this afternoon was what I should have expected from him. Of course, he had to attack us as Ministers; but he said that government can be carried on only on the basis of the production achieved, in terms both of its amount and of its cost. He said that the cost element in our production is vital to our exports and to our cost of living. I think that that is perfectly true. Then the noble Lord gave us a picture of how we should all put our heads together to improve the economy. That, of course, is just what the Government are seeking to do.
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When I come to the terms of the Amendment:
"but humbly regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation"
I would suggest that its general wording seeks to prejudge adversely the effect of the steps which have been taken by Her Majesty's Government. These were designed to prevent certain developments in our economy which were bringing about an inflationary situation that could wipe out the undoubted benefits the nation has experienced under the present Government. I would remind your Lordships that there has been a great improvement in the standard of living in the past ten years; an increase in real earnings of about one-third, quite apart from the expansion and improvement of the social services. If we are to continue these benefits there must be a more co-ordinated and effective attack upon those matters which are obstacles to a continuous growth. I do not think any of your Lordships would object to that.
There are fundamentally two problems which were giving rise to anxiety and were weakening confidence in our ability and our resolve to overcome them. The first was the pressure from home demand upon our resources, and the second was the pressure from earnings of all kinds—wages, salaries and profits—and I agree with the noble Lord about profits which have been rising to an extent out of proportion to our increase in national production. As a consequence, last summer our economic situation had become unsatisfactory, both as regards the external accounts and as regards the domestic economy. The measures taken by the Chancellor of the Exchequer in July last were in part intended to cope with the immediate strains at home and on sterling, and in part directed to a more fundamental improvement of the health and competitiveness of United Kingdom economy.
The balance-of-payments situation had been deteriorating. In 1960 there was, as your Lordships know, a large deficit, though its impact was not felt at the time because of the large inflow of short-term funds. Although the balance of imports and exports improved considerably in the first half of this year, the underlying position remained unsatisfactory and made necessary the remedial

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measures introduced by the Chancellor of the Exchequer. The result was an immediate and striking effect on confidence abroad in sterling from the announcement of the July measures and the large drawing from the International Monetary Fund which took place early in August. The sterling exchange rate improved immediately, and has remained strong.
Funds began to return to London, and after allowing for the International Monetary Fund drawing and repayment of debt under the Basle arrangements, there was an appreciable increase in the reserves in both August and September. The capital outflow of the preceding months was reversed and £100 million of the International Monetary Fund drawing has been repaid. It has been possible, as your Lordships know, to reduce the bank rate from 7 per cent. to 6½ per cent., and then to 6 per cent. I would emphasise at this point that last week's decision to make a small reduction in the bank rate does not indicate any relaxation of the credit restriction, which it is still necessary to maintain.
The measures taken to reduce the pressure of home demand have also had some effect. Obviously we cannot expect to see such immediate changes in domestic demand as we have seen in the foreign exchange markets. The total of advances by the London clearing banks, after a continuous rise, fell by £220 million in August and September, and have been declining through October. There are indications, too, that the rise in consumer expenditure was checked in the third quarter. But all this, my Lords, really does no more than provide us with a breathing space in which to tackle the underlying imbalance of our overseas trade. Indeed, with the loss in the last two or three years of most of the net earnings from invisibles, to which reference has been made, and on which we used to be able to rely, we must develop a substantial surplus of exports over imports to carry the load of overseas commitments for investment and aid and defence.
The development of world trade in the period ahead looks like providing a good opportunity for our exporters to sell more. The noble Lord, Lord Grantchester, asked that something
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should be done to wake up the enthusiasm of the people to export. That is what we have been trying to do all along, because, as the noble Lord, Lord Lucas of Chilworth, said, it is the key to the problem. At any rate, in world markets it looks as though the demand will be there, and we must shape the economy at home so that this opportunity is not missed. This means that we have to make sure that the goods we are offering for export are competitive and that home demand is not excessive. To this end we have to prevent inflation and the consequent rise in costs, so that exporters can carry on their business on a stable basis. At the same time, we have to keep room in the economy for the needed expansion of exports and we must not be swamped by continuous expansion in home demand.
My right honourable friend the Chancellor of the Exchequer, as I said earlier, has already seen a fall in bank advances, and the rise in consumer expenditure has been checked in the third quarter of this year. He has received the co-operation of the banks, building societies and insurance companies in restraining advances for private house building and projects other than those relating to exports and to productive industry. These steps have been taken to curb inflation and to ensure that sufficient resources are available for export.
On the side of costs, it has been evident for a long time that personal incomes of all kinds have been greater than the growth in national production could bear. Consequently there should be, and I believe that there has been, an acceptance that a pause in the continuous increase in wages, salaries and profits is needed. In spite of what the noble Lord, Lord Latham, said, the last figures confirm that there has been a check to company profits this year. Plainly, the pause is not the whole solution; it is a pause, but it gives time.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, may I ask a question on this matter of profits, because we want to get the facts right? As I understood it, the actual profits so far in the calendar year declared by companies show a considerable increase on last year. It is true that a great number have announced that they will not increase their dividends this year, but in fact there has

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been no halt at all in increasing the resources and the ultimate distribution may be of more capital to shareholders. Am I putting my fact right?
LORD MILLS: My Lords, I think the noble Viscount is mistaken. In any case, I will write to him with the actual figures upon which the statement I have just made is based.
I was saying that plainly the pause is not the whole solution. It is a pause, but it gives time—time in which we hope the Government, employers and employees will be able to determine ways of getting a better and more sensible balance between increases in money incomes and in national output. Failure to do this would mean economic trouble in the future. We should be putting a chronic drag on the faster rise in production and real wealth which we all want to secure. The pause will, of course, have been of little avail if, with its ending, there is a reversion to previous practices which have in large measure contributed to the present difficulties. My right honourable friend the Chancellor of the Exchequer is in consultation with those concerned with industry about possible new machinery to assist in securing a faster, sustainable growth in the economy. He is also giving consideration to the problem of securing a more sensible long-term relationship between increases in income of all sorts and increases in national productivity. One thing is clear. Excessive increases in wages, salaries and profits—that is, increases greater than the increase in national productivity—have resulted, and would again result, in a slower rate of growth in real incomes all round than would otherwise be possible.
The Government's aim is to establish new procedures of economic planning—and I use that word "planning". It has been asked this afternoon: what are the terms of reference? I think the terms of reference are a matter to be discussed and agreed between the parties concerned. As I say, the Government's aim is to establish new procedures of economic planning so as to clarify what are the essential conditions for realising our potential economic growth. The potential is there. I do not agree with the noble Lord, Lord Grantchester, that people are in a frame of mind in which they cannot
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use their energy and their will to improve affairs. These new procedures would involve closer co-ordination of the various processes of consultation and forecasting, and an improved flow of ideas and information between the Government and industry and between one industry and another.
Noble Lords will be aware that these discussions have taken place. Last August, the Chancellor of the Exchequer held meetings with representatives of the main employers' federations and with the Trades Union Congress, or their representatives. On September 23 he sent them a letter outlining certain proposals, and he has since had further meetings to discuss the proposals. The employers' organisations have already expressed support for them, and my right honourable friend is very hopeful that in due course the Trades Union Congress will do the same; because the Government believe that consultation on the lines under discussion can make an important contribution to the solving of our long-term economic problems. There are attitudes and customs in industry to-day, and in commerce, working against national efficiency, and there exist out-of-date restrictive practices which are obstacles to economic growth. Greater understanding stemming from the closer co-ordination of the needs and resources of our economy should help us in tackling these problems.
But, my Lords, the fulfilment of our economic objectives depends on the cooperation of all engaged in industry, and the Government are anxious to see that the consultation takes place at every stage of the process. The noble Lord, Lord Latham, said, or indicated, that we were in a recession but were saying that there was no recession. I must repeat that the July measures were not so severe as to produce a recession, as some people, not the Government, feared at the time they might. The Government are confident that they will not do so. We expect investment will be higher next year, even if there is a pause in manufacturing investment after the great upsurge of the last two years. Public investment is still rising, and we know from the White Paper published last week that we expect it to be about £85 million higher in 1962–63 than in the current financial year, measured at the same level of prices in the two years.

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Nor is there any reason to expect a decline in economic activity as a whole. In these circumstances, my Lords, I suggest that the Opposition Amendment cannot be supported by the facts. Your Lordships are well aware that, well as exporters have done, further expansion is necessary if our standards are to grow, and the measures which the Government have initiated are based on this need. The Government, I submit, are entitled to ask for the co-operation of all who can contribute to the task they have undertaken.
5.12 p.m.
LORD CITRINE: My Lords, I rise to support the Amendment, and I do so not in any representative capacity but as one who is proud to have been a member of a trade union for 50 years. It is from that point of view in the main that I wish to participate in this debate.
All of us are well acquainted with the fact that our country is faced with a serious economic situation. Production is too sluggish; imports have been difficult to reduce; exports are meeting with severe competition:, the balance-of-payments situation is causing a great deal of anxiety, and inflation is becoming more intractable. We have been operating our economy for a considerable time past by a series of stops and starts, and I think that that kind of operation is deprecated by everyone who is related in some way or other to the conduct of modern business. Clearly, what we are dealing with is a recurrent problem and not something that can be resolved by expedients such as manipulation of the bank rate, credit squeeze, purchase tax and other temporary measures. These do afford, and have afforded, apparent temporary alleviation; but it is only temporary. The need for adequate planning of the national economy has been plainly apparent for many years past. Those who sit upon these Benches and the Party they represent have always realised that our life is too complex in the economic sphere without some greater measure of order represented by planning.
I was very happy to be reminded, by an article which appeared in the Daily Telegraph only a week or so ago, of the interest of the Prime Minister, Mr. Macmillan, in this same subject. I had forgotten the book that he had written in 1938 proposing the establishment of
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a National Economic Council and outlining broadly the terms and functions of such a Council. Even at that time the necessity for planing was in the air; and if I had forgotten that book and the proposals that Mr. Macmillan had made, it would seem that the members of his Party have either forgotten it also or have never, in fact, taken any notice of it. It cannot be said that there have been in the Conservative Party many supporters of planning.
I gave some indication of this in an earlier debate and I do not wish to repeat it, but at long last it is now being perceived that the economy cannot be operated effectively without some such measure of planning.
When we talk about our national economy we are talking about a very complicated subject. Millions of human beings, in our own country and in other countries, are engaged in producing goods and exchanging services and commodities of all kinds—myriads of them; and I think we too often think of the economy in abstract terms and forget that what we are really talking about is the relationship of human beings to other human beings in this complex system of production, distribution and exchange. Of course it is imperative to have a maximum of co-operation if that kind of system is to operate efficiently, and I was very glad to hear the noble Lord, Lord Mills, stress that point in the final words of his speech. The gracious Speech says:
"My Ministers will continue to seek the co-operation of both sides of industry in the better co-ordination of the national effort with a view to promoting faster economic growth, while maintaining stability in prices and a high and stable level of employment."
That is a most laudable aim; but I cannot escape the query as to how the Government have gone about achieving this aim.
The Chancellor of the Exchequer made a statement in another place on July 25, and he announced, not a matter for consideration, not a matter for the consultation to which the noble Lord, Lord Mills, alluded a moment ago and which he said the Government were anxious should take place at all stages, but a declaration of policy—policy firmly made by the Government—which, I venture to suggest, was a bombshell to the trade unions of this country. He

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announced a wages pause, and referred, as the noble Lord, Lord Mills, has done, to this giving an opportunity for a review of our long-term policy. While on that point, I may say that he is much more optimistic than I am as to the speed with which a long-term policy can be worked out—but let that pass. He laid down the principle that increases in wages and salaries, and incomes generally, must follow and be related to increased production.
My Lords, if ever there was a vital question to trade unionism as a whole, it was this one. The Chancellor must have known that trade unions have been traditionally opposed either to wages restraint or anything in the nature of a pause. Even during two world wars they have always declined to exercise what was considered by the Government of the day to be wages restraint. That does not mean that they have not exercised restraint, but it does mean that they have not subscribed to it in agreement with the Government. Now this policy of a wage pause was laid down without consultation of any kind with the Trades Union Congress or its constituents. No warning was given, and I know from my own trade union experience when I was Secretary of the Trades Union Congress the means that are available to Governments to impart information on impending developments in Government policy without doing it in any official way. Yet nothing of that kind, so far as I know, took place in this case.
I say, as one of considerable experience in the industrial sphere, that the action of the Chancellor was precipitate and provocative, and we are entitled to know the reasons why he acted as he did. The Chancellor told his hearers in another place that he had based his action upon a report published by the Organisation for European Economic Co-operation which was issued in May, 1961, and then went on to say [OFFICIAL REPORT, Commons, Vol. 646 (No. 167) col. 621]:
"After studying the reasons for rising prices in 20 or so O.E.E.C. countries, it came to the conclusion that in six of them, among them the United Kingdom and the United States of America, excessive wage increases constituted both an important and independent inflationary force. My submission to the House is that in these circumstances it was necessary for the Government to act."
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Well, my Lords, I thought that was a most remarkable discovery. The Chancellor of the Exchequer may not have heard of the exhortations of his predecessors. He perhaps had never heard of Mr. Thorneycroft and his doctrine when he was Chancellor of the Exchequer, that we were paying ourselves, I think it was, £900 million more than was measured by the actual amount of increased production. He may not have heard even of Mr. Gaitskell, who, in the later part of his Chancellorship, was issuing a rather similar warning to the country. And then the noble Viscount, Lord Amory, and others, have always hammered away at this point. So the Chancellor of the Exchequer is not on good ground when he gives the impression that something new had arisen, some new information had come along which prompted the Government to take immediate action.
May I stress this point: that while it is true that that ascertainment of fact by the Committee of O.E.E.C. is correctly represented by the Chancellor, he did not go on to say what he should have said, that there was no agreement among the authors of the report as to what should be done to remedy that situation. There was not a word about that. That was left for others to detect in the Press report or by those who were favoured to get access to the report itself.
LORD BRAND: My Lords, may I ask the noble Lord whether it was not the case that out of seven members two were of a different opinion and five agreed among themselves?
LORD CITRINE: I thought it was four and three, but I may be wrong about that.
LORD BRAND: It may have been four to two, but it included Mr. Richard Kahn, who is a well-known economist in this country and well known to be a Left Wing economist. He is a successor of Lord Keynes and is a very well known Cambridge professor.
LORD CITRINE: I think it would have been a help to everybody if the Chancellor of the Exchequer had said that in Parliament and showed, in fact, that there was not unanimity in regard to the remedies which might be applied.

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Moreover, I would point out that in the report, the part which I have quoted already, it is said that this situation existed in six separate countries, and I am quite unaware of any one of those countries having taken the drastic measure of instituting a wages pause to try to correct the situation.
LORD BRAND: My Lords, in the Netherlands they have had some system like that for many years.
LORD CITRINE: I do not suggest for one minute that all the other countries have sat down and done nothing. I am merely saying they have taken no such drastic measure as a wages pause; that is the point I am making. This report was published in May. The Chancellor of the Exchequer's statement was made on July 25. There was ample time for him to have consulted the Trades Union Congress, the Federation of British Industries, the British Employers' Confederation, or anybody he wished, but he did not do it. As a matter of fact, he went further and said that the time for appealing for wage restraint had gone by, had passed. I thought that a most serious statement, and I really am puzzled to know where the Chancellor of the Exchequer went for his advice. Did he go to the Ministry of Labour, for instance? They could have told him what the reaction would be in the trade union movement; they would know it would be violently opposed. And yet the Chancellor of the Exchequer made his announcement.
He did not even, so far as I am aware, tell the Trades Union Congress of his conclusion and his decision to operate the policy even after his statement in Parliament. Instead, the Chancellor went on to impose—and I stress that word "impose"—a wages pause in the Civil Service and in that section of the economy where he has a measure of direct control. He expressed the hope that nationalised industry would follow suit and he has also stated that he hoped that private industry would follow. This strikes me as a very curious way of going about trying to secure the co-operation which is mentioned in the gracious Speech.
What has been the result of the Chancellor of the Exchequer's statement? First of all, the most bitter opposition at the Trades Union Con-
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gress in September. I attended that Congress, as I have done successively for many years past, as an observer, and I cannot transport into this assembly here the atmosphere that was prevailing in that Congress and the anger that was raised. The speeches of every delegate who took part in the debate, including the spokesmen of the General Council, were in the same vein: "We will resist and we will fight this measure of dictation." I have seldom seen such unanimity in the Trades Union Congress. We know that since that time there have been threats of strikes in some of our vital industries, and goodness knows how far this movement will go. The Chancellor himself has struck a blow at the confidence of the average workman in the system of arbitration and conciliation that I feel confident he cannot possibly realise.
It is not understood that there is a natural reluctance because of the trade union traditions in this country to go to arbitration at all. They have resisted it for years. Australia and other countries have systems of compulsory arbitration, and others get over the difficulty by a different system, as in Sweden and Holland. But in this country it is the devil's own job for a trade union officer to persuade his members that the right thing is to take the case to some form of arbitration. You may think that I am using extreme language but I recall a leading article in the Guardian on September 7:
"Mr. Selwyn Lloyd can scarcely have imagined that the British economy will be strengthened by promoting the most serious industrial disturbance since 1926".
That was the year of the National Strike.
"Yet unless he and Mr. Macmillan think again industry is in for a bitter autumn."
Then, concluding their article (there is some argument in between) they say:
"Mr. Lloyd is destroying institutions that may sometimes work badly, but which at least do work, and he is offering nothing in their place. That is to invite anarchy, and the settlement of all wage disputes by private wars."
I want to make my own position clear. I am not attacking the policy of wage restraint. I have long supported that policy and have advocated it in public and in private, because I believe that it is necessary not only in the interests of the nation as a whole, but in the interests

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of trade unionists themselves. But always the base of that belief is that there should be equitable and similar treatment in broad character in regard to the incomes of other sections of the community. Experience shows that that is not easy to achieve; nor is it quite so easy to work out an equitable policy as to how wages shall be related to production. The Chancellor of the Exchequer himself (whether subsequent to his speech or not, I do not know) is now finding some of the difficulties and he has announced these in Parliament. He says [OFFICIAL REPORT, Commons, Vol. 646 (No. 167), col. 630] that
"there is no great difficulty, perhaps, in arriving at a view on the likely rate in the growth of national productivity, but there are many practical problems to be worked out in regard to personal incomes. How would it be possible' under such an assessment to secure proper relatives among wage and salary earners, and how would it be possible to secure the most effective deployment of our manpower? How do we reconcile the interests of those whose productivity can be measured and those who work in industry where productivity and increases in it cannot be measured? How do we reconcile the interests of those who work in industries where there is great scope for increasing productivity, for example, because of new investment, with those who work in industries where, in the nature of things, productivity increases extremely slowly? Most important of all, how does one secure that answers in principle are translated into action in the practical world?"
I wish to goodness that the Chancellor had thought about that before he made his announcement. He would have found that this is no short-term policy.
This is not something that can be done overnight or in a few short months. It means embarking upon a long and difficult road, and of course one which I and most of us hope will be traversed and will bring about some satisfactory and equitable conclusion. I want to make this point as plain as I can. There are real difficulties in regard to this knotty problem. The noble Lord, Lord Mills, knows them as well as I do. You cannot impose upon workpeople measures of this kind. Even where the Chancellor of the Exchequer has direct power he has created resentment and, for the first time, we have seen a measure of disturbance in the Civil Service and among teachers and others without, I think, parallel in the whole history of those institutions.
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The people with whom agreement has to be come eventually in these matters are the people who have been antagonised and have been driven into a resentful and non-co-operative attitude. The Chancellor of the Exchequer thinks that he can impose a wages pause. He has done that in the Civil Service and, as I have said, he hopes it will happen in nationalised industries. He has said that he hopes employers in private industry will do the same. What same? Speaking in the debate in another place on October 23 he said [OFFICIAL REPORT, Commons, Vol. 646 (No. 167), col. 628]:
"Then the accusation was made that I have discriminated against the public sector and done nothing about the private sector. That is not true. In fact, part of the indictment made by the right honourable Member"—
I think that is Mr. Wilson—
"was that I hoped what I had done in the public sector would spread to the private sector. He is absolutely right: that is exactly what I hope will happen."
Just think of those words for a moment. Those words will be read in trade union branches by officials. They will be circulated in documents in all sorts of places among 8½ million trade unionists. But an interpretation will be placed upon those words which is perhaps quite different from what the Chancellor himself intended. He says:
"what I had done in the public sector".
What has he done in the public sector, except to impose a wage pause? Is this a standing invitation to private employers to impose a wage pause, too? I really cannot see that any interpretation will be put upon it by the average trade unionist other than the one I have just quoted.
It cannot help but embitter relations. I cannot say how much I personally deeply regret the way this situation has been handled, especially at a time when there is a chance of doing, something practical to solve some of the basic economic problems of our country. I am here referring to the proposal to establish a National Economic Development Council which was referred to by my noble friend Lord Morrison of Lambeth and by Lord Mills. Let me say at once that I welcome this; I welcome it without reservation. I think it would be a really constructive effort to get to grips with our problems. It is long overdue, but better late than never.

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My noble friend Lord Morrison of Lambeth said something in regard to the powers of this Council. Such information as has come to me is most reassuring on that point. It is probable that the terms of reference will be as wide as possible, that little if anything will be excluded. It is highly probable that the representation of the Government on the Council will be at a small but high level. It is also probable that there will be appointed a sufficient number of representative trade unionists and employers who have experience of the subject and can give the benefit of that experience. I think there is some doubt in regard to what are called independent members—that is to say, members who are appointed by neither the employers' organisations nor the trade unions. My own view would be that such people could be of value on the Council, but I am not sure that there would be unity of view on the side of the trade unions on that. They may think that such people, economists and others, could play their parts most effectively at (shall I call it?) the staff or executive level, and not as members of the Council.
On the question of staff, if this Council is going to be manned exclusively by the Civil Service it cannot succeed. It must incorporate a number of people with direct experience in industry on both the employers' side and the trade union side. My noble friend Lord Morrison of Lambeth mentioned that earlier. Above all, it must have a director who has complete independence and great powers of initiative, because I am quite sure that, without drive from the executive body, it will be almost impossible to keep the Council from languishing into a talking shop. I am sorry to say to the noble Lord, Lord Mills, that that is what happened with the National Production Advisory Council on Industry, a body started with the best of intentions, which has been a mine of information to myself and others who served on it for so many years. But bit by bit the decisiveness of action was whittled away—not by intention or anything of that kind, but it just happened. I hope that that will not occur on this particular occasion.
Let me say to trade unionists, if I can, through this House—because it is quite possible that what I say may be represented to trade unionists—that I sincerely hope that the resentment that trade unionists feel at the wages pause
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will not blind them to the value of such a Council.
As I have said, the work of that Council could be not only in the interests of the nation but in the fundamental interests of trade unionists themselves. To my mind, the essential question is: what will happen to any recommendations that are passed by the Council? The employer bodies are autonomous. Both the Federation of British Industries and the British Employers' Confederation are autonomous bodies. They are confederations, in sonic cases, of federations, and their measure of direct power in extremely limited. The position is similar on the side of the Trades Union Congress. So it is or immense importance that the people who represent those bodies are of the highest possible calibre; men who will carry the confidence of their constituents. It may be difficult to achieve that, but I am sure that that will be the shortest way and the best way of achieving this result.
I must say to my noble friend Lord Morrison of Lambeth that I cannot possibly see a Council of this kind being endowed with executive powers. No Government would pass over to such a body the power to deal executively with such a wide range of subjects as must come before this Council. We had the same problem with electricity. The unions there claimed to come on our advisory council with executive responsibility. We had to say, "No, we cannot do it. It is not constitutionally possible". But what we did was to appoint on to that council the chairmen of the various boards or their deputy chairmen and every member of the Central Authority at that period, with the result that, when a recommendation was made, we were pretty sure that those men, who had subscribed to that recommendation, would do their best to see that it was carried out by the bodies with which they were associated. Now, that may not be possible in similar form with this Council, but I think it would be desirable for the Government to aim as near to that analogy as possible.
This Council will throw up problems not only to the Government: it is going to throw bigger problems to the trade unions and also to the employer organisations. I think it is going to be a great test for all concerned, in their personal

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character and firmness, in their decisiveness of mind and in their readiness to do unpopular things in the confidence that what they are trying to do is the best that can be done by human beings in the interests of our country and its people.
5.43 p.m.
LORD BROCKET: My Lords, although we have no direct power over finance, I feel that it is a great credit to our House that we have in it representatives of all sides of industry and all sides of politics, and that we can listen to a speech such as that which we have just heard from the noble Lord, Lord Citrine. I feel that speeches of the kind made by the noble Lord must be helpful to the Government in their negotiations at the present moment over wages and productivity. I think that everyone in this House, on whichever side he sits, realises that the prosperity of this country must be based on production, and I feel that speeches from noble Lords on the Opposition side which are as reasonable as some of those we have listened to this afternoon are very helpful indeed to the Government in the formulation of their views on how production can be kept going satisfactorily and, also, on how exports can be increased.
Although I sit on this side, I should like to say that I agree wholeheartedly with the noble Lord, Lord Citrine, that the handling of the wages position during the last three months has been very far from satisfactory. On July 17, when our late, lamented friend and colleague, Lord Pethick-Lawrence, made one of his excellent speeches on the Finance Bill, I made a few remarks on the subject of the extra 10 per cent. which might be put on Customs, Excise and everything else. Unfortunately, since then the Chancellor of the Exchequer has seen fit to put on this extra 10 per cent. Although I am personally a non-practising barrister, and the Chancellor is an eminent Queen's Counsel, if I were going to negotiate wages with the trade unions I would not increase the cost of living before negotiation. I would not have put on this extra 10 per cent. It is quite easily shown that it may not be so very great an increase, as it is 10 per cent. of the purchase tax of the customs, of the excise, and so on, on all these various articles; but to go to members
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of trade unions when the price of tea has gone up, when the price of beer has gone up, when the price of fuel has gone up and when the price of everything has gone up, and then to ask for a wage pause seems to me a most foolish way to negotiate; and it is not a way in which I should expect a Government, in these very serious times, to negotiate.
But, my Lords, to go back a little further, in 1960 the cost of living went up by only 2 points, to take the nearest round figure—from 110 to 112. This year the cost of living has gone up, to take the nearest round figure, by 4 points. I only wish that Her Majesty's Government had taken this matter in hand during 1960, instead of 1961, because there is no doubt that the export trade of this country is far from satisfactory. If purchase tax on cars is put up, how can the motor industry sell enough cars in the home market to keep its costs down so that it can export as cheaply as possible to the foreign markets? Those of us who spend our lives, apart from the times when we are here, in industry realise that one must have a satisfactory and profitable home market in order to export satisfactorily. Take motor cars, for instance. It looks as if the last Motor Show has done well, particularly in certain makes of cars. But there is no doubt that the Midlands of this country—Birmingham, Coventry, and so on—are founded upon the prosperity of the motor industry, and there are very sad thoughts in many parts of the Midlands at present on the future outlook for the motor industry. Then, just at that time, one finds that another 10 per cent. is put on to the purchase tax on cars. It seems to me, my Lords, quite extraordinary that really responsible Government should do such a thing.
May I take some other points? In the Victorian era (and I am not saying this in any way against the Victorian era, which was in many ways an era of great prosperity), there were various theories on economics. One theory was that inflation was caused by too much money chasing too few goods. That theory may have been all right in that era, but there was at that time the possibility of unemployment. I am not speaking now as an employer: I am speaking as somebody who has studied these

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things. If there is the prospect of unemployment, the Government might say, "We will mop up purchasing power", as the noble Earl, Lord Dundee, said in our debate on July 17. He said that if these two regulators were put on it would mop up, in a full year, £400 million worth of purchasing power. If there is the prospect of unemployment and you mop up purchasing power, it means that the unfortunate wage-earner can spend less on the various necessities and luxuries of life. But if you have over-full employment—and I am thankful to say that we have had that during the last few years—the question of mopping up purchasing power does not arise. It adds to the cost of living, and the wage-earners, through their legitimate negotiators, the trade unions, will say, "As the cost of living has gone up, we want more wages". That does not mop up purchasing power: it adds to inflation.
I should like to emphasise, as strongly as I can (it is not the first time I have said this, and your Lordships may weary through repetition), that if the Government keep on increasing taxation, increasing purchase tax, and adding in various ways to the cost of living, they do not mop up purchasing power but simply encourage further wage rises. At the moment our country cannot afford large wage rises. I am sure that representatives such as Lord Citrine, who had such a very distinguished career, both with the Trades Union Congress and with the Electricity Board, as Chairman, would agree with me that wage rises, when the country is prosperous and paying its way among other countries of the world, are all right; but at a time like this, when we have been certainly outrun by such countries as Italy, Germany and so on in the export market, we cannot expect large wage rises unless those wage rises are tied to the cost of production.
For these reasons, I am sorry that this obsolete theory of too much money chasing too few goods seems still to be at liberty in the minds of some members of the Government. As I have said before, although we in this House have no power over finance I hope that some of our words, particularly from those of us who are in industry, will find their way into the minds of some of the members of Her Majesty's Government, and
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that they will take a little notice of what we say. Because we are all, on both sides of the House, absolutely all-out for Britain, whatever our political views may be.
Now, my Lords, there are one or two other small factors. I should like to welcome the reduction of the bank rate from 7 per cent. to 6 per cent. I feel that, although I could not vote for the Opposition Amendment, which says that they:
"regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation."
I think they have taken some effective steps, and I could not vote for the Opposition's reference to the absence of "any effective steps".
To take the bank rate, I am not, like the noble Lord, Lord Brand, sitting in front of me, an expert on international finance, and it may well be that the bank rate had to be put up to 7 per cent. I should not like to express an opinion on that. But I would say that if a company which wishes to export goods has to borrow money at 7½ per cent. or 8 per cent. to improve its factory, it becomes very expensive, although the company is trying to improve its factory in order to export goods more cheaply. I am told that in Belgium exporting companies can borrow money more cheaply to improve their factories, and that is perhaps one reason why, in fact, they have a more satisfactory record of exports than we have.
Or, again, take the question of local authorities, which I mentioned before. If they have to borrow money at 7 or 8 per cent. the rents of their council houses are higher. It means that the occupants of the council houses want more wages to pay the rents—inflation again. I do not want to labour this point, but I do hope that at some time in the future Her Majesty's Government, and particularly the Treasury, will realise that high taxation and high bank rate are themselves inflationary and not deflationary.
My Lords, I do not intend to take much longer this afternoon, because I might repeat myself. But I would reiterate my hope that Her Majesty's Government will realise, as I am sure is the case, that all Members of this House, coming from both sides of

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industry, and from both sides of politics, only wish prosperity to the country, and that any advice they may give comes from the heart. I hope that Lord Amory, who has now gone to Canada, will have his wish, and that the future Council on Productivity and Wages will be a great success and will help our country to go forward, particularly if we have European Free Trade. If we have European Free Trade, there is no doubt that we shall have to compete with some of the other countries with their lower costs and, if I may say so, in some instances with harder work. Therefore, I do hope that any advice which the Chancellor of the Exchequer and the Treasury may receive from industry, will be regarded seriously, and that the Chancellor will realise that anything we say is meant not in any unkind way but to help our country to be more prosperous, and to enable the reasonable wages which we all desire to see to be paid.
5.54 p.m.
LORD STONHAM: My Lords, apart from the contribution of the noble Lord, Lord Mills, all the speeches so far in the debate, from all parts of the House, have been severely critical, or even condemnatory, of the Government's economic record, and I think that the speech of the noble Lord, Lord Bracket, is no exception to that. Indeed, I would draw the attention of my noble Leader to the fact that if only we had worded the Amendment "failure to take adequate steps" we might have had the pleasure of Lord Bracket's company with us in the Lobby. It just shows how much there is in a word.
LORD LINDGREN: That is wishful thinking.
LORD STONHAM: Not at all. My experience tells me that we might have had that distinguished company with us, and it shows how important it is to word the Amendments exactly.
My Lords, I think the feature of this debate has been the insistence of almost every speaker, whilst welcoming the fact that at long last the Government have taken unto themselves a cleaned-up version of what was at one time a dirty word, "planning", that the Government are handicapping themselves almost be-
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yond repair by the fact that they have made it virtually impossible for the trade unions to co-operate to the extent we should all like.
My noble friend Lord Citrine spoke from 40 or more years' experience as a trade unionist, and as a negotiator on behalf of the trade unions at the highest possible level. The noble Lord, Lord Brocket, spoke as an employer. I speak in this matter as an employer, but one who for 30 years has had—at not a very high level—and still has, direct experience of negotiations with employees about wages. I am also a member of a trade union, and even now I go to St. James's Square and sit on a joint industrial council. I would say at once that no one who had the slightest and most elementary experience of industry and negotiation could possibly have handled this matter as badly as it has been handled. It is quite incredible that so many mistakes should have been made. I think that the noble Lord, Lord Mills (who I regret is not in his place at the moment), really agrees with that, because he made no attempt whatever to answer the case that has been put forward so far.
The noble Lord did, indeed, express his sorrow, I think it was, for the position in which my noble friend Lord Latham found himself in building up his case against the Government. I did not notice that my noble friend was in any difficulties at all, and I thought his case was unanswerable. Indeed, as I have said, I think that the noble Lord, Lord Mills, shared that view, because he did not attempt to answer it. He expressed some regret that my noble friend had referred to Mr. Henry Brooke in slightly unfavourable terms, but we do not in any way doubt Mr. Henry Brooke's sincerity. There are people who say that Satan is sincere. What we object to is the results of that sincerity, the results which my noble friend clearly pointed out—thousands more homeless people; hundreds of thousands of people paying double or treble the rents they were paying—all as a direct result of the Government's policy.
Lord Mills himself said, as a point in the Government's favour, that the discount houses and banks are restricting their loans to young people who want loans for houses. That is a result of the

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Government's policy. Have all these hundreds of thousands of people who cannot get homes, or find it impossible to pay for the homes they require, to be grateful to the Government for these things? As the noble Lord, Lord Brocket, made so clear, there is this policy of adding all the time to the cost of living through dear money: 2 per cent. on bank rate, on interest rates, on the public works loans rate—and 2 per cent. on that means 24s. per week on a council house. How on earth is it possible, when the Government keep on doing things like this, to expect a wage freeze? My noble friend Lord Morrison of Lambeth said that these trade unionists have wives. They read the papers, and spend the housekeeping money. Many of them actually pay the rent out of the housekeeping money, and they know these things.
Anyone who has had any experience at all of negotiation knows that the guilt for this present situation lies entirely with the Government. Indeed, we on these Bench, including myself, two or three years ago told the Government, or foretold to the Government, exactly what would happen as the result of the policies they were pursuing. And that was not very difficult; it was merely adding two and two together and making it four. After all, twice in four years we have had a credit squeeze and a 7 per cent. bank rate, and this time, although it has solved the largely self-inflicted, short-term monetary crisis, it has done nothing towards making the economy more efficient, or towards removing the underlying cause of our balance-of-payments problem.
That is why the Government have been compelled to take a leaf out of the Labour Party's book and say that they realise the situation cannot be solved without economic planning. But unfortunately, now that the Tory horse has at last been persuaded to jump this hurdle, the Chancellor of the Exchequer has tied its front feet. Because whatever form of planning is put forward, it can be successful only if it is given the full co-operation and backing of the trade unions. But how can they he expected to co-operate, with prices rising, their members subjected to a wage freeze, and no absolute restriction or limit of any kind of profits and divi-
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dends? The men say: "We were entitled to get a 2s. a week rise. The machinery gave it to us. It is an agreement which has gone on for years. We are not getting our miserable 2s. a week rise". This is the men's point of view, and it is an understandable one. What is the action of the Government with regard to profits and dividends? They exhort. There is no kind of compulsion on them. We all had high hopes when the Chancellor of the Exchequer promised a Bill to deal with speculative profits on shares and property deals; but that matter is not mentioned in the Queen's Speech. That is something we should have liked to see in the gracious Speech, but it is not there. Indeed, it seems that the Chancellor of the Exchequer and the Government are determined to make it utterly impossible for a joint effort by management and workers.
These wage agreements which have existed for decades have been dishonoured. The pledge to introduce a Bill to improve the safety, health and welfare conditions in shops and offices has been dishonoured. The Government have even refused to implement the Bill we passed last year of a similar, but more limited, kind. At a time when it is common ground that we are desperately short of scientists and technicians, it has been decided to close the scientific and technical register. When we need all the skill that we can muster, the Government are going to close the training centres for school-leavers and unemployed, and to reduce the training facilities for the physically handicapped. I think that last decision, to reduce the training facilities for the physically handicapped, is not only senseless but really quite inhuman, because it means that many unfortunate people who can be trained to make a useful contribution will now find that their lives are a burden not only to themselves but to the State.
This list of follies is indeed unending. All the major wage claims are being turned down. As my noble friend Lord Citrine mentioned, a strike is threatened in the electrical -power industry. Wage trouble looms on the railways and in engineering. If the Government adhere to their wage freeze policy with no restrictions elsewhere, they are positively asking for a head-on clash with virtually the whole of organised labour; there

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cannot be any doubt about that at all.
The British people as a whole, as well as the British working man, are reasonable and sensible people, and if they can see the need for sacrifice they will make it—we have known that before. But no man in his senses can expect sacrifice and restraint from wage-earners unless equal demands are made on the rest of the community. Every trade union leader can see the value of cooperating with Government and employers in working out and implementing a long-term programme of capital development in the hope of ensuring a steady, planned expansion, but only if there is built into the agreement the guarantee that his members will share fully in the increased wealth which they create. But such a plan cannot even begin—and, with all respect to my noble friend Lord Citrine, I would say the first joint meeting cannot even take place—until the Government abandon their present policy of dishonouring the machinery of negotiation. Therefore, the first step is for the Government to restore confidence in the processes of conciliation and arbitration.
For 42 years the industrial court has been an honoured body whose decisions have been honoured by employers and workers alike. If you are in an industry and are discussing wages and conditions with representatives of the workers, you may first of all discuss it with the joint industrial council. You are on friendly terms with them, but you come to a disagreement and say: "Very well, we will voluntarily go to the industrial court." There you both put your case before an impartial body and a decision is made. It may go in favour of the men; it may go in favour of the employers; it may be halfway between the two. But whichever way the decision goes, both sides honour it; and when the Government destroy that machinery they are dishonouring both sides. It is not only the men who are complaining about this, it is the employers as well; and I am one of them who would complain if an award which was arranged in that way was set aside.
The second essential step is for the Government to halt rises in living costs, in so far as they can, by dealing with profits and speculators, and, as quickly as they can, by lowering interest rates. Unless
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these positive steps are taken there can be no co-operation and any plan will be stillborn. Instead there will be commercial and industrial anarchy and economic disaster. Unless these steps are taken, my Lords, the Prime Minister will prove what I have long suspected—that the Government are suffering from "ballistic thrombosis".
Your Lordships probably all know the story of the City gentleman who devoted so much of his life to the pursuit of wealth that he had neglected the social graces. He tried to correct that by hiring a grass moor and buying a very expensive gun, but unhappily he failed to hit a bird. Of course, he did not blame himself. He went back to the gunsmith and blamed him, because the gun did not aim true. The gunsmith, besides being very good at his job, was a man of tact, and asked him whether he could take it away for examination. He came back in due course and said that he was very sorry, there was a fault with the gun; it was suffering from an obscure and rather technical fault. "Oh", said the man, "and what is that?" "Ballistic thrombosis", the gunsmith replied. Then the man said: "Tell me, what is that in plain English?" "I'm sorry, sir," said the gunsmith, "it means that there's a clot behind the trigger." That is exactly the difficulty in which the Government will find themselves, unless they repent before it is too late. If they do take steps to prove that they have seen the error of their ways, I am sure that the unions will co-operate.
But one top-level planning committee, however eminent, will not be enough. I think that my noble friend Lord Citrine had this in mind. Even with the full co-operation of the unions, with everybody pulling one way, as I should like to see, I do not think we are really going to do any good with one, and only one, top-level committee, association or conference. The work is done when the people in industry, knowing this industry and its needs, what it can do and the help it needs to do better, get round the table and discuss things together. What we shall need is not only a top-level conference but also a planning commission for every major industry, so that each one can work out its needs and so give us an overall picture.
Exhortation is no good any more. We are getting sick of it. We are beginning to think—some of us thought it a long

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time ago—that we know more about this than the Government, and that the best service the Government can do for us is to leave us alone. If we are going to have these plans built up for every industry, agreed to by employers and workers, by men who trust each other and will work together for the common good, it is imperative that there should be an assurance that those plans will not be disturbed by sudden changes of policy. We just cannot have "Stop and Go" any more. What is really necessary is for the Government to recreate goad will and trust, to restate their faith in the virtues of arbitration and conciliation, to realise their mistakes, to get to work with a national planning committee, trying to secure the co-operation of the trade unions at top level—and they will secure it, if only they will retrace the wrong steps they have taken—and then break it up into separate commissions for each industry. Then we shall really begin "to go places".
It is not all black now. Last year, the electrical industry exported £300 million worth of goods, 10 per cent. of our imports, and that was 10 per cent. up on the previous year. But they could do very much better, if there were a sane and settled policy on the purchasing programmes of the nationalised industries, on hire purchase restrictions, on exports incentives and the like. Therefore, I urge the Government to give industry an opportunity to work out these plans and to promise continued support when they are worked out. With such support, I am sure that employers and workers alike can be trusted to prove once more that British is still the best and that, if we pull together in a team, we shall advance along the road to national solvency and increased prosperity.
6.15 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lords, the noble Lord who has just sat down has said that our present economic ills are the fault of the Government. I do not agree with him. We have to go back much further, to the 1930's. I think this is a case of the pot calling the kettle black. The truth is that our economic policy for a very long time has been immoral. Having had as our chief aim a vast programme of State welfare, for years we have been living beyond our means. Our per capita production has always fallen
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behind our expenditure. We cannot go on like that. Since the late 1930's, when our exports failed to cover the cost of our imports, we have been liquidating our foreign assets to square our adverse balance of trade. We have seen how great assets, like Trinidad Oil and Argentine Railways, which were built up in the past by our ancestors and—let me remind noble Lords opposite—by private enterprise, have been sold off to maintain a standard of living which we have not earned. The barrel is now scraped pretty clean, but that is not the fault of the Government; it is the fault of Party politics. We have to give the voters to some extent what they want. If we have democracy, that is how it goes.
I agree with the noble Lord, Lord Lucas of Chilworth, who scoffed at the rising bank rate. I think it is rather an outworn method of controlling the economy, because the bank rate can control only about two-fifths of actual spending capacity, owing to the vast Government expenditure, and therefore it cannot act as a real brake on expenditure. We want a bold, comprehensive plan and I am sure that the Government are attempting to work one out, but it requires a great deal of work. Personally, I have never understood why we cannot have a selective bank rate. By all means let us have a high bank rate for "wine, women and song"; but cannot we have a low bank rate for exports and for industry generally? We can have a high bank rate for unnecessary imports. But to have a high rate for shipbuilding and industries like that is crazy. But I am not an economist.
The Premier told us that in ten years' time it would be possible to have a basic wage of £20 a week, £1,000 a year. I agree with the noble Lord, Lord Lucas of Chilworth, that it would be far more attractive if he could tell us that in ten years' time our present wages are going to buy us twice as much. But I understand that that would be rather a rash thing to say. Suggesting that wages must increase is really what I can only call a glass-bottomed dish policy. If you give a dog a bone in a glass-bottomed dish he thinks he has two bones. People are rather fooled by this perpetual increase in wages, and think they are really bettering themselves.

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It is essential to try to preserve the value of money. I have often wondered whether a nation like ours, whose economy is tied to world markets (after all, we have had to take as our motto "Export or Die") can have a Socialist State—and by using the word "Socialist" I do not mean to be political; I am referring to the complete Welfare State. I rather doubt it. If we were entirely self-supporting, it might perhaps work. I quite understand that to ask the Government to put welfare on proved need would be asking too much of any democratic Government; but in our precarious position it is what is required. You can have your bankers and financiers juggling with the figures, putting up and bringing down the Bank Rate, and borrowing from the International Monetary Fund, but the basic fact is that we are spending more than we earn and have been doing so for a very long time. I suppose that we shall go on having recurring crises until, like the Gadarene swine, we rush to our doom. But we have a spark of hope on the horizon, thank Heaven! in the Common Market which is now looming up and will probably arrive in time to avert the complete collapse of our standard of living.
What I am frightened of is how the people of this country, having had rather a soft time in some ways, are going to stand up to the competition of a free economy in Europe. I would say that the Welfare State has had rather an injurious effect on the standards of duty and responsibility in this country. If we are to compete effectively in Europe we want to overhaul our whole industrial machine and try to get the people in this country to have a different attitude to life. At the moment we have the attitude that you can get something for nothing. Well, of course, you cannot. You can fool yourself into thinking that you can, but in the end the day of reckoning always comes and it can be highly unpleasant.
I am pleased to hear that the Government are going to set up this National Council for Planning. I think that one of the most important things in our economy is to plan to use our capital for the best results possible. We must also, as I have often said before, root out restrictive practices and unofficial
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strikes. I am wondering whether this National Council for Planning will have wide enough powers to set up a capital investment committee really to use our capital in industry for the best purpose. I am quite certain that capital is not always used for the best purpose; and if one thinks of the railways, the Government, I am afraid, have been one of the worst offenders in that respect.
Our chief revenue to-day really comes from indirect taxes on consumption, and these taxes weigh most heavily on the poorer members of the community. You are going to have the Welfare State, but you cannot raise direct taxation any more. It seems a sort of Alice in Wonderland. I suppose it keeps the voters happy, but I think they must be a little bemused. The question is: what are we to do? What are the Government going to do? I should hate to be in their shoes. We are pledged to the Welfare State, apparently, irrespective of the national economy. And if the Opposition came to power (Heaven forbid!) the day of reckoning would come far, far quicker. It is all very well for the Opposition to accuse the Government of this and that, but if they were in power the balloon would very soon go up.
We have heard from several noble Lords the same old thing about increasing our exports, and so on. But how are we to do this? The trend of world trade is rather working against us. Our own Commonwealth are now manufacturing a good many of the goods they require. We always hear much about management, executive and all that, but basically it is the restrictive practices and unofficial strikes—the tea-breaks and all that nonsense—that destroy our productive power. I agree that some trade union officials are very loyal people and they are worried about the position. But for some time we have asked them to try to do something about unofficial strikes and, so far as I know, nothing has been done. An unofficial strike is a fraud; it is a complete travesty of justice, and absolutely against the law. But nothing is done about such strikes. Why is this so? Is it not possible for the Government, together with the Opposition and the trade union officials, to have a Royal Commission of inquiry

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into the working of the unions regarding unofficial strikes?
A short time ago we had all these revelations concerning the E.T.U., which I think shocked the public. It is all highly unpleasant. Can we not really try to do something about this?—because I think it is useless taking any other measures to increase exports if we cannot stamp out unofficial strikes and restrictive practices. I agree with the noble Lord, Lord Citrine, that it is unfortunate, if it is the case, that the Government have not taken the unions into their confidence over the wage pause. Personally, I should like to see in every Government, irrespective of their colour, a member of the T.U.C. as a member of the Government, because I think it is high time that the T.U.C. rose above Party politics. They are such a power in the land and of such importance that we must have complete co-operation and complete confidence between the unions and the Government of the day. That is extremely important.
I know very little about trade unions, and I should not be talking about them at all. Have the trade unions any sort of information service which explains to their people the great damage they do to their own cause, their own livelihood and the purchasing power of their own wages by these strikes? After all, the average British working man is a decent person, if only we can explain these things to him. I try in my small way to explain the position to the few with whom I come in contact, and they seem to understand. I have seen these T.V. interviews of strikers. I hardly ever look at T.V., but I have seen them. It is obvious that they do not have a clue what they are striking about; they are completely at sea. I think it is important that we should try to explain to the people that they are completely destroying themselves.
I have probably spoken far too long, but I hope that the Government in future will really try to co-operate. Perhaps they do, but we have just heard from the noble Lord, Lord Citrine, that they do not. You must have this co-operation. If we do not, it is absolutely hopeless. I will end by quoting a saying from Benjamin Franklin:
"Experience keeps a dear school, but fools will learn in no other."
I only hope that we are not the fools.
6.35 p.m.
LORD LINDGREN: My Lords, the last time I spoke in this House on a major debate, I am afraid I rather shocked some noble Lords by using the more robust form of debate that I was more accustomed to in another place. The noble Viscount who has just sat down could hardly have been more provocative, even if he had set out to be so. When he started, he was really trying to draw me away from a good resolution I had made to keep more strictly to the Rules generally observed in this House. I do not believe he really wanted to be provocative. I noticed him sitting in the House, and he has sat through most of the debate—which is very creditable to him. But it has not made much impression on him.
The noble Lord, Lord Mills, commended my noble friend Lord Morrison of Lambeth on the fact that he opened his remarks by saying that the vital matter was production. What seems to have upset the noble Viscount is the Welfare State: we cannot afford the Welfare State, and all our ills are due to the Welfare State. There is no such thing as "something for nothing" in this world. All wealth that is produced is produced by the application of man's muscle and brain to the raw materials of the earth, and if there is anybody who lives without working then he is living only on the backs of those who are working. Of course, those who are working and producing have to provide the necessary sustenance for those members of the community who are rendering a service but who are not producing. The science of government is to facilitate production, to decide what proportion of the wealth that is produced is required back in the form of taxation to meet the cost of the Army, Navy, Air Force, Colonial Office, housing, education and all the social services. It is the worker in production who pays for the social service.
The noble Viscount said that we are spending more than we earn. Who is spending more than he earns? Not the engineer in the engineering factory; not the miner producing coal. It is the land speculator, whom this Tory Government encourages. In Hertfordshire, where I come from, the County Council have had

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to spend hundreds of thousands of pounds in the last three years in increased cost of land for social services. That has gone to land speculators, who have rendered no service whatever to the community. It has had to be paid for in their rates by the men working in the factories, the workshops and on the land in Hertfordshire.
VISCOUNT MASSEREENE AND FERRARD: My Lords, a famous economist—I cannot remember who it was—worked out that in one of our greatest shipyards the productive work done by the men was only sixteen hours a week, and the rest of the time was unproductive, in tea breaks and union meetings. I am all against speculators. I have never speculated in land in my life, and I am all for having a capital gains tax on land speculators for a certain time. I also agree that if you have a wage pause you should have dividend limitation. But you have to remember that if you have dividend limitation the Government cannot have so much tax. It works both ways.
LORD LINDGREN: My Lords, I am not quite sure whether I am provoking the noble Viscount or he is provoking me. If it is a fact that there is any workshop in which there is only sixteen hours' productive work out of the normal working week, whether it is 44 or 40 hours, it is not the workman who is only working sixteen hours, but those who are responsible for the supervision and organisation of the factory floors. That is where the problem comes.
If I may leave the noble Viscount now, I will deal further with some of his problems in regard to unofficial strikes as I go along. The noble Lord, Lord Mills, in his speech said he was sorry for the noble Lord, Lord Latham, in the case that he had to make out against the Government. Well, we can turn the tables and say that we have been sorry for the noble Lord, Lord Mills, because, quiet frankly, not one question that had been put to him by my noble friends Lord Latham or Lord Morrison of Lambeth was answered. If I might briefly sum up Lord Mills's speech it was that in this present crisis the action that the Government have taken was in fact to get a breathing space. Well, really, ten years of Tory
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government, and they either have not got their breath or have so lost it that they want a breathing space to get it back again!
He implied that the noble Lord, Lord Latham, had rather stretched the facts, and he referred to machine tools. When he was corrected on that he immediately moved away, but never came to the question of housing, which is a vital factor in the economic position and in production. Practically no local authority in this country is at the present time producing houses for general need. It is a fact, and I challenge the noble Viscount who leads the House to refute it when he comes to reply. As was stated by my noble friend Lord Latham, the only house building that is going on at the present time—local authority house building—is a little slum clearance; certain housing for old persons in which there is still a subsidy; in the new towns, built not by local authorities but by the development corporations; and a little in towns which are expanded towns and which is really being carried out by the London County Council or such councils as the Manchester Corporation, or in regard to which local authorities are arranging for overspill with local authorities in the neighbourhood around them. May we ask where the 300,000 houses that the Tories talked about are? We had an election fought on it at one time. The Tories disrupted the whole economic structure of the country in order to produce those 300,000 houses; they cut school building programmes and the rest; but to-day fewer than 100.000 houses—for slum clearance, old persons, expanded towns and development corporations—are being built.
LORD HAWKE: My Lords, has the noble Lord got his figures from the Housing Return? Because my impression is that very nearly 300,000 are being built every year, though I agree the vast majority are for sale.
LORD LINDGREN: It is true there were 300,000 houses built two years ago. Last year there were not 300,000 houses built, and the 100,000 houses I am referring to are of local authorities.
Now we come, as the noble Lord referred, to private development. But the Tory Party talked about "a property-owning democracy", and there are

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now fewer houses being built by speculative builders for private ownership—owner-occupied houses—than at any time in the last three to four years. They are not building them because they cannot sell them. The speculative builder cannot sell privately-developed houses because newly-married persons who want to buy houses cannot, in fact, get a loan. The noble Lord seems to doubt it. Building societies to-day will not end anyone more than 75 per cent. of the purchase price. Where is the ordinary man or woman going to get the other 25 per cent.? Previously Tory Governments were intending to, and did, facilitate the provision of Government money to building societies in order that they could lend up to 90 per cent. They are not doing it. What is more, if a manual worker applies to a building society to-day for a loan he cannot get one if his house is going to cost £2,000 to £2,500, unless he is earning more than £20 a week. So now the "property-owning democracy" has gone as well as local authority building.
The noble Viscount referred to television. I know Ministers have not much time to look at television, but very likely other noble Lords looked at television last night. Are the Tory Government proud of the spectacle of housing in London as shown on "Panorama" last night? Will the noble Viscount tell us when he comes to reply tonight what will be done for the hundreds of respectable families in houses of over £40 rateable value who are being evicted just before Christmas and have nowhere to go, and with the London County Council unable to help them? That is the position in regard to housing which the noble Lord, Lord Mills, did not develop; nor did he deal with the charges that were made by my noble friend Lord Latham in regard to them.
I want to emphasise as much as I can much of the speech which was made by my noble friend Lord Citrine regarding the references in the most gracious Speech to co-operation between both sides of industry, because, as I said just now in answer to the noble Viscount who spoke before me, production is what matters, and unless we can get an effective and efficient production this country is sunk.
VISCOUNT MASSEREENE AND FERRARD: My Lords, might I ask the noble Lord whether he agrees that the objective of production is to produce wealth, or to produce jobs? Because that is very important.
LORD LINDGREN: Production is wealth. After all, I do not want to go into my elementary economics, but it is the shaping by labour of the raw materials of the earth that is producing wealth.
VISCOUNT MASSEREENE AND FERRARD: Have we not rather fallen into, as one noble Lord suggested we now have, two men doing one job?
LORD LINDGREN: Two men are not doing the same job, but they might be doing half each. As regards co-operation within industry, which is necessary if we are to get production going, the Government have struck a very serious blow to it, and that blow is in the undermining of trade union confidence; and without trade union confidence production will go by the board. The Chancellor of the Exchequer has undermined the whole faith of the trade union movement—when I speak about the trade union movement I am referring to the ordinary trade unionist and not the trade union leader; the trade unionist who pays his contribution, goes to his branch meeting and expects a return from his trade union in the improvement of his wages and conditions of employment—because so far as the trade union movement is concerned in this country it has prided itself (I believe industry as well as the trade union movement) in the fact that there has been free bargaining between employer and the employed, collectively, without the interference of Governments, with the Government coming in only when asked, when negotiations between the two sides break down. What I really cannot understand with this Government is that in their activities they hit hardest those who are least able to bear the blow from their action. Where does the enforcement of the wage pause hit hardest? It hits in the public sector of industry; the Civil Service, local government, the nationalised industries. The industries which are covered by the wages pause are all the industries which over the generations have been recognised as being those that have always lagged

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behind general industry in their rates of pay.
Transport is a very important factor in production and London is the centre of trade and commerce. But the action of the Government is taking away from some of these vital industries even the workers they had. Because of the fact that public service industries have for many years had a lower wage basis, and a lower salary basis, than manufacturing industries there has been a tendency for there to be drift from these public sectors into manufacturing industry. That is why London Transport, the railways and others have a very poor recruitment basis, and have great difficulty in retaining within their employ those whom they do recruit. One of the problems of British Railways and London Transport is not the desire of the officers to provide an efficient transport service, but their inability to secure the labour force necessary in order to provide that service. They cannot get that labour force because of poor rates of pay, or lower rates of pay than obtain in industry generally; and here again, the Government, by the pay pause, are hitting at that particular sector and pushing it even lower than it was below the manufacturing sector.
Equally, as I mentioned just now, the Government are damaging confidence. Over the last 10 years the trade union movement, and industry generally, has moved away, with a great measure of success, from that old and shocking guerrilla warfare which we used to have, with each trying to pick the time which was most advantageous to itself and most damaging to the other to attack. The trade union would wait until they knew the employer was anxious to secure an order at a certain time with a group of customers and then put in their wage demand, with the alternative that if it was not met they would withdraw their labour, knowing full well that they were more likely to meet success because the employer did not want to break his contract so far as his order was concerned. Equally, the employer would wait till he was slack, and so did not mind whether there was less labour, to make demands for wage reductions, knowing full well that the worker would consider half-a-loaf better than none and
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would accept wage reductions rather than unemployment. Such guerrilla warfare got us nowhere. Over the last 40 years we have developed negotiating machinery, and that machinery has, in the main, worked exceptionally well, both sides of industry, collectively, employers and employed, stating their case, arguing their case, coming to an agreement and implementing the agreement. We talk a good deal about strikes: they get the headlines. But generally industry has worked exceptionally well, and so have the various negotiating machines.
One of the problems of the trade union movement, however, has been that negotiating machinery is of necessity a slow machinery. Blame for the slowness does not lie on any one side. There have to be stages: application by one side or the other; arrangements for meeting; negotiations, one side putting its case, the other side answering it; deferment for further consideration. This all takes time, and of course there are always some folk in industry who are impatient. With the ordinary worker, who does not understand the difficulties of arranging dates—and sometimes the trade unions officers, as well as the employers, cannot find suitable dates—there is a tendency to kick over the traces.
I should be the last not to admit that full employment has brought its problems. The great problem, perhaps, is lack of discipline. None of us, certainly none of us in this House, would want to go back to the days in which there was a fear of pay day because of the possibility of being handed one's cards and of unemployment. That is a discipline no one wants to see return. But in a period of full employment one of the problems the trade union has to face is how to maintain discipline in the light of the employee's ability to find other farms of employment, to withdraw his labour and injure the employer who has no other source of labour.
Within the factories, within offices, drawing offices and all the rest, there have always been a number who try to make it difficult for the trade union movement to maintain that discipline. They have suggested, "We have got power now; we can wield the big stick, because in fact we can withdraw our labour and hurt the employer". What

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are the Government doing now? They are really encouraging the fellow-traveller and the Communist, because whereas the trade union before has been able to say, and say with success, "We have agreed to this machinery. We are going through the stages of that machinery, and when we come to the end of it, if we cannot secure agreement, then is the time to talk about withdrawing labour", the fellow-traveller and Communist is now able to say on the shop floor, "The Government have broken the rules. We have gone all through the stages of the machinery. We have got the award and now the Government refuse to implement it". What a weapon to hand to the agitator on the floor!
The noble Viscount—I can understand him—thinks that men should not withdraw their labour. I agree. But not every fellow who is on the shop floor has studied economics. He does not understand all the ramifications of industry. All he is concerned about is that when he goes home on Friday night with his wages his wife complains that this, that and the other has gone up; that when he gets his rate demand his rates have gone up; or, if he is paying his rates with his rent, that his rent has gone up. He just cannot make ends meet on what he has got coming in. The wife presses him for more money for housekeeping. He has got to cut down on his cigarettes and beer, and then the Chancellor puts up the price of cigarettes and beer. So the poor fellow is immediately susceptible to people who say, "The Government are not only creating difficulties for you, putting up prices and the rest, but when you keep to the rules and go through the machinery they break them and will not let you have the increase".
As I think my noble friend Lord Citrine mentioned, this Government—and this is a shocking thing—said that to a group of workers who had secured 2s. a week more. That is the increase they were awarded after going through the whole of the machinery—2s. a week! A packet of 10 cigarettes—and the Government stop it! Yet in the Budget in April the Chancellor of the Exchequet had given £80 million to surtax payers. True, they have not got it yet, because it comes in next year. But if the Communist on the shop floor says to the
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worker, "The Government stop your 2s. but there is £80 million for the surtax payer", can you wonder that the worker gets a little out of hand and is more susceptible than he otherwise would be to suggestions that he should withdraw his labour? And the fault is not with the trade union movement. The fault lies with the Government, who have broken faith in so far as the trade union movement is concerned.
I turn to an industry which I have much at heart. It gave me a living; the workers in the industry made it possible for me to enter political life, and when I was turned out by the electors at the last General Election the railways gave me a living again, until I joined our Lordships. So I have every reason to be grateful to the railway industry of this country. But the railways, as one of the industries in the public sector, are always well behind general manufacturing industry in rates of pay.
LORD STRATHCLYDE: My Lords, I wonder whether I might interrupt the noble Lord for just a moment? I do not want him to be misrepresented. I understood him to say earlier—he is returning to the same theme now—that the rate of wages in the public sector was lower than that in manufacturing industry. So far as I understand it, that is not accurate. What is accurate is that what the worker brings home at the end of the week in manufacturing industries is much larger than what the man in public service can possibly bring home.
LORD LINDGREN: That is not so. Let me explain this to the noble Lord. This is one of the problems of full employment. So far as the public sector was concerned it always had the virtue of regularity, whereas in pre-war days, before full employment, those in general industry were in and out of employment. Security was always paid for. The railway carpenter or joiner, the engine fitter, the wheelwright or anybody else, was always paid 10s. a week below the district rate. So far as the Post Office line men and others were concerned they were always paid 10s. below the district rate. But so far as the worker was concerned, particularly when he came to the age of 40 or 45, when he could not "tear about" as he could when a youngster on piecework wages, it was a better proposition to get 10s. a week less each

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week for 52 weeks than to get the district rate for 20 weeks and then to be out of work for 30 weeks of the year. So far as the building industry is concerned, in those days the employees always had to face sixteen weeks out of work owing to frost and wet weather.
The wage rates have always been based on applications on the existing wage rate. The public sector has never gone up with general industry, except that within the railways following the 1957 negotiations we did have the Guillebaud Report, which had as its object—the Civil Service, to its credit, has been doing this through its Civil Service Research Department—the bringing of wages and salaries levels within the railways up to a mean rate within the manufacturing sector or other similar sectors in general industry. We had Guillebaud.
I was one of those who took part on behalf of my trade union in the negotiations with the British Transport Commission and the Government which followed the Guillebaud Report. It was understood at that time that the Guillebaud Report was the basis which should be carried on right the way through, and that, instead of doing what we did in the old days, making applications through the recognised machinery, the basis of comparability with general industry would be maintained throughout. There was the appointment of a new Chairman of the British Transport Commission. He was to be paid a salary of £24,000 on the basis of comparability, not with the job that he was taking over but with the job that he had left.
Just to prove that I was not alone in thinking that the Government as well as the British Transport Commission meant to continue with comparability as recommended in the Guillebaud Report, may I refer to a statement by the Minister of Transport in another place, when he was questioned by one of the honourable Members for Cardiff on the appointment of Dr. Beeching to the British Transport Commission. The question arose from the suggestion that the Minister had said that the salary of £24,000 was being paid on the basis of comparability, and the honourable Member for one of the Cardiff divisions asked:
"Does this apply all the way through and down to the engine driver?"
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The reply of the Minister of Transport was:
"Yes, it does, because it follows the Guillebaud principle by which railwaymen were given wages comparable with outside industry. If railwaymen get that principle accorded to them, why should honourable Members opposite deny it to the managerial side?"
Here we have the Minister of Transport on the appointment of the new Chairman of the British Transport Commission bringing to his aid the Guillebaud Report—comparability of the job with general industry. Then the Chancellor of the Exchequer, one of his fellow Ministers in the Government, says to the British Transport Commission, in spite of Guillebaud, in spite of the fact that we give the Chairman of the Transport Commission £24,000 a year, "You must not implement a recommendation of the Guillebaud Report."
Again we have difficulties within the railway industry. Sometimes a fellow who can stop a job by getting off the engine, or in other ways, is tempted to do it if he cannot get his own way. What a glorious opportunity for those who wish to undermine discipline in the trade union movement to say, "The Government can give your Chairman £24,000 a year on the basis of comparability, but so far as you are concerned they stop the negotiations that will enable you to get it even though you were promised it under the Guillebaud Report"!
I opened this part of my speech by saying that unless we can get harmony in industry, both sides working together—I think the noble Lord, Lord Mills, used the phrase "putting our heads together"—we shall get nowhere. We have gone a long way in industry on joint consultation. The best place to get the ordinary fellow on the shop floor to understand what is happening and why it is happening, is in joint consultation. When the ordinary workers, not trade union leaders, come up from the floor to meet departmental managers they discuss and argue what is happening and how things are to be done on the job. That is where you can improve the effectiveness and efficiency of production. But, by their action, the Government are endangering joint consultation. There has always been a section of workers—the same section who always try to create trouble within industry—who have objected to

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joint consultation, who have always opposed joint consultation in the trade union branches. Now the Chancellor has given added facility to the fellow who is trying to cause trouble and stop joint consultation. It is one of the easiest things to do. If the agitator cannot get a fellow to stop the job he can say to him, "Come out of joint consultation".
This is happening because of resentment of the fact that the Government have broken trade union agreements. Within the Government service it is happening. In the Post Office joint consultation is being withdrawn because of failure to implement awards. In my own industry, the railways, it is more difficult because the managerial side of local departmental committees and the rest are made up of employees as well. Where the managerial staff is disgruntled as well as the fellow on the shop floor, how can you expect harmony in discussions? The Government have in mind (I am not going to argue it now, because there will be other opportunities to do so) the reorganisation of the railways. They have given Dr. Beeching the job of doing that, and I believe they are going to bring in legislation to facilitate it. Dr. Beeching will not be able to carry out a reorganisation of the railways unless, through the whole of the joint consultative machinery, both sides are prepared to work to implement it. You have both sides represented in the joint consultative machinery except at the very top level; and where you have the managerial side representing the employer, and the various trade unions representing workers on the line, both disgruntled, then you will not get very far.
Apart from the noble Viscount who spoke before me and, of course, the noble Lord, Lord Mills, who intervened on behalf of the Government, every Member of this House who has spoken this afternoon has condemned the Government for their action in regard to the pay pause. I ask the Government to think twice, and to be as honest as the Chancellor of the Exchequer was in making his Leicester speech. If they have made a mistake, well, let them correct it. Now is the chance. Withdraw the pay pause. Let the trade unions and the employers in the private and the public sectors have their discussions and come to free and open decision arising from
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those discussions, and let the Government go back to their ordinary function of coming in only when there is a dispute.
7.12 p.m.
LORD ROCHESTER: My Lords, there are two reasons why I should like to speak for just a few minutes this evening: first, I work in industry in an occupation which gives me the best possible opportunity to observe the effects of the Government's economic policy on employers, on the one hand, and on trade unions, on the other; secondly, I. owe allegiance to no political Party, and in the controversial subject we are debating now I therefore have no political axe to grind. As one who is closely involved in industrial relations today, I am frankly appalled at the prospect before us. As I see it, on the one hand the Government have said that, in the public sector of industry at least, there shall be no increases in wages or salaries. Incidentally, there must be many firms whose current trading position is such that they need no advice from the Government to make them unwilling to grant those increases. On the other hand, the trade unions claim that the effect of the Government's policy has been to reduce the standard of living of their members, and that this is something which cannot be tolerated. I shall not perhaps be accused of exaggeration in saying that there seems to me to be a grave danger of widespread industrial strikes in the country within the next few months.
Nevertheless, I think that most patriotic, thinking people feel that the time has come to stop the process whereby wages and salaries are increased unless they are matched by corresponding improvements in productivity. But what many of these people also feel is that the sacrifices that the Government have called on the nation to bear are not being spread equally over all sections of the community. They hear that restraint has been called for in the distribution of dividends in the form only of a request, whereas, at least in the public sector of industry, there appears to have been a directive that wages should not be increased. They know, too, of concessions to surtax payers—promised, it is true, before there was a change in the weather, but not again referred to now that the storm is at its height. A much more reverend and distinguished Member of

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your Lordships' House than I is reported recently to have said:
"The trouble with politicians is that they are incapable of saying they are sorry".
I would add that the rigidity of our Party system appears to be such that, too often, they dare not even recognise the other person's point of view. I have observed that this is less true of your Lordships' House than of another place, but it certainly does not help in trying to find common ground on which to solve our immediate problem.
It may seem paradoxical, but I believe that the divisions between us at the present time are not primarily those of economic or political doctrine. Indeed, at long last, to judge from what the noble Lord, Lord Mills, was telling us, there seems every reason to hope that the Government will gain the co-operation of both trade unions and employers in at least trying to plan a way out of our long-term difficulties. In my view, the qualities that are needed to solve our immediate problem are not intellectual at all. They are qualities of character: courage and, above all, leadership. I wonder if it is too much to ask the Government, in view of the magnitude of the dangers that are now confronting the State both from within and without, to practise a little more of this joint consultation which, as the noble Lord, Lord Lindgren, was just saying, we have in industry. That is something of the past; but I would express the hope that the advice which has been proferred to the Government from both sides of the House this afternoon should be taken in future, and that they should try to put the people a little more in the picture, to take them into their confidence, and to tell them a little more of what it is they have in mind.
At the same time, one wonders whether it might be possible for the Government to make some really imaginative gesture, designed to gain much more widespread support for their policies in the nation as a whole. Is it possible, for example, to say that the surtax concessions which were announced last spring will be postponed for a period of twelve months or so? This idea is not original to me. I first heard of it when it was mentioned by, I think, a Conservative Member of
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another place. Or would it be possible to accede, at least in principle, to the suggestion that the noble Lord, Lord Melchett, had the courage to canvass when he moved the humble Address last week—namely, that some form of restraint should be placed on dividends and other forms of profit realised in business? The point has been made again by the noble Lord, Lord Morrison of Lambeth, this afternoon, and I understood that the noble Lord, Lord Mills, in his interim reply to the debate, said that that view had his support.
But what I think some of us are looking for is a commitment on the part of the Government which is a good deal more definite than that. There will, no doubt, be difficulties involved in drafting the necessary legislation, but these difficulties did not stop the Government when they took the brave step recently of deciding to tax short-term capital gains; and, in my view, they should not stop them now. My Lords, in face of the danger from outside, we need at this moment, more than ever, economic stability at home, but as a democracy it is only in unity that we shall achieve it. If the Government are to get that unity, as I am sure they desire to do, it will be by giving a lead which all can follow. Once that lead has been given it will be for the Opposition and trade unions to show equal character, courage and leadership in persuading wage-earners to follow it. But I have enough faith in the British working man to feel that if he is then told clearly what is required of him and why, he will not let his country down.
7.21 p.m.
LORD SHEPHERD: My Lords, I would first apologise to the noble Lord, Lord Mills, because I was not in my place when he made his speech. Unfortunately, I was in a committee connected with the Kitchen. We are now at the end of ten years of Conservative Government and I wonder how historians will rate those ten years. I think, charitably, they will say that it was ten years of wasted, missed opportunities. As I see it, the world emerged from war, most countries prostrate with their exertions, and there was a golden opportunity for this country to organise its economy with some degree of a chance of overtaking some of the more powerful industrial

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countries. For a few years, perhaps because we were more advantageously placed, we made tremendous strides, but in the recent years many countries in Europe have now overtaken us or are in the course of overtaking us.
My Lords, why is that? There are some who say it is purely a question of labour costs; there are others who say that investment has not been rightly placed. I think the reason is possibly something of both, because if we look at the figures since 1913, we find that over the years the productivity of this country is less than that of many of the countries in Europe and the United States, and yet our investment rates are considerably higher compared with those countries. Therefore, I often ask myself whether the investment that we are now making is being channelled in the right directions. Is this valuable item, this investment, going into the manufacturing industries which will provide us with our overseas income, or is far too much going into services and luxury industries in this country? I believe that happens to be the case.
The Government may say that this really is not their responsibility. I think it is their responsibility. It is their responsibility on one point only, and that is the question of defence. At the present moment, there are many of us who are gravely worried about our overseas commitments and our ability to meet those commitments, and yet we are spending £1,600 million a year. I think that in the foreseeable future we shall have to continue that burden. We may well have to increase that burden. How, my Lords, is this to be paid for? The Government are to provide this defence; therefore, they have to find the means.
Over the years the balance of payments has been causing concern, because we are an industrial Power taking in raw material and producing manufactured goods; and since, I think, 50 per cent. of the food that we eat has to be imported, we have to ship overseas and earn more currency each year. My Lords, the figures are very poor. The noble Lord, Lord Mills, said that the Opposition had no evidence to produce to support their Amendment. May I remind him of the balance of payments position last year? The then current
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balance for the United Kingdom with all territories was a deficit of £339 million. It had changed since 1958 when it was £320 million, and since 1959 when it was £90 million. The trend was there. The Government, surely, must have known not only the way the trade, the imports and the exports, was going; they must have had a shrewd idea where the invisible balances were going, because we have depended over the years on the income from invisible assets and invisible earnings to balance our economy, and these invisibles continue to decrease very rapidly.
I think it is when we look at the balance of the United Kingdom with Europe or the non-sterling area that we see the disastrous trend. We had a deficit in 1960 of £670 million. That cannot last, that cannot continue; and yet during the period January-June, which I think provides the latest figure, the then current deficit between United Kingdom and the non-sterling area was £229 million. But I think that when one considers the stability of the pound sterling, which the Government are pledged to protect, one must take into account the trade of the Commonwealth with the non-sterling area, and there in 1960 there was another deficit of £579 million.
There are some noble Lords who say that this is not entirely the fault of the exporters; that it is because the Commonwealth are changing their trade. The Commonwealth trade rose between 1958 and 1960 by £550 million. Western Europe contributed £143 million and North America £334 million; and if the noble Lord, Lord Mills, wants evidence of our case, what was the expansion of British trade to the Commonwealth?—£19 million. Now it cannot simply be said that our prices were wrong and that our deliveries were wrong, because during that period we were able to raise our exports to Europe by something in the region of £301 million.
We have heard much about the Commonwealth, how close our ties are with the Commonwealth, particularly our friends in Australia. I was horrified to read the other day that, while some years ago this country provided 49 per cent. of their imports, last year it was only 31 per cent. Why is this?

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Are the Government to blame, or is it just something that is unfortunate? In my view, we look to the Government to guide us and to provide us with the direction in which the country should go. The Government are not a board of directors. They are the representatives of the people. If the Government fail to give the country the direction it needs, they are failing in their responsibility to their supporters.
My Lords, how far have we to go before we can say that we have turned the tide? A considerable effort will be needed, but it is not an effort that is beyond the ability of other countries in Europe. From January to June this year, Western Germany raised its exports by l2·5 per cent., as opposed to our rise of 1 per cent. If we could increase our exports by 12½ per cent., we should have a credit balance of £129 million. If we increased our productivity by one-half of 1 per cent., the earnings would be sufficient to pay the entire military expenditure of the country without any increase in taxation. And yet 2½ per cent. is the rate of growth of Germany. How is it that Germany can do it, yet Britain fails? Is it that we are decadent, ignorant and idle? Or is it that we have lost a sense of purpose and direction? I believe that we have; and the responsibility for that, in my view, rests directly upon the shoulders of the Government, for it is they who have created in ten years a society in which the rich and the strong may take it and the poorer sections must suffer.
We have heard a great deal about justice to civil servants who are being asked to accept a pay pause. I fully recognise, as I am sure do my noble friends on this side of the House, that wage costs in industry are becoming very high. It is not the fault of the worker, because wage costs depend upon productivity, the amount that is put out in the factory. Output also depends upon sales and on the man who goes out to sell. From my experience I feel that there are far too many companies in this country that are quite prepared to restrict production in order to maintain a profit margin. They are not prepared to buy the raw material for manufacture which is speculative because in the
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export market the margin is low. I have heard of this in a number of cases.
My Lords, we have got to make a very great effort. We have to get a real new spirit in industry. Management must—I will not say make its peace with the workers, but give the workers a real understanding, not only of the position of the industry but of the company in which they are employed. From the Government, we want them to show to the workers that there will be justice. If there is to be a wage pause, it cannot be just a few months after surtax payers have been given £80 million.
On that matter, I would make one point to the Government. It may be that they had a case to give incentives to what might be called the middle-class executive, the man in the £2,000 to £3,000 a year group. If my memory serves me correctly, the men who will enjoy the relief from surtax are not the £2,000 to £3,000 a year group, but the £5,000 to £6,000 a year group. Of those men who will enjoy relief from surtax, how many belong to the "top hat" insurance schemes in which their companies have voted them an increased salary, which they do not take and on which, therefore, they do not have to pay tax, but which they receive at the end of their service, a salary which is accumulating over the period meanwhile? I suspect that many, if not all, of those in that surtax group were in the "top hat" schemes.
My Lords, time is short. I beg the Government to realise that it is not only their own good name that is at stake. I beg them to realise that it is not only the standards of our people that are at stake, but that it is perhaps Europe, the part we play in defence and the part we play in the Commonwealth, that is at stake. Unless we can gear ourselves up and make ourselves dynamically strong, we shall become a second-class nation.
7.38 p.m.
LORD FERRIER: My Lords, it is relatively easy to criticise, as noble Lords opposite have done, and I have great sympathy with most of what the noble Lord, Lord Lucas of Chilworth, said. All parts of the House agree, however, or appear to agree, that we must export to live, and that we must export to earn the means to take our

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proper part in the world and pay for our defence expenditure. Is not the simple fact that the system of arbitration meant an almost automatic steady rise in wages, from which arose the spiral with its demand for higher wages, higher salaries and higher profits? This had to be stopped. My belief is that world competition is doing its share in controlling profits. The fact is that, by and large, profits on the year are down; and in most companies in which there has been a rise, the rate of rise has been stopped. Economic factors are imposing their own restraint upon profits. However, with here and there a stumble, the steps which the Government are taking lead, I believe, in the right direction.
Such stumbling as I see seems to me to arise from three factors: either not stepping firmly enough; perhaps missing a step, or, thirdly, taking a false step arising from glancing aside from the true Tory track. Where, in my belief, the Government are not stepping firmly enough is in failing to provide the incentive for which so many noble Lords have appealed, and to which the noble Lord, Lord Lucas of Chilworth, so emphatically pointed, the incentive towards leadership and towards enterprise in exports by means of taxation relief. In other words, I do not agree with the noble Lord, Lord Rochester, or with the noble Lord, Lord Shepherd, opposite, that the surtax relief should be paused. Indeed, if it were to be left at its present level, that would be a pause, because, in my view, originally it did not go far enough.
LORD SHEPHERD: Humph!
LORD FERRIER: The noble Lord says "Humph !", but the fact is, as the noble Lord, Lord Shepherd, was saying, many of the executive class in industry are not receiving enough, after their incomes have been taxed, to provide the incentive by which we should seek to encourage enterprise.
LORD SHEPHERD: My Lords, would the noble Lord agree that if a man is in the "top hat" scheme, that should also be taken into account?
LORD FERRIER: If the man was in the "top hat" scheme?
LORD SHEPHERD: Is in the "top hat" insurance scheme, of which I am sure the noble Lord is aware.
LORD FERRIER: My Lords, of course I am aware of it, but I do not see the point. I am talking of the young executive who has possibly not begun to think of the "top hat" scheme.
But I must confess to some disappointment that the Government have missed a step in the absence of any reference in the gracious Speech to decimal coinage. This was a disappointment, I feel, to many besides myself. However, I see that my noble friend Lord Fraser of Lansdale has a Question down for November 14, so perhaps we may get a statement fairly soon. My own view in this matter—and it is a subject which affects the economic position—is that no time should be lost. The change, after all, is inevitable, and the longer it is deferred the greater will be the cost. The ultimate savings will be enormous; we cannot get away from that. Further, I believe it is important that it should be introduced, but in such a way that it is kept quite distinct from the forthcoming negotiations regarding the Common Market. Because we do not want controversy which is not intrinsic to the basic problem to cloud the issue. I support what the noble Lord, Lord Brocket, had to say, and I am particularly glad that he ranged so far from the fairly narrow path which we have been following in this debate and from which I also propose to range a little. But I would express my entire agreement with what he said: that, after all, all of us wish for prosperity for this country, and we are all striving toward that end.
I will now turn to the suggestion of a capital gains tax, to which some noble Lords have referred. A draft measure, of course, is not available, though it is promised. But I implore the Government to reconsider the whole matter. If some touchstone is required in regard to negotiations over the wage pause, I have another suggestion to make. I speak with some experience in this matter, though, of course, experience in another country, because a firm in which I was a partner became involved in a capital gains tax assessment on a transaction which took place in 1948. My Lords, it is not settled yet. The years

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rolled by; partners have died and been replaced by executors; the cost to the Government concerned, as well as to the assessees, has been heavy. I cite this only to illustrate that a capital gains tax, no matter how carefully drafted, is very hard to administer. Further, by virtue of the cost of its administration and of the complications which may arise from it, the revenue from it falls far short of what it appears to be at first sight.
My Lords, a capital gains tax can trap the innocent. What about trustees? What about executors, and similar persons who may be faced with forced sales of an urgent nature? It adds to the inhibitions which taxation already imposes upon the simplest business transaction. It can prove to be a tax on inflation, though, of course, the one-year period—if that is the period which is contemplated—may avoid much of the inflation angle. That period is twice the period which the United States of America fix. Cannot more powers, existing powers under the Finance Act, be used to tax income of an unusual nature? I was talking the other day with a friend in the North who was strongly of this opinion. He is an experienced man, and he believes that powers exist which could be used more powerfully under the Finance Act. Then, how are losses to be offset against gains? It is a very complex and a most provocative matter. I am no speculator—indeed, I do not approve of speculation, though, of course, it is only human to have a sneaking respect for those who do it successfully. As I say, that would only be human.
Now we come to one of the problems of any stock exchange—namely, the stag. One must remember that the stag appears only in a period of inflation. Stagging is no sin, but it is most undesirable, especiall when large gains are made which are untaxed. These stags must be stopped and brought to book. But surely, besides the political counter, it is revenue which is sought; and trusting that this is so I have the following constructive suggestion to make as an alternative Ito a capital gains tax. This is a proposal which is simple to legislate for, it is easy to administer, and it is consequentially, in my belief, potentially more remunerative than a capital gains tax. It is this: to
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remove the 2 per cent. stamp duty on transfers, and to substitute therefor a 2 per cent. tax on all contracts. This comparatively simple—I repeat, comparatively simple—measure would bring down the stags, or most of them. It would take a levy on the full measure of dealings. It may be objectionable to the Stock Exchange, but it is not so objectionable as a capital gains tax. It would, in my view, not inhibit real investment, as I believe a capital gains tax would. One can speak only from intelligent anticipation of the terms the Government may have in mind, but if our information is right, then the proposed measure for taxing capital gains would, I to use a slang phrase, inevitably "gum up" the market.
The noble Viscount who is to reply may say that the suggestion has been considered and rejected; but, if it has not, I urge the Government to give it close study, bearing in mind the complexity of a capital gains tax and the staffing and the administration of its operation, and bearing in mind also the fact that, rightly or wrongly, a capital gains tax may be regarded by some as oppressive, certainly on occasions, with consequent litigation, disputes, suits, prosecutions, and the like. These all cost money in terms of time; it is a great loss to the nation's productivity, a loss which already arises from the hours and hours of time which would otherwise be spent in productive work which people, not only businessmen, have to give to-day to the avoidance of tax. After all, no director, no trustee, no administrator, no property owner, no salary or wage-earner, is worth his salt if he does not keep a wary eye on his tax position. And, talking of wasted hours, how many millions of man and woman hours are spent weekly in playing the pools? Would it not be equitable to have a rising scale of taxation chargeable to winners of big dividends on the pools—or am I allowing a measure of "sour grapes" to creep into my thoughts?
I would emphasise that I am not saying that large gains on quick transactions should go untaxed. But I am urging a more practical method of taxing such gains than that which we believe is proposed. I would say that a capital gains tax in the form visualised is objectionable. And once a system of

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this sort is established we may never get rid of it, on the ground of political sentiment, no matter how impracticable the use of it may prove to be.
Turning to another subject, despite what the noble Lord, Lord Shepherd, said and other noble Lords have hinted, I believe that management as a whole in this country is fully alert to the dangers which surround them and industry. Our management is, by and large, efficient; but, as I said earlier in my speech, we must remember that the income of the middle-level manager, the well-paid representative overseas and the like, after tax, is not sufficient, certainly in my view, to provide the necessary incentive for the real enterprise which the country needs in order to gain the way that the country demands in the export market. I propose to vote against this Amendment, for. I believe that it is only when people are doing something that they make mistakes, and if the Government have made mistakes, at least they are doing something; and most mistakes can be rectified.
7.52 p.m.
LORD WALSTON: My Lords, I hope that it will not be long before the Government take in what the noble Lord, Lord Ferrier, has just said about rectifying their mistakes. They have had ten years for that rectification to take place. I think that all of us have little criticism of the short-term methods which the Government have adopted to meet this latest crisis in our financial and economic affairs—namely, the raising of the bank rate. Unfortunately, it was an essential thing to do. Things having got to that pass, and with the country entering upon the period of abnormal strain upon sterling, with many heavy imports to be paid for, there was nothing to do except to attract into this country more short-term money. That could be done only by raising interest rates, so that the foreign depositor found that he could grow somewhat richer by sending his money into England instead of sending it to Frankfurt, Basle or New York. That has worked. We have got the money into this country—in fact, we have got rather too much money into this country at this stage by those means.
We must remember that the use of such means is a highly expensive method, not only in general terms but
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also in terms of foreign exchange, because we have to pay out a far higher percentage in interest rates to foreigners who deposit their money than we do with the lower bank rate. That is perfectly simple common sense. It is not something which we can enjoy doing and which we can allow to happen for any length of time. That is why, on these reasons alone, disregarding everything else for the moment, the Government are perfectly right to respond to the needs of this immediate crisis of foreign exchange by introducing a lower bank rate and trying to force out same of this foreign money into other places. Unfortunately, doing this gives the impression to people in this country that the crisis is now over and that there is no need for any of these further actions. I hope that when the noble and learned Viscount the Leader of the House replies to this debate he will tell us a little more about the Government's further ideas about this crisis. How long do they think it is going on?
The feeling is getting around, partly because of the lowering of the bank rate and partly because of certain statements that have been made about wage increases in the spring, that by April 1, or some such time, we shall be out of the wood and able to return to normal. I hope that that is so, but I very much doubt it. I think it would be disastrous if the country, particularly those who have put in wage claims, took it for granted that, when the sun returns and the cowslips bloom again clear skies will follow and the wage pause will evaporate. I hope that on this occasion we shall be told definitely whether the Government confidently expect that this will be so or whether they do not.
The noble Lord, Lord Mills, patted himself and his colleagues on the back for the great increase in the standard of living that has taken place in the past ten years. Surely in ten years any reasonable country would expect to have some increase in the standard of living, and we should have thought it only natural that it had taken place. But what is disturbing to some of us is that some of this increase has been brought about by mortgaging the future. We have been buying our prosperity on hire-purchase. And on that we have to keep up the weekly or annual payments.

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Sometimes, when times get hard, that becomes difficult. Because we have pledged so much of our future to this increased prosperity, we are now finding that the birds are coming home to roost, and it is not so comfortable.
What is more important than this immediate short-term problem, which has been to a certain extent overcome—though we do not know if it will recur in nine months' or twelve months' time—is what are the Government's longterm plans for avoiding these constantly recurring crises which come back once every two or three years. I think that all noble Lords who have spoken to-day have agreed that the answer to this must be increased production and exports. That is self-evident. That is what has been said in the gracious Speech; and, with that, of course, none of us has any quarrel. But, as my noble friend Lord Latham said, it is not enough simply to say that this is what we want. How is it going to be achieved?
Let me remind your Lordships, as other noble Lords have done, that the Government have had ten years in which to solve this problem. Are they coming out now with some new "secret weapon" which they will not disclose to us? Have they some newly found solution to this problem, or are we to be given once again the old recipes? So far, in the gracious Speech and in other pronouncements we have had no indication of what the answer is. So far, the only suggestions seems to be that we should have a wages pause.
It is perfectly true that wages are a big factor in our production costs if we are to compete abroad. We must not allow our production costs to rise, and, therefore, to some extent it is sound and reasonable to say that wages must be kept stable. But wages are not the only factor in the general cost of living. It is the cost of living, in effect, which determines wages. There are many other factors. House rents are a significant factor, particularly for lower-paid workers. Rents takes up 20, 25 or even 30 per cent. of their weekly earnings, 30 per cent. of their weekly wages. And what are the Government doing about housing? They believe to a large extent in the law of supply and demand, from which it follows that, if they are to re-
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duce the cost of housing, there must be more houses. Conversely, if the number of houses does not increase sufficiently to meet the demand, prices must rise. That is precisely what has happened, particularly since most forms of restriction have now been removed. At the same time, a large factor in the cost of housing is the cost of land. There is no need for me to remind your Lordships of what is happening to the cost of land, and how it is due to the deliberate and thought-out plans of the Government.
I think the point must be made clear that we cannot solve our economic problems in this country simply by saying: "Let us keep wages level and everything else will follow from that". We want to keep wages level and do not want to let them spiral right up thereby pushing up the price of everything. But if we are to do it sensibly we must at the same time look at other factors which cause inflationary pressures.
I was very much impressed by all that my noble friend Lord Citrine said in his speech. He spoke of the present lack of confidence in the Government's policy among trade unionists and among workers, and also of the essential need that there should be confidence if any successful policy is to be worked out in this country to-day. He went so far as to say—and it was a courageous thing for him to say—that in his view wage restraint was a good thing. That is something which we should take note of and and welcome. My noble friend then went on to make a few remarks about a national wages policy. I know that there are difficulties here, and it is not a simple matter by any means. I do not know how many of your Lordships read a letter in The Times a few days ago written by Professor Kahn of Cambridge, already referred to by the noble Lord, Lord Brand, in which he suggested that perhaps the Chancellor of the Exchequer had not entirely understood the full implications of a national wages policy. It seemed to me to be quite clearly expressed and I hope that it was read by the Chancellor and by other members of the Government.
My noble friend Lord Citrine went on to talk of the National Economic Development Council or the Economic Planning Board, which has been mentioned also by my noble friend Lord Morrison of Lambeth. There has been a

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lot of talk about this, but none of us, I think, is very clear as to just what is hoped to be achieved by it. One thing of which I am quite certain is that, however desirable such a council may be, it cannot in any sense undertake the responsibilities which must ultimately lie with the Government and specifically with the Chancellor of the Exchequer. It cannot be an executive body. It can be an advisory body and, if it is of sufficient standing, a body whose advice will be listened to and frequently acted upon. But it would be a complete abandonment of all that we understand by democracy if the Chancellor of the Exchequer were to abrogate his own responsibilities and put them on to a National Planning Council. He must remain the Minister responsible, and the Government must remain the responsible body for the economic policy of the Government.
But I believe that the Economic Planning Council (or whatever name it may be given), if it is properly constituted and has the confidence of the vast majority of the people in the country who will be affected by its decisions, can do an invaluable job, particularly in the matter of a national wages policy, not only in deciding on the total amount of wage increase which is permissible in the interests of the country, but also in advising on the rough allocation as between industries and groups on the basis of need, and on recruitment value to the community, or whatever criteria may be set up, and in advising the Government as to the best means of implementing this national wages policy.
But there is no point in having a national wages policy which affects only the weekly wage earner while allowing salaries and dividends to go completely free, because wages are not by any means the only factor in our total cost of production, and certainly it would be grossly unfair to have Government action which was regulating and restricting the one while allowing the others to pursue any rises, inflationary or otherwise, that they might see fit to obtain. Therefore, at the same time as it brings in anything suggestive of a national wages policy it must be made very clear indeed that the whole economy is to be subjected to the same form of planning and the same form of control.
I am not suggesting for a moment that one should have another council to
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decide the level of salaries of company directors or the level of dividends that companies can pay out; that is manifestly impossible. But we have the simple fiscal weapon of taxation, and in order to gain the confidence and the acceptance of this policy by the unions and the weekly wage earner it should be made quite clear that this weapon will be used relentlessly in order to keep salaries and dividends in line with the wages which are recommended by the National Planning Council.
On this subject I think it is worth reminding your Lordships of what has happened in the last ten years, during which we have had a Conservative Government, in the matter of wages, salaries and dividends. We have been talking, and many people have been writing, as if wages were the only thing that had got out of hand and were the cause of this inflationary pressure, high costs and our inability to export. But if your Lordships refer to this document of the Central Statistical Office on National Economy and Expenditure for 1961, where the figures from 1950 to 1960 are given, you will see that wages as defined by the Central Statistical Office rose during those ten years by some 87 per cent., whereas salaries rose by 117 per cent. In parenthesis, I might say that farmers' incomes rose by only a meagre 38 per cent. during that same period. To come to dividend payments during that same ten years, they rose by 142 per cent.
So your Lordships will see that the greatest rise that has taken place on a percentage basis has not been that of the weekly wage earners but that of the receivers of dividends; that the second greatest rise has been for the recipients of salaries; and the lowest rise, apart from the farmers, has been that of the weekly wage earners. We have now come to the stage where salaries, instead of being about 50 per cent. of the cost of wages, as they were in 1950, are 60 per cent. of that cost. So, if we attempt (as I hope we shall) to plan and regulate our wages, it is important that we should not ignore salaries or dividends in the whole question of the distribution of the economic resources of the country.
While I am on this question of dividends and company profits, perhaps may save the noble Lord, Lord Mills, the trouble of writing a letter to my

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noble Leader in answer to the question that my noble Leader put to him. As your Lordships will remember, my noble Leader asked the noble Lord, Lord Mills, if it was true that company profits had been declining during the past twelve months. If you refresh your memories with the Economist of July 15, you will find that the figures for the second quarter of this year are there given. It is there written that the gross trading profits of the 892 companies analysed in the second quarter of the year rose by 6¾ per cent. So during the second quarter of the year company profits were still rising, and in fact rose by 6¾ per cent. over those of the previous period. If you turn to the Economist of October 14 dealing with the third quarter of the year, you will see that the combined trading profits of the companies referred to have risen by £29 million, a rise of 7¼ per cent. So, in fact, in spite of wage restraint, in spite of all the exhortations of the Government—not that Government exhortations can have any effect on companies' profits—it is quite clear that companies' profits are still rising. Perhaps they are not rising as fast as they have done, but so long as they are rising it is extremely difficult to enforce anything like an effective wage pause.
In parenthesis, it seems to me a rather peculiar state of affairs that a Government spokesman should appear to be almost anxious to say that company profits have not risen in any period of time. It surely is to the credit of the Government, and to the benefit of the country, that company profits should continue to rise. But so long as they do continue to rise, it is very hard to maintain that wages should not rise also.
LORD MELCHETT: My Lords, may I say, before the noble Lord leaves that point of company profits, that there seems to be some confusion on this point this afternoon. My right honourable friend the Chancellor of the Exchequer on October 23 in another place, during the debate on wages and salaries, gave the Treasury figures on this point. Speaking of the first half of this year, he said [OFFICIAL REPORT, Commons, Vol. 646 (No. 167), col. 627]:
"Gross trading profits of companies—that is, profits before providing for depreciation—were
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£1,695 million in the first half of 1961 compared with £1,833 million in the first half of 1960."
That shows a fall of about 7 per cent. I think the noble Lord was quoting the figures of a certain number of specific companies selected by the Economist, but I believe the overall figures have in fact shown this 7 per cent. fall during the first half of this year.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, if I could intervene in this little discussion, perhaps I could give the best figures I have. These are from the Financial Times of October 16. It says that the analysis of profits of 2,136 companies published by the Financial Times records a grand total of £2,603,777,000, compared with £2,399,868,000, for the nine months to the end of September. Although there may have to be some adjustments outside that very large number of companies which are the principal ones reported in the Financial Times, I must say this seems to prove the case my noble friend Lord Latham was putting.
LORD WALSTON: My Lords, possibly I have not saved the noble Lord, Lord Mills, his letter after all. Perhaps it will have to be a rather longer letter, and possibly there should be a letter from the Chancellor of the Exchequer to the Economist or from the Economist to the Chancellor to settle this point. All I can say is that I hope that company profits have not fallen, because I think it would be a disastrous indictment of the Government's economic policy if in fact that were true. It seems to me to be rather an Alice in Wonderland world where noble Lords on the Government side are trying to make out the company profits are lower, and where the Opposition is trying to make out that the economic state of the country is more prosperous than it really is.
Be that as it may, let us come back to what is really the most important fact in this matter. Here may I remind your Lordships of the words of our old friend Lord Pethick-Lawrence in the last debate on this subject in July. He emphasised the need for justice and "fair do's". If we are going to achieve anything like a planned society, a planned economy and a planned output, and use our national resources (and we are delighted to learn now that noble Lords

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opposite are coming round to believe that some form of planning is necessary in order to achieve this), we can do so only by making quite certain that the antagonism between the two different sides of industry is once and for all abolished, and that people realise, whether they are on the factory floor, in the managing director's office, sitting in banks or wherever they may be, that they are working for the same ends and to the same purpose. The great tragedy of these last six months is that the action of the present Government has made any hope of that fact getting home far more remote than it was before.
I do not want to labour this point, but let me repeat just once more that you cannot say to the weekly wage earner, "You are to have a wage pause" or to the school-teacher or the civil servant, "You must not have any more money", and at the same time—and I will not repeat them—take all these other actions that the Government have taken which in effect make those who are above that income level still richer. You are not getting that feeling of justice; you are not getting that confidence, as my noble friend Lord Citrine said earlier on. And we must get that confidence and that feeling of co-operation. The longer we wait, the harder it is to achieve it. But it can still be achieved, even by this present Government. I would suggest that the three things they must do rapidly and in a clear-cut manner, with no "ifs" and "buts", if they are to obtain this result, are: first, see that land speculation is curbed—inflated land prices must not be allowed to continue; secondly, in whatever form it is introduced, even if it is not economically or fiscally sound, but for psychological reasons if for no other, introduce a capital gains tax so that people do not get rich in one form which is denied to many other people; and thirdly, postpone the surtax reliefs announced in the last Budget until the wage pause is lifted.
I believe that, if those three things are done, the Government will at last have the support of the whole country in this effort of getting the country's economy once again on its feet. There will be no more recriminations about the ten wasted years; there will be no more saying, "You never bad it so
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good", and the rest of it. We shall at last believe, even on this side, that there are in charge of the destinies of this country a Government who are prepared to work for justice and who believe in "fair do's". When we have that, we shall then get the economy of the country going ahead; but until we have that, we shall never do it.
LORD FERRIER: My Lords, before the noble Lord sits down, may I make three points arising out of his speech? One is with regard to gross profits. Surely they are bound to increase as investment increases. The noble Lord referred to dividends and surtax. It is true, of course, that dividends are taxed in the hands of the receiver as unearned income, and I think I am right in saying that at the time the surtax relief was granted the profits tax was increased.
8.20 p.m.
LORD BRAND: My Lords, I should like to make a very few remarks, as the noble Lord, Lord Citrine, and I had a certain discussion for a few minutes this afternoon. He referred to an O.E.E.C. book called The Problem of Rising Prices. published some months ago. It is 500 pages long, deals with all the European countries and is the final judgment of four out of six professors to whom I referred, and I should like to read a short piece. I quote:
"We are fully aware that the idea of a wages policy runs counter to the traditional view of how collective bargaining should be conducted and of the role of the government in wage determination. In some countries it may take some time before public opinion can be brought to see the need for such a policy. In our opinion, however, the traditional view no longer conforms to present day realities, hence a deliberate policy towards wages offers the best, perhaps the only, means of securing an appropriate behaviour of wages where wage-push is a serious threat to the attainment of other basic objectives."
I am not, I think, being a schoolmaster in referring your Lordships also to an admirable article in a magazine that I have something to do with, The Round Table. You will find the article in the last number, a quite admirable article, with which I had nothing to do, on this question of wages and inflation.
My Lords, our great danger is more and more inflation. Nobody can deny that prices are now rising rapidly. Certainly I know it. I have had a little to do with building in the country

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recently, and the prices stagger one, when one sees them. I cannot believe that the building industry is not very fully occupied, even if fewer houses are being built. Anyhow, prices are rising rapidly. Why are we suffering from this inflation? It is a combination, I think, of full employment and the almost yearly rise in wages, the rise being disproportionate to production. This custom, I think, did not prevail before the Welfare State came into being. Now, as prices rise, naturally the worker assumes that he ought to get more wages; and next year, as prices have risen more, he will assume that he ought to get more wages still. And so it goes on, year after year. I have seen a lot of inflation in certain other countries, in Germany and in France, and the results are apt finally to be disastrous. Ask the German workman how he liked the two inflations that he has had to go through since the First World War and you will learn the answer.
But it is not only that inflation is growing more and more, but that we are not now anywhere near paying our way. Last year, I think one of your Lordships stated that we were short on our balance of payments by £345 million. We are supposed to be the great lender to the rest of the world, and I think that a great many of the Party of noble Lords opposite consider it our duty to lend to African countries, to Cyprus and to all the countries in the British Commonwealth. But we have nothing to lend them. We are short of money. We have to borrow from other people. We have just had to borrow £500 million from the International Monetary Fund; and therefore we, who are so great a debtor, cannot possibly assume the role of the lender of capital to the rest of the world. How we are paying now for the United Nations' dealings in the Congo I am not sure.
It is because our consumption is greater than our production that our situation grows worse; and for that reason inflation will increase. I fully understand the difficulty of explaining to the ordinary man what the balance of payments means. If you were to ask a million of the ordinary workmen it is likely that you would find very few who knew. What the ordinary man does know is that prices have risen, and he
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wants more money; and as prices rise next year he will want more money again. Mistakes may have been made by the Government in their strategy, but I think they can be remedied. Of course dividends and salaries are involved in such a scheme, but I believe that people overlook the fact that sometimes profits decrease, and that the owner of shares cannot say he wants more money because his company has done badly. He has to stand the loss. In that way dividends are quite different from salaries and wages. Moreover, it is inflation itself which produces the big profits and the big profiteers. No doubt dividends and profits have gone up. We are in a period of inflation, and in a period of inflation, they go up and up; but ultimately, of course, the whole structure crashes.
However, I gather from this debate that a great deal of unanimity exists on both sides of the House, and I should like to say that I personally agree with almost every word uttered by the noble Lords, Lord Morrison of Lambeth and Lord Citrine.
8.28 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, we have come now almost to what we call in sport the penultimate round of the debate, and the noble Viscount will be winding it up in its final stage. I think we have had a very good debate to-day and I want to say at the outset how much I am indebted to my noble friends who have addressed the House from our point of view and who, I think, have been quite fair and just and have put the case, as we see it, adequately before the House. The speech of the noble Lord, Lord Mills—I do not see him here; is he coming in?
VISCOUNT HAILSHAM: I hope so.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Perhaps I will leave it for a moment and turn to one or two other points.
What I took a special note of, in the course of the earlier speeches, was the fastening by the noble Lord, Lord Morrison of Lambeth, on the point of the lack of leadership in this Parliament and in previous Parliaments which have also had a Conservative Government. I think that that is brought out perhaps

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even better when you find the kind of contrast that was pictured in the Sunday Express on Sunday by one who is certainly not a Labour supporter and I think, on the whole, probably belongs to as long a Conservative tradition as anybody, Lord Hinchingbrooke. I noted this comment particularly:
"The present Conservative Government is the weakest from which Britain has suffered since the collapse of Mr. Balfour in 1905. There is no spirit of determination to be found on any front except that of massive bribery of the electorate."
I think I can say to my noble friend Lord Morrison of Lambeth that he must have a complete supporter, in the person of Viscount Hinchingbrooke, for his charge of lack of leadership.
I come to the end of that sentence of that noble Lord in the other place. The "massive bribery of the electorate" used always to be the charge of Toryism against Socialism; that was always the case. But a large part of the economic troubles of the Government to-day stem directly from the massive bribery of the electorate by the Conservative Party, who were so anxious to get back into power and were also anxious at every subsequent Election to go on sticking to office like limpets, as was once said in the other place. How did they do it? First of all, in their appeal to the country in 1950 and in 1951 they took no notice of all the economic troubles which the noble Lord, Lord Brand, put to the House to-night, in spite of the fact that we had a £30,000 million debt and that we happen to be, I suppose, the only major partner in the war which really goes on paying its international debts, compared to some of the others who are now boosted as wonderful, marvellous, but who never sought to meet the debts we have met and who comprise the European Economic Community.
And what happened? What happened was this: they offered the people what they called freedom from the effective controls that were already on the community, which was burdened not only with keeping the promises of all the Parties of the establishment of the Welfare State but also burdened with the two factors, first of the extension of the military programme in support of the North Atlantic Treaty Organisation and secondly of intervention, in the middle of all that, in the war in Korea.
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You could not possibly justify coming in, taking off controls and introducing economic behaviour in the nation which was on the basis of a "free for all". There lies the responsibility of the Government.
And in each subsequent election that they have held what have they done? They have, first of all, brought in a Budget which distributed tremendous largesse to the electorate, and when they were returned each time they came back to meet a new financial crisis. On each occasion the main policy that they have adopted in dealing with it was not to restore more direct taxation on those who have unearned or very high earned incomes, but, on the contrary, to raise money again by indirect taxation, raising the cost of living of the common people and therefore being responsible for the demand for increased wages, thus raising the costs of production all the time, and perhaps thereby (it may be true or it may not be true, if it is measured very minutely) this has meant there has been a wage income out of proportion to the volume of production. If there is anybody responsible for that in the last ten years, there they sit on the Benches opposite, and it is entirely due to their economic policy that those conditions obtain to-day. There is no doubt whatsoever about it.
If one looks at what are almost the adventures of the Chancellor of the Exchequer, Mr. Selwyn Lloyd, one wonders exactly how it has come about and where he is going. I am not going to join in the earlier remarks about whether or not he made a statement that he at least had a share in the blame himself. That is quite fair. I do not think he said anything very much out of place in that particular speech that has been quoted, and I do not want to dwell upon it. But what we do know is that he has shaken to the roots the ordinary trade unionists in the country in the procedure which has been adopted with regard to the proposed wage pause on the one hand and the lack of consultation in regard to this new proposal for setting up an economic planning board.
As regards the wage pause, it was stated in detail in the other place nearly three weeks ago what a disgraceful situation that presents. I know it can be argued that any reigning Government

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responsible for the general position of its nation ought to have the final say upon the general economic policy. But when it comes to challenging the actual results of the tribunals set up after years and years of organisation, both for public servants and, through industrial wages councils and the like, for ordinary industry, and then to come forward with proposals of this kind for a wage pause and to say, "We set the example at once by interfering in the independent tribunal award for teachers; we interfere by suspending the award with regard to public servants, such as servants of the Admiralty and certain classes of civil servants, and we expect the rest of industry in the country to follow," that is not the kind of thing that the most progressive minds in the Conservative Party ever thought they would have to agree to—not by any means.
I am going back to a quotation from Mr. Butler when he was Minister of Education and talking to people concerned on the other side of these arbitration meetings, arrangements and regulations. I just take one short extract, but if any noble Lord wants to read the rest of it he will find it at Columns 611–2 of Volume 646 (No. 167) of the House of Commons Hansard of October 23, where he is quoted as saying:
"You would be making an even greater mistake than the Government if you were to regard it as any part of the general duties of a Government to regulate the conditions and rewards of those who serve in any non-State regulated branch of our national life. I, personally, should very much regret it, and it would go right against the grain of some of my most fundamental ideas."
No wonder that many on the Labour Benches in the other place said, "We want 'Rab'". There is no need for any further explanation when you see the different view of this divided Cabinet at the present time on these fundamental matters relating to the social consequences of economic policy of this kind.
Take, for example, the repetition this afternoon—I still do not see the noble Lords, Lords Mills, here, and I do not like to refer to him when he is not here, but I will. How has this crisis we are going through now arisen? In 1959 we had "never had it so good". If there is anything at all in what the Chancellor of the Exchequer has now put before
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us, if the steps now proposed by the Government were the right ones, they ought to have been proposed in the middle of 1960, after proper consultation. Now it is expected that the Trades Union Congress is just, as it were, to come to heel to follow these dishonest and, from the point of view of the law as it stood, illegal measures against the awards of independent bodies set up under well-known legal practice. If you take the question beyond the wage points which the noble Lord, Lord Brand, has mentioned, you then come to the comparison (which would have been better put by him, if I may say so) that is now so often used, I must confess, by Ministers as well as others, not on the basis of wages but upon personal incomes all round. I am quite sure that the noble Lord, Lord Brand, will not mind looking at it from that point of view.
I want to support my last point by saying that of course they ought to have introduced their measures in 1960 if necessary, because it is quite clear from the Return that whereas wages went up by 8 per cent. in the particular twelve months, personal incomes from other sources went up by 13 per cent. in the same period. What proposals were made by the Government to deal with that? They gave a promise that in another twelve months £83 million would be made available for the relief of the surtax payer. What sort of opening gambit do you make with the Trades Union Congress in such circumstances? I shall wait to hear the answer, because although the noble Viscount, Lord Hailsham, and we often quarrel on politics, when it comes down to dealing with moral and human values over and over again I have found that he is much nearer to us than he is to other people.
To take the point that was made by the noble Lord, Lord Mills, I especially want to refer to his speaking of there being two problems: first, the pressure of the home demand on resources; and, second, the pressure from earnings of all kinds. Who is responsible for the pressure of earnings of all kinds? I think I have proved my case on that. I would go through with anybody, and debate stage by stage, all the ten years of political history of complete Tory majority and prove my case. I would not fear any tribunal.

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The other point put as a problem by the noble Lord, Lord Mills, was pressure of the home demand on our resources. Who is responsible for that? I remember the speeches reported in the different shades of the Press at the 1950 Election, as well as at the following Election of 1951, about the iniquitous Socialist controls. Set the people free! They spoke of "this dreadful rationing for the people five years after a war." There was no regard there for how you were ultimately going to deal with the immediate needs of the Welfare State to which you had all agreed, and at the same time meet not only the proper amortisation of the debt with which much progress has never been made, but also the interest we had to pay on our own internal national debt, and meet the debts that we had to pay for obtaining what we needed to carry on in a bankrupt State in 1945. "So," said the Tories, "take off the controls. Set the people free!"
When the Tories were returned in 1951 they said, "Things are even worse than we expected. The situation is getting worse." What did they do? At the Election they had promised to bring freedom, to abolish rationing, to give the people more of this and more of the other—everything that they wanted. Within three years there were groups of them, some of them Parliamentarians in both Houses, supporting that well propagated proposition for an independent television channel which was to be financed by the advertisers. So since then you have had nothing but constant pressure salesmanship. Unfortunately, they knew the human mind better than I did, because they seem to get away with the most kindergarten type of advertisements. What is the result of that? You talk about incomes going up. I wonder whether we can analyse the financial position of all those who were in that pressure for I.T.V. programmes which the noble Viscount, to his honour, opposed on principle during the whole passage of the Bill through this House; he foretold some of the things that were likely to happen.
I ask your Lordships to draw a comparison. The noble Lord, Lord Mills, was quite right to-day to stand up for the shipbuilding and shipping industry. I find it convenient to say that because I want to make a comparison. The shipyards of the Clyde, the Tyne, the Tees
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and of Belfast do not make as much profit as does commercial T.V., the pressure salesman group which is making the particular problem that the noble Lord, Lord Mills, put to us: too much pressure by the home market upon our resources. The shipping industry does not make so much profit as does commercial T.V. Commercial T.V. is a new type of enterprise upon which the Government have conferred great rights. The total profit of ten of Britain's commercial T.V. companies is £26,400,000. It is a figure impressive by any standards. It is startling when it is the easy money made by the T.V. tycoons from a monopoly of exploitation which the Government have bestowed upon them. It can be compared with the £22 million earned by the big firms in the shipbuilding industry. But that industry provides employment for 220,000 men and sustenance for their families. You have something to answer for! We are perfectly entitled to put down our Amendment to-day, and to say that you have no economic policy which is likely to get us out of our troubles.
With regard to the actual outlook for trade at the present time, my noble friend Lord Latham, in his excellent speech to-day, made some reference to a comparison. I just want to point to some of the figures, because these are the results of an inquiry by the Federation of British Industries. I understand that noble Lords opposite will always be prepared to raise their hats to the integrity and success of their records. Here is the present position compared with four months ago, as compiled by the Federation of British Industries. Referring to order books, it says that those that are up numbered 28 in June; in October the number was only 17. Those that were the same were 37 in June, and in October the number was 36. Those order books that were down were 23 in June, and in October, 35. There were twelve not available. That is a pretty bleak picture.
The noble Lord, Lord Mills, said this afternoon that the effects of the Chancellor's action were already bringing great results. As I said then to one of my colleagues on the Front Bench here, of course, we never expected anything else with regard to the position of sterling as a result of a 7 per cent. bank rate,

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although I do not remember (I may be wrong) any similar circumstances in which the Government had also to go outside to borrow £700 million to do it. Because "hot" money will always come like that. It can be just as dangerous for this country when it chooses to leave; and it can choose, because it is independent. It is short money; it is international; it can leave when it likes. The, Government have succeeded in getting some stability for the time being. I think that is what the noble Lord, Lord Mills, had in mind when he said, "It gives us a breathing space." I said to my colleagues here, "Just listen; there is not a thing in this argument that deals with the balance of payments"—and that is what finally affects you—"not a thing". Was there anything in the noble Lord's mind by which he could show that the measures proposed by the Chancellor of the Exchequer were going to be efficacious in dealing with the problem of balance of payments? I could find nothing at all there. So I say again that I can find nothing in the Government's policy.
There is another point that the noble Lord, Lord Mills, made. He said, "Export goods must be competitive". How? I do not think he told us. How does he want them made competitive? I have here a whole list of notes that have come partly from the Report of the Board of Trade. I do not want to trouble your Lordships with them tonight—it is too late—but I could show you many ways in which the efficiency of industry could be very greatly improved by those who control the management of industry. Or is it really what lay behind the remark of the noble Lord, Lord Brand, when he referred to unemployment? What is the real objective of the Government in pressing to go into the Common Market? It is in the hope that this will bring the only way of deflating the economies of Europe in such a way that they will secure control of the economic and the political lives of the ordinary people of the country. In the case of this country, it is really because the Government can find no other hole to go to at the moment, after ten years of Tory financial failure. They think there is in that direction a means of rescuing the position.
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That certainly seemed to be the opinion of the gentleman whom I quoted last week, speaking on behalf of General de Gaulle's French Pan-European Union committee. Look them up: I will not repeat his words. He said, "You had your chance to go in early, and you are going in now only because you have a sick economy." There were merits in going in back at that time; perhaps there are less merits in going in at the present time. I look at the representatives of the Tory Government, and when I recall such a remark as was made this afternoon, to the effect that somebody on the other side was sorry for my noble friend Lord Latham, speaking from this side, all I can say is that I am very sorry for the Government. They are in a dreadful mess, and they have not yet got the sense to see it or to get out in time.
8.55 p.m.
VISCOUNT HAILSHAM: My Lords, at this somewhat advanced hour the House is, of course, torn between a desire to bring matters to a conclusion and the equal and opposite desire to see that the speaker for the Government does not scamp his work. The speaker for the Government is equally torn between a tendency to prolixity and a tendency to superficiality; and I have no doubt that noble Lords opposite will hope that I shall succeed in achieving both objectives.
My Lords, we have had three days of debate upon the Queen's Speech, and now the noble Viscount's Amendment is to be voted upon, humbly regretting
"the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation."
My Lords, the Amendment is vaguely worded, and I do not think that this was at all an accident. It was hoped thereby, I think, to draw into the same Lobby those who criticise the Government's economic policy for equal and opposite reasons. It was hoped to bring in, for instance, the noble Lord, Lord Grantchester, who, in his speech, discovered a number of dragons that he wished to kill in the shape of trade union tyranny and collectivism; the noble Lord, Lord Lucas of Chilworth, who objected to the high rates of taxation to which we are all subjected: and the noble Lords opposite who, in the main, have reiterated their belief in

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democratic socialism, involving high taxation, very close co-operation with the trade unions, and controls. I have a good deal of sympathy with all these speakers, but of one thing I am absolutely certain: that they cannot all be right. I myself find something rather comforting in the situation of a Government faced with critics whose criticisms are mutually destructive and who have failed, as I shall endeavour to show, to put forward any really intellectually-satisfying and consistent alternative to the policy which we are endeavouring to pursue.
When the noble Lord, Lord Silkin, spoke the other day he confessed, when he introduced the debate on home affairs, to what he described as "a sense of unreality" in doing so in the context of an international situation like the present. I should myself be doing rather less than justice to my own convictions if I did not go a great deal further, and say that, in the context of the present international situation, I find the whole atmosphere of Party political controversy somewhat artificial, and even uncongenial. To that extent, at any rate, I agree with the noble Lord who spoke from the Cross-Benches, Lord Rochester, when he said something early in his speech, I think, to the same effect.
We cannot conduct the affairs of this country in an atmosphere of frayed tempers or jagged nerves. It may be that a few weeks ago, in the atmosphere of the two Party Conferences, the political commentators hazarded the guess that the coming Session was going to be one of increased Party political tension. I should suspect that in the last few weeks the atmosphere has changed, and that the atmosphere of public opinion has changed; and I hope that they are wrong. I would venture to predict, my Lords, that if either Party—and either Party could do it—attempted to raise the political temperature at this time, the attempt would quite certainly recoil upon their own head. So far as I am concerned, though I shall try to say a number of things with which I am sure noble Lords opposite will strongly disagree, I hope, none the less, that I may manage to say them without giving any kind of offence.
My Lords, we are to-day dealing with the economic situation, but the economic
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situation must be fitted into this general context, and I would, with respect, like to test some of the criticisms which have been made of us against the remarks made and the policies which have been advocated, either during to-day's debate or on the rest of the gracious Speech.
When the noble Viscount who leads the Opposition spoke first in the debate, I remember he reproached us with neglecting our national defences. His case was that, when his colleagues had left office in 1951, they had handed over a defence force of, I suppose, about three-quarters of a million, amply armed, so he thought, with adequate weapons; and he went on to say how much smaller the defence forces are now than they were then. I am not qualified to assess the value of the defence forces then—it was a matter of controversy inside the then Labour Government—but, so far as I am concerned, I should like to say that the noble Viscount's policy on defence at that time reflected nothing but credit upon the patriotism and courage of the Labour Government of the day.
I would say only two things in answer to him: the first is that if we had continued to maintain forces of that size and shape for the following ten years we might as well have tried to defend this country with the weapons of Waterloo. The science and art of defence, if that is what we are to call it, has probably changed more in the last ten years than at any other time. If we were saddled to-day, in a period of continuing tension all over the world, with the huge unwieldy forces which we had then, I should think we should be less, and not more, able to play an effective part in the international situation. But of one fact there is absolutely no doubt, my Lords, and that is that in so far as our economic situation is in question, and in so far as our economic strength is part of our national strength in the international world to-day, then, of course, we should have been very much weaker and our economic situation would have been much more serious than it is to-day.
I heard the noble Lord, Lord Morrison of Lambeth, make a forthright and interesting speech earlier in the debate to-day. He reproached us

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with having cut off the food subsidies—running, as far as I remember, at something like £400 million a year, and rising, when we took the matter in hand. I know that this was a matter of controversy between the Parties at the time, but I venture to say to the House this evening that it is in a sense paradoxical, for the Party that wanted us to keep the food subsidies on at that time, to reproach us on our economic difficulties of to-day.
VISOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, I do not like to interrupt the noble Viscount, because he has been so reasonable in the way he is presenting his case, but of course we should not agree at all from that point of view. For one thing, we hold that if you had kept your direct taxation at a proper level, and if you had kept your subsidies on so that you would not have had to increase industrial wages to the extent that you have, you would have been in a much sounder economic position, and you would still be. Because we had not been unmindful of the atomic menace, and after great difficulty we had decided, against many of our supporters' wishes, to start with the production of a British atomic weapon. We should have been in a much stronger position, because we could have met in our stride the other variations in the strengths required by the North Atlantic Treaty Organisation.
VISCOUNT HAILSHAM: If the noble Viscount will forgive my saying so, that only makes the matter a little more puzzling, because the operative part of that sentence was "if you had kept your direct taxation at a proper level". Now one crucial point in the last Election, which, after all, was only two years ago, was the promise by the Labour Party not to raise the income tax. How can it now be said that the one error which the Conservative Party made was in reducing direct taxation down to the level at which it was at the last Election, when the Labour Party were not going to increase it? My Lords, we really owe it to ourselves, we owe it to the country, and we owe it to the House and to one another, to try to make sense of our economic policies. One thing I am absolutely certain of, and that is that this does not make sense.
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We have heard a great deal from noble Lords opposite about housing, and this is a criticism with which I, personally, have a great deal of sympathy. Of the various social evils which remain after the reforms of recent years, I should probably agree that the one which causes the greatest amount of human suffering is the shortage of housing. If it were at all possible in the present economic context to step up the production of houses beyond the figure of about 300,000 at which it is now running, beyond the level referred to by my noble friend, Lord Waldegrave, on Thursday, then I should agree completely with noble Lords opposite that this would be a very highly desirable thing to do, and as the Session progresses no doubt this will be a matter that will engage your Lordships' attention from time to time.
But, my Lords, I must again come back to the Motion and to the facts of economic life. Whatever may be said about this criticism from the social or human point of view, and I am willing to give it its full weight, the building industry is certainly hopelessly overburdened at the present time. Skilled men are not being trained on an adequate scale, the capital programme as a whole is acutely strained, and though I should agree that in the long run good housing is certainly one of the most important social aims and one of the most valuable social investments, immediate increases in our housing programme of the order of that which the noble Lord, Lord Silkin, proposed earlier in this debate, from 300,000 to 400,000 a year, could be achieved only at the cost of accentuating our economic difficulties.
Therefore, when the Opposition put down a critical Amendment directly attacking the failure of the Government to take any effective steps to remedy the grave state of the economy of the nation, I am entitled to point out that, in the three or four fields of policy in Which they have made any constructive suggestions, as against long jeremiads of lamentations, what they have suggested would, at any rate in our judgment on this side of the House, not only not improve the situation but be actually calculated to make it worse.
There is one other general observation which I feel bound to make to your Lordships in the light of the debate.

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Many noble Lords opposite—I think most noble Lords opposite—have referred to the happy fact that we in the Conservative Party are now celebrating ten years of continuous office. The noble Viscount opposite said that the time had come for consideration and judgment of the whole period. My Lords, it is worth saying, if we are to judge the period as a whole, that since 1951 we have twice appealed for the judgment of the electorate and every time in the light of experience we have been returned with an increased majority.
LORD MORRISON OF LAMBETH: "Never had it so good".
VISCOUNT HAILSHAM: And if I were asked—in the light of what the noble Viscount has now said and what he said in his speech about bribing the electorate—to state in a sentence why it was that we achieved a decisive victory in 1959, I would say quite confidently that although, as I pointed out again and again in my election speeches, we were putting forward an extremely ambitious programme which we could achieve only with difficulty, the programme proposed by the Labour Party would have cost anything up to £2,000 million a year more than ours. If the country had taken their advice then, whatever may be the position of the economic situation now, we should certainly have been right over the cliff.
That, my Lords, brings me straight away to the question of the wages pause, against which the noble Lord, Lord Stonham, made an impassioned philippic. I simply am bound to say this. During the five years past that I have been a member of the Government—though I cannot celebrate, like some of my noble friends, a period of ten years continuously in office, as noble Lords remind me when they talk about television debates; but during my five limited years of office—we have had, I suppose, about four debates upon the economic situation every year, and in the great majority of them I think I have played some part. I think one can by now draw one or two broad conclusions from the experience of these debates, and the problems which have been handled in them.
In the first place, whenever we have had signs of inflation, as we have during part, but not all, of the time, we have
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been threatened at the same time with a balance-of-payments crisis; and so long as we have been free from inflation, as we have during part of the time, we have, on the whole, avoided balance-of-payments deficits. One can, of course, over-simplify this issue, but I think that to some extent one can infer from this that our balance-of-payments difficulties, when they occur, stem, at least in part, from a want of confidence in sterling, engendered by inflationary tendencies. That, my Lords, is the first general conclusion I will draw.
Secondly, when we have been faced with a balance-of-payments crisis, I believe the country has shown quite clearly, and quite rightly, that it would be prepared to slow up even the rate of economic growth of our economy, desirable as that is, rather than sacrifice the stability of our currency. I believe that this is still the situation; and although we all, I think, on both sides of the House, desire economic growth, I believe that no Party, neither that of the noble Lords opposite nor my own, would dare openly to advocate pursuing economic growth at the price of a depreciating pound.
Thirdly, in almost every debate that we have had since 1958 I have been driven to comment upon what I believe to be the fact (which has not so far been contradicted, I think) that, wherever inflation has occurred in recent years, the signs of inflation were due in their origin to the simple fact that personal incomes of all kinds were rising at a rate which was very much greater than the rise in productivity and production, something of the order, I think (although I am not going to trouble the House with figures, as the House hears so many from time to time) of 10 per cent. in the previous few months before the Chancellor of the Exchequer's statement of July 25, as compared with an increase in productivity of about 2½ per cent. Whoever is responsible for that, and however unpalatable it may be, I believe this to be the fact. And if it is the fact, it is no good complaining that the policy of wage pause to which it gives rise is disagreeable unless it can be shown that the policy of wage pause is not a logical inference of policy to be drawn from the fact. And it is no good people—not only noble Lords opposite, but anybody

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—flexing their muscles and threatening to strike against the policy unless they can present to us a viable alternative. It is no good striking against the facts of life; you do not make the Government look silly by doing so.
LORD STONHAM: My Lords, if the noble Viscount will allow me, I think that no one on this side of the House objects to wage restraint, but we do say that wage restraint must be accompanied in other directions by restraint of profits and dividends; and that the Government themselves contributed to the inflation by the release of some £84 million to the surtax payers.
VISCOUNT HAILSHAM: My Lords, I was well aware, of course, of what the noble Lord's case is, and I think perhaps he does me an injustice in thinking that I was going to avoid meeting it. At any rate, we have made progress. We have now agreed that the policy of wage pause is, in itself, a reasonable proposal. We are quite aware that to impose a wage pause is not a long-term solution, and I think that if we were wholly devoid of long-term plans, this would be a legitimate subject of reproach against us. But, my Lords, in agreeing to the necessity of long-term plans, it is irresponsible to reject the necessity of a short-term remedy; and we wanted a short-term remedy in July. Moreover—and I say this with great humility, in view of the fact that I have been criticised by my own side, as well as by the other—it is a short-term remedy which, on the whole, has worked and has contained the evil with which we were faced on July 25.
I am, of course, quite aware, as the noble Lord, Lord Stonham, has reminded me, that it is important to see whether we can control dividends and profits as much as wages. I think that noble Lords on both sides will do me the credit of saying that I have never attempted to deny this. But it is important—and I must emphasise this—lo control them in the appropriate way; and it is important not to pretend that they can both be controlled in the same way, but to recognise that they must be controlled by devices appropriate to their nature.
I would also say this to the noble Lord who spoke from the Cross-Benches: that
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economic affairs at the moment are far too serious for us to be preoccupied about the impact on one another's minds of what we do. We have to consider what is right economically in the interests of the country, to trust our powers of persuasion, and to hope that they will be supplemented by the powers of persuasion of others perhaps not of the same political opinions as ourselves (if we convince our hearers logically that our proposals have a logical coherence, and are economically correct), in order to persuade the people of this country that our proposals are correct. If you once start kidding yourselves that by doing what the other side likes, even though you believe it to be wrong, you can give any form of democratic leadership in a free democracy, you are, I think, ultimately betraying the truth that is in you. You are sinning against the light. Therefore, although I absolutely agree with some of the premises of the noble Lords opposite, I beg them to pay some attention to the considerations which I am putting before them. So far as dividends are concerned, the Chancellor of the Exchequer called for a dividend pause at the same time as he called for a wage pause. Both, of course, are unenforceable, except in the limited sphere in which the Government can control dividends or wages by its own action. Over the whole field of private industry wages are free, and dividends are free. So far as the appeal for wage control is concerned, it was met with a flat refusal. In the case of dividend control, this was not the case.
My Lords, since different figures were given by the noble Lord, Lord Latham, I should like to give the House the figures which have come into my possession. I have been told that in the three months following my right honourable friend's statement on July 25, there have been noted, from the Financial Times, dividend declarations by 365 companies. Of this number, 122 were recorded as being higher than the previous year; 243, the same or lower. As a percentage, the number of increased dividends is 33 per cent., or one-third of the whole. In the three months before the Chancellor's statement, the percentage was almost 55, or over half. We believe that this does show a substantial response to the Chancellor's

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request. I think it must be remembered that, as in the case of wages, the boards of some companies may have felt themselves irretrievably committed to certain levels of dividend payments before the Chancellor made his statement.
Without examining each and every company statement relating to these dividends it would not, of course, be possible to ascertain how many companies among those who were in a position to choose have, in fact, positively responded. All we can say is that the statistics show a substantial drop in the number of companies declaring increased dividends since the statement of July 25, and that justifies our claim that the response has been considerable. I could have wished that the response had equally been considerable in the other appeal which the Chancellor of the Exchequer made.
I ventured to point out on a previous occasion the distinction to be drawn so far as profits are concerned, and I am grateful to my noble friend Lord Brand for pointing out the same distinction a few moments ago. There are capital profits, which my noble friend said are the direct result of inflation. They are perhaps not so much the result of inflation as a symptom of inflation. If we control that kind of profit, there does not seem very much sense in doing so unless we prevent the inflation which gives rise to that kind of profit; and if we do take adequate steps to control that kind of inflation, we control that kind of profit. It is those capital profits of individual firms that have been controlled pretty effectively by the financial squeeze of this summer, as anyone who reads the share index day by day in the papers can verify for himself.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, would the noble Viscount compare the amount under the "squeeze" with the position over the last two or three years? The index went up from 200 to 360, and it has dropped nothing like that.
VISCOUNT HAILSHAM: My Lords, I do not want to involve myself with the noble Viscount in an elaborate statistical discussion. What I was saying was that the element of capital profits was
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I created by the fact of inflation; that the proper way in which to control that was to control the inflation; and that that had been done. I do not think that the noble Viscount will claim that I have stated the case at all unfairly.
As regards trade profits, I pointed out on the last occasion we debated this matter that the appropriate weapon with which to control this was taxation. May I say, in parenthesis, that noble Lords opposite have reverted to the question of surtax relaxations which, I must remind the noble Lord, Lord Walston, do not affect the current year at all. He asked us to remove them so soon as the wage pause was lifted.
LORD WALSTON: My Lords, may we then take it, in answer to another question I put, that the wage pause will be finished at the end of the current year?
VISCOUNT HAILSHAM: My Lords, I think it would be extremely incautious to give a positive reply of any kind to that question. I only say that that is the way of doing it. I beg noble Lords opposite, when they come to talk with the representatives of their own Party, to point out that, whatever the merits of this question, what was really done by the Chancellor of the Exchequer this summer was no more than to secure by profits tax a sum of money which was previously borne by surtax payers who, I think by common consent, in the lower ranges of surtax, were having to bear a tax which, having regard to the change in the value of money, they had never been intended to bear. If it were only adequately pointed out that, whatever the merits or demerits of this problem, the surtax relief was financed out of the increase in profits tax, I think that much of the sting would be taken out of the criticisms which have been made.
It is worth repeating what I have had occasion to say before: that profits have not risen in the period under discussion; indeed, they have fallen, both during the period of the wage pause and before it. Although I should be the first to admit in principle that the demand for the control of profits is not an unreasonable one, I think that noble Lords opposite would have been more just had they pointed out that in fact that there had not been any increase in profits to control. Therefore

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I would say that this is an argument which is not really open to the Opposition in attacking our present measures.
I would add, although there was no specific reference to it in the gracious Speech, that my right honourable friend the Chancellor of the Exchequer intends to restrict speculation in capital profits as distinct from genuine investment. As this is a highly complex matter, I shall probably be excused for dealing with it in detail; but the plans remain and an opportunity of debating them will arise in due course.
This leads me from the wage pause to the question of long-term plans and to one of the underlying assumptions of the Amendment, which blames the Government for failing to take effective steps to remedy the economic situation. I do not want in any way to deny the responsibilities of the Government in this matter, or to give any impression of wavering in our duty; but we cannot accept—because if we did we should be disregarding the truth—the underlying implication that the industrial growth of this country is entirely something which can be created by political activity on the part of the Government alone. This economy is based solidly on industry, commerce and agriculture, which, broadly speaking, are carried on by persons other than the Government, both in management and labour; and without the co-operation of both we can do nothing to achieve the purpose we all have in mind.
That brings me right up against the issue of planning, which has been mentioned in the speeches of several noble Lords, both in this debate and in previous debates, in which the noble Earl, Lord Attlee, has returned again and again to the theme that we in the Government are against planning. Indeed, the noble Lord, Lord Latham, said as much again in his speech this afternoon. I agree with my noble friend Lord Mills that that is not at all how we have ever seen the matter. No Government can be against planning, because all policies involve forecasting the future in one way or another, and those policies can only be described as a plan. But we must realise, if we are to avoid a mere argument about words, that what is in issue is not whether we are to plan but
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in what sense we are to plan; in particular, whether the right way to plan is a centralised plan on the Socialist pattern, which we learned to recognise in the years when noble Lords opposite were in office.
It is perfectly legitimate for them to look back upon their period of office, which we regarded as disastrous, as a great achievement. What we saw, or thought we saw, in the policy of that Government was the belief that, side by side with the system of wages and prices, with prices controlled but wages not effectively controlled, they could impose a series of physical controls and directions based on a series of decrees operated at the centre as a means of regulating the economy in place of a prices and wages structure. We believe sincerely that an industrial society cannot be run on those lines—at least not in times of peace. We do not think that it can be run at all on these lines without control of wages, which noble Lords opposite never sought. Even with a control of wages, we do not think that it can be run efficiently, because we do not think that it is possible to predict the direction of future demand with sufficient accuracy to make controls either effective or beneficial. After all, the planners are no better than the tipsters who tell one how to make money on shares or on horses. If they really knew accurately what people were going to want, or were going to be offered, they would be financial geniuses and would have a place in industry rather than in administration.
LORD MORRISON OF LAMBETH: My Lords, the noble Viscount said that the Government were not averse to planning as such. He has spent the last three minutes saying that planning is impossible. Will he tell us whether the Government have ideas about planning, and tell us in some detail what they are?
VISCOUNT HAILSHAM: I was going to endeavour to do that, anyhow. I thought that three minutes was rather a short time in which to demolish the noble Lord's colleagues.
LORD MORRISON OF LAMBETH: That is why it was not effective.
Viscount HAILSHAM: I was about to say that this is very different from saying that we do not believe in planning.

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Indeed, one of the things we complain about is that the conception of planning which I was attempting to criticise gives it a bad name not only among Conservatives but among the public at large. All forms of business management and all forms of political activity depend in some degree on forecasting, to use a neutral word. This is often difficult to do, but it is an essential part of an attempt to control one's own future. We have done it in a variety of different ways, and somewhere about the summer an internal Government exercise was carried out to do it more efficiently than it had ever been done before.
But, as the noble Lord, Lord Morrison of Lambeth, has reminded me, all this is not enough. So long as industry is carried on through free private enterprise and free trade unions, and agriculture is carried on by free farms and not in collectives, and as long as industrialists are free and not State Boards, some form of co-operative planning, not limited to Government and individual businesses, is essential if any form of industrial planning is to be possible at all in certain fields and if the general conception of what is desired to be achieved is carried on in the whole field.
Personally, I agree with the noble Lord, Lord Grantchester, 'although I hope I shall not subsequently be taken to task for accepting his words. I believe that the realisation of this truth contributed to the relative success of the French plan although I think it is fair to add that another factor was their willingness to accept a heavier strain on their currency than we, as the centre of the sterling area, could have done, and also they had available a pool of mobile labour in the shape of about 26 per cent. of their population engaged on agriculture. But, as I see my right honourable friend's plans, which I shall not endeavour to describe in detail tonight, for the reason that my noble friend Lord Mills gave, what we are concerned with is the creation of machinery which will be acceptable to more sides of the question than ourselves, and we are at the moment engaged in trying to make it acceptable.
As I see the intention of my right honourable friend the Chancellor of the Exchequer, it is that he is determined to institute something that will correspond in general character to the French
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system, as explained by the noble Lord, Lord Grantchester. It will be a difficult thing to do, because we shall be attempting to graft something on to our system which has not existed there before. What I have tried to establish is that the need for it is present, and what we are trying to do is neither a reversion to planning in the sense advocated by noble Lords opposite, nor yet a repetition of laissez-faire. If I may say so in his absence, as I see, the welcome given to it by the noble Lord, Lord Citrine, though somewhat qualified, was, I thought, a step forward of some importance this afternoon.
I cannot sit down without a short reference to the speeches which have been made about the subject of our system of arbitration. Certainly the noble Lord, Lord Stonham, and I think the noble Viscount who leads the Opposition, referred to this. I must say that I venture on this field with a great deal of trepidation, because I am now outside the field of my speciality, although I did practise a little in it at one time in my career at the Bar. It is quite wrong to say that we are trying to overthrow that system. It is something that has been developed over the years, by the most enlightened Governments of more political persuasions than one, and among the most progressive elements in management and among the trade unions. I do not desire, and I am sure my colleagues do not desire, to overthrow negotiating machinery which has been the product of so much devoted labour and insight over such a long period of time.
But here I feel bound to issue one personal word of warning—and I make it personal in case I say something that might cause offence, so that I alone may bear the blame for what I say. Twenty-five years of my life were spent in the practice of negotiating compromises and conducting litigation over a wide field, and this included arbitrations of all sorts, including arbitrations of wages as part of the ordinary negotiating machinery from 1945 onwards. Therefore, what I say is based to some extent on experience both inside and outside the Government. Where a bargain is struck between two parties by way of compromise, it is inevitable that those panties will consider their own interests rather than those of any person

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not present or being a party to the agreement. When an action is brought in the courts, or when a reference is brought before an arbitrator, the judge or the referee has inevitably to come to his conclusion on the evidence and on the arguments adduced by the parties themselves and not by some party outside the litigation.
Excellent as our system of negotiating may be, I must testify personally that in the five years in which I have been in the Government I have seen case after case where agreements have been made between employers and employees, or awards have been made by arbitrators after hearing arguments between employers and employees, in which the public interest could not possibly have been made a determining factor in any of them, and where nobody was present to argue the case for the public interest, where what determined the matter was not what the public economy would stand, but only what the parties were willing or able to pay. I do not blame the unions, management, or the arbitrator for coming to that conclusion. What we really have to understand is that in a state of full employment and rising demand our negotiating machinery itself, with all its virtues, has built into it a tendency towards inflation which must be corrected if we are to avoid inflation. It was built up over a generation of underemployment, and, excellent as it is as a means of avoiding the industrial strife which accompanies under-employment, it has still built into it the seeds of economic collapse in a period where the underlying tendencies are different. Until we correct this we do not take effective means to remedy the "grave state of the economy."
I should hope that noble Lords opposite would co-operate with us in explaining this. What we have in mind is not to overthrow the system but to develop it. Having said what I have, I would try to allay the suspicion, which is undoubtedly genuine, in the minds of those who have complained of what we have done. This is not yet a complete edifice. We have still to build it up and build into it some correcting or governing mechanism which will protect the public interest.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, are we to
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assume, then, that the action of the Government, as governing the public interest, as regards all State servants or State arbitration results, is that they then ask the rest of the community in industry to do the same: that you are really bringing pressure upon the whole community by way of Government action, and you have done that without any consultation with the parties to the arbitration which the noble Viscount has mentioned? Would it not have been better to have the consultation first than to put down this breaking of your word, breaking of your covenant, as an example to the rest of the industrial community, and then make it clear to both sides what was the matter?
VISCOUNT HAILSHAM: My Lords, I think a distinction must be drawn between the short-term remedy which we undertook as part of the wage pause and what I am trying to do now, which is to try to persuade noble Lords opposite to enter into some kind of discussion, public or private, as to how the system can be improved. It must, I think, be plain to noble Lords opposite—I am not accepting at all the charge that we have broken our word, but the noble Viscount will not expect me to pursue that at this hour—that we could not ask industry and the unions to observe a pause in wages unless we had shown that in our own field we were prepared to do what we were asking others to do. Obviously, in regard to our own employees it was more painful for us than to ask it of other people in regard to theirs, but if we were to establish any kind of reputation for being in earnest in the matter I cannot see that my noble friend could have acted differently from the way in which he did. When we are asked whether we should or should not have consulted, of course this is a matter which is open to debate. But my own belief is that on reflection noble Lords will see that this was not possible in the short-term remedy.
LORD LATHAM: My Lords, is it the case that the noble Viscount is giving notice to the trade unions that the Government propose to change the structure of negotiation and arbitration?
VISCOUNT HAILSHAM: I thought I had made it abundantly clear that I was making my own speech on my own responsibility. I deliberately did so in

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order that if I said anything amiss no one else should be involved in it. None the less, what I am saying—
LORD MORRISON OF LAMBETH: Ministers cannot contract out.
VISCOUNT HAILSHAM: They can, because in the end their own reputation may fall by what they say. I am seeking to reply to a debate. I will give way in a moment, but I think it would be quite wrong of me not to have said this which I profoundly believe, and I hope noble Lords will listen to what I have said. Criticise it afterwards, by all means, but try to see whether perhaps I have not said something which might be in the public interest.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, of course, I respect entirely the individual position taken up by the noble Viscount, but he cannot separate it from the responsible statement of a Minister and whether it is to be understood in that sense by the trade unions. It is very important that we should get the best possible relations we can on this matter, and I think the noble Viscount had better explain it a little more, because if this is not a sort of notice either to the trade unions or in some cases to the employers, then what is it?
VISCOUNT HAILSHAM: This is no kind of notice. This is a request for people to think about the inherent virtues and limitations of our system, and to give us the benefit of their counsel when they have thought. I hope I have not said anything I should not say, but I thought that I should be doing less than my duty if I did not indicate my own mind on this subject. There is no kind of notice to anybody, and nobody is to take me as negotiating with the trade unions. This is not part of my departmental function. My responsibility is to this House and to noble Lords on both sides of it.
At the end of the day I really must bring my speech to a close (although I do not in the least resent the various interruptions which have quite properly been made), and challenge the whole assumption underlying this Amendment. Clearly our economic affairs demand serious attention or we should not
342
have given them serious attention on so many occasions. Time after time we have had to defend the economic policy of the Government from this Box. But I would deny, and I do deny, that, apart from the international situation, the fundamental state of the British economy is grave after ten years of Conservative Government. I know that fun is made and scorn is poured upon the phrase, "You never had it so good". It is a phrase I have never liked. It is a phrase I have never used, and it is a phrase I have never encouraged.
LORD MORRISON OF LAMBETH: The Prime Minister has.
VISCOUNT HAILSHAM: Not in the context which the noble Lord tries to suppose. I have dealt with that before. I could not help being struck, as this debate developed, by the fundamental contrast between East Germany building a wall of bricks and mortar, compelling her citizens to remain where they are to prevent them from escaping, and ourselves being made, much against our will, to erect a wall, not of bricks and mortar, but of law, to prevent people from one country or another, either from the Commonwealth or aliens, from coming here who wish to come in because life in Britain is so much more desirable than in any other country they know, or so much more desirable than in any other country which they have a chance to enter. This is not a picture of a country in grave economic difficulties; it is not a picture of a sick society. Our difficulties are not so grave that, if we have the wish, we cannot overcome them.
We stand, as I have have said many times before, on a pinnacle of prosperity, poised precariously on a knife-edge. It is true that in this confused international situation our economy oscillates from time to time, but our production has steadily increased and our capital has increased as well. Our technical skill is undiminished; our technology is steadily improving; our currency is held and stabilised, and would, I think, have remained stable but for the immense efforts we have made to provide for the security of the world by the presence of our troops abroad, and for its prosperity by the aid we have given to countries less prosperous than ourselves.

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I confess that the prospect of a Party dog-fight in the present international context fills me with despair—the same feeling of unreality that animated the noble Lord, Lord Silkin in his speech. But the prospect of Britain after ten years of Government by the Party of
On Question, Motion agreed to, nemine dissentiente: the said Address
which I am a member does not inspire me with a feeling either of shame or of misguided effort.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided: — Contents, 28; Not-Contents, 88.

CONTENTS

Addison, V.

Kilbracken, L.

Shackleton, L.

Airedale, L.

Latham, L.

Shepherd, L. [Teller.]

Alexander of Hillsborough, V.

Lawson, L.

Silkin, L.

Amwell, L.

Lindgren, L.

Stonham, L.

Archibald, L.

Longford, E.

Strabolgi, L.

Attlee, E.

Lucan, E. [Teller.]

Summerskill, B.

Chorley, L.

Morrison of Lambeth, L.

Taylor, L.

Cork and Orrery, E.

Peddie, L.

Walston, L.

Crook, L.

Rea, L.

Williams, L.

Henderson, L.

NOT-CONTENTS

Aberdare, L.

Elliot of Harwood, B.

Milverton, L.

Ailwyn, L.

Ferrier, L.

Molson, L.

Airlie, E.

Foley, L.

Newall, L.

Allerton, L.

Fortescue, E.

Newton, L. [Teller.]

Amherst of Hackney, L.

Fraser of Lonsdale, L.

Perth, E.

Ampthill, L.

Fraser of North Cape, L.

Radnor, E.

Auckland, L.

Goschen, V.

Rathcavan, L.

Bathurst, E.

Gosford, E.

Remnant, L.

Bessborough, E.

Haddington, E.

Robins, L.

Bossom, L.

Hailsham, V. (L. President.)

St. Aldwyn, E. [Teller.]

Boston, L.

Hampton, L.

St. Oswald, L.

Boyd of Merton, V.

Hastings, L.

Salisbury, M.

Bradford, E.

Hawke, L.

Saltoun, L.

Brand, L.

Home, E.

Sandford, L.

Bridgeman, V.

Horsbrugh, B.

Savile, L.

Buckinghamshire, E.

Howe, E.

Sinclair, L.

Carrick, E.

Hylton, L.

Somers, L.

Carrington, L.

Jellicoe, E.

Soulbury, V.

Chesham, L.

Kilmuir, V. (L. Chancellor.)

Spencer, E.

Clitheroe, L.

Lansdowne, M.

Strathclyde, L.

Colville of Culross, V.

Leconfield, L.

Stuart of Findhorn, V.

Conesford, L.

Long, V.

Swinton, E.

Crathorne, L.

MacAndrew, L.

Tenby, V.

Cullen of Ashbourne, L.

McCorquodale of Newton, L.

Teviot, L.

Davidson, V.

Massereene and Ferrard, V.

Waleran, L.

Denham, L.

May, L.

Weir, V.

Devonshire, D.

Melchett, L.

Wellington, D.

Donegall, M.

Merrivale, L.

Wolverton, L.

Dundee, E.

Mills, L.

Yarborough, E.

Dundonald, E.

Resolved in the negative, and Amendment disagreed to accordingly.

to be presented to Her Majesty by the Lords with White Staves.
House adjourned at ten o'clock.