Sitting of 12 April 1962

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  DARTFORD TUNNEL BILL
    SHOREHAM HARBOUR BILL
    Read the Third time and passed, with Amendments.
    LONDON COUNTY COUNCIL (GENERAL POWERS) BILL (By Order)
    As amended, to be considered upon Wednesday next.
    LETCHWORTH GARDEN CITY CORPORATION BILL
    Mr. William Ainsley, Mr. Compton Carr, Mr. Corfield, Mr. Hornby, Mr. Harry Randall nominated Members of the Select Committee.—[Mr. Hughes-Young.]
ORAL ANSWERS TO QUESTIONS
  COMMONWEALTH RELATIONS

    Colonial Development Corporation
    Mr. Stracheyasked the Secretary of State for Commonwealth Relations (1) whether he will introduce amending legislation to enable the Colonial Development Corporation to initiate schemes in newly independent Commonwealth countries;
    (2) whether he will change the title of the Colonial Development Corporation to the Overseas Development Corporation.
    The Secretary of State for Commonwealth Relations (Mr. Duncan Sandys): The present limitations upon the scope of the Colonial Development Corporation
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    are now under review and the desirability of extending its operations in independent Commonwealth countries is being examined.
    Mr. Strachey: I am sure the whole House will be very glad to hear that Answer, because does the Commonwealth Secretary not realise it is just after independence that the support of schemes initiated with the economic and technical knowledge of the Corporation can be of such great value to the new countries? In those circumstances, where they are willing to have such support given to them, does he not agree that this is the most efficient and economical way in which we can help them?
    Mr. Sandys: Those are some of the thoughts we have in mind.
    Mr. Thorpe: While adding to the pleasure that this is under reconsideration, may I ask the right hon. Gentleman if he will consider whether other Commonwealth Governments might be persuaded to take part in this scheme as well, for example, Australia or Canada?
    Mr. Sandys: That is a wider question.

    European Economic Community
    Mr. Biggs-Davisonasked the Secretary of State for Commonwealth Relations what representations have been received by Her Majesty's Government from other Commonwealth Governments concerning British membership of the European Economic Community since the Commonwealth Financial Ministers' Conference at Accra; and to what extent these disclose a change of policy on their part.
    Mr. Sandys: We have been in continuous consultation with other Commonwealth Governments about the negotiations in Brussels. Such communications are naturally confidential.
    Mr. Biggs-Davison: Is my right hon. Friend aware of frequent reports that the terms under which the United Kingdom may join the Common Market include the ending, or tapering off, of Commonwealth preference and even anti-Commonwealth preference in the case of manufactures? Can he give some assurance that our arrangements in

    1473
    Europe will strengthen rather than destroy the economic unity of the Commonwealth?
    Mr. Sandys: That, of course, is what we axe negotiating about.
    Mr. Healey: Can the right hon. Gentleman at least tell the House that he disagrees with the views expressed yesterday in Washington by Mr. Hall-stein, Chairman of the Common Market Commission, that it is possible for the Commonwealth's political and cultural links to survive unimpaired if its present economic relations with this country are ruptured?
    Mr. Sandys: I have my work cut out commenting on what is said in this country without commenting on what is said all round the world.

    Colonial and Overseas Services (Pensions)
    Mr. Russellasked the Secretary of State for Commonwealth Relations if he will make a further statement about the position of members of the Colonial and Overseas Services, formerly employed in certain Commonwealth countries, who have not been granted pension increases commensurate with those of the United Kingdom Pensions (Increase) Act, 1959.
    The Joint Under-Secretary of State for Commonwealth Relations (Mr. Bernard Braine): There is nothing I can add at present to the general statement of Government policy made by my hon. Friend the Financial Secretary to the Treasury on 21st December last.
    Mr. Russell: Is it not a fact that only some Commonwealth Governments are not facing up to their requirements on this matter of pensions increases? Can my hon. Friend say what representations are being made by Her Majesty's Government to those countries which are defaulting in this respect?
    Mr. Braine: The answer to the first part of the supplementary question is, yes, it is only some Governments. The answer to the second part is that while it is not open to my right hon. Friend to make formal representations to Governments about how they deal with their own employees, nevertheless we bring to their attention increases in our own pensions. My right hon. Friend would
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    be willing to forward to those Governments any representations which the pensioners themselves wish to make.
    Mr. Strachey: Would not the Joint Under-Secretary agree that it would pay us to have a rather more generous attitude in this matter? After all, this is a form of assistance which we can give to under-developed countries, as well as to the individuals concerned by giving them security of tenure. Would this not be a very economical way of giving assistance, even if it meant a larger share of the burden falling on the British Treasury?
    Mr. Braine: That sounds all very well, but on the whole Commonwealth Governments are treating their pensioners very well indeed. As the Financial Secretary told the House—this is why I quoted his speech—for us to interfere in their payments to their former employees might gratuitously call into question the security of the basic pensions themselves, which would help no one.

  RHODESIA AND NYASALAND

    Review Conference
    Mr. Wallasked the Secretary of State for the Home Department (Central African Office) what proposals he now has for continuing the Central African Federation Review Conference.
    Mr. Brockwayasked the Secretary of State for the Home Department (Central African Office) if he will now state when the review of the Federation of Rhodesia and Nyasaland will take place.
    The Secretary of State for the Home Department (Mr. R. A. Butler): I have nothing to add to the reply which I gave the hon. Member for Eton and Slough (Mr. Brockway) and my hon. Friend the Member for Sunderland, South (Mr. P. Williams) on 29th March.
    Mr. Wall: Does not my right hon. Friend agree that it is very important to settle the future of Central Africa as quickly as possible, as the prevailing uncertainty is gravely damaging the economy of that part of the world?
    Mr. Butler: Yes, I entirely agree. I realise the importance o£ making progress in this field, and I will keep the House informed of any developments, which I hope may be sooner rather than later.
    Mr. Brockway: In view of the statement by the Monckton Commission that the African populations in these territories were strongly opposed to the maintenance of the present Federation, will the right hon. Gentleman guarantee that those African populations will be allowed a majority in their Legislature before any conference is held determining the future of the Federation?
    Mr. Butler: I do not think I can give any general assurances at this stage. My whole actions are governed by the Preamble to the 1953 Act. Apart from that, it is important at least to make some progress in the near future towards a possible solution.
    Mr. Healey: Can the Home Secretary assure the House that he will not call a review conference until the Northern Rhodesian elections have been held and have produced a Government which is more representative in that territory of the majority of the population there?
    Mr. Butler: I have not at present in mind the calling of a review conference. What I have in mind is preparatory work for the future.

  NORTHERN RHODESIA

    United National Independence Party
    Mrs. Castleasked the Secretary of State for the Home Department (Central African Office) why the provincial headquarters of the United National Independence Party of Northern Rhodesia has been refused registration for the second time.
    Mr. R. A. Butler: The Registrar of Societies refused the second application on the same grounds as the first, namely that it was likely to be prejudicial to peace and good order. I am informed that the Northern Division of the United National Independence Party has exercised a right of appeal to the Governor in Council and that appeal awaits a hearing.
    Mrs. Castle: Is not the right hon. Gentleman aware that the Colonial Secretary removed the ban on this party some months ago on the ground that violence had abated and that this was the basis on which the constitutional talks were reopened? Is it not, therefore, intolerable that an important section of this party should be refused the right of registration and thus be prevented from organising the African vote in accordance with the normal democratic procedure?
    Mr. Butler: As an appeal is pending, I would rather not make any further observations on this matter.
    Mr. Biggs-Davison: As the hon. Lady referred to the normal democratic procedure, may I ask my right hon. Friend if he is aware that the publicity secretary of U.N.I.P. has threatened with violence Africans who may stand as independents in the Northern Rhodesian election and has also threatened Europeans with an "orgy of blood"?
    Mr. Butler: That is a matter which I have noticed and which I regret, but it is wider than this question.
    Mr. G. M. Thomson: Has the Home Secretary also noticed the disclaimer of that speech made by Mr. Kenneth Kaunda, the leader of U.N.I.P.?
    Mr. Butler: Yes, I have also noticed that.

    Partition
    Mr. Healeyasked the Secretary of State for the Home Department (Central African Office) what reply he has given to Sir John Moffat's request for assurances that Her Majesty's Government will oppose any proposal to partition Northern Rhodesia.
    Mr. R. A. Butler: I would refer the hon. Member to the reply I gave to the hon. Member for Dundee, East (Mr. G. M. Thomson) on 29th March.
    Mr. Healey: Could not the Home Secretary find it in him to make a rather more absolute reply to this suggestion? Does he not agree that the Monckton Commission was absolutely right in saying that any such proposal to separate from Northern Rhodesia those areas on which its economic prosperity would depend would be unjust and would certainly encounter the sort of opposition from the African population which

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    would make organised Government in that territory impossible?
    Mr. Butler: The Governor of Northern Rhodesia on returning home indicated the difficulties he saw in this solution from the point of view of Northern Rhodesia. He also quoted my words—
    "The solution to be sought should be one that" can obtain general acceptance."
    I stand by that in all the decisions I make.

    Mining Townships (Political Activities)
    Mrs. Castleasked the Secretary of State for the Home Department (Central African Office) if he will take steps to ensure that in future the rights of free speech and of political association and meeting are not denied to the inhabitants of the mining townships of Northern Rhodesia.
    Mr. R. A. Butler: There is no restriction under the law of the rights of the inhabitants of mining townships to free speech or of political association and meetings. Certain companies, in their capacity as property owners, do regulate political activities on their own property, but generally the residents enjoy the same rights as any other persons subject only to compliance with statutory laws which do not discriminate.
    Mrs. Castle: Is the right hon. Gentleman aware that I have here copies of correspondence which has passed between the national secretary of the United National Independence Party of Northern Rhodesia and the general manager of the Northern Rhodesian Broken Hill Development Company, showing that the latter prohibits the holding of political meetings in the African mining townsihip of Kaswe and also the sale of political party membership cards? Is not this a gross interference with personal liberties? Do these companies think that they have bought the freedom of Africans just because they have provided them with tied houses?
    Mr. Butler: I, too, have a copy of this correspondence. The company's reply was that it was not responsible for police action against certain party officials. The company said that it did not interfere with its employees' private activities and that there was no discrimination against the union. I believe that to be
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    true, but it is quite true that the company discountenanced political activities within this particular township. That means, if the hon. Lady reads my original Answer, that political meetings must be held outside the particular township or outside townships owned by these companies. In that I am not able to interfere.
    Mrs. Castle: Would we not consider it quite intolerable in this country if a farmer, for instance, were able to say that one of his tenants in a tied cottage could not have a politcial meeting in that tied cottage? Would we not take steps to deal with this as a gross violation of civil liberties? Is it not within the power of the Northern Rhodesian Government to take action to prevent the abuse of the private rights of individuals?
    Mr. Butler: The hon. Lady must not under-estimate the importance of the early part of my Answer, that there is no restriction under the Jaw of the rights of the inhabitants of these townships in their political life, and nobody intends that there should be. The only thing that I am not able to control is the actual behaviour inside the property of these companies.
    Mr. Brockway: Will not the right hon. Gentleman reconsider this matter? Does he remember that fifty years ago this issue was fought out in the United States of America, where mining companies in a smiliar way prohibited political activities in their towns? America has remedied this. Is it not time that our Government did so in a Colonial Territory?
    Mr. Butler: I am perfectly ready to receive from the hon. Member or any Member of the House information which I can pass on to the administration locally, and I will certainly do so; but I do not wish to give any undertaking today which I cannot carry out.
    Mr. Healey: Will the Home Secretary at least assure the House that he will bring his influence, which is not inconsiderable, to bear on the mining companies to implement the views he expressed in the first part of his reply?
    Mr. Butler: I will certainly communicate with the mining companies; but in this case, as I have said, the company said that it was not responsible for police action against certain party

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    officials. That I cannot interfere with. However, I will certainly have a general discussion with them on the points raised today.

    Futher Education
    Mr. Swinglerasked the Secretary of State for the Home Department (Central African Office) what are now the admission requirements for Africans at the colleges of further education and technical institutes in Northern Rhodesia; how many Africans qualify at present; and what is his estimate of the number of Africans who will qualify when the proposals of the Keir Report are carried out.
    Mr. R. A. Butler: The normal minimum entry requirement is education to Form II standard, or its equivalent. Implementation of the Keir Report will not change this. About 5,000 Africans possess this qualification, although only a small proportion are likely to want technical courses.
    Mr. Swingler: Does not that Answer reveal that, even with the welcome reforms of the Keir Report, the opportunities for further and higher education of Africans are very limited because only such a small proportion of them receive higher education? Will not the right hon. Gentleman urgently investigate the need to develop the secondary educational system so that more Africans will qualify for higher education?
    Mr. Butler: I think that the more we can do in this direction the better. The Keir Report is now being considered by a working party appointed by the three sponsors, and when I receive that I may be able to look at the matter further.

  UGANDA

    Former Civil Servants (Pensions)
    Mr. Tilneyasked the Secretary of State for the Colonies how many ex- members of the Colonial Service or Her Majesty's Overseas Civil Service are receiving pensions from the Government of Uganda; and how many of these are receiving increases less than those received under the Pensions (Increase) Act. 1959 of the United Kingdom.
    The Secretary of State for the Colonies (Mr. Reginald Maudling): As my information is incomplete, I have
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    asked the Government of Uganda for further information, and will write to my hon. Friend as soon as I have it.
    Mr. Tilney: Would my right hon. Friend bear in mind that the Uganda Government last year received 8·4 million dollars, and will receive more in pounds this year in the form of aid or loans; and that it is the poorer end of the pensioner scale that really requires attention?

  MALTA

    General Election
    Mr. Awberyasked the Secretary of State for the Colonies what were the reasons for preventing the Malta Labour Party from broadcasting during the period of the election, in view of the fact that their political opponents were given such facilities.
    Mr. Maudling: Broadcasting facilities were offered to all political parties in proportion to their estimated strength. The Malta Labour Party made one broadcast in January, but when it was asked to re-write the script of a second broadcast because it contravened the provisions of the Broadcasting Ordinance it decided to make no further broadcasts at all.
    Mr. Awbery: Will the Minister give an assurance that in future the Labour Party of Malta will be given the same opportunity as the other parties of expressing its opinion on the wireless?
    Mr. Maudling: I see no reason to suppose that anything other took place.
    Mr. G. M. Thomson: In view of the general disquiet over the background of this election, would the Minister arrange to put in the Library the script of this broadcast that was banned, and the section to which objection was taken, so that we may make up our own minds about it?
    Mr. Maudling: I will certainly consider that, but the point is that there is this Ordinance, and it is clearly the responsibility of the authorities in Malta to see that all parties, whoever they may be, fall in line with the provisions of that Ordinance.
    Mr. Awberyasked the Secretary of State for the Colonies what representations on the subject of the Malta general election were made to him and

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    the Governor of Malta by the Malta Labour Party and the Socialist International about two months before the general election on the island; what were the terms of the statement; and what reply was sent.
    Mr. Maudling: About six weeks before the elections Mr. Mintoff made certain complaints to the Governor about alleged bias on the part of the police and other authorities and sent a copy of them to me. These complaints were discussed with the Governor, but neither the Governor nor I was able to accept them. I have received no representations from the Socialist International.
    Mr. Awbery: Is the Colonial Secretary aware that the position was so serious six and eight weeks before the election that representation was made to the Governor, and nothing was done; that representation was also made to the Colonial Secretary in this House, and nothing was done? Now, when we call for an inquiry into the whole position, I hope that something will be done about it.
    Mr. Maudling: Nothing was done because it was not thought that the representations warranted it.
    Mr. Healey: But is the right hon. Gentleman aware that I have myself received documents that contain some very serious allegations about the conduct of these elections? Would he agree to meet me and a number of my hon. Friends in order to discuss those allegations?
    Mr. Maudling: Yes, Sir, certainly.

    Constitution
    Mr. Wallasked the Secretary of State for the Colonies whether any adjustments will be made to the Constitution of Malta as a result of his conversations with the Prime Minister of Malta.
    Sir W. Teelingasked the Secretary of State for the Colonies if he will make a statement on his talks with the Prime Minister of Malta.
    Mr. Maudling: I have discussed with the Prime Minister of Malta a number of suggestions he has made for alterations to the Constitution. I finally conveyed to him yesterday my willingness to accept the majority of his proposals, and I am awaiting his reply.
    Mr. Wall: While welcoming my right hon. Friend's agreement with the Prime Minister of Malta, and particularly the display of confidence this shows in the new Maltese Government, may I ask when it is likely that these Amendments will come into effect when they are finally agreed; will they come into effect immediately?
    Mr. Maudling: I cannot see why there should be any delay, but I am awaiting the Prime Minister's reply.
    Sir W. Teeilng: Will my right hon. Friend bear in mind that the many friends of Malta here are very pleased that the Prime Minister of Malta has, in four weeks, been able to get as much as we understand he has got from a rather grudging and slightly mistrustful Colonial Office? Will my right hon. Friend, in the next few days, while the Prime Minister of Malta is still here, do everything possible to come to a final decision? And, eventually, can we please have a debate on the whole Malta question?
    Mr. Maudling: The question of a debate is not, of course, for me. I have been doing my best to reach agreement with the Prime Minister of Malta, and I am very anxious to do so, because there is one point on which I have found great difficulty. I cannot accept that it is right for Malta to be in danger of the public service of the island becoming a matter of political patronage.
    Mr. Awbery: Will the right hon. Gentleman say what agreement was reached with Dr. Olivier when he was here, what subjects were agreed to and those that were disagreed, and will he give the reasons why he disagreed?
    Mr. Maudling: I intend to do that. I should have liked to have done it in answer to Questions today, but I do not think I can do so until I have heard from the Prime Minister.

  COLONIAL TERRITORIES

    Former Civil Servants (Pensions)
    Mr. Tilneyasked the Secretary of State for the Colonies what steps were taken to inform ex-members of the Colonial and Her Majesty's Overseas

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    Civil Services, on first appointment, that the responsibility to pay pensions lay with overseas Governments.
    Mr. Maudling: An offer of appointment is made to the public service of a particular territory. It is accompanied by a statement of the principal conditions of service in that territory, and these show that pensions are awarded under the legislations of that territory.
    Mr. Tilney: Can my right hon. Friend say whether that has always been the case? The Colonial White Paper of 1954 set out that Her Majesty's Overseas Civil Service was one Service under the Crown. Does he not agree that the remarks in another place of his predecessor, Lord Boyd, hardly support what he has just said?
    Mr. Maudling: I have looked into this question, but I cannot see any discrepancy between the White Paper of 1954 and this system which, I gather, has always applied; that actual pensions legislation is the responsibility of the particular Government. I have looked at specimen documents given to people who axe being recruited, and I think that it is made quite clear that it is on the individual Government of the territory that the pensions responsibility rests.
    Mr. G. M. Thomson: But is it not the fact that recruits to the Overseas Civil Service accept their position on the assumption that their general security, including their pensions, is ultimately the responsibility of Her Majesty's Government here? Would not the Colonial Secretary look at this subject again, on the lines suggested from these benches, that it would be helpful for Her Majesty's Government to take over a much larger measure of responsibility for these pensions?
    Mr. Maudling: That is a very different question. The point here is Whether people, on taking up their appointments, are clearly informed about this and, on investigation, I am satisfied that they have been clearly informed.

    Sugar
    Mr. Brockwayasked the Secretary of State for the Colonies what tonnage of sugar will be imported during 1961–62 under agreements with Colonial Territories;
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    and what proportion of the estimated production this represents in each case.
    Mr. Maudling: The only agreement under which sugar is imported into the U.K. from Colonial Territories is the Commonwealth Sugar Agreement. Shipments of sugar from Colonial Territories to this country under this agreement arriving in 1961 or early 1962 totalled 1,049,000 long tons, representing approximately 53 per cent. of the estimated production of the Colonial Territories which are parties to the C.S.A. With the hon. Member's permission, I will circulate the detailed figures in respect of the main colonial sugar-producing territories in the OFFICIAL REPORT.
    Mr. Brockway: While thanking the right hon. Gentleman for that promise, may I ask him whether, in view of the restriction on emigration from these countries, it is not very desirable that we should do our utmost to assist them in sugar production, which in many of these territories is the mainstay of the economy? Is it not a little humiliating that Jamaica should be now sending someone to the United States of America to beg them to take Jamaican sugar, and is it not all wrong that we should be maintaining Imperial Preference for the Republic of South Africa when our own Colonial Territories and Commonwealth are in this need?
    Mr. Maudling: I think the importance of the sugar price to the West Indian territories is very high, but it is very wrong to under-estimate what this country is doing. We are buying very large quantities of sugar from this part of the world at a price away above the world market price, which represents an enormous advantage to these countries.
    Mr. Strachey: Does not the Colonial Secretary agree that just because we are buying at this very much higher price, as he says, there is not necessarily a limit to the amount of sugar we can buy at that price? Is it not a great scandal that some of that amount is now bought from a foreign country under the Commonwealth Sugar Agreement, when all of it quite clearly should be used for the benefit of the Colonies and the Commonwealth countries?
    Mr. Maudling: The right hon. Gentleman is trying to reopen a rather different question.
    Mr. Thorpe: Is it not true that one of the beneficiaries of the Commonwealth Agreement is Swaziland, but, because of the South Africa Act, the price in that territory is depressed by £10 per ton, and expansionist possibilities are being deliberately repressed in order to subsidise foreign producers in South Africa? Is not that an outrage?
    Mr. Maudling: If the hon. Gentleman will put that Question down, I shall be very glad to answer it.
    Following are the detailed figures:

    IMPORTS OF SUGAR FROM COLONIAL TERRITORIES IN 1961–62

    '000s long tons

    —

    Production

    Exports to United Kingdom

    Exports to United Kingdom as percentage of production

    Fiji

    163

    74

    45

    Mauritius

    544

    402

    74

    The West Indies

    921

    437

    47

    British Guiana

    325

    117

    36

    British Honduras

    28

    19

    68

    Totals

    1,981

    1,049

    53

    The figures in the first column relate to production for the calendar year 1961; those in the second column relate to shipments to the United Kingdom during 1961, arriving in 1961 or early 1962.

  KENYA

    Employment
    Mr. G. M. Thomsonasked the Secretary of State for the Colonies what steps he is taking to alleviate the unemployment situation in Kenya.
    Mr. Maudling: The Kenya Government, in consultation with Her Majesty's Government, have been able, partly by adjusting their development plan, to increase the number employed in the public sector. A long-term solution is difficult without increased investment in the private sector, which provides over two-thirds of the jobs, and where much depends on the confidence of investors.
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    One thousand families have been settled during the last few weeks on land excised from the forests. Planting grants will be made to assist these settlers.
    Mr. Thomson: While thanking the right hon. Gentleman for that reply, may I ask whether he is aware that the latest estimates about unemployment that have come out of Kenya are very alarming indeed? In the meantime, will he do everything he can to increase assistance in the public sector while awaiting the political developments which, we hope, will encourage private investment?
    Mr. Maudling: I do regard this question of unemployment in Kenya very seriously, and I can assure the House that the new Government are well aware of it.

    International Bank (Loan)
    Mr. Goodhartasked the Secretary of State for the Colonies how much of the money loaned by the World Bank in 1961 for African resettlement in Kenya has been spent; and how much has been allocated to specific resettlement projects.
    Mr. Maudling: International Bank loans are drawn in reimbursement of expenditure on the basis of specific settlement projects approved by the Bank. None of the loan has yet been drawn; but the Kenya Government have so far earmarked £180,000 of the loans from the International Bank and the Colonial Development Corporation for specific settlement projects.
    Mr. Goodhart: Is not that rather a depressing Answer? Can my right hon. Friend give the House any assurance that the bulk of this money will be used before the end of the year?
    Mr. Maudling: It is a little disappointing that it has not gone faster, but the difficulty is to find suitable tenants for this type of scheme with adequate capital of their own and adequate standards to meet the rather substantial requirements. It is disappointing that it has not gone faster, but I have no doubt that every effort is being and will be made to make things move as fast as we can.

  ZANZIBAR

    Constitutional Conference
    Mr. G. M. Thomsonasked the Secretary of State for the Colonies if he will make a statement on the Zanzibar constitutional conference.
    Mr. Maudling: Useful discussions took place at the conference on a number of constitutional issues. I told the delegates that Her Majesty's Government agreed to extend the franchise in Zanzibar by removal of the means and educational qualifications, and to appoint an independent Commission to recommend the number of elected members to sit in the Legislative Council, and to delimit the new constituencies on that basis. The way would then be clear for the holding of further elections. I regret that, in the absence of agreement between the Zanzibar Ministers and the Opposition delegates, it proved impossible to settle the timetable for further advance towards self-government and independence, but I reaffirmed on behalf of Her Majesty's Government that full independence is still the aim for Zanzibar.
    I will, with permission, circulate a fuller statement in the OFFICIAL REPORT.
    Mr. Thomson: I very much welcome the decision about the extension of the franchise, but is the Colonial Secretary aware that there is a good deal of disappointment that he was not as successful in Zanzibar as he was in Kenya in getting the two groups of politicians to co-operate in the interests of their country for the time being? Will he say whether he has asked the British Resident to continue these efforts in Zanzibar.
    Mr. Maudling: The British Resident—who, I think, is an outstanding Resident—is continuing his efforts, and I am sure that if any man can make progress, he will.
    Mr. Brockway: Is the Minister aware of the very deep disappointment there is that there has not been a successful conclusion to these discussions as there was under his leadership in Kenya? In the case of Zanzibar, would it not have been possible to reach a compromise, first, by giving the Opposition the adult
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    suffrage they desire and, second, by asking for a Coalition Government until independence, on the same basis as he adopted in Kenya?
    Mr. Maudling: A Coalition Government is precisely what I did ask for, but the great question was whether there should be elections or not. On that, it is difficult to compromise.
    Following is the statement:
    The Zanzibar Constitutional Conference met between 19th March and 6th April
    Agreement was reached on a number of points related to internal self-government, including the form of constitution at that stage, provisions for safeguarding human rights, and various matters connected with the public service.
    Both the Zanzibar Ministers and the Opposition delegates pressed for the declaration of early dates for internal self-government and independence, but there were divergencies of opinion between them on the programme of advance. These covered the franchise, the number of elected seats in the Legislative Council and, in consequence, the number of constituencies, the timing of the next elections, and the possibility of forming a Coalition Government.
    While Her Majesty's Government have been prepared to consider further constitutional measures for Zanzibar, last year's events in the Protectorate showed how deeply and evenly parties were divided, and the serious results the division could have. In these circumstances, Her Majesty's Government felt that it was impossible to make progress unless the parties were able to resolve these differences, preferably by forming a Coalition Government. In the absence of such agreement, there was no prospect of securing a stable administration during the period of internal self-government. Despite prolonged discussions between the parties, no agreement was reached. In consequence, Her Majesty's Government decided that it would be wrong for them to set dates at present either for internal self-government or for independence. But, since there was a measure of agreement between the parties on the extension of the franchise, I informed the Conference that Her Majesty's Government were agreeable to extending it by removal of the means and educational qualifications, though they did not consider that a case had been made out for reducing the minimum age below 21 (as proposed by the Opposition delegates). Her Majesty's Government also agreed to the appointment of an independent Delimitation Commission:

    (i) to recommend, on the basis of the franchise thus extended, the appropriate number of elected members to sit in the Legislative Council, having regard to the distribution of population in the islands; and

    (ii) to delimit the new constituencies on that basis.

    When the work of the Commission has been completed, the way will be clear to the holding

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    of further elections, either when they next normally fall due in June. 1964, or at such earlier date as may be agreed upon.
    While only this limited agreement could be reached at the Conference, I reaffirmed on behalf of Her Majesty's Government that full independence is still the aim for Zanzibar. Whether and when it will be possible to make any further advance to that goal must depend on the success of the political leaders and people of Zanzibar in reducing the existing tensions and the differences which divide them.

  ST. HELENA

    Educational Facilities
    Mr. C. Hughesasked the Secretary of State for the Colonies what educational facilities are now available to the children of St. Helena; and what opportunities for further education are open to them.
    Mr. Maudling: Education is compulsory for children up to the age of fifteen. There are eight primary and three senior schools and there is one secondary school for children who pass the necessary examination. At this school, courses may be taken leading to the Royal Society of Arts General Certificate Examination. Courses at the Teacher Training Centre provide opportunities for further education. Apprentice training is given by the Public Works and Agricultural and Forestry Departments.
    Mr. Hughes: Does not the right hon. Gentleman agree that if we analyse that position we find it very unsatisfactory? Does it not reveal that there are fewer opportunities for further education in St. Helena than in any other British overseas territory? Would not the Secretary of State consider setting up some scheme whereby young people from St. Helena who wish to proceed further with their education may come to this country to do so, bearing in mind that the population of St. Helena is only 4,500?
    Mr. Maudling: Yes, Sir. It is just because the population is so small and the geography is such as it is, that it is difficult to arrange for adequate educational facilities. I think we are making progress with it, but if the hon. Gentleman has any suggestions for improving the situation. I should be very glad to consider them.

    Constitution
    Mr. C. Hughesasked the Secretary of State for the Colonies if he will now approve some measure of constitutional reform for St. Helena.
    Mr. Maudling: I am glad to report that the earlier proposals, by which the present nominated Advisory Council would be replaced by one consisting of eight elected and eight nominated or ex officio members, are now generally acceptable. I am arranging for the necessary constitutional instruments to be prepared as soon as possible.
    Mr. Hughes: May I say how glad I am personally to welcome that information, and to express the hope that this new experiment in St. Helena will be a great success?

  BRITISH GUIANA

    Disturbances
    Mr. Sorensenasked the Secretary of State for the Colonies if he has now ascertained, as a result of the Commission of Inquiry, the precise cause of the disorders in British Guiana; what is the estimated amount of damage caused by the disorder; whether the situation is now quiet; when the troops are likely to be withdrawn; if a locally recruited militia is now receiving consideration; and whether the Independence Conference will be postponed.
    Mr. Maudling: I am appointing a Commission of Inquiry to report on the causes of the disturbances. The British Guiana Government, which is constitutionally responsible for internal security, has not published an estimate of the damage caused. The situation is now quiet and the number of troops has been reduced. British Guiana already has a local volunteer Defence Force. As to the last part, I have nothing to add to the reply I gave to the hon. Member for Willesden, West (Mr. Pavitt) on 23rd March.
    Mr. Sorensen: Arising out of that reply, may I ask the right hon. Gentleman how long we are likely to have to wait before we get the report of this inquiry, and whether there is any kind of interim report to show us exactly what were the causes of these unfortunate disturbances?
    Mr. Maudling: I have invited certain gentlemen to be members of the Commission, but I have not yet received their answers. It is difficult to get hold of people of the eminence one wants. It is most important to have people whose judgment will be respected. I hope very soon to get the Commission established, and I am sure that it will begin its work as soon as possible.
    Mr. Healey: Can the right hon. Gentleman at least give us some clue as to the composition of this Commission, and, in particular, say whether there will be members from other Commonwealth countries and from this country?
    Mr. Maudling: Yes, Sir. The idea is that it should be of a judicial character, with a chairman from this country and other members from other Commonwealth countries.

  BRITISH HONDURAS

    Hurricane Damage
    Mr. Fisherasked the Secretary of State for the Colonies (1) if he will make a statement about the Government's financial contribution for the rehabilitation of British Honduras, following the recent hurricane;
    (2) whether he has come to a decision about the re-siting of the capital of British Honduras, in the light of the severe damage to Belize, following the recent hurricane.
    Mr. Maudling: Financial talks with the British Honduras delegation are in progress. I will make statements on both Questions after these discussions are concluded.
    Mr. Fisher: Will my right hon. Friend bear in mind that it is now about five months since this disaster took place and that no major work of reconstruction can even be begun until some decision is given? Will he expedite that decision? On my second Question, will my right hon. Friend bear in mind that Belize was built on a swamp, is very much overcrowded, with no room for expansion at all, and that it might be wiser to rebuild it inland on somewhat higher ground? Can he give some estimate of the comparative cost of rebuilding on the old site, with a wall round to keep the sea out, which will probably be
    1492
    necessary, and rebuilding on a new site inland, which might be the cheaper of the two alternatives?
    Mr. Maudling: We have already provided over £800,000, and further bills are coming in, but the question of the capital is a very large one, involving many millions of pounds, and the question which my hon. Friend mentions is precisely one which we are examining at the present time.
    Mr. G. M. Thomson: Is the right hon. Gentleman aware that there is a good deal of disquiet on this side of the House as well at some of the delay in reaching a final settlement with Mr. George Price? Will he do everything he can to hurry it up?
    Mr. Maudling: Yes, Sir, but I must point out that there are many millions of pounds involved in this and that before we provide money from this country to that extent we must be quite clear that we are spending it to the best advantage.

  EDUCATION

    School Meal Tickets
    Mrs. Butlerasked the Minister of Education if he will send a circular to local education authorities drawing attention to the undesirability of issuing school meal tickets in different colours for different amounts paid.
    The Parliamentary Secretary to the Ministry of Education (Mr. Kenneth Thompson): My right hon. Friend agrees that it is undesirable for any procedure to be adopted in the meals service which may lead to the identification at school of those children who are receiving meals either free or at a reduced charge. Details of the arrangements are, however, a matter for the local education authority, and he does not consider that it would be appropriate for him to issue any instructions about them.
    Mrs. Butler: Since a number of education authorities at the moment are experimenting with different systems of collecting school meals payments in order to relieve the teaching staff of the responsibility, would not this be a very appropriate time for the Minister to

    1493
    remind them that they should not adopt a system which clearly sets apart children receiving free or cheap meals from the others, because, while a number of them do not mind, some who may be more sensitive may be caused very great distress?
    Mr. Thompson: My right hon. Friend shares the view expressed by the hon. Lady in the latter part of her question, and I think it is true that most local authorities, if not all, are now alerted to the danger which would arise from anything which resulted in differentiating between children who pay and those who do not. I think their attitude generally is quite enlightened on the point.

    School-leavers, Durham
    Mr. Ainsleyasked the Minister of Education if he is aware that in the western division of the Durham County Juvenile Employment Office the amount of benefit paid in unemployment insurance and National Assistance benefits to young people leaving school increased by over 100 per cent. to some £615 in the past two years; and if he will now increase the school leaving age to 16 years.
    The Minister of Education (Sir David Eccles): I am aware that there are more young people unemployed in this district than there were a year ago. With regard to the second part of the Question, I would refer the hon. Member to my statement in the debate on 21st March, 1960. Local, and I hope temporary, fluctuations in employment cannot be the deciding factor.
    Mr. Ainsley: While appreciating the gravity of the situation, which the Minister recognises, may I ask him whether he is aware that this is one of fourteen areas in the County of Durham with a similar juvenile unemployment situation? Would the right hon. Gentleman consider putting a proposal to the Secretary of State for War with a view to taking over the military training camp, with its indoor and outdoor facilities, in order to implement, to some extent, the Albemarle Report?
    Sir D. EcclesIf such a proposal is put to me, I will certainly consider it.
    Mr. Willey: On the general question of raising the school-leaving age, is the Minister sufficiently aware that an obligation is placed on him by the Education Act? In view of the Crowther Committee's Report, does not he think it high time that he made a specific statement on this matter?
    Sir D. Eccles: I am aware of the statement in principle that we must raise the school-leaving age, but we must first ensure that the teachers are available.

    National Institute for Adult Education
    Mr. Boydenasked the Minister of Education what grant was paid to the National Institute for Adult Education in 1961–62 to enable the Institute to conduct its inquiry into the accommodation and staffing of adult education; and what grant he proposes to make during the next financial year.
    Sir D. Eccles: £2,000 was paid in 1961–62, and up to £500 has been offered for 1962–63, towards the cost of completing the job.
    Mr. Boyden: Is the Minister aware that this is barely adequate for the completion of this job? Can he cast his mind back to the Swansea annual conference in which he himself suggested that this line of development should be a permanent feature of the National Institute? Can he hold out some hope that next year he will be prepared to make an annual grant which will enable permanent inquiries of this sort to be made?
    Sir D. Eccles: I must consider the question of subsidising a permanent research unit. As the hon. Gentleman remembered when he came to see me, I was not able to accept that at the time.

    School Meals (Meat)
    Mr. P. Browneasked the Minister of Education if he is satisfied that schools are getting meat of the quality and type for which they are paying; and what specialised staff he has with responsibility for inspecting meat bought by education authorities.
    Mr. K. Thompson: Local education authorities are responsible for running the school meals service and it is for

    1495
    them to ensure that the meat supplied to schools is up to standard. My right hon. Friend has no specialised staff to inspect meat purchased for the schools.
    Mr. Browne: Is my hon. Friend aware that there have been complaints that meat has been bought of a quality below that justified by the price paid compared with the price for an equivalent grade of meat in the shops? Will he not agree that it is a pity that certain local education authorities are determined that schools should buy a fairly large percentage of foreign meat with home-produced meat?
    Mr. Thompson: Yes, Sir, but these are matters for the local authorities themselves to decide, and I think that that is where the responsibility should lie. If my hon. Friend has any specific cases in mind, I will be glad to look into them.
    Mr. Clark Hutchison: Why does not my hon. Friend buy Scottish meat to avoid all this trouble?
    Mr. Thompson: I think that my hon. Friend's persuasive powers should be directed to the local authorities.
    Mr. Prior: Could not my hon. Friend instruct the local education authorities to buy British meat during the summer, at any rate, when British meat is plentiful, is in good supply and is very cheap, thereby helping the Exchequer to save subsidies?
    Mr. Thompson: Local authorities have to balance all these considerations with the amount of money that they are allowed to spend per meal and the object of getting a properly balanced diet.

    General Certificate of Education (A Level)
    Mr. Boydenasked the Minister of Education if, in view of the difficulties caused to applicants for training college places and the clearing house by the lateness of the General Certificate of Education A level examination results, he will now ask the examining boards to hold their examinations three months earlier each year.
    Sir D. Eccles: No, Sir. This would be unacceptable to the schools, and impracticable for the examining bodies. I do not, however, rule out the possibility of
    1496
    holding the summer examinations a little earlier than at present, and this is being studied.
    Mr. Boyden: Can we not do something practical for the schools? In view of the number of university applications, will the Minister not consult both the teacher training college clearing house and the university clearing house to see what can be done about the matter? Late results cause considerable difficulties for a number of successful candidates who may be disappointed in gaining entry to a college and may be lost to the teaching profession.
    Sir D. Eccles: The schools are very much against going to a month like March, for reasons which the hon. Gentleman will know. It is also necessary to secure the examiners, a large number of whom are available only in the holidays
    Mr. Willey: In spite of the good work done by the Secondary Schools Examinations Committee, has the time not come when there should be a general review of the General Certificate Examination by a well-established, broad-based committee?
    Sir D. Eccles: That is another question which would have to be considered with great care.

  NORTH-EAST REGION
  Mr. Greyasked the Prime Minister when he next proposes to make an official visit to the North-East.
  The Prime Minister (Mr. Harold Macmillan): I find it difficult to know what the hon. Member means by an official visit other than to use a phrase which will allow him to get his Question accepted by the Table.
  Mr. Grey: Is the Prime Minister aware that we have got as much out of that reply as he got from his visit to Stockton? Will he tell the House whether he intends to visit Middlesbrough, West to use his high position as a gimmick to try to win that by-election, as he tried to do at Stockton?
  The Prime Minister: I had hoped that the hon. Gentleman was more experienced and could do better than that.
  Mr. Shinwell: Will the right hon. Gentleman accept an invitation from me to make a visit to the North-East, whether official or unofficial, and, while he is there, will he visit the town of Peterlee and hear what the residents there have to say about the failure of his colleague the President of the Board of Trade to do anything for this new town?
  The Prime Minister: I had the pleasure of going there when I was Minister of Housing. If we can fit in a joint visit, let us see what we can do.
  Mr. Gaitskell: Will the Prime Minister tell us whether he is going to visit Derby in the next few days?
  The Prime Minister: I will go to the Derby with the right hon. Gentleman at any time he likes.
  Mr. Milne: Is the right hon. Gentleman aware that a visit of the description requested would be extremely valuable to the people in the industries in the North-East because they feel that they are being neglected by the other Ministers? Visits during by-elections are no substitute for visits in order to get real information on what the problems of the North-East really are.
  The Prime Minister: I do not accept that, because I do not think it is fair to my colleagues. But, as a matter of fact, I have been to the North-East Coast several times in the last few years on visits for the sort of purpose which the hon. Gentleman has in mind.
  Mr. Ross: In view of all these demands for the right hon. Gentleman's presence at various places, will he take it from me that there is no need for him to visit West Lothian in Scotland?
  The Prime Minister: I am very gratified by the courtesy of the hon. Gentleman.

  LORD PRESIDENT OF THE COUNCIL (SPEECH)
  Mr. K. Lewisasked the Prime Minister whether the speech of the Lord President of the Council and Minister for Science to the Federation of British Industries at Eastbourne on 6th April, about Great Britain's industrial survival, represents the policy of Her Majesty's Government.
  The Prime Minister: My noble Friend the Lord President's speech was entirely consistent with the policy of the Government.
  Mr. Lewis: Does my right hon. Friend recall that the Lord President of the Council is reported to have said that there was a danger of Britain becoming a cross between a museum and a curiosity shop? Is he aware that, although I represent a very ancient county, I feel that I am part, not of a museum nor of a curiosity shop, but of a modern, thriving and virile community? Today, this country is celebrating twenty-five years of the invention of the jet engine. We are putting the first hovercraft into service, and goodness knows what else into space. Would it not be a good idea if we went out and advertised ourselves in the world as a very modern, thriving Great Britain?
  The Prime Minister: I think that we have every right to do that, but at the same time I think that my noble Friend, in the part of the speech to which I gave special attention, urged that we must try to keep what he called one move ahead in technology, design, organisation, salesmanship, management, industrial relations, and so forth. It is always difficult exactly to keep the balance, but I think that this kind of speech is valuable, and I myself agreed with it.
  Mr. Gaitskell: In view of the fact that the Lord President of the Council, in the course of his interesting and, indeed, challenging speech, referred specially to the grave weakness in industry concerning research, can the right hon. Gentleman tell us what the Government propose to do to make industry, to use the noble Lord's phrase, "more science based" than it is today?
  The Prime Minister: Of course, as the right hon. Gentleman knows, there are already various financial incentives for research expenditure. If he has a more detailed point in mind, perhaps he will table a Question.
  Sir C. Taylor: Is my right hon. Friend aware that the Member for Eastbourne was at this function, that he listened to the speech with great joy, that it was completely unexceptionable and that it is unfair to take one small statement in the speech out of context?
  Mr. M. Foot: While the speech of the Minister for Science may have been in strict conformity with the Government's policy, may I ask the right hon. Gentleman if he would care to say whether he thought that it was delivered in better English?
  The Prime Minister: I have the greatest regard for and much experience of my noble Friend's high standard of scholarship.

  AGRICULTURE, FISHERIES AND FOOD

    Skim Milk
    Mrs. Butlerasked the Minister of Agriculture, Fisheries and Food what arrangements he is making to convert surplus milk into dried milk powder to be made available to developing countries where children are suffering from protein deficiency.
    The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. W. M. F. Vane): As my right hon. Friend the Prime Minister said on 5th April, it would not be worthwhile to install additional processing plant to deal with the small temporary surplus of skim milk that may occur. I understand that the Oxford Committee for Famine Relief has discussed with the Milk Marketing Board the possibility of transporting skim milk to Northern Ireland for processing. But in view of the very high transport costs and the technical difficulties that would be involved it has been agreed, very reluctantly, that the operation would not be justified.
    Mrs. Butler: There will be great concern at that reply, especially since the news that this milk was to be processed in Northern Ireland received a warm welcome from the public. Is it still too late to find some means of financing the transport so that the milk can be utilised for children who are suffering desperately from deficiency diseases in the famine areas? Cannot something be done, perhaps by the Oxford Committee for Famine Relief, to help in this matter?
    Mr. Vane: I naturally understand the feelings of the hon. Lady about this matter, but we must keep it in proportion.
    1500
    The cost of new plant in order to dry skim milk could be hundreds of thousands of pounds, and the volume of skim milk concerned is only small and of a temporary nature.
    Mr. Peart: I hope that the hon. Gentleman will appreciate the concern that exists about this matter. We are dealing with a surplus product and methods by which it might be used and disposed of. Will the Government, despite the hon. Gentleman's answer today, keep this matter in mind with a view to doing more work regarding the best ways of using this product?
    Mr. Vane: Certainly, and the Milk Marketing Board is, naturally, very concerned to find some practical outlet for all the skim milk, but this seems to be proving an insuperable difficulty.
    Sir C. Taylor: Will my hon. Friend ensure that everyone has the correct impression about this product? It is not milk but skim milk which results from butter-making.
    Mr. Peart: So what?
    Mrs. Castle: Are not the figures which the Government keep giving us rather misleading? Is this expenditure of hundreds of thousands of pounds not a once-and-for-all expenditure for plant which could be used indefinitely, year after year, to deal with a surplus which although it may seem fairly small to us will, none the less, be recurring? Might it not also increase in years to come and would not such expenditure really be economical so that good protein food could be given to people who are starving?
    Mr. Vane: This is a bulky commodity and a highly perishable one, and it is misleading to try to represent this particular small seasonal surplus as something of very great moment.

    Surplus Farm Produce
    Mr. Darlingasked the Minister of Agriculture, Fisheries and Food if he will consult the Agricultural Research Council and the appropriate marketing boards with a view to promoting a joint research project into the processing of surplus perishable farm produce both for human consumption and for animal feedingstuffs.
    Mr. Vane: Surpluses are significant for only a few products and only occasionally for these. The marketing boards are responsible for promoting efficient disposal of their respective products and arrange for research as necessary. The technical problems connected with processing are generally less difficult than the economic problems of disposal but we shall always be ready to bring to the notice of the Agricultural Research Council any matters requiring fundamental research.
    Mr. Darling: Is this not doing it the wrong way round? In view of the public criticism that is bound to grow when surplus foods in this country are destroyed and when there is hunger in the world, is it not desirable to get a research project going to see what can be done to process surplus products? While they may be seasonal, could not these surplus products over a period of time provide animal feedingstuffs, and so on, if the research work is properly done?
    Mr. Vane: Although, as I said, the problem is more the economic one of disposal, research is going on by the Horticultural Marketing Council into the processing of surplus apples, by the Tomato and Cucumber Marketing Board into the processing of small and low-grade tomatoes, and the Agricultural Research Council has been asked to look at the qusetion of skim milk. It would be wrong to suppose, therefore, that a great deal of attention is not being given to this subject.
    Mr. Eden: Is my hon. Friend aware that some surplus skim milk has a considerable value in its natural state as a fertiliser when employed as a spray on land, particularly hill farming land and forestry land? Will my hon. Friend consider this aspect as one of the possible ways for using some of this skim milk?
    Mr. Vane: I have not had experience of that, but the most natural outlet for this product is for stock feed. The demand for this is increasing and the Milk Marketing Board is endeavouring to develop that outlet, but, as I pointed out, hon. Members should remember that this surplus is an irregular one.
    Mr. W. Hamilton: Why do we have this policy of at one time having a surplus of foods which we cannot get rid of and at another time a shortage of potatoes?

    Fowl Pest
    Sir A. Hurdasked the Minister of Agriculture, Fisheries and Food if he will give an assurance that the present policy for dealing with fowl pest will not be discarded until a workable scheme has been agreed with the poultry industry to carry forward the vaccination programme recommended by the Plant Committee, with compensation for the slaughter of diseased stock on terms acceptable to the industry.
    Mr. Vane: My right hon. Friend and his right hon. Friend the Secretary of State for Scotland are now in consultation with the poultry industry on the Report of the Plant Committee and they wish to make progress with their consultations with the industry and others concerned before coming to any conclusions on future policy.

    Pigs
    Sir A. Hurdasked the Minister of Agriculture, Fisheries and Food if, before he introduces amending legislation, he will consult all sections of the pig industry to get their views on the Pig Industry Development Authority's proposal to double the levy on pigs slaughtered so as to bring in an additional £500,000 a year for research and advertising.
    Mr. Vane: My right hon. Friend and his right hon. Friend the Secretary of State for Scotland will naturally be ready to receive any representations from the industry and to consider them with the Pig Industry Development Authority.
    Sir A. Hurd: Would my hon. Friend not agree that Parliament should not be asked to authorise the collection of this additional levy of £500,000 a year from pig producers and bacon curers unless they are satisfied, from experience and the prospects of further research and development, that they are likely to get value for the money that will be exacted from them? [HON. MEMBERS: "Answer."]
    Mr. Peart: As it appears that the hon. Gentleman does not intend to reply to that question, will he say if representations have already been made and, if so, by what organisations? While it would be wrong to criticise the P.I.D.A. as such, because it is a useful instrument of policy, were the pig producers consulted?
    Mr. Vane: My right hon. Friend has received representations from the National Pig Breeders' Association, the National Farmers' Union and others, and he is prepared to consider such representations. I can assure hon. Members that he will not ask the House to approve an Order unless he considers that its contents are right and proper.
    Mr. Peart: Can the hon. Gentleman say whether the representations were against the levy?
    Mr. Vane: They are, by and large, against an increased charge, which is natural, but I think that a lot of people—both inside and outside the industry—probably do not appreciate, although J know the hon. Gentleman does, the value of research, which is one of the projects which the Pig Industry Development Authority has in mind.

  NATIONAL FINANCE

    Universities
    Mr. Wainwrightasked Mr. Chancellor of the Exchequer if he will state the proportion of the national income which was spent on all university education for the years 1957, 1958, 1959, 1960 and 1961 and the estimated proportion for the years 1962,1963,1964 and 1965.
    The Chief Secretary to the Treasury (Mr. Henry Brooke): As the reply contains a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Wainwright: What will be the approximate proportion in 1965–66? Is the right hon. Gentleman aware of the answer I received from his Department the other day, to the effect that in 1964–65 the ratio of university students will be I in 19 of the relevant age group and that, in the following year, it will be I in 22? How can the right hon. Gentleman expect to create a modern, progressive
    1504
    and thriving Great Britain if he does not do something about our educational facilities?
    Mr. Brooke: I explained to the House last week that the Government are increasing their allocations from public funds to the universities at an unpredented rate. They have been doubled in the last five years and they will increase by 50 per cent. in the next five.
    Following is the reply:
    The proportion of national income spent on university education consists of the recurrent and non-recurrent grants from the Exchequer to the universities, which in 1961–62 made up approximately 75 per cent. of university income, together with public expenditure on student awards and the other income of universities (such as endowment income and fees personally paid).
    Expenditure on the universities is normally given in terms of academic years (August to July), but for the purposes of the comparison requested it is necessary to take financial years (April to March). The table below gives the figures of expenditure from public funds for the financial years 1957–58 to 1961–62:

    PUBLIC EXPENDITURE ON UNIVERSITY EDUCATION

    Financial Years

    Total Cost to Public Funds*

    Gross National Product

    Col. (2) as percentage of Col. (3)

    (1)

    (2)

    (3)

    (4)

    £m.

    £m

    Per cent.

    1957–58

    56·3

    19,693

    ·29

    1958–59

    67·3

    20,249

    ·33

    1959–60

    76·7

    21,491

    ·36

    1960–61

    85·8

    22,678

    ·40

    1961–62

    109·7

    23,790

    ·46

    * Excluding expenditure by Research Councils towards university research and post-graduate awards.

    Precise forecasts for future years over the whole field covered by the Question are not available, but it is anticipated that public expenditure on university education will continue to rise annually and by 1965–66 will reach about £150 million.

  TRADE AND COMMERCE

    Resale Price Maintenance
    Mr. Jayasked the President of the Board of Trade whether he will now make a statement about the Government's policy on resale price maintenance.
    The President of the Board of Trade (Mr. F. J. Enroll): No, Sir. This is a complicated matter and I have not yet

    1505
    completed my study of the results of the fact-finding inquiry conducted by my Department.
    Mr. Jay: Is this not yet another subject on which the Board of Trade has been engaged in active consideration for months, if not years past? Can the right hon. Gentleman say if there is any prospect on his making up his mind on this one?
    Mr. Erroll: I have every hope of making up my mind.

BUSINESS OF THE HOUSE
Mr. Gaitskell: May I ask the Leader of the House whether he will state the business of the House for next week?
The Chancellor of the Duchy of Lancaster (Mr. Iain Macleod): Yes, Sir. The business for next week will be as follows:
MONDAY, 16TH APRIL—Licensing (Scotland) Bill [Lords], Second Reading.
Report stage of the Budget Resolutions.
Motion on the General Grant Increase (Scotland) Order.
TUESDAY, 17TH APRIL—Transport Bill: Progress on the remaining stages.
Motion on the Potato Marketing Scheme.
WEDNESDAY, 18TH APRIL—Transport Bill: Completion of the remaining stages.
THURSDAY, 19TH APRIL—It is proposed that the House should meet at Eleven a.m., that Questions be taken until Twelve noon, and that the House adjourn at Five o'clock, until Tuesday, 1st May.
Mr. Gaitskell: In view of the serious potato shortage, will the Leader of the House confirm that the Motion on Tuesday evening is to be an affirmative one and, therefore, exempted business?
Secondly, can he tell us anything about the two Committees, the Select Committee on Procedure which he has announced is to be set up, and the Joint Select Committee on House of Lords Reform? Are these likely to be constituted before the Easter Recess?
Mr. Macleod: The answer to the right hon. Gentleman's first question is "Yes". In view of the interest in this side of the matter, one of the Law Officers will probably take part in the debate, in addition to the representative of the Ministry concerned.
As the House knows, the Motion on House of Lords Reform has now been accepted by both Houses. I hope to be able to put names before Parliament before we rise for the Recess. The Select Committee on Procedure is in its more or less final stages, and I hope to be able to table a Motion on Monday.
Mr. M. Foot: Does not the announcement about business which the Leader of the House has made mean that there will not be a full debate in the House on the proposed new round of nuclear tests? Has not the Leader of the House seen that there are important Motions on the Order Paper about this subject? Is it not possible that some of these tests, the American tests, may take place before the House returns? Does not the right hon. Gentleman agree that it would be much better for the House to have a full and open debate on this crisis, which is a good deal more important even than the potato shortage crisis?
Mr. Macleod: I have, of course, studied the Motions and, as the hon. Gentleman knows, they have been recently dealt with by the Prime Minister at Question Time. I should have thought myself that, after the approach which has been made jointly and the personal letter by the Prime Minister to Mr. Khrushchev, the whole House supported that initiative and hoped that good would come of it.
Mr. M. Foot: Is that the right hon. Gentleman's reason for not having a debate? The statement on the tests says that they may go ahead in any case, but, if there is a reply next week on the subject, shall we have an opportunity of debating it then, or are we to go away and let the tests go ahead without the House giving its view on the subject?
Mr. Macleod: If a further statement by my right hon. Friend the Prime Minister or by another Minister is appropriate, then, of course, it will be made to the House, and, in the ordinary way, subject

1507
to the discretion of the Chair, questions will follow.
Dame Irene Ward: Will my right hon. Friend find time to discuss the Motion on the pensions of Regular officers, other ranks and Service widows? If the whole House of Commons were to stand as a demonstration of democracy requiring action, would my right hon. Friend arrange time for a debate, or say straight away that these pensions will be increased without further delay in order to terminate the scandalous treatment of these old widows?
[That this House, recognising the hardship suffered by retired officers, pensioned other ranks and widows of the armed services, especially those who are old, whose retired pay and pensions cannot be debated under Pensions (Increase) Bills and bear no relation to current awards, urges Her Majesty's Government immediately to improve the pensions of widows bereaved before 4th November, 1958, and to examine the conditions peculiar to all armed service pensioners, and, as soon as economic circumstances permit, to introduce special provisions to improve their retired pay and pensions]
Mr. Macleod: I have answered this question on several occasions in the House.
Dame Irene Ward: Not to my satisfaction.
Mr. Macleod: Not, I agree, in response to that particular suggestion by my hon. Friend. I regret that all I can say, as I have said before, is that I have faithfully made the representations which I have been asked to make on this matter, and that action must lie with the Ministers concerned.
Mr. Shinwell: Last Thursday, the right hon. Gentleman promised to direct the attention of his right hon. Friend the Home Secretary to the Motion on the Order Paper on the prerogative of mercy. Has he done so, and, if so, with what result?
[That this House calls upon the Secretary of State for the Home Department, within the powers vested in him, to advise the exercise of the prerogative of mercy in respect of those persons associated
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with the Nuclear Disarmament Campaign who were sentenced to terms of imprisonment at the Old Bailey.]
Mr. Macleod: Yes, Sir. As the right hon. Gentleman knows, or as is reported in the Press this morning—this is the information which I have—in the case concerned the court has given leave to appeal to the House of Lords against conviction, I think. Clearly, in that case, it is the view of my right hon. Friend the Home Secretary that it would not be appropriate to discuss it.
Mr. Speir: Has my right hon. Friend's attention been drawn to the Motion on the Order Paper, signed by about 70 hon. Members on both sides of the House, regarding the failure of the Government to find a solution to rural transport problems? Does he appreciate that this type of Motion has appeared on the Order Paper time and again in recent years? If he cannot find time for a debate on the subject next week, will he at least find time to discuss the matter with his right hon. Friend the Minister of Transport, bearing in mind that, if the Government cannot or will not find a solution to the problem, it would be very much better to say so, so that those who live in the country areas may know what the future holds for them?
[That this House, whilst accepting the necessity for the closure of many unremunerative branch lines, nevertheless considers that some form of public transport in the rural areas of Great Britain must be maintained, and therefore urges Her Majesty's Government to decide forthwith to assist the maintenance of adequate rural bus services either by the remission of fuel duty on predominantly rural services or to sustain them by other means.]
Mr. Macleod: I shall certainly discuss my hon. Friend's point with my right hon. Friend the Minister of Transport.
Mr. Grimond: May I put two questions to the right hon. Gentleman? First, as well as the matter of tests, will he bear in mind that, if the conference at Geneva reaches deadlock, there will be a considerable demand for a debate on foreign affairs and on disarmament?
Secondly, can he say when the Finance Bill may be available?
Mr. Macleod: I shall bear in mind the first point which the right hon. Gentleman makes and take it into account, but the Easter Recess is normally the shortest one in the whole year and is almost of traditional length. We shall, of course, bear those matters in mind.
The Finance Bill will. I think, be available next week.
Commander Courtney: Has my right hon. Friend given attention to the Motion signed by several of my hon. Friends and myself on the subject of the hazards of a Channel bridge? In view of the rather immediate importance of the matter, could he find time for a debate on the technical maritime objections to the erection of a Channel bridge?
[That this House considers that the navigation hazards in peace and the naval risks in war attendant upon the proposed erection of a Channel bridge outweigh the possible economic advantages of this method of establishing a cross-Channel link, and calls upon Her Majesty's Government to reject any such proposal on maritime grounds alone.]
Mr. Macleod: No, Sir. I could not undertake to find time for that. Some time ago, my right hon. Friend the Minister of Transport told the House that all aspects—he did, in fact, refer to the question of a bridge—were under consideration. I think that that must cover it.
Mr. Gaitskell: In view of the talks which have taken place between some of Her Majesty's Ministers and the United Nations delegation or committee on Southern Rhodesia recently, can the right hon. Gentleman say whether the Government will be making a statement on these talks? Further, can he confirm that there will be a debate on Central Africa before the Home Secretary visits that part of the world?
Mr. Macleod: The reply to the right hon. Gentleman's second question is "Yes, Sir". There will be a debate before my right hon. Friend visits Central Africa. I should like to discuss the first point with my right hon. Friends concerned.
Mr. Thorpe: Can the right hon. Gentleman say when we are likely to
1510
have a debate on the Farm Price Review? Is he aware that there has already been a debate on this subject in another place and there are many hon. Members on both sides of the House who represent farming interests who would like to put questions to the Minister of Agriculture and learn his views?
Mr. Macleod: Yes, I understand that. I answered this question last week. At this stage, I cannot give any undertaking about time.
Mr. Hayman: Will the Leader of the House, when he is considering the points made by his hon. Friend the Member for Hexham (Mr. Speir), take into account the Amendment tabled by several of my hon. Friends and myself to the Motion to which the hon Member for Hexham referred, namely, in line 1, to leave out from "House" to the end of the Question and to add:
"deplores the indiscriminate closure of branch railway lines, advocates the integration of the nation's transport services and, in particular, urges Her Majesty's Government to take immediate steps to ensure the provision of an adequate rural transport system."
Mr. Macleod: Yes, Sir. I have read both the Motion and the Amendment.
Mr. Short: Will the right hon. Gentleman give an assurance that the House will have an opportunity of debating the two important Boundary Commission Reports on the north-east of England before the Government announce their decisions on them?
Mr. Macleod: I think that that is a long way from the business for next week.

BUSINESS OF THE HOUSE
  SITTINGS OF THE HOUSE
  House to meet on Thursday next at Eleven o'clock; no Questions to be taken after Twelve o'clock; and at Five o'clock Mr. Speaker to adjourn the House without putting any Question.—[Mr. Iain Macleod.]
ADJOURNMENT (EASTER)
House, at its rising on Thursday next, to adjourn till Tuesday, 1st May.—[Mr. Iain Macleod.]
ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee [Progress 11th April].
  [Sir ROBERT GRIMSTON in the Chair]

  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Question again proposed,
    That it is expedient to amend the law with respect to the national debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to make amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description or for all goods to which any of the several rates of tax at present applies.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION
3.41 p.m.
Mr. Douglas Houghton: We are coming to the end of the debate on the Budget Resolutions, but before I make further remarks on the Budget I should like to congratulate the hon. Member for Manchester, Moss Side (Mr. F. Taylor) and my hon. Friend the Member for Pontefract (Mr. Harper) on two excellent maiden speeches. My hon. Friend gave us a racey account of a lock-out at Featherstone in 1893, which, a statue in the Central Lobby tells me, was the year in which Gladstone died. My hon. Friend also referred to the position of old-age pensioners and those on National Assistance, which is a matter very near to the hearts of my right hon. and hon. Friends in this debate.
Mr. J. Grimond: The Liberal Party has many difficulties to put up with, but killing off Mr. Gladstone five years too early is one of those which we ought to dispel.
Mr. Houghton: I am obliged to the right hon. Gentleman. I must have misread the date.
I was saying that the position of retirement pensioners, the widowed, and the sick is something that we must keep very
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much in our minds in debates on taxation. By contrast, the Chancellor's speech on Monday left us all flat and uninspired, including, I think, Members opposite. [HON. MEMBERS: "No."] I noticed no great enthusiasm or inspiration when the right hon. and learned Gentleman sat down. I am sure that Members opposite felt, as we did, that this was not the tonic and bracer the nation needs.
We are still to have the curb on home demand. Restraint on personal incomes is reaffirmed. We are not, it seems, out of the wood, and the Chancellor is still looking for a footpath with the aid of his guiding light. He has now appointed the National Economic Development Council to help him find the way. This Budget has very little to do with the economy of the country and a lot to do with taxation. For that reason, I propose to deal mainly with the fiscal provisions and aspects of the Budget, and I shall also make some reference to what I believe to be the politics of the matter.
To begin with, I strongly deprecate the thoroughly bad practice of making forward promises of substantial tax reliefs and of changes in the tax system. They are equally undesirable whether they are promises of favours to come or threats of wrath to come. The motives behind what the Chancellor did last year, and is doing again this year, are open to question.
Last year, the Finance Act contained reliefs for Surtax payers for this year. He need not have done that last year. He could have done it this year. But twelve months ago he put a charge of over £80 million on his estimated revenue for 1962–63. This was a forward charge on the Revenue, made without regard to the possible conditions in which his promise to Surtax payers would have to be redeemed. This year's Budget cannot, therefore, be fully or properly judged unless we realise that £80 million of tax reliefs to the Surtax payers is just as much part of it as if the Chancellor had announced them along with the tax on toffee last Monday.
Scarcely was the ink dry on last year's Finance Act when the right hon. and learned Gentleman introduced his "little Budget". He then increased indirect taxation on a wide range of things we all need. Increases of prices made it

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harder for pensioners, the widowed, the sick and the disabled. He imposed a strict pay pause on millions of public employees, and urged private employers to do the same. In the public sector, he put the arbitration tribunals in chains.
When we on these benches demanded that he should reconsider and repeal the Surtax concessions, as being entirely out of keeping with the worsened economic situation and the sacrifices that he was asking the country to make, the right hon. and learned Gentleman refused. His excuse was, first, that the Surtax payers would get no relief until the 1st January, 1963, and, secondly, that he badly needed this incentive to extra effort and initiative from Britain's top men to pull our country round.
We have not seen any signs of that. Anyone in touch with trade unions and industrial relations knows well that what he did last April appeared even more outrageous last July, and added greatly to the resentment that the workers had towards the pay pause. So far. I believe that the country has lost more from the ill-will of millions of workers of all kinds than it has gained from the incentives that he has given to their bosses. At any rate, the Surtax reliefs were set out in last year's Budget, but we must now relate them to this year's Budget, to which they truly belong.
What do these reliefs look like now in the context of the present situation? Not a single penny of Surtax relief has yet been given. It will be operative from 1st January next year, and we still have eight months to go. Would the right hon. and learned Gentleman have included these Surtax concessions in his Budget statement last Monday? Could he conceivably have done so? Would he have risked wrecking his incomes policy completely by doing so? Yet this year he must make room for a drop in revenue of over £80 million for Surtax reliefs. Allowing for the increased tax on higher incomes, the net fall in Surtax yield for the coming year will be £36 million—which is just about the amount to be raised by the new tax on sweets and soft drinks. But for the Surtax concessions made in last year's Budget this new tax would not have been necessary. It is just about as simple as that.
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Now I turn to another forward promise, or threat—depending on the point of view from which one looks at it—made last year. This was made not in April, but in July. The Chancellor promised to bring forward measures for the taxation of certain short-term speculative profits and to bring them within the scope of the existing system of taxation. The Committee will remember that in April last year he demurred, but that by July he made a firm promise.
The Chancellor also went as far as to say that there was a prospect of introducing special legislation in advance of the Budget and of the Finance Bill this year. Why did he say this last July? Why did he hold out hope of special legislation to introduce a new tax in advance of the Budget this year? It was because he wanted to smooth the way for the pay pause. He also began to talk planning—so one can see how bad things were. I think that perhaps what dissuaded him from bringing special legislation before the House was that he was afraid of the meal which the House would make of the mouse. Anyhow, we are to get it in the Finance Bill now.
In the meantime, there has been a period of uncertainty, guesswork, gossip and forecasts about this new tax. All that would have been quite unnecessary had the Chancellor held his peace, and, when he decided to do a thing, said that he was going to do it, instead of announcing it six or eight months in advance. The truth about the so-called capital gains tax is that within three months of what was acclaimed as a good Tory Budget last year the Chancellor was looking for an alibi for the Surtax reliefs, and this so-called capital gains tax was it.
This year we have another forward promise—that of Schedule A tax on owner-occupiers which the Chancellor says will go—but whether all at once, or by instalments, he cannot say. At least, he is holding himself free to decide whether to do it in one go or by instalments according to the state of affairs next year. But why has the Chancellor considered it necessary to make a statement now? The reasons he gave are, to my mind, quite unconvincing. Owner-occupiers already know, or could be assured, that there is no statutory or

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automatic link between rating assessments and Schedule A assessments. That was made plain enough in 1956, when most rating assessments went up somewhat, whereas Schedule A assessments stayed where they were.
Clearly, the future of this tax has to be reconsidered before long, though I think that it should still be borne in mind that any change in Schedule A tax or in the level of assessments requires the express and specific sanction of this House. Until the House decides what change there should be, Schedule A goes on as it has and the assessments stay as they are. They cannot be raised without a revaluation. There has not been a revaluation for twenty-five years, and there cannot be one now unless the House says so.
In my view, there is really no need for the Chancellor to make any forward promise except to say that he would not in any case raise the Schedule A assessments to the level of the new rating assessments on owner-occupiers and that, therefore, they need not fear that the new rating assessments would be reflected in the Schedule A values. I do not want to prejudice the merits of this matter at all—we shall be debating them on the Finance Bill this year, or certainly next year—but I think that, however desirable it is to wind up the Schedule A tax, it is undesirable to make a forward promise, a forward commitment and a forward charge upon the Revenue and upon the resources that the Chancellor has at his disposal a year earlier than he need have done. We should see the shape of the Budget for 1963 as a whole and at the time before making promises of this kind.
I notice, in passing, that no forward promises are made to the old-age pensioners. If we ask what the Government are going to do in this respect, they say that it would be very wicked indeed to hold out false hopes, or that it would be improper to announce improvements in advance lest the parlous position of retirement pensioners should lead them to press for an earlier operation of the promise made. They just sit and wait, but very important sections of the taxpayers can be told a year in advance what is coming their way. Of course, the news about Schedule A is welcome to those concerned, and we can rejoice in it
1516
because we have already sought some relief for owner-occupiers but up to now have been voted down. We shall be able to discuss the merits of this matter, as I say, very shortly.
I would, however, remind the Chancellor of the Exchequer that last year he had a thought for tenants, and that, I think, is something which is bound to come into our minds when dealing with redistribution of taxation. The Chancellor, deploying the arguments for and against, said:
"We have 6½million owner-occupiers and 9 million tenants. If this concession were made, there would be a strong demand for a rent allowance. There is quite a strong view, honestly held, that if this concession were made it would be difficult to hold out against such an allowance. For me, in my unpleasant position as controller of the public purse, a rent allowance would mean over £100 million"—
of revenue
"of itself, and we should have to add on the other cost on Schedule A, which would bring the total up to about £150 million. I must keep that sobering consideration in mind."—[OFFICIAL REPORT, 20th June, 1961; Vol. 642, c. 1353.]
Is that no longer a consideration? I am sure that the 9 million tenants will want to know.
The facts are that the demand that we have heard for the abolition of Schedule A tax has become louder and louder as the victims of house purchase have found themselves in the jaws of the property sharks and have had to contend with high interest rates. This is a plea for relief from the burdens of house purchase in present circumstances where land values are exorbitant, building costs are high, mortgages are difficult to get and the rate of interest upon them is 6½ per cent.
House purchasers share hardship with tenants. Tenants are being fleeced as well. In 1957, the Government opened the doors of many homes in Britain to let in the rapacious landlord. Owner-occupiers, I am sure, will not wish to take tax reliefs which mean imposing additional burdens on people less well off than themselves. I think that all of us who are owner-occupiers feel that we enjoy peace of mind which is the envy of the harassed tenant in a decontrolled house on a short lease and in the hands of an exacting landlord.
I now turn to another feature of the Budget which, I think, also calls for

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attention. I refer to economic regulators. Last year, the Chancellor introduced two economic regulators. One proved so unpopular that he has never used it and is now proposing to drop it. The other he did use—that of the surcharge imposing additional taxation over a wide range of goods and services What he proposes now is, first, to allow last year's surcharge regulator to lapse; secondly, to impose additional taxation over much the same field by much the same amount; and then, having wiped the slate clean, to ask for another regulator, the same as last year's, to start all over again.
This is surely an abuse of the whole idea and purpose of these regulators. They were intended to give the Chancellor the economic weapons to combat excessive pressure on home demand to meet an emergency. They were not intended as a sly method of increasing taxation by the back door and for good. What the Chancellor is doing will, I think, bring discredit upon this useful and novel device.
Emergency taxation should be seen to come off, just as clearly as it is seen to go on. It would have been preferable to have continued the regulator for a further period and not get it mixed up with sundry manipulations and extensions of indirect taxation of this kind. But the Chancellor is in a hurry to pave the way to the introduction of a sales tax. He is undoubtedly moving away from the principles and structure of the Purchase Tax which, he complains, distinguishes arbitrarily and probably unjustifiably, in his view, between one class of articles and another.
I am sure that the Chancellor has in mind to move quite definitely towards an extension of the field of indirect taxation and a flattening out of the rates of taxation. Many things now free of tax are likely to come into the field of taxation if the Chancellor's plans are what I think they are. That is a matter which will need very careful consideration. On the whole, we on these benches are against indirect and regressive taxation as a means of raising a disproportionate amount of revenue. We know all the objections to direct taxation and all the arguments about disincentives, but there is nothing which we have which is as fair and as accepted as progressive direct
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taxation as a means of fitting the burden to the shoulders which have to bear it.
We were very pleased to see that the Chancellor has introduced a proposal to give a lift to the limit for age exemptions and for small income relief, but why did not the Chancellor do this last year, when we asked him to do it? We brought to his attention last year the emergency which had arisen for many people because a rise in retirement benefits had pushed them over the limit for age relief with the consequence that the marginal rate of taxation was excessive for the small increase which they had got. We gave him examples in a long debate which took place on this matter in June of last year, but he refused to do anything. We are very glad to see it done now.
I want to pass to business expenses, on which the Chancellor said something both last year and this year. He seems now to be relying on a new form which has been introduced to give him a great deal of additional information which he wants about the nature and the amount of perquisites of various kinds before making up his mind whether further legislation is necessary.
I am sure that many hon. Members opposite, if not on this side of the Committee, have seen this form, and I agree that it is quite searching. It wants to know whether the directors go fishing and shooting on the firm, whether they have their teeth attended to on the firm—I do not know why they are not in the National Health Service—whether they have their house repainted on the firm, whether they get goods on the cheap on the firm.
I have no doubt that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) would cut it out. I know that nothing annoys him more than a discussion on business expenses. I do not know whether he enjoys the benefit of them, or whether he does not think that we should spend time on this matter, but there is no doubt that a good deal of information which this form will bring in will interest the Chancellor.
Probably hon. Members opposite saw a very amusing article recently in the Statist, written by John Allan May. It was called "Getting even with Potter".

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This is the Chancellor's way of trying to get even with Potter. Potter rides to work in the firm's car. He has lunch in the directors' flat. He dances the night away at the Savoy on behalf of the firm and the country, and, finally, he goes home to rest in a house which is already paid for. Watson, on the other hand, has to pay for equivalent amenities out of his own income, so that in the game of life Potter starts with a handicap of plus £1,500 a year. That is the contrast between those who are able to get the advantage of these perquisites and those who are not. I hope that the Chancellor's vigilance on this matter means that he will tackle it later. I hope that the Chancellor will have the courage to tax the perquisites of business firms.
Mr. Edward du Cann: Have the hon. Member's researches led him to read the subsequent article in last week's Statist which indicated that the amusing article from which he has quoted in the earlier week gave a somewhat exaggerated picture?
Mr. Houghton: I have it here, and I shall refer to it in a moment.
What I have constantly said on this question is that a mere tightening up of administration will not be enough. What is needed is a tightening up of the law. Some things have to come out of tax relief all together. Some drastic remedies are suggested in the later edition of the Statist, of 6th April. First, there is an article by George Schwartz, entitled "Blitz on Expense Accounts—Et cetera! Et cetera! "This is largely because the form, after asking detailed questions for four pages, leaves a nice space at the back for et cetera, et cetera.
Here are a few suggestions for drastic remedies. "Wycliffe", writing an article, "The Case against Perquisites ", in this issue, says:
"I would define a special class of 'expense which would never be a permissible charge against profits for income tax or profits tax purposes. The Revenue would be allowed no discretion. I would call this special class of expense 'perquisite' which would mean roughly 'any benefit provided for any individual or class of individuals which could be used or enjoyed by that individual or a member of that class of individuals when not engaged in his office, employment, trade, profession or vocation'."
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He goes on to say that not only would he disallow expenses on these items as a deductible item from the taxable profits of the firm, but he would assess the money value of these perquisites at standard rate of tax upon the beneficiaries. He would get it both ways. He would disallow it from the firms and tax the recipient. I have never gone as far as that.
Mr. Victor Goodhew (St. Albans): No doubt the hon. Member has read the remaining part of that article which says that if this is to happen the rates of Surtax must be adjusted so that members of the public can retain sufficient of their income to be able to pay for these things themselves.
Mr. Houghton: What is the hon. Member talking about? Was he not here when I described the £80 million relief which they will get next January? Was he not here last year when we discussed this matter of Surtax reliefs and some of us said that probably now company directors and other Surtax payers would be able to afford their own meals?
Mr. Goodhew Mr. Goodhew rose—
Mr. Houghton: I do not think that the hon. Member has anything to say which would be useful in assisting me in my remarks.
I have not gone as far as this contributor in saying that we should disallow the expense of the firm and assess the money value on the recipient. What I have said is that this range of expenses should be disallowed as a deduction from taxable profits. This matter is as important as ever. This is where all the visible signs of luxury are, and there is no doubt, in a society with a free Press and a widely-read Press, and with long social, gossipy columns telling the workers how the rich live, about the psychological effect of this display of luxury on the great masses of people who have to go to work in the morning and come home at night for an average wage.
Viscount Hinchingbrooke: Bunk
Mr. Houghton: The noble Lord will keep on revealing what is in his own mind. It is no good his sitting there

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saying "Bunk" when anyone who knows how the ordinary folk think about these matters realises what an important effect they have. If he had to deal with angry trade unionists who feel that there is no reason that they should have a pay pause when the expense racket goes on unabated, he would realise that this is an important matter.
Mr. David Price: Would the hon. Member assist us by telling the Committee in which profession this practice happens most? Some of us who try to earn our livings outside the House have no personal experience of all these perquisites which apparently are to be had. I should like his advice. My experience is that this happens mostly in the field of entertainment, and not in industry or business, but I hope that he can tell us exactly where I should be able to go—or where any other hon. Member could go—to be able to dance all night and sleep all day at the expense of my company.
Mr. Houghton: It would be of interest to ask the Chancellor in due course to give us a summary of the information that he gets on these forms.
I leave these thoughts with the right hon. and learned Gentleman and impress upon him that on this side of the Committee, at all events, we are not disposed to let the matter rest at the mere issue of this form. He is being very slow about this. Last year, he made a reference which hinted that he was prepared to consider legislation if necessary. Now he says that he must see what comes out on the form. Undoubtedly, further delay will occur.
I now pass to tax avoidance. I do not like bringing up these controversial matters on a nice, pleasant afternoon, but they go to the root of many attitudes in the Chancellor's Budget statement and his taxation policy. Now, apparently, we must again do our annual penance for past errors of omission and have some more complicated Clauses on tax avoidance. I see the Chief Secretary to the Treasury in his place. Probably he has almost forgotten how long ago it was when, as Financial Secretary to the Treasury, he said that the days of this breed of dividend strippers were
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over. They are dead, but they will not lie down. They crop up every year and we have had to deal with tax avoidance provisions in every Finance Bill since.
What a miserable story it all is, of boasts of having vanquished dividend stripping, threats to the dividend strippers, warning of retrospective legislation, proposals for retrospective legislation, the withdrawal of proposals for retrospective legislation and Clauses in Finance Bills as long as a wet week. But here we are again.
The Government are sadly to blame on this matter. The Chancellor is acclaimed for his courage in certain matters. Here is a field in which he could take much bolder steps to stop the robber barons getting at the national Exchequer.
Sir Alexander Spearman: I know that the Member is a much-respected authority on these matters. Has he made any estimate of the amount of tax which is evaded by part-time work for which no return is made?
Mr. Houghton: There may be quite a lot, and I deplore it, but one can excuse people for wanting to make a little bit "on the side" when they see so many people making a great deal "on the side". After all, they cannot fiddle about with property transactions. They cannot have a gamble on the Stock Exchange. All they can get is a little earned income that they may omit to put under Pay-As-You-Earn. The whole morale of taxation has been lowered by the malpractices and abuses to which we are constantly drawing attention in the House of Commons. There is no doubt that this will have to be tightened up and an astringent applied to our taxation system before the general tone of taxpayers will be raised.
Now I come to capital gains, which is a disappointment to my right hon. and hon. Friends, although we never believed that the Chancellor would go further than he said he would. Here again, it would have been better to have said nothing and to have brought it in without a lot of tittle-tattle about it for eight months and a good deal of uncertainty and dither about the Chancellor's intentions.

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What surprises me is the manifest injustice of the arbitrary time limits of six months for Stock Exchange profits and three years for land. This is quite contrary to the principle of graduation, for which we provide escalator clauses of different types. A tapering arrangement would be appropriate so that a taxpayer did not go from the full tax to no tax at all between Monday night and Tuesday morning. If the Chancellor is distinguishing between short-term and long-term profits, a complete cut-off at six months and three years, respectively, is obviously open to objection. When speculation ends and investment begins is scarcely a matter to be decided by drawing a single line. Speculation can be recognised in its obvious form, but what is called a "lock-up" is speculation, too.
We on these benches see no reason to distinguish in principle between long-term and short-term capital gains. Nor, it seems, did the Board of Inland Revenue, in its lengthy and interesting paper to the Radcliffe Commission a few years ago. This does not mean that we should tax short-term and long-term capital gains at the same rates irrespective of the length of period of accrual. Just as speculation tapers off into investment with the passage of time, so the incidence of the tax could take account of that. The Chancellor's proposals, however, are quite inadequate in this respect since they distinguish sharply between short term and long term and make a very big difference taxwise between the two.
It seems to me that there is nothing here to reassure the public that those adding to their wealth by capital transactions or profitable investment will pay a proper share of taxation like those who are adding to their income, although not their wealth, by work, skill, initiative and enterprise. What has happened, for example, to the hope held out by the Home Secretary, when Chancellor of the Exchequer, years ago that the earned income relief of two-ninths could be raised some time to one-quarter? These are matters which are forgotten. We could be getting from capital gains enough revenue to give reliefs of that kind.
What the public want to know is whether the large and many small operators in the field of take-over bids and
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capital transactions are paying tax on what are plainly the profits of their trade. I deplore the secrecy that overhangs this whole field of taxation. The public has not the faintest idea, and not even experts have any real idea, of who pays and who does not in this field of capital transactions and speculative activities of one kind or another.
So long as the Chancellor is reticent about these matters, the country remains in ignorance of what is going on. Fortunes are being made; there is no secret about that. How can we blame people for regarding Income Tax and Surtax "fiddles" as fair game when there is such an enormous tax-free reward to come from activities of the kind that we are describing?
The Evening Standard of 10th April said:
"The new opportunities. … As one door shuts, another opens. Accountants, who in recent years have made a comfortable living from the entirely legitimate business of tax avoidance "—
that is what we have come to, "the entirely legitimate business of tax avoidance "—
"were today studying the Budget to find the profitable loopholes in the Chancellor's latest proposals.…The speculative gains tax, not surprisingly, is the centre of attention and here accountants are delighted with the apparent impossibility of keeping its administration watertight."
Is the hon. Member for Brighouse and Spenborough (Mr. Shaw) delighted, or does he contract out of this delight?
Mr. John Diamond: Would my hon. Friend allow me to interrupt him, as he has talked in his fourth successive speech on these occasions about accountants? Would he accept it from me that all accountants do not share this view, and that they take the view that this is such a do-it-yourself avoidance device that no accountant at all need be consulted?
Mr. Houghton: I am very much Obliged to my hon. Friend. I have immediate confirmation of what he has just said, because this writer says:
"In a sense, of course, the six months' limit makes it a purely voluntary tax. To avoid it, you only need wait six months and a day before selling."
I agree that one need not pay five guineas to an accountant to be told about this so-called capital gains tax.

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This writer goes on to say:
"But the eager speculator will probably want even more freedom of movement. Two courses which are not strictly legal, but which, because of the great difficulty of checking on them, will undoubtely be used are to get a friend with a lower tax rate to operate for you in future or to work through a bank in the Channel Islands."
Smart people are beginning to make fun of the Chancellor's proposals already, and a little later they will make business out of them, but we shall be debating all this on the Finance Bill and we shall want to get very much closer to how the thing is to work, what loopholes there are likely to be, and whether this will be a tax or a farce, and whether the Chancellor can find any justification for proceeding with a manifestly inadequate tax reform.
To conclude, we do not really expect that this will be the Chancellor's last Budget. It is probably next to the last. Already, the forecasters are predicting a bumper Budget next year. They, of course, know the form. They know, just as we all do, that Conservative Budgets are just as much part of their political strategy as they always have been. The Chancellor, however, is feeling somewhat virtuous just now, and he will probably deny this, because in a recent television interview, on Monday of this week, he was asked some questions by Mr. Robin Day, and one referred to the suggestion that the Chancellor had made some promises in this Budget which could be turned to electoral advantage. The right hon. and learned Gentleman said:
"I think there is one very sound rule for Chancellors of the Exchequer. They should not pay any attention to by-elections or to the morale of political parties. They should do what they think is right, and that is what I have done."
The Chancellor would have us believe that his strength is as the strength of ten because his heart is pure. Still he cannot escape from the fact that he is part of the Tory conspiracy to get power and keep it.
How simple does the Chancellor think people are? Let us look at the facts and the coincidences: April, 1955, 6d. off the Income Tax; May, 1955, General Election; October, 1955, a second Budget to claw back the April tax reliefs, but not to put the 6d. back on the Income Tax
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—no, to put extra taxes on pots and pans.
Viscount Hinchingbrooke: Is that all?
Mr. Houghton: No, it is not all. The noble Lord knows that this is only the beginning of the indictment.
April, 1959, 9d. off the Income Tax; October, 1959, General Election. Summer of 1960, crisis, emergency, balance of payments, sterling; so we had the credit squeeze, hire-purchase restrictions, and so forth to save the £—and the then Chancellor of the Exchequer and two Treasury Ministers resigned because the Government would not save it hard enough.
Mr. Græme Finlay (Vice-Chamberlain of Her Majesty's Household): Which year?
Mr. Houghton: April—[HON. MEMBERS: "Which year?"] The crisis lasted twelve months and they resigned at the end of it. [HON. MEMBERS: "Who resigned?"] April—[HON. MEMBERS: "Who resigned?"] Is anyone denying that the right hon. Gentleman the Minister of Aviation did resign? [HON. MEMBERS: "1958."] Well, there have been so many crises that I have not kept track of them. In April, 1961, we had an £80 million tax relief for about 500,000 people, people with money to give away and they will get the benefit on 1st January, 1963.
We can see it coming now, 1963: the tide will have turned and the sun will be rising over the Wirral. Tory freedom will be working again even though the Chancellor has to turn the handle. The National Economic Development Council will be trundled around as the Government's white hope in the field of international competition. We shall hear that Conservative planning works. We shall be told that it works despite the fact that the National Economic Development Council is composed mainly of people on both sides of industry whose advice the Chancellor has persistently ignored for the past ten years.
Now, apparently, the Chancellor is ready to listen to them, unless he is to do most of the talking. But what may appear to be a real thing to some viewers is merely the studio set of a party political broadcast on behalf of

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the Conservative Party. It is a make-believe, and the country is tired of it. The Government have become a bore, a deadbeat. They are yawning their way through, and the by-elections show that they are shuffling along on borrowed time. A man of the Chancellor's integrity ought to realise that the hour has now come to hand in his checks, and go.
4.27 p.m.
The Economic Secretary to the Treasury (Mr. Anthony Barber): The Committee has now heard seven speeches from the two Front Benches, and there are to be two more this evening. I have not sat on the Treasury Bench so long as to be oblivious of what is in the minds of many hon. Member's on the back benches on both sides of the Committee who are still hopeful of catching the eye of the Chair, so I shall do my best to be relatively short.
We have just listened to a typical, rollicking speech of the hon. Gentleman the Member for Sowerby (Mr. Houghton), as always, agreeable, good humoured, and hard hitting. I shall do my best, in the course of what I have to say, to answer some of the points he has made. I think that it would be convenient if I dealt at the outset with two questions which he raised.
The hon. Gentleman deprecated the giving of advance notice of changes in taxation. I am sure that, as a general rule, the hon. Gentleman is right, but there have, of course, been exceptions before, which were thought to be justifiable. I mention only one, and that was in, I think, the autumn of 1945, when the late Lord Dalton announced what the rates of Income Tax and Surtax were to be for the following financial year.
The hon. Gentleman talked a good deal about Surtax. Well, we have been over this ground before, but on the question whether or not my right hon. and learned Friend was justified in announcing the Surtax changes when he did I would only point out to the hon. Gentleman, what he must know from his own experience, that the Surtax concessions related to statutory income for the year 1961–62, that is to say, to wages and salaries in the year 1961–62 and earlier Schedule D earned income. It was, I submit, therefore quite proper
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to deal with the changes at the beginning of that financial year. The hon. Member, when talking about the burden on the Exchequer this year as a result of the changes in Surtax last year, omitted, somewhat significantly, to refer to the increase in Profits Tax.
The second point that the hon. Member raised was the way in which my right hon. and learned Friend has dealt with the Customs and Excise surcharge regulator. He complained that my right hon. and learned Friend had allowed the surcharge to lapse and had now consolidated part of it. He thought that this was an abuse and would bring discredit on the regulator. It was, quite genuinely, precisely because my right hon. and learned Friend did not want to abuse the regulator that he proceeded as he has done. [Laughter.] Hon. and right hon. Members opposite may laugh, but how much easier it would have been for him to let the surcharge run on to the end of August and then, if he thought it necessary in the circumstances, then to apply the regulator again under new powers. But my right hon. and learned Friend considered that the proper way to proceed was to bring the whole matter before the Committee at this stage.
To turn to Schedule A, I will deal with the one point which was seriously raised by the hon. Member, and that is whether my right hon. and learned Friend is right to make the announcement at this time. The hon. Member is perfectly correct, in law, in saying that there is no statutory link between valuation for rating and valuation for Schedule A, but we should face the realities. It is now known that the new rating values will be between three and four times the existing rating values, and if no announcement of the Government's intention had been made there would have been a fear on the part of owner-occupiers that the new rating values would be adopted as the basis of future Schedule A assessments. This would have certainly led to more appeals against rating assessments than are to be expected on rating grounds alone. Therefore, I think that once my right hon. and learned Friend had decided in principle what he proposed to do about Schedule A he was absolutely right to inform the Committee and the country.

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I think that the hon. Member for Sowerby would agree that a constructive appraisal of any Budget must proceed along two lines.
Mr. G. R. Mitchison: Would the hon. Gentleman comment on what his right hon. and learned Friend said some time ago and what my hon. Friend the Member for Sowerby (Mr. Houghton) said today about rent allowances? What are the Government's views on that subject?
Mr. Barber: No, Sir. My right hon. and learned Friend has already said that this is a matter for legislation next year. He has explained what he proposes to do in principle and that is a matter of considerable significance for any owner-occupier who is considering appealing against the new rating valuations. I think, therefore, that it would be most unwise at this stage, before this matter can be considered in detail in the context of legislation, for me to deal with that at all and I do not propose to do so.
Mr. Mitchison: Schedule A allowances are in exactly the same position. They must be the subject of legislation. They have been mentioned and a promise, or quasi-promise. has been given. What about rent allowances?
Mr. Barber: The hon. and learned Member asks, "What about rent allowances?" I have already explained that the question of valuation for Schedule A purposes will have to be considered for legislation next year, and at this stage I do not propose to go any further than my right hon. and learned Friend has gone.
As I have said, I am sure that the hon. Member for Sowerby will agree that a constructive appraisal of any Budget must proceed along two lines. First, there is the aspect dealt with in the last speech made in the debate yesterday by my hon. Friend the Member for Eastleigh (Mr. D. Price), that is to say, consideration of the general effect of the proposals on the economy, including, of course, the likely consequences for the balance of payments. Secondly, there is consideration individually of the particular proposals which in the aggregate make up the Budget. I want to proceed in this way.
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First, on the general effect of my right hon. and learned Friend's proposals, I do not want to speak at length, because my hon. Friend the Financial Secretary to the Treasury yesterday dealt fairly fully with the economic background to the Budget. We start from the assumption that in the coming year there will be a substantial increase in home demand, that total investment will rise and that personal spending will rise. Despite these facts, which were made known by my right hon. and learned Friend in his Budget speech, quite a number of hon. Members opposite, in their speeches, have taken the view that there are compelling reasons for a Budget designed to stimulate an even greater increase in home demand than is in any event expected.
This argument is based on the fact, which the right hon. Member for Batter-sea, North (Mr. Jay) pointed out yesterday, that in some industries there is at present a certain amount of unused capacity. I agree that that is a fact, but I do not think that we should exaggerate the extent of this reserve of productive power. The overall level of unemployment is only 2 per cent., and it is the supply of labour, particularly of skilled labour, that is the limiting factor in our productive resources.
My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) yesterday gave the Committee some telling facts about the reasons for the economic growth of Germany and France, and he pointed, in particular, to the considerable reservoir of agricultural labour in those two countries. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) also referred to economic growth in Common Market countries. Perhaps I can refer briefly to a third E.E.C. country—Italy. Four years ago, in 1958, the level of unemployment there was 9 per cent. By last year the Italians had reduced it to 6½ per cent., and the result has been that their economic growth has been faster over those years than has ours. Indeed, it would have been quite astonishing if it had been otherwise.
I ask the Committee to think what an increase in production we could have had in this country if we had moved from a level of unemployment of, say, 4 per cent. or 5 per cent. to the present 2 per cent. It is one of our achievements,

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under both Labour and Conservative Governments ever since the end of the war, that, despite all our difficulties, the overall level of unemployment has been kept so low. I have said already that in the coming year we expect a substantial increase in home demand. To press for an even greater increase than is expected seems to be dangerous in the extreme, because it ignores one essential factor—the balance of payments.
All that has happened since the end of the war surely proves that the higher the demand at home becomes the greater the increase in imports. And in a free enterprise economy, a higher level of home demand in relation to the resources available is bound to dull the incentive to export—to put it no higher than that.
Hon. Members opposite, particularly on the Front Bench, quite rightly urge the Government to plan ahead. But for a country like ours one of the essential factors of forward planning is the trend in world trade, and it is basic to the purpose of this Budget that the prospects for world trade are good and that, in consequence, in the next year or so there is an opportunity for a substantial increase in British exports.
If this opportunity is grasped—and that is a matter primarily for industry and not for the Government—the increase in overseas trade, combined with the expected increase in home demand, will put quite as much pressure on our productive resources as the economy can stand, consistently with our remaining competitive. In these circumstances, it would have been the height of irresponsibility not to ensure that there was room in the economy for British industry to respond to that opportunity.
All of us, on both sides of the Committee, want economic growth. But I must say that, listening to the speeches which have come from the Opposition during the last three days, it seems that their policy is to take a gamble on exports. I know that, if necessary, the Opposition are prepared to attempt to keep the balance of payments light by imposing import controls, a policy to which we on this side of the Committee do not subscribe. It is worth while examining where this Opposition policy would get us.
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Ignore for a moment the withdrawal from millions of consumers of the increased choice of imported goods which they have learned to enjoy over the last few prosperous years—I might say, in passing, in view of the sotto voce remark by the hon. Member for Cardiff, South-East (Mr. Callaghan), that it is perfectly clear from what he has said that the Labour Party is prepared to sacrifice that—ignore for the moment the far more serious consequence of the United Kingdom imposing import controls, namely, that some of the countries to which we want to sell our exports would in all probability retaliate, ignore for the moment our international obligations; even assuming that we were prepared to ignore all these consequences, would the policy of import controls advocated by hon. Members opposite really help?
Only a few weeks ago the hon. Member for Cardiff, South-East with one breath declared
"… I cannot but wonder at the infirmity of a Government who permit the unregulated importation of consumer goods and machinery…"—[OFFICIAL REPORT, 19th March, 1962: Vol. 656, c. 41.]
and with the next breath he went on to say that it is the policy of the Labour Party to promote demand.
But if one restricts imports artificially by import controls, one diverts demand to goods produced in this country, and if, at the same time, one is promoting total demand, as the hon. Gentleman suggested, the inevitable consequence will be that there will be less capacity available for export. The policy of the Government is to improve the balance of payments not by the negative method of restricting other countries' trade, but positively by making possible an increase in exports from this country.
The hon. Member for Cardiff, South-East, who leads for the Opposition on these matters, has again advocated a tax incentive scheme for exporters. That is a point of view, but I wish that he would tell us what he has in mind. In his television broadcast on Tuesday he said that he had sent the Chancellor a scheme. That went out to millions of viewers. To say the least, I thought that it was a little disingenuous of the hon. Member not to mention also the fact that I had replied to him in a letter, long before his broadcast, that that

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scheme, the only one he has submitted to me, was quite obviously contrary to our international obligations.
Does the hon. Member want us to break our international obligations? I am still hoping that perhaps he will have another shot. [HON. MEMBERS: "Answer."] After all, the rules laid down by the international conventions are quite simple and straightforward. There is certainly nothing in them which would make it particularly difficult for the hon. Member to formulate a scheme in principle. But he really ought to tell the Committee whether he wants us to break the international rules. Or does he perhaps want us to switch to a new tax, which we might well have within the rules, perhaps a tax such as the German turnover tax, which applies to a vast range of goods which are not now subject to indirect taxation in this country—to raw materials, machinery, and food, for instance? I do not know whether that is what the hon. Gentleman wants—I assume that it is not—but I would say in all sincerity to him that I think that the Committee is entitled to know what the hon. Genleman has in mind. I hope that, in view of my invitation, he will, before too long, tell us.
Last year the United Kingdom was faced with very real difficulties, but it cannot seriously be argued that the policies which have been pursued by my right hon. and learned Friend are not improving the balance of payments. During last year, compared with 1960, exports rose by £156 million, and the deficit in invisible trade was reduced by no less than £256 million. During the last six months of last year the deficit in visible trade was reduced to only £23 million compared with £245 million in the same period of 1960.
Moreover, I would remind the Committee that as a result of the measures which my right hon. and learned Friend introduced on 25th July last sterling has been strong on the exchanges and we have been able to repay £225 million of our International Monetary Fund drawing of last August. It is perfectly true that this repayment has been made possible by an inflow of funds, but it is important to bear in mind that much of this inflow has been identified as a considerable increase in portfolio investment—in other words, in investment in
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United Kingdom stocks and shares—in the second half of last year, and that is a sure sign of confidence in the policies which my right hon. and learned Friend is pursuing.
It cannot, of course, be satisfactory to rely on a continued capital inflow of this kind to balance our accounts. The only balance of payments which can be considered really satisfactory is one which shows a substantial surplus on our current account. It is because of this that one of the prime objectives of the Budget is to ensure that capacity is available for additional exports and that our costs remain competitive so that at least British industry has the chance to take full advantage of the export opportunities which we can expect.
It is against this improving position of the balance of payments in recent months and the need for further continued improvement that we have to consider the Budget proposals, and also, I might add, in the light of a Bank Rate which has twice been reduced in recent weeks. The significance of those two Bank Rate reductions so far as the Budget is concerned was, I think, misunderstood in some quarters. Like the hon. Member for Sowerby, I also read the Statist, and I thought that the true relevance of those two reductions was well expressed by the Statist shortly before the Budget. I should like to read this short passage, because I think that it puts it very well:
"There is no logic and only the flimsiest evidence of timing that would lead one to suppose that the reduction in Bank Rate to 5 per cent. promises comparable easement in fiscal policy on April 9.
Logic as well as the harsh facts of the situation should lead to precisely the contrary conclusion. The modest easing of credit restriction, of which the reduction in Bank Rate is the symbol, should make it all the more necessary to restrain domestic consumer demand through fiscal policy ".
I think that that is right. As the Committee knows, my right hon. and learned Friend has, in fact, proposed no change in the general burden of taxation.
I now want to turn for a few minutes to two particular proposals—the tax on short-term gains and the changes in Purchase Tax. The former has already been explained by my right hon. and learned Friend at considerable length,

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and the details will shortly appear in the Finance Bill.
The short-term gains tax was referred to by the hon. Member for Pontefract (Mr. Harper) in his maiden speech yesterday. I heard his speech, and I think that other hon. Members who did so will agree with me that it could hardly be described as non-controversial on this matter. It was, however, certainly one of the most amusing maiden speeches that we have heard for some time. I am particularly pleased to have the opportunity of congratulating the hon. Member, because I am the hon. Member for Doncaster and we are, therefore, close neighbours. The hon. Gentleman mentioned the occasion in 1893 when the whole of the Pontefract police force had gone to Doncaster races. I am bound to admit that until he spoke I had not realised that even in those days Pontefract races were so inferior to those of Doncaster.
To return to the tax on short-term gains, I want to refer to only one aspect. The right hon. Member for Battersea, North (Mr. Jay) derided the tax because my right hon. and learned Friend has given no estimate of the yield. I should have thought that with his own experience at the Treasury the right hon. Gentleman would have been the first person to realise that in the very nature of things it is quite impossible to make an estimate in the case of an extension of the tax field of this kind.
Even if the right hon. Gentleman and his hon. Friends were right in thinking that the yield would be small, I would not accept that as a conclusive argument against the proposal, because there is another consideration which is of great importance in matters of taxation. Again and again the Committee has approved provisions in Finance Acts not primarily because of the amount of revenue involved, but to ensure that the incidence of taxation is fair; for instance, the so-called "golden handshake" legislation introduced by Lord Amory.
Many of the transactions which are covered by my right hon. and learned Friend's new proposals are socially unobjectionable and, indeed, some are economically desirable. But it does not follow that the profit to which they give rise is not a proper subject of taxation.
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After all, the incomes of ordinary employees, the profits of the trader or professional man, are subject to taxation, despite the fact that they contribute to the well-being of the economy.
This extension of the field of taxation to short-term gains is not concerned with the morality of particular transactions, as the right hon. Member for Battersea, North seemed to think yesterday. Its justification lies in the fact that the transactions which it embraces give rise to profits which are just as properly the subject of taxation as are the activities of men and women who are already liable to tax.
The right hon. Member for Battersea, North said that we were proceeding on the basis that if a transaction were completed in six months or less it was immoral, while if it took longer than six months it was moral. That is complete nonsense. The right hon. Gentleman the Leader of the Opposition and the hon. Member for Sowerby also thought that there was something odd about a distinction between six months and less and a period of six months and a day. One would think from that type of criticism that the idea of a time test was something which had simply been conjured up by my right hon. and learned Friend. But there is a time test in many other European countries. In West Germany, for instance, profits from speculative transactions are taxed as ordinary income and the test for real property is two years or less and for other assets the test is six months or less.
Mr. Douglas Jay: If the hon. Gentleman is arguing that a capital gain can reasonably be taxed as income, why does he exempt gains beyond the time limit?
Mr. Barber: My right hon. and learned Friend has already explained this. He said that it was his view that to go further than he has, in other words to introduce a conventional capital gains tax—and I know all the debating points about what is done in the United States and so on—would operate as a disincentive to investment and so would certainly not be conducive to growth.
Mr. Jay Mr. Jay indicated dissent.
Mr. Barber: The right hon. Gentleman may dissent and I know that he

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takes a different view, but he asked a question and that is the answer.
I come now to the changes in Purchase Tax. The Committee has often discussed the relative merits of Purchase Tax and a sales tax, which was also mentioned this afternoon. I do not propose to go over that ground again. But many of those who prefer the system of Purchase Tax have made two criticisms in the last few years—first, that the tax is too discriminatory in that the range of rates is too wide, and, secondly, that it is too discriminatory in that it is not sufficiently broadly based.
This year my right hon. and learned Friend has gone some way towards meeting both those criticisms. To listen to the speeches from the Opposition one would think that there was something positively immoral about reducing the top rate from 55 to 45 per cent. But we have moved on from the dreary days of Socialism when a motor car, or radio, or T.V. set, or even cosmetics, was something beyond the range of ordinary people. This reduction of Purchase Tax on goods which in 1962 are no longer the prerogative of the rich will command widespread support. After all, there are now 5 million privately owned motor cars and more than 11 million television sets, with some 40 million viewers.
Mr. A, E. Oram Mr. A, E. Oram (East Ham, South) The hon. Gentleman says that we have moved on from those dreary days, but have we now moved into the days when the tax on essentials like furniture and clothing should be doubled?
Mr. Barber: If the hon. Member would like me to do so, I will describe the sort of situation which existed when the Conservative Government took over and when the top rate was 100 per cent. AH those goods which were within the tax at 100 per cent. are now with the exception of cosmetics taxed at 25 per cent. There are many facts which I could give to the hon. Gentleman, but he can look them up for himself.
Mr. Jay: Should not the hon. Gentleman also add that at that time the great bulk of clothing, boots, shoes and furniture, which he is taxing at 10 per cent., were tax-free?
Mr. Barber: That is so, but since those days—I do not want to make
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purely party political points on these matters but it seems that the right hon. Gentleman has been provoked—the standard of living has risen considerably. The increase in the cost of a suit, for example, as a result of the action taken by my right and learned Friend in this Budget cannot be said in 1962 to be a matter of real hardship.
Yesterday evening my right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan) referred to Purchase Tax simplification and regretted that the Chancellor had brought in the tax on confectionery, ice-cream and soft drinks at a new rate. The important considerations in the introduction of a new rate of Purchase Tax are two-fold. First, what really matters is the discrimination, that is to say, the gap, between the lowest rate of tax and the top rate. As I have said, many people have criticised the great disparity between the extreme rates of Purchase Tax, and the new rate of 15 per cent. does nothing to detract from the advantage of my right hon. and learned Friend's reform in that respect.
The second aspect which is important from the point of view of the structure of the tax is whether the introduction of a new rate is likely to produce anomalies. For example, to take certain articles out of the 25 per cent. rate and put them into the new 15 per cent. rate would create anomalies and distortion of trade. But there can be no question of anomalies arising from taxing confectionery, ice-cream and soft drinks at the new rate. Nor will the fact that the rate is new involve any additional administrative work. Given that my right hon. and learned Friend considered that 25 per cent. was too high and 10 per cent. was too low, I hope that the Committee will agree that in this instance it was sensible to create a new rate.
To turn to the merits of the tax; to tax confectionery, ice-cream and soft drinks at the modest rate of 15 per cent. is not unreasonable. Hon. Members opposite have spoken over and over again about children's pocket money, but what does the tax mean in real terms? It means that a child who spends a shilling a week on sweets, or pop, or ice-cream, will in future get only as much as he previously got for 10½d., or will have to have his pocket money increased

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by 1½d. a week. In the light of the substantial increase in real earnings over the years, this is not an unreasonable extension of Purchase Tax. A tax of 15 per cent. on the wholesale value is equivalent to about 1½d. in the shilling on the retail price. The amount which people spend on ice-cream and pop and lollipops and so on varies from person to person, and from family to family, but there is available a good deal of information about the pattern of spending by families at various income levels.
Mr. Arthur Lewis: Strange as it may seem, I have no vested interest to declare, because I do not touch these things. The hon. Gentleman dodges the question. Every time the Chancellor of the Exchequer puts on these increases, which come almost every week, he says that it is only a small increase. The rent increases were "only a little"; increases in National Insurance contributions are "only a little", increases in Purchase Tax are "only a little"; increases in lollipops are "only a little". Does he not realise that almost every month there is a price rise for which the Government are directly responsible and that every time the Government say that the increase is only a shilling or sixpence or two shillings? Do they not appreciate that these small increases total up to a good deal, particularly for old-age pensioners, for it is not only kiddies who spend money on sweets and, if they can afford it, on ice-cream?
Mr. Barber: I was not going to weary the Committee with these figures, but the fact is that in the last ten years the retirement pension for a single person in real terms has gone up by 37 per cent.—[HON. MEMBERS: "No."]—It is no good hon. Gentlemen shaking their heads. That is a fact, and the pension for a married couple has gone up by 32 per cent. According to social surveys, the average expenditure by pensioners is Is. 3d. a week on these things, and a typical family with a total family income—that is not one man's income—of between £14 and £20 a week spends about 7s. on these three items, so the tax on this will not be more than about 10½d.
Mr. William Warbey: The hon. Gentleman said that the increase
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on sweets and soft drinks amounted to 15 per cent. on the wholesale price. Does he know that the price being charged by manufacturers and retailers, who are adding to their profits at the same time as the 15 per cent. of tax is being imposed, is resulting in a total increase in the wholesale price of 50 per cent. and not 15 per cent?
Mr. Barber: The increase is 15 per cent. of the wholesale price.
I was a little suprised that the Leader of the Liberal Party, in what was otherwise a rather good, moderate Socialist speech, apparently thought it odd to impose tax on these things. He said:
… in the year when everybody is trying to stop people smoking, especially young people, the Government elect to put a tax on sweets."—[OFFICIAL REPORT, 10th April, 1962; Vol. 657, c. 1196.]
I thought that it was a little odd to say that, because only last Saturday the Liberal News, under banner headlines
"How Liberals would plan a Budget"
took the contrary view and advocated a tax on sweets as a hedge against a fall in tobacco sales. But perhaps we should be well advised to rely on the right hon. Gentleman, because the whole of this article was based on the assumption that the present standard rate of Income Tax was 6s. in the £.
So far I have spoken of the Budget proposals, but they cannot be considered in isolation from the rest of economic policy, in particular, as my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) pointed out, from the incomes policy which the Government have set out in the recent White Paper.
The right hon. Member for Battersea, North yesterday seemed to resent my hon. Friend the Financial Secretary to the Treasury dealing with this matter, but there is no point in a Budget designed to leave room in the economy for the production of goods for export if, because of increased costs, the price of the goods is too high for the overseas customer. That the pay pause has worked to the advantage of the economy no one can really deny. Costs have not risen as much as they otherwise would, and so far as the greater part of manufacturing industry is concerned our export prices are now competitive, but we must keep them so.

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Hon. Gentlemen opposite have frequently referred in these debates to the record of West Germany. In the light of the criticism which has been directed against the incomes policy of my right hon. and learned Friend, it is not without significance that the Federal German Minister of Economics declared the other day that because of increased wage costs and shorter hours, there had been
"an unmistakable decline in the international competitiveness of the Federal Republic."
We in the United Kingdom can take some satisfaction from the fact that due to a policy which may have been unpopular our international competitiveness has improved. But the object of the Government's policy for incomes is not merely to ensure that we should remain competitive. It is also, in the long run, the fairest policy.
Hon. Members know that an indiscriminate scramble for wage increases is the surest way of hurting the very people whom the Labour movement has always said it cares for most, the poorer sections of the community living on small fixed incomes. The truth is that hon. Gentlemen opposite genuinely want to help this section of the community just as much as we do, but they lack the courage to support a policy which will help those people, and the reason is that in so doing they are afraid that they will incur the displeasure of other sections of society. The truth is that they are suffering from political schizophrenia.
To listen to some hon. Gentlemen opposite one would think that the standard of living in this country was no longer rising. Let me remind the Committee of one undeniable fact. Over the last ten years, for every Is. that prices have risen, earnings have risen by no less than 2s. 3d. Last year, even at constant prices, consumers' expenditure went up by more than £200 million. Yet, despite this increase, personal savings were up by £478 million, and last year 10·7 per cent of personal disposable incomes, that is after deducting tax and contributions, was saved, compared with less than 2 per cent. ten years ago.
Those are the facts of a prosperous society. But prosperity, or affluence if one likes, will not continue unless the foundations of our economy are sound.
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It would have been all too easy for my right hon. and learned Friend to trim his sails to the passing winds of Orpington, to curry favour with those who think only of the present. Instead. he has chosen to present a Budget which time will show to have been both sound and courageous.
5.8 p.m.
Mr. Arthur Holt: I am delighted to hear that the Economic Secretary reads The Liberal News. I hope that he will continue to do so, not only at Budget time but throughout the year. Occasionally he may find some statements in it which do not correspond with what other Liberals may say in the country, but he should not deduce too much from this, which is what many Tories apparently appear to be delighted to do at the moment.
The Tory Party, of all the parties represented in the Committee, is the one most able to be challenged on consistency of policy. I think that we should all be interested to hear the hon. Gentleman's view of what the Chancellor of the Exchequer called speculators' capital gain. The view that the Chancellor of the Exchequer put out about this on Monday was that as it was pretty widely felt to be inequitable that those who supplemented their incomes by speculative gains could escape tax on these gains, and therefore it was necessary to design a tax system to produce a feeling of broad equity of treatment between taxpayers.
The right hon. and learned Gentleman was quite clear that he was not introducing a capital gains tax. On the other hand, as I understood him, the Economic Secretary indicated that some people, perhaps many people, who were indulging in perfectly proper and legitimate transactions would be caught by this tax, and he went on to defend the decision to impose it.
I think that what it adds up to is that this tax is a beginning. It will have to be developed. We shall have to see how it works. But if the idea is to produce greater equity between those who are taxed on earnings and those who accumulate a lot of wealth from capital gains, then I do not think that the tax can be left in this form. I should have

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thought that hon. Members on both sides of the Committee agree that it is most important to create equity between those people who make their money purely out of earnings and those who are in the fortunate position of being able to accumulate greater wealth merely by the possession of capital.
The fact that conditions are so much weighted in favour of those with capital is one of the obstacles to our efforts to prevent further inflation. Some of those who possess capital also have considerable influence in our affairs, and they have in their hands a permanent hedge against inflation which is not possessed by the ordinary wage earner. If that hedge were removed or reduced they would be just as interested in preventing inflation as are pensioners or wage earners. I welcome the introduction of this tax. I shall be interested to see how it works out in practice, and to consider what development or alteration there should be in it as we go along. If it is extended in the future it will probably have to take in a lower rate of tax than the Chancellor intends to impose at the moment.
One aspect of the problem which is largely responsible for some of the troubles of the Government is the competitive climate in which they wish British industry to act. There was a period in the middle 1950s when it seemed that a certain element in the party opposite was interested in trying to see that British industry operated in a fair but thoroughly competitive climate. The Restrictive Trade Practices Act was passed in 1956. There were criticisms of it, but it started a new era, and when complaints were made that it was not fierce or vigorous enough the Government said. "Let us see how it works out. We can strengthen it as we go along". Since then the initial urge on the part of the Government to bring about a more effective competitive climate seems to have died.
The President of the Board of Trade now has on his plate a number of problems concerning competition, but he has done very little about them. A vigorous competitive climate is one of the prerequisites for the success or development of a policy designed to promote economic growth, a wages policy, and one that
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will help to increase our exports. Why are the Government so reluctant to make even the smallest unilateral reduction in tariffs? From time to time Government spokesmen talk about the desirability of such a move and the good effect it would have on British industry, but nothing is done about it. There is no difficulty about this, even in the present situation vis-à-vis the negotiations for the Common Market. Generally speaking, our tariff level is higher than the ultimate Common Market tariff level, and there would be no difficulty in making a number of reductions in our tariffs, which we should not have to increase again if we entered the Common Market.
It must be remembered that those firms which are carrying on an export trade are bearing the burden of other firms which are in business only because they are protected. If we want to help firms engaged in the export business we must remove from their backs the other inefficient firms from whom they may have to buy products or services. This is particularly the case in relation to the Lancashire textile industry. Very often that industry has no tariff protection against its overseas competitors, but it has to buy many of its services, and some of its materials and machinery, from other firms which do have tariff protection.
Are the Government really tough enough about monopolies or semi-monopolies? On 10th April, when the Minister of State, Board of Trade, was asked to remove or reduce the tariff protection in respect of the man-made fibres industry, he said, in answer to a supplementary question from me:
"… we have to face the fact that in this country the law is that a monopoly is objectionable only when it abuses its position."—[OFFICUL REPORT, 10th April, 1962; Vol. 657. c. 1125.]
That may well be the case, but if it is we ought to turn the law the other way round, and state that a monopoly is prima facie objectionable unless it can show that it is not.
This is of special relevance to the textile trade. The man-made fibres industry, which is now providing an increasing proportion of the raw material for what is still called the cotton textile industry, has the benefit of high tariff protection. But it provides one of the

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raw materials of the cotton textile industry, and it was never our policy, even during the last generation, which was a protectionist era, to protect raw materials. This is an added reason why the Board of Trade should take some action to remove this tariff, whether it be on the ground that the man-made fibres industry is supplying a raw material or that it is a monopoly. Some of us cannot help despairing at the fact that the Board of Trade is not taking a more active part in making monopolies subject to real competition from abroad, if they cannot be subjected to it from firms at home.
When the restrictive trade practices legislation was introduced it was said that it might well lead to amalgamations with a view to avoiding its effects, and that this would lead to semi-monopolies or possibly complete monopolies, and that if its provisions were not to be frustrated early amending legislation was required. As I have suggested previously, we should say that if a company or a group of companies reaches the stage at which it is producing a third or even a quarter of the products of a trade it shall automatically come before the Monopolies Commission, which will decide whether any good technical grounds exist for allowing it to go on increasing its production, or whether it would be in the public interest, in order to maintain competition, to say, "No, you cannot increase your production any further." If there were good technical grounds—because of great advances in automation—for a company to continue to increase its production beyond one-third of the products of the trade it would have to come under regular scrutiny in order to ensure that it was continuing to act in the public interest.
In the last report of the Registrar of Restrictive Trading Agreements, for the period 1st January, 1960, to 30th June, 1961, attention was drawn to one of the manœuvres which had been developed in order to get round the provisions of the Act, namely, the growth of price information agreements. We have had nothing from the Board of Trade as to the action that it intends to take about this. I should have thought that we must now incorporate it in the Act as one of the things which should be registered
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when it takes place, so that the court can decide whether the use of such an agreement is against the public interest. I know that probably a number of these agreements do not act against the public interest. They are a useful source of information which is probably of help to the proper carrying on of a business and are not a threat to the public good; but certainly there is plenty of evidence that others are. I think that this should be dealt with in the same way as other practises are dealt with under the Restrictive Trade Practices Act.
The last point that I want to make on this whole proposition of improving the competitive climate in which industry works is partly related to this and also to consumer prices. It is time that we repealed Section 25 of the Restrictive Trade Practices Act. There was considerable doubt in the House of Commons when the provisions was included as to whether it would net have very undesirable effects, and I think that there is a growing feeling now that it is having such effects.
This is the Section which deals with individual enforcement by legal proceedings of conditions as to resale prices. In addition a Departmental Committee within the Board of Trade is considering the question of resale price maintenance, and we are shortly to have a report from a consumers' committee as well. I think that all these matters are relevant to the creation of a proper climate in which private enterprise competitive industry ought to operate. It is on this score that the Government have been extremely weak and feeble in their approach.
If we really believe in a fair and competitive system—because if it is only partially competitive it is unfair to other people operating in it—it is essential that the rules of competition should be clearly understood and that where they are the responsibility of the Government the Government should see that they are carried out. I believe this to be an absolute pre-condition for creating the right atmosphere in which to get a developing policy on wages and on growth.
Unless the Government tackle questions if this kind with real energy, I do not think that they will succeed in their other policies. It is up to them. They have not very much time before we go

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into the Common Market or, for that matter, before we come to a General Election, and whether or not they succeed in doing this will make a lot of difference.
5.24 p.m.
Mr. R. H. Turton: The right hon. Member for Bolton, West (Mr. Holt) rightly began his speech by considering how far the Budget was creating greater fairness in taxation between one section of citizen and another. He dealt with the short-term speculator and pointed out that there was undoubtedly a feeling in the country that the man who is paying P.A.Y.E. and the man who is making quick profits by short-term speculations ought to be treated alike.
The main feeling that I get is that the Budget is very fair. It is trying to bring about a degree of equality where there has been inequality. I am extremely pleased that it deals with exemption limits for elderly people. It is a pity that this had ever drifted away from fairness. With the proposed limit it merely means that an elderly person can have other pension or savings equal in amount to the National Insurance pension and no more without being taxed. In other words, the limit is twice the rate of the standard rate of the National Insurance pension. This is bringing it back to what it was pre-1959.
I should like my right hon. and learned Friend to consider whether he cannot avoid the unfairness in future by so drafting his recommendation that this exemption is always at the limit of twice the National Insurance pension, which would avoid the difficulty that when we put up the standard rate of pension the pensioner is at a tax disadvantage. I should also like him to tell us how many pensioners will benefit from his concession.
Parliament should consider whether we cannot deal with the marginal case of those who have over £9 12s. 6d. a week in pensions and savings but less than £10 12s. 6d. or £11 per week, and whether we cannot ease their burden of taxation. The people who are being hit hardest in the present society are those living on small fixed incomes.
I hope that my right hon. and learned Friend, when dealing with inequalities—
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he has dealt with a number in his Budget—will not forget one mentioned by several hon. Members. It is the unfairness which those taxed under Schedule E feel because the rules for allowances and expenses for them are different from those affecting people taxed under Schedule D. There would be great satisfaction generally if the rules for the two Schedules could be made the same.
I wish to point out to the Economic Secretary that there is a feeling of unfairness among those parents who make sacrifices by paying for the education of their children but find that they get exactly the same tax allowances as do the parents of children who take the education supplied by local education authorities. If the children are under 11 they cost the country £90 a year and if they are over 11 they cost the country £150 a year. I believe that there is a strong case for giving a small measure of tax relief to parents who make sacrifices to pay for their children's education.
My right hon. and learned Friend's simplification of the Purchase Tax scales is, in general, equitable. Some artificial indignation has been worked up by the Opposition over the confectionery tax. This indignation is artificial because hon. Members opposite know perfectly well that the dental profession has been stampeding for this tax for many years. It is also artificial because if one goes round the confectionery shops in the West End of London, one will find that they are not frequented by children under 16. Undoubtedly, these confectioneries come within the category of luxuries. I have never heard hon. Members opposite making a great clamour about the Purchase Tax on toys, which certainly affects children and which stands at 25 per cent. Yet they clamour about the tax imposed on confectionery which is only 15 per cent. To me, that does not ring true.
I think it unfortunate, however, that when reducing the number of tax scales from four to three the Chancellor should have added to the complication by making the tax on confectionery at the new level of 15 per cent. I should have thought that there was a strong case for starting off at the lower rate of 10 per cent. which is imposed on other petty luxuries. If that did not bring in sufficient revenue my right hon. and learned

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Friend could have considered whether the whole range should be brought into the 12½ per cent. class. It is an advantage to have as few rates of Purchase Tax as possible.
We use the opportunity afforded by this debate not merely to look at the Budget, but also to make our own reviews of the economy of our country. I wish to look at two aspects which have caused considerable concern to a great number of us. The first is the continuous rise in Government expenditure and the second is the fact that in recent years we have been showing a deficit on our current account.
After about four years of being associated with and helping to look after the Estimates Committee, I have decided that it is impossible to save more than £1 million or £2 million by cutting out waste and extravagance in the public service. I admit that it is possible to achieve economies to the tune of a few million pounds, but we cannot achieve a major saving in expenditure except by looking at policy. I think that there is a weakness in the ministerial and the parliamentary review of policies which have an effect on expenditure.
In its recent Report the Estimates Committee noted, as the Committee will recall, that a Measure was introduced in respect of local employment. That resulted in a contingent cost of £112 million. When the Measure was introduced no mention was made of that contingent cost to Parliament. I am not criticising the legislation. I am using the instance to illustrate something of which the House should have been informed, the likely amount of expenditure which would be incurred following the passing of that Act.
I might add that, having been given that information, in my view Parliament ought also to have considered whether there were other policies which could be altered in order to save a similar amount. If we are continually passing new legislation and throwing large contingent financial burdens on the economy, there will be no end to the inflation which will result.
We ought to review policies to see whether some of them are not out of date and require alteration. There are some policies which were very desirable
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ten, fifteen, or twenty years ago. Now they may be out of date and should be reviewed. So far as I know, there is not in the Government—and certainly there is not in Parliament—any machinery for reviewing policies. There may be policies which are still desirable but, due to changing circumtances, we need the adoption of new methods to make them work.
This brings me to the Supplementary Estimates of last year, in which there was an alarming increase, due principally to the increase in the requirement for agricultural deficiency payments which amounted to 25 per cent. In other words, the payments for agriculture came to 25 per cent. more than had been previously estimated. I do not think it has been sufficiently recognised that the main reason for that increase lay in what is happening in agriculture and in agricultural imports.
Comparing the figures for 1959–58 and last year, agricultural domestic production had gone up by 12½ per cent. In that same period imports of food had gone up by 2 per cent. in quantity and had declined by 2 per cent. in price. But as our appetities remained fairly constant the only effect of that—with a 12½ per cent. increase in domestic production and a 2 per cent. increase in imports—under our system of agricultural deficiency payments must be a very large increase in the bill on the Estimates.
I can illustrate that by referring to eggs, and then the picture will become clear. Last year, we produced 34,000 more tons of eggs. At the same time, we increased our imports of eggs in the shell by 12 per cent. and of frozen, broken eggs by 40 per cent. That means that the burden on the balance of payments for eggs, in shell and broken, was £10 million, and the burden on the subsidy account was £15 million. That is something which requires to be reviewed. I could give other illustrations. Last year, imports of Irish fresh beef rose by 120 per cent. Imports of foreign barley went up by 1,500 per cent., which must throw the economy out of balance. I do not believe that we can work this system of price support for agriculture without some form of import control. I believe that to be absolutely necessary if this form of support is to be continued.

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That was one part of the speech of my hon. Friend the Economic Secretary where I found that I was not entirely in agreement with him. Equally, if we are to expand our exports, if we are to stimulate our export trade, it is absolutely vital that we should show more concern about our trading balances with particular countries. Each year we run into a very heavy deficit in our trade with France and Holland. At the same time, we have favourable trade relations with countries such as Australia and Ghana. I cannot see why we should not take those factors into consideration. Despite her international commitments, the United States of America practices this form of reciprocal trading. It would be very valuable if we could imitate the United States in this respect.
Last Tuesday, my right hon. Friend the President of the Board of Trade, speaking on this subject, said that what our economy required was growth, but that growth would not come automatically. Here, I think that he was referring to the speech of the right hon. Member for Orkney and Shetland (Mr. Grimond). He said:
"in a modern industrial society progress and growth mean change … change of product, change of method, change of market and often change of size are essential. … "—[OFFICIAL REPORT, 10th April, 1962; Vol. 657, c. 1183.]
I entirely agree that as society progresses we must have change in trade and change of product, but I do not believe in this change of market about which he spoke. If change of market means leaving our traditional markets for new ones, we may well find that our whole superstructure is geared to the traditional markets and not to the new ones and, therefore, we should lose on the change. In other words, infidelity is not productive, either in marriage or in international trade.
I would have the Committee realise that our main difficulty in recent years has not been any great defect in our salesmen or of management or men, but the three facts: that our traditional customers have been in the past the primary producing countries of the Commonwealth, that our trade with those countries has been bound and tethered ever since 1947 by the General Agreement on Tariffs and Trade, and that, except for a very generous policy of
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investment in the Commonwealth, we have done very little to promote an economic policy with the Commonwealth.
Those are the vital facts of the present time. If we read the year books of the General Agreement on Tariffs and Trade we find that year by year they point out that the primary producing countries are getting the worst of it in international trade while the industrial countries are getting the best of it. In other words, the rich countries are getting richer and the poor countries poorer. Our rôle should be to champion all those primary producing countries, but we are failing.
This is not good either for economics or politics. We do not want to see this rift occurring on the world. It our customers become impoverished, our trade will decline, and so will their feeling of satisfaction with the order in the world. If primary production becomes ill-rewarded, I warn not only the Committee but the country, the world will go in to another economic slump such as we had in 1929.
I draw attention to the Balance of Payments White Paper, and particularly to tables 3 and 4, to point to the balance on current account of the rest of the sterling area and ourselves with the non-sterling countries. To get the true picture in those tables we have to exclude gold production. We find, on current account, that the rest of the sterling area had deficits in balance of payments in 1959 on £211 million, in 1960 of £674 million, and in 1961 of £518 million.
If we add to those the deficit in our balance of payments on current account with non-sterling countries we get the final figures; 1959, £389 million; 1960, £1,321 million; and 1961, £880 million. Those are deficits which I do not believe that we and the primary producing countries of the Commonwealth can continue to incur for very long without a general world catastrophe.
I therefore beg the Government to think about changing our fiscal policy in this respect. I noticed that my hon. Friend the Member for Isle of Ely (Sir H. Legge-Bourke) had something to say about this in a letter he wrote to the Sunday Times last Sunday. I fear that our present pattern of trading is leading us to the opposite position. A few years ago I worked out for some research I

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was doing the level of our imports of agricultural products from the Commonwealth and from foreign countries, taking the average for the years 1956–58. Looking at the present position of importing certain agricultural products and comparing last year with 1956–58, we get these results, which I think the Committee should study.
Imports of butter from the Commonwealth in that period slightly declined while imports from Europe went up by 30 per cent. Imports of cheese from the Commonwealth were steady, but our imports from Europe went up by 28 per cent. Imports of barley from the Commonwealth declined by half while our imports from Europe and other foreign countries went up by 90 per cent. There was an increase of 25 per cent. in imports of pork from the Commonwealth in that period, but imports from foreign countries went up by 1,600 per cent.
I labour that point because so often it is said that we are doing all we can to help the Commonwealth. In fact, the Commonwealth's share of certain agricultural imports to this country in that period declined. That, I believe, is the result of our present policy, which should be amended. Our rôle in the world is to help primary producing countries to sell their products, not to encourage industrial countries to take over the markets from the Commonwealth in those agricultural products. One of the most disturbing factors I see at present is the way in which our policy is tending to encourage industrial countries to go more and more into agriculture at the expense of primary producing countries.
Therefore, I ask the Government to consider whether we should not be thinking out ways of helping to stop fluctuations in the prices of primary products, probably by creating buffer stocks, which will guarantee price stability. It is far better for emerging countries to gain resources with which to buy capital and consumer goods from rising prices of primary products than from grants and loans given as favours by this country or any other.
I quite agree that for emerging Africa and Asia grants and loans will be required, but it is far more important to have stable remunerative prices for primary
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production. It is also true that if we give aid and help to feed the famine areas of the world that in itself will help to get prices stable. All three policies should go together.
That is Britain's rôle in the twentieth century. We shall grow, and can only grow, if we can help the emerging countries to have an expanding share of the world's prosperity. I believe that my right hon. and learned Friend, in this Budget, has put a firm, fair base for an incomes policy for the country. I believe that he should build on it a superstructure to ensure that we and the Commonwealth can together have economic prosperity in the future.
5.50 p.m.
Mr. A. V. Hilton: On this the fourth and final day of the Budget debate most of the points have obviously already been covered more than once. We have just listened to a very sincere speech by the right hon. Member for Thirsk and Malton (Mr. Turton) with the majority of which I almost completely agree. I did not agree with the first part of his speech when he said that in his opinion this is a fair Budget. He went on to speak a little about pensions. What he said on that point proved that he is not so familiar with the problems of old-age pensioners as he is with agriculture.
As I continue, I hope to be able to show the Committee that this is anything but a fair Budget. I am very disappointed that no reference is made to giving any additional help to old-age and other pensioners. I suppose at this stage, half-way between two General Elections, it would be too much to expect this Government to announce any immediate increase in benefits for pensioners. We shall have to wait another year, as was said so well by my hon. Friend the Member for Sowerby (Mr. Houghton). We shall have to wait until a little nearer the next general election for this and other bribes, as a good many of us regard them, from the present Government to sway the electors.
Mr. David Webster: If the hon. Member takes so great an interest in matters concerning pensions, he should know that it is not a budgetary matter. Pensions have never been changed in any Budget since the war by either party.
Mr. Hilton: I am grateful to the hon Member. Even if it is traditional not to include pensions increases in the Budget, I am still disappointed that we have not broken with tradition this year and dealt with them, in view of the plight of so many pensioners. The night after the Budget I called to see an old-age pensioner not very far from the House of Commons. She said, "We did not get very much out of it, did we? There is to be a ½d. per lb. off sugar. That is the only benefit I have got, but my rent has gone up a few coppers again, so I shall still be a little worse off".
The fact that the Budget has satisfied the hon. Member for Kidderminster (Mr. Nabarro) is evidence that it is not fair for all sections of the community. I am sorry that the hon. Member is not here to hear that remark. In recent years he has threatened successive Chancellors of the Exchequer and voted against the Budget proposals, but, as he admitted in his speech earlier in the debate, for once in his life he is satisfied with a Chancellor of the Exchequer and he does not intend to vote against any of the proposals this time. The hon. Member takes the doubtful credit for the Chancellor of the Exchequer having put this iniquitous 15 per cent. Purchase Tax on sweets, "pop" and ice-cream. I should not like to take the credit for that. The hon. Member told us that he suggested this during last year's Budget debate. This is one item of Purchase Tax which the country could well have done without. It will not hit the small daughter of the Chancellor of the Exchequer. The right hon. and learned Gentleman said that he would have to make his peace with his young daughter for imposing this tax. It will hit the children of the workers and old-age pensioners, especially old ladies who still are very fond of sweets and chocolate.
A number of hon. Members have said that we have to plan for the future. I am sure I am on good ground in saying that we all agree with them. In the meantime, pensioners and those on the bottom rung of the wages ladder have to live and should not be forgotten. If any benefits were to be given, I claim that these people should have been considered. The tax on sweets will affect youngsters. This comes after what was
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done to them last year by the Tory Government, who imposed the additional charges on welfare foods for youngsters and expectant mothers. This has had disastrous effects on many children. It is outrageous to punish children by imposing this item of Purchase Tax, especially after the Government's action last year in giving £83 million to Surtax payers.
This is anything but a just Budget. To prove the point we have merely to look at the changes proposed in Purchase Tax, both the reductions and the increases. I have gone through them carefully. I cannot find an instance where these changes, up or down, will benefit to any marked extent farm workers and pensioners in my constituency. It has been said that the average earnings of workers are £15-odd a week. The Economic Secretary spoke of earnings of from £14 to £20 a week. In my constituency in South-West Norfolk, such earnings are the exception rather than the rule, because the minimum wage of farm workers is still only £8 9s. for a 46-hour week.
The following examples prove that it is the wealthy section of the community which will get the real benefits from the changes in Purchase Tax. Purchase Tax on cars, refrigerators, washing machines and carpets is to be considerably reduced. On the other side, there is to be a reduction of only ½d. a lb. in the price of sugar, and the tax on such essential things such as clothes and furniture is to be increased. Like other people, retirement and other pensioners—and the lower-paid workers—have to replace worn-out clothes now and again. I know that the Chancellor said that a 10s. increase in the price of a suit costing up to about £12 is not very much. It may not be very much to a wealthy person, but it is a considerable sum to a farm worker and a bigger burden for pensioners.
We, on this side, welcome the abolition of Schedule A, but that, again, will not affect very many of the farm workers in my constituency.
A number of references have been made to Great Britain and the Common Market. I was particularly interested in what the hon. Member for Halifax (Mr. Maurice Macmillan) said about that yesterday, because just previously I had

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read in a newspaper article that he is one of the Tory back benchers whose job it is to whip up support for the Common Market among his colleagues. The hon. Member was talking about how Germany and other countries had managed to get their additional labour, and said:
"… as the Common Market grows, whether the United Kingdom is in or out. One of the main policies of the member countries of the Common Market is the reform of their agriculture—to close 5 million small farms and smallholdings in the course of the next period of agricultural adjustment, to increase the size of their holdings, and to remove people from the land to industry. That is part of their policy. This must put the other countries of Europe at a permanent competitive advantage in labour force.—[OFFICIAL REPORT, 11th April, 1962; Vol. 657, c. 1383.]
I was unable to catch the hon. Member's attention at that point, but I should very much like to know whether, if we enter the Common Market, the Government intend to put a large number of our small farmers and smallholders out of business.
That is a very important matter to Norfolk and the adjoining counties. After all, it was the son of the Prime Minister who said that, and we are entitled to know whether it is true. If it is true, I can only say that the Tory revolt at Orpington and in other recent by-elections will be a picnic compared with the revolt there will be in the agricultural areas.
It has been rightly said on both sides of the Committee that we must concentrate on increasing production and exports, and I want to suggest two ways in which I think this can be achieved. I welcome the Chancellor's late conversion to the wisdom of planning, which we on this side have long thought essential to increased production. To get that planning we need real cooperation between employers, workers and the Government, but the Government's recent policy on wages is not conducive to the workers' co-operation, and the Chancellor would be very wise to realise that.
In setting up the National Economic Development Council the right hon. and learned Gentleman has certainly shown far more sense than did the hon. Member for Ilford, South (Mr. Cooper) on Monday. The hon. Member said that
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he spent much of his time trying to sell goods abroad, and then want on to make a rather serious criticism of trade unionists. In particular, he sorted out Ted Hill. The hon. Member should remember, as we all should, that for the production of these export goods we must rely to a large extent on our workers. The hon. Member's criticism was unjust to the majority of our workers, who are first-class people, As workers, they have the best record of any. They should be encouraged, and not criticised as the hon. Member thought fit to criticise them.
The President of the Board of Trade can assist in planning by means of distribution of industry. I hope that the Government will give greater consideration to the siting of factories, and will take more industry from London and the other big industrial towns and cities which are now over-industrialised, where traffic is such a great problem, and where building land costs a fortune to buy. I want to reinforce my recent appeal for light industry to be diverted—and, if necessary, directed—to such places as the many small towns in Norfolk.
Agriculture was at one time almost the only industry that Norfolk had, but the changing pattern in farming techniques has resulted in a great reduction in the labour force. There are now redundant farm workers, but they get no compensation for redundancy. About a year ago, this House agreed that cotton workers becoming redundant should be compensated, and I agreed with that. Workers in other industries should also be compensated. But there is at present no compensation at all for farm workers who, after giving a lifetime of service to the industry—sometimes forty years or more—find themselves redundant. They are then on the labour market, and there is very little alternative industry for them.
In a number of these small market towns there are facilities for industrial development. There is land in abundance that could be acquired at a reasonable price, and the labour is available. Swaffham—my own town—and Downham Market are examples. Both are on the trunk road, and have everything to commend them to light industry. I appeal for Ministerial co-operation in that connection and for co-operation between the various ministries to encourage firms to come to these areas.

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Quite recently, a firm was prepared to come to Swaffham. It would have been welcome, as it would have absorbed some of the redundant workers. All arrangements were very nearly completed, and the county planning committee had given the project its blessing. At the last minute, the Ministry of Transport stepped in and now, because of some doubt about access from the proposed site to the road, the whole thing is held up. I have appealed to the Minister of Transport, and I hope that he will reconsider the matter sympathetically and allow this firm to come to Swaffham.
While I am on the question of cooperation and planning for increased production to help our exports, it is appropriate to refer to another place in Norfolk—Sculthorpe—a village in the constituency of my hon. Friend the Member for Norfolk, North (Mr. Gooch). There, a large American air base is about to be what is called "phased down", and, eventually, I suppose, it will be closed.
For a long period, this camp has provided employment for many hundreds of workers from a very large area of Norfolk, including many from my own constituency, and it now appears that if it is to be closed, many people will lose their employment. I hope that one of the Ministers on the Treasury bench will take note of this, and will be able to say later whether it is possible to divert some sort of industry into the Sculthorpe area. On the site, there is available almost every type of building and hundreds of houses, and the suggestion has been made that it might be converted into a New Town.
Whether it becomes a new town or not, industry certainly needs to be diverted to the area, and I therefore hope that the Government will give the matter sympathetic consideration. By doing this, they will give the workers in that part of Norfolk an opportunity to increase production, which is desired by everyone in this House and in the country, and to increase our export trade.
6.12 p.m.
Viscount Hinchingbrooke: Someone remarked the other day that what distinguished me from the rest of my hon. Friends was that I was a Whig at home and a Tory abroad,
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whereas they were the reverse. Certainly, my hon. Friend the Financial Secretary to the Treasury, who made a most distinguished speech yesterday, is the reverse. Where the Chancellor is, I do not quite know. I hope my right hon. and learned Friend is on the side of the angels—my angels, of course.
I agree with my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) that it is Britain's duty abroad to use the powers of the State in a handsome way to rectify the inequalities that exist. I believe myself in a strong defence programme and in the protection of this country by tariffs. I believe in very large Government-organised aid to the Commonwealth. But, on the home front. I am entirely different.
I believe, like the representative of the Liberal Party, the hon. Member for Bolton, West (Mr. Holt), who spoke this afternoon, in free enterprise, in anti-monopoly legislation for the restitution of the full-scale capitalist system, untrammelled by the exercise of the State, except in so far that the State, in the famous words of my right hon. Friend the Member for Woodford (Sir W. Churchill), should make quite certain that there was a platform below which no individual life should fall.
It is in the light of that philosophy that I wish to examine the Budget which my right hon. and learned Friend has introduced. The hon. Member for Pontefract (Mr. Harper), in an amusing and witty maiden speech, deprived me, I am afraid, of the adjectives which I should have liked to have used about the Budget. He said that it was—
"dull, unimaginative, uninspiring and vision-less ".—[OFFICIAL REPORT. 11th April, 1962; Vol. 657, c. 1365.]
At breakfast time this morning, I had to think up a few more. I think that it is tedious, trivial and largely irrelevant to the British position in the world, and, in one respect, at any rate, positively menacing.
Of course, some of the concessions that my right hon. and learned Friend has made are to be welcomed by all of us—'the increase of the income limit for personal reliefs from £300 to £400, the increase of the age exemption limit from £275 to £300, the change in the basis for claims under Section 20 of the Finance Act, 1954, which has not been very much

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remarked upon, but which will actually cost as much as all the other small concessions put together, the increase in the exemption limit from £3,000 to £4,000 in Estate Duty, and the remissions on sugar, coffee, cocoa, and the like.
There, the useful concessions seem to end, and we are forced to the more ugly realities behind the thinking of the Treasury officials. I say that advisedly. One is supposed to be unfair in attacking Treasury officials, and if one is unfair the Chancellor can reply on their behalf. I am coming inevitably to the conclusion that there is a taut little core of very able and dynamic people in the Treasury, in whose hands successive Chancellors of the Exchequer, imbued with every kind of Tory principle and belief, become little better than putty.
We have seen it time and time again since the end of the war. My noble Friend Lord Amory, the previous Chancellor, went to the Treasury saying, at any rate on one occasion, in a speech in the country, that the object of the Tory Government was not only to stabilise prices while maintaining full employment, but actually to reduce them. He had not been there a year before inflation was resumed. Bureaucracy grows all the time.
Before I get on to that theme, I want to concentrate on the capital gains tax. This is a sad business. We are crossing the Rubicon between the taxation of incomes and the taxation of capital, where individuals are concerned, and when we cross the Rubicon all sorts of curious things happen. Of course, there is nothing in it this year. The manipulators of the levers are only just setting the points and pulling the signals. I remember the first scene in the famous play "The Ghost Train". All was quiet. A genial old gentleman was sitting puffing a pipe in the corner of a signal box. A few lights winked, a few little bells tinkled, and then he slowly got up and gently pulled the levers, and sat down again. A few minutes passed, and then, the ugly roar of the deadly express began, and the excitement and violence of the play proceeded. The train rushed by, directed to the disused chalk pit, where it was dashed to pieces.
I remember that when Surtax was introduced in 1909 it was introduced at 2d. in the £. I remember that
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when Estate Duty was introduced in 1894—[Laughter.] I remember reading that when it was introduced in 1894 it was £8 per cent. Where is Surtax now? It is 10s. in the £. Where is Estate Duty? It is at £80 per cent. It is very likely that this is what will happen with the capital gains tax. Of course, the Chancellor is not to get any revenue from it this year. The Treasury officials are just setting the points. The real pressure will be applied in succeeding years.
I can see certain of my hon. Friends, some of them, I regret to say, zealous for this tax, supporting the Chancellor, thinking that somehow this is the way to get back on the results of Orpington, behaving like the Priests of Bael, cutting themselves with knives, and getting into a frenzy of enthusiasm when it is revealed, as it will be next year, that a great many people, by a little judicious handling, have escaped the six months' limit and are operating at six months and ten days.
Then the messages will flow to the Chancellor, "Make sure that they suffer, these miserable types who have escaped your magnificent taxation system. Make them suffer this year". Slowly, the whole thing will elaborate until people who have been making investments over a six-month, nine-month and twelvemonth period will be brought in. That is the way in which this tax will go.
Why should we stop at catching the proceeds of sale of shares or land? Why should not we tax any other sort of capital windfall? Why should the football pools be left out?
Mr. A. Lewis: They are already taxed.
Viscount Hinchingbrooke: No. The football pool promoters pay a specific tax, just like the whisky distillers pay a specific tax. This is not a tax on the individual receipts of the person who indulges in football pools. The same applies to winnings from greyhound racing and horse racing.
The arm of the law, now that we have crossed the Rubicon, will be stretched out increasingly to catch all those who have a fortuitous winning of some kind, ending no doubt in the stabbing of the sacred cow of the Prime Minister himself—the Premium Bond. When we start on something of this

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kind, I do not know where we stop. I think that the institution of this tax is utterly indefensible and I profoundly regret that my right hon. and learned Friend has been associated with it.
Let me now examine the state of the economy. We have had speeches from the Chancellor of the Exchequer and from two other Ministers showing satisfaction and complacency about the situation in which we find ourselves. My right hon. and learned Friend said in his Budget speech that certain cautions must be exercised in future. His speech was, however, a great deal more optimistic than the Budget speech of a year ago, and I cannot believe that his optimism is really justified. The wage claims have only been dammed up over six months. The wage pause has not really paid off at all. A certain détente, as they say in foreign affairs, has taken place, but it will not last. The backlog of wage demands is building up. It will burst on the country in quite a short time.
No one will observe the Government's injunctions to avoid wage increases after the way in which the wage pause has been infringed. The Chancellor argued as though the wage pause had served its purpose and as though we were now on an even keel. That is a piece of wish-ful thinking. The wage pause was breached by the actions of violent men who refused to observe it, notably the Electricity Authority, and everyone else has taken his cue from the Authority. The policy of my right hon. and learned Friend, instituted last summer, has not succeeded. It has failed. It has been broken by the opinions of people evidently more powerful than himself.
We still have the International Monetary Fund loan hanging over our heads. Only part of it has been repaid. It is true that the balance of payments position is a little better than it was last year, but it is still a minus in the total figure and worse than during any other year since 1955. My right hon. and learned Friend has admitted that the growth in personal spending this year is likely to be 4 per cent. against a possible increase in production of 2 per cent. We are about to see, no doubt, a further rise in stocking, resulting in a heavy demand for imports.
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But, over and above all these dangers, I continually see staring me in the face the graph produced annually by The Times showing the declining value of the £, that bar sinister across our national life. The Financial Secretary to the Treasury gave some startling figures on 5th December last. He showed that the value of the £, which was worth 20s. in 1914, fell to 8s. in 1920, recovered to 14s. in 1935 and stood at 4s. 6d. in 1960. That is to say that in the fifteen years preceding the war the £ almost doubled in value compared with the value to which it sank at the end of the 1914–18 war but, of course, at fearful cost in the 2 million or so Who were unemployed at the time. During the fifteen years from 1935, it lost 60 per cent. of its value. In the last ten years during which the Conservatives have been in office it has lost another 25 per cent. of its value.
Nothing whatever has been done to correct this. Chancellors of the Exchequer come and go. Credit squeezes and pay pauses are instituted. Exhortations of every sort and kind are used, but entirely without effect. This declining value of the £, which some people, notably the individual who wrote to The Times two or three days ago, appear to think innocuous, is to me one of the worst features in our national life. I sometimes think that it is the direct cause of the demoralisation of society today compared with the society of twenty or thirty years ago. When we see on television that young men earning £30 a week are spending £20 of it in the betting shops regularly every week, when we hear and see violence on the television and in the cinemas, and when we notice how the quality of British newspapers has declined over the last fifteen or twenty years, we must ascribe it to some cause. I cannot but ascribe it to the cause of inflation. I sometimes think that the Germans and French, who suffered swift, short-lived but violent inflation, have not done their social life anything like the damage that we have done to ours by this steady depreciation of the £ by 2, 3 and 4 per cent. every year.
Cannot the Conservative Government find a way of breaking through this situation? The Labour Party found itself incapable of doing it in the six years that it was in office, and the £ declined at

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much the same rate as previously. We came in zestful of the chances of improving the situation. Gradually our ideals have been neglected. No attempts have been made to maintain full employment at stable prices, much less at reducing prices.
In the period between the wars we could put up the value of the £, drastically, in fifteen years by the amount I have described—at the cost of 2 million unemployed—and if we are reducing the value of the £ at the rate I have described since the war—at the cost of overfull employment—is there not a midway position that can be attained which the public will find satisfactory and which they will regard as a major political triumph for this country?
Is it to be left to the Liberal Party to do that, a party which has not had an opportunity of exercising power so far? Will the Liberals be able to go to the country shortly with the claim that they alone will succeed in doing something which neither of the two traditional parties recently in power have been able to do? I would not be a bit surprised if the Liberals laid claim to do that. They may not look very competent in the House—[HON. MEMBERS: "Oh."]—but some of their candidates are looking fairly competent in the countryside.
I believe that only the Government can act in this situation. The private sector of the economy is absolutely immoveable, it is rocklike, and it cannot be squeezed by taxation. The only thing which will result in the private sector of the economy constraining itself is either Communism or war. Communist tactics make it absolutely compulsory on the individual to obey for the sake of a national peace-time endeavour. Wartime tactics persuade people voluntarily to sacrifice their liberties and standards of living and surrender them to the State to enable the country to survive.
In peace time there is absolutely no means, Socialist or Conservative, by which the private sector of the economy can be squeezed. We must do this, therefore, in a free way, by voluntary sacrifice of part of the public sector. Government expenditure is now the key and I believe that it is higher in this country than in any other. If one takes
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in local authority expenditure, which is directed and approved by the Government, the total demand which the State is now making on the gross national product is 34 per cent. We are back to the figure we were at in 1954, when the Conservatives were fast reducing it. The Conservatives are now fast increasing it and, as I say, we are back to the level of 1954. In Sweden, a country which is extremely docile and Socialistic, and where one would have thought that the private sector would voluntarily sacrifice itself to the elected Government, the figure is only 26 per cent.
Mr. Geoffrey Hirst: In fact, the total demand on national and local expenditure is nearer 45 per cent. of the gross national product.
Viscount Hinchingbrooke: To reconcile this with my hon. Friend we would have to consider this matter around the table to see whether one nationalised industry or another had been included or excluded. I have taken some care to look into this matter and the figure I have given is the one with which I have charged myself.
We have not heard a word from the Chancellor about Government expenditure. I do not know whether my right hon. and learned Friend is shy of the subject as the result of his broken pledge of last July, but I hope that before the debate ends, perhaps when he replies tonight, he will say something positive about this matter. I am not persuaded that my right hon. and learned Friend is not an inflationist. It would be a terrible thing to find that he was that because other hon. Members of the Government have declared themselves very strongly against an undue exercise of the State's activity.
My right hon. Friend the Minister of Aviation, as we all know, resigned over this very subject—When it was a question of another £50 million upon the Estimates. The Estimates have now soared to about twenty times the figure at which he resigned. My right hon. Friend said:
"I hold the view that the Government have spent, are spending and are certainly planning to spend, a great deal too much money."—[OFFICIAL REPORT, 6th April, 1960; Vol. 621, c. 432.]

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My right hon. Friend the Minister of Health is also on record as having expressed deep regret that the claims of the central Government on the national income had ceased to fall, but had risen. That shows that there are friends at court if my right hon. and learned Friend could direct his attention to this matter.
The Chancellor of the Exchequer (Mr. Selwyn Lloyd): My noble Friend said that I had not mentioned this topic in my Budget speech. After dealing with Supply expenditure I added these words:
"Nevertheless, I say frankly to the Committee I see no diminution in the public pressures to put additional burdens upon the Exchequer. But if we do not keep down these demands to what can be safely met out of increases in the gross national product, we have no hope of preventing an intolerable burden of taxation with all its consequences for our costs and balance of payments."—[OFFICIAL REPORT. 9th April, 1962; Vol. 657. c. 970.]
Mr. Hirst: It was the best part of my right hon. and learned Friend's speech.
Viscount Hinchingbrooke: I am grateful to the Chancellor for having pointed that out. That single sentence of about nine lines escaped me when I re-read his speech this morning. I would have hoped for one of the cross-headings in his speech and for a very large programme, which I am now about to offer him, for the reduction of Government expenditure.
My right hon. and learned Friend's institution—the National Economic Development Council—does not seem to be going to do anything but replace Parliament in consideration of these matters. If it does not act dynamically and purposefully to replace Parliament it will prove to be very little different from the old draft horse of Mr. Low, the cartoonist—but this time with Lord Robens in the front legs and with Mr. Cousins in the rear.
The Financial Secretary to the Treasury (Sir Edward Boyle): Does my noble Friend consider that the Iron and Steel Board, which was set up by the 1953 Act, has in any sense replaced Parliament? Surely the job which the N.E.D.C. will do is very much analogous to the job of the Iron and Steel Board—only covering the whole of the economy instead of part of it?
Viscount Hinchingbrooke: I regard it as symptomatic of the political cowardice of Ministers that, year after year, they set up new institutions behind which to take shelter, allowing them to walk out into the public gaze and appear as purposeful and confident for a time and then, quietly, to fold up a few years later, just as we have seen with previous ones. I want direct action from the Cabinet—determined and courageous action, and that is what we are not getting.
Inflation is built into our existing system and the Chancellor has not acknowledged that fact in the way he should have done. Pay pauses are no answer, as I have said; the last one had to be given up. Taxation in order to establish Budget surpluses as a means of reducing inflation is useless. I have pointed out in previous speeches that, time after time since the war, when we have had a Budget surplus, there has been an inflation, and, time after time since the war, when we have had a vast Budget deficit, there has been a deflation. Figures of £200 million either side of the Budget, when one is dealing with a gross national product of £23,000 million, are meaningless.
What must be done—it is a very unpleasant job—is to make a straight cut in the public sector of about £500 million to £1,000 million, and do it over a definite planned period. One often hears about foreign five-year plans. I should like this country to have a five-year or four-year plan for a reduction in Government expenditure of that order.
It cannot be applied to things for which the Government are inevitably responsible. As I have said, I am enthusiastic about a strong defence programme, about large loans and gifts to the Commonwealth and countries abroad, and about a roads programme. There are many other things which only the Government can do. The Government's work there cannot be replaced by the private individual. But there are a great many other things where the Government's work can and should be replaced by the private individual.
In saying what I have to say, I do not want hon. Members to get it into their heads that I am advocating an absolute reduction of standards. When one talks about a cut in the Health Service, in the

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education service, or in pensions, this does not mean that there is to be a reduction in the amount and quality of the service. The actual amount of service given continues, but it is paid for by the individual instead of by the taxpayer. In every case, of course, it means the concentration on those in need of the money which the Government do, in fact, continue to spend.
I said in the House last year that I should apply a 5s. tax to every family with a child at school, yielding £100 million, I have said before that we ought to have higher hospital and prescription charges.
Mr. D. Price: Is it 5s. a week, or 5s. a year? Five shillings a year on each child, if my arithmetic serves me aright, cannot yield £100 million a year, since the total population is only 52 million. Is it per week?
Viscount Hinchingbrooke: No, it is not per child. It is 5s. per family with a child at school.
Mr. D. Price: Per what?
Viscount Hinchingbrooke: Per week per family with a child at school, and that yields £100 million a year.
The Beveridge system of pensions should be made a closed account and the money devoted to those who really need it. On the appointed day, we should enable everyone to have the option of drawing his accumulated previous contributions at compound rates of interest, whatever the calculation should be actuarially, or continuing in the scheme and being paid out at the then value on the appropriate date. All weekly contributions to the Beveridge scheme would cease and all the money would be concentrated on those who directly need it. Family allowances and unemployment and sickness benefits should all be subjected to a means test after a certain time. Subsidies should be drastically reduced.
I should like to see a great change made in British agriculture, a change forced on to it not by going into the Common Market but forced on to it by the decision of this House. I should like to put tariffs on all imported foodstuffs sufficiently to give British agriculture the sort of protection that it has
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now and then let the farming community go completely free of all subsidies and all special payments and go unto competition on that basis.
I should hand back to each Commonwealth country the proceeds of the tariff on its imported food. This would be a tremendous thing. Each Commonwealth country concerned could decide how the money was to be expended, on social services, handing it back to the growers or livestock producers, or whatever it might be. We could tie this in with our gifts to the Commonwealth and make a vast programme of it which would inspire the Commonwealth in a way in which it has not been inspired since the Ottawa Agreement days.
The general housing subsidy should be abolished. There is still a continuing basic housing subsidy, I think, of £100 million a year for old houses which is being continued. That should go.
I reckon that by a programme of this kind 10 per cent. of the State's expenditure, or £700 million, would be saved.
Hon. Members will immediately ask: what will be the cost to this country in unemployment? I cannot see any reason why it should be appreciable. Certain services performed now for ourselves would require the retraining of personnel employed in them. They might go into export work. Everybody should get a job in a different direction. Nevertheless I seriously suggest that we ought to look again at some of the unemployment figures. We are now working with what is still regarded as overfull employment, 2 per cent. per annum. We have the lowest unemployment rate of any country of the world. The lines of unfilled vacancies and current unemployment cross and recross each other. It is too tight a situation fundamentally for a free society.
I am amazed to look back to the Beveridge Report and find that the social security scheme which he prepared envisaged an unemployment rate of 8½ per cent. of the whole body of insured employees. At present rates, that would come to a total of 2 million persons. This was the scheme which Labour and Conservatives supported during the war. It seemed to the Coalition Government, to Lord Attlee

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and to my right hon. Friend the Member for Woodford an acceptable scheme at that time.
Mr. A. Lewis: And the Liberals.
Viscount Hinchingbrooke: And the Liberals.
The 1944 White Paper on employment policy gives tables devised on the assumption of 8 per cent. or 1,900,000 persons unemployed. We have also got the figure which the right hon. Gentleman the Leader of the Opposition, to say nothing of Sir Stafford Cripps, have subscribed to as being acceptable in modern society, namely, 3 per cent. That would give us an unemployed rate of 720,000 persons instead of the present 400,000.
Above all, it is essential—here, I agree with the Liberal Party fundamentally—to restore capitalism to this country, to find something which repeats the success of the United States. In the United States today, every working man regards his wages as coming from the earnings of his company. He looks to the boss of his concern. He hopes to be the boss himself. His avenue to success is right through the machine of industry. Over here, the working man looks to an outside trade union organisation to force on the country wages which, in many cases, are inflationary.
I would like to see a tremendous effort made to get trade unionism out of this setting, out of this whole picture, as the engine of inflation, and trade unionists somehow put on to the boards of companies as personnel managers or employed by companies for personal relations work. The day of trade unionism, in a certain sense, has passed away. The State now guarantees and provides for the very social minima which trade unionism came into existence to bring about. Trade unionism is largely redundant, and in so far as it is not redundant it is forcing the country, by selfish means, to the verge of devaluation. That cannot be tolerated in modern society. The Government must take the trade union position in hand.
Mr. Selwyn Lloyd Mr. Selwyn Lloyd indicated dissent.
Viscount Hinchingbrooke: I notice that my right hon. and learned Friend is turning away in great embarrassment. I
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realise that I am causing him the utmost pain, because his mind has never moved in the direction which I am trying to indicate is necessary.
Of course, something must be done about the employers' side. There are too many people in trade associations going round the country handing out the orders with a glass of hock at the luncheon table. I am not sure that A.E.I. and English Electric are really trying to drive each other into the dust by competition. I am not sure that Lord Chandos and Lord Nelson really detest each other in the way they should. There seems to me to be too many of these easy-going, friendly, happy relations between big businessmen—and small businessmen—in gatherings round the table in trade associations, having a jolly good time and making quite sure that orders are not really competitive.
I should like my right hon. and learned Friend the Chancellor to inject himself like a rocket into the situation.
"Who is the happy Warrior? Who is he
That every man in arms should wish to be?…
—'Tis he…
—Who, if he rises to station of command, Rises by open means; and there will stand On honourable terms, or else retire …"
I would like to see my right hon. and learned Friend in the lead of the nation's affairs. I would like him to institute a tremendous change in our national life, one which would redound to our future glory and prosperity in the world and make our name ring throughout the Continents.
6.53 p.m.
Mr. John Diamond: The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) said that at breakfast time today he had to alter some of the notes he had made and to prepare a new speech—at all events, new epithets. I find myself also in that position. I, too, have prepared a speech but, as it is my privilege to follow him, I feel that some of the things he said ought to be answered. One cannot answer them all because there was no general philosophy governing his speech. He was as ambivalent in many of the things he said as he claimed to be at the start of his speech.
He made remarks about the capital gains tax, which is a matter I have been

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interested in for many years. For reasons I could not follow, he thought it right to attack the civil servants, and to put the whole of the blame on to astute officials in the Treasury who were able to understand what was going on and were able to mislead successive Chancellors. But I have more respect for Chancellors of the Exchequer—including Conservative Chancellors—than to think that they would be hoodwinked by their civil servants.
It is a poor reward for a civil servant who, in a most responsible position, has served every Minister, whatever his politics, as loyally and faithfully as he can. to sit here and have to listen to somebody attacking him, knowing that he cannot answer.
The reason why the noble Lord is sitting now in his place—where he presumably likes to sit—is because the Conservatives won the last General Election. They won it because of the then Economic Adviser to the Treasury. He was no Tory, but it was his policies, adopted by the Government in the last year or two before the election, that won that election for the Government and allowed the noble Lord to sit where he now sits. The noble Lord should not be so thoughtless and so discourteous to his own chiefs by attacking the Treasury civil servants.
Sir E. Boyle: The hon. Member for Gloucester (Mr. Diamond) has made some remarks about the general propriety of criticising civil servants with which I have some sympathy. But he then rather committed the offence himself. Knowing him personally as well as at the Treasury, I am certain that Sir Robert Hall, for many years the Economic Adviser, would certainly not wish to be considered by this Committee or by anyone else as author of the victory of any political party. He has served both parties to the best of his ability.
Mr. Diamond: I have said that. I do not know why the Financial Secretary thought it necessary to interrupt. The civil servants serve the Government to the best of their ability. They were asked by the Government for advice on economic matters, and no doubt gave it. It was the sound advice to have the economy moved up and keep prices
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stable. That was the advice which the then Economic Adviser gave to Lord Amory, and which Lord Amory no doubt accepted. I do not know it as a fact. It is only a conjecture. But any party which won an election on the economic policy prevailing in the previous three years should be chary of offering criticism of the economic advisers responsible for producing that policy.
I was referring to the capital gains tax, which is really a short term speculative gains tax. The noble Lord said that we had crossed the Rubicon in this. I want to follow this matter up, because that statement is neither right nor wrong. It is right in one sense and wrong in another.
I agree that all the Government have done is to bring into the net of Income Tax profits which should have been taxed for a long time already. They have done it by defining profits in this field as those made within a restricted period. They say that if they are made within a restricted period, than it is obvious that the man who entered into the transaction had the making of profit in his mind at the time he entered into it, and therefore it should be taxed in the ordinary way. I agree with the Government that this is a clear distinction, another method of distinguishing between income and capital. AH they have done is slightly to extend Income Tax.
However, I support the noble Lord in one matter. He does not see the difference between income of this kind and a realised capital gain. There is no difference. Of course, there will be pressure, when it is seen that this scheme does not work, to increase the tax so that it has some effect and raises more revenue. There is no real difference between a realised capital gain and income. There is a demarcation figure for taxation purposes, however. One cannot strictly draw the line anywhere, although it has been drawn previously to a certain extent, inasmuch that speculative gains are borderline transactions, sometimes falling one way and sometimes the other. Now, for clarification, they are to be included in Income Tax.
Mr. John Hall: Does the hon. Gentleman include transactions relating to individual purchases and sales of houses in his view that there is no difference between income and a capital gain?
Mr. Diamond: There is no dispute between either side of the Committee that the realisation of a capital gain on one's own house cannot be so classified, because one is going to use the money to buy a new house at the same level of price. All that happens is that the level of price has moved up. It is clear that one bought the house to live in and was concerned with living in it and with nothing else. When one realises a profit by capital investment in the ordinary way, one has additional money in one's pocket to spend, and one is just as much able to pay additional tax as if one had additional money to spend from any other source.
I would go much further and say, if one wanted to treat the matter on a moral basis as opposed to a purely factual and financial basis, that one has a much greater capacity, and should feel a much greater willingness, to pay tax on a realised capital gain which one has done nothing physically or mentally to earn in whatever period it is since one invested it than one would feel called upon to pay on one's earnings as a Member of Parliament or whatever other occupation one pursued.
Obviously, earnings should attract a far lower rate of tax than realised capital gains. Therefore, I say that the noble Lord is right in foreseeing that there will be, as there should be, pressure the whole time to highlight the fact that there is no distinction of any kind between income and realised capital gains in the resulting ability to pay tax. One's shoulders are the broader, and one's taxability is the greater.
Mr. Holt: Does not the hon. Gentleman agree, however, that the increase of wealth depends on capital accumulation and capital growth? Therefore, there is at least an argument involved here in suggesting that if one is going to tax capital gains, this ought to be, possibly, at a lower level than a tax on income?
Mr. John Hall Mr. John Hall rose—
Mr. Diamond: Let me answer one question at a time. One earns an income for a given purpose but, of course, one has to encourage people to work just as much as one has to encourage people to save. There is no distinction there.
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Working and saving are both useful economic functions. What I am saying is that if one wants to distinguish between the two as to which should bear the higher rate of tax, surely one should encourage people to work rather more than one should encourage them to save.
Mr. John Hall: Suppose a realisation of investment produced a capital gain which was related only to the fall in the value of money from the time the investment was made. Would the hon. Gentleman regard that as a true capital gain, or would he merely regard it as a pouring out of £s worth the same as when they were first invested?
Mr. Diamond: It depends on the length of time and the amount of inflation which has taken place in the meantime. Equally, everybody's salary has a certain amount of that element, although it may be earned over a shorter period, and so has every income in any case. The real point is that we are not taxing either of these at 100 per cent. Nobody has suggested that these things should be taxed at more than a modest amount. The average rate of Income Tax bearing on it, for instance, may be 5s. or 7s. 6d., whatever is the average effective rate of Income Tax on the average person's income. Nobody is suggesting that it should be more than that. The rest of the money is available for the man in question, because we are not taxing his income at 100 per cent.
I hope to see this levy, this tax, this tightening up of the Income Tax, in the Finance Bill. It will produce nothing. As I have already indicated in an intervention, one does not even have to go to one's accountant to consider ways and means of avoiding it. It is easy to avoid it oneself. It will produce nothing, but it will be put there on the Statute Book and that will enable us to build on it, as we mean to do. I certainly mean to. To that extent, and to that extent alone, I go with the noble Lord.
I now turn from the noble Lord's speech, though I might add that if he had been a resident of Orpington, I am sure that it would have resulted in his voting for the Liberals, as many dissident and disaffected Tories did there,

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partly because the Government were taking them into the Common Market—as I gather from many of them—and mainly because there was no party 300 miles to the right of the Tories for whom they could vote.
I come back to the main shape of the Budget and the things which the Budget omitted. These are the serious matters. As to the main shape of the Budget, I cannot understand why so many hon. Members have been referring to it as a Budget which has helped to establish a sense of justice and fair play. This is a Budget which continues the Tory pattern of taking burdens from those who are richer and putting them on to the shoulders of those who are poorer.
This has been done in the Purchase Tax proposals. It is simple to demonstrate this. The net result of all the Purchase Tax proposals plus the Surcharge rearrangement is that a larger sum will be collected notwithstanding that the highest rates will be substantially reduced. Where is the additional sum coming from? This represents a net increase all-told of some £35 million, plus the reduction from 55 per cent. to 45 per cent., and that is coming from the lowest rates on the things which are more in the nature of necessities for the ordinary people. Those who are fortunate enough to be able to buy motor cars and so on will pay much less tax. This is the typical Tory pattern.
The same thing can be seen in the promise to extinguish Schedule A, which is a complete answer of the noble Lord about whether Chancellors take the advice of the Inland Revenue. Previous Chancellors have defended Schedule A, which is not easy to defend. It is easy to demonstrate that one will be more popular if one gets rid of Schedule A, which is a tax which householders have to pay, if one defends the other side of the matter, that one would only have a net resulting equality if as between two people who are absolutely equally placed and live in identical houses, one of them renting his house and the other having bought his house, one imposed a Schedule A tax on what the Chancellor sneeringly referred to this time as "notional income". Chancellor after Chancellor has explained this "notional income" and said that nevertheless one
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has to tax it in order to secure simple justice between the tenant on the one hand and the owner of the house on the other.
Here was the Chancellor coming and saying, notwithstanding that his advice must have been to the contrary, "Fancy charging notional income! So we will forgo Schedule A." But he said that the Government would not forgo it this year, that they were merely raising the argument this year, thus getting all the propaganda value from it, and that there would be further benefit from it next year. He said that it might, no doubt, come off in more than one instalment. Apparently, he was not certain yet whether the date for the next General Election has been fixed and was taking that into consideration. This is a great development of the method whereby one can over three years get a benefit from one simple piece of legislation.
As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) indicated in his intervention, there will be pressure for an equalising relief to make it fair. There will be pressure for an equalising relief for rents. We shall be told that we can get the same answer only if we allow the person who is paying rent to get relief equal to that which is being given to the person who receives the notional income on his owner-occupied house, who will no longer have to pay tax on it.
I come now to the main criticism of the Budget which everybody has voiced, namely, that it does absolutely nothing to help the real needs of the country, which are productivity and exports. We had a debate on exports very recently and there is no need to go over that ground again, but I want to suggest some of the things which the Government should have done in the Budget to help production, and we all agree that whether we enter the Common Market or not we need a strong economy, that our economy has been stagnant for far too long and that nothing has been done about it. There are four major needs and they centre around skilled labour, investment. Government leadership and what I can only call a tonic to industry.
Everybody recognises that the commodity of which we are most short is skilled labour and that there should be

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much more mobility of labour and that we will only get the economy moving satisfactorily if we can encourage this mobility. Of course there should be more training, but this is not the occasion to talk about that. The Budget can do a great deal about the mobility of labour. It can ensure that there is a much heavier accent on housing. We will never get mobility of skilled labour unless we have more houses. Every employer knows that he cannot get men to move to his factory if he has an expanding firm because he cannot offer them anywhere to live. If someone has a council house, he knows what a prize it is and is not likely to chance his arm and go to a different town with no likelihood of being able to get another council house for five or six or ten years, or however long it may be he has to wait on the waiting list. The first thing therefore, is more houses, and that involves a reduction in the Bank Rate, certainly for local authority houses because there will not be sufficient houses if the Bank Rate remains where it is. The alternative of private houses is covered by the same reasoning.
But a new point which I want to make and which I believe profoundly is that we will never get satisfactory mobility of labour until we have a State responsibility for retraining at full or 90 per cent. salary every worker who has to be retrained because the skill which he has been using to the full is not required in that form in his next industry. After all, Ministers move from Department to Department and we recognise that that is possible and appropriate. Skilled men are skilled men because they have great skill in their hands and great knowledge in their heads, but they are incapable, without retraining, of moving their skill from one industry to another. If one industry closes down, as has been the case with the aircraft industry, as I know only too well from the example in my own constituency, if an industry is concentrated and skilled men become available, there is no method by which they can be retrained, except at their own expense, which means by getting unemployment relief which is absolutely hopeless.
The Coal and Steel Community has set us the perfect example in this respect. It has had to concentrate coal mining,
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and coal miners who have become unemployed have been retrained at 100 per cent. of their salary for the first four months and 80 per cent. of their salary for the next four months, and within the first six months about 90 per cent. of them have been retrained and re-employed. So we will never get satisfactory mobility of labour unless there is more housing and particularly unless there is an accepted State responsibility, no doubt tied up with an insurance scheme, for retraining men so that they can move of their own free will to whatever employment is offered.
We need more investment, but it must be more investment of the right kind. In view of the increasing figures of investment, it would be difficult to prove that investment has not gone up reasonably well. One of our great disappointments has been that productivity has not gone up in proportion to investment. We always felt that investment by itself was the clue to all this. We had always thought that all we had to do was to get investment rising and the rest would follow, but it is clear that it is not as simple as that and we must have investment of the right kind. Investment which is of the right kind is investment in industries where there is rapid growth and where by virtue of that rapid growth there is a need rapidly to expand plant or rapidly to renew it.
The present system of capital allowances and allowances for depreciation is inadequate for encouraging those who are in a rapid growth industry. The Government should consider what I have suggested before and what they know to have been carried on in other countries for many years—the system whereby the allowances are the same as those which are dealt with by the company in its own balance sheet. If the company chooses to write off a machine over three years instead of writing it off over ten years, let it do so. It does not cost the Government a penny in the long run and costs them only a little money in the short run. It is a tremendous encouragement to those boards and managing directors who are dynamic and who have guts and who want to press ahead and who anxiously want to replace their plant fast.
One of the vast differences between this country and the United States of America, for example, in this as in other

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things is that we are far too conservative as a country and change our plant far too slowly and renovate far too slowly and adopt new machines and new methods far too slowly. There ought to be encouragement and this encouragement has to be much more selective than any kind of increase in capital allowances or investment allowances or anything of that kind, which would be very broad and costly.
This would cost absolutely nothing and would merely result in a slight addition in the early stages and a slight reduction in the later stages and the difference would be the cost of borrowing in the early stages and would be neglible. But this is a method which would improve investment.
I repeat what I have said before about leadership—that if the Government realised how frustrating their "Stop-Go" policies were to the average managing director, they would certainly hesitate much more than they have in the past before restricting production by the various methods with which we are all familiar and with which I will not bore hon. Members. It is most frustrating when managing directors cannot plan for a long run and for straightforward development. All sorts of embarassments are put in their way and what is particularly damaging, as my right hon. Friend the Member for Middlesbrough, East (Mr. Bottomley) said earlier, is that the capital goods industries which we should help most are hindered most by the increase in the Bank Rate and, therefore, the increase in the rate for borrowing money.
There was an intervention from the Government Front Bench which suggested that a 5 per cent. Bank Rate was something to be proud of and that it had been reduced twice in recent months and was now down to "only" 5 per cent. But they should regard 5 per cent. as an intolerably high Bank Rate, especially when 3 per cent. or 3½ per cent. is the normal everywhere else. Having endured a Bank Rate of 7 per cent., the Government think that coming down to 5 per cent. is something comparatively good. It is appalling. It delays everything; it slows housing and prevents people from putting down plant and developing buildings and so on.
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It is particularly damaging to the capital goods industry because, without wishing to be technical, in a capital goods industry one turns over one's money only once and therefore the cost of borrowing it is felt to the full, whereas in light industry, where the money is turned over four times, the cost of borrowing it felt only one quarter of that amount. Therefore, the impact of borrowing money is felt four times as strongly in the heavy goods industries as in consumer goods industries, for example, and in this way we are keeping down the country's productive effort and not letting the people who could go have a go.
I can see only one tonic and that is in the Common Market. There is the tonic of the larger market, the tonic of the free exchange of ideas, the tonic of rubbing shoulders with people who are keen to get on, the tonic of seeing expansion, the tonic of workers rubbing shoulders with other workers like the Germans who have had a wage increase of about 11½ per cent. in the last year alone, there is the tonic of being stimulated by the general dynamic attitude to be seen all around, and there is the tonic of full production which has been mentioned on both sides of the Committee. This is the tonic to which I am looking forward and the sooner the Government can achieve it, on appropriate conditions, the more pleased I shall be.
7.10 p.m.
Sir Thomas Moore: This will be a short speech, because I realise that there are many hon. Members who want to take part in the debate and whose contributions may probably be more valuable than mine. The few remarks that I intend to make will differ from the speeches during the last three days, because I propose to deal with the Budget, which is what only one or two hon. Members have done today. In my rather naïve way I thought that the Budget was to be the main topic of discussion today.
As far as the Budget goes, it is tidy, helpful, on the whole beneficial, and, I think, wise. Obviously, the stock markets think that there is something in it to their taste, although I imagine that their feelings stem rather from relief than from rejoicing. I agree that the Budget is not

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as inspiring as many of my right hon. and learned Friend's enthusiastic supporters hoped for, nor have the proposals aroused a storm of enthusiastic applause from any direction, although I noticed that the hon. Member for Cardiff, South-East (Mr. Callaghan) contained his enthusiasm by implying that, innocuous as it was, Labour would do it better still; in other words, that Labour would produce a still more innocuous Budget.
The hon. Member for Cardiff, South-East made one comment which has been repeated today. In fact, it has been repeated ad nauseam, and one is getting tired of it. It is becoming tiresome and monotonous to hear it said that last year the Chancellor gave away—and I stress that word "gave" because that is the word that has been used on two occasions today—£84 million to the Surtax payers. It is nonsense to talk like that, because no Chancellor has ever given away anything to the taxpayer as such.
Those who use this phrase believe, as did Dr. Goebbels, that if the lie is big enough, and is repeated often enough, it will eventually assume the guise of truth, and there is no doubt that there are many excellent, well-meaning, but economically half-witted supporters of Labour in the constituencies who have definitely swallowed that statement hook, line, and sinker.
Just to show the kind of ignorance that exists in many minds today, I remember Mr. Attlee, as he then was, saying that he proposed to allow private Members more time. That, also, was nonsense. The Government have no time to give away. Members allow the Executive such time as is needed to carry out the policy which the majority of Members want, and so it is with the taxpayer and the Chancellor.
I imagine that the Chancellor has watched with growing concern the efforts of successive Chancellors of the Exchequer since 1945 to kill, and at times practically succeeding in doing so, the golden-egged goose, but my right hon. and learned Friend, having seen the red light, wisely allowed the said goose to retain sufficient sustenance to keep it alive so that it could go on laying. My right hon. and learned Friend knows, and we all know, that without that sustenance, and without the eggs that that
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goose lays, he could not possibly support our present standard of social services, nor protect our defence programme.
I have only one or two comments on some of the more important proposals in the Budget. I used to oppose a capital gains tax, not because I thought that it was moral or immoral to make a capital gain, but I took the experience of America, where they have found that owing to the offsetting of capital losses, and because of the difficulties of collection, it is hardly worth while. But during the last few years, because of a rising market, the gains have become rather exorbitant, and, it seems to me, that is contrary to the public interest.
Even though the Chancellor has made a rather limited application of this tax, and has perhaps allowed himself to be too timid in that application, I hope that it will have the desired effect. I believe that he has been affected too much by those pre-Budget bleats or threats of the Chairman of the Stock Exchange. I cannot help thinking that it is not right that those who neither toil nor spin should be able, merely by astute timing and anticipation, to enjoy fantastic capital appreciation and holidays on the Riviera, which the rest of us have to work hard to achieve.
I think that it might also be useful for my right hon. and learned Friend to consider some of these more obvious take-over bids and the substantial hidden profits made by them. In some cases these bids are quite indefensible. Where a genuine merger, agreed by both sides for the mutual interest of workers, shareholders, and the general public takes place, it is all right. But some of these bids are indefensible, and indeed in my opinion even unethical, since these bidders not only obtain the material assets of the victim—and written down assets at that—but buy for cash the tears, blood, and sweat poured into the business by countless men who have given years of their lives to make it prosperous, progressive and succesful.
I was disappointed at the somewhat canny approach of the Chancellor to the fuel oil tax, but I expect that next year he will fully disclose his intentions.
On the controversial subject of the 15 per cent. tax on sweets, I wholeheartedly support my right hon. and learned

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Friend's efforts to safeguard our children's teeth, and, at the same time, to gain such a substantial benefit for the Treasury. In addition to protecting children's teeth, he has given parents the virtuous feeling of satisfaction that they may now minimise their own dangers from lung cancer by devoting what they save on cigarettes to allowing their children to go on enjoying their favourite lollipops, though possibly in reduced quantities.
As for that synthetic burst of spurious indignation shown by the Opposition last Monday, it was not worthy of a presumably intelligent and adult party. Perhaps they overlooked the warning given the other day by the Dental Association, who pointed out that the over-consumption of sweets today was ruining our children's teeth, especially at a time when there were not nearly enough dentists to undo the harm in time.
I now turn to one or two complaints that I have to make. About two years ago I protested strongly to the then Chancellor of the Exchequer, as I did again the other day, at the inequities of the existing rate of Surtax coupled with the present fantastic scale of Estate Duty. I cannot understand how any Government, especially a Conservative one, can connive at the perpetuation of these two indefensible taxes.
Next year I admit the Chancellor will do something for the Surtax payers, although Income Tax will still have to be paid on the £5,000 that will be free of Surtax. This means that the tax remains a powerful penalty upon effort. If business executives, who are now beginning to enjoy high incomes, do not have the incentive to put everything they have into their businesses, our social services will inevitably suffer, which will mean that those in the lower fixed income group, who really need help, will not be able to receive it.
When a man has worked hard to provide better or more rewarding opportunities for his children and more comfort for his whole family—when he has put so much effort into building up his business and putting by a certain amount of savings—I cannot understand why he should have up to three-quarters of his wealth taken away. Estate Duty is one of the most shocking of all our taxes. It is a penalty on effort and success.
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What justification can there be for the imposition of such a sadistic retribution on those who want only to serve their families, but who, in the end, serve the country as well?
I have said my say. I fear that my criticisms outweigh my commendations, but I can always look forward to next year.
7.31 p.m.
Mr. John McKay: I have listened to some very peculiar speeches during this debate, especially the one from the noble Lord the Member for Dorset, South (Viscount Hinching-brooke). It makes me wonder whether this place is becoming a Chamber where one makes up stories in order to attract attention—a place where hon. Members say things not to do good, but simply to criticise. The less we take note of some of these speeches the better it will be. Although some of the things that I shall refer to are plain to most people they still require to be emphasised, because they are defects which even Conservative supporters would like to see remedied.
We have given lots of money to the Surtax payers, and we are also giving extra privileges to aged people who have investments that are not very small, because they are receiving about £400 a year from them. The Government are going out of their way to help those people. It can be argued that their income has not risen recently, although the cost of living has, and that they ought, therefore, to be given some help to enable them to live again in the style to which they have been accustomed. I cannot understand why people worry when they have thousands of pounds invested and are getting about £400 or £500 a year from those investments. They will still have a lot of money when they die, which they can hand on to their relatives, if they do not wish to take it with them in their coffins.
What annoys me is not that so much is being done for people in exceptional circumstances, but that nothing is being done for others who are in a very much worse position. Many workers with families are earning less than £480 a year for a full year's work, but are still having to pay about £27 for insurance

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benefits and £22 in taxation. The Government are selecting those people who have £5,000 invested, and, therefore, have £400 a year coming in, for special concessions, while ignoring those people who are earning low wages. Yet if those poor people fall ill. or have an accident, their £9 a week drops to about £4 10s.
I now turn my attention to those people who are receiving not £9 a week, but, if they are married. £4 12s. 6d. Who are those people? They represent the main body of the nation. They are the relations of people who are carrying on the work of the country, and there are nearly 6 million of them. We are making small concessions to some people and big concessions to others, but we are leaving these people standing still. We are giving them about 30 per cent. of the average wage. Next year at least 10s. will be added to the average wage, and this will make the difference between the old people and the workers even greater.
The question is: how can we ensure that these old people have a reasonable income? This is too great a problem to be tackled in the way in which the Government are tackling it at present. We had to pay 1s. 6d. extra in contributions to enable the single pensioner to receive an extra 7s. 6d. on the last occasion. If we continue to try to look after the old people on the present contribution basis we shall never succeed in giving them a reasonable income. The Government know that, but their policy is not to help these poor people to be independent, in the way in which those with £5,000 invested are independent. The Government are not very anxious to make old-age pensioners sufficiently independent to be able to do without public assistance.
They do not want that. The Government could easily find ways and means of doing it, but they are not prepared to do it on principle. If we are to help the aged people we shall have to change the financial methods that we use at present. This problem is being solved elsewhere—in Germany, France and other places. America is also considering it. The United States is paying a married couple £10 15s. a week, and we are paying £4 12s. 6d. That is a mighty
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difference. There may be a mighty difference in the cost of living, but it shows that this problem is quite possible of solution. It is being solved in Germany by regulations and by law.
The question is: do the people of our country, regardless of whether they are Tories or Liberals, want the aged people to be able to live on a reasonably self-sufficient basis instead of having to undergo a means test to receive National Assistance?
What is the attitude of the Government on this question? At the moment they are suggesting to us that by far the better way of dealing with the problem of the aged people and their needs is to push more and more of them on to public assistance, where they have to give particulars of their family affairs before they can get aid. This will get worse as time goes on. To the extent that rents are raised a bigger percentage of aged people are bound to have to undergo the means test. It has been well-established by experienced investigators-it is not simply a matter of opinion—that thousands of aged people are not prepared to undergo the means test.
They would not have to do this if National Insurance were put on a proper basis, which would enable them to be self-supporting. We could do that without having to draw very heavily upon Government resources. It would not cost the Government a great deal more to make that possible. It is a question of saying how much more people shall contribute towards making such a scheme financially sound. There is no doubt, in my mind, that this could be done if any party considered the matter sympathetically and obtained the help of the public. I am sure that the people who work hard would not mind contributing a little more.
The people who might object will not be those who work hard in the factories, in the pits and on the farms. The big objection will come, as it has done in the past, from those who earn higher incomes. It is part of human nature, apparently, that the more people earn the more mean they are about paying out a little more. They are the people who will be the biggest objectors.
I want to refer to a case which I examined myself, and which I sent to

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the National Assistance Board for consideration. It concerns a married couple who are constituents of mine. The father was injured in the war and the son was killed. After examination, the Board came to the conclusion that the father was entitled to a pension. It was decided later that both the father and mother were entitled to some extra money. They were given a pension on behalf of the father and on behalf of the son. They have managed to carry on, but they are getting old and rather feeble and their health is beginning to break down. They do not want a lot of extra help. They send out their washing and they have also to have home help. That does not cost them very much, 9s. per week.
It must be admitted that people in receipt of pensions for war injuries have an income which is greater than that provided by ordinary pensions. The Government have announced their intentions towards old people and their needs and have advocated the means test. The margin between the ordinary pension and an income following the means test is becoming greater and the Government are endeavouring to create the impression that the extra money which results from a means test is an advantage for old people. In the case of the family to which I refer the maximum disregarded was 30s. The impression was given that this amount would be disregarded completely, but that was not so.
The couple to whom I refer found it necessary to have their laundry done for them and to ask for the provision of a home help. But the cost of these things was refused to them because it was argued that the amount of the disregard was sufficient to cover the cost of that extra assistance. So, in fact, the only people who enjoy the advantage of so-called disregards are those who have no extra expenses to meet. One way to improve National Assistance grants would be to change the situation so that a disregard would be an advantage, in full, regardless of extra needs.
I have been trying to understand some of the economic problems about which various opinions have been expressed. Some people are of the opinion that we should encourage investment and that the volume of our trade should be increased. By these means it is hoped that there will be more production per head
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of the population and consequently the whole country will benefit. I feel that the present financial situation is one which reacts more favourably to the capitalist than ever before.
I have tried to discover what are the prevailing amounts of dividends which investors expect to receive and whether the amount which they get is justified. I have heard it argued that people who had shares in various companies in 1938 then received dividend on their shares to the extent of 5 per cent. and that that was a satisfactory figure at that time. But, in the post-war years and because of the rise in prices and material costs, dividend returns on share capital have increased. This has been going on ever since the end of the war. It is argued that dividend at 5 per cent. is not sufficient. Because of the increase in the cost of living, at least 15 per cent. must be paid so that a person who received 5 per cent. in 1938 may enjoy the same purchasing power today. A newcomer to industry who is investing his capital argues that he, too, should receive 15 per cent. because people who held shares ever since 1938 now receive that percentage of interest upon them. Producing the same commodity, he commands the same price.
The Stock Exchange has issued a booklet which seems to me to make the position clear. It quotes dividends on shares. The average dividend which is quoted is 14 per cent. on each share.
Sir T. Moore: Nonsense.
Mr. McKay: Has the hon. Gentleman examined the figures?
Sir T. Moore: What was the purchase price?
Mr. McKay: The hon. Member is quick to shout "Nonsense". But the booklet to which I refer is available for his inspection. It contains the share capital figure and the dividends year by year, and a figure of 14 per cent. is realised on the average.
I inquired from the Treasury what were the dividends for companies which appear in Table 3 in the Blue Book covering nearly all the industries of the country. I could not get all the information for which I asked, but I was told that two-thirds of these companies paid a dividend of 16½ per cent. in 1954 and 15 per cent. in 1960. So we have the

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Stock Exchange figure of 14 per cent. and a figure of 15 per cent. for the companies referred to in Table 3 of the Blue Book. It seems to me, therefore, that they get a better dividend percentage per share than that indicated in the Stock Exchange booklet.
Is there anything attached to that financial situation which is worth considering? To my mind, there is. If a company is selling commodities, and getting 14 per cent. or 15 per cent. dividend, is there anything else that it can get? It can get undistributed profits. Mr. Jay mentioned some of these things the other day. He knows what he is talking about. What are the undistributed profits which these companies are getting? There is no mystery about this. It is in the Blue Book. Do the undistributed profits amount to 5 per cent., or are they similar to the dividend which has been received?
I have the figures, and can give them if necessary. In most years the undistributed profits are three times as great as the dividend. If a company has a dividend of 12 per cent. or 15 per cent. and has extra profit which is three times the amount of dividend retained is that not a rather big return? Is it an absolute necessity? Is it to a large extent an organised practice in industry?
It is amazing to think that at any time when we are in difficulties over trade that is the situation. Yet that is what this Blue Book says. It gives the total dividend and the total undistributed profits, which are nearly three times the dividend. We can try to get over a crisis by increasing the productive power of industry and to that extent we can get production and reduced profits, but this kind of thing is repeating and we are not getting at the root of the problem. We get into difficulties over balance of payments, and so on. People who have the power seem to have no idea of getting prices down. Have industrialists any real desire to get prices down? Is pressure brought to bear on employers to keep prices down?
No pressure of any great consequence is put on industrialists. They are all doing well. We may be able to point to some companies which are doing badly, but we have to look at these matters in a general way. The Government have to find out where there are
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ways and means of getting over this difficulty. Unless great pressure is brought to bear on industrialists, there will be no beneficial factor in it. How some hon. Members opposite can stand on their feet—
Hon. Members: We can
Mr. Kenneth Lewis: On a point of order. Since I am not interested in speaking in this debate, may I point out that the hon. Member for Wallsend (Mr. McKay) has been speaking for 35 minutes? May I ask whether he is winding up for the Opposition? Thirty-five minutes seems to be a long time.
The Temporary Chairman (Mr. James McInnes): That is not a point of order.
Mr. McKay: Are there any ways and means whereby the Government might be helpful? Could a case be presented on actual information supplied by the Government? Do they agree that the returns made by industrialists today are—[Laughter.] It is all right laughing, but if the people knew exactly what was happening—[Interruption.] It was all right when Lord Hinchingbrooke spoke. There were no interruptions of his speech, which had no sense in it and no attempt to deal with the problem, but which was a wild story of what he would do.
Mr. Webster: Is it in order, Mr. McInnes, to refer to the noble Lord by name and not by constituency?
The Temporary Chairman: No it is not in order. The hon. Member for Wallsend (Mr. McKay) has referred to hon. Members on two occasions in that way. I hope that he will address and refer to hon. Members in the proper fashion.
Mr. McKay: I did not want to breach the rules. I notice that another hon. Member used the term "Lord", but did not mention a name. I am sorry, Mr. McInnes; I will not do it any more. I am not trying to talk party politics but economic sense. That may take some time, but I think that I have as much right to take time over that as has anyone else.
The question is: can we collect that information? I could not get to know

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what the price was, or exactly what was the position, to show that the undistributed profits were of such a nature and size that if there were an attempt to deal with them honestly and fairly for the nation at large something could be done about them by industrialists. I looked at Table 3 and considered the trading profits and the collective wages and came to the conclusion that, taking one-third of wages as the cost of material, the total of wages, trading profits and material would roughly give the price.
When we take the trading profits with the other factors and add the undistributed profits we find that the undistributed profits are equal roughly to 10 per cent. of the approximate price. If the undistributed profits collectively are practically 10 per cent. of the price, there is an opportunity for the industrialists to see whether, instead of relying on investment and getting more production, there is something in their own hands by which they can reach a financial position in which employers collectively could reduce the price. If industrialists are exploiting the nation by demanding such enormous dividends and retaining such huge sums as undistributed profit, it is time that pressure was brought to bear on them as well as on wage earners.
Anyone who asks for wage restraint is talking about 24 million of his fellow countrymen. The Government have tried to put a collective responsibility upon the wage earners. The Government allege that our economic troubles are caused by excessive wages. Yet Stock Exchange capital rose by 59 per cent. in five years and Stock Exchange dividends rose by 73 per cent. in five years. The dividends of the companies set out in the Blue Book also rose alarmingly, 70 per cent. in five years. But the individual earnings of men on piece work, who depend on the money they receive for their very life, rose by only 37 per cent. and the total bulk of wages in the five years rose by only 28 per cent.
In spite of this, it is continually alleged that our economic troubles are caused largely by the wage demands of the people. What a farce and an untruth! Bulk wages, including lower-paid men and everyone else, instead of rising by 70 per cent. in five years, have risen, according to the Blue Book, by only 28 per cent. These are some of the
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figures that my right hon. Friend the Member for Battersea, North (Mr. Jay) mentioned. They are not farcical or imaginary figures. They are contained in Government returns.
In all these circumstances, I do not know how the Government or anybody else dare give the impression that the wages of the workers are responsible for the nation's troubles.
8.13 p.m.
Mr. Edward du Cann: The hon. Member for Wallsend (Mr. McKay) in that part of his speech which related to the problems of old people spoke with sincerity and made a number of very worth-while points to which I shall refer later. In the second half of his speech when he discussed the financial affairs of companies and of the country at large—I say this with great respect to him—he was much wider of the mark than I have ever heard any other speaker in the House of Commons be, and that is saying something. This is a matter which we might discuss together some time, when I shall do my best to put him right.
I think that it is right to come back to the Budget now. I want most warmly to congratulate my right hon. and learned Friend on his Budget. It is a tough Budget, but I believe, that it is a sound and sensible one. If the country were now in a state of economic crisis, it is abundantly clear that my right hon. and learned Friend would be criticised very sharply on both sides of the Committee for that. It is, therefore, appropriate that we should offer him our congratulations that the balance of payments is better than it has been for some time. That is not to say that it is yet totally satisfactory. We should also congratulate him on the fact that exports are rising and imports falling, although we should again like to see further progress made, and so would he. We congratulate him, lastly, on maintaining a state of full employment, though again many of us on both sides of the Committee, judging by what has been said already, think that we are in a state of over-full employment.
It is a fact that the standard of life in this country is very high. It is a fact that it is continuing to rise. My right hon. and learned Friend, as the chief administrator of the economic well-being

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of the nation, deserves the credit for this, together with his colleagues. This creates a slightly difficult situation in England, for this reason. We are a curious people. We are much happier in defeat than we are in victory. For example, we remember Dunkirk very much better than we remember El Alamein.
There is a difficulty in the United Kingdom at the moment in that people find it hard to adjust themselves to the new lush circumstances in which they live. They are able for the first time for many years—a very different picture exists today from that which existed before the last war—to fill their houses with material goods, which make living so much easier. They have more money in real terms and more leisure than they ever had before. They find it difficult to adjust themselves to the new situation.
As a result, there is perhaps an especial need for the Government to give the people a lead and a clear purpose and particularly, through fiscal measures and in other ways, to ensure that in their philosophy they are given something concrete to bite on. It is clear that the people look to the Chancellor of the Exchequer in this Budget to give that lead. We have heard much criticism from commentators outside Parliament and from speakers on both sides of the Committee to the effect that my right hon. and learned Friend has not fully done that. In some ways he is the prisoner of the Budget situation, because before Budget day commentators in this place and outside it build up the position greatly. I believe that the public is led to expect far too much and far more than any Chancellor of the Exchequer could possibly deliver.
This is most unsatisfactory. After all, the purpose of the Budget is twofold. Its first purpose is to provide the revenue which the Government must have to administer the country. Its second purpose is as an instrument to control the economy, but it is only one of many instruments and it is by no means the chief instrument. The sooner that point is better appreciated in the country at large the better.
Our economy requires constant surveillance. Now that the Chancellor of the Exchequer has so rightly set
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up the National Economic Development Council, which everyone on both sides of the Committee wishes well, it is plain that the Budget will become of less and less importance as a single instrument to control the national economy. I hope very much that the Council will look particularly into the training of labour, the mobility of labour, about which the hon. Member for Gloucester (Mr. Diamond) so rightly spoke, the hoarding of skilled labour, which has been one of our economic difficulties in recent years, and especially into restrictive practices on both sides of industry. Last, but by no means least, I hope that the Council will pay particular regard to the need for realistic training and apprenticeship schemes.
All these things will happen. It is quite wrong for anybody to feel let down because the whole financial system of the United Kingdom has not been turned upside down by the Chancellor of the Exchequer on this occasion. In any case, he would have been quite wrong to do that, because the most effective changes are probably those which are accomplished most gradually. He has himself already endeavoured to reduce the scale of importance of the Budget in the context of our national affairs, it seems to me, by sparing those of us who have to sit on these benches having to listen to the usual thirty minutes of economic polemics which used to precede the announcement of the previous year's results. I congratulate my right hon. and learned Friend on that, and if he can further reduce the occasion of its importance it would be a good thing.
Incidentally, I must say that the Opposition, and some of the outside commentators, do themselves a disservice by finding their chief line of argument or discussion on the Budget to be this new tax on sweets, soft drinks and ice-cream. It is, of course, perfectly true to say that it is to some extent hard upon the children and, perhaps, on old and retired people, but on the generality of the community it is a tax that is very much overdue. I went to the cinema the other night, for the first time in a long time—and saw such a wretched film that I cannot see myself going again for a very long time—and noted in the interval that the queues for the sweets, soft drinks, chocolate, popcorn and the rest

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were enormous; and the noise they made eating those things afterwards was almost a disgrace.
The truth is that it is not the price of admittance that makes the cinema pay so much as the sale of the soft drinks, sweets and chocolates, and so on in the interval. The agitation about this tax I believe to be completely "phoney". Indeed, if that is all the Opposition can find seriously to complain of it is an indication that the Budget is just about right for the national needs.
This Budget is, of course, a standstill operation. It is a holding measure. Its purpose is to consolidate the gains we have made since the financial crisis of July—and the very substantial gains made in raising the standard of life ever since the Conservatives formed the Government in 1951. As such, I support it. In some quarters it has been called dull, but that is a totally misleading description. Rather, I regard it as being an exciting Budget, because it is setting the stage for sound growth in 1963 and 1964.
I believe that the country is beginning to be only too well aware of this, and only too well aware of the fact that it would have been very easy for the Chancellor to give money away—as it is called, although that is the wrong phrase, because he only returns to the people their own money in tax concessions—and be popular. I do not believe that that is what the people want, but that, instead, they congratulate the Chancellor on budgeting for a borrowing requirement of only £74 million, which compares with last year's estimate of £69 million.
Of course my right hon. and learned Friend had to rein in. Of course he was right not to try to bribe the electorate in any sort of way. After the Chancellor's television appearance, which I dare say many hon. Members saw, one of my constituents wrote to the following effect:
"I was very much struck by the way in which the Chancellor said that he would do what he believed to be right in the country's interests and, so to speak, devil take everything else. I will always support a man like that and so, I believe, will the country at large."
That is profoundly true.
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I have spoken about the excitement of the Budget. There is some excitement. If a man gives a lead there is excitement. There is excitement in the Purchase Tax consolidation leading, as it so obviously does, to a change to an overall sales tax, maybe to export incentives, and so on, in due course. There is excitement and good sense in the idea of a single corporation tax. That might make United Kingdom investment very much more attractive to foreigners. It is particularly noteworthy that the volume of investment in the United Kingdom in common stocks, as it were, gilt-edged stocks, in the last year amounted to £184 million, of which £155 million was in the last six months of the year. That is a great thing. There are great opportunities here. It is completely and totally right that the Government should be taking us forward, so to speak, gradually into a prospect of change.
My noble Friend the Member for Dorset, South (Viscount Hinchingbrooke), whose speech I very much enjoyed and with which I very largely agreed, spoke about the moral purpose of our nation. I have felt for a long time, and I think that many hon. Members will agree, that it is distressing to see the growth of materialism in our country. It is perfectly plain that an attitude has developed among people of all classes and types of seeking to grab all they can for themselves, and "devil take the hindmost", which means very largely at the expense of the other fellow. I do not say that everybody does it, but it is a tendency, and we are all very well aware of it. For my own part, I deplore it.
The Government have introduced the pay pause. This has not been altogether a satisfactory policy, as we all know. In the first place, it has been thoroughly unfair, particularly on some civil servants, on the nurses, especially, and it is also true, as my noble Friend said, that a coach and horses was driven through it by the Electricity Authority, among others. I thought that the responsible Minister at that time should have resigned, but that is neither here nor there.
On the other hand, that policy has succeeded, from a psychological point of view, I believe, beyond our wildest dreams, for the country is at last fully

1599
aware of the need for voluntary restraint. It was prophesied when that policy was introduced that it would perhaps lead to a head-on clash between organised labour on the one hand and the Government on the other. That has not occurred, and I congratulate both the Government and organised labour on handling the situation so tactfully. It is plain that our competitive position is improving, as my hon. Friend the Economic Secretary to the Treasury said in his very able speech this afternoon. It is plain also that if this policy succeeds in the end, it will be those very people Who are practising restraint at the moment who will be the gainers, and, what is more, they will deserve success.
The second aspect of life which has bothered me very much has been the attitude of our citizens to the Welfare State, and, indeed, to the State in general. The other day, I was driving my little car—and. in view of what was said by the hon. Member for Sowerby (Mr. Houghton) about business expenses, I should immediately say that it is my own car—from my office to the Palace of Westminster, when I turned on the radio hoping to pick up Mr. Acker Bilk, who is a well-known son of Somerset—
Mr. Webster: Hear, hear.
Mr. du Cann: I am glad to have the support of my hon. Friend the Member for Weston-super-Mare (Mr. Webster), whose constituency I think he comes from. Instead of that. I got Lord Morrison of Lambeth, a very different thing altogether, being interviewed. He was asked what his impressions were regarding the greatest changes he had noticed in his very distinguished life in politics and public life in Britain. He replied "I remember how when I first became interested in politics the slum dwellers in the parts of London with which I was associated were opposed to any political party which wanted to change and improve their circumstances. They said 'We will not be interfered with'."
Today, of course—although he did not go on to say this—the situation is very different. Sometimes, on reading my mail and when holding interviews on Saturday mornings, I think that it is the chief aim of the community to get everything they jolly well can out of the
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State. We are all proud of what the Welfare State has achieved, and these achievements are very real. One has only to go to one of the modern secondary schools, a housing estate, or a hospital to realise that we have every right to be proud of what we have—politics apart—all created together.
Mr. Mitchison: With a few divisions.
Mr. du Cann: If the hon. and learned Member for Kettering (Mr. Mitchison) wishes to intervene, perhaps he would be good enough to stand up.
Mr. Mitchison: The hon. Gentleman says that we have all created it together; I said "With occasional divisions". There were divisions at the time.
Mr. da Cann: The hon. and learned Gentleman is, as usual, absolutely right, but that has not stopped us getting on with it, and I think that between us we have not done a bad job. On the other hand, I think there is a good deal more to be done in the psychological field. A constituent of mine said to me at a meeting the other day in the broad Somerset language which I will try to imitate, "My dear, the trouble with you and that than Government is that you do too much for us. You want to let us stand on our own feet a bit more." That is absolutely true. We should concentrate much more on giving aid where it is most needed. We should stop assisting everybody irrespective of whether they need help or not.
Of course, this is sound, old-fashioned, radical Conservative doctrine, enunciated by past leaders of the party like Burke, Disraeli and others. I was glad to hear my noble Friend the Member for Dorset, South repeating it this afternoon. Of course, we have done a great deal in moving towards it. The future abolition of Schedule A is a step in the right direction, as was the reduction in Stamp Duty on house purchase. The abolition of the general housing subsidy and the substitution of new subsidies for building houses for old people and clearing away slums are also steps in the right direction. The tax concessions to old people are very fair and much required.
May I say in reply to the hon. Member for Wallsend that one does not have to have a great deal of capital to produce an income of £400.

1601
One needs only to invest £8,000 in War Loan. A few days ago a constituent of mine told me how he had worked like mad for twenty years in building up a little sweet, confectionery and tobacconist business and then sold it for £9,000 He invested that money and was living in retirement with his wife on the income from that investment. I say, jolly good luck to him. That is a fine thing for a person to do with his life. To suggest that people with incomes of £400 a year are all bloated capitalists and enemies of society is totally and absolutely wrong.
I support the increase from £3,000 to £4,000 in the minimum level of Estate Duty. All this is excellent, but I say that, although this Budget fits the general pattern, the main stream, of Conservative philosophy, thought and policy, it does not go far enough. My noble Friend the Member for Dorset, South was right when he suggested that more should be done in health and education matters to ensure that people paid for what they received. Let us concentrate on endeavouring to do what we can to build a nation of independent people, not a nation of people always expecting their problems to be solved by their local councillors, local Members of Parliament, or by the Government. People must learn to settle their problems for themselves.
Mr. McKay: If the hon. Gentleman thinks it right for the Government to give £22 a year, arising out of regulations, to people of 65 years of age or so with £5,000 or £9,000, as the hon. Gentleman said, invested from which they get an income of £400, whereas the man in the factory or on the farm who is working every week—
The Temporary Chairman: Order. I thought that the hon. Gentleman wished to put a question. It seems that he is making a good attempt at another speech. Will he put the question direct?
Mr. du Cann: If the question is not put, I cannot answer it.
Mr. McKay: That is all right.
Mr. du Cann: I repeat that this is a proper thing to have done. I most warmly support it and I am glad that it has received support from both sides of the Committee.
1602
I wish to deal very shortly with the subject of economy in Government expenditure because I think that this is a part of the same psychological process. If there is something wrong with the behaviour and attitude of the Government, it is that we are not sufficiently clearly projecting our policies. For example, I have not heard it said in this Budget that we are, so to speak, in the main stream of endeavouring to help people to stand on their own feet and encouraging independent-minded people. Economy in Government expenditure is something to which we have to devote very much more attention.
I heard it said this afternoon by a distinguished back-bencher, a Privy Councillor and former Minister, namely, my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), that he did not believe it possible to effect economies unless there were radical changes in policy. He went on to argue that this was not necessarily a matter which Ministers could decide for themselves, and he took agriculture as his example. I could not disagree with what he said more strongly. I do not know why it has not been made very clear to the farming industry, as some of us have tried to make clear in our constituencies over a long period, that it must face—and the sooner it faces it the better—a radical change in the system of support. I do not believe that there has been any need for us to be hoisted with this open-ended situation.
Mr. Turton: If my hon. Friend will read in the OFFICIAL REPORT tomorrow just what I said he will find that I stated that, so far as I knew, there was no machinery at present by which either Ministers or Parliament were reviewing policy to see how they could effect economies. I instanced agriculture as one where they should make such a review.
Mr. du Cann: I apologise if I misinterpreted my right hon. Friend's remarks but it is plain that we are agreed on the main point that there is urgent need for reform in this connection and, I dare say, in others.
One recognises that it is not easy to introduce sweeping changes and reductions in Government expenditure, but I remain totally unconvinced that economies are not possible. All hon.

1603
Members are familiar with cases in their constituencies where economies would be possible. In my constituency, for example, the Home Office intends to spend the enormous sum of £300,000 on the building of an approved school.
I am sure that that Department could find an old mansion which would be suitable for this need. Indeed, the advertisement columns of the newspapers are full of mansions for sale, many of which are excellent for institutional purposes. But no, For some reason the Home Office must have a brand new school in the middle of nowhere and, of course, a further £15,000 will have to be spent to provide new roads. Meanwhile, I cannot get a few pounds to improve the roads which really do need a bit of money spent on them. This is just one of many instances that could be given. It is urgent and essential that the Government should set local authorities and the nation as a whole a strong example in this regard.
I wanted particularly tonight to plead that something be done to encourage a greater volume of saving. This is a field in which the Government could do much to encourage people who are anxious to stand on their own feet. But, because of the time, I will content myself by making that general plea and I hope that it will be possible to discuss this matter more widely in Committee on the Finance Bill.
I am a strong supporter of this Budget. I believe that it has many good features. But it has one thoroughly bad feature—the capital gains tax. It is possible to argue that it is a tax designed, so to speak, to make people who, somehow or other, do not have an opportunity to make gains of any sort feel a little happier. That suggestion is very much exaggerated and I believe that the tax has substantial demerits. It is, as my noble Friend the Member for Dorset, South said in his excellent speech, the thin edge of the wedge. Hon. Members should make no mistake about that, for that is what it is.
If we ever have a Labour Government or a Lib-Lab coalition it is true that they would grind the knife in a little deeper.
Miss Margaret Herbison: Hear, hear.
Mr. du Cann: Indeed, they make it plain and I am glad that it has been made plain. The suggestion that there should be a harsher rate of tax indicates very clearly that the ideas of the hon. Member for Lanarkshire, North (Miss Herbison) about social fairness are totally out of date.
This form of taxation is psychologically damaging. How on earth can we expect to raise new capital for industry if the Government—indeed, if any Government—intend to engage in this sort of enterprise? How can people be expected to produce the money that is so urgently required to keep British industry going? I believe that it is absolutely certain, at least in the short term, to restrict the operations of the London market. A market is only as good as its turnover. It is too early to judge, of course, but the turnover of the London Stock Exchange is already down. If we want London to become the financial centre which we all hope it will be when we go into the Common Market, we have set the process back by the introduction of this tax. It is the old game. We are catching a few, perhaps, and we are wrecking the situation for the many.
Lastly, I believe that this tax will do positive harm, apart from the psychological effect which it is bound to have, because there will be innocent transactions interfered with. I have written to the Chancellor on this subject, and I will not go into detail now. I am sure that this is not my right hon. and learned Friend's intention, and I hope that he will give attention to these matters as the debate on the Finance Bill proceeds. In my view, this tax is a blot upon the Budget which otherwise I strongly support.
8.41 p.m.
Mr. Ifor Davies: Before I comment on the speech which we have just heard from the hon. Member for Taunton (Mr. du Cann), I wish, as a Welshman, to take this opportunity to congratulate my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) on his excellent maiden speech as the shadow Chancellor of the Exchequer in reply to the Budget. It was a speech worthy of a representative of the capital city of Wales, and I am happy to offer him my congratulations.

1605
The hon. Member for Taunton gave us a hymn of praise on the Budget, with some reactionary suggestions. His speech was characteristic of nearly all the speeches I have heard from the benches opposite. The hon. Gentleman called the Budget a tough Budget, a standstill Budget, a holding operation. He even said that it was "exciting". This is typical. I have heard most of the speeches in the Committee during the past four days. The remarkable thing is that, when we compare the speeches from right hon. and hon. Members opposite not with speeches made from this side of the Committee—for we may be charged with political bias—but with the comments in the free Press, we can hardly recognise that it is the same Budget that is being discussed.
The hon. Member for Taunton praised the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), who made a deplorable speech, in my view. He gave a display of dramatic indignation about the so-called capital gains tax. He exhibited great indignation in referring to the pay pause and the attempts which have been made to stop it. He went further and proposed a means test, in connection with the social services and he proposed that there should be a tax of 5s. per family per week to pay for education.
The noble Lord did not utter a word of indignation about the plight of those who need consideration, the people that my hon. Friend the Member for Walls-end (Mr. McKay) told us about, those who are in need and suffering as a result of some of the social injustice which still exists.
The noble Lord treated us to a poetic reference. I reply to him with another quotation:
"Ill fares the land, to hastening ills a prey. Where wealth accumulates, and men decay."
I am sorry that the noble Lord is not here to listen to that.
I have said that it is difficult to recognise that it is the same Budget when one compares comments on it in the Press and in the speeches of hon. Members opposite. Here are some comments. The Daily Mail, for instance, which is certainly not a Labour Party paper, says:
"No inspiring take-off for Britain's forward leap."
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For once, I agree with the Daily Mail. The Times—not exactly a friend of ours—described it as "waiting for Neddy".
I see that the Chancellor has returned. I believe that he claims Welsh connections, so I shall refer to some Welsh journals. The Western Mail described the budget as being
"…a typical Conservative half-way Budget."
That is a significant comment. The South Wales Evening Post said that the Budget contained "nothing to inspire."
I can agree with all these newspapers. The comment by the Daily Mail is precisely our criticism—that there is no inspiring take-off for a leap in our economy. A Budget must be designed to ensure that the Government earn enough revenue to meet their commitments, but the real test of a modern Budget is whether it promotes national efficiency and production, stimulates exports and charts a course for the national economy. But this Budget, as a revenue regulator, is unfair, and as an example in leadership is pathetic.
On Monday, the nation was waiting anxiously for a lead—which is what the hon. Member for Taunton said that a Budget should give. Even the Stock Exchange says that it was waiting for a lead. Instead of an inspiring call, however, we were given a depressing recital of doubts and promises. It has been said that the British people are never better than when facing difficulties, and I believe this to be true. No one can deny, after listening to this week's dismal record of our economic position, that we are not in difficulties. Here, then, was the psychological moment to make a clarion call for a tremendous national effort based upon proposals fair, equitable and able to stand up to the important test of social justice.
By one single announcement, the Chancellor could have changed the atmosphere in the country. An example of that has been mentioned already—the cancellation of the Surtax reliefs. If he could not have done that, the Chancellor, alternatively, could have imposed a real capital gains tax and not just a sham tax which, it is admitted, will yield only a little; but a proper capital gains tax, which it was estimated in the minority Report of the

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Royal Commission on the Taxation of Profits and Incomes, in 1955, would yield about £300 million. The Chancellor could also have taken the important step of convincing the nation that he really wanted to promote productivity by offering an incentive. The best incentive in this direction would have been a change in the disastrous pay pause policy. It is claimed that this policy has achieved some success. But at what price? I spent most of my working life, before I came to the House, in industrial relations. In this country, after tremendous efforts, we succeeded in building up machinery for wage negotiations of which we are proud. But, as a direct result of the Chancellor's disastrous interference we have witnessed unprecedented action, not by irresponsible militants but by people such as teachers, Post Office workers, and even university professors. These people feel such a sense of grievance that they have been forced to demonstrate their feelings, for the first time ever.
Instead of improving the atmosphere, however, the Chancellor made matters worse by imposing another item of Purchase Tax. I do not want to say a great deal about it, but I must make a comment on it, because this was the meanest tax ever introduced by a Chancellor. The right hon. and learned Gentleman defends himself as a father and claims that sweets are a luxury. I answer him also as a parent of young children. I am convinced that one of the essential pleasures of a child's life is the gift of sweets. The only other comment that I want to make is to ask the nation to compare the yield of £50 million from this tax with the relief of £83 million to the Surtax payers.
The Chancellor has missed a very great opportunity to take the initiative. What is he waiting for? Can it be that The Times is rigfht in saying that he is waiting for "Neddy"? I remind the Committee that on Monday the Chancellor said that the setting up of the National Economic Development Council was a step of major importance. I agree entirely. But if the Council is of major importance now, why has it taken so long to introduce it?
The hon. and learned Member for Liverpool, Garston (Mr. Bingham) challenged
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us yesterday evening to give the Council our support. Let me say at once that I wish it well, but let me also say that we on this side of the Committee have been advocating planning for expansion for a very long time. The Council is, after all, only an advisory body. It is the Government's responsibility to plan the nation's economy. Indeed, the noble Lord the Member for Dorset, South was right when he said that it is the Cabinet's business to give a dynamic lead.
The Chancellor said on Monday that the Council had a threefold task. This is worth repeating. Its task is to examine, to consider and to recommend. I want particularly to comment on the second:
"to consider together what are the obstacles to quicker growth, what can be done to improve efficiency, and whether the best use is being made of our resources."—[OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 968.]
But there is no need for the Chancellor to wait for the Council to tell us what can be done. Indeed, in the Economic Survey we read:
"Public opinion is increasingly aware of what these objectives mean; an example is the current concern about the inadequate training of apprentices and of adult skilled labour."
I was very glad indeed to hear a reference to this in the speech by my hon. Friend the Member for Gloucester (Mr. Diamond)—it was the first time I have heard it in this Budget debate—and it was mentioned also by the hon. Member for Taunton, later.
In this context, I listened to the speech by the Parliamentary Secretary to the Ministry of Labour on the Adjournment last Thursday in reply to the hon. Member for Rutland and Stamford (Mr. K. Lewis). The Parliamentary Secretary said:
"Our expansion has been consistently held up"—
the hon. Gentleman did not say "by strikes" or by absenteeism—
"by shortages of skilled labour."—[OFFICIAL REPORT, 5th April, 1962; Vol. 657, c. 816.]
He added that the present position is that for every machine tool setter unemployed there are ten vacancies and for every turner unemployed there are eight vacancies. It is obvious that our very prosperity as a manufacturing nation depends to a great extent not only on our technological skill and our technicians, but also on our skilled craftsmen.

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This morning I received the third annual Report of the Development Corporation for Wales, a Report which is comprehensive and well produced. Under the heading "The prerequisites of a Balanced Economy", it states that in the constitution of a balanced economy there are seven elements, but I am glad to note that the first is quoted as follows:
"The best use of the employment potential of the various parts of the area under review, men, women and youth."
I entirely agree with that, but it was said as long as four years ago by the Carr Committee, the Government's own advisory committee. Yet the Government still insist that industrial training is a matter for industry.
In this year of the bulge, only 38 per cent. of all the youths entering employment will obtain apprenticeships, and in Wales the figure is only 28 per cent. I agree with this Report and with the statement last Thursday by the Parliamentary Secretary to the Ministry of Labour when he said that our prosperity largely depended on the increase which we could get in our skills. Apprenticeship and training should not be left to chance, therefore, but should become a matter of national responsibility. We need a national scheme.
Here is a proposal not for a Development Council to consider, but for the Government to implement, for in the last resort an increase in productivity depends on the nation's human resources, the workers by hand and brain in every sector of industry. To train them and, having trained them, to give the fullest play to their talents, should be our top priority. This is the way to improve our efficiency and to ensure the growth of our economy, which should be the main theme of this Budget.
8.57 p.m.
Mr. G. R. Mitchison: I earnestly hope that I have not been responsible for any undue shortening of what my hon. Friend the Member for Gower (Mr. I. Davies) was saying so eloquently, for I agreed with every word of it. I have been listening for most of the four days we have been talking and I have read the rest of what has been said, and I think that we have had a more man usually interesting debate on
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what I shall suggest was a rather dull Budget. Hon. Members have gone some way beyond it, very rightly, for at this time of year, ever since the late Sir Stafford Cripps introduced the practice, we discuss the country's economic situation as well as the actual terms of the Budget, afterwards to be incorporated in the Finance Bill.
There is one matter on which I agree very cordially with my hon. Friend the Member for Sowerby (Mr. Houghton). I should like to congratulate the Government on a quite remarkable feat of conjuring. They have succeeded in getting through four Government speeches and reviewing the country's economic situation and the Budget proposals without once mentioning the £80 million concession to Surtax payers which comes into this year's finances and for which the figures are in the Financial Statement and so on.
This is getting a little too skilful. There is a limit to political] tactics, perhaps especially for the Chancellor of the Exchequer, and there comes a time when he ought to tell the country that this, too, should be taken into account. We can all see his reasons for not wishing to do so. It would fit very ill indeed with some of the proposals which he has been putting before the country and some of the proposals in this very Budget.
For the rest of the Budget—and I say the rest of the Budget because I count the Surtax in it—we may at first sight be tempted to say that it would not really have made any difference if he had said, "No change, boys. Carry on as before". That is not quite so. That is, of course, the final balancing effect of the Budget. There is a very small change one way or the other. No one pretends that there is anything else, but there are some matters of some importance in it, and I am going to mention one or two of them.
The right hon. and learned Gentleman has very properly met, I think, the first two Amendments of the Opposition in last year's Finance Bill—I think that we have had them there for some time now—and given small income relief and dealt favourably with age exemption limits. These are very small beer. There is little money in these two concessions, but they are quite right and I am glad that we persuaded the right hon. and learned Gentleman.

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I am not going to say very much about sweets. I see the dental case, if I may so put it, but I do not think that that is the real reason for the tax. It is unfortunate that the tax has been put on at the moment when we have had the report of the Royal College of Physicians about tobacco, because many people who are trying to give up smoking eat a lot of sweets in the process, and I think that this is a wrong moment to put on the tax. But lately the Government have been hunting for new things on which to put Purchase Tax. and some of their efforts are really quaint. The last couple that I had to deal with were taking tax off garden mowers and putting it on to fireworks. We had quite a lively debate about it. This is the same sort of thing. The Government go hunting round for something on which to put Purchase Tax, and I agree with the comments that have been made, in the same way as I did with the comments about fireworks. It is rather unfortunate that every time they choose things that children want. The Government say that it is only a little one. The sort of pickpockety noise that we had from the Government—"We are just filching a little out of their pockets; they really will not notice "—falls a little flat when one finds that the total is £50 million in a full year and £30 million this year. It is really quite a substantial tax.
The other thing is the Purchase Tax arrangement. In 1955—that was, if I have kept count correctly, the last financial crisis but one; but it may have been another; one loses count of them a little but they all run absolutely true to form—we had the present Home Secretary bringing in for the first time, after the General Election—that was rather a quick one, because it came directly after the General Election and this has been just a little bit slower—Purchase Tax on pots and pans, brushes and household goods, and all kinds of things. These things had been taxed during the war, but directly after the war Mr. Hugh Dalton, as he then was, took the tax off household necessities, things like furniture, and so on. They were then introduced in that financial crisis at the 5 per cent. rate.
We objected to it strongly at the time We said that it was—as indeed it was
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—a regressive tax, a mean tax, and from every point of view thoroughly unsatisfactory. We have never liked it. We have been in the difficulty time and time again of not being able to deal with individual cases of Purchase Tax. I do not complain of that. It was actually Sir Stafford Cripps who introduced the Resolution and I see the reason for it. But what is happening now? That tax is being doubled, and it is part of the financial arrangement that the Chancellor is bringing forward. What is more, it is not only those things. It includes clothing, and the staple trade in my constituency, boots and shoes.
It is a fantastic sort of civilisation which, in the same Budget—and apparently for a reason which satisfies the Chancellor—lightens the tax on motor cars and doubles the tax on boots and shoes. Some people still have to walk; not everybody has a motor car. But it is part of good, sound Tory policy to lighten the tax on motor cars—the Press comment on this concession was that all the agents and dealers in the motor-trade would be drinking champagne that night—and at the same time to double the tax on boots and shoes. I am only taking boots and shoes as an example. Somebody was talking about the number of people who used various articles. Almost everybody has one pair of boots and shoes. Some have two. The number involved is, therefore, quite considerable.
In fact, the boot and shoe trade is in some difficulty at the moment. Its members have written to the Chancellor, and have sent to other hon. Members and myself a copy of the letter, in which they point out, rightly, that there is some short-working in the trade and some redundancy. They do not say, as they might, "It is enough for us to have to deal with Mr. Clore, without having to deal with the Chancellor, too."
I cannot see the reason for these changes. The whole business of bringing the two ends of Purchase Tax together is, in essence, regressive, because of the effect it has on those articles which ought never to have been taxed in the first place, and in respect of which the tax certainly ought not to have been doubled. I cannot understand what it is all about. The Chancellor told us that he was not heading towards a sales tax.

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Is this, therefore, a sort of preliminary step before we know what the conditions of entry into the Common Market will be? If that were the case, the Government would not be acting quite straight, in face of what has been said about our not going into the Common Market unless the conditions were satisfactory. But one's ideas of what is straight are so odd.
I come now to the famous speculative gains tax. My hon. Friend the Member for Sowerby and I had a look at the Evening Standard. I shall not quote it all again, but my view is that people who commit crimes should be dealt with by due process of law. I wonder whether hon. Members opposite will tell me whether they think it right or wrong, or criminal, to incite people to defraud the Inland Revenue, and whether they do not regard what the Evening Standard said as just exactly that. I shall read it out slowly and carefully. The newspaper says:
"The eager speculator will probably want even more freedom of movement."
That is quaint language, but there is nothing very wrong so far, by Evening Standard standards. It then goes on to say this:
"Two courses which are not strictly legal but which, because of the great difficulty of checking on them, will undoubtedly be used, are "
so and so, and so and so; I do not see why I should advertise these things by reading them out again. I do not know whether they are good or bad courses, but I regard that passage as a direct incitement to the readers of that newspaper to defraud the Inland Revenue. The newspaper says, "These courses are not legal, but you are unlikely to be found out."
What does the Chancellor say about that, and what does he say about a tax that immediately provokes such a statement? Also it tells people that they need not bother too much, because they need only wait for six months and a day and everything will be all right, and then goes on to point out a legal way out and says that the accountants are busily engaged in concocting other ways out. Have not we had enough trouble with dividend strippers and the rest without introducing a new tax which is greeted by everybody as being the leak of all leaks, and as having more holes in it
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than anyone has ever been able to devise before?
What is the Government's defence? The Chancellor says, "Revenue is not my main purpose. What I intend to achieve is a greater sense of fair treatment between taxpayers." I suppose that some taxpayers read the Evening Standard. If they happen to be engaged in a Schedule E P.A.Y.E. occupation, without the opportunity for playing any of these games, I wonder whether they will be impressed by the fair treatment between taxpayers which is arrived at by the introduction this tax, or by the fact that it was apparently introduced to achieve fair treatment. I should have thought that the party opposite might have thought up something a bit better than that. This is too thin. It will not wash. Nobody will believe that the Chancellor really thought that he would get away with that one.
I say to him that I think it a very great pity that hon. Members opposite who tell us, as the hon. Member for Taunton (Mr. du Cann) did just now with perfect sincerity, that the one thing that they object to is materialism, will be faced with having to defend, as the right hon. and learned Member conspicuously refused to do, this really rather shameful tax, introduced to produce a greater sense of fair treatment between taxpayers. It is a most discreditable performance to bring in that sort of tax and to defend it in those sort of terms.
I am sorry to say this to the right hon. and learned Member. He knows perfectly well that I am talking only about his political activities and that I would not dream for a moment of saying anything of the sort about his personal character, but I do say that I regard this as a semi-fraudulent attempt from a political point of view to persuade the public that the Government are really doing something about capital gains at last.
Of course they are not doing anything about capital gains. This is about the silliest measure one could think of, and it will not have the effect that the right hon. and learned Member intends it to have. He has brought it in—and this is significant—because capital gains both in stocks and shares and in land now run against the public conscience. People are really disturbed at this sort

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of thing. They are disturbed at the kind of cases of profiting in land to which my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) called attention on Tuesday. They are disturbed not at any particular set of transactions about stocks and shares, but that sometimes some individual makes an enormous amount for doing nothing in a very short space of time, but, and more generally, by the knowledge that these particular gains are not taxed and that for some reason or another a responsible political party appears to think that they ought not to be taxed.
I have never understood the objection in principle. What is the difference between a man who gets an income of, say, £100 a year and a man who gets that amount by what I believe is known in the worst circles as "capital Apt.", and, having got it by capital Apt., sells off one share or two shares, or whatever is required year by year, and gets exactly the same amount to spend, and who, moreover, carries on his business for that purpose?
I cannot see what the difference is and I agree with what was said about this by my hon. Friend the Member for Gloucester (Mr. Diamond). It is perfectly true that at present the line between what is sometimes called the badge of trade in these matters and cases which are not treated as constituting trade is a very shadowy and unnecessarily difficult one. Surely it is right, and must be right, to treat what is in fact responsible for so much of the spending power of this country at present as good sound taxable capacity, and the taxing of it as raising no question of principle which I can see under modern conditions. I say, therefore, apart from the machinery of the thing—I am talking about what is here at the moment—that I see no reason whatever why a proper capital gains tax should not have been introduced. I do not regard this as any substitute for it or as anything but a derisory makeshift intended, apparently, to deceive the public into thinking that something effective has been done. I repeat, and the right hon. and learned Gentleman will understand, that these words are not meant personally.
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I go on from that to deal with one other matter which is, as I see it, the background of the Budget which we are being asked to consider today. We have had it clearly pointed out, and it has not been denied, that the pay pause, in one sense, has failed completely; that is to say, between the time when it was introduced and the beginning of this year, there has been a fall in production of 9 per cent. per annum which constituted a record, and the rise in exports, if there has been some rise, was slower than the rise which occurred in previous years before there was a pay pause. We can say, therefore, that if the object of the pay pause was to improve production or exports, in both respects it has had the opposite effect to what was intended—it has made the position rather worse instead of rather better.
I am not sure that this is the last word about it, but it is the last word about it. if we are to regard it as a direct instrument for the purpose. I do not think that is the right way to look at it. I wish to point out that it is an instrument which has led the British Government to repudiate and to break contracts that they have made with their own employees. It has led classes of the community—public servants, like the nurses who appeared in the Lobbies of this House recently, like many of the groups in the Civil Service, and others we can all think of who are not as a rule in a position to take strike action about their claims—to become furious, frustrated, angry and indignant with the Government for breaking arrangements about negotiations, and so on, which have existed in this country for years, which have worked well and which constitute a really notable part of the national heritage to which we can pay tribute. That is a very heavy price to have to pay for an economic measure.
I turn now to the O.E.C.D. economic surveys which seem to me to be excellent. As members of the Government have already indicated, there are parts in them where they get support and others where they do not. But there is one outstanding matter in the conclusion. It is that the pay pause and all that goes with it are temporary measures intended as a sort of clamp-down for the moment. I am leaving out whether these temporary measures work. But they are only temporary, and, of course, the longer they are imposed the worse

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they will be and the less effective for their purpose. I wish to quote from paragraph 48 in the conclusions of the surveys where reference is made to the difficulty—one which I need not elaborate again—about the effect on the foreign exchange position of an excessive domestic demand. The paragraph reads:
"Escape from this impasse lies in the achievement of a steady and significant export rise as the major dynamic element in new economic growth."
It is with reference to that that the report says:
"it equally is important that full advantage should be taken of the breathing-space thus provided …"—
that is the way in which it refers to the pay pause—
"to set on foot the more fundamental adjustments which the economy requires."
This Budget does nothing of the sort. The survey of the economic position promised nothing of the sort. There is a very great deal indeed in the comment which was made, I think it was by The Times, about "Neddy". When we look at what the Chancellor said we find language used about the Advisory Council which seems to pass to that Advisory Council some of the powers and responsibilities which can be properly exercised and borne only by the Government of the day.
I read this sort of thing which was said by the Chancellor about "Neddy":
"The collective target agreed in Paris by the O.E.C.D. for this decade is one of just over 4 per cent. a year. It will be for the Council to decide whether its study should be based on that figure, or a larger one, and what period of years should be taken for this."
My comment on that is that in a Parliamentary democracy as we understand it it is the duty and the responsibility of the right hon. and learned Gentleman to tell that to the Council and then certainly to collect its advice on it—I say this, of course, without any derogation of the weight and value of the advice he may receive—and, having received the advice, to consider and decide himself what action he will take. I do not like this language. These speeches are usually written. I do not think it was a slip of the tongue or anything of that sort. It is not for the Council to decide that sort of question as I understand the constitutional
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position in this country. The Chancellor also said:
"What the Council must do "—
the Council, mark you—
"is to set an ambitious but realistic target figure. Both sides of industry, the Government "—
we have got to the Government at last—
"and, indeed, all sections of the community, must be prepared to face up to the practical consequences involved in its achievement."—[OFFICIAL REPORT. 9th April, 1962; Vol. 657. c. 968–9.]
It seems that this is putting the Council in the place of the Government. What is the reason for it? It is perfectly obvious that the Government have been more conspicuous than any Government of recent years for consistent failure by comparison with every other country. It cannot go on for ever like this. What they want to do with "Neddy" is to put it up and say, "Here are the boys, a distinguished lot, representing both sides of the table in industry. They will make the decision. You shoot them if it does not go right. If it does, we shall come in and take the praise for it".
This has happened before in other fields with this Government. The Chief Secretary to the Treasury had a long and happy time as Minister of Housing and Local Government. I used to tell him time after time—I am sure I was right—that many of the measures he introduced were with the object of pushing the local authorities, like women and children, in front of the Government in the firing line, so that they could get shot down, if there were any trouble, before anyone could get at the Government. This is being done for the same reason. These birds will not face the music. They have had so much of it in the last few years and it is a terrible record.
Look at the pamphlet—I am not now talking of the pay pause or what it recommends. From beginning to end it is a record of failure to keep up with our competitors. Successful contribution is heaven in the eyes of the Tory Party, but hon. Members cannot do it, and they cannot get the country to do it. What is the matter? They had some suggestions from my hon. Friend the Member for Cardiff, South-East. I advise hon. Members opposite to have a look at them. There is a great deal of

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sense in them. They had some more from my right hon. Friend now the Member for Middlesbrough, East (Mr. Bottomley) and they were very good suggestions. He used to be Secretary for Overseas Trade and he has some experience of this kind of thing—[HON. MEMBERS: "Where is he now?"]—I am not his keeper.
I want to end my speech my asking the Government about one point which my right hon. Friend mentioned particularly, namely, the growth of scientific invention and new technique, to put it as broadly as possible, in industry. He felt, as I feel, that the Government are not taking this seriously enough. When I say not taking it seriously enough I do not mean that they have not appointed a Minister for Science. They have put him in another place, but that is as may be. The difficulty is that we fall behind not in actual inventions—we are very good at those—but in their practical application and, above all, at the stage of development.
The reason is that this Government take a thoroughly Tory view of the matter. If industry will not pick up the inventions, that is the end of it. The Government do very little—they do a little—to try to develop the inventions themselves. A very great deal more ought to be done on these lines. At the end of the day this country has not very many natural resources. It has coal. It has harbours. It has a few other things, but it is not particularly rich in them. We are a great industrial country. We depend not merely on the old-fashioned, excellent manual skill of some of our workers—technical skill, too—but also on the fact that we have some highly intelligent scientists and thinkers. We do not make enough use of them. We do not ensure that what they do is properly translated into what can make us successful in world competition, because that is undoubtedly what we have to do.
When one makes a speech like this one always sits down—at least, I do—regretting hundreds of things that one wanted to say but did not and the things one has forgotten to say. I suppose I shall do that again tonight, but I do say this to the Committee. I believe that if the Government get away with
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this Budget and with the things which were said about the speculative gains tax, and if that is regarded as sufficient at the moment, it will in itself be a step backward.
The country needs Governments and people who will for the time being look beyond their immediate advantage and be prepared to look to the interests of the community as a whole. I have the feeling that the Chancellor's attitude at the moment is lacking in that respect. Until we can get that attitude restored, we are not likely to go far and we shall continue to welter in the troubles which intermittently have afflicted us since we have had Tory Governments in the past few years. I honestly think that a change of Government is not only the best chance for this country but, as matters stand at present, a necessity for its survival.
9.29 p.m.
The Chancellor of the Exchequer (Mr. Selwyn Lloyd): We have had an agreeably stimulating debate on a sound and sensible Budget. I came here tonight ready to meet the serried ranks of a furious Opposition, and I can only say that, "Even the ranks of Tuscany could scarce forbear to stay away."
I should like to begin by paying tribute to the maiden speeches we have heard during the debate. Unfortunately, I did not hear the speech of my hon. Friend the Member for Manchester, Moss Side (Mr. F. Taylor), but I read it, and it certainly contained much admirable good sense. I did hear the speech of the hon. Member for Pontefract (Mr. Harper), and it was a most humourous and entertaining interlude. My view of his speech was not the same as was his view of my Budget. Perhaps the only slight debt of gratitude I owe him is that he did take away some of the epithets that my noble Friend the Member for Dorset, South (Lord Hinching-brooke) might otherwise have used.
I shall not stress too much the fact that a large part of the hon. Member's speech dealt with events of 1893, a period in which a large part of the theory of his party is still embedded. However, I do most sincerely congratulate both new Members. They represent constituencies held by former popular and respected Members of the

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Houseo; we are delighted to see them here, although sad for the reason. We wish them well, and congratulate them.
The hon. and learned Member for Kettering (Mr. Mitchison) dealt with some emphasis with the short-term gains tax, and suggested that in that portion of my proposals I was deceiving the public. I know quite well that nothing I could do would satisfy the predatory instincts of the Opposition, but I have done exactly what I said I would do; to bring into the field of income certain short-term transactions.
When suggestions are made that it is such an extraordinary charge, and one that is bound to be evaded, I would remind the Opposition of what is done in other countries. I have selected the same period as there is in the United States for the full range, and exactly the same period as in the Federal Republic of Germany, except that for the German real estate transactions the period is two years, not three. The same is true of some other European countries. This is not crossing the Rubicon, but accepting the reasonable proposition that one applies the test of time to certain transactions, and says that, within that time, they come within the income bracket.
With regard to Schedule A, I was rebuked a little about the morality of forward promises. I thought it right to make the position clear, but I want to make it clear again, because at least one evening newspaper represented me afterwards as having said something quite different from what I did say. I said:
"We will not seek to use the new rating valuations for Schedule A purposes so far as these owner-occupiers of residential property are concerned. On the contrary, for the reasons which I have set out, we will make proposals for bringing this tax on them to an end.
I cannot say now whether this will be done in a single operation in one year. It will mean giving up about £50 million a year. Whether we can manage to get to that position in one year will depend on revenue considerations."
I say that because at least one newspaper said that I had announced the complete abolition of the tax in the next Budget.
Perhaps I may say a word about the Scottish position. Schedule A values there are frozen at 1956–57 levels and their current valuation for rating is not
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affected. Thus, I can give the same guarantee in this case as in the case of England and Wales: we shall not seek to use the new rating valuations for Schedule A purposes in regard to owner-occupiers of residential property—
Mr. William Ross: The Chancellor could not possibly do so even if he wanted to, because that was the purpose of the amendment made in the 1957 Act; that was made in view of the revaluation. The point is that if he really means that it was right to give people warning, he could have given the warning he has given to England and Wales to the people of Scotland at that time.
Mr. Lloyd: I understood that there was some uncertainty about the position—[HON. MEMBERS: "NO."] Then, if there was no uncertainty, I cannot understand why the matter was ever raised. I understood that there was some uncertainty, and tried to put it right.
I have watched with interest and enthusiasm the desire of hon. Members opposite for the ending of this tax on owner-occupiers of residential property. The hon. Member for Sowerby (Mr. Houghton) said that up to now the Opposition had been voted down on that proposition. Last year, they carried their passionate conviction that the tax should go to the ultimate sanction of abstention. What I have done is entirely consistent with what I said, during the course of last year's statement, I would do—
Mr. Hugh Gaitskell: The Chancellor voted against us last year.
Mr. Lloyd: What I then said was that I intended to deal with it in connection with next year's Finance Bill, and that is exactly what I have done.
The next point which was raised concerned the regulator. The hon. Member for Sowerby referred to this as a useful and novel device, but he said that it was wrong to end it, and asked for it again. I believe that the hon. Gentleman is wrong. It would be quite wrong for me not to have told the Committee, "I think that the rates for the full year should be fixed by this Committee at Budget time." It would be quite wrong to say,

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" Let the regulator run on until the end of August, and I will continue it by some device or special power."
The right thing to do is that at Budget time we should fix the rates for the full year, even if they are rates added to by the regulator. That is a matter for the Committee to decide at this time for the whole year. I think that is the right way to tackle it and then ask for a new regulator, if that is what the Committee is disposed to give.
The question of sweets has caused a great deal of synthetic indignation, but this proposal is felt, generally, to be sensible on broad grounds. The British Dental Association talked yesterday of the ravages of dental disease reaching alarming proportions, and the hon. and learned Member for Kettering did not have much about that in his speech. I think that it is wholly reasonable, when we consider what else is taxed. Indeed, a great deal of the yield will not come from the cheaper sweets which are eaten by children. A great deal will come from the expensive confectionery consumed by adults.
My noble Friend, the Member for Dorset, South talked with approval of what goes on in Sweden in another connection. Sweden has a tax of over 100 per cent. on this sort of thing. France has a tax of 25 per cent. Having regard to the broad sweep of taxation in this country, it is a very reasonable proposition to extend Purchase Tax to these commodities.
With regard to the rest of the Purchase Tax, I do not think there was any argument based on logic to be put against my proposals. The hon. Lady the Member for Stoke on Trent, North (Mrs. Slater) talked—it is reported in column 1085 of the OFFICIAL REPORT—about a poor woman buying £100 worth of furniture and having to pay more taxation, and the hon. Member for Gloucestershire, West (Mr. Loughlin) defended emphatically—and I agree with him—the right of those who live in council houses to have motor cars.
That shows the complete change in what constitutes the standard of living of ordinary people at the present time. There is not this distinction between these various commodities, and I think
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it is much fairer and much better to try to equate them and bring them to a more equal rate. I do not say that we shall come to an identical sales tax for all of them. All I say is that I am certain that it is right to bring the extent of the rates closer together.
In reply to the questions which my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) raised about the small reliefs I was able to make, the age exemption will give complete relief to 100,000 incomes and some relief to 170,000 incomes, the small income relief to rather more than 50,000. Therefore, I think that there will be between 400,000 and 500,000 people who will benefit from these small reliefs.
The next point on which I was tackled from time to time was in regard to export incentives. Here, I would remind the Committee of the main conclusions of the Forbes Report, because I think that they were very important findings. I quote:
"The introduction of Government-financed export incentives in this country is undesirable. The policy of seeking international agreement against Government-financed export incentives has had a wide measure of success. The use of these by other countries is confined to a few isolated cases. Her Majesty's Government should seek through international co-operation the abolition or limitation of the Government-financed export incentives remaining in use overseas."
I think that those are very important findings by a very representative Committee, and I hope that that puts an end to this argument.
The Committee goes on to say:
"The primary solution to the country's export problem lies in the achievement of sound and stable policies for the economy as a whole."
I entirely agree. It continues:
"The present pattern of distribution of taxation and the type and scope of indirect taxes under the United Kingdom fiscal system are not necessarily the most suitable for the encouragement of exports."
That is an observation which we should carefully take into account.
However, I do not think that the Committee should leap to the conclusion that exports would necessarily be helped by a change in our system of taxation, such as the adoption of a turnover tax. We are looking at the various possibilities very closely. I think that it may well

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be that at the end of the day we shall find British industry in this, as in some other ways, is better off as it is at present.
The turnover tax is now receiving extensive criticism from German industry. However, I will not pronounce on that today. There is also the French system to be examined. But we must look at these with a fairly open mind. I do not think that there is a quick solution by saying that the turnover tax is necessarily the answer to this problem. The main thing is that we want sound and stable policies for the economy as a whole.
In connection with these taxation matters, the right hon. Member for Batter-sea, North (Mr. Jay) sought to maintain in his speech that there had been a shift in the burden of taxation. He is not a person with whom it is difficult to bandy statistics, and there are many statistics to bandy on this matter. I have asked for some statistics and have been given some. They deal with the percentage of the yield of direct taxation on individual incomes.
In 1956–57, the year that the right hon. Gentleman took, for those earning under £10 a week the figure was 78 per cent. of the total. For those earning between £10 and £20 a week, it was 32·2 per cent. of the total. The total yield of taxation on individuals earning over £20 a week was 60 per cent. For 1961–62, for those in the lowest income group, instead of 7·8 per cent., the figure was 4·4 per cent.; for those in the £10 to £20 group, instead of 32·2 per cent., it was 30·9 per cent.; and for those in the over £20 a week group, instead of 60 per cent., it was 64·7 per cent.
The right hon. Member will probably say, "What about the National Insurance contribution? "That is not included in my figures. There are two reasons for that. First, there are increased benefits for the National Insurance contributors, and retirement pensioners do not pay the National Insurance contribution.
There is, however, another factor, and I say that anyone who uses figures in this connection without revealing this other factor is not being straightforward with those whom he addresses. Government expenditure on social services must be taken
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into account. Whereas that was £1,180 million in 1950–51 and £1,680 million in 1956–57, the year to which the right hon. Gentleman referred, it was £2,460 million this year. It is grossly misleading to deal in these figures without taking into account the very large increase—nearly £800 million—in the expenditure on social services.
Mr. Jay: What I said was that if one takes incomes from £10 a week downwards, and includes direct and indirect taxation and the insurance contribution, we find that the percentage is larger as we go down the scale. Does the right hon. and learned Gentleman deny that?
Mr. Lloyd: I should like to look at that proposition again, just as the right hon. Gentleman can look at my proposition. As I say, it is easy to bandy statistics in this matter, but I think that the main factor is the massive increase in social service expenditure. Which really helps those who are least well off.
On the question of an incomes policy, which has also been referred to today, I refer to the report of the O.E.C.D. That attaches primary importance to the Government adopting a more positive attitude than in the past to the process of income determination. As I have said on previous occasions, I regard this as one of the most important challenges to a free society in the 1960s. The hon. Member for Cardiff, South-East (Mr. Callaghan), who has had considerable experience of these matters, said in an intervention that twenty-five years' experience had led him to the conclusion that we could do nothing about it.
If we do not have an incomes policy it seems to me that there are three possibilities; inflation, complete state control—and direction of consumption, prices and production—or deflation on a major scale. I think that the people are tired of the first—of inflation—that they would never accept the second—which is complete state control—and that if they refused an incomes policy the only practicable alternative is deflation, unemployment and a lower rate of growth. That is the path which those who refuse their co-operation of an incomes policy are marking out.
To me, that idea is unthinkable, intolerable and, therefore, we must have

1627
an incomes policy. It is part of the Government's duty to have a positive attitude towards incomes. That means practising what we preach where we have control and, in every other case, trying to persuade, influence, educate and to reason. At present, there are serious anomalies and inequities. Of course there are. And what we have to do is to find the means of settling individual cases without each automatically becoming a precedent for similar demands elsewhere.
Comparability is all right within reason, but if it is to be used as a device for leap frogging it will not help anyone. It is easy for Opposition parties to cash in on temporary discontents and to exploit this kind of pressure group society without making any constructive suggestions. I have tried to get people to face up to this problem because I believe that it is in the interests of the whole nation, in particular the poorest paid and those least able to protect themselves, that we should have an incomes policy. However, I have not heard one constructive suggestion from either Opposition party on this matter.
Mr. James Callaghan: I think that the words are accurately reported in HANSARD. It is not a question of our not being able to do anything, but that the Government could not do anything. The reference I was making, when I interrupted the Financial Secretary, was to the effect that the Government have forfeited their moral authority in this field by their past actions. [Interruption.] I wish that hon. Gentlemen opposite would shut up. At least, I am not an "idle, wet Conservative".
I wish to put this to the Chancellor. There is no difference about the necessity for ensuring that production and incomes march forward hand in hand. The difference between us is that the Chancellor seems to think that if he depresses production he can also keep down wages. I can assure him that if he gets an expansion of production going, then wages will keep pace with that.
Mr. Lloyd: That really is a most skilful piece of evasion. The hon. Gentleman has completely evaded the
1628
point. The Government have a positive attitude towards incomes and that means some restraint of incomes and, as I have said, there has not been a single suggestion from hon. Gentlemen opposite. There is nothing in what the hon. Member for Cardiff, South-East said about any restraint of incomes at all.
I have been asked about profits and dividends. I have always maintained that in considering rises in dividends one should take into account the fact that the capital upon which they are paid is increased. I gave the example of the figure of £11,500 million in the past ten years. The right hon. Gentleman argued that it is not enough to look at dividends because the money ploughed back adds to the value of the shareholders' capital. I do not disagree; but, if that is so, why do the right hon. Gentleman and his hon. Friends continue to make so much fuss about dividends? Why cannot we agree that it is profits which really matter, whether they are distributed or not?
If that view is taken, the hon. Gentleman will, I think, see from the excellent book of statistics produced by my right hon. Friend the Minister of Labour earlier this month that, taking 1950 as the base year, the total of wages and salaries had risen by 1961 from 100 to 213·9, and gross trading profits had gone from 100 to 158·7. Another table on the same page shows that, whereas ten years ago trading profits of companies represented 16 per cent. of total domestic income, in 1961 they represented 14 per cent. I hope that these figures will be widely studied, because they show up the falseness of the picture which the right hon. Gentleman was trying to paint, that shareholders are trying to grab a larger and larger slice of the national cake at the expense of wage and salary earners. That is quite untrue and is shown to be so by those statistics.
There have been references to the N.E.D.C. during the debate. If I may say so with respect, the most sensible comments came from the hon. Member for Ashton-under-Lyne (Mr. Rhodes). His words are recorded in column 1396 of HANSARD of yesterday. The hon. Gentleman said that, if I were to allow the Treasury to dictate to the N.E.D.C., that would mean failure for the N.E.D.C.; in other words, failure if I

1629
followed the advice of the hon. and learned Gentleman. The hon. Member for Ashton-under-Lyne went on to say that he hoped very much that I would not try to hurry up too much the functioning of the N.E.D.C. He said that we must take time for it to get going and set its work right. I have no time to quote the hon. Gentleman's actual words.
There is no question of the Government abdicating their responsibilities to N.E.D.C. This answers my noble Friend the Member for Dorset, South. Executive action subject to the control of Parliament must rest with the Government for budgetary matters, monetary policy and for matters such as the distribution of industry. But in a free society the Government cannot dictate to the private sector, or, by their own decisions, determine the rate at which the economy will grow. They must rely upon a co-operative effect by the whole community. This is why we have on the N.E.D.C. representatives not only of the Government but of the other partners in industry, public and private, with one or two independent members.
During the somewhat lengthy processes of setting the Council up, I have said that I have no desire that the Council should be a body which just listens to Government decisions and comments or advises on them. I want a body which will have an influence in the formulation of policy both in Whitehall and in industry. The first priority for it will be to undertake an examination of the obstacles to sound growth and of the ways of improving our economic performance. In my view, this examination must take place against an ambitious but realistic target.
For such a target I mentioned 4 per cent. per annum, which is the collective O.E.C.D. target for growth during the decade. It will be open to the Council to fix a higher one if it considers that right. I shall not prejudge that decision. It would be absolutely wrong for me to prejudge it by any kind of Government diktat beforehand. The Council, which is, I believe, a very great experiment—I think it is a wholly new conception to have a body of this sort—can be of tremendous value in securing economic growth.
The hon. Member for Sowerby said that the Budget had very little to do
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with the economy. That is a complete failure to understand the position. In my view, Budget judgment is of vital importance to the economy at the present time. I thank that the balance I have sought to achieve is about right in the present situation. The hon. Gentleman attacked me on the ground that, as Chancellor, I had been seeking popularity, that I have been at the game of catching votes and that I am part of the Tory conspiracy to hold on to power. Yet I have had to do more unpopular things, I think, than any other Chancellor. There were the Health Service charges and the measures of 25th July last. There were the taxes on heavy oil and on sweets. There was the increased tax on furniture and clothing.
Mr. Callaghan: And the Surtax reliefs.
Mr. Lloyd: I agree that the Surtax reliefs were not very popular.
I refuse to do the nice, easy things—to saunter down the path, as the hon. Gentleman wants me to, of agreeable irresponsibility. He would have me abolish Schedule A this year—at a cost of £50 million. He would reject the tax on sweets—at a cost of £30 million. He would sweep away the bottom two rates of Purchase Tax—at a cost of £150 million. He would relieve tax on fuel for bus companies, which would cost £34 million. He urged a modest incentive to exports. But what is a modest incentive? I suggest 5 per cent., which would cost £175 million. Then we were urged to have selected depreciation reliefs.
I am convinced that the general balance of my Budget is right. The Opposition have claimed that I should have reflated, that the margin I have adopted is far too harsh. They forget the question mark over revenue with regard to tobacco, and that, under our system of accounts, even with the best estimates in the world, there are bound to be supplementaries.
We know already about Service pay and extra money for universities. These agreements were made since the Estimates were published. We know quite well that there may be supplementary demands to meet. But I have many weapons these days to ensure that the economy is kept in proper balance. I

1631
have the Bank Rate, Special Deposits and the regulator, if the Committee gives it to me.
I can assure the Committee that I will watch the situation carefully and will not hesitate to relax if need be, if that is what is wanted and it is adjudged right. As I said in my Budget statement, I am certain that events will prove the soundness of our present policies and the wisdom of our present action.
Question put and agreed to.
Resolution to be reported.
Report to be received Tomorrow. Committee to sit again Tomorrow.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION
  BUSINESS OF THE HOUSE
  Proceedings on the Lords Amendments to the Commonwealth Immigrants Bill exempted, at this day's sitting, from the provisions of Standing Order No. 1 (Sittings of the House).—[Mr. Red-mayne.]
COMMONWEALTH IMMIGRANTS BILL
Lords Amendments considered.
COMMONWEALTH IMMIGRANTS BILL

  Clause 2.—(REFUSAL OF ADMISSION AND CONDITIONAL ADMISSION.)
  Lords Amendment: In page 3, line 13, leave out "or to a medical inspector" and insert:
  "on the advice of a medical inspector or, if no such inspector is available, of any other duly qualified medical practitioner"
  10.0 p.m.
  The Minister of State, Home Office (Mr. David Renton): I beg to move, That this House doth agree with the Lords in the said Amendment.
  Under the Bill as it stood, an immigration officer was given power to refuse admission for medical reasons without necessarily obtaining the views of a doctor. The effect of this Amendment is that the immigration officer will not be able to refuse admission on medical grounds except on the advice either of a medical inspector—and that will be the usual case—or, if there is no medical inspector available, on the advice of any other duly qualified medical practitioner. We were pressed
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  in both Houses to agree to an Amendment on these lines and, therefore, I hope that the Amendment will be accepted.
  Question put and agreed to.

  Clause 6.—(APPLICATION OF PART II.)
  Lords Amendment: In page 5, line 39, leave out from beginning to "being" and insert:
  "a citizen of the United Kingdom and Colonies who became such—
  (i) by virtue of"
  Mr. Renton: I beg to move, That this House doth agree with the Lords in the said Amendment.
  I suggest, Mr. Speaker, that it would be convenient to take at the same time the next two Amendments. Clause 6 (2) defines the categories of Commonwealth citizens who are exempted from deportation and subsection (2, b) refers to those who became or will become citizens of the United Kingdom and Colonies by being registered in the United Kingdom under Section 7 of the British Nationality Act, 1948.
  There is a better way of doing this than that in the Bill which left this House, and that is what these three Amendments attempt to achieve. The effect would be that not only those registered under Section 7 of the 1948 Act would be exempted but also those registered under Section 6 and Section 12 of that Act, and also those whose citizenship of the United Kingdom and Colonies was registered by our High Commissioners in an independent Commonwealth country.
  For most complicated reasons, with which I will not trouble the House unless pressed, these Amendments make little or no difference to the substance of the Bill, but to the extent that they do so, they exempt a very few more people from the possibility of deportation than did the original drafting.
  Question put and agreed to.
  Subsequent Lords Amendment agreed to.

  Clause 8.—(PROCEDURE AND APPEALS IN RESPECT OF RECOMMENDATIONS.)
  Lords Amendment: In page 7, line 10, leave out "three" and insert "seven".
  Mr. Renton: I beg to move. That this House doth agree with the Lords in the said Amendment.

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  I suggest, Mr. Speaker, that this Amendment and the next one be taken together. Both are drafting Amendments consequential on an Amendment made in this House to Clause 8 (1) increasing from three to seven days the length of notice to be given to an Offender letting him know the classes of person in respect of whom a deportation order may be made; that is, before the court can possibly give sentence.
  Question put and agreed to.
  Subsequent Lords Amendment agreed to.

  Clause 12.—(QUALIFICATIONS FOR CITIZENSHIP BY REGISTRATION, ETC.)
  Lords Amendment: In page 9, line 22, after "entitled" insert "or qualified".
  Mr. Renton: I beg to move, That this House doth agree with the Lords in the said Amendment.
  This is purely a drafting Amendment, and with it goes the next Amendment. By inserting the words "or qualified" in line 22 we find that the last twenty-eight words of the Clause are unnecessary and this is an obvious drafting simplification.
  Question put and agreed to.
  Subsequent Lords Amendment agreed to.

  Clause 20.—(CONSEQUENTIAL AMENDMENTS AND REPEALS.)
  Lords Amendment: In page 13, line 39, after "Kingdom" insert "and".
  Mr. Renton: I beg to move, That this House doth agree with the Lords in the said Amendment.
  This is purely a drafting Amendment. The word "and" was inadvertently omitted in the original drafting of the Bill.
  Question put and agreed to.

  First Schedule.—(SUPPLEMENTARY PROVISIONS AS TO CONTROL OF IMMIGRATION.)
  Lords Amendment: In page 18, line 36, leave out from "person" to end of line 37 and insert:
  "accordingly, except that he may be required to submit to examination at any time before the ship has left the port."
  Mr. Renton: I beg to move, That this House doth agree with the Lords in the said Amendment.
  I suggest that this and the remaining Lords Amendments may be taken together.
  These Amendments collectively make some alterations in the Bill's provisions for the control of seamen and they arise from an undertaking which I gave to the hon. Member for Huddersfield, West (Mr. Wade) that I would look into these provisions, the details of which he had some reason to question. The effect of the first Amendment is that an immigration officer may examine a seaman at any time while his ship is in port, whether or not it is more than twenty-four hours since the seaman first landed in the United Kingdom. It will be remembered that the normal provision is that there must be an examination within twenty-four hours, or an automatic consequence follows which may be to the disadvantage of the person concerned.
  It follows that an immigration officer may impose a time condition on a seaman in accordance with the general powers given by Clause 2. We feel that it would be to the advantage of the seaman in certain cases to examine him, especially if his ship is to sail without him more than twenty-four hours after he landed. This arrangement, incidentally, will make the administration simpler and smoother and in many cases will avoid the somewhat stringent conditions which would otherwise have to be imposed under paragraph 8 (3) of the First Schedule.
  Another of the Amendments has the effect that if a seaman on whom such a time condition has been imposed fails to leave the United Kingdom in accordance with that condition, he may be treated as though admission had been refused.
  The remaining three Amendments are purely consequential, drafting Amendments.
  Mr. Denis Healey: Is the hon. and learned Gentleman yet in a position to answer the question asked by my noble Friend. Lord Shepherd, in another place about the period which a seaman in the course of changing his

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  ship will be allowed to stay in this country before he becomes subject to the provisions of the Bill?
  Mr. Renton: I am glad that the hon. Gentleman has asked that question because it is important. In many cases arrangements will have been made with the owner of the ship for the seaman to be transferred to another ship sailing at a later date and belonging to the same owners. But where that is not possible, for one reason or another, and where it is obvious that the seaman must be given an opportunity of finding another ship, perhaps not even in the same ownership, then the time condition will be such as will reasonably enable him to look for a ship. I should have thought that very often it would be fourteen days in the first instance.
  If he applies through the seaman's office of the local immigration control when the fourteen days' period is about to expire, if he has not yet found a ship, then there will be no difficulty in arranging an extension for him. I think that that completely meets the point to which the hon. Member has referred.
  Mr. Healey: I am grateful for those assurances.
  Question put and agreed to.
  Remaining Lords Amendments agreed to.

  TRANSPORT BILL (ALLOCATION OF TIME)
  Notwithstanding the provisions of the Order [7th March] as to the Business Committee's Report on the Proceedings on Consideration and Third Reading of the Transport Bill, leave given to the Business Committee to make a further Report to the House on those Proceedings.—[Mr. Redmayne.]

POLICE, SCOTLAND (PENSIONS)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. M. Hamilton.]
10.12 p.m.
Mr. John Robertson: In raising the question of police pensions in Scotland, I make no attempt to pose as an expert on pensions, and, in particular, on police pensions. I shall restrict what I have to say to the Scottish position and deal exclusively with a very narrow point, namely, the position of the older men concerned. To make my point clear, however, I must say something about the general question of police pensions. I hope to paint in a little of the background.
In Scotland, there are approximately 4,000 retired police officers who are drawing pensions under the provisions of the various Pensions (Increase) Acts. As far as I have been able to discover, the dates of retirement cover the period from 1927 to date. The pensions paid vary considerably, depending on a number and variety of factors.
This circumstance of the variation in the amount of pensions paid rather clouds the issue as it is very difficult to determine, by looking at the statistics, the reasons for some of the very low pensions. From information given to me, it seems that the range of pensions is from about 25 s. a week to nearly £9 a week. Dealing with men with thirty years' service, the range of pensions seems to be from just under £5 a week to approximately £9 a week.
We have to realise that the upper and lower limits of these pensions will increase with the passing of time, but I am concerned about those men who retired a considerable time ago, and particularly those who retired before 1945. Pensions for these men who served as constables are at a maximum of £5 per week, with a large number of pensioners receiving much less. We have to remember that these men are precluded from the benefits of the old-age pension for which those who retired after 1948 qualify.
One man whom I know served in the police force for many years and retired in the 1930s. He receives a pension of £4 8s. 3d. a week. He also receives

1637
£1 14s. a week from the National Assistance Board. Out of this he has to pay rent and rates of 17s. a week. Light and fuel average about 30s. a week throughout the year, leaving him £3 15s. 3d. on which to live. What we must all remember is that this is after a lengthy period of service in the force and after paying contributions equivalent of 5 per cent. of his salary all the time that he is in the force.
The fact that the numbers of ex-policemen who are similarly circumstanced and the numbers who retired before 1945 are not large, does nothing to weaken my case; in fact, it strengthens it. I am aware of the wide implications that are involved. What is said of police pensioners may be said of all pensioners. But there are special circumstances in relation to retired policemen that ought to be examined.
I have a whole sheaf of statistics bearing on the question of the relative value of pensions before 1940 and today, and also the pension levels throughout the years. I am not sure whether a recital of all these figures will help us very much, but I do not think that the hon. Member and I will be in dispute about the fact that older police pensioners are finding it very difficult to make ends meet. I ask the Government to examine the possibility of initiating a discussion of the problem in the Police Council.
There are many ways in which they can help by administrative action. I am given to understand that funds are available which could be diverted for this purpose. I also understand that the Government have some responsibility in relation to the allocation of these funds. I am given to understand that the question of increases for older pensioners has already been discussed between the official side of the Police Federation and the Police Council. It seems possible that something might be done in this way, if only as a temporary measure.
The police are sometimes a much-maligned section of the community—at least until their services are needed. I suggest that the circumstances in which the older police pensioner now finds himself do nothing to help the recruitment of the right kind of man to the police force. It may be that the final answer to the problem is the incorporation of some automatic adjustments in
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the pension scheme, but, in the meantime, pending legislation, I hope that the Government will do something to help the older police pensioners.
I suggest that they should have discussions with the representatives of the policemen through the Police Council, and I hope that this will be done.
10.19 p.m.
The Under-Secretary of State for Scotland (Mr. R. Brooman-White): I will deal, first, with the specific suggestion which the hon. Member for Paisley (Mr. J. Robertson) has made before turning to a more general discussion of the problem. I am sorry that I cannot be definite on this matter; indeed, a good deal of my speech will be devoted to explaining why, in this debate, I cannot be as specific as the hon. Member would like in regard to the other points that he has made.
I do not think that the hon. Member will expect me to comment upon the National Police Fund. He probably realises that the fund is a trustee fund, and is not the responsibility of the Government. The trustees of the fund are responsible for deciding what it may or may not be proper to do with the moneys in the fund. The trustees are bound by the same legal conditions as are the trustees of any other trust fund, and it would not be right for me to go into the possibilities which might lie open to them.
In the broader context, the hon. Gentleman mentioned the wider implications in which this problem is set, and he does, as he made clear in his speech, appreciate that pensions for retired Scottish policemen, although they are paid under Regulations made by my right hon. Friend the Secreary of State, are, nevertheless, under the same pensions scheme as for the police service throughout Great Britain. I do not think that he, or the House, would expect me to suggest that the Scottish position should be dealt with in isolation. I do not want to labour that point.
The main consideration is that retired policemen, whether Scottish or English, have always been dealt with under legislation embracing retired public servants generally. That is the matter in a nutshell. I know that we do not normally in this House leave matters in nutshells, and I should like to enlarge on it a

1639
little, both out of courtesy to the hon. Gentleman and also because the last thing that I would wish to do is to give any false impression that my right hon. Friend is disinterested or perfunctory about a claim such as this, and, in particular, a claim, as the hon. Gentleman said, that embraces a group of people to whom the country is as indebted for past service, as it is to police officers.
It is true that to some extent police officers have special claims arising from the nature of their duties. This is already recognised in the relatively generous terms of the police pensions scheme in relation to the terms of other schemes. Ordinary pensions are paid at half pay rate after twenty-five years' service, while thirty years' service earns a two-thirds rate, and there are other special provisions. It comes to this, that when any hon. Member asks the House to consider police pensions he is inviting it to concentrate on a group, admittedly a very deserving group, and a group among whom there are far too many people having far from an easy time; but, nevertheless, a group in a very much larger class of public service pensioners. A group moreover which from the outset has had something of a lead in its pensions scheme over those who retired at about the same time from other branches of public service.
I should be out of order, as well as trespassing upon the sphere of my right hon. and learned Friend the Chancellor of the Exchequer, if I tried to deal tonight with the arguments for or against legislation to increase public service pensions generally. In the past, where appropriate, such pensions have been increased by pensions increase legislation for which Treasury Ministers have been responsible. The hon. Member will have noted, and I hope that those on Whose behalf he speaks will appreciate, that my hon. Friend the Financial Secretary to the Treasury is on the Government Front Bench beside me.
My hon. Friend is not replying to this debate because he could not, within its necessarily limited scope and under the rules of order, deal with general questions affecting all public services, or answer any specific points raised about future legislation. But my hon. Friend has been listening to the case advanced
1640
by the hon. Member and it will be carefully considered with all other information which has a bearing on the problem.
It might be helpful if I discuss how police pensions stand in relation to the factors which successive Governments have taken into account in the past in connection with pensions increase legislation. These are, I am sure, factors which will remain valid for current thinking on any form of action which may be taken. Police pensions are based on length of service and salary before retirement. It is a fundamental principle with them, and with all public service pensions, that, once awarded, they cannot be altered except by Statute.
Where they are contributory, as in the case of police pensions, the contributions are assessed on this basis. In the financing of the scheme the contributions are not calculated to make allowance for any possible future increase. It follows inevitably that the cost of any such increases falls entirely on the general taxpayers and ratepayers.
This is particularly true of police pensions. I emphasise that, because it brings out clearly that being assessed in this way, on the basis of salary and length of service, public service pensions are not directly related to subsistence or need. They are related to service and to the levels of pay that applied during that service. This, of course, does not mean that the Government can stand aside and see the value of these pensions eroded by substantial rises in the cost of living without doing anything about it. For this reason successive Government have passed successive Pensions (Increase) Acts, about which I will say something more in a minute.
In these circumstances, there are other things that the Government have to consider. One is that retired public servants are not the only people who live on small fixed incomes. Any improvement in public service pensions places an additional tax or rate burden on members of the general public who will, at the same time, be feeling the selfsame effects of any rise in the cost of living which may be the justification for the pensions increase.
These general considerations are the context in which the pension legislation has been passed. Successive Governments have given some assistance to

1641
mitigate the hardship caused by the rise in the cost of living by means of five Acts passed since the latter part of the last war—in 1944, 1947, 1952, 1956 and 1959. Comparable increases have been awarded to pensioners of the Armed Forces by means of Prerogative Instruments. The combined effect of these Acts has been to give the largest percentage increase to the oldest and smallest pensions. For example, a pension of £100 awarded in 1939 has been increased by nearly 100 per cent. A pension of £200 has been increased by over 70 per cent. and a pension of £300 by over 50 per cent.
Action has been geared to the needs of the pensioner who has been in the scheme the longest and who for that reason has the smallest pension. Each of these measures was introduced only when there had been a substantial rise in the cost of living since the previous measure. But their object has been to relieve hardship, not to restore the purchasing power of the original pension, still less to give yesterday's pensioner a pension at today's level.
There is one hard but inescapable fact. It is that economic progress means, among other things, that later generations of wage and salary earners in general will find themselves better off in real terms than earlier generations both during their working life and after they have retired. To those affected, this may sometimes seem unfair. But when one considers all that is done for old and retired people it may be claimed that substantial efforts are being made to balance the interests of those who are currently earning with those who are not and, indeed, with the increased proportion of the population which is living on pensions or retirement arrangements of some kind. As the hon. Member said, we explore every possibility.
I turn to consider one question of machinery. It is that police pensions are paid under Regulations made by the Secretary of State for Scotland. It is worth explaining why this machinery cannot be used for the special action in relation to this problem which the hon. Member suggested. If it were right to single out police pensioners for special treatment—and the general tenor of my argument has been that it would not be right—it would be a fair question to
1642
ask why Regulations should not be made to do so. This is a slightly technical digression. The position is that police pensions Regulations are made under the Police Pension Act, 1948. That Act lays down the categories of people to whom the Regulations apply. They include serving or future policemen and their dependants, with whom tonight's debate is not directly concerned, and also pensions, or increased pensions, to the widows and children of policemen who the after the date on which the Regulations come into force, but they are confined to those classes. My right hon. Friend has no power to increase pensions of retired policemen themselves.
The Act was passed when hon. Members opposite were in office. There is no party point in this. It seemed perfectly reasonable then and seems perfectly reasonable now that it would be inconsistent with the general principles of public service pensions to have powers by Regulation to do in part of a pensions field what would require legislation to do for the whole field. Widows and children are in a rather special case. For a number of reasons Regulations have had to be made from time to time as consequentials of the Pensions (Increase) Acts or changes in the National Insurance benefits, but these special cases which are the justification for the Regulations do not affect the main point I am making, which is, that even if we thought it right to single out retired policemen for selective increases there would be no power under the 1948 Act to do so by Regulation.
Another problem which I know has been causing concern is that a number of police pensioners have no entitlement to retirement benefit under the National Insurance scheme and that they should be given special treatment. The hon. Member will agree that that is not a problem confined to the police, or indeed even to members of the public services. There are other classes of persons who, because they were then exempt from paying contributions did not qualify for National Insurance pension. For this reason we feel that it would be wrong to single out the police for specially favourable treatment.
Clearly the most effective way of helping everyone living on a fixed income, including pensioners either from the

1643
public services or elsewhere, is to preserve reasonable stability of prices. That, of course, remains one of the Government's primary objectives. I can assure the hon. Member that we are very much aware of the real and human problem he has raised. We are sympathetic towards it and we keep a constant watch on it, but, as the Chief Secretary to the Treasury said in reply to a Question in the House on 15th March, the Government do not consider that the time has come for a further increase in public service pensions at present at the expense of the taxpayer and the ratepayer in general.
10.35 p.m.
Miss Margaret Herbison: I understand all the problems which have been outlined by the Under-Secretary. I realise that it would be impossible for the Government to deal with police pensioners, even the oldest of them, in isolation from other public service pensioners, some of whom are very old and some of whom are suffering considerable hardship. I am very glad indeed that the Financial Secretary has stayed at this time of night to listen to the debate. I hope that this is a hopeful sign that he is coming to the conclusion that it is time to do something to ease the hardship, not only of police pensioners—my hon. Friend the Member for Paisley (Mr. J. Robertson) was rightly concerned particularly with the older ones—but of all pensioners who worked in any of the public services.
The Under-Secretary said that it is not only pensioners who are suffering from the increased cost of living. He said that other ratepayers and taxpayers are suffering from the increased cost of living. Apart from those on a small fixed income, from whichever source the small fixed income may come, other members of the community have the opportunity of having a rise in their salaries or wages to meet the increased cost of living. The majority of people would be more than willing to pay the little extra—in view of the vast Government expenditure, I can indeed call it the little extra—which would be necessary
1644
to relieve these old police pensioners of hardship.
I am concerned particularly with the old ones—the old policemen, the old teachers, etc. I come across them very often. Many of them suffer great hardship. All these people, in whichever category they may be, contributed towards a pension in the hope that when they retired they would be safeguarded in their old age from hardship and penury. In these circumstances, there is a great obligation on all of us who are interested in these matters to keep them constantly before the attention of the Government, as my hon. Friend has brought this matter to the attention of the Government tonight, in the hope that help will come.
I understand that the last increase was in 1959. The Under-Secretary said that the objective of the Government is to keep stable prices. That may be their objective, but in the last two years they have not been very successful in achieving their objective. The cost of living has risen since the previous increase. The previous increase was granted because the Government realised that there was indeed real hardship among old pensioners—not only among old police pensioners, but among all who received pensions because they had been employed in the public service.
I will make this last plea to the Financial Secretary. Again I must say how pleased we are that he has remained at this hour to listen to the debate. I hope that he and the Government are now giving serious consideration to taking steps to relieve the real hardship which is being suffered by these people, who thought that they had safeguarded their future from hardship. I hope that we shall not have to wait until 1963 before the Government do so. I hope that they will do so very soon. I can assure them that not only Scottish Members but all hon. Members on this side of the House will push that legislation through as quickly as possible.
Question put and agreed to.
Adjourned accordingly at nineteen minutes to Eleven o'clock.

MALAYSIAN FEDERATION
  Commission of Inquiry
  Commission of Inquiry
COMMONWEALTH RELATIONS
  Students' Accommodation, Reading
  Students' Accommodation, Reading
EDUCATION
  Commonwealth Education Conference
  Commonwealth Education Conference
  National Association of British Manufacturers (Memorandum)
  National Association of British Manufacturers (Memorandum)
  Welsh Language
  Welsh Language
AGRICULTURE, FISHERIES AND FOOD
  Toxic Chemicals
  Toxic Chemicals
  Skim Milk
  Skim Milk
  Potatoes
  Potatoes
NATIONAL
  Post-War Credits
  Post-War Credits
  Gross National Product
  Gross National Product
HOME DEPARTMENT
  Air-Raid Shelters
  Air-Raid Shelters
  Cinemas and Theatres (Smoking)
  Cinemas and Theatres (Smoking)
  Prostitution
  Prostitution
  Parked Car, Oxford Street (Police Action)
  Parked Car, Oxford Street (Police Action)
  Women (Prison Sentences)
  Women (Prison Sentences)
  Bristol Prison
  Bristol Prison
CENTRAL AFRICA
  Secretary of State (Visit)
  Secretary of State (Visit)
EMPLOYMENT
  Trade Unions
  Trade Unions
  Insured Employees
  Insured Employees
NORTHERN RHODESIA
  Floods, Fort Rosebery (Relief Measures)
  Floods, Fort Rosebery (Relief Measures)
SHIPPING
  Ports (Efficiency)
  Ports (Efficiency)
ROADS
  Development Plans (Road Proposals)
  Development Plans (Road Proposals)
  Financial Commitments
  Financial Commitments
MINISTRY OF AVIATION
  Air Navigation Order, 1960 (Schedule 10)
  Air Navigation Order, 1960 (Schedule 10)
  Fatalities
  Fatalities
  Jet Aircraft (Arrester Gear)
  Jet Aircraft (Arrester Gear)
  Aircraft-to-Ship Communications
  Aircraft-to-Ship Communications
  Private Aircraft (Radio Aids)
  Private Aircraft (Radio Aids)
  Runways (Slush and Water)
  Runways (Slush and Water)
  Airfields (Fog Dispersal)
  Airfields (Fog Dispersal)
EAST AFRICA
  Designated Officers, Common Services Organisation (Compensation)
  Designated Officers, Common Services Organisation (Compensation)
MALTA
  Constitution
  Constitution
POST OFFICE
  Portadown, West Armagh (Head Post Office)
  Portadown, West Armagh (Head Post Office)
SCOTLAND
  Fowl Pest (Compensation Payments)
  Fowl Pest (Compensation Payments)
TECHNICAL CO-OPERATION
  Low-Priced Books
  Low-Priced Books

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

ORPINGTON URBAN DISTRICT COUNCIL BILL [H.L.]
2.35 p.m.
Read 3ª, and passed, and sent to the Commons.

JUDICIAL STANDING ORDERS
THE LORD CHANCELLOR (VISCOUNT KILMUIR): My Lords, the purpose of the Amendments to the Judicial Standing Orders which stand on the Order Paper is to raise from £700 to £1,000 the amount required by way of security from an appellant who is appealing to your Lordships' House. The existing figure of £700 has remained unaltered for a great number of years—so far as my researches have informed me, certainly since 1876—and it is considered that a figure of £1,000 now more realistically represents the average amount of costs incurred by a litigant in this House. I beg to move.
Moved, That the following Amendments be made to the Standing Orders regulating Judicial Business:
Standing Order V—
(1) (a), line 1, leave out (" seven hundred ") and insert (" one thousand ")
(b) line 1, leave out (" two ") and insert (" five ")
(c) line 3, leave out (" two ") and insert (" five ")
(2) line 15, leave out ("two") and insert (" five ").—(The Lord Chancellor.)
On Question, Motion agreed to: the said Standing Orders amended accordingly.

SOUTH AFRICA BILL
2.37 p.m.
Order of the Day for the Second Reading read.
THE SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE EARL OF HOME): My Lords, I was asked by my noble friend the Duke of Devonshire to make his apologies to your Lordships to-day for his not being present on the Bench. He is touring abroad and I know your Lordships will understand why he cannot be here.
Your Lordships will recall that on May 11, 1961, in preparation for South Africa's departure from the Commonwealth, a temporary provisions Bill was brought in to govern the operation of United Kingdom law in relation to South Africa. The effect of that temporary Bill was to treat South Africa as though she were still in the Commonwealth, but clearly that had to be a temporary measure because South Africa could not be treated permanently in that way. But the purpose of the temporary Bill was that it gave time to study the complex relationship which had grown for over 50 years, and, so far as legislation was concerned, went back even further than that. It was because of South Africa's new constitutional position that our legislation has had to be reshaped and, in some respects, action taken which was not governed by legislation at all. On the one hand, in considering legislation on this subject we had to take account of the fact that South Africa has ceased to be a member of the Commonwealth and therefore cannot continue to enjoy the benefits and privileges of Commonwealth membership. South Africa cannot, in other words, go out of the Commonwealth and continue to enjoy all the advantages of being in. We have also had to take account of the links and ties of common heritage and common endeavour between our two countries, which had gone on for a very long time, and the reciprocal co-operation which had become so much a part of the day-to-day life in both our countries. To damage that indiscriminately would have been needless folly. Therefore, the task before us was a very difficult one: the task of finding the right balance between two partly conflicting considerations.

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The Bill which is now before your Lordships deals solely with the legislative relationship between this country and South Africa, and although the change in relations and the need for this legislation have been brought about by political change, I am sure your Lordships will readily agree that this Bill should not be used to attack the policies of the South African Government.
The laws which we have to consider here are laws which directly or indirectly affect the lives of individuals and the well-being of South Africans and persons in this country. Because of the claims of many of these people, we thought it right to examine all the laws that have applied to South Africa, either to South Africa specifically or in general to members of the Commonwealth. It has been a very complex and heavy task. I do not know whether your Lordships realise it, but there were 90 or more laws which had to be looked at, and many of them adjusted, touching all sorts of aspects of the lives of individuals. Therefore, we thought it right that the Commonwealth Governments should be informed in good time of the changes which we thought of making so that they could comment. We consulted Colonial Governors in so far as the laws touched on the relationship between the Colonies and South Africa. In most cases the Colonies are able to make their own arrangements. And, of course, we had to have the most detailed discussions with the South African Government. All I can say is that in the review of these very complex arrangements we have met with understanding, and these talks have been conducted in a spirit of good will. The result is this Bill which is before the House to-day. It is almost impossible in a Bill which embraces so much to give a simple presentation, and therefore I have arranged for all the more important Acts to which this Bill refers, and especially the first four Schedules, to be put in the Printed Paper Office.
I will now try to make as simple an exposition as possible, having taken the precaution to enlist the aid of my noble and learned friend the Lord Chancellor, because many of these matters concerning nationality are extremely technical and he has an unrivalled knowledge of these subjects, in which a layman is apt
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to flounder. The most important and symbolic provisions in the Bill are those dealing with nationality, which are contained in Clause 1 and the First Schedule. In deciding what to do about these matters concerning the lives of individuals we had to recognise the human problems, the sentiment, the sympathy for the feelings of individuals and, too, a reluctance to bruise the personal ties of the past, recognising that all this to some extent conflicted with the hard constitutional realities; and we had to find a balance between the two which was fair and just.
Our starting point is that South Africa is outside the Commonwealth and therefore cannot be among those countries listed in subsection (3) of Section 1 of the British Nationality Act. Therefore, South Africa becomes for the purposes of our nationality laws, as for all other purposes, a foreign country. All of its citizens who have no source of British nationality other than South African citizenship will lose their British nationality forthwith and will become aliens. As aliens they would normally have to rely on naturalisation to acquire United Kingdom citizenship and thus to recover their British nationality.
It was thought inappropriate (I think your Lordships will agree as to this) to adopt the same arrangement as we devised in the case of the Republic of Ireland. The Irish Republic really was a special case, and I do not think could be used as a precedent. But we think that South Africans should for a limited period be given an opportunity to acquire citizenship of the United Kingdom and Colonies by registration, as in the past, instead of by naturalisation. In fixing the period we have taken into account the fact that for many this will be an important and perhaps crucial decision in their lives, and it may not be easy to take or to take quickly. We have therefore given until the end of 1965, that is three and a half years, for those people to decide what they want to do and to take the necessary steps to do it.
I have already mentioned that the basic nationality provision of this Bill is that after May 30, 1962, South African citizenship will no longer confer on those who possess it the status of a British subject. This is provided for by subsection (1) of Clause 1. The result will

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be that South African citizens who have no other citizenship conferring British nationality will acquire the status of aliens on May 31. This will not be true of those South African citizens who are also citizens of the United Kingdom and Colonies, for example, because they or their fathers were born in the United Kingdom. By virtue of their second citizenship the position of such people will continue unchanged, and they will not be affected by this Bill.
The transitional provisions for the recovery of British nationality are contained in subsection (2) of Clause 1, read in conjunction with the First Schedule. As your Lordships will be aware, nationality law is a highly technical subject, and the transitional nationality provisions of this Bill are necessarily exteremely complicated. Since, however, the whole question of how British nationality can be recovered is likely to be of very close personal interest to the individuals concerned, I feel that it is important to explain in some detail just how they will work.
The general effect of subsection (2) of Clause 1 is to extend to South Africans after May 31, 1962, and up to December 31, 1965, those sections of the British Nationality Acts which allow Commonwealth citizens to apply for registration as citizens of the United Kingdom and Colonies. The relevant provisions of the British Nationality Acts are specified in the First Schedule, and if your Lordships do not mind I will mention what they are. They are three. The first is Section 6(1) of the 1948 Act, which provides for registration on the grounds of residence in the United Kingdom or in a Colony, or of Crown service. The second is Section 3(2) of the 1958 Act, which provides for registration on the grounds of employment with an international organisation of which the British Government is a member, or of service with a home-based United Kingdom firm. Those two sections are specified in paragraph 1 of the First Schedule. The third provision which is to remain open to South Africans temporarily is Section 12(6) of the 1948 Act, which allows registration on the grounds of descent from an ancestor in the male line born in the United Kingdom or a Colony, coupled with close connection with this country or a Colony, and the intention
566
ultimately to make his ordinary place of residence here or in a Colony. This is covered by paragraph 4 of the First Schedule.
I should perhaps emphasise here to your Lordships that the concession which we are making to South Africans consists in allowing them to register at all. What we are doing is to permit South African citizens, notwithstanding the fact that they are aliens, to acquire citizenship of the United Kingdom and Colonies during a limited period on the same terms as if they were still Commonwealth citizens. I said earlier on that the transitional provisions were to run until the end of 1965, and this is in fact the basic terminal date for this concession. But, as your Lordships will no doubt have seen, subsection (2) of Clause 1 does not require that an actual application for registration must in all cases have been made by December 31, 1965, since it concedes that, as an alternative, it will be sufficient if notice of intention to apply for registration is lodged before that date.
Since this means that some South Africans will be able to apply for registration after the end of 1965, which at first glance might appear to run counter to what I said about the transitional provisions ending at that date, it will perhaps be helpful if I explain how the notice of intention procedure works, and why we have introduced it. The purpose is to help those South Africans whose applications for registration are based on the qualifications of residence or service. These provisions would not have been necessary had it not been for the Commonwealth Immigrants Bill, which happens to have crossed the path of this Bill. These people might be put out of court by the new five-year qualifying period for which the Commonwealth Immigrants Bill provides, and a South African who had to show a five-year period of service or residence before becoming eligible for registration might well not have time to qualify by the end of 1965. He would thus lose the benefit of the nationality concessions under the Bill.
Paragraph 1 of the First Schedule therefore allows such a person to apply for registration after 1965 under those provisions of the British Nationality Acts

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which require a qualifying period of residence or service, but only if he gives notice before the end of 1965 of his intention so to apply and puts in his actual application for registration within five years of giving notice. The complementary provisions of paragraph 2 of the First Schedule ensure that notice of intention is not lodged unless the person concerned is already in qualifying service or has started a period of qualifying residence. Thus, for those South Africans who take advantage of the notice of intention procedure, the operative date on which they will have to decide whether or not to seek registration as a citizen of the United Kingdom and Colonies will still be December 31, 1965. The only difference in their case will be that they will have to wait to complete the balance of the qualifying period before their actual application can be submitted.
In fixing December 31, 1965, as the terminal date for these concessions we have tried to achieve a reasonable compromise between our sympathy for individuals, faced with what in many cases will be a most difficult choice, and the inescapable logic of the situation in which South Africans, as citizens of a foreign country, cannot indefinitely be treated as if they did not possess that status. So everyone will have three and a half years in which to decide what to do. We feel that this is as long as we can reasonably give, and, as I said earlier, we feel that we have achieved a reasonable and a fair balance. Nor, of course, will the door be completely shut thereafter to South Africans. The ending of the transitional provisions will mean merely that, like other aliens, their avenue to British nationality after 1965 will be by naturalisation.
I do not think I need detain your Lordships long on the remaining provisions of Clause 1. The second part of subsection (2) provides that a South African woman who applies for registration as a citizen of the United Kingdom and Colonies on the strength of her marriage shall, until the end of 1965, be treated as if she were a British subject. This concession does not affect her entitlement to registration, since the relevant section of the British Nationality Act applies equally to aliens and
568
British subjects; but it will have the effect of exempting South African women from a requirement to take the Oath of Allegiance and to pay a fee.
Finally, in this part of the Bill, subsections (3) and (4) of Clause 1 provide that South Africans who on May 31, 1962, are in employments or professions from which aliens are debarred by Statute shall be exempt from that disqualification until the end of 1965. Without such provisions those who became aliens on May 31, 1962, would automatically become ineligible to remain in their jobs or in their professions. They will now have until the end of 1965 to recover British nationality and thereby safeguard their employment. For the great majority of them this will be ample time, since most of the employments to which the disqualification applies will count as qualifying service for the purposes of registration. But for those few who may not be able to complete the necessary qualifying period of service or residence before the end of 1965, it may reasonably be assumed that the Home Secretary would be prepared to exercise his discretion to accept a shorter period in order to prevent hardship.
The provisions affecting nationality are, as your Lordships will have seen and I have reason to know, the most complicated part of this Bill. They are also the provisions likely most widely to affect individuals. The remaining provisions in the Second, Third, Fourth and Fifth Schedules are less complicated, and also most of them have more limited application. They fall into two general groups. The first includes Statutes which we consider should remain in force without any specific limitation in time. That is because these Statutes operate in the interests of the welfare of individuals, or assist in the smooth maintenance of the commercial relationship with South Africa which we wish to preserve in our own interests. The second group includes Acts which we consider should be retained for a specific transitional period, or in respect of which some saving provision is necessary in order to make the future position clear.
I will deal first with the first group. They are to be found in the Second Schedule to the Bill. The first Act referred to

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there is the Colonial Probates Act, 1892. This provides for the recognition within the United Kingdom of probates and letters of administration issued in British possessions, and also for the reverse case. It has applied to South Africa, as a British possession for the purposes of the Act, since 1914. There is nothing like this provision between the United Kingdom and foreign countries; so that, unless we were to make arrangements for it to continue these facilities would cease to be available to individuals in both this country and South Africa, and the result would be inconvenience, if not hardship, to individuals. We therefore propose to retain these arrangements, and the South African Government have confirmed that they are willing to do so, too.
Similarly, there is no arrangement between us and foreign countries parallel to that provided by the Maintenance Orders (Facilities for Enforcement) Act, 1920. This is dealt with in paragraph 2 of the Second Schedule. Under this Act maintenance orders made in South Africa may be enforced in the United Kingdom, excluding Scotland, and those made in the United Kingdom may be enforced in South Africa. This arrangement has applied in relation to South Africa since 1923, and your Lordships will appreciate its usefulness as a means of avoiding hardship to wives and families. It therefore seems right that we should continue it not only in respect of maintenance orders that have already been made, but also for those which may be made in the future; and the South African Government have also agreed that this is a useful provision. We also have a law which provides a simple procedure for enforcing maintenance liabilities incurred by Royal Naval personnel—the Naval Forces (Enforcement of Maintenance Liabilities) Act, 1947. We propose to retain this, too. Paragraph 3 of the Second Schedule makes the necessary provision.
Under the Companies Act, 1948, which is dealt with in paragraph 4 of the Second Schedule, United Kingdom companies conducting business in South Africa are able to keep branch registers of members resident in South Africa, and to transfer shares registered in that branch register without paying United Kingdom stamp duty. That Act also
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provides that, so far as our law is concerned, companies in South Africa can keep branch registers in this country, and these registers may be inspected by persons having an interest in them. These arrangements assist in the smooth maintenance of many business links between this country and South Africa, and the Bill therefore provides for their retention.
The next provision, paragraph 5 of the second Schedule, concerns sugar. This is in fact merely a financial provision to enable the Sugar Board to assume responsibility for payments in respect of South African sugar. The reason for this is that as South African sugar can no longer be handled under the Commonwealth Sugar Agreement, we have considered it advisable to make other arrangements for it. Therefore, these arrangements take the form of a bilateral agreement between the Minister of Agriculture and the South African Sugar Association; and that was announced in a Written Answer to a Question in another place on November 15 last year.
The provision in the Bill enables South African sugar bought under the new bilateral agreement to be handled by the Sugar Board in the same way as Commonwealth sugar. The new Agreement runs for five years up to the end of 1966, while the Commonwealth Agreement runs until 1969, with provision for extension. Under this bilateral agreement with South Africa we shall purchase from the South African sugar industry 150,000 tons of sugar at a price of £35 15s. a ton. The amount of 150,000 tons is less, in fact, than we have been purchasing from South Africa under the Commonwealth Agreement, and the price is nearly £10 a ton less than the current price under the Commonwealth Agreement.
This bilateral agreement with South Africa does another very important thing, which your Lordships will notice. It ensures that Swaziland will continue to have a guaranteed market in South Africa for her sugar. It does more than that, however: it provides for an expansion of Swaziland sales to South Africa; and that is really very important.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, could we not have a little more explanation upon this matter? I gather that there is to be a sort of three-tier price for sugar, if I am

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interpreting the Foreign Secretary correctly: a world price, a special South African price, and a preferential price to the Commonwealth. Apparently the South Africans are to get a special price, a better price than the world price, in comparison to the preferential member of the Commonwealth, and therefore will take a larger share of the market than she would have been likely to get under the preferential terms. I should like an explanation from the Foreign Secretary upon this.
THE EARL OF HOME: I should like to give a more considered answer, but under this bilateral agreement which the South Africans have with us they will sell South African sugar to this country at a price of £35 15s. a ton. Under the Commonwealth sugar arrangements the price is about £10 a ton higher. If I may, I should like to communicate with the noble Viscount later on. Perhaps my noble and learned friend the Lord Chancellor will be able to say something about the world price of sugar in relation to both of these prices, so that we can examine it further then. What I am mainly concerned with here is the fact that this Agreement with South Africa is of great importance in relation to the Swaziland sugar crop, and provides not only that they will have a guaranteed market in South Africa for Swaziland sugar, but that there will be an expansion of Swaziland sales.
LORD OGMORE: My Lords, is it not a fact that what the noble Earl is saying is that Swaziland will in fact get £10 a ton less than it would get if it itself came under Commonwealth preference?
THE EARL OF HOME: My Lords, it is a fact that Swaziland will get £10 less than if it were under this Commonwealth arrangement, for the five years for which this Agreement runs; I think that that is so. But it also gets—which is immensely important to Swaziland—a guaranteed market for the sugar, which it otherwise might not have, and it also gets the benefit of the provision for expansion of Swaziland sales. I think on balance the noble Lord will find that Swaziland gets an advantage out of this bilateral arrangement.
BARONESS SUMMERSKILL: My Lords, could I ask the noble Earl one
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question, because this is a most remarkable statement? In view of the very difficult situation that to-day exists in South Africa, why cannot we give Swaziland a guaranteed market?
THE EARL OF HOME: I think there are a number of reasons, and the sale of Swaziland sugar has been very closely tied up with the South African market for many years. Under this bilateral arrangement the South Africans have agreed that for the five-year period they will guarantee a market for Swaziland sugar, and also increase that market. I think that this is a very desirable arrangement, at least for this transitional period, and that Swaziland will come off better under this arrangement because I do not know that they could at the moment sell their sugar in Commonwealth markets. I should like to hear what the noble Lord, Lord Ogmore, says about this, because I know he knows a lot about this subject. And perhaps this question can be taken further when my noble and learned friend replies to the debate.
The next provision, the amendment to the Import Duties Act, 1958, makes a formal amendment to the reference to South Africa in the text of the Import Duties Act, so as to take account of South Africa's new constitutional position but to keep her within the Commonwealth preference area, as happened with Ireland and Burma. We have made it clear since South Africa left the Commonwealth that we hope that our trade arrangements with South Africa will continue. This arrangement stems from the Ottawa Agreement of 1932, and this is a bilateral agreement which need not be affected by the constitutional change. These arrangements are valuable to us just as they are to South Africa.
We must, too, take great care of the interests of the Territories. They are accustomed to dealing with South Africa; they depend heavily on South Africa as a market and for many marketing facilities. There are therefore very strong and practical reasons for retaining preferences for as long as we may be able to do so. If we join the Common Market it may be that these arrangements will have to be reviewed and in many respects modified.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Hear, hear!
THE EARL OF HOME: There is nothing to prevent that—except possibly the noble Viscount the Leader of the Opposition! But the South African Government recognise that this must be so.
I now turn to the Third Schedule, which contains the group of Acts which are of a strictly transitional or saving nature. The Fugitive Offenders Act, 1881, applies only to the United Kingdom and our dependencies and members of the Commonwealth; it will cease to apply between ourselves and our dependencies and South Africa after May 30. We shall have to replace it by new arrangements which we are at present discussing with the South African Government. They are not part of the South Africa Bill, and do not need to be, because it can be made separately under the provisions of the Extradition Act, 1870.
But, my Lords, in the meantime we must ensure that where cases involving the procedures of the Fugitive Offenders Act have already been properly started before May 30, they can be concluded. This is the effect of paragraph 1 of the Third Schedule. It does no more than apply the general principle that when a law is repealed or amended the repeal or amendment should not affect proceedings which have been started before it took effect. We have, however, excluded from this transitional process any offences which are not offences in the territory being asked to return an offender. In addition, we intend to introduce an Amendment in the Committee stage which will exclude political offences. It is our intention—and we have informed the South African Government of this—that the new arrangements, when they come into being, should similarly exclude such political offences. We also intend that they should exclude offences which are subject to the death penalty in South Africa, but not in the territory being asked to surrender the fugitive.
My Lords, I should like to make one short digression, to say that the changed constitutional position may necessitate some review, and perhaps re-shaping, of the relationship between the High Commission Territories and South Africa generally. We have reached agreement
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in principle on some aspects of this relationship. We are still discussing the details, but from our discussions so far, and from the South African Government's statements, we have no reason to think that the interests of the individual, or of the Territories as a whole, will be significantly jeopardised. We have, in fact, been assured that if at any time the South African Government find that, because of circumstances in the Republic they wish to make any changes, we shall be given advance notice and afforded an opportunity of expressing our views. Naturally, my Lords, our objective would be to reduce to a minimum any damage to the interests of the Territories.
To return to the Bill, the next set of provisions, in paragraphs 2, 3 and 4, are all of similar effect. They deal with the registration of persons with South African qualifications on the registers of professional bodies. Their effect is to allow those persons who are already on "Colonial" or "Commonwealth" registers to stay on them, and they provide that persons applying after May 30 will he registered on the "Foreign List". The list on which they are registered in fact makes little or no practical difference to their ability to practice in this country. Paragraph 5 of the Third Schedule concerns solicitors. At present, South African attorneys enjoy special facilities for admission to practise as solicitors here, and these facilities are available only to people from the Commonwealth. But there may be some South African attorneys who have already taken steps to qualify for admission here, and the purpose of the provision in the Bill is merely to allow them to finish qualifying. The effect of the provision concerning certificates of competency of merchant seamen is to enable persons, whether United Kingdom citizens or South African citizens, who hold South African certificates of competency to continue in employment on British ships for as long as they are not disqualified from doing so by virtue of their citizenship.
The provision concerning the indication of the origin of goods—paragraph 7 of the Third Schedule—is purely a transitional measure to avoid hardship to importers and traders. There are many South African products labelled "Empire" which are already in the

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stores and stocks of retailers. Furthermore, my Lords, since in South Africa this is the height of the canning season, there are supplies of tinned fruit and other canned goods already committed to this country as "Empire" produce. The purpose of this provision is to give a five months' period of grace for these goods to be imported, and a period of grace of 17 months during which they may be sold as Empire produce.
The remainder of the Third Schedule deals with Statutes which affect the welfare of individuals and which, if not preserved would cause hardship and inconvenience to them. The first provides that, in effect, South Africans now receiving the old age non-contributory pension, or the blind pension under the Old Age Pensions Act, 1936, shall continue to receive it, and that any who would have qualified in the future had they remained British subjects will still be able to qualify. There is then the provision to ensure that certain divorce and nullity decrees made by the courts in South Africa and recognised by British courts, under a Statute which applies only in respect of Her Majesty's Dominions, may continue to be recognised. Finally, there is a provision to ensure that United Kingdom teachers already in the employment of the South African Government or South African public authorities will continue to be able to count such service for the purpose of qualifying for United Kingdom superannuation.
The last two Schedules, the Fourth and the Fifth, repeal various Acts in so far as they apply to South Africa. The effect will be that in all these cases South Africa will be treated in the same way as any other foreign country. In addition to all the Acts mentioned in the Bill, there are some 30 or 40 which will automatically cease to apply in the case of South Africa, without need for us to take any special legislative action to deal with them. As I have said, a list of these is available in the Printed Paper Office. Your Lordships will notice that this list includes the South Africa Act, 1909. We consider that, as a result of the constitutional change, this Act is spent, and we have so informed the South African Government.
My Lords, I do not remember having made such a long speech in your Lord-
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ships' House, but I hope you will forgive me, because I thought it well to lay before your Lordships the main points of this very important Bill. I hope that what I have said will have helped your Lordships more readily to interpret the Bill, and to see it in perspective. I think it is a fair and reasonable compromise, and we sincerely hope that the day will come, and will come soon, when the present differences of view on racial matters and human freedoms which divide our two countries will be narrowed to insignificance. We do not want to do anything, either by this Bill or by any other measure, to retard that day. My Lords, I beg to move.
Moved, That the Bill be now read 2ª.— (The Earl of Home.)
3.18 p.m.
THE EARL OF LISTOWEL: My Lords, the noble Earl the Foreign Secretary has given us a very clear and very interesting exposition of the contents of the Bill. I am sure we are all grateful to him for the trouble he has taken, and it certainly was not necessary for him to apologise for the length of his speech. I do not think he said very much about the policy behind the Bill, or the policy implied by the provisions of the Bill. I think it is these matters of policy which, above all else, are relevant to a Second Reading debate, and these are the matters with which I propose to deal.
It seems to me that one can look at this Bill from two quite different points of view. You can look at it as the noble Earl did, very properly, from a Foreign Office point of view, and take as your criterion whether or not it is likely to promote good relations between this country and the Republic of South Africa. From that point of view, it is an excellent Bill. I cannot think of any country save Eire—and Eire was a special case; the noble Earl himself said that Eire was a special case, because, of course, of the large number of Irish citizens in the U.K.—which has left the Commonwealth on as favourable terms as South Africa has. Alternatively, you can look at the Bill from a Commonwealth point of view, and take as your criterion whether or not it will benefit Commonwealth relationships. From that point of view, I think it is a dangerous Bill.

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It is detracting from the value of belonging to the Commonwealth, by giving to a foreign country many of the advantages now enjoyed by Commonwealth countries. It is offering South Africa advantages, in respect of trade and citizenship, which are a prized possession of the Commonwealth and which hitherto have been denied to foreigners. I am sure that the noble Earl, who, of course, has been at the Commonwealth Relations Office as well as at the Foreign Office, appreciates both viewpoints and is fully aware that they cannot be wholly reconciled. Indeed, during the course of his speech I took down one sentence because it seemed to agree exactly with what I had anticipated. The noble Earl said that the task of the Bill is to strike the right balance between two partly conflicting considerations.
My Lords, it may be said that the Commonwealth viewpoint is somewhat academic as no member State will leave the Commonwealth because South Africa is still being treated in some important respects in the same way as a Commonwealth country. No doubt that statement is perfectly true, but I think it is also fair to ask this question: what about British territories that have not yet decided whether or not they will join the Commonwealth when they become independent? I am thinking particularly of the British territories in East and Central Africa. These are all countries that will weigh very carefully indeed the pros and cons of staying in the Commonwealth before they finally make up their minds, and one has to remember that in their case the cons are very much more considerable than they are in the case of the existing members of the Commonwealth. Moreover, the inhabitants of these African countries are, after all, mainly African. Many of them will not understand that, by giving South Africa such favourable treatment as South Africa is receiving under this Bill, we are not condoning a policy they abhor—and, of course, their abhorrence is much greater than ours because for them the Africans in the Union are brothers as well as neighbours.
It may be said—and I am sure it has been said—in defence of the most important advantage accruing to South Africa under this Bill, the continuation of Imperial Preference, that British
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exports to South Africa will benefit as well as South African exports to Britain. But the whole pattern of our export trade will change if we go into the Common Market—a possibility to which the noble Earl referred. It is reassuring to know—at least, this is what I gathered from reading ministerial speeches in another place—that we shall not treat South Africa as a Commonwealth country in negotiations with the Six, and that if we do in the end sign the Treaty of Rome our preferential arrangements with South Africa will fall into line with the rest of these arrangements. I rather think that that is what the noble Earl said, although he used rather different words. I hope I have not misinterpreted his meaning.
What I should like to ask is this: what happens if we do not go into the Common Market? Do these preferences go on indefinitely? The Sugar Agreement is a temporary, a transitional, arrangement, lasting only until 1966; but, of course, there seems to be no such provision in the Bill regarding these preferences. Perhaps the noble and learned Viscount, when he comes to reply, could say something about the future of these trade agreements.
I cannot help feeling that there is even less justification for the Sugar Agreement, about which there has already been some discussion between noble Lords on this side of the House and the noble Earl the Foreign Secretary, because that gives South Africa the benefit of selling her sugar considerably above the world price; and I think that that will emerge as a fact when the noble and learned Viscount replies to the debate. The price of £35 15s. is, I think, considerably above the world price, something like £10 per ton of sugar above the world price, and there is no corresponding advantage to British trade. In fact, the British taxpayer will be paying almost £2¾ million this year to the South African Government on account of sugar, without getting a farthing in return. The amount of sugar we buy under the Commonwealth Sugar Agreement is, of course, much less than many of the Commonwealth producers (such as the Commonwealth countries in the West Indies) would like to sell to us; and, surely, if

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we are to subsidise sugar producers anywhere in the world, we should subsidise Commonwealth rather than foreign growers.
The Government have, of course, pointed out—the noble Earl did this—that we shall be helping Swaziland, a British dependency, as well as South Africa; but why cannot Swaziland, like the British territories in the West Indies, or like Mauritius, rather nearer the scene of what is happening in Africa, be treated separately from South Africa? It would get a better price for its sugar under the Commonwealth Sugar Agreement. The noble Earl has said that this agreement is giving about £10 a ton less than is being given for sugar under the Commonwealth Sugar Agreement. Moreover, of course, the agreement with South Africa ends in 1966: the Commonwealth Sugar Agreement goes on until 1969, and can be renewed. If, at the end of that time, at the end of the period of the agreement with South Africa, Swaziland is to get a better price than the world price for its sugar, it would have to become a party to the Commonwealth Sugar Agreement.
My Lords, why could this not be done now? I agree that the argument of the noble Earl rests on the balance of advantage, but it seems to me that the balance of advantage is the other way. Swaziland would get a better price for her sugar, and there is no reason why we should not absorb the small quantity of sugar coming from Swaziland in the way we absorb much larger quantities from other parts of the Commonwealth.
So far as nationality goes—and may I say, in passing, that I have never in all my experience found any branch of the law which I have had administratively to study more difficult and complex than the law relating to nationality?—and so far as I can understand the provisions in the Bill, we think it right that South African citizens should have three years in which to have the chance to acquire British citizenship if they so desire. This is a special privilege, but I think there is a very strong reason for allowing it. I am rather doubtful whether the qualification set out in paragraph 2 of the First Schedule to the Bill, and the other qualifications in the two Nationality Acts so far as they apply to South Africa, really
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go far enough. Moreover—and perhaps the noble and learned Viscount would be good enough to answer these points when he replies, because I myself am in some doubt about the validity of the point I am about to mention—I am not altogether certain whether paragraph 2 of the Second Schedule to the Bill is consistent with paragraph 1, which says that certain parts of the British Nationality Acts of 1948 and 1958 will apply in the case of South Africa.
For instance, the latter Act, the 1958 Nationality Act, gives the Secretary of State discretion to accept an application for British citizenship by reason of the applicant's—and here I quote—
"close connection with the United Kingdom and Colonies".
The noble Earl did not mention this as among the qualifications which would enable an applicant to obtain British citizenship. I believe this discretion would be useful where a person cannot satisfy the other conditions. I am all in favour of giving the maximum opportunity and encouragement to anyone who wishes to acquire British citizenship, so I should be very grateful if the noble and learned Viscount could answer that point when he comes to reply.
We are not by any means satisfied about the arrangements which have been made for dealing with the High Commission Territories. It is reassuring to know—and the noble Earl mentioned this at the end of his speech—that the South Africa Act, 1909, lapsed when South Africa left the Commonwealth, because it was this Act which gave the Union its tenuous legal claim to these Territories. This claim has in the past been pressed from time to time by the South African Government. I remember very well that Dr. Malan came here to discuss it with Ministers of the Labour Government which took office in 1945. I should be glad to know whether the South African Government concurs in the view that the lapsing of this Act has brought about the lapse of its claim to these Territories. So far as I am aware, there has been no public statement by the South African Government about its renunciation of the claim to the three Protectorates or, to put it in a rather different way, about any change in the legal position.

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My Lords, we regret that the departure of South Africa from the Commonwealth has not been followed by new administrative arrangements for dealing with the High Commission Territories. It really is extraordinary, and I am sure quite without precedent, that an Ambassador to a foreign country should also he responsible as High Commissioner for the administration of three British dependencies. Surely we should have sufficient regard for our senior diplomats not to turn them into schizophrenics by giving them conflicting responsibilities. Moreover, the dual appointment will not inspire the Africans in those Territories with any great confidence in Her Majesty's Government. It would surely be far better to have a separate Government or High Commissioner, with administrative headquarters in one of the Territories—possibly in Bechuanaland, which would seem to be the most suitable. I cannot think of a single instance in British colonial history where a British territory has been administered from a foreign country. That is surely an extraordinarily anomalous situation, and needs a great deal of justification; but that is exactly what we are doing in South Africa.
The economic future of those Territories is, of course, entirely bound up with South Africa, and let us hope that the South African Government will continue to work with us in that field and will help us to improve living conditions in those economically backward areas. At any rate, it is extremely satisfactory that there appears to be no hesitation, in spite of the change in the status of South Africa, in continuing to collaborate in regard to the economic development, trade, and so on, of those Territories.
I was rather hoping that the noble Earl might repeat what the Lord Privy Seal said in another place about the mandated territory of South West Africa. I think it should go on record in this House, as well as in another place, that it is not the intention of the Government to alter by this Bill its attitude to the status of this territory. If I may disgress for a moment, your Lordships will remember that the International Court of Justice decided in 1950 that South West Africa was still a mandated territory and that therefore the Government of South Africa was still under an obliga-
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tion to rule it in accordance with the Mandate, and to make annual reports. The Government of South Africa has not accepted this judgment or the authority of the United Nations. It would seem, on the face of it, that becoming a Republic has made its position in International Law even weaker, as the original Mandate was given (here I will read some words from the Preamble) to—
"His Britannic Majesty for and on behalf of the Government of the Union of South Africa"
The noble and learned Viscount shakes his head, but perhaps he will enlighten me when he comes to reply.
THE LORD CHANCELLOR (VISCOUNT KILMUIR): My Lords, the view I have always taken—I do not think anyone has ever disputed it—is that that is the technical way of expressing the Crown in right of the Union of South Africa; and when the Union of South Africa passes from the Crown, it leaves no residual duty on the Crown. That is what I intended to convey by the shake of my head. If the noble Earl has any argument to the contrary, I shall be very pleased to consider it. I did not know that there was one.
THE EARL OF LISTOWEL: My Lords, I think I should need a very long period of study to produce any argument to the contrary. I am obliged to the noble and learned Viscount. I was just putting a layman's view on the basis of the words in this document. I think it is extremely important that the treatment of South West Africa, a part of South Africa for the purposes of this Bill, should not give anyone the impression, either here or in Africa, or indeed at the United Nations, that we recognise the annexation of South West Africa, or the sovereignty of South Africa over the mandated territories. Now that South Africa has left the Commonwealth, I hope that we shall support the United Nations and the International Court by our deeds as well as by our words. My Lords, too often in the past have we sat on the fence at Lake Success. The time has now come for us to uphold the authority of the United Nations on every possible occasion, and to urge South Africa to carry out its obligations or to relinquish the mandate.
The unexampled generosity of this Bill towards a country that has left the

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Commonwealth will, I hope, convince the people of South Africa that we bear them no ill-will for having done so. It will show them that the cause of the rupture with the Commonwealth was simply and solely a policy that has shocked the conscience of the world. This policy of apartheid was, and is, the only obstacle between us. There are opponents of this policy in South Africa, and they are not confined to the black and coloured population. I am sure that we can all say to the forces of progress in the Union that if and when they succeed in reversing the present racial policy we will welcome their country back to the Commonwealth.
3.36 p.m.
LORD OGMORE: My Lords, I feel that this is a melancholy end to what was a noble experiment. In 1908 it was thought, by the Government of the United Kingdom at that time, that having made this experiment in statesmanship, all would be harmony, and that the Boers and the British would live amicably together. Well, they have not done so. There is no doubt about it that the Boers, looked at from the point of view of the British in South Africa, were intent upon reversing the decision which had been arrived at in war, and upon dominating the populations in the Union. The British, from the standpoint of the Boers, seemed to be selfish and arrogant, and not prepared to take their due share of the administration of the country. Whether those views be right or wrong, there is no doubt that the black and the coloured people were not sufficiently protected by legislation, although it is very difficult, of course, to protect people by legislation when the majority parties are not interested in their being so protected.
I feel a personal blow, because South Africa was, in a sense, part of my boyhood. My father's people were colliery and electrical engineers, and they went out in the very early days of the mining industry to the mines in South Africa and did great work there. Some of them are still living there to-day. My grandfather went out there 60 years ago on a visit, and when I was a little boy I heard a great deal about affairs in South Africa. So, in a sense, I feel that this is a personal break
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with a link forged in my childhood; and, as we all know, those links are very dear to us, and very strong.
This situation is not an easy one for the Government here to deal with. One cannot pretend that it has not presented this country, and the Government of this country, with a very delicate problem. How does one deal with a situation of this kind? The implications of South Africa's withdrawal, it seems to me, have not been thoroughly worked out by anybody. It created an entirely new situation in the Commonwealth which had never occurred before quite in this way. That country was one of the original partners, it may be said, who withdrew owing to pressure from other, and in some cases newer, partners. What happens now? Is it open to others to urge Ghana, for example, to leave the Commonwealth? I think that, whatever may be the results, we have not yet fully worked out the consequences of what was a brave action at the time, and which may lead to quite a different kind of Commonwealth in the future.
The situation in South Africa has been bedevilled largely by apartheid; and when you have a people like the Afrikaners, who are not like ourselves—that is, utterly illogical—but are logical people, being originally Hollanders, and therefore people who have a logical mind, you get absurd results. In South Africa to-day, a Japanese is regarded as an "honorary" white man and has all the benefits of the white race. Lately the case of Mr. Sung, a Chinese, caused some interest, because he was treated as a white man while Mrs. Sung, who is no more nor less Chinese, was treated as a coloured woman; and the absurd position arose that if Mr. and Mrs. Sung live a normal married life, they can be charged under the law which prohibits association of a sexual nature between men and women of different races. That shows how absurd one can get by being truly logical in this world.
What Dr. Vorwoerd has been doing is little understood in this country, because he really means what he says. We have tended to think that the Government of South Africa have been putting up a smoke-screen and that they do not really want to take an interest in the future of the Africans. But I think that they are interested in the future of the Africans,

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in the light in which they see that future. Of course, it is entirely different from ours. The South Africans are logical, and that is not understood in this country. And they will try to carry out this policy. They have started several Bantustans—that is, colonies—within their country. They have, for instance, self-government in the Transkei. The Transkei will have certain elements of genuine self-government—not very great, but still far greater than any black African has had up to now in South Africa. They are going to spend £57 million on Bantustans during the next ten years. These facts ought to be made known because, unless we understand what they are doing, we cannot understand their motives.
Another development in South Africa, which is perhaps not so healthy, is that they have decided to take away the restrictions on the sale of European liquor to Africans and coloureds, who in future will be able to buy whisky, brandy and gin as freely as white men. This will have one peculiar result. The numerous white men who have made an easy and handsome living by selling illicit hard liquor to Africans will be out of business. What other results there will be, time will show.
Developments in South Africa are of immense importance to us because of the responsibilities we still have for large areas of Africa. There is no doubt that, both inside and outside the Union, Black Africa is watching and waiting, and time will show to what extent they will be prepared to take action in support of what they believe the future of Africa should be. It is quite impossible to regard South Africa in isolation. It is part of Africa as a whole, and anything done there has repercussions in other areas where we still have responsibilities, just as things done in other areas have repercussions in South Africa.
Coming directly to the Bill, I think that the cases for and against have been well expounded by both the noble Earl Ole Foreign Secretary for the pros, and the noble Earl, Lord Listowel, for the cons. I think we have heard practically all the arguments that could be adduced for and against the Bill. The criticism has been on three grounds. The first, of which the noble Earl, Lord Listowel, made a great deal, is the question of whether South Africa should have any
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more privileges than any other foreign country. Should the fact that it is an old member of the "Club" give it any advantages? The only other two foreign countries who have the same sort of position have already been mentioned by the noble Earls. As the Foreign Secretary said, Ireland, in this, as in most other things, is not a good example to take from the legislative point of view. We have always regarded Ireland in an ambivalent way, because of its close proximity to our shores and because it is our ancient friend and copartner. I do not propose to go into the other special case, Burma, although I could do so at length, because both the noble Earl, Lord Listowel, and I had something to do with the steps leading to the independence of Burma and know that there were special circumstances in that case.
The special arrangement with regard to nationality—people are given 3½ years to decide whether they want to retain or obtain British nationality or not—has been criticised. It is thought that this period should be shorter. I do not make a great point of it. Having regard to the centuries of contact we have had with South Africa, I think probably 3½ years is not unreasonable, but some have thought that twelve months would be enough.
There has been greater criticism of the retention of South Africa in the Commonwealth preference system. I do not think any answer has been given to the question of why South Africa should retain Commonwealth preference, and certainly the noble Earl did not attempt to give one to-day. We should genuinely like to know. The noble Earl, Lord Listowel, said that in this respect this was a dangerous Bill. I think that is going a little far, but I believe that if we water away the benefits of being in the Commonwealth too far, there is nothing left. What can we offer people to stay in the Commonwealth, if countries going out retain the important benefits? There is nothing left at all. I believe—and I think I am the only person in this House, in this Parliament or in this country who believes it—that we have had far too few obvious signs of our Commonwealth allegiance. There will be one obvious sign when Her Majesty the Queen opens the new Commonwealth Institute in Holland Park.

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That will be an obvious sign, to the hundreds of thousands of school children and adults who will visit it, that this Commonwealth means something. It is the only Commonwealth institution on whose governing board all the independent Commonwealth countries are represented and which as partly financed by them, although, of course, it is mainly financed by the United Kingdom Government.
The last point of criticism is of the Sugar Agreement. New bilateral arrangements are being made by the two Governments to bring the South African Government into association with the Agreement or at least with most of its benefits. I gather that the difference is £10 a ton. We have not really been told why, having gone out of the "club", the member should receive this valuable concession. I ask these questions—and I am sure your Lordships will want to know the answers—in no sense of criticism, knowing, as I have said, that the Government have a difficult task. But they are points to which we ought to have answers, and I hope that the noble and learned Viscount on the Woolsack will be able to give us the answers.
I feel that, so far as we in this House are concerned, one of our most important tasks to-day is to secure the position of the protectorates. As your Lordships know, these three protectorates, the High Commission Territories, are in a peculiarly difficult situation. Basutoland is entirely surrounded by Union territory, while Swaziland and Bechuanaland, although not entirely surrounded by South African territory, are to a large extent. Their history has been that they have developed, as is only natural, in very close association in all ways with the rest of South Africa.
The Government have recently recognised the special significance of the Territories by removing the control of them from the Commonwealth Relations Office to the Colonial Office. But they have not gone the further step which I should have thought desirable—namely, to remove from the High Commissioner, who in future will be an Ambassador, the responsibility for the Governorship of these Territories. It was just possible in the old days—although I never thought it a convenient arrangement—to have the High Commissioner also
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as Governor of the three Territories. But, as South Africa is now a foreign country, to have someone as an Ambassador, accredited to the country from the Foreign Office, who is also regarded as a Governor, responsible to the Colonial Office, is a task which we should expect no man to undertake.
I see no reason why we should not at this stage (and everybody will understand the situation), a new office having been assigned to look after its interests, appoint a separate official to be Governor of the three Territories, with, if possible, a separate headquarters. This latter suggestion, I recognise, presents difficulties, because the most convenient central spot for the three Territories—and it is not very convenient—is, in fact, Johannesburg, in the Union of South Africa. There is really no place which is very central with regard to the three Territories. But I am certain that it will be found impracticable to have the administrative and legal headquarters of what are three Colonies in a foreign country, as it is now. I would suggest that Her Majesty's Government should seriously consider the creation of a separate capital for the three Territories in Mbabane,which is in Swaziland, which seems to me (I shall be corrected if I am wrong) to be the only possible site for the capital of these Territories.
I have one further point on the vexed question of sugar. I must say that I do not understand the sugar position—at least, I understand the sugar position, but I do not understand the Government's reasoning on it. But, as always, I am open to be persuaded, and if I am wrong—it is a difficult situation—I am quite prepared to learn from the Government and from the noble and learned Viscount on the Woolsack, who is to reply. The present position, as I understand it—and I have gone to some trouble to find out what it is—is this. Swaziland sugar production is at present limited, by agreement with the South Africa Sugar Association, to 80,000 short tons per annum. This sugar is sold within the markets available to the South African sugar industry in the Republic and overseas. Marketing and price arrangements are laid down in agreement between the Swaziland milling companies and the Association, and are generally those applicable in the South African sugar industry.

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Towards the end of last year, only a few months ago, it was agreed between the British Government and the South African Government that in the 1964–65 production season, and subsequent years, the present figure for Swaziland sugar production of 80,000 short tons per annum should be replaced by a limit of 8½ per cent. of the total sales of South African and Swaziland sugar. So that after this Bill was in gestation, or when, no doubt, it was pretty well on the stocks, the British Government made this new arrangement with the South African Government, departing from the old idea of a block grant, as it were, or a block amount of 80,000 short tons, and tying the Swaziland production to a percentage of the total South African and Swaziland production. That seems to have been a curious thing to do just at that moment, although there may have been good reason for it.
I feel that the test in all these things should be not what we think is right for ideological reasons, but what is to the benefit of Swaziland. If the Government thought this was right, and have facts to support them, that is fine, and we should not quarrel with that decision. But I think the onus is on them to say why, a few months ago, when this great change was impending, they altered the system which had been in operation for some years and went into an entirely new system, based not on the ceiling amount of sugar, but on a percentage of the sugar production and sales.
Swaziland, in fact, as the noble Earl admitted in his answer to me when I intervened, is going to lose £10 per ton on the price of sugar, compared with what they would receive if they were in the Commonwealth sugar scheme. I think that is a matter which the Government have to defend. Why should Swaziland, which is a Protectorate, and is our responsibility, be in a different position from, as the noble Earl, Lord Listowel, said, Mauritius, which is in the Indian Ocean and not so far away? There may be good reason for it, but I personally do not understand what it is. Swaziland is building up a considerable export in sugar, and it seems to me that it could well come under the normal Commonwealth Sugar Agreement
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instead of being linked into this new agreement with South Africa, with the result that it will receive £10 a ton less than under the Commonwealth Sugar Agreement.
LORD DERWENT: The noble Lord Will forgive me for interrupting. He says that Swaziland is building up a big export trade in sugar. To where is that, apart from the Union of South Africa?
LORD OGMORE: I did not say "a big export trade in sugar "; I said they are building up an export trade. But there is an export of sugar into Rhodesia, I believe; and I am glad to say that there is an expanding economy in Bechuanaland, and there is no reason why we should not sell sugar there. Sugar, soap and tea are, I gather, the first recipients of the benefit of development anywhere. Where there is economic development, people begin to wear white clothes and want soap; they drink tea, and they use sugar in the tea. So with the development of the standard of living in other parts of Africa, particularly the Rhodesias, there is no reason at all why Swaziland should not develop as I gather, subject to correction, it is developing, a good export trade to other areas, apart from South Africa.
My final point is with reference to the difficulties of citizenship in the protectorates. The noble Earl the Foreign Secretary said that this was one of the matters which was going to be safeguarded, I think with an amendment of the Bill. I am glad to hear that, because there have recently been cases in which people from the protectorates have been arrested in the Union of South Africa. There was one case recently of Dr. Swame, a Swaziland politician, who had had the unfortunate experience of being arrested while returning from a visit to Basutoland, which seems very hard luck indeed. He was a citizen of the High Commission Territories and was going from one of the territories to another. He had to cross a piece of South African territory on the way and was promptly arrested. That is the sort of case which I am quite sure the Government have in mind in proposing this amendment, and if that is its intention it will certainly have my support when it comes on the Order Paper.
VISCOUNT STONEHAVEN: My Lords, this is a very important point. To the best of my belief, although Dr. Swame was resident for a while in Swaziland, he is, I am told, a Zulu. Could the noble Lord confirm that?
LORD OGMORE: I am not quite clear about Dr. Swame's antecedents. But whether he was originally a Zulu or not, the fact is that he is the leader of one of the Swazi political Parties. In fact, the Government of Swaziland made urgent protest to the South African authorities and he was released, so they must have regarded him as having some claim upon their activities and their protection. I instance just that one case—there are others—because I think it shows that this proposed amendment by the Government is an important one, and one which we ought to welcome when it comes. That is all I have to say. I am sorry that it has been necessary for the Bill to come forward. I can only hope that, at all events, the association between the High Commission Territories and South Africa will be a harmonious one.
4.3 p.m.
LORD FRASER OF LONSDALE: My Lords, as a South African deeply interested in South Africa and Basutoland, and with family and business ties going back for nearly 90 years, I should like to say that I welcome the moderate, businesslike way in which this Bill has been received in this House and, indeed, in the newspaper Press of both this country and the Republic of South Africa during the period which it was going through the House of Commons. It was to be expected that, when the Bill was being discussed here, and Mr. Louw's synchronous statement was being discussed in the Parliament of South Africa (because although they have not had a Bill parallel to this in South Africa as yet; they have had a statement endorsing the principles involved and indicating that the two Governments have, so far as possible, seen eye to eye in these matters) the Opposition in Cape Town and in Westminster in the Commons would "go to town", to some extent, in indicating their strong feelings about what the Government were doing. That is one of the functions of Opposition.
I should like also to say that I thought the Lord Privy Seal, in presenting the
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Bill in the Commons, when he had claimed that he had found a balance between sentiment and reality, was making a just claim. I think it as well to judge countries and peoples by what their Governments do, rather than by what oppositions say—" By their deeds shall ye know them "is a good motto. If we look at what the Governments of the Republic of South Africa and the United Kingdom are doing in relation to this question of trying to provide a permanent arrangement for living together in this world, as evidenced by this Bill and by the non-legislative steps they are taking, we shall find, it seems to me, that they are in fact doing wisely and well. They have been tolerant, even generous, to each other, and they have come to broad, general arrangements for working together which are sensible.
In South Africa, they have resisted the views that might have been expressed by Afrikaans-speaking or English-speaking Oppositions of diehard natures, and in England the Government have resisted the opposition of Leftish persons in the House of Commons, and rightly so. It was to be expected that Mr. Fenner Brockway would make a demonstration, and I am very sorry that he is depriving himself of South African oranges. I hope he will get some satisfaction from eating Spanish oranges, and that they will not give him doctrinal indigestion. There still seems to be in some quarters a slight feeling—I am glad to say very slightly represented in the speeches today, as I listened to the remarks of the noble Earl, Lord Listowel—that we must punish South Africa in some way for her internal policies or that we must not perhaps trade with them as freely as we should with some others, lest by doing so we contaminate ourselves. This retributive attitude, or "holier than thou" attitude, happily is not widespread, and I think it is true to say, looking at this matter as dispassionately as one can, that Britain and South Africa as a whole have decided to live together in a friendly way, notwithstanding what minorities or Oppositions are going to say about it.
THE EARL OF LUCAN: My Lords, I am sorry to interrupt, but my noble friend Lord Listowel being out of the Chamber I must say that in my hearing

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he never said a word that could be construed as punishment, retribution or anything of the sort. I really must protest on his behalf.
LORD FRASER OF LONSDALE: I shall be very happy if, when I read his speech, I can feel as the noble Earl does. I hope that is so. In the light of the view expressed, may I say that however the noble Earl, Lord Listowel, put it, there were those in the House of Commons, and there are others in the country, who seem to me, at any rate, to be expressing this retributive view. I was trying to give what I thought was some small answer to it. Since the view comes rather more frequently from members of the Labour Party than otherwise, it is right to bear in mind that it was during their term of office that both Burma and Ireland were given special treatment nearer to a Commonwealth relationship and slightly different from that of a foreign power. It is worth underlining that, because the Labour Party are making rather much of the point that Burma was a special case and Ireland was a special case. Why should not those of us who love South Africa be entitled to say that South Africa is a special case, with a great history of co-operation and friendship?
May I make one comment about liquor? I was not sure whether the noble Lord was referring to the new freedom to drink in South Africa now to be applied to coloured men and to Africans themselves—whether he had a critical idea in his mind or not—but he seemed to imply that it was open to some criticism.
LORD OGMORE: My Lords, I should like to point out that I was only saying that we know too little about what is happening in South Africa, and I gave some instances with the development of the Bantustan and this freedom, in future, to drink. I do not see why they should not have this freedom; they are having it in other parts of Africa. I was not criticising; I was only instancing development in South Africa.
LORD FRASER OF LONSDALE: Then the noble Lord evidently agrees with me that it is a good thing. I am glad to hear that. The object, of course, is to enable them to drink decent drink in lawful and proper circumstances instead of having to do it, as usually happens, in
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less worthy circumstances and with much worse liquor. On balance, it is a good thing. It is supported by the police, who very much dislike having to go to clean up unlawful stills.
This Bill is long and complicated, but we are dealing with the Second Reading debate in which principles should be in our minds, and perhaps I might devote myself in the main to the two major matters which are dealt with in the Bill and just touch upon the principles involved. The Bill deals mainly with trade and citizenship. I will take trade first and, in doing so, I will attempt to answer some of the questions or points made by those who spoke before me. Imperial Preference agreements are not of the essence of the Commonwealth relationship; they were bilateral agreements reached at Ottawa. Each one of them was a separate agreement, and there is nothing in the fact of South Africa's going out of the Commonwealth to cause a breach in the trade agreement between Britain and South Africa. There was therefore no reason why the retirement of South Africa from the Commonwealth should alter that agreement. There may be other causes for altering the agreement which may arise in the future—new agreements can always be entered into by Commonwealth countries or foreign countries, by Britain or by any other country—but moving outside the Commonwealth, that particular instance of last year, was not one that made it necessary for that agreement to be abrogated. It therefore goes on, and this Bill does not, in fact, do anything except tidy up that position.
Now some have said: "It is not fair that these people should have this preference; let us alter it". Very well; if it is to be altered let it be done in due course for good reasons, and not because of the fact that South Africa has gone out of the Commonwealth. We have almost similar agreements, to mutual advantage, with many countries, and we can perfectly well continue this one. I think the Government have been sensible to do nothing in this Bill to diminish the extent of trade which has gone on under this bilateral agreement and to allow it to continue. Of course, as has been said, they may all come to an end in the next year or two. All well and good. But for the time being they go on.

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I will say a word or two about the general balance of advantage which has been entered into by these two Governments and which is the reason for this Bill. But I want to divert just for one moment to say a word about sugar. It may well be that the sugar arrangement is part of a kind of package deal which the two Governments have made, the one with the other, touching many of their interests. There are certain things which we should want very particularly from South Africa; there are certain things which South Africa would very particularly want from us; and, undoubtedly, in recent months the two Governments have been in discussion about all these matters. In one instance no doubt they have given way a bit, in another taken a bit, and, by process of give and take, this viable arrangement has been entered into between the two Governments and is now, I hope, to be given the force of law. The sugar arrangement takes into account the special circumstances of Swaziland, about which I am sure the noble and learned Viscount, the Lord Chancellor, will be well-informed when he comes to speak. It takes into account the special relationship between ourselves and Natal, which is of long standing. And it takes into account the large sums of money which have been invested and the propriety of giving time for adjustment. All these are circumstances which I think should be taken into account.
I should like now, my Lords, to turn to citizenship. The general principle here is that a few older persons with special connections in the two countries, persons like myself, for example, may enjoy the citizenship of the two countries for quite some time. But it cannot be contemplated that our children and our grand-children can enjoy an option to revive their United Kingdom citizenship for all time. I mention this matter, because while in South Africa quite recently I met a number of persons with British connections, such as myself, and Scottish connections, who said: "Why cannot I, or my son or grandson, have the option to retain our British citizenship indefinitely? Why just for five years?" I had to point out that there must be some limit to the time during which a person who adopts the manners of a country, and who lives and becomes
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part of that country, can go on doing that without opting to become a citizen or to lose the advantages of becoming a citizen.
Therefore, the arrangement contemplated between the two countries whereby some older rights or older privileges may be honoured but whereby the younger generation must, within a limited time, make a choice, seems to me to be the right one, and I think it has to be understood from both points of view—not only from the British but also from the South African. If there are some points in this matter which we can deal with on Committee I shall be very glad to concert with others to see whether they seem to be valid matters. But, by and large, I think the Government are right in the proposals they are making about citizenship, and I believe it will be found that they are in accord with the wishes of the South African Government as well as of our own.
Dealing with this question of trade, I do not think we can fail to be concerned with the amount of the trade unless we are going to be complete humbugs. I should like, very briefly, to mention one or two figures which will illustrate it. There is an investment of £1,000 million of British money in Southern Africa. I may say, in passing, that apart from the proper interest which Her Majesty's Government is entitled to take in so large an investment, we may well rejoice that that investment over a long period of years has done much to raise the standard of living of South Africa, and particularly the standard of living of the Africans themselves.
Last year the United Kingdom sold to South Africa £154 million worth of goods and bought from South Africa £106 million worth of goods, in addition, of course, to taking all their gold and uranium, amounting to some £200 to £300 million worth, and distributing it throughout the world. Not only are these very substantial figures in themselves, but it is a paradox indeed that the very nice balance of trade between our two countries, the Republic and the United Kingdom, is not matched in respect of any other pair of countries, in the Commonwealth or out of it. The trade done between Britain and Canada, between Britain and Australia, between Britain and New Zealand is not as good

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to the two countries or as substantial or as well balanced as that done between Britain and South Africa. Let us bear that in mind in considering this whole question of trade.
Now, if I may, I will say a word about the protectorates. These three Territories are very dependent upon South Africa, and Basutoland is absolutely dependent upon South Africa. It does not grow enough food to feed itself; it has not access to the sea. It cannot survive without work in South African mines and industry, and without exporting its wool and mohair through South Africa and selling its beasts to South Africa. The criticism has been made that it would be better if those three Territories were governed by a Governor, a separate person with a separate office. That may come in due time. Who knows how that situation will develop? But I think we ought to remember that there is a great tendency in Colonial government to over-govern, to have too many Lieutenant-Governors and too many Governors; and every one of those Governments is very expensive. To have yet another Government and another capital there, on top of the three Governments and capitals we already have, would, I think, be a needless expense.
Moreover, it is not true to say that Sir John Maud, our proconsul out there, has a divided mind or schizophrenic mind in this matter. He is working for the two countries, not for the one against the other, or the other against the one. He, above all, realises that it is very important for Basutoland to remain a comfortable, healthy, happy British Protectorate and, at the same time, to remain a friend of what is really its Mother Country, its surrounding country, the Republic of South Africa. He is therefore working for both and not for one against the other. I may say, in passing, that I think that both Governments, in the Republic and here, owe a deep debt of gratitude to Sir John Maud for the very able way in which he has guided us and for the help he has given us both to bring about the agreeable result in which we are taking part to-day.
There is one other figure about South Africa which it is well to have in our minds. The lowest point reached by their reserves of gold and dollars during last year was £76 million. The figure
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to-day, only ten months later, is £166 million. That is partly due to the turn of trade, and partly to restrictions of capital movement and of imports. But already in this brief time both the restriction of capital movements and the restriction of import trade are beginning to be relieved. The economic growth in South Africa this year is some 5 per cent.; the average in the world generally is 1½ per cent. There are, therefore, good reasons to hope that South Africa may be in for a time of quite considerable prosperity; and I, for one, believe that she is destined to enjoy, behind her moderate or even reasonably high protective screen—I think she is destined to a little inflation, which she can stand better than many countries—some years of prosperity. And that ought to make it all the easier for us to get on with her, and for her to help to support and aid our important interests in the three Territories, about which noble Lords have expressed concern.
The noble Earl, Lord Listowel, said that he would like to know if any official statements had been made about the Republic's designs upon the Territories or about their intention to incorporate the Territories—which was, of course, the traditional attitude, and one that was forecast in the South Africa Act, 1909. On February 9, in the House of Assembly, Dr. Verwoerd said, by way of preparing his own Parliament and his own people for a change of view, that incorporation was no longer an active matter in the policy of the Union of South Africa. He has personally told me the same thing within the last few weeks, and I believe that there will be no troubles between the Republic and Basutoland except those that may arise out of fugitive offenders and chasing delinquents and other similar troubles which must always worry people who have borders, as I suppose our Irish friends will know so well.
Now may I turn to South West Africa? It was said a little in this House, and very much in another place, that the Bill should not be given a Second Reading because it does not clearly define the British Government's policy towards South Africa; or, putting it another way, that, because it applies to South West Africa the same preferential arrangements and the same citizen arrangements, therefore the British Government

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must be condoning the assimilation of South West Africa into South Africa, and they should not do that since the matter is before the Court at The Hague. I should like to make just a few remarks on this point.
I should not wish to anticipate, and I could not anticipate, what the Court may say; but whatever the Court says I think it is not unwise to look at the facts. Here is a Territory very far South, a long way from any other place, contiguous with, and geographically part of, South Africa, with similar problems of water and drought and farming; with similar native experience and primitive peoples governed by and living among the whites. It is only natural that this Territory should be governed by South Africa. One of the noble Lords who spoke before me reminded us that it was a Liberal Government here in Britain that placed the affairs of South Africa, its destiny, in the hands of the whites to the exclusion of the coloured and the blacks. It was a Liberal Government under Mr. Grimond's grand-stepfather, I think. Of course, your Lordships will remember that he was a Liberal.
It was not unnatural, when the Great War came to an end, and South Africa was one of the victors, and when the old German territories had to be divided up, that this one should be handed over to them. And so it was. One of the obligations placed on a mandatory Power is to manage the country according to their lights; to assimilate it into their government, and look after it according to their methods. Words to that effect were enshrined in the old League of Nations schedules, or whatever they may be called, which dealt with this question of Mandates. And it must be so. You cannot expect a mandatory Power at one end of the world to manage a place in a different way from the way in which it manages its own people. The very fact of placing it under South Africa recognised the fact that it was going to be under the whites and was not going to be under black government.
Geography and history suggest that this is the right and the sensible thing to do. We could all go on for ever imagining what could be done that would be better. We could say, "Let someone else have the Mandate". But who? It
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would not be agreeable to South Africa that Britain should have it. It certainly would not be agreeable that America should have it. Or Russia. Then who? Same impotent Power quite incapable of managing a Mandate on its doorstep, much more incapable of managing a Mandate at the other end of the world? Or is it to be left to U.N.O.? That is the easy way out: that U.N.O. shall do it! But what is U.N.O.? It is three or four great Powers with amphibious Fleets and the means of enforcing sanctions in various parts of the world—three or four Powers with Fleets, and 97 others who have produced no intelligent proposals, who talk nonsense and get into a muddle whenever they intervene. So, "Leave it to U.N.O." is no solution.
My Lords, there is no solution for South West Africa but to let South Africa manage it. That is the sensible thing to do. May I also point out to your Lordships that it is most unlikely that the South African Government will invite or permit a United Nations committee to go in and investigate what is going on there? If South Africa does not, then it is unlikely that Britain will allow such a committee to go through Bechuanaland. Britain refused to do that only the other day; and rightly.
There is only one other way to South-West Africa, and that is by sea. There is a most inhospitable coast, and there are few who have the amphibious means to do it. I do not think that Britain or America would want to. I am quite sure that none of us would want Russia to do it. So do not let us talk quite 130 much nonsense about South-West Africa. It is a good thing to learn about the facts of this world. We have all of us, on all sides of this House, learned to live with Russia. We are not constantly bringing Russia up to the United Nations in order to ask when she is going to report on Latvia or Estonia, or on all the countries on her borders, from the Baltic to the Black Sea, which she has brought under her Government, by artifice, by war, by "fiddling" or whatever. We do not do that. Why should we always be persecuting South Africa and chasing her up over this matter? I also warn your Lordships that part of the inhospitable coast on which an invader would have to land is called the "skeleton coast".

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My Lords, think that this Bill is a sensible arrangement, made by two Governments who have not been moved too much by the views of their Oppositions. It is notable that most people do behave sensibly when they have the responsibility to do it. I think that we ought to give the Bill a Second Reading. If there are small points which we desire to deal with in Committee, let us do that. Meantime, let us rejoice that these two Governments, representing two peoples who have been friends for so long, are determined that that friendship shall continue.
4.35 p.m.
LORD ROBERTSON OF OAKRIDGE: My Lords, I fear that my contribution to this debate may be regarded as most unsophisticated, and indeed naive. In compensation for that, I can assure your Lordships that it will be brief. In any case, it may be that on such an occasion as this it is not too bad a thing that some of the simple things should be restated. I think that would especially be the case if it were true, as I hope it is not, that we were attending the obsequies of a noble experiment.
The only reason why I have ventured to stand on my feet is that before the war I lived in South Africa. I had South African nationality as well as British. Throughout the war I served in South African uniform, and I was proud to do so. I wear to-day the medal of that war awarded by the South African Government. Indeed, I had every intention of returning and continuing my life in South Africa after the war, if fate in the person of Sir Winston Churchill had not forcefully intervened. I have not ventured to come to this House without studying the Bill which is before us, nor without reading the debate on it in another place; but I feel myself incompetent to comment on the complex details of the Bill. It is only with the broad principle underlying it that I am at all concerned.
As I read the Bill, it appears to strike a middle course. On the one hand, as the noble Earl the Foreign Secretary has said, it does not propose that the Republic of South Africa, having left the Commonwealth, should continue to be treated as if she were a member of the Commonwealth, or that she should continue to enjoy the full privileges of
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Commonwealth membership. On the other hand, it does not propose to do those things which might be regarded as cutting off our own nose to spite our face, or slashing the South Africans' nose to spite their face. It is because it seems to me to be the kind of a Bill that strikes a middle course that I feel warmly in support of it.
Because one supports this Bill, it does not mean that one condones in every respect the policy of the Government of South Africa. I myself, I must admit, find that certain aspects of their policy of apartheid offend against my conception, at least, of Christian behaviour. I find that some of their ideas of government are not consonant with my idea of democratic freedom. I feel that their attitude towards South-West Africa, with which the noble Lord, Lord Fraser of Lonsdale, has dealt so well, is difficult to justify; and, perhaps above all, I feel that a tendency which still seems to persist among a section of the Afrikaans-speaking population to wish to dominate the scene to the exclusion of the English-speaking element in the population, is most unwise, particularly in view of the common problems and perils that face them both. I think it right to say these things, but I also remember some things on the other side of the balance sheet.
Now as regards the native question. I apologise for using the word "native". I became accustomed to using it when I was in South Africa. Of course it is a most inappropriate word, because the Bantu races that are now in South Africa are no more indigenous to that part of Africa than are the European elements; but it is a convenient word. As regards the welfare of the native, I recall that before the war those natives who worked in our factory had to live in petrol-tin shanties, in stinking barges in Durban Bay, just where they could get cover over their heads. When they were sick, which they frequently were, they were sent back to their kraals, because there was no hospitalisation of any consequence to look after them. When they died my officers came to me asking that they should be buried at the firm's expense, because otherwise they would not get a decent burial. I did not hear any great outcry, either in this country or out there, about that state of affairs at that time, but I think it is

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proper to say that at least the physical state of the native in South Africa is not worse but better to-day, and I think the noble Lord, Lord Ogmore, was fair and right to draw attention to some things which have been done to improve the lot of the native.
Another thing about this very difficult native question is that if South Africa were indeed to swallow the prescription which some people would have her swallow then the European population would be completely overwhelmed and would almost certainly have to leave the country within a short period of years. The British who lived in India can come back to Britain; the Belgians who lived in the Congo can go back to Belgium; the Portuguese who were in Goa I suppose can go back to Portugal. But a very large number of the white population of South Africa have no country at all, except the one in which they and their ancestors have lived for many generations, and in which they have as good a right to live as the Bantu races who live around them.
I remember, in brief, the history of South Africa since that war which is so curiously and incorrectly called "the Boer War." Mention has been made of the Act of 1909. Was that not a fine example of high-principled statesmanship on the part of both countries? It may be that its force is spent—I am sure that is right, as the Foreign Secretary has said—but it was a very great act of statesmanship, and we should to-day try to tackle these problems in the same mind.
Then I think of what happened in two World Wars. I remember in the First World War how I admired the performance of the South African contingent at Delville Wood and elsewhere. In the Second World War I remember the formations with which, and in which, I served and how magnificent they were at E1 Alamein and elsewhere—rough, tough chaps, but bonny fighters, like the football teams they send over from time to time. I remember the wonderful comradeship that existed between the South Africa and the British troops. I recall how, within a few days of the destruction of the Guards Chapel here in London by enemy action, £5,000 was raised in the South African Armoured Division from the officers and men:
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that works out at about 10s. a head. Incidentally, I am very glad that the Chapel is about to be rebuilt.
Of course, in saying these things one knows that there were elements in the country which did not want to take part in these wars, and there were even some men who worked with our enemies. It is right to remember those things, and to recall that they are not all yet departed from the scene. But they were a minority, and, as the noble Lord, Lord Fraser of Lonsdale, said, you judge a man or a country by their deeds—" By their deeds ye shall know them "which is not a bad yardstick. Then I think it fair to remember that since the last war there has been concluded a defence agreement between this country and the Government of South Africa, an agreement which is of great value to both countries and which is something we have not been able to get with all the other countries that have remained in the Commonwealth.
Finally, I recall to mind my friend and hero, Field Marshal Smuts, whose statue stands outside these Houses of Parliament; I recall all he stood for and all he fought for: "South Africa for the South Africans" he said—not just for this lot of South Africans, or that lot of South Africans, but for all South Africans. I look forward, I hope to live to see the day when the Government of South Africa will really take up that principle which Smuts laid down and put it into practice. I look forward to the day when the Government in South Africa will seek to repair such breach as is now being made between their country and ours, either by re-entering the Commonwealth or in some other way. The Commonwealth itself cannot be completely sheltered from the wind of change. Meanwhile, I hope that nothing will be done to make the repair of that breach any more difficult than it need he. And it is because this Bill appears to be drafted in such a spirit that I warmly support it.
4.47 p.m.
THE EARL OF LUCAN: My Lords, I, like most of your Lordships, I am sure, was glad that the noble Lord, Lord Robinson of Oakridge, gave such a balanced picture of South Africa. We tend to personalise countries that we know and to colour them very black or very

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white; and it is true that South Africans fought beside us in two wars. It is also true that in both those wars there were sizable revolutionary, rebellious elements—in fact, there was armed rebellion in both cases. There were powerful movements, like the Broederbond, that were indistinguishable from our enemies at that time. So, as regards character, let us say that South Africans are not wholly bad or wholly good.
But the noble Lord also said: "By their deeds ye shall know them". And surely that is what all this is about—the deeds of the ruling Party in South Africa, the Party that has been in power ever since the great Field Marshal Smuts lost power. It is that Party and its policies that have caused South Africa to leave the Commonwealth and have engendered such strong feelings on the part of millions of people in this country, in the rest of the Commonwealth and in the world at large. I would not admit that there was here a note of punishment or a wish for retribution, as was suggested by the noble Lord, Lord Fraser of Lonsdale. I know that my noble friend Lord Listowel did not say anything that could conceivably be characterised by that word. But there is a strong feeling which does find expression in strong words and strong criticism. Because of this, some of us feel that this Bill is rather too neutral. It seems to wish to gloss over all the underlying movements that are the cause of South Africa's leaving, and to say "Well, let bygones be bygones". Surely, my Lords, if Commonwealth membership is to have any value at all, it must mean something. The departure of a country from the Commonwealth must mean that that country forfeits some of the advantages that it derived from Commonwealth membership. That is why some of us think that it is difficult to justify the continuance of preference—trade preferences, the sugar agreement, and the other provisions on trade.
The noble Lord, Lord Fraser of Lonsdale, talked a good deal about the Mandate. He let himself go, shall we say, on the United Nations. But if we ignore that I think he was wrong about the Mandate itself. It was only natural, when the League of Nations allotted the Mandate for South-West Africa that it should have been allotted to the self-
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governing Commonwealth country of South Africa; but it was not only natural that this should be incorporated as part of South Africa. I cannot quote the provisions of the League of Nations' instrument which governed the Mandate system, but I am quite sure that no Trust Territory, was, in fact, incorporated in the country which held the Mandate. We were most careful that Tanganyika should be governed according to the terms of the Mandate. I do not think South Africa's action in incorporating its Trust Territory in its own Metropolitan area, making it subject to its own laws, can be justified in any way. Indeed, I think Her Majesty's Government do not admit that the annexation—which is what it amounts to—is justified. I was glad to see that, when the Bill passed through another place, a small concession was made in the terminology in the Bill, and in one or two places South-West Africa has been described as a Mandated Territory. That is a small but definite improvement in the Bill.
I was very glad, and your Lordships will have been glad, to hear from the noble Lord, Lord Fraser of Lonsdale, a first-hand account of Dr. Verwoerd's present attitude on the High Commission Territories. I think it is most important that Dr. Verwoerd should have declared openly that the question of their incorporation in the Republic is no longer alive (or words to that effect), because those Territories and the Republic of South Africa must live together. Those Territories cannot exist without friendly relations with South Africa.
That brings me to the question of the governing of those Territories, and the combining of the post of Governor or High Commissioner of those places with that of Ambassador to the Republic. Nobody has accused Sir John Maud, as the noble Lord, Lord Fraser of Lonsdale, said has been done, of having a split mind. But what many people have said is that the two functions are split: that they involve a split loyalty and split responsibility. Surely the case is even stronger now than it ever was for the control of those three Territories to be removed from the capital of the Republic of South Africa, from Pretoria or Cape

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Town. I do not know whether, as the noble Lord, Lord Ogmore, said, it would be possible to select one of the High Commission Territories and locate the combined capital at Mbabane in Swaziland; or whether those three Territories should not be made individually responsible to the Colonial Office, to Whitehall. I should have thought that that was another solution well worth thinking about. They are small Territories, but there are other small Colonies depending directly on Whitehall, and I should have thought it would be in accordance with precedent that the resident Commissioners there now should become Governors answerable direct to Whitehall.
My Lords, the Swaziland sugar question is highly complicated and, from what we have heard, I am not sure, even now, why Her Majesty's Government think it impossible to separate the Swaziland sugar production from that of the Union. We were told that it is to give an assured market to the Swazi producers. But is that so?—because we were told by the noble Lord, Lord Ogmore, that the quota has been limited and adjusted to the production in the Union? If, as we have heard, there is already over-production in Natal, it is hard to see why the production of the two countries cannot be divorced.
Lastly, my Lords, there is a question which was mentioned in another place, though I do not think the noble Earl, the Foreign Secretary, dealt with it in his speech to-day; that is the question of the diplomatic representation of the Republic of South Africa in other countries. It has, of course, been the custom for British diplomatic and consular officials in many countries in the world to represent South Africa; and while that was perfectly reasonable, and obviously a sensible solution, when South Africa was in the Commonwealth, it does not seem appropriate, since she has left the Commonwealth, that that system should continue. Can we be told whether, in fact, it will continue in the future?
Much has been said, and most of the arguments have already been well set out on either side. I think all that needs to be said is that, while in this situation we should avoid anything like vindictiveness in our dealings with South Africa,
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we must at the same time remember the rest of the world. What is the rest of the world going to think? The rest of the world will be watching very closely our relations with South Africa, on the termination of its Commonwealth membership.
There is no doubt that until last year, until Dr. Verwoerd decided to take South Africa out of the Commonwealth, we were suffering under a great handicap in our dealings in the world, particularly with the Communist countries, in having a member of the Commonwealth whose policies were so diametrically opposed to everything for which we said we were fighting the Communists. In fact, in the diplomatic relations between the so-called Free World and the Communist world, we were prejudiced by the fact that we condoned this policy by a member of our Commonwealth. Now, my Lords, we start with a clean sheet; we can hold up our heads, with our consciences to that extent clearer; but we must not forget the underlying, reason for South Africa having left. We feel that this Bill errs, if anything, on the side of being too kind to South Africa; nevertheless, we think that, on the whole, most of its provisions can be justified.
5.1 p.m.
VISCOUNT STONEHAVEN: My Lords, in your Lordships' House you will not think it at all odd that I should be the third South African to address your Lordships this afternoon. You may wonder at my temerity in doing so, and I can offer as a possible reason only the fact that I spent six years after the war in that country and in Swaziland, and that it also, by a fluke, happens that I was responsible for installing the pilot irrigation scheme from which one of the two big sugar groups was finally developed. I left Swaziland permanently, although I have been back since, in 1953.
I must admit that I think that this Bill is a very good Bill. It is a very good compromise of a very difficult problem. I am not going to say much, because I heartily agree with the two speeches of my fellow (if only until the end of May) South Africans and I do not want to repeat their speeches again. But I must say, knowing how strong are the feelings of noble Lords opposite on this question, that those noble Lords have been very restrained; and although I

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could say quite a lot in amplification of what the noble Lord, Lord Robertson of Oakridge, has said, I will not do so because I do not want to draw forth any controversy.
There are just one or two things about which I should like to ask. I am not clear as to the sugar position and as to the sugar price question. So far as I know, the Swaziland sugar quota was split from the Natal quota—under what sort of arrangements I do not know, but it was a proportion granted to Swaziland from the South African Government. Whether there were reciprocal arrangements, or things of that sort, I do not know. The other point about which I am not sure is that what I might call quite a large quantity of a very small quantity—the total quantity involved is round about 80,000 tons, I believe, but a large proportion of that—is consumed in Swaziland itself, and the vast bulk of the balance, I thought, was consumed in the Republic of South Africa. Whether the export price will control the South African price or the internal price I do not know, so I really cannot say how the price structure will affect Swaziland at all. I do not know whether anyone can tell me about that, but to understand the position is not quite as easy as it appears at first sight. There may be a loss of £10 per ton, and it is rather difficult if that is so, but I am not sure on that point.
The noble Lord, Lord Ogmore, commented on the question of making alcoholic drink available, and I should like to add just one point on that subject. Just as in this country, drinking hours are prescribed in order to have some control over drink, and I know that control measures are contemplated in a Bill which I believe is being prepared or which is before their Parliament now. The noble Lord, Lord Ogmore, did not mention that fact, and I thought it might be of interest if I did. The noble Lord also suggested as a potential capital a place I call Mbabane. I think it is one of the most beautiful places in which I have ever been; but heaven help anybody who tries to make a telephone call! So that matter would have to be put right if it were ever used for that purpose.
I thought the noble Lord, Lord Fraser of Lonsdale, put the reciprocal
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preference in its true perspective, and I have nothing to add to that point. However, there are two very short points that I should like to add before I sit down. First of all, it has not been mentioned to-day, but we are also considering the wellbeing and the future and the kind of treatment we wish to be meted out to approximately 12 million Bantus. Now I do not for an instant say it is so, and I am making no accusations at all, but suppose certain people did visualise a tougher policy. I think we must also bear in mind that, if any suffering did come about, those whom we do not wish to catch in that policy would be the first people to suffer. That point should be borne in mind.
The only other point I wish to make is that there are a number of people who have bought building sites in Swaziland, which is a most beautiful country, with a view to retiring there, and a number of those people would have liked to retire there as citizens of the United Kingdom. Whether it will be easy for anybody in that position to become naturalised, even though, through reasons of not being in a position to retire yet, they cannot do so within the prescribed time limit, I do not know, but I should like to put in a plea that in a case of that kind anything that can be done to ease that situation should be done.
5.8 p.m.
LORD LUCAS OF CHILWORTH: My Lords, my excuse for venturing to intervene in this debate is that I have returned only recently from a visit to South Africa, and I thought it might be interesting to your Lordships and helpful in the consideration of this Bill if I told your Lordships the conclusions I had come to and the impressions that I had gained. Honesty compels me to admit that perhaps the principal reason I went to that glorious country was to enjoy its sunshine and to leave your Lordships behind to withstand the rigours of a more than usually severe winter; but I went there also to see for myself what the conditions in South Africa were like and to learn what I could of the economy of the country.
During that protracted course of self-education, I travelled, in the company of my wife, about 3,500 miles. I visited the chief cities of Capetown, Johannes-

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burg, Durban and Port Elizabeth. I discussed at length the problems with Ministers and the leaders of all the political Parties—the Nationalist Party, the United Party, and the Progressive Party. I talked to financiers, bankers, industrialists, professional people, and everybody from whom I could learn anything. I went over industrial estates and factories, and down gold mines and diamond mines. I visited those group areas where the nonwhites are forced to live as a result of this policy of segregation; I talked to them. Also, I visited those slum shanty towns where human degradation is at its lowest ebb. Those are my bona fides for venturing to address your Lordships this afternoon.
My Lords, South Africa is a Fascist State, and three-quarters of its population are living in a Police State: of that there is no shadow of doubt. The Nationalist Government's plan for the future of South Africa is writ large everywhere you go. The Nationalist Government in South Africa are trying to do precisely what Hitler tried to do in Germany. Hitler tried to set up a pure Aryan State, and to do that he tried to exterminate one of the greatest races in the world. The Nationalist Government in South Africa are trying to set up a pure Afrikaner State—a white Afrikaner State—and to do that their policy is to reduce to servitude the non-white population. Verwoerd will fail just as ignominiously as Hitler failed. But I would beg of your Lordships to ponder that this is no passing phase. The policy of the Nationalist Government in South Africa is firmly entrenched. There is no need for me to dwell on something of Which most of your Lordships know, but still fresh in my mind are the horrors of the working of the Group Areas Act, the Jab Reservation Act, the Immorality Acts, and all those many Acts—and they are legion—and regulations which strip every civil right from a coloured person. These, my Lords, are the facts.
This policy does not extend to only the non-whites. When I was in South Africa, there was a vitriolic campaign of vilification against the British Government—as the Government that "sells its citizens down the river". I must confess that the happenings in the Congo and in the Federation were readily used to propa-
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gate that campaign. But, in my view, that was done for a far more subtle reason. I was interested in what the noble Earl the Foreign Secretary said on this question of nationalism. The vilification of the British Government in South Africa to-day has one express purpose, and that is to hold before the entire English white population of South Africa the picture that the Nationalist Government is the only sort of Government that a white man can trust. That is why it is done. And the sad thing is that it is collecting far too many adherents.
This question of nationality wants very careful handling, because when this present campaign has worked itself out there will be a Nationality Act in South Africa. That Act will give the white population of South Africa the choice of South African citizenship, British citizenship, or the citizenship of any other country—America, or wherever their hereditary allegiance may lie. I am quite certain that, when that choice has been made, there will be a disenfranchisement in South Africa of all those who have not opted for South African citzenship. That will remove practically the last sensible opposition to the policy of the Nationalist Government. I beg the Government not to lose sight of this. I do not think they will, because I am not telling them anything they do not know. But perhaps I can say these things from the Cross Benches in your Lordships' House. It would be a big mistake for anybody in this country to think that the Nationalist Government represents the white population in South Africa.
When this Bill was in another place I happened to be in Johannesburg, and I can tell your Lordships that it was received with the greatest possible relief by all the people concerned to whom I spoke. They thought that this Bill was one of the most generous actions that a Government could take. One person after another said to me, "We do not want to lose our British citizenship"; and they thought that the commercial part of the Bill was a generous action. In Nationalist circles, it is looked upon as just another trick by a British Government protecting their own selfish interests. I commented, "Since when need a British Government start apologising for protecting the

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huge capital investment "—it has been mentioned this afternoon—" of £1,000 million, which has done so much to raise the standard of living in South Africa?" I felt that the British Government had no reason to make any apology in that direction.
My Lords, I came away sore and sick at heart. It was a heart-breaking experience to go round the country and keep one's eyes open and an impartial mind. South Africa will never be saved by her politicians. In my view, you will never, for as long as it is sensible to look forward, have a change of Government there. There is not a vestige of a chance of getting a liberal Government in South Africa, sorry as I am to say it. Of the three chief political Parties, only two appear to be engaged in fighting the common enemy, which is the suppression of three-quarters of the population. That should be the job of the Government. The duty of a Government is to work for the welfare of the whole people and not of a section of the people—and a very small section—as is happening in South Africa.
But I am not despondent. South Africa can be saved by the efforts and enlightenment of a first-class industrial community. In my contacts with this community I formed the highest opinion of the industrialists of South Africa, and one of the bright factors is the infiltration of Africans into the highest industrial circles. I have always held firmly the view that when political or racial ideologies come into conflict with economics, economics will win in the end. The forces of modern economic development affect all men without regard to the colour of their skins. It is from the force of this economic truth that the salvation of South Africa will come.
That is why I am so hopeful about this Bill. There are three things which are vital for the future of South Africa as a great country—outside capital, outside know-how and wise use of the country's vast resources of non-white labour. When in South Africa, I went over a huge works employing 4,000 operatives, 50 per cent. white and 50 per cent. non-white, working side by side on the same machines, under the same conditions and earning the same money. They were being paid the rate for the job right the way through. Yet,
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when we get progressive industrialists like the owners of this works, who want to contribute their meed to the economics of their country, they find hanging over their heads, like the sword of Damocles, the infamous Job Reservation Act. The latest estimate I could get when I was there showed that the population of South Africa is just over 16 million: 3 million white and 13 million non-white. And the non-whites are increasing five times faster than the whites. How can a policy of segregation, of apartheid ever continue to exist under a condition like this?
South Africa requires a vast expenditure on secondary industries. The industrial advancement of South Africa depends upon countries like ours giving economic aid and not upon trying to veto a fanatical ideology, which we shall not do. These industries will want more customers, and more customers can be provided only by a higher standard of living, and it is only by increasing the standard of living that a greater sense of social responsibility can be brought about. I learned in South Africa that the non-white is a skilled operative, far more skilled as an operative than he is developed in a civic sense. How can we expect a high sense of responsibility when the non-white population are deprived of every social and civic right? As I left South Africa, the Government were just bringing in another Bill to take away the last vestige of their municipal responsibility.
I agree with the noble Lord, Lord Fraser of Lonsdale, that the credit side must be mentioned. There are huge housing estates on the Cape Plains and outside Port Elizabeth, Johannesburg and Durban. I went over some of them and talked to people in the houses. But what is the good of decent housing if you segregate the non-whites from the people with whom they are working all day? How can you expect anything else but the fomenting of nests which can be fired at any time?
LORD FRASER OF LONSDALE: My Lords, the noble Lord has said that, as he was leaving South Africa, they were taking away some municipal rights from the coloureds or natives. I was there at the same time as the noble Lord and I actually went and sat with a local native council, which was all black, including the chairman and secretary.

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They were discussing local roads, lighting and sewage, and the rest of it, just like our local representatives. Far from taking this council away, they have just set it up.
LORD LUCAS OF CHILWORTH: My Lords, what the noble Lord says just illustrates the insidious way in which this apartheid policy is carried out—they are all blacks, all coloureds; not a real non-racial municipality. What are they proposing in the Transkei? They are proposing to put up factories where nobody wants to go. In many of these places they are intent on segregation right the way through, from top to bottom. That is an unholy doctrine.
That is my experience. That is why I welcome this Bill. It is a generous gesture. What we cannot afford to do as a country is this. Because we are at odds—and quite rightly—with a Fascist Government, we cannot take it out of the people with whom we have ties of generations. Of course there will be other examples. This is the shape of things to come.
The noble Earl the Foreign Secretary will not agree with me, but perhaps I might say this, which he himself would not like to say. Do not ever delude yourselves, my Lords, that South Africa will ever come back into the Commonwealth. That is just Cloud Cuckoo-land thinking. I think this is the first of a series of Bills like this. I have to confess something which I have said at other times in your Lordships' House: in my view, the Commonwealth as we have known it in the past, is a thing of the past. The tying together will emerge commercially and in many other ways; but if we think the next two years is not going to see the whole structure of our relationship with South Africa, Australia, Canada or any other part of the Commonwealth radically altered, then we are not facing up to realities.
Therefore, I welcome this Bill, and I hope that the Government will never do anything that is going to injure the ordinary people of South Africa. We have more friends there than would be imagined from what we read in the popular Press. It ill becomes anybody, as happened when I was in South Africa, to leave this country and make
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inflammatory speeches and say the idiotic things that are said. Fancy going to a place like South Africa at a time such as this and castigating the British Press, saying they can only find all the things that are bad in South Africa and blow them up for the sake of selling their newspapers! When that was repeated to me when I was in South Africa, I had no hesitation whatsoever in characterising behaviour like that as rabble-rousing clap-trap—an inelegant expression, but one that fitted the circumstances only too well.
5.34 p.m.
LORD MILVERTON: My Lords, in rising to support this Bill, I should like, first of all, to offer my apology to the House for having been unavoidably prevented from being here in time to hear the first two speeches in the debate. If I may go on to say what my own credentials are for speaking at all, apart from a great interest which I have always taken in Africa, and especially in South Africa, I was privileged a few years ago to go there for some weeks as a guest of Sir Ernest Oppenheimer, and I was given every opportunity, which I took, of making an intensive study of conditions in that great country.
I must admit that I have listened with increasing amazement to the speech to which the noble Lord, Lord Lucas of Chilworth, has just treated us. He concluded, to my amazement, by saying that South Africa was packed with friends of ours. All I can say is that if there are many more speeches which so, to my mind, totally distort the facts and the genuine position in South Africa as the speech to which we have just listened, then we shall certainly have very few friends left in that country. I propose to say one or two things in relation to those so-called facts before I conclude. Before doing so, however, I would say that I am not sure that in distorting facts the noble Lord has not a little distorted the subject of this debate. And I should like to go back to the Bill before us, and to say one or two things about the points which have been raised. I am afraid my remarks may be a little disjointed, because I have no wish to repeat in detail what has already been better said.
As I view this Bill. I think it is a very good Bill. The Government have sifted

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through all the complex statutory relationships, keeping in mind relationships and arrangements the destruction of which would damage our interests as well as perhaps cause unjustifiable hardships to individuals, and not only European individuals, both in this country and in South Africa. It is obviously foolish, unless it is absolutely necessary to do so, to destroy links which have been woven over so long a period. I understand, too, that members of the Commonwealth concerned in these preferential arrangements, have all been kept informed of what the British Government propose to do in this Bill, and there has been no protest from them. Canada, I understand, proposes to carry on with her bilateral arrangements, and it will be a case of the status quo with that country, as no doubt it will be with others.
What is it that opponents of this Bill really want? I suggest that consciously or unconsciously—perhaps consciously—their opposition must be based upon a desire to punish South Africa for having a political system which they, and most other people, so heartily dislike. But surely there is no sense in allowing political theories and political systems in another country to affect one's judgment in economic affairs. There are so many things outside of politics, and indeed outside of the Commonwealth, with which this Bill deals. There is, for instance, co-operation in defence matters, which does not depend on Commonwealth membership. There is the fact that South Africa is an important member of the sterling area, and has trading relationships of the utmost importance with most members of the Commonwealth.
I think it was the noble Earl, Lord Lucan, who made mention of the diplomatic relationships. In passing, before I forget this point, of which I made a note, I understand that this Government have never diplomatically represented South Africa in any country. I gather that consular matters have occasionally been looked after by officers of this country; but surely that is a reasonable thing to do to a friendly country. I do not propose to go into more detail on these matters, because I imagine that the noble and learned Viscount on the Woolsack will deal with them at the end of the debate. After all, it is for the Govern-
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ment to reply to these questions about sugar. But I must admit that I have read with considerable interest the debates in another place where the representative of the Government made a perfectly clear explanation of why these sugar arrangements were made.
May I refer to one or two things the noble Lord, Lord Ogmore, said on Swaziland? I gather that in this quota of 150,000 tons Swaziland, by arrangement with South Africa, has been guaranteed something like 72,000 tons. I also gather that that quota is more than Swaziland can at present fill. In any case, if she were a separate member of the Commonwealth Sugar Agreement she would not get any more than any member of that Agreement would, the full amount of her quota. So under this arrangement she is, in fact, very much better off than she would be had she been taken out of it. It is possible to go into this matter at much greater length; but, as I say, I have no doubt that the noble and learned Viscount on the Woolsack will deal with that point.
The next point I should like to mention is the matter of South-West Africa to which reference has been made. The Mandate for South-West Africa is still held by South Africa. That is the legal position: it is legally administered by the South African Government. I think the noble Earl, Lord Lucan, said that he did not know, or was not sure, what were the terms. I happen to have a note that Article 2 of the Mandate for South-West Africa says:
"The Mandatory shall have full power of administration and legislation over the territory subject to the present Mandate as an integral portion of the Union of South Africa and may apply the laws of the Union of South Africa to the territory, subject to such local modifications as circumstances may require."
To the best of my knowledge that has not been altered, and the legal position is surely the one to which we must pay attention.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, should not that Mandate be considered in relation to what have been the decisions of the successor of the body which issued that Mandate, the League of Nations? And should there not be incorporated in that policy the resolutions which have been

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carried by the United Nations Organisation? That apparently is not being done.
LORD MILVERTON: I do not know whether casual resolutions can alter a Mandate. But I understand that that Mandate stands in its original form.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Those resolutions are no more casual than the resolutions which were responsible for the issue of the Mandates to trustees. The noble Lord is merely prevaricating on this point.
LORD SHEPHERD: Is it not a fact that, with the exception of South Africa, all the other countries who have had Mandates have passed them over to the trusteeship of the United Nations?
LORD MILVERTON: I do not claim to be a legal authority, but I still maintain that I am not prevaricating. I am speaking what I believe to be the truth, and I still think that what I said was the truth. Surely the way to conduct trade is on an economic basis. We believe in encouraging trade with Russia and with China, so I am told. So why not with South Africa? The more we encourage trade and communications, surely the greater is our influence. If we once start allowing emotions to sway our economic policy, and if we try to apply economic sanctions to our distaste for the internal policies of other countries, we damage ourselves as well as others, and we certainly do not help the cause of freedom.
Surely South Africa has lost enough in her departure from the Commonwealth. She has lost in position and in prestige. She has lost in all those mutual communications and consultations which go with membership of the Commonwealth. Surely it is not necessary to add to those things, when there is no cause other than, once more, our dislike for certain of their policies. As I think was said by a Minister in another place, this Bill is not a "good conduct" ticket; nor is it an impeachment of South Africa. It is an attempt to preserve friendly relations with a country with whom we have had those relations in peace and war for such a very long period of years.
As I have said before, no Commonwealth country has protested about this
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Bill. Canada, Australia, New Zealand, the Federation of Rhodesia and Nyasaland—all intend to preserve the present preferential arrangements with South Africa. African territories do not have such arrangements either with South Africa or with ourselves, so they do not have to make any such decision. Surely, as I said, we should not allow ourselves to be influenced by emotional distaste, nor should we allow the distaste of other friendly countries expressed to us, to dictate to us what our own trading arrangements shall be.
I should like to mention one or two vital points about our financial and industrial stake in South Africa. On this matter the noble Lord, Lord Fraser of Lonsdale, gave a number of interesting figures. All the foreign money invested in South Africa comes to about £1,538 million. Of this sum, £900 million is British. In other words, our contribution is 58·5 per cent. The United States of America comes next, with 19 per cent., and then Europe, with 16 per cent. Our annual imports, excluding gold, from the Republic, as the noble Lord, Lord Fraser of Lansdale, said, come to £106 million, and she imports from us £154 million. Britain provides nearly one-quarter of her total imports; and, incidentally, she is a better customer of ours than India. Much of what we buy consists of raw materials, and we mostly sell her finished products. It would surely be difficult to replace this market, and any attempt to interfere with it would be damaging to a number of industries in this country.
There is another point to consider. If we were so foolish as to withdraw our stake in South Africa, the wide open door would be crowded with Americans, Germans and Japanese, only too willing to take our place. As has been said, South Africa's goldfields are the largest in the world, and each year's output is worth £260 million. The annual output of uranium is worth another £52 million. All this gold is sold to the Treasury which puts it on the market in London. Similarly, owing to the South African Diamond Corporation, 95 per cent. of the world's diamond output is sold through London.
The number of these things indicate how closely tied our interests are with those of South Africa. I agree also with the noble Lord, Lord Fraser of Lonsdale, in saying that there are excellent

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reasons why the High Commissioner or our Diplomatic Representative in South Africa should also deal with the Protectorate Territories, because those Territories are economically and in many other ways so closely bound up with South Africa that it is much more than finance, it is a matter of efficiency, that the position should be filled by one man.
In conclusion, and also in reply to the noble Lord, Lord Lucas of Chilworth, I should like to take up the reference made by the noble Lord, Lord Fraser of Lonsdale, when he said: "By their deeds shall ye know them ". In listening to Lord Lucas of Chilworth, I am strongly in favour of being fair, even when one has such a violent dislike for certain things as the noble Lord has, and nobody would ever have guessed, when listening to him, some of these things which are facts of the situation there. For instance, four out of every five Bantu children are at school. Each year there are 100,000 more, and complete literacy will be achieved in this generation. There are 27,000 Bantu teachers and more than 2,000 university undergraduates. There are three Bantu universities. The annual cash income of the Bantu exceeds £500 million, and wages are far and away the highest in all Africa. Incidentally, it is extraordinary that in this "police State", as the noble Lord, Lord Lucas of Chilworth, was pleased to call it, every year thousands of Africans flock in with a desire to work there from the Territories to the North, and come regularly, again and again, after they have returned home.
With reference to the appalling conditions, surely, in fairness, one must remember that particularly in the last eight years immense strides have been made by the South African Government in eliminating slums. That work, incidentally, was started by Dr. Verwoerd when he was Minister for Native Affairs. In the last ten years approximately £100 million have been spent on rehousing urban Bantu families and providing them with transport and other services, and by next year South Africa's greatest social revolution of this century will have taken place in that every family will have a roof over its head. In the early future slums will be a thing of the past.
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I remember when I was there myself being shown over these places on the instructions of Dr. Verwoerd, who said "You want to see the worst; I will show you the worst." And, when I had seen that, and seen the plans which he had made for improving conditions and eliminating the slums, he asked me what I thought about it. I said: "I think that what you are doing is what any competent authority would attempt to do, and my only criticism is that perhaps so rich a municipality as Johannesburg might have started doing this a little earlier ". In any case, I explained that I thought it was not unusual, because I could show (and I told him this) conditions just as bad as these, and I named certain places that I knew, but which I will not mention here, in various parts of our own Commonwealth and also in the British Isles.
I am sorry to have appeared to have strayed so far, but I have been led astray by the noble Lord, Lord Lucas of Chilworth. Some of the best hospitals in South Africa are for the Bantu. One would never have guessed all this from listening to the noble Lord. The per capita income of South Africa's entire population exceeds the second highest in Africa by 50 per cent., and during the next five years £152 million will he spent on developing thirty-three towns and villages in the Bantu homeland. I could go on with these details for a long time, but I mention them now only in the name of justice to a country like this. I am not at all defending the political theories held there; I do not think they are relevant really to this debate. I think that this Bill has got the thing in the right perspective and has endeavoured to preserve those relationships which stand outside such considerations. My Lords, I support the Bill.
LORD SHEPHERD: My Lords, before the noble Lord, Lord Killearn rises may I say to the noble Lord, Lord Milverton, that last year I also was in South Africa. The views that were expressed this afternoon by the noble Lord, Lord Lucas of Chilworth, are not his alone; they are to be heard repeatedly throughout South Africa, mainly, it is true from what are called the English-speaking South Africans. It is indeed a sorry thing that the English-speaking South Africans did

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not wake up to the danger before they did, else perhaps the story might be different. In fact, my summing up of the situation is that the Afrikaners regard this Bill as the victory that came after the Boer War—that they have now achieved the independence for which they fought in the Boer War.
5.58 p.m.
LORD KILLEARN: My Lords, by courtesy of the noble Viscount who is next to speak, I intervene for a very few moments. The only reason that I do so is that in his very clear summary of the contents of this Bill with which the debate was opened by the Foreign Secretary, it emerged very clearly that the status in future of residents in South Africa will be that of foreigners—I think he used that word, which is obviously quite correct. That is what impelled me to feel that I ought to get up and say a word or two. Because during the war, when I was in Cairo, we had a good deal of experience and a great deal to do with the South African Forces. Tribute has already been paid by the noble Lord, Lord Robertson of Oakridge, to what they did in the First World War and, I think, in the Second also, and I am very glad to have the opportunity to record my tribute to those excellent forces that we had right through the War, both men and women. I, too, should like to pay the warmest tribute to their services.
It is quite a shock to realise now that they would be foreigners, not British subjects. That is really what brought home to me what this means. It seems to me to be a deplorable Bill, but an inevitable development, in the difference in status which it underlines. Probably everybody in this House thinks that this is a deplorable development; though inevitable. I certainly do. I felt that I could not let this opportunity pass without recording, as I say, my warmest tribute to the South African forces during the late War in the Middle East. Incidentally, during the war we had an opportunity of getting to know very well that great and good man Field Marshal Smuts—he has been mentioned only once in this debate I think—whose appalling statue, making him look like a boy scout, stands over the way in Parliament Square.
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That brings me to two small anecdotes. The first concerns Field Marshal Smuts who, with his wife, came to stay with us in Cairo on many occasions, and we got to know them very well. There was a time, you may remember, when Rommel was not very far from our gates and some people were a bit flappy. There was Ash Wednesday and all that. At any rate, one day a message came to me that the Field Marshal's personal aeroplane had arrived at Almaza, and the purpose of the arrival of this 'plane was that the Field Marshal had come to the conclusion that Cairo was not a very healthy place for wives and families. That machine had arrived, the Field Marshal was good enough to suggest, to take my family out of the danger zone. It was a very noble thought. It was a Dakota, and not only was it a Dakota (which was fashionable in those days); it was gleaming silver shiny. The R.A.F. got on to me and said "We cannot keep this machine here because it is a beacon light to any attack; you can see it in the moonlight miles away ". Finally that particular problem was solved because my family said that nothing in the world would induce them to leave. I thanked the Field Marshal very warmly, and he did, in fact, take away quite a number of people, all South Africans I believe, who wanted to get out.
The other anecdote is apropos of the troops we had from South Africa. There were white troops and there were black troops. Incidentally, I had two members of those forces on my personal staff, so I got to know them pretty well. Now, before the invasion of Sicily a lot of maps had to be prepared, and they were prepared in the Toura Caves, just outside Cairo, where incidentally the stones of the Pyramids came from. They were huge caves. I went up there one day to have lunch in the mess, and there was a very smart Basuto guard, because there were Basuto battalions. I remember commenting on how smart they were and asking whether there was any trouble at all. They said there was no trouble at all except this: that they could not have a defaulters' parade because the one thing they wanted was to be defaulters, to be kept on and drilled and drilled. It was no punishment at all, but quite the contrary.

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I do not want to go on any further. My whole point was to put on record, as formally as I could, the noble part, the fine part, South Africa played with her troops in the last war in the Middle East, as I can personally testify. We had them in Cairo. They behaved in a most exemplary way. They fought out in the desert, as we so well know. General Terun was the man we had with us in Cairo, but I need not go into that; it is a matter of history.
6.5 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I must say it is quite essential for me at the moment to exercise a little self-control. I look back at the opening of the debate and remember. I will not say the appeal, but at least the suggestion, of the Foreign Secretary that this Second Reading debate should not be used as an occasion for attack upon South Africa. I think that my colleagues who have preceded me from these Benches have followed that suggestion, and I think I might say the same for the noble Lord, Lord Ogmore. Whilst we have had points of importance raised from these Benches, there has been in no sense a spirit of common attack upon South Africa in connection with the composition of this Bill.
The Bill may be regarded as quite generous to the South Africans, in view of all the circumstances. This country did not move a motion of expulsion of South Africa from the Commonwealth. South Africa chose, because of opinions which had been expressed about the manner in which she was governing the country, to withdraw from the Commonwealth. The position which has to be met now arises from that fact. If one were to ask what is the general opinion in this country of the average South African citizen who visits us, not only the whites but the non-whites, it would be that the Briton you meet in the street expresses respect, very often admiration, and certainly contentment to be able to meet them and to associate with them. Nor do they forget the kind of associations we have had in the past in matters which were common to the necessities of the achievement of the rights of man and to the general defence of the Commonwealth and the freedom of the world.
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As to whether one could say that these particular objectives in which they were associated with us are the sole objectives in these matters of the present Government in South Africa, I should have to begin to express doubts; and therefore from that point of view I cannot dissociate myself from what the noble Lord, Lord Lucas of Chilworth, said on that issue. No one can justify the continuous, deliberate policy of apartheid. But now instead of "letting go ", as I should have liked to do, on all the matters covered by the noble Lord, Lord Milverton, in reply to the noble Lord, Lord Lucas of Chilworth, I think I will confine myself to the Bill.
I will begin, as my noble friend Lord Listowel ended, after he had put some detailed points: that was that he thought that, on the whole, this Bill was night. I think that, on the whole, it is right. I think it is essential that we should look a little more closely on the Committee stage at some of the points which are provided in the Bill. It was examined fairly in detail in another place, and some of the things that were then said have been taken exception to by Members of your Lordships' House. But it is important that when this Bill becomes an Act it should enter the Statute Book with the maximum amount of the nation's confidence in its provisions and in its likely achievements as can be managed.
The question of nationality is important. I will not hide from the Foreign Secretary that what the noble Lord, Lord Lucas of Chilworth, said to-night as to the possibilities of what may be the future attitude in South Africa to nationality is very disturbing; but I do not think that can excuse us from achieving the main objective of the clauses in the Bill. If I may have in mind, for example, relatives of my own family in South Africa, who have been there for a century, I would say that if they wished to undertake a new citizenship they should have the option provided for them within the British Statute to opt for that citizenship. If it should be the fate of any of the people who opt in that way to receive very unfair treatment afterwards by the reigning authorities in South Africa, that will be perhaps an unfair punishment of our friends out there who wish

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to take British citizenship, though we shall honour them for their choice in asking for registration as British citizens. I do not propose to say any more in detail about the citizenship matter.
Coming to the other matters contained in the Bill, perhaps the most outstanding one that we have to deal with is the question of the sugar preferences. It is perfectly true that when dealing with matters of this kind one needs to be careful before forming a final judgment as to what are the facts. I listened with great interest to the noble Viscount, Lord Stonehaven. In the course of the debate there have been suggestions that the sugar industry in Swaziland has been built up almost entirely through its particular association with the sugar trade as it was in the Dominion of South Africa, and that, in consequence, it would be difficult, in dealing with this matter now, to separate the parts of that industry in Swaziland and South Africa.
Nevertheless, I greatly hope that we shall bear in mind the general views expressed by my noble friend Lord Listowel—namely, that what has happened so far in respect of the sugar industry in Swaziland ought not to be regarded as the only guide to the future of the sugar industry in Swaziland. If not in this Bill, I hope that before long it will be possible to achieve at least equal opportunity for those who run the sugar industry in what will remain one of our responsibilities, the British Protectorate, the special Territories; and I hope that we shall try to get for them exactly the same amount of preference as remains for the rest of the sugar interests in the whole of the Commonwealth. I am bound to say that when this morning I read the questions and answers given in the Press Club in Washington on the future of the Commonwealth, I wondered just how long the Government are going to be able to keep the valuable position of the preferential situation which reigns at the present time in business matters in the Commonwealth.
Then I should like to say a word or two about the question which was raised regarding diplomatic matters. I know that the noble Lord, Lord Milverton, did not agree with the manner in which
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my noble friend Lord Lucan referred to this. But I am bound to say that, with this sharp and strong division between the old state of South Africa as a Dominion and its position as a foreign country, it seems to me to be essential that territories such as the High Commission Territories should be now represented by direct representation; and, if necessary, that should be done on their behalf by this country. I hope that some arrangement will be made to see that that is carried through. I suppose that where the centre should be is a matter for the Government to negotiate with the people concerned in the High Commission Territories. I think that is a point that ought to be kept in mind. I hope that it will be referred to again, perhaps in the course of the further discussions that will come under the Bill.
I should like to say a word or two about the speech of the noble Lord, Lord Robertson of Oakridge. I was not present to hear it, but I had the elements of it reported to me. Having been a Service Minister for altogether twelve and a half years, including practically the whole period of the war, I should like to say that the way in which the Government conclude their negotiations with South Africa is bound to have a quite considerable effect upon the feeling of these two countries in matters of defence. I do not think any of us who have had wide experience of this would wish to do anything other than pay a tribute to South Africa for her association with us. Speaking as an ex-First Lord of the Admiralty in regard to the question of naval assistance and provision, I may say that it was an outstanding contribution, and we should not wish to let that be hidden in any way.
My Lords, I should like to conclude on the note which was struck at the commencement of his speech by the noble Lord, Lord Ogmore. In a Bill of this kind the Government have to face a melancholy end to what was, after all, a great attempt at securing, in a great country at the end of a war, something like a liberal presentation of what change there ought to be in the interests of democracy. It has failed not from any failure on our part here, but because the ideals of the British Commonwealth of Nations are to-day not being met by the reigning Government in South

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Africa. That is the only reason why they are not continuing in the Commonwealth of Nations at present—they have themselves resigned.
When I look back on the tremendous number of meetings that I had with representatives of the Dominions in the course of the war; and when I think of the philosophy and, whatever he liked to call his faith, the Christian witness of Jan Smuts; and when I then associate that with the combination of the efforts of General Botha and myself at the time of the great constitutional change in South Africa in 1908 and 1909, I can do no more than deplore the melancholy circumstances which we face tonight. And I can only hope and pray that, whatever may emerge from this Bill as a means of increasing good will—and that remains to be seen—may begin to change the situation and not leave us, as Lord Lucas of Chilworth thinks it will, in a hopeless situation that will never alter. I hope that, somehow, sooner or later, the whole world will grasp the idea that man will be free; that he will fight until he is free; and of haw much better it would be if freedom were granted and fighting avoided.
6.19 p.m.
THE LORD CHANCELLOR: My Lords, the debate on this Bill has ranged over practically the whole field of our relations with South Africa. It has touched on many points which are not covered by the Bill, and some which are covered in only a formal manner, like the Sugar Agreement and Commonwealth Preference. But, ion the whole, I think I may say that the Bill has gained a great deal of support and almost universal acquiescence. I am most grateful to the noble Viscount who leads the Opposition for the tone of his speech. I hope he will allow me to tender him my thanks for it.
It is, of course, impossible to consider any aspect of our relationship with South Africa, or indeed with any other country, without giving some consideration to its general background. Certainly the Government, in preparing this Bill, have had fully in mind these wider considerations. I say that because I think that was the first point that the noble Earl, Lord Listowel, wanted to impress on your Lordships: that this is not only a matter of the Bill; it is not only a
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matter of bilateral relationships; but it is a matter of the position which they take in the whole world scene. In particular we have kept constantly in mind, as my noble friend the Foreign Secretary has made clear in his speech, that we are dealing with a country which has left the Commonwealth, and because it has left the Commonwealth it cannot continue to enjoy all the benefits of Commonwealth membership. I should like to say to the noble Earl, Lord Listowel, with all the sincerity I can command, that we value the Commonwealth far too highly to undertake lightly any course of action which might seem, whether reasonably or not, to devalue it.
On the other hand, we have also felt it right to keep well in mind the fact that there are very many people in South Africa whose links with this country are very strong and have endured through many years and many variations of fortune. We could not ignore the fact that for more than half a century there have existed close and friendly relations, and, as my noble friend Lord Robertson of Oakridge pointed out—and I was glad this was underlined first by the noble Earl, Lord Lucan, and then by the noble Viscount who leads the Opposition—many of our young men have died in the same fields and for the same causes. These are things which we could not forget, and therefore we could not look lightly at the destruction of arrangements which have developed and operate to the benefit of South Africa and ourselves. These are the main criteria which have guided us in preparing this Bill. They have guided us in our discussions with the South African Government on a number of other aspects of our relations with them which are not affected by legislation and are therefore not in the Bill.
I am going to deal with the points in the order in which they were raised by the noble Earl, Lord Listowel; I think that would be a convenient course. I should like to deal with the point he made, which I put interrogatively: what has South Africa lost by leaving the Commonwealth? The noble Earl, I think, was slightly worried that she had not lost enough, if I may put it that way. My Lords, it is important to remember what she has lost. Because the Bill preserves to some limited extent some of the benefits, it has been contended

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that South Africa has lost nothing. I suggest that this is a narrow view and ignores all the other many and varied benefits which South Africa has lost. If one takes into account all the Acts which will lapse in their application to South Africa, as well as those repealed in the Bill, there are, as my noble friend pointed out, more than 90 pieces of legislation of which South Africa will lose the benefit.
This, however, is of course only part of the picture. On May 31 last year South Africa ceased to be a member of a large number of Commonwealth organisations, both official and unofficial. These organisations cover a wide range of technical and economic activity. They are unique to the Commonwealth and they are important and substantial features of its structure. They include all the economic liaison Committees; also such things as the Commonwealth Education Liaison Committee and the Commonwealth Scholarship and Fellowship Plan. The South Africans are also excluded from the normal, automatic, and very full exchange of information which goes on day by day within the Commonwealth and is part of the very lifeblood of the Commonwealth connection.
I have always felt—and I am sure we all agree on this point—that the minute to minute exchange of views which goes on through the Commonwealth Relations Office, when the old nations are being explained to the new, the new are being explained to the old, and world affairs are being explained to both of them, is a matter of great importance. It is all done on a level of complete equality and, as I say, I think it is of the lifeblood of the Commonwealth connection.
Furthermore, they can no longer look to us automatically—and this point was raised by the noble Earl, Lord Lucan—to look after their Consular interests in countries where they do not have their own representatives, and they have none of the advantages of Commonwealth exchanges of view which so help and strengthen members of the Commonwealth in facing up to the problems and responsibilities of life in this ever-shrinking world. Departure from the Commonwealth has meant to them a
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deepening of their isolation. There is no way of measuring this. It cannot be evaluated by counting up lists of what has gone and what has been left. It is a hard reality and amounts to a real loss. I am sure no one—neither the South African Government nor any of the Commonwealth Governments— would seriously contend that this exercise has shown that leaving the Commonwealth makes no difference. Nor can it really be contended that the temporary and limited retention of some of the economic benefits is all that matters or compensates for the many other tangible and intangible benefits that have been forgone.
The next point which the noble Earl raised was the question of Commonwealth Preference. That has been criticised (though Lord Listowel did not put it as crudely as this) as giving South Africa an important benefit of Commonwealth membership after she has left the Commonwealth. I first would remind noble Lords that South Africa is not the only non-Commonwealth country to receive Commonwealth Preference—I think the noble Lord, Lord Ogmore, referred to this; nor is Commonwealth Preference an automatic benefit of membership of the Commonwealth, to stand or fall with membership of the Commonwealth. There are, in fact, a number of Commonwealth countries which do not extend Commonwealth Preference to us or to each other.
However, this agreement with South Africa is a bilateral agreement entered into in 1932, and need not be affected by the constitutional change. This we have made clear from the very moment that South Africa left the Commonwealth. It is not a question of continuing to give a benefit to another country, as a price for good behaviour or as a gesture of approval of their policies. It is purely a question of maintaining an arrangement Which, because it facilitates the flow of trade between our two countries, because it has been an important base on which this trade has been built, brings benefit to us just as much as it gives benefit to South Africa. In these matters of trade it serves little purpose, indeed, it is misleading, to try to draw precise mathematical equations. All that we can say is that trade depends upon the will of people on both sides to trade with each other and upon the

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facility with which they are enabled to do so.
Let us consider the other possibility. If we were unilaterally to abandon the Preference now, because of the constitutional change, it would be seen to be a deliberate gesture of political censure, a disguised attempt at some form of boycott or ostracism. It would not be realistic to expect that the South African Government, or even the majority of South African traders, would take this without trying in some way to retaliate. The result might well be damage, even considerable damage, to the flow of trade in both directions.
I ask your Lordships to consider it in this way. This is not only a matter of economics. It might well cause hardship not only to traders, but to workers of all sorts and of all colours, in both countries. This is not to say that the Preference arrangements will necessarily continue as they are, without any modification, for all time. For example, if we join the Common Market this is obviously an agreement which in due course will have to be reviewed, and it may well be that it will be necessary to alter it. But this would be a quite different situation. It would not be unilateral action capable of interpretation as a vindictive political gesture; it would be the inevitable result of a new set of circumstances in world trade, and I am sure that the South African Government as much as ourselves would approach it in this light.
I want to emphasise—as I think the noble Earl, Lord Listowel, knew and understood—that the fact that South Africa is remaining in the Commonwealth Preference area does not mean that we are pleading for South Africa in our negotiations concerning the Common Market. In those negotiations we are asking for special arrangements for the Commonwealth, not for the Commonwealth Preference area. The fact that South Africa is in the Commonwealth Preference area is no more an embarrassment to us in that context than the fact that the Republic of Ireland and Burma are in the Commonwealth Preference area.
I come now to the question of the Sugar Agreement, and I ask for your Lordships' patience in this matter, because I think every noble Lord who has spoken has mentioned it and added a
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new complication to it. Therefore, if your Lordships will bear with me, I shall deal with the points as I understand them. I hope that noble Lords will have the chance of reading them as well as hearing them, and if there are any further points which I can clear up I hope that they will let me know. I think I was asked by the noble Lord, Lord Ogmore, about the new arrangement at 81 per cent. The new arrangement regarding 8½ per cent. of the total South African sales is the way of securing an expanding market for Swaziland. South African sales are around 900,000 to one million tons per year, so that 8½ per cent. of this will certainly be above the present fixed quota; and if the South African sugar sales expand—as there is reason to think they will—Swaziland's 8½ per cent, will expand. We believe that this may well give all the expansion that the Swaziland sugar industry can deal with for the next few years. There are only about 80,000 tons of sugar planted at present, and it takes three or four years for sugar to grow after planting.
We made the arrangements with the South African sugar industry with Swaziland's interests very much in mind. With the world sugar market as it is, in a state of chronic over-supply, it is difficult to conceive that we would have been able to make an arrangement which would be more beneficial to Swaziland than the one which we have now secured. I realise that, on the face of it, it has appeared to some noble Lords that Swaziland loses some £10 per ton on her sugar; but, in fact, only a small proportion of the sugar—about 16 per cent.—was benefiting indirectly from the full Commonwealth sugar price, and it was doing so only because of the arrangement with the South African Government and not because Swaziland was in her own right a member of the Commonwealth Sugar Agreement. All her sugar benefits from the average price obtained for South African sugar in all its markets at home and overseas. Thus, Swaziland has benefited by the recent increase in the home price of South African sugar. That increase is about £3 a ton.
The net result, therefore, is that Swaziland is at present receiving more for her sugar than she was receiving last year,

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when South Africa was in the Commonwealth Sugar Agreement. Moreover, she has an assured market, at least for the duration of the present agreement, on her doorstep. What is more, she has an assurance of an expanding share in that market. These are important considerations for any producer of any commodity, and we are convinced that this is the best possible arrangement that could be achieved for the present: and it gives the Swaziland industry all the opportunities that it can at present use.
It may be that we shall in the future have to revise the arrangements or make some new arrangements, but by then the situation, not least the situation in the world sugar market, may be quite different. As I have already said, we must, in the interests of the Territories, deal with the situation as it is now. The Sugar Agreement, like our policy with regard to Commonwealth Preference, illustrates our belief that we should not suddenly, needlessly or wantonly destroy links that have developed between our two countries over many years, links which are of mutual benefit. In making the arrangement which we have made on sugar we have taken account of the fact that we are dealing with the sugar industry, not with the South African Government; that the benefits, such as they are, which we are continuing to give are being given to an industry and to an industry which was built up largely on the basis of our market.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, may I interrupt? I think that the noble and learned Viscount the Lord Chancellor has given a very clear explanation of the position at the present time. But there will be later stages of the Bill and I hope that, before that time, we shall get some idea of how much of the South African area's production comes into the administration of the general scheme, and how much of it comes to our market, so that we may have an idea whether some of that could be allocated to Swaziland.
THE LORD CHANCELLOR: I will look up that point. There are just one or two points that were raised earlier in the debate to which I am very anxious to give the answer, and I am making
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this as short as I can, but what I felt was that if I gave the answer to-day noble Lords would have a chance of looking at it, and it might save some time at the later stages of the Bill.
It has been argued that we should have ceased all concessions to the industry forthwith as a political gesture. Whatever merits that course would have had from this point of view—and I have my doubts about them—it would certainly have been an action in ill-accord with our reputation for fair commercial dealing. It would also have affected, perhaps seriously, the livelihood of many people, both black and white, whom the advocates of the course would wish to help, and it would have had repercussions in the sugar market, both in this country and in the world as a whole, which would have been detrimental to the interests of other producers of sugar within the Commonwealth.
My Lords, it should be remembered—I have I think made the point, but I want to make it quite clear—that Swaziland is not and never has been a member of the Commonwealth Sugar Agreement in its own right. Even if she could now be admitted (and there are others waiting to be admitted) it is very doubtful whether all her sugar would be admitted—no other country has all its admitted—so she would still need a market for it. South Africa is a natural, and in many ways the best, market; and we have considered it right to ensure that it is preserved for Swaziland. It is true that these arrangements terminate in 1966, and we shall have to consider the position of Swaziland then; but, as I said, the circumstances at that time will probably not be the same as now, when there is chronic over-supply in world sugar markets. We cannot forecast what may then be necessary and possible. But I want to say this—and I am sure I speak for the whole House on this point: we shall see that Swaziland's interests are not adversely affected. In the meantime, we have made the best possible arrangements, in all the circumstances, for at least five years ahead.
My Lords, I am sorry to have taken some time to deal with that matter, but there was a great deal of interest shown in it during the debate, and so I have dealt with it fully. I want to say only one final word.

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The Sugar Agreement is a bilateral trading agreement which is contractual, with a fixed term. The Treaty of Rome makes provisions for such agreements which are already in existence, and there is provision for review in the light of the circumstances. So there is nothing inconsistent in this agreement and our negotiations to enter the Treaty of Rome. I think I have dealt with all the points, and I hope noble Lords will take what I have said in the spirit in which it has been offered, and will write to me if they have points to raise about the Sugar Agreement. It is obviously the sort of thing on which we ought to clear the ground, and I am only anxious to help.
The noble Earl, Lord Listowel, asked me about paragraph 4 of the First Schedule, I believe, on the questions of nationality. It is a technical matter and I have the answer—I assure him there is an answer—but perhaps it would be more convenient if I wrote to him on that technical, though not very wide, point rather than detain the whole House. I am entirely in the noble Earl's hands, but if he will agree with that course I promise I will write and give him the answer.
THE EARL OF LISTOWEL: My Lords, I am much obliged to the noble and learned Viscount. If that course is agreeable to the House, I am quite content to adopt it.
THE LORD CHANCELLOR: I am very grateful to the noble Earl. There were two points about which I think the House felt a keen concern. The first was the question: should one man fulfil the dual rôle of Ambassador and High Commissioner for the Territories? This had long been the case when South Africa was in the Commonwealth; and I gathered from all the speeches that everyone thinks that the present holder of these two high offices, who is well known to most of us, is the last person to be liable to allow his responsibilities in one office to swamp his responsibilities in the other. But apart from that, I should like your Lordships to consider for a moment, the position that obtains at this moment.
The present arrangement seems to me by far the best possible, and your Lordships will, appreciate that it is of par-
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ticular value at a time when negotiations are being conducted with the South African Government which affect not only the legislation of this country and of South Africa but also, either directly or indirectly, the relations between the Territories and South Africa. If there were two people, I think all noble Lords will agree it would be absolutely essential that the two people should be in constant communication with each other in dealing with the present situation, and should have an immediate appreciation of each other's problems and each other's objectives.
In that present situation, I ask your Lordships to consider the view that I formed—and I have been dealing with this matter continuously over the last year: that there is no better way of achieving this comprehension of the other's problems than by having the two offices combined in one man. I do not mean that that will necessarily always be the case, and I undertake to your Lordships that it will be kept under review. But, whatever the position may be in the future, at the present moment the existing arrangement is, in my view, the right one.
Now I should have liked to say more about the position of the High Commission Territories, but your Lordships have shown a great understanding of that position, and I shall therefore say only a sentence. In forming our views, in considering what we say (and I am sure the noble Viscount the Leader of the Opposition had this in mind), we must always be thinking of the people in the High Commission Territories. Being practically surrounded by South Africa, they are at the mercy of South Africa with regard to their products. But, more than that, if South Africa were to take a certain line about admission of labour from the Territories, they would be in very grave difficulty indeed. We all recognise that fact, and it is a good thing to face things frankly. All I can say is that I am grateful to noble Lords who have spoken, from every part of the House, for realising how important it is for us to have always in our minds the position of the High Commission Territories and their people.
My Lords, I do not want to become controversial at all over South-West

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Africa, because I know that it is a matter on which there are strong feelings. Therefore, will your Lordships again allow me to put it this way: that, in putting this Bill before your Lordships, we have to consider how the law will require to be changed, in relation both to the old Union of South Africa and to South-West Africa. From that point of view, as I understand the judgment of the International Court of Justice at The Hague and the Mandate, it is necessary for us to treat South-West Africa—that is, simply on the legal position—so that the changes we make in our laws that apply to South-West Africa bite equally in South-West Africa as they do in the rest of the Union.
That is the purpose of the Bill. I am very definitely avoiding going into the question of controversy which developed during our debate, but I assure the noble Viscount that, from our point of view of making our law fit the changed position of South Africa on its leaving the Commonwealth, we have to deal with it in that way. If he would like any further explanation, I could, of course, have given him one at length, and I will do so at the Committee stage, if he thinks that is right.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am much obliged. I think I have already said, on behalf of my colleagues, that we did appreciate that there was a slight amendment in the words of the Bill when it arrived here, in referring to it as a "Mandate Territory" instead of leaving it as it apparently was in the first draft, as if it were just part of South Africa. That seems to me the view of South Africa itself, which I think is quite wrong. I hope that we can clear the matter up and reach an even clearer understanding in the later stages of the Bill.
THE LORD CHANCELLOR: My Lords, I wanted only to make clear to the noble Viscount that, in my view, whatever be the special position of mandated territories—that is a matter we could profitably discuss in itself—our immediate task is to make this Bill work and to make clear our relations with the two parts, the old Union and the old German South-West Africa. This is a
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course that we have had to take as a matter of legal compulsion.
My Lords, I have a feeling that there were other matters which the noble Earl, Lord Listowel, raised in his most interesting speech, but I think that these were the most important ones. I have tried, as I always do, whether successfully or not, to give a direct answer to his points, except the one technical point which I think he has agreed we can deal with by correspondence. In doing so, I think I have dealt with the points which have been most in your Lordships' minds. I want to say once again—a point my noble friend Lord Home pressed earlier—that the Bill we are now considering is not a declaration of policy. It is not, and it cannot be, an all-embracing instrument to deal with all aspects of our relations with South Africa. Many of these are not in any way governed by, or affected by, legislation.
The Bill deals merely with those things which are affected by legislation, and tries to deal with them in such a way that it preserves the things which it seems right to preserve in the interests of this country, in the interests of individuals who might otherwise suffer hardship, and in the interest of the maintenance of good relations with the people of South Africa. What we think of apartheid—and our frequent expressions of our opinion have made that perfectly clear—is one thing. What we think of South Africa and its people, and what value we put upon preserving our long-established ties with them, is quite another thing. It was interesting to-day that the noble Earl, Lord Lucan, jumped up at once to repudiate the idea that there was anything vindictive or punitive in anything that was said.
We come back to that sense of heart-break that the noble Viscount who leads the Opposition expressed so movingly a short time ago. They have been our friends and staunch allies through many difficult situations. As the noble Lord, Lord Ogmore, pointed out, many of them are our kin. That was his own position. And I would repeat what my noble friend said: that we hope that the day will come when the difference in principle on matters of racial relations and human freedoms which now lie between us will disappear. My

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Lords, that is our hope. In the meantime, we must deal quietly and in a workmanlike way with the problems in front of us. That is what this Bill does, and I ask your Lordships to give it a Second Reading.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.
House adjourned at two minutes before seven o'clock.