Sitting of 27 July 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  DERBY CHURCHES (SAINT CHRISTOPHER'S, SAINT PETER'S AND SAINT PAUL'S) BILL
  Lords Amendment considered and agreed to.
BRITISH RAILWAYS BILL
Lords Amendments considered and agreed to.
ORAL ANSWERS TO QUESTIONS
  SCOTLAND

    Land Holdings (Registry)
    Mr. Hamlingasked the Secretary of State for Scotland whether he will now take powers to compile a registry of land holdings in Scotland.
    The Secretary of State for Scotland (Mr. William Ross): No, Sir. The cost of compiling a register of individual land holdings would be very great, and I do not think it would be justified.
    Mr. Hamling: Will not my right hon. Friend agree that such a proposal would be of advantage in preparing for the nationalisation of land in Scotland, which would be a great example to the English?
    Mr. Ross: We have gone a long way in that respect, judging by the amount of land already held by the Secretary of State. But I assure my hon. Friend that, although I share his interest and curiosity, the expense would not be justified in this case.
    Mr. Brewis: Will the right hon. Gentleman arrange for the change of use of
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    Woolwich Arsenal to be recorded in a suitable register?
    Mr. Ross: If the hon. Gentleman puts that Question down—it will not be to me—he may get an answer.

    Inverliever Lodge
    Mr. Hamlingasked the Secretary of State for Scotland what representations have been made to his Department by the Highland Development Board on the future of Inverliever Lodge.
    The Minister of State for Scotland (Mr. George Willis): The Board has made no formal representations to my Department about Inverliever Lodge.
    Mr. Hamling: Would my hon. Friend tell the House what informal representations have been made?
    Mr. Willis: I understand that, quite naturally, the Board would like to see the regulations changed to enable the Department of Education and Science to grant-aid youth service projects for English school children, such as adventure schools in Scotland, particularly in the Highlands and Islands, as well as in England and Wales, but it is very conscious that this is really the responsibility of my right hon. Friend the Secretary of State for Education and Science.

    Rates
    Mr. Edward M. Taylorasked the Secretary of State for Scotland what estimate he has made of the percentage increase in the rate income of local authorities in the year 1966–67.
    The Under-Secretary of State for Scotland (Dr. J. Dickson Mabon): So far, 36 authorities have informed us officially of their rate poundage for 1966–67. The sample is too small to justify a valid estimate for the whole country.
    Mr. Taylor: Has the hon. Gentleman read the statement which Lord Fraser made at his firm's annual meeting today, that consideration was being given to moving the headquarters of the company down South and to closing several of the stores in Glasgow because of the very high rate burden? What steps, apart from exhortation and inquiry, is the Minister taking to prevent a dramatic rise in rates this year?
    Dr. Mabon: I can make no comment on what has just appeared on the tape attributed to Lord Fraser of Allander. I have no doubt that his Lordship will be aware that there are procedures under the Valuation Acts which were passed by a Conservative Government entitling him to appeal against the assessor's present valuation. As regards the other matters, the hon. Gentleman knows what my right hon. Friend and I have done to try to persuade local authorities that in this year of revaluation they should not go as high as they did under the Conservatives, in 1961, with a 19 per cent. increase.
    Mr. Monro: Is the hon. Gentleman aware that the rate increases which have so far been reported by local councils seem to be around 15 per cent.? Is not this far in excess of anything which will be helped by his Local Government Bill?
    Dr. Mabon: In fairness, it should be said that the rise in the system over the last five or six years has been between 6 and 9 per cent. The teachers' salary award, which, I understand, is not opposed by hon. Members opposite, will add something like 3 per cent. Therefore, there is this figure which can be assessed as being, perhaps, the normal figure in a revaluation year. The Secretary of State would deplore any increase higher than the kind of figure suggested by the hon. Gentleman.
    Mr. Taylor: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek an early opportunity to raise the matter on the Adjournment.

    Selective Employment Tax
    Mr. Edward M. Taylorasked the Secretary of State for Scotland what alterations he has made in the Scottish National Plan to take account of the effect of the Selective Employment Tax.
    Mr. Buchanan-Smithasked the Secretary of State for Scotland whether he will amend the figures in his White Paper on the Scottish Economy published in January, 1965 to take into account the effects of a Selective Employment Tax.
    Mr. Monroasked the Secretary of State for Scotland what re-assessment he has made of the projected expansion of service industries in Command Paper No. 2864.
    Mr. MacArthurasked the Secretary of State for Scotland what revision he has made to the employment targets for manufacturing and service industries set out in the first paragraph of the Scottish Economy, 1965–1970, Command Paper No. 2864, in view of the effect of the Selective Employment Tax on service industries.
    Mr. Ross: I do not at the moment foresee any need to make alterations to the White Paper to take account of the effects of the Selective Employment Tax.
    Mr. Taylor: As the Plan states clearly that service industries have a major rôle to play in building up modern manufacturing industry and the reduction of emigration, bearing in mind that emigration this year has been higher than ever before, does not the Secretary of State feel that something should be done to alter the Plan drastically?
    Mr. Ross: The hon. Gentleman mentioned emigration this year. We have not got the figures for this year, so I do not know how he manages to reach that conclusion. I do not share his gloomy predictions about the effect of the Selective Employment Tax.
    Mr. Buchanan-Smith: Does the right hon. Gentleman recall that, in the White Paper, the service industries were described as generators of economic growth? Will he acknowledge that this tax strikes directly against the development of industry in Scotland and makes nonsense of his claims to expand the economy of Scotland?
    Mr. Ross: That is quite wrong. As a right hon. Friend of mine rightly interjects, industry in Scotland, including service industries, is expanding, and I am satisfied that it will continue to do so.
    Mr. Monro: Is the right hon. Gentleman aware that in my constituency over 50 per cent. of the employment is in service industries? How can he expect them to expand with the Selective Employment Tax?
    Mr. Ross: I expect them to expand because I expect they will meet the

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    new demands made on them as a result of the stabilising effects of the overall system of manufacturing industry.
    Mr. MacArthur: Is the right hon. Gentleman aware that the target for employment by 1960 in his own plan was an increase of 130,000 in service industries and 80,000 in manufacturing industries? Is he now saying that there will be no change and pretending that the Selective Employment Tax will have no effect?
    Mr. Ross: I am not saying that it will have no effect. I am saying that the gloomy predictions of hon. Gentlemen opposite may well be wrong as they have been wrong in the past, and at this moment I do not think that I should be justified in making any change.
    Mr. Noble: Does the Secretary of State not realise that the gloomy predictions are not confined to hon. Members on this; side of the House but are made to us in representations from almost every branch of industry in our constituencies? Does he imply by his Answer that the hotels, to take one example, should put their prices up sharply to meet this? Is this what the Secretary of State wants?
    Mr. Ross: The right hon. Gentleman knows well that we have debated this over a number of months now and he has had the answers to all these questions. [HON. MEMBERS: "No."] It may well be that the answers were unsatisfactory to hon. Gentlemen, but I do not know who would produce an answer that would be satisfactory to them. I can assure hon. Gentlemen opposite that I do not share the predictions. The tourist industry in Scotland is expanding because the demand on it is expanding, and it will continue to expand.
    Mr. Manuel: Is my right hon. Friend aware that there is no doubt in Central Ayrshire about the expansion of industry, coupled with the massive help that it gets from relief of taxation? Will he do what he can to obtain more land so that I can get more factories to come to Central Ayrshire?
    Mr. Ross: As my hon. Friend knows, there is a Question on the Order Paper about this subject, and it is a very satisfactory Answer that he is getting in regard to administrative action. The
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    more industry that we get in Central Scotland, the more people will be able to afford holidays and to go and see the part of Scotland where hon. Gentlemen opposite say there is gloom and despondency and everything that is denied by the facts.
    Mr. Monro: In view of the unsatisfactory nature of the reply, I give notice that I shall raise the subject on the Adjournment at the earliest possible moment.
    Mr. Clark Hutchisonasked the Secretary of State for Scotland what estimate he has made of the extra cost to the school building programme that will be caused by the Selective Employment Tax; and what steps he will take to prevent any such rise from further slowing down his programme.
    The Under-Secretary of State for Scotland (Mr. Bruce Millan)No reliable estimate can be made. It is too early to assess the effect of offsetting factors and the extent to which contractors are able to absorb the cost of the tax. As regards the latter part of the Question, I would refer the hon. Gentleman to the reply given to my hon. Friend the Member for Edinburgh, Central (Mr. Oswald) on 12th July by my right hon. Friend.
    Mr. Hutchison: Yes, but does the Under-Secretary of State realise that the figure as published is about 2 per cent., and how does he think this ridiculous tax is going to help the school-building programme or the modernisation of schools in Scotland?
    Mr. Milan: I do not accept that the net effect of the Selective Employment Tax will be 2 per cent., but I would draw the hon. Member's attention to the fact that the school-building programmes has been recently increased both in the current year and for the following three years. So the new level in 1967–68 onwards will be £26 million compared with the previous figure, itself a record, of £24 million.
    Mr. Clark Hutchisonasked the Secretary of State for Scotland what percentage increase in the cost of a house in Scotland he estimates will result from the Selective Employment Tax.
    Mr. Monroasked the Secretary of State for Scotland what is his estimate

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    of the increase in cost due to the Selective Employment Tax of the total Scottish housebuilding programme in 1967, on the basis of 40,000 houses being completed in that year.
    Mr. Ross: I cannot add to the reply which I gave to the hon. Member for Glasgow, Hilihead (Mr. Galbraith) on 15th June.
    Mr. Hutchison: I think this figure was 2 per cent. Will the Secretary of State explain how this is going to help young people to buy their houses, which was one of the main planks in Labour's manifesto?
    Mr. Ross: I can assure the hon. Member that if the building industry of Scotland shows that efficiency which we recognise it can achieve, it will be able to offset the considerable increase in relation to this particular part of the costs.
    Mr. Mono: In the unlikely event of the Secretary of State building 40,000 houses next year, does he realise that 2 per cent. is now equal to £2½ million on building costs?
    Mr. Ross: I think the hon. Member will know that no one has said, apart from himself, that we are going to build 40,000 houses—[HON. MEMBERS: "Yes. Election manifesto."] No, we did not. We do not go by his estimates. In relation to his 2 per cent., the same thing is equally true. If we get savings in manpower in the building industry—which can be achieved, particularly now it has the benefit of the incentive scheme in relation to its equipment—then it may well be that houses instead of being dearer will be cheaper.
    Mr. David Steel: In view of the indications we had from the Chancellor during the passage of the Finance Bill and the Selective Employment Payments Bill that the application of the tax may be very flexible in future years, will the Secretary of State give us an undertaking that he will press very strongly within the Government for regional and sub-regional variation in the application of the tax in this next year?
    Mr. Ross: A statement was made by the Chief Secretary of the possibilities—and I am certainly very interested in the
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    possibilities—of a changed use of this tax as the years develop. The first thing, in this first year, is to have the tax established.
    Mr. Brewisasked the Secretary of State for Scotland what is his estimate of the increase in cost of the Scottish road programme in the financial year 1967–68 resulting from the Selective Employment Tax.
    Dr. Dickson Mabon: I expect that some of the increase will be absorbed by the contractors and some offset by higher productivity. I am therefore unable to make an estimate.
    Mr. Brewis: Is it not ridiculous for the Government to try to pretend that this tax will not add considerably to the cost of road building? Will the Under-Secretary tell me whether the road programme is going to be increased to offset the extra expenditure or whether we are merely going to have the cuts made after 1964 restored?
    Dr. Mabon: I cannot make any estimate either way, up or down, because I do not know to what extent the tax will secure its main object of having increased efficiency in the use of labour—[HON. MEMBERS: "What?"]—but there are also the benefits involved of the lifting of the import surcharge, the extension of investment grants to the building industry, and the effect on the price of components of the enhanced refund of Selective Employment Tax to industry. As such, it is difficult to make an estimate.
    Mr. Noble: Can the Under-Secretary of State explain to the House why it is in all these questions he is expecting some increase in productivity when all the evidence of the last nine months shows this is not happening in the country?
    Dr. Mahon: I cannot accept the premise in the last part of the right hon. Gentleman's supplementary question. Surely he is agreeable to our trying to make great efforts to increase productivity by fiscal means as well as other means? As I say, without accepting the premise in his question, I would have thought that he would have supported this aim if not this method.
    Mr. Brewisasked the Secretary of State for Scotland what action he will take to offset the burden of the Selective

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    Employment Tax, the loss of investment allowances and the ineligibility for investment grants suffered by the tourist industry in Scotland.
    Dr. Dickson Mabon: My right hon. Friend the Prime Minister announced on 20th July the Government's intention of introducing a new loans scheme to assist hotel developments, and yesterday my right. hon. Friend the President of the Board of Trade made an announcement about the scheme.
    Mr. Brewis: Is the hon. Gentleman aware that this particular scheme is very unlikely to help the small country hotels? Is he further aware that this is another hammer blow upon the small six to eight-bed-roomed hotels, following revaluation which is revaluing some of these hotels higher than palaces? Will he see whether he can help these hotels with their revaluation figures?
    Dr. Mahon: That question was really in two parts. As to the first part, I do not see how an announcement as generous as the one made by the President of the Board of Trade yesterday and his promise to consult the representatives of the industry about the working of the scheme can mean that we are not helping small hotels. I hope they will be included in the discussion. As regards the second part of the question, the revaluation costs were creations of his own Government. There is a process of appeal open to small hotels and others if they find they have been unjustly assessed by the assessor. I hope they will take full advantage of it.
    Mr. Noble: Does not the Under-Secretary of State realise that this scheme, which will include the big hotels such as Gleneagles and so on, is only part of the answer? It is the smaller hotels which need improvements before they attract dollars and which, as far as we can see from the scheme, will not be helped at all.
    Dr. Mabon: I would not dissent from what the right hon. Gentleman has said, but it is a matter to the credit of the Government that we have gone thus far, which the right hon. Gentleman did not go when he was in office. [HON. MEMBERS: "Oh."] That is a perfectly fair comment. The right hon. Gentleman intended to impose a tax through a Bill
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    which failed before the House—if he remembers correctly. There was to be 6d. per bed per night, I think, from that tax—£2 10s. a year, my right hon. Friend reminds me. The point I make to the right hon. Gentleman is that these discussions are beginning with the industry and I have no doubt that the representatives of the industry will bear in mind the needs of these hotels and insist that under the principles of this scheme they are covered.
    Mr. Brewis: I give notice that I shall take the earliest possible opportunity of raising this matter on the Adjournment.
    Mr. Nobleasked the Secretary of State for Scotland what representations he has now had from the Highlands and Islands Development Board on the Selective Employment Tax; and if he will publish their views.
    Mr. Ross: In informal discussion with me, the Board has stressed the need for vigorous prosecution of positive measures to strengthen the economy of its area, and I have assured the Board that I shall consider carefully any suggestions or proposals it may put forward. I do not think any question of publication arises.
    Mr. Noble: Would the right hon. Gentleman now please answer my Question?
    Mr. Ross: I have answered the Question. I have had no formal representations from the Board. I have had informal discussions with the Chairman and Secretary of the Board.
    Mr. G. Campbell: How can the Secretary of State reconcile the opinion he gave earlier this afternoon about the tax with Treasury estimates that its effects will be severe in the Highlands because there is only 10 per cent. of employment in manufacturing industry there?
    Mr. Ross: It is quite easy to reconcile it. Meantime, in relation to this Question, the information which I gave stands, and it was related entirely to the Question which was asked.
    Mr. Noble: Will the Secretary of State please read the Question which I put down, which asks what representations he has now had from the Highlands and

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    Islands Development Board on the Selective Employment Tax. He never mentioned formal or informal decisions on it at all.
    Mr. Ross: I did not mention decisions, because no decisions were taken and no decisions were inquired about. The right hon. Gentleman asked what representations I have received. I have not received any formal representations. I have had informal discussions with the Chairman and Secretary of the Board which covered a wide order of subjects.
    Mr. Bruce-Gardyneasked the Secretary of State for Scotland if he will ask the Scottish Economic Planning Board to undertake an investigation of the extent to which the impact of the Selective Employment Tax on development areas in Scotland would be offset by reinstatement of free depreciation in these areas.
    Mr. Ross: No, Sir.
    Mr. Bruce-Gardyne: Is the Secretary of State aware that the Minister of State of the Board of Trade told us that he would be prepared to investigate the possibility of reinstating free depreciation in areas like the Highlands which are particularly hard hit by the Selective Employment Tax? Will he take steps to see that he is involved in those investigations on behalf of his Department?
    Mr. Ross: I find it very difficult to understand what the hon. Gentleman is talking about. On the question of reinstatement, in the first case, as he knows, we have a very much wider area than we had before, so we could not be reinstating where people did not have it before. On his second point, free depreciation did not arise in relation to the kind of industry in which he is interested. Free depreciation was related to manufacturing industries and not to service industries.
    Mr. MacArthur: Will the right hon. Gentleman not try to treat this question seriously? Is he not aware that, instead of splitting hairs as he has been doing, he should recognise that the Selective Employment Tax and its impact on Scotland flies in the face of everything that he and his hon. Friends have said about the future of Scotland? Will he treat us seriously this afternoon, instead of giving a string of evasive and ignorant answers?
    Mr. Ross: If hon. Gentlemen would phrase their questions properly it would be very much easier. If people talk about reinstatement when the question of reinstatement is quite irrelevant, they make nonsense of their own Questions.
    Mr. Bruce-Gardyne: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek the earliest opportunity to raise the matter on the Adjournment.
    Mr. G. Campbellasked the Secretary of State for Scotland whether the anticipated rise in the general cost of living resulting from the Selective Employment Tax will be taken into account when the total of the new rate support grant is decided by the Government for the period 1967–68.
    Mr. Ross: Any net increases in costs arising out of the Selective Employment Tax will be taken into account when the total of rate support grant is under consideration.
    Mr. Campbell: Will the further rise in the cost of living resulting from the measures announced last week also be taken into account?
    Mr. Ross: I think that I should advise the hon. Gentleman to read the Bill. He will then know what should and should not be taken into account. [HON. MEMBERS: "Answer the question.] I answered the first Question.
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland what consultations he has had with representatives of the fishing industry in Scotland with a view to offsetting the effect of the Selective Employment Tax in an acceptable way.
    Mr. Willis: None, as the tax will be refunded in respect of fishing.
    Mr. Wolrige-Gordon: I am aware of no consultations at all. Is the hon. Gentleman not aware that even now the fishermen's associations have only the vaguest information about the effect on their industry of this tax? Is it not a fact that from September to February of next year, when repayment commences, the sum to be found will be £28 for each member of the crew of

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    each boat? How does the hon. Gentleman think that the owners of the inshore and herring boats will meet this additional burden?
    Mr. Willis: If we assume that there are ten men per vessel, the sum involved will be about £275. This has to be considered against the annual turnover of the boat of about £10,000 or £20,000. That puts the matter into perspective.
    Mr. Youngerasked the Secretary of State for Scotland what estimate the Scottish Economic Planning Board has made of the percentage of Selective Employment Tax collected which will be returned in premiums and refunds in the South-West and Border regions, respectively.
    Mr. Bakerasked the Secretary of State for Scotland whether he will instruct the Scottish Economic Planing Board to estimate the impact of the Selective Employment Tax, in particular the percentage of tax collected which will be returned in premiums and refunds in the Highlands and Islands, and in the North-East, respectively.
    Mr. Ross: I regret that, on the statistical information which is available, precise calculations of this kind are not possible.
    Mr. Younger: Can the right hon. Gentleman try a little harder to produce this information? Does he not recall that we were rather alarmed some months ago to learn that whereas England would get 68 per cent. of the S.E.T., the Highlands would get only 18 per cent.? If the figures are being concealed for the Borders and the South-West, are they worse than those?
    Mr. Ross: The figures are not being concealed. The fact is that it is impossible to sort out these figures. If the hon. Gentleman is not satisfied with my answers, let him write to the bishop again. The fact is that the further down one goes in relation to regions, sub-regions and areas, the more difficult it is to sort out these figures because of the categorisation in relation to employment. The hon. Gentleman can take it from me that one cannot sort out and get precise figures in this respect.
    Mr. Baker: If these figures are not available, can the right hon. Gentleman
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    tell the House how the Scottish Economic Planning Council will work?
    Mr. Ross: I assure the hon. Gentleman that we will quickly get from the areas—and as he knows in his area we have set up a group—an indication of the impact of the tax, and it will be very much more accurate than some of the suggestions which are being made at the present time.
    Mr. Youngerasked the Secretary of State for Scotland what representations he has had from the Highland Transport Board on the Selective Employment Tax and the abolition of investment allowances on road vehicles; and if he will publish these representations.
    Mr. Willis: The Board has not given me any advice on these matters.
    Mr. Younger: Will the hon. Gentleman ask the Board to look into this matter urgently? Is he aware that more than 80 per cent. of the goods carried around Scotland are transported in C-licence vehicles which will get no refund from the S.E.T.? Will he ask the Highland Development Board to make an estimate of the effect that this will have on the price of goods in the Highlands?
    Mr. Willis: I am sure that the Board is aware of the various factors affecting transport costs, and I am sure that it will take these into account when giving advice on the most effective and most economic means of meeting the transport needs of the Highlands.
    Mr. Steele: In view of the previous supplementary question, does not my hon. Friend think that it may be a good idea to abolish C-licences altogether?
    Mr. Willis: That is rather a different question.
    Mr. Bakerasked the Secretary of State for Scotland what proposals he has for offsetting the Selective Employment Tax as a result of the Minister of State's meeting with the Scottish Woodland Owners' Association on 20th May.
    Mr. Willis: The Selective Employment Payments Bill provides for the refund of the tax to forestry employers.
    Mr. Baker: Is the hon. Gentleman aware that the disproportion in this

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    country between private forestry and state forestry will be further widened by the effect of this tax on private foresters? There is a gap which has to be closed, even in forestry, between September and the repayment of this tax, which is in effect an interest-free loan from the forestry industry.
    Mr. Willis: I do not think that this will stop the private owners from contributing to the forestry plan, as we expect they will.

    Smallholdings (Rents)
    Sir F. Macleanasked the Secretary of State for Scotland by what method he obtained the agreement of the 15 smallholders at Thirdpart, West Kilbride, to the 110 per cent. increase in their rents imposed by him last year.
    Mr. Willis: Twelve of the smallholders agreed to the increases. The other three have exercised their right to seek arbitration by the Scottish Land Court.
    Sir F. Maclean: Is the hon. Gentleman aware that his right hon. Friend assured me in May last year that 14 had agreed? How does the discrepancy arise?
    Mr. Willis: When the discussions first took place between the lands officers and the tenants 14 of them agreed, but when the Department wrote to get written confirmation two of them had decided to go to the Land Court.
    Mr. Alasdair Mackenzieasked the Secretary of State for Scotland, in view of the demand for Department of Agriculture smallholdings in Ross and Cromarty, resulting in high rents being offered when a holding becomes vacant, thus putting them beyond the reach of the people for whom they were originally constituted, if he will refer the matter to the Scottish Land Court whenever there is a change of tenancy, so that a fair rent may be fixed.
    Mr. Willis: No, Sir. Most Department holdings in Ross and Cromarty are crofts let at a fair rent settled by negotiation or fixed by the Land Court. About a dozen holdings under ordinary agricultural tenancy are let in accordance with the provisions of the Agricultural Holdings (Scotland) Acts. I do not accept that either category of holding is being put
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    beyond the reach of those for whom they were intended.
    Mr. Mackenzie: While thanking the hon. Gentleman for that Answer, may I ask him whether he would not agree that, since there is such a keen demand for holdings, it would be much fairer to fix a fair rent to begin with and then select candidates on their merits? The present system seems to be getting away from the original intention entirely and enables people who have no connection whatever with agriculture to come in and thus deprive people brought up on the land who have been saving for a long time to get a holding.
    Mr. Willis: The principles of fair rents applies in the case of crofts. In the case of the very small number of ordinary agricultural holdings, the rent is fixed on the basis of a willing tenant and a willing landlord.

    Kyles of Bute (Bridge)
    Sir F. Macleanasked the Secretary of State for Scotland what progress has been made with plans for building a bridge across the Kyles of Bute.
    Dr. Dickson Mahon: A technical panel set up by the county councils of Argyll and Bute started six months ago to investigate the problems of a permanent crossing.
    Sir F. Maclean: Can the hon. Gentleman give any idea yet of what the cost is likely to be?
    Dr. Mabon: I regret that I cannot. The panel consists of officials of both counties and a consulting engineer and a bridge engineer from the Scottish Development Department. There are a number of possibilities—a high-level bridge, a low-level bridge, and so on—which may mean a fairly thorough investigation. I regret that I cannot give an estimate of how much it may cost.

    Hill Grazings (Fences)
    Mr. Alasdair Mackenzieasked the Secretary of State for Scotland, in view of the number of sheep killed on unfenced roads in the Highlands due to increasing numbers of tourist cars, if he will introduce a special grant to help occupiers of those hill grazings to erect suitable fences.
    Mr. Willis: Fencing is at present eligible for grant under the farm improvement and crofting grant schemes. In addition, Clause 39 of the Agriculture Bill provides for grants for improvements for the benefit of hill land, and it is intended that fencing should be one of the improvements eligible for 50 per cent. grant under this scheme. I see no need for any further special grant.
    Mr. Mackenzie: I realise that there are large stretches of hill country where there is no stock, but there are special areas where there is a density of stock. Is not the result that there has been tremendous slaughter of young stock at this time of the year? Do not these special cases deserve special treatment?
    Mr. Willis: The hon. Gentleman will find that in the conditions that he has just mentioned occupiers would be eligible for a grant under one of the schemes that I have mentioned.
    Mr. Noble: While I accept the forms of grant to which the hon. Gentleman has referred, may I ask him whether it would not be worth while for the Scottish Office to make a study for a year of both the number of sheep killed and the number of accidents caused by sheep? Might there not be a real point in having an extra grant where it was proved necessary?
    Mr. Willis: We could, of course, look at that.
    Mr. Manuel: Will my hon. Friend recognise that if a 50 per cent. grant is to be authorised for fencing along side roads, many of which have passing places, it should be laid down that the fence should be removed a certain distance from the road to allow for off-road parking and other amenities at present enjoyed by tourists travelling in the Highlands?

    Artificial Kidney Machine
    Mr. Dempseyasked the Secretary of State for Scotland what action he is taking to overcome the shortage of artificial kidney machines in Scottish hospitals; and if he will make a statement.
    Mr. Millan: Regional hospital boards have considered, at the request of
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    my right hon. Friend, the development (in Scotland) of treatment of chronic renal failure by dialysis in the light of recommendations by a working group of the Standing Medical Advisory Committee. As a result of this, there should, by the autumn, be 10 additional kidney machines in operation in Scottish hospitals making 14 in all; 5 in Edinburgh, 5 in Glasgow, 2 in Dundee and 2 in Aberdeen. This should enable 42 patients to be treated.
    Mr. Dempsey: Can my hon. Friend give an assurance that the shortage of machines will in no way impair the provisions of this essential medical service? Furthermore, can he say that it will in no way delay the new hospital building programme in Scotland?
    Mr. Millan: We are planning for a further expansion of this service. The hospital building programme is already laid down in the Review of the Hospital Plan.
    Mr. Stodart: Is the hon. Gentleman aware that the Minister of Health announced that the number of persons being treated by machines in England and Wales would be doubled within the next twelve months? Can he say whether the same speed of expansion will apply to Scotland?
    Mr. Millan: Only twelve patients are being treated at the moment. There will be 42 patients by the autumn, and over the succeeding twelve months there will be another 30 or so. I think that we are doing at least as well as England and Wales.

    Housing (Overcrowding)
    Mr. Doigasked the Secretary of State for Scotland if he will take steps to amend the Housing (Scotland) Acts in relation to overcrowding, in view of the fact that only gross overcrowding is at present eligible for rehousing priority.
    Mr. Ross: At present the Housing Acts lay down only a minimum standard and any local authority is free to adopt a higher standard for rehousing purposes. I await the report of the Scottish Housing Advisory Committee on the allocation of houses, which will be relevant to this important matter.
    Mr. Doig: Is my right hon. Friend aware that a kitchen and two bedrooms containing a husband, a wife, a stepdaughter aged 22, a daughter aged 7, a son aged 12, and an infant son is not considered overcrowding under these regulations, and will he take steps to draw to the attention of the local authorities the variation which there can be of these standards so that they can apply reasonable standards and give reasonable priority to houses which are overcrowded in this way?
    Mr. Ross: I think my hon. Friend is under a misapprehension. There is no regulation covering this. It is covered by a part of a Schedule to the 1950 Act. This is only a minimum standard, and every local housing authority in Scotland is entitled to the discretion to change its operation as it likes. As a matter of fact, the recommended standard—in, I think it was, Circular 149 of 1944—is being applied by most authorities in Scotland, and even beyond that. If my hon. Friend would like to write to me about any particular authority giving him concern, I should be glad to hear what he has to say.

    Raasay (Land Use)
    Mr. Russell Johnstonasked the Secretary of State for Scotland whether he will issue a general direction to the Highlands and Islands Development Board to investigate allegations of improper land use on the Island of Raasay, details of which have been sent to him by the hon. Member for Inverness.
    Mr. Willis: No, Sir. My right hon. Friend has no evidence of improper land use on Raasay. He is, however, asking the Highlands and Islands Development Board to give him its views on the economic situation and the scope for development in the Island.
    Mr. Johnston: While thanking the Minister of State for the general reference to the Highlands and Islands Development Board, I wonder if he could at least give an assurance that his Department will not sell any more crofts or houses or holdings to Dr. Green till he has the results of this survey?
    Mr. Willis: Yes, we are very conscious of what is happening here, and, of course,
    1708
    we will be careful in the future about land use.

    Farmers (Tenancies)
    Mr. Russell Johnstonasked the Secretary of State for Scotland when he proposes to introduce legislation to improve security of tenure for tenant farmers in Scotland.
    Mr. Willis: I presume the hon. Gentleman has in mind the question of succession to tenancies. Consultations are proceeding with the National Farmers' Union of Scotland and the Scottish Landowners' Federation on possible amendments to the law on this and other matters, but my right hon. Friend is not in a position yet to say whether, or when, it will be appropriate to propose legislation.
    Mr. Johnston: Is the Minister aware that that is a very surprising answer, since this has been a mater of Scottish Labour Party policy for a long time? There are many examples of heirs being dispossessed since the Labour Government's 1948 Agriculture Act was repealed by the 1957 Agriculture Act. Would he proceed with much more dispatch in this matter?
    Mr. Willis: I think the hon. Gentleman is referring to the 1958 Act, which made this change. There are several points resulting from that Act which have aroused discussion. That was why I did not select that one but referred to the one which was more prominent in the minds of agriculturists.
    Mr. Emrys Hughes: In view of the fact that the Scottish Landowners' Federation has done so well out of the increase in rents arising from the 1958 Act, how does my hon. Friend expect to get any agreement satisfactory to tenant farmers from the Federation?
    Mr. Willis: We are trying to bring the National Farmers' Union and the Scottish Landowners' Federation rather closer together to try to achieve some measure of agreement before we look at this to see what can be done.

    Messrs. MacBrayne's (Strike Losses)
    Mr. Nobleasked the Secretary of State for Scotland what estimate he has made of the loss to Messrs. MacBrayne's

    1709
    arising from the seamen's strike; and whether he will give an assurance that this will be met from Government funds and not be added to the fares to the public.
    Mr. Ross: The company has provisionally estimated that it has lost £175,000 as a result of the strike, and this will affect the amount of the grant to be paid to the company this year in accordance with the terms of its undertaking. The question of future charges will be considered in the light of all the circumstances, including of course the Government's policy on prices and incomes.
    Mr. Noble: Can the right hon. Gentleman give a clear assurance that no continuing results of this loss will fall on the ordinary people in the Islands, who have themselves suffered considerably from the strike?
    Mr. Ross: I realise that there have been difficulties in the Islands, particularly during the period of the strike, and, as the right hon. Gentleman knows, I am under an obligation in relation to my duties for the control of MacBrayne's and its charges to take account of the economic difficulties and effects that any change in charges might have on the Islands.
    Mr. Grimond: Will the right hon. Gentleman confirm that he is willing to consider all applications from areas particularly affected by the strike for some compensation in respect of damage and loss which they have suffered?
    Mr. Ross: The Question deals with Messrs. MacBrayne's. If the right hon. Gentleman would like to put his Question down, I should be glad to answer it.

    Scottish Economy (White Paper)
    Mr. Bruce-Gardyneasked the Secretary of State for Scotland if he will publish a revised version of the White Paper on the Scottish Economy, Command Paper No. 2864.
    Mr. Ross: No, Sir. I see no need to depart from the strategy of development outlined in the White Paper.
    Mr. Bruce-Gardyne: Is the right hon. Gentleman not aware that the Scottish
    1710
    Plan is said to be based on the National Plan, and the National Plan's targets have now been scrapped, and that the First Secretary threatened to resign because of that? Why did the right hon. Gentleman not threaten to resign?
    Mr. Ross: I can assure the hon. Gentleman that the objects and targets which we hope to achieve under the Scottish Plan remain as they are.
    Mr. Bruce-Gardyne: Rubbish.
    Mr. Ross: That does not mean to say that we cannot, as time goes on, see how the targets go in relation to achievements and in relation to changes. However, at present, I see no reason to make the review for which he asks.

    Scottish Law Commission
    Mr. Wylieasked the Secretary of State for Scotland whether he will appoint one of the Commissioners of the Scottish Law Commission on a full-time basis in addition to the Chairman of the Commission.
    Mr. Willis: No, Sir. The Lord Advocate and my right hon. Friend do not think the present arrangements need be changed meantime.
    Mr. Wylie: Does the hon. Gentleman really think that there is adequate provision for coping with the problem of law reform, bearing in mind the wide field of law reform which the Commission is attempting to deal with, as set out in the Report? Is it fair to the very able permanent Chairman of the Commission that so much work should fall on his shoulders?
    Mr. Willis: We are very much aware of the volume of work falling on this body, and my right hon. Friend and the Lord Advocate intend to keep the matter under review. If the need for a further full-time appointment appears to arise, it will be made.

    Loch Lomond Water Scheme
    Mr. Wylieasked the Secretary of State for Scotland what proposals he has for the supply of water to the central area of Scotland, and in particular to the proposed new town of Livingston, as an alternative to the Loch Lomond Water Scheme.
    Dr. Dickson Mabon: None, Sir.
    Mr. Wylie: Is the hon. Gentleman aware that at one time it was hoped that the Loch Lomond Water Scheme would be commenced two years ago, and we are now at the stage at which, after one inquiry, it seems to be a matter now for the Parliamentary Commissioners to decide? Does the hon. Gentleman not agree that, just in case the Parliamentary Commissioners recommend against the proposed Order, it would be wise to have some alternative to meet the very serious gap in the water resources of central Scotland?
    Dr. Mabon: I agree with the hon. and learned Gentleman, but the statutory processes which we are obliged to follow are enormously lengthy and very complicated. At this stage, I cannot make any comment on the matter, which is to be brought before the Parliamentary Commissioners, but the hon. and learned Gentleman will note that, in the Queen's Speech, we promise to bring in legislation in this Session of Parliament dealing with the arrangements for water supply in Scotland.

    Rate Rebates (War Disabled)
    Mr. G. Campbellasked the Secretary of State for Scotland whether war disability pensions will be disregarded in the assessment of income for the purposes of rate rebates.
    Dr. Dickson Mabon: This possibility was discussed and was not accepted when the Rating Bill was being debated in February.
    Mr. Campbell: Will Ministers look at this again and restore the principle of immunity which has hitherto applied to war disability pensions?
    Dr. Mabon: I think the hon. Gentleman has to recognise that when Parliament discussed this it decided to take account only of the amount of the income and not the source of it. This is not a matter of hardship, since hardship cannot be caused when one is giving rebates which were not allowable under previous legislation.
    Sir H. Legge-Bourke: Will the hon. Gentleman recognise that this matter is of importance not only to Scotland but to the whole country? Will he undertake to
    1712
    consult the Minister of Housing and Local Government and the Minister of Pensions and National Insurance to see whether this very important matter can be reconsidered?
    Dr. Mahon: I accept that this is a United Kingdom matter. It was a United Kingdom Act. I take the point made by the hon. Gentleman. We had discussions about this when the Bill was going through the House. We have had discussions since, and we are keeping the whole position under review.

    Teacher Training Colleges (Graduates)
    Mr. Buchanan-Smithasked the Secretary of State for Scotland what estimate he has made of the total graduate intake into teacher training colleges in the 1966–67 session; and what were the corresponding figures for 1964–65 and 1965–66.
    Mr. Millan: About 1,180 in session 1966–67 compared with 1,107 in 1965–66 and 1,131 in 1964–65.
    Mr. Buchanan-Smith: Would not the hon. Gentleman agree that these figures are still inadequate if we are to meet the target of raising the school-leaving age by 1970? Can the hon. Gentleman say how his negotiations with the teachers' organisations are progressing with regard to the introduction of non-graduate men to primary school teaching?
    Mr. Millan: I agree that there is a general shortage of teachers and that this is likely to persist for some time. The whole question of recruitment is now with the General Teaching Council.
    Mr. Hugh D. Brown: While recognising that this is an area where it is still pertinent to talk about 13 wasted years, bearing in mind that it takes three years to train a teacher, may I ask my right hon. Friend for an assurance that urgent consideration will be given to the recommendations of the Roberts Committee, which will at least equalise the scarcity of teachers resulting from the policy followed by our friends opposite?
    Mr. Millan: We shall have to undertake discussions on the Roberts Committee recommendations with both the teachers' organisations and the local

    1713
    authority associations. We look on this whole question as one of considerable urgency.

    Fishing Industry (Subsidies)
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland what consultations he has had with the fishing industry with regard to the subsidies to be paid in the year to 31st July 1967.
    Mr. Willis: Representatives of Scottish inshore and herring fishermen met my officials on 29th April and myself on 27th June; the Scottish Trawlers Federation met my officials on 17th June about a claim for supplementary subsidies but declined the offer of a later meeting with me.
    Mr. Wolrige-Gordon: Is the hon. Gentleman aware that these consultations seem to have had very little effect, and that the reductions proposed in the subsidy bear most heavily on the smallest boats? How much consultation do the Government need before they become aware of the importance of the fishing industry to the Scottish economy?
    Mr. Willis: All the points made to me by the fishermen have been considered. The points made by them last year have been responsible for some of the changes which have been made in the scheme this year.
    Mr. Noble: Is the hon. Gentleman suggesting that the fishing industry suggested to his Department that the heaviest cuts should be made on the smallest boats?
    Mr. Willis: I did not suggest anything of the kind. What I said was in reply to the Question as to what consideration was given to them. They were fully considered, and their views have had an effect on the subsidy.

    Beef and Veal Production
    Mr. Stodartasked the Secretary of State for Scotland why, in preparing the National Plan, he did not accept the figure for the possible expansion of beef and veal provided by the National Farmer's Union of Scotland.
    Mr. Ross: The National Plan, which relates to the United Kingdom as a whole, does not lay down any specific target for
    1714
    the possible expansion of beef and veal production. The Government accepts, however, the Farmers' Union's assessment that the broad objective should be to expand home production to the full extent of the technical possibilities.
    Mr. Stodart: Is the right hon. Gentleman aware that there is great disappointment in the National Farmers' Union that its target, which was very much in excess of what the Government have accepted, has not been taken up by the Government?
    Mr. Ross: I can assure the hon. Gentleman that the National Farmers' Union played its part and subscribed to the relevant chapter of the National Plan. Indeed, no separate Scottish figure was either called for or provided by the N.F.U. But we have certainly accepted the general appreciation of the full expansion within the technical possibilities.

  HOUSE OF COMMONS

    Select Committee en Science
    Mr. Palmerasked the Lord President of the Council when he will move to appoint the Select Committee on Science; and what will be the proposed terms of reference.
    The Lord President of the Council and Leader of the House of Commons (Mr. Herbert Bowden): I would ask my hon. Friend to await the outcome of the discussions which are taking place.
    Mr. Palmer: Does not my right hon. Friend appreciate that this sensible proposal has been hanging fire for a very long time? There is a general desire on both sides of the House for a Select Committee on Science to be appointed. Cannot things be speeded up, and this tremendous delay avoided?
    Mr. Bowden: I accept that there has been some delay in the discussions on the setting up of this proposed Select Committee. It has, nevertheless, to be appreciated that we do not desire to duplicate the work which is being done by a Sub-Committee of the Estimates Committee, and in considering the terms of reference of the civil aspect of science and technology, we want to be sure that we get them right.
    Mr. David Price: Is the right hon. Gentleman aware that this has gone on too long and that that very quiet and submissive body—the Parliamentary Scientific Committee—is getting very disturbed at the delay in making a decision? Is the Lord President also aware that our request for a Select Committee on Science and Technology does not raise the wider issues of principle that are involved in the important proposals that hon. Members on both sides of the House have for extending the Committee system? This is within the general principles established in the Select Committee on Nationalised Industries. Is he also aware—[HON. MEMBERS: "Speech."] Many hon. Members on both sides are interested in this—
    Mr. Speaker: Order. Supplementary questions must be brief.
    Mr. Bowden: I am aware of the importance of this proposed Select Committee, and there is no question about its being set up. Perhaps the hon. Gentleman could help me by having a word with his hon. and right hon. Friends on the Opposition Front Bench.

    Medical Facilities
    Mr. Winnickasked the Lord President of the Council why there is no full-time nurse for the first-aid room in the House of Commons; and if he will arrange for such an appointment.
    Mr. Selwyn Lloyd: I have been asked to reply.
    The question of the provision of medical facilities is being considered by the Administration Sub-Committee of the Select Committee on House of Commons (Services) and the hon. Member's suggestion will be borne in mind.
    Mr. Winnick: I am grateful for that answer, but does not the right hon. Gentleman agree that a nurse, adequately paid, should be appointed for the first-aid room, not only for Members of Parliament but also for visitors or strangers who may need first aid?
    Mr. Selwyn Lloyd: I am not sure what she would do all day.
    Mr. J. T. Price: Is my right hon. and learned Friend aware that if my hon.
    1716
    Friends have to endure any more performances like that of the Leader of the Opposition yesterday we shall all be in need of medical attention?
    Mr. George Jeger: Is not there much more need for a full-time psychiatrist?

    Calculating Machines
    Mr. Ian Lloydasked the Lord President of the Council (1) whether he will make arrangements for a pair of electronic desk calculating machines to be made available in a suitable room for the use of hon. Members;
    (2) whether he will make arrangements for hon. Members to have access, from a suitable point within the Palace of Westminster, to pragramming and calculating facilities on a high speed computer.
    Mr. Bowden: The provision of such equipment and services could be justified only if it were to be established that hon. Members had a need for them.
    Mr. Lloyd: In that event will the Lord President take some steps to ascertain how many Members would find this a great convenience—certainly the desk calculating machine—in enabling this House to catch up to the 20th century with the shortest possible time lag?
    Mr. Bowden: I should be interested to know how many Members feel that an electronic desk calculating machine would be of help to them. On the second Question, I do not know whether they feel that they should have some system whereby they could programme their requirements for the future.
    Mr. David Price: Will the right hon. Gentleman take into account that the needs of Members for better statistical information from Government Departments could fit in with the Government's having a central computer; that much of the basic statistical information of Government Departments—non-classified—could be fitted into a central computer, and that if this House were able to have access to that computer it would help the Government as well as hon. Members?
    Mr. Bowden: This could be done at some cost if the House generally thought it was necessary. It could he done by agreement with a university, or some organisation which has such a computer at hand.

  WARDSHIP AND ADOPTION CASES
  Mr. Abseasked the Attorney-General (1) whether he is aware that the delay in the determination of a wardship proceeding impinging upon the prospective adoption of two sisters has been condemned by the Court of Appeal, and that the presiding judge stated that the rules of the court covering such proceedings urgently need revision; and, in view of the fact that this judicial comment follows his attempt to secure changes in the practice of the Chancery Division which would materially reduce the time which elapses before a case is heard, what further action to prevent delay is now to be taken to expedite hearings in wardship and adoption proceedings;
  (2) whether, in view of public and judicial concern with the present operation of adoption and wardship proceedings, it is intended that the Law Commissioners' review of family law will include consideration of the law relating to wardship and adoption; whether the Law Commissioners intend delegating the detailed review of the law relating to adoption and wardship to another body under its aegis; and when it is intended that such a review will commence.
  Mr. Deedesasked the Attorney-General what proposals he has for accelerating the work of the Chancery Court; and the Chancery Judges.
  The Attorney-General (Sir Elwyn Jones): I am aware of the dissatisfaction expressed by the Court of Appeal at the procedure in the Chancery Division in wardship and adoption cases. The delays are due to a variety of reasons, in particular the increase in the number of wardship cases from 102 in 1955 to 424 in 1965, and the fact that legal aid enables these to be fought more strenuously than in the past. Practice directions have been issued with the intention of reducing delay in the earlier stages of proceedings, but the speed with which the cases are decided depends to a large extent on the parties themselves. My noble Friend, the Lord Chancellor and the Chancery Judges are urgently considering the position with a view, to amendment of the Rules of the Supreme Court if necessary. My noble Friend considers that the problems of delay ca n be dealt with more satisfactorily
  1718
  in this way than by referring the matter to the Law Commission, which is however engaged in a long-term review of the structure of the courts dealing with family matters.
  Mr. Abse: Is the learned Attorney-General aware that on the last occasion when this question was raised it was suggested that the rules would be altered. Is he further aware that these changes are proving remarkably ineffective, and that these delays will bring our legal system into disrepute, besides causing irreparable harm to children, often subjecting them to lifelong emotional maiming? On the second Question, will he remember that he has not indicated what the Law Commissioners are doing? Are they setting up a separate committee to deal with this complex matter, which is causing such disturbance among parents, foster parents and would-be adopters?
  The Attorney-General: The Law Commission at the moment is engaged on a long-term review of the structure of the courts dealing with family matters and with family law in general. I am aware of the anxiety of the people affected, and so is my noble Friend the Lord Chancellor and the Chancery judges.
  Mr. Deedes: Does the right hon. and learned Gentleman recall that about two years ago his party undertook to fulfil massive and early law reform? Where is it?
  The Attorney-General: It is taking place massively, and at the present time. It required a Labour Government to introduce a Law Commission, a statutory body concerned with law reform whose output will be a great step forward in law reform any minute now. The problem will be in providing time for these changes in the law. I am delighted to see that at last some interest in law reform has appeared on the benches opposite.
  Mr. Whitakerasked the Attorney-General what the average length of delay before adoption cases have been heard in the Chancery Division has been in each of the last three years.
  The Attorney-General: The average interval between the issue of an originating summons for an adoption order and the making of an order on the summons

  1719
  was 21 weeks in 1963, 17½ weeks in 1964, 18 weeks in 1965 and 23 weeks in 1966 to date.
  Mr. Whitaker: Will my right hon. and learned Friend, with his well-known humanity, recognise that these delays cause irreparable harm to the future of young children? Does he agree that the Chancery Division, with its lengthy delays, bears far too much resemblance to the description in "Bleak House", and will he adopt the advice given by the Chancery Lord of Appeal about the future of the Division?
  The Attorney-General: These matters are now under urgent consideration. The recent appointment of an additional judge to the Chancery Division will reduce the delays, and it may well be that changes in procedure will effect a further improvement.
  Sir P. Rawlinson: Will the Attorney-General note that there is wide support for the idea of a Family Division of the High Court, to which all these matters and all matters affecting family life should be sent?
  The Attorney-General: I am reassured by that information. The problems of family law are now under consideration at various levels, and we expect some fundamental changes before long.
  Mr. Archerasked the Attorney-General whether he will ask the Committee on the Age of Majority to present at an early date an interim report on the procedure of the Chancery Division in ward of court proceedings.
  The Attorney-General: The Committee on the Age of Majority is not concerned with the procedure in cases affecting wards of court but only with the substantive law, such as whether there should be any change in the present power to make anyone under 21 a ward of court. The Committee does not intend to present an interim report, but it is hoped that its full report will be available at the end of this year or shortly afterwards.
  Mr. Archer: Is my right hon. and learned Friend aware that a considerable body of evidence on this subject has been given to the Committee by the Chancery Bar Association? Will he bear in mind the fact that if this reform is
  1720
  delayed by two or three years it will not assist the unfortunate children whose cases are listed for hearing now?
  The Attorney-General: I do not think for a moment that there will be a delay of that length of time. The Select Committee will be reporting by the end of the year.

ALBERT HALL (MEETING)
Mr. Whitaker44. Mr. Whitaker asked the Attorney-General whether he is aware that treasonable or seditious statements were made in the area of the Albert Hall on the evening of 21st July, 1966; whether he will instruct the Director of Public Prosecutions to institute proceedings in this case; and whether he will make a statement.
The Attorney-General: I have asked the Director of Public Prosecutions for a report on this matter.
Mr. Whitaker: I sympathise with the right hon. Member for Streatham (Mr. Sandys) in the fact that he was shouted down for being too Left-wing, but does not my right hon. and learned Friend agree that it is deplorable that a meeting should be held urging support for an illegal racialist rebellion by an audience which The Times said consisted of Nazis Fascists?
The Attorney-General: I have said that I have asked the Director for a report. In the circumstances, it would not be proper for me to comment on the matter.

BILL PRESENTED
  MARINE, & C., BROADCASTING (OFFENCES)
  Bill to suppress broadcasting from ships, aircraft and certain marine structures, presented by Mr. Edward Short; supported by Mr. Michael Stewart, Mr. George Darling, the Attorney-General, and Mr. Joseph Slater; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 94.]

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

  PORNOGRAPHIC PUBLICATIONS
  3.31 p.m.
  Mr. John Cordle: I beg to move,
  That leave be given to bring in a Bill to proscribe pornographic publications.
  One of the benefits which back benchers have in bringing forward a Bill of some importance under the Ten-Minute Rule is that the House is in session and there is a full audience.
  The past two decades have seen a massive change in our attitudes to censorship in literature and entertainment. Much of this change I would not quarrel with. There are sound and cogent—
  Mr. Speaker: Order. The House has insisted that Ten-Minute Rule Bills be taken at this time of day. It must listen to hon. Members who are asking leave to introduce them.
  Mr. Cordle: I was saying that much of this change I would not quarrel with. There are sound and cogent reasons why many subjects previously regarded as unmentionable should be discussed and written about in an honest and adult manner.
  But there is, unfortunately, another side to this cry for greater freedom of expression. The margin between liberty and licence is always narrow, and I have no doubt that this margin has been overstepped in a number of important ways. Hon. Members on both sides of the House have been perturbed at the growing flood of cheap and trashy pornographic publications imported into this country, largely from America. A feature of such publications is invariably a lurid and highly salacious jacket, invariably featuring a scantily dressed woman in attitudes or situations which are provocative in the extreme.
  The sole object of such illustrated depravity is, of course, to sell the books. With modern methods of display and self-selection, including selling books from vending machines, the publishers would argue that the more lurid and erotic the cover the greater the turnover for the particular book.
  This situation, disgusting and unhealthy although I believe it to be, could per-
  1722
  haps have been tolerated when most of these books were sold and displayed in those strange establishments in Soho and other well-known parts of our great cities where the clientelle for such publications, largely male, middle-aged and psychologically mixed-up, could while their hours away perusing and choosing their favourite erotica. That was the situation a few years ago. The majority of decent families were not exposed to such sordid rubbish and the filth when the only dangers were from those curiously antiseptic naturalist magazines.
  That is not the case today. First, most of this cheap pornographic trash, lurid covers and all, is now being openly displayed and sold in every—[Interruption.]
  Mr. Speaker: Order. The House must be consistent in its attitude to Ten-Minute Rule speeches.
  Mr. Cordle: I am very grateful to you, Sir.
  I was saying that a good deal of this trash, lurid covers and all, is now being openly displayed in every possible kind of outlet. Respectable and responsible booksellers, both chain and independent, many newsagents and tobacconists, supermarkets and general stores, vending machines on railway stations, all now offer self-service racks filled with books whose jackets would make a sailor blush.
  Only last week, I was interested to see that the Monmouthshire County Libraries Committee has been concerned with this flood of sex and sadism and is urging the county council's education committee to raise the matter with the County Councils' Association, in the hope of gaining support from other local authorities. I believe that they are rightly concerned about the effect upon young children.
  Secondly, this practice of attracting custom by wrapping books up in jackets which go far beyond the bounds of decency has spread to many of the well-known classics, which are part of our literary heritage. I was fascinated to read in the Daily Telegraph the other day the publishers' blurb for a new edition. It read:
  "Don't take our word for it. Experience for yourself this whirlwind of adventure and passion."
  The book? "Great Expectations", by Charles Dickens. Anyone buying the

  1723
  book on the blurb alone, or as a result of seeing the cover, which I do not doubt was an extremely salacious one, would find his particular expectations unfulfilled.
  It could be argued that dressing up the classics in an erotic guise is the only way of selling them, and that it is surely good for everyone to read them, even if for the wrong reasons. This is a totally cynical and unworthy view of the British people and I reject that argument absolutely.
  I have a few examples here, with illustrations. What worries me most about this problem is the effect it has on children and young people. The position now is such that no one can escape the flood of erotic illustrations, because one is as likely to meet it in one's local supermarket as in the sleaziest Soho bookshops. Largely anonymous publishers started the practice and I regret to say that more responsible publishers are now, seemingly, jumping on the band wagon. This problem is now growing and is affecting record sleeves; more and more long-playing records are being sold in sleeves bearing a picture of an unclothed young lady which has no possible connection with the music on the record.
  What can parents do? What can school teachers do? We cannot forbid our children to go into shops, yet we know that day by day they are increasingly exposed to this filth. I think that what St. Paul said is true:
  "Evil communications corrupt good manners".
  What was true then is true today. It is our bounden duty to protect our children in the character-forming years from illustrations which openly cover such subjects as flagellism, sado-masochism, voyeurism, lesbian relationships, transvestism, and virtually everything except the sex act itself.
  1724
  My Bill would propose to set up a stautory body with power to control and stamp out this unsavoury exploitation. It would be composed of local authority and educational representatives, representatives of the Publishers' Association and of the retail trades. It could demand the withdrawal of books and records the covers of which depicted scenes which bore no resemblance to the story in the book or the music on the record. It could also require the withdrawal of books and records the covers or sleeves of which might fulfil this first condition, but which, nevertheless, offended public taste and which might have a depraving or corrupting influence on young people who could not help seeing the cover on public display.
  I abhor restrictive and oppressive legislation, but, where the trade refuses to put its own house in order, I believe that Parliament must step in to protect those who cannot protect themselves. In that spirit I commend the Bill to the House. If publishers continue to fan the growing unhealthy interest in sex and sadism, then the gusts of lust which sweep our country today can bring in its wake an indictment which will shame this House and the British people in years to come.
  I commend the Bill to the House for its genuine consideration.
  Question put and agreed to.
  Bill ordered to be brought in by Mr. Cordle, Sir Charles Taylor, Mr. J. H. Osborn, Mr. Goodhew, Mrs. McKay, Mr. Urwin, Mr. Evelyn King, Mr. Loveys, Mrs. Anne Kerr, and Sir W. Bromley-Davenport, Mr. Ron Lewis, and Mr. John Wells.

  PORNOGRAPHIC PUBLICATIONS
  Bill to proscribe pornographic publications, presented accordingly and read the First time; to be read a Second time upon Friday, 9th December, and to be printed. [Bill 93.]
  SUPPLY

    4TH ALLOTTED DAY
    Considered in Committee.
    [Sir ERIC FLETCHER in the Chair]

  CIVIL ESTIMATES, 1966–67
    CLASS I

      VOTE 3, TREASURY AND SUBORDINATE DEPARTMENTS
      Motion made, and Question proposed,
      That a sum, not exceeding £3,247.000, be granted to Her Majesty, to complete the sum necessary to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1967, for the salaries and expenses of the Department of Her Majesty's Treasury and subordinate departments and of the Lord Privy Seal, the Chancellor of the Duchy of Lancaster, and two Ministers without Portfolio.—[£1,750,000 has already been voted.]
      Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. Lawson],—put and agreed to.
      Committee report Progress; to sit again Tomorrow.

  ECONOMIC AFFAIRS
  Order read for resuming adjourned debate on Question [26th July].
  That this House has no confidence in the competence of Her Majesty's Government to manage the economic affairs of the nation.
  Question again proposed.
  3.44 p.m.
  The Prime Minister (Mr. Harold Wilson): This debate about the economic situation is basically about our balance of payments, and it is also about what the world thinks about our balance of payments prospects, because, as past experience has shown, failure to reach an objective by even comparatively small amounts—by £100 million or £200 million, which is only about 1 per cent. of the total figures involved—can rapidly escalate into monetary movements far transcending the actual deficit or the prospective deficit.
  Basically, what we are talking about today s the balance of payments and
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  everything bearing upon it. When that is in balance and when the world has confidence that it is going to be in balance and to move into surplus, the sterling confidence factor will be much less of a problem.
  But, of course, when we do have difficulties of this kind, psychology, abroad and at home, tends to dwell on much wider aspects of our difficulties than movements in exports or imports or invisibles or capital movements or Government expenditure abroad. It is at such times that psychology gets involved not only with the underlying factors, such as our costs and prices structure and our industrial efficiency, but even with intangible questions such as the mood and determination not only of Government or Parliament, but of the British people as a whole. It is right that this debate should deal with all of these issues.
  Before I come to the basic balance-of-payments questions, I think that we should perhaps eliminate from our thoughts the somewhat naive caricature that what has been going on is a machination of some bearded troglodytes deep below ground speculating in foreign currencies for private gain. Of course, there is a speculative element based on the hope of private gain.
  But in fact—and our detailed analysis which we carried out of what happened a year ago bears this out—one does not need to look for sinister interpretations. I would distinguish two main elements in the monetary movements. In the first place, we have the large international companies with substantial trade in and with this country which, in periods of doubt, are tempted to reduce their holdings of sterling for purely precautionary reasons—precautionary, not speculative.
  We have to recognise that over the past year some of these companies which have American roots have been under the strongest pressure from their own Government as a result of the American balance of payments position to transfer profits more rapidly to the United States and certainly to keep their sterling holdings to a minimum. In a very real sense sterling has been the front line, taking part of the attack which is basically, or at any rate equally, directed against the dollar.

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  But even more important than the dispositions of some of the big international companies is another feature—the rapid intensification of a problem with which right hon. Gentlemen opposite were painfully familiar, arising from the way in which our trade is financed. The external trade of the United Kingdom alone—quite apart from the rest of the sterling area—is on a massive scale. Our imports in the past year were just under £6,000 million and our exports were just over £5,000 million. But we have to take account of the transactions of the sterling area as well.
  If payment for all sterling area imports from the rest of the world for just one week were made one week early this could cost our reserves over £150 million immediately. Of course, there can be an element of speculation in this, but to be realistic I think that the precautionary motive rather than the hope of speculative gain must be the motive we have got to attribute to these transactions.
  From the figures I have given it should be seen that if only a very small proportion of future currency transactions were anticipated or deferred in this way it could explain recent movements across the exchanges—most of them obviously, of course, reversible when psychology and when expectations have changed.
  It is for this reason that I must reject the argument so much emphasised in the Press of late, and surprisingly restated with the authority of the right hon. Gentleman the Member for Bexley (Mr. Heath) yesterday, that it ought to have been possible to foresee, anticipate and deal in advance with the sudden pressure on sterling.
  These movements are incapable of statistical prediction or forecast, as right hon. Gentlemen opposite will recall from their own experience. Indeed, this goes back much earlier than 1951. In 1947, there was the convertability crisis, after which a thorough inquiry which was undertaken showed, as might have been expected, that when there were thousands of holders of convertible sterling against a background of a dollar famine at that time the rate and extent of conversion of sterling into other currencies could be neither measured nor foreseen.
  More recently, on 25th July, 1957, the House will recall that we debate inter-
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  national inflationary problem and the then Chancellor was able to give an encouraging picture of the external position and the position of sterling. It was all clear blue skies from the point of view of the international position at that time in 1957. But a week later we were in August, a month in which we lost a fifth of the reserves of the sterling area, showing the speed at which a development of this type can occur. Again, in 1961, the crisis was certainly not foreseen at the time of the Budget of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), and even in early July of that year I believe that there was not even the faintest perception of what was coming later in the month.
  I am saying these things not by way of explanation or excuse, still less recrimination, but because this position is inherent in the facts I have just given to the House; that one week's deferment in the payment of our sterling area trade could knock the monetary situation sideways, just by the size of the figures involved.
  The danger is the more acute today, at a time when, as is undoubtedly the case, there is acute pressure on liquidity throughout the world. This imparts the greatest urgency to international action to deal with the liquidity problem, including initiatives taken by Her Majesty's Government and other Governments following on the initiatives taken by the right hon. Member for Barnet (Mr. Maudling) three or four years ago.
  However, having said all this, there is one obligation on Britain. This is to see that leads and lags apart—and it is this that can explain rapid movements of this kind—world liquidity apart, we do not, through our economic policy, in other words, through the maintenance of a deficit, allow loose amounts of sterling to be floating around the world, a permanent temptation to those who, for one reason or another, may wish to convert, perhaps at high speed. This is why our vulnerability will not cease as long as we are in deficit, indeed as long as we fail to achieve an adequate surplus in our balance of payments, and it is to this problem that I now turn.
  There are three basic sets of factors underlying both the reality of our balance of payments situation and the world's

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  estimate of that reality. Some of the factors that have a larger or smaller impact on the reality may loom very large, perhaps disproportionately large, in the world's calculations about our propects, and, therefore, in the world's willingness to await in patience the results of what we are trying to achieve. However, there are these three basic factors affecting the balance of payments, which is what we are debating, and I will distinguish these three factors. [Interruption.] I hope that hon. Gentlemen opposite are concerned about what we are debating and will listen to this purely factual account which I am giving. If they find it difficult to understand it, they know what they can do.
  The first factor is the economic policies pursued by this country directly or indirectly affecting the balance of payments—expenditure abroad, demand and industrial deployment at home. For these economic policies for the past 21 months, we hear full and unequivocal responsibility.
  The second factor is the underlying intrinsic industrial pattern, industrial structure, industrial efficiency, and the deployment of British industry so far as its end product is concerned. It is this which, of course, in an underlying sense more than anything else affects our ability to set aside enough goods for export to pay our way. It is this, too, which determines how successful industry is at home in keeping imports down to reasonable levels; and on this second point, industrial efficiency and deployment, both the major parties bear the responsibility, since we have both had the direction of the nation's affairs since the war.
  Having said that, the House will agree that there is very little that we could have done in 21 months to build the new factories that are needed, to get them into production—to get modern plant and machinery built and installed—and to create and get into production the new science-based industries that hold the key to the future. [Interruption.] Not in 21 months, though, as I shall show, we have made a real start. Therefore, on this second question, while we have taken full responsibility on the first issue, on the second one right hon. Gentlemen opposite must shoulder a great deal of the responsibility for
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  deficiencies in the layout, structure and deployment of our industry.
  The third basic factor is represented by industrial attitudes, attitudes affecting management, investment, labour relations, rewards, incomes, prices and, perhaps above all, attitudes affecting productivity where restrictive practices and insistence on out-of-date manning schedules, or, equally, out-dated attitudes on modern investment and management techniques, are involved. But when we are talking about attitudes in industry, both major parties bear their full share of responsibility, and these responsibilities are not confined to periods of government.
  A party in this matter has influence in opposition as well as in power. If hon. Gentlemen opposite have sometimes argued that we in opposition encouraged our supporters, and industrial labour generally, to expect more and more higher incomes without working for them—and I could produce a long record of evidence, from Hugh Gaitskell onwards; indeed, from Sir Stafford Cripps onwards in refutation of this—hon. Gentlemen opposite, whatever may be our views, are entitled to say it.
  Equally, though for their part they will deny this, we are entitled to say that, in opposition, they have encouraged irresponsible attitudes among their supporters in the business community, as regards Britain's economic policies, co-operation with the Government, the future of sterling and, more particularly, attitudes to prices and incomes.
  I propose to deal briefly with each of these three underlying factors affecting the balance of payments and then to deal with the measures we have proposed for getting the balance of payments right and putting the country on its feet. I begin by taking the topic I just mentioned, the industrial pattern, structure and deployment—the industrial situation, in fact, which we inherited.
  First, there was in industry the attitude to investment. Although our gross product was rising less rapidly over the past 10 years than most other countries, year by year over those years, the proportion of the gross national product devoted to investments in fixed assets by manufacturing and construction industries was lower than in all the other main European countries. In the early years, Belgium

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  and France were slightly lower, but they picked up remarkably and, from 1960 onwards, we were below every other country of any importance.
  Much the same is shown if we take total investment in machinery and equipment. Significantly, only in mining did we appear high in the league. This inadequate rate of investment, then, has meant a capacity bottleneck and has also meant the wasteful use of labour, so that whenever the economy has got up to full production and full employment there have been serious industrial shortages and a brake on further expansion. We cannot take responsibility for that over the last 21 months.
  From the point of view of exports, there have been lengthening delivery dates—indeed, even more serious to our exports, more uncertain delivery dates—and there has been an inability to keep pace in some of the most rapidly expanding sectors in world export trade. It was a commonplace as recently as 1964 to say that many industries which not long before had led the world were moving from a position of a net exporter even to that of a net importer, or, at any rate, showing a diminishing surplus between exports and imports, especially in machine tools and other branches of engineering.
  The third factor to which I would draw attention in the matter of our industrial structure—and this was a direct result of lack of modernisation and competitiveness—was our growing dependence on imported manufactures. In 1963, our total imports of manufactured goods rose by 9 per cent.; in 1964, they rose by a further 27 per cent.—in a single year. The range of manufactured goods imports that we were importing on this increasing scale was very wide and included many consumer goods. but the most serious element was in machinery, where in 1964, we were importing at a rate 33 per cent. above that of 1963. This rise was contained with considerable success last year because of the imports Surcharge, but I must tell the House that machinery imports have been rising again this year.
  The fourth factor to which I draw attention in connection with the industrial structure and pattern has been the uneven growth within the economy of industries
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  not very relevant to our balance-of-payments problems, but more relevant to meeting the demands of the home market—demands which were themselves frequently artificially fostered and stimulated by the advertising boom. From 1960 to 1964 the numbers employed in this country rose by 850,000. One would like to think that this increase was reflected in manufacturing but, in fact, of that 850,000 increase in employment from 1960 to 1964 only 40,000 net went into manufacturing. The increase in services over those four years was twenty times the increase in manufacturing.
  In a world dominated by trade in capital goods of all kinds, and particularly the more sophisticated ones leading the automative revolution, we were in those years losing ground rapidly, and as much because our industrial development was not fully relevant to national needs as to lack of efficiency in the industries concerned.
  Comparisons were made yesterday between this country and Germany. In the last five years before we came into office, Britain's productivity in electrical engineering rose by less than 2 per cent. a year against 4 per cent. in Germany; in the motor industry, by 3 per cent. in Britain against 6 per cent. in Germany; in metal goods, by 1½ per cent. against 4½ per cent. in Germany. In shipbuilding, productivity barely rose at all in Britain over the five years while in Germany it rose by 41 per cent. per annum.
  This is the explanation of our balance-of-payments problem. This, and our inadequate deployment on these and other key industries explained why, over the period 1958–64, our share of world exports of engineering goods fell from 21 per cent. to 16 per cent.—motor vehicles from 25 per cent. to 21 per cent.—while the Germans were increasing their share from 20 per cent. to 24 per cent.
  Those figures are taken from the last six years, but if we went back 13 or 15 years the contrast would be much more marked due to the fact that the hard-centre metal-using industries were expanding in Germany—and in most other Continental countries—far more rapidly. Indeed, in some countries they were expanding at twice the rate at which they were expanding in Britain. So lack of proper deployment is one of the basic problems we have inherited here.

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  Our attack in the last 21 months—for which we do bear responsibility; what I have been saying is about something for which we do not bear responsibility—on Britain's economic problems has been directed to dealing with these underlying causes of Britain's failure to keep pace. As I have said, in 21 months it would have been impossible to bring about the technological revolution and build the factories needed, and it is too early for anyone to expect to see the real results in terms of exports or completed factories or import substitution. What we have done is this—and it is time the House had this very brief record.
  First, Government expenditure on civil research and development has been increased from £142 million a year when we took office to £216 million this year. Second, we have increased the capital available to the N.R.D.C., which we ourselves set up, from £10 million to £26 million, and have made the terms on which it can operate more flexible. The outstanding commitments of N.R.D.C. have risen from £1·4 million when we took office to £10·1 million today. Economic development committees on a partnership basis between Government and private enterprise have been set up for 19 industries, and all of them are concerned with the problems of modernisation, import saving, productivity and exports.
  Let us now take individual industries. We have saved the British computer industry. A variety of programmes have been put in hand to assist the development of computers, both hardware and software, including an allocation of £5 million from N.R.D.C. The investment grant scheme makes special provision for the installation of computers. We are providing £30 million to instal computers in universities and for research in the next six years. We have given our manufacturers 23 development contracts in the last 21 months.
  I turn to machine tools. The Report of the Economic Development Committee has charted the way ahead to expand production, particularly production of the types, which up to now we have been importing. This, again, is relevant to the balance-of-payments problem. We have given development contracts to a number of go-ahead firms, and are now
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  negotiating pre-production contracts to ensure that the most advanced equipment is in production to increase commercial demand. We have started a scheme whereby numerically-controlled machine tools can be obtained for a trial period on a sale or return basis in order to familiarise industry with this new development. This is very relevant to our balance of payments, and it should have been done before.
  We have entirely changed the position in the shipbuilding industry. Demarcation and inter-union disputes have been remarkably reduced due, it is true, partly to our improved credit terms, but also to improved efficiency and better labour relations, which have been remarkable. Our shipyards last year took orders for 1·8 million gross tons of shipping, mostly for export. This is the highest figure in any year since 1956 and it is, again, relevant to our balance-of-payments problem.
  As my right hon. Friend the President of the Board of Trade said last night, we are not stopping there, but are going right ahead now with the Geddes Report, designed to put the shipbuilding industry in terms of managerial efficiency, structure and working practices in the forefront of the world's industries.
  The House knows what is happening in the docks as a result of the Devlin Report. We also have the Cameron inquiry into restrictive practices in printing. That is what we do—first get the facts, then give them publicity, then take action.
  Finally, we are setting up the Industrial Reorganisation Corporation—the House will shortly be debating the necessary Bill—under the chairmanship of Sir Frank Kearton, to deal directly with some of the structural weaknesses which industrial inquiries, including inquiries by E.D.C.s have shown to be putting us at a disadvantage compared with our overseas competitors. A report over a wide range of industries surveyed by the N.E.D.C. showed that there are too many small firms, too many firms not strong enough to provide the management skill or finance needed to compete in the modern world.
  There are too many family firms. The I.R.C. will concentrate [Interruption.] Not all the family firms have expanded

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  with that degree of efficiency that others in our industries have shown, and every independent review of our industries has shown that too high a proportion of our output is in small family firms, and the fourth generation hardly rivals the founders of the firms—[Interruption.] We can all throw up the names of individual firms. Pilkington's and Marks and Spencer's will not require the help of the I.R.C., but many small firms will. We shall need mergers and amalgamations between them if we are to have industries on an efficient basis, and become net exporters, not net importers as was the position when we took office. There has never been a stronger board for any Government-sponsored corporation than that of the I.R.C.
  In this brief survey of what is my first theme, I have not dealt with the contracts in universities, colleges of advanced technology, colleges of further education, research establishments of all kinds; nor with the mobilisation of research capacity within the Atomic Energy Authority on a wide range of industrial problems going far beyond the Authority's original terms of reference, including import saving and developments overseas. Nor, again, have I dealt with the very significant redeployment of Government research facilities on advanced projects in the civil field. All of this marks a deliberate and purposive reversal of trend. From what I have said it will be seen that it was needed. No degree of efficiency could have shown the results we wanted in 21 months, but in time it will show results in terms of productivity and export and import saving. It is a pity that all this work on reversal of trend was left for so long.
  Sir Harry Legge-Bourke: Is the Prime Minister not aware, when he refers to reversal of trend, that during the Conservative period of government the amount spent on research and development by the Government switched from 60 per cent. for defence and 40 per cent. civil to 40 per cent. defence and 60 per cent. civil?
  The Prime Minister: Yes, I know that that was going on in the last three or four years, but when talking about reversal of trends I was talking about the reversal of trends in the deployment of our industry and efficiency of industry's
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  skill. As far as the control of military expenditure is concerned, we have continued with what was left very late in the day. I was glad to give way to the hon. Member, although yesterday we had an announcement that there was to be no giving way. Compared with the low rate of productivity and the very adverse deployment of our activity in export and investment goods, I think that the hon. Member will agree that tee reversal was right and that we were right to put it in hand.
  Now I turn to my second theme, of the deployment of Government economic policy over the last 21 months. As I have said, in this period we bear responsibility for these policies. The account by the right hon. Member for Bexley yesterday was unrecognisable. I shall give the facts now. We started with a balance of payments deficit which, after taking account of the bisque available to us on repayment of the American loan, amounted to £769 million in 1964. Last year, this was reduced from £769 million to £354 million. Since all we are debating in these two days is balance of payments, it is right that we should analyse these figures.
  The improvement was due, first, to an improvement on visible trade, from a deficit of £535 million in 1964 to £265 million in 1965, an improvement of £270 million. This was realised as the result of an improvement in our exports of £308 million offset by slight worsening in imports of £38 million. The net yield from invisible was unchanged between the two years. Long-term capital, official and private, improved mainly as the result of controversial decisions taken by the Government by £145 million. The overall balance therefore improved by £415 million. Indeed, the balance of monetary movements improved by £498 million from 1964 to 1965. When the right hon. Member talked yesterday of putting all the facts before the people during the election, I do not seem to remember any of these figures being quoted by him, although I was rather busy at the time.
  So much for 1965. In fact, in the fourth quarter of last year our external payments were completely in balance, though, of course, for exceptional as well as seasonal reasons, this was a favourable quarter. In that quarter all

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  the same, exports were 10 per cent. higher than in the same quarter of 1964 by value and imports were hardly up at all. At the beginning of this year, and, indeed, up till very recently, there was every reason to hope that we should be in balance by the latter part of this year in a real sense, that is, on a seasonally correct basis. It is the disappointment of this expectation during the past few weeks, indeed, since the Budget speech, that more than anything else has caused the situation which we are now facing. Everything we are debating now revolves round expectations on the balance of payments and inevitably the effects in terms of world psychology, world confidence goes far beyond the worsening in the real situation as measured by balance of payments this year.
  What are the factors that have led to this worsening in the estimates? I will go through them very frankly and give the Government's understanding of what is happening. [An HON. MEMBER: "The right hon. Gentleman was wrong."] Anyone can be wrong but I shall give the House the facts. If hon. Members will listen they will be able to form their own views on whether these are accurate and explain the situation. The first thing was the publication in June of the balance of payments figures in the first quarter. The trade figures were no better; the capital balance was slightly worse at the beginning of this year.
  I think that there is good reason to feel that the failure of the capital balance to improve was caused partly by exceptionally heavy movements from Britain to sterling area countries such as Australia during the first quarter. Certainly, as the Australian Prime Minister has told me, the expected adverse balance of payments for the year ended last March was suddenly reversed and turned into a surplus partly as a result of large capital movements from Britain as well as from the United States. In addition, there was a fall in the first quarter of the capital inflow into Britain.
  The second reason why we have had to revise estimates for our balance of payments target for this year was the movement in imports and exports over the first five months of the year—that is, before the seamen's strike threw the export and im-
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  port figures into confusion. In this period exports were 9 per cent. higher than in the same months of 1965. This was nearly double the average rate of increase over the past decade. If all of us on both sides of the House have said that the real test of a country's determination to get its balance of payments right is what it does about export trade, to have achieved in the first five months a rate of exports double the rate of increase in the 10 years previously is a sign of our determination and, to draw a word from the Motion moved by the Opposition, even a sign of competence.
  As my right hon. Friend the Chancellor of the Exchequer explained yesterday, there was a worsening in imports over the same period partly through the increase in import prices for raw materials, particularly metals. The rise in our import prices in the first five months of this year, before the seamen's strike, compared with a year ago, was sufficient to cause a worsening in the trade balance at an annual rate of £100 million—serious and significant, though, I think, totally unrelated to the kind of language which the right hon. Gentleman was using yesterday.
  In addition to the worsening in the import prices, as I have said there was an increase in imports of certain manufacturing goods, particularly machinery. For the first six months of this year imports of machinery, for example, rose by 23 per cent. over last year, again underlining the urgency of our measures to make the machine industry more competitive. Then, of course, there was the seamen's strike—as my right hon. Friend explained yesterday, although the right hon. Member for Bexley sought, I thought, to discount it. The worst effect of the seamen's strike was in terms of monetary movement, first, through loss of confidence while the strike was on and, second, when the June reserve figures were published showing the effect of that first loss of confidence.
  It is still too early to assess the real effect in terms of exports and imports and the shipping account, but undoutedly the strike has had a marked temporary effect—we must hope that it does not go beyond that—and in the frenzied atmosphere of foreign exchange markets this summer an escalated psychological effect resulted

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  from it. Therefore, the cost in terms of sterling pressure has far exceeded the real cost of the strike in terms of trade or shipping income, which was, in any case, mainly temporary.
  I turn from the real factors affecting the balance of payments to the monetary movements Britain has been at the receiving end of in the past few weeks. There was, dominating the situation, the pressure on the Euro-dollar market. The American subsidiaries abroad have been raising funds in Europe to reduce finance from America. Higher interest rates have encouraged a movement of short-term funds from Europe. Higher interest rates and the Euro-dollar famine, which put immediate pressure on sterling, have been among the major factors affecting the sterling situation in the past few weeks.
  Every hon. Member, whether he is in opposition or whether he sits on this side of the House, who has been in touch with the markets during this period, knows that this squeeze—this Euro-dollar famine, this acute shortage of liquidity in Europe—has been the underlying factor against which all the other factors I have described have had to operate.
  Then, as my right hon. Friend the Chancellor of the Exchequer said yesterday, the pressure on the domestic economy during this summer remained unexpectedly high, higher than was forecast at the time of the Budget, for the reasons my right hon. Friend explained yesterday.
  These are the basic facts of the situation. When these facts are considered, one can see how irrelevant—indeed, some would say extravagant—were some of the political comments made by the Leader of the Opposition yesterday. I take it that neither he nor any hon. Gentleman will deny any of the facts I have given, either as affecting the 1966 balance of payments or as affecting confidence.
  Nor, I think, would the right hon. Gentleman and his hon. Friends deny this. One of the problems here affecting our ability to meet short-term movements is that during the 10 years up to 1964 we lent abroad—in the main, unearned resources, not out of any surplus on our balance of payments—to the tune of £1,400 million and balanced the greater part of this by incurring short-term debts.
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  Lending long and borrowing short, which is what we were doing for 10 years before last year, leads to vulnerability, especially when one is a world trading currency.
  We have been taking sharp action to reverse this trend. One of the problems we have to face is that, when a deterioration of the kind that we have had in the past few weeks takes effect, the questions which are asked about us abroad, when they all start talking about us and phoning up, go far deeper than the statistical or real factors about which I have been talking. These people even set in train queries about the economic and social, even the moral fibre of the British people.
  Many articles have been written about that just now, questioning the resolve of the people to deal with the situation, the resolve of the British Government, and the resolve of both sides of industry. We may know how wrong they are in what they have been saying about us abroad recently and what they have been saying at intervals for several years past. However, when there are movements of this kind, we cannot stop these questions from being asked.
  I cannot help feeling that our own people, particularly those with strong overseas connections, sometimes allow their prejudices, sometimes even their political prejudices, to get the better of them and to paint, in what they say over the telephone or the Telex, an unrecognisable picture of the Britain we are living in. Hon. Members will have seen some of the reports in the Guardian earlier this year from their Financial Editor. He was reporting from Zurich about the mood there and about what was being said. Referring to a distinguished banker in Zurich, whom he called a "gnome", this is what he said:
  "'The crisis', said my gnome, 'is of your own making. You headline every fractional change in sterling'"—
  both parties have done that—
  "'you even publicise it on the radio … Journalists, I suppose, have to report what is going on … the English are their own worst enemy'."
  I cannot help feeling that there is a lot of truth in that analysis.
  Mr. Maurice Macmillan: Can the Prime Minister distinguish between the overseas sterling area and the non-sterling area in his argument about

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  lending abroad? I was under the impression that over the five years 1958–63 the United Kingdom was a net importer of capital from the non-sterling area and that our export of capital was to the sterling area.
  The Prime Minister: It is true that, taking it broadly, over that period—I would not know the exact years—we were net importers, but most of it was imported on short-term, while we were lending abroad on long-term.
  Mr. Maurice Macmillan: No.
  The Prime Minister: This can be argued in debate.
  The point I am trying to put to the hon. Gentleman is that during this period—it came about since the relaxation after the 1959 election—there was a very heavy movement of portfolio investment—I am not talking about capital investment in industry—from Britain to New York, running into very heavy figures indeed. This was mainly on long-term and difficult to get back, while, at the same time, we were attracting from different parts of the world—sterling area and non-sterling area—very considerable amounts of capital on short-term. If the hon. Gentleman wants to pursue this point, no doubt when he catches your eye, Mr. Speaker, he can give his own view.
  Mr. Maurice Macmillan Mr. Maurice Macmillan rose—
  The Prime Minister: Yesterday, the right lion. Member for Bexley refused to give way at all to any hon. Member from this side. I have now given way twice. I have given the House the facts. The hon. Gentleman may want to put his own version of them. He is entitled to do that when he speaks. The facts I have given are the facts that we have.
  I have just been dealing with the point that, when the arguments about the industrial pattern of the country and about economic policies over the last 21 months have been dealt with, at the end of the day, if there are movements of the kind I have mentioned, people start asking about our basic attitudes. As I have said, these become escalated and exaggerated.
  I must ask: what is the charge of the right hon. Gentleman in regard to our policy this year, I having set out these facts? Is the right hon. Gentleman arguing that our policies are responsible
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  for the worsening in our balance of payments prospects? He gave very little evidence to support that yesterday. Is the right hon. Gentleman arguing, for example, that exports have had a miserable increase? I have given the figures.
  Is the right hon. Gentleman arguing that the rise in raw material prices is due to the policy of the Government? Is he blaming us for the import of machinery and other manufactured goods? This could have been avoided only by taking action much earlier to make these industries more competitive. Is the right hon. Gentleman saying that we are responsible for the Euro-dollar squeeze? Is he saying—he could argue this if he wanted to—that we were responsible for the seamen's strike? If I remember aright, the right hon. Gentleman was exhorting the Government to stand firm and not give way—and we did.
  No, Sir. In so far as the censure Motion relates to the worsening in our real balance of payments, or in so far as it relates to the exaggeration of the balance of payments position in terms of foreign confidence, right hon. Members opposite have, so far at any rate, entirely failed to make their case.
  I turn now to the third factor which affects our real balance of payments—attitudes in industry. Both major parties must bear responsibility. Here we have a real problem. Each side of the House can accuse the other of preaching materialism. I think that right hon. Members opposite have been very articulate about this.
  I would say for our part, in return, that 13 years in which the philosophy of economic opportunism, of grabbing without any self-restraint everything it was possible to grab, of keeping up with the Joneses, at a time when the advertising drive was pushing up both the Joneses' demands and their neighbours' demands for affluence—I believe that all of these have curbed our economic, and indeed our moral, standards.
  It is not tenable to preach the gospel of a free market and of the right to cash in on that market and, at the same time, ask for restraint in personal incomes. If everyone in a seller's market is free to exploit their position, then in a seller's market for labour small wonder if there are those within the labour market who would seek to cash in.

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  Everyone knows—this is under-stated and under-rated abroad, and we have a duty to say more about it—the great change which is taking place in British industry over the past three or four years, the managerial revolution, and equally the responsible attitudes of trade union executives and so many of our shop stewards. It is only the minority who get headlines. The responsible ones get no headlines. All of us know that we need to go a lot further in creating more efficient and more professional management. Change is going on, but there are still outdated attitudes to investment which have not been completely eliminated. For example, there is the classic statement of post-war British industry summarised in one of the Anglo-American productivity reports by one firm that
  When times are good we do not need to modernise; when times are bad we can't afford to'.
  There are still out-dated attitudes to labour management, and a feudal tradition still lingers in some of our less modern firms.
  On the other side of industry one finds the "I'm all right Jack" attitude, the minority of "never-sweats", the man who was asked why he only worked four days a week and said that he had to because he could not keep up his standard of living on three days' work. There is the problem of out-dated restrictions on entry to craft unions, and there are conservative and restrictive attitudes in individual plants and among individual trade unionists not only to working practices, but more particularly, as the right hon. Gentleman said yesterday, to the overmanning of individual jobs.
  At this point, perhaps I might correct something that I said to the right hon. Gentleman yesterday when I interrupted him on the question of the T.U.C. evidence to the Royal Commission. I thought from what I had read in the Press that that evidence had gone in. [Interruption.] I am correcting a statement. It is in accordance with the traditions of the House that if one inadvertently makes a statement which is wrong one corrects it at the first opportunity. I was basing myself on certain Press reports which I had misread. The fact is that this is now being considered by the T.U.C. General Council. I was wrong to say that it had
  1744
  gone in, and I thought that I should take the earliest possible opportunity of saying this to the right hon. Gentleman. I know that it will never satisfy some hon. Gentlemen.
  I was talking just now about the attitudes in industry, particularly as regards over-manning and restrictive practices. Hon. Members who are old enough to remember the depression know the reasons for these attitudes because in the 1930s where work-sharing was possible it was the only way, however uneconomic, of avoiding years on the dole. But what many of our union members, including some who have reached high positions in their branches and perhaps even some on national executives have not yet learnt, is that the only guarantee against unemployment in the 1960s is an insistence on sweeping away these restrictions and this over-manning rather than an insistence on maintaining them. To change these attitudes in industry is the biggest challenge our society is facing. We shall not solve it by speeches or exhortations, and I put it to the right hon. Gentleman that equally it will not be done by legislation.
  But if there is one challenge to the political leadership of all of us, every hon. Member—especially those with influence in industry, whether on the management or the trade union side—and if there is a challenge to our great organs of public opinion in the Press and television, it is the need to get across to everyone in industry that what was good enough for grandfather is worse than useless today in the situation we are facing, and the defensive postures of the depression have no relevance to the problems of today.
  I have described the measures which have been taken by the industrial Departments, the D.E.A., the Ministry of Technology, the Board of Trade and the others, to make our industry more efficient and to produce a significant redeployment of industry in favour of the hard centre metal-using industries. I hope that the House will not run away with the idea that nothing is being achieved here. The introduction of the 40-hour week has somewhat masked the increase in productivity that has been going on.

  1745
  If one compares the first quarter of this year, Wirth the first quarter of 1965 one finds that there was an increase in output per man-hour of 3½ per cent., and, contrary to some of the figures stated by the right hon. Gentleman throughout the General. Election and in his well-known and well-worn slogan, in the last three months for which we have figures now, the index for manufacturing output was four points up on the same period of the previous year; not one, but four.
  I want now to describe the relevance of last Wednesday's package to what we are trying to do to redeploy our resources in the hard centre metal-using industries and those which can make a contribution to exports. We cannot go on with a situation where only one in every 20 in the expansion of our labour force goes into manufacturing employment. The reduction in consumer expenditure in last Wednesday's package brought about by the intensified hire-purchase restrictions and the use of the regulator is designed to restrain demand and to release labour from the production of goods for the home market to meet the acute shortage of labour in our essential industries, particularly our export firms. Outside the development areas—and even within parts of them—hon. Members on both sides of the House know that the biggest impediment to an immediate increase in exports is a shortage of labour, both skilled and unskilled. I reported to the House last week on the impressive exhibits many of us saw at this year's Moscow Trade Fair. At stand after stand I was told that the biggest limitation on increased exports was the length of the order books and the shortage of labour.
  A further restriction through the cuts in the investment programmes of local authorities and of nationalised industries will play a part in increasing the supply of labour for exports and for import saving, but will do more than this. Together with the effects of our tightened building licensing and the extension of the office building control, they will also help to release labour for essential building programmes. It is still true that many projects are being started and not enough are being finished on time. House building, school building, hospital building and factory building, which have been exempted from last Wednesday's an-
  1746
  nouncement, will gain in efficiency and cost by the concentration of more building resources on them by some of the cuts we are making in the less essential sector.
  But the other Government policies, all of which involve measures currently before the House—the Finance Bill, the Selective Employment provisions, the investment grants, and the Industrial Reorganisation Corporation—are all designed to secure a redeployment of resources in favour of manufacturing industry against services.
  I have referred just now to hire purchase. I believe that the level of hire purchase we have reached in recent years not only puts a strain on our resources at a difficult time when we want to increase exports, but is, in absolute terms, more than the country can afford for some time ahead, for it means that a substantial part of our production is being financed out of future earnings. I believe that if we restrict it now and for a considerable time ahead, we will create a freeing of resources for getting our house in order and for a permanent strengthening of our economy by increasing our investment and our modernisation programmes.
  At the end of the day our balance of payments depends more than anything on our manufacturing industries, their efficiency and the extent to which they are deployed on exports or import saving. [An HON. MEMBER: "And our salesmen."] Yes, certainly; we have all said that many times, and I absolutely agree—on the effectiveness of the salesmen and the design teams as well as the actual producers on the factory floor.
  This is one of the purposes of the Selective Employment Tax and of the new discrimination introduced into investment grants, to give a bias back now in favour of manufacturing. It is the main purpose of I.R.C., and the measures we have taken to hold back consumer demand are part of the same strategy, in that we are determined to release resources for those industries which have a top national priority to fulfil.
  Hon. Members have asked about similarities and differences between what we are doing and the old stop-go economy. Some of the differences are obvious: the sheltering of the development areas; the safeguarding of our housing programme; the school building, hospital

  1747
  building and factory building programmes, all of which were cut; and our decision, contrary to the precedents of 1961 and 1957, to maintain the social services.
  But there is another more basic difference. The stop-go economy of 1955–64 was based on a quadrennial cycle of production. After each boom the brakes were slammed on, a hole was created in the economy, production stagnated, investment stagnated, unemployment and short-time working developed—and more in the development areas than elsewhere—and this then persisted for two or three years. As it became increasingly intolerable—or, as those more cynical than myself would suggest, as the election years grew nearer—action was taken. But the action taken was simply to reverse the restrictions in demand. Hire purchase had been cut; hire purchase was restored. Government expenditure had been cut; Government expenditure was increased. We had this in 1958 and 1963.
  This is why we say now that the dis-inflationary provisions of my right hon. Friend's successive Budgets, including the present Finance Bill, must create a gap in the economy which must be filled not by a restoration of these cuts, but by a planned expansion of those elements in the economy which can make the biggest contribution to exports and to import saving in industry by all the means which I have mentioned. It is the only basis on which we can get sustained industrial expansion, the only basis on which the National Plan, or any national plan, can be realised, the only basis on which we can look forward to sustained public investment.
  I claim, therefore—[Interruption.] I should be glad if some hon. Members would recognise, though they may disagree with the facts I am giving, that we are addressing ourselves to the most important problem the country faces today, our balance of payments. This is not a subject for the frivolity which some hon. Members are exhibiting.
  Mr. Victor Goodhew: On a point of order, Mr. Deputy Speaker. Is it right for the right hon. Gentleman to accuse hon. Members on this side of the House of frivolity—[HON. MEMBERS: "Yes."]—because we are finding it necessary to express our disgust at some
  1748
  of the things the right hon. Gentleman is saying, when he yesterday spent so much time whispering that even the Press commented on it?
  Mr. Deputy Speaker (Sir Eric Fletcher): That is not a point of order. If the right hon. Gentleman feels that incessant conversation is frivolous, he is entitled to say so.
  The Prime Minister: I make this concession to the hon. Gentleman. He stopped talking just long enough to hear me give the facts of which he complains.
  I claim, therefore, that the measures we announced last week are relevant not only to dealing with the confidence factors abroad, but also for dealing with the issue on which these confidence factors depend, namely, the restoration of Britain's balance of payments position. It is for this reason, equally, that I commend to the House the more direct measures we have taken to put the balance of payments right, the cuts in Government expenditure, in military expenditure and aid expenditure—particularly military—and also the restrictions on tourist expenditure.
  Yesterday, the right hon. Gentleman, in company with several hon. Members, suggested that the cuts in military expenditure were no more than a repetition of previously declared targets. He is quite wrong. This figure I have mentioned of £100 million represents a number of carefully formulated plans and carefully formulated options east of Suez and west of Suez adding up in total to a figure considerably in excess of £100 million.
  Sir John Rodgers Sir John Rodgers (Sevenoaks) rose—
  Hon. Members: Sit down.
  The Prime Minister: The hon. Gentleman has been laughing and talking for the last half hour. He has not been taking this seriously.
  As the House will realise—I think that none would press this point more than right hon. Gentlemen opposite—it is essential, with the options which have been formulated, that we should have consultations with our allies, with our partners in the Commonwealth and in our various alliances before putting these schemes into operation. It is right that

  1749
  we should go through these procedures, but the House must realise, as our allies will, that a cut of not less than £100 million, and preferably more, is essential if we are to make the direct impact on our balance of payments which the situation requires.
  This is why, while we shall certainly go through the necessary procedures of consultation, we cannot accept a financial solution which fails to cut overseas Government expenditure by at least £100 million. For military expenditure overseas has been rising year by year, and if our predecessors had taken action from 1959 onwards, as we are now doing, our outlays from 1960 to 1965 would have been—this is on military expenditure alone—about £400 million less, and our resources and reserves in consequence that much stronger.
  In addition to the restrictions on home demand, in addition to the cuts in overseas Government expenditure, our problems cannot be solved, nor can the measures we are taking make the impact which must be made abroad, without effective action within the field of prices and incomes. As the House may be aware, the General Council of the Trades Union Congress has this afternoon agreed, by a substantial majority, to co-operate with us. I would not underrate the difficulties involved for those who have to operate this; nor would I underrate the sacrifice, restraint and statesmanship which the Government are calling for on the part of those who will be principally affected.
  I do not deny that it will bear heavily in individual cases, that many will have to forgo increases in personal reward to which they feel entitled, that there will be anomalies and, some will say, injustice. But it is essential if we are to solve our economic problems, if we are to get full employment and an orderly growth of incomes. Like several hon. Members, I say that this problem can be solved only by an increase in productivity, but that increase in productivity must be earned and not assumed and spent before we have got it.
  I have sought this afternoon to give the House the facts as I see them, not to follow the right hon. Gentleman in the more combative parts of his speech yesterday. He was perfectly entitled to
  1750
  enter upon that part of his speech, and there are abundant precedents for it, but I felt that it was right for me to give the facts as we see them and to leave the facts to speak for themselves.
  I have shown what we need in terms of effort and co-operation from our own people to get our balance of payments right. I have said how far this problem would be eased given overseas cooperation in some of the key sectors in our attack on the problem. I hope that we shall get that co-operation. But I am sure that it is the resolve of this House and of the country that our own strength and determination will carry us through.
  4.48 p.m.
  Mr. Reginald Maudling: This debate is taking place on the Opposition Motion,
  That this House has no confidence in the competence of Her Majesty's Government to manage the economic affairs of the nation.
  and I must tell the Prime Minister straight away that nothing in his speech has in any way increased our confidence, or, to judge by the appearance of his rather unhappy supporters, their confidence either.
  As my right hon. Friend the Member for Bexley (Mr. Heath) said in opening the debate yesterday, we have reached a watershed in British politics, with the collapse of so many cherished and boosted Labour Party policies, with the repudiation of so many promises, with the appearance of the biggest, toughest and most ruthless "stop" we have yet seen in our economy.
  Today, the Prime Minister tried to pretend that we were not in a stop cycle now. I do not always agree with Professor Alan Day, but he put it very well in the Observer on Sunday when he said:
  "Unless the Government is very lucky, go-stop-go will be replaced this time by go-stop-reverse."
  The Prime Minister confirmed that very clearly this afternoon when he said that not only were these measures introduced in the short-term but they would be persisted in. He had no intention, he said, of making the mistake which we had made of reversing the restraints. [Interruption.] That is what the right hon. Gentleman said. Let him look at HANSARD and see that he made it quite clear that they do not intend to reverse

  1751
  the hire-purchase restrictions or the cuts in Government expenditure. These are the right hon. Gentleman's own words and will be recorded in HANSARD.
  We must be clear on the nature of the crisis. First, it is not an attack from overseas. The Prime Minister rather went that way today. In his broadcast the other day he was talking about an attack on our country from overseas. This is sheer nonsense. Overseas bankers have gone the full extent they possibly could to help us and support the present British Government. It is not a question of the gnomes of Zurich. It is not a question of an assault upon this country. The dangers that we are in arise from the faults of our own Government. That is absolutely clear.
  The second point is that in economic terms this problem is a marginal one. About 1 per cent. of the national income, the Prime Minister said, is all that is involved, in mathematical terms, between an adequate surplus and a deficit on the balance of payments. Although in economic terms this is marginal, in financial terms it is crucial. This is a crisis of liquidity. It is a crisis of confidence.
  The absence of an enemy battering at the gates, the absence of any apparent immediate economic compulsion, makes it all the more difficult to explain the real situation to the public at large. It is all the more essential, therefore, that the Government should be clear and consistent in what they say. Yet they have been absolutely the opposite. They have been full of contradictions, full of disorder. Time and time again they have fallen to the temptation, having introduced tough measures, of trying to pretend that they were not tough at all and that no one would feel them.
  As to the causes of the present crisis, I do not agree with the Prime Minister's diagnosis. The prime cause is excess demand at home. That is absolutely clear. It comes out particularly from his speech today. The lengthening of delivery dates, the main holding-back factor in our export trade, is a clear example of excess demand at home. The growing and continuous pressure on imports is another clear proof of excess demand at home.
  1752
  The Prime Minister said a significant thing when he talked about the course of the balance of payments in the last 21 months. He pointed out, anticipating my intention, that the great improvement in the balance of payments took place in the first few months of the Labour Government, when it could not possibly have been affected by any measures which they took. The improvement, as he said today, had taken place by the first quarter of 1965. There has since then, as the Prime Minister said, been no further improvement in the visible balance of payments.
  As for excess demand at home, I think that the Prime Minister would agree that, apart from the special problems of individual areas and a limited number of industries, there was no undue pressure on resources calling for action when the Labour Party became the Government. That was in their White Paper, and they confirmed it by taking no action. The excess pressure on demand has arisen since then, and it has arisen for two reasons. The first was the total collapse of the First Secretary's incomes policy, and the second was the failure of production to rise.
  The Prime Minister gave some figures and I will quote two back. The index of industrial production, seasonally adjusted—the latest published figure—stands now no higher than it did in January, 1965. The Prime Minister talked, as the Chancellor did yesterday, of an increase in productivity per man hour worked last year of 3 per cent. But he did not say that in 1964 it was 6 per cent. This is the change that has been brought about. This is the productivity per man hour worked. It has been cut in half by the present Government. The combined effect of the fall in productivity and the rise in demand underlies the present financial difficulties.
  The second reason, as the Prime Minister really knows, is the sudden collapse of confidence at home and abroad, in his own capacity and in the capacity of his Ministers. Many excuses are trotted out. Some have some substance, I agree, such as rising import prices. There are great problems. But the fall in import prices last year created opportunities. I think I am right in saying,

  1753
  as my hon. Friend the Member for Norfolk, Central (Mr. Ian Gilmour) said yesterday, that over the period of the life of this Government the terms of trade have moved in their favour. The seamen's strike, of course, had some effect. The shortage of Euro-dollars has also had an effect. But one could foresee the shortage of Euro-dollars years ago. Seeing that A was going to happen, one ought to have foreseen the difficulties. The truth is that the factors that the Prime Minister mentioned have had the effect of making our problems more difficult, but the sudden onset of this particularly acute financial crisis stems from a collapse of confidence at home and abroad in the Government's ability to manage our economic affairs.
  The Chancellor of the Exchequer has on more than one occasion contradicted himself on vital matters within only a very short time. When he first put up the Bank Rate he said that he hoped that it would not have any effect on the domestic economy. Each time that he has said that there was no need for further measures of restriction he has had to come along in a short time and produce new measures of restriction. As to the incomes policy, one day in Brussels the Chancellor said that this was a bonus on top of the rest of it, and the next day in the House of Commons he said that it was an essential part of policy. How can one have confidence in Ministers who contradict themselves like this?
  Possibly more important was the introduction first of all of the Capital Gains Tax and the Corporation Tax. The announcement that they would be introduced was made at a time when the Chancellor clearly had not the faintest clue how they would work or what their effects would be. This was bad enough. The even more inspired lunacy of the Selective Employment Tax must have done more harm than anything else to the British Government's credit overseas.
  The other factor in the collapse of confidence has been the Prime Minister himself. The fact is that the world has rumbled the Prime Minister. His technique of gimmick after gimmick, of covering the failure of one publicity stunt by the noise of the next one, has now been exposed. His latest examples have been some of his worst, such as his
  1754
  weekend expeditions to Moscow and Merseyside, his much-publicised meetings with Mr. Kosygin and Mr. Ken Dodd. The fact that the Prime Minister does these things is one of the major contributing factors to our present crisis of confidence. Another is the excessive use of inspired leaks from No. 10. At one time, "There is going to be no mini-Budget". The next time, "The First Secretary's powers are to be greatly extended". Which of these two did more damage to confidence I do not know.
  The worst effort of the Prime Minister was when he said, "We have worked out a prepared package and not one of the old scratching together of panic measures". It could not be possible to say more clearly the opposite of the truth. I am astonished that the Prime Minister should have made the fundamental error of saying this knowing, as he must have done, that it would be openly contradicted by his own statement within a few days of his saying it. We are censuring in this Motion the men in the Government because we believe that there has been a collapse of confidence in them.
  I turn from the men to the measures, to the "prepared package" that we have been told about. It is true that the deflationary effect will be sharp of the addition of £500 million, as the Prime Minister said, to the £700 million already withdrawn from the economy. It is a pity that the Chancellor of the Exchequer and the President of the Board of Trade yesterday tried to blur this over. It will waste the effect. If one is taking deflationary measures, they are bound to hurt someone. One reduces demand; one reduces employment: it is mathematically certain. But if the Government try to take the credit for taking bold measures, they destroy the result if at the same time they pretend that the measures will not hurt. So if the Government are not careful the country will get the sacrifices to bear without the psychological benefits.
  These proposals are immensely vague. Were the cuts in the nationalised industries a carefully prepared package? I doubt it. With regard to cuts in overseas expenditure, the Prime Minister produced a wide range of possibilities. How long have the Government been considering them? Not long ago the Government had

  1755
  a defence policy that they were to maintain. What is the position now on the incomes policy front? I was glad to hear indeed that the trade unions will support the Government in this matter.
  The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): Is the right hon. Gentleman pleased?
  Mr. Maudling: I have said so.
  Mr. Brown: Are they?
  Hon. Members: Yes.
  Mr. Maudling: Really, if the First Secretary is going to interrupt he ought first to listen and then stand up.
  Mr. Brown: That the right hon. Gentleman is glad, I am sure. What I ask is, are his right hon. and hon. Friends glad?
  Sir William Robson Brown: Yes, yes, yes.
  Mr. Brown: May I draw the right hon. Gentleman's attention to the fact that the right hon. Member for Wolverhampton, South-West (Mr. Powell) still has not answered?
  Mr. Maudling: My answer is that at least I am at one with my party.
  Our next complaint about the Government's package is that it hits investment far too heavily. I heard the Prime Minister talking this afternoon about the need for investment, and it astonished me that he should do that after all this Government have done to discourage investment. The effect of the Selective Employment Tax will be very severe indeed on investment. It will hit the small man particularly, and it will hit manufacturers who cannot pass on the tax in prices, unlike distributors, obviously, who, within the terms of the Government's own policy, should do so, and it will hit those people who have been enterprising, ploughing all their money back into their business and not hoarding cash. Inevitably the result of the tax at the present level of credit squeeze will be to cut back very severely on investment. If this intention is held to, as the Chancellor announced so recently, investment will be held back at the very time when it should be encouraged.
  1756
  The Prime Minister said that there would be investment in factories. If he thinks that there will be more investment in factories this year he had better think again. He talked about the share-out of labour and its redeployment in industry. He talked this afternoon about many things which are obviously desirable, but there are obstacles in the way, and I should like to know how the Government intend to deal with them.
  What about the effects of short-time working? If people are employed on short time they are not dismissed and they cannot be redeployed. What indications are the Government giving to industry about that? Then there is the retraining which will be needed. I think that one of the obstacles to the retraining of workers has been the attitude of the trade unions and this is one of the difficulties at the moment in this so-called well-prepared package.
  Then there are development districts. We have heard the Government say that we did nothing for them and they have shielded them from the effects of their present measures. Of course it is nonsense. They have only to look at the factories built in Wales, Scotland, Merseyside, and the efforts undertaken there by us, and in particular the free depreciation scheme we introduced, which together have revolutionised the situation in the development districts, which are benefiting now from those measures which are a continuation of our own policy. But if the Prime Minister thinks his measures will not affect Merseyside or Scotland, or the North-East he had better think again. The cutbacks on demand and the effects of the hire-purchase arrangements and the increasing taxation will certainly be felt in those development districts. What must not be overlooked are the effects of the Selective Employment Tax which will fall particularly severely on many development districts, in Scotland for example, and the other outlying districts.
  All these are criticisms of the so-called well-prepared package and unless we can be shown an answer to some of them we must conclude that, in the Prime Minister's own words, this was a scratching together of measures to meet a crisis.
  I think these measures are enough to hold the position of sterling if they are rigorously and bravely carried through.

  1757
  The technical position of sterling should now be strong. I should think a high proportion of privately-owned sterling balances has already been sold or covered and therefore the opportunities for bear attacks are less than they were.
  The Government are right not to devalue, or to adopt the system of import quotas. I think that many hon. Members opposite favour either one or both of those measures. I have always myself been attracted by a form of floating exchange rate. It is of course no substitution for deflation. But it would leave a certain amount of elbow room and have the effect of damping down rises in real demand at a time when money incomes are going up very fast. But it is difficult for a reserve currency such as ours and impossible for us to contemplate, when sterling is weak. Devaluation to a new fixed parity would be entirely wrong, and I am quite certain it could produce no good results. In the first place, our indebtedness in sterling terms becomes much more onerous. In the second place the problem of exports is not helped at all for the problem is not price but delivery. Thirdly, the other countries of the world are not willing to see any devaluation of sterling. Therefore, I support the Government entirely in setting their face against devaluation. As for import controls, they are clumsy, slow to operate and they invite retaliation.
  But these are not the full extent of the possible measures. What about the control of import credit? I should like to have the Government's thought on the possibilities here. This is a measure used by other European countries, particularly by the Italians. It must, therefore, I imagine, be consistent with the G.A.T.T. It is a measure which ensures that importers of foreign products have to pay the full amount within a given time, and when the Italians operated it in 1964 and 1965 there was a very sharp reduction in the import of consumer goods, and that was achieved simply by the restriction on import credit.
  Have the Government examined this possibility? It seems to me this is one way which could cut down import costs effectively, and apparently without any conflict with our international obligations, and could be applied to consumer goods and not basic raw materials. This seems to me to be an alternative to import
  1758
  quotas, not as a permanent system, but as a temporary system, and it would be legal and could be administered within the present exchange control system. I should like to know the Government's reactions to that suggestion.
  I should like them to look again at the system used by the French to encourage exports, whereby export bills can be rediscounted at the Central Bank at a favourable rate of interest.
  But my main point is that we should now make a major new attempt to fund the sterling balances. We are the central bankers of the sterling area and we cannot abandon this position—as I think some hon. Members opposite would like to do—for we have taken those people's deposits and we cannot welsh on our obligations. Therefore, we must remain the central banker for the sterling area; and the position of sterling as a currency of exchange is of great value in assisting our invisible exports which are so important and will become more important as the years go by. The trouble, as the Prime Minister hinted, is the composition of our liabilities, the short-term liabilities in relation to the long-term liabilities. The difficulty is to persuade people other than firm holders of sterling to fund their balances. Then take the large debts which have been accumulated in the last 21 months. It is right for the Government to make provision for their repayment on time if they can do so. But it is right for an Opposition spokesman to question whether it is in the general interests for Britain to try to repay them out of current trading surpluses. The result might be a deflationary effect on world trade. It might also mean missing an opportunity for expanding liquidity.
  What I mean is this. I contemplated more than once the desirability of medium-term foreign exchange loans to this country. The problem of international liquidity is not solely one of inadequate total amount. It is also one of maldistribution—too much in some places and too little in others. When we find, in the progress made in the Group of Ten, that the basic problem of overall liquidity seems to be stymied by Continental opposition, is not that an opportunity to tackle the other and equally important problem of the distribution of reserves between the main monetary centres. I put the

  1759
  suggestions forward quite seriously, because they seem to be lines of policy which could usefully be adopted in the present circumstances, and which would be valuable both in the immediate situation and in the long-term future as well.
  My other suggestions on the external balance relate first to defence and secondly to aid. On defence, should we not look at it along these lines? There is a limit to the amount of overseas defence effort that this country can afford. Where is it best deployed in the interests of the West as a whole? If reductions have to be made, are they best made east of Suez, with the consequences which follow, or in Europe, with the reduction in the land forces available to contain the Communist threat in the European theatre? Surely it should be on that balance of the marginal value of British defence expenditure to the West as a whole that these problems should be solved. The tragedy is that it takes time and thought to do it. In these circumstances, time is very short and I am afraid that thought is sadly lacking.
  As I understand, the Government do not propose to cut aid expenditure. I hope that that is so, and I think that it should be so. I know that there is much criticism about overseas aid, and no doubt there is much inefficiency and sometimes corruption in its use. It is infuriating to give aid to people who then treat us badly. But it is the duty of this country and other industrial countries to continue to give aid on the scale which we can afford to the developing countries. The burden on our balance of payments is not so heavy so long as it is tied to the supply of British goods. It only creates a problem in the balance of payments if the economy is overheated. If there is no spare capacity, it means that we do not have a power station to sell to America because we have already sent it to Tanzania as a gift. When the economy is not overheated—if the party opposite is capable of bringing about that situation—then overseas aid tied to sterling goods does not really create problems for our balance of payments from which we should shrink.
  I turn to my suggestions for domestic policy, and the first need, clearly, is to restore confidence which has been shattered.
  1760
  The first thing must be to drop the Iron and Steel Bill. People overseas and impartial people in this country, seeing the Government choosing this time to push ahead with the nationalisation of steel, must think that they have taken leave of their senses. There must be a real attempt to tackle current Government expenditure. It is a great pity that the cuts in Government expenditure announced have been concentrated solely on capital and cutting back capital investment. Does it make sense, in those circumstances, to continue handing out benefits to people in many cases for things which they could perfectly well afford to pay for themselves?
  How bitterly the Chancellor of the Exchequer must regret the abolition of prescription charges. Above all, to be proposing still in a few months' time to pay out over £100 million a year in subsidies to employers in manufacturing industry to employ more people only looks like inspired lunacy. We cannot begin to understand it.
  Mr. A. Woodburn: The right hon. Gentleman mentions paying for prescriptions. Is he saying that, by the present methods, people do not have to pay for prescriptions according to their ability through tax? Surely that is the fairest way?
  Mr. Maudling: It is a very odd sense of priorities to use large amounts of Government money to provide free services to people who are perfectly capable and in most cases willing to pay for for themselves
  My next proposal is to abolish the Department of Economic Affairs. The right hon. Gentleman can well use his great talents elsewhere to better advantage. It has become quite apparent, as we said from the start, that the Government cannot have two separate Departments and two different Ministers trying to run one economy. The only result is that it is landed into the lap of the Prime Minister, and we all know the consequences of that happening.
  We must attack restrictive practices of capital and labour, as the Prime Minister said. Here, the situation is a rather unbalanced one. There is pretty stringent legislation against restrictive practices of capital which is vigorously enforced by

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  the courts. There is no such legislation against restrictive practices of labour, yet they can be equally damaging to output and to the public interest at large. It may be that it is a problem which does not lend itself to legislation at any time. I am not sure. Short of that, at present, a real attack should be made on restrictive practices. The Prime Minister talked about them this afternoon. What does he intend to do about them The right way is through the "Little Neddies", which we set up. The real purpose of those committees was to get rid of obstacles to production. They should be put on to full-time working to get rid of restrictive practices. In the absence of legislation, which may not be the right way, the focussing of public opinion and knowledge upon those practices is precisely the thing to do.
  As for unofficial strikes, I doubt whether we can wait long for legislation to reform the law relating to the trade unions and bring it in line with modern conditions. Surely it is becoming more and more urgent to have new legislation which will enforce the sanctity of contracts and agreements. It can only be of benefit to all concerned. We must reshape the social services to concentrate on priorities where need is greatest, encouraging people to stand on their own feet and provide for themselves.
  We must encourage investment, and not discourage it by abolishing investment allowances and by this silly little side-swipe at Surtax, which means so little to the economy and so much to people who have to pay it—[Interruption.] It means so much to the people whom the Prime Minister talks about, the technologists, the managers, and the leaders of industry. They are singled out for a deliberate swipe by the Prime Minister who talks so much about the contribution which they can make to the country.
  Then, on agriculture, surely the time has come for more measures to increase the contribution which agriculture can make both to import saving and to exports abroad, which are already very great. I do not think that the Prime Minister helps in this regard by the sneers which he constantly addresses to the policy of import levies. That is an essential part of any joining up with Europe, and it could make a big con-
  1762
  tribution to the health, strength and the expansion of our farming industry.
  Those are the ways in which we think that the problem should be tackled. I have endeavoured to set out not only our criticisms of the Government and their follies but also some of the practical ways in which we believe that the problem can be tackled. As the Prime Minister hinted, the basic problem which we have to tackle is the problem of attitudes. That is the hardest thing to deal with. It is easier to persuade people to work harder than it is to persuade them to change their minds, practices and old ingrained habits.
  I believe that the matters which we must set before the country are, first, the need to have a Government in which people can have confidence and which will be frank, forthright and consistent. Secondly, there must be more incentives to individuals and companies. Thirdly, there must be a recognition of the proper place of profit and achievement in our economy. We must encourage and hack up success and effort and discourage and penalise sloth, failure and incompetence.
  It is along those lines that the problem will be solved, but the one fundamental condition to solving any of our problems is the disappearance of this Government.
  5.19 p.m.
  Mr. Bob Brown: I rise today to give general support to the measures announced by the Prime Minister last week. As the representative of a constituency in a development area, I am pleased that the Government are seeking to exempt development areas from the worst effects of these proposals. That makes it possible for me to give general support to these measures.
  I appreciate that although the development areas are being exempted as far as possible, they cannot be completely insulated, and our factories, along with others, will be hit by these measures. Having said that, may I now say to the Prime Minister and the Cabinet that, like many other hon. Members who represent constituencies in development areas, I must seek from the Government an assurance that should the effects of these proposals bite harder than we at present think, should they go beyond what we consider to be an acceptable point, such

  1763
  areas will be subject to immediate selective action to ensure that they do not, as they have formerly had to do, bear a much greater crunch than the present more prosperous areas of the country.
  I must emphasise that I am not prepared to accept a return to the two nation concept which we knew for so long under successive Conservative Governments. The economic situation of the North-East was like the weather forecasts—north of a line from the Wash—and we are not prepared to accept that sort of thing again.
  I hope that any plans which there may be for the clearance of derelict sites in the development areas will not be interfered with. I have in my constituency much dereliction in the wake of a dying coalfield. The Newcastle City Council proposes to landscape one of these derelict sites. The Newburn Urban District Council proposes to treat three of these sites, two for the introduction of new industry, and one for landscaping. I appreciate that man does not live by bread alone, but I sincerely hope that if there are to be any restrictions on the clearance of derelict sites, all the restrictions will be on the landscaping sites, and not on those which will be used for new industry.
  The Government must undertake a massive operation of redeployment so that as labour becomes surplus in certain industries it is mopped up pretty quickly and transferred to areas where we know there are labour shortages. This is a task which the Government must tackle with great determination.
  The right hon. Member for Barnet (Mr. Maudling) referred to investment in industry. I do not share his gloomy forecasts. I certainly hope, as I am sure many hon. Members in the House do, that he is wrong, because I believe that investment in industry during this period, probably more than ever before, must be maintained, and more so in the development areas than anywhere else in the country. I should like an assurance from the Chancellor of the Exchequer that the Government will be prepared to increase the investment incentive within development areas to 50 per cent. so that we may have an impetus to go forward once again once the freeze is ended. Why should not the planning councils
  1764
  and the planning boards in the development areas play their part in this type of operation?
  I further appeal to the Government to seek powers to establish State-owned industries in the advance factories now being built in the development areas. It is not good enough that we simply build the factories and have to wait months for tenants to come along and take them, when there are industries which the Government, like their predecessors, literally prop up as the major source of supply. For instance, the Post Office is one of the biggest purchasers from the electronics and telecommunications industry. Is there any reason why we should not have a share in the production of this industry? We are importing machine tools in large numbers. I could go on quoting manufactures which we are importing, but which we could readily produce in State-owned factories in the development areas. This is a part of Labour Party policy which I hope the Government will get down to implementing pretty quickly. If it cannot be done during the squeeze period, I hope that we will go ahead immediately the squeeze is over.
  I am not one of those who believe that our economic ills will be cured, as it were, by the wave of a magic wand if we cut defence expenditure. Nevertheless, I am satisfied that the most famous empire builders of all time, irrespective of nationality, are the "brass-hats". We hear a lot about the need for organisation and methods studies in industry. I often wonder whether Her Majesty's Forces have been subjected to an organisation and methods study. I am satisfied that if we could get in the Armed Forces a close scrutiny on the lines of the industrial type of organisation and methods study, the empire builders would be subjected to considerable cuts, and in this way we would be able to reduce defence expenditure.
  Mr. Julian Ridsdale: I assure the hon. Gentleman that during the period of Conservative rule a time and methods study was carried out in the Ministry of Defence, and that as a result many millions of £s were saved.
  Mr. Brown: All I can say is that if an organisation and methods study was carried out in the Forces it certainly was

  1765
  not carried out to the extent that it ought to have been.
  If I were a German, I should feel inclined to say, "If the British want troops in Germany, let them pay for them". As I understand things, the German Government are very anxious to have the feeling of security given by the presence of British troops, but they are not prepared to pay towards their maintenance. I am grateful to my right hon. Friend the Chancellor of the Exchequer for the assurance that he has given, but I hope that the Government will pursue this issue with great vigour, because I see no reason why we should continue to carry this unfair burden. We are no longer an imperial Power, and I see no purpose in attempting to create the impression that we are.
  I have always held the view that the strong should help the weak, and on this basis I welcomed a decision at a Labour Party conference to set aside 1 per cent. of our gross national product, in the ultimate, towards the development of under-developed countries. I still passionately believe that this is the right thing to do, and, indeed, that this can be the greatest prop against Communism if the Western democracies do this on a large scale.
  Another old adage is that charity begins at home. In present-day circumstances I could not agree more with the right hon. Member for Barnet that we should have reciprocal arrangements so that we can increase our trade with the nations which are receiving aid from us, but in normal circumstances I think that it would be wrong for us to impose any such conditions on a nation to which we are giving aid.
  I propose now to say a few words about the prices and incomes freeze. Whatever the Government do, it will have to be tough, it will have to be unpopular, and it will be riddled with anomalies. No pay freeze can be a just issue. No Front Bench Labour Member wants to kid us differently. The Prime Minister conceded the fact that there will be anomalies. There are bound to be, in any pay freeze. The tragedy of the situation is that the free-for-all scramble for wages in the post-war years has helped to create this situation
  Some trade unions have given extremely fine support to the Government while
  1766
  others have done pretty well the reverse. I pay tribute to the Trades Union Congress for being the true patriots of the nation in these extremely difficult circumstances and adopting the statesmanlike decision that it took this morning. My own union—the National Union of General and Municipal Workers—has recently negotiated a wage award for manual workers in the gas industry, who were by no stretch of the imagination overpaid. The wage increase will be about 4 per cent. My union, together with N.A.L.G.O., has recently negotiated a salary award for local government staffs. On both these issues the unions are naturally awaiting anxiously the Government's decision.
  The awards were agreed before the Prime Minister's statement, but they are post-dated. I wonder whether, the statement having been made at that time, these awards can be conceded. I hope that they will be because these people are not overpaid.
  I want to refer further to the support which the unions have given in the past 12 months. My union, negotiating as the major union for local authority manual workers, recently negotiated a settlement in which it asked the Government to refer the question of manual workers' wages in local authorities to the Prices and Incomes Board. This is an example of the good will we have from the trade unions, which hon. Members opposite tend to deride.
  I say with some feeling that if the Government feel it necessary to use statutory powers of any kind in order to restrain those who would deliberately attempt to break the pause they deserve the support of hon. Members on both sides, whether it be on the incomes front, the prices front or the profits front. The Government deserve full support in respect of any measures which they may be forced to take.
  I hope that when the sluice gates are opened at the end of the first six months we shall ensure that the first people allowed to trickle through are the lower-paid workers. No hon. Member can feel very happy about a situation in which thousands of workers take home less than what we regard as the basic minimum National Assistance subsistence. We shall all hang our heads in shame at this. If ever there were a case for a

  1767
  self-denying ordinance for some of the stronger sections of industry, this is it.
  We have been in the straitjacket of recurring economic crises in every postwar year. If the measures which the Government propose could be a cure-all, once and for all, the price that we are being asked to pay would be small by any standard. But it seems to me—and this view is shared by many of my hon. Friends—that we are not entirely masters in our own house in this respect; outside influences are easily brought to bear upon the economy. To get the balance of payments right and to have a strong reserve is the answer, but we all know that there is an extremely fine margin between being on the right side and being on the wrong side. What worries me is the fact that at any time that we are almost in a position of balance, speculators can bring pressure to bear on the economy. So long as we are a reserve currency this situation will prevail.
  I do not suggest that in these circumstances the Government can do anything about it, or that they, as world bankers, should say, "We are finished. We are not going to be world bankers any longer". Nevertheless, this is something which, in the long-term, the Government should think about.
  I have already intimated my general approval of the Government's measures. Desperate situations call for desperate measures, and so long as the Government can guarantee that our less fortunate areas will continue to be kept under constant review they will have my support.
  I close on the theme that this is a "must" if we are to give future support to the Government. The North-East will never forgive the Tories for the way they treated us under successive Administrations. We should find it extremely difficult to forgive a Labour Government if they allowed the situation to drift too far.
  5.37 p.m.
  Mr. David Crouch: During the last election I sensed a new mood among people I met—a mood different from that which I had found in other elections that I have fought. It was a feeling of community rather than selfish
  1768
  ness—of country rather than material personal achievement. It was an awareness of history, and a search for greatness in the future. I had a strong feeling that it was a last cry for leadership—a cry for leadership before it was too late, a cry from people wanting to be led, to be helped, and to be allowed to express their abilities in a thriving and competitive industry once more.
  This feeling was not confined to my constituency; the mood existed throughout the country. Politicians and parties were on trial three months ago in the General Election. The decision was given quite clearly in favour of the Labour Party to take hold of our country and lead it towards a new Britain—the new Britain that the party had spoken of so bravely. They were elected to Government and were given a majority to govern strongly. There were no illusions among the electorate about the problems facing the country. They knew that we were in troubled waters, but little did they know that we should be blown off course so soon. Little did they know that the captain of their choice would prove such an uncertain navigator and such a dangerous helmsman.
  The mood today has changed, and the high hopes of those who supported the party opposite last April have been dashed. Disillusionment has set in. What an extraordinary tragedy this is for our country, and what a terrible let down for the people that in three short months this politically strong Government should have proved so weak and ineffectual. I do not gloat over the situation. I accept the responsibility which must fall on all hon. Members to recognise that it is the economic survival of our nation that counts. This is more important than party interests. I accept the advice of the leader writer of The Times newspaper yesterday, that Members of Parliament must contribute positively. This is what I hope to do today.
  I should like to pay tribute to my predecessor in the House, Sir Leslie Thomas. He was greatly admired and liked throughout my constituency by people of all persuasions and activities. He served the constituency with great zeal, thoroughness and attention. He was greatly respected and loved in the House. He had the special understanding of both

  1769
  sides of the House through a very long association, and he had a very distinguished father who was also a great servant of the House. I mention this to illustrate the special background which Sir Leslie had, which gave him such an acute understanding of the political scene. It was this which enabled him sometimes to take the Chair here and it was this which gave him a very special pride.
  Earlier this Session, the Chancellor of the Exchequer gave some advice to new hon. Members about maiden speeches. If I remember rightly, he said that he thought that the tradition that maiden speakers should always speak about their constituencies and should at no time be contentious was of relatively recent origin and that he, a great sportsman in these matters, saw no reason why such traditions should be continued. I should be happy to accept his advice on both counts but I hope that he will excuse me if I am selective and tax myself accordingly. I should like to make reference to my constituency.
  The economic state of our country is the affair of my constituents as much as anyone else and they are very concerned about it. How can I not be contentious if I am to speak to the Motion? However, I hope that you, Mr. Deputy Speaker, will correct me if I fail to show respect to all hon. Members, no matter how controversial I find their views.
  My constituency is a remarkable mixture. We have a cathedral, the latest and newest university, a coal mine, commuters, and many pensioners. We have oysters and apples. We are the largest apple-growing area in Britain. We have a great retail trading centre which serves the whole of East Kent. I spoke earlier about the mood which I had sensed in this country during the last election. I said that it was a cry for help and a plea for leadership.
  Farmers in my constituency want to be free from the shackles of Treasury price support and to move towards a levy system. They ask me at many meetings to press for such a move, so that they can "have a go" at competing with their rivals on the Continent. There is no lack of initiative among these men, no lack of energy, ability or even scientific knowledge. These are the men who will be the spur to the Ministry of Agriculture
  1770
  to research more and to provide more information so that they can increase productivity. This is the word which the farmers use today; they talk of farm planning, farm management and greater productivity. They speak in practical terms of productivity, looking at the achievements of their competitors in Holland, Italy, France and West Germany.
  They are confident not only that they can win at home against competition but also that they can gain new markets abroad. One of my constituents with no less than 12 acres under glass—at a capital investment of £20,000 an acre—is already selling flowers to the Italians. He is prepared to sell flowers anywhere else in the world and is seeking opportunities to examine these markets. But such men are caged in a small economy and are forever uncertain whether the Government really want to help them and give them a long-term plan for the future.
  Canterbury was savagely bombed in the war, but it has been replanned and rebuilt. The great areas which were laid waste have been developed into a great retail trading centre which serves the whole of East Kent, an area comprising about 200,000 people. The shops there are modern, the car parks are huge and the approach to retailing and distribution is second to none anywhere in the world, including America. This is modern distribution, efficient and labour-saving.
  The retail trade today is a highly competitive one. There is no room for inefficient trading or selling or over-high prices. It is a healthy trade because it is a competitive trade. Why should the Chancellor single out this trade—retailing—to carry the heavy burden of the Selective Employment Tax? In the United States, retailing is the vital end of the process of production. Why can we not consider it so here as well? This is where the competition is hottest. Go to Macy's in New York and G.U.M. in Red Square and compare the value. I know that I would prefer the competitive economy any time, having seen both those places.
  Perhaps I may make a suggestion to the Chancellor. It is that he should export his S.E.T. to Russia, where it could do a good job in getting rid of labour wastage in department stores; there is over-employment in retail because of the absence of competition.

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  I have talked in my constituency to many old-age pensioners. My area is one to which people come when they retire to sped their days by the sea in Herne Bay and Whitstable. I have met many old couples earning less than £7 a week through their old-age pension, and they have complained to me that life is hard. I was struck also by their mood. Their greatest interest is the future of our country. These old people are conscious of our great past, but they are still looking forward.
  What are we offering them today? What economic future, security and development are we showing them? Canterbury is also the site of our newest university, with 500 students enrolled so far, another 500 arriving in October, and it is planned that, by 1970, there should be 3,000. This is a modern and exciting university and all the students there to whom I have spoken refuse any longer to look backwards. Instead they want to seek new opportunities for Britain. They want a philosophy which accepts the past and yet looks into the future. They are not content to rest on past glories nor are they ready to see Britain lose and give up just because the future may seem difficult or uncertain.
  These young people in their first year at university are eager, excited and vigorous and they want to build a new Britain. The Labour Party were right in their election campaign to refer continually to the new Britain which they wanted to build. The tragedy is that we see these promises in ruins because of the ineptitude of their management of our economic affairs. These young students are individuals in search of a philosophy. Idealists they are, of course, but they seek success and they will not forgive failure. The tragedy of the Prime Minister's failure is not only that he has failed the nation and failed the party but, most serious of all, he has failed Parliament.
  I am a new and junior Member of the House but I am a servant of the House and of democracy. I am a late arrival. I have been in industry for 20 years. Indeed, I started my industrial life on the factory floor, not as a trainee but to earn my living at £7 a week, starting work at twenty minutes to seven o'clock each morning and going on till six o'clock at
  1772
  night. I regret that the factory in which I worked had not the benefit of trade union supervision and help. I am not a big business man now; indeed I have given up the opportunity in order to come here. But I believe in the greatness of our country's past and the greatness of our people and I still believe in the greatness of our opportunity for our future.
  Moreover, I believe in our Parliamentary system, modernised and brought up to date as we go along. I value our party system and treasure our two-party pattern. I ventured to come here because I believe that it is in this Chamber that the centre of power in this country must reside, and in no other place. The procedures of democracy are vital. I do not want to see our country dominated by any other sector of it. The only power that I will acknowledge is the power of political parties by pursuing their policies on the Floor of the House. I will accept power nowhere else, neither in the trade unions nor in the banks nor, indeed, in the board rooms of big industries. All arguments must be centred here, debated freely and voted on by the freely elected representatives of the people.
  There is a mood in the country today. It is a mood which has a sense of frustration, I believe, as a result of the Government's continual ineptitude in the handling of our economic affairs. Confidence is ebbing away—slowly to begin with but now, I believe, rapidly. It has ebbed away from the Prime Minister and from all his colleagues. I do not believe that they are any longer entitled to the trust of our people. The banks, the farmers, the manufacturers, the retailers, even the students—none of them is looking to them with trust any longer. The Government have failed them all.
  I do not want to see this present frustration with the Government and a political party turn on Parliament itself. I am sorry that the right hon. Member for Nuneaton (Mr. Cousins) felt that he had to leave the Cabinet, because he had greater power and more opportunity in his great trade union. I am sorry that the First Secretary did not stick to his guns and resign, for he has undermined still further public confidence in our system and in the Government.
  I have great faith in our country. I believe that we still have the energy, the

  1773
  initiative, the inventiveness and the right spirit to spread wealth and happiness throughout our society, but we must have the leadership and strong Government. We cannot have disunity. Three months ago more than half the nation thought that leadership was what they would get with a Labour Party having a majority of a hundred in the House. The country was prepared for dynamic action and government from the Labour Party. What did they get? They got a series of exhortations from the First Secretary, a series of deflationary retreats from the Chancellor of the Exchequer who tried to make them seem like advances, and a continual cry from the Prime Minister for the Dunkirk spirit. I thank God for Dunkirk, but it was a deliverance of our nation and certainly not a great advance. I am against too great a reliance on divine providence and too great a reliance on help from the Government.
  This is what is wrong with the nation today. Our philosophy is wrong. It does not produce the dynamic which we need to survive. We are offering too cosy a reception from cradle to grave. All the time we are offering more and more for less and less. There will be no future for the country, even if the present Government double their majority, if they do not quickly abandon this false philosophy. They underestimate our people and underestimate the abilities of our people. We no longer live in the bad old days and there is no reason, not even now, why we should return to high unemployment, even with the present Government.
  The Government must appreciate that welfare today must be earned and that a better way of earning it is for people to pay for it directly rather than for them to be taxed in order to pay for it. I am afraid that the time has come when I for one can see no future for the country under this Government. They are wedded to old-fashioned ideas and outmoded thoughts and solutions. The strength of the country is in our individuals. The Government simply do not understand this and their recent actions have done everything possible to sap the strength of the individual. All the measures which they have taken are restrictive. There have been no incentives at all.
  1774
  The hon. Member for Newcastle-upon-Tyne, West (Mr. Bob Brown) referred to his trade union, the National Union of General and Municipal Workers. It is a union for which I have high regard. I would tell the First Secretary that I have a very high regard for the trade union movement of this country and for the sense of responsibility of most of the trade union leaders and executives whom I have met. But we live in an age when we must tackle the question of reform of the trade unions. This can no longer remain a cliché to be bandied between the parties, with nothing being done about it.
  I do not believe that the party opposite will ever get down to the question of rewriting the rules so that the trade unions become a responsible element in our economic society. Many of the trade union leaders with whom I have spoken agree that they are concerned that there is an over-towering power in their hands, and they, like me, believe that that power should reside here and should not slip away into their hands uncontrolled.
  There is today a mood among our people. It is a murmur that is spreading through all walks of life. It is a cry for leadership. Regretfully, the Prime Minister has failed to give that leadership and his whole Cabinet and Government stand condemned with him. I am afraid that I no longer have any confidence in the party opposite to produce the leadership, philosophy, command, reform and education which must be the foundations of a purposeful society and a new Britain.
  6.1 p.m.
  Mr. John Horner: I am pleased to have been called to speak following the hon. Member for Canterbury (Mr. Crouch). I am sure that the whole House was delighted by the wide-ranging maiden speech which he made. I confess that when he began by referring to certain advice which my right hon. Friend the Chancellor of the Exchequer had given to maiden speakers, I was not sure whether or not he would follow that advice. It is obvious that he and I are at one in believing that maiden speeches should be controversial.
  We are obliged to the hon. Member for the treat he gave us by bringing into his maiden speech so many thoughtful and thought-provoking statements on various subjects, from G.U.M. in Red Square to

  1775
  apple and flower growing in his delightful constituency which, I recall, is the constituency nearest to the Continent of Europe.
  Mr. Arthur Lewis: And the "Red Dean".
  Mr. Horner: In this two-day debate many references have been made to the problems of the trade unions and I am sure that hon. Members will not be surprised when I say that I intend to refer to the problems of my trade union. Within an hour of the Prime Minister resuming his seat in the House last Wednesday afternoon, the general secretary and president of my union were faced with my right hon. Friend the Home Secretary and my hon. Friend the Minister of State for the Department of Economic Affairs.
  The representatives of my union had perforce to learn from these Ministers that after nine months during which the union had been engaged in prolonged negotiations with the local authorities for a review of the wage structure in the Fire Service—which was to have operated from 1st August, which is next week; nine months during which the Government had been kept informed, in which this trade union had readily gone to the T.U.C., in which it had fully operated the early warning system and in which this union had willingly agreed with the local authorities that, at the end of the day, before the settlement became operative, the matter should be referred to the Prices and Incomes Board—the negotiations had reached a dead stop.
  My union's representatives came away from that painful interview with my right hon. Friend—to use a word sometimes mentioned by members of the Government Front Bench—clobbered. This will mean that the members of this emergency service, who do not have the power and facilities—
  Mr. Arthur Lewis: While we sympathise with my hon. Friend about the result of that interview, will he say to what extent he was told whether his union and its members should increase their productivity?
  Mr. Horner: The one service which cannot be paid by results is, we are grateful to know, the Fire Service. I do not
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  wish to dwell on this issue, but I must point out that here is an example of the sort of problem that is facing us in the trade union movement.
  I am referring to a union which cannot defend itself in the traditional way. It has wholeheartedly and without demur concurred with the early warning system and accepts that the matter should go to the Prices and Incomes Board. Yet we are obliged to tell the members of this union that, in the foreseeable future, there can be no productive results from the many months of negotiation that have taken place.
  I would be prepared to go to my old comrades in the Fire Service and local government and my colleagues in the trade union movement and tell them that the urgency of the situation—the simple, dire necessity of the economic position in which Britain finds itself—obliges them to accept the present wage freeze if I could be satisfied that the total package of the proposals we are considering in this debate will do the job we are told they will do.
  If, as the Chancellor of the Exchequer has affirmed, these proposals will ensure that the British people are released for good and all from the perpetual burden of economic crisis, if I could believe that this is the last crisis that Britain will have to face, and if I could accept the words of my right hon. Friend the President of the Board of Trade, that when these measures become operative we shall see "soaring exports", then I would be happy to go to my old colleagues in the trade union movement and local government and tell them that, unfortunately, they must remain clobbered. The hon. Member for Canterbury said that these things must be said in this House. I must, therefore, say that I have the gravest doubts about whether the package unfolded last Wednesday will do this job.
  Yesterday, the Chancellor said that the deflationary measures alone would be sufficient to get us out of the "red" and that these measures alone would produce a substantial balance of payments improvement. The wage freeze, he said, was an additional element to get the totality of the measures right, and he added:
  "Generally speaking, it is not true that our goods are over-priced in foreign markets."—

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  [OFFICIAL REPORT, 25th July, 1966; Vol 732, c. 1473.]
  In saying that, my right hon. Friend blew sky-high once and for all the oft-repeated piece of economic mythology that high wages have priced our goods out of world markets.
  If this totality of the deflationary measures would do the trick, and if unemployment and statutorily imposed wage control which the new Prices and Incomes Bill must contain would guarantee the full development of the progress of social and economic advance enshrined in the Labour Party's manifesto—then I would find it possible strongly to contend that my friends in the trade union movement should accept that the wage freeze is an absolute necessity.
  I will make my own position clear. supported the voluntary incomes policy. I believed that the early warning system, based on the co-operation of individual anions with the T.U.C., contained the first beginnings of a co-ordinated wages strategy that might finally develop as a rational alternative to the sectional partisan scramble that has characterised the traditional bargaining processes of wage fixing in British industry for so long.
  It is hardly possible to exaggerate the significance of the change in trade union thought as exemplified by the early warning system managed by the T.U.C., I am anxious lest that opportunity for change should now be in danger; I am anxious about strain which will be placed on the structure of our industrial relations and on the loyalty of working people to the Government. I am concerned about the potential damage that can flow from a wage squeeze imposed from the top—injust and inequitable as it must be. It is this anxiety that provokes me to speak as I do.
  I would defend these measures if I were convinced that the real nub of the problem facing the country was being tackled, but it seems to me that even in this debate my right hon. Friends are still blurring the issue; that the illusions are still clinging. My right hon. Friend the Chancellor of the Exchequer said that the best estimate of unemployment was that if it were spread evenly round the country it would represent little more than the movement of men between jobs.
  I do not want to be unfair to my right hon. Friend the President of the Board
  1778
  of Trade, but last night he seemed to me to give the impression that the cuts in home consumption added up to only £500 million—say, a mere 2 per cent.—which was much less than the present annual increase in public consumption. As a consequence, one would be justified in concluding that the measures that have been put to us yesterday and today could almost be defined as part of Socialist planning. The fact is that they were forced on the Government by the total dependency of Britain on the continued support of foreign banks.
  In June, the credits from the Bank for International Settlements were renewed to the tune of 1,000 million dollars. It was hoped that that sum would tide us over the next few months. The credits are to be reviewed every three months; Britain has to appear every three months before the Bank of International Settlements. The Bank's annual report on our economy, read in the light of last Wednesday's statement, can be seen to be no more than a preview of what the Prime Minister said.
  It refers to the unduly high level of employment, the high level of public sector expenditure, the ineffectiveness of the incomes policy, the inadequacy of the Chancellor of the Exchequer's fiscal restraints—all these came in for severe strictures from the 12 banks which are now really determining Britain's policy. And I am bound to say that the statutory wage freeze we are being asked to accept is a genuflection made in the direction of the Bank of International Settlements. I ask whether these orthodox schemes now being spelled out in detail will do the job. It is thought that they will give us a breathing space, but every one of us knows that much more than a breathing space is needed. And after the breathing space—what?
  I want at this stage to deal with two points that have already been touched on by some of my hon. Friends. The first is the position of sterling as a reserve currency, the problem of freeing ourselves from the historical straitjacket of being banker for nearly half the world's trade and, second, the problem of getting other nations to co-operate in an agreed solution to the problem of international liquidity, about which my right hon. Friend the Prime Minister has talked today.

  1779
  We all know that this will take time. The Chancellor of the Exchequer has just returned from meeting his colleagues at The Hague, where the Finance Ministers of the 10 richest countries in the world discussed these problems. Almost every one of those other nations is running a credit squeeze designed to reduce its import payments, to control its overseas payments and to cut its investments abroad. All our own main customers are seeking to cut their imports. Deflation, unemployment, sound money—these are the criteria that were being applied at The Hague by the Finance Ministers this week in judging each other's economy. Can we, therefore, assume that the serious measures we are being asked to accept will just give us a breathing-space, after which there will be a surge forward of the nation's economy?
  There is a real emergency here. Neither I nor any of my hon. Friends denies the deep-rooted nature of these problems with which we are seeking to grapple. Yesterday, the Chancellor, and today, the Prime Minister, spoke about the control of the export of capital. Yesterday, the Chancellor of the Exchequer said that even in present circumstances that control was adequate, but I put the following point to the Government.
  Just before the Labour Government took over in 1964, the Bank of England published an analysis of the overseas holdings of British companies and private individuals. It showed a total of no less than £11,000 million. This had been accumulating over the 10 years prior to 1964 during which period the country was forced to deflate no fewer than three times. Of that total sum, £5,000 million related to subsidiaries of companies in Great Britain. The Bank of England showed a figure of £3,000 million in overseas portfolio investment—well over three times the total amount of our nation's present reserves, every penny of which we accept as being borrowed money.
  I ask the Government to consider whether—since this crisis is so grave, and so much is at stake—it is not possible to face the political and economic challenge of nationalising the overseas portfolio investment of individuals. I make no reference to subsidiary companies. I would remind the House that, during the war, measures far more drastic
  1780
  had to be taken. If a cushion three or four times the size of our present reserves can be created, I ask the Chancellor of the Exchequer to consider creating it—
  Mr. John Smith: Is the hon. Gentleman aware that it was the earnings in foreign exchange from those foreign investments, built up when we were in office, which have bailed the Government out of their troubles of the last few months?
  Mr. Horner: I have taken full account of the alleged earnings from overseas investments. I put this suggestion forward with urgency. I stress that we are, and will remain, hostages of the foreign bankers, to whom we must report every quarter on the way we are running our economy. That being so, no measure should be left untried, and if a cushion to our reserves can be effected in this way, I invite the Government to give the matter serious consideration.
  Mr. Stratton Mills: The hon. Member referred to alleged earnings. Is he aware that they came to £454 million in the balance of payments in 1965?
  Mr. Horner: The earnings would continue.
  I come to my last point, which has been emphasised by many hon. Members on both sides of the House, particularly by my hon. Friends below the Gangway. A cut of £100 million in overseas expenditure is totally inadequate. The military saving cannot take place for a year or two. It represents, I understand, only an acceleration of the Defence Review. In this critical position, so grave that we have to deflate, to risk unemployment, to bring about a reduction of the national income—estimated at up to 3 per cent.—to endanger future investment, we shall not have completed the job unless correspondingly we enter into a drastic revision of Britain's rôle in world affairs which, over the recent decade, has been such a drain upon our reserves.
  I invite the Government to strip themselves of illusions. We simply cannot afford 220,000 men overseas. We cannot afford an east of Suez policy. We cannot afford to start contemplating spending over £1,000 million buying aeroplanes from America which can be used only at

  1781
  the behest of America in the Far East. No one believes that we can do this cutting tomorrow, or that we can bring the boys home by Sunday week. In this review everyone is expected to make sacrifices. I, with other trade unionists, have been invited to exercise my influence in the trade union movement to get trade unionists to accept the wages freeze. Surely I am entitled to say that I could do this more effectively and with much better heart if I were satisfied that it was a total review and that these measures, also, were under examination.
  The Government cannot afford to impose a wages freeze, to allow unemployment to occur, however euphemistically they express it, as a shake-up or shakeout, unless radical steps are taken to regain for us the sovereignty of these islands, where we can carry through Labour's policy. We are told that we are in danger of bankruptcy. In my view, if these dire forebodings were to come true we would have bankrupted ourselves, not because trade unionists were bloody-minded and selfish, not because of unpatriotic city businessmen—that is the system we live in—but because the Labour Government could not rid themselves of the absurd ghost of that rôle of a one-time great Power which still shackles us to the remnant of a foreign policy and so-called defence policy relevant to another age.
  Unless we abandon it, it will not only condemn us to continued bondage to the foreign bankers, but it will destroy for us on this side of the House the hopes of realising the social and economic advances and of changing British society for which people voted at the last election and for which so many tens of thousands of rank-and-file workers in the Labour and trade union movement have given their working lives.
  I beg the Government to carry this review to its logical conclusion, to win this real independence to give us the chance of real prosperity, to recognise illusions for what they are. Otherwise, this crisis will certainly not be the last which Britain will see. If the Government do not do that, I suggest that they will have both gone too far and not far enough.
  6.25 p.m.
  Mr. Selwyn Lloyd: I begin by congratulating my hon. Friend the
  1782
  Member for Canterbury (Mr. Crouch) on his maiden speech. We liked very much his graceful tribute to his predecessor, who was very popular in this House. His speech was admirable in form—not exactly uncontroversial, but nevertheless a very powerful reinforcement of our opinions on this side of the House. I am sure that we shall all enjoy listening to him speaking again many times.
  I shall try to deal with the Government's present proposals and the future, but it may not surprise hon. Members if, first, I speak about the past. The Government and their supporters are the victims of their own propaganda. I think that they have made things very much more difficult for themselves. They must now realise how wrong they were to describe stop-go as a Tory policy, because in fact it has been the policy forced on all Governments since the war. Sir Stafford Cripps had to do it, Mr. Gaitskell had to do it, and now the present Government have to do it, because in an island like this, as economically vulnerable as we are, it is absolutely impossible to get a steady, even rate of growth year by year. There has to be occasional use of regulators according to the circumstances.
  The object is, of course, to avoid the stop being too violent and to avoid the screeching of the brakes. There have been many references to the 1961 measures. The Prime Minister must have blushed a little, if he could, about his reference in 1961 to screeching of the brakes which he applied to my measures. Those measures were successful. They did save the £. Within 12 months we had repaid all the borrowings, £300 million to the central bankers, and £550 million withdrawn from the International Monetary Fund.
  Mr. James Dickens Mr. James Dickens (Lewisham, West) rose—
  Mr. Selwyn Lloyd: I shall give way in due course.
  Within nine months the Bank Rate was down to 4½ per cent. and it was possible to begin to reflate not only in regard to Bank Rate, but to release some special deposits, relax hire-purchase and credit controls. Our costs were more competitive and weekly earnings

  1783
  went up in October, 1962, by 3 per cent. compared with 6 per cent. in October, 1960. The reward for that restraint came in the comparatively stable prices of 1963. The way was made clear for the growth of 8 per cent. in the two years 1963 and 1964, an average of 4 per cent., which was the best rate of growth suggested by the planners. Those measures, unpleasant although they were to introduce, did, in fact, work.
  I suspect that hon. Members opposite have the word "unemployment" on their tongues. The criticisms about unemployment as a result of my measures were greatly exaggerated. It is right to mention the figures. The critics base their attack on the figures for January and February, 1963–815,000 and 878,000 respectively—but they do not point out that in February of that year 286,000 of those were in the construction industries and that, of those 286,000, 217,000 were temporarily stopped because of the weather. In fact, the monthly average for 1962 was 463,000 and the monthly average for 1963, excepting those two months of exceptionally bad weather, was 520,000. That is just about the Prime Minister's figure, the 2 per cent., his acceptable figure. Even taking the two bad months, it was within or near Mr. Gaitskell's acceptable seasonal peak. That deals with the myth about unemployment.
  About investment, on 9th May this year the Chancellor spoke in the House about avoiding the disaster of the calamitous fall in investment between the third quarter of 1961 and the first quarter of 1963, but he did not compare like with like. Allowing for the end of the iron and steel investment programme, as he conceded in his speech on 9th May it was right to do, the difference between the first quarter of 1961 and the first quarter of 1963 was down £9·8 million and between the third quarter of 1961 and the third quarter of 1963 investment was down £17·2 million. I do not call that a calamitous fall.
  I do not contend for one minute that the 1961 measures were perfect. It may well be that in the light of experience certain things could have been done in a better way. Nevertheless, their bad consequences have been so grossly exaggerated and their benefits under-esti-
  1784
  mated. I say this because I believe that the Government's authority to deal with this situation has been undermined by the extravagance of their former criticism.
  I hope that there is virtual unanimity in the House as to the main purpose of these measures, although it is true that there have been one or two dissentient views. The alternative now, as in 1961, is devaluation. I am utterly opposed to that. There might be a temporary advantage to exports, but that would soon be wiped out by the increased cost of imports. Aid would cost more. International subscriptions, for example, are now running at nearly £40 million a year. They would all be greatly increased as a burden. Overseas defence we know about.
  It still is to our general advantage to be a reserve currency. That position would be damaged. We should be breaking faith with those who have deposited their money with us. What is more to the point—a point which has not yet been made—we would start a flurry in all currencies which would damage trade. The business in March, 1961, was all started by the German decision to revalue only to the extent of 5 per cent. That started a wild series of speculations, fluctuations and anxieties with regard to currencies. If we were to do this now, I believe that it would have a similar sort of result, and goodness only knows where it would end. Therefore, devaluation must be prevented. I believe the Government when they say that they mean to prevent it. They are committed to prevent it; and I welcome that fact.
  In my view, provided that the Government do not immediately begin to run away—for example, over redeployment of labour, over-manning and things like that—provided the Government do not begin to run away, and there is a heavy responsibility on the First Secretary of State in this regard—these measures will do the trick in the short term.
  I come on now to look at the measures themselves. I agree with what the Chancellor of the Exchequer said about import quotas. They are extremely complicated to enforce and any system for putting them into force is very likely to be defeated by forestalling. They would cause great hostility and criticism from our allies after the surcharge. I agree that import quotas should be rejected.

  1785
  After what was said about the 1961 pay pat, se, I am, naturally, interested in what the Chancellor of the Exchequer described as the temporary standstill in increases in incomes.
  Mr. Joel Barnett: Would the right hon. and learned Gentleman agree with the right hon. Member for Barnet (Mr. Maudling), who earlier suggested, as an alternative to import quotas, the system, adopted in Italy and elsewhere, of taking prior deposits?
  Mr. Selwyn Lloyd: Dealing with credit for imports is a quite different proposition. I think that that should be further considered.
  Returning to the question of the temporary standstill in increases in incomes, the hon. Member for Newcastle-upon-Tyne, West (Mr. Bob Brown) sensibly pointed out that this cannot be achieved without anomalies. The hon. Member for Oldbury and Halesowen (Mr. Horner) said much the same thing. There are bound to be unfairnesses. If it is carried to the extent of refusing to honour awards which have already been made, it will be very much tougher than the pay pause for which I asked.
  I want to say a few words about the future. I believe that it is right to ask for this restraint in increases in personal income as a short-term measure. I hope that the Government will not be discouraged if there are one or two breaks in the line. The difficulty about a norm or a pause, and one which did receive careful consideration before introducing first the pause and then the 2½ per cent., is that any deviation receives the widest possible publicity, but the mass of conformists get no recognition.
  In spite of what happened over the electrical workers in November, 1961, and the dockers the following summer, that restraint worked pretty well and there was much more co-operation in it from the unions than anyone has been prepared to admit. I welcome the T.U.C.s decision, which has been announced today, that it will co-operate in seeking to make this standstill effective. It is a negative, temporary policy, but it is necessary in the present circumstances.
  Profits and dividends are frequently mentioned. I do not think that these are
  1786
  a problem at the moment, because profits are falling so fast, as they did in 1961, that the apostles of fairness need not worry about them.
  The case of the poorer paid workers has been made. It is a strong one. The most disagreeable decision of all the decisions I had to take in 1961 was the decision I took about the M-rate workers. However, the poorer paid workers have the most to gain from the stopping of inflation. Inflation does not harm the rich, the propertied, those with strong economic bargaining power, or those with powerful trade unions behind them. It is the poorest paid, those with the least bargaining power, those on fixed incomes, who suffer from inflation. If these measures halt inflation, it is in the interests of the poorer paid workers. I hope that every means will be taken of putting this point over to them.
  Having said that about the present measures, the next question—a question which was foremost in the thinking of the hon. Member for Oldbury and Halesowen—is this: how do we avoid, when we expand again, a repetition of what has happened before? I do not think that there is any easy or simple answer. The Government have learned that lesson. There are certain things which are common ground between us. I think that the Prime Minister was a little unfair in relation to many of the things which had been started before the Labour Government came to power and which are being continued, and in suggesting that there has been a complete change of trend. For example, in the matter of regional development, and so on, many things were done by the Conservative Government.
  We can go along with the encouragements to exports, with the aids to mobility of labour, with the retraining schemes, with securing a better balance between the regions, more efficiency, more management training, etc. All these matters are common ground, and we welcome the developments which are being made in them.
  I now want to mention one or two matters which can be regarded as rather more controversial. The first is the point made by my right hon. Friend the Member for Barnet (Mr. Maudling) this afternoon. It is essential to get the Government set-up right with regard to the

  1787
  management of the economy. The present set-up must be wrong. The Chancellor of the Exchequer is in control of fiscal and monetary policy and of public spending. The First Secretary of State deals with expansion and economic development.
  I have never held up my hands in horror at the idea of planning. I started the five-year forward look at public expenditure. I started N.E.D.C. to examine the obstacles to growth and with a view to expansion. Our set-up was very much better after we had instituted the post of Chief Secretary to relieve the Chancellor of the Exchequer of the burden of arguing with his colleagues about individual items of public expenditure, a process which used to take up a great deal of the time of any Chancellor of the Exchequer.
  We created the post of Chief Secretary to relieve the Chancellor of the Exchequer of the burden of keeping day-to-day control on public expenditure and of the task of coping with the endless departmental arguments. We wanted the Chancellor of the Exchequer himself to be freer to deal with general economic policy. That was a much sounder basis. It is nothing to do with personalities. It is the machinery of government. I think that the present set-up is wrong. We had it much better.
  The second point is that the Government must exercise firm control of Government expenditure overseas and at home. My right hon. Friend the Member for Flint, West (Mr. Birch) made some suggestions about that yesterday, with which I agree. They were endorsed today by my right hon. Friend the Member for Barnet.
  Another thing which must be done, if we are to get the economy sound, is to keep control of the overall borrowing requirement. Only if control is maintained over the overall borrowing requirement shall we be able to get a firm grip on the gilt-edged market and once again get long-term interest rates on the move downwards. That was just beginning to happen in 1962. It was a very important contribution to the well-being of all our citizens, because one of the greatest burdens is a very heavy interest rate going on in perpetuity. Therefore, I believe
  1788
  that strict Government control of the overall borrowing requirement is extremely important.
  As for overseas defence, I am all for withdrawing from commitments as quickly as is possible, provided that we do not leave a vacuum behind us when we go which may involve us in added expenditure at a later stage. I very much hope that it will now be possible for us to make substantial economies in the Far East, as it appears that confrontation is ending.
  On the question of expenditure in Europe, I do not know whether I speak for all my right hon. and hon. Friends, but I think that the W.E.U. Treaty should be observed. There is clearly a reservation in the treaty about the balance of payments, and when we were worried about that in 1957, I negotiated with our allies a reduction of 23,000 in our forces in Germany. That was done by agreement on balance of payments grounds, and we are entitled, provided that we do not do it as a unilateral decision, but by negotiation, to proceed on those lines, making our allies see that it is important to have an ally with a strong balance of payments. This is more important than having troops actually in Germany. It is my view that, as long as it is a planned operation and does not happen too quickly, it is the sensible thing to do.
  Thirdly, the Government must realise the huge complications they have created for trade and industry by their recent and proposed legislation. The consequences of the Capital Gains Tax, Corporation Tax, the new investment allowances, the Land Commission, when it is set up, the Prices and Incomes Bill and the S.E.T. impose a heavy burden on the ordinary business as well as on the machinery of government. The Inland Revenue is grossly overworked. There are not enough valuers to go round, so what will happen about some of the provisions I do not know.
  Far too much time is having to be spent by people who should be thinking of increasing productivity and capturing foreign markets in working out where they stand—not to frustrate the provisions—and the consequences of this legislation for their projects. The Government should scrap most of this legislation, or, they will not do that, they should delay it; and while they are delaying it they should clarify some of the things they

  1789
  have introduced or propose to introduce. The measures are major disincentives to investment, effort and initiative.
  Fourthly, the Government must do something about providing more incentives for savings. The hon. Member for Lewisham, West (Mr. Dickens) recently talked at Question Time of unearned income as though it was something which stank. How can we get people to save unless they receive some reward for their saving? Perhaps, to deal with some prejudices, the Government might contrive to provide the incentive for new saving, but if somebody denies himself something out of his year's wages or salary so that he can save, he is entitled to adequate reward on that saving.
  Mr. Dickens: Is the right hon. and learned Gentleman aware that between 1960 and 1964 productivity in this country rose by 17 per cent., the cost of living rose by 19 per cent., the national wages and salaries bill rose by 38 per cent., and dividend distribution rose by 59 per cent.?
  Mr. Selwyn Lloyd: One reason for this was that dividend distribution had been held back at an earlier period. Another reason is that in these calculations there is not taken into account the great increase in capital formation, which vitiates those statistics. The State receives a very large cut on dividends. Dividends depend on profits, and the hon. Member need not be worried on this point because profits are falling very seriously at the present time.
  The Government should push on with reform of trade union law. This must be done delicately. One would want to take responsible trade union officials with one on this. [An HON. MEMBER: "And the lawyers."] And the legal profession, certainly. Can it be sensible that strikes should be allowed over demarcation disputes at the present time? I should go along with any proposals the Trades Union Congress brought forward as a means of stopping that sort of thing, whether it was a period of delay, some form of arbitration, or whatever it might be. But I cannot accept that, when our economy is in its present difficulties, demarcation disputes can be allowed to end in strikes.
  There is much to be said for the establishment of some sort of industrial court,
  1790
  at all events to examine restrictive practices. There is something to be said for agreements being made legally enforceable in certain cases. I hope that the Government will, whether or not the evidence has yet gone to the Royal Commission, exercise all the pressure upon it that they can to report quickly, and that, if it does not look as though it will do so, will initiate independent action of their own.
  Mr. William Molloy: I have followed the right hon. Gentleman's speech with very great interest. It is a quite remarkable speech. The right hon. and learned Gentleman earlier made what I thought was a very good point about the co-operation he had received from trade unionists and the T.U.C. when he held the reins of office. I thought of interrupting him then to ask him if it was not ludicrous for his right hon. Friend the Leader of the Opposition to talk about introducing legislation which could only smash up this good co-operation. Would the right hon. Gentleman not agree? I am sure that he must know that the standard of behaviour of British trade unionists with regard to the responsibility of the positions they hold is second to none and that British strike figures, official and otherwise, are lower than any in Europe.
  Mr. Selwyn Lloyd: I agree with a great deal of what the hon. Gentleman has said. Leaders of our trade unions are extremely responsible people. I have one criticism about the trade unions and that is that they do not pay these men anything like enough—though I am not suggesting an immediate increase in their emoluments! My sole purpose in supporting any measures to this end would be to strengthen the position of the responsible trade union leader, and if I were convinced that something I put forward would not do that I might change my mind. But I am convinced that it is wrong to have strikes about demarcation disputes, and it is important that just as restrictive practices in management can be brought into the open something similar should happen with regard to restrictive practices of labour.
  I think, although some people may disagree with me, that the Government are right to persevere with the idea of the incomes policy. I should like the right

  1791
  hon. Gentleman to look again at the ground rules I laid down in a speech in December, 1961, when, I think, I first used the phrase. It is an essential part of an incomes policy to have the proper handling of demand. If the Government do not maintain the economy at a proper temperature, no incomes policy can possibly succeed.
  Part of the incomes policy must also be planning for growth, and it should also consist of education all the time about the facts of economic life. If increases in personal income outrange increases in production, there is bound to be inflation and, in the long run, most people will be worse off. We have to preach restraint, that those who are in a powerful economic bargaining position will serve their own interests better in the long run if they do not push their privileged position to the full, and that restraint benefits the community as a whole. I am against compulsion. If it becomes statutory, it will fail, but we must try to make the whole community more and more aware of the consequences of increases in incomes beyond increases in production. The answer is to increase production and then incomes also can go up.
  The Government would be wise to do everything possible to make our trading arrangements and systems and standards accord with those of the Common Market countries, but I shall not develop that point now.
  To conclude, the country is in difficulties. They were avoidable. We are entitled to condemn the Government for incompetence in action and arrogance in opposition, but the main problem is to surmount the difficulties. We must unite in our determination to defend sterling. The strength and resilience of the economy is much greater than some of its detractors think.
  If the Government want general support, I beg them to understand that they must abandon some of their shibboleths and forgo or postpone irrelevant measures that only add to our difficulties.
  6.50 p.m.
  Mr. R. B. Cant: Having sat here, I feel, almost continuously since half-past two yesterday—though I must have slept and had
  1792
  lunch—I find a great deal of what the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) has called common ground. There are matters on which I agree with many hon. Members on both sides of the House, though I suspect that, before I have finished what I hope will be a brief speech, I shall receive a good deal of criticism from my hon. Friends on the bench immediately in front of me.
  In my view, the Government were quite right to assert that, to some extent, the economy has been blown off course. I do not want to go into all the details of the Rhodesia problem, the seamen's strike, the terms of trade, even the resignation of my right hon. Friend the Member for Nuneaton (Mr. Cousins) from his post as Minister of Technology. Neither shall I comment on the complexities of the situation, which were dealt with so adequately by the Prime Minister, in connection with the world decline in liquidity.
  In expressing my support for what the Government have done, I add the hope that my hon. Friends will not throw overboard what are regarded as the traditional techniques for controlling the economy. To some extent, my right hon. Friend the Prime Minister has been hoist by his own petard, because he, alas, with his fertile mind, invented the expression "stop-go", giving birth to it on 27th July—July is a fateful month—1961.
  I would argue—here, perhaps regretfully, I have common ground with the right hon. and learned Member for Wirral—that it is impossible to conceive of an economy here or, I would add, in Russia, in which one can look forward to uninterrupted, unfluctuating economic growth of either 1 per cent. or 10 per cent., and that what is important, if we are not to sink into a morass of critical discussion, is that we concentrate on the average rate of growth over a period rather than on achieving complete consistency. Let us look at those who are in the fast growth league. Let us look at Japan, Italy, or France and ask ourselves whether their economies behave in this way.
  With all respect to those who do not think that we should have any unemployment at all, I think that this may to some extent be a condition of progress. If we can learn to refine our techniques of monetary and fiscal control, if our timing and our quantitative changes are much

  1793
  more precise than they have been in the past, we shall manage our economy much better and bring the wage component much more fully under control.
  I do not want to be academic about it, but what is most significant in the wealth of statistics which are quoted is that the real correlation is not between the level of unemployment and the level of wages, it is not that Professor Paish is right in saying that we must have 2½ or 3½ per cent. unemployed, but that changes in the level of employment of resources have a quite significant correlation with incomes.
  As my first point, therefore, I plead that we should accept these techniques as part of our total policy and not throw them overboard because they are associated with stop-go. I would support the Government in that respect.
  Mr. Dickens: I will bet on that.
  Mr. Cant: I hear my hon. Friend say that he bets that I will. All right.
  I support what the Government have done in he field of overseas policy. I do not think that we should go any further in the control of capital out-flow. My speech is becoming something of a catalogue, because I am trying to be brief. In my view, the Chancellor is quite right to say that we have gone far enough in this respect. I do not consider that we can do much more in the short term about changes in overseas military expenditure, though we should like to see the economies defined a little more clearly.
  What we might do in this connection is accept Mr. McNamara's—if I may mention his name in the Chamber—2 dollar exchange rate which he uses in the United States to make absolutely certain that American defence authorities spend their money in the United States as far as they possibly can, not outside.
  I support the Government also in their attitude to import controls. This may be a delightful idea if one wants to think in terms of a siege economy, but I do not equate Socialism with a siege economy. Import controls have some quite serious consequences, which have been talked about from time to time in the House. If we have the right control policies, we shall control imports, and this is the dramatic factor in the whole context of the balance of payments situa-
  1794
  tion. I shall not say more about it. I support what the Government are doing.
  Having said that I support the Government along those lines, let me now say what I think they should do in other respects. Here I come to the question of the incomes policy. Having looked at this problem, not in any academic sense, for a very long time, I have come to the conclusion that, if we can get an incomes policy—and we should try—all right; to use the Chancellor's terminology, it is a bonus. But I do not place very much confidence in getting it, and neither do I think that the Government should bring pressure on the trade unions to do it.
  If one looks at the rise in wages and salaries last year and asks why there should have been this enormous disproportion between the increase in output and the increase in incomes, the paradoxical answer, in my view, is that it is a consequence of having an incomes policy. Once we institute a norm, it becomes the starting point, and people say, "What shall we get beyond the 3½ per cent.?".
  A lot has been said about the freeze, and I accept that it will be extremely difficult to implement—but good luck to those who want to do it. But, once we have done it, we have to start making concessions. In the Financial Times and, more particularly in The Times this morning, we learn that two suggestions are being put forward, that we give special treatment to the lower-paid worker—yes, excellent—but that, to overcome the question which arises in the mind of my hon. Friends in front of me about dividends accumulating and being harvested in the future, we should have a sort of delayed wage and dividend unit trust.
  I see that I have taken hon. Members by surprise. Obviously, they do not read The Times as consistently, perhaps, as they should. It is a very ingenious recommendation. All I am saying is that, if we have this situation, we may be led to spend far too much time on all these various methods of avoiding having to do what we want to do.
  Let the First Secretary of State concentrate much more on prices. I think that the control of prices, if the French system is any guide, is a much better

  1795
  method of control not only of incomes but of the economy as a whole.
  My next point is the Selective Employment Tax. I must move extremely careful here, though I am sure that nothing I say in this Chamber is likely to have the slightest effect. Why do not the Government drop the Selective Employment Tax premium? They are to give £130 million to manufacturers, who, I gather—although it is rather difficult to accept—do not want it. As things are going, the £250 million in Selective Employment Tax which is to be taken from the economy will be eroded by the continuous rise in import prices, and will also be eroded, alas, by the increase in unemployment. Therefore, if the Government are determined on deflation, why do they not make it effective by abolishing the premium? This would cancel out the other developments that I mentioned.
  As to my third short-term point, why do the Government not do something about the payment of cash for imports and about the whole question of people in the foreign exchange market seeking cover? We have been lecturing for many years about the leads and lags and the problems that they pose particularly for a reserve economy. Why cannot we come to grips with the problem, because it poses considerable difficulties?
  I now come to one or two longer-term suggestions. All that we have said about overseas expenditure and import substitution is important, but I am certain that our economy will not survive, progress and evolve and the dynamism that everybody talks about unless we have much higher investment per head. The vital correlation is growth of national income and investment, if we define it in the right sort of way. I hope that the Government Front Bench will give much more attention to this problem than in the past.
  Related to this, as any analysis of our economic situation since 1948 would show, is the inflation that has emerged, whether we call it demand, pull or cost, in this sector of our investment-savings equation. It is not that the banks have gone mad and started turning out too much money in the sense that they are responsible for too much money chasing too few goods at this critical point. Therefore, I would support any hon. Member on the other
  1796
  side of the House or on this side who would say, "Incentives for savings".
  I would take issue with the right hon. and learned Member for Wirral for saying that the Chancellor is having too big a net borrowing requirement. My argument with the Chancellor is that his net borrowing requirement is far too small because he is raising far too much in forced saving through taxation.
  I do not think that devaluation is in. But I would tell the Government that they might look not at the vague floating exchange rates but, seriously, at something which would be consistent with the I.M.F., and that is the idea of a sliding parity within the existing margins. This is a very fruitful adaptation of the floating exchange rates.
  There is a lot more that I could say, but I promised to be reasonably brief, and so I will not launch into discussions of international liquidity, sterling as a reserve currency and so on. But I hope, not with much expectation, that the Government Front Bench will take note of these things even though it may be some time before they fructify.
  7.5 p.m.
  Mr. John Boyd-Carpenter: I hope that the hon. Member for Stoke-on-Trent, Central (Mr. Cant) was wrong when he said that anything that he said in this Chamber would be unlikely to have any effect. I thought that a great deal of what he said to his own Front Bench made very good sense, and I hope they will pay some attention to it, though my hope, like the hon. Member's, is perhaps a faint one.
  I thought that the hon. Member was dead right when he said that the Government, and the Prime Minister in particular, were in this situation to a great extent prisoners of their own past speeches and their own past attacks on not dissimilar measures. He evidenced the startling phrase "stop-go" and told us that the Prime Minister originated it. I thought he was absolutely right when he said that all Governments will from time to time have to use something like stop-go. Indeed, Mr. Harold Macmillan once commented on this "How else can anybody drive a car?"
  I wish that the Chancellor of the Exchequer had had the hon. Member's wisdom in this matter. In his own

  1797
  address at Cardiff in the 1964 General Election he said:
  "The most important protection for the steelworkers, as for everyone else, is that we should escape from successive Conservative 'stop-go' crises …"
  It seems to me that the hon. Member for Stoke-on-Trent, Central knows a good deal more about these matters than the Chancellor did at that time, or than he, I suspect, knows now.
  Indeed, there has been a very curious change in the speeches from the Dispatch Box this afternoon compared with what we heard 20 months ago or even three or four months ago. Then all the troubles were due to the "terrible inheritance from the Tories", and they were all going to be put right by purposive planning. [HON. MEMBERS: "Dynamic policy."] Yes, by dynamic policy and purposive planning. [HON. MEMBERS: "Gritty."] I am indebted to my hon. Friends for the supply of adjectives, although I have never been terribly short of them myself.
  I quote from the Government's own election manifesto. This illustrates the change. Their last manifesto said:
  "Overseas confidence in sterling has grown steadily as the world has become convinced that we are winning the battle for solvency. The victory was a real one; but so was the price the nation paid. In particular the high interest rates required to strengthen sterling forced up mortgage payments and council house rents. But one price the nation did not have to pay—the deliberate creation of unemployment which our predecessors regarded as inevitable."
  The Government call it "redeployment" or "shake-up" now, but it hurts the people concerned just as much.
  I quote that as showing that at least part of the difficulty which the Government have got themselves into has been the extent to which they have been committing themselves, even up to a few months ago, to opposition to the kind of steps which they are now taking. And I believe that part of the reason for the Chancellor of the Exchequer undertaking what he yesterday admitted to be the gamble of not moving earlier in the matter was a natural and understandable reluctance to go back on so much of what he personally, the Prime Minister and members of his party had been saying by way of criticism of us and by way of general comment on the situation.
  1798
  It may well be that that delay for that reason—here I agree with the hon. Member for Stoke-on-Trent, Central—has caused these measures to have to be, and to have to appear to be, tougher than they otherwise would have been.
  I want to turn to a point which, curiously enough, has had very little indeed said about it today from that Box, and that is the pay freeze, to which the Prime Minister gave very great prominence when he made his statement on 20th July. May I recall to the House what the Prime Minister said? He said:
  "But the House will recognise that the whole operation stands or falls on the extent to which we can keep our costs and prices under control."
  He went on:
  "The Government are calling for a six-month standstill on wages. salaries and other types of income, followed by a further six months of severe restraint, and for a similar standstill on prices."—[OFFICIAL REPORT, 20th July, 1966; Vol. 732, c. 636.]
  He gave that great importance, as, indeed, did the Chancellor in this House, though he has not yet explained to us those curious observations, which my right hon. Friend the Leader of the Opposition quoted from the report in the Financial Times, in which he described this as a bonus. But the Prime Minister put this as being an important step on which the whole thing stood or fell. The Prime Minister in the course of his speech—during which at one moment he seemed likely, I thought, to talk out, or at any rate read out, the debate—never mentioned it at all.
  I understand that the First Secretary, however, is going to say something about it in his winding up speech. The House knows that the First Secretary's enthusiasm for these proposals can he restrained within the limits of decorum, though it is sufficient to keep him within the confines of the Cabinet. But I hope he is going to tell us a great deal more about this because I have a number of questions, and I should be obliged if the Minister of State would be courteous enough to take a note of them—a number of questions which I think many hon. Members would like to have answered about this pay freeze when the First Secretary comes to reply. We are dealing, after all, with what the Prime Minister has said—I will repeat it—is the point on which this whole package stands or

  1799
  falls. Many of us want to know how practical this step is, whether, indeed, it is practical, how it will work, and I think our judgment on this must turn very largely on the answers to a number of questions.
  First of all, is this to be voluntary or compulsory? Indeed, the word "voluntary" has many meanings. I recall that when I went to school the prospectus observed that membership of the cadet corps, then called the O.T.C., was voluntary, but added the comment that all boys of 15 and over then present in the school were members of it. "Voluntary", therefore, has a certain flexibility of meaning. But is it intended that the threatened or promised amendment of the Prices and Incomes Bill—which none of us has seen, including the Standing Committee engaged on the Bill, and, therefore, I think I am in order in referring to it—is to introduce any measure of compulsion or not?
  If not, has the First Secretary, have the Government, contemplated the position in which they are putting employers? What is to be the position of an employer who has promised an increase in wages but not yet put it into operation? Is he to carry the can for declining to carry out his promise on the basis of no more than a request from the Government? Is he to be in the position of facing, perhaps, a strike embittered by accusations of broken faith simply on the basis that the Government have asked him to? What is the position? What is the employer in that position to do? This goes further. There are cases, which the House knows, in which successive increases in pay have been promised in return for advances in productivity. The Esso case is one with which most hon. Members are familiar in which most hon. Members are familiar. There are cases in which increases in pay are agreed, with improvements in productivity in return. Is the employer to withhold or postpone that increase or is he not? And on what authority? Is he to go back to what is in these circumstances his undertaking?
  It goes further than this. About 3 million workers in this country are covered by agreements under which their wages rise in accordance with rises in the cost of living. It is common ground that
  1800
  there will be such rises. Indeed, it is the purpose, of this package including the use of the regulator, to effect just that. Are those employers—I want an answer to this, and I hope that the Minister of State will note it—are those employers, or are they not, to honour their agreements during these next six months? These are long-standing, long-running agreements, to which most of them will regard themselves as morally bound. What are they to do? What guidance do they get from the Government?
  There is a case of even greater difficulty than this, that of the wages councils. Where there is a wages council award—I speak subject to correction by the Minister of State on the matter—am I not right in saying that the Ministers responsible cannot reject the wages council award; they can only send it back for reconsideration? If in fact the wages council persists the Minister has no option but to accept the award. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), who has been Minister of Labour and who has great familiarity with this, confirms the view I put tentatively. What is to happen? It is my understanding that where a wages council award is put into force it is legally enforceable. Are the Government, through legislation, to relieve them of these legal liabilities and ask the employers to repudiate them?
  What about the position of the Agricultural Wages Board? As I understand it, its awards are enforceable. What about an award at arbitration going through now with both parties having accepted the obligation to accept the award whatever it is? What is to happen to an award from the Industrial Court during this period? If we are to be persuaded that this is an effective policy and not a mere empty gesture we really have to be satisfied that the Government have thought this thing through and have positive answers to these questions.
  Mr. Arthur Lewis: I am in agreement with every word the right hon. Gentleman has said. Would he add a further one? What is the position where a case goes through the normal channels and which has taken six months to resolve and then is referred to the Prices and Incomes Board? Does the Prices and Incomes Board accept and recommend it? Is it

  1801
  to be told, as I understand is the case, by the Government that those employees cannot have that increase?
  Mr. Boyd-Carpenter: I am glad to say that that is for the First Secretary to answer, and not for me but I hope that that question from one of his hon. Friends may be added to the list.
  When he made his statement I asked the Prime Minister some of these questions. He merely said that it was a matter for discussion. We really must know a little more tonight.
  How are the Government going to act in their own sphere where they have control? In respect of the Civil Service, is the Whitley Council system to be put in cold storage? Are the Government going to override Civil Service awards at arbitration? Hon. Members will remember the ferocious attack made upon my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) for his even more modest efforts in that direction. What are the Government going to do in the sphere of the nationalised industries? It is our experience that, with happy disregard for the profit motive, they have often Jed the way in inflationary wage increases. Are the Government going to give directions to the chairmen that they are not to concede any request in the next six months, and only modest ones thereafter?
  Then again, if this is to be voluntary action by private employers, and if private employers are put into the position of great difficulty of the matter being left on a voluntary basis by the Government, they really will expect the Government, if this is their policy, to see this enforced in their own spheres, and the nationalised industries, of course, comprise one of them. What is the direction to the nationalised industries?
  I ask the First Secretary to deal with these questions when he replies. Because opinion outside wants to know whether this is to be just one more appeal for moderation—and the First Secretary's appeals for moderation in the last 18 months have been a conspicuous failure. People outside, who think this is only an appeal, will be very much affected by these answers, and in particular they will deduce from these answers whether this policy has really been thought out and
  1802
  whether there is real determination and not just a general hope.
  I want to refer to two other matters only, one of which is public expenditure. I agree with the hon. Member for Stoke-on-Trent, Central that one of the casualties of this should be the £130 million premium on the Selective Employment Tax. If other matters are to be cut, it seems to me that this is a very proper cut. However, there are others. I am bound to say that I was disappointed by the fact that the Chief Secretary in a Written Answer yesterday gave an indication of cuts practically all of which are in the field of investment; for example, in the investment in nationalised industries resulting in the postponement of the re-equipment of plant of some of the basic services. There are very few cuts in the field of consumption.
  Hon. Members may ask what I suggest. I suggest reversing the Government's decision on prescription charges, and I suggest, too, looking closely at the current expenditure of local authorities. Let me give the Minister of State one positive example, which I have already taken up. The Greater London Council has announced its intention to spend something like £600,000 a year on a new information service, and it proposes to start it at the very moment when the Government are asking people to cut back existing expenditures. I asked the Minister of Housing and Local Government whether he had been consulted about it and what he was going to do. He gave me a written reply, the effect of which was that it was nothing to do with him and he had no powers. Constitutionally, no doubt that is right, but the Chancellor of the Exchequer has powers by legislation to alter the grant to any local authority which indulges in wanton and extravagant expenditure at this moment.
  We shall judge the Government's handling of this very strongly by whether they allow this expenditure, because it is an open secret that the real reason for the initiation of an expensive project of this kind at ratepayers' expense to explain to the citizens of London how well they are governed by the G.L.C. is not wholly unconnected with the fact that the G.L.C. has an election next April. Therefore, I suggest that it will be a test of the

  1803
  Government's sincerity to tell the Greater London Council that it will not be entitled to get away with impunity at this time with an extravagant and politically motivated project of that kind.
  I come next to the squalid touch of the Surtax surcharge. As the Minister of State knows, it is completely irrelevant. It is the experience of hon. Members that Surtax is not always paid with complete punctuality, but it is not even payable until September of next year. Is that an indication that the Government expect this emergency to last at least that long?
  When my hon. Friend the Member for Stratford-on-Avon (Mr. Maude) asked a Question about this yesterday, the Financial Secretary tried to argue that Surtax payers would cut back expenditure now in order to meet this liability. But it is not the habit of any taxpayer to collect money in a little plastic bag labelled "For Jim"—[Interruption.]—to meet tax which will not be payable until 15 months hence. One of my hon. Friends says, "With love", but I doubt that in this case.
  Apart from the time factor, is increasing taxation to the level of 19s. 3d. in the £on certain incomes likely to help us out of this emergency, when one remembers that we are already the highest-taxed nation in the world and that the tax falls upon extremely useful members of the community—[Interruption.] I hope that hon. Members opposite do not dispute that, because it falls upon every member of the Cabinet. I will accept that that argument is against me. However, there are a great many other people who are much more useful, such as technicians and executives. It is common experience that, at a certain level, it is difficult to provide additional payments for an executive whom one wants to move to another job because of the problem of compensating him adequately.
  Is this or cutting back the travel allowance to £50 a year likely to help give the required incentive? After all, £50 is spent on holidays in Europe by many people of moderate income. It does not affect the rich, because they go to the sterling area, to their houses in the West Indies. It affects the ordinary people who wish to get a touch of sunshine on the Mediterranean, many of whom work hard
  1804
  and save hard throughout the year for their holidays.
  The theme which I want to leave with the House is that both the Surtax and the travel allowance indicate that the Government have not yet understood what makes a free economy tick and that the legitimate desire that hard work should produce personal reward for oneself and one's family is the dynamism of a free enterprise society. A Communist State can be run without it, but a State which is 80 per cent. private enterprise cannot be run by damping down and discouraging the most enterprising sections of society from taking on extra work and extra responsibility.
  The Prime Minister referred to the effect upon the mood and feeling of the country. It is there, above all, that these measures fail. They offer not the faintest contribution to restoring the zip and dynamism which our economy needs. They simply pile a mass of worthy and respectable but painful and unpleasant burdens on the shoulders of the most heavily taxed people in the world, and then the Government are surprised if our economy is a little slack and sad.
  7.27 p.m.
  Mr. Russell Kerr: It will be agreed that we have heard a lot of interesting and well-informed speeches from both sides of the House over the past two days. For my money, the most interesting and relevant speeches have come from this side, I regret to say, and two of them came from my hon. Friends the Member for Salford, East (Mr. Frank Allaun) and the Member for Salford, West (Mr. Orme). The third one came from my hon. Friend the Member for Oldbury and Halesowen (Mr. Horner).
  The reason why I say that is not because I wish to be partial to friends of mine but because my hon. Friend the Member for Salford, East correctly pointed to the impossibility of providing any permanent solution to our problems unless something drastic is done to the enormous burden of our defence costs, which are running at the rate of over £2,000 million a year.
  As to my other two hon. Friends, I say it because they spoke with the

  1805
  authentic voice of the trade union movement in pointing to the irrelevance of many of the present proposals to deal with the wage freeze and that kind of thing.
  If I understood my hon. Friends, they all agree that the basic malaise of the British economy is that it is unable to sustain the present level of overseas expenditure, both on the military side and in terms of overseas aid—which runs at the rate of £454 million net a year and, represents about 9 per cent. of what we earn from exports of all types—without a great strain on our balance of payments brought about in large part because of our attempt to hang on to the last vestiges of our Imperial grandeur in maintaining sterling as a reserve trading and exchange currency along with the dollar.
  What has emerged most clearly from the debate is that we have not a cat in hell's chance of avoiding stop-go economics so long as sterling plays such a large and over-rated part in international financial affairs. What the ultimate answer should be is difficult to say—perhaps some new reserve currency unit such as the Chancellor was discussing some time ago, or perhaps allowing the dollar to get on with the job alone. All that one can say is that Britain's present economic situation is such that we can no longer afford the luxury of acting as a major world banker, and therefore some other way must be found.
  In my opinion this should not worry us unduly. Although precise figures are difficult to come by, the finances of the country, despite what was said this afternoon by the hon. Member for the Cities of London and Westminster (Mr. John Smith), benefit only to a modest extent, perhaps by no more than £100 million a year net, from our international banking rôle, and that benefit is confined largely to the friends and former colleagues of hon. Gentlemen opposite in London E.C.2, rather than helping the more deserving sections of the community.
  As against this highly marginal benefit, by retaining sterling as a reserve currency we place the economic well-being of Britain at the whim of a motley collection of E.C.2-type characters, perhaps without the bowler hats, who not only
  1806
  have a pathological fear and hatred of everything Socialist, but react in somewhat similar fashion to anything even expansionist in economic terms.
  I regard it as of the utmost importance that Britain—particularly Labour Britain—should begin immediately the urgent task of insulating, by whatever means necessary, our economy from the self-seeking inanities which have become part of the folklore of the international financial community, and against whose disastrous counsels some of us, at least on these benches, are determined to wage war to the finish, or at least until such time as our gnome-like brethren in Zurich—and their friends in London, E.C.2—act in awareness of the biggest single political fact of our time, namely, that more than half of the world's people are at this moment hungry.
  In addition, there is another aspect of our economic situation which should be stressed—it was touched on by my hon. Friend the Member for Salford, West in his very interesting and courageous speech yesterday—because in my opinion it affects very much the vexed question of how to avoid imports going up by leaps and bounds when economic expansion takes place, whilst at the same time acting in a way which will avoid retaliatory action by our friends in G.A.T.T., E.F.T.A., and elsewhere, as well as taking account of our international obligations.
  I am pleading for selective import controls. I find it very hard indeed to understand the Government's fear at the prospect of introducing such selective controls. No one pretends that there would be no snags or difficulties, but I believe that the way forward in this direction has been pretty carefully mapped out for the Government by an outstanding Cambridge economist of the younger school, Michael Posner, who, happily, is shortly to move to the Ministry of Power as Chief Economic Adviser. He showed the Government the way in an article published on 23rd July last year, entitled, "The Arithmetic of Controls". That was just 52 weeks ago today.
  In my opinion Posner's article should be required reading for all Government economic Ministers and their officials. He points out that a system of quantitative restrictions on certain categories of commodities could save about £200 million, whilst leaving 90 per cent. of our imports

  1807
  unaffected, and our trading relations not significantly disturbed.
  Excluding from the exercise, for a variety of reasons, such imports as raw materials, most semi-finished manufactures, basic foodstuffs, even also, and alas, chemicals—which at present cost us about £250 million a year—and certain types of machinery, in his article Posner says that we are left with about £40 million being spent on luxury foodstuffs, £250 million being spent on assorted machinery and consumer durables, including £50 million on foreign motor cars, a figure which has risen since he wrote his article, and about £250 million being spent mainly on consumer goods, including things like foreign-made clothes, handbags, cameras, and so on.
  A 30 per cent. cut in that total of £540 million would save about £180 million from our import bill, and, along with other measures, including the cut in holiday spending abroad which the Government have announced, and heavier cuts which we should like to see in arms expenditure, as was suggested yesterday by my hon. Friend the Member for Salford, East, together with perhaps even more stringent controls over capital exports and overseas investment, would take us a long step towards financial independence and solvency.
  I believe that only vigorous intervention by the Government into the economic and financial affairs of the country—"purposive economic planning" if I may quote a phrase used by the right hon. Member for Kingston-upon-Thames (Mr. Boyd Carpenter)—can take Britain out of the valley of the shadow of economic death, and who better than a Labour Chancellor to lead the way?
  7.35 p.m.
  Mr. Michael Hamilton: I enjoyed the speech of the hon. Member for Feltham (Mr. Russell Kerr), as I have enjoyed all the speeches in this two-day debate, and very good they have been, from both sides of the House.
  My overriding impression is that throughout this debate the Government have found remarkably few friends. I have the feeling that all the benches in this Chamber, with the exception of the Treasury Bench, are in agreement on the words of the Motion:
  1808
  "That this House has no confidence in the competence of Her Majesty's Government …"
  and, of course, if we are honest with ourselves we admit, do we not, that no back bencher in any part of the House has any confidence in any Government? That being so, I think that my suggestion of camaraderie between the back benches during this debate has some merit in it. I hope that this impression may translate itself into results when we go into the Lobbies tonight to divide.
  It is exactly a week ago this afternoon that the Prime Minister announced his latest measures. A week has passed. Yet further and more drastic medicine has been given to the patient, and if we are honest with ourselves again we must admit that the patient shows no very healthy reaction. As far as I know—I do not know what happened at closing time—the £today has been drifting, and there is nothing to persuade any of us that these measures have restored confidence. We have all thought very deeply about these measures. We are all conscious of the gravity of the situation, and I wish that my conclusions were rather less controversial than they are.
  My first conclusion is that there is nothing surprising about this sterling crisis, nothing unexpected, nothing unforetold. My second conclusion is that this sterling crisis can be dated precisely to October, 1964, when, even while the Labour Party was celebrating its victory, like Belshazzar at the Feast, the writing was on the wall.
  Mr. Gwilym Roberts rose—
  Mr. Hamilton: I should like to give way to the hon. Gentleman, but many of my colleagues wish to take part in the debate.
  "The plain fact is that a Socialist Government cannot hope to make a success of administering a capitalist system, because they do not believe in it."
  As senior Members know, that was said by Lord Attlee. I thought it a perfect example of a comment on the capitalist system today by the Prime Minister who stigmatised the system and referred to it as "grabbing without any self-restraint".
  Another quotation:
  "I cannot imagine the Labour Party coming into office without a first-rate financial crisis."

  1809
  Many hon. Members will recognise the speaker. He was mentioned earlier today—the late Sir Stafford Cripps. There is one more quotation from the former right hon. Member for Dundee, West, the late Mr. John Strachey, who said that if a Labour Government were elected—and this was in the 1950s—
  "the national reserves of gold, dollars and foreign exchange would pour out of the country in a torrent."
  He was a very distinguished member of the Labour Party.
  The Minister of State, Department of Economic Affairs (Mr. Austen Albu): Is the hon. Gentleman suggesting that we should have one-party government in this country?
  Mr. Hamilton: I am giving certain quotations by the hon. Member's former colleagues which I believe to be highly relevant to this crisis. I think that he is capable of following what I am saying.
  To me, these brief quotations summarise the present sterling crisis and put the tape measure round it. That is what is so tragic about the crisis; it is self-inflicted. We have brought it upon ourselves. We achieved it at the ballot box. We learn so little and forget so much. We have even forgotten the lessons of recent history—1924, 1929 and 1945. Today we pay for it. We have no more and no less than we deserve. Did the hon. and learned Member for Northampton (Mr. Paget) wish to intervene?
  Mr. R. T. Paget: No; I am sorry.
  Mr. Hamilton: My conclusion is that the birth of this crisis was in October, 1964. I remember that autumn very well. I remember the First Secretary—I am sorry that he has left the Chamber—coming to my constituency. He spoke in the market place. It was 20th September. I remember that there was a brush with some schoolboys which figured rather prominently in the national Press on the following day. They were very young, and did not understand politics.
  The First Secretary said:
  "We must put our economy in order. We must get Britain industrially on its feet again. We must get competitive in the world. Labour's economic plan is the only way we can do this"
  1810
  The schoolboys were very young. Labour's economic plan was something which went over their heads—or was it that, fresh from their lessons, they remembered the history of the Labour Governments from 1924 onwards as being a history of promises unfulfilled and hopes disappointed.
  We had a lot of very interesting speeches that autumn. I remember the Prime Minister dazzling the citizens of Edinburgh. He told them about the great outside world and about the central bankers of Europe. Since moving into Downing Street he has six times been either to the International Monetary Fund or to the central banks—in November and December, 1964; in February, May and September, 1965, and in June of the present year. He told these Edinburgh citizens:
  "The central bankers will before long be demanding that Britain puts her house in order."
  How right he was ! How prophetic were those words. Here we are within 20 months, and the world has lost faith in the value of British currency.
  Yet no Socalist Government ever started off with a greater fund of good will among the business and financial community. No Government could have dissipated it quite so fast. At home, the small businessman, the small shareholder and the small property owner have been treated as if they were just so many obstacles on the road to State control. Relations between this Government and private enterprise could hardly be more strained. I thought that the remarks of the hon. Member for Feltham about the men who do their work in London, E.C.2, were a good example of this.
  Perhaps I may quote another example. I remember that recently the clearing banks responded to a directive from the Bank of England to limit lending and in so doing suggesting that it might be desirable that public expenditure should also be restrained. Immediately they did so some hon. Members opposite tabled a Motion denouncing this—as they called it—
  "blatant and insolent incursion into matters of party political controversy"
  Hon. Members: Hear, hear.
  Mr. Hamilton: I hear, "Hear, hear". The fact remains that this is typical

  1811
  Socialist resentment of criticism. It is typical Socialist hostility to the business community. Who but they could deny that what the clearing banks said was correct?
  It needs stressing that it is private enterprise which provides the wages and the employment of the bulk of our population; it is private enterprise which provides the profits and earnings upon which so much of our tax revenue is based, and it is private enterprise which provides nearly 100 per cent of our exports.
  I listened last night to the President of the Board of Trade telling the story of our export achievements in recent months—and a very fine story it was. But I could not help feeling, as he was speaking, that we could have done with the lost exports—the Buccaneer contract with South Africa, worth £20 million; the frigate contract with Spain, for £30 million, and the age-long tradition of Portugal buying her warships from this country. Instead we preferred our Socialist theories.
  I think that I can claim to have in my constituency the finest memorial to these 20 months of Socialist administration. I was looking at it only a fortnight ago. It is an aircraft, and at the moment there is no room for it in the hangar. It is standing outside in the long grass, not protected from the weather. I noticed a blackbird's nest in the undercarriage. I hope that this aircraft will be allowed to stay there, but it is more likely to be hurried away rather quickly, because it symbolises too much. Until April of last year it was the spearhead of Britain's technological development. Here lies the TSR2; died 6th April, 1965. Here lies the British aircraft industry. Here lies achievement—years ahead of any other country in the world; done to death by a Socialist Government which preferred free prescriptions, and done to death by a Socialist Government whose theories have wrecked the nation's economy.
  I see no early solution to this crisis. It will play hell with my constituency, and it will play hell with all Members' constituencies. We endure ever-increasing taxation, ever-deepening austerity and restriction upon restriction. Yet I do not see these latest measures helping, although they may be a palliative. As my
  1812
  right hon. Friend the Leader of the Opposition has pointed out, this crisis is a crisis of confidence in the Labour Government. So long as this Government continue, so long will the crisis continue—[HON. MEMBERS: "Rubbish."] Oh, yes. As yet, we have felt only the first drops of rain. The £is on the dole and our prospects are damaged—this must be faced—for years ahead.
  I see only one solution, and that is a return to the ballot box. [HON. MEMBERS: "What, again"?] Yes, again. After that, there will be plenty of time to wear shorts and sandshoes on the Isles of Scilly, plenty of time for writing memoirs. Buy it on the bookstalls—"Our Island Story: From Huyton to St. Helena. Mini-Resignations I Have Known. What Socialism Did to Britain in Twenty Months." Then, as in 1931, as in 1951, the Conservative "Salvage Corps" will have to go in.
  7.52 p.m.
  Mr. Alan Williams: It constantly amazes me that Conservative speakers can in one breath speak tearfully of the plight of the Surtax payer and in the next spit out words of animosity because we do something to help people who are sick and on low incomes. Their numbers in the House would be a little stronger if only they could arouse the same enthusiasm for the needy in our community which they raise for the affluent.
  I would ask the indulgence of the House for the speech I am about to make. I came here this afternoon—I notified the hon. Member concerned—specifically to answer a speech made during yesterday's debate. I am sure that many hon. Members—particularly the older ones—have been in a similar predicament, finding that the flow of the debate has drifted away from the point they are interested in. For this reason, I beg the tolerance of the House. I will be particularly brief, but I will make points which I think must be made from the Government side in answer to an attack launched on the Government during the debate yesterday.
  Many hon. Members who, like myself, heard the maiden speech made by our most recent Member, the hon. Member for Carmarthen (Mr. Gwynfor Evans) may have felt, as I did, that it would

  1813
  have been an ideal speech had it been delivered in some other place, such as the Welsh Nationalist Summer School, but which was hardly appropriate to the proceedings of this House. We were treated to such diverting gems as the claim that the Welsh people
  "… are treated quite as well as any slaves in history."
  The hon. Member further aroused himself to enthusiasm when he said that he
  "… can think of only one European nation which is governed as badly as Wales…"
  Those of us who heard this were all agog to know which State was as badly governed as Wales. We wondered whether he was going on to say that it was Eastern Germany, or Hungary, or Spain, or Portugal. It seems, however, that he was referring to Brittany.
  I feel that the voters of Wales and the voters of Carmarthenshire might care to bear in mind that their new representative in this House finds Fascist and Communist dictatorships preferable to the form of government which we have at the moment, or, apparently, which we had under our predecessors.
  The hon. Member's contribution was made to the economic debate. Here again, he took perhaps a predictable line of approach. In effect, he washed his hands of it. He said:
  "This is an English crisis"—
  Many of us may feel that we would like to get out of it as easily as that—
  "but as usual, the Welsh people have to pay more than their share of the price."—[OFFICIAL REPORT, 26th July, 1966; Vol. 732, c. 1498, 1501, 1500.]
  Looked at in realistic terms, we could ask, even if Wales had a form of government of its own, even if it were independent, does the hon. Member seriously think that an economy like that of Wales, geared so much to producing goods for the economy of Britain as a whole could avoid the backwash simply—
  Mr. T. L. Iremonger: On a point of order. Would it be in order to inquire whether the hon. Member for Swansea, West (Mr. Alan Williams) has given notice to the hon. Member—
  Mr. Williams: I did.
  Mr. Iremonger: —who made a maiden speech? Is it customary in this House to launch a personal attack on an hon. Member, even if he has been given notice, who is not in his place, and who has made a maiden speech?
  Mr. Deputy Speaker: It is not customary to criticise a maiden speech at any length, but certainly not unless the maiden speaker has been given notice of that intention.
  Mr. Williams: As I said earlier in my speech, when I explained the position to the House—I am sure that most hon. Members heard me—I sent a note to the hon. Member for Carmarthen to tell him personally of my intentions; he was in the House at one time. I have, therefore, done everything in my power. I think that the House will bear in mind that I have not done as the hon. Member for Ilford, North (Mr. Iremonger) said, and made a personal attack. This I have not done and would not do, because I have a great personal regard for the hon. Member, whom I know well and who is a particularly nice person—
  Mr. William Price: On a point of order. Was it not made clear that if maiden speakers indulge in controversy, they can expect to take the consequences? This, as I understand it, is exactly what the hon. Member for Carmarthen (Mr. Gwynfor Evans) did.
  Mr. Deputy Speaker: That does not raise a point of order. This matter resides in the conventions of the House. Since the hon. Member for Swansea, West (Mr. Alan Williams) has said that he gave notice to the hon. Member for Carmarthen (Mr. Gwynfor Evans) I think that that complies with the conventions of the House.
  Mr. Williams: In any case, I believe that it is our attitude to help a maiden speaker during his speech by not interrupting. But that does not mean that he is absolutely free from criticism for anything said during that speech. I am sure that the hon. Member for Carmarthen would not want to be free from criticism, any more than any of us would.
  Let us look at the point of view of the Welsh people, who have to bear "more than their share of the price",

  1815
  of this "English" economic crisis. Even if there were this elusive Parliament for Wales, that country still could not escape these economic facts. The hon. Member quoted, for example, the Selective Employment Tax. In Wales, the employers of 30 per cent. of the insured population will not be receiving the rebate, compared with nearly 35 per cent. in the country as a whole. On this point, the hon. Member does not have a valid argument.
  In any case, virtually the whole of Wales is a development area. This is a particularly important part of the Government's present policy, in that exemption from restrictions is given to these development areas, the very areas which most need aid and employment. We are arguing that development areas may be in a fairly strong position, particularly the more established ones, to defend themselves. Many of them have the more recent factories.
  I know that it is commonly argued the opposite way, that it is the subsidiaries which suffer, but it could be that because the subsidiaries have more up-to-date plant than the large national firm, they may survive these attacks even without special treatment.
  The hon. Member said that unemployment in Wales is three or four times as high as in the South-East of England, but many hon. Gentlemen who represent English constituencies could probably say the same. It is not fair to take the area with the highest employment in England, which is admitted to have over-full employment, and try to treat it as the norm, which is what the hon. Member was trying to do. Surely it is because we recognise that the South-East of England is receiving an undue proportion of resources that we have proposed restrictions. The more relevant fact is that in Wales 98 out of every 100 of the insured population already have jobs. In every 100 insured workers in Wales, there is one fewer at work than in England. That puts the matter more in perspective.
  I said that I would be brief, and I should have been even briefer but for the points of order that have been raised. Confronted with a position in which there could be unemployment and redundancies in the coal mines and redundancies in the steel industry as the result of techno-
  1816
  logical change, there are two possible approaches. The hon. Member for Carmarthen took one when he virtually implied that we should not allow these technological changes to take place because they mean redundancy. But this is the surest way to long-term unemployment.
  The other solution, which is the choice of the Government, is to ensure that adequate alternative work is available for those who will be redundant. This, surely, is the sensible solution, as I think both major parties accept. Over the first 12 months of office we created in Wales 60 per cent. more new jobs than had been created on the average of the 13 years that hon. Members opposite formed the Government. Last year there were 31 new firms and 15 extensions. During the first six months of the year—and these are significant statistics for Wales—5 million square feet of factory space have been subject to industrial development certificates. This is more in six months than in the years 1961, 1962 and 1963 all taken together.
  On this basis I claim that Government policy is Wales is extremely relevant. The prospects for Wales are extremely good, and I am sure that all Welsh hon. Members, perhaps with one exception, see that we are approaching this problem in the correct way.
  8.3 p.m.
  Mr. David Howell: Although I am of Welsh ancestry, I feel that, reluctantly, I must drag the House away from this fascinating quarrel in the Principality and back to the main theme of the discussion. I interpret the main theme as one which has concentrated—and this is very encouraging—on where we go now rather than how we have got here. We have heard much analysis of the past from some hon. Members, but most of the valuable contributions from speaker after speaker have concerned the question: what do we do now in the economic crisis? It is heartening to see how constructive they have all been, and constructive in a direction which is contrary to that taken by the Government Front Bench.
  Indeed, it is extraordinary how every one appears to be out of step except the Government Front Bench. The public is out of step, hon. Members on both sides

  1817
  of the House are out of step, commentators in the Press are out of step and the Government, such as they are, are right. I feel that they could be left with a motto from Edmund Burke—that we have a very good Ministry and a very bad people.
  It is not surprising that a number of hon. Members have said that there is this almost universal line-up against the proposals which the Government Front Bench have put forward because, in essence, in looking to where we go now, what the Government have put forward is the same as before. We have reached a major turning point, a watershed, in politics and in public debate about economic matters—a time when a great deal of new thinking is coming forward, many valuable contributions to economic debates are being made and many hon. Members on both sides of the House have some genuine, new ideas to contribute to the management of a modern full-employment economy, combining that with other economic aims.
  At such a time the Government Front Bench have come forward with two main proposals which are, in essence, along the old lines. The first is for a primitive, overall restriction, an attempt to hit demand on the head. I personally believe—I may not speak for all my hon. Friends—that this is a discredited approach to the management of a full-employment economy. The second idea is a development of the incomes policy carried to its logical next step, a wage freeze. This, too, is a discredited approach. It has no relevance either to the question of short-term economic management and to the longer-term question of trying to bring flexibility and a reformist element into our wage and salary structure. It does not surprise rite that we have had almost all-round opposition to the two main ideas which inspire the latest dose of Government measures.
  Nor do I think that it is of any great value for us to suggest that some other instant 10-point package or alternative remedy can solve our problems at present. In a sense we have had enough instant policy and enough superficial 10-point packages. It could be argued that it is precisely this kind of approach, this "off-the-cuff" thinking which has led the country into the present difficulty.
  1818
  The point which I regarded as particularly interesting and important in the speech of my right hon. Friend the Member for Barnet (Mr. Maudling) was that there was a need for calmer and deeper thought on these very complicated questions, that we must get away from imagining that it could be done by packages and 10-point policies trotted out by any hon. Member or by any expert outside who cares to try to command a platform.
  Now may I put before the House two points on which, to my mind, deeper thought is particularly necessary and in which some intellectual break-through must be made if we are to make an effective contribution as politicians to the resolution of our economic problems? The first is that our aims are varied and diverse. Perhaps it is rather obvious to say that we have many economic goals, such as the management of a full-employment economy, the achievement of cost-price stability and the whole question of raising low incomes. But this does mean that we must approach the problem sensibly. It is no good coming before the House or the public with economic policies contained in slogans.
  The slogan and the banner which have been waved before us for some months is that the whole issue is one of incomes policy versus widespread unemployment. I always thought that this was very dangerous and silly. Now that we have an incomes policy of a developed kind and prospects of unemployment, it looks sillier still that this choice should ever have been offered to us.
  It is even more absurd that the Government have embarked on a policy in which an essential element is unemployment, or an increase in labour reserves. Yet, because they regard this as a "horrific and unthinkable" alternative, they are totally unprepared to operate an economic policy which has this element in it. The retraining facilities required for the kind of policy on which they are embarked do not exist. The attitudes, the facilities, the redirecting and redeploying of labour all require very careful and very detailed planning measures. These do not exist, because until a few days ago the Government had put the whole question of unemployment in the emotive and unthinkable category. Hence they are caught in a very dangerous position.

  1819
  It is incredible, but I have never seen a set of generals or staff officers proceed on a campaign with so little information, so few statistics, so few maps of where they are going or the terrain which they will cross, or so little knowledge of the kind of enemy they will encounter or the objectives of the campaign. That is what we are now embarking on—a Government policy in which the Government have taken no precautions and have ruled out of their thinking the need for precautions and facilities to assist the implementation of the policy.
  What it all amounts to is that the two words "incomes policy", which have so freely been thrown about by many people on both sides of politics, are no substitute for detailed fiscal and monetary management, which is a much more difficult concept to grasp. Everyone has learned Part One economics—the familiar aggregates, incomes policy, wages, unemployment, Budget surpluses, and so on—because these are relatively easy things to grasp. I have no doubt that even right hon. Gentlemen opposite were able to learn those prior to the 1964 election.
  When we move on to the Part Two economics, so to speak, things become more difficult because one must learn about sophisticated ideas of controlling demand through time; about such things as the timing and structure of measures to control demand. This is a far more difficult and complex task and the more one listens to members of the Front Bench opposite the more it becomes clear that a good deal is lacking in their absorption of the economic ideas contained in Part Two economics, some of which I gather, was rather hurriedly learned prior to the 1964 election. It seems that they stopped dead at the end of the easy part—about aggregates, wages, unemployment, and so on—without finishing the course and moving on to Part Two.
  The hon. Member for Stoke-on-Trent, Central (Mr. Cant) made this point with lucidity. I thought that his speech represented a ray of sense and clarity from the benches opposite as he went over some of the economic policies which the Government should be pursuing if they are to achieve the objectives which we all desire to see.
  1820
  Now, I have outlined the first fundamental point which it is important for the Government to grasp and I move on to the second. It is that if, as politicians, we want to be effective in contributing to the nation's economic recovery—which must be made, and of which this country is perfectly capable—we must come out of our ideological foxholes.
  I will give two examples of what I have in mind. The first concerns the public sector, about which a great deal of debate in the House and outside is now raging. But it is being conducted in sadly primitive terms. One group is saying that public spending is all perfect while the other group is saying that it is all bad, and that is about as far as the argument goes. But it is no good, in a mixed economy, having such dogmatic attitudes about public spending, saying that it is good and that anyone who opposes it is evil and that we must leave the present state of the public sector as it is.
  The problem of public spending lies at the heart of both our short and medium-term difficulties. We must inject into the public sector, as well as private, some radically new thinking. After all, the public sector is the one sector of the economy that has been growing during the past year and will, apparently, go on growing in the coming year. By my calculation, it will take up to 1½ per cent. to 2 per cent. more of the gross national product, which itself will be stagnating, if not contracting.
  In other words, all the extra resources that we have, after the Government's measures are enforced, will go into this sector of the economy. Yet this is the one area where the rays of managerial enlightenment have hardly penetrated, to judge from what has happened so far. They have hardly penetrated the primitive, dark forests of Whitehall where all sorts of activities go on under the name of "management". It really is essential to look coolly and long at the public sector and apply the techniques to it which are available and which could score colossal savings and increases in national efficiency.
  The second place where we need to come out of our present prison of ideas concerns the private sector. Here, too, it is no good looking at the general question in terms of it being either good

  1821
  or bad. Hon. Gentlemen opposite may have views on how big or small a private sector they want. Some say that it should be much smaller than it is, while others say that it should disappear altogether. But once they have decided on the size of private sector they want they must be prepared to pursue policies which will make that part of the economy left in the private sector really work well.
  It is no good merely having private sector and unless, at the same time, you introduce policies which will make it efficient. If we are to have a vibrant, efficient and enterprising private sector—and I personally believe that it should be considerably larger than it is at present—it is absolutely essential that the Government pursue policies to make that possible and not policies which can only make it impossible.
  It may be said that this is a simple point. However, it is fundamental to our difficulties. Because until we make up our minds about the relative size of the public and private sectors and pursue policies to make both perform with the maximum efficiency, a great deal of muddle will permanently undermine the country's efficiency and condemn us to limp from one crisis to another.
  If those two fundamental thoughts are grasped bravely by the Government, it would be possible to combine effective and active Government—remembering that the days of passive Government have gone—with free and highly efficient private enterprise, instead of having rather feeble Government trying desperately to sit on free enterprise and then complaining that it is not doing its job.
  It has been said that any revolution of attitudes, which is what we require if we are to get out of our economic difficulties, must be preceded by a revolution in the dictionary. I suggest that our first task, if we are to get on the road which leads to an expansionist economy, is to clear away some of the mumbo-jumbo surrounding what was called "new thinking" when Labour came to power. This is now utterly discredited and is out of line with the kind of thoughts and idea which we should be developing.
  Unless the Government realise—although, perhaps, the present Government never will—that slogans are not economic policy and that phrases like "incomes policy" and "purposive planning" repre-
  1822
  sent escape routes from the realities of modern economic management, they will never be in the position in which the real obstacles can be faced and we will never escape from the mists of all this verbiage. We will never achieve the momentum we require.
  Perhaps I am being staggeringly obvious in saying that we do not have a labour shortage. We certainly have the problem of overmanning, but this represents a labour surplus. It has been going on for a considerable time. If we solved this problem we could bypass the whole question of the dangers of overheating, with the need continuously to cut back demand. This should appeal to hon. Gentlemen opposite, because if we could solve this problem it would benefit all concerned. Certainly, we should attempt to solve it rather than continuing to argue about unemployment or about being unfair to trade unions.
  We should concentrate on the question of overmanning but, with it, we must consider the question of the present low incentives to save and work. Tremendous emotions are roused when this topic is discussed, but we must face the fact that there is a lack of incentives, monetary and others, to high wage earning, high saving and the sort of stimulus we want to see. The third obstacle is the one to which I have referred, efficiency in the public sector. This problem is not insoluble. It is a question of applying the best managerial techniques to public spending.
  Above all, however, the real obstacle, which has become sadly apparent in the last few days, is the fact that right hon. Gentlemen opposite have failed to grasp the techniques of demand management, techniques without which the chances of getting out of our present difficulties for more than a few months at a time are very slight indeed.
  If ever there was a need for a cool and calm look to be taken at the question of economic policies it is now. We must get away from the cry, "Either this package will do, or there must be alternatives; either it is a 10-point plan, or we must think of something else." Until the Government realise that all the 10-point plans in the world cannot take the place of real policies, we shall continue with a debate which, while interesting and sometimes amusing, in terms of

  1823
  the public interest and of a strong British economy is not particularly valuable.
  8.19 p.m.
  Mr. Norman Buchan: But for the speech of the hon. Member for Guildford (Mr. David Howell), I would have started by saying that the most marked feature of this two-day debate has been the total irrelevancy of the speeches from the other side. The hon. Member's speech has been the distinguished exception. Hon. Members opposite have in general been talking of the debate going on on this side of the Chamber, above and below the Gangway, but the real point that emerges therefore is that it is there that the debate is going on; that it is within the Labour movement and the Labour Party that the real debate is taking place, and the Tory Party has nothing except irrelevancies to contribute to the present discussion.
  We have listened to one or two interesting things, and one or two curious examples of Tory failure to understand English. The hon. Member who quoted John Strachey seemed to think that the crisis that might face the Labour Government—an outflow of capital, and so on—was in some way an indictment of the Labour Government. He did not understand that it was an indictment of the people whom he sought to defend. It was the business section which was referred to in that quotation.
  There is, therefore, every reason for this debate to be conducted on the Floor of the House with real srength on this side. Even where we feel compelled to disagree with our own Front Bench that is not a sign of disunity, but a sign, rather, of our unity of intention and purpose to get the country out of the mess created by the party opposite. When I make one or two critical points, therefore, I hope that that fact will be kept in mind.
  I should like, first of all, to raise one or two points on the general background. There has been a tendency on the part of one or two of my hon. Friends to feel that this crisis is entirely phoney. I do not think that that is so—although in every financial crisis there is a mixture of the phoney and the real; as soon as
  1824
  our financial stability depends on how people react to certain events, we get of course a touch of unpredictability and unreality.
  The real background is the problem of dealing with full employment. I do not believe that we on this side have solved that problem any more than the other side has—although I think that we have the tools to do so, which that party has not. There is also the imbalance, the permanent crisis of the balance of payments, but the astonishing thing is that, in real terms this country is in balance when we include the invisibles—a fact that seems to be continually forgotten.
  What has caused these recurring crises—the crisis that gave us the "Selwyn squeeze" of 1961, and the present squeeze? In a sense, the real crisis stems from the nature of our reaction to it. The biggest single cause that is bleeding away so much of our financial strength—and I know that this will be said to be the old record, but it is worth playing again—is the country's colossal defence expenditure in sterling—about £2,000 million plus, and the £270 million east of Suez. That is the kind of cost we have to bear.
  The Government have shed a lot of illusions—and the party opposite has not shed any—but they have not shed the final illusion; they believe that we still have a vast military rôle to perform. I heard a colleague criticising the speech of the hon. Member for Carmarthen (Mr. Gwynfor Evans) but I confess that to some extent I responded to the Welsh Nationalist Member when he said, "This is not the fault of Wales, but of English imperialism." In a way, I could understand that statement—we in Scotland also have to face that kind of treatment. The key question, therefore, is not a financial question, but a question of foreign policy and defence policy; it is a question of cutting down our overseas expenditure.
  Here I should like to draw attention to a report which appeared in the Financial Times on the morning when the Government statement was issued—Wednesday, 20th July. The report itself was from Washington, and was dated 19th July. It stated:
  "From the American point of view, three things stand out as immediately essential:

  (1) There must be more deflation in the British economy …

  (2) There must be … a more vigorous attempt to control incomes and wages.

  1825

  (3) Any cuts in overseas military commitments must be kept to a minimum …"

  We have only to read the speech made in this House on that subject last Wednesday to see how closely our involvement in the American alliance is dictating or, at any rate, affecting, policies taken here. I therefore state that we must first look closely at our defence commitments—at the actual alliances we are making and the commitments we are undertaking.
  The second point is that we are not discussing this subject in merely technical terms—though I enjoyed the speech of the hon. Member for Guildford—but are dealing with human beings. When I hear the terms "redeployment" I wince. I know what that means on Clydeside. It is all very well talking about a "shakeout" and redeployment. Redeployment in the South-East and the Midlands may mean a person losing his job for a week or so and then going into another. But I know that process of deflation going on unchanged will mean a cutting back, perhaps for years to come, of the beginnings we have been making—and we have started to make them, which is more than the party opposite did—to pull Scotland out of its previous state.
  The deflationary process we had in 1961, which was somewhat less than is now envisaged, put 137,000 people out of work in a few months. In that spring, in my own constituency and around it, in the area of Greenock and Port Glasgow, there was an unemployment figure of 11 per cent. That is not redeployment—it is one man in ten unemployed. These are human beings. We cannot any longer allow ourselves to have the handling of our society dictated by external financial problems created by our own illusions of our military rôle. It is that fact that we must get down to. I therefore have to give warning that I shall do anything I can to resist this redeployment, this deflation, this shake-up, as it affects the people of Clydeside and Scotland.
  The third point is selective import controls. I have been told that we cannot have selective import controls—G.A.T.T. would not like it, and E.F.T.A. would not like it. I understand the difficulties. I do not think we have had sufficient answer to our argument in favour of selective import controls, but I see the difficulties. I wonder whether the Gov-
  1826
  ernment would consider looking at import controls—very selective specific import controls—geared to assisting our productive needs, remembering the warnings about cushioning, and the rest, for our our productive and manufacturing industry, but selective import controls in association, as of now, with tariff reductions.
  Tariff reductions are coming in future between E.F.T.A. and ourselves. Why not do it now? We are dealing also with a short-term crisis. I believe that E.F.T.A. would be willing to accept selective import controls if they were associated with tariff reductions. I cannot see that we should be cutting across E.F.T.A. or G.A.T.T. agreements by using physical measures, but if it could not be done in that way we should use fiscal measures by the method of prior deposits so that we are not loaning money to increase our imports. I am trying to be constructive here. The Government Front Bench will know the point I am making and I do not need to labour it, but it is very important. Have they considered it?
  The second big factor along with military expenditure is the big bill for imports to this country. I have looked at some of the figures and discovered that the squeeze in 1961–62 reduced the intake of imports only by 2·1 per cent. at the highest and by 1·2 per cent. at the lowest over those years. In other words, using the sledge hammer of deflation at home with all the consequent social effects of 130,000 unemployed in Scotland, we dropped the total figure by only between one and two points. The moment it was removed the figure shot up to 125 points within the 12 months by the year 1964.
  We have to control manufacturing imports. We find that in 1961–62 they fluctuated between 98·4 and 101·3, but immediately the squeeze was taken off in the usual pre-election boom it shot up to 141 points by 1964. Therefore, this is not effective and does not work. We headed straight into boom and overheating the moment that it was removed. It was inefficient. It is inefficient because we are not getting the direct ratio effect of one to one. The inefficiency figure is something like 6 to 1 so that £1,200 million deflation might save only £200 million in imports. The social cost is

  1827
  too much and it is an efficient weapon. Therefore, we should look closely at the question of import quotas in conjunction with selective import controls, plus a reduction in tariffs,
  Thirdly, we should look at controls over overseas investment We have by no means completely squeezed that sponge, particularly as regards overseas development in the Mediterranean countries and the West Indies. The hon. Member for Guildford dealt extremely well with the question of prices and incomes policy. It will be very difficult, despite any decisions reached today, to get the right kind of agreement on a wages freeze or wage restraint when at the same time deflation is taking place. It would have been possible—indeed some of my hon. Friends may be surprised to know that I was advocating an incomes freeze—without deflation, not in conjunction with deflation. It could be done when involved with an expansionist programme, but not otherwise.
  If the Government are to bring in a wage freeze or wage restraint I am all in favour of wage restraint on some groups. We must not forget that incomes in the top 6 per cent. are equivalent to those in the bottom 40 per cent. In other words, nearly half the people are earning only as much as the top 6 per cent. are receiving. I am all in favour of a wage freeze on the top 6 per cent. The Government should think in terms of social justice, for that is the only way to get a response and to put a floor in the construction of the policy.
  We could say that there should be no wage restraint below, say, £20 or £25 a week but above that level we would consider a wage freeze. This would bring back social justice into the situation and it would also help under-developed regions. One of the economic problems is the imbalance of the regions. This would mean that the lowest paid workers would continue to have their incomes rising and would bring necessary money into the under-developed regions such as Scotland, the North-East and the North-West and thereby increase the economic efficiency of the country at the same time.
  In order to get a response to an incomes policy there should be a lowering of the Surtax level. I am sorry that the right hon. Member for Kingston-upon
  1828
  Thames (Mr. Boyd-Carpenter) is not present. I think that he said that it was terrible to lower the level of Surtax and that that, with the controls on travel allowance, would prevent ordinary people having two or three weeks' well-earned holidays in the South of France. He should say that to my shipyard workers, because not many of them get two or three weeks of sunshine in the South of France.
  I am in favour of lowering the level at which Surtax begins. I shall be told that this will reduce incentives. I do not believe that the incentives that matter work in this way. Those who are contributing to the manufacturing industries are not the top earners in the firms. The top earners are those who manipulate the shares and the bonds. The incentives of those who produce the machine tools, the new methods, the productive machinery, are not on that kind of level. They are incentives on the kind of level which would be hit if a wages policy of the type advocated by some right hon. Members opposite were adopted. The real incentive is on the more personal level of a man doing a worthwhile job. The wages of such a man and his fellows should be negotiated and increased along with a productivity agreement.
  I am alarmed to think that there is a danger at present of creating another class of injustice if an incorrect wages policy is operated. If dividends are allowed to go scot-free, there is a danger that dividends, profits, and the like will be deferred for 12 months and then distributed as a bonanza. This cannot be tolerated. Perhaps the machinery of the Corporation Tax could be used. Could we strengthen that machinery so that, if there is any holding back of dividends in the meantime in the hope of getting a bonanza, they are creamed or soaked off?
  If I am told that this would reduce investment, that people are moved only by the profit motive, as hon. Members opposite think, that the reduction in the Surtax starting point and the creaming off of dividends would reduce private investment, there is a very good answer, namely, public investment. It is time we had more public investment. It is time we had the science-based industry which we talked about in relation in my area and in other areas. There is an old-fashioned answer. We used to call it "Socialism".

  1829
  From the cheer it seems that some hon. Members think it surprising to mention the word "Socialism" in the House nowadays. I hope that the Front Bench will remember it.
  8.37 p.m.
  Mr. Stratton Mills: I shall not follow the hon. Member for Renfrew, West (Mr. Buchan) in his argument, because at this time of night there is an obligation on those taking part in the debate to be brief so that others can participate. Hon. Members will, therefore, understand that I shall be reluctant to give way.
  Neither the Chancellor of the Exchequer yesterday nor the Prime Minister this afternoon attempted to respond to the Motion of censure, the most serious Motion which can be tabled by any Opposition. The speeches of the Chancellor and the Prime Minister were more of the type of a five-day teach-in, keeping the temperature down with a long statistical lecture.
  Little attempt was made to answer the accusation that the real reason for the crisis is not the gnomes of Zurich, nor the buying of gold by the Chinese. The blame rests firmly on the shoulders of the occupants of the Treasury Bench, who, by their mismanagement, have contributed excessively to the crisis.
  Another point which has struck me is that there have been precious few speeches from Labour Members supporting the actions of the Prime Minister and the Chancellor of the Exchequer. People have compared the Prime Minister with Ramsay MacDonald. That comparison is not entirely accurate.
  Mr. Iremonger: It is over-generous.
  Mr. Stratton Mills: A closer comparison is a comparison with David Lloyd George, who, by his oratory and brilliant mind, bewitched the electorate and won a classic victory in 1919. But eventually people saw through him, and that is what is happening now to the right hon. Gentleman. As my right hon. Friend the Member for Barnet (Mr. Maudling) said, people are rumbling him. Hon. Members opposite must realise that the Prime Minister is now repudiating everything in which their party has believed for two generations.
  1830
  My right hon. Friend the Member for Flint, West (Mr. Birch) is entirely right to say that these measures are the greatest deflation in this country's history. I read this morning some of the speeches made by right hon. and hon. Members on the Treasury Bench when they were in opposition. I shall not repeat them to the House this evening, but the complete world of unreality that they built up when in opposition can be seen in those HANSARD reports and in their election speeches. They are now saddled with those speeches. Part of the reason why they are having such great difficulty in removing those shackles is that their history is sitting on their shoulder and is particularly difficult for them to move.
  Why have we had this crisis of confidence and why, in the past week following the greatest deflation in history, has the not recovered as sharply as one would have expected? The reasons are complicated. What frightens me most is that the Government could put up Bank Rate to 10 per cent. and could take another £1,000 million of purchasing power out of the economy, but it would have no great effect on overseas holders of sterling, because they have now reached the stage at which they do not have complete trust and faith in the Prime Minister because they recognise his financial schizophrenia. Unless this situation is recognised, we shall drift on and on, and we shall be merely postponing yet another crisis.
  The other frightening thing is the way that overseas opinion is concerned about the failure of public opinion in the country to recognise how difficult and tight is the situation facing the Government today. Hon. Members can go out of the House and ask people in their constituencies—people do not yet really believe the true basic seriousness of the crisis. It has not come home to ordinary people; they do not believe it. The Prime Minister has helped in the past to create the myth that by verbal sides-stepping one can deal with economic problems. There is a duty on all hon. Members to impress on the people in their constituencies the great seriousness of the situation and the need to face up to it and to the changes which the Government are making.
  I was horrified this afternoon by the Prime Minister's suggestion that the nation had been caught by surprise by this

  1831
  economic crisis. That suggestion does not bear examination. I read the newspapers, and it had been clear since at least the beginning of this year that an economic blizzard was approaching. Anyone reading the Press and examining the level of the gilt-edged market would have seen all the danger signals. They were accumulating, and by the beginning of July they must have been sitting around the Treasury door in squadrons, because they were there to be seen.
  The Prime Minister said that they caught him by surprise. The real trouble was that he saw them coming early in the year and rushed a General Election at the end of March because he knew that after the measures which were presented last week he could not have faced the country this autumn. The Prime Minister's argument that perhaps, he was naïve and a little simple and that it was a bit of bad luck simply does not wash. The right hon. Gentleman has been caught out on this occasion, and the electorate will not forget it when their next opportunity comes to express dissatisfaction through the ballot box.
  I come now to the Prime Minister's handling of Press relations during the crisis. Hon. Members will recall that, on the Saturday, 9th and Sunday, 10th July the Press was very bleak as the crisis blew up, and it was quite clear—I shall not read all the cuttings—on Monday 11th July that guidance had been given from an official source to the Press as to the Government's interpretation of the crisis. I invite hon. Members to look at the newspapers for Monday, 11th July; they all told the same story. The best summary of what had happened appeared in the "Insight" column of the Sunday Times on 24th July:
  "Trevor Lloyd Hughes, Wilson's Press officer, issued strong denials that the situation needed such measures…. But thrughout Monday the guidance to journalists from No. 10 remained sanguine: no mini-budget, no need for deflation."
  The article adds that dealers in foreign exchange had gradually ceased to believe what the Government were putting out.
  It is justifiable for the Government Press Office to put out guidance to the Press on certain issues, but, in order to be clear about the composition of the
  1832
  crisis, it is essential that we be given the facts. I want the First Secretary of State to tell us exactly what was done by the Government Press officer on this occasion and to give us his judgment of its effect upon the development of the crisis.
  Now, the rôle of the Chancellor of the Exchequer. We often see the right hon. Gentleman in the House, smiling and confident—and virtually always wrong. History will say that his judgment is so bad that he must go down as the most complacent and incompetent Chancellor of the century. I shall not quote them to the House, but I invite hon. Members opposite to look through the economic predictions of the Chancellor of the Exchequer since he took office. Virtually invariably, his judgment has been wrong. Overseas opinion has very little faith in anything he says.
  There is a strong case now for the Prime Minister to get rid of him and appoint a new Chancellor of the Exchequer. This could be a vital factor in helping to restore foreign confidence. Moreover, the Prime Minister must give an assurance that he will not for ever be sitting on the desk of the new Chancellor. Let us have a strong Chancellor and one who is not dictated to by the Prime Minister.
  There is much more I should like to add, but I conclude in this way. The Prime Minister's statement means, inevitably, a cut in investment. This is so clear that I need not elaborate the point. It will mean unemployment in areas like Northern Ireland and in the development areas. It is a fact that men will be thrown out of jobs, whether or not the Prime Minister calls it redeployment or uses the old-fashioned word "unemployment". This, together with the Selective Employment Tax, will increase our difficulties in Northern Ireland.
  Yet the right hon. Gentleman talked today of sheltering the development areas. This is hypocrisy, for the combined effect of the Selective Employment Tax and the rundown of industrial investment will be fewer jobs in areas of that kind. The right hon. Gentleman promised us other things at the election. When the next election comes in Northern Ireland, his record will be remembered. The

  1833
  measures he introduced will be remembered. His incompetence and mismanagement of the economy will be remembered. He will go down in history as one of the worst Prime Ministers of the century.
  8.50 p.m.
  Mr. Alan Lee Williams: We have had today an atmosphere of Alice is Wonderland, with the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) making a political comeback. He need only justify his record over Suez and he can retire with full honours.
  I shall concentrate principally on measures that I believe ought to be taken for the future. We have heard, in my view, too much about the past, and have had to:) many party points from hon. Members opposite in attempting to justify their record. On this side of the House, we have tended to concentrate upon obvious things and to say that this or that reason is the one reason why we are in our present predicament.
  I believe that the matter is far deeper than that and that the time has arrived for reckoning our economic capabilities. If we do not take advantage of this challenge the country will deteriorate economically until we become just an interesting museum with toy soldiers guarding Buckingham Palace. We need to get down to the question of modern economic planning.
  I do not believe that the crisis has in any way discredited the concept of planning. My complaint is that the planning that we have had to date has been on the optimistic side and has failed to take into consideration fundamental reforms on both sides of industry, including the trade unions. We still have far too many trade unions. In various industries and crafts we are still seriously overmanned. On the other side of industry, we still have amateur business men, and people are promoted for the wrong reasons—their connections at school or in high places. This is one of the reasons why we find ourselves in our current position. So we have the present tiresome process.
  I came into politics round about the crisis of 1951 when we had the nearly disastrous arms budget. Since then Governments have pared the cost of arms. In fact, the proportion of the gross national product spent on arms today is less than in 1951, but the burden is
  1834
  still far too heavy. I believe that Britain still has an important peace-keeping rôle and I would not favour sweeping cuts which would impair that rôle. Nevertheless, we are spending too much on unnecessary military preparations. I am sure that there is a great area for contraction here, particularly in respect of support costs in Germany, and I also believe that now that the confrontation in South-East Asia has, we hope, ended we can save some costs there, but not, I emphasise at the expense of Britain's peace-keeping rôle.
  One of the most disturbing things we have had in the past few years and which, I think, has shown itself very clearly in the last few months, is that the economic crises we have faced generally have been of a psychological nature. We seem to have lost confidence in ourselves. Although the recent economic situation was a serious one, I cannot help saying that the hysterical leader writers in various newspapers contributed very seriously to the subsequent difficulties. The fact is that we are blown off course by a series of quite superficial reportings and a lack of fundamental understanding of the British economy.
  It has been said by my hon. Friends, and I say again, that basically Britain's economic position is one which can be marshalled provided we can get down to a planned growth economy, and what this crisis has indicated, in my view, is the need for us to strengthen the positive sides of planning. I do not know, any more than you do, Mr. Deputy Speaker, the differences which occurred between the Treasury and the Department of Economic Affairs, but I want to go on record as saying that I myself am very much in favour of a high-wage economy and expansion, but I do not believe that the restrictive, recessionary moves the Government have taken necessarily mean that we have been permanently blown off this course of expansion.
  With patience, particularly with patience, if I may say so, on the other side of the House, and with support in the country, these measures which we have been forced to take will enable us soon—the sooner the better—to get on the course of purposeful planning which I myself believe not to be mere claptrap but to be part of our armoury as democratic Socialists to make sure that this

  1835
  country goes forward with increasing standards of living for everybody.
  8.57 p.m.
  Mr. Iain Macleod: I am grateful to the hon. Member for Hornchurch (Mr. Alan Lee Williams) for telescoping his speech. As the last backbench speaker in the two-days' debate, he made what I think was in these two days the only back-bench speech which was wholly uncritical of the Government's measures.
  I ought to start by paying a tribute, which I gladly do, to the two maiden speeches, one by the hon. Member for Carmarthen (Mr. Gwynfor Evans), and one by my hon. Friend the Member for Canterbury (Mr. Crouch), both of whom succeeded hon. Members who had friends on both sides of the House; and we were very glad to hear those hon. Members' speeches, and the tributes they paid to them.
  Even two days, or many days, would not be enough for this traumatic debate. I am sorry that a number of hon. Members on both sides have not been able to make their speeches.
  The reason why the announcement of last Wednesday is such a watershed in British politics was given by my right hon. Friend the Leader of the Opposition yesterday, when he said that it
  "exploded every myth, and shattered every illusion, which had been nurtured by the Left for years and foisted on the people."—[OFFICIAL REPORT, 26th July, 1966; Vol. 732, c. 1451.]
  We have come a long way in 21 months, because on 11th November, 1964, the present Chancellor of the Exchequer, condemning the 1961 approach of my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), said that the balance of payments had led him to
  "a credit squeeze, a pay pause and other measures which led to the slowing down of British industry and a high level of unemployment. On our first weekend, when the present Prime Minister formed his Administration, we determined that we would not tread that path again."—[OFFICIAL REPORT, 11th November, 1964; Vol. 701, c. 1023.]
  They are treading it now, and it is a rougher and a harsher road than any that the British people have ever previously been asked to walk.
  1836
  It is for that reason that there has been so much criticism, not just from this side of the House and from the Liberal benches but from the Government benches as well. The dialogue—it has been almost pleading with each other—has followed the same sort of course as it did on the Prices and Incomes Bill.
  Last night, when the President of the Board of Trade wound up, at one point in his speech he was picked up by an hon. Member who spoke from the Government benches when he started to play down these measures to show how small this vast sum of £500 million in domestic demand was. As he talked about relaxation, I murmured some comment which I am happy to see does not appear in the OFFICIAL REPORT, and the right hon. Gentleman asked me if I was alarmed. The answer is that I was, and perhaps I might tell the House why.
  It is a great boast of the Government that their unemployment figures are the lowest for 10 years. I well remember the time 10 years ago, because I was then at the Ministry of Labour. Those particular figures, which really I inherited from Sir Walter Monckton, were one of the many signs which we could see at the time were leading us into inflation and into a balance of payments crisis, which came in 1957.
  As my right hon. Friend the Member for Wirral said, inflation hurts the poor, the unorganised and those on fixed incomes. Those who are organised are all right, Jack; they can organise themselves out of it, in ordinary circumstances. Anyone who has been at the Ministry of Labour as long as I have—and I was longer there than anyone on either side of the House—has an attitude towards unemployment which, I am happy to say, he never loses. I never think of unemployment figures in terms of percentages, because it makes little difference to an unemployed man who sit at Westminster and on which side they sit. If a man is unemployed, for him it is a tragedy.
  I loath seeing the planning of recession and the planning of unemployment, whoever the Government may be who plan it. I loath one thing even more—and that was the purpose of my silent intervention in HANSARD last night—and that is infirmity of purpose. That is why on Thursday, 14th July, a date to

  1837
  which I shall return, after the Prime Minister had made his statement, and winding up the Prices and Incomes Bill Second Reading debate, I said in the course of a very brief speech:
  "I therefore urge the First Secretary to plead with the Prime Minister to do it soon—and this time please can we have no double talk to accompany it. Do it and say it and mean it, for there is no other way and indeed I do not believe that there is any other hope."—[OFFICIAL REPORT, 14th July, 1966; Vol. 731, c. 1840–1.]
  What has happened so often in the past 21 months is that we have had action watered down by words, so that further action had to be piled upon it, all to the suffering of the people of this country.
  If I might give one example—and there are scores of them—The Guardian had this to say on 5th February, 1965:
  "Mr. Wilson's message to a private meeting of the Parliamentary Labour Party yesterday was one of good cheer. He told his followers that things would now begin to improve. The economic crisis, with the unpopular measures it had demanded, was now virtually over. The future was bright with promise."
  It is that sort of remark made for that sort of purpose at a private meeting of the Parliamentary Labour Party that, all the time, has led those who hold and deal in sterling to doubt the intensity of purpose of Her Majesty's Government. We have had all the other illustrations that we know so well—the Chancellor saying that the 7 per cent. Bank Rate would not work through to the domestic economy, the measures in July, 1965, which he was going to resist, and which he resisted for a total of a fortnight before he brought them in, and so on. The right hon. Gentleman knows that these measures will hurt. They are meant to hurt, but it will be much less painful if we do not wrap reality in illusion.
  There is another illusion which is being fostered by speeches which we have heard from that Dispatch Box, and that is that there is some magic recipe for sheltering the development areas from disinflation of the economy. This is simply not true. All the measures which operate to create unemployment operate in the development areas. The regulator operates in the development areas. Hire-purchase restrictions operate in the development areas, so do Post Office charges, and so does the 10 per cent. on Surtax. So, too, do the
  1838
  various restrictions on holidays, and next year is World Tourist Year. What a wonderful contribution we have made to that institution by the measures announced last Wednesday.
  All this would be bad enough for the development areas, but it comes on top of the Selective Employment Tax. This tax will deal hammer blows to the remote areas of this country, where there is so little industry, and where they depend so much on services. It is, therefore, an illusion that we can somehow protect them. I wish that we could, and to some extent the measures which both sides have united in bringing in since 1961 may help, but they will help only marginally, and we should not try to create the illusion that unemployment will not rise fiercely in the development areas if these measures are to succeed.
  I want, now, to say a word about the one measure which was announced by the President of the Board of Trade last night in relation to hotels. It is an absolutely worthless proposal which the Government are putting forward. Let us consider what this industry has suffered in recent months. It has suffered the imposition of the Selective Employment Tax. It has had to put up with the withdrawal of investment allowances. It has had to put up with increased Purchase Tax on its essential equipment, and some of its products and goods are now going up in price. The effect of the S.E.T. alone will put up hotel costs by about £20 million a year.
  What are they offered? They are offered a loan at, I presume the going rate to be about 7½ per cent., for 15 years. It simply is not good enough to offer a loan as a substitute for the money which has been withdrawn from this industry in extra taxation, and these proposals, which have not been discussed with the British Hotels and Restaurants Association, are a useless exchange for the damage which the Government have done to this industry in recent months.
  The Motion concentrates on the incompetence of three men whom we regard as guilty—the Chancellor of the Exchequer, the First Secretary and the Prime Minister. The Chancellor yesterday made an admission that his Budget judgment was wrong. He was quite cheerful about this. He said, "Yes, I was

  1839
  wrong, and you were right", and on that he was prepared almost to leave the point. But the right hon. Gentleman gambled, as he gambled last year, with the economy of the country, and because he lost we are having this debate, and the people of this country will have to suffer the unemployment which is coming.
  Of course it was a difficult judgment to make. It always is, and I acknowledged in my Budget speech that it was a particularly difficult judgment this year, but the criticism which has come from this side of the House has been consistent. In all our speeches it has been almost a dialogue with the Chancellor since the day of his Budget. I put it the very day after his Budget. He will remember it. I talked about the danger of a soft and a hard Budget, or one that might be thought to be, and I said that the great danger seemed to me to be that the proposals did not operate on demand until the autumn. On 9th May the Chancellor replied to this point. He said:
  "If I understood his argument aright, it was that he would have preferred me to reduce purchasing power in the economy straight away rather than wait until September, when the Selective Employment Tax comes into operation. It is an arguable case; but I think the right hon. Gentleman is neglecting two points which I put forward and adhere to."—[OFFICIAL REPORT. 9th May, 1966; Vol. 728. c. 163.]
  He went on to say that the first point was the check in demand that was supposed to come over the next few months. This was the only economic forecast—this check on demand, following the Budget—that the Chancellor offered to us, and it was wrong. Demand was not checked; demand went on. It is no good saying, as the right hon. Gentleman said yesterday, that this was unforeseen. In the Second Reading debate on the Finance Bill, having rehearsed exactly the same argument about the timing of the Chancellor's proposals, I said that the Chancellor
  "justified this on what seemed to me to be a very strange argument about the course of demand anticipating the Budget. This can only be a trifling factor in the ordinary course of demand. It is far too slender a base on which to hang as much as the Chancellor has chosen to do".—[OFFICIAL REPORT, 25th May, 1966; Vol. 729, c. 632.]
  He was challenged at once on that, even in detail, and he was wrong and we on this side were right.
  1840
  He then produced the excuse about commodity prices. Anybody who has read the newspapers and knows what has happened in Rhodesia and Vietnam knew what was happening and what would happen to commodity prices. Then the Chancellor produced the question of import prices, which have risen—but so have export prices. The point was very efficiently dealt with by my hon. Friend the Member for Norfolk, Central (Mr. Ian Gilmour) in his speech yesterday. Although the price of imports has risen by 3 per cent. since January, the price of exports has risen by 2 per cent., and they have had the benefit of favourable terms of trade throughout the period since October, 1964.
  Finally, the last argument they produced, which the Prime Minister relied on again today, and relied on in his telecast to the nation, was the seaman's strike. They were blown off course. That is the alibi that they now put forward. I want to put two simple questions on this point. If it was the seaman's strike, which lasted all that time, which blew them off course why was there no planning, and why was there no plan when we came to 20th July? Secondly, if our economy is really to be blown off course because of one strike, how on earth does the First Secretary hope to mount a prices and incomes policy on the lines that he has been indicating? Does he hope, magically, that there will be no strikes at all—or is it to be that every time there is a serious strike we are to be blown off course?
  The Chancellor of the Exchequer, who has made various forecasts about the balance of payments, knows that those, too, were challenged at once when he made them so optimistically just before the election on 1st March, and he knows that what we said proved right and his estimate proved wrong.
  All this led up to his conclusion, at the end of the Budget, as the House will remember, when he considered all the possibilities of taxation and put them all on one side. He said:
  "I therefore put all of them on one side. There will be no increase in the rates of Income Tax, Surtax, Purchase Tax, vehicle licence duty or other Customs and Excise revenue duties".—[OFFICIAL REPORT, 3rd May, 1966; Vol. 728, c. 1453.]
  But we have them all now. We have the Selective Employment Tax, and the duty on beer has gone up; the duty on

  1841
  petrol has gone up; Purchase Tax has gone up, and hire-purchase restrictions have been imposed. These were put forward to the House at the time of the Budget as alternatives, not as additions which could be piled on at some appropriate later date. The Prime Minister this afternoon said that this crisis came out of the blue. Anybody with any experience of Government knows that that is absolute nonsense. These things do not happen like that. The First Secretary might like to deal with this point.
  How comes it that, on all these points—as I have shown—the Chancellor, with all the resources of Government and the Treasury, was wrong and the Opposition, on all these points and in detail, were right? How comes it that there was no contingency planning at all in the Treasury, just in case the Chancellor was not right, just in case some of the things which were being said from this Dispatch Box and by my right hon. and hon. Friends behind me turned out to be right? The Chancellor—he admitted this yesterday—has been proved to be comprehensively and massively wrong in July, 1966, as he was in July, 1965, as he was in November, 1964.
  I turn to the First Secretary of State. I agree with my right hon. and learned Friend the Member for the Wirral. The right hon. Gentleman had, in one sense at least, a hopeless task. I believe that it would be right to scrap the Department of Economic Affairs, because I do not believe that two people can be in charge of this country's economic direction.
  This can be put quite simply. The wage bill of this country is about £20,000 million a year. One per cent. of that is £200 million and 2 per cent. of that, £400 million, unrelated to productivity, would be a massive deflation in itself and would cancel out and has cancelled out many of the efforts—
  Mr. J. Enoch Powell: Inflation.
  Mr. Macleod: No; massive inflation which would cancel out the deflation which the Chancellor of the Exchequer, in successive Budgets, has tried to produce.
  I can understand the feelings of the First Secretary of State. I read in the paper that I am supposed to bully him
  1842
  about his resignation. I have no intention of doing that. But he is the apostle of growth, and Wednesday must have been a poignant time for him. He knows now that his National Plan is so much waste paper, that all those targets have now gone. He has led the House into a ridiculous position in relation to the Prices and Incomes Bill. We had hardly given a Second Reading to the Bill when we were told in the paper—it has not appeared upstairs, but it is in order to refer to it briefly—that we gave a Second Reading to a quite different Bill from that which is now in the mind of the First Secretary of State.
  I said during that Second Reading that what we were engaged in was not a Second Reading, it was a burial service. What the right hon. Gentleman has tried to do in introducing a new part of this Bill is to give the corpse the kiss of life. But one cannot do that. The prices and incomes policy as enunciated by the First Secretary is dead.
  Let us consider for a moment, because this is a matter which affects the whole House, the shambles which Government business is in at present, as we move towards the Summer Recess. Tomorrow, we are to have the Third Reading of the Finance Bill. But the Finance Bill is out of date now. It has no relevance whatever to this debate or to the measures which were produced before[Interruption—.] they were not. His right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said that much of this appeared—this was a masterly understatement—less relevant than it did at the time. That Bill has been slain by its parent, by the Chancellor of the Exchequer.
  Then we have the Prices and Incomes Bill. We are about to have a new Bill. I understand—there is no time to do anything else—that we are to have a danse macabre of the other place, with both of us simultaneously debating different prints of the same Bill and moving Amendments across intervals so that somebody can presumably meet in the middle and try to put the two together.
  On top of this we have the Selective Employment Payments Bill. That guillotined torso is still twitching. I put this in a neutral manner, Mr. Speaker, because the decision is yours, but heaven

  1843
  knows what will happen if the Leader of the House was right and the Selective Employment Payments Bill in fact is not a Money Bill and one that can be discussed and can be amended, as the Leader of the House told us, in another place, because in that case farce really will reign supreme. The utter slaughterhouse shambles to which Gov-'Lent business has been reduced by the sheer incompetence of the Treasury Bench deserves a Motion of censure of its own.
  To the First Secretary let me say that I am very glad indeed—I mean this sincerely—to hear that, however many qualifications and however many reservations there may be, the T.U.C. will give support to the Government's plan. No doubt he will tell us more about this. But I ask him, would he please learn from the experience of the Declaration of Intent? Would he please not boast too much and would he please not sneer at us too much? Because the Declaration of Intent of which he was so proud a year ago went wrong—and we know it; and one of the reasons why it went wrong was the way that the right hon. Gentleman made it at once a party issue in this House.
  I hope that the First Secretary of State was given notice of the questions put by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) about the operation of the wage freeze. They were extraordinarily cogent and important questions. Indeed, at one point the hon. Member for West Ham, North (Mr. Arthur Lewis) said that he agreed with every word that my right hon. Friend was saying, which startled me as much as it startled him. It worried us. We thought we might be wrong.
  Would the First Secretary tell us what is to happen to those workers—I believe there are 3 million of them—whose wages are tied to the retail prices index? What is to happen to agreements which have already been signed, sealed and delivered on productivity or some other basis stretching out into the future? What is to happen to those industries protected by wages councils, where the Minister of Labour stands, as he knows, in a very special position? I do not
  1844
  think that he can answer the next question off the cuff, but what is to happen in such cases as the doctors' pay award where, if the award is frozen and somebody retires, then from the time that it is frozen the whole of that man's pension will be affected? Shall we be told in a comprehensive White Paper the answers to these and 50 other questions, because until we are it is impossible for the House to make up its mind on these issues.
  I have one last question to the First Secretary. He thought it right to bring himself to the brink of resignation and then not to resign. We know what he thinks. I guess he still thinks it. If as First Secretary, as economic C-in-C, he has no confidence in these measures, why on earth should we have confidence in them? If he, as First Secretary and economic C-in-C, has no confidence in these measures, how does he expect foreign opinion to be impressed by them? I was delighted to hear that on his return from Germany, when he was asked his views on the Chief Secretary's withdrawn resignation, the Chancellor of the Exchequer said that he was pleased that he had withdrawn his resignation as he did not wish to change a winning team. Would the First Secretary please, for heaven's sake, tell us what they are winning?
  The third guilty man is, in our view, the Prime Minister.—[HON. MEMBERS: "Where is he?"]—Never mind. I wish that he had heard the speech of my right hon. and learned Friend the Member for Wirral this afternoon. He might have remembered his own comment on 25th July, 1961, when he said:
  "Perhaps it will take the smirk off the Prime Minister's face if he is reminded that the boasts of prosperity on which he won the last General Election are now being sustained by borrowing sixteen years after the war."—[OFFICIAL REPORT, 25th July, 1961; Vol. 645, c. 229.]
  Some chickens come home to roost, do they not? The truth of my right hon. and learned Friend's proposals was that they took £210 million out of the economy, which at present prices would be £250 million. This Government and this Prime Minister are embarked on a course twice as severe as that put forward by my right hon. and learned Friend in 1961. And the reason why they have to make it

  1845
  twice as severe is because in 1961, when the present Prime Minister spoke, my right hon. and learned Friend was believed, but nobody believes this Government. Both Peter Thorneycroft—[HON. MEMBERS: "Where is he?"]—If Peter Thorneycroft had fought his election after last Wednesday, he would still be in this House. He said it, and my right hon. and learned Friend the Member for Wirral said it, and they meant it.
  I think that one day we may be able to find out what was the cost of the Prime Minister's Moscow visit. I do not mean the cost of the entourage. I do not attack him on that sort of thing. I am talking about the sheer cost to our reserves of the inept delay which took place. Let us briefly run through that week. Sunday, 10th July, various articles in the Sunday Press; Monday, guidance given to the Financial Times and other newspapers, officially given from No. 10 Downing Street; Tuesday, that impromptu speech to the Prime Minister of Australia; Wednesday, the trade figures; and, Friday, that absurd performance of the Prime Minister in the House of Commons when he came to tell us that he was going to do something, that he was not sure what, and that now he was going off to Moscow for two days while other people worked out this particular battle.
  Now the Prime Minister goes to Washington. In an interesting editorial in the New York Times—
  Several Hon. Members Several Hon. Members rose—
  Mr. Speaker: Order.
  Mr. E. Shinwell: Anything wrong?
  Mr. Speaker: Order. The right hon. Member for Easington (Mr. Shinwell) must contain himself.
  Mr. Shinwell: On a point of order. Have you observed, Mr. Speaker, that for the past 20 minutes the right hon. Member for Enfield, West (Mr. Iain Macleod) has indulged in a long sneer, and are we not entitled to reply to him?
  Mr. Speaker: The right hon. Gentleman must reply in a Parliamentary way.
  Mr. Macleod: In an editorial in that famous newspaper, the New York Times, two days ago, this was stated:
  1846
  "In the near term, Mr. Wilson's urgent needs are to stabilise the pound and to restore his personal credit with other world leaders."
  I said that we brought charges against three men whom we regard as guilty. The charge against the Chancellor of the Exchequer, which he has already conceded, is not just that he was wrong but was improvident in his planning and that that has been very expensive indeed for the people of this country. The charge we bring against the First Secretary is that, for all his passionate beliefs in his own policies, those policies have been disastrous to our economy. The charge we bring against the Prime Minister is a simpler and a graver one. It is that, as long as he sits in this House, on whichever side he sits, my hon. and right hon. Friends do not feel that we will ever be able to trust him again.
  9.30 p.m.
  The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): Wherever Conservative Party propaganada speeches are regarded as valuable the speech of the right hon. Member for Enfield, West (Mr. Iain Macleod) will earn its reward, but in the country as a whole, which at this moment in our history has absolutely no such regard, it will be looked on as one of the most disastrous speeches that the right hon. Gentleman has ever made.
  I have now heard during this debate three allegedly major speeches from that side—[Interruption.] I must tell the Opposition their Chief Whip assured me that I would get a hearing tonight. As I say, I have heard three major speeches from that side of the House during this debate. They were made by the Leader of the Opposition, the right hon. Gentleman the Member for Enfield, West and his right hon. Friend the Member for Barnet (Mr. Maudling).
  The Leader of the Opposition and the right hon. Member for Enfield, West occupied themselves wholly with scoring the kind of party points one would expect them to score in this situation. The right hon. Member for Barnet distinguished himself by doing all that—and, if I may say so, doing it rather better than the other two—but in the middle of his speech there were 10 minutes of real constructive thought.
  Not one-third of the hon. Members opposite who are now present heard the 2G2

  1847
  right hon. Gentleman—[HON. MEMBERS: "Rubbish."] I advise the other two-thirds to read his speech. As for myself, as a Minister, clearly I cannot espouse it, but I must say that members of the Conservative Party ought to read what he said and decide whether they can go along with him.
  The froth we can push aside. The country outside is not the least interested —[HON. MEMBERS: "Oh!"]—in the kind of party points—[Interruption.]which was all the Leader of the Opposition and the right hon. Member for Enfield, West thought they only had to make, but the country is interested in that 10 minutes in the middle of the speech of the right hon. Member for Barnet.
  May I come to our position—[HON. MEMBERS: "Get on with it."] If this is one of those silly nights—all right. I tell hon. and right hon. Members opposite that if it is one of those silly nights it is not the night I am fighting. They can have it their way, but if they want to listen to a serious argument I should like to deploy it. I shall come to our position, I shall come to my own position. There are things to argue about in this situation, things which only the right hon. Member for Barnet raised today and, of course, it takes of lot of decision to decide where one is to stand at the end of the argument. We have decided.
  Any right hon. Member opposite could say that he would have chosen radically different decisions from the ones we have chosen. No right hon. Member opposite has said that except the right hon. Member for Barnet who raised it en passant, in the middle of his speech. The Leader of the Opposition did not raise it and the right hon. Member for Enfield, West did not raise it. If they do not raise it, and are not willing to raise it, they cannot attack us for what we are now doing. They have to discuss how we handle the situation, given what we want to do. I want to pose a question which the country, I think, would like all of us to answer. I pose it by stating our position. We want to manage the economy while keeping people at work, while using all our resources and yet, at the same time, to get the mobility
  1848
  of labour and investment in the industries which we need.
  Right hon. Members opposite know what they really believe. They think that the only way they could do this is to put a lot of people out of work and not use lost of factories, whereas we still believe that the economy can be managed. I now speak to my trade union friends as clearly as I speak to management. For almost two years now we have tried to manage the economy in a way that no economy has been managed before. [Interruption.]
  Mr. Speaker: Order. The Government side heard the Opposition spokesman with courtesy and silence. We must have the same treatment of both Front Bench spokesmen by both sides.
  Mr. Brown: May I read something that I did not write myself, something that was written by a great statesman from another country, a great capitalist country. This is what he wrote an hour ago in this very building:
  "No free democratic society has solved the problem of achieving simultaneously four basic economic objectives: first, a rapidly expanding economy; secondly, full employment; thirdly, reasonable price stability; fourthly, equilibrium in the balance of international payments."
  No, nobody has yet solved it and when hon. and right hon. Members opposite giggled so hard just now it was because for two years we have been trying to solve those four things which no free democratic society in the world has ever yet solved. By their very giggles they showed that they do not even know what the problem is. I repeat that that was written an hour ago by a very great statesman from a very great country.
  Added to that problem, to which all of us should be addressing ourselves, there is another problem, which we alone, in a way, share. Right hon. and hon. Members opposite must make up their minds about this, whether they are for it or against it. The additional problem is whether we are to maintain the rôle we play in the world, partly by our physical presence in some places, partly by the banking facilities we make available.
  It is easy, if one does not have to answer this question—[Interruption.] The right hon. Member for Streatham (Mr. Sandys) should shut up or get up, whichever he likes. He thinks that we must

  1849
  keep our presence all round the world. There are other right hon. Gentlemen who do not believe that at all. The Opposition must make up their mind, just as we have had to make up ours. We have made our mind up. [Interruption.] This is not the night I am fighting. I am trying to develop an argument. If the Opposition do not want to hear it, I am not fighting. They make up their own mind.
  We have made our mind up. It is no secret from anybody, in the House or outside the House, that I had a lot of trouble—[Laughter.]—in deciding whether we were right. If any hon. Member opposite facing these problems could make up his mind just like that, he must be an idiot. [Interruption.] That is not worthy of the Leader of the Opposition. It is all right for the rest of them.
  Mr. Edward Heath: I did not say anything.
  Mr. Brown: Yes, the right hon. Gentleman did. I heard him.
  Mr. Heath: I ask the right hon. Gentleman to withdraw that statement. I have said absolutely nothing in the whole course of his speech.
  Mr. Brown: Then it must have been "Charlie McCarthy", but it sounded very like the right hon. Gentleman. I withdraw it if it was not him, but I thought it was.
  May I make it plain that we have made up our minds? We, the Government, have made up our mind, and we present this package of measures to the House, having made up our mind.
  One thing I am constantly asked about—that is, when hon. Members opposite are sufficiently steady to ask me anything at all—is: how does this affect the National Plan? I will be absolutely frank with the House. It means that the rate of growth we intended to get, and were set to get, and on the basis of which we predicated all other things for 1970, is no longer available. Therefore, I must sit down again with my advisers, with industry, with the men who used to pay for the Conservative Party, but no longer do so—[Interruption.]—and with the trade unions, and have a new look at the rate at which we now think we can go, and the changes we now think we can make. But it does not destroy the idea of a plan to which the Government are
  1850
  committed—[An HON. MEMBER: "It is beyond me."] All the things that we set down in the plan may well be beyond the hon. Member, in which case he can go out. He does not have to stay. He can go, and we will send him a child's guide tomorrow.
  Both sides of industry and the City want to know what we do from here on. We go on with the Plan. In the light of this, we rewrite the figures and the time scale, but the check list of action of things to be done by industry, management, the unions and Government become more important than ever, not less important.
  At some stage—I am not really concerned which party is on this side of the House when it happens, nor is the right hon. Gentleman and certainly not the right hon. Member for Barnet—the country must go forward again into expansion, into growth, and all the things set out in the Plan must have been done by then if we are to do so.
  I say to the country that management, unions, commerce and the banks must understand that this is not an evening for washing their hands of it. It is an evening for picking up their responsibilities and getting on with it, and they know what they must get on with. Nobody outside the House is interested in party political points; the world is not interested in our having a party political game. People are interested in knowing whether we can somehow stimulate people into taking up the yoke and getting on and pulling the cart behind them. This is what we should be telling them about.
  Now I come to prices and incomes. How many times have I been taunted by hon. Members opposite that it would fail? Some, like the right hon. Member for Wolverhampton, South-West (Mr. Powell) hoped that it would fail.
  Mr. Powell: I knew.
  Mr. Brown: All right. The right hon. Gentleman knew that it would fail and has taken a lot of pleasure—
  Mr. Powell: No, I knew.
  Mr. Brown: But this afternoon the right hon. Member for Barnet regretted that it had failed, and when I interrupted him at his express wish, and asked whether the right hon. Member for Wolverhampton, South-West went along with

  1851
  him, I was jeered at by hon. Members opposite for daring to ask such a silly question. We now have an answer, almost 12 hours later—[Interruption.] All right, eight hours later.
  For goodness' sake—cannot the Tory Opposition grow up? The difference between the right hon. Member for Barnet and the right hon. Member for Wolverhampton, South-West is far more than seven hours or whatever it is; it is a whole circle, the whole world. The right hon. Member for Barnet wishes it had worked. He told us that. The right hon. Member for Wolverhampton, South-West knew it would fail and is glad it failed.
  Mr. Powell: I did not say that.
  Mr. Brown: He knew it would fail and is glad it would fail; and behind him there are benches of men who did not care whether it succeeded or failed.
  Whatever the Opposition may feel, if this country is ever to expand, to grow, to export, to join Europe—not join Europe; we have been in Europe for 2,000 years—if we are ever to join the Common Market—if we are ever to do any of these things, the prices and incomes policy is inescapable. The one man over there who knows that is the one who tried very hard to get it, and may well have been let down. I shall not comment on that. But the rest of them over there have not yet got the understanding.
  We shall go on trying to get it. We shall work for a prices and incomes policy which can work by voluntary acceptance and agreement because, at the end of the day, that is the only way it will. [An HON. MEMBER: "NO compulsion?".] The unions and employers, the T.U.C. and the C.B.I., both know this. We are going to work for it. The hon. Gentleman who has no constructive rôle to play says, "No compulsion?". To get through the immediate problems, I am prepared, with my right hon. Friend's support, to say to the unions that there will have to be some compulsion in the meantime, and I am prepared, with my right hon. Friend's support, to say to the price fixers, to the manufacturers, that there will have to be some compulsion in the meantime, so as to give us what everyone opposite knows we must have—a breathing space.
  1852
  We must have a period while we get rid of what has been going on. [An HON. MEMBER: "Who is 'we'?"] The nation. I happen to be a Britisher. I do not know what you are, but I happen to be a Britisher. Ask the nation. I mean we the nation.
  Mr. Speaker: Order. I hope that the right hon. Gentleman is not casting any doubts on my nationality.
  Mr. Brown: I include you, Sir. I was a bit doubtful about some of them over there. We, the nation, need a period in which we can recover from things that people, good people, have done last year not quite realising what they were doing. So we shall face the trade unions, the manufacturers and everybody else with the need to enforce, I trust by voluntary agreement, a standstill while we recover from what has been done this year. [Laughter.] People do not read the giggles of hon. Gentlemen opposite. Some day we shall have television cameras in the House and then they will see them.
  The interesting thing this afternoon was that when it was announced that the T.U.C. had decided to give us, to give the Government, not really the Government but the country, its co-operation in something that must have gone very deep to its heart, something which means tremendous interference with all its traditional thoughts, habits, beliefs and makeup, we did not get even the thinnest of sounds from the Opposition. [Interruption.] I trust that right hon. Gentlemen opposite will ensure that we get the same forthcoming noises from the C.B.I. tomorrow. We have not had them yet. The T.U.C., not for the first time, is ahead in saying, "We will surrender for the good of the country". This is what this party and this movement is always doing. We are always ahead. [Interruption.]
  Speaking in this House late at night, Mr. Speaker, is always a problem, because of reasons we all know. I want to tell you, Sir, that at the end of this pause which we have to have, at the end of these measures which we have to take and which we shall ask the country to support us in—I get around the country as much as most people and I am pretty sure that the country will support us in them; I have no doubt about that

  1853
  —I want all our policies to be in a position where they can move ahead from there. I want the Plan to go on.
  Mr. Geoffrey Hirst: Leave the Plan alone.
  Mr. George Brown: Only somebody like the hon. Member for Shipley (Mr. Hirst), who does not care about this nation, would want it to fail.
  It has to go on. We have to improve our industrial efficiency, get rid of restrictive practices, encourage the "little Neddies"—as has been said by the right hon. Member for Barnet, the only mem-
  ber of the Opposition to understand the problem—to go on doing their work, and ensure that we can pick up a prices and incomes policy still in being at the end of the day.
  Right hon. and hon. Gentlemen opposite have had their day of giggling and jeering. They can vote against us for all we care. We know that they are irrelevant, and that we are speaking for the nation at this moment.
  Question put:—
  The House divided: Ayes 246, Noes 325.

  Division No. 147.]

  AYES

  [10.0 p.m.

  Alison, Michael (Barkston Ash)

  Errington, Sir Eric

  Joseph, Rt. Hn. Sir Keith

  Allason, James (Hemel Hempstead)

  Eyre, Reginald

  Kaherry, Sir Donald

  Astor, John

  Evans, Gwynfor (Carmarthen)

  Kerby, Capt. Henry

  Atkins, Humphrey (M't'n & M'd'n)

  Farr, John

  Kershaw, Anthony

  Awdry, Daniel

  Fisher, Nigel

  Kimball, Marcus

  Baker, W. H. K.

  Fletcher-Cooke, Charles

  King, Evelyn (Dorset, S.)

  Batsford, Brian

  Fortescue, Tim

  Kirk, Peter

  Beamish, Col. Sir Tufton

  Foster, Sir John

  Kitson, Timothy

  Bell, Ronald

  Fraser, Rt. Hn. Hugh (St'fford & Stone)

  Knight, Mrs. Jill

  Bennett, Sir Frederic (Torquay)

  Galbraith, Hn. T. G.

  Lambton, Viscount

  Berry, Hn. Anthony

  Gibson-Watt, David

  Lancaster, Col. C. G.

  Bitten, John

  Giles, Rear-Adm. Morgan

  Langford-Holt, Sir John

  Birch, Rt. Nigel

  Gilmour, Ian (Norfolk, C.)

  Legge-Bourke, Sir Harry

  Black, Sir Cyril

  Glover, Sir Douglas

  Lewis, Kenneth (Rutland)

  Blaker, Peter

  Glyn, Sir Richard

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

  Body, Richard

  Godber, Rt. Hn. J. B.

  Lloyd, Ian (P'tsm'th, Langstone)

  Bossom, Sir Clive

  Goodhart, Philip

  Lloyd, Rt. Hn. Selwyn (Wirral)

  Boyd-Carpenter, Rt. Hn. John

  Goodhew, Victor

  Longden, Gilbert

  Boyle, Rt. Hn. Sir Edward

  Gower, Raymond

  Loveys, W. H.

  Braine, Bernard

  Grant, Anthony

  Lubbock, Eric

  Brewis, John

  Grant-Ferris, R.

  MacArthur, Ian

  Brinton, Sir Tatton

  Gresham Cooke, R.

  Mackenzie, Alasdair (Ross & Crom'ty)

  Bromley-Davenport, Lt. Col. Sir Walter

  Griffiths, Eldon (Bury St. Edmunds)

  Maclean, Sir Fitzroy

  Brown, Sir Edward (Bath)

  Grimond, Rt. Hn. J.

  Macleod, Rt. Hn. Iain

  Bruce-Gardyne, J.

  Gurden, Harold

  McMaster, Stanley

  Bryan, Paul

  Hall, John (Wycombe)

  Macmillan. Maurice (Farnham)

  Buchanan-Smith, Alick (Angus, N & M)

  Hall-Davis, A. G. F.

  Maddan, Martin

  Buck, Antony (Colchester)

  Hamilton, Michael (Salisbury)

  Maginnis, John E.

  Bullus, Sir Eric

  Harris, Frederic (Croydon, N.W.)

  Marples, Rt. Hn. Ernest

  Campbell, Gordon

  Harris, Reader (Heston)

  Marten, Neil

  Carlisle, Mark

  Harrison, Brian (Maldon)

  Mathew, Robert

  Carr, Rt. Hn. Robert

  Harrison, Col. Sir Harwood (Eye)

  Maude, Angus

  Cary, Sir Robert

  Harvey, Sir Arthur Vere

  Maudling, Rt. Hn. Reginald

  Channon, H. P. G.

  Harvie Anderson, Miss

  Mawby, Ray

  Chichester-Clark, R.

  Hastings, Stephen

  Maxwell-Hyslop, R. J.

  Clark, Henry

  Hawkins, Paul

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

  Clegg, Walter

  Hay, John

  Mills, Peter (Torrington)

  Cooke, Robert

  Heald, Rt. Hn. Sir Lionel

  Mills, Stratton (Belfast, N.)

  Cooper-Key, Sir Neill

  Heath, Rt. Hn. Edward

  Miscampbell, Norman

  Cordle, John

  Heseltine, Michael

  Mitchell, David (Basingstoke)

  Corfield, F. V.

  Higgins, Terence L.

  Monro, Hector

  Costain, A. P.

  Hiley, Joseph

  More, Jasper

  Craddock, Sir Beresford (Spelthorne)

  Hill, J. E. B.

  Morgan, W. G. (Denbigh)

  Crawley, Aldan

  Hirst, Geoffrey

  Morrison, Charles (Devizes)

  Crouch, David

  Hobson, Rt. Hn. Sir John

  Mott-Radclyffe, Sir Charles

  Crowder, F. P.

  Hogg, Rt. Hn. Quintin

  Munro-Lucas-Tooth, Sir Hugh

  Cunningham, Sir Knox

  Holland, Philip

  Murton, Oscar

  Currie, G. B. H.

  Hobson, Emlyn

  Nabarro, Sir Gerald

  Dalkeith, Earl of Dance, James

  Hordern, Peter

  Neave, Airey

  Davidson, James (Aberdeenshire, W.)

  Hornby, Richard

  Nicholls, Sir Harmar

  d'Avigdor-Gildsmid, Sir Henry

  Howell, David (Guildford)

  Noble, Rt. Hn. Michael

  Dean, Paul (Somerset, N.)

  Hutchison, Michael Clark

  Nott, John

  Deedes, Rt. Hn. W. F. (Ashford)

  Iremonger, T. L.

  Onslow, Cranley

  Dodds-Parker, Douglas

  Irvine, Bryant Godman (Rye)

  Orr, Capt. L. P. S.

  Doughty, Charles

  Jenkin, Patrick (Woodford)

  Orr-Ewing, Sir Ian

  Drayson, G. B.

  Jennings, J. C. (Burton)

  Osborn, John (Hallam)

  du Cann, Rt. Hn. Edward

  Johnson Smith, G. (E. Grinstead)

  Osborne, Sir Cyril (Louth)

  Eden, Sir John

  Johnston, Russell (Inverness)

  Page, Graham (Crosby)

  Elliot, Capt. Walter (Carshalton)

  Jones, Arthur (Northants, S.)

  Page, John (Harrow, W.)

  Jopling, Michael

  Pardoe, John

  Pearson, Sir Frank (Clitheroe)

  Sandys, Rt. Hn. D.

  Vickers, Dame Joan

  Peel, John

  Scott, Nicholas

  Wainwright, Richard (Colne Valley)

  Percival, Ian

  Sharpies, Richard

  Walker, Peter (Worcester)

  Pike, Miss Mervyn

  Shaw, Michael (Sc'b'gh & Whitby)

  Walker-Smith, Rt. Hn. Sir Derek

  Pink, R. Bonner

  Sinclair, Sir George

  Wall, Patrick

  Pounder, Batton

  Smith, John

  Walters, Dennis

  Powell, Rt. Hn. J. Enoch

  Stainton, Keith

  Ward, Dame Irene

  Price, David (Eastleigh)

  Steel, David (Roxburgh)

  Weatherill, Bernard

  Prior, J. M. L.

  Stodart, Anthony

  Webster, David

  Quennell, Miss J. M.

  Summers, Sir Spencer

  Wells, John (Maidstone)

  Rawlinson, Rt. Hn. Sir Peter

  Talbot, John E.

  Whitelaw, William

  Rees-Davies, W. R.

  Tapsell, Peter

  Wills, Sir Gerald (Bridgwater)

  Renton, Rt. Hn. Sir David

  Taylor, Sir Charles (Eastbourne)

  Wilson, Geoffrey (Truro)

  Ridley, Hn. Nicholas

  Taylor, Edward M. (G'gow, Cathcart)

  Winstanley, Dr. M. P.

  Ridsdale, Julian

  Taylor, Frank (Moss Side)

  Wolrige-Gordon, Patrick

  Rippers, Rt. Hn. Geoffrey

  Teeling, Sir William

  Wood, Rt. Hn. Richard

  Robson Brown, Sir William

  Temple, John M.

  Woodnutt, Mark

  Rodgers, Sir John (Sevenoaks)

  Thatcher, Mrs. Margaret

  Worstey, Marcus

  Roots, William

  Thorpe, Jeremy

  Wylie, N. R.

  Rossi, Hugh (Hornsey)

  Tilney, John

  Younger, Hn. George

  Royle, Anthony

  Turton, Rt. Hn. R. H.

  Russell, Sir Ronald

  van Straubenzee, W. R.

  TELLERS FOR THE AYES:

  St. John-Stevas, Norman

  Vaughan-Morgan, Rt. Hn. Sir John

  Mr. Francis Pym and

  Mr. R. W. Elliott.

  NOES

  Abse, Leo

  Crawshaw, Richard

  Ginsburg, David

  Albu, Austen

  Cronin, John

  Gordon Walker, Rt. Hn. P. C.

  Allaun, Frank (Salford, E.)

  Crosland, Rt. Hn. Anthony

  Gourlay, Harry

  Alldritt, Walter

  Grossman, Rt. Hn. Richard

  Gray, Dr. Hugh (Yarmouth)

  Allen, Scholefield

  Cullen, Mrs. Alice

  Greenwood, Rt. Hn. Anthony

  Anderson, Donald

  Dalyell, Tam

  Gregory, Arnold

  Archer, Peter

  Darling, Rt. Hn. George

  Griffiths, David (Rother Valley)

  Armstrong, Ernest

  Davidson, Arthur (Accrington)

  Griffiths, Rt. Hn. James (Llanelly)

  Ashley, Jack

  Davies, Dr. Ernest (Stretford)

  Griffiths, Will (Exchange)

  Atkins, Ronald (Preston, N.)

  Davies, G. Elfed (Rhondda, E.)

  Gunter, Rt. Hn. R. J.

  Atkinson, Norman (Tottenham)

  Davies, Ednyfed Hudson (Conway)

  Hamilton, James (Bothwell)

  Bacon, Rt. Hn. Alice

  Davies, Harold (Leek)

  Hamilton, Marquess of (Fermanagh)

  Bagier, Gordon A. T.

  Davies, Mir (Gower)

  Hamling, William

  Barnes, Michael

  Davies, Robert (Cambridge)

  Hannan, William

  Barnett, Joel

  Davies, S. O. (Merthyr)

  Harper, Joseph

  Baxter, William

  de Freitas, Sir Geoffrey

  Harrison, Walter (Wakefield)

  Beaney, Alan

  Delargy, Hugh

  Hart, Mrs. Judith

  Bellenger, Rt. Hn. F. J.

  Dell, Edmund

  Haseldine, Norman

  Bence, Cyril

  Dempsey, James

  Hattersley, Roy

  Benn, Rt. Hn. Anthony Wedgwood

  Dewar, Donald

  Hazell, Bert

  Bennett, James (G'gow, Bridgeton)

  Diamond, Rt. Hn. John

  Healey, Rt. Hn. Denis

  Bidwell, Sydney

  Dickens, James

  Henig, Stanley

  Binns, John

  Dobson, Ray

  Herbison, Rt. Hn. Margaret

  Bishop, E. S.

  Doig, Peter

  Hilton, W. S.

  Blackburn, F.

  Donnelly, Desmond

  Hooley, Frank

  Blenkinsop, Arthur

  Driberg, Tom

  Horner, John

  Boardman, H.

  Dunn, James A.

  Houghton, Rt. Hn. Douglas

  Booth, Albert

  Dunnett, Jack

  Howarth, Harry (Wellingborough)

  Boston, Terence

  Dunwoody, Mrs. Gwyneth (Exeter)

  Howarth, Robert (Bolton, E.)

  Bottomley, Rt. Hn. Arthur

  Eadie, Alex

  Howell, Denis (Small Heath)

  Bowden, Rt. Hn. Herbert

  Edwards, Robert (Bilston)

  Howie, W.

  Boyden, James

  Edwards, William (Merioneth)

  Hoy, James

  Braddock, Mrs. E. M.

  Ells, John

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Bradley, Tom

  English, Michael

  Hughes, Emrys (Ayrshire, S.)

  Bray, Dr. Jeremy

  Ennals, David

  Hughes, Hector (Aberdeen, N.)

  Brooks, Edwin

  Evans, Albert (Islington, S.W.)

  Hughes, Roy (Newport)

  Broughton, Dr. A. D. D.

  Evans, Ioan L. (Birm'h'm, Yardley)

  Hunter, Adam

  Brown, Rt. Hn. George (Belper)

  Faulds, Andrew

  Hynd, John

  Brown, Hugh D. (G'gow, Provan)

  Fernyhough, E.

  Irvine, A. J. (Edge Hill)

  Brown, Bob (N'c'tle-upon-Tyne, W)

  Finch, Harold

  Jackson, Colin (B'h'se & Spenb'gh)

  Brown, R. W. (Shoreditch & F'bury)

  Fitch, Alan (Wigan)

  Jackson, Peter M. (High Peak)

  Buchan, Norman

  Fitt, Gerard (Belfast, W.)

  Janner, Sir Barnett

  Buchanan, Richard (G'gow, Sp'burn)

  Fletcher, Raymond (Ilkeston)

  Jay, Rt. Hn. Douglas

  Butler, Herbert (Hackney, C.)

  Fletcher, Ted (Darlington)

  Jeger, George (Goole)

  Butler, Mrs. Joyce (Wood Green)

  Floud, Bernard

  Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)

  Callaghan, Rt. Hn. James

  Foley, Maurice

  Jenkins, Hugh (Putney)

  Cant, R. B.

  Foot, Sir Dingle (Ipswich)

  Jenkins, Rt. Hn. Roy (Stechford)

  Carmichael, Neil

  Foot, Michael (Ebbw Vale)

  Johnson, Carol (Lewisham, S.)

  Carter-Jones, Lewis

  Ford, Ben

  Johnson, James (K'ston-on-Hull, W.)

  Castle, Rt. Hn. Barbara

  Forrester, John

  Jones, Dan (Burnley)

  Chapman, Donald

  Fowler, Gerry

  Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

  Coe, Denis

  Fraser, John (Norwood)

  Jones, J. Idwal (Wrexham)

  Coleman, Donald

  Fraser, Rt. Hn. Tom (Hamilton)

  Judd, Frank

  Concannon, J. D.

  Freeson, Reginald

  Kelley, Richard

  Conlan, Bernard

  Gardner, A. J.

  Kenyon, Clifford

  Corbet, Mrs. Freda

  Garrett, W. E.

  Kerr, Mrs. Anne (R'ter & Chatham)

  Craddock, George (Bradford, S.)

  Darrow, Alex

  Kerr, Russell (Feltham)

  1856

  1857

  Leadbitter, Ted

  Oakes, Gordon

  Skeffington, Arthur

  Ledger, Ron

  Ogden, Eric

  Slater, Joseph

  Lee, Rt. Hn. Frederick (Newton)

  O'Malley, Brian

  Small, William

  Lee, Rt. Hn. Jennie (Cannock)

  Oram, Albert E.

  Snow, Julian

  Lee, John (Reading)

  Orbach, Maurice

  Spriggs, Leslie

  Lestor, Miss Joan

  Orme, Stanley

  Steele, Thomas (Dunbartonshire, W.)

  Lever, Harold (Cheetham)

  Oswald, Thomas

  Stonehouse, John

  Lever, L. M. (Ardwick)

  Owen, Dr. David (Plymouth, S'tn)

  Strauss, Rt. Hn. G. R.

  Lewis, Ron (Carlisle)

  Owen, Will (Morpeth)

  Summerskill, Hn. Dr. Shirley

  Lipton, Marcus

  Page, Derek (King's Lynn)

  Swain, Thomas

  Lomas, Kenneth

  Paget, R. T.

  Swingler, Stephen

  Loughlin, Charles

  Palmer, Arthur

  Symonds, J. B.

  Luard, Evan

  Pannell, Rt. Hn. Charles

  Taveme, Dick

  Lyon, Alexander W. (York)

  Park, Trevor

  Thomas, George (Cardiff, W.)

  Lyons, Edward (Bradford, E.)

  Parker, John (Dagenham)

  Thomas, Iorwerth (Rhondda, W.)

  Mabon, Dr. J. Dickson

  Parkyn, Brian (Bedford)

  Thomson, Rt. Hn. George

  McBride, Neil

  Pearson, Arthur (Pontypridd)

  Thornton, Ernest

  McCann, John

  Peart, Rt. Hn. Fred

  Tinn, James

  MacColl, James

  Pentland, Norman

  Tomney, Frank

  MacDermot, Niall

  Perry, Ernest G. (Battersea, S.)

  Tuck, Raphael

  McGuire, Michael

  Prentice, Rt. Hn. R. E.

  Urwin, T. W.

  McKay, Mrs. Margaret

  Price, Christopher (Perry Barr)

  Parley, Eric G.

  Mackenzie, Gregor (Rutherglen)

  Price, Thomas (Westhoughton)

  Wainwright, Edwin (Dearne Valley)

  Mackie, John

  Price, William (Rugby)

  Walden, Brian (All Saints)

  Mackintosh, John P.

  Probert, Arthur

  Walker, Harold (Donenter)

  Maclennan, Robert

  Pursey, Cmdr. Harry

  Wallace, George

  McMillan, Tom (Glasgow, C.)

  Rankin, John

  Watkins, David (Consett)

  McNamara J. Kevin

  Redhead, Edward

  Weitzman, David

  MacPherson, Malcolm

  Rees, Merlyn

  Wellbeloved, James

  Mallalieu, E. L. (Brigg)

  Reynolds, G. W.

  Wells, William (Walsall, N.)

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

  Rhodes, Geoffrey

  Whitaker, Ben

  Manuel, Archie

  Richard, Ivor

  Whitlock, William

  Mapp, Charles

  Roberts, Goronwy (Caernarvon)

  Wigg, Rt. Hn. George

  Marquand, David

  Roberts, Gwilym (Bedfordshire, S.)

  Willey, Rt. Hn. Frederick

  Marsh, Rt. Hn. Richard

  Robertson, John (Paisley)

  Williams, Alan (Swansea, W.)

  Mason, Roy

  Robinson, Rt. Hn. Kenneth (St. P'c'as)

  Williams, Alan Lee (Hornchurch)

  Mayhew, Christopher

  Robinson, W. O. J. (Walth'stow, E.)

  Williams, Clifford (Abertillery)

  Mellish, Robert

  Rodgers, William (Stockton)

  Williams, Mrs. Shirley (Hitchin)

  Mendelson, J. J.

  Roebuck, Roy

  Williams, W. T. (Warrington)

  Mikardo, Ian

  Rose, Paul

  Willis, George (Edinburgh, E.)

  Millan, Bruce

  Ross, Rt. Hn. William

  Wilson, Rt. Hn. Harold (Huyton)

  Miller, Dr. M. S.

  Rowland, Christopher (Meriden)

  Wilson, William (Coventry, S.)

  Mitchell, R. C. (S'th'pton, Test)

  Ryan, John

  Winnick, David

  Molloy, William

  Shaw, Arnold (Ilford, S.)

  Winterbottom, R. E.

  Morgan, Elystan (Cardiganshire)

  Sheldon, Robert

  Woodburn, Rt. Hn. A.

  Morris, Alfred (Wythenshawe)

  Shinwell, Rt. Hn. E.

  Woof, Robert

  Morris, Charles R. (Openshaw)

  Shore, Peter (Stepney)

  Wyatt, Woodrow

  Morris, John (Aberavon)

  Short, Rt. Hn. Edward (N'c'tle-u-Tyne)

  Yates, Victor

  Moyle, Roland

  Short, Mrs. Renée (W'hampton, N.E.)

  Murray, Albert

  Silkin, John (Deptford)

  TELLERS FOR THE NOES:

  Neal, Harold

  Silkin. S. C. (Dulwich)

  Mr. Charles Grey and

  Newer's, Stan

  Silverman, Julius (Aston)

  Mr. George Lawson.

  Noel-Baker, Francis (Swindon)

  Silverman, Sydney (Nelson)

  CUSTOMS AND EXCISE AND PURCHASE TAX
  Surcharge on Revenue Duties Order 1966 (S.I., 1966, No. 884), dated 20th July 1966 [copy laid before the House 20th July],approved.—[Mr. MacDermot.]
  TOWN AND COUNTRY PLANNING
  Control of Office Development (Designation of Areas) Order 1966 (S.I., 1966, No. 888), dated 20th July 1966 [copy laid before the House 20th July], approved.—[Mr. Darling.]

  VETERINARY SURGEONS BILL [Lords]
  Order for Second Reading read.
  Motion made, and Question put pursuant to Order [25th April], That the Bill be now read a Second time.
  Question agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  UNEMPLOYMENT BENEFIT (MR. THAIN)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Whitlock.]
  10.15 p.m.
  Mr. Peter Doig: On the Adjournment tonight I wish to raise the case of one of my constituents—a Mr. Thain—who in my opinion has had a very raw deal in relation to unemployment benefit. Because he has a wife and two children his weekly rate of benefit is £9 1s. 6d., his daily rate being £1 10s. 3d. This man was paid off on 31st May—a Tuesday evening. He received no unemployment benefit for the Wednesday, Thursday or Friday, because he had to have three waiting days. He received no unemployment benefit for the Saturday, because this was not a normal working day for him.
  He was put off the following week for the Monday, Tuesday and Wednesday—6th, 7th and 8th June—for which he received three days' benefit. He restarted work on Thursday, 9th June, so that, excluding Sundays, he was off for seven days. For those seven days he got three-sixths of the weekly rate, or three days' benefit, simply because he was a five-day week worker. Had he been a six-day week worker he would have been paid benefit for four days, or a weekly rate of four-sixths, yet both the five-day week worker and the six-day week worker generally work the same number of hours in a week.
  It seems quite wrong that one man should receive only three days' benefit while the other receives four days' benefit. If these workers are sick there is no difference in the benefit they receive; they both receive four days' benefit, or four-sixths of the rate.
  I took this question up with the Minister of Labour by correspondence, and in his reply he said that it would be very difficult to work out a rate for each working day in respect of a five-day worker in a way which would give him an additional one-sixth, but if this can be done in the case of sick benefit I do not see why it cannot be done with unemployment benefit.
  1860
  In the reply I received I was referred to the debate in 1957, and was told that the position was fully discussed then. That is true. I have looked up the records. But in that debate every Labour speaker, including those on the Front Bench, spoke against the existing Regulations. It seems strange that the Government should now seek to justify a measure which they opposed when it was first put forward, and which made people worse off at that time, and to have the nerve to say that the question was fully discussed in 1957.
  At that time the Labour Party was in favour of adopting the courses that I am arguing. If these are the Regulations I do not expect any change now, but I expect the Minister to say that he recognises the existing position as unfair and that he will take steps to change it, by legislation. But they have not done this.
  I come now to the details of this case. On a 40-hour week, which is now normal for five-day or six-day workers, this man worked two days, or 16 hours on a five-day week. The person who is on a six-day week and works the same number of hours in the week, in two days would work 13⅓ hours, so the advantage which the five-day worker has in wages is only a difference of 2⅔ hours for that week, yet he loses the whole day's benefit. This is wrong. It is unfair and something which our people spoke against when it was passed. It is something which they ought not to accept now.
  They should take another look at this. If they have the power to change it by Regulation or by interpretation of existing Regulations, they ought to recompense this man for what he has lost. If they do not do this or they cannot do this they ought to say that they will take steps at some time in the future to change the Regulations. The present system is totally unfair, probably not only to this man. There must be many more in the same position.
  It is unfair to five-day workers. It does not seem to matter which day they go off, because while the Regulations say that unless they are off for the whole of a calendar week they cannot be paid for the Saturday, in fact it does not matter when they go off because, as they work only five days, they cannot possibly be paid off on a Saturday, so they will lose

  1861
  the Saturday anyway, whichever day they are paid off.
  It is wrong that a man should be unemployed for eight days and receive only three days', or half of one week's benefit. The excuse for this is that it would be very difficult to administer it on a different daily rate, but we find that the six-day-week worker gets sickness benefit for the Saturday, so I can see no justifiable reason for refusing benefit to a five-day-week worker for a Saturday.
  10.22 p.m.
  The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Norman Pentland): I fully understand my hon. Friend's concern about his constituent's unemployment. Many of us who represent industrial areas have over the years had to deal with similar cases in our constituencies.
  Mr. Thain, my hon. Friend's constituent, was unemployed from 1st to 8th June because of a stoppage of work due to a trade dispute in which he was not involved personally. His employment was not terminated but he was suspended by his employer. The first three days of his unemployment were waiting days. The next day, Saturday, 4th June, was a day on which he would not have worked in any case and for which benefit could not therefore be paid. Benefit was, however, paid to Mr. Thain in respect of the three days, 6th to 8th June, at the full rate for a married man with three children.
  The amount of benefit payable was one-sixth of the appropriate weekly rate for each of the three days. This method of calculation is laid down in the National Insurance Act and it has applied all along to any day of unemployment or incapacity for work. My hon. Friend has suggested that his constituent and others who work a five-day week suffer a double disadvantage by not being able to obtain unemployment benefit for Saturday because it is a day on which they do not normally work and by being paid only one-sixth of the weekly rate of benefit for the days on which they qualify for benefit.
  Let me explain straight away that where a man has lost his job or is sick it makes no difference at all whether he is a five-day week worker or not. Every day of unemployment or sickness carries benefit at the rate of one-sixth of the
  1862
  weekly rate and the man who is off work for part of the week gets the appropriate proportion of the weekly rate of benefit.
  The rule that unemployment benefit is not paid for days when the claimant would not normally work applies only in certain limited circumstances. In the first place, it applies only where employment has not been terminated. Even then it does not apply if the claimant is off work for the whole week; he still gets a whole week's benefit. It is only when a claimant still has an employer and has worked for part of the week that the rule applies. This normally occurs during short-time working and very short periods of temporary lay-off, such as that experienced by Mr. Thain.
  It is, or should be, well known to hon. Members on this side of the House—and I say this in answer to my hon. Friend—that we opposed the introduction of this rule in 1957 because we could see the anomalies and complications which were likely to flow from it. Experience of its operation has illustrated all too clearly how right we were in 1957. As my hon. Friend knows—and this is in reply to his question about the steps which the Government intend to take to try to overcome this difficulty—we have already taken steps under the legislation introducing the new earnings-related short-term benefits to make fundamental changes in the conditions under which unemployment benefit is to be paid in the future to workers whose employment has not been terminated.
  The Government see the proper maintenance of workers in this situation as primarily the responsibility of the employer concerned and not of the general body of contributors to the National Insurance Fund. These changes will not come fully into operation until 1969. The reason is that we were determined to give both sides of industry ample opportunity to negotiate suitable arrangements, but in the meantime we must operate the law as it stands.
  The question whether five-day week workers should be paid one-fifth of the weekly rate was raised, as my hon. Friend said, during the passage of the National Insurance Act, 1957, which introduced the normal idle day rule. There were at that time many administrative considerations which made it impracticable

  1863
  to do this, and I am afraid that I must tell my hon. Friend that the difficulties which existed then are still as great today.
  For practical purposes, as I have explained, the problem is largely confined to five-day week workers on short time and those suspended for short periods, and to depart from the well-established principle of a standard formula for determining the daily rate of flat-rate benefit for everybody would be in the Government's view to take a very large hammer to crack a comparatively small nut.
  It would not be practicable to confine payments in fifths to those affected by the normal idle day rule, nor would it be possible to abandon payment of one-sixth of a week's benefit for each day in the case of those who work on six days a week. Although many people now work a five-day week, there are still some millions who work on more than five days a week and there are, of course, some shift workers who do a full week's work on four.
  If the daily rate of benefit had to be governed by the extent of the claimant's working week, the difficulties would be enormous. It would slow up the payment of benefit and add appreciably to the number of staff needed to handle claims. Where the extent of a claimant's normal working week has to be established under the law as it stands, it is the individual record of employment and not the general practice in a particular firm or industry which is the governing factor. For example, a record of fairly regular Saturday overtime by a man in what is regarded as a five-day week job may establish him as a six-day week worker.
  Furthermore, workers who change their jobs, as many do in the course of a year, may also change their status as four, five or six-day week workers. The difficulties in administering a scheme with two or more different bases for calculating benefit for odd days would certainly be out of all proportion to the amounts involved for individual claimants.
  Under the present scheme, days of unemployment and days of incapacity for
  1864
  work carry the same rate of benefit and there are very sound reasons for this. This would mean that any change in the method of calculating the daily amount of benefit could not be limited to unemployment benefit alone but would have to be extended to sickness benefit, which is also payable on a daily basis. The millions of sickness benefit claims each year are generally made by post and it would be a quite impossible task to establish in each individual case whether the claimant was a five or six-day week worker. But to apply arbitrary rulings which might or might not accurately reflect the actual status of the claimant could mean that people who were unemployed or sick for the same period would get different amounts of benefit, and this could only lead to more anomalies and more confusion.
  We all accept that cases can arise, like the one to which my hon. Friend has referred, where the logic of the particular situation suggests that a daily payment of benefit at a fifth of the weekly rate would be justified. But the general application of such a principle to the whole field of unemployment and sickness benefits is not a practical possibility under the present scheme at the present time.
  Having said that, it does not mean that future developments in the scheme and in the technique of handling claims could not eventually lead to changes. I assure my hon. Friend that it could well mean that changes would have to be made in future. However, I have pointed out what the Government view is at present, which is that the real remedy for the situation to which my hon. Friend drew attention is to secure that all employers follow the example of the good ones who provide their employees with continuous employment or a proper guaranteed wage. That is the position we want and it is the Government's objective to achieve a solution to this problem in future along the lines I have outlined.
  Question put and agreed to.
  Adjourned accordingly at twenty-five minutes to Eleven o'clock.

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

LORD KILMANY
The Right Honourale Sir William John St. Clair Anstruther-Gray, Baronet, M.C., having been created Baron Kilmany, of Kilmany in the County of Fife, for life—Was, in his robes, introduced between the Lord Stratheden and Campbell and the Lord Margadale.

SCOTTISH ISLANDS AND THE SEAMEN'S STRIKE
2.45 p.m.
LORD TWEEDSMUIR: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will consider setting up an inquiry to ascertain the extent of the damage to the economyof the islands of Scotland, resulting from the recent merchant seamen's strike.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): My Lords, the Highlands and Islands Development Board is making a special review of the effects of the strike in the islands in consultation with local authorities and other public bodies concerned. Her Majesty's Government consider that the Board is best placed to assess the situation and to consider whether any new measures to promote the development of the affected areas are necessary. My right honourable friend the Secretary of State has said that he will be very ready to consider any recommendations the Board may put forward.
LORD TWEEDSMUIR: My Lords, I am obliged to the noble Lord. I would
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ask him this further question. In view of the grievous hardship suffered by the people of the Scottish islands during the recent seamen's strike, will the Government consider giving sympathetic study to finding some means of relieving them of some of the harsher aspects of the selective employment tax?
LORD HUGHES: My Lords, that is another question.
LORD FORBES: My Lords, are the Government aware that crofters do not have large reserves of capital or, for that matter, large reserves of artificial manure? They live a hand-to-mouth existence and the seamen's strike has hit these crofters in the islands very hard indeed.
LORD HUGHES: My Lords, I have no doubt the intention there was good, though not too happily expressed. But I can assure noble Lords that the Government have all these matters very much in mind. It is because we believe that we have a very useful instrument in the Highlands and Islands Development Board that the Government have entrusted to them, in the first instance, the task of assessing the effects and what action may be necessary.
LORD TWEEDSMUIR: My Lords, will the noble Lord tell us when the Highlands and Islands Development Board are likely to make their report?
LORD HUGHES: No, my Lords, I am afraid not. I can only say that the Board were very willing to have this remit and very much impressed with the urgency of getting the report in quickly.
LORD STRANGE: My Lords, the noble Lord will bear in mind the Isle of Man in all this?
LORD HUGHES: My Lords, when the territory to be under consideration by the Highlands and Islands Development Board was being considered in your Lordships' House some noble Lords on the other side of the House had some suspicion about how far South in Scotland the Highlands would be considered to go, but, to the best of my knowledge, no one suggested that the Isle of Man would come within its limit.

"THE WAR GAME"
2.51 p.m.
LORD REAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they do or do not consider it desirable that The War Game should be shown on television.]
BARONESS PHILLIPS: My Lords, the broadcasting authorities are responsible for the content of their programmes, and it is for them to decide what and what not to show. The Postmaster General has the power, which successive Governments have regarded as being, in the strictest sense, a reserve power, to veto programmes. This has never been used in respect of any particular programme. My right honourable friend has no power to require programmes to be broadcast. In sum, therefore, the question is not one on which Her Majesty's Government could properly express a view.
LORD REAY: My Lords, I thank the noble Lady for her Answer. Would Her Majesty's Government not accept that, as a nuclear attack would bring consequences on any country incomparably more ghastly than any event that has ever occurred in history, it is improper to conceal demonstration of such consequences from the public, and that this is especially true in a country which, in the first place is a democracy and, in the second place, still possesses an independent nuclear deterrent, so that it is still possible that the Government themselves, by miscalculation of tactics or general policy, might promote such an event? Secondly, may I ask—
BARONESS PHILLIPS: My Lords, if I may reply now to the noble Lord's rather lengthy question, the Government have never refused to make a statement of what would be their policy in the event of nuclear attack. I think I must advise the noble Lord that any question relating to Civil Defence would more properly be addressed to my right honourable friend the Home Secretary.
LORD REAY: My Lords, may I perhaps be briefer and more precise and ask the Government this: Does it remain proper for me to ask the Government
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whether or not one is entitled to require them to give an opinion on this; and, if it is, may I ask that they take notice of the decision by the Board of British Film Censors to make this film available for general release? Also, if they consider it would be a form of impropriety to make any statement of their view on this subject, because of the independence of the B.B.C., would they give an assurance that they would pass on this argument, and any other remarks made by noble Lords in this House, to the B.B.C.?
BARONESS PHILLIPS: My Lords, in thanking the noble Lord, may I apologise for saying that the question should be addressed to the Home Secretary; I should of course have said that the question should be addressed to Her Majesty's Government but would be replied to on behalf of my right honourable friend the Home Secretary. So far as the B.B.C. is concerned, the noble Lord will appreciate that Her Majesty's Government cannot direct the B.B.C. to show or not to show any film of this kind.
BARONESS SUMMERSKILL: My Lords, on the wider issue, would my I noble friend not agree that the time has now come when in peace time the people should be taught that there is no nobility in war, only cruelty and vulgarity?
BARONESS PHILLIPS: My Lords, while possibly sympathising with the noble Lady and personally even agreeing with her, I must say that that point does not arise on this Question.
LORD PEDDIE: My Lords, can my noble friend indicate whether anydefinable code exists upon which this power of vetoing is exercised?
BARONESS PHILLIPS: My Lords, it is a matter for the B.B.C. If the noble Lord wishes to have more information on this, I am sure it could be obtained.
LORD ARCHIBALD: My Lords, would my noble friend agree to pass on to the B.B.C. the fact that there is a widespread feeling in the country that this film should be shown?
SEVERAL NOBLE LORDS: No!
BARONESS PHILLIPS: My Lords, I do not feel that this is a matter on which I could properly comment. It appears to be based on a premise. The

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noble Lords says that this is so, but we do not know whether in fact it is so. We do not even know whether the B.B.C. rejected this on the ground which the noble Lord has put forward. They have frequently decided not to show films considered to be of an horrific nature. They may do so with a "Western".
LORD TAYLOR: My Lords, is my noble friend aware that the historic assumptions on which the first supplementary question was based were entirely false; that in the history of the slaughters of mankind there have been many slaughters much worse than those to which the noble Lord referred, including those involved in the Albigensian heresy?
LORD REAY: My Lords, may I suggest that the motives may have been worse, but the effects were not?

INDUSTRIAL DISPUTES
2.56 p.m.
LORD HANKEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government how many men were involved in official and unofficial industrial disputes, and the number of working days lost, in this country in the years 1960 to 1964; and how this compares with the men involved and working days lost in France and Germany in those years.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, about 7½ million workers were involved in all stoppages of work, both official and unofficial, due to industrial disputes in progress in the years 1960 to 1964 in the United Kingdom. Workers involved in more than one stoppage are counted more than once in the total. The number of working days lost was nearly 16 million. Figures published in the I.L.O. Year Book of Labour Statistics 1965 for France and Germany for 1960 to 1964 were:

Workers involved

Days lost

France

10,300,000

14,000,000

Germany (Federal Republic

440,000

2,400,000

LORD HANKEY: My Lords, while thanking the Government for that informative reply, may I ask whether they agree that the state of affairs thus revealed may explain in some small degree our economic failure to keep up with, for instance, Western Germany in these years, and is a contributory cause of our balance-of-payments difficulties?
LORD CHAMPION: My Lords, I agree that this loss of work is to be deplored, and of course it is bound to have an effect on our economic situation. We should do everything possible to lessen the figures, but it is very largely a matter in which we expect good management to co-operate with responsible trade unionists to stop this loss of work.
LORD LINDGREN: My Lords, could my noble friend inform the House about the absenteeism arising from attendance at Ascot, Goodwood and Newmarket, and whether, if the people involved had not been attending those race meetings, their activities would have been of any use to the export drive or the national income?
LORD CHAMPION: My Lords, that is a slightly different slant on the Question originally put down. I have noticed that the attendance in this House falls off slightly on Derby Day, though not so considerably lately.
LORD CARRINGTON: My Lords, may I ask the noble Lord, Lord Champion, whether, in view of the seriousness of the figures he has read out to the House, the Government intend to ask the Royal Commission to make an Interim Report?
LORD CHAMPION: My Lords, this is a matter which of course we shall consider. I agree with the noble Leader of the Opposition that it is a very serious matter. The sooner we can find the causes, and eliminate them, the better it will be for all concerned.
LORD POPPLEWELL: My Lords, may I ask my noble friend to inform the House how the United Kingdom record as a whole compares with other countries in general? Would it be possible for him to express the number of days lost in percentage terms, according to the number of days of actual employment?
LORD CHAMPION: My Lords, I am glad to say that, despite what I said previously, our record in this connection is good. International Labour Organisation figures covering a wide range of industries for the same period show that only seven countries, out of seventeen, lost fewer days per thousand persons employed, and these include a number of fairly small countries. The United Kingdom position is even a little better when the longer period of ten years, from 1955 to 1964, is taken.
LORD INGLEWOOD: My Lords, is the noble Lord aware that the last question sounds like a put-up one? He has read out all pat these details in answer to it. Could he tell the House how the trend continues since 1964, and whether to-day we are seeing an improvement on the situation which he described in answer to the principal Question.
LORD CHAMPION: My Lords, as an ex-Minister, the noble Lord should not give away ministerial secrets. I do not have later figures that I can give him, but if the noble Lord would care to put down a Question, I will give them to the House as soon as possible.

CUTS IN OVERSEAS EXPENDITURE
3.1 p.m.
EARL JELLICOE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what proportion of the proposed cuts in overseas expenditure indicated in the Prime Minister's Statement on July 20 will fall on overseas civil aid and what proportion on defence spending abroad.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD BESWICK): My Lords, no further announcement can be made at present, as the decision the Government have taken requires, in many cases, further consultation in detail with those concerned at home and overseas.
EARL JELLICOE: My Lords, while thanking the noble Lord for his remark-
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ably informative reply, may I inform him that I am extremely surprised by it, because the Prime Minister said in his Statement that firm programmes had been settled for these cuts? If that is so, how is it that the noble Lord is not able to give us this further information?
LORD BESWICK: My Lords, I must say that I am extremely surprised at the line the noble Earl takes, in view of the criticism which he and other noble Lords onthat Bench have made on other occasions about the failure to consult before decisions were taken. I should have thought that he would appreciate the fact that when we have undertakings in conjunction with others overseas it is better to consult them first, before we announce firm decisions.
EARL JELLICOE: My Lords, may I take it that the "firm" programmes are not firm?
LORD BESWICK: My Lords, what the noble Lord may take is that we have decided to cut our overseas commitments by £100 million. The precise proportion between one theatre and another is still at present to be decided.
EARL JELLICOE: My Lords, since the noble Lord has now given me a lead, may I ask whether the figure, which was announced as £100 million by the Prime Minister last week, included, or did not include, possible cuts in the British Army of the Rhine?
LORD BESWICK: My Lords, they include proportions in various theatres that still have, as I say, to be discussed with the various authorities overseas. I should have thought that that was a perfectly sensible line of action to take, and I am surprised that the noble Lord disputes it.
LORD CARRINGTON: My Lords, the noble Lord has said that the Government have decided a cut of this sort but have not decided where to cut. Is that really true?
LORD BESWICK: My Lords, what has been announced is that we shall cut by at least £100 million. What I have also said is that the precise details of these cuts have to be decided after consultation with those concerned overseas.
LORD CONESFORD: My Lords, can the noble Lord say whether he considers

785
the maintenance of an adequate defence a luxury or a necessity?
LORD BESWICK: My Lords, it depends on the definition of the word "adequate".
THE EARL OF SELKIRK: My Lords, are we to understand that if no cuts are to be made in Germany, all the cuts will fall East of Suez?
LORD BESWICK: My Lords, I should have thought that the noble Earl would be greatly mistaken if he decided that no cuts could be made in Germany.

THE HOUSING SITUATION
3.4 p.m.
LORD HAWKE LORD HAWKE rose to call attention to the housing situation; and to move for Papers. The noble Lord said: My Lords, anybody listening at the hustings would imagine that the first task of any Government on being returned to power was to take off its coat, roll up its sleeves and start to lay bricks. In our great war-time Leader, Sir Winston Churchill, we had a card-holding bricklayer. I do not know whether there are any bricklayers among the present Government, but there certainly seem to be some card-holding brick-droppers. But, to be serious, Governments do not build houses: it is builders who do that. Governments can help a little, and Governments can hinder a lot. This Government has done remarkably little to help and quite a lot to hinder the supply.
Of recent years, the construction industry has been under some strain to fulfil all the demands made upon it by the construction requirements of the country, plus the housing programmes; but, like all industries under strain, it has tended to expand and to increase its productivity. Earlier in this year there was, at any rate in my mind, a strong doubt as to whether the industry was capable of undertaking all the public works about which Ministers were so gaily talking, plus the half-million housing targetto be produced by 1970. However, the effects of the squeeze which started in July, 1965, are now beginning to show up, and the latest measures have still further lowered the demand on the industry. Nevertheless, I doubt the ability to produce half a million
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traditionally built houses by 1970, and I think that the Minister is quite right in deciding to include in that programme 100,000 factory-built houses. But here again I think that will be physically possible only if other construction activity is substantially reduced, in particular the very considerable amount of site works and labour required for the industrial houses, and if there is a redeployment of labour in the industry to provide the labour in the factories which produce the component parts. The present intensive squeeze would appear likely to produce both these conditions.
Is there a need for such a large programme? When one turns to the White Paper (Cmnd. 2838), The Housing Programme 1965 to 1970, dated last November, one is left in little doubt that the author, at any rate, thought so. The White Paper emphasises that a great deal of information is not available, but the needs are given, suggested or guessed (your Lordship's can apply whichever word you wish) at 150,000 a year for new households, 30,000 to replace houses pulled down to provide new roads and so on, making 180,000 annually; and, in addition, a once-for-all figure of 700,000, to cover existing shortages and provide a margin for manœuvre, plus one million to deal with existing slums, and 2 million for near-slums. If we take that figure of 3ç7 million once-for-all houses, pins 180,000 annually, we discover that if our production is 400,000 a year, it will take 17 years to clear off the arrears. If it is 500,000, it will take 11½ years. Meanwhile, of course, further houses will have aged and become obsolete. So I think that we can take it, at all events in the foreseeable future, that there will be a large demand—possibly there for ever.
This fact has been recognised always by Governments. While the Conservative Government were in power, production went steadily up and in 1965, for the first time, there were real hopes of exceeding 400,000 new houses. Then things began to go wrong with the economy, and, ofcourse, this was reflected in housing. In 1965 we did not reach the 400,000 total; 1966 looks like being a little worse, and 1967 worse still. I have no doubt that the noble Lord who is to reply to the debate will produce a more cheerful set of figures, which he has and we have not, showing the latest

787
number of houses started and completed; but I hope he will not claim that the tide has turned. All I can say is that every authority I have consulted—trade associations, financial journals, bankers—all foresee a very difficult time in housing in the near future. And the most vital figure of all—namely, the number of houses unsold—is not known to anybody.
What has gone wrong? Finance, of course, is the governing factor; but I believe that lack of confidence is a good second. The Labour Government have never really understood the paramount importance of confidence in the fields where men have to stake their personal fortunes in the hope of making a profit. Since they came into office, they have literally behaved like a string of destructive bulls which have at last burst their way into the china shop. But whereas the bull is a strong, silent and taciturn animal, Her Majesty's Government are far from being silent or taciturn. In consequence, they have played havoc with business confidence, particularly in housing.
Let us try to put ourselves into the shoes of a builder-developer who builds houses for sale. First of all, he has to keep his organisation together, because if he loses his organisation he has lost his livelihood. Therefore, he must provide continuity of work. He must have land to build on now, next year, the year after and, if possible, beyond that. He has to buy that land in heavy competition with other builders who do precisely the same thing. He has to calculate what price he can afford to pay, having regard to two principal factors: first, the cost of building the type of house that he thinks people will want to buy; and secondly, the size of the mortgage that he thinkshis potential customer is likely to be able to raise. He has then to finance the purchase of the land and the building costs up to the time when he can get his money back, to say nothing of having to try to make sure he will be able to build houses which will not only sell, but also please the more aesthetic tastes. In addition, he has to take all the risks which the ordinary contractor has to take, such as site difficulties, acts of God, strikes, wage increases and tax increases. If he cannot sell his houses, he may or may not go bankrupt—though a great
788
many builders do. But one can be sure that he will not build any more houses until he can sell those already built. Above all, since the present Government have come to power he has felt that in their eyes he is a speculator and is rather a pariah in Socialist thought. He is likely to get all the kicks, and has to look out for the ha' pence himself.
This long chain of decisions and risks which have to be taken before the houses can be built is vastly dependent on confidence: the more uncertainties that are introduced into the chain, the greater the risk, and the more temptation there is to "play it" as safe as possible. Consider the uncertainties that have faced builders recently—uncertainties in some cases created, in some abetted, and in remarkably few cases alleviated by the present Government.
First of all, on land, the advent of the Land Commission has created the most appalling doubts and uncertainties as to the future supply of essential raw material process. Secondly, the price the builder has paid for land has often turned out, in the light of later financial factors to be too high. Sometimes he has had to pay more for his finance than he calculated, and he has found it much more difficult to get that finance. He has had to pay higher wages, higher material costs, than he expected; and now he has to face the selective employment tax, which is perhaps the biggest irony of all to somebody who is manufacturing one of the nation's greatest needs. All this requires more finance. His potential customer has the same difficulties, due to changes in Government talk about mortgages, which has continually put him into uncertainty, too. Mortgages have been available fairly freely for the new houses, but bridging loans have been very short, and this means that it has been difficult for people to change houses all the way down the line.
I am not going to enlarge on the details of all these difficulties, because other noble Lords will be doing so. But I think one can sum up by saying that the builders' difficulties are that houses cost more than intended; that the potential customers have difficulty in raising the money to buy them, and the money has cost more to hire. Hence, builders have been more cautious in planning their future operations; buyers have been more

789
cautious in committing themselves; and I suspect that there are a great many unsold houses about. In fact, the outlook for maintaining the present tempo for private house building is not at all bright unless, in some way, conditions change.
What of the future? The Conservative Government, by leaving things alone, were content to see about two-thirds of the new houses built privately for sale, and about two-fifths built by local authorities to rent. Labour says that the process should be reversed. My Lords, is that a good thing? What are the advantages of private home ownership? First of all, it fulfils one of the basic human desires. Then the amount of income devoted to paying off the mortgage represents the market rate of interest and repayment of the savings of somebody that have been borrowed to take out the mortgage: and the repayments finance the next man's house-buying. Contrast that with the council tenant, who in a new house will hardly ever pay a rent which fully services the money the local authority have borrowed to house him. The shortfall is paid off by the ratepayer, the taxpayer or the tenant of the older house in the pool: in fact, it is not too far-fetched to say that when one sees a large number of new motor cars on a new housing estate the ratepayers, and so on, are subsidising the motor car industry.
Labour have always had reservations about rents being anything like economic, and some small percentage of income is regarded by them as appropriate. Yet what do we find when we examine the practice of building societies? They reckon to let a man have a mortgage of two-and-a-half to three times his gross annual income. This means monthly repayments of up to a quarter of his net income. With average industrial earnings running pretty near £1,000 a year, there is obviously a big scope for home ownership to-day, especially when one remembers how many households have money coming in other than from the husband's earnings. The Minister may hope to call in local authority housing to make up any shortfall in the private sector, but local authorities look like having the same difficulty about obtaining money as the builders, and they are notoriously slow in getting under way.
Why do we not have more home ownership and houses built for sale? The plain answer is, "finance". The banks have cut down bridging loans; insurance companies have cut down their loans; the local authorities have cut their housing loans; and there remain only the building societies, who always produce the bulk of the money anyway. But they can lend only the money they can borrow plus what they have coming in from repayments. If the building societies could borrow more they could lend more, and the demand for loans is intense. The Government have produced a better value National Savings medium and that, I am told, competes strongly with the building societies for the funds of the small savers. The Government are in process of producing a mortgage rebate scheme which will open the possibility of loans to people with an even lower income. But this will increase the demand for loans. Normally a squeeze on supply and a boost to demand spells famine. In fact, money is short all round.
This is all rather depressing, but I am afraid it is only part of the general malaise which is the root of our economic troubles. We want an awful lot of capital goods, and we are not willing to forgo current consumption to pay for them. The results will be fully adumbrated by 40-odd speakers on the morrow. I would say this, though, about savings, which are vital for the housing programme. I confess that I have not read The National Plan, or "Old Brown's Almanac", from cover to cover, but I have browsed through it, and I have not been able to find any reference to savings. I may have missed it. You can only create a brave new world by borrowing people's savings, by taxing the money out of them or by printing it. So I should have thought that the question of savings should be the most vital chapter in the Almanac. It appears to work on the principle that the Lord will provide. That frequently works when it comes to patching up the church roof, but one wonders whether Providence will be as kind to Messrs. Brown and Balogh as it generally is to the vicar and churchwardens.
My Lords, what is the remedy? Either curtailment of this vital social necessity of the housing programme, or an abnormal share of available finance. That means, in fact, opting out of the credit

791
squeeze; and if housing opts out, somebody else must be squeezed harder. There is no getting away from that. Her Majesty's Government really must do something to restore the confidence of the builders. They feel that the Government have no confidence in them, and they certainly have no confidence in the Government. They must get the banks moving again to lend money to developers, to builders and to house buyers for bridging loans. The building societies must get more money in, and the local authorities must make the very best useof the limited amounts they can borrow. I am glad to see that Her Majesty's Government have thwarted the new council offices and swimming pools to that end.
In effect, I am asking that housing should be allowed to opt out of the credit squeeze. The Government have said that it is intended that it should do so, but I cannot quite see how they are going to do it. I ask Her Majesty's Government to tell me how they are going to do it—I have given notice to the noble Lord, Lord Kennet, that I want to know—otherwise I fear that the housing programme will be smothered in the dust and flutter of chickens homing to roost. My Lords, I beg to move for Papers.
3.25 p.m.
LORD WADE: My Lords, I am sure we are greatly indebted to the noble Lord, Lord Hawke, for introducing this debate on housing. Of course, housing is always a topical subject, but it is particularly appropriate that we should be debating it to-day, since we are in a position to consider the progress during the first half of this year—which has not been quite as good as I had hoped—and also the prospects for the future, which are not as bright as I would wish.
The need for more housing accommodation, both to rent and to buy, is not in doubt. The target of 500,000 houses a year is not an exaggeration at all. I agree with the noble Lord, Lord Hawke, as to the demands, and as to the continuity of that demand in the future. In some industries, those who are responsible for selling the product have to peer into the future and consider whether there is likely to be some change in fashion or some new technique which may make it more difficult to sell their products.
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But in the building of houses there should be no such fear. It is scarcely likely that, as a result of some change in fashion, the majority of the population will suddenly change over to living in tents or in the open air—that is scarcely likely in this climate. Therefore, there is really no question about continuing demand, and the future should be assured. But unfortunately it is true that there is the feeling of uncertainty and some lack of confidence, especially among the small builders.
If I devote my remarks mainly to the building of houses for owner-occupation, I hope it will not be taken to imply that I am not concerned about local authority building and building of houses and flats to rent, because there is indeed a great need for more rented accommodation. I think that in the last fifteen years insufficient attention has been paid to this need for rented houses and flats. There is much to be done, and in tackling this I hope that the Government will stand firm on the view that those who can afford to pay a fair and economic rent should do so.
Turning to building houses for owner-occupation, there is a need for houses to buy, as well as to rent. The two are complementary. I am expressing the view of my Liberal colleagues when I emphasise that we must have an increasing number of houses available for owner-occupation, as well as rented accommodation. If houses for owner-occupation are difficult to obtain, this has the effect of adding to the numbers on the local authority housing list, and it adds to the numbers of young couples having to live with their in-laws, which is seldom an ideal state of affairs.
The problem which most would-be owner-occupiers have to face is that of obtaining a mortgage, as the noble Lord, Lord Hawke, has pointed out. In this field the building societies have an important role to play. Here I must declare an interest. I have for a number of years been a vice-president of the Building Societies Association, and recently I have become a director of a building society. To that extent, I have an interest, but the views which I express are entirely my own. The financing of house building and home buying is not a very exciting subject, and I feel almost inclined to apologise for talking about it. But it

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is, nevertheless, a very important subject, because it affects so many people.
There is a good deal of misunderstanding in the public mind about it. I do not think it is fully appreciated that interest rates charged by building societies are largely determined by Government policy. We read in the Press about meetings of the Building Societies Association Council. One gets the impression that it is a body of tycoons meeting together to decide what interest shall be charged, in some such way as a body of industrialists might create a kind of price fixing arrangement, but that really is not an accurate impression. In fact there is little room formanœuvre and the recommendations which are made are not always followed by the societies. There are arguments both for and against a recommended rate, but the determining factors are, first, the amount which building societies have to pay to those who invest with them, in order to attract savings and, secondly, the amount of tax which the Government extract from the building societies in the form of taxation.
The main competitors of the building societies are, first, the National Savings Movement, and there of course the interest offered is decided in effect by the Government. The other competitors are the local authorities, particularly so far as short-term loans are concerned, and again directly or indirectly the rate of interest offered is decided by Government policy. It is as a result of these considerations that the amount charged to home buyers by the building societies is arrived at, and at the present time it would seem to me that 7¼ per cent. is about the lowest that building societies could possibly charge; and with the bank rate at 7 per cent. and the effective rate to customers of banks running to 8 or 9 per cent., and even higher rates from other institutions, I think it will be difficult for the building societies to maintain the rate as low as 7¼ per cent. This is most unfortunate because some people will find that buying a house is too expensive on account of the high rate of interest.
Now a scheme is being discussed by the Government with the building societies with a view to reducing interest rates. It is intended to bring about some reduction and to benefit those who do not pay tax
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at the full rate. I hope agreement will be reached and that it will not be deferred as a result of the deflationary decisions of the Government. Perhaps in the course of the debate we shall hear what is happening. There is an element of subsidy in this, and I am not entirely happy about subsidising interest rates, but nevertheless I think it will be of some benefit as long as it does not lead to increased prices, which could wash out all the benefit of any subsidising of interest rates. But one thing is clear: there is no prospect whatever of bringing down interest rates to anything in the region of 3 per cent. That will remain a will-o'-the-wisp for quite a long time.
Even if interest rates were to be reduced, that alone would not provide a solution to the problems of the building societies and the home buyers because it is the availability of funds that is so important. During the last six months there has been a steady inflow into the building societies and I am very glad that should be so. Even then they have been fully stretched because of the intensity of the demand for mortgages. But for the months ahead the outlook is not nearly so encouraging. I think the inflow to the building societies will diminish and that the consequence is bound to be rationing of mortgages.
Much as I wish to see a reduction of interest rates, I am inclined to the view that rationing of mortgages creates greater heartaches than do high interest rates. It can be very disappointing and frustrating for someone wanting to buy a house to find one and then be unable to complete the purchase because no mortgage is available. I think this will happen and it is the direct consequence of the Government's deflationary measures that have recently been announced. I am sure they do not wish that to happen, but I think it is bound to happen. As a rule I hesitate to make any forecast about the future, but I am afraid this rationing of mortgages will be experienced in the coming months. This is bound to affect building because builders have to plan ahead and their planning depends partly on a reasonable assurance of a quick turnover, and if they fear that houses will remain on their hands I think they will tend to lay off and postpone building until the economic climate is rather better.

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That is the position. The question is, what are the remedies? I think one must look carefully at any remedies that are offered. The noble Lord, Lord Cohen of Brighton, has put forward certain suggestions. In effect I think his suggestion is that the building societies, in order to have more money available to lend, should run down their reserves or, in expanding, should not be so concerned about building up their reserves.
LORD COHEN OF BRIGHTON: My Lords, if I may interrupt the noble Lord, my proposal was that the Government should guarantee a proportion of the reserves in order to avoid the necessity of adding the full amount of reserves, and if the Government guaranteed a half then the building societies need only put by a half each year and they would have more to lend.
LORD WADE: I am much obliged to the noble Lord. I was just going to say that, in place of the reserves, it was suggested that the building societies should rely on Government guarantees, and I had notified the noble Lord, Lord Cohen of Brighton, that I was going to refer to his interesting suggestions. However, I think there are some serious objections. In the first place, the building societies are required by law to invest their reserves in Government securities and the interest derived from them helps to cover their overheads which, of course, indirectly helps the home buyers. But there are more important reasons for maintaining adequate reserves. Institutions in this country such as banks and building societies have a reputation for being sound. This is partly due to having adequate and substantial reserves, and exceptions are rare. This is as it should be, and I think it would be unwise for any Government to urge building societies to spend even part of their reserves.
Then again, to qualify for trustee status, building societies are required to maintain a certain ratio of reserves. Personally, I think that when the last Administration granted trustee status they made the condition rather too low, but that is my own opinion. It would be unfortunate, and it certainly would not help to encourage an inflow of investment into the building
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societies, if the societies were to lose their trustee status. But I think perhaps the conclusive argument in my mind is this. If these societies were to rely on Government guarantees instead of the financial soundness and the stability of their reserves, in effect the Government would be taking over some of the risks and responsibilities of the building society movement, and I think some day someone would demand that the societies should be nationalised. Now some noble Lords may think that would be a good idea. Personally I do not think it would be. I do not think it would be of benefit to the country or to home buyers. Therefore, I think one must look elsewhere for a solution.
I want to be as constructive as I can. I certainly will not attempt to cover the whole of the ground; that would be discourteous to the other noble Lords who will be taking part in this debate. May I, however, put forward four considerations? First, if the construction industry is to be forced to contract, I think it would be wise (I believe the noble Lord, Lord Hawke, said this) to cut down on office building and to encourage, so far as possible, the building of houses and flats, both for owner occupation and to rent; and I hope that both the noble Lord, Lord Hilton of Upton, and the noble Lord, Lord Kennet, will indicate that this is Government policy. On that perhaps we shall agree.
On the second point they may agree, but I imagine they will not wish to say so publicly. I believe we should scrap the selective employment tax. There is a strong case for special relief in the case of the construction industry and in the case of building houses and flats of either type. But I think we have seen, from what we have at any rate heard about the discussions in another place, that as soon as you remove one anomaly you create another, and the wisest course would be to abandon the selective employment tax altogether. I think that any arguments for it that were put forward at the beginning have now been exploded and this tax is merely an impediment.
The last two proposals are primarily directed to the Chancellor of the Exchequer. I cannot expect to get on immediate "Yes" from the Government Front Bench to-day, but I hope that my views may percolate through to the right

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quarter. Building societies' surpluses—that is to say, the difference between what they collect and what they pay out—are subject to corporation tax. I do not think there is any logical reason for imposing this corporation tax, and if this tax were cancelled, as I think it should be, it could be made conditional upon helping home buyers by reducing the interest rates or, alternatively, making the rates more attractive to small savers and so helping the inflow into the building societies. I think the latter is the more immediate need. It is most important to attract small savers to increase the funds flowing into the societies and to lessen the extent to which mortgages will be rationed in the coming months. This is not an inflationary proposal, because I do not think that buying one's own home is an inflationary activity.
Finally, I think attention should be paid to bridging finance. Building firms must maintain continuity. It is very important to have help from the banks. Many building firms require assistance from the time they start building an estate to the time they finish selling the houses. Again, an owner-occupier who wishes to move may be unable to complete the purchase of his house until he has sold the house in which he is living. There is very often a chain reaction if one completion is held up. Very often if one purchaser is unable to complete because he cannot get temporary bridging finance from the bank, a number of completions could fall through. If as a result of the credit squeeze this temporary finance is not available it will have far-reaching consequences. Therefore, if it were within my power I would give a directive to the banks not to apply the credit squeeze to this temporary bridging finance. We have not had any clear definition of a "shake-out". It may be just an euphemism for unemployment, but if it means, as it should mean, mobility, then surely it is important that those who are willing and able to move from one job to another should be able to move from one house to another and should not have difficulties placed in their way.
So I come back to my original point. The need for housing is very great. The number of 500,000 per year is not an over-estimate, but I am very much afraid that we shall fall short of that figure.
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This is not an academic point. To have a home of one's own choice, however small and modest, can bring great joy, but to seek for a house in vain may spell real tragedy, and I hope we shall keep these tragedies to the minimum.
3.45 p.m.
EARL JELLICOE: My Lords, I, too, am grateful to my noble friend Lord Hawke for opening this discussion this afternoon and for doing so across so wide a canvas. I think myself that this is a subject to which we in this House still perhaps give too little attention: we have not had a full housing debate since we discussed Lord Wade's Motion last year. I feel this because, to me at least, housing represents the last frontier of the widespread physical want which our society still has to push back. Far too many of our fellow citizens are still poorly housed, and far too many are abominably housed judged by any human criteria. Whatever we may feel about the actions or inactions of this Government or that Government in the last half century or so, be it Labour, Conservative or Liberal, I think we all know that the real roots of the problem here lie far deeper than Government action or inaction. They lie in the legacy of obsolete mid-Victorian housing which still hangs around this nation's neck; they lie in all the social and demographic changes of the last decade or so which have sharply increased the nation's demand for housing and also sharpened, rightly and understandably, its appetite for high housing standards.
I suspect that some of us, myself included, may have some fairly hard things to say about this Government's housing record. What we say might tend to be rather harder and harsher because of the very rosy housing prospectuses which the present Government, on two occasions in the last two years, have flourished before the electorate. Yet, I think that, whatever we might feel or say, we must if we are honest recognise that this Government, like any Government, in the matter of housing are grappling with a really vast and difficult problem. It arouses deep passions. There is a crust of habit and custom, much of it bad, which is difficult to break through in this field. It involves a whole complex of financial and legal problems; and not least it is one of the areas of our national

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life where the legislator and the administrator above all still picks his way through an extraordinary maze of uncertainty. We still do not yet properly know many basic facts which affect this problem.
Be this as it may, I would claim that the legacy which the Conservative Government bequeathed to the present Government was one of substantial and accumulating achievement. I will not dwell on that. I will only pause to remark that it needed something of a genius to produce fewer than 400,000 houses last year. I do not wish to overplay what is sometimes called "the numbers game in this debate. We all recognise that there is much more in housing policy than merely creating the conditions in which a certain gross quantity of houses is produced each year. Nevertheless, numbers are important here. We all agree—I certainly agree—with the noble Lord, Lord Wade, that the sooner we can produce 400,000 houses a year in this country the better, and the sooner we can move towards the next target of 500,000 better still.
The Government, of course, have in some ways gone rather further than this. In the White Paper produced only last November they recognise that the expansion of the housing programme must be, to use the words of the White Paper, "steady and continuous". I would assume that this statement was more than the pious aspirations of some quill driver in the Ministry of Housing and Local Government, and that it must have embodied, at least at that date, the firm plan and the firm policy of a Minister who had by then been settled firmly in the saddle for more than a year. Yet what in fact have we seen? Each month since and including that November, the month of the White Paper, the number of houses completed has been less than in the equivalent month of the year before, and, given the ripeness of the grapes, 1965 was not a particularly good vintage year.
But the figures for new starts are more significant and more sad. So far, in the first quarter of 1966 over 13,000 fewer dwellings have been started than in the corresponding quarter of 1965. The private sector is far worse off: 11,500 down, with the hopes of 11,500 households, perhaps some 40,000 people, dis-
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appointed. But to me, more striking and even more surprising, is that the figures for starts in the public sector are nearly 2,000 down. In paragraph 14 of the White Paper it was stated:
"Public authorities will build substantially more houses next year than this."
I should like to ask noble Lords who will be replying: does this still hold good? I hope it does. And what about the overall figure for the year? As Mr. Crossman said in another place on March I:
"This year we shall build 400,000."
By mid-June, Ministers were a little cagier. The Joint Parliamentary Secretary, Mr. Mellish, told the House:
"My right honourable friend is not prepared at this stage to forecast the number of completions this year."—[OFFICIAL REPORT, Commons, Vol. 729 (No. 31), col. 260: 14/6/66].
But a week later his colleague in the Ministry of Public Building and Works, Mr. Boyden, told my right honourable friend Mr. Geoffrey Rippon, that he (Mr. Rippon) was wrong in thinking that the 400,000 target would not be reached. He said:
"No, Sir; there is a very considerable likelihood"
that it would be reached. But the day before, the Ministry of Housing and Local Government said that it was probably true that the target could not be reached. These statements and counter-statements present, at least on the face of it, a rather startling picture of ministerial muddle.
It would be interesting to learn from noble Lords opposite whether they in fact consider that 400,000 houses will be attained this year. I think it would allay a good deal of doubt. It would be even more interesting to know if they could tell us whether the National Plan target, 500,000 houses by 1970, is still intact. This figure of 500,000 houses sounds most impressive. Two years ago, at least, it was judged to be well within the capacity of our construction industry. And this is, or was, a Government target in a real and special sense.
I would remind your Lordships that the Prime Minister, speaking at Bradford on March 27 of this year, said of the 500,000 houses by 1970:
"This is not a lightly given promise. It is a pledge. We shall achieve the 500,000 target, and we shall not allow any development, any

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circumstances, however adverse, to deflect us from our aims."
It would seem that in his choice of language the Prime Minister had a sure, prophetic sense. But Prime Ministers do not give pledges lightly; and therefore, can the noble Lord confirm, quite categorically, that, despite the present somewhat adverse economic circumstances, that pledge still stands?
That is the bare statistical background, and I find the statistics both dry and rather sad. But we must look behind them for the causes of this trouble. I would entirely agree with my noble friend Lord Hawke that one of the prime causes here is lack of confidence. In that White Paper again, we read in paragraph 5 that if the housing plan is to succeed
"it must command the confidence of all concerned in house building."
I would hold the first ingredient for such confidence to be a firm belief that the Government of the day is firmly committed to a rising programme of construction.
As the present Foreign Secretary put it three years ago in another place, the industry needs—and I quote his words:
"a steady programme which will not be chopped down every time the Government run into some kind of financial difficulty."—[OFFICIAL REPORT. Commons, col. 678, 13/11/63]
Mr. Stewart in fact last year opposed the broad chops across a wide field of public construction. I wonder what he has felt about the chops announced last week. In any event, the result is that our construction industry, the industry which builds the nation's houses, expanded by a mere 2·5 per cent. last year compared with a steady average expansion rate of 7 per cent. for the five previous years.
Of course I realise, as do we all, only too well, that we are in economic difficulties, and that we have been in economic difficulties for almost two years. I also realise that, however high a priority one is prepared, for social reasons, to accord to housing, no Government can, or really should, seek to insulate housing and the consumer industry from all the slings and arrows of our outrageous economy. It seems that at present our housing figures are falling further and further behind target. But if they are, then I should not count Mr. Prentice and Mr. Crossman to be the
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real villains of the piece. The real and root cause is, of course, the total failure of the Government's economic policies. Yet, although I would readily concede that bad housing policies are not in themselves the basic cause of our present housing discontents, I suggest—and I do so most emphatically—that a difficult situation in housing (it would have been bound to be difficult, given the economic situation) has been aggravated by mistakes and failings in its own special field.
There have been some symptoms, as I judge them to be—the noble Lords opposite may be able to allay my doubts when they reply—of what I would term straight administrative incompetence. There is the cross-talk or the double-talk to which I have referred, about the missing 400,000. There is the great brick muddle. But there are other signs and symptoms that in this field there is some lack of administrative grasp. For example—it is perhaps a more important example than it seems; there are many who regard it as an example—there has been the failure somewhere in Whitehall to get dimensional co-ordination finally settled.
More serious, perhaps, are the delays in handling ordinary planning matters. A year ago, so Mr. Crossman has informed another place, it took on the average some 33 weeks for the Ministry to give its decision on ordinary planning inquiries. Now the period has gone up to 44 weeks. These, of course, are only symptoms. They may be unfair examples, but they seem to me possibly to represent the tip of the iceberg. I am not in any way seeking to be discourteous to the noble Lord, Lord Kennet, but it seems tome that Mr. Crossman's now bloated province, containing two Ministers and four Under-Secretaries, might not pass Mr. Healey's cost-effective exam.
But more serious than these signs of administrative imprecision have been the mistakes in the field of policy. It is their cumulative effect which has shaken the confidence of all concerned in house building. There is the matter of the selective employment tax. I agree with the noble Lord, Lord Wade, that as that Bill is at present drafted the construction industry will bear the full incidence of this tax. Personally, I find the line between manufacturing and service industries as drawn in the Bill quite arbitrary and shot through with every sort of

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anomaly. But if one is going to draw a line, I find it very hard to understand how an industry which builds not only our houses, but also our bridges, roads, docks, our steelworks and our power stations, can be classified as a service industry. In any event, the incidence of this tax, if it is applied, will be very heavy indeed, some £80 million in a full year—greater, we are told, than any wage award ever made in the history of this industry. And we are told that this will add some £150 to the price of an ordinary council house. This seems a very odd way of winning the confidence of all concerned in house building.
Yet this is not all. In the original Bill the direct labour departments of local authorities were placed in the Bill's neutral zone, and the private house builder, quite rightly, regarded this as a foul (to use a word which has become only too common to us in the last few weeks). Under pressure the Government have agreed to remove new building by direct labour departments from this favoured category. But that concession affects only some 10 per cent. of the output of the direct labour department. The 90 per cent. devoted to maintenance work will escape. There is no similar escape, I understand, for the small private builder, or the large one for that matter, and this has not escaped his notice.
Your Lordships will recall that last autumn the Ministry of Housing and Local Government issued a now famous circular, Circular 50/65, which abolished the rule that one out of every three local authority projects should be put out to competition, the so-called one-in-three rule. This circular reversed the principle laid down by that famous "Right-wing" character, Mr. Aneurin Bevan, in 1946 that direct labour departments should operate in competition with the private sector. These matters have greatly disturbed the building industry. Given the fact that it is claimed, and I think it is true, that its productivity is higher than that of direct labour departments, they have concluded, not surprisingly, that Whitehall's actions, on both the selective employment tax and as represented by the circular, have been actuated by a certain bias against the private sector. This again is hardly the way to win the confidence of all concerned in house building.
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Then there is the proposed Land Commission. Well, we could argue its pros and cons indefinitely, and we may have a chance of arguing them fairly shortly, so I do not propose to do so now. I would only say, with my noble friend Lord Hawke, that this Bill is a major factor underlying the lack of confidence of all concerned in house building in the Government's policies. It has certainly caused the smaller builder to postpone work until he knows where he is going to stand. And even if he reads the Bill he will not, I am sure, be very much the wiser because many parts, especially the Schedule, are incomprehensible, save to the computer mind. Here again this is hardly the way to win the confidence of all concerned in house building. I would ask the Government not to underestimate the dangers here. They might have noticed that in the issue of the trade magazine Building for June 10 there was the clear-cut statement that:
"The construction and building supply industries are facing a crisis of confidence, the gravity of which should not be underestimated."
I trust that the Government are not underestimating its gravity. One can perhaps exaggerate the effect of all this on the larger builder, who has reserves of land and finance, but the effect on the smaller builder working to much narrower margins is very serious. The fact remains that at the moment 60 per cent. of the houses constructed in this country by private house builders are built by the smaller man. Therefore, there is no chance at present, as I see it, of reaching this elusive 500,000 unless the Government can carry the smaller builder with them. That is not the present position, not by a long chalk.
To summarise what I have said, if the Government attach the importance which they say they do to commanding or regaining the confidence which they had two years ago from this industry, I would suggest three simple and straightforward things which they should do. First, they should scrap, or at least greatly simplify, the Land Commission Bill. Secondly—I agree with the noble Lord, Lord Wade—they should scrap the selective employment tax. Thirdly, they should withdraw the one-in-three circular.
Those are negative recommendations, and, like the two noble Lords who have spoken. I should like to conclude by

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sketching out one or two positive suggestions. Much ground has already been covered, and I will not repeat what was suggested by those two speakers, but I will mention two or three things which I hope the Government will consider. I hope they will give earnest attention to every possibility of streamlining our planning procedures; I have already referred to the sort of delays which have occurred. I am certain that we should move increasingly towards regional planning boards. I am certain that there are devices open to the Government by which delays could be cut. Furthermore, I feel that the ordinary planning appeal procedure could well be decentralised, perhaps again on a regional basis, with independent tribunals. In the public sector I would hope that they would make every effort to be quite certain that subsidy is in fact only paid to those who are in need. This can be done by making rent rebate claims compulsory on local authorities. Another way would be by limiting, by Statute if necessary, the amount by which a local authority was able to subsidise its housing account. That could be done by imposing some limitation on its rate fund contribution, but I advance that only as a suggestion.
Finally, I hope that the Government can give a real boost to the third arm in housing, the housing society and the housing association movement. I must straight away confess an interest here, as the very new President of the National Federation of Housing Societies. I confess to a keen personal interest in this subject which I derive in almost direct descent from my noble friend, Lord Brooke of Cumnor, whom we were so glad to welcome here yesterday, and whom I am so glad to see attending our debate this afternoon. But I believe that in this field there are great and increasing opportunities, not only to help those in special need such as the elderly, not only to increase the attack on the "twilight" areas by what can be done to improve housing—especially where local authorities already have their hands completely full in slum clearance—but, also, in that important middle ground to which the noble Lord, Lord Wade, referred, housing for rent.
I believe that there are many people in this country who either do not qualify for, or do not wish to be accommo-
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dated in, council housing, and who at the same time are neither ready nor willing for home ownership. For them, either by cost-rent schemes or by co-ownership schemes, the housing society movement provides a very useful middle way. Great progress has been made in this, but I believe it could be helped if the Government made a clear-cut declaration of their support for this movement. I know that the Minister has on a number of occasions referred in general terms to this, but I find it significant that in the White Paper on Housing there is only one glancing reference to the housing society and housing association movement. I believe that if the Government's interest was reflected in further action this could be helpful.
I think that a review of the procedures and the financial aids, for which housing associations might be eligible in the "twilight" conversion schemes, would be helpful. I also assume that the Government will see that the cost-rent schemes are eligible for the 4 per cent. special interest rate, if this is in fact introduced, and that the co-ownership schemes are eligible for the mortgage option schemes. This would maintain their relative positions vis-à-vis public sector housing, on the one hand, and owner-occupation, on the other.
I have deliberately left vast areas of this huge field uncovered, but in conclusion I believe that the situation with which we are faced at the moment is one of very special concern for the Government themselves, for was not housing the Prime Minister's own chosen electoral battleground? Did not the Labour Party go to the country only four months ago stating that their first priority was housing? But let the Government take comfort. It is not too late yet for them to mend their ways, provided they are prepared to jettison some of their pet schemes—and the two previous speakers and I myself have suggested some good candidates. Provided they are prepared to do this, confidence among all those concerned in house building can still be restored. It is not yet too late for the houses to start flowing back again into the housing returns. And yet those who are waiting for houses should also not lose heart. I think that the present Government have shown in a number of

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ways that they are not cabined and confined by any undue attachment to past principles, prejudices and convictions, and they make a virtue of pragmatism. I hope that in tackling the housing problem from now on they will, in fact, make a virtue of that pragmatism
4.15 p.m.
LORD HILTON OF UPTON: My Lords, I am sure the whole House is very grateful to the noble Lord, Lord Hawke, for introducing this debate this afternoon, because we are all united about the importance of this subject of housing. We in the Labour Party regard it as of paramount importance. The noble Earl has just referred to housing having priority in the Labour Party's last General Election programme, and I would say that housing still has top priority in the Labour Government's programme. I hope that, either now or a little later, my right honourable friend the Prime Minister will make this perfectly clear again in another place.
Personally, I feel very strongly about housing. I doubt whether there is any other Member in any part of your Lordships' House who has had, as I have had, the ordeal of being on a housing list, waiting years and years for a house which never came. So I know from practical experience some of the heartbreak of people who are desperately in need of a house. The Labour Party and I believe that it is the right of every family in this country to have a decent house, either to own or to rent, in which to live. So we are indeed grateful to the noble Lord, Lord Hawke, for raising this matter this afternoon.
I will resist the temptation to indulge in recriminations about thirteen years of Tory Government and their housing record, because that will not produce one more house and production is what we are all anxious to achieve. I must say that the noble Lord, Lord Hawke, appeared to be quite a prophet of gloom, and was very pessimistic about the future prospects of housing in this country. But I should like to say that the Labour Party, with our belief in planning, being not just an optimistic Party but a realistic one, believe that our target of 500,000 houses a year by 1970 can and will be achieved, despite all the difficulties. I would be the first to admit that there are
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difficulties, but I hope to convince your Lordships—if not the noble Lord, Lord Hawke—that by our policy of planning this target will be achieved.
The noble Lord, Lord Hawke, and the noble Earl, Lord Jellicoe, referred to a lack of confidence in the building industry. It may appear to some that there is a lack of confidence, but to try to allay it my right honourable friend the Minister of Housing has called, for next Tuesday, a special meeting of all those interested in house building, to consider the problems. I am sure the whole House hopes that, if there is any lack of confidence—and I would not admit that at the present time there is—that meeting will clear up any difficulties.
Your Lordships are all aware of the Government's White Paper on Housing, which describes quite plainly how the Government propose to give greater priority to housing than it has had for many years, within a national housing plan embracing both the public and the private sectors. The first objective is an output of 500,000 houses a year by 1970. This is a marked increase over what has gone before, and can be achieved only if there is a steady and continuous growth in accordance with clear priorities. All concerned with housing, in both public and private sectors will need to understand what is expected of them, and this is one of the reasons why my right honourable friend has called this meeting. A proper balance will have to be struck between the two sectors. This is something on which the Government have to exercise their judgment having regard to social needs.
The Government realise—and it has been said two or three times already this afternoon—that there is a large and increasing demand for houses for owner-occupation which must be catered for in the housing plan, and my right honourable friend the Minister of Housing and Local Government hopes to meet this need, which we in the Government fully appreciate. I know that the noble Lord, Lord Hawke, considers that the prospects are not very bright, but I hope that at the end of the day he will agree that the situation is not quite as dreary as he at the moment thinks it is.
LORD HAWKE: My Lords, before the noble Lord leaves that point, may I ask

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him who has got the Treasury brief—himself or Lord Kennet? Because the Treasury brief is the ace of spades. It is all very well to say how many houses you are going to build, but until the Treasury allow you to have the money they will not get built.
LORD HILTON OF UPTON: I cannot speak for my noble friend Lord Kennet, but I can assure the noble Lord that I have not the brief to which he is referring. Although we appreciate the need to which I have just referred, we have to confess that the greatest need is for more houses to rent, especially in the bigger towns, with their problems of slums, over-crowding and obsolescence. The families in the really bad conditions are often precisely those who cannot afford to buy a home of their own at to-day's prices and who, in many cases, cannot even afford an economic rent. Their needs can be met only by the public sector building through local authorities.
I have referred to the problem in some of the bigger towns, but there is also a problem in rural areas, as some of your Lordships will appreciate. There can be no doubt that the housing problems of the rural areas, however, are relatively less acute than those of the larger towns and cities, with their massive concentration of slums and high degree of overcrowding, but I repeat that many of the rural areas have their housing problems. Only last Saturday evening I was visiting a village in my old constituency in Norfolk, and there I saw some of the worst houses that it is possible to see, whether it be in town or village—and this is not just an isolated case. We have our problems in the rural areas as well as in the towns and cities.
Now the Government came to the conclusion that the aim over the next five years must be to build up the public sector programme to the point where it will be providing roughly a half of the target of 500,000 houses in 1970—to a figure of 250,000. The proposed overall building programme was discussed with the builders and building societies before the White Paper was issued, and, subject to there being flexible targets and certain tolerances, they accepted the Government's intention.
The White Paper summarises the essential requirements for carrying out the
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programme it outlines. A good deal of progress has already been made in implementing these. Less essential building will be controlled by the provision in the Building Control Bill, currently in your Lordships' House. "Little Neddies" have been set up for the building and construction industries. A Working Party on land and planning procedures, including representatives of the builders, building societies and local authorities, is considering questions of land supply. There was a very useful discussion of builders' problems at a recent meeting which the Minister of Housing and Local Government chaired, and which the Minister of Land and Natural Resources attended. There is a second Working Party, including representatives of the builders, material producers, building societies and local authorities, to deal with questions arising on forward programmes and on the balance between the public and the private sectors.
I want to say a word about housing subsidies, to which, again, the noble Earl referred. The Government intend to reintroduce the Housing Subsidies Bill, which did not complete its passage through the last Parliament, as soon as possible. The Bill was designed to achieve four objectives: (1) to give greater help to local authorities to enable them to increase their programme of building to let; (2) to encourage building to the standards appropriate to the latter half of the twentieth century; (3) to give most help to those authorities whose need is greatest because their costs are high or because their programmes are large in relation to their existing stock of houses; (4) to relieve them of uncertainty about interest rates, which stands in the way of that long-term planning which improved productivity requires. My Lords, the drive for industrial building is continuing. Three-year programmes have been settled for 130 local authorities with top priority housing needs.
I should like to say a few words about the housing figures for Great Britain for the first five months of this year. In the public sector, public authorities started 15,400 houses in May. This is 100 up on April, but 1,800 down on May of last year. In the first five months of the year these authorities started 69,500, compared with 75,500 for the first five months of 1965. During the second half of last year authorities held back their tenders

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so as to qualify for the more generous new subsidies. It takes something like six months for approvals to become "starts", so "starts" were down in the first part of the year; but the flood of approvals which followed the announcement of the new subsidies at the end of November should lead to an increase in the "starts" over the rest of this year. As to completions, public authorities completed 14,800 houses in May. This is 1,600 up on April, and 1,000 up on May last year. In the first five months they completed 67,900 houses, compared with 66,900 over the same period last year. This improvement is not as good as might have been hoped for. Part of the explanation may lie in a lengthening of construction periods, and the aim is to reduce these by increaseing use of industrial methods, by giving local authorities three-year programmes, and by encouraging them to use well-tried dwelling-types and to let larger contracts.
Private "starts" have been running at the annual rate of about 200,000. Private builders started 18,700 houses in May—2,200 down on April and 600 down on May last year. But in the first five months of this year they started 84,600, compared with 98,100 in the corresponding period last year. Private builders completed 17,000 houses in May. This is 600 fewer than in April, but 200 up on May of last year. In the first five months of the year they have completed 81,500, compared with 86,400 in the first five months of last year.
On the question of prospects for the rest of the year, so far as the public sector is concerned, the pattern over the country varies very considerably, with great activity in the northern part of the country, particularly in the West Midlands, and strong demand from authorities in the southern counties and the South-Eastern counties. So far this year, however, tender approvals in Scotland, the Greater London Area, the East Midlands and East Anglia are below expectations. The priority authorities, 130 in number, have their settled three-year programmes, and a great deal is expected of them. They are mostly authorities in conurbations where the greatest problems of slums and obsolescence are to be found. They have been given programmes limited only by their capacity to build. Three-year pro-
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grammes are now being negotiated with other authorities whose needs are not quite so great and who are building over one hundred houses a year. The Government are committed to a steadily rising programme of building by public authorities. Despite the disappointments of the first six months, the prospects of improving this year on last year's achievements are still good. As far as the private sector is concerned, the reasons for the decline are complex. The smaller builders, in particular, who build a large proportion of private houses, tend not to complete houses unless they are certain they can sell them, and not to start houses until they have a certain sale for a completed or near completed house. Their activities are thus keyed to effective demand.
My Lords, a word on local authority lending. A year ago local authority lending had to be severely cut back. The authorities were allowed to lend in 1965–66 only the average amount that they had lent over the three previous years. As a result, many authorities, including the Greater London Council, stopped lending altogether, apart from meeting existing commitments. This had a serious effect on the housing market because local authorities tend, more than building societies, to lend on older houses. People living in old houses who wanted to move to a new one found that they could not sell because the buyer could not get a mortgage. In April this year the authorities were told that they could lend up to £130 million in the present financial year. There is a time lag between commitment and advance, so this money is only now beginning to enter the housing market. This £130 million should be a great help to the market over the next nine months.
There is much more that can be said on this most important subject; but we have still a very long list of speakers and I am sure they are going to say all that needs saying. I repeat that the noble Lord, Lord Hawke, in opening this debate presented a pretty gloomy picture of the prospects for housing in the future. Despite this, I am convinced that this Government, with their belief in planning and putting planning into effect, will by 1970 achieve their target of building 500,000 houses a year.
4.35 p.m.
THE LORD BISHOP OF CHESTER: My Lords, I should like from these Benches to express our gratitude to the noble Lord, Lord Hawke, for introducing this debate and also for the very measured and moderate way in which noble Lords have spoken about a matter of such cardinal importance. I do not myself possess the technical experience and knowledge of this very complicated problem, and therefore I hope you will forgive me if I speak from a rather different angle about this matter of the housing situation, one which I believe to be extremely relevant to the discussion in which we are taking part this afternoon.
It is, I think, incontrovertible that of all the material elements which contribute to the welfare of society there is none more important than the provision of good housing. If it is true that the family is the nucleus of society, then it is essential that the family should have a place in which it can thrive; if it is true that the welfare of society depends on the happiness of the individuals, then there is nothing which contributes more to the happiness of individuals than the happiness of their homes; if it is true that the future of the nation depends upon a well-educated youth, well-trained and understanding its moral responsibilities, then there is no place where young people can learn these lessons better than in a good home. Therefore it is good housing which makes as great a contribution as any other element in society to the things which we wish to see established in our midst.
We know the dangers which come from bad housing and we have seen them. Still, there are many things which are symptomatic of the dangers which are present at the present time. For instance, the figures for the year ending March, 1963, which are the last figures available, for children who came into the care of local authority children's departments as the result of their families being homeless, was 3,610. There is evidence also in places where rents are very high, such as in the South-East, that there is a great deal of sharing of homes; and statistics go to assure us that the sharing of a home is one of the most fertile factors in the break-up of home life. These are only symptomatic of what is going on in our midst at the present time
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as a result of the shortage of proper houses. It is again, I think, undeniable that there is a very serious shortage, especially of the right houses available at the right time in the right places for the right price. And there are the obvious reasons why this is so. We know the demand for the replacement of slums and houses which have outlived their usefulness; we know the pressure of the growing population.
But there are also more subtle reasons, which have grown up perhaps quite recently as a result of social pressures and changes. Thus, for instance, there is the demand created not only by the increase of individuals but by the increase of households which require separate homes. It was, comparatively recently, fashionable to criticise young people as being heartless when they wanted to throw out the older people so that they could find their own homes or that they should go into old people's homes. Now there is a change in emphasis, largely as a result of the affluence of society: very often, older people do not want to live with the younger members of their family. They want to have their homes. Therefore there is this demand by reason of the increase of households, as well as that created by the increase of population.
There are two matters which I think need some examination in this question of the shortage created by such circumstances. One is to ask whether there is not, in fact, a certain amount of under-occupation of existing houses. This is a matter which I am sure noble Lords would wish should be approached with great delicacy and sympathy. It sometimes happens that a couple have gone into a large house and brought up their children, and the children have married and gone off. Quite understandably, the parents are very reluctant to leave the house in which they have lived for so long a time. Yet it may well be that one couple are living in a house much larger than their needs require while a younger family, with a large number of children, may be prevented from getting proper accommodation. As I say, this is not a matter in which anyone would wish compulsory powers to be exercised, but I think it should be brought to the attention of those concerned. Possibly some powers of persuasion could be brought

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to bear upon those living in houses larger than their needs require and in accommodation which could be made available to families whose need is greater.
There is, also, I think need for some investigation into the balance of housing permissions as between one part of the country and another. In this matter I speak with no expert knowledge, and I may be completely wrong; but I am under the impression that in those places which possibly are more pleasant to live in, and where people want to live, there is a disproportionate amount of permission for housing compared with larger cities. I, for instance live in the delightful city of Chester, where, I am told, there is no great problem at the present time about fulfilling the necessary housing programme; whereas very near to us there are great cities which have very big problems. I think this an element in the situation which needs some examination in order that the balance may be kept right.
Noble Lords have spoken in this debate about the highly complex and technical matters connected with the provision of houses, and I should like just to touch upon one matter which was mentioned by the noble Earl. Lord Jellicoe: the importance of giving every encouragement to housing associations. The record of housing associations in this country is indeed a fine one, and the name of Jellicoe is one which is greatly honoured in it, as one remembers the contribution by Father Basil Jellicoe, in the early days, in the St. Pancras housing estate. There are a very large number of small housing associations throughout the length and breadth of the country which are making small but very significant contributions to this problem, and I am proud to think that the Churches are taking a notable part in this work, to such an extent that a British Houses Council Trust, in connection with the British Council of Churches, has recently been set up to assist those who, on a local basis, wish to give encouragement to this work.
I think it must be stressed, however, that many of these small associations are frustrated by the red tape with which they find themselves surrounded when they want to get on with the work. I
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was told of a case, which I believe to be typical, of a housing association that wished to convert one house into four separate places and provide for very needy families. It was four months after permission had been given to make the improvements before the association received the necessary financial aid. If there are to be frustrations and discouragements of this kind, it is possible that this very valuable source of expert voluntary help may dry up because those concerned do not feel that they are receiving the encouragement which they need.
There is a matter of a larger issue in the housing situation to which I would once again draw the attention of your Lordships. I refer to the vital importance of providing the necessary social amenities in those places where new towns and new housing estates are being set up. I know that a great deal of care and thought is given to these matters by those responsible for building the new towns. I have read the interesting report, published last year by a committee of the Ministry of Housing and Local Government, entitled The First Hundred Families which gave valuable advice as to what should be done in the beginning on a new housing estate when the first residents come to live there. Even so, we are still making grave mistakes, and we must accept the fact that it is not enough merely to build houses in which people can live. Those houses will be in a community, and unless we make it possible for the people living in them to build not only their own family life but also a life in the community in which they find themselves, we shall largely have defeated the objective at which we aim.
Those who come to live in these new housing estates come from communities, from places in which they have naturally taken their part and in which they have found a source of personal satisfaction. They have been uprooted, and find themselves in a completely new situation; and it is a very skilful and delicate matter for people with no previous experience or insight to create a new community life ab initio, in such circumstances. Therefore they must be given the means to enable them to accomplish this and to encourage them to do so. They must be given churches and places where they can meet socially.

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Here I should like to pay tribute to the authorities who, so far as my experience goes, have always given every encouragement and help to churches to find suitable sites and to get on with their work. The people must be given shops and places of entertainment, and facilities for sport. Yet, as I have said, I am afraid that we are still making grave mistakes. I think of a certain place, within my own diocese, of which I have recently had experience and where, after many years of planning, houses suddenly began to be built with a rapidity that was quite bewildering: almost before one knew where one was, there were thousands of people coming into the area. In the early days, I believe, there was only one telephone booth, which was generaly broken up over the weekends by hooligans. The streets were unadopted and so, I was told, it was not possible to impose a speed limit on vehicles in streets where children where playing.
Early on, there was only one school, and it was necessary to search around the periphery in order to find suitable places where the children could be taught. Most significant of all, I think, was the lack of people within the community with some sense of authority and leadership. was grateful to the authorities for making available a house in which I was able to put a young clergyman, who was one of the first people to live in the area and so could go around as an "older inhabitant" and welcome new arrivals as they came in. I think he was the only person of that calibre and character in the place. The schoolmaster did not live there in the early stages; nor was there a doctor living on the site. There was no member of the learned professions, such as a solicitor, or anybody to whom people could go for advice; and the whole burden fell on this young clergyman, who discharged it very courageously.
The sort of problems with which he was faced were those created when men went into Manchester to work, leaving early in the morning and coming back late in the evening. In this sort of situation, of which they had had no previous experience, the women found themselves lost. I am sure that those who are responsible are aware of these problems. We hope that they have been investigated, and perhaps solved. Pos-
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silbly they will be in the future; but they have not altogether satisfactorily been dealt with in the immediate past, and it is a matter on which we should still keep a watchful eye.
We are grateful for having had this opportunity to discuss this matter from so many points of view. I hope that we shall keep two points before us in further debate. First, I welcome the statement by the noble Lord who spoke from the Government Front Bench that this matter of housing is not going to be subjected to economic pressure and stricture; for it is one upon which the health of our society depends and upon which we dare not retrench. In these days, the whole subject of housing is so complicated that it cannot be left to individuals to find their own houses. They must have the help of the Government and of the public authorities. And we dare not economise on this. Also, I would ask (although this debate has been very moderate in its tone) that we shall continue to try to lift housing outside the realm of Party political controversy. If we do not do so, we shall run the risk to which the Milner Holland Report drew attention: that the whole matter may be vitiated if it becomes the sport of political prejudice.
4.52 p.m.
LORD MITCHISON: My Lords, with the noble sentiments that we have just heard from the right reverend Prelate I find myself in very general agreement. I can assure him that the troubles of new towns, at least in the case of one that I watched for many years, do not necessarily last. I am not sure that I agree with the right reverend Prelate about taking this matter out of Party politics at this stage. We have heard from the Benches opposite distinctly political speeches. I am grateful to the noble Lord, Lord Hawke, for having introduced this subject, for the simple reason that this is a subject on which the Government has about the best record and the previous Government's about the worst, and if we are going to be lectured about what we have and have not done, it is just as well to reply in kind, though I do not want to take long about it.
I would ask noble Lords to remember one simple thing. Last year's statistics show that the total of houses completed

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in 1965 and the total of houses under construction both constituted records. Under successive Conservative Governments the total number of houses built went up and went down. It always went down when there was a slump or an economic crisis—one understands that—but it did not rise steadily or anything like steadily, and it was only recently that the total passed the 300,000 mark. But that is not by any means the whole story. I listened to the noble Lord, Lord Hawke, to-day, hoping that he would tell us what he had in mind we should do. All he said was to leave things alone. This was Conservative policy.
LORD HAWKE: My Lords, I gave a very positive programme. I said, first regain the confidence of the builders, and secondly, exempt housing from the credit squeeze, because if we do not do that we shall not get any houses.
LORD MITCHISON: My Lords, let me deal with the first point. How does the noble Lord or anybody else know that the confidence of the builders has been lost? This is the kind of nonsense one hears from people who have no better argument. I prefer the view of my right honourable friends in another place who, as responsible Ministers, have had to deal with the builders, and they do not present this picture at all. I simply do not believe it.
We have been told that we have lost the confidence of the country. Would somebody like to applaud?—well, perhaps not. But look at the Gallup and National Opinion Polls. Then we are told that we have lost the confidence of the builders. This depends on what is meant. If the noble Lords opposite and their Party colleagues in another place go on telling the builders all the time that the Government are doing the most dreadful things to them and they ought not to have any confidence in the Government, undoubtedly it has some effect; and the position of the responsible authorities who want to get more houses and the right houses in the right place at the right time is made more difficult, because what our opponents are doing is, for Party purposes, to reduce the output of the builders. We are told that the builders will not do it because they
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have no confidence. I think, with great respect, that this is nonsense.
When we look at the programme of successive Conservative Governments, we see that it is not only a question of housing but, even more important, of the distribution of housing. We had an admirable speech on behalf of private builders from the noble Lord, Lord Hawke. I wondered when he was going to get to the local authorities. He did, after talking about private builders for a considerable time, but did not say much about them and went back to the private builders again. We want all the agencies we can get for building houses and that is what the Government have said repeatedly. It is the local authorities who, in present circumstances, are the primary providers of houses to let for the ordinary working man. The building societies meet a great deal of the demand, but I am sure that my noble friend Lord Cohen of Brighton would agree that there is a considerable number of people earning their bread and butter in this country and citizens of it who cannot afford to buy a house or to borrow from a building society. It is too much for them. And council housing was started to meet just that need.
Let me remind your Lordships that in 1951 about seven local authority houses were being built in proportion to one private builder's house. By the time the Tories had finished, about two private builder's houses were being built in proportion to one local authority house. What is the reason for that? Is it that there was no need for local authority houses? Is it the case that the people who could not afford to buy through building societies or from private builders or developers ought not to have a house? I should have thought that it was Tory doctrine that those who needed them most should surely get houses.
LORD WOLVERTON: My Lords, may I remind the noble Lord that up to 1951 there was a licensing system and private builders could get only one in four? So that it is not fair to say what he has been saying. A large number of people who wanted to build houses had to rent houses built by local authorities because they could not get licences to build.
LORD MITCHISON: My Lords, it was the effect of the policy of successive Tory Governments—though perhaps they did not have a policy—to reduce the number of local authority houses built in proportion to those built by private builders and it is about this result I am talking. I do not want to quarrel with the noble Lord. If he says that they did not mean it, all right. If he says that they did mean it, equally all right. But that is the result of their policy.
There were one or two other measures that came in as well. There was the 1957 Rent Act. The noble Lord, Lord Brooke of Cumnor, and I have discussed this matter in another place from time to time, and I am not going to enter into any violent diatribe about it. I would simply say that since the passing of the 1957 Rent Act the number of houses to let in the major towns has steadily decreased. What has happened is that houses that were formerly let have been sold. This again reduces the number of houses to let. I am not saying that they are the only things needed, but I believe that the Government are right at the moment in saying, as they have said for a couple of years past, that that is the major need, taking the country as a whole, and not considering ideological prejudices about local authorities, private builders or anything else. What matters is the country's need.
In addition to that, of course, there are other needs which can and should be filled; and the owner-occupier's need to have a house of his own is a very real one. We have not neglected this. We were the first Party to introduce, in Aneurin Bevan's time, the arrangements for improving houses—for getting rid of the but and ben house that we had in some parts of the country, and notably in parts of Wales. We have in one Parliament after another, whenever we have had the chance, done our best to encourage the owner-occupier. He is not the tame pet of the Tory Party; he is a citizen of this country for whom we feel at least an equal responsibility.
So much for the number and types of houses. But we have had one thing under this Government which has been a real advantage. We have had a Housing Minister with vision, and he has done some extremely useful things which I would commend to your Lordships'
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attention. I will not mention all of them, because there have been a great many. First of all, let me turn to the land. Between the end of 1964 and the end of 1965 the cost of housing went up by about 10 per cent., and only 4 per cent. of that was due to construction costs. The rest of it represented land costs. We all know that—haphazard, if you like, over the country, and not the same in one part as in another—there have been these staggering rises. And the wrecking of the planning arrangements originally introduced by my noble friend Lord Silkin, and replaced by the Tory Party, resulted in local authorities finding it extremely difficult to get land at a reasonable price for their housing needs. And not only local authorities, but builders, too.
When we turn to the Land Commission, if this Commission is going to do what it is intended to do, it should at least be able to make land available for housing, whether to local authorities or for private development. I believe that this is a major need in the housing field. I am not going to discuss this in detail—we shall have the Bill later—but that is obviously the purpose.
Now I come to New Towns. We started the New Towns after the war. I think, looking back, that we perhaps put too many of them too close to London. Well, the present Minister is in the course of adding a further range of New Towns a little further away. And that is not the only thing. In addition to this, the Scottish New Towns have had a good deal of development. One does not want to go into this in detail, but at the end of the day one has to bear in mind that the contribution that New Towns make is an important one from the social and economic point of view. But it may not tot up in numbers in any one year to as much as one would hope.
What happened under the Tory Administration? There was a period when they refused to build New Towns. Then some light, or the Opposition, induced them to amend their ways and they started to build them again. It is right to carry that on. It fits in with the economic intention to stop the drift to the South-East, and to get more done, not only in the development districts, but in the North of England and in Scotland as a whole. I believe that you must fit

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your housing problem into your economic needs. It is true that there is a vitally important social side, but it will not be as important socially, or for any other reason, unless you can see that the New Town does not become a mere dormitory, but becomes a place where people can have both their job and their home life. In that way you make it a real community. You cannot make a proper community out of a suburb from which people go popping into the middle of London to do their work; nor can you out of a New Town which is somewhere from which people do the same thing. One has to remember that housing is not just a question of the number of houses. As the right reverend Prelate said a little earlier, it is a question of getting them at the right time and in the right place. To have a New Towns policy is, I believe, making a really valuable contribution.
I must not take up too much time tone tends to do so in housing debates; I have done it in the past, and I must not repeat myself), but there is one other point I should like to mention. What about the amount of building you can do, looked at as a building question? The noble Lord, Lord Hawke, said quite rightly that there was a correlation between the amount of labour and housing and the labour in other forms of construction. You must not press it too far, because if you consider what men are doing when they are building a large concrete factory and when they are building a council house you realise they are not the same thing, and they will not be altogether the same men. But there is a broad connection.
I was interested in some figures that I saw in the table on page 85 of the Monthly Digest about new orders obtained by contractors in the public sector. The total of new orders as between 1964 and 1965 fell from 715 to 691. But the total of new orders as to housing only, which is part of that figure, rose from 465 to 510. I conclude from this that more steps are being taken to strengthen or keep the housing force.
Then there is the question of methods. Industrialised house building seems to all those who know about it (not me; I do not know) to have very real possibilities, and we are aiming at a target of 40 per
824
cent. of local authority housing by this means in a year or two. All I can say is that we are going steadily and swiftly towards it. I believe that this is a real change which should add materially to the housing results without drawing too much on the demand for manpower.
I want to end up by saying this. It astonishes me to hear noble Lords opposite saying that the right way to remedy the housing situation is to get rid of the selective employment tax. With great respect, what do they expect to put in its place? This tax will raise between £200 and £300 million. The Chancellor of the Exchequer was unable to think of an acceptable alternative. But there are alternatives. Perhaps noble Lords would like more income tax, more purchase tax or more surtax. Those who say that the selective employment tax should be dropped ought to explain what they will put in its place, or to explain why it is wholly unnecessary.
I understand that at this season of the year, particularly when the Finance Bill is going through, the reluctance of the average Briton to be taxed reaches monumental proportions, particularly if he (if I may put it in this way) is a building society. After every Finance Bill, the building societies say, "We are taxed too much". Nevertheless, they do pretty well. Be that as it may, it is all very well to take fiscal matters and financial matters, and to say this, that and the other is wrong. If that is the kind of answer that is required, I should very much like to know what view noble Lords have about the housing subsidy. It was £24 when the last Government went out it is now to be £67. Which figure do they think is right—£24 or £67?
Noble Lords will have heard the right reverend Prelate say—and how right he was!—that housing in this country is something which must have Government and local authority help if people are to be housed properly. Housing is like education used to be. At the beginning of the nineteenth century, we had private schools all over the country. In the last resort they could not do the job, and we had to have public education, like every other civilised country. Just the same is true of housing to-day. It is no longer a matter of two or three people: one to build a house, the second a

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developer, and the third the buyer of the house, or the building society. This is a public service and a public responsibility, and the sooner we in this House realise that this is what we have to face up to, the better we shall do the duty that I hope we can do.
5.12 p.m.
VISCOUNT GAGE: My Lords, I must apologise for appearing as a sort of spoilsport, because I want to revert to the question of housing societies and housing associations, which do not fit readily into the pattern of what is sometimes rather euphemistically described as the cut-and-thrust of Party debate. In a way, those of us who are interested in this movement might feel that it was a very good thing that these societies and associations should not be a matter of Party controversy. But it has this disadvantage: that in the average housing debate, particularly in another place, they are hardly mentioned. In your Lordships House the situation would appear to be rather different, because already we have had two speeches on the subject this afternoon. Your Lordships are getting a reputation for being progressive, sometimes in rather controversial directions. This is a direction of progress which I very much welcome. But I think it is a pity that so little is known about the operation of these societies (if it is not a breach of privilege to say so about another place), because I believe that if more were known it would be discovered that what my noble friend Lord Jellicoe described as the third arm in housing had certain advantages over private enterprise or public enterprise building.
I would remind your Lordships that both housing associations and housing societies, though they cater for a whole range of different types of tenant, have this in common: they all depend largely upon voluntary labour, and they all work for a profit, the maximum being laid down by the Treasury. The housing societies enjoy no subsidy, but they have access, through the Housing Corporation set up by the Act of 1964, to that fund of £300 million from which they can borrow. I understand that in the last two years they have spent about £22½ million in erecting some 6,640 units of housing, chiefly cost-rent, but a proportion of cooperatives, and are considering a further £15 million of such work.
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Taking into account the newness of the venture, in view of the fact that the time has been difficult and the costs of materials and money high, and that many of these societies produce flats which are an expensive type of construction, I think your Lordships will agree that that is fairly good going. Unless they run into unforeseeable difficulties—which is always possible in these days—they should continue, I imagine, to use this £300 million at a steady and, perhaps, quicker rate than they have achieved hitherto. Naturally enough, without subsidy they cannot hope to compete with subsidised local authority building, and I suppose they cannot at the present moment produce a flat for much less than £5 a week; and that only in rather favourable areas.
Housing associations present a much more complicated picture, because although they administer about 120,000 houses at present, these include a great variety—some old, some new; some subsidised and some not; some charitable and some not. Equally, the tenants are very diversified, ranging from those who live in converted historic houses divided up into 40 or 50 flats, and where the tenants (very respectable tenants; perhaps some of your Lordships, for all I know, among them) pay perhaps £10 or £15 a week inclusive, ranging right down in the economic scale to homes where everybody is on National Assistance.
Again, as in the case of the housing societies, the associations cannot hope to compete with local authorities in the matter of new building, except where they receive a subsidy. In practice, this means almost entirely building for the elderly. In this field, progress has been made. We are housing now perhaps 15,000 old people, and we are housing a further 1,000 people each year. I hope that this number will be increased. So even going on as we are, I suppose that in the next two or three years we shall be able to claim that, between the housing societies and the housing associations, we shall be providing about 250,000 houses, a total which, compared to the numbers provided by other agencies, is, I agree, very small. Nevertheless, it is something and, as I have already said, there seems to be some quite substantial argument for suggesting to the House and the Government that this contribution ought to be made a great deal larger.

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Perhaps I may be permitted to develop one or two of these reasons. In the first place, as was pointed out to-day and in the White Paper, private enterprise has long ceased to build houses to let at low rent. But what is more important is that the stocks of low-rent houses are rapidly diminishing. They are going into the auction, and I do not think it is an exaggeration to say that in a few years' time anybody who requires accommodation at anything under £200 per year will find it almost impossible to discover it in private hands. I am not sure that in certain places this is not already true. The old Victorian notion that bricks and mortar were a good solid investment has been proved to be an absolute snare and delusion, due partly to the high cost of maintenance and partly to restrictive legislation. I have no doubt it is inevitable that because of certain glaring cases all landlords, from John o' Groat's to Land's End, should have to be tarred with the same brush. They certainly have been, and I cannot see any Government ever putting them into a position where they can provide this low-rent accommodation again. So that really means that we are getting to the position where the local authorities will soon have a complete monopoly of all low-rent accommodation.
I have been a member of local authorities for many years and I believe I have some knowledge of their virtues and limitations, but I do not like monopolies and I do not think it is right that local authorities should have this complete monopoly of low rental accommodation. If that is a sound view—and a good number of people agree withit—the only alternative that I can see to this local government monopoly in the future will be the housing society or the housing association. That view was clearly held by the Milner Holland Committee in 1965, though their terms of reference did not permit them to develop that argument. So on that ground alone I think there is a strong argument for encouraging the work of these societies.
I would also suggest that they have certain advantages over local authority building. Because they cater for allsorts of people they do not carry with them that class cachet which certainly in many parts of the country is inseparable from the council housing estate and which
828
sometimes has the effect of lowering values in surrounding property. The other day we had an interesting discussion on the independent schools, and some noble Lords and Ladies opposite were so insistent on the evils of class divisiveness that they were moved to make certain recommendations which I thought were fairly totalitarian. But if there is this stigma to be attached to class divisiveness they might turn their attention to the council house position, about which a book has recently been written.
Again, having a more flexible approach, housing associations do not have to divide up humanity in quite the same way as the local authorities, so that the able-bodied, those in need of care and attention and those in need of medical care come under three authorities. As we all know, unfortunately we tend to slide from one category to another, and I think it is an inconvenience to have them so divided by Statute. Again, the housing society and the housing association can make some contribution in that respect.
Lastly, I think the housing association and housing society tends to be cheaper to administer than local authority schemes, because so much is done by unpaid volunteers. Having been for some time connected with this movement, it has fallen to my lot to visit some of the associations, and I am nearly always impressed with the quality of the people who are running them. They are professional people—architects, surveyors, school masters, ministers of religion and many other able people who would find it difficult to work full time in local government but who do find it possible to work in this particular form of social service and to lend their professional skills. At the time when local authorities have so much on their plate, and at a time when a committee is sitting, to put it bluntly, to see how best to improve the quality of representatives in local government, I do not see how we can afford to disregard this type of worker.
From what I have seen, a well-administered housing association, with its variety of income and age groups, can provide about as good a solution to the housing problems of the less well to do as any group so far devised, and for

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that reason I should like to see a considerable extension in their operation. Whether that is going to happen seems to me to depend a great deal on luck, the chances being as to whether some Minister of Housing and Local Government really shares the sort of views I have been putting forward.
I think there is some significance here in the fact that the two Ministers who have done most to help in this direction, mainly my noble friend Lord Brooke of Cumnor and Sir Keith Joseph, were both in a private capacity members of the management committee of a housing association. Of course it is not for me in his presence to analyse the motives which led my noble friend to promote the course of these associations in Parliament, but he certainly did so, for which we are grateful. I think I am right in saying that he had the management of a housing association himself, and I should not be surprised if the two things did not go together, because I have noticed that many people in local authorities are very much affected in their attitude towards these associations by the amount of knowledge they have of them. The present Minister of Housing and Local Government has certainly expressed enthusiasm and encouragement for these associations, and his Parliamentary Secretary, Mr. Mellish, gave us an encouraging address at our annual meeting last year, but I sometimes wish he could make that encouragement a little more noticeable, because certainly in this last White Paper, to which my noble friend Lord Jellicoe referred, I think there is only one small mention of the housing association in a remote part of that White Paper. That is not, perhaps, a very great encouragement to those who freely spend their time trying to make these schemes operative.
I would go one step further. The present Minister seems to be of an inquiring frame of mind. In fact, he has set up a whole range of commissions, working parties and departmental inquiries into a number of matters coming under his Department, and I have been wondering whether he would at least consider setting up an inquiry into the working of housing associations and their relationship with the Housing Corporation, with a view, perhaps, to making it easier for them to do their work. It is true that progress has been made. When
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I first became associated with this movement we had 200 housing associations affiliated to the Federation; now there are 1,400. But I think the progress is too much like Pilgrim's Progress. The tasks which face these people are really quite difficult, and I think they ought to be made easier.
Again, I would call in aid the Milner Holland Report, which has several times been quoted this afternoon. This is just one sentence from page 146 of their Report:
"It seems to us that if non-profit-making housing associations are to make an effective contribution to the most urgent needs—and it is widely accepted that they should—then a rationalisation of the fiscal and legal provisions governing their activity is urgently needed at present these seem to have the effect of discouraging the very associations which are equipped to give effective help in the area in which it is most needed."
We are urged to-day to be constructive, and that is what I am trying to be. I submit that it would be a constructive suggestion to make that the Government should investigate the position of this third force, the part they are playing now and the part they could play, and the part that the Milner Holland Committee certainly thought they should play.
5.30 p.m.
LORD COHEN OF BRIGHTON: My Lords, this could well be one of those most interesting debates in the House which deserves a great deal of publicity, but unfortunately it is possibly not so exciting as some of the debates we have had recently, and so whilst the speeches may be full of good matter I am very worried whether in fact we shall obtain the value from this debate that one would wish; because, after all, housing is so vitally important. If we realise what it means to the majority of our people we know that housing is one of the most important matters that the Government of the country can deal with, and I think this Parliament and this Government have really understood this.
May I begin by saying two things? First of all I want to declare an interest, because, as I think is known, I am the chairman of a building society. Secondly, I want to thank the noble Lord, Lord Wade, for his courtesy in informing me not only that he was going to speak, which I already knew, but that he was

831
going to refer to me and give me an opportunity later of dealing with those comments.
It seems to me that to-day we have dealt with housing rather in isolation; that is to say, some speakers have spoken of one kind of housing and some of another. And yet housing is comprehensive. Housing obviously must include local authority housing, private enterprise housing, and the very important part that my noble friend Lord Gage has raised, the question of housing societies and housing associations, and we cannot consider them in isolation. The two main ones must be considered together, with a little help, and it will not be a great deal of help I am sorry to say, from the housing associations and the housing societies.
In considering that we must consider how the policy of this Government has worked so far. We have heard figures this afternoon, and one can prove anything from figures. What is interesting and what has struck me—and I say this not as one who has something to do with building societies but as one who has been a member of a local authority for a good many years—is the decision of the Government that the proportion of houses that are being built should be somewhat changed so that there is a greater number of local authority houses than we have had in previous years. All of us must know of the many many hundreds, thousands, tens of thousands, of families who cannot buy their own homes.
As has been said earlier in the debate, building societies demand that a purchaser should pay only a quarter of his income in his building society repayments. As your Lordships must be aware, I am sure, houses for sale to-day, particularly in the South-East, are costing anything from £4,000 to £5,000 for the usual three-bed roomed house. This means that buying a house is outside the reach of the families who are most in need, the young couples with one or two children who cannot qualify for a building society loan, and who, because of the many people on the corporation housing list, cannot get on to that list. As your Lordships know, some local authorities are demanding three years residential qualification. Some authorities are
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even more difficult than that. And most authorities are saying, "We will only make our houses available for people earning up to £14 or £15 a week". If you earn between £15 and £20 you cannot get a building society mortgage. So a very large number of people are being excluded from the opportunity of buying a home. This situation will be dealt with only by the building of more local authority housing, and of course by the new method of a lower rate of interest so far as corporation housing is concerned.
Having said that, I must say something controversial which may well not be agreed to by a number of my friends. I think the time has long passed when we should realise that local corporation houses should be let at economic rents, but it is important that there should be first-class rent rebate schemes. I think the position of local housing calls for a certain amount of unfortunate comment from the ordinary ratepayer. Provided that we have a really good rent rebate scheme, there will be every encouragement to local authorities to build more houses than they are doing at the moment.
However, be that as it may, the Government are encouraging local authorities to increase the number of local authority houses. We heard figures to-day of the housing starts and the housing completions, and what impresses me in looking at these figures, what I think is really worth emphasising, is the fact that for the first five months of this year the number of completions, so far as local authority houses are concerned, is up on last year. I think that is very important indeed, and I hope and believe that is going to be improved as time goes on.
We face the question whether in fact we are going to maintain the drive of the housing industry Ito come to 400,000 houses rising to 500,000 a year, which the Government have said must be reached. It has been suggested that the building industry has lost a certain amount of confidence in the Government and the Government have not done anything to restore that confidence. I do not think that statement can be justified, for I was present at a meeting which the Minister had with the National Federation of House Builders and the building

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societies and other organisations associated with housing, when a comprehensive housing plan was placed before them whereby step by step, year by year, we could get up to the figure of 500,000 houses a year. In that statement it was suggested, first, that we should say roughly 225,000 a year by private enterprise, give or take 25,000 or 50,000, and roughly, in the end, 250,000 houses a year by local authorities, again give or take 25,000 or 50,000.
LORD HAWKE: My Lords, if I may interrupt the noble Lord, he is talking of a very interesting meeting and I have not seen the minutes of that meeting. Was the Minister able to give the builders any assurance that the loans and the money they required would be forthcoming?—because that is the vital point, not the plan but the money.
LORD COHEN OF BRIGHTON: I was going to divide my speech, if I may, into mainly two parts: first of all the part dealing with local authority housing, and then I was going to come to private enterprise housing; and I should like to deal with that question later, if I may, when I deal with private enterprise housing.
That was accepted as the basis of a scheme approved by both the builders and the building societies and as a scheme, or proposals, which would go forward as the plans of the Ministry and of this Government. And I believe we are going to achieve that object. Of course in that object of 500,000 houses we shall not get 500,000 built by normal building methods, and the proposal is that we should have 400,000 houses built by normal methods and 100,000 by prefabrication. As your Lordships may be aware, I have been appointed chairman of the national board who are going to deal with the question of new materials in building. We are working in conjunction with the National Building Association to encourage both new materials and new methods in building. We have just acquired our new offices and staff at Hemel Hempstead.
In this connection the N.B.A. is most important, but my Board, comprised as it is of outstanding personalities in the building industry, is dealing also with new materials in building; and the two organisations working together, particu-
834
larly the N.B.A., will, I believe, make it possible to provide the organisation so that the extra 100,000 houses a year will be built by modern methods of prefabrication. It will not happen at once, because these things take a considerable time, and so far as new methods are concerned there are too many on the market at the moment and the direction has got to be in the way of, say, half a dozen, or some such number, of proved and accepted new methods of prefabrication. But I believe that with that plan, which, as I say, was accepted at the meeting, and with these proposals, we shall get up to 500,000 houses a year. I should not be telling the truth nor should I be fair to the House if I did not say that so far this year I am disappointed over the number of houses that have been built. It is obvious and it is unfortunate.
If I may turn now to the private market, I would say that one of the causes of the difficulty—it has been stressed before—is the high cost of land. This is a difficult question so far as the small builder is concerned. May I give your Lordships an example that highlights this matter and which happened only last week. There was a question of a small piece of land which was sold in the village of Keymer—my noble friend Lord Gage will know that village well; I think the matter came before his town planning committee. This small piece of land was sold for the erection of 17 houses. They were small, terraced, three-bed roomed houses. The auctioneers announced that the land was going to be submitted to auction. They had five inquiries before the auction. A great deal of interest was shown, and the land was sold. The price of the land is £2,000 a plot. This, for a house that normally would sell at the most for £4,500, is just ludicrous, as I am sure your Lordships will agree.
I blame noble Lords on the other side for the fact that there has been no effort at all at controlling the price of land. When we had the South-East Study, and Sir Keith Joseph announced on television the details of that Study, I raised with him the question whether there was going to be any control of the price of land, and he evaded the question; and there has been no control at all. So where the blame lies to a large extent is on those who have permitted this escalation, this terrific rise in the price of land which is

835
damping down the possibility of building houses at prices that people can afford. I say that so soon as we can possibly get the Land Commission working, and so soon as we can possibly stop these sky-high prices from being paid both by private enterprise and by local authorities, the better it will be for the housing market. I believe the price of land is one of the main reasons why we have gone so slowly this year.
There is just one point I wish to make before I turn to normal owner-occupation. I believe that a great deal could have been done with an idea which we started in my town and which has been copied a little, but nothing like enough. I refer to self-built houses. What we have done is to sell land at a reasonable price, the market price, the price agreed by the district valuer, to groups of people who build their own houses. In my town they are just ten ordinary citizens who have two craftsmen with them and who spend their week-ends and evenings, with lights in the winter, building their own houses. If anyone would care to come to Brighton I could show them about 300 of these houses that have been built at a cost nearly £1,000 less than the market price. They are built, with the agreement of the trade union, by people who have given all their spare time for something like two years. Thus they have obtained a decent, well-built house for £1,000 less than the normal price that anyone else would have paid. I wish that idea could be extended and developed throughout the country.
May I turn to building societies and the assistance they give to people to buy their own homes? Of course, things are not so bright as one would wish; but it is true that during the first six months of this year building societies have advanced more money than ever before in their history. It is also true that the flow of money is slightly slowing down, although not so appreciably as one would have thought. I will admit this: when we had that famous meeting, the proposal was that if building societies had too much money they should restrict their loans, so that there would not be too many private enterprise houses built. If there was not enough money it was hoped that the Government would come in and help in some way. But that is difficult at a time of crisis such as we
836
are in now. However, I believe that building societies could be helped much more than they are, once we get back to more normal times. Suggestions have been mooted which I think are well worthy of consideration, that building societies, holding, as they do, millions of pounds' worth of assets in the shape of real property, could deposit some of those deeds with the Treasury and borrow in times of need. Millions of pounds are involved, and it might be possible to do that.
Then there is the question that the noble Lord, Lord Wade, dealt with—that of reserves. Building societies carry many millions of pounds' worth of reserves, to enable them to avoid any question of losses on mortgages. But in an inflationary position losses on mortgages just do not occur, and year by year the societies put by their £1 million or £2 million more to reserves. The delightful part of this is that that money goes into Government securities which depreciate year by year; but the societies put still more money in reserves, and nobody gets any benefit from it. The last Government decided that 2¼ per cent. up to £100 million and 2 per cent. above £100 million should be the proportion of reserves that the societies needed to retain their trustee status. I say that that could be halved if the Government would guarantee the other half, and I sincerely hope that when the problem comes to the Prices and Incomes Board they will consider that point, because it will make a great deal more money available.
Moreover, building societies have to put by gross 12s. per cent. of their earnings to build up their reserves. If they did not have to put up that 12s. per cent. they could lend at 6½ per cent. even to-day, before we get the Government scheme. I would remind the noble Lord, Lord Wade, that the rate is now 7⅛ per cent. Incidentally, I think that the Government scheme, the option scheme, is going to be of the greatest value to the ordinary house buyer. We shall be able to lend money to the man who is not liable for much income tax, or is liable to no tax at all, the chap who really needs help. We shall be able to lend him his house purchase money at 4½ per cent.

837
There are two other matters that obviously have to be considered at some time. There is the question of the law costs. If you buy a house at £4,000 or £4,500 it is not only the deposit you have to find; there is £70 in law costs as well. That is a lot of money for some young people to put down and it is a matter that we have to consider. This question of housing is not just one of what we say here, but is one of determination on both sides of the House, I hope, to see that we deal with the problem.
There are two and a half million old houses in this country which are rapidly declining in valuable use. We are not going to solve the housing problem within the next ten or fifteen years, even if we build 500,000 houses a year or a few more. I feel that we should consider the restoration of some of those old houses and the far more generous use by local authorities of more extensive improvement grants, and that it should be made mandatory upon local authorities to assist in this matter. Some local authorities are not so easy with this kind of assistance as others, and in that way I feel that we could save a proportion of those two and a half million old houses. If we could save, say, a million of them so that they provided good housing for the next twenty years while we were dealing with the housing problem proper, we should go a long way to ease the present difficult position.
Let us not forget that the builder who does that kind of work is not the ordinary house builder; he is the jobbing man, of whom there are a great number. He could be brought in to carry out the work of maintenance and preservation in a number of houses which otherwise will go out of proper use and become slums. In this way they could be made into useful homes for the next twenty years. If we adopt this method we must make certain that the repayments will be within the pocket of the ordinary purchaser.
There is another point on which I feel strongly, and it is this. The noble Viscount, Lord Gage, said, quite rightly, that houses to let are disappearing. If an empty house comes into the market today, the owner does not let it, but sells it. I hope that one day the Government
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will decide that if properties are left empty for more than three months they should pay full rates to the local authority. This will encourage owners to see that houses are put on the market and let rather than left empty for a long time waiting to be sold at the best possible price.
I could go on for a long time as this happens to be my pet subject. However, there are other speakers, and I am not going to bore your lordships. I would nevertheless stress this point. It is possible—it can be done—to deal with the housing problem of this country within the next ten or fifteen years so that we can give to all the people the opportunity of a decent home to live in, at a repayment or a rent which they can afford. That is a vital matter. It is no good building houses to sell at £5,000 or £6,000, it is no good housing societies building flats to let at £5 a week and rates, if that is going to take too high a proportion of a man's income. At the moment many people are paying half their income for bad accommodation. We must put our backs into the problem to see that we get the houses we need. Whilst in a modest way I have criticised the other side, I hope that we shall look at this as a national problem, a problem that must be solved, and a problem which we can solve if we put our backs into it.
5.55 p.m.
LORD AIREDALE: My Lords, the noble Lord, Lord Cohen of Brighton, is such an expert on all matters pertaining to new housing that I shall not attempt to add to anything he has said about that matter. But I was glad when he referred to conversion grants and improvement grants for old buildings for that is the subject on which I wish to say a few words. I suggest that at present this is probably the Cinderella of the present Government's housing policy, and probably mistakenly so.
Consider the average English village somewhere near an industrial town, which is probably used largely to-day as a dormitory for the people who work in the industrial towns. You will probably find, in the centre, the old village, which may be several centuries old, with its buildings made largely of stone. This nucleus will be surrounded by houses nearly all built in this century, which have probably doubled or trebled the population of the

839
village. Near the centre you may find stone-built farm buildings which are perhaps 300 years old and which, if they have been well looked after, are probably as sound to-day as they were on the day they were built. Unfortunately, they will not be very satisfactory for use in the future as farm buildings.
To begin with they are probably not so efficient as the modern farm buildings which can be purchased to-day. Secondly, they are extremely badly sited for use as farm buildings. In the winter, vehicles used in connection with the farm buildings are bound to bring mud into the village. I know that it is an offence to do this, but in bad weather it is almost impossible not to do so. In the summer time if one of the buildings is fitted with a mechanical grain-drier it will make a noise and disturb the villagers, and will get the farmer a bad name with them.
Something ought to be done about these old buildings. If you ask the ordinary, average, reasonable man what he thinks ought to be done, he will probably say: "Well, if I have not got to pay for it, these old farm buildings in village centres should be replaced with modern, more efficient farm buildings nearer to the farm lands which they now serve, and these old buildings, with the help of conversion grants which are available from the Ministry of Housing, should be turned into dwellings." It is, unfortunately, even though grants are payable, an expensive exercise to do this, but it is worthwhile, bearing in mind that buildings of this kind, well converted into houses, will probably be good for the next 300 years, and certainly will outlive many generations of some of the new houses that are being built to-day.
The first expense which one is usually up against in attempting anything of this kind is the problem of rising damp, because most of these buildings were built before damp-courses existed; and the first thing that has to be done is to put in new flooring to combat the rising damp. The Ministry of Housing recognized this and made a special grant available for the specific purpose of fitting new floors into old buildings to combat the problem of rising damp. I have not been able to ascertain when this policy decision was taken—I imagine that it was some time during 1964. At any rate,
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by December 10, 1964, a Member of another place put down a Question for Written Answer asking if the Minister
"…will now issue a circular to local authorities inviting them to apply for the increased grant which is payable when stone, brick or earth floors are replaced…"
The Minister's reply was that he would issue a circular, and that
"In the meantime he will gladly consider applications from local authorities on this matter."—[OFFICIAL REPORT, Commons, Vol. 703, cols 234–5; 10/12/64.]
That circular, No. 41/65, did not appear until May 5, 1965—nearly six months later.
The question I would ask is this. Once a decision has been taken to make a new, special inducement to people to convert old buildings into new dwellings, why wait six months before addressing a circular to authorities inviting them to proceed with such a scheme? Perhaps the answer is that the Ministry were feeling their way with regard to this new development. If it is so, all I can say is that you do not solve an acute housing shortage by feeling your way. Another answer may be that on grounds of economy it is the practice not to issue Ministry circulars too often but to wait until there is an omnium gatherum of all sorts of things it is desired to convey and then, on the grounds of economy, to issue a circular. But an acute housing shortage is not solved by that sort of false economy. So I come back to the question which I asked at the beginning: Is not the policy of Her Majesty's Government, with regard to improvement grants and conversion grants for old buildings, the Cinderella of their housing policy, and could not something a bit more vigorous be pursued in the future with regard to this part of their policy?
6.0 p.m.
LORD AUCKLAND: My Lords, because of an official engagement of long standing I may not be able to be in my place when the Parliamentary Secretary winds up this debate, tonight, but I hope that the House will acquit me of any apparent discourtesy. The House will be very grateful to my noble friend Lord Hawke for having enabled us to discuss this very human social problem of housing. I think those of us who heard the speech of the right reverend Prelate the Bishop of Chester will all agree that

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housing is perhaps one of the greatest of all human social problems. Those of us who are magistrates (and my wife sits on the bench at the juvenile court at Epsom) will recognise that many cases of juvenile crime are due either to broken homes or to bad housing conditions—and very often both, with one a result of the other.
I should like, so far as possible, to keep any political aspersions out of what I have to say. Neither of the main political Parties has a perfect housing record, and I do not suppose that any political Party in this century ever will have. I should like to deal primarily with the future of the construction industry. Only a week ago I presented the prizes at a boys' grammar school in North London, where a very big emphasis is put on the building and construction industry. In fact, the President of the London Master Builders' Federation attends these annual prizegivings, and he himself presents a prize. Before the actual ceremony, we touredmany of the exhibits which these boys had made, not only of building but of metal ware and other crafts. One of the most interesting items was a complete scale model of a new house constructed by a very backward boy of fourteen years of age—and it really was a very impressive sight.
I want to ask the noble Lord who is to reply (I apologise for not giving him notice of this question, and I shall not expect a reply in the immediate future) what plans the Government have in mind for training the builders of the future, because I know that in the building industry there is a great shortage of young apprentices. We talk in terms of 200,000 houses, 400,000 houses and 500,000 houses, whether built by private enterprise or by local authorities. But unless we can get young people interested in the building industry, we shall not get those houses, under any Government.
That brings me to another problem which faces the housing industry; that is, the quality of workmanship, which is not always as high as it should be. I think that this is true both of local authority building and of private building. I was in Sussex the other weekend, and I happened to be walking with a friend over the Sussex Downs. We looked at a new housing estate near the village of Alfriston, near Eastbourne, and
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we saw some quite expensive houses under construction. One, in particular, was to cost £10,000. I am no expert on the building industry, but I could see for myself the very bad workmanship on the floorboards. The bricks were not properly laid, and one could imagine what would happen after a short time, with the amount of rainstorms we have been having over the past few weeks. I know that many builders guarantee their workmanship, in some cases for two years, and I believe that the Consumer Council itself is involved in this matter. But I believe there is a need for more rigorous inspection of building, particularly local authority building, because, if there are defects, the cost of putting them right often has to be paid for out of local authority or central authority finances. This not only delays housing schemes but also, eventually, puts up the cost. This is a matter which needs looking into.
I should declare an interest as a director of a very small building society—very much smaller and very much less distinguished than the one of which the noble Lord, Lord Cohen of Brighton, is a director. We specialise chiefly in loans for the older type of house and, like other societies, we have been meeting with problems. But I think that building societies play a very vital role in this country. Not only do they enable people of modest means to purchase houses, but they are a very good investment for people of moderate means who want to invest money in something sound. Those who decry building societies, and who decry high rates, should sometimes bear that point in mind, because the financial development of a building society is a matter of great importance.
I should like now to turn for a moment to Scotland, which has not so far been mentioned, although no doubt my noble friend Lord Stone haven will have something to say about Scotland when he comes to speak. But I hope that the Government will pay attention to the areas affected by the Highlands and Islands Development Act, because presumably a great deal of employment is going to be moved up there. There is the paper mill at Corpach, near Fort William, and it is essential that sufficient houses are available there to attract the very necessary labour, much of which will help the export drive.

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Another very big problem which faces housing is that of planning, and here we have the problem of compulsory purchase. All too often it takes many months of time to effect a compulsory purchase order, and in any democratic society this problem must be faced. There should be more liaison (this is not a Party matter; it is something which I think any Government must face) between the Ministry of Housing and Local Government and the Ministry of Transport, particularly where new roads are affected. Only recently there was a case in a New Town where two almost brand-new houses had to be pulled down to make way for a road-widening scheme. It is clear that in this case there was no real liaison between the Departments concerned. This is the kind of thing that is making housing such an expensive development. So far as the New Towns are concerned, I agree very much with what the right reverend Prelate the Bishop of Chester has said. Knowing at least one New Town in Hertford shire, Steven age, I know that much has been done there to develop the community. There is a very thriving youth centre, which has drawn in a great many of the young people. But not everything should be provided by the local authority. The youngsters themselves, under the Youth Employment Act, should be encouraged to play their part in this work.
My Lords, in the Government White Paper of November, 1965, there is one really nebulous paragraph—and this is about the only controversial thing that I wish to say. It is paragraph 19, and I would mention particularly paragraph (b), "Expansion and modernisation of the construction industries". This is, of course, very laudable, but I believe that the construction industries are very worried about the possible effects of the selective employment tax. I will not say any more about that now, because we shall have an opportunity of discussing this when the Bill comes up for Second Reading in a few days' time; but I hope that the Government will study this point carefully. Having said that, my Lords, I would end by again urging the Government to do all they can to recruit the right people into the construction industries, and particularly into the
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smaller building industries. The small builder is the backbone of this country. I know that there are many who say he is uneconomical and inefficient, but the small builder, like the small shopkeeper, gives good personal service, with good-quality workmanship; and, in the end, that is the cheapest possible way of fulfilling our housing programme.
6.13 p.m.
LORD SILKIN: My Lords, so far every single speaker in this debate has started off by referring to the very grave housing situation, the very large numbers of people who are housed in bad conditions and the very big problem that confronts us. I shall be no exception, except to say that it has been my view for very many years that we have always underestimated the size of the problem. It reminds me very much of the need for car parking. Whatever number of places you provide for car parking, you inevitably find that it is not enough. I know one instance where a New Town decided to provide a certain number of places for car parking. Then they thought that, to make quite sure, they would double it; and within a year or so there was no room in that New Town for car parking on the surface. My noble friend Lord Cohen of Brighton can guess the particular place to which I am referring. So it is my view that, on the present basis of what we are proposing to do, it will take very much longer than any of us have contemplated before we can say that we are well on the way to solving the housing problem. I think it might well take a generation or more. I fear that we have got to look far more ambitiously at what we are proposing to do to deal with the housing problem.
Now I want to speak, as other noble Lords have spoken, fairly briefly, about the various media by which we are at present providing housing—that is, the public sector and the private sector. I am not going to play the numbers game. The noble Earl, Lord Jellicoe, said he was not going to play the numbers game, but he spent more than half his speech doing so. I think it is quite irrelevant merely to compare figures. I think the noble Lord, Lord Hawke, would agree with me that merely to compare so many houses provided by one Party as against so many provided by

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another is leaving out all sorts of factors which ought to be taken into account.
I want just to look at the way in which we are providing the housing. I do not think that, with our present labour force and with the present mechanism for building houses, it is possible to increase the numbers substantially. It may be that, as a result of the Building Control Bill, when it becomes an Act, a certain number of building projects will be diverted from office building and luxury building, town halls and so on, to housing, and that that will provide, temporarily, a certain amount of additional labour. But, by and large, it is not going to produce very much more, and is not going to provide a solution to our problem. I feel that we have to look far more drastically, in a far more revolutionary way, far more dramatically, at the manner in which the public sector is being administered.
At the present time there are 1,300 local authorities, all engaged in building houses, some of them in a very small way, building perhaps twenty or thirty houses a year, and others, of course, in a very large way, producing some thousands. In Lancashire alone there are 130 housing authorities. That seems to be an absurd situation. If one were starting afresh and considering how to provide housing for this country, would anyone ever imagine that the most efficient way of doing it would be to create 1,300 agencies in this small island for the purpose of building houses? Moreover, many of the local authorities have no land available for building, and have to go outside. They have to try to enter into arrangements with other bodies to enable them to house their overspill; and anyone who has had any connection with local government will know the difficulty of arriving at any sort of agreement between two authorities. It takes years to arrive at an agreement and another few years to settle the quarrels that arise afterwards.
Every one of these 1,300 authorities has an organisation—a housing officer, offices, clerks and so on—engaged in providing for houses in its area. And, ex hypothesi, all they are concerned with is their immediate area, large or small. Consequently, it would follow that in many cases houses are not being built
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in the most suitable, most appropriate places, but merely in order to fit in with the ideas of the particular local authority.
The noble Earl, Lord Jellicoe, in one of the few remarks with which I agreed, expressed the view that we should deal with the planning of this country regionally; that we ought to prepare regional plans instead of each planning authority preparing its own plans and the Minister trying to fit one in with the other. I think that, by the same token, having made our regional plans we ought to create regional housing authorities who would be responsible in an executive way for providing for the housing in their areas. In that way we could ensure that housing was provided to fit in with the regional plan; that houses would be put in the right places; that there would be no problems of overspill or jealousy or disputes between one authority and another. Moreover, they could place their orders on a large scale, they could make bulk purchases and make all the other economies which large-scale production of houses would permit.
I know that this is asking for trouble, I know that the same trouble arose when we had something like 1,300 town planning authorities in 1947 and it was decided that that number should be reduced to something like 140. But the problem was solved, and to-day the town planning authorities are the county councils and the county boroughs. I feel that even that number is too high and, as I have said—and the noble Earl, Lord Jellicoe, agreed—it would be much more appropriate if we had regional planning authorities.
Furthermore, if side by side with that we also had regional housing authorities, one could ensure that houses of the right kind were built in the right places, and built much more efficiently and economically than they are today. I do not suppose for one moment that the noble Lord, Lord Kennet, when he comes to reply, will stand up and say that he agrees with me; but I know that the Minister is one of the most courageous and imaginative Ministers that we have had for a very long time. I say this with respect to other Ministers who may be listening to the debate. If anybody would be prepared to consider it and go into the whole thing, I think this Minister would. Moreover,

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he is in fact considering the whole question of the reorganisation of local government.
The whole trend of local government has been away from the parish councils and towards larger and larger areas. In olden days the size of a local authority was largely determined by the distance a person could walk; it was thought that a person should be able to walk from one end of the local government area to the other without undue exhaustion. Of course, with the advent of the motor car, that situation changed and today I think the time has come for a new look at local government coupled, as I have said, with regional planning and regional housing. I feel that if we could only secure that we should get a much larger output of housing, with the same labour force, than we are able to get at present; and many of the financial difficulties would be overcome. A regional authority would be in a much better position to finance its housing and secure its land than are the existing 1,300 or so housing authorities. That is something that I hope will be looked at—not necessarily immediately—and considered quite seriously, because I feel that only by some method such as that can we hope substantially to increase the number of houses that can be produced and thereby bring about a solution of our problem at a much earlier stage.
I will now say a word or two about private enterprise houses. As did my noble friend Lord Mitchison and my noble friend Lord Cohen of Brighton, I would disagree with the noble Lord, Lord Hawke, that the private builders have lost confidence in the present Government, that it is a question of confidence. I do not think that is the reason at all for the reduction in the number of houses being built by private enterprise. One of the difficulties, the most obvious, is that the private builder has been priced out of the market. There is a definite market. The house costing about £3,000 sold very readily; but once you get beyond that figure houses do not sell so readily. So where the builder at one time thought he was well on the way to becoming a millionaire, he now finds that he has houses left on his hands and is not prepared to take the risk of building further houses.
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Then there is, of course, the high cost of land which contributes to the higher cost of houses. Private developers have burned their fingers in building the wrong kind of houses. Incidentally, when one talks of the number of houses built by private developers, one includes a large number of luxury flats that have been standing empty in places like Bourne-mouth and other seaside resorts for a number of years because they are too expensive even for wealthy people to buy. These are all included in the numbers of dwellings provided in certain periods. But there is another difficulty: the amount of land available and suitable for housing is gradually becoming exhausted. I know that if one travels round the country one finds mile after mile of open land apparently suitable for building; but, in fact, people want to live relatively near to their work, in towns and villages, in proper communities. The kind of land that is suitable for building is rapidly coming to an end. Private developers are finding it very difficult to get hold of land.
A further factor is that town planning authorities are not always very helpful. They have their own development schemes; these schemes are very often placed before the Ministry, and they are not in a position to give a decision until the Minister has approved or dealt with their schemes. It may be a matter of years before he is able to do so. In the meantime there is a definite shortage of land, and if we wish to speed up development by private developers we shall have to look into the question of land and of the town planning machinery to see that matters are expedited.
I believe that the Land Commission Bill will be very helpful to the private developer. At least half the difference between the value of the land for agricultural purposes and its value for building will, under the provisions of that Bill, be returned to the community which created the additional value. The Land Commission will therefore be able to buy land at a considerably cheaper price than is possible at present, and it is contemplated that the Land Commission will be letting land to developers at a much lower price than is at present paid by a developer. To my mind, this should be very helpful to private developers. It will enable them to secure

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the necessary land, which at present they find difficult, and do so at a reduced rate. If the Bill becomes law it will, I think, be of great assistance to private developers and will enable them to increase their output.
THE EARL OF KINNOULL: My Lords, does the noble Lord, Lord Silkin, think the houses will be cheaper in future if builders are able to get land cheaper under the Land Commission?
LORD SILKIN: My Lords, that is what I was trying to indicate: that the price of houses will go down if private developers can get land more cheaply. I think that is pretty obvious.
I was going on to say something about a point which the noble Viscount, Lord Gage, has already dealt with rather fully, but I wish to support him wholeheartedly in his plea for housing societies and associations. In spite of the fair words of various Ministers, they do not seem to me to be making much headway and one of the difficulties is lack of machinery. The noble Viscount knows as well as I what is the drill. A housing association finds some land on which it would be appropriate to build. It has to obtain an option on the land which it is not in a position to buy. The association must find a landowner who is prepared to wait until the association can obtain planning permission, it having obtained an option on the land subject to getting such permission, which might take many months. Town planning authorities are very slow, and so it is necessary for the association to find an owner who is prepared to wait for many months before the association can exercise its option.
Even then, the association has no money, and once it has secured planning permission it has to negotiate the price of the land. It is not possible to do that before the agreement of the district valuer about the price of the land has been obtained, and then the association must get a building society, or a local authority, to advance money. Ministerial sanction must be obtained, and I can assure your Lordships that the procedure may take a year and a half or more. In the meantime, the owner of the land has to wait without knowing for certain that in the end his land will be acquired by the housing association. If we are serious about housing societies, something must
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be done to speed up this process and make it possible for the bodies to function properly.
Like the noble Viscount, Lord Gage, I am chairman of a housing association and know exactly what associations are going through. It is unfair to expect a landlord to wait a long time, and it is difficult for an association, when it does not know for certain that it will be able to acquire land. An association has to find an architect who will prepare plans in the expectation that one day they will be paid for, if the project matures. I am sure that the noble Viscount, Lord Gage, knows of these problems. It is not, therefore, surprising that the housing association movement has not made very much headway. I hope that if the Minister realises the problems involved, he will do something to ensure that things are speeded up and that housing associations are not discouraged from going forward; and make it possible for them to be able to proceed with greater certainty if they find suitable land.
My Lords, each speaker in this debate has tried to make his contribution towards assisting in solving the housing problem. As I said at the outset, the problem consists of trying to produce more housing more quickly with the same amount of labour as we have at present. I believe that it is necessary for us to look again, courageously and imaginatively, at the existing machinery to see whether we can streamline and rationalise it and so obtain better results with existing material. I hope that the Minister and the Government may be persuaded to look at this matter courageously and afresh, because I think that a fresh mind is needed on the subject.
6.38 p.m.
LORD WOLVERTON: My Lords, we are all grateful to the noble Lord, Lord Hawke, for putting down this Motion. It is, in my opinion, of paramount importance that the people of this country should be properly housed. The right reverend Prelate the Bishop of Chester was perfectly right when he said that housing is one of the most important of our social problems at the present time.
I wish to talk for a few minutes on the financial aspect of this problem, and I hope that at the end of the debate the

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noble Lord, Lord Kennet, will be able to give us a ray of hope. I do not think it wrong that noble Lords on this side of the House should be accused of not supporting Her Majesty's Government in their credit squeeze on housing, because housing, hospitals and schools were specifically excluded from the credit-squeeze restrictions. If adequate finance is not provided at reasonable rates, the houses will not be built, either by local authorities or by private enterprise, because they will be too expensive. I have recently had talks with local builders and local authorities who are worried about the very high rate of interest they have to pay. We are putting up substantial amounts of housing, both by private enterprise and by the local authority, in my own town of Newmarket, which is a small town with 12,000 inhabitants but which is growing a little. At New market, 75 flats are nearing completion which it is said will have to be let at between £4 10s. and £5 a week per flat. And for units that is a great deal of money. I should like to know from the noble Lord, Lord Kennet, whether he can tell us what are the proposals of the Government and the Treasury to help builders.
The Minister said that he hoped to reach a target of 500,000 houses by the year 1970, half to be private-enterprise houses and half municipal houses. Last year (to pick out a few figures), private enterprise completed 206,246 houses in England and Wales, and 7,555 in Scotland, where they do not build many private houses, making a total of something over 213,000 for the year. Local authorities in England and Wales completed 133,024, and in Scotland, 21,000, making a total of just over 154,000. So we have a long way to go, if we are to achieve the target mentioned.
I would remind the House that last year in Great Britain 382,297 houses were completed—only about 4,000 more than the year before. I have seen various estimates from responsible bodies, and the best I have seen shows that perhaps we shall get 390,000 this year. But if no finance is forthcoming, I do not think we shall. The position to-day is that a number of new houses are standing empty because, much as families who are overcrowded at present would like to move into a larger house, even if they can get
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a mortgage, they cannot sell their own house. Unless some guidance or directive is given to the banks to help this bridging operation for housing, like the priority loans for exports, I cannot see that we are going to advance much more than we are now.
The figures over the first five months of this year are down (we knew them before, but the Minister has given them to-day), though May was a little better than April. I should like to know what arrangements can be made for finance, because at 7½ per cent. for building society mortgages, and perhaps 8 per cent. for builders' loans from the banks, we are not, in my humble opinion, going to get the increased target that we all want and to which the present Government are committed by 1970.
In conclusion, I would say one thing in criticism of the speech of the noble Lord, Lord Mitchison. I well remember that when the Labour Government went out of office in 1951, Mr. Attlee (as he then was) said that it was not possible, with other things to do as well, to build more than 200,000 houses a year. Later the noble Earl, Lord Wool ton, accepting a Motion at the Conservative Conference at Blackpool, said that he would do his utmost to complete 300,000. If my memory is right, in about three years we had got up to 300,000 and when the Conservatives left office in 1964 we had reached 378,000: and we left over 430,000 houses building. So the record of the late Conservative Government, if we look at the facts, was a pretty good one. That is the only controversial thing I want to say. But I feel that we ought to be told, to-night if possible, what arrangements can be made for finance, because this matter is of prime importance. If we cannot get finance, I am perfectly certain that we shall not be able to build the extra houses that we all want to have.
6.45 p.m.
LORD SOPER: My Lords, the noble Lord, Lord Hawke, must be gratified at the attention which has been attracted to this debate. I too should like to thank him for the opportunity to take some part in it, and for the information and help I have already received from the various speeches to which I have listened. I would briefly take advantage of the context in which this Motion is framed to

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make some observations on at least four of the main issues which seem to me to lie within the general area of what is called the housing situation. If these are large ticks I remember the ecclesiastical advice I received as a student, "Take large ticks, gentlemen, and if they persecute you in one city then flee into the next".
I do not pretend to have the expertise shared by many noble Lords, but I am aware of the gravity and intensity of the housing situation. I am pastorally responsible for an area of great housing need in West London, and would echo briefly, and not rehearse in any detail, what my right reverend prelatorial friend has already said about the cardinal importance of good housing in any amenity situation and in any civilised community. To know something of the actual conditions of housing and overcrowding in West and North Kensington is to realise to what an extent this is a tremendous and almost forbidding programme to which any man, any community or any Government can set its hand, and I echo what my noble friend Lord Silkin said of the size of this problem and of the inability to plan adequate measures to deal with it in the proximate future.
This leads to my second general observation, which is that not enough is being done. It is obvious that there are halts and hesitations and maybe quite grave faults in the actual administration of this programme as it is at present being undertaken. One of them is that there has obviously been a failure in the private sector or, at any rate, the majority of the criticisms of the failure are to be lodged there. I would agree with what my noble friend has already said, that here the Land Commission can at least provide one measure calculated to improve efficiency within that sector.
But it is on the third general category that I would delay your Lordships a little, if I may. In a speech made in another place on May 19 in a debate on housing, the honourable Member for Hexham referred to what he described as "a revolution by consent." He said that he was convinced that the present housing programme was revolutionary. I give the author of this statement because the word "revolution" might tend to stick somewhat uncomfortably in the gullets of some noble Lords. This was the
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only point on which the Minister and the honourable Member agreed. In the rest of his speech, he provided statistics which took the Minister almost as long to refute. But in this conception of a new kind of housing situation I believe lies the key to a great deal of what has been said this afternoon and of what needs to be done in the application of what has been said.
If your Lordships will let me say so, I have come from another forum which I regularly have to address on Wednesday, and I think that one thing which has commended itself as reasonable to the average crowd is that for the first time Housing is now considered as a service Ministry; that it is no longer part of the cut and thrust of a society in which it is regarded in terms of market values, and of private enterprise "enlightened self-interest", but takes its proper place alongside health and education as a primary requirement of any civilised Government which has to be provided as a service not only if it pays or happens to be profitable. It is this concept which I think has to be largely advocated and more widely spread.
I make no apology for saying that it is this kind of defence which I believe Her Majesty's Government are most in need of finding, and can most obviously and sincerely present. Whatever may be the faults and the imperfections lying within the present housing situation and the present housing programme, it is a revolution, and a great deal of it must be conducted by consent, and that consent is as yet not given in large enough measure. And if it is an appeal to the heart, let it be so, because in so far as people realise that the community is set upon the task of rehousing those who need it and setting up a general home life, so far as physical means can do that which is acceptable, and in so far as the community recognise that that is the intention of Her Majesty's Government, I believe that whatever feelings there may be of indecision and lack of cordiality towards the Government, and indeed lack of any confidence in the Government, may largely be repaired. This may not have an immediate financial application, but I make no apology for introducing it, because I think that only in so far as this housing situation is regarded and seen as part of the service which an enlightened

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Government must render to the community will it have any effective chance of final success.
One of the last things I want to say is something upon which I hope to adduce a certain amount of specific evidence. In considering the present situation of housing, it is, I think, of imperative need that we should know what the present situation is, and because I was not acquainted in sufficient detail with what that situation is I took the trouble to find out. If your Lordships will allow me, I think I can introduce at least one or two of the ideas which as yet have not been sufficiently ventilated, if indeed they have been dealt with at all. It is true that the housing problem is immense, and it is true that there are halts, hesitations and failures. But it is also true that the present situation has encouraging features, and has a strategic plan which is of profound significance; and that to me is very hopeful.
It is a plan which under the present system of stress recognises, as my noble friend Lord Silkin so pertinently pointed out, that we have not sufficient resources to do all that we should desire to do, even if we had the acumen to set about the task efficiently. Therefore, what we have to do is to set about an emergency plan, and to provide a priority housing programme, and it is to this particular field that I would commend the Government, if I may without impertinence, reminding myself and your Lordships that this is one of the elements of this debate that have hardly been dealt with at all. In a nutshell, it means this. In the absence of adequate machinery to deal with the overall problem the Government have decided on a specific and selective programme, and some 72 per cent. of the housing programme will be undertaken by some 15 per cent. of the housing authorities in the public sector. Why is this? It is because there are certain areas which have much greater need than others, particularly in London and some of the larger conurbations.
It is the specific intention of the Government, which is already in process of being carried out, that this programme should deal with those areas which are most in need in the first instance, and by so doing tackle the problem in its most acute form at that point where it
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must necessarily be treated. This, if I may say so to my prelatorial friend, is exactly his point. There is greater need in some areas than in others, and those areas where there is the greater need should have the primary consideration.
The first to be settled were four-year programmes for the 34 London authorities. They were highlighted in the Milner Holland Report, and they clearly merited the highest priority. That took place in September. Then came the turn of the conurbations, with their massive concentrations of slums and overcrowding, and these 96 priority authorities outside London were settled between February and April. The interesting thing to me is that in most of these cases—in fact, in all these priority cases—the agreed three-year programmes are well up on the authorities' tender approvals over the last three years.
I mentioned Kensington, and I naturally look at the housing programme in terms of the particular percentages. I find when I turn to Kensington, which is a borough in profound need of much housing, that the percentage increase in the programme, comparing the tenders approved from 1961 to 1964 and the programme between 1965 and 1968, is 539, which is a considerable percentage increase. Other percentage increases are, for example, Barking, 259, and Bevington (which as your Lordships know is in the North-West region), 550; and there are others.
This is the hard fact. It is perfectly open to noble Lords to say that, as yet, there is no absolute guarantee that unless we solve our financial problems we shall be in a position to fructify these particular plans. But, considering the present situation—and this is precisely what the purport of this particular conversation and Motion is about—it is only right and proper that the Government should be given the credit to which they are entitled for their priority programme and for the selectivity with which they have chosen the most needy places for the most immediate attention. This, I think, is right, and, with all the failures and difficulties, indicates a general trend which is admirable.
May I turn in a final comment to what to me is by far the most important aspect of this whole situation. I regard the community as one, in which the

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priorities must necessarily be priorities for people, and for people who are most in need. I want to make my plea again, as a pastor, for the young people, particularly for the young married people; for the people on incomes which are inadequate to provide them with the means of acquiring houses; for the many people I know who are living with their in-laws and are putting up with it—and both parties have to put up with it because it is satisfactory neither for the in-laws nor for the young people; and particularly for those who as yet have no hope.
In North Kensington there is a housing society, and in preparation for this debate I inquired of them what they regarded the present situation to be. Among the various comments they make is one which I think is significant. There is a high degree of immigrant population in North Kensington. For the first time many of these immigrants are asking for their names to be put on housing lists, because for the first time they seem to have confidence that the general trend of the housing policy is one to which they can commit themselves and in which they can find hope. That, I believe, is both the guerdon and should be the inspiration of the housing programme in future; and, based upon the conditions in which that programme is now framed, I, for one, have lively hopes.
6.58 p.m.
VISCOUNT STONEHAVEN: My Lords, I should like to add my thanks to the noble Lord, Lord Hawke, for bringing this Motion forward to-day and enabling us to discuss it. I have enjoyed two notable speeches from the Government side. I found a great deal with which I agree, but not all, in the speech of the noble Lord, Lord Cohen of Brighton, and in that of the noble Lord, Lord Silkin, as I very often do. Nevertheless, I want to keep this entirely non-Party, and if I say anything controversial it will not be in any Party spirit, because I should not know how to do it. I think noble Lords know I am no good at that. I have attended many debates in your Lordships' House which could be described as a lawyers' benefit, and it is refreshing that we could almost describe this debate as a building societies' benefit, because many noble Lords appear to run the building societies themselves. The
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only connection I can claim with a building society is that I loan one of them a certain amount of money. Nevertheless this is an interesting subject.
Up to 1953 I was employed full time in the constructional industry; therefore I have some knowledge of this problem from that side, and I hope noble Lords will bear with me if I talk a little about the background of that industry. I left it about thirteen years ago. The last six years have been marked by a steady progress. Output rose by roughly 5 per cent. per operative, and the remuneration or the "take-home" of the operatives rose by approximately 10 per cent. These are all average figures, and your Lordships know what averages are. But they are figures from the Ministry's publications. It is something which has not been mentioned to-night, and I believe it is something of which the building industry can be a little proud.
At present the industry is not in an extremely happy state. Many views have been expressed about that. While I accept the views expressed by the noble Lord, Lord Cohen of Brighton—who knows far more about the subject than I do—I still think that one reason for this recent setback is worry or the lack of confidence (that might be too strong a way to express it) about the Government's policies and actions. Obviously, the electorate believed the Government's Election pledges, and they are still waiting for this promised Utopia. If you are waiting for a promised Utopia you do not buy at the top of the market, which this appears to be. So it is a two-edged weapon, so far as I can see. Certainly to some extent—to what extent I do not know—this has stopped people from going ahead and buying, as they would have done had they not been told that heaven was just around the corner and if they waited a bit they would get it. At any rate, it has had the effect of slowing things up.
There are a few other things I want to talk about, and I do not want the noble Lord, Lord Mitchison, to think I am merely slinging mud if I mention things which are worrying people in the building industry. I do not think it is being unpatriotic or anything of the sort. If the moment you start criticising that is thrown at you, it is a bit off-side. Any way, I do not know how to sling Party mud, so I will just go on with my remarks,

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if noble Lords do not object. One of the things with which competitive tendering on a fixed-price basis has to compete is local authority direct labour which is not tied to the same conditions at all and which has what therefore appears to be an unfair advantage. This may not be so, but the industry thinks it is. The Ministry of Public Building and Works published some figures. I read them in a cutting from a newspaper, so they may not be accurate, but I think they are. It shows that the average output for a man in a direct labour team for a certain period was £1,440, compared with that of a man in a similar private enterprise team or contractor's team, whose output was £2,700 over the same period. Those are not my figures, but I have them here if anybody would like to go into them. They are allegedly the figures of the Ministry of Public Building and Works, and therefore I think there is something in them.
There is another point. On the one hand you have the Redundancy Payments Act, which is probably Avery good Act, and on the other hand you have the selective employment tax. One encourages you not to lay your men off, the other encourages you to do so, and you are caught by both. The provisions of the Redundancy Payments Act are drawn so wide that even if you sack or lay a man off to-day and he walks into another job on Monday, you still have to pay him a redundancy payment. This is something which worries the employers a little. Then there is the 40-hour week, and yet they have a fixed-price contract and cannot raise their prices.
The Government Department, through the Ban well Report, urges the adoption of a standard form of contract, which I believe is a good thing. But the Restrictive Practices Court says that you may not do that, so there is another contradiction which worries them. The industry is told, quite rightly, to modernise and mechanise, but very recently the investment grants were taken away from them and have only just been restored. That does not give them any confidence, either. The building industry is told to reduce its demand on manpower, but public and local authorities are allowed to increase strictly in accordance with Parkinson's Law. The National Plan makes it clear
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that the building labour force must grow: the selective employment tax is designed to stop it from growing. Owing to the nature of building, which is often localised, you have a large number of, perhaps, elderly men employees with a home in the district. You lay a man off from the building industry, and he is taken on in a factory where he will stay, and you have lost a building trade worker and a skilled man for good. That is a point worth considering.
There are the supply industries, and bricks, tiles, plasterboard and cement are the chief ones which come to mind. I believe in planning—no one who has been in the building trade can believe in anything else. But it must be good planning, and I do not call it good planning when you fluctuate between scarcities of certain building bricks, plasterboard and cement, and a state in which your brickyards are stocked up when they should be empty, to such an extent that the firms are beginning to consider that they will have to lay off a large number of men this winter, because that is a time when you cannot use a large number of bricks, anyway. The extra cost of financing all this idle material, and the cost of double-handling, all derives from inefficient planning. In that connection, one must remember that the building industry depends to quite a large extent on the transport industry. The sorry tale of the gallon of fuel started, I think, with Selwyn's sixpence; it then went on with Callaghan's "tanner", and now we have Wilson's "fourpenny wallop" on top of the lot. That does not help the building industry at all, or anybody else. It may be essential, but it is a fact.
Can we do anything about high building costs? I think this is something we really should think about a little. I do not think it is generally realised that when a builder tenders for a contract, over and above the basic rate of pay of an operative he has to allow a figure of about 2s. 2d. for all the various contingencies he has to deal with. They are the sort of things one normally forgets. There is absenteeism; he has to allow for overtime; travelling time; travelling facilities (and very often he has to provide his own transport); National Insurance, of course; graduated pensions; annual public holidays with pay;

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guaranteed time (because the building industry has a guaranteed week no matter what the weather); tool money—that is, sharpening tools and providing replacements; sick pay; construction industry training levy; redundancy payments and third party insurance. There are probably other items, but those are just the normal things which add to the cost of building.
The costs of materials for a house are a good deal greater than the cost of putting up that house. Therefore any rise in the general industrial field or in impositions and taxes indirectly hits building hard, because the cost of every single item used in a building is affected by any general rise. Wages, costs, anything at all, hits building twice, it might be said, because the cost of everything goes up.
What of the future? Can we make any savings? I think a point which has not been mentioned yet is that quite a large field for savings exists in customer efficiency. Customer efficiency means, among other things, prompt payment of bills. In many cases a builder is kept hanging about for a long time before the bill is met, and of course he has to finance the cost, with the interest that is involved. There is another thing that I would suggest ought to be done. It is the practice in the building industry when a building is finished for the retention money to be held back. It used to be5 per cent. for six months, in my day. I do not know what the figure is now, but it is something of that sort. That retention money represents the whole profit, and I would suggest that a fidelity guarantee could be taken out with an insurance company, just as a professional man does. If you are a design engineer you take out a fidelity guarantee in case you make a muck of the design and the structure falls down. Overall, in a sizeable building programme this retention represents a heck of a lot of money, and I think that is a saving which could be made.
We have already heard mention of dimensional co-ordination. I do not know whether everybody realises what that means. In London the height of a ceiling in a new building is 8 feet. Therefore the factory-made staircase or the plaster board for the walls, and all that kind of thing, works in on the 8 ft.
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dimension. But in the Provinces it is 8 ft. 4 in. This seems to be idiotic, and I think it is a field in which Her Majesty's Government could put a bit of drive.
Another point is that these chaps who say they are going to get on with it should really put their foot down about modular construction. They should make people work on a module, because almost every engineer and a large number of architects agree that great advantages can be derived from this. The only thing they cannot agree on is what module should be used; but that is where the Government could come in. Another matter is in regard to the plans for council houses. Many of them are as alike as two peas in a pod, and they are bound to be because they must be built as cheaply as possible. I do not see why there should not be plans—as in fact there are—of 20 standard local authority houses, with full drawings, full bills of quantities and full measurements of payment. This could arrive through the post. At the present moment every local authoriy has an architectural department, which generally employs a quantity surveyor to measure the contract when it is done. This is rubbish. It has all been done. And if 20 varieties of houses are not enough, I do not know what is. Therefore a big saving might be made there.
The same point applies to schools. Why sit down and spend months designing a plate glass and concrete palace when it has been done all over England, and we sit and do it again in Scotland and have the same snags. Why not have the same design of school for varying numbers of pupils and treat it in exactly the same way? A packet of money could be saved on that.
I am afraid my next barb is directed to the Scottish Office, but I certainly think the Departments concerned should be scrutinised a little. Our local authority is building a new academy and, like everyone else, we have a cost allowance which we must not exceed. This is a cost allowance of so much per square yard of building, and that is all right. If we save on that we do not save the Exchequer anything at all, but we are permitted to use the sum saved for building something that is not essential, such as a

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swimming pool. This particular school is finally destined to take 1,000 pupils. It requires two gymnasia and a swimming pool. Within half a mile of the school there is a heated swimming pool up to international standards. I may say the pool that the school will get is only a quarter-length thing which is not up to any standards at all. If this is not a colossal waste of money when money is tight, I do not know what is. I am all in favour of teaching people to swim, but the facilities are there, and running half-a-mile is a jolly good bit of physical training. Indeed it might remove the necessity for one of the gymnasia. I think these things should be looked into.
I would just add to my plea in regard to improvement grants. I do not know whether I ought to declare an interestin this matter, but I have myself done 22 houses under this scheme. It is a thoroughly good scheme, but it depends on the local authority's having a good sanitary inspector or building inspector—we call them sanitary inspectors in Scotland—who will be tolerant. If there is a good building which can be brought up to modern standards with the exception that the ceiling is two inches lower than it should be, if there is a good county official he will say, "All right; in order to make the ceilings right you would have to tear the whole house down, and that is idiotic when it is perfectly sound". We have a good man and he says this sort of thing. But I tried to do another scheme under the Hill Farming Act, and the hill farming inspector saw the same house, condemned it and said, "Build a new house. It will cost you £4,000 and the Government will give you £2,000 grant". I said "Rubbish! I won't do it under the Hill Farming Act but under the local authority legislation". It cost me £1,100 and it is a darned good house. This is the sort of thing that is going on and we must stop it.
In particular I would put in a plea for our old Scots stone houses, which are solidly built although the height of the ceilings is sometimes a wee bit under the height laid down. A large number of these houses can be brought up to reasonable standards for certainly 20 to 30 years at a very reasonable cost, instead of being pulled down and a new house started. I think that is a matter which should be looked into.
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Now I must declare a very tenuous and indirect interest. One of the problems with old houses is that they have no damp course. There is a thing called electro-osmosis, which merely consists of putting a copper anode into the wall at about every18 inches, together with a copper strip, and by some sort of magic physics you can dry that wall up with no further bother whatever. This is a cheap method and should be fully known. Our local authority knows about it, and I think it is a point which should be taken up in a field of this kind.
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, can the noble Viscount tell us the cost of this in a comparatively small cottage?
VISCOUNT STONEHAVEN: I can tell your Lordships the approximate cost. It depends on the size of the operation, but for the usual size of cottage it would be about £250. I could not tell you more precisely unless you showed me a house and asked, "What will it cost in this case?" I hope that this Government, the next Government, or indeed any Government, will meet and surpass this target of 500,000. Personally I do not mind who does it so long as it is done.
LORD FERRIER: My Lords, on the subject of stone houses in Scotland, could the noble Viscount tell us this about the cost of this drying system in lieu of damp-course? Does he not mean that that is not the bare cost? It saves destroying a house which would otherwise be condemned because it had not got a damp-course.
VISCOUNT STONEHAVEN: One can use this method instead of putting in a damp course. It is very costly to put in a damp course, but you can instead put in the electro-osmosis and preserve the house.
7.22 p.m.
LORD WELLS-PESTELL: My Lords, I wish to concern myself with certain sociological factors connected with housing, but before I do so I should like to refer to the speeches of the noble Lord, Lord Hawke, and the noble Earl, Lord Jellicoe. I rather detected a hint of criticism of the Government's plans and achievements so far; I felt that they did rather delicately twist the tail of the

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Government, and perhaps they will not mind if I nip theirs—or try to.
With regard to the noble Lord, Lord Hawke, I am under the impression that he said that when the Conservative Party were in power the production of houses continued to rise. This may not be an important point, but we may as well have it correct for the record. As the noble Lord, Lord Wolver ton, quite rightly pointed out, it took them two years—and that does not seem to me to be at all unreasonable—to reach their promise made in 1951 of building 300,000 houses. It is equally true that in 1954 the number went up to 347,000, in round figures. But then it fell, and for the next four years from 1957 onwards the production of houses fell below 300,000a year. So I do not think it is quite accurate to say that during the thirteen years of Toryism the production of houses continued to rise.
Having said that, I wonder whether we appreciate the extent of the problem which faces us. I think we should be less than fair if we did not recognise that the present housing problem has been building up for a good many years. I do not want to make political capital out of this, but I think we ought to get clear in our own minds what the problem is, and what it was a year or two ago. After thirteen years of Conservative rule—and I make no complaint about this, because I am the first to recognise that during those thirteen years they built over 4 million houses, which I do not think was a bad achievement—in 1964, Britain was still left with at least 1 million families without homes of their own, with about 1 million slums remaining to be cleared, and up to 5 million house-holds which lacked essentials like baths and hot water supplies.
The tail I should like to nip of the noble Earl, Lord Jellicoe, concerns his reference to some brick "muddling" of this present Government—I think I quote him correctly. But I would remind him that in September, 1964, just before this Government took over, there was a sharp shortage of a good many building materials. I think I am right in saying that when the Conservative Party went out of office there was only four days' supply of bricks, four-and-a-half days' supply of cement and eight-and-a-half
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days' supply of plasterboard. As I said, I do not deny that during those thirteen years the Conservative Government built on average about 303,000 houses per year, and I think that most of us would recognise that that was something of an achievement. The fact that they reached their peak of 373,676 houses in 1964 may have some relation to the fact that that was Election year—I do not know. I think we shall reach our peak in 1970.
EARL JELLICOE: My Lords, I wonder whether I might interrupt the noble Lord in this interesting point he is making. He referred to the trough in housing built under the Conservative Government. I personally disagree with what he was saying, that the Conservatives built those and Labour is building them; it is merely creating the conditions in which they are built. But he referred to the trough, and I would remind him that the Election year, 1959, happened to be one of the low years.
LORD WELLS-PESTELL: My Lords, I have made no claims at all so far as the building by this Government is concerned. But I wonder how much of the success of the last Administration—and it was successful when it came to housebuilding—was due to the fact that standards of house-building were very drastically reduced.
November, 1951, saw the adoption of a people's house, a three-bed roomed house of 847 square feet with 77 square feet of storage space, for five people. The following spring, local authorities were told to economise not only in the design of the house but also in the services and equipment installed in the house. Not only were standards cut, but floor space was reduced, ceilings were lowered and the quality of internal and external design fell. I think many of us would feel that we have been left not so much with houses but with a good many boxes. Here again, I would not deny that there may have been very good reasons at the time for cutting down in the way these drastic cuts were made, and I think we have to face the fact that, notwithstanding that the present Government have decided not to cut back housing, we are living at a time of grave economic crisis when it may not be possible to do some of the things that all of us would like to see.

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I think one noble Lord has already made the point—and perhaps your Lordships would allow me to put it another way—that the fact that there are about 1,000 families moving daily into new homes (and this again applies to the last year or two of the last Administration) only serves to remind us that the rate of building to-day is not fast enough; and it is something that we on these Benches realise only too well. Many of your Lordships, on both sides of the Chamber, will be in close touch with many of the problems, social and personal, which stem from inadequate housing. I am primarily concerned that we build the right kind of homes. For me, it is not just a question of the number we build—although that is important; it is essential that the standard is right. This is a matter to which the Government are giving most careful consideration, and encouraging the National House-Builders Registration Council and the Building Societies Association to pool their ideas with a view to protecting the house buyer from shoddy building.
I think we have to keep in the forefront of our minds the fact that the average wife and mother spends a large part of her life in the house. We have already had far too many under-sized, poorly designed, and cheaply built homes in the past. I think we have got to show more imagination in our building, and get away from the two-storey box which to me seems to dominate both town and country. I understand that the Building Research Station is undertaking a two-year study of housing estates. It is reported that on one estate, where the average cost of a house was £2,780, £165 went in site costs, £108 for footpaths and roads, £59 for services, and only £12 for landscaping. Surely in future we must give more thought to location and surroundings.
I am also concerned with the question of privacy. Most people like a degree of it. I realise that it is difficult to give a real measure of privacy when housing densities are so high and must, of necessity, be so in our large cities. I therefore welcome the Government's intention to plan the growth of cities, and to give careful consideration to the planning of new towns. High housing densities mean high blocks of flats. I do not think
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some of us in your Lordships' House realise what life can be like in a high block of flats. It is a strain for both mother and child.
A Rowntree Trust Survey has shown, in a study of 200 families with children aged 2 to 5 living in twelve London estates, that the mothers felt that their children were deprived of the opportunities of meeting and playing with other children of similar ages because they had to spend the whole of their time in the flats, perhaps on the tenth, eleventh or twelfth storey. It is too great a responsibility for mothers living high up to leave their children, particularly younger children, to play in the courtyards. One London borough has, I understand, installed closed circuit television in its flats so that the mothers can keep their children under observation when they are playing in the courtyards. But what happens when the mother sees the child going out of the courtyard and she is twelve storeys up, I just do not know. I wish local housing authorities could be persuaded, and I wish the Ministry would issue a note to the effect, that they must exercise more care when it comes to rehousing families with young children in high blocks of flats.
My main concern is in respect of the young marrieds. Young couples to-day are not prepared to put up with the kind of living accommodation familiar to, and suffered by, their parents in the past. On marriage, they want, and quite rightly want, a place of their own. I speak as a sociologist, and I can say (and it is not meant to be funny) that a new aim and purpose has arisen among young marrieds to-day, that of mother-in-law avoidance.
Marriage is popular to-day, and earlier marriage is taking place. To-day, we have the situation of the average woman leaving school at 15, and at 22 marrying a batchelor of 25. Many marry much younger. Over 25 per cent. of all brides, and upwards of 6 per cent. of all bride-grooms, are under the age of 20. The average wife goes out to work for the first eighteen months then she starts her family. By the time she is 25 years of age she has two children, and is often not adequately housed, nor has the chance of making a home of her own. In my view, it is the young marrieds who have a real claim on society when it comes to housing. A young man can

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marry under the age of 21 if he gets his parents' consent. He can fight for his country and is expected to do so when he is under the age of 21. Until a few months ago, he had the doubtful privilege of being liable to be hanged if he was 18 or over. But no one—I repeat no one—will help him to acquire a house of his own if he is under the age of 21, and even at 21 he has to have a surprisingly high income.
In 1964 there were 359,307 marriages. In 51,940, nearly 52,000, of those 359,000 marriages the bridegroom was under the age of 21. So we have 15 per cent. of all the bridegrooms who marry in this country under the age of 21. This is one of the reasons, if I may say this with the greatest respect to the noble Lord, Lord Hawke, why some of us feel so strongly that the local authorities must be given a real measure of preference to build local authority houses as distinct from privately built houses—because the only hope these couples have is to get rented accommodation from their local authority.
As your Lordships know, the local authority will not grant a mortgage to anyone under the age of 21; nor will any building society, so far as I know, because, being a minor, he cannot own land nor be proceeded against in the courts. In my view, this calls for an amendment of the law, and I hope that something will be done quickly. I understand that the noble and learned Lord the Lord Chancellor is more than aware of the situation and, had he been here, I would have said (and will nevertheless say it in his absence) that I hope he will not think me impertinent if I congratulate him on setting up the Latey Committee, which is at the present time considering the position of minors and the law. Regardless of the recommendation, if any, of the Latey Committee, I hope that the noble and learned Lord the Lord Chancellor will feel able to hold out some hope for those who marry under the age of 21 being permitted to own land, so that they can take advantage of whatever mortgages may be available in the future.
The position is difficult enough for people over the age of 21. The potential borrower must have a weekly income of between £27 and £28 per week before he can borrow £3,000 from a building
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society. He then pays it back at the rate of £23 17s. 6d. per month for twenty years, if it is at twenty years, and by that time he has paid back the inclusive sum of £5,730 for the £3,000 that he has borrowed. It is perhaps not surprising that the ten or so major building societies have between them millions of pounds in reserve, and, as we have been told this afternoon have succeeded in avoiding losing any money. Perhaps the time has come when there should be an independent inquiry into the scope and function of building societies to see whether they are meeting, or could meet, the needs of the changed situation to-day.
I realise that the Government, faced with the present economic position, cannot arrange for cheap loans, but I understand that the Minister of Land and Natural Resources has made it clear that the Land Commission will be acquiring land for the national and regional plans and will act as a land bank for small buildings. He went on to say:
"Thus, if the small house-builder is ready and willing to build, he will be able to get land without difficulty at prices which are not inflated by artificial scarcity"
I can only hope that that particular Minister will move far more quickly than others of his colleagues, as this will help to bring house ownership within the grip of a much higher number of married people; and they are my chief concern. I believe that the Government are to be congratulated on their housing policy and on their determination to make it succeed.
7.42 p.m.
THE EARL OF KINNOULL: My Lords, anybody who has referred back to previous debates on housing in your Lordships' House cannot have failed to notice that this subject always produces plenty of criticism for the Government of the day. But I feel that the difference to-day, as compared with earlier debates on this subject, is that there has never before been such unified criticism of the growing uncertainty and depression of the present housing programme. Other noble Lords who have spoken have described in detail the reasons for this depression, and at this late hour I do not wish to repeat them. I hope that when the noble Lord, Lord Kennet, comes to reply he will be able to describe what positive

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steps the Government propose to take to correct the present situation.
It is difficult, in a debate with so many speakers, not to repeat or trespass upon the points made by earlier speakers, and I hope that I shall not be guilty of this. I will confine my few remarks to two points: first, the paralysing effect which the proposed Land Commission is having on house-building, particularly in the private sector; and, secondly, to draw attention to certain injustices which arise under the present law of compulsory purchase and compensation.
Criticism of the Land Commission will not come as anything new to the noble Lord, Lord Kennet, and it will be interesting to hear from his Department about the enormous deluge of letters which one assumes must have been sent in, and also the number of delegations which have asked to be received seeking amendments to the proposed legislation. Yet, so far as I know, in spite of all these letters and delegations, the Minister of Land and Natural Resources has not thought fit to move one inch from the proposed and published legislation.
One particular point of criticism of the Commission to which I would draw the noble Lord's attention today concerns that part which has caused private builders to reduce drastically their house-building programme. I refer to the effect of Clause 64 of the Bill as it now stands. That provides that if a builder purchases, or holds, residential building land, and has not obtained the necessary outline planning consent, and has not been able to start the development before March, 1967, he will be required to pay a 40 per cent. levy tax on the difference between existing use value—which in most cases will be agricultural value—and the development value.
Let us take as an example a 10-acre site, which a builder purchases at £10,000 an acre, with outline planning consent. If he is unable—perhaps because of delays in planning—to start that development before March of next year, he will suddenly find that he is liable to tax, as I estimate, in the region of £38,000, which he will have no alternative but to pass on to the house purchaser. Again, assuming that that 10-acre site has a density of six houses per acre, one reaches a figure of approximately £650 extra cost to the
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individual house purchaser. Because of this threat, builders to-day are not prepared to commit themselves to purchase building land with outline planning consent, as they feel it to be a gamble to which they are not prepared to commit themselves.
I believe that the case for relief of tax in the case of builders is a very good one. It is simply that the principle of the levy was designed solely to fall on the landowner, and not on the builder. What the builders are asking is that temporary relief should be given to their land banks up to March, 1967. Any land bought after that date would automatically be liable to a levy on the landowner, as the Land Commission wishes. In a Written Answer on June 29 on this point, the noble Lord, Lord Kennet, said that the present provisions were designed by his Department to encourage builders to buy land now. It may be of interest to Lord Kennet to know that I have shown his reply to a number of builders. Without referring to the various Anglo-Saxon adjectives which they used about the noble Lord's Department, they were genuinely appalled by what they considered to be a thoroughly misleading and deceptive reply from his Department. What is the encouragement, they ask, offered by his Department to builders at present, except the threat of working to a deadline? I should very much appreciate it if the noble Lord, when he comes to reply, would explain to the House what this advantage is.
The second point I would draw to the noble Lord's attention is the question of compulsory purchase and compensation. I believe that at present there are two fundamental weaknesses in the law of compulsory purchase, both of which are causing hardship. The first occurs when a local authority announces its plans to develon an area, subject, of course, to the Minister's approval. Any owner within that development area immediately discovers that his property becomes very difficult to sell and is put under a cloud in terms of value. Should the owner wish to move out of the area, he finds it extremely difficult to sell the property. At that stage the local authorities will not commit themselves to purchase the property because the Minister's consent has not been given, and in many cases, particularly in Uxbridge, it takes years for a

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decision to be reached. I very much hope that the noble Lord will urge his Department to look again at this legislation with a view to remedying the hardship it is causing.
The second grievance arises where, under Section 12 of the Housing Act1957, local authorities serve a compulsory purchase order on property deemed unfit for habitation and not capable of repair at reasonable cost. It is quite possible for people to purchase such property for, say, £1,500, after consulting a solicitor, and to find within a few months that they receive a compulsory purchase order notice from the local authority. Then, to their horror, they find that the only compensation they receive is on the site value. Site values are often as low as £30 to £50. I know that there has already been a considerable outcry on this point, and last year there was a further concession given under the Housing (Slum Clearance Compensation) Act 1965. But the National Federation of Property Owners have studied this problem since that Act came into force, and they still find that there is a considerable amount of hardship being caused.
I should like to ask the noble Lord whether the Government would look at this compensation law again, and allow all owners to have the benefit of full market value when such a notice is served on their property. If those two weaknesses were corrected, I am sure that a great deal of unnecessary hardship could be prevented in the future.
7.52 p.m.
LORD GRIDLEY: My Lords, before I deal with the main parts of my speech, I want to say that I am terrified of the noble Lord, Lord Mitchison. I think that this is a pity. I like noble Lords opposite, but it seemed to me when the noble Lord spoke that I, in common with other noble Lords who sit on this side of the House, was considered by him as responsible for all the evils which face the building industry to-day. Personally, I refute this. I do not want to say who particularly is responsible. I look upon your Lordships' House as a constructive Chamber, the nation's forum, and although I believe in private enterprise and endeavour, I like to think of myself as believing in the humanity in endeavour, and I intend to be constructive.
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With the greatest respect to the noble Lord, Lord Cohen of Brighton, who quoted the astronomical price of £2,000 for a plot of land as evidence of the Tory failure to deal with land values when they were in power, he must know that an example such as this of an isolated piece of land does not convey an accurate picture of the price of land everywhere. In fact, I could take him to a place where there is building land at £2,400 an acre, or £300 a plot, and any amount of further land is available at that figure. So much for that.
Other criticisms were made concerning the alleged failure of noble Lords on this side of the House when they were in power to deal with local authority housing, and it was said that a sufficient number of that class of house was not being built. But although there are a great number of people on the waiting lists for local authority housing, there are also large numbers of people who really have no right to be in occupation of local authority housing and who should be in occupation of private dwellings. Those are the main points which have arisen since the debate began.
It is customary to state one's interest when speaking in your Lordships' House and I am another one of those who arc directors of a building society. I am very proud to belong to this building society and to be among the people with whom I am associated. It seems to me that an important factor to-day which is increasing the burdens of those involved in the building industry—this is apart from the general economic situation, which it has been accepted by noble Lords on both sides of this House is an intense worry at this time—is the effect of the Land Commission Bill and the selective employment tax which create the maximum amount of uncertainty.
I want to speak first about the developers. There are many fine men in the industry, and in building houses they are filling a social need and carrying out a social service. As a general rule, they prefer to be left alone to get on with the job in hand without too much interference from Government legislation. Let me illustrate this from my experience. Before the advent of the present Government and the arrival of the present legislation, people in the development industry had always to contend with the Town and

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Country Planning Act and its effects. In 1964 I negotiated as agent the sale of land in Somerset to George Wimpey and Company, the national developers. Before they were prepared to make an offer for the land, on which there was outlined planning permission but no detailed planning permission, they carried out the most exhaustive investigations. This is an example of what every developer is faced with when acquiring land for a large-scale development. They carried out these investigations, because they wished to be certain that the development was right economically. I have no reason to believe that this is not general among people who work in a similar capacity.
They took samples of the soil over a wide area and made a statistical analysis of the population within a reasonable area of the site which was to be developed. Estimates had then to be prepared of the cost and type of house which it was proposed to build. This had to be dead right and in the right price range, so that the prospective purchasers could afford the type of house which it was proposed to build. When all of these criteria had been satisfied, that was not the end of the business. After being satisfied that the development was economically sound, the developers were then faced with the problem of submitting to the planning authorities an application for detailed planning permission. In the case to which I am referring—this was in 1964–65—the lapse of time between the submission of the detailed application and the approval of the planning authorities was six months. I will not weary your Lordships with too many further details on this subject. There were arguments with the planning authorities about the type of layout and the type of house of which they would approve, and arguments went backwards and forwards between the developers and the planning authorities concerned.
Another point which I should like to put to your Lordships (and, in this case, to the Government particularly) is that when anybody is submitting to a planning authority a detailed application for planning permission there is an invariable rule that the application must be with the planning officer at least one week before it is considered. If this is not
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so, then the application is put back four to five weeks before it is considered. It seems to me that there is an example here of a constructive suggestion which can be made to Her Majesty's Government: that the time has come to issue some directive, if you like, to local planning authorities that they should streamline their organisations; that their committees should sit more than once a month; or that perhaps there should be a delegation of authority to the planning officer, allowing him to approve some of the detailed plans which are submitted. I merely draw attention to this because, if this kind of delay occurs—it occurred in this case, and was general in other areas throughout the country—it automatically holds back the "starts" of housing, and if this position could be improved I think it would be a contribution towards that increase in the number of "starts" that we should all like to see.
My Lords, referring again to this particular type of development (because I think it is interesting) I may tell you that we were not finished with this when, in November, 1964, the bank rate was raised to 7 per cent. for the reasons which the Labour Government gave at the time. In the spring and summer of the following year, when we were about to get under way, there was a shortage of money in the building societies, and it was practically impossible to get any funds. As a direct result, phased development started. The plan was to develop 112 houses, but, because of the shortage of finance, it was impossible to start and to build straight through the 112 properties which were planned. They built 25 properties at a time, and they sold those 25 properties. Only when those 25 properties were completed and sold did they start the next 25.
I think it is erroneously believed in some quarters that owners of land, and even developers, are wicked speculators with no social conscience. This is simply not true of the majority, who, for the reasons I have given, face difficulties and considerable financial risk. I think the Land Commission, to which I referred just now, has created a certain amount of uncertainty for developers, who do not know quite how the Land Commission will operate so far as concerns the land held by them for future development. If a statement could be issued by

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the Ministry of Housing and Local Government on this point, it would help developers in this matter.
My Lords, may I say just one more thing about these people? There are some fine men in the development industry—and let me quote the case of one whom it is my privilege to know. This is a Mr. Daniel Sheffield, J.P., of Twickenham, who, without any prompting on the part of the Government, has built on his estate at Ling field houses for the occupation of old people. This means that, on the same estate, families can be together, and that young married couple, while still having their own separate residences, can look after mother and father in their old age. He is doing the same on the other estates he is developing. Mr. Sheffield is, I believe, a brother of Andrew Sheffield, whom we know and often see on television. I think it might be a good idea if other developers followed Mr. Sheffield's fine example.
Now with regard to building societies. They render a great service to the country, and attract finance from private savings which goes towards capital formation. They have reserves of capital, and it is essential in my view that this should be so. I believe that the Government is at present discussing matters with leaders of the building societies. I do not know what it is about, but one sincerely hopes that the building societies will be left alone to manage their own affairs. My Lords, I do not think that, on this matter, there is anything more that I can usefully add to what has been said by other noble Lords. I have given a practical example of things which, in my dealings with the development industry, happened to me in 1964 and 1965, and I will now leave it to other noble Lords to make their observations.
8.8 p.m.
LORD NEWTON: My Lords, a large number of the speakers in our debate this afternoon have emphasised the social importance of housing because of its direct relationship with human happiness. I should like to start off by saying how entirely I agree with those sentiments. As one would have expected in this House, the debate to-day has been extremely wide-ranging, and I would say that it has comprehended nearly all the aspects of housing, which the noble Lord,
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Lord Cohen of Brighton, said is really a single, indivisible whole. I would agree with that, too, but I do not think it is surprising that different speakers have dealt with different aspects.
Your Lordships have spoken with great knowledge, and many constructive ideas and suggestions have been thrown up. It seemed to me—and I think I have heard every speech—that every speech had its own particular interest. The right reverend Prelate the Bishop of Chester closed his observations by expressing the hope that, somehow or other, housing will be taken out of the sphere of Party politics. My Lords, I think that is too much to ask of politicians; but, at any rate, I believe it was only a matter of chance that the most enthusiastic political speech made so far in this debate was made by the noble Lord who followed the right reverend Prelate.
As this debate progressed, I felt myself wishing more and more that it was possible for me to withdraw from it, because it appeared to me that there would be nothing left for me to say—except, of course, uncomplimentary things about the Government; but there are plenty of opportunities for doing that. But I suppose a winding-up speaker is not permitted to withdraw from the debate, and so, as I cannot do that, I will be as brief as I can and, in the light of the speeches which we have heard, concentrate on what seem to me to be the salient features of the housing situation at the present time.
The first impression I got, after listening to the speech of the noble Lord, Lord Hilton of Upton, and from what I was able to take in of the information he gave us (though I was not able to take down all the figures) was that that information did not justify the optimism he showed about the Government's housing programme. I hope I am wrong; I hope I may realise I am wrong to-morrow when I read his speech and the figures he gave. I fancy that all of us who have taken part in this debate, or listened to it, were conscious that it has been overtaken by the Prime Minister's Budget statement of last Wednesday. What is going to happen now to the housing programme is, I suppose, anybody's guess—and I dare

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say that Mr. Crossman is guessing as hard as anybody.
But the underlying weaknesses of the housing situation remain; they are not the result of the Prime Minister's Budget. Anyway, we have the Prime Minister's Election pledge, to which my noble friend Lord Jellicoe referred in his speech: that no development or circumstance, however adverse, will be allowed to deflect the Government from achieving their target. Those are sentiments that we can all applaud, wherever we sit in this House. But, as my noble friends Lord Hawke and Lord Jellicoe pointed out, unhappily—or happily, according to which way you look at it—houses are not built by Governments; and I would add that they are not sold by Governments, either. What depresses me is the downward trend which began with the disappointing total of houses completed in 1965. I think it was disappointing although the noble Lord, Lord Mitchison, did not.
LORD MITCHISON: It was a record.
LORD NEWTON: It was a record, but it ought to have been a better record, considering the number of houses under construction—434,000, I think—in the autumn of 1954. That is really the point.
LORD MITCHISON: Both figures were records.
LORD NEWTON: I do not think the noble Lord and I will agree about this. But I do not think that is an unfair comment I have made on one portion of his speech. It seems to me also that this downward trend is still apparent in the results so far this year: fewer completions and fewer starts than in the same period last year. But both completions and starts, it seems to me, ought to have been better this year if there is to be a steady approach to the target of 500,000 by 1970.
In this connection, it is significant to me that the National Federation of Building Trades Employers recently reported that half of the 700 building firms of whom it made inquiry about the state of trade said in their replies that they anticipate that they will both complete and start fewer houses this year than last. It was only the very large firms who said
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they expect to do better this year. Of course, this inquiry was made before the last Budget, the Prime Minister's Budget of last week, although it was made after the Chancellor of the Exchequer's last Budget, in April.
The firms were asked by the National Federation what they considered to be the deterrents at the present time to house building. High in the list of answers was the belief that there is deliberate Government discrimination against private house building, with consequent discouragement of home ownership. I hasten to say straight away that I myself decline to consider that that belief was justified. I do not think the Government have been consciously discriminating against private house building. On the other hand, I think the Government have only themselves to blame for 'the existence of this misbelief—and I will come back to that point a little later.
I think it was a psychological error on the part of the Government to announce that the private sector would be limited to half the planned 500,000 houses. By all means let the Government say that they want many more local authority houses to be built for letting. I think the Government have been quite right to take steps to try to stimulate local authority building of more council houses. But it seems tome that if you set a ceiling on private enterprise building, then you must expect that output will start falling off. You must expect that capitalists—and builders are capitalists—will be more cautious in their plans. What the Government should have done, in my view, was to say that they will take all steps they can to secure that more council houses are built; and leave it at that. Had they done so, they could have waited to see how these sectors advanced; and if the private sector started building too many houses, then something could have been done to rectify it. I am sure that that would have been more beneficial.
I have always believed that one of the reasons why Mr. Macmillan was so successful a Minister of Housing is that he said to everybody: "The sooner you complete what you are building now, the sooner you will be able to start building more." In 1964, house building in this country was booming; the pressure of effective demand for home ownership was insatiable, and in the local authority

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sector the only factor limiting the output of council houses was the availability of loan sanction. But that trend has been reversed since 1964; and the change began with the change of Government at the end of 1964. I think it would be straining charity too much to attribute that change to coincidence. The noble Lord, Lord Mitchison, took noble Lords on this side of the House to task for not speaking enough about the public sector. He also seemed to be attacking those of my noble friends who had spoken for indicating that they thought the Government wrong to stimulate building in the local authority sector. But I do not think that any noble Lord did take that line.
I am now going to say something about the local authority sector, because it seems to me that the most worrying factor in the housing situation to-day is precisely what is going on in the local authority sector. The Minister, Mr. Crossman, said in the other place last Tuesday:
"…the public sector is doing well and this year will increase on last year and will increase on this year's target."—[OFFICIAL REPORT, Commons, Vol. 732 (No. 57), col. 356; 19/7/66.]
I presume that he was talking about completions, but what about starts in the local authority sector'? The Minister said in another place on May 19 that in the first four months of this year starts were down by 4,000 on 1965, and if I under-stood the noble Lord, Lord Hilton of Upton, aright, he said this afternoon that local authority starts were down another 1,800 in May of this year.
My Lords, I find this situation completely baffling, bearing in mind that for nearly two years now, the Government have been at pains to give the go-ahead and to show the green light to local housing authorities. I cannot form any idea about what has gone wrong. There can be only two possible answers, in my opinion. One is that for some reason or other the local authorities are reluctant to build. Whether that reason is that they are waiting to know details of the housing subsidies, or whether they do not want to build in the present economic climate, I do not know. The only other explanation seems to me to be that the Government have not been generous enough in granting loan sanctions or that they have been taking too long to getting around to doing so. I suppose it is pos-
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sible that for some time now, perhaps for too long, local authorities have been cogitating on introducing industrialised instead of traditional building methods. I hope that the Parliamentary Secretary will be able to tell us what has been going on this year in the public sector, and what are his expectations about starts in the public sector for the next few months of this year.
As a number of speakers have pointed out, the trend is disappointing, too, in the private sector, In the first quarter of 1964 about 47,000 houses where produced for home ownership. In the first quarter of 1965 the figure rose to 50,500. In the first quarter of this year it has, I think, fallen to 46,000. The noble Lord, Lord Hilton of Upton, gave some later figures about completions in the private sector, and the impression which I received from those figures was that the position was no more encouraging than during the first three months of this year, but I may be wrong. Obviously there are a variety of reasons for this down-turn and a number of them have been given to us this afternoon. But in the aggregate it seems to me that it comes down to a willingness on the part of the buyer to buy and a willingness by the builder to build. From such inquiries as I have been able to make, it seems that the desire to be an owner-occupier is just as strong as ever it was, and perhaps more so. But it may be that the effective demand for owner-occupation is falling off.
We know that house prices have been rising rapidly—I think 10 per cent. last year, was it not? Mortgage rates are immensely high, and potential purchasers are still waiting for the Government to carry out their promise to do something about subsidising mortgage rates. There are conflicting views, and conflicting views have been expressed, about the availability of mortgages for new houses; but I do not think there is any doubt that there is a shortage of bridging finance and it is at present extremely difficult to get a mortgage for the purpose of buying an old house. Rates have risen substantially in the last two years, as we all know, and so it may be—I am only guessing—that the monthly outgoings of owner-occupiers are now such that people who would have contemplated owner-occupation a few years ago no longer do so. It may be that potential buyers are deterred by the fear that they may

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make a loss on resale. At any rate, I think it can only be a matter for concern that at the end of May applications for house purchases were fewer than they were three months earlier, despite the fact that summer is usually the time of the year when house sales reach their peak.
The builders and the organisations which represent them give a number of reasons for the short-fall, and among those reasons are the cost and shortage of land and labour. I suspect that these are merely symptoms of a deeper malaise because for a number of years now the cost and shortage of land and labour have, relatively speaking, been great. I think that this deeper malaise is a lack of confidence in the industry. A number of my noble friends have spoken about this, and a number of noble Lords opposite have pooh-poohed it. But this is not just an invention of the wicked Tories, trying to make debating points. You have only to ask the builders and the organisations representing them. This is what we are saying, and have said: that there is a lack of confidence. It is no good the Government complaining about it. After all, it is the Government who create confidence, or alack of it, and it is up to them to do something.
As we all know, the majority of houses are built by small firms employing few men. These builders are capitalists. They take risks in the hope of making a reasonable profit and they will not take a risk if they do not think they will make a reasonable profit. They cannot afford to hold on for too long to building land, and because they have to borrow money in order to build at all they look for quick sales. At the same time they know that credit is tight for them and for potential house purchasers, and, like the potential house purchasers, they are still waiting for the Government to redeem their promise which is now nearly two years old, to do something about mortgage rates. I think there is one thing which has been more depressive in its effect on the housing problem than any other, and that is the long wait for something to be done about mortgage rates by the Government. As we have heard from other speakers, builders are frightened of the proposed
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Land Commission. This was explained by my noble friend Lord Knoll. They are also affronted by the payroll tax, and I am afraid that many of them believe that no Labour Government is really on the side of the small capitalist. I imagine that that is really the reason for the existence of the mistaken belief, to which I referred earlier, that the Government have been discriminating against private house builders.
My Lords, as I said at the beginning of my speech, a great many constructive suggestions have been made in this debate, and at this time of night I do not propose to rehearse them all over again. But I would emphasise that a number of noble Lords, including the noble Lord, Lord Cohen of Brighton, have in one way or another, made the point that the time has come when economic council rents should be paid by those who can afford to pay them. I would also mention that a number of noble Lords, particularly my noble friend Lord Jellicoe and my noble friend Lord Gage, think that the Government ought to give some form of encouragement to housing societies and housing associations. As I listened to the various suggestions that emanated from both sides, I tried to think of other helpful ones I could make. I am afraid I was unable to think of any which, by my reckoning, would be acceptable to the Government.
I must say, in conclusion, that the future does not look to me particularly rosy. Housing seems to have escaped unscathed from the Prime Minister's Budget; but are the local authorities going to get the loan sanctions which they will need if they are going to build the houses the Government want them to build? And are potential buyers of their own houses going to get the money they will need in order to buy? With great respect to the noble Lord, Lord Hilton of Upton, it is no good his saying that in the view of the Government housing is of paramount importance and that it still has top priority, unless the answers to both those questions are firmly in the affirmative. I am afraid that if they are not, then Mr. Crossman is going to lose the reputation which he has himself put at stake.

BUSINESS: ECONOMIC SITUATION DEBATE
LORD CHAMPION: My Lords, perhaps the House will permit me to intervene to make a Business statement. Having regard to the fact that fifty noble Lords have indicated their intention of participating in the economic debate, it has been decided after the usual consultations to split the debate into two parts, the first part to be taken on the Motion to-morrow and the second part on Monday. The Finance Bill will then be taken formally through all its stages at the end of the debate on Monday.
LORD HAWKE: My Lords, is the noble Lord aware that, during the thirteen years of Conservative Government, it was never found necessary for fifty noble Lords to speak on the economic situation?

THE HOUSING SITUATION
8.32 p.m.
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, this has been a long debate. It is late, and of set purpose I will not detain your Lordships long. It is amazing—is it not?—that when we all agree what is to be done, namely, to build the largest possible number of houses of the highest possible standard at the most appropriate places as soon as possible, what wide differences of opinion there are about how it should be done. A great many points have been made in this debate, many of which seem to me to be valid, some of them invalid and all of them interesting, but I cannot possibly take them all up. I will write in due course to those noble Lords whose points I am unable to answer, where I think they are of such a nature as to call for a reply, and if I seem to pass over any noble Lords' points to-night which they think I should answer now, I hope they will not take it that that is the end of the matter. We have had a great mass of interesting material and I could not possibly answer it all. I cannot carry that much in my mind and we should be here for two hours.
I would start by thanking those noble Lords who supported the Government in their housing policy, because in the nature
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of events I should like to address most of my remarks to the criticisms levelled against it from the other side of the House. I am grateful to the noble Lord, Lord Hawke, for initiating this debate, but I must take him up on one point in his speech when he said that no Labour Government could ever understand the workings of the minds of people who have to risk their livelihood to make a profit, and that the Government were thus incapable of doing anything to help the building and development industry. I do not think this is quite fair. Citizens in all walks of life have to make decisions which risk their livelihoods and may or may not increase their profits, and not only those normally known as capitalists—and many capitalists have been known to support Labour Governments. I think that any strictures which might be levelled against our policy towards the private sector of the construction industry ought not to be based on the belief that we are incapable of understanding how their minds work and what they want.
There is another small point, almost a verbal point, in the noble Lord's speech which I want to answer. He spoke of the difficulties and complications of builders in buying land. Builders as such do not have to buy land. They may live very satisfactorily for many years and make a reasonable profit by building for the local authorities without ever having to make a contract for the sale of land one way or another. A builder who chooses to buy land and go in for that form of economic activity does it by choice, and it is not strictly as a builder that he is doing it but as a developer—one can use any word one likes.
The noble Lord, Lord Wade, asked whether it was the intention to cut office building. It is indeed the broad intention of the Government to control office building. It will not have escaped his attention that the level of control has been reduced from £100,000 to £50,000, and that the area of control has been expanded from London and Birmingham to the whole of the South-East and the Midlands. The noble Lord invited the Government to scrap the selective employment tax and to exempt the surpluses of building societies from corporation tax, and exempt bridging finance from the credit squeeze. I regret that I cannot meet him immediately and that

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I cannot undertake that the Government will do so. I do not think he expected that I should be able to.
Turning to the speech of the noble Earl, Lord Jellicoe, I would say that he made the point that in every month between November and now the completions of new houses had been lower than in the corresponding months of last year. I am glad to be able to tell him that in May this was not so. Completions were higher than in last May, and there is no reason to suppose that the upward trend will not be continued. I was surprised when the noble Earl asked me whether I could confirm what the Prime Minister had couched in unusually strong terms about the pledge for the construction of500,000 houses a year by 1970. I cannot imagine that my word will add much to the weight of the word already given by the Prime Minister, but, for what it is worth, I give it to the noble Earl most gladly.
The noble Earl also raised the point, in passing, about the increase in the time-lag in planning decisions from 33 to 44 weeks, and he suggested that this might be the tip of a hitherto unrevealed iceberg of incompetence in the Department or possibly in the local planning authorities—I was not clear which. I would assure him it is not so bad as he thinks. What is happening is that more and more planning business is coming before the Department every year. People are building more. Development is proceeding at an increasing rate, and the present planning machinery, which is extremely complex—it was devised by my noble friend Lord Silkin nearly twenty years ago—is in large part groaning under the weight. There are very severe delays. We are considering how to cut down these delays. We know that the only way is by new legislation which we have in hand.
The noble Earl raised the point about the selective employment tax in respect of the differential between maintenance workers in direct labour departments of local authorities and those in private building firms. Construction workers engaged on maintenance by direct labour departments will be treated in the same way as other local authority employees, but an exemption from the privileged
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position will be made for direct labour staffs engaged in new construction. They will be treated in the same way as employees of private contractors and will not rank for reimbursement. The reason for the different treatment is that it is mostly in new building that direct labour departments are in competition with private builders, and they are not to any marked extent in competition on maintenance.
The noble Earl also asked about the repeal of the one-in-three rule. This repeal was decided on for a variety of reasons, including improving the continuity of work in the direct labour departments, which is a fairly obvious benefit. Also—and this is a crucial point—the rule itself was a stumbling block to efficient organization in direct labour departments because some of the less praiseworthy local authorities were deliberately padding two projects in order to be able to put in an artificially low tender in competition with private enterprise tenders on the third, which had to go out for competitive tender. It seemed to us that this abuse was most easily rectified by the repeal of the one-in-three rule.
I turn now to the remarks of the noble Lord, Lord Cohen of Brighton. He said, broadly speaking, that building societies should raise Exchequer money on deeds; that is, by the transfer of the deeds they have in their possession. During the debate any such notion has been opposed by more than one noble Lord—the noble Lords, Lord Wade and Lord Gridley—on the ground that it might in time amount to a sort of creeping nationalisation, which would be unwelcome to some building societies, if not to others.
The noble Lord, Lord Wells-Pestell, introduced an interesting link between the inability under the present law of building societies to grant mortgages to under 21s and the size of their reserves. These points are noted, as is, indeed, the difference of view between noble Lords who are directors of building societies. The noble Lord, Lord Cohen of Brighton, asked whether we could not immediately rate at full value empty property in order to fill it up and so reduce the number of empty houses. We have considered this idea, but there are difficulties. In the meantime, I would remind your Lordships that we have proposals coming up

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to rate empty houses at half value, which is the first time this has been done, and it should bring them into the market more quickly.
My noble friend Lord Silkin told me that he would be surprised if I got up and agreed with him. I am afraid that he will miss his surprise, because I agree with much of what he said about the number of housing authorities and planning authorities in the country. It is among other things precisely this apparently excessive number and the difficulties of co-ordination between them that has led my right honourable friend the Minister to refer the whole structure of local government—including housing authorities, planning authorities and everything else—to a Royal Commission, which is very much charged with this question of how many authorities there should be, and what should be the size of housing units and planning units. In the meantime, local authorities have been given a greater freedom than they have ever had before to set up joint consultative committees, and even joint executive committees, when their problems bridge local authority boundaries.
The noble Viscount, Lord Stone haven, released a quick fire of practical points and proposals. I think almost all of them I knew too well already. They are all familiar headaches which present immediate attractions to a Government to carry them out. But they all have disadvantages. I assure the noble Viscount that every point he mentioned with the exception of electro-osmosis, which I shall look into at once, is well known to me personally. None of these suggestions will be easy to put into effect. None is being neglected in the Department at the moment, and some are already fairly far forward or are in the process of study, which, of course, will proceed.
The noble Earl, Lord Knoll, returned to a point which is now familiar between us, concerning one of the complications of the Land Commission. I noticed that he has shown a Written Answer I gave to an answer to a question that I invited him to put, to various builders, and he described my reply as "deceptive and misleading". If he would care to send me concrete examples of the difficulties which he alleges the builders of his acquaintance have found—without
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the four-letter words—we might increase our common understanding of this matter. In the meantime, I note his charge that it is a deceptive and misleading reply, and I note, also, the absence of any evidence for this charge in his speech. The Land Commission Bill is in another place at the moment, and will, I imagine, be here before the end of this year, when we shall be able to thresh out this matter in detail.
LORD WOLVERTON: My Lords, could the noble Lord say (he was out of the Chamber when I made my speech) a little about the financial aspect? This is important, and I tried to concentrate on it in my speech. Can he say whether there will be any help in bridging operations and so on? If you are going to exclude housing from the credit squeeze—and I agree with this—then something should be done on this cardinal point of finance.
LORD KENNET: I am sorry, but I cannot to-day say any more than has already been said about bridging finance in the House of Commons.
LORD NEWTON: With respect to the noble Lord, we have been listening in this Chamber, and not in the other place.
LORD KENNET: This leads on to what I was going to say in answer to the noble Lord, Lord Newton, and if I may, I will continue. He said that the future of the housing programme is anybody's guess. Well, really, it is not. I think the main characteristic of the Prime Minister's announcement of new measures last week was the exclusion from cuts in Government spending of what we judge to be the essential priority sectors of housing, hospitals and schools. Public sector housing is not cut. It is not anybody's guess whether it will be cut. It is not cut. It stands out from the very severe cuts which have been made in Government spending in many other fields by the fact that it is not cut.
LORD HAWKE: My Lords, before the noble Lord leaves this point, that concerns only the public sector. The private sector is vitally dependent on the question of the banks once again lending money to builders and to house purchasers.
LORD KENNET: I appreciate the noble Lord's point, and I must repeat that I have nothing to say on it at the moment.
The noble Lord, Lord Newton, asked what is wrong in the public sector.
LORD NEWTON: In the starts.
LORD KENNET: Yes. I would say, in general, that nothing is wrong, for reasons which already have been well aired in this debate.
LORD NEWTON: What is wrong is simply this. For the first five months of this year the local authority sector has been down on last year. I think that is wrong and that the figures should be greater this year.
LORD KENNET: I said that, in general, in the public sector housing programme nothing was wrong. I now turn to the particular question of fact that starts in the first months of this year have been lower than in the corresponding months of last year. The reason for this is that local authorities held back on approvals during the second half of last year in order to qualify for the more generous new subsidies announced at the end of November. This was followed by a flood of approvals which will become starts in the second half of this year. It is an apparent deficit for purely local reasons which does not reflect anything really wrong in the public sector at all.
The noble Lord hinged most of his remarks on the phrase "lack of confidence". "Lack of confidence" has rung around this Chamber in all stages of the debate. It is a difficult matter to talk about, and I find myself much perplexed. As I said the last time we discused this topic, during the debate on the Queen's Speech at the beginning of this Session, it was at that time, and I think probably still is, partly true that small builders are held back by lack of confidence. It was not then, and is not now, true of the big builders. I think that there should be a limit to the theory that a Government have to create confidence—and I quote the noble Lord, Lord Newton's words.
In this case we are dealing with the small builders, who probably have the greatest difficulty in expressing their views; they do not have time to send someone to lobby the Minister. Their
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organisations do not have paid staff, such as they have in some other organisations. But it is up to those who feel that they are held back by lack of funds, and even up to those who think that others are held back by lack of funds, to tell us frankly and in detail what is wrong. It is right to debate this in Parliament, but they should also come and tell us privately what is wrong. When small builders come and do that, I assure your Lordships that in the Ministry we drop everything and listen to them; and we learn a great deal. When they come and tell us in detail what is wrong, we do, within the limitations of the present economic difficulties, seek to find out what we can do to rectify it. I should like to repeat, with all solemnity, what has been said by my right honourable friend the Minister of Housing and Local Government, and by me before, I think, and by many others, that we are not discriminating against the private building sector. We know that it has its difficulties. We know that the whole of the economy has its difficulties at the moment. We do not control the private building sector, and we are not seeking to discriminate against it.
Let me turn now to the question of housing associations, which has been raised by many noble Lords in this debate. The housing association movement—if we may call it that—owns probably rather fewer than 150,000 dwellings at the moment, which is a smallish proportion of the country's stock of housing. To say that it is small at present is not to belittle the importance of this movement, or the contribution which it can make, or is already making, to the solution of our housing problems. The Government do not regard it as unimportant because it is small—quite the contrary. Sometimes small things are better able to set examples, and the Government intend to do all they can to develop and encourage this movement.
The Housing Corporation was set up under the 1964 Act with the express purpose of encouraging cost-rent and co-ownership schemes. It obtained its powers only eighteen months ago and, of course, it takes time for new associations, when they are set up, to find their land, to prepare plans, to get planning permission—as we all know to our cost—to arrange finance and to do all the work

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necessary before they can start to lay bricks. It is too early therefore to judge how the new Corporation will do. The work of the Corporation is, however, gathering momentum, and schemes are coming forward now in increasing numbers; and the Government hope that they will continue to come forward in ever-increasing numbers. Up to now, the emphasis in this field has tended to be on cost-rent associations, but a number of co-ownership societies have recently submitted proposals which have been approved and we hope that many more of them will be coming along.
But new building by cost-rent and co-ownership societies is only one of the fields in which we hope to see the contribution of the housing association movement increase. The traditional housing associations, the big charitable trusts, the associations building for special purposes like old people, are all making a useful contribution which we hope to see increase, not only in that field but also in that of improvements and conversion of existing property. We hope that local authorities—especially those taken un with new building—will recognise this and will give housing associations every encouragement and co-operation in their power in these circumstances. Many of them feel, only too reasonably, that their strained resources ought to he going principally on new building, but there is a big place here for housing associations to get on with improvements in the "twilight" areas. A number of trusts and associations are already doing extremely well in this field, particularly in London.
More than one noble Lord, including the right reverend Prelate, complained in broad terms about the "red tape", and about the complication of the allowances and the complication of the legislation which governs the activities of housing associations. This is a point which was brought out forcibly, as the noble Viscount, Lord Gage, has reminded us, in the Milner Holland Report. The trouble is that it is the varied nature of the housing associations themselves which makes some of this complication inevitable. The noble Viscount quoted Sir Milner Holland about the arrangements governing their operations—"their", referring to the housing associations. The point here is that it is their operations
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which are so different in type one from another. Some of them build with Government subsidy and some without. Some are charitable, and some are not. Some are in business as landlords; some are building new buildings, and some improving old ones. Associations which want to go in for a variety of different types of work, perhaps in a number of different places under different local authorities, are bound to find their operations complicated.
There is a lot to be said—and I put this especially to the noble Viscount, Lord Gage, and the noble Earl, Lord Jellicoe, who have spoken on behalf of housing associations—for housing associations, particularly the smaller ones, concentrating on one sort of work and concentrating their activities in a relatively coherent area. The progress of the housing association movement is under continuous review in the Ministry. At the moment we are not convinced that there is a need for a special inquiry, for the simple reason that we do not think it likely that a special inquiry would find out more than we already know or would be able to increase the amount of active thought that is being given to this matter.
EARL JELLICOE: My Lords, may I interrupt the noble Lord for a moment? I am grateful to him for what he has said about the housing association and housing society movement. I should like to ask him whether he could give us any specific information on the particular point which I put to him about the housing societies: that is, whether cost-rent schemes, on the one hand, and the co-ownership schemes, on the other, would be eligible for participation in the differential interest rate and the mortgage option scheme, as and when they come forward.
LORD KENNET: My Lords, I am afraid I cannot give the noble Earl any information about that at the moment. I will keep my eye on it and let him know as soon as I can. Indeed, if he wishes I will communicate with him immediately with a more detailed account of how things stand at the moment.
My Lords, we think there are about 2 million sound old houses which lack the basic amenities. Unless they are improved, many of these houses will turn into slums and have to be knocked

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down. I would remind the noble Earl of the general picture—I am quoting off the cuff, so the figures I give are not precise. About ten years ago there were about 800,000 slums in the country. Over the next eight years the Conservative Government, very properly, knocked down about 500,000. Two years ago there were about 800,000 slums in the country once again. The pool just fills itself up. It is like the Red Queen—you are running to keep up with yourself all the time. The principal way you can turn off the tap filling up the slum pool is by improvements. For this reason we are going to attend more closely in the future to the improvement grant procedure which has—not to put too fine a point on it—not been doing too well recently. We pay a great deal of attention to slum clearance and new town planning—and so we should—but we are convinced that this matter of propping up the viable old houses and putting plumbing, baths and electricity into them should be jogged up a bit, if we possibly can do it, from now on.
Owner-occupiers have always made more use of the provision of these grants than the landlords. Local authorities were given power to compel landlords to improve their properties in the Housing Act 1964. Local authorities can declare compulsory improvement areas in which landlords must install the five standard amenities in their houses. Local authorities have power to improve tenement blocks, and tenants of individual houses can ask the authorities to compel their landlords to improve them.
On paper this is all very fierce and authoritarian, and makes one want to say, "Where is my thunderbolt?", pick it up, hurl it and direct it at this. And that can be done all over the country. In practice it is a very difficult matter to determine up to what point one may properly force someone to have a bath put in his house if he does not want one. The presence in a street of, say, 30 houses, of 20 tenants or owner-occupiers who are only too glad to get the improvements, and 10 who refuse, immensely complicates the calculations of the local authority. Should they do the 20 and come back to the 10 in a few years' time when maybe the inhabitants have changed, or should they do the 20 and
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forget the other 10, or should they do the 20 and declare the 10 to be slums and knock them down and put a car park there? These are matters to which we are turning an increasing degree of attention.
THE EARL OF KINNOULL: My Lords, could the noble Lord say something about compensation under compulsory purchase in regard to slum areas?
LORD KENNET: Yes my Lords, but as it is now rather late in the evening, I would ask the noble Earl, Lord Knoll if he will be so good as to allow me to write to him about it.
One of the main complaints about the improvements grant system—and this is something which is partly rectified already—used to be that it was hedged around with red tape from Whitehall. Last year the Minister freed local authorities from all administrative restrictions and assured them that in future Exchequer contributions would be forthcoming if the council were satisfied that it was right to pay grants under the improvements scheme. Incidentally, I would say to the noble Lord, Lord Airedale, in regard to his complaint about the delay in issuing the circular, that when it was held up for five months it was not simply stuck in somebody's "In" tray. A large number of administrative matters were being cleared out of the way, and I would say to your Lordships that the period between a policy announcement and the detailed administrative circular putting that policy into effect is often five months, and I doubt whether, as a general rule, we shall be able to get it much shorter.
My Lords, I have already spoken for too long a time. I will not conceal from you (why should I?: it would be absurd to do so) that this has been a difficult day on which to have a housing debate. Over the whole of our discussions has loomed the economic crisis and the measures which have recently been taken, and which are in process of being taken, to counteract it. To-morrow we shall ourselves be discussing that crisis in general terms at quite considerable length; indeed, during our debate to-day I could see many noble Lords sheering off it. It has been discussed yesterday and to-day in another place. The broad outlines of the remedies which the Government are imposing are known to us;

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but the detailed applications of those out lines are not yet known to us; and cannot be. What is clear—and I will repeat what I said at the beginning—is that housing, hospitals and schools are totally exempt from the cuts in Government expenditure, and I think this is the point on which the Government, this year at any rate, would like their housing programme to be judged: that we are managing to maintain it in spite of having to cut so much else.
9.2 p.m.
LORD HAWKE: My Lords, forty-odd years ago the Bryce Committee gave as one of the functions of the House of Lords the fact that it was a place where matters of great public interest could be debated without involving the risk of a vote against the Government and their resignation. I think this is one of those days. I thank noble Lords very much for taking part in this debate. I have listened to nearly every speech, many of which were of great expert interest. We even had the noble Lord, Lord Caradon, on the Government Front Bench for a moment or two—doubtless he had come over to discuss Armageddon and the World Cup. But throughout the debate, as the noble Lord, Lord Kennet, has said, we have been overshadowed by the fact that the voice of Callaghan is muted; the voice of Crossman has spoken out loud and clear on plans, but it is the voice of Callaghan which decides whether those plans come to anything or not. With those few words, I beg leave to withdrawn my Motion.
Motion for Papers, by leave, withdrawn.

GREATER LONDON COUNCIL (MONEY) BILL
Reported, without amendment.

BARRY CORPORATION BILL
EXETER CORPORATION BILL
Returned from the Commons, agreed to with Amendments: the said Amendments considered and agreed to.

BRIGHTON CORPORATION BILL
Brought from the Commons; read 1a, and referred to the Examiners.
LAW REFORM (MISCELLANEOUS PROVISIONS (SCOTLAND) BILL
Returned from the Commons with the Amendment agreed to.
MINISTRY OF SOCIAL SECURITY BILL
Returned from the Commons with the Amendments agreed to.

OVERSEAS AID BILL
Returned from the Commons with the Amendments agreed to.
House adjourned at four minutes past nine o'clock