Sitting of 28 July 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  EAST KILBRIDE BURGH
  Bill to make provision for the constitution of the burgh of East Kilbride in the County of Lanark into a large burgh and for other purposes, read the First time; to be read a Second time.
ORAL ANSWERS TO QUESTIONS
  EDUCATION AND SCIENCE

    Technical Education
    Mr. Hamlingasked the Secretary of State for Education and Science what representations have been made to his Department on the organisation of technical colleges by the Association of Teachers in Technical Institutions; and what reply he has sent.
    Mr. McNamaraasked the Secretary of State for Education and Science what consultations he has had with the teachers' organisations since the publication of the White Paper on Polytechnics and the Report of the Pilkington Committee on Size of Classes in Technical Institutions.
    The Secretary of State for Education and Science (Mr. Anthony Crosland): I will shortly be receiving a deputation on these subjects from the Association of Teachers in Technical Institutions.
    Mr. Hamling: Would my right hon. Friend say whether, in his opinion, there is any conflict between these representations and the representations he has had from the Association of University Teachers on this subject?
    Mr. Crosland: There is naturally a certain amount of disagreement generally
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    about the subject. Almost everybody agrees that there must be some degree of rationalisation and concentration in the technical college world. But the A.T.T.I., for perfectly natural and legitimate reasons, thinks, that this might become too rigid and inflexible. I have already reassured it that it will not be, and I hope further to reassure it when I meet it in September.
    Mr. McNamara: Will my right hon. Friend bear in mind particularly the size of classes recommended in the Pilkington Report, because this matter is causing grave concern to many teachers in the profession?
    Mr. Crosland: Yes, Sir.

  Training Colleges (Part-time Attendance)
  Mrs. Joyce Butlerasked the Secretary of State for Education and Science if he will send a circular to teacher training colleges asking them to consider making arrangements on an experimental basis to admit a limited number of suitably qualified married women for courses during normal school hours.
  The Minister of State, Department of Education and Science (Mr. Coronwy Roberts): My right hon. Friend has asked local education authorities and institutes of education in three areas to prepare experimental schemes of teacher training involving part-time attendance. Some of the courses will be specially designed to meet the needs of married women who can attend during the daytime but not on a full-time basis.
  Mrs. Butler: While thanking my hon. Friend for that reply, which will go a considerable way towards ending the frustration felt by capable married women in this respect, may I ask him whether he could give any indication about whether a report on this matter will be published or made available, or what result is expected from these experimental schemes, and how it will be made known?
  Mr. Roberts: We hope to get from these pilot courses information about the feasibility and prospect of wider developments. I am sure that my hon. Friend's suggestion about a report is well worth consideration.

  Royal Shakespeare Company
  Sir Knox Cunninghamasked the Secretary of State for Education and Science if he will state the amount of subsidy paid from public funds to the Royal Shakespeare Company during each of the past five years, respectively.
  The Joint Under-Secretary of State, Department of Education and Science (Miss Jennie Lee): Starting in 1962–63, when the Arts Council first gave the Company a subsidy, the annual amounts up to last year have been £10,000, £47,000, £88,000 and £93,300. In addition, the Company has in the same period received £34,434 from the British Council in guarantee against losses incurred in touring abroad.
  Sir Knox Cunningham: Knowing the right hon. Lady's interest in the theatre, will she use her influence with the Governors of the Royal Shakespeare Company and persuade them to use some of this public money at Stratford, where the inhabitants and visitors object to seeing only one new Shakespeare production this season?
  Miss Lee: I would consider it most improper for a political Minister to interfere with the activities of the Royal Shakespeare Company. By leaving these matters in the hands of the Arts Council, we are guaranteeing the freedom of artists in this country which we all cherish.

  Tees-side
  Mr. Kitsonasked the Secretary of State for Education and Science if, in view of the planned amalgamation of the four local education authorities in the Tees-side area, he will seek to implement a unified policy for secondary education there so that all four education authorities may reorganise their secondary education on the same lines; and if he will make a statement.
  Mr. Crosland: When I consider the secondary reorganisation schemes of the three existing local education authorities involved, I shall take into account the fact that the new Tees-side Authority is to come into existence in 1968.
  Mr. Kitson: Would it not be better if there were discussions at this stage be-
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  tween the local authorities? There is a good deal of fear in the Tees-side area that there is not enough co-ordination between authorities.
  Mr. Crosland: I understand that the authorities concerned have already set up a Joint Steering Committee, which itself has set up an education sub-committee, which ought to provide the forum for discussion which the hon. Gentleman wants.

  Schools, Staffordshire
  Mr. Hugh Fraserasked the Secretary of State for Education and Science whether he is aware of the discontent and inconvenience occasioned by his letter of 27th June which, by refusing the closure of the secondary modern school at Hixon, has made impossible the promised September opening of a comprehensive school at Walton in Stafford; what steps he now proposes to enable the intention of his Circular 10/65 to be fulfilled; and whether he will receive a deputation from the Staffordshire Local Education Authority at an early date.
  The Joint Under-Secretary of State for Education and Science (Mr. Denis Howell): The school at Hixon was built less than ten years ago as a secondary school. My right hon. Friend was unable to approve that it should be closed with the effect that part only of its premises would be used—as a primary school—having regard to the general shortage of school buildings in the district. I am aware of the disappointment that will result from the effects of this decision on the plans for opening Walton School. My right hon. Friend has recently received the Authority's full proposals under Circular 10/65 and is considering them. Arrangements are being made to receive the proposed deputation.
  Mr. Fraser: Is the hon. Gentleman aware that that is one of the most unsatisfactory replies that has ever been received in the whole field of education? It is grossly unfair to the children in the area and monstrously wasteful of public funds in so far as two white elephants will be created, one the Walton School, on which some £250,000 has been spent, and the other the inevitable demand for a new primary school at Hixon. Will he think again and bear in mind what I am

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  going to say to him when I come with a deputation not to see him but, I hope, the Minister?
  Mr. Howell: I am aware that it would be wasteful of resources now to turn a school which was built specifically as a secondary school less than ten years ago into a school for primary purposes, with the added factor that the proposition would involve transferring children from the Hixon area, a distance of seven or eight miles away. Of course, we shall be glad to hear anything the right hon. Gentleman or the local authority has to say to us when they come to see us.
  Mr. Fraser: On a point of order, Mr. Speaker. In the event of the failure—
  Mr. Speaker: Order. That is not a point of order.

  Toxic Chemicals
  Mr. Harold Walkerasked the Secretary of State for Education and Science if he has yet received a report from his Advisory Committee on pesticides and other toxic chemicals; and if he will make a statement.
  Mr. Goronwy Roberts: The Committee presented a report in February, 1964 and a supplementary report in July, 1964 on the persistent organo-chlorine pesticides. The Government accepted and implemented their recommendations in consultation with manufacturers. Since then the Committee, besides continuing to provide advice to the Ministry of Agriculture, Fisheries and Food for the operation of Safety Precautions Schemes for pesticides and veterinary products, has been engaged on a major review of present safety arrangements for the use of pesticides in agriculture and food storage and possible improvements or extensions. A report on this subject will be made to Ministers, probably by the end of this year.
  Mr. Walker: Will the hon. Gentleman not agree that the much more urgent question of organo-phosporus compounds demands a report very quickly, and that one of the most lethal of these, parathion, is more deadly than potassium cyanide and has already been responsible for many deaths? Will he take steps to get the Committee to report
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  on this with a view to banning its use as quickly as possible?
  Mr. Roberts: The Committee has been asked to consider and advise on any improvements and extensions to the present safety arrangements which may be desirable. In particular, it is considering whether stricter criteria should be applied when considering new products.

  Voluntary Service
  Mr. Juddasked the Secretary of State for Education and Science what is the total financial assistance granted by his Department to organisations sponsoring international community service projects by young people as a practical method of education in international understanding.
  Mr. Denis Howell: None, Sir. Grants for this kind of activity are already made by the Ministry of Overseas Development. The Department makes grants in respect of "Service by Youth" work in England and Wales.
  Mr. Judd: Is the Minister aware that in Germany the Government make available £80,000 and in France the Government grant £70,000 towards international work camps of this kind in their own territories? Would our own Government be willing to consider grants of this order?
  Mr. Howell: I am informed that the amount of money being made available by the Department of Overseas Development and, therefore, by the Government in respect of oversease voluntary work is at the moment running at something in the order of £500,000, which, in view of the fact that the scheme started only recently, I should have thought was eminently satisfactory.
  Mr. Freeson: While that is a very welcome figure, will the Minister accept that there is no sharp dividing line between the kind of service provided by young people going abroad and the activities of their own organisation in this country, both with their own young members and introducing foreign youngsters into this country for such work? Will he look at this again?
  Mr. Howell: I think that this takes us on to the next Question.
  Sir E. Boyle: In view of the Minister's reply to the earlier supplementary question, would he consider making a statement to the House about the progress of schemes, such as the "Study and Serve" scheme, which was approved at the Ottawa Conference two years ago?
  Mr. Howell: I will certainly consider that.
  Mr. Juddasked the Secretary of State for Education and Science what action he proposes to take in response to the Bessey Committee report on voluntary service by young people in Great Britain; and in this respect what action he has taken to consult officially the organisations at the national and local level involved in this work.
  Mr. Denis Howell: I would draw my hon. Friend's attention to Circular 15/66 of 2nd June, 1966, of which I am sending him a copy. This says that my right hon. Friend will make a considered statement on the implementation of the report and, before doing so, will take into account the views of interested bodies.
  Mr. Judd: Is the Minister aware that many of the local and national organisations are very fearful that a heavy, high-powered national structure would kill local initiative, which is the essence of voluntary service and which is desperately needed in the country at this juncture?
  Mr. Howell: I am very anxious, as soon as we can and as soon as the country can afford it, to get voluntary services going. I am equally anxious to see that it is not bogged down by a hierarchical structure such as my hon. Friend mentions.
  Mr. Bob Brown: Will my hon. Friend give an assurance that he will expedite the implementation of this, and can he say whether International Voluntary Services will be one of the organisations consulted?
  Mr. Howell: Certainly that organisation will be consulted. I can say that this is something dear to my heart, and, as soon as the possibility exists of extending this service, we shall be happy to do so.

  New School, Walton-on-the-Naze
  Mr. Ridsdaleasked the Secretary of State for Education and Science when he estimates will be the completion date
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  for the new secondary school at Waltonon-the-Naze.
  Mr. Denis Howell: The Essex Local Education Authority is planning this school on the basis of a completion date in December 1968.
  Mr. Ridsdale: Will the Minister assure the House that this will not be affected by the cuts recently announced by the Government?
  Mr. Howell: I am not aware that the Government have recently announced any cuts in the school building programme.

  North-East Essex
  Mr. Ridsdaleasked the Secretary of State for Education and Science why, when vacancies exist, some parents are being prevented in North-East Essex from sending their children to schools of their choice, as is their right under Part IV, paragraph 76 of the Education Act, 1944.
  Mr. Crosland: My hon. Friend the Minister of State has written to the hon. Member and explained that this does not state the position accurately.
  Mr. Ridsdale: If I can provide the Minister with evidence to show that there are places available and that it is not an effective instruction, will he look at it again, because I have reason to believe that this is so?
  Mr. Crosland: If the hon. Gentleman provides some evidence, I shall be happy to look at it. From inquiries that I have made of the local authority, it appears that there are no vacancies here. This is the age-old problem of more children wanting to go to a school than can be accommodated in it.
  Mr. Arnold Shaw: Will my right hon. Friend not agree that under the tripartite system the whole idea of parental choice is simply nonsense?

  Immigrants (Children)
  Mr. Winnickasked the Secretary of State for Education and Science what steps are being taken to encourage local education authorities and schools not to treat school pupils born of immigrants in Great Britain as immigrants themselves.
  Mr. Denis Howell: My right hon. Friend does not believe that further special steps on his part are needed at present. The advice given to local education authorities in his circular is based solely upon educational considerations, and some of it is relevant to the pupils mentioned in the Question.
  Mr. Winnick: Would my hon. Friend not agree that it is somewhat unfortunate for children born in this country of immigrant parents to be themselves treated as immigrants? Would he not agree that there is no justification for such a step and, in order to discourage this practice, would he not agree that a fresh circular should go out from the Ministry?
  Mr. Howell: As I have stated, we are governed entirely by educational considerations, and it is a fact that many children of immigrants who are born in this country still have considerable language difficulties. In those circumstances, it is those educational problems which have to be dealt with specially.
  Mr. Winnick: But they are not immigrants.

  General Certificate of Education
  Mr. Hamlingasked the Secretary of State for Education and Science whether he will set up an inquiry into the operation of General Certificate of Education examinations at both ordinary and advanced levels.
  Mr. Crosland: No, Sir. This is one of the main functions of the Schools Council for the Curriculum and Examinations. I am sending my hon. Friend copies of two of the Council's recent publications—"Examining at 16-plus" and "6th Form Curriculum and Examinations".
  Mr. Hamling: Is my right hon. Friend aware that in one of these recent reports, on the physics examination for G.C.E. 'A' level, one of the examiners put in a model set of answers which his colleagues marked and failed him? Does not that indicate that such an inquiry is called for?
  Mr. Crosland: No, Sir. I am aware that incidents occur which cause a good deal of public unease. They always receive a great deal of public attention. The fact is that very intensive efforts are
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  made the whole time to improve these procedures. It is also worth bearing in mind that the Schools Council is still a comparatively young body, and although I have every sympathy with what lies behind my hon. Friend's Question, it would be premature now to conduct a brand new investigation into the whole matter.
  Mr. Armstrong: Will not my right hon. Friend agree that the "O" level has now outlived its usefulness and perhaps the better way is to abolish it altogether?
  Mr. Crosland: My hon. Friend will certainly have read one of the reports that I have mentioned, "Examining at 16-plus" which discusses in great detail what the rôle and future of the "O" level ought to be. But this is said quite reasonably to be put forward as a basis for general discussion and comment, and we ought to allow a certain amount of time for discussion and comment before any of us come to a firm conclusion.

  Nursery Education
  Mr. McNamaraasked the Secretary of State for Education and Science what representations he has received on nursery education; and what reply he has sent.
  Mr. Denis Howell: Several, but no special record has been kept. My right hon. Friend has replied that he is awaiting the reports of the Central Advisory Councils for Education, which are considering provision for children under five as well as other aspects of primary education.
  Mr. McNamara: Is my hon. Friend satisfied that sufficient provision is being made by local authorities for married women seeking to return to education, by providing nursery education for their children?
  Mr. Howell: Last December we announced that we would wish to extend this provision of nursery schools where there was a net gain of teachers coming into the educational service. We shall be following that up from time to time, and this Question helps in that direction.
  Sir E. Boyle: Will the hon. Gentleman bear in mind the extremely useful pamphlet by Mrs. Elspeth Howe on the

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  subject, published under the imprint of the Conservative Political Centre?
  Mr. Howell: I am ready to believe that in a special instance Conservative pamphlets may be of great use to us, and I shall therefore be prepared to look at it.

  Theatres
  Mr. Hannanasked the Secretary of State for Education and Science whether consideration has been given to the memorandum sent to him by Howard and Wyndham Limited requesting a subsidy of £50,000 for each of five theatres in Scotland and the north of England or alternatively offering to sell each of these theatres for £300,000; and what reply he has sent.
  Miss Jennie Lee: The company has informed me of approaches it has made both to the Arts Council and the local authorities concerned. The Arts Council tell me that it is seeking to help the company by putting it in touch with Dramatic and Lyric Theatres Association, which is the organisation comprising Covent Garden, Sadler's Wells, the National Theatre and the Royal Shakespeare Company.
  Mr. Hannan: Will the right hon. Lady give an assurance that no public subsidy will be granted to this commercial enterprise, which is concerned only with making money for its shareholders? Is she aware that part of the proposal is that the theatres should go to the local authorities during the lean summer months when less support is afforded to them?
  Miss Lee: As my hon. Friend knows, the allocation of public funds is the responsibility of the Arts Council. The Council is carrying out a Committee of Inquiry into opera and ballet, and it will consider whether the theatres at present used for operas in Manchester, Glasgow, and Edinburgh would be suitable as permanent homes for opera and ballet. If the conclusion is that they could be adapted satisfactorily, the possibility of purchase or lease will then be considered.

  University of the Air
  Miss Lestorasked the Secretary of State for Education and Science what further progress has been made towards establishing a University of the Air.
  Miss Jennie Lee: The preliminary survey, including costs and television channels, has been completed. I will give the House further information as soon as I am in a position to do so.
  Miss Lestor: While thanking my right hon. Friend for that reply, may I say that there are many who hope that this proposition is likely to become a little more concrete in the foreseeable future? Can my right hon. Friend say what degree of co-operation she has received from organisations already concerned with adult education?
  Miss Lee: I have been very much encouraged by local authorities and the adult education world who know what we propose to do about a University of the Air. My only difficulty comes from people who at the moment are uninformed or misinformed about the nature and status of this project.
  Mr. Hornby: Can the right hon. Lady give an indication of the costs involved as shown in the research which she says has been completed, and can she say what place this will have in the priorities of the education budget?
  Miss Lee: I can give the exact figures, but I am not free to do so at the moment. I can only say that they are extremely encouraging to me, and I consider that we shall be able to do more for more people at less cost in the field of higher education once this project is under way than in any other part of the educational field.
  Mr. J. E. B. Hillasked the Secretary of State for Education and Science whether, in view of the economic crisis and the need to concentrate all available educational resources where they are most needed, the proposals for a University of the Air will now be shelved.
  Miss Jennie Lee: Most certainly No, Sir.
  Mr. Hill: Would the right hon. Lady agree that the financial costs, which may be satisfactory but not disclosed, plus the costs in manpower are bound to bear hardly on the educational budget? If the University of the Air is not to be postponed, could she say what other educational services will have to be reduced to make way for it?
  Miss Lee: An open university in Great Britain's circumstances today is not a dream. is not a luxury: it has become an urgent necessity.

  Schools (Staffing Ratios)
  Mr. Longdenasked the Secretary of State for Education and Science what is the permitted staffing ratio for schools of over 1,000 pupils.
  Mr. Crosland: I do not prescribe staffing ratios for any size of school.
  Mr. Longden: Is the right hon. Gentleman aware that the Hertfordshire Education Authority is under the impression that he has allotted a higher number of full-time teachers for large schools with more than 1,000 pupils? If he has, can he confirm that they will be used for teaching and not, as the Hertfordshire Education Authority understands, to deal with the complicated administrative problems which arise' in such schools?
  Mr. Crosland: With respect, I think that the hon. Gentleman is muddling two things. One is the quota of teachers between different authorities which we try to allocate from the Department. This is based on a number of different criteria, on the type of school, and so on. I think that the hon. Gentleman is referring to the quota which goes to the Hertfordshire Education Authority as a whole. What that Authority decides about staffing any school is entirely a matter for it, and not for us.

  School Holidays (Playground Facilities)
  Mr. Dunnasked the Secretary of State for Education and Science what progress has been made in his Department's discussions with the Liverpool Education Authority towards implementing his recommendation that school playgrounds, playing fields and play centres should be made available and open to children during school holidays and after normal school hours; and if he will make a statement.
  Mr. Denis Howell: I have asked each Regional Sports Council to carry out a survey of all recreational and sporting facilities within their area and then to consider what action is required to ensure their maximum use by the community. This will include educational
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  facilities and I anticipate that there will be co-operative discussions between local authorities and Regional Sports Councils when the surveys have been completed and studied.
  Mr. Dunn: I thank my hon. Friend for that encouraging reply, but would he not agree that there is a need for greater use to be made of existing school buildings and attached playgrounds especially in areas of high density and traffic hazards?
  Mr. Howell: I agree about that. I hope that many authorities will consider the possibilities open to them in advance of the survey and discussions which I mentioned in my reply.
  Mrs. Braddock: Is my hon. Friend aware that I raised this matter about two years ago, when I asked whether it was possible to instruct local authorities in areas where children had nowhere safe to play, to require school playgrounds to be kept open after school hours'? Has any progress been made in this direction? Certainly none has been made in my constituency.
  Mr. Howell: The joint circular was sent out about two years ago to local authorities asking them to consider all these possibilities. I have indicated a course of action which suggests that next year systematically regional sports councils will be holding such discussions, and I hope that these will bring the desired result.

  School Building
  Mr. Charles Morrisonasked the Secretary of State for Education and Science what is the estimate of the cost of secondary school building proposals put forward by local education authorities in reply to Circular 10/65; and how much of this is for basic needs.
  Mr. Crosland: As I explained in my Answer to my hon. Friends the Members for Fife, West (Mr. William Hamilton) and for Croydon, South (Mr. Winnick) on 21st July, replies from the 162 local education authorities to Circular 10/65 are still coming in.
  Mr. Morrison: I appreciate the right hon. Gentleman's difficulties at the moment, but can he say what priority he intends to give such building proposals

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  over and above basic needs requirement, and will he give an undertaking that he will give no priority over primary school building, whether for basic needs or replacement?
  Mr. Crosland: I have made it clear in the circular, and repeatedly in public statements of various kinds, including in the House, that priorities are, first, basic needs, and, secondly, the replacement of sub-standard schools, particularly substandard primary schools.
  With regard to comprehensive reorganisation, I made it clear in Circular 10/65 that there would not be a separate allocation specifically for reorganisation, although it remains true that authorities are free to use minor works allocations, basic needs allocation, and the allocation for raising the school-leaving age in such a way as to facilitate comprehensive reorganisation plans.
  Sir E. Boyle: While welcoming, as we on this side of the House do, the terms of the right hon. Gentleman's Answer, may I ask whether it is still his intention to make a statement on Circular 10/65 before we rise for the Summer Recess, and can he give a date for it?
  Mr. Crosland: I intend to make a statement, but I ask the right hon. Gentleman not to tie me down to the exact date. It will be made in time for the debate which I believe he has in mind.
  Mr. Charles Morrisonasked the Secretary of State for Education and Science to what extent school building costs will be affected by the Selective Employment Tax.
  Mr. Crosland: It is too early to judge. It will depend in part on how much of the tax is passed on.
  Mr. Morrison: In view of the increase in costs which is bound to arise, and in view, therefore, of the increase in costs in tenders which will result, can the right hon. Gentleman say how he expects building programmes to be carried out within either the existing overall total, or within existing cost limits?
  Mr. Crosland: One must not exaggerate what the increase in costs is likely to be. The Minister of Public Building and Works has said that, considered in isolation, the tax might add
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  about 2 per cent. to building costs, but that assumes that the whole is passed on and none is met by increased efficiency in the industry. I do not think that we should exaggerate the quantitative significance of this, but in any event it was one of the factors which I bore in mind in deciding recently to increase the cost limit by 8½ per cent.

  Day Release
  Mr. Brewisasked the Secretary of State for Education and Science what progress is being made towards meeting the target of an additional 250,000 young people obtaining day release from employment for further education by 1969–70, as recommended by the Henniker Heaton Committee.
  Mr. Goronwy Roberts: Between 1964 and 1965 the percentage of young people receiving day release rose from 31 per cent. to 32·5 per cent. for boys and from 7·3 per cent. to 7·6 per cent. for girls, but the age group was smaller and the actual numbers fell slightly from 276,000 to 269,000.
  Mr. Brewis: Does not the hon. Member find these figures rather disappointing? What measure does he propose to increase the numbers taking advantage of day release?
  Mr. Roberts: The percentages are more significant than the numbers, for three reasons—first, the fluctuations in the size of the age group; secondly, the increasing proportion of young people staying on for full-time education in schools or further education institutions, and, thirdly, because the full impact of the Industrial Training Act is still to be experienced in this field.
  Mr. Hamling: Is my hon. Friend aware that progress under this Government has been a darned sight quicker than it ever was under that lot?
  Mr. Hogg—
  Mr. Speaker: Order. I have not called the right hon. and learned Gentleman. Mr. Hogg.
  Mr. Hogg: I am obliged to you, Mr. Speaker. Is not the hon. Member being grossly complacent about this? The target set by the Henniker Heaton Committee was not expressed as a proportion but

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  in absolute numbers. It looks as if we are going backwards and not forwards.
  Mr. Roberts: I have said that the percentage shows a small but significant advance. Further, the Henniker Heaton Committee itself said that the industrial training boards would make the major contribution to advance in this field of education.

  Secondary Education (Reorganisation)
  Mr. Longdenasked the Secretary of State for Education and Science, in cases in which he has ruled upon a local education authority's plan for reorganising secondary education which would leave some pupils in selective schools for an indefinite period, what action he proposes to take when that local education authority proceeds with its original plan.
  Mr. Crosland: No such case has arisen.
  Mr. Longden: Does not the right hon. Gentleman agree that the sensible thing to do is not to impose a crash programme of universal comprehensiveness—which appears to be the purpose of Circulars 10/65 and 10/66—but to allow comprehensive schools to compete with existing bipartite schools and after a few years to judge which is the better system?
  Mr. Crosland: It is quite clear that the hon. Member cannot have read Circular 10/65, if he describes the situation in that way. As for its being a sensible solution, apart from the fact that it has been rejected by the electorate, it is quite impossible to have this competition, because a comprehensive school cannot be comprehensive so long as there are selective schools in its area.
  Sir E. Boyle: I do not wish to anticipate the debate that we intend to have on this matter, but does not the right hon. Gentleman agree that this question raises a very real point? Will he give an assurance that in cases like that of Manchester, where he has given contingent approval to certain schemes only upon certain building work being done, he will firmly insist on those conditions being fulfilled before final approval is given?
  Mr. Crosland: This has nothing to do with the Question. If I laid down conditions, however, I should make sure that those conditions were met. The Opposition must come off the fence and make up their minds whether they believe in selection. At the moment they are trying to have it both ways and are adopting a completely inconsistent position.
  Mr. Wallasked the Secretary of State for Education and Science what provision he proposes to make for denominational education to continue under a comprehensive system.
  Mr. Crosland: In Circular 10/65 I asked local education authorities to include voluntary schools in their plans for the reorganisation of secondary education.
  Mr. Wall: Will not comprehensive education mean the concentration of a larger number of pupils in a smaller number of schools? Will the right hon. Gentleman undertake to safeguard parents' rights in respect of denominational education for their children?
  Mr. Crosland: I think the hon. Member will find that the point that he has in mind—which is a real one, concerning the size of classes—is met in the Education Bill which is now before the House and which we shall debate when it comes to us.
  Mr. McNamara: Can my right hon. Friend indicate the degree of co-operation he has had from denominational schools on this point? Is he aware that many members of denominations are very grateful to the Government for implementing the increased grant, which has enabled them to go ahead with forward-looking plans for education?
  Mr. Crosland: I am obliged to my hon. Friend for his fair statement of the case. I want to stress once again the very high degree of co-operation that we have received from denominations in our consideration of this problem.
  Mr. Armstrongasked the Secretary of State for Education and Science if he will fix a time limit for the operation of any interim scheme of secondary schools reorganisation which involves selection for different types of school.
  Mr. Crosland: It would not be practicable to fix an exact time limit; but Circular 10/65 stressed that such schemes should be regarded only as an interim stage in development towards a fully comprehensive system.
  Mr. Armstrong: Can more urgency be given to this very difficult problem? Where parents are compelled to choose at 13—as many schemes provide for—between schools offering different facilities and proceeding on different vocational lines this is social selection at its worst, and we want it ended as quickly as possible?
  Mr. Crosland: I sympathise with my hon. Friend, but it is a difficult problem. As he knows we have approved about four major schemes of this kind so far, and in each case I have made it clear to the authority that the scheme is acceptable only as an interim measure, and that it will have to give way eventually to a fully comprehensive scheme. But it is not practicable to lay down a time limit and to state a particular year by which these schemes should be altered.
  Sir E. Boyle: I do not wish to debate the matter now, but does the Minister recognise that the approval he gave to the Doncaster scheme was very much welcomed in many quarters, and that it will be a much more serious issue if the suggestion is that any such scheme as that will be ruled out for the future, except as an interim measure?
  Mr. Crosland: I have made my position clear both here and to the Doncaster authority. These schemes are not suitable for a long-run solution, for the reasons that my hon. Friend has given, but if they come forward in the interim period it would be wrong on my part to reject them out of hand.

  Curzon Street House
  Mr. John Smithasked the Secretary of State for Education and Science when his Department will leave Curzon Street House.
  Mr. Goronwy Roberts: In 1968.
  Mr. Smith: Does the hon. Gentleman agree that, although we certainly do not wish to hamper the work of such a vital Department, it will be helpful to
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  return this and other Government-occupied buildings in Central London to the purposes for which they were built, and that such dispersal of Government offices, does help the economy?
  Mr. Roberts: The new accommodation will certainly bring together many parts of the Department, at present inconveniently and uneconomically scattered in a number of offices in Central London.

  Sports Clubs and Organisations
  Mr. Goodhartasked the Secretary of State for Education and Science what additional grants will be made to sporting clubs and organisations in order to offset the impact of the Selective Employment Tax.
  Mr. Denis Howell: Where sports bodies receive grant towards their administration costs my right hon. Friend will be prepared to treat the cost of the tax as a cost increase to the extent that effect of the tax cannot be offset by staff economies.
  Mr. Goodhart: Does the Minister appreciate that the Treasury estimates that this tax will take £500,000 a year from amateur sport alone? Does he realise that this will be a very heavy burden for many sporting clubs and organisations? Has he no proposals to make to help those clubs which are facing a crushing burden because of this tax?
  Mr. Howell: I have just stated that in respect of all the main governing bodies of sport which carry the main burden of employing professional staff for sporting purposes the tax will be offset by the grant that we shall give them. As for the thousands of small clubs affiliated to the 200 governing bodies of sport, to deal with those clubs which do not receive grant at the moment would be an impossibility.
  Mr. Rose: I welcome my hon. Friend's reply, but will he consider the possibility of new sources of tax, such as a further levy on betting, or a national lottery?
  Mr. Howell: That question is not one for me at the moment, but I am prepared to consider anything at any time.

  University of Wales (Computers)
  Mr. Elystan Morganasked the Secretary of State for Education and Science what provision for computer

  1885
  machines has been made in the colleges of the University of Wales in accordance with the recommendations of the Flowers Report.
  Mr. Goronwy Roberts: Orders have been placed with manufacturers for new computers for each of the constituent colleges.
  Mr. Morgan: Will the Minister confirm that if and when these computer machines are issued to colleges of the University of Wales they will be made available for joint use by industrial concerns in Wales in appropriate cases, subject to the university colleges having the first claim upon their use?
  Mr. Roberts: I can certainly give that assurance, and add that it is not a question of "if" but of "when". Delivery dates are now in hand and the first machine will be delivered in September of this year.

  Teachers (Retirements)
  Mr. Archerasked the Secretary of State for Education and Science how many male teachers under retirement age left primary and secondary school teaching in 1965.
  Mr. Goronwy Roberts: I regret that this information is not yet available.
  Mr. Archer: Does not my hon. Friend agree that the number is likely to be fairly substantial? Is his right hon. Friend in a position to indicate the principal reasons for this?
  Mr. Roberts: It would be best to await the full statistics and then to consider exactly what are the reasons for the decline, however great it may be. I do not expect that we shall be in a position to examine this carefully until about March of next year.

  Pay Pause
  Mr. Brian Harrisonasked the Secretary of State for Education and Science what instructions he has given to his nominees regarding Whitley Council negotiations during the period of the Government pay freeze.
  Mr. Crosland: The attention of the Official Side members of the Departmental Whitley Council concerned with pay questions has been called to the
  1886
  statement made by my right hon. Friend the Prime Minister on 20th July.
  Mr. Harrison: Is this not an interference in the negotiating machinery, about which right hon. and hon. Gentlemen opposite waxed so indignant on a previous occasion?
  Mr. Crosland: I have a very strong suspicion that the hon. Member is muddling up the Burnham Committee with the Whitley Council.

  Industrial Training
  Mr. Fowlerasked the Secretary of State for Education and Science what plans there are to establish a chair of industrial training, and to develop a department to specialise in this field of study in any centre of higher education.
  Mr. Goronwy Roberts: A Committee of the Central Training Council is considering the possible creation of a national centre of industrial training in association with an institution of higher education, and a number of institutions have shown interest in the subject. The establishment of a chair would be a matter for the university concerned.
  Mr. Fowler: If such a department were established, does my hon. Friend not agree that it would be suitable to establish it in a university in one of the development areas?
  Mr. Roberts: I would not wish to offer a view on the merits of a national centre until the Central Training Council has fully considered every aspect of this important matter.

  Universities (Adult Scholarships)
  Dr. Grayasked the Secretary of State for Education and Science how many applications were received by his department for adult scholarships to universities in 1965; how many were awarded; and whether it is his intention to increase their number.
  Mr. Goronwy Roberts: 112 applications for mature state scholarships were received and 24 of the 30 available scholarships were awarded. My right hon. Friend is not proposing to increase the number of these scholarships.
  Dr. Gray: Will my hon. Friend say whether his aim is to ensure that all adult

  1887
  students, of any age, if they have the necessary qualifications, should be enabled to go to university?
  Mr. Roberts: There are, of course, other ways, apart from this arrangement, in which mature matriculants, if I may call them that, can enter university. The limiting factor in awarding these scholarships is not finance, or the arrangements as they now stand, but the shortage of suitable candidates.

  Direct Grant Schools
  Mr. Armstrongasked the Secretary of State for Education and Science what proposals he has to assist local education authorities to organise secondary education on comprehensive lines where direct grant schools are refusing to co-operate.
  Mr. Crosland: In Circular 10/65 I asked local education authorities to open discussions with the governors of direct grant schools in which they take places. I also asked them to include in the plans to be submitted to me a statement about their future intentions as to taking up places and about the extent to which direct grant schools were participating in their plans. I shall consider this whole question further when I have studied the information in the plans.
  Mr. Armstrong: Will my right hon. Friend continue to bear in mind that there are many hon. Members on this side who would resent the continued expenditure of public money on schools which would perpetuate all the injustices of inequality?
  Mr. Crosland: Yes, Sir. I think that the Government's policy is clear on this. We want to proceed by co-operation. This is why I want to allow a reasonable time for discussions between the schools and the authorities, but, in the last analysis, as my hon. Friend has said, the persistence of a wholly selective field of education like this would bring the future of the direct grant Regulations into question.
  Mr. Hornby: Would the right hon. Gentleman now give an undertaking that his letter to the local education authorities is in no sense regarded as a threat to the future existence of the direct grant schools, which are very highly regarded in many parts of the country?
  Mr. Crosland: There is no question of a threat. What I made perfectly clear in the circular, as the hon. Gentleman knows, was that we want discussions to occur at a local level between the schools and their authorities. I am very anxious that these discussions should go on in an amicable and co-operative frame of mind. But, of course, it must be made clear that, in the last analysis, we on this side of the House are against the 11-plus.

  Training and Supply of Teachers (National Advisory Council)
  Mr. Neaveasked the Secretary of State for Education and Science whether he has yet come to a decision on the future of the National Advisory Council on the Training and Supply of Teachers; and whether he will make a statement.
  Mr. Crosland: I cannot add at present to what I said on this subject during the debate on the Address on 25th April.
  Mr. Neave: Will the right hon. Gentleman accelerate his decision on this point? Would not this be of great value to the reconstituted council in the long-term planning of education?
  Mr. Crosland: I consider and reconsider this question a great deal. I have received far less detailed advice on what I ought to do than I thought I would receive. The hon. Member knows the difficulty—this is a very large body, consisting of well over 50 people, and it is doubtful whether a body quite so large is the right one to have responsibility for the crucial, central question of the supply and training of teachers. I should, nevertheless, like to find some answer to this very difficult problem of how best to consult.

  SECRETARY OF STATE FOR DEFENCE (STATEMENT)
  Mr. Blakerasked the Prime Minister whether the public statement by the Secretary of State for Defence at a Press conference in Kuala Lumpur on 5th July about the reduction of British forces in South-East Asia represents the policy of Her Majesty's Government.
  The Prime Minister (Mr. Harold Wilson): Yes, Sir.
  Mr. Blaker: Is the Prime Minister aware that the Secretary of State said

  1889
  that it was the aim of the British Government to reduce British Forces in South-East Asia to the level planned before confrontation, that is to say, the level planned by a Conservative Government? Is that still the Government's policy, or do they intend further cuts in that area in pursuance of the package announced by the Prime Minister last week?
  The Prime MinisterWhat my right hon. Friend said then is the policy of Her Majesty's Government. We do intend to reduce it, as he stated, but, as I have said a number of times, we are always on the watch to see if further economies can be made in order to reduce the overseas expenditure on our task in fulfilling our commitments.
  Mr. Tapsell: How does the right hon. Gentleman intend to reconcile the Government's recent promise to Australia that we will maintain a substantial presence in the Far East with his almost simultaneous promise to his Parliamentary Party of massive reductions in our Forces there?
  The Prime Minister: The phrase "massive reductions" referred to the reductions in the number of troops which we had there for confrontation. We plan to take them out and reduce in total to the number which would have been required if there had been no confrontation. There is nothing inconsistent with that statement in what was said to the Prime Minister of Australia.
  Mr. Heath: How many troops will be brought back if the strength of the Forces is reverted to that before confrontation?
  The Prime Minister: It has never been the practice to say exactly how many troops would have been in that area if it had not been for confrontation. My right hon. Friend refused to answer that Question when it was asked. As soon as we can make a fuller statement, we shall certainly do so.
  Mr. Heath: Did the Secretary of State not mention a figure of 16,000?
  The Prime Minister: He used that phrase. He said that he was using it purely as illustration. There was no decision at that time: it was early on in
  1890
  his visit. He has been looking hard at the question of how many ought to be brought out and how quickly.

  ARMS SALES (INFORMATION)
  Mr. Martenasked the Prime Minister if he will amend the security ban on information about arms deals.
  The Prime Minister: No, Sir.
  Mr. Marten: While I realise that there are certain difficulties about this, is it not time that the Prime Minister had another look at this matter and allowed Ministers to give more information to Parliament about it? Now that we have an arms salesman who is determined to maximise arms sales, how can this House properly judge whether he is fulfilling his task properly if we do not know what contracts he succeeds in landing and what contracts he fails to land?
  The Prime Minister: The hon. Gentleman will recall that the practice of not disclosing information about arms sales is the normal safeguard of the customer's interest. If one disclosed too many details, the sales would, of course, fall. The hon. Member was a Minister responsible for defending this policy of not giving details, and our practice is exactly the same as the practice which he defended.
  Mr. Powell: Is not this ban extremely convenient for the Prime Minister, in view of his undertaking that we should not be supplying arms even indirectly for the fighting in Vietnam?
  The Prime Minister: This has nothing to do with the—[Interruption.] No, it has nothing to do with this subject. We are pursuing exactly the same policy which right hon. Gentlemen opposite pursued when they were in office.
  Mr. Michael Foot: Will my right hon. Friend take into account that any precedent set by the hon. Member for Banbury (Mr. Marten) is probably one which we ought to depart from?

  PRIME MINISTER (T.U.C. CONFERENCE)
  Mr. Kenneth Lewisasked the Prime Minister what reply he has sent to the invitation to address the Annual Conference of the Trades Union Congress this year in his official capacity.
  The Prime Minister: I have received no such invitation, Sir.
  Mr. Lewis: Perhaps the Prime Minister will not receive an invitation this year. Since, in the past, he has himself asked to be invited, may I ask him if, were he to be invited this year, he would be prepared to bring forward to the T.U.C. practical proposals for increasing productivity and for getting rid of the rule book which would give incentives to the unions?
  The Prime Minister: I have had no invitation, so the latter part of that supplementary question is hypothetical. Nor have I ever asked to be invited to the T.U.C. I was once appointed a fraternal delegate from the Labour Party and, in that capacity, addressed the T.U.C. in September 1964. As to references to rule books and things of that kind, I have already made statements on this subject, not to the T.U.C. but to the particular union in question.

  UNITED NATIONS (CHINA)
  Mr. Bidwellasked the Prime Minister if, during his forthcoming United States visit he will urge full recognition for the Chinese Peking Government and an invitation to join the United Nations Organisation.
  The Prime Minister: The United States Government are already well aware of our position on these questions which was set out in my speech to the United Nations General Assembly on 16th December last.
  Mr. Bidwell: Will not my right hon. Friend; re-emphasise this British view when he goes to Washington, and will not he agree that, in the interest of world peace, he should emphasise that the only feasible Government of China should be invited to come before the bar of world opinion by being invited to join the United Nations Organisation? Meanwhile, may I wish my right hon. Friend all the best on his trip to Washington?
  The Prime Minister: I thank my hon. Friend for his concluding words. I do not think that this needs any re-emphasising on the United States Government, who are well aware of our position. As I have said, this was one of
  1892
  the central themes of my address to the United Nation's General Assembly last December.
  Mr. Maxwell-Hyslop: Would the right hon. Gentleman recognise that, whatever the merits of Communist China getting a seat, the Nationalist Government in Formosa at least has the same right to remain there—[Interruption.]—as the representative of the Ukraine or Byelo Russia in the United Nations?
  The Prime Minister: I do not know that pursuing that subject would be particularly helpful to the aim which, I should have thought, was the same in the three parties in this House, and that is to see that the representative of China to the United Nations is the Chinese Government.

  EUROPEAN ECONOMIC COMMUNITY
  Mr. Ridleyasked the Prime Minister if he will now give an assurance that, in negotiations to join the Common Market, he will accept the principles of the common agricultural policy; and if he will make a statement.
  The Prime Minister: I would refer the hon. Member to the speech of my right hon. Friend the Foreign Secretary in the foreign affairs debate on 11th July.
  Mr. Ridley: Would the Prime Minister confirm that it remains the policy of Her Majesty's Government to apply for membership of the E.E.C.? Would he not further agree that the recent agricultural agreement in Brussels makes it imperative that the right hon. Gentleman accepts that agricultural policy if he is to achieve his own policy in this matter?
  The Prime Minister: I certainly confirm that it is the desire of Her Majesty's Government to join the Economic Community if we can get satisfactory conditions to ensure British and Commonwealth interests. I am not so defeatist as the hon. Gentleman to think that all decisions made in the Community are immutable and incapable of taking into account British interests.
  Mr. Anderson: Since my right hon. Friend's reply on 20th July to the hon. and learned Member for Montgomery

  1893
  (Mr. Hooson), the Minister of Agriculture has said that there could be no White Paper on the agricultural implications for the United Kingdom of our accession to the Common Market. Would my right hon. Friend reconsider the publication of a White Paper in the light of this agreement?
  The Prime Minister: I think that my right hon. Friend had good reasons for saying that it is difficult, in a White Paper or in any other way, to make precise calculations. It is a fact that since target prices have now been fixed for a number of additional agricultural commodities, and not just for cereals and a few others, it might be possible to begin to make some calculation of the effect on the cost of living in this country and on our import bill of being forced to accept prices at that level and to impose corresponding levies on imports of Commonwealth produce. Whether it is possible to make really worth-while calculations I should like to examine further.
  Mr. Kershaw: Does the right hon. Gentleman realise the importance of moving our agricultural policy somewhat in line with the Six so that eventually the transition may be made easier?
  The Prime Minister: I think the right thing for this country is that we should continue to pursue an agricultural policy which is right for our own agriculture and trade in foodstuffs. Of course, if and when negotiations become possible with the Economic Community, the question of what changes will be needed in our agricultural or other policy is a matter about which we will have to negotiate and then put into effect.
  Mr. Molloy: Would my right hon. Friend confirm that the sensible probings which this Government have initiated in regard to Britain's possible entry into Europe go much further than the narrow sphere of the E.E.C.?
  The Prime Minister: The probings which are taking place with E.E.C. countries of course relate principally to the position of Britain and other E.F.T.A. countries in relation to the E.E.C. But, as my lion. Friend knows—he may have this in mind—we are in constant touch with EF.T.A. about further developments within E.F.T.A.

VIETNAM
Mr. WinnickQ7. Mr. Winnick asked the Prime Minister if he will give details of the exchanges which have recently taken place with the United States of America over extending United State's air attacks in North Vietnam.
The Prime Minister: I have nothing to add to the speech I made in the debate on 7th July or to my statement of 29th June.
Mr. Winnick: Will the President of the United States be told that the continued bombing of North Vietnam will not lead to a settlement and to an American victory? Could the President also be told that those of us who are very critical of his policy want the Communists to negotiate, but question whether President Johnson really requires or wants a negotiated settlement in Vietnam?
The Prime Minister: The President of the United States is fully aware of the position of Her Majesty's Government. This was explained to him last December and further exchanges and public statements have confirmed our position. I will certainly consider whether I should tell the President of my hon. Friend's views, but I think it right to say that my view is that I am absolutely satisfied of the sincerity of the President and the American Government in wanting unconditional negotiations; and, if I were to have a chance, I would convey to Hanoi my hon. Friend's views that Hanoi should be similarly willing to enter into negotiations.
Mr. Mendelson: Has the attention of my right hon. Friend been drawn to the two statements made by Marshal Ky in the last four days, in which he called on his allies to support the invasion of North Vietnam and the destruction of the North Vietnamese Government and tried deliberately to embroil the United States in war against China? Will my right hon. Friend make it quite clear that there is now urgent need for a change of Government and attitude in Saigon if real negotiations are to start?
The Prime Minister: I am aware of these statements. As my right hon. Friend the Foreign Secretary has made

1895
clear, we hold no brief for statements made by the Government in Saigon—and as to those particular statements, if correctly reported, I totally disagree with them.

MOSCOW TRADE FAIR
Mr. Hector HughesQ8. Mr. Hector Hughes asked the Prime Minister if he will make a statement on the prospects of increased trade between Great Britain and Russia as a result of his visit to the Moscow Trade Fair, with particular reference to the trade between Russia and Scotland.
The Prime Minister: I would refer my hon. and learned Friend to the Answers I gave to Questions on 19th July.
Mr. Hughes: Did my right hon. Friend draw the attention of the Russians to the proximity of North-East Scotland to Northern Russia, particularly since Russian goods so often come to Aberdeen in vessels which go away empty?
The Prime Minister: I did not, in my most recent talks with Mr. Kosygin, go into that degree of geographical similaritude, although during previous trade talks when I have been there I have, as the House knows, particularly pressed on them our desire for them to buy more herring from this country. As for Scottish firms, I did not specifically press that they should place more orders in Scotland, although there were, of course, some very distinguished representatives of Scottish trade exhibiting at the Fair.

O.E.C.D. (PRODUCTIVITY REPORTS)
Mr. Ian LloydQ9. Mr. Ian Lloyd asked the Prime Minister whether he will refer to all Departments of State directly involved in the implementation of the Government's new economic measures the report of the Productivity Bargaining Team, comprising members of the Trades Union Congress and the Confederation of British Industries, on its visit to the United States of America under the auspices of the Organisation for Economic Co-operation and Development, a copy of which has been sent to him by the hon. Member for Portsmouth, Langstone.
The Prime Minister: I have seen the interesting article in British Industry and am sure that it will also have been widely read in Government Departments. I understand, however, that the full report has not yet been produced.
Mr. Lloyd: Would the Prime Minister take this opportunity of emphasising that where increases in income are directly and demonstrably related to increases in productivity, it is in the national interest that both should take place?
The Prime Minister: Yes. We have always stressed the importance of pay and productivity agreements where one can be really satisfied that it is not just an aspiration about productivity but where there are clear guarantees that the additional income will be earned out of changes in productivity, particularly changes in manning.
Mr. Heath: Can the Prime Minister say whether, when the conference on productivity meets in September, it will have before it the revised National Plan announced by the First Secretary last night?
The Prime Minister: The Productivity Council, when it meets in September, will have all relevant information before it, including the information we tried to give the House yesterday about the relevance of the immediate steps to ensure continued growth in this country.

RHODESIA (ARREST OF UNITED KINGDOM CITIZENS)
Mr. Faulds(by Private Notice) asked the Prime Minister what action Her Majesty's Government are taking to protect British citizens against the action of the illegal regime at Salisbury University.
The Secretary of State for Commonwealth Relations (Mr. Arthur Bottomley): I have been asked to reply.
I have called for a full report from Mr. Hennings, Head of the British Residual Staff in Salisbury.
Meanwhile, I have instructed him to make immediate representations to the appropriate officials in Salisbury about the arrest at the instance of the illegal regime of United Kingdom citizens for whom we are responsible, and to take

1897
all possible steps to protect their interests.
A member of his staff has this morning seen a number of those detained.
Mr. Faulds: Is my right hon. Friend aware that the whole House will regard that Answer as totally unsatisfactory in the matter of the protection of British lives? As we are the legal Government, would it not be more responsible to forestall the breakdown of law and order and the inevitable African insurgency by putting down this colonial rebellion in the customary manner, by military means?
Mr. Bottomley: In present circumstances. I think it most unwise to pursue the matter in the way suggested by my hon. Friend.
Mr. David Steel: As one who knows two of the persons now detained, may I ask the right hon. Gentleman to make it absolutely clear that the whole country will feel revulsion at the detention without trial of British subjects?
Mr. Bottomley: Yes, Sir. That will be made clear, and it is reinforced by the question which the hon. Gentleman has now put.
Mr. Winnick: Will it be possible for consultations to take place between the Government and the Leader of the Opposition about the way in which certain Tory M.P.s attend public meetings with the aim of giving comfort to the illegal regime in Rhodesia?
Hon. Members: No.
Mr. Speaker: Order. A supplementary question must have something to do with the original Answer.
Mr. Maudling: In answer to his hon. Friend's question about the use of military force, the Secretary of State used the phrase "in present circumstances". Will he make it absolutely clear that in no circumstances will this be contemplated?
Mr. Bottomley: It has been made clear earlier that there is no intention of using force. By the phrase "in present circumstances", what I wished to convey was that it would be unwise even to talk about such a subject.
Mr. William Hamilton: Can my right hon. Friend say what effective power we
1898
have to enforce our wishes on this illegal regime?
Mr. Bottomley: We have none, Sir.
Mr. Thorpe: Does the right hon. Gentleman agree that this action is all the more sickening when this university was one of the few places left where intellectual freedom flourished? Is he aware that to close down a university is a typical hallmark of the police State? Does this action, by which British subjects have been detained without trial, affect our attitude to the resumption of talks about talks?
Mr. Bottomley: What the hon. Gentleman has suggested in the earlier part of his supplementary question gets the support of us all. With regard to the talks, I think that we must await the report before we are able to consider further the full implications of what action should be taken in the future.
Mr. Wall: Does not the fact that the university was to close down for the summer holidays this week emphasise the foolishness of this action? Will the Secretary of State confirm that British Government funds will continue to be made available to the university as long as it remains open and multiracial?
Mr. Bottomley: That is a separate question, which should properly be addressed to my right hon. Friend the Minister of Overseas Development. I think that it is premature to speculate about the matter.
Mr. Evelyn King: In condemning the action of the Rhodesia authorities, which I wholeheartedly do, may I ask whether the right hon. Gentleman does not think that the moral validity of his position is weakened because, weakly, he has not used similar forthright language when other African States have behaved similarly and done equal acts of tyranny?
Mr. Bottomley: I think that I have used forthright language on other occasions, and will continue to do so whenever it is justified.
Mr. John Hynd: As the Minister has clearly announced to the House that the United Kingdom Government have no effective powers to administer this territory or protect our citizens in it, is it not time that we reviewed our policy, and

1899
considered handing over the matter to an authority that can handle it?
Mr. Bottomley: That is another question.
Mr. Faulds: Owing to the extremely unsatisfactory nature of the reply, I beg to give notice that I intend to raise the matter on the Adjournment at the earliest opportunity.

BUSINESS OF THE HOUSE
Mr. Heath: May I ask the Leader of the House to state the business of the House for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Herbert Bowden): Yes, Sir. The business for next week will be as follows:
MONDAY, 1ST AUGUST—Selective Employment Payments Bill.
Completion of the Committee stage.
TUESDAY, 2ND AUGUST—Supply [5th Allotted Day]: Committee.
There will be a debate on the Problems of the Development Areas, which will arise on the appropriate Votes.
At 9.30 p.m. the Questions will be put from the Chair on the Vote under discussion and on all outstanding Votes, under Standing Order No. 18.
Motions on the Motor Vehicle (Tests) (Extension) Order, the Variation of Speed Limit and the Speed Limit on Motorways Regulations.
WEDNESDAY, 3RD AUGUST—Supply [6th Allotted Day): Report.
It will be proposed that the Questions should be put on all outstanding Votes so soon as the Orders of the Day are entered on.
Second Reading of the Consolidation Fund (Appropriation) Bill, which, if the House agrees, will be taken formally to allow debate on an Opposition Motion on the Procurement and Sale of Arms and Aircraft.
Second Reading of the Singapore Bill [Lords].
Consideration of Lords Amendments to the Building Control Bill and to the Docks and Harbours Bill.
1900
THURSDAY, 4TH AUGUST—Selective Employment Payments Bill.
Report and Third Reading.
FRIDAY, 5TH AUGUST—Remaining stages of the Singapore Bill [Lords].
Consideration of Lords Amendments to the Reserve Forces Bill.
Motions on the Drugs (Prevention of Misuse) Order, the National Insurance (Industrial Injuries) Amendment Order, the National Insurance (Mariners) Amendment Regulations and the Solus Petrol Orders.
Completion of the remaining stages of the Criminal Appeal Bill [Lords].
MONDAY, 8TH AUGUST—The proposed business will be: Committee and remaining stages of the Consolidated Fund (Appropriation) Bill.
There will be a debate on Crime until about eight o'clock, to be followed by subjects which hon. Members may wish to raise.
As to the Recess, it may be helpful for the House to know that it will be suggested that the House should return on Tuesday, 18th October. This will result in a shorter Summer Adjournment than usual, but I am confident that this will be acceptable to the House.
Mr. Heath: Is it not extraordinary that the Leader of the House gives us the date on which we will return after the Summer Recess without having given us the date on which we shall rise for the Recess? Here is another example of the Government working back to front, and standing on their heads. Is the right hon. Gentleman not aware that this demonstrates the extraordinary congestion of business into which the Government have got themselves, and the confusion that exists over it when, at a time when the House would normally be going into recess, we cannot be told the possible date? Is the right hon. Gentleman aware that the whole handling of the Government's business at this stage is making the situation impossible for hon. and right hon. Members?
Is he not aware that if what his right hon. Friend the First Secretary said in winding up last night's debate is correct we shall be asked to consider in Committee, and later in this House, Amendments to the Prices and Incomes Bill

1901
which make it a Bill of very different character from that which was given a Second Reading? Does he not agree that if both Houses are to carry out their proper legislative functions, they must be given the proper facilities and time in which to do it, especially when dealing with Measures of such immense importance?
Mr. Bowden: I am surprised that the Leader of the Opposition should be concerned about sitting a day or two longer when only a few days ago his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) wanted to sit into September. I am sorry that I am still not able to tell the House the precise date of rising, but I said on Thursday of last week that we hoped to rise on the 9th or 10th in the hope that all business would have been obtained by that time
Following upon the statement of my right hon. Friend the Prime Minister, and in the national interest, it is now felt necessary to obtain a strengthened Prices and Incomes Bill and to place it on the Statute Book before the House rises. This, therefore, will entail the House sitting one, perhaps two, days longer than was envisaged last week.
Mr. Heath: Far from criticising the Leader of the House, I was asking that he should give an assurance that there will be proper time both in Committee upstairs and on the Floor of the House to consider a Measure which was always important, but which the Amendments proposed by the First Secretary last night make a Bill of a different character, with far more fundamental changes, which ought to have proper and full consideration.
Mr. Bowden: The right hon. Gentleman, as a former Chief Whip, will know that one does not usually discuss allocation of time across the Floor of the House. We might do this through the usual channels.
Mr. Shinwell: Is there any reason why the request of the right hon. Member for Enfield, West (Mr. Iain Macleod) should not be acceptable? Is it not a shame to disappoint the right hon. Member? If he asks that the House should sit in September and even October we could meet again on 18th October and could still meet on 17th October. Why
1902
should we not do so? Why disappoint the right hon. Member?
Mr. Bowden: Quite apart from any personal difficulty that I or any other hon. Member may be in, I think that if we endeavour to keep the House sitting up to the second week of August it will be generally acceptable.
Mr. Bessell: In view of the Government's publication of the White Paper on Transport, could be have a debate on this subject before the Recess?
Mr. Bowden: No, Sir, I should think that quite unlikely.
Sir R. Cary: Has the Leader of the House seen an all-party Motion on the Order Paper in my name and the names of hon. Members of all three parties which concerns limbless ex-Service men and the rate rebate scheme?
[That this House regrets that, by legislation passed in the last Parliament, war disability pensions were included as income in connection with the Rate Rebate Scheme; and calls upon the present Parliament to revise that decision, thereby restoring the traditional disregard which hitherto has always been given to disability pensions arising from war service.]
In the last Parliament the Department concerned, in conjunction with the Treasury, directed Parliament to break a trust with limbless ex-Service men which had been observed since 11th November, 1918. In this Parliament the matter could be dealt with by administrative Order if the House so directed. May we have an early chance of discussing the matter? Parliament has never been short of compassion for limbless ex-Service men.
Mr. Speaker: Order. We cannot argue the merits at this moment.
Mr. Bowden: I fully understand and appreciate the problem raised by the hon. Member for Manchester, Withington (Sir R. Cary). I cannot promise a debate before the Recess, but I find that there is a Question down for 8th August which will be answered in the House and which may bring him some immediate answer.
Mr. Raphael Tuck: Can my right hon. Friend say whether in the foreseeable future we can have a debate on the

1903
Brambell Report, or is that Report to be shelved indefinitely?
Mr. Bowden: No. I have promised a debate on the Brambell Report and it will be debated, but I do not think that it will be before the Recess.
Mr. R. Carr: Can the Leader of the House say when the Minister of Aviation will be making a statement on the Government's decisions on the Plowden Report and procurements problems of British European Airways and British Overseas Airways, both of which are extremely vital and urgent?
Mr. Bowden: I cannot give a firm answer, but I will write to the right hon. Member.
Mr. Molloy: Can my right hon. Friend give an assurance to the House that we shall have an early debate on the transport White Paper, because the whole country will acknowledge that this is a remarkable piece of work by my right hon. Friend. [Laughter.] Oh yes, it is—
Mr. Speaker: Order. No argument on merits. This is a business question.
Mr. Molloy: I can understand the chagrin of hon. Members opposite, because they did nothing about this matter. Is my right hon. Friend prepared to say that we can have an early debate on this very interesting White Paper?
Mr. Bowden: There is no doubt about the quality of the White Paper; this is an excellent programme. But I cannot promise a debate before the Recess. If my hon. Friend means early in the sense of being fairly soon after we resume, I shall do my very best.
Mr. Biffen: Does the Leader of the House recall that at this time last week I asked him when a White Paper would be published on the Prices and Incomes Bill? Is he aware that so far that has not been published? Will he tell the House when it will be possible?
Mr. Bowden: The hon. Member asked me last week whether it would be published before the debate on economic affairs and, of course, that debate has taken place. I told him that I could not promise it firmly, but it will be published very quickly now.
Mr. Orme: Can my right hon. Friend say why there is this terrific urgency to get the Prices and Incomes Bill through? When are we to see the Government's proposed Amendments? It is not only the usual channels which are concerned. Many hon. Members on this side of the House want to see the proposals. Surely we are entitled to see them as soon as possible.
Mr. Bowden: The new Government proposals on the Prices and Incomes Bill arise out of the statement made by my right hon. Friend the Prime Minister and strengthen the Bill in relation to the first six months and the second six months envisaged in that statement. The Amendments will be available later today.
Mr. Sandys: It is customary to have a debate on Commonwealth affairs before the meeting of the Commonwealth Prime Ministers. The Commonwealth has seldom faced greater difficulties than now. Are we to have such a debate?
Mr. Bowden: I should think it unlikely before the Recess.
Dame Irene Ward: Before the right hon. Gentleman commits himself to a debate on the White Paper on Transport, will he remember that he has already given a pledge that we shall have a debate on the Geddes Report on Shipbuilding? Will he remember that that has priority in regard to transport, because shipping and shipbuilding problems relate to transport? When can we have a debate?
Mr. Bowden: The hon. Lady will be aware that it cannot be before the Recess, but I have promised a debate on the Geddes Report.
Mr. Gibson-Watt: The Leader of the House will be aware that today the Welsh Office has published the consultants' Report about the new town in mid-Wales. In view of the fact that the Government have suppressed this Report for seven months, may we now be told when there will be a debate on it?
Mr. Bowden: I cannot accept for a moment that the Report has been suppressed. There will be the normal opportunities in Welsh Grand Committee and in the House during the current Session.
Mr. Mendelson: In view of the fact that the Prices and Incomes Bill, in its

1905
original form and in its now promised further extension, introduces radical changes in industrial relations, will my right hon. Friend give an assurance that no matter how long the House has to sit this Measure will not be rushed, so that we can consult our constituents, who have never given approval to this Measure, and that we can consult the trade union movement in the country, and that there will be every opportunity to oppose the Bill by those who wish to oppose it?
Mr. Bowden: I have already said that adequate time will be available.
Mr. Jopling: Has the Leader of the House seen Motion No. 160, in my name and the names of more than 100 hon. and right hon. Members, asking that the agricultural industry should have greater opportunities for production in view of the balance of payments crisis?
[That this House, having noted the Prime Minister's statement containing the emergency measures to meet the present economic crisis, expresses disappointment at its, generally negative tone and, in particular, is concerned that he did not make use of the opportunity to provide new incentives to the agricultural industry to increase production, whereby the industry's magnificent record of increased productivity, which the Prime Minister has himself publicly acknowledged, could be harnessed to save food imports, and tints make an important contribution to the balance of payments situation; and urges him to open immediate talks with the industry's leaders towards this end.]
In view of the very conflicting statements made by the Minister of Agriculture on Tuesday morning and the First Secretary of State last night, will the Leader of the House give time for a very urgent debate on this matter, so as to reduce the uncertainty in the agricultural industry?
Mr. Bowden: I cannot promise time in addition to the two days we had when it would have been in order to discuss the matter. I cannot promise more time this side of the Recess.
Mr. St. John-Stevas: Since the long list of delayed Amendments to the Prices and Incomes Bill seem likely, as far as we can tell, to be a radical departure from
1906
the present Bill, would it not be more in keeping with our constitution that those Amendments should be embodied in a new Bill and that the House should be given an opportunity for a Second Reading debate upon them?
Mr. Bowden: These Amendments must be acceptable to the Bill and in line with its Long Title, or they would not be introduced in that way.
Mr. Godber: Further to the point raised by my hon. Friend the Member for Westmorland (Mr. Jopling), will the Leader of the House consult the Minister of Agriculture with a view to seeing that at the very least we have a statement to clear up the confusion between what the Minister of Agriculture and the First Secretary said about the National Plan, which made complete nonsense of the Minister's attitude?
Mr. Bowden: I will see whether there is any confusion and I will consult my right hon. Friend the Minister of Agriculture.
Mr. McNamara: In view of the penal Clauses in the Prices and Incomes Bill, can my right hon. Friend say when we can expect to receive the Bill dealing with imprisonment for debt?
Can my right hon. Friend also give an undertaking that if there is any proposed settlement made with the illegal regime in Rhodesia he will seek a recall of Parliament?
May I also urge that at the earliest possible moment after the Recess we should have a debate on the excellent White Paper on Transport?
Mr. Bowden: I have already replied to the request for a debate on the White Paper on Transport.
My right hon. Friend the Secretary of State for Commonwealth Relations has already said that there will be a debate in the House before any decision is taken arising out of the position in Rhodesia.
The question of the abolition of the imposition of imprisonment in cases of debt is a matter for my right hon. Friend the Home Secretary. I will communicate with my right hon. Friend and let my hon. Friend know the outcome.
Mr. David Steel: Would the Leader of the House consider a one-day debate after

1907
the Recess on the Government's policy on Southern Africa, following the decision of the International Court at The Hague on South-West Africa?
Mr. Bowden: I will certainly consider that, but I would not hold out any hope for such a debate immediately after the Recess.
Mr. Evelyn King: Has the Leader of the House read on the tape the recently announced news that Mr. Hill, of the South-West Economic Council, has resigned and that the chairman has threatened to resign, owing to the fact that they have not been in any way consulted about the Government's economic policy? In the light of the collapse of regional economic policy in Dorset and the South-West, may we have a debate on the matter?
Mr. Bowden: I have not seen the tape. I cannot promise an immediate debate. Had the facts to which the hon. Gentleman refers been known, he could have raised the whole of this matter in the two-day debate on the economic situation.
Sir D. Glover: There is no doubt that the Government are drastically altering the purpose of the Prices and Incomes Bill. Will the Leader of the House consider recommitting the Bill to the House so that the House can have an opportunity of debating these alterations? [An HON. MEMBER: "That question has been asked already."] I know it has, and we received an unsatisfactory answer.
On Tuesday the House debated the Basutoland and Bechuanaland Independence Measures until 3 o'clock in the morning. The remaining stages of the relevant Bills are to be debated tonight. It is obvious that the House is seized of the very important problems involved in these two Measures. Will the right hon. Gentleman provide more time for the consideration of these Measures by the House?
Mr. Bowden: I have already twice answered the question about the Prices and Incomes Bill. The Select Committee of Procedure is currently considering the questions of hours of sitting. One of the proposals before the Committee is one I put myself—this is why I am aware
1908
of it—that these matters could perhaps be taken at morning sittings.
Sir G. de Freitas: If we cannot have a debate before the Recess on Commonwealth affairs before the Commonwealth Prime Ministers' conference is held, may we have one as soon as possible afterwards—in other words, very soon after we return?
Mr. Bowden: I should have thought that after the Commonwealth Prime Ministers' conference, as is usual, a statement will be made in the House. We can then discuss whether a debate should take place.
Mr. Patrick Jenkin: Would the Leader of the House agree that it might be for the convenience of the House that, when we discuss the double taxation agreement with Finland tomorrow, we take also the double taxation agreement with New Zealand, which I believe is also on the Order Paper? It is of some importance that these should be accepted before the House rises for the Recess.
Mr. Bowden: Yes. That is a very reasonable request. I will put it in order for tomorrow.
Sir T. Beamish: Will there be a statement on the strength of the B.A.O.R. and on the cuts the Government are contemplating in our overseas defence costs before the House rises for the Summer Recess, in view of the very great importance of these matters, and since this decision should not be taken unilaterally without the House having the opportunity to discuss it?
Mr. Bowden: I cannot promise a statement before the House rises. The matter is under deep consideration at the moment, as the hon. and gallant Gentleman knows.
Mr. Kenneth Lewis: is the Leader of the House aware that he is proposing to bring the House back immediately following what will be a very enthusiastic Conservative Party conference? Will not this depress his back benchers even more than they are at the moment?
Mr. Bowden: The hon. Gentleman should be grateful to me that I am not bringing the House back in the middle of the Conservative Party conference.
Mr. Ian Lloyd: The Leader of the House will doubtless be aware that the South-East Report on Hampshire by Professor Buchanan was published yesterday. As this Report contains a great many serious and practical proposals, affecting the whole of this area, is the House to be given an early opportunity to discuss it after the Recess?
Mr. Bowden: As the Report was published only yesterday, perhaps we had better have a longer look at it before we talk about a debate.
Mr. W. Baxter: When are we likely to have a debate on Scottish affairs, as such a debate is somewhat overdue?
Mr. Bowden: There are the usual occasions for debates on Scottish affairs on the Floor of the House in addition to those which occur upstairs in the Scottish Grand Committee. We can discuss after the Recess whether we can bring one of the two days forward.

ORDERS OF THE DAY

  FINANCE BILL
  Order for Third Reading read.
  3.55 p.m.
  The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move, That the Bill be now read the Third time.
  As I gather that we are to have a shortish debate, it is in accordance with precedent that the opening speech on this occasion should be short. Moreover, as we have already had an economic debate, covering two days, and as the major item in the Bill is the Selective Employment Tax, which we have fully discussed on another Bill, I hope that it will be for the convenience of the House if I myself make only a short introductory speech on Third Reading.
  The Bill contains the usual number of minor provisions affecting old taxes, the tidying up of Income Tax, of Corporation Tax, of Capital Gains Tax, and, as usual, a provision in respect of antiavoidance—on this occasion that in relation to bond-washing on certain Stock Exchange transactions, involving additional powers of inspection by the Revenue.
  There are also provisions in the Bill for new taxes, in particular the Betting and Gaming Duty, which I think we would all agree have been unusually well accepted for new taxes.
  The major provisions in the Bill are those for strengthening the economy. First, there are in Part I a number of provisions facilitating international trade; and among those I would include in other parts of the Bill the double taxation agreements.
  There are provisions for encouraging investment in the most direct way. The Bill paves the way for another Bill. The two Bills together provide for what I have just indicated. We must not forget that Corporation Tax, which is in the Bill and the rate for which is fixed for the first time, is one of the greatest incentives to investment that we have.
  There has been some discussion about the rate of Corporation Tax. On one or two occasions I have been challenged as

  1911
  to the comparable burden of taxation arising out of Corporation Tax and out of the previous system. There are a number of factors which will tend to affect the yield of Corporation Tax for the first year. There are various transitional reliefs and there is the effect on the Schedule F yield of the forestalling of dividends which took place.
  There is also the fact that, even apart from this, we shall not be collecting more than 11 months of Schedule F tax in the first year, 1966–67. I repeat that the best estimate we can make is that the amount of tax which will, with a Corporation Tax rate of 40 per cent., reach the Exchequer in 1966–67 will be less than it would have been under the old system. It is, therefore, quite clear that my right hon. Friend the Chancellor of the Exchequer cannot be said to have increased the burden of company taxation as a result of the change to the new system of Corporation Tax.
  There have also been from time to time questions as to whether the Corporation Tax, which is an incentive to plough back profits and to increase investment capacity therefore out of the retained profits of a company, rather than by distributing dividends in the hope that they, in turn, will be reinvested, serves a useful purpose in this respect.
  This has been confirmed in many ways and recent investigations, both here and in the United States, show that the individual investors on balance have spent on consumption the full amount of their dividend income and some fraction of their capital gains. As a group, they are net sellers of securities and not net buyers. The net acquisition of financial assets by the public—I am including securities of all kinds and not merely ordinary shares—is more than accounted for by increases of holdings by life assurance companies and pension funds.
  In other words, security holders other than the institutions consistently sell some proportion of their total holdings. It follows, therefore, that the ultimate source of personal savings is the contributions of wage and salary earnings in the form of life assurance and pension funds, that individual shareholders do not provide the savings to finance
  1912
  investment, and that there is no evidence to show that any significant part of additional dividend payments would, in fact, be saved and reinvested rather than spent.
  Corporation Tax, therefore, is even more relevant to our needs today than when it was produced a year ago.
  Mr. Peter Tapsell: But is not what the right hon. Gentleman has been saying the result of the taxation policy being pursued by the Government? Surely it is because taxation is so high that what he says is true. Should the Government, therefore, not seek to reverse this trend?
  Mr. Diamond: I have already said that what I am saying is based on investigations here and in the United States into a pattern that is followed in both countries. One cannot be certain, of course, but I am sure that the hon. Gentleman would accept that the probable cause is that people are inclined to spend their income and to spend part of their capital gains, but are not inclined to spend their capital. This is borne out by the figures, If one increases dividends there is no likelihood, contrary to what has been suggested, of a reverse process whereby increased dividends would be saved and returned in the form of investments in new companies.
  Corporation Tax, which provides tremendous encouragement to ploughing back, through the reduction in the tax borne by the company, is one of the best incentives that exists for the further investment that is so necessary for the development and growth of the economy.
  The Bill also contains, in the provisions relating to the Selective Employment Tax, further encouragement to production and in particular to production for exports. In this connection, I do not think that I can do better than remind the House of what my right hon. Friend the Prime Minister said only yesterday:
  "We cannot go on with a situation where only one in every 20 in the expansion of our labour force goes into manufacturing employment."
  He went on to refer to
  "… the acute shortage of labour in our essential industries, particularly our export firms."

  1913
  and added:
  "… the biggest impediment to an immediate increase in exports is a shortage of labour, both skilled and unskilled.
  … 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."—[OFFICIAL REPORT. 27th July, 1966; Vol. 732, c. 1745–6.]
  That is, indeed, the case and it is because there are so many provisions in this Bill which encourage investment, exports, international trade and mobility of labour—it includes a provision to relieve redundancy payments from taxation—that I feel sure the House will give the Bill a Third Reading today.
  4.5 p.m.
  Mrs. Margaret Thatcher: Seldom has the Chief Secretary to the Treasury made a speech with which I disagreed more. I shall follow him in one respect only, in that I shall be brief. He attempted to brush aside the Selective Employment Tax. In fact, never has a Finance Bill imposed such a heavy burden of taxation as this one. It extracts about £1,100 million a year in tax.
  The Selective Employment Tax need never have come about if the Chancellor of the Exchequer had got his forecasts remotely right. It has caused, and will continue to cause, a great deal of worry to the older folk, the older employed part timers and the disabled, who have to pay out money long before any will be returned to them.
  Dame Irene Ward: And charities.
  Mrs. Thatcher: And charities.
  Although represented as a tax on services, it is, in fact, a tax on all goods and services, because the cost of distribution is as much a part of the cost of the finished product as is the cost of manufacture and the attempt to distinguish between the two elements in cost has no basis in logic or in fact.
  The tax involves the collection of £1,130 million and then handing back £890 million, less administrative costs. As a means of collecting about £240 million of revenue with no contribution to greater
  1914
  productivity this is an idiotic way of proceeding. Already, the protests we have had have been terrific, but they are only a fraction of what the protests will be when the tax bites in September. This is an unusual Bill, in that its taxation provisions do not bite until the Bill has passed all its stages in this House, so the average person has not yet felt the impact of its provisions and has, therefore, not yet made his particular protest.
  The Bill is also a blow to savings, especially to small savings through friendly societies. These are savings which, by law, could not have exceeded £500 per person. I will quote an example. It concerns a firm near my constituency which employs many of my constituents and many represented by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod).
  The firm drew up a monthly premium savings plan for the hourly-paid workers. On the whole, therefore, it affected small savers. In March, it negotiated with the Registrar of Friendly Societies to draw up rules for an appropriate friendly society. By April, the scheme was announced to the hourly employees. On 2nd May, the rules were adopted and on 9th May the society was registered.
  Then the Bill was published and it was found that this type of friendly society, although designed for small savings by hourly-paid employees, was caught badly by the provisions of the Bill. On 7th June, representations were made to the Inland Revenue. On 23rd June, the firm received a reply stating that the matter had been reported to Ministers, who had decided that the society could not be exempted.
  That is a specific example where a company which was proposing a scheme to help its employees to make small savings has now had to withdraw the scheme because of the Bill. It is an example of where the more the taxation the less savings there are and is positive proof that the Government prefer taxation to savings.
  This is the eighteenth Budget and Finance Bill since 1951. In analysing the additions to the tax burden imposed by each one, one finds that, for imposing higher taxation burdens Labour Governments have it every time. Of the Budgets

  1915
  between 1951 and 1966 that have imposed most taxation, that of Mr. Hugh Gaitskell, in 1951, led the field with a new tax burden of £388 million. The second in the higher taxation stakes goes to the present Chancellor, with this Bill, which, in a full year, imposes a burden of £265 million.
  Mr. Joel Barnett: I am following the hon. Lady's argument very closely, but I am not clear whether she is arguing that in the present Finance Bill there is too much deflation, or whether she would not have had as much.
  Mrs. Thatcher: I am pointing out that Labour Governments are those which impose high taxation. If the hon. Gentleman wants a comparison with an emergency Budget—and he has been present when I have spoken on this subject before—he will remember that Mr. Butler's emergency Budget of 1952, introduced in circumstances identical to those of last year's, did not impose extra taxation.
  The Budget with the third highest taxation was the right hon. Gentleman's of 1965 and the fourth was the right hon. Gentleman's of 1964. Only then do we get to a Conservative Budget, the fifth highest, and it is that which was introduced in April, 1964, and it is noteworthy that that Budget, imposing the highest taxation of Conservative Budgets, was introduced in an election year. This Budget holds the second prize for introducing the highest taxation burden since 1951. Out of the eighteen, all of the nine which reduced taxation were introduced by Conservative Governments.
  We face tremendous new taxes and we must consider this Finance Bill in the context of other statements. We know the crowd on the Treasury Bench fairly well by this time and that when they get their hands on extra money they tend to spend it. If the Chancellor is to spend the extra taxes which he is taking in, and not to use them to reduce the National Debt, the whole purpose of the extra taxation will be defeated. I should, therefore, like an assurance that the extra taxes which he is taking in this year will be used to reduce the National Debt and not to subsidise nationalised industries which cannot pay their way.
  Mr. Speaker: If the right hon. Gentleman gave the hon. Lady the assurances for which she is asking, he would be out of order.
  Mrs. Thatcher: Thank you very much, Mr. Speaker. Perhaps he can give them to me another time.
  This Finance Bill embodies a disastrous Budget. It is a monument to financial misjudgment and administrative lunacy, and it is, therefore, a fitting monument to this incompetent Government.
  4.12 p.m.
  Mr. Sydney Silverman: Opposition to the Third Reading of the Finance Bill in my experience is rather rare. Objections to the Budget are usually raised at earlier stages. When we have reached the stage of the Third Reading, everybody knows that the money has to be provided and that the Bill cannot be amended at this stage and opposition to it is, therefore, purely mischievous and irresponsible even if it is carried with sincerity into the Division Lobby.
  However, I appreciate that what the Opposition wish to do is not to defeat the Finance Bill, because that would be too absurd even for them, but to offer a challenge to the whole of the Government's management of the economy. It is a challenge which they have made repeatedly over past weeks. No one would deny that they have a perfect right to do so and that it is certainly within their rights and within Parliamentary tradition to take this further opportunity to offer the challenge. What I should like from them is a redefinition of what their challenge is.
  In the course of the debate in the last two days, they have repeatedly told us not that the Government's immediate policy is wrong, not that they object to making hire purchase more difficult, not that they object to a wage freeze and not that they object to anything the Government are doing. They tell us that in their opinion what the Government are doing, although not wrong in itself, is too little and too late. I should like to know whether I have got the message correctly.
  Mr. Iain Macleod: No relation to it.
  Mr. Silverman: It bears no relation to it because it comes too late, because the

  1917
  Chancellor of the Exchequer gambled and should have taken what risks he was taking earlier and that what he is now doing is not only too little but too late? Have I got it right this time?
  Mrs. Thatcher: The hon. Gentleman has got it quite wrong. I thought that I made it clear in my opening sentences and certainly my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) made it clear last night. When the Chancellor made his Budget statement, he said that the Selective Employment Tax was an alternative to increases in Purchase Tax and petrol tax and so on. We now have increased Purchase Tax and petrol tax. The point is that we need never have had the Selective Employment Tax if the Chancellor of the Exchequer had got his forecasts right.
  Mr. Silverman: Do I take it that it is no longer the Opposition's argument that my right hon. Friend's measures are too little or too late?
  Mr. Speaker: The only measures which we can discuss at the moment are those contained in the Finance Bill.
  Mr. Silverman: I do not propose to discuss measures other than the Finance Bill. If I am wrong in thinking that the Opposition wish to challenge the Finance Bill at this stage because they wish to challenge the Government's whole economic policy, then I have nothing further to say. They can go on opposing these measures from now until doomsday and it will not make any difference to anybody and it will not give anybody any satisfaction of any kind.
  The only usefulness of the debate is whether it gives a further opportunity to consider whether the general economic policy now being pursued by the Government is right or wrong in the opinion of the Opposition and in the opinion of supporters of the Government. If such a discussion is out of order, I confess that I am not interested in this discussion at all and certainly would not wish to waste the time of the House by spending another half minute on it.
  I thought that what the Opposition were doing was to say that we were in a very serious economic position, that the Government were responsible for it, that the measures which the Government have taken to deal with it were not enough,
  1918
  and that such measures as the Government have taken of which the Opposition approve were taken too late. I should like to offer my own contribution to the discussion on the basis that that discussion would be in order. If it is not, I am not interested.
  Mr. Speaker: The hon. Gentleman knows that he is out of order if on the Third Reading of the Bill he pursues matters except those which are in the Bill. This is the Third Reading of the Finance Bill, and the only Measure which can now be discussed is the Finance Bill and what is in it.
  4.18 p.m.
  Mr. Richard Wainwright: if I may presume to follow at any rate in the spirit of what was said by the hon. Member for Nelson and Colne (Mr. Sydney Silverman), one cannot help feeling a little sorry for the Chief Secretary and the Financial Secretary to the Treasury, who in recent weeks have been defending the Finance Bill while in the forefront of their minds has been the knowledge of the present situation which has been available to them as members of the Government. At times they must have felt like the Pharisees described by St. Matthew, dealing with mint and anise and cummin and omitting weightier matters. I have no doubt that as they prepared for today's debate they had in mind the words of Wystan Auden—
  "And look behind you without a sound
  The woods have come up and are standing round
  In deadly crescent."
  The House will be aware that the poet's next verse goes on:
  "Outside the window is the black remover's van."
  It is the intention of the Liberal Party to vote against the Bill this evening and it is our hope that it will never come into practical effect, particularly Clause 44 which is the Finance Bill portion of the Selective Employment Tax.
  When I first came into the House, one of my early challenges from outside was an inquiry whether I was in favour of vivisection, and I hedged on that matter and kept the letter in my file, where it still is. But I am certainly against the kind of vivisection which Clause 44 will enforce. It has been admitted by the Government that the Selective Employment Tax is a vivisection measure. It is

  1919
  a try out, and it is only to be refined—that is the Government's hope—as time goes by. But in the time that goes by before we have the refinements many living businesses, indeed many people's means of livelihood, will be destroyed. That is why we describe it as a piece of fiscal vivisection.
  One example from a very large postbag which I and my right hon. and hon. Friends have received in recent weeks is that of a firm of shipbrokers in Lerwick, Shetland, which wrote to my right hon. Friend the Leader of the Liberal Party on 20th July with regard to the Measure now before the House:
  "The object of the Bill would apparently be to cut out part-time workers, but in this case we are forced by the union to employ casual dockers. An example of the difficulties that will arise: recently my firm employed 32 dockers for a vessel discharging on Monday only. This would mean that apart from having to pay each man's National Insurance stamp for the week, which we do at present, we would also have to pay £40 in tax for this one day's work."
  That is what I mean in referring to this experimental tax as a piece of vivisection.
  The hon. Member for Finchley (Mrs. Thatcher) referred just now to the tax biting in September. I take leave to doubt how far it will bite in September, especially amongst traders who neither have the cash with which to buy the new stamps nor can get the necessary facilities from their bank with which to buy them. I hope that we shall be told during the debate just how the Government intend to make the tax bite in September, because it was my experience, going on audit to small businesses, that very often one of the first things I had to instruct my staff to do was to stamp the client's insurance cards—often for a long period in arrears.
  Those who operate the high-value stamping procedure, are not, or were not when I last inquired, required to pay until the end of the quarter. It is well known that if a citizen presents himself at the post office and finds that he needs stamps which have gone out of circulation, because he is so much in arrear, he is told to produce the money, and the printed form of receipt is readily available to acknowledge that the cash handed over in lieu of stamps satisfies the obligation. I know that we shall be told—
  Mr. Barnett: I do not want to impugn any of the hon. Gentleman's clients, but would he not agree—I am sure that he would not want to exaggerate the case, and I am sure that he is right in saying that this happens—that this happens only in the case of very small businesses, and that it hardly applies to medium and larger size companies?
  Mr. Wainwright: Not at all. The high-value stamping to which I referred is specially designed, and is an admirable measure, to assist the larger businesses. The operation of the high-value stamping procedure is so complicated that only a large business with a considerable wage-office staff could hope to operate it. As I think I made clear, I was speaking not entirely with regard to arrears of stamping that have happened in the past, but with regard to the very much greater arrears of stamping which I apprehend will occur in the future, now that the stamp in some cases will cost as much as 56s. 1d.
  The recent revelations of the economic situation which have been debated in the House this week have destroyed a great many of the arguments to which the House listened during earlier discussion of this Measure. I refer particularly to the effect which the tax set out in Clause 44 will have upon the employment of the elderly, the part-time and the disabled. When this matter was discussed on Second Reading, we received from the Chief Secretary the following attempt at reassurance with regard to the elderly, the part-time and the disabled:
  "So long as the policy of full employment is maintained—and this the Government are determined to do—it does not seem that there can be an overall falling-off in the need for workers in these groups."—[OFFICIAL REPORT, 25th May, 1966; Vol. 729, c. 485.]
  That assurance is now largely worthless, and because this Measure, and especially Clause 44, will inflict a very great deal of personal hardship and encourage a great deal of commercial inefficiency, the Liberal Members will vote against it tonight.
  4.26 p.m.
  Mr. Harold Lever: When we look at a Bill on Third Reading, we are best advised to look at it in its totality and see whether we are justified in accepting it or rejecting it at this stage. We have had

  1921
  exhaustive debate on the details, and I shall make a brief speech merely upon whether we are justified in accepting the Bill in totality. When we consider this, it is necessary to have in mind the very grave economic situation of the country with which the Bill is intended to deal.
  It is the Tories' view that a Tory Government are equivalent to an extra couple of a thousand million pounds in the reserves and that hence when they are in office one does not need to worry about financial difficulties of this kind. I hope that no one will accuse me of excessive partisanship when I say that this view is not universally shared, even by those who are normally political supporters of the Conservative Party.
  We must take the general situation into account in deciding whether the sacrifices, burdens and difficulties that we all admit are imposed by the Bill are justified. The first major criticism made against the Bill, very often from hon. Members on this side of the House, is that the measures in the Bill are not those that the Government wants to take; they are the measures that international bankers insist that they take. If that were true, and this House were of that opinion, it would feel obliged to reject the Bill.
  It is true in a superficial sense that the Government do not want to take measures that will be painful and cause suffering and difficulty to the citizens of the country. But it is equally true that they want these measures for the same reason that the international bankers want them, namely, that they want this country to pay its way in the world and be in a position to maintain the stability and strength of our currency and have a strong £, which is one of the central determinations of the present Government.
  In assessing the complaint against the Bill that it is dictated by international bankers, it should be remembered that the only international bankers who matter in the modern world are the financial wings of foreign Governments. These are not irresponsible and rapacious tycoons of the 19th century seeking with their cheque books to enslave this proud and independent nation. They are the financial wings of friendly Governments seeking to co-operate with the British Government in the common interest of us all to provide that collective financial
  1922
  and economic security on which the prosperity of the Western world depends.
  In so far as the Bill plays a vital part in the Government's policy of defending the £and ensuring that this country pays its way in the world, I support it, and even if there are sacrifices and burdens and some temporary anomalies I absolutely respect the courage of the Government in pursuing this course of insisting that the country pays its way in the world and preserves the value of its currency.
  It is said that we need not worry about preserving the value of the currency, that sacrifices such as those exacted by the Finance Bill are unnecessary, and that all that is needed instead of a Measure of this kind is a once-for-all devaluation. My first comment is that, if we get into the habit of having once-for-all devaluations every 10 years or so, we are hardly likely to add to the wealth, prosperity and reputation of our land. We have heard this story of once-for-all devaluations before, and we are not impressed by the suggestion that it should be undertaken now.
  I often think that those very sincere and knowledgeable people who put forward engaging arguments for devaluation of the £rather than approving the kind of financial measures we are now discussing mistake the assembly in which they are speaking. The House of Commons is a debating assembly. It is not a debating society. Our resolutions have consequences. Those of a debating society have not. If this debating assembly comes to the conclusion that we should support concepts like devaluation of the £, then, in my respectful submission, it will be a very sorry and lamentable conclusion with dire consequences for the people of this country and their reputation.
  Mr. R. T. Paget: Is not this the first time in this century when we have gone as long as 10 years without a devaluation?
  Mr. Lever: My hon. and learned Friend's recollection of modern financial history is, to say the least, a little inadequate. It is not true that this will be the first time we have gone for 10 years without devaluation.
  In any event, we are discussing a Finance Bill to protect against devaluation, at a time when the world has perfected international monetary arrangements on a scale and of a value never

  1923
  seen before in our history. It is idle for my hon. and learned Friend to seek to justify rash acts which would demolish the whole arrangements developed to maintain international financial stability by reference to what has occurred in a different age and in different circumstances.
  My hon. and learned Friend must bear in mind that people hold sterling today on the basis of different undertakings—
  The Chancellor of the Exchequer (Mr. James Callaghan): What has this to do with the Bill?
  Mr. Lever: I take it to be a justification for the Bill. I am sorry that my right hon. Friend thinks otherwise. I regard the sacrifices under the Bill which we are asked to support as being part of the necessities rightly imposed upon us in honouring our obligations internationally in relation to our currency. This was the only point which I wished to make about the Bill, and I am sorry that it does not seem to have registered.
  At a time when many people seem to think that the honouring of our obligations in relation to the £at home and abroad to friendly Governments and to trusting individuals is some kind of meglomaniac quirk, I want to go on record as entirely endorsing the Government's policy of supporting the £at its present parity and the international arrangements and obligations which go with it. I am willing readily to support them in a Budget designed to play a notable part in putting this country in a position to pay its way in the world and honour its obligations.
  4.34 p.m.
  Sir Cyril Osborne: I shall make one point in following the observations of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) on the question of devaluation, and I think that it will not be too unwelcome to the Chancellor. I want the Chancellor to make clear to the House and the country that devaluation is of itself no easy way out of our troubles. It would make our imports dearer and our exports earn less. [Interruption.] But this is following the argument used before with reference to the Finance Bill.
  The Bill is already out of date. The most important factor in it is the Selec-
  1924
  tive Employment Tax, and there will be lots of Amendments moved to Bills of which we have no knowledge yet. This Bill is completely out of date, as a result of statements made by the Chancellor and the Prime Minister in the circumstances which have arisen since the Bill was first introduced some months ago.
  The Financial Secretary to the Treasury (Mr. Niall MacDermot)indicated dissent.
  Sir C. Osborne: We are talking about a dead horse. It is no good the Financial Secretary shaking his head. The real factors are not in this Bill. Other things have been superimposed, and the Chancellor knows full well that the position is totally different from that when he introduced the Bill so long ago.
  I shall bring myself entirely within order now by directing attention to Clauses 17 and 18. I shall speak as a Surtax payer for Surtax payers. If the Chancellor cannot deal with the point I make this year, I hope that he will bear it in mind for another year. Clause 17 imposes a standard rate of Income Tax of 8s. 3d. in the £, and Clause 18 imposes Surtax to the limit of 10s., making a total of 18s. 3d. in the £. Thus, when the Bill was first introduced, the man on the top level with, say, over £15,000 a year, or thereabouts, was left with 1s. 9d. in the £.
  Subsequently, the Chancellor has imposed a further 10 per cent., which means that the top rate Surtax payer will have 9d. in the £out of his last earnings. I know all the argument about average earnings, but when a man is asked to take greater responsibility or to take greater risks it is his marginal risk and effort which is taxed at this ridiculous rate.
  I put it to the Chancellor—I am sure he will listen to this—that 19s. 3d. in the £is an absurd rate of direct taxation, especially when the right hon. Gentleman is himself pleading with industry for men to take greater risks and to make their businesses more efficient in order that the nation may survive. It is in these circumstances that he says to them, "Out of every 20s. you earn extra, you will get 9d.". This is financial madness. No one can be expected to work for 9d. in the £.
  The history of the matter is that, over the years since Lloyd George's famous Budget of 1909, we have inherited the

  1925
  idea that the Finance Bill should be used as a measure for social justice, for the redistribution of the national wealth and income. As matters stood in David Lloyd George's time, there was a lot to be said for it. Now, however, we have swung to the other extreme. We all want social justice, but we also want economic efficiency. If the demand for social justice through a tax Bill like this weakens our economic efficiency, the whole is worse off.
  A few days ago, the right hon. Member for Nuneaton (Mr. Cousins) said that he was not interested in a fairer distribution of the same sized national cake; he wanted a bigger cake. But this is not the way to make a bigger cake. The whole idea of taxation as embodied in the Bill and these two Clauses in particular is wrong. We ought to tax people's spending more and not tax their earnings so much. If we want men to work and take responsibility and risk, we must reward them.
  Mr. Deputy Speaker (Mr. Sydney Irving): Order. I am following what the hon. Gentleman says with interest, but he must not discuss the general economic situation on Third Reading. He must discuss what is in the Bill.
  Sir C. Osborne: I am much obliged, Mr. Deputy Speaker, and I shall try to keep in order.
  I am referring to Clauses 17 and 18 of the Bill. Clause 17 imposes Income Tax at a standard rate of 8s. 3d. in the £and Clause 18 imposes Surtax at 10s., making 18s. 3d. in all. But since then the Chancellor has imposed another 10 per cent.
  Mr. Deputy Speaker: Order. Unfortunately, the 10 per cent. is not in the Bill and it is, therefore, out of order.
  Sir C. Osborne: Then I shall stick to the 18s. 3d. The 18s. 3d. is a ridiculous rate to impose on top Surtax payers. [Laughter.] That is true. It is no good giggling. A responsible Member on the Government benches ought not to giggle in such a silly way.
  The men who are already running businesses and taking risks with their health and wealth are being asked to work harder. It is responsibility which pulls men down quicker than manual labour. They are being asked to take on greater
  1926
  responsibilities and worries, and under the Bill they are being offered Is. 9d. in the £for every earned. It is absurd. I am asking the Chancellor to give a thought to this for another time. I remind him that at the moment our economy is a mixed one. About 80 per cent. is private and about 20 per cent. nationalised industry. If the economy is to work there has to be a mainspring, and the mainspring of the capitalist system is the profit motive.
  If one taxes a man's earnings at the rate of 18s. 3d. in the £, one weakens the profit motive. Hon. Gentlemen opposite have often argued that the profit motive is bad, selfish and almost immoral, and should be abolished. The challenge that I put to the Chancellor is to ask him what he will put in the place of the profit motive. Will he tax it out of existence, or tax it so much that it will not operate properly and efficiently? What will he replace it with? In the Communist world force would be used. What will he do in the Socialist world?
  I beg the right hon. Gentleman to bear this in mind for another occasion and to look at Clauses 17 and 18 to see whether really drastic reductions could not be made in Income Tax and Surtax on earned income. This is one of the greatest weaknesses in the handling of our economic affairs and until it is put right the efficiency asked for by the Chancellor will not be attained.
  4.41 p.m.
  Mr. Joel Barnett: The really important question on this Finance Bill is: does it have in it the right amount of deflation?
  Mrs. Thatcher: No.
  Mr. Barnett: The really important question about it, from my point of view, is whether it has the right amount of deflation, and that is what I propose to discuss, even if the hon. Lady the Member for Finchley (Mrs. Thatcher) does not wish to do so.
  I want to see if it has the right amount of deflation in the context of the present circumstances. In asking that question one must also obviously ask: is it the right amount to deal with three different problems—the short-term economic position, the fundamental problems facing us, and the pressures on sterling?

  1927
  It will be clear that there is nothing in the Bill which gets to the root of the faults of our economic situation. Neither if one takes both the economic package, which we cannot discuss today, and this Bill, can one believe that the measures are purely and simply for short-term economic reasons.
  It is clear that the Bill and the general deflationary measures in it, but more particularly the other measures that we have had, have been taken because of the pressures on sterling, and it is in that context that one must ask whether the amount of deflation is right. In asking whether the Bill is right, it is necessary to ask whether one feels that it will be successful in its short-term aim of getting us over the interim period, leaving us free to deal with the fundamental problems facing us. In considering this one has to look at the general situation we are now in and see the effect so far of the measures taken and the other measures that we have debated.
  It seems to be pretty clear from the effects so far seen that the measures, unfortunately, will be effective only if and when we have the 500,000 unemployed. As things are, people who are concerned with pressures on sterling—and I make no criticism here of those who deal in sterling for many quite legitimate reasons—are concerned with our general position. They will only be satisfied as and when the measures taken are effective and are seen to be effective in dealing with our basic balance of payments problem.
  In looking at this one has also to consider whether it would have been better to have taken other steps. It was suggested in the House yesterday and the day before that we should have devalued the £. This, I believe, would be utterly wrong. The trouble is that many people see this as a cure-all. It is nothing of the kind. It no more deals with the short-term situation than do the deflationary measures in the Bill and the package. Only too often I have seen companies, given financial assistance, whether by way of increased overdrafts or debentures, suddenly finding themselves with an enormous amount of increased liquidity and going beserk, as it were, frittering away the money which is literally not theirs. Unfortunately, this could happen with devaluation, if it were seen as a long-term
  1928
  answer to our economic problems. There are many other arguments which one cannot deploy here, on Third Reading.
  Mr. Deputy Speaker: No doubt the House is listening with interest to the remarks of the hon. Gentleman, but he is going too far. He is debating the economic situation, which is not in order on the Bill.
  Mr. Barnett: I apologise Mr. Deputy Speaker. I was, I hope, relating it to the Bill and I was about to ask whether the measures in the Bill will get us over this period of uncertainty and whether the amount of deflation contained in the Bill and the package will give us this breathing space. I am not at all convinced that they will. For all its difficulties, I would have much preferred the certainty of import quotas, which, of course, I cannot discuss today, or even the measures suggested by the right hon. Gentleman the Member for Barnet (Mr. Maudling) yesterday by way of financial control on imports.
  This was a very interesting suggestion which, I hope, will be followed up, although I would prefer the other alternative I have referred to. The real point is that in the longer term we have a very much more difficult problem. Here I do not believe that the Bill gets to the root of this long-term problem. This does not mean that we should go on as we have been doing, exaggerating the case as has happened only too often, in the instance of the Selective Employment Tax and of our general economic position. The difficulties of our economic situation have been grossly exaggerated. We should repeat and repeat that we are not bankrupt and nowhere near it. The longer we go on creating this psychological state of affairs into which we are talking ourselves, then all the more will people who are in a position to exert pressure on the continue to do so. I therefore hope that we can stop talking as though we are in a state of bankruptcy.
  The position is really nothing like as desperate as has been alleged in many quarters. If one takes the 14 years since 1952 the total net deficit on the balance of payments on current and capital account totalled about £1,796 million, or an average of £128 million a year. During the past year we spent in foreign exchange abroad £454 million, of which

  1929
  £293 million was in the foreign exchange element of military expenditure. It will be clear that the Bill, or any of the other measures we have had, is not dealing with the fundamental problems. One has only to consider the sort of figures to which I have referred to see that it is not anything like so serious a problem. The main deflationary new tax in the Bill is the Selective Employment Tax. But we are literally creating the problem for ourselves.
  The main item in the Bill is, of course, the S.E.T. Despite the many words of very great exaggeration we have had from the other side and despite the fact that I would like to see some changes in the field of part timers, charities and the disabled, I believe that this is a broadly based good new tax measure and that it will be a better one as and when we are able to amend it, as I hope, in the very near future.
  An aspect I would like briefly to discuss is its administration. Unfortunately, for the reasons we know, the tax has been sub-contracted to the Ministry of Pensions and National Insurance and the Ministry of Labour. I hope that it will not be felt that because it has been so sub-contracted, we should leave it with them for a fairly long time. I hope that the Revenue will take it back again very quickly, indeed, because there already exists a not too difficult procedure which could be adopted. We already have a tax deduction card which would need only one or two more columns added to enable a tax of this kind to be administered very much more simply than in the way proposed.
  I believe that we should do this very quickly and I hope that when we do we shall take the opportunity to do away with the millions of pieces of paper, in the form of stamps, which are stuck on National Insurance cards every week. It would be a very simple task in the administration of this new tax to have additional columns entered on the P.A.Y.E. deduction card so that we can get away from the necessity of sticking on millions of stamps every week. In a modern society, it is quite ridiculous.
  Mr. Raymond Gower: The hon. Gentleman hopes that this may be amended very soon. I respect that point of view, but does it therefore leave him
  1930
  to regret that we have not taken fairly recent opportunities of achieving that?
  Mr. Barnett: I agree with the broadly based new measures and it is not so long now till next April. I hope that it will then be possible to have the appropriate amendments. For example, I am not wedded to the idea of premiums to manufacturers, as I said on another occasion.
  On the administrative aspect, I hope that Her Majesty's Government will look into this because it would seem to me that it need not take long to arrive at a decision and say, "This is what we will do. We will get away once and for all from the old idea of sticking millions of pieces of paper on cards each week. We are now to have a stamp which includes the Selective Employment Tax so that when we do away with the proposed method we can do away with the stamp altogether and have on the P.A.Y.E. card the figures, one for the employee showing the amount to be deducted under National Insurance."
  This would not be difficult because already, on wage sheets, under many systems for deducting P.A.Y.E., which is referred to in the Bill—[Interruption.]
  Mr. Deputy Speaker: It is entirely desirable to get rid of stamp licking, but the hon. Gentleman must refer to the tax in the Bill.
  Mr. Barnett: I was, I hope, relating it to the Selective Employment Tax in Clause 44. I hope that the Government will consider this very seriously.
  Finally, I hope that this will be the last major Finance Bill we shall be discussing. I hope that we can get away from this idea of a once-a-year major Finance Bill with its aura of crisis, and fear and expectation. I hope we can get away from this creation of an unnatural atmosphere. I feel that the petty jokes of the right hon. Gentleman the Member for Enfield (Mr. Iain Macleod), when he speaks of another mini-Budget or the five or six Budgets of my right hon. Friend, are unworthy of him.
  I believe that we can do away with a major Budget once a year and have regular financial statements. Any businessman, company, or managing director who tried to run his business on the basis of one major decision a year would be rightly criticised.

  1931
  I hope, therefore, that this will be the last major Finance Bill of its kind to be discussed in this House.
  4.55 p.m.
  Mr. John M. Temple: I am hardly surprised that the speakers from the opposite benches have not been very favourably disposed to this Bill in detail. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) started by saying that he wanted to refer to the totality of the Bill. With his great knowledge of the details, I am not surprised that he restrained himself and kept to the totality, because it is when one enters on the details that the snags arise. The hon. Member for Heywood and Royton (Mr. Barnett) asked whether the Bill would bring about the right amount of deflation. He need not have troubled to ask, because the Bill has been overtaken by another one. But the hon. Gentleman did not seem satisfied with that. He wanted more Finance Bills in a year. All I can say is that this House will soon be in continuous session on finance business under a Labour Government.
  Frankly, I have found the Bill very depressing and extremely confusing. It is the second most confusing Finance Bill I have had to study; the most confusing was last year's. But I will stick to the detail of this Finance Bill and what it actually contains. There are still a number of aspects I would like cleared up by the right hon. Gentleman the Chancellor of the Exchequer. Three of the points I wish to put to him are contained within the provisions dealing with the Selective Employment Tax.
  The Chancellor of the Exchequer will know that local authorities have to pay the Selective Employment Tax and then are to be reimbursed. The Chancellor of the Exchequer has over-all responsibility for the grants to local authorities. I would like him to state very clearly at this stage what will be the method of reimbursing through the grants system the impact of the Selective Employment Tax on local authorities.
  The second point I would like to ask the Chancellor of the Exchequer is the mechanism for refunding the effects of the tax to the agricultural industry. I am aware that individual employees in agri-
  1932
  culture are to get the tax refunded, but there is something over and above the refunding of the individual amounts of tax. There is the additional amount of loans which will have to be raised in the agricultural industry which will have to be serviced. Are we to be told by the Chancellor of the Exchequer or his right hon. Friend the Prime Minister that this is no cause for a further Price Review, or of an interim Price Review, due to the increase in costs? I ask that because the Prime Minister has said that costs have to be contained. I would submit that a very severe increase in costs will be placed upon agriculture through the whole administrative and loan charges that will result from the effect of the Selective Employment Tax.
  I come now to the third point, on which I have corresponded with Ministers, regarding the Selective Employment Tax. This concerns the treatment of "share fishermen". It has always been realised that the share fisherman comes into a very special category with regard to the Selective Employment Tax. For most purposes these fishermen are treated as being self-employed, and I would never have raised this matter at this late stage had this matter not still remained obscure after correspondence with Ministers. Around the coasts of Britain almost all inshore fishing is carried on by share fishermen. I believe the Chancellor of the Exchequer will know the methods under which they are reimbursed. For all practical purposes, they are self-employed. They very often go out on one day in the week and then there may be three, four or more days when they cannot go to sea because of weather conditions. Are these "share fishermen" to pay this Selective Employment Tax at all? That has not yet been made clear to me, and it is a matter of great importance, not only in England and Wales but in Scotland as well; because this particular method of sharing out money from the catch is the normal way in which these men are remunerated, and for all practical purposes they are taken to be self-employed.
  I wish to comment on what the Chief Secretary said. In recommending the Third Reading of the Bill, he stated that the betting and gaming legislation had been well received. I cannot confirm that statement. I cannot think that the sensible way of taxing betting is by taxing

  1933
  stakes. The method which we recommend was different. It was rejected. The industry will calculate this tax in an entirely different manner. The hon. Member for Heywood and Royton drew attention to the administrative costs. This is a further administrative cost. Surely it is far better to collect a tax in the same way that it is to be administered throughout an industry.
  I have spoken on many occasions recently about taxation mechanisms, grant mechanisms and the like, and I have said on every occasion that there will be added to this country's costs an enormous sum in administrative costs which will bring no recompense in productivity. This is one of the major reasons why productivity is not rising under the Government.
  The gaming legislation in the Bill is based on a tax on rateable values. I criticised this tax an rateable values and suggested a method whereby the taxation of the gaming area of an establishment would be based on the area in which the gaming took place. That proposal was rejected. The gaming legislation proposed in the Bill is an encouragement to maximising the amount of gaming which takes place in any establishment. Only a few days ago I visited a country club in which there was a very small gaming room indeed. The taxation proposed in the Bill will be an encouragement to the proprietor of that club to use every room for gaming purposes. I should have thought that that was antisocial legislation such as the Chancellor of the Exchequer would not contemplate.
  I regard the Bill as a most depressing Bill which increases taxation to an alarming extent. I have had instances only in the last few days of young and old people leaving this country—young people whom we can ill afford to lose and elderly people who would be paying full taxation if they remained here—they are leaving because of the tremendous weight particularly of direct taxation. I shall always be opposed to the Bill because of the disincentives in it and the great confusion caused by the lack of clarity of the measures proposed.
  5.4 p.m.
  Mr. Robert Sheldon: The hon. Member for Colne Valley (Mr. Richard Wainwright) said
  1934
  that he was sorry for the members of the Treasury Bench. I am sorry for them, but for different reasons from those which the hon. Gentleman gave. I have been sorry for them during the course of the Bill because of the repetitious nature of some of the arguments to which they have had to listen and the tedious comments which have been frequently made. I am glad to say that today is proving to be something of an exception. Therefore, I hope that their tedium is somewhat diminished.
  I did not come into Parliament as a member of the Opposition. Therefore, I have not been sufficiently aware of the frustrations which certain hon. Members opposite feel. Nevertheless, I must accept that their comments have been extremely testing to members of the Treasury Bench. It is a tribute to them that they have reacted so well and favourably during the long days of criticism from both sides.
  The Bill—I have criticised and commented on it freely—contains the seeds, if not at this stage the final fruit, of very great reforms. I always think of myself as being interested, not so much in the details which the Finance Bill embodies, but in the opportunities it offers to control the economy in the way in which we wish to see it proceed. This Bill, added to the great measures in the last Finance Bill, has provided further powerful means of discriminating in many cases and of being able to follow certain desirable objectives in the years to come.
  Up to the advent of the Labour Government, there were very few measures enabling us to control the economy in the way which we will now be able to do. We had the regulator, with its useful but limited control over consumer demand. By the introduction of the Capital Gains Tax last year and its improvement this year, we have been able to tax all increases in wealth as and when they arise. By the Corporation Tax we have been able to discriminate between the taxation of companies and of individuals. Further progress has been made in Clause 44 of the Bill dealing with the Selective Employment Tax whereby we are able to tax companies on the basis of the individuals employed by them. Naturally, we expect to see refinements of this tax in the years ahead.
  Another method of discrimination has been the promotion of investment grants

  1935
  and the removal of investment allowances in Clause 35. This is a means of influencing the kind of investment which is thought to be desirable. Just in case there are some who feel that this change is not desirable—there have been comments in the last two days on this—I draw attention to the issue of Metalworking Production, which came out yesterday, showing that 63 per cent. of the machine tools of this country are over 10 years old. Those who feel that the investment allowances have been doing their job must question their view in the light of this recent report.
  The measures in this Bill and in the Finance Bill of last year give some degree of control over certain aspects of the economy. We can now control in a limited way the flow of money in and out of industry. There is also some influence over investment by investment grants and some means of regulating the supply of money into the economy. These are measures which were notably lacking in the arsenal of previous Chancellors of the Exchequer. The combination and use of these various measures—the regulator, Capital Gains Tax, Corporation Tax, the Selective Employment Tax and the investment grants—will give the Chancellor of the Exchequer and his successors a great deal of control and influence over the economy which they will come to value greatly in the years ahead.
  But the great weapon lacking in these measures is proper control over consumer demand. Although the regulator may be used to control the level of hire purchase from time to time, I hope that some of the Government's advisers will concentrate on a method of controlling the level of consumer demand much more accurately and immediately than we are now able to do. What we need here is a fine screw for continuous control of the level of consumer demand, in the same way as we control other aspects.
  Under Clause 16, we have the use of the regulator, but it cannot be used in a wide enough range of industries, and there are difficulties in its being able to be used frequently enough. We require a measure which can be introduced more frequently over a much wider range of industries. Means to do this must be found to remove purchasing power as
  1936
  required and to take account of various changes in the economy. I hope that the Chancellor will make use of some of the brain-power in the Treasury to suggest such methods for the future.
  Mr. Richard Hornby: Would the hon. Gentleman not agree that the regulator is a very flexible weapon, which can be used at varying rates? The problems are the administrative complications which follow from repricing and so on. Legislatively, the weapon is very flexible, which is what other hon. Gentlemen opposite have been asking for. They are asking for more flexibility and not less, which is just what the regulator gives.
  Mr. Sheldon: The difficulty is that the range of industries covered by the regulator is limited. We have the industries which have always been subject to increases in Purchase Tax whenever demand has been too high, and they have been the greatest victims of the stop-go cycle. They have been quite unfairly victims of this because of the nature of the goods which they manufacture and the ease with which certain increases in Purchase Tax can be made. I am asking for a much wider measure which can be introduced more frequently than the regulator has been introduced since it was first created.
  Whenever the introduction of new taxes has been undertaken, the Chancellor has been in great difficulty. At all times, an innovator is discomforted by the comments of those people who are hurt or who are asked to change their methods. Any Chancellor who undertakes great reforms must be even more severely the subject of such criticisms.
  I feel that the dilemma of the Chancellor throughout the Finance Bills he has introduced has been this. Either he has been able to give advance notification of the introduction of a new tax in order to anticipate difficulties which are inevitably encountered and is thereby accused of uncertainty by the business community and others, or, alternatively, he gives no notification at all and he is accused of the inevitable errors which come to light when the Bill is announced.
  Any Chancellor finds that dilemma hard to resolve. I would be in favour of a longer period of gestation of new taxes. That is not to say that we should

  1937
  postpone the introduction of new taxes for future years, but that the thinking about them should start immediately the last Finance Bill is over, so that one can have six months of rather more thorough thinking about new taxes.
  I am not very much in favour of taxes being introduced to meet the circumstances of a particular time. In taxation, one needs to look further ahead than that. One needs to look at their impact over the next five or ten years rather than over the next particular year because of the economic circumstances in which the country happens to find itself. This long period of gestation, using the advice and ability within the Treasury, can be of great value in improving the taxation system of our country and effecting a more refined control over the working of the economy.
  5.15 p.m.
  Mr. Terence L. Higgins: I am sure that all of us who sat through the last two Finance Bills will agree with the hon. Member for Ashton-under-Lyne (Mr. Sheldon) that, if we could examine new taxes before they were introduced into the House, we might save everyone a great deal of trouble. However, I trust that he will forgive me if I do not pursue him into that particular realm.
  I think that it behoves hon. Gentlemen who, like myself, have been in the House for only a short time to take the advice and benefit from the experience of those who have been here longer. During Committee stage, when I had the privilege of initiating a debate which we had on the regulator powers, I listened to the Chancellor's reply with great interest, naturally. He offered the following advice:
  "I am neither an economist nor a statistician; I do not have a trained mind. I merely dance to an old Hungarian tune. But I have been in politics for 21 years, and have survived. The lesson that I would offer to the hon. Member, if I may in all humility, is always to pay a proper respect to arithmetic and a proper disrespect for forecasts."—[OFFICIAL REPORT, 16th June 1966; Vol. 729, c. 1854.]
  Naturally, I took that advice to heart, though I cannot help feeling that, as we come to the Third Reading of the Finance Bill, the advice might have been better taken either in regard to the forecast by the right hon. Gentleman the First Secretary, in view of his statement last night, or in regard to the statement of the right
  1938
  hon. Gentleman the Chief Secretary in a debate which took place a few days after that, to which he referred in his opening speech today. That was the debate on the rate of the Corporation Tax. On 21st June, during the Committee stage, the Chief Secretary was further questioned by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) about the Corporation Tax rate. My right hon. Friend pointed out that, in his endeavour to explain why the rate was 40 per cent. and not 35 per cent., the Chief Secretary had fallen into very grave error. My right hon. Friend went on:
  "The right hon. Gentleman was talking about two quite different things. He said that because £50 million, the eleven-twelfths argument, is one-twentieth or 5 per cent. of £1,000, that alone explains the difference between the old figure and the new. That is quite untrue. It is a different 5 per cent., as anyone can see. The increase from 35 per cent. to 40 per cent. is an increase of one-seventh, or 14 per cent. What the Chief Secretary has done is to commit an error into which a primary schoolboy would not have fallen. He has taken the 5 per cent. of the £1,000 and equated that with a 14 per cent. increase from 35 to 40 per cent."—[OFFICIAL REPORT, 21st June, 1966; Vol. 730, c. 314.]
  That was a very severe indictment, and on that occasion we had no real answer from the Chief Secretary. Today he comes in and, admittedly in an admirably brief speech, again fails completely to explain why the Corporation Tax rate is at 40 per cent. It is surely right and proper that before we approve or disapprove the Third Reading of the Finance Bill, the House, the country and the business community are entitled to an explanation which is not based on an arithmetical fallacy as to why the rate increased from the anticipated 30 per cent. to a rate of 40 per cent.
  I want now to deal with the old argument that the Corporation Tax will encourage investment. The Chief Secretary resorted to an argument, which has not been spelt out in detail before, to the effect that it is not true that people who receive dividends actually reinvest them rather than spend them, and therefore there is no reason why we should not have a Coroporation Tax which encourages people to plough the profits which are made on their investments back into the particular firms in which they are already investing.
  It the Chief Secretary's argument is correct and people really do rely on the

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  dividends which they receive to spend rather than to save and reinvest, the ploughing back of the profits in the way that the Corporation Tax is alleged to encourage will merely mean that people holding shares will sell some of them and spend whatever they realise instead. The argument is clearly founded on a fallacy. Even if that were not so, the fact is that what is relevant is not whether people are investing but whether they are investing in the right companies.
  The trouble with Corporation Tax is that it encourages firms which already have capital to plough it back instead of putting it into the market where it can be reinvested in those companies which are likely to offer a higher rate of return, which in turn means that the community as a whole will benefit most. Therefore, I thought that the Chief Secretary's speech was extremely inadequate.
  I turn now to the question of the regulator and the Budget judgment. It is surely the case that the judgment which the Chancellor made in his Budget speech has been completely invalidated, and therefore we are being asked to consider this Bill in a completely different context from that which was apparent to the Chancellor at the time of his Budget judgment. I hope that in the reply to this debate we shall have some real reappraisal of what the Chancellor's expectations are now, at the time when we are being asked to give this Bill a Third Reading, rather than at the time of his Budget speech, or the Second Reading of the Bill.
  The extraordinary situation now arises that the measures introduced in the Budget, in particular the Betting and Gaming Tax and the Selective Employment Tax, will come into effect after the measures which have been introduced during the last few days. There has been an extraordinary cross-over in the implementation of the measures which have been announced in this House.
  The relevant question—and I ask it in a spirit of genuine inquiry, because it may be puzzling many people in the House, and in the country as a whole—relates to the position with regard to Clause 16. As the House knows, this Clause refers to the regulator and it relates to the continuation of the regula-
  1940
  tor powers under Section 9 of the Finance Act, 1961. The powers given to the Government under the Finance Act of last year have been used, partially it is true, by the Chancellor during the last few days. The powers which we are continuing in this Bill presumably refer to the same powers. I would, therefore, be grateful if the Minister could clarify whether the powers which we are granting in this Bill are a continuation of the previous powers in which case, presumably, as far as the taxes which have been raised are concerned, the Chancellor cannot raise them again, though he could, presumably, lower them, or whether they are additional to the powers covered in the 1965 Act.
  Mr. MacDermot: Assuming that this Bill is passed, there will be no need for any further Order to continue the effect of the Order which was laid before the House and passed last night.
  Mr. Higgins: I am grateful to the hon. and learned Gentleman, but he has not quite taken my point. I shall gladly give way again if he wishes me to do so, or perhaps he can deal with it later.
  If this Bill continues the powers which were given in the 1965 Act, for example, to raise the duty on petrol, then it merely enables the Chancellor to continue to raise the tax on petrol by 10 per cent. Or does it enable him to raise it a further 10 per cent. at some later stage? It is very important to get this clear, for reasons which I shall refer to now.
  Clearly the situation with regard to taxes which have not been changed, for example tobacco taxes, would be unaffected, but the hon. and learned Gentleman will remember that when action was taken by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) to use the regulator, as soon as we came to the next Finance Bill it was incorporated into the Measure, and we went back to square one. It is not clear whether we are back to square one. I do not want to detain the House for much longer, but I want to follow on from what I have said and stress that we are entitled to a real appraisal of what the Chancellor's expectations are over the next year.
  After the debate on the regulator, a number of papers, the Financial Times, for example, took up the point that while

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  there was every case for demoting the Budget as an annual event, there was not a case for demoting the Budget speech, and they deplored the fact that the Chancellor gave less information about his real Budget judgment than any other Chancellor they could recall.
  I hope that we shall have this reappraisal, because so many variables are being changed. For example, the impact on investment of, on the one hand, imposing the Selective Employment Tax, and on the other, having a prices and wages freeze, will be very grave, and clearly the effect of this on profits, and therefore on investable funds, will be substantial. Presumably, therefore, the Chancellor's expectations when he formulated this Bill have been altered. I do not want to go into a quarter-by-quarter appraisal of the sort that we had in Committee, but I hope that the Chancellor will give us some sort of appraisal over the period.
  When we discussed the regulator in Commit tee, we emphasised that the S.E.T. would have an enormous deflationary impact between September and February, and that after February it would have a considerable reinflationary effect as the premiums and refunds were paid out. We asked the Chancellor why, if he foresaw a reasonably steady level of demand in the next year, he should take this terrific deflationary action in September and re-inflate again in the spring? I think that the situation between now and the autumn is all too apparent. It is very gloomy indeed, but we can see some sort of rationale to it, although we disagree with the right hon. Gentleman's approach and lament the fact that he could not foresee what was apparent to us all during the Committee stage of the Bill.
  What action does the Chancellor propose to take when the time comes to pay out the refund and the premium? It is difficult to visualise any situation in the spring where the Chancellor will want to reinflate by that amount. This means that what he has to do is to collect the money twice to pay out the refund and premium, once through S.E.T., and again through some other Measure. If he is not to weaken foreign confidence by effectively building into the next few months a situation where a reinflationary action is positively proposed for the spring, it is essential that he should have
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  the full regulator powers, and in Committee we suggested that he might need to use these in the spring to offset the reinflationary effect of the S.E.T. refund and premium. But, as I understand it, the regulator powers have been largely exhausted, and therefore it is very important that we should be clear whether the Chancellor proposes to take additional powers in this respect or not.
  5.28 p.m.
  Mr. Patrick Jenkin: It has been common ground on both sides of the House that as we approach the final rites of the Finance Bill we do so in an air of unreality, because they have been overtaken by events which, I hasten to add, it would be out of order to dwell on for long.
  During the course of our discussions in Committee I detected among the Treasury spokesmen a marked likeness to the character of which Coleridge wrote in the Ancient Mariner, the traveller
  "that on a lonesome road
  Doth walk in fear and dread,
  And having once turned round walks on,
  And turns no more his head;
  Because he knows, a frightful fiend
  Doth close behind him tread."
  The frightful fiend was exposed in all its fury on 20th July. It is this which has given this air of unreality and irrelevance to the proceedings on which we are engaged. Yet I venture to suggest to the House that this Bill is not irrelevant in the sense that it is not likely to have any effect on the economy of the country. On the contrary, it will have a largely pernicious effect.
  We have only to examine a number of its more important provisions to realise how pernicious it will be. What we are trying to achieve in our economy is a state of vibrancy—to use the expression of my hon. Friend the Member for Guildford (Mr. David Howell)—a more resilient, thrusting and enterprising economy. What we find in the Bill is a series of measures which, to a greater or lesser extent, seem calculated to reduce incentives, depress investment and increase the rigidity of the economy. It is this that we complain about and criticise in the whole pattern of the Bill.
  Let us consider some of its provisions. First, Clause 25 swipes at share options granted to managements of businesses as

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  one form in which they might be encouraged to take a stake in the business and become more personally involved in its success and profit. Hitherto the law on this matter has been somewhat obscure, but it appears to have been on the basis that an option was taxed at the value of that option when it was first granted. Last year the Capital Gains Tax was introduced. It might be more just to maintain—although it would be economically unsound—that the option should be taxed when it is realised at the Capital Gains Tax rate, but that is not what the Clause does. It treats the gain made on the realisation of a stock option as a Schedule E emolument at the time when it is realised.
  This cannot be in the interests of our economy. At a time when everyone is asking management at all levels to give more of its skill and energy to running business, to put more into business, and to improve the quality and skill of management, to deprive the enterprises which these people are managing of the chance of rewarding them in a way calculated to unify both the interests of the firm and those managers seems to be clean contrary to everything that the economy requires.
  Let us next consider the rate of Corporation Tax, to which my hon. Friend the Member for Worthing (Mr. Higgins) has referred. It cannot now be doubted that to impose a rate of 40 per cent. Corporation Tax is substantially to increase the burden of taxation on industry. Is this the way to create a buoyant industry, which will be encouraged to invest and expand, or is it, on the contrary, merely saddling industry with an extra burden of taxation which is bound to make the whole process of our economic future more sluggish and depressed?
  Let us consider the swipe which has been taken at the more recent and efficient form of friendly society. It may be a small matter, but it has its relevance to savings. The country depends upon the savings of the people being channelled through the institutions of the City to productive investment and also to investment in Government securities. The friendly societies in this new form, which have been hit by Clause 29, provided one means by which this could be
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  achieved. But they offended the egalitarian theories of hon. and right hon. Gentlemen opposite. Therefore, whatever the consequences to the greater efficiency of the economy and the encouragement of savings and investment in industry, a swipe had to be taken at them.
  Clause 30 withdraws relief for underlying tax on portfolio investment in the Commonwealth. In our debates last year it was frequently asked of the Government, "Granted that you want to discourage future overseas investment and to make it more discriminating, why did you have to introduce taxation changes which struck such a savage blow at all existing overseas investment?"
  Last year the Government introduced a provision giving advance warning to investors in the Commonwealth that they would withdraw this relief. That warning had a very short life. Clause 30 withdraws that relief, pursuant to that warning, at the earliest possible opportunity—another hit at investment and enterprise on which the country depends.
  One of the most serious measures is the withdrawal of the investment allowances and free depreciation. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) said a few moments ago that this is being compensated for by the introduction, under the Industrial Development Bill, of a new system of investment grants. Hon. Members opposite are suffering from an astonishing amount of self-delusion if they seriously continue to believe that those new investment grants offer anything like comparable value with the investment allowances which the Bill removes.
  Over and over again my hon. Friends have said that what industry wanted was free depreciation. The enormous upsurge of investment in the development districts following the introduction of free depreciation by my right hon. Friend the Member for Barnet (Mr. Maudling) in his 1963 Budget was ample testimony to that. Granted that the Chancellor would be unable to introduce complete free depreciation at one go, and that it might be unrealistic to expect him, in present circumstances, to take any further steps in that direction this year, to set his face wholly and blackly against any form of free depreciation, as the Bill appears to do, is the height of irresponsibility.

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  There is little doubt that this form of investment incentive gives the maximum encouragement to investment. It can be readily adapted to what is now the development area concept, and it is extraordinarily depressing that the Government should not be prepared even to countenance it.
  Mr. Sheldon: If the system of investment allowances was so good, why is it that 63 per cent. of our machine tools are over 10 years old?
  Mr. Jenkin: I will deal with that point. I believe the hon. Member has quoted a figure from a technical journal. I accept his figure as being correct. But it is common ground that one needs to increase the amount of investment and also its quality—which is another aspect that is not always remembered. It is common ground that it is among the users of machine tools in particular that the need to put in more modern plant is paramount. But that begs the question. Does the hon. Member believe that the incentives contained in the Industrial Development Bill are more valuable than the incentive withdrawn by the Bill.
  Mr. Callaghan: Yes.
  Mr. Jenkin: The Chancellor says, "Yes". I wonder whether he has studied the series of Answers given to me by the President of the Board of Trade on 1st July, in which he spelt out the response to a series of cases which I put to him of variations in the net present worth of the discounted cash flow of investments in a variety of different projects under a variety of different circumstances. If he did, he could not possibly say that he thinks the new system is more valuable.
  What those figures show beyond peradventure—they were designed to take not the most extreme case in my favour but a neutral case—is that even for qualifying industrial plant, even if the whole of the investment qualifies for grant under the new system, the combination of the change in the taxation system and the change in the form of investment incentive has left firms substantially worse off.
  Not only that, but they have narrowed the margin of advantage between the development areas and the rest of the coun-
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  try. My right hon. Friend the Member for Argyll (Mr. Noble) was recently at an engineering firm in Glasgow. That firm had worked out its calculations on the net present worth of a discounted cash flow of the sort of investment it has put in and it found that the effect had been to halve the value of the investment grant compared with what had existed before—
  Mr. Callaghan Mr. Callaghan indicated dissent.
  Mr. Jenkin: The right hon. Gentleman shakes his head. All I can tell him is that those in industry who do these calculations—more and more firms are engaging in this very sophisticated form of investment appraisal, as was recommended by the pamphlet of that name by the N.E.D.C.—have no doubt whatever where the advantage lies.
  They know that the advantage lay with the old system which this Bill withdraws and that the new system which is introduced is, in the great majority of cases, even for those who qualify for the new grants, substantially less advantageous—
  Mr. Callaghan Mr. Callaghan indicated dissent.
  Mr. Jenkin: The right hon. Gentleman goes on shaking his head. No doubt he will answer what I am saying when he replies to the debate.
  I am prepared to concede that the new system is advantageous in three cases. One is that of the company which makes no profits. We have criticised that very fiercely; the advantage of the allowances should be subject to the test of profitability. The second is that of the company which was not in a development district but is now in a development area, that is to say, those areas which are of lesser importance. Finally there is the case of the company—of which there are some but relatively few—which was investing so fast that its investment incentives never caught up with its taxable profits—
  Mr. Gower: Does my hon. Friend not also feel some anxiety about the wider field of discretion which is now the Treasury's?
  Mr. Jenkin: I entirely agree with my hon. Friend. As he sat in on part of the proceedings on the Industrial Development Bill, he knows that we attacked this

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  fiercely. I was ignoring all those points which one could properly put against the Government. Taking even the Government's own case, the case of machinery, the whole of which qualifies for the new grants and comparing it with the allowances which they got under the old one—
  Mr. Callaghan: I keep irritating the hon. Member by shaking my head because he is ignoring one or two important points. I agree that, on a discounted cash flow technique—all of which was examined—one could prove, by sheer arithmetic, that in some cases the grants are not as valuable as the tax credits. What he has not referred to, however, is that one is a grant and the other is a tax credit. That has a considerable effect on motivation. All the evidence on this is piling up, and, of course, the cash grant is to be paid earlier.
  Mr. Jenkin: It is rather unfortunate that the Government by their policies should, in the first place, recognise that industry's techniques for appraising investments are defective but then, instead of attempting seriously to get down to correcting that, should devise their whole policies on the footing that industry should continue to perpetuate these errors—
  Mr. Callaghan: No.
  Mr. Jenkin: This is exactly what the Government have done—if the firms carry out an appraisal correctly—as the right hon. Gentleman has conceded, he said that, in some cases-I would have said in most cases—the old system can be shown to be more valuable than the new. It cannot lie with him to say that, nevertheless, the new system, if one did one's sums wrong, could be made to look more favourable than the old. That is what he is saying—
  Mr. Callaghan: No.
  Mr. Jenkin: Yes, indeed. This is the whole of our case against what we regard as a deplorable and regrettable change.
  There are many other criticisms. The right hon. Gentleman can talk about arithmetic as he likes, but when one is doing a quantitative assessment of the profitability of an investment, it is the
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  arithmetic which counts. If one chooses to ignore the arithmetic and proceed on other factors, one can be led into very grave error.
  Another point which the right hon. Gentleman made in his short intervention was that the new grants are to be paid sooner. We will believe that when we see it. There is no timetable in the Bill for their introduction. The figures which I was quoting, given to me by the President of the Board of Trade in a Written Answer on 1st July, assumed a position midway between the 18 and the six-months' period which is intended eventually to apply.
  A discounted cash flow technique takes into account exactly the period in which a payment or a tax relief becomes available. It is because it is sensitive to these factors that it is the most reliable way of appraising an investment—
  Mr. Sheldon: I am sorry to interrupt the hon. Gentleman again, but he is making a great deal of figures which are based on six or seven assumptions. Each of these assumptions could have been made totally differently. If they had been made only slightly differently, all six or seven would have shown a massively wide range of different answers.
  Mr. Jenkin: The hon. Gentleman is quite right. In a discounted cash flow calculation, one must, of course, make assumptions. One must make assumptions about the rate of profit and the profitability of the rest of the business—so as to set off the taxation allowances against the other profits in the early years—about the scrap value of the asset at the end of its life and about the rate of distribution.
  All I am suggesting is that the assumptions which were written into those Parliamentary Answers were completely reasonable, particularly as they related to the rate of distribution, where they assumed the same overall rate of tax before and after the change. However, I will not labour the point. The figures are there for all to read.
  I leave the Chancellor with this thought. Those who do these calculations in industry are finding increasingly that the Answers to those Questions of 1st July reflect their own experience and that right hon. and hon. Gentlemen opposite who say that the new system

  1949
  is more valuable than the old are deluding themselves and making a mockery of themselves in front of those who know the real answers.
  I come finally to the Selective Employment Tax. Enough has been said about this to point the extent to which it will distort the pattern of the economy in small ways and large. Perhaps the most ludicrous feature of the whole matter and one which has been severely criticised both within and without the House is the provision which subsidises employers of labour by giving them an extra weekly sum of money for every man whom they employ.
  How, in heaven's name, faced with the need to "shake out" or get redeployment or—to be more honest—to increase the level of unemployment, that sort of provision could still be defended absolutely passes my understanding.
  I should like briefly to touch on three matters which seem to me to relate to a very important aspect of what I would call "revenue morality". They deal with Clause 24, the question of spreading the Surtax, Clause 28, dealing with dividends out of pre-Corporation Tax profits, and Clause 39, which deals with the very wide anti-avoidance provisions in Clause 28 of the 1960 Act.
  These three measures are all unworthy of the Treasury and the Inland Revenue, in the face of the criticisms which have been advanced against them both within and without the House. My hon. Friend the Member for Finchley (Mrs. Thatcher) summed up the anti-Surtax-spreading provision and pointed out that the Government were suspending justice for a year. The relief under Section 228 of the Income Tax Act, the operation of which is being suspended, was designed to make such adjustments "as are just", but the Government, by this Clause, are depriving themselves of the opportunity of being just.
  Clause 28 deals with the one-year and three-year surplus of dividends and we have yet to hear a word of apology to the business community, which was sadly misled by the provisions written into last year's Finance Act. The Chancellor has acknowledged that there was a mistake. He could not have done otherwise. But not a word of apology has he uttered for the problems and difficulties which
  1950
  that mistake caused to the business community. In many cases people laid out their affairs based on last year's Act, only to find that they had been misled and deluded. The least the right hon. Gentleman can now do is to apologise.
  My only comment about Clause 39 is that the provisions of Section 28 of the 1960 Act have been fiercely criticised by those who must advise businesses and taxpayers on the arrangement of their affairs. I will not weary the House by requoting the words I quoted in our earlier debates. I am sure that the Chancellor has read those two contrasting quotations I gave on Report, one from a speech by the then Attorney-General in 1960, when he introduced Section 28, and the other, some words of Lord Justice Danckwerts in a recent case in the Court of Appeal. Those two quotations cannot stand side by side while, at the same time, the Revenue and the Treasury attempt to preserve their reputation for morality in these matters. Something must be done. Either the Clause must be amended next year or other measures taken, perhaps by an instruction being given to Inland Revenue inspectors about the way they should administer the Clause.
  These three matters underline the overriding importance in the Treasury preserving the taxpayers' respect for it. That can be done only by its maintaining the highest possible standards of justice and fiscal integrity. I am sorry to say that all three of these Measures represent a falling off of those standards, standards which we are entitled to expect and which must inevitably, if they are reduced, lead to corresponding irritation and cynicism on the part of taxpayers. That cannot be in the best interests of the Revenue and it would be unwise to follow the recent precedents that have been set.
  I have made a number of serious and important criticisms of the Bill. In view of these criticisms and others which many of my hon. Friends have made, it would be wrong if we were to allow this Measure to pass without expressing our disapproval of it by dividing the House against it.
  5.53 p.m.
  Mr. J. E. B. Hill: To those of us who, at the last General

  1951
  Election, said, "Wait and see what a Labour Chancellor will do after 1st April", this Measure has come as a complete and grievously disappointing vindication. Its fault is that it is all penalty and burden and offers far too little encouragement.
  If the Bill is the Labour Party's only alternative to devaluation, perhaps that is the best thing that can be said for it. I dislike hearing people use the word "devaluation" unless, at the same time, it is stressed that its supreme disadvantage, which has not been mentioned today, is that it would greatly add to the real burden of our debts and diminish our capacity to repay them.
  That apart, the Bill has several great defects. I am particularly disappointed because—and this is partly due to the time given to it—it has not provided enough opportunity to remedy some of the anomalies which still remain from the Finance Act of the preceding year. Considering the trouble and uncertainty that has been caused to accountants and taxpayers, it is probable that we will need another Finance Bill at some stage, merely to make good the defects that continue. I would like to see the Treasury making a real effort to simplify some of the administration. We should have a better de nnnimis rule in working out some of the small tax liabilities which at present take up an amount of professional effort disproportionate to any tax yield.
  Under the preceding Measure, as well as this one, practically every schoolboy and schoolgirl with a pass in G.C.E. in maths will be able to find remunerative employment, either in the files department of the Inland Revenue or in accountants' offices taking part in what has become a gigantic national imposition—the registration and recording of every Stock Exchange transaction, however small, to calculate whether or not—in respect of, say, a poor person, perhaps a widow with a few shares—there is some tax liability.
  I have been checking up in my constituency and with some London accountants' firms. These firms say that they are absolutely clogged by the sheer weight of purely unproductive work. The costs of the imposing exceed any revenue
  1952
  that might accrue by way of taxation. This state of affairs must be plain nonsense at a time when we are short of labour and every type of trained skill.
  Selective Employment Tax will bear harshly on my constituents as much as on those of any other hon. Member, particularly on disabled and part-time workers. Such alleged remedies that have recently been given to the hotel industry do not make up for the treatment meted out to it by S.E.T., particularly in view of the absence of any proper investment allowances. That is clearly borne out by a letter from Sir Geoffrey Crowther, a great expert in these matters, in The Times this morning. His firm has invested a great deal in a hotel in my constituency, an extremely worthwhile development which I am sure would not have been achieved had the Government's latest proposals been in force.
  I am worried, too, because of the likely effect of S.E.T., now that it will have only small easements, on many businesses, particularly on some private schools which also provide homes for children whose parents are overseas. These children are often dependent on such schools for the care and attention of a home as well as tuition while their parents are necessarily abroad. Some of these schools rely very much on part-time help, domestic and teaching. Even to a small school this can make a tax difference almost equal to the livelihood of the people running the school. It could easily have the effect of taking. £1,000 away from a school which has only 50 or 70 pupils. This is a serious matter for that type of undertaking, just as it is for any small business, which may find itself penalised in what would otherwise be open competition with local authorities on, for example, contract work. Some businesses and farms that will have to find this tax are already pressed to the limit of their bank credit. The disadvantage of the tax is that for those who have to pay it there is very often no option. It is not merely a question of discharging people and in that way saving the tax. It may be that the payment of the tax makes a business no longer worth while carrying on. That is a very bad tendency to have in the countryside.
  The Selective Employment Tax worries me, because from September onwards

  1953
  it will take out of the economy about £100 million a month until such time as repayments fall due when, as has been said by my hon. Friend the Member for Worthing (Mr. Higgins), we will have a period of sharp reflation. This tax, starting out on a fixed pattern, may well become a very serious factor which we cannot control. I may be at fault, but nowhere in this Bill, or in any of the other legislation dealing with this tax, can I find any provision, short of an Act of Parliament, for reducing the incidence of the tax, yet such a reduction might be highly desirable and very important. It seems to be a curiously inflexible tax to be brought in by a Government which say that manipulation of the economy is so important.
  The big danger of this Finance Bill is its cumulative effect of deterrence, which may defeat the Government's own plans for maintaining and, if possible, increasing the level of production and the growth of productivity. It is much more likely that those who should be making important investment decisions, and making every extra effort to improve their businesses, will decide, in view of the economic storm and the dangers of taking on extra risks, just to batten down the hatches and weather the storm. That will produce the worst possible effect on our economy, but it is the most likely consequence of the Bill. Too many people in the next year or so will prefer extra leisure to extra effort, and that is not in the national interest.
  6.3 p.m.
  Captain Walter Elliot: I only want to put a brief point to the Chancellor of the Exchequer which, with his serried ranks of Treasury experts, he should not find difficult to answer. With the passage of time, and the onset of events since the introduction of this Finance Bill, it is probably inevitable that this discussion should put the emphasis on the deflationary effect. That is true of this Bill and of subsequent Measures. When we first started to discuss this Bill, I remember the right hon. Gentleman, resisting certain Amendments, making the plea that all Chancellors of the Exchequer make, that the provision was essential as he had to raise revenue. I presume that this was to pay for all the Measures that have been introduced
  1954
  in the last two years. We have had a good deal of tough talk in that time, but, at the same time, quite a lot of expensive Measures have been brought in by the Government. I assume that this present Measure is one of the bills that has now been presented.
  My hon. Friend the Member for Finchley (Mrs. Thatcher) has expressed the hope that some of the money being collected will be used to reduce the National Debt. I wish that were the case, but I very much doubt it. Not only are we not likely to reduce it, but, as we know, we are at present selling our assets in order to pay our way. It is a very serious state of affairs. What amount of the money resulting from this Finance Bill—and from the other packages, for that matter—will be used for revenue purposes, and what for debt reduction? That figure may have been produced somewhere, but as the ordinary Member is not always an expert in finance and is without the resources to keep a check on the large impositions of recent weeks, I have no idea what amount will go to revenue and what amount, if any, to reduce debts.
  If the Government spend all this money, it will obviously have an inflationary effect. We will then be back in what I think of as the nightmare process of two years of the Government pumping money into the system and the Chancellor of the Exchequer fighting a losing battle to draw it back. I well recall the right hon. Gentleman remarking in the Budget debate that he sometimes feared that rising prices would always be with us. They always will be with us, of course, if we pump money into the system and only belatedly draw it out again.
  I therefore hope that the Chancellor of the Exchequer will let us know what is being done with all this money. Is it being used for revenue purposes? Is it being used to redeem debts? That information will enable us to judge fairly what the right hon. Gentleman is aiming at. If I knew that it was being creamed back to redeem debt, it would in many ways greatly lessen my opposition to some of these Measures.
  6.8 p.m.
  Mr. Raymond Gower: The Chancellor of the Exchequer will probably agree that from this side he has

  1955
  heard a series of pertinent, sometimes critical, but never unfair speeches. We recognise, as any responsible Opposition must, that dependent as we are on imports of raw materials and food, this is an extraordinarily difficult country to run and that it would be folly for any of us ever to suggest that it is easy to keep Britain's affairs always in balance. At the same time, the right hon. Gentleman will recognise that the anxieties and criticisms that have been expressed are valid in some cases.
  For example, what is extraordinary to some of us is that while, doubtless, the right hon. Gentleman has had some real difficulties in the last two years, he has at the same time contrived to introduce such far-reaching successive changes in our taxation system, of which the latter portion of this Bill is part. One thinks at once of the problems of those engaged in the economy, and in industry, in particular. If these changes in taxation are far-reaching for the Treasury and for the Inland Revenue, they are also far-reaching and extraordinarily disturbing for those who have to administer some of our great productive companies. In the last 18 months they have had to cope with the introduction of a new system of company taxation, and now with such revolutionary changes as the Selective Employment Tax embodied in Part II of the Bill. It seems that possibly the Chancellor has added to his difficulties by rushing through these very big changes at such a speed that they cannot easily be digested either by the administration of the Inland Revenue or the administration of companies and their professional advisers.
  In his remarks earlier in the debate, the hon. Member for Heywood and Royton (Mr. Barnett) asked pertinently, I thought almost plaintively, "Does this Finance Bill achieve the right degree of deflation?" If it does, it could not have done so when it was published. If it did achieve the right amount of deflation at the time when it was published, it must be too deflationary at present. That is the only conclusion we can reach. I would not press that too far, because I recognise that there have been changes since the publication of the Bill, not all of which could easily have been foreseen.
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  Nevertheless, it seems that the hon. Member for Ashton-under-Lyne (Mr. Sheldon), when referring to more taxes and new taxes, reflected a rather strange kind of thought which seems to be shared by a number of hon. Members on the benches opposite. It is perhaps not surprising that they seem to think in terms of new taxes and more taxes. While we on these benches share a general ambition to broaden the tax base, we want that to be associated in due course with reductions of taxation in other sectors.
  I think I speak for a large majority of this side of the House in saying that it is no good achieving a widening of the tax base if at the same time we tend to increase taxation in every direction and every part of the taxation system. As has been said, taxation by this Bill alone has been increased very greatly indeed. It has been increased, of course, by the Income Tax, by the Surtax and by the Corporation Tax at 40 per cent. All this represents a very large increase in taxation. This is the culmination of previous increases in taxation which occurred in the last 15 months prior to the presentation of this Bill.
  The hon. Member for Ashton-under-Lyne also, I think, betrayed a kind of thinking which is all too prevalent among some of his colleagues when he suggested that investment grants were preferable to investment allowances because they would enable the Treasury to control the economy always in desirable directions. This is a relic of the old saying attributed, perhaps wrongly, to the present President of the Board of Trade, that "The gentleman in Whitehall knows best." I fear that there is much thought opposite that the Treasury knows best, that the Government know best, and that they can decide more effectively than anyone else the best future trends for our economy.
  Mr. Barnett: Surely the hon. Member has seen the figures in various reports relating to the increase, or lack of increase, in investment related to the position when investment allowances applied?
  Mr. Gower: Yes, but the hon. Member for Ashton-under-Lyne went much further. I am sorry that he is not present at the moment. I could not warn him at such short notice that I

  1957
  would refer to what he said. He suggested that it would be better that the Government should decide which particular company should receive an investment grant, in other words that the Treasury and the Government should decide what was best for the country. If that had applied in Japan immediately after the war, how many would have decided that transistor radios would be one of the best things which Japan could introduce? Similarly, how many in Italy could have foreseen that production of beachwear and shoes would provide one of the most automatic means of helping their economy?
  Businessmen can make serious mistakes, but, by golly, Governments can make much more serious mistakes—much more serious in their consequences. That is why I am deeply anxious, not only for the reasons stated clearly by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), whose views I share about investment allowances being preferable to investment grants, but for the extra reason that I do not like this discretion. We should have heard more about how it would be exercised. I do not like the wide discretion to be given to the Treasury in the giving of this new form of grants.
  This Bill in its present form does not achieve many of the things which we on this side of the House believe most desirable for our country. It does not in its present form provide any sort of stimulus, except the granting of premiums in the Selective Employment Tax arrangements. This is the only form of stimulus in the Bill. Enough has been said about that to make it appear that there are severe grounds for criticism. Very few, if any, proposals in the Bill appear to make for greater industrial efficiency. There is certainly nothing in the Bill as it stands to promote savings, nothing to encourage private investment, and nothing to provide one of the most important things, namely wider diffusion of ownership of industry among the people.
  Many of my hon. Friends have criticised the Selective Employment Tax as presented in this Bill. I share their deep anxieties about it. The tax as in the Bill at present will be collected from all parts of the country. It will be collected from urban and rural areas alike, from the prosperous and the less prosperous parts, from
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  the development areas and the rich manufacturing areas. It will be collected from the farming areas and the holiday resorts. It will be collected from factories employing disabled persons, factories employing elderly persons and factories employing part-timers.
  We read on the front page of the Bill: "As amended in Committee and on Report". We can only deeply regret that it was amended so slightly in Committee and that no improvements were made, particularly in this part of the Bill. In its effect it will permit the Government under their present proposals to pay out the premiums to all kinds of productive industry, the good and not so good, the vital and the not so vital—
  Mr. Deputy Speaker (Mr. Sydney Irving): Order. The hon. Member must know that the pay-out is in another Bill and that it is out of order to refer to it in discussion of this Bill.
  Mr. Gower: Certainly other hon. Members referred to it, Mr. Deputy-Speaker. I was led astray. I share the views of the hon. Member for Heywood and Royton on this point. He admitted that there is need for a substantial amendment of this part of the Bill.
  Mr. Barnett: I was referring to the premiums, which, of course, are in another Bill.
  Mr. Gower: That is one of the reasons why I was led astray. As several of my hon. Friends have said, the Bill has taken us a stage further along a course of ever-increasing taxation in the last 18 months—burdensome to industry, excessive in the case of the individual, and not contributing to stimulating either investment or effort. We can only express the deepest anxiety about it. I hope that the Chancellor will heed the criticisms and anxieties which have been expressed.
  6.20 p.m.
  Mr. Ian Lloyd: My hon. Friend the Member for Barry (Mr. Gower) referred in the most interesting terms to the extreme difficulties of prediction in economic affairs, whether it be prediction in terms of technology or in terms of the requirements of the market. My hon. Friend mentioned transistor radios from Japan. One of the things which astonished me most on my

  1959
  last visit to Japan was the extraordinarily high number of what are known as fruit machines which the Japanese people seem to enjoy employing in their leisure time.
  I make this point deliberately, because we are today—the Bill certainly registers this point of view—growing dangerously near the position where, having decided what is to be taken by the public sector and what is to be taken by the private sector, we then, in a secondary phase of our judgment, heavily criticise how the private sector deploys its resources. It is very dangerous to allow this to happen, because, having made our decision through all the collective pressures of political discussion and decision, we must surely allow the private sector to deploy its resources in whatever manner it sees fit.
  It may be amusing if I refer to something said quite a long time ago by a man who was regarded as a prophet and, indeed, as an authority. I refer to Maynard Keynes. In 1925 Maynard Keynes, referring in one of his great essays on the economic possibilities for his grandchildren to the sick man of Europe at that time—France—and to the devaluation of the French franc and its relationship to the £, said this:
  One blames politicians, not for inconsistency, but for obstinacy. They are the interpreters, not the masters, of our fate. It is their job, in short, to register the fait accompli."
  Perhaps we are registering this evening on this Bill a fait accompli.
  I draw the attention of the Chancellor to one other form of registration to which we should pay particular attention. That is the registration of this vexed question of employment and unemployment. The Selective Employment Tax, which is a considerable part of the Bill, will tempt the Chancellor and other Ministers to refer repeatedly to the index of unemployment.
  This is one of the most dangerous criteria which we in the House of Commons can consider as being important today, for these reasons. It is not that we want to maximise the employment figure as it stands and to minimise the unemployment figure—this very crude index. What we want to maximise is employment in the sectors of highest productivity. We want to bring the
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  facilities for retraining and redeployment into balance with the rate of technological change. We want to deal with the maximum of humanity and understanding with the unemployable, the inefficient, the incompetent, the lazy, and the unfortunate.
  Mr. Deputy Speaker: The hon. Gentleman is going far too wide on Third Reading of the Bill. I hope that he will return to the contents of the Bill.
  Mr. Lloyd: Certainly, Mr. Deputy-Speaker. In the half a minute remaining to me I will return to the contents of the Bill and conclude by again quoting a prophet whom the House will surely accept as being a far greater prophet than I can ever hope to be. This perfection which I think lies behind the thinking of the Government in this Finance Bill and in many other of their measures is a philosophy of idealism. This is what Keynes said:
  "For at least a hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight."
  6.25 p.m.
  Mr. Iain Macleod: When the Chief Secretary to the Treasury moved the Third Reading of the Bill and delivered a short panegyric about the benefits it would undoubtedly bring to the country and as to the excellence of its drafting, I wondered whether for the last two and a half months he and I had been discussing the same Measure in the House. I came to the conclusion that we had not and that that accounted for some of the answers which we received from the Treasury Bench during the course of these debates.
  To put it mildly, the circumstances are unusual. As the hon. Member for Colne Valley (Mr. Richard Wainwright) said, the basic assumptions which were made at the time of the Budget are no longer tenable after the statement made by the Prime Minister last week. The assumptions of full employment, which was the answer given over and over again to the problems of the disabled, the part-time and others affected by the Bill, are no longer answers which could have been given today, although they were given a week or two ago.

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  The Bill is the child of the Budget speech. The truth is that it has been strangled by its father, who is about to join in the wake in a few minutes. We are debating for a short time something quite unreal and unrelated to the Budget speech which was made on 3rd May.
  It is traditional on these occasions for the Chancellor of the Exchequer and the Shadow Chancellor to have a sort of brief prize giving. I gladly and willingly follow that custom. I have found it a great pleasure once more to be the opponent of the Chancellor on a major Bill. I have always been grateful to him since the years when I was Colonial Secretary and he was my shadow. I do not forget the help he then gave me.
  Throughout the Bill, with the exception of Clauses 42 and 44, for reasons which the Chancellor understands very well, we have always known exactly where we were going to get to, even though it sometimes took us a little longer than usual. This knowledge was for the convenience of the House always.
  The Chancellor has been courteous to me at ad times. I am extremely grateful to him. We have managed the timing this evening correctly. As long as the Chancellor manages to remember to sit down at one minute to seven, we shall then be able, with good luck, to conclude the proceedings.
  I saw in the paper that the Chancellor had retired to his cottage exhausted by his labours in carrying through the Finance Bill. I cannot believe that this is true, because we have not seen a great deal of him during these long days and nights. He has left the work to his chief lieutenants.
  The Financial Secretary to the Treasury, I thought, was always cool and courteous. If we did not like his answers, that is not unusual in an Opposition. We had a real respect for him. That respect grew as the weeks went by.
  I wish that I could be as complimentary to the Chief Secretary, but I cannot be. I do not think that he was happy in his handling of the S.E.T. Clauses in the Bill, simply because we did not think he cared enough about a problem which is essentially a deep human problem. Whenever hovercraft were mentioned, the Chief Secretary went berserk. I could only
  1962
  conclude that he had been bitten by a rural bus at one stage. However, I am feeling in a generous mood. I will simply say that I think that the Chief Secretary took a year's sabbatical leave of his senses.
  Turning now to my own side of the House, the House will understand if I pay a warm and sincere tribute to my hon. Friend the Member for Finchley (Mrs. Thatcher). She has been efficient and tireless as we have gone through the Bill. Her performance has been very much admired on both sides of the House and outside the House.
  I will lump together all my remaining assistants. I was baffled, as always—and I think that the Chancellor was sometimes—by their erudition, and I am grateful to them for the very hard work they have put in. I should not like to forget words of thanks to the Chair, both in the House and in Committee. The fact that at one time we were in dispute with the Chair in Committee has nothing to do with the sincerity of our gratitude to its occupants, which I also extend to the staff of the House.
  First, I want to say something about the betting and gaming taxes. The betting tax is, of course, wholly supported. We think that it is being done the wrong way round, but I shall not argue the case again now. I believe that the right hon. Gentleman is not taking enough out of the gaming industry, and I hope that he will look at this again. We were in an odd position here in that we were trying to get the Chancellor to take more, but he refused to do so. It was curious for a Chancellor, but that was his attitude both towards our gaming proposals and when we tried to stop him paying out £133 million in premiums. The Treasury was determined to collect as little as it reasonably could, however, and to spend as much as it possibly could. It seems an odd way to run the Treasury.
  I do not know how many right hon. and hon. Gentlemen know this, but perhaps they will take it from me. The gaming going on in London is not only much higher than anywhere else in the world but probably higher than it has ever been in any previously recorded time. I shall not give the figures because I do not believe that people would accept the figures I gave. They would find them almost unbelievable.

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  The Chancellor must look at this again. It is a very dangerous position. I have expressed my own view—there is no party line in this. I am not for trying to stamp gaming out—that would be a fundamentally foolish approach—but I believe that it is right to soak it good and hard, and I think the right hon. Gentleman should turn to this again next year.
  I shall say little about the Selective Employment Tax. My hon. Friend the Member for Finchley rightly pointed out that the collection, which starts on 5th September at the annual rate of £1,100 million, is the highest impost, as far as I know, that has ever been put in any Finance Bill upon the people of Britain. We debated the dangers of this yesterday and have referred to them on a number of occasions during the progress of the Bill.
  The level of Corporation Tax has been fixed at 40 per cent. My hon. Friend the Member for Worthing (Mr. Higgins) went into this in some detail, which enables me to be all the briefer about it. I very much hope that the Government spokesman in another place will give rather more justification for it than the Chief Secretary felt able to do today. The Chancellor will recall what happened on 21st June, and it is very odd that a mistake of this nature could be made by someone who is Chief Secretary and has been an accountant all his working life and who presumably was reinforced by a Treasury brief.
  The Chief Secretary explained the point about the eleven month collection of Schedule F, calculated it at £52 million—which is something like 5 per cent. of £1,000 million, the gross figure looked for in Corporation Tax—and said:
  "Of course, 36 per cent. and 5 per cent. makes 41 per cent."—[OFFICIAL REPORT, 21st June. 1966; Vol. 730, c. 309.]
  There is no "of course" about it. I think the right hon. Gentleman recognises that that simply is not so. If one increases 5 per cent. to 10 per cent. one doubles it, adding 100 per cent. Therefore, no reason has been given why this extremely high rate of 40 per cent. should be taken. The Chancellor may not feel that he has time to deal with this tonight—and I shall quite understand if that is so—but I hope that the Government spokesman in
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  another place will spell it out because the business community is entitled to know.
  The hon. Member for Heywood and Royton (Mr. Barnett) asked what the view of this side was about the amount of deflation, forgetting the timing, and whether we thought it about right. The answer is in two parts. First, this is now, as are so many others, a wholly irrelevant question after last week's statement. Secondly, I have never disputed—and the Chancellor acknowledged this at the time—that about £240 million in a full year may well have been about the right judgment. That is not in dispute.
  What was in dispute—and we debated this at some length yesterday—was the timing of the Chancellor, but the right hon. Gentleman has told us that he was at fault there. The position is that if he had seen the danger earlier—and at least we can claim that we saw it—either we would not have Clause 44 of the Bill or last week's Budget. The failure of the Chancellor is simply that as a result of an error in timing we have got both. That was part of the burden of our complaint.
  The Bill is irrelevant both to the Budget of 3rd May and, in a sense, to the measures of last week. The Chancellor has been blown off course—to use the nautical metaphors with which we have been inundated—and it has all been done by a group of tightly knit, politically motivated men which means the Cabinet, although it is not as tightly knit as all that.
  Still, the Recess is only a few days away, and how the Chancellor must be longing to get away if only he can get through the mess which still lies ahead. The Government have tried to hustle and curtail debate on the Bill and on others. We have wasted ten weeks of discussion. We have been here night after night watching the dawn come in through those windows or the others—depending on which way one is facing—[Interruption.] I do not know what one sees from the tearoom. I have seen it from this Chamber. As I was saying, we have had all these weeks of discussion and the assumptions on which we were debating have now proved completely unfounded.
  I draw the Chancellor's attention to one comment which did a great deal of

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  harm. It was made by the Chief Secretary on 29th June when we were discussing on Clause 4 the problems of the part-time workers. The hon. Member for Bristol, Central (Mr. Palmer) said that, as a whole, the Committee was having the better of the argument with the Government, and this was true. My hon. Friend the Member for Barry (Mr. Gower) then said,
  "… but there has been no argument …"
  because both sides of the Committee had agreed. The Chief Secretary then replied to my hon. Friend:
  "Surely the hon. Gentleman has not been absent from every Division."—[OFFICIAL REPORT, 29th June, 1966; Vol. 730. c. 1892.]
  The Chief Secretary was saying that argument did not matter—that it did not matter how good a case might be—because there were enough people sitting outside ready to come in at a moment's notice and support the Government against all the arguments and the whole of the case poured on the Treasury Bench from both sides of the Committee.
  If the Chancellor likes to look back on our proceedings he will realise that it was from that moment of admission that the Chief Secretary did not care about the arguments or show an interest in what we were saying that some of the difficulties and troubles came. However, the House of Commons is a strange place and I was slightly mollified by the Chancellor of the Exchequer.
  Mr. J. T. Price: The right hon. Gentleman is in a very amiable mood. It is rather disturbing when one is at the receiving end of Parliamentary operations. For 13 years we were in opposition and were often in the position of having an unanswerable case and finding the Conservative legions coming into the Lobby against us. It is something we all go through, so please do not let the right hon. Gentleman complain too much.
  Mr. Macleod: I am not complaining. If the Government go on as they are we shall be back on those benches in a very short time. I was saying that I was mollified to some extent by the frank, open and honest apology that the Chancellor made at the beginning of our two day debate earlier this week, when he said, in effect, "I was wrong, I am sorry, I apologise."
  1966
  From that moment the Third Reading of this Bill really became irrelevant to the Budget and to all the debates we have had since, so I shall not spend more hours on the Bill—I have an arrangement with the Chancellor to sit down now—which has been so badly handled, which was conceived in entirely different circumstances and which has been based on entirely wrong premises. But we can give it one final blast of contempt with our vote against Third Reading and that we propose to do.
  6.40 p.m.
  The Chancellor of the Exchequer (Mr. James Callaghan): I should like at the outset to acknowledge—not merely as a normal courtesy, but because I mean it—the co-operation which I have had, and which the Chief Secretary and the Financial Secretary have had, from the Opposition Front Bench in the conduct of the debates on the Bill. With our procedures, it certainly makes it easier if, with the general consent of the House or the Committee, it is possible for us to consult and to know where we will get and how we are to conduct the business. Having had some experience of Finance Bills, I can say that it has been done better this year than I have known it for a number of years, and I thank the right hon. Member for Enfield, West (Mr. Iain Macleod).
  As for his team of 13, not only was I baffled by the erudition of its members, but I never knew where they were going to turn up. They seemed to be like the Argentinians and to play all over the field. Sometimes I saw them in one place and sometimes in another, but they were always putting points which betrayed that they had mastered the two Clauses each which they had been given and that they were determined to ensure that the House knew that they had mastered them. I can only say that from the Treasury Bench we felt as though they were popping up all over the place and we had a very formidable team against us. If only half the number is playing next year, we shall be obliged to the right hon. Gentleman, and we shall be able to get used to one style of bowling and know what we have to deal with.
  I should like to thank my right hon. Friend the Chief Secretary for his patience and thoroughness throughout the

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  whole of the debates. Some harsh words have been uttered, but I should like him to know that he has the full confidence of everyone on this side of the House and, I believe, of very many hon. Members opposite. As for the Financial Secretary; if I may be allowed to echo the words of the right hon. Gentleman, my hon. and learned Friend's coolness and courtesy in debate and his mastery of betting legislation have been to me a revelation of a new feature of his character. He has instructed me in many things and now he has in betting and gaming.
  There is no difference between the right hon. Gentleman and myself about betting and gaming in the sense that I feel, whether through puritanical upbringing or whatever it may be, that there is far too much going on nowadays. I think that that view is widely shared throughout the country. I have framed legislation on the advice of those who have studied and know about this matter and who feel that some of the people with whom we are dealing, although not everybody, would take advantage of rates of tax which were fixed too high to evade the provisions. Thereby the rot might spread throughout the system. I think that it is better to start moderately and to ensure as far as possible that the provisions are observed than to fix a high rate knowing that there will be considerable evasion.
  I cannot agree with the right hon. Gentleman that debate was hustled. To take as an example Clause 44, in Committee when it was Clause 42, we spent on it a whole week of normal Parliamentary time, taking it from 3.30 to 10 at night. That may have been right and I do not complain about it, but it is not proper to say that debate on that issue was hustled.
  The right hon. Gentleman said that the Finance Bill had been made irrelevant by the events of last week. I should like to relate that to the question put to me by the hon. and gallant Member for Carshalton (Captain W. Elliot) about the size of the revenue and how it is to be spent, because against that background the right hon. Gentleman will see that he is wrong when he says that the Finance Bill is irrelevant. The answer to the hon. and gallant Gentleman is that the
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  revenue to be raised under the Budgetary proposals amounts to rather more than £10,000 million. How can that be irrelevant when a margin—and it can be only a margin—of £350 million is to be added—not additional revenue but an additional lessening of the pressure on demand as a result of the measures of last week? The additional revenue is much less than that and the right hon. Gentleman is vastly overstating the case when he says that a Budget of £10,000 million is irrelevant because a further £350 million is being added, which in another connection can be said to be about £160 million or £170 million. Of course it is not irrelevant.
  To return to the hon. and gallant Gentleman's question; total expenditure at about £9,100 million is £1,047 million less than revenue. That is a very large surplus, which is probably a record, although I have not had time to check that since I was asked. The hon. and gallant Gentleman will understand that that is before last week's measures. That £1,040 million surplus in the Budget is hypothecated to the redemption of the National Debt, but then is immediately recovered in order to give assistance to industry of various sorts, including the nationalised industries—and by "assistance" I mean funds for capital investment, the programmes being undertaken in the electricity and gas industries and so on, accounting for £760 million—and to meet other expenditure of which the largest item is the provision of various local authority services—I am referring to capital expenditure—such as housing programmes accounting for £570 million.
  Taken together, assistance to industry and local authorities and others, there is a total of £1,330 million, which means that the Government have to borrow about £287 million this year over and above the collection of taxes. What I am certainly expecting is that the largest part of that borrowing will not be through the banking system, but will be raised by genuine borrowing through the National Savings movement and in other ways. In that sense I claim that the Budget is financially and fiscally realistic in that it raises a large surplus—we could argue about the theory of whether we ought to do it this way, but I do not have the time to do that now—"above the line" and that surplus is used to finance the capital needs of the services

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  which l have mentioned. The amount left for borrowing is very small indeed and I think that I can claim a great deal of support from the hon. and gallant Gentleman in this connection.
  The hon. Lady the Member for Finchley (Mrs. Thatcher) referred to the way in which we discourage savings, as she thought. I should like to join in the appreciation of the way in which she has put her argument over a long series of weeks. I am not sure that I have identified the case to which she referred, because she did not name it; but if I have identified it, then it is not true that the employer company was providing any benefits for its hourly-paid workers. What it was doing was to sponsor a commercially inspired friendly society—and there is nothing wrong in that—which was originally set up to do the sort of business at which Clause 29 is aimed. That cannot be distinguished from the better known friendly societies of the same kind. It has not been prevented from doing business. What it has been stopped from doing is business free of tax. Perhaps I do not have the right organisation in mind, but I think that I have, because I remember seeing this case.
  The hon. Member for the City of Chester (Mr. Temple) asked me three questions to two of which it would, I think, be out of order for me to reply. The third was about share fishermen, groups of fishermen who own shares in fishing boats, a practice to be found particularly in Scotland. I understand that the normal procedure is that the owner pays the National Insurance contributions for the group of fishermen and would therefore pay the Selective Employment Tax for that group. He would then be able to claim refund in the normal way for the fishermen. Being share fishermen, they may decide to do it in some other way among themselves. There are a great many arrangements made. But I understand that that would be the normal way in which it would be done.
  The hon. Member for Worthing (Mr. Higgins) asked about the use of the regulator. He asked whether the Clause to which we shall now give a Third Reading would be additional to the powers recently exercised. The answer is, "No". Clause 16 continues the
  1970
  powers to apply a surcharge of up to 10 per cent. on certain Customs and Excise duties and the Purchase Tax. It does not increase them, and is in no way additional to them. We have not used two out of the five groups for reasons that I think are known to the hon. Gentleman. I would not expect to use them normally. In any case I could not once again increase the 10 per cent. as a result of the passage of this Bill.
  The hon. Member for Colne Valley (Mr. Richard Wainwright) raised the question of employers being in arrears with their contributions of National Insurance. It is an offence not to pay National Insurance contributions at the proper time. I hope that the hon. Member will direct his staff to this effect when they are doing their audit work. He should tell his staff that an employer who does not pay at the proper time risks prosecution. The proper time is weekly or monthly depending on when wages are paid. When the employer makes the contributions he will have to pay the tax, because it goes on the same stamp.
  The tax is already beginning to have an effect in the sense that a number of firms and companies are looking ahead to the liquid financial arrangements they will have to make when they begin to pay the tax in September, so that I would not wholly agree that the tax has no effect until then.
  I come now to the questions on the Selective Employment Tax raised by my hon. Friend the Member for Heywood and Royton (Mr. Barnett) and a number of other hon. Members. From the very outset, my right hon. and hon. Friends and I have made clear that there is scope for changes in the tax in the future. The possibilities can be broadly divided into two categories.
  First, there are improvements to the existing structure. No tax is ever perfect, no matter how long it lasts. I have undertaken to keep under review the effect of the tax on employers with groups of employees in particular categories such as part-timers, the disabled and the elderly. In addition, we shall need to watch those matters which can be judged only in the light of practical experience. I do not believe, and I do not think that many hon. Members believe, that the tax

  1971
  will result in the discharge by employers of a large number of disabled or elderly workers. We shall need to watch these matters in the light of experience, and other matters such as the operation of the Standard Industrial Classification and the difficult borderline cases that are bound to come up in particular industries or groups of industries.
  I have followed up some of these cases. There was one which achieved a great deal of prominence in the national Press. I asked the company concerned to come to see my officials in the Treasury. I do not blame the company for not having understood the Bill. I am sure that very few of us can understand any Bill at first reading. But when Treasury officials went into the matter with this very large company they found that it was entirely different in its impact from what the company itself—it was quite honest about it—had in good faith assumed. We shall have to watch to see how these borderline cases operate. But I believe that when the tax is in operation we shall find far fewer troubles than people now think.
  Secondly, in addition to improving the existing structure, it will be possible to introduce changes to adapt the tax to the changing needs of the economy. This will be for the long term, because we cannot make alterations of substance until the tax is properly launched. Because it is selective, we shall be able to look at the possiblity of varying the impact of the tax between different regions as well as between different sectors of the economy. Over and above the two main ways in which we might want to refine the tax, there will be the possibility of varying the rates of tax and the rates of premium, both absolutely and relatively as the circumstances require.
  All in all, and whatever imperfections the tax may be launched with, I am certain that it is an economic instrument of very considerable significance and capability. It is significant that the critics of the new tax have divided themselves into those who think that it is too selective and those who think that it is not selective enough. For the moment, within the limits of the administrative possibilities, I believe that we have about the right amount of selectivity, and that over the
  1972
  years it will be an instrument capable of a number of variations. In my view—I am not claiming any particular credit for this—it will be an important instrument in the armoury of any future Chancellor.
  Hon. Members on both sides of the House have expressed very considerable concern about the effects of the tax on the employment of disabled persons. In the debates on the Bill, both my right hon. and hon. Friends and I have explained why we do not think that it should work particularly to the disadvantage of disabled persons. About two-thirds of the disabled in employment work in establishments that will qualify for the premium or refund. There will clearly, therefore, be no incentive to discharge anyone in those establishments.
  The remainder, some 200,000, have the protection of the quota and the designated employment scheme. We have said—and my hon. Friend the Parliamentary Secretary to the Ministry of Labour made this clear in another debate—that we shall watch very closely for any signs that the tax is having an adverse effect on the employment of the disabled, and, if necessary, it will be possible to take action accordingly.
  I must conclude. There is a number of other points that should be dealt with, but we have rather done the Bill to death at the moment. I understand that the Opposition—and, apparently, the Liberals—are about to vote on the Bill. When they do so they will have reached the nadir of financial irresponsibility.—[Interruption.] Let us see, in the last minute left to me: they will be voting against the betting tax, which the right hon. Gentleman says should be higher; against the casino tax, which he thinks should be increased; against the tax on one-armed bandits, thus saying that they do not believe in a tax on them; against the tax relief given to redundancy payments for those who are put out of a job; against the charge to Income Tax; against the charge to Surtax; against the Corporation Tax; and against the reliefs given for social security benefits to those in need.
  There are half a dozen other things they will be voting against. If they had their way—they know that they will not get it—the result of their vote tonight would leave the country without the financial resources with which to carry

  1973
  on its government. I knew that they were irresponsible. I never knew that they were as bad as all that.
  Question put:
  The House divided: Ayes 315, Noes 237.

  Division No. 148.]

  AYES

  [6.59 p.m.

  Abse, Leo

  Dobson, Ray

  Johnson, Carol (Lewisham, S.)

  Albu, Austen

  Doig, Peter

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

  Allaun, Frank (Salford, E.)

  Donnelly, Desmond

  Jones, Dan (Burnley)

  Alldritt, Walter

  Driberg, Tom

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

  Allen, Scholefield

  Dunn, James A.

  Jones, J. Idwal (Wrexham)

  Anderson, Donald

  Dunnett, Jack

  Judd, Frank

  Archer, Peter

  Dunwoody, Mrs. Gwyneth (Exeter)

  Kelley, Richard

  Armstrong, Ernest

  Eadie, Alex

  Kenyon, Clifford

  Ashley, Jack

  Edwards, Robert (Bilston)

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

  Atkins, Ronald (Preston, N.)

  Edwards, William (Merioneth)

  Kerr, Russell (Feltham)

  Atkinson, Norman (Tottenham)

  English, Michael

  Leadbitter, Ted

  Bacon, Rt. Hn. Alice

  Ennals, David

  Ledger, Ron

  Bagier, Gordon A. T.

  Evans, Albert (Islington, S.W.)

  Lee, Rt. Hn. Frederick (Newton)

  Barnes, Michael

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

  Lee, Rt. Hn. Jennie (Cannock)

  Barnett Joel

  Faulds, Andrew

  Lee, John (Reading)

  Baxter, William

  Fernyhough, E.

  Lestor, Miss Joan

  Heaney, Alan

  Finch, Harold

  Lever, Harold (Cheetham)

  Belienger, Rt. Hn. F. J.

  Fitch, Alan (Wigan)

  Lever, L. M. (Ardwick)

  Bence, Cyril

  Fletcher, Raymond (Ilkeston)

  Lewis, Ron (Carlisle)

  Henn, Rt. Hn. Anthony Wedgwood

  Fletcher, Ted (Darlington)

  Lipton, Marcus

  Bennett, James (G'gow, Bridgeton)

  Floud, Bernard

  Lomas, Kenneth

  Bidwell, Sydney

  Foley, Maurice

  Loughlin, Charles

  Binns, John

  Foot, Sir Dingle (Ipswich)

  Luard, Evan

  Bishop, E. S.

  Foot, Michael (Ebbw Vale)

  Lyon, Alexander W. (York)

  Blackburn, F.

  Ford, Ben

  Lyons, Edward (Bradford, E.)

  Blenkinsop, Arthur

  Forrester, John

  Mahon, Dr. J. Dickson

  Boardman, H.

  Fowler, Gerry

  McBride, Neil

  Booth, Albert

  Fraser, John (Norwood)

  McCann, John

  Boston, Terence

  Fraser, Rt. Hn. Tom (Hamilton)

  MacColl, James

  Bottomley, Rt. Hn. Arthur

  Gardner, A. J.

  MacDermot, Niall

  Bowden, Rt. Hn. Herbert

  Garrett, W. E.

  McGuire, Michael

  Boyden, James

  Garrow, Alex

  McKay, Mrs. Margaret

  Braddock, Mrs. E. M.

  Ginsburg, David

  Mackenzie, Gregor (Rutherglen)

  Bradley, Tom

  Gordon Walker, Rt. Hn. P. C.

  Mackintosh, John P.

  Bray, Dr. Jeremy

  Gourley, Harry

  Maclennan, Robert

  Brooks, Edwin

  Gray, Dr. Hugh (Yarmouth)

  McMillan, Tom (Glasgow, C.)

  Broughton, Dr. A. D. D.

  Greenwood, Rt. Hn. Anthony

  McNamara, J. Kevin

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

  Gregory, Arnold

  MacPherson, Malcolm

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

  Griffiths, David (Rother Valley)

  Mallalieu, E. L. (Bragg)

  Brown, R. (Shoreditch & F'bury)

  Griffiths, Rt. Hn. James (Llanelly)

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

  Buchan, Norman

  Griffiths, Will (Exchange)

  Manuel, Archie

  Buchanan, Richard (G'gow Sp'burn)

  Hamilton, James (Bothwell)

  Mapp, Charles

  Butler, Herbert (Hackney C.)

  Hamilton, William (Fife, W.)

  Marquand, David

  Butler, Mrs. Joyce (Wood Green)

  Hamling, William

  Marsh, Rt. Hn. Richard

  Callaghan, Rt. Hn. James

  Hannan, Wiliam

  Mason, Roy

  Cant, R. B.

  Harper, Joseph

  Mayhew, Christopher

  Carmichael, Neil

  Harrison, Walter (Wakefield)

  Mellish, Robert

  Carter-Jones, Lewis

  Hart, Mrs. Judith

  Mendelson, J. J.

  Castle Rt. Hn. Barbara

  Haseldine, Norman

  Mikardo, Ian

  Chapman, Donald

  Hattersley, Roy

  Millan, Bruce

  Coe, Denis

  Hazell, Bert

  Miller, Dr. M. S.

  Coleman, Donald

  Henig, Stanley

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

  Concannon, J. D.

  Herbison, Rt. Hn. Margaret

  Molloy, William

  Conlan, Bernard

  Hilton, W. S.

  Morgan, Elystan (Cardiganshire)

  Corbet, Mrs. Freda

  Hooley, Frank

  Morris Charles R. (Openshaw)

  Craddock, George (Bradford, S.)

  Horner, John

  Morris, John (Aberavon)

  Crawshaw, Richard

  Houghton, Rt. Hn. Douglas

  Moyle, Roland

  Cronin, John

  Howarth, Harry (Wellingborough)

  Mulley, Rt. Hn. Frederick

  Crosland, Rt. Hn. Anthony

  Howarth, Robert (Bolton, E.)

  Murray, Albert

  Cullers, Mrs. Alice

  Howell, Denis (Small Heath)

  Neal, Harold

  Dalyell, Tam

  Howie, W.

  Newens, Stan

  Darling, Rt. Hn. George

  Hoy, James

  Noel-Baker, Francis (Swindon)

  Davidson, Arthur (Accrington)

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Norwood, Christopher

  Davies, Dr. Ernest (Stretford)

  Hughes, Emrys (Ayrshire, S.)

  Oakes, Gordon

  Davies, G. Elfed (Rhondda, E.)

  Hughes, Hector (Aberdeen, N.)

  Ogden, Eric

  Davies, Ednyfed Hudson (Conway)

  Hughes, Roy (Newport)

  O'Malley, Brian

  Davies, Harold (Leek)

  Hunter, Adam

  Oram, Albert E.

  Davies, Ifor (Gower)

  Hynd, John

  Orbach, Maurice

  Davies, Robert (Cambridge)

  Irvine, A. J. (Edge Hill)

  Orme, Stanley

  de Freitas, Sir Geoffrey

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

  Oswald, Thomas

  Delargy, Hugh

  Jackson, Peter M. (High Peak)

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

  Dell, Edmund

  Janner, Sir Barnett

  Owen, Will (Morpeth)

  Dempsey, James

  Jay, Rt. Hn. Douglas

  Padley, Walter

  Dewar, Donald

  Jeger, George (Goole)

  Page, Derek (King's Lynn)

  Diamond, Rt. Hn. John

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

  Paget, R. T.

  Dickens, James

  Jenkins, Hugh (Putney)

  Palmer, Arthur

  Rowlands, E. (Cardiff, N.)

  Tuck, Raphael

  Pannell, Rt. Hn. Charles

  Ryan, John

  Urwin, T. W.

  Park, Trevor

  Shaw, Arnold (Ilford, S.)

  Varley, Eric G.

  Parker, John (Dagenham)

  Sheldon, Robert

  Wainwright, Edwin (Dearne Valley)

  Parkyn, Brian (Bedford)

  Shinwell, Rt. Hn. E.

  Walden, Brian (All Saints)

  Pearson, Arthur (Pontypridd)

  Shore, Peter (Stepney)

  Walker, Harold (Doncaster)

  Peart, Rt. Hn. Fred

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

  Wallace, George

  Pentland, Norman

  Short, Mrs. Renée (Whampton, N.E.)

  Watkins, David (Consett)

  Perry, Ernest G. (Battersea, S.)

  Silkin, Rt. Hn. John (Deptford)

  Weitzman, David

  Prentice, Rt. Hn. R. E.

  Silkin, S. C. (Dulwich)

  Wellbeloved, James

  Price, Christopher (Perry Bar)

  Silverman, Julius (Aston)

  Wells, William (Walsall, N.)

  Price, Thomas (Westhoughton)

  Silverman, Sydney (Nelson)

  Whitaker, Ben

  Probert, Arthur

  Skeffington, Arthur

  White, Mrs. Eirene

  Pursey, Cmdr. Harry

  Slater, Joseph

  Whitlock, William

  Rankin, John

  Small, William

  Wigg, Rt. Hn. George

  Redhead, Edward

  Snow, Julian

  Willey, Rt. Hn. Frederick

  Rees, Merlyn

  Spriggs, Leslie

  Williams, Alan (Swansea, W.)

  Reynolds, G. W.

  Steele, Thomas (Dunbartonshire, W.)

  Williams, Alan Lee (Hornchurch)

  Rhodes, Geoffrey

  Stewart, Rt. Hn. Michael

  Williams, Clifford (Abertillery)

  Richard, Ivor

  Stonehouse, John

  Williams, Mrs. Shirley (Hitchin)

  Roberts, Goronwy (Caernarvon)

  Strauss, Rt. Hn. G. R.

  Williams, W. T. (Warrington)

  Roberts, Gwilym (Bedfordshire. S.)

  Swain, Thomas

  Wilson, William (Coventry, S.)

  Robertson, John (Paisley)

  Swingler, Stephen

  Winnick, David

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

  Symonds, J. B.

  Winterbottom, R. E.

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

  Taverne, Dick

  Woodburn, Rt. Hn. A.

  Rodgers, William (Stockton)

  Thomas, George (Cardiff, W.)

  Woof, Robert

  Roebuck, Roy

  Thomas, Iorwerth (Rhondda, W.)

  Wyatt, Woodrow

  Rose, Paul

  Thornton, Ernest

  Yates, Victor

  Ross, Rt. Hn. William

  Tinn, James

  Rowland, Christopher (Meriden)

  Tomney, Frank

  TELLERS FOR THE AYES:

  Mr. Lawson and Mr. Grey.

  NOES

  Alison, Michael (Barkston Ash)

  Dean, Paul (Somerset, N.)

  Holland, Philip

  Allason, James (Hemel Hempstead)

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

  Hooson, Emlyn

  Astor, John

  Dodds-Parker, Douglas

  Hordern, Peter

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

  Doughty, Charles

  Hornby, Richard

  Awdry, Daniel

  Douglas-Home, Rt. Hn. Sir Alec

  Howell, David (Guildford)

  Baker, W. H. K.

  Drayson, G. B.

  Hutchison, Michael Clark

  Batsford, Brian

  du Cann, Rt. Hn. Edward

  Iremonger, T. L.

  Beamish, Col. Sir Tufton

  Eden, Sir John

  Irvine, Bryant Godman (Rye)

  Bell, Ronald

  Elliot, Capt. Waiter (Carshalton)

  Jenkin, Patrick (Woodford)

  Bennett, Sir Frederick (Torquay)

  Errington, Sir Eric

  Jennings, J. C. (Burton)

  Berry, Hn. Anthony

  Eyre, Reginald

  Johnson Smith, G. (E. Grinstead)

  Bessell, Peter

  Farr, John

  Johnston, Russell (Inverness)

  Biffen, John

  Fisher, Nigel

  Jones, Arthur (Northants, S.)

  Birch, Rt. Hn. Nigel

  Fletcher-Cooke, Charles

  Jopling, Michael

  Black, Sir Cyril

  Fortescue, Tim

  Joseph, Rt. Hn. Sir Keith

  Blaker, Peter

  Foster, Sir John

  Kaberry, Sir Donald

  Body, Richard

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

  Kerby, Capt. Henry

  Bossom, Sir Clive

  Galbraith, Hn. T. G.

  Kershaw, Anthony

  Boyd-Carpenter, Rt. Hn. John

  Gibson-Watt, David

  Kimball, Marcus

  Boyle, Rt. Hn. Sir Edward

  Giles, Rear-Adm. Morgan

  King, Evelyn (Dorset, S.)

  Brains, Bernard

  Glover, Sir Douglas

  Kirk, Peter

  Brewis, John

  Glyn, Sir Richard

  Kitson, Timothy

  Brinton, Sir Tatton

  Godber, Rt. Hn. J. B.

  Knight, Mrs. Jill

  Bromley-Davenport, Lt. Col, Sir Walter

  Goodhart, Philip

  Lamhton, Viscount

  Brown, Sir Edward (Bath)

  Gower, Raymond

  Lancaster, Col. C. G.

  Bruce-Gardyne, J.

  Grant, Anthony

  Langford-Holt, Sir John

  Bryan, Paul

  Grant-Ferris, R.

  Legge-Bourke, Sir Harry

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

  Gresham Cooke, R.

  Lewis, Kenneth (Rutland)

  Buck, Antony (Colchester)

  Griffiths, Eldon (Bury St. Edmunds)

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

  Bullus, Sir Eric

  Grimond, Rt. Hn.

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

  Campbell, Gordon

  Gurden, Harold

  Lloyd, Rt. Hn. Selwyn (Wirral)

  Carr, Rt. Hn. Robert

  Hall, John (Wycombe)

  Longden, Gilbert

  Cary, Sir Robert

  Hall-Davis, A. G. F.

  Loveys, W. H.

  Channon, H. P. G.

  Hamilton, Michael (Salisbury)

  Lubbock, Eric

  Chichester-Clark, R.

  Harris, Frederic (Croydon, N.W.)

  MacArthur, Ian

  Clark, Henry

  Harris, Reader (Heston)

  Mackenzie, Alasdair (Ross & Crom'ty)

  Clegg Walter

  Harrison, Brian (Maldon)

  Maclean, Sir Fitzroy

  Cooper-Key, Sir Neill

  Harrison, Col. Sir Harwood (Eye)

  Macleod, Rt. Hn. Iain

  Cordle, John

  Harvey, Sir Arthur Vere

  McMaster, Stanley

  Corfield, F. V.

  Harvie Anderson, Miss

  Macmillan, Maurice (Farnham)

  Contain, A. P.

  Hastings, Stephen

  Maddan, Martin

  Craddock, Sir Beresford (Spelthorne)

  Hawkins, Paul

  Maginnis, John E.

  Crawley Aidan

  Hay, John

  Marples, Rt. Hn. Ernest

  Crouch, David

  Heald, Rt. Hn. Sir Lionel

  Marten, Neil

  Crowder, F. P.

  Heath, Rt. Hn. Edward

  Maude, Angus

  Cunningham, Sir Knox

  Heseltine, Michael

  Mawhy, Ray

  Currie, G. B. H.

  Higgins, Terence L.

  Maxwell-Hyslop, R. J.

  Dalfreith, Earl of

  Riley, Joseph

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

  Dance, James

  Hill, J. E. B.

  Mills, Peter (Torrington)

  d'Avigdor-Goldsmid, Sir Henry

  Hobson, Rt. Hn. Sir John

  Mills, Stratton (Belfast, N.)

  1976

  1977

  Miscampbell, Norman

  Quennell, Miss J. M.

  Temple, John M.

  Mitchell, David (Basingstoke)

  Rawlinson, Rt. Hn. Sir Peter

  Thatcher, Mrs. Margaret

  Monro, Hector

  Rees-Davies, W. R.

  Thorpe, Jeremy

  More, Jasper

  Renton, Rt. Hn. Sir David

  Tilney, John

  Morgan, W. G. (Denbigh)

  Ridley, Hn. Nicholas

  Turton, Rt. Hn. R. H.

  Morrison, Charles (Devizes)

  Ridsdale, Julian

  Vaughan-Morgan, Rt. Hn. Sir John

  Mott-Radclyffe, Sir Charles

  Rippon, Rt. Hn. Geoffrey

  Vickers, Dame Joan

  Munro-Lucas-Tooth, Sir Hugh

  Robson Brown, Sir William

  Wainwright, Richard (Come Valley)

  Murton, Oscar

  Rodgers, Sir John (Sevenoaks)

  Walker, Peter (Worcester)

  Nabarro, Sir Gerald

  Roots, William

  Walker-Smith, Rt. Hn. Sir Derek

  Neave, Airey

  Rossi, Hugh (Hornaey)

  Wall, Patrick

  Nicholls, Sir Harmar

  Royle, Anthony

  Walters, Dennis

  Noble, Rt. Hn. Michael

  Russell, Sir Ronald

  Ward, Dame Irene

  Nott, John

  St. John-Stevas, Norman

  Weatherill, Bernard

  Onslow, Cranley

  Sandys, Rt. Hn. D.

  Webster, David

  Orr, Capt. L. P. S.

  Scott, Nicholas

  Wells, John (Maidstone)

  Orr-Ewing, Sir Ian

  Sharpies, Richard

  Whitelaw, William

  Osborn, John (Hallam)

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

  Wills, Sir Gerald (Bridgwater)

  Osborne, Sir Cyril (Louth)

  Sinclair, Sir George

  Wilson, Geoffrey (Truro)

  Page, Graham (Crosby)

  Smith, John

  Winstanley, Dr. M. P.

  Page, John (Harrow, W.)

  Stainton, Keith

  Wolrige-Gordon, Patrick

  Pearson, Sir Frank (Clitheroe)

  Steel, David (Roxburgh)

  Wood, Rt. Hn. Richard

  Peel, John

  Stodart, Anthony

  Woodnutt, Mark

  Percival, Ian

  Summers, Sir Spencer

  Worsley, Maurice

  Pike, Miss Mervyn

  Talbot, John E.

  Wylie, N. R.

  Pink, R. Bonner

  Tepsell, Peter

  Younger, Hn. George

  Pounder, Ration

  Taylor, Sir Charles (Eastbourne)

  Powell, Rt. Hn. J. Enoch

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

  TELLERS FOR THE NOES:

  Price, David (Eastleigh)

  Taylor, Frank (Moss Side)

  Mr. Pym and Mr. R. W. Elliott.

  Prior, J. M. L.

  Teeling, Sir William

  Bill accordingly read the Third time and passed

  TEES VALLEY AND CLEVELAND WATER BILL (By Order)
  Order for consideration, as amended, read.
  Motion made, and Question proposed, That the Bill, as amended, be now considered.
  7.10 p.m.
  Mr. Marcus Kimball: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
  "this House declines to consider a Bill which would involve irreparable harm to a unique area of international scientific importance, fails to have regard to the proper long-term planning for the water requirements of the area, and is contrary to the declared advice of the Nature Conservancy and the National Parks Commission."
  This Amendment seeks to reject the Tees Valley and Cleveland Water Bill. It is a Bill which would authorise the Tees Valley and Cleveland Water Board to construct a river regulating reservoir in the area which is know as Cow Green. My hon. Friends and myself are asking the House to reject this Bill for three specific reasons.
  The first is that if this reservoir is constructed it will destroy a unique area of international scientific importance. Secondly, this crisis has only arisen, together with the danger it brings to this unique area, because of the lack of long-term planning for the water resources and needs of the area. The Bill is contrary to the advice of the Nature Conservancy and of the National Parks Commission.
  In asking the House to reject this Bill, I am not asking it to do something which has never been done before. In one case the House threw out the Mersey Docks and Harbours Bill after it had been to a Committee. I also want to make it clear that there is no reflection at all on the Committee which did such a thorough job of work on this Bill. The point is that the Committee had only a limited amount of evidence available. Since the Committee found the Long Title of the Bill proved, most disturbing geological evidence has come to light. There is a need for further exploratory borings in the field above Cow Green, and there
  1980
  is the problem which only came up in the last day of Committee—and this is what is so disturbing—of the whole question of grouting and the damage that this will cause.
  My hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) will deal in detail with this point if he should catch your eye, Mr. Speaker. Another reason why I am asking the House to reject this Bill is quite simply because we have this unique feature of one hon. Member of this Committee, the hon. Member for Norfolk, South-West, who has sat through the Committee and heard all the evidence and who has now signed the Amendment asking the House to reject the Bill. There is no doubt that the site is unique from a botanical and nature conservancy point of view. The site was recommended as a special conservation area by the Wild Life Conservation Special Committee in Cmnd. 7122. It is true that in the early stages of the negotiations over this Bill the Nature Conservancy had hoped to make some sort of compromise with the promoters. That hope was based on a false understanding of what the Bill would involve. There is no doubt that this reservoir, if it goes ahead, will destroy a complex community of plants, and whatever may be said there are no similar communities in the Western world at the moment.
  This community is quite irreplaceable, and every botanist in the United Kingdom and in Europe subscribes to this view. It was proved, and put in a letter to The Times, signed by Peter Scott, at the beginning of this controversy. The Senior Scientific Officer at Kew said that this Bill, if it went through, was:
  "An act of scientific vandalism, unparalleled since the scientific conservation movement began."
  The implications of Teesdale go far wider. If a highly developed and sophisticated country such as Great Britain is seen to act in this way, what an example we are setting to the underdeveloped countries.
  Properly planned conservation and the proper use of natural resources is desperately important to them. If the Duke of Edinburgh's Study Conference on the Countryside in 1970 means anything, it means that Teesdale must be saved. Perhaps it would be unfair to

  1981
  comment that I was on that Study Conference, and the chairman of my working party who said that greater protection was needed for sites of special scientific interest was none other than Lord Beeching. It is quite true that Imperial Chemical Industries have offered £100,000 to make an extra programme of crash scientific research on this site. This means nothing because research done today can be out of date in the next century.
  We had the problem in this House when we could not prove a particular disease because the only evidence was research done on it in 1881. There is a possibility that if the research continues on this site we shall add very considerably to our knowledge of what the flora and fauna of this country were like in the past 10,000 and 15,000 years. The House may say that if this is such an important site, why was it not in the National Nature Reserve; why is it only scheduled as an S.S.S.I.? The original intention of the Water Board was not to come back for a Further area of land until 1983. I contend that the Nature Conservancy was quite in order in thinking that the site which was scheduled as an S.S.S.I. and not in the nature reserve had sufficient protection.
  I hope that when my hon. Friend the Member for Crosby (Mr. Graham Page) on the Front Bench makes an intervention in this debate he will give some encouragement to the naturalists and botanists by assuring us that when our party is in power we will take action to strengthen protection under the S.S.S.I. agreements. I know that it will be said that this is only a small area—20 acres out of 170 acres which are to be flooded. But it is the most important bit. My hon. Friends will seek to show from the evidence given to the Committee that a reservoir in the area will change the whole environment of the valley. One of the difficulties in the Bill, which I think was faced by the Committee, is that scientists are very bad at giving evidence to Parliamentary Committees. They will not say what they think will happen, they will only say what will happen if it has been proved. Most of us who are not exact scientists know that if one puts a reservoir in an area one changes the whole botanical aspects of the area. One has only to look at existing reservoirs
  1982
  to see that that has happened. Having said that about the scientists and botanists, I would like to place on record my endless admiration and the admiration of my hon. and right hon. Friends for the magnificent work done by the small Botanical Society of the British Isles in bringing this Bill before the House—in taking on the Goliath of I.C.I. on this important issue.
  I said earlier that the situation would not have arisen had there been proper long-term planning for the needs of the area. This point was made, interestingly and well, today in the leading article of The Guardian. I was a member of the Private Bill Committee which in 1959 allowed the Baldor Head Scheme to go ahead on the firm understanding that the water board had stated its requirements as far ahead as 1983. In fact, it now appears that the water board has grossly under-estimated its requirements. This unsatisfactory solution arises because of the financial arrangements under which this water board works. The consumers pay a substantial sum towards the capital costs of any new works. If the board plans realistically for the future, then the capital costs are going to be a great deal higher. It is significant that in Day 4 of the evidence before the Committee, on page 68, it came out that pays 1s. 1d. per 1,000 gallons for its water against a national average of 3s. If this scheme were to go ahead—and I trust it is not going to—the figures produced by the Minister of Housing and Local Government and the Water Resources Board, as against the water board, make clear that it will only meet the estimated demand in Teesdale from four to ten years from completion; and it will still be necessary to face up to the long-term needs of this area.
  The House should look for a moment at the alternative possibilities. From the Nature Conservancy point of view—and without getting involved in the argument about the use of good arable farmland—may I say straight away that a reservoir further up the river, higher in Teesdale, would be quite acceptable and the Nature Conservancy would be prepared to allow some of the Moorhouse Nature Reserve to be used in exchange for saving this important site. We cannot take seriously the argument about the costs in the promoters' case, because they do not know

  1983
  what the true cost will be, what the true geology will be found to be, or what the cost of grouting will be.
  The House must also face the fact that in this country we have a great interest in the conservation movement. May I say, representing an agricultural constituency, one may find reasons for having to put nature conservancy interests and the interests of others living in towns ahead of the agricultural industry's interests in the next few years. This was brought home to me in my constituency when agriculture destroyed Waddingham Common, one of the most important sites in that part of Lincolnshire.
  As a countryman and as one with a deep interest in the subject and a love of nature, can I say to the House simply that this is the most important conservation issue that has ever come before the House of Commons, ever since this House recognised that conservation was important and hon. Members opposite passed the National Parks Act in 1949. If a stand is not taken on this issue no single other area in the country is safe. If we do not reject this Bill tonight we shall be setting an appalling precedent for the rest of the countryside and I sincerely hope the House will reject it.
  7.23 p.m.
  Mr. Timothy Kitson: I am grateful for the opportunity to speak in this debate, but I must say straight away that I feel that our procedural arrangements are wrong. It would be much more satisfactory if we debated a Bill in the House before it was sent upstairs for the Select Committee to consider. Then at least the promoters of the Bill, if it were defeated in the House of Commons, would not have to go to the considerable expense and time of putting their evidence before a Select Committee. Whether we are in favour of or opposed to a Bill, I believe most hon. Members would agree with that.
  I had hoped originally that I should not have to get heavily involved one way or the other with regard to this Bill, because over the years I have a large number of problems in my constituency with the Tees Valley and Cleveland Water Board. But I felt that the arguments for and against the Bill were so strong and were involving my constituency so heavily that
  1984
  I would have to speak in support of the Bill.
  We must bear all the problems and alternatives in mind when we consider this Bill this evening. My main fear, if the Cow Green reservoir scheme is defeated, is that the possible alternative of a reservoir at Middleton would have a very serious effect on many of my constituents who farm in that area.
  During the inquiry by the Select Committee and in the House this evening criticism has been made of Imperial Chemical Industries for not recognising much earlier the need for a substantial increase in its water requirements. When the last Tees Valley and Cleveland Water Bill came before the House it was strongly pointed out by the Select Committee that future plans for reservoirs in the area would not be considered favourably by Parliament.
  Since then there has been tremendous expansion on Tees-side. The I.C.I. new steam reforming process for the conversion of naptha into ammonia and fertilisers, the substantial increase in demand for man-made fibres with the potentialities for export, new types of fertiliser and major developments in the plastics industry, with other advances in chemical technology have led to a substantial increase in the demand for water.
  I.C.I. has asked the Tees Valley and Cleveland Water Board to supply an additional 25 million gallons of water a day by 1970 and another 10 million gallons of water are required by Dorman Long, the Shell Refinery Company, Industrial Estates Management and domestic consumers. I.C.I. has already launched into a substantial development programme which will produce many more jobs on Tees-side, and there is no doubt that, if the organisation is to complete its development programme, a new reservoir will have to be constructed in the area. When one remembers that the Hailsham Plan was largely responsible for encouraging I.C.I. to extend its development programme on Tees-side, and bearing in mind the high unemployment figures we had not many years ago in this area, we must try to do everything possible to continue industrial expansion on Tees-side.
  There are three possible alternatives. First, there is the reservoir at Upper

  1985
  Cow Green which the hon. Member for Gainsborough (Mr. Kimball) mentioned. As he rightly says, this area has not as yet been surveyed, but one of the problems facing industry on Tees-side is the need that will exist for water in the early 1970s. If the Upper Cow Green project was to be pursued it would probably take another three years before the reservoir was developed. No survey has yet been done. I would cost in the region of an additional £5 million. Also, it should be remembered that Upper Cow Green would probably be capable of holding as a reservoir and supplying only 27 million gallons as day, as against the 35 million gallons a day which will be possible at Cow Green. Then there is the third suggestion of a reservoir at Middleton-in-Teesdale. This would destroy many agricultural holdings in the area and certainly would have a harmful effect on the town of Middleton.
  If I may refer to the evidence given to the Committee by the County Secretary of the National Farmers' Union, Mr. Stan Jones, he pointed out that the area of land at Cow Green supports only about 500 sheep for summer grazing, whereas the site at Middleton-in-Teesdale would flood about 1,300 acres of land, 200 acres of pasture and about 1,100 acres of first-class meadow-land. This would also affect the grazing rights on about 500 more acres, because the lowland helps to keep during the winter the flocks that run on the moors higher up the dale. This would affect 39 holdings, 20 of which would be totally submerged; and about 30 farmers would lose their livelihood. The compensation for tenant farmers which the Tees Valley and Cleveland Water Board made in respect of Balderhead in the same district was inadequate to get many of the people affected reinstated in farming. Certainly the position of tenant farmers was quite hopeless.
  Therefore, the other alternative is bore holes. The reports suggest that the total amount of water available by the early 1970s through bore holes would he no more than 6 million gallons a day. Therefore, I think that we have to rule that out.
  I know the area fairly well and I feel that the reservoir would not spoil the natural beauty of the area. But, at the same time—and this is most unfortunate—there is the problem of the flora in
  1986
  the Cow Green area. What my hon. Friend the Member for Gainsborough did not point out was that of the 300 acres around the Widdybank area, where one finds the viola rupestris, only 17 will be affected. I.C.I. has offered £100,000 to the Nature Conservancy which could do a great deal of help the research work in the area.
  Sir David Renton: I am sure that my hon. Friend realises that the purpose of that £100,000 would be merely to study the existing vegetation before it was flooded.
  Mr. Kitson: I was pointing out that only 17 out of 300 acres where there is flora are to be flooded. The whole area is not to be flooded and the whole flora structure is not to be lost.
  Botanists all over the world consider this area to be unique. However, I refer my hon. Friend the Member for Gainsborough to the evidence given by Dr. Arthur Stoker Thomas, who is a Fellow of the Institute of Biology, because he did not seem to hold these views when I heard his evidence. I.C.I. employs 31,000 people on Tees-side, and, with this substantial development programme under construction, there is no doubt that a reservoir will have to be provided from one of these three possibilities
  The water board is to take the water from the reservoir down the Tees to Croft where it is intended to put a weir across the river. This was the subject of an inquiry at Northallerton only yesterday. I hope that we shall have assurances from the Government that the flow of water between Croft and Low Worsall will not be substantially reduced. I understand that it is the river board's intention to instruct the water board to allow a flow of 15 million gallons a day over this weir. I hope that the Northumbrian River Authority will determine a minimum acceptable flow for this stretch of the river and take all possible steps to improve it.
  To sum up, we have to weigh up the evidence given to the Committee. If industrial expansion on Tees-side is to go ahead, a reservoir in the area is essential. I hope that hon. Members, when they vote tonight, will bear in mind that if the Bill is rejected probably 40 or 50 of my constituents will lose their farming jobs in the next five years.

  1987
  Two other points have been raised about the Cow Green reservoir. It may not be fully appreciated that the water board, through its consulting engineer, made a very early approach in 1964 to the Nature Conservancy. The consultant discussed 17 sites with the Conservancy in order to get its reaction to them. The then director of the Nature Conservancy wrote in a letter on 23rd October, 1964, to the consultant that the Cow Green site would be most unlikely to be objected to by the Nature Conservancy. Since then, the opposition to the Bill has built up.
  Another point which is being discussed is the additional borings which have been taken at Cow Green. This has been done by the promoters to refute evidence and criticism that there is the possibility of this area not being suitable for a reservoir. These additional borings have been sunk to prove their point and to demonstrate that the geological construction of the area is suitable for a reservoir.
  Mr. Paul Hawkins: Would not my hon. Friend agree, however, that additional borings are still being made because the board's engineers are not satisfied with their previous evidence? In other words, the evidence given to the Committee was not complete.
  Mr. Kitson: This is not the information which I have had from them. These additional five borings have been made to allay any suspicions voiced during the inquiry.
  Although I have not been a great friend of the Tees Valley and Cleveland Water Board, I hope that the House will not reject its Bill.
  7.37 p.m.
  Mr. Gerry Fowler: I have a particular interest in this area because my family origins lie in it. Teesdale, the name of the river valley, is my mother's maiden name and my middle name. Therefore, I feel that I should speak in the debate.
  County Durham is a naturally very beautiful county, but, alas, the eastern half of it has been ruined in appearance by two centuries of industrial development and spoliation. However, the west of the county remains a singularly
  1988
  beautiful area of wild country of very great amenity value, not least to those who live in the eastern industrial half of the county. Much of the county is part of a development area and the needs of industry must be paramount.
  No one wishes to deny that the development of I.C.I. is vital to the industrial needs of the area. The expansion of I.C.I. will take up at least some of the labour surplus created in the area by the decline of old industries. I am sure that no one in the House would like to see unnecessary obstacles placed in the way of the further development of I.C.I. at Billingham. However, if the area is to be redeveloped industrially, we should this time be most careful and ensure that all of the natural amenities of the area are preserved.
  Many Members on both sides have spoken inside and outside the House, and not least in the last two election campaigns, of the necessity of looking to the quality of life rather than simply material values. Upper Teesdale is one of the most important relaxation and recreational areas for the inhabitants of the Lower Tees Valley and the Durham coal mining area.
  Many hon. Members will be familiar with the Pennine Way. We should also remember Cauldron Snout, immediately below the area known as Cow Green, which is one of the most magnificent cataracts in the country. Many a time have I walked past the Cauldron Snout, in the area popularly known as High Cup Nick. To me, Cow Green is an unfamiliar name, as it would be to local residents. I would like an assurance from the Government Front Bench that the flow of water over Cauldron Snout and over High Force, a singularly superb waterfall, will not be affected materially by the development proposed at Cow Green. If it is to be materially affected, I feel that I cannot vote for the Bill.
  Mr. James Tinn: I believe that I can offer my hon. Friend the precise assurance that he is seeking. This is a reservoir which will conserve the water and regulate its flow, so that the water which is abstracted on behalf of industry will be removed further down the river, below both waterfalls that he has mentioned. From the scenic point of view, it will have the beneficial effect of

  1989
  ensuring a more regular flow in dry seasons as well as in wet.
  Mr. Fowler: I am grateful to my hon. Friend for that assurance. At times of heavy rainfall I find the flow of water over High Force singularly magnificent. If we have a regulated flow of water, I suppose that we shall never see that again, so we are bound to lose something.
  I turn briefly to the botanical interest of the area. I gather that here we have some unique plant communities; indeed, I am told that they are ice-age survivals, and perhaps that is not surprising in view of the climate of the area. But I would urge the House to remember that the study of our environment has unforeseeable consequences. It is not merely a question of the value in this day and age, but in future days as well. That is something which we should not forget. We do not know what the consequences of studies might have for human betterment, and for scientific and, ultimately, industrial potential, too. I am not satisfied by the statement in the document issued by the promoters of the Bill, in paragraph 17 of which they say:
  "The particular assemblage of plants found growing in part of the reservoir site may well be different in some degree from every other assemblage of plants—it would be surprising if this were not so—botanical witnesses … could not say that comparable assemblages of plants did not appear elsewhere in Upper Teesdale."
  That is a singularly absurd statement. Obviously they could not say that comparable assemblages of plants did not appear elsewhere in Upper Teesdale or elsewhere in the country. But we must remember that it is possible that the area which will be drowned, albeit it is part of a larger area which is of botanical interest, may contain unique assemblages of plants, and we shall lose the opportunity of studying them afresh for ever.
  I want now to say a word about the problem of water supplies in general as it is affected by the Bill. General concern has been shown about the problem of national water supplies for a number of years. The party to which I belong promised in the election before last that one of the items in our programme would be the nationalisation of water supplies. I hope that that may still be an item in the programme because, in my view, it should have been done a long time ago.
  1990
  What we are faced with in the Bill and what we have been faced with as a nation and will be faced with increasingly over the next ten or fifteen years is the piecemeal encroachment on areas of amenity value and on agricultural land because of our failure to plan our water supplies in the long term.
  If I might refer again to the document issued by the promoters of the Bill, I find this statement in paragraph 4:
  "In their report to the Minister the Water Resources Board stated that they could see no possibility of obtaining the necessary additional supplies from outside the catchment area of the River Tees in time to meet the demand and that there was no practical possibility of desalination solving the problem in time."
  We are all fighting a losing battle. In present circumstances, we are running hard in order to catch up.
  That is the basis of the problem which we face with the Bill. In the long term, we may find that this sort of policy is also more expensive. Rather than give in to the policy of piecemeal encroachment which we find in the Bill, I would hope that, as a nation, we could resolve to set up a national water supply with a national grid and the development of large sea reservoirs such as Morecambe Bay and The Wash, thereby ensuring as well that the cost of conserving the nation's water supplies will be more evenly distributed over the whole population than is possible at present, with a plethora of local water boards levying local water rates.
  I feel that the Bill represents what I can only refer to as a very bad principle on which to solve the problem of our national water supplies in the long term.
  7.46 p.m.
  Mr. R. W. Elliott: It is nice to learn that the hon. Member for The Wrekin (Mr. Fowler) is appreciative of Durham's beauty and that he originates from that delightful county. I cannot claim to do that, because I am a Northumbrian, but I claim to know a bit about the area in general, which is why I presume to take part in the debate.
  In the course of what I have to say, I should like to take up, to a degree, the hon. Member's point about what he calls piecemeal encroachment. I should make it clear from the outset that I support the Bill. For once, I am at variance with

  1991
  my hon. Friend the Member for Gains-borough (Mr. Kimball), for whom I have considerable respect.
  Dame Irene Ward: (Tynemouth): And Tynemouth.
  Mr. Elliott: I must confess that learning that I am at variance with my hon. Friend the Member for Tynemouth (Dame Irene Ward) does not make my task any easier. Again, I would suggest that it is an unusual circumstance.
  Like most hon. Members present for this debate, I am trying to understand the conservancy case, and like my hon. Friend the Member for Gainsborough and others who have supported his Amendment, I want to appreciate it.
  The case which I wish to put, if I may be presumptuous enough to suggest it, is the practical case for the Bill. My entire thinking on the Bill is dominated by that which has dominated my thinking and activities since I first entered the House some nine years ago as Member of Parliament for a constituency in the North-East of England. Those of us who have been in the House for some time as Members for the North-East of England, no matter where our constituencies may be, have been fully aware during the past decade that our major problem in the North-East is that of its continuing prosperity and its continuing employment. The Bill has a very big effect on the future employment of people in the North-East.
  The problems of the North-East can be pinpointed quite easily. Our two major industries in the past decade, coal mining and shipbuilding, have been declining. The future picture of prosperity has not always been rosy and still is not rosy, for that matter, and some of us will be attempting to catch the eye of the Chair on Tuesday, of next week when we debate the problems of development areas.
  Although the picture in the North-East is much brighter than it was a few years ago, problems still remain. During the past nine years there have been bright parts of the picture. There have been pieces of the picture which have given considerable encouragement. No part of the north-eastern area of the country has given us in this House more encouragement than Tees-side, because the development of a number of industrial concerns
  1992
  there has, to say the least, been most encouraging.
  My hon. Friend the Member for Richmond, Yorks (Mr. Kitson) listed a number of industries which we are delighted to have in that area, but one must refer particularly to I.C.I. On its Billingham site alone, which covers 1,000 acres, 17,000 people are employed. Employment has been my major concern since I came into this House nine years ago. The capital involved at Billingham is £190 million, and the all-important point is that it is proposed to increase this figure to £223 million by 1970. I.C.I.'s Wilton site consists of 700 acres, and 14,000 people are employed there. The capital employed in the refinery at Wilton amounts to £206 million, and it is proposed to increase this to £330 million by 1970. We must remember, too, that on Tees-side I.C.I. employs 7,000 people in constructional work alone.
  Production from I.C.I. factories amounted to £226 million in 1965, and will rise to £404 million if I.C.I.'s development plans continue. We have heard a great deal in this Chamber during the past two days about the importance of exports. I.C.I.'s exports amounted to £54 million in 1965, and it is estimated that if the company's development plans can be continued, its exports will reach £98 million by 1970.
  I make no apology for quoting those figures, because, as I see it, they support the case for the Bill in that these developments which I.C.I. and other industries propose can continue only if they are assured of a reasonable addition to their water supplies.
  Mr. Eldon Griffiths: My hon. Friend has made an impressive recital of the enormous resources of I.C.I. Does he not think it strange that a company with such enormous resources should be set back and unable to continue its business because of the demand to save a few acres of lichens and dandelions?
  Mr. Elliott: I can only ask my hon. Friend to be patient, and I hope that I shall answer his point. Perhaps I might now begin to do so. As a Member for the North-East, I know that I.C.I. and other industrialists have been encouraged to expand their production in that area. I am aware that these essential development plans, in an area where our basic

  1993
  industry has declined, and declined most rapidly and dangerously, are within the Hailsham thinking, or, if I may put it this way, are very much within the Hail-sham concept of what was necessary for the North-East.
  Hon. Members on both sides of the Chamber have done their best to bring employment to the North-East. Each of us has been responsible for encouraging industry and industrialists to expand there. Certainly from Hailsham onwards we have been responsible for encouraging not to go elsewhere, as it could have done, with the enormous development which it now proposes in the North East. Consequently, I am anxious, and see it as my clear duty in terms of what I have advocated in the past, to make sure as far as I can that the physical requirements are at hand to allow for this considerable development.
  My knowledge of the proposed development leads me to the view that if there were a drought in the '70s, with this development going on, and without additional water to hand, it could have a disastrous effect on our national trade figures and would have an appalling effect on employment in that area.
  A great deal has been said about alternatives, and I thought that my hon. Friend the Member for Richmond, Yorks, outlined them rather well. I know that many hon. Members wish to take part in this debate, so I shall touch on them only briefly.
  My hon. Friend the Member for Gainsborough suggested that an accurate assessment had not been made of the cost of the construction of a reservoir at Cow Green. An estimate has been made with regard to Upper Cow Green, and it is reasonably established, as far as I am concerned from such evidence as I have to hand, that the Upper Cow Green site would cost £5 million more, but what is so much more important is that it will take at least three years longer to construct, and our industry in the North-East cannot afford to wait that long.
  Another alternative is desalination. Figures given to me—and I have no reason to doubt them—show that the cost would be about 10s. per 1,000 gallons. I must, in all fairness, say that it is estimated that that figure could be reduced to 5s. per 1,000 gallons by 1980,
  1994
  but this compares—and in these days of competitive industry one must always make this comparison—with 1s. per 1,000 gallons which will be the cost of getting water from the proposed new reservoir.
  I feel that I do not need to enlarge on the Middleton proposal, in that my hon. Friend the Member for Richmond, Yorks is well aware of the nature of the agricultural land in varying parts of Yorkshire. It would mean using excellent farmland.
  Finally, what is the botanists' case? Those who see this Bill as essential have tried to understand it. We have read everything that has been sent to us, and we have received excellent letters from people who feel strongly about the possibility of this, from a botanists' point of view, valuable area being flooded. As I see it from such evidence as is to hand, there was full consultation with the Nature Conservancy at an early stage in the thinking on this proposal. There was a nine-month investigation of Cow Green, which cost £50,000. The Bill—it is before us in its amended form—was considered in Committee upstairs for 13 days. I suggest that this is evidence enough that those who oppose the Bill have had ample opportunity to voice their opposition to it.
  The fact is that 20 acres of botanical interest out of 5,000 acres of similar if not identical land are involved, and I believe that it is somewhat unfair for my hon. Friend the Member for Gains-borough to suggest that the money offered by I.C.I. for research means nothing. I find this difficult to understand. A considerable sum of money has been offered, and even if this means carrying out the research before the area is flooded, surely if it is carried out thoroughly it can be of great service to scientists and botanists in the future.
  I conclude by adding my appeal to that made by my hon. Friend the Member for Richmond, Yorks for the progress of this Bill. I believe that it is an essential Measure for the future employment of people in the North-East and the future prosperity of that area.
  8.0 p.m.
  Mr. Ted Leadbitter: The question of a Private Bill is something to be dealt with with the deepest

  1995
  suspicion. I have a natural disinclination to support Private Bills. I have a tendency to oppose them, and in this Parliament I have already opposed one that affected my constituency. On that occasion I felt that I had made some improvements to the Bill. I am grateful for the co-operation that my constituency gained from Members in the House and in Committee upstairs, and to some extent I am in a forgiving sort of mood tonight.
  I want to see if I can speak to this Bill bearing in mind the interests of the North-East and the arguments both for the Bill and against it. Whatever opinions we may have about Private Bills much of my personal dislike concerns their nineteenth century origins, especially in connection with vested interests, railway and the like. I feel that there is an increasingly less important place for them within the modern context in which we are living.
  Having said that I want to be fair to the Bill I must say at once that I am rather surprised to find that the hon. Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott) finds in it—no doubt in a degree of haste or in a state of anxiety—some Hailsham thinking. I felt that there was a little opportunism being exercised, because I could not see how this Hailsham thinking sprang from the hon. Member in the light of the assessment of the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) on the issue of dandelions and daisies. I hope that having made the point we shall have an end first to nonsense and, secondly, to assessments about the Bill which are quite unrelated to the Hailsham thinking.
  Mr. Kitson: Is it not a fact that I.C.I. was persuaded to put a substantial amount of capital investment into this area instead of going to one or two other areas where there would have been an adequate water supply? Was not this decision based very much on the recommendations of the Hailsham Plan—in fairness to my hon. Friend the Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott)?
  Mr. Leadbitter: I find this in my constituency—members of the community and people in responsible positions with a spot of hindthinking see relationships between certain progress made on the industrial front and the Hailsham Report.
  1996
  Whatever else can be said about the Hailsham Report, it was a very belated document, and if anyone reads the record during the past few years he will see that Labour Members representing North-East constituencies have been pressing for some action for a long time. My estimation of that Report has not altered for the past two or three years. I still believe that it was an account of what had not been done and that it is therefore only incidental to the efforts of all the public representatives in the northern region to bring about the resuscitation of the economy. Their efforts merely coincided with the White Paper.
  I want to refer to one point in that White Paper. It does not propose anything. It does not refer to the historical background of the region. It merely states the simple fact that in this region—Tees-side and the surrounding area—it is expected that the population will grow from 545,000 in 1962 to 675,000 in 1981. That is an important piece of information, because, related with the employment trends in this area we see an increasing need for the means to carry on industrial progress. In 1960 the number of people employed on Teesside was 173,029 and in 1965 it was 178,861. If, even in general terms, we attempt to project that increasing employment against the background of the projected population growth, between now and 1981 we can see that whatever agreements or understandings might have existed between Hailsham and I.C.I. the boom in industrial growth is there. It is real, and it must be catered for. Anyone opposing the Bill is not talking sense.
  The hon. Member for Newcastle-upon-Tyne, North—whose personal interest in the region is not to be refuted and certainly not to be challenged, and whose contribution is appreciated by hon. Members on both sides of the House—said that the North of England is fully aware of its continuing prosperity and importance. That was the most important contribution he made to the debate, expressing a consistent, purposeful plan to support the region at all costs as a North of England constituency and Parliamentary Member. I support and encourage that kind of language from wherever it comes. We must therefore accept that in this region the primary thing at this stage is employment.

  1997
  I want to refer to the whole region, including Hartlepools, the Middlesbrough area, and Tees-side in general. During the years in which the hon. Member for Newcastle-upon-Tyne, North and others in the region were fighting for work—
  Mr. Frank Hooley: On a point of order. Is not my hon. Friend straying somewhat from the point?
  Mr. Deputy Speaker (Sir Eric Fletcher): I have been listening to what the hon. Member is saying. If he strays outside order I shall call him up.
  Mr. Leadbitter: I am merely carrying on the theme introduced by the hon. Member for Newcastle-upon-Tyne, North. We were passing through a very dark tunnel and our hopes of reaching the end were a little dismal. We could not see the light. There were depressing economic circumstances, with increasing levels of unemployment and the incomprehensible indifference of those in power to bring these conditions to an end. I think that the preservation of human life with all its scientific interests was far more important than the scientific interests of other things.
  I do not say that other things were unimportant but their importance had an evaluation which was related in some way to the extent to which we, as a society, judged each other. In other words, I made the point then, and I make it now, that we cannot evaluate the scientific interests of things outside ourselves unless we ourselves in society have cultivated—
  Mr. Deputy Speaker: The hon. Member is now going rather wide of the subject. I must ask him to relate his observations to the Motion before the House.
  Mr. Leadbitter: I am relating the conditions, in the sense that when opponents of the Bill attempt to defeat it on premises which have been questioned upstairs and valuations which are very much exaggerated, it is important to stress the point that in my region we cannot evaluate beauty and the scientific interests of flora until we have the social conditions for all those who live there to enjoy it. That is the true evaluation of the area.
  I am making the point that human kind was predominant in my thinking at that
  1998
  time and I was strongly opposed then, as I am now, to any hypocrisy which gives lip service to values, but which fosters notions and attitudes which are antagonistic to the real values in society. But now we have got through this dark tunnel and the North-East is now beginning to look brighter. There is work, people are moving about and the population is able to enjoy the area in question—an area in which I live and where I have worked, where I go for my own leisure—
  Mr. Deputy Speaker: Order. The hon. Gentleman must relate his observations to the Motion before the House.
  Mr. Leadbitter: Having made the point that we have reached the stage where things are better in this region, it is right that, in considering the Bill, we should say to those who determined this Bill and sought to promote it that their concern is not only with the matters which I have raised but with the social and economic life of the region, and that they should therefore, in consequence, look very seriously and deeply into all the matters which the objectors have hitherto raised.
  It is therefore right that, in support of the Bill, I should claim that I have looked at some of these objections. I notice that the Botanical Society has outlined in a memorandum to hon. Members the purposes of the Bill. They refer to the area and the plant community life which in some way has its origins in the Ice Age. They also refer to a consultant who makes the comment that the intrusion of something man-made into this splendid landscape would be wrong and would do great damage. It refers to the particular demand of an industrialist.
  In the question of this industrialist, I.C.I. are spending about £1 million per day on new processes. This, in itself, creates difficulties of demand for water. It is very difficult to assess the demands for water when a user of water of this size is involved, and there is an experiment of this magnitude in terms of capital cost. No one can claim as an argument, as an hon. Member opposite did, that the Board has failed in not assessing the demand properly. It is impossible to do so.
  The memorandum goes on to say that the past history of the Board is such that actual demand over a prolonged period outstrips the estimated demand for water.

  1999
  I repeat this point only in order to make out that, to my knowledge, no water board, however successful has been able to estimate the demand for water. If there is anything wrong in the Bill at all it is that the water supply of the country is not really organised and administered properly to satisfy the needs of the nation.
  However, accepting the situation as it is, it is not a valid argument to say that the board has not been successful in recent history in assessing the demand of the area. It is not unusual; this is understandable. It is because of this circumstance that the board has had to use this instrument of a Private Bill in order to get this kind of solution to a problem which is most pressing in the area.
  Of course, the memorandum finally refers to a short term requirement and long term possibilities of the irreparable damage to unique vegetational features. In The Times on 27th July, a writer indicated some concern about this question of unique vegetational features. He wrote that a previous letter in The Times:
  "refers three times to the destruction of the area which the creation of the Reservoir will entail. The area of 770 acres to be submerged contains no human habitation. The greater part, as usual, is used only for rough sheep grazing. Seventeen acres only are admittedly of special botanical interest, but the flowers and plants found there are not, as I understand it, unique in the sense that they cannot be found elsewhere. Indeed, they occur in the same neighbourhood but outside the limits of the proposed reservoir."
  It is interesting to notice that on 23rd October, 1964, a letter written by the Director-General of the Nature Conservancy to Mr. Kennard on behalf of the board indicated a lapse in opposition. At the time that the letter was written, the proposed top water level for the reservoir was about 1,600 ft., and this was known to the Nature Conservancy. The top water level proposed in the Bill is 1,603 ft. above ordnance datum. It was therefore necessary to raise the level by about 3 ft. This is the reason for it: in order that the dam can be moved further back from the top of Caldron Snout in the interests of amenity.
  This is only one of a number of examples by the water board to meet the objections of botanists, naturalists and others, who are scientifically interested
  2000
  in the area. The Board went to this extent and the letter from the Nature Conservancy is of interest. I want to read only the first paragraph of it:
  "I was very glad to hear from you"—
  that is, the Board—
  "on Tuesday about progress in your investigations and also to meet Mr. Hetherington. However troublesome it may be reconciling our respective interests in this way, it is far less difficult and more civilised than the alternative of developing projects unilaterally and then fighting them in the chaotic conditions of a public inquiry!"
  So the Nature Conservancy was saying to the water board that it appreciated the co-operation of the board and that it understood that it was a very important step forward to remove from the area of dispute the practice of unilateral action the kind of action which spoiled the northern region in the nineteenth century.
  Hon. Members who speak in the House about pit and slag heaps are really talking about unilateral action by industrialists at a time when provisions were not available to support the interests of those who were scientifically inclined towards botanical matters in this area. A leading figure in the northern region wrote to The Times on 27th July:
  "The Bill if enacted will enable the regulating reservoir to be constructed to supply 35 million gallons of water per day for domestic and industrial purposes on Tees-side. The water will not be piped away from the reservoir, but will pass down the river to be abstracted at and below Darlington. The whole regime of the river will thus be improved."
  A great deal of work has been done to consider alternative sites and to make them available to the water board, but the Cow Green site was found to be less costly than other ventures. The proposed site was marked out to avoid a despoliation of agricultural land, taking into account the interests of the Botanical Society, naturalists, nature lovers and people scientifically interested in the area.
  On 12th July Professor Harper indicated the concern of the British Ecological Society, which means that we now have another organisation which is interested in the area. I mention this because the members of this society are men of great distinction whose authority and opinion in these matters are difficult to question. Concern was also expressed on the scientific side, when the members of this

  2001
  Society stated why this unique area should be preserved. When I read the letter containing the view of the Ecological Society I could not, however, find any detailed argument about the types of plant and so on involved. Although there were no facts of that sort, I could only draw the assumption that this important Society was approching the subject as a matter of principle and was indicating its support for the objectors in the case.
  Mr. Hawkins: As one who was a member of the Committee, I assure the hon. Gentleman that the British Ecological Society is wholeheartedly against this proposal and gave evidence against the Bill. I assure the hon. Gentleman that its representatives gave extremely good reasons for taking that view. If I am fortunate enough to catch Mr. Speaker's eye, I will develop this theme.
  Mr. Leadbifter: I am not speaking in order to dispute what was said in Committee upstairs but merely to produce the evidence which is available to me. I was referring to a letter in The Times. Having considered all the evidence, as well as the priorities which should be maintained in the area, I am satisfied that the case which has been made out by the botanical interests and bodies associated with them—indeed by the objectors in general—has, I regret to say, been exaggerated.
  Unless the Bill is passed and water is made available to this expanding firm—remembering the need of domestic users, which is rising with the growth in population—this area will suffer a serious loss. It has been estimated that, in the event of drought, one firm alone might lose £45 million worth of exports of water is not made available in the sort of quantities we are discussing. I hope that, these priorities having been considered, hon. Members will support the Bill, bearing in mind that those who live in the area are, nevertheless, sufficiently aware of the need to preserve the beauty of what is a wonderful regions.
  8.25 p.m.
  Mr. Graham Page: This is not the occasion when much time should be taken up by members of either Front Bench. We are discussing a Private Bill on which hon. Members must make up their minds without the assistance of the Whips of either side. I am sure, how-
  2002
  ever, that the Minister will wish to give some advice to the House, and it is therefore right that I should comment on the matter from this side.
  The House has an opportunity of debating this matter because a Private Bill was necessary since, in this case, certain common lands were involved and the Water Board wished to take them over. Thus, the Bill reaches the Floor of the House after being for 13 days in Committee. To correct my hon. Friend the Member for Richmond, Yorks (Mr. Kitson), the Bill could have come before the House on Second Reading if anyone had objected at that stage. But, having gone through 13 days in Committee, I doubt whether any points of argument for or against it have failed to be put in that Committee.
  However persuasive hon. Members may be in debating on the Floor of the House—and we have heard some very persuasive speeches today—the Committee appointed to consider the Bill heard the evidence first-hand. The House is grateful to those hon. Members of the Committee who sat for 13 days listening to this evidence and all the other arguments. Therefore, prima facie, the case is for the Bill when it comes back at Report stage in this way, and the burden is on those who object to it to prove their case.
  Their argument is that the Committee itself was not unanimous, and my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) has declared that he was not with his colleagues on that Committee in their decision. My hon. Friend the Member for Gainsborough (Mr. Kimball) has pointed out that the Committee did not have all the evidence before it which is available now. So, to some extent, the objectors to the Bill have justified bringing the Measure before the House today.
  The debate is a little wider than procedural points concerning a private Bill and how it has been through its Committee stage and so on. The issue is, perhaps, wider than the Bill itself. It has been put as the preservation of human life being more important than the preservation of flora and fauna. That may be a somewhat exaggerated way of putting it, but my hon. Friend the Member for Gainsborough said that there were

  2003
  three reasons why the Bill should be rejected. He stated that if it were to become law it would, first, destroy a unique area of scientific importance; secondly, that it showed a lack of long-term planning; and, thirdly, that its content was contrary to the advice of the Nature Conservancy and the National Parks Commission.
  He asked me whether the Opposition would support action to strengthen the protection of areas of international scientific importance. I can confidently give an assurance that from this side full support will always be given to action taken to strengthen the protection of these vital areas of international scientific interest and importance. My hon. Friend the Member for Gainsborough said that this was perhaps the most important conservation matter that had come before the House for a very long time, while the hon. Member for The Wrekin (Mr. Fowler) expressed it as a consideration of qualities of life rather than the material values.
  What, then, is the need for this reservoir? The promoters of the Bill have very clearly set out for us that the undertaking, Imperial Chemical Industries Limited requires additional supplies of water for very important purposes at the chemical works at Billing-ham and at Wilton, and the new refinery at North Tees. Further, and I do not think that this has been very much mentioned so far in this debate, it is not only a question of Imperial Chemical Industries Limited but of Dorman Long and Company Limited, the Shell Refining Company Limited and the Industrial Estates Management Committee of the Tees-side. On the other hand, does this important need of these industrial concerns outweigh irreparable damage to this area of unique botanical interest?
  My hon. Friend the Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott) said that the major problem was the future prosperity and employment in North-East England. On the other hand, those who object to the Bill say that there are alternatives; that there is the Middleton area where a reservoir could be placed; that there is the Upper Cow Green area where, again, there is opportunity for a reservoir, and that investigations could be made of the quantities
  2004
  of water that might be provided by means of bore holes.
  I should think, though, without necessarily taking sides, that the advantage of the reservoir proposed by the Bill is very great as compared with the alternative sites. It uses an area of comparatively unimportant unproductive land, and only a small area of that, it is said, is of botanical importance. We are told that only 17 acres of some 300 acres of the scientifically important area will be submerged, but even 17 acres of an area which is of international fame is of importance, and should be protected if that is at all possible.
  There is no doubt that a new water supply is necessary in order to continue the substantial expansion of industry in this area. Reference has been made to what is known as the Hailsham Plan. There is no doubt whatever that the intention of that plan for the North-East was the expansion of industry there, and my right hon. and learned Friend who devised that plan worked very hard to persuade I.C.I. to increase its investment. Had that undertaking not done so at that time, there would have been many fewer jobs in the area than there are now—indeed, there might have been greater unemployment had that firm not been persuaded to invest substantially in that region. At any rate—if, even on a Private Bill, I might make one political remark—we did not have to abandon the plan for the North-East as the present Government have had to abandon the National Plan. The plan for the North-East has gone ahead, and has provided substantial employment—
  Mr. Arthur Blenkinsop: If the hon. Gentleman is to raise an issue like this, he should make it clear that we are stepping up our plans for the North-East and other development areas, to the great success and happiness of the people living there.
  Mr. Page: Indeed, the present Government are developing, increasing, improving and implementing the Hailsham Plan. We are very glad that they are. Therefore, it is not, as one hon. Member opposite said, an account of what has not been done; it was an account of what should be done and is going to be done and not, as the National Plan

  2005
  now is, an account of what is not going to be done.
  The Parliamentary Secretary to the Ministry of Public Building and Works (Mr. James Boyden): The hon. Member rather forgets that in this area—which is in my constituency—a particular part of Teesdale was left out of the development district. It has been put into the development district by the present Government and this reservoir is of great importance in providing a job carry-over.
  Mr. Page: We were getting the results without making it a development area. We were getting the investment from I.C.I.
  Mr. Boyden: I referred to Teesdale, not to Tees-side.
  Mr. Page: At any rate I think we are agreed that I.C.I. is doing a good job by providing employment for 17,000 at Billingham and 14,000 at Wilton. The argument against that is that here is a very wealthy concern which has got the money to make other provision than to obtain a water supply from this area.
  Dame Irene Ward: I come from the area, and what I want to know is whether my hon. Friend the Member for Crosby (Mr. Graham Page) can deal with the technical details about alternatives to this site. We know all these arguments backwards. What we want to know is what is the appreciation of my hon. Friend, who represents the Opposition, of the alternative sites which have been offered? That is what we have to make up our minds about. I want the technical details, not all the flim-flam which anyone could give.
  Mr. Page: I offer my hon. Friend the technical details given in 13 days in Committee. They certainly cannot be Given on the Floor of the House at this time. The alternatives are the Middleton Reservoir, the Upper Cow Green Reservoir, which was dealt with in considerable detail in Committee, and other possible alternatives, but in those cases—
  Dame Irene Ward: Not every hon. Member sat on the Committee.
  Mr. Page: —there would be more expense and they would take a longer time. I do not want to sit in judgment
  2006
  on the question of which reservoir should he provided. Each individual hon. Member on a Private Bill of this sort has to make up his or her mind as to which way to vote. Frequently the decision is more satisfactory either way than when the Whips direct us into which Lobby to go. Undoubtedly there is a very grave problem and a very difficult issue, on the one hand to maintain the expansion of industry in the area and to ensure employment, and on the other hand not needlessly to throw away a most important asset of the country, the scientific knowledge which can be gained from this area and the enjoyment which can be given by the beauties of nature in this area.
  These have to be set against the development. It is a difficult issue but with the decision of the Committee and the evidence taken by the Committee, hon. Members should be able to make up their minds on whether they support the Bill or wish to reject it.
  8.39 p.m.
  The Minister of Land and Natural Resources (Mr. Frederick Willey): I do not think anyone in the House who thought twice would think that the Hail-sham Plan was worth while spending much time on, and I shall not spend any more time on it.
  Mr. R. W. Elliott: Will the right hon. Gentleman give way?
  Mr. Willey: No, I shall not. I have expressed a point of view which the hon. Member may not share, but I think it is the view of most people who have thought about the North-East. I intervene because I got the impression that on balance the hon. Member for Crosby (Mr. Graham Page) was in favour of the Bill.
  Dame Irene Ward: Nobody knows what he thought.
  Mr. Willey: I can only express the opinion that I thought on balance he was in favour of the Bill. As he said, this is Private Business. I am intervening without the automatic nod of approval from the Whips regardless of possession or lack of eloquence. I can only very briefly advise the Committee. I agree with the hon. Member for Crosby that the facts are available. They have been considered. They have been fairly well deployed this evening.

  2007
  Like the hon. Member for Crosby—I think that I at any rate have this impression correctly—I think that when my hon. Friend the Member for Chorley (Mr. Kenyon) and his colleagues have exhaustively considered the Bill upstairs for 13 days there is a predisposition to agree with them. They have had an opportunity of hearing the evidence first hand and forming a view on it. It does not commit the House, but it expresses a point of view to which we must pay very serious regard.
  I could give my personal advice. I know the area very well. I had the great pleasure of opening the youth hostel at Langdon Beck when it was rebuilt after being burned down. I was very happy to do that because I had often stayed there. In company with my hon. Friend the Member for South Shields (Mr. Blenkinsop), I have been on the High Cup Nick and walked up there. My own personal view would be that, if this were a choice between the Cow Green and the Upper Cow Green reservoir, I would prefer the present scheme. I do not like the prospect of the high concrete dam, although it is higher up the valley.
  I also think—this is no more than a personal opinion—that from an amenity point of view this reservoir will be very attractive. We rather misleadingly talk about this as being a very remote area. With this attraction, it will bring to the Upper Tees Valley quite a number of people at the weekends from the Three River country—from the Tyne, the Tees and the Wear.
  The main issue here is that this is an area of unique scientific interest which might be prejudiced or damaged by what the promoters of the Bill propose or seek permission to do. Therefore, what we have to consider is whether this can be avoided and whether it can be avoided at a cost commensurate with the scientific interest. These are the questions to which we must direct our minds.
  This could be avoided if we had no reservoir. That would be—there is no need for me to re-state this—to the great prejudice of this important industrial development on Tees-side. I agree with the hon. Member for Crosby that it is not only I.C.I. It is Dorman Long and other industrial development on Tees-side.
  2008
  The question is, then: is there an alternative?
  Mr. Eldon Griffiths: Middleton.
  Mr. Willey: My advice can only be based on the technical advice available to me. That is the advice of the Water Resources Board. After all, we have been asked this evening about technical advice. The advice available to me is that there is no alternative without a grave risk. There would be a grave risk if there were a succession of three or four dry summers. This is entirely a matter on which the House must express its judgment. I do not think that it is a risk which we can afford to run.
  The second issue is whether it is an unavoidable risk. There is no question of possibly avoiding the risk over the three- or four-year period. Even if one had to run that risk, can one preserve this unique site undamaged, unprejudiced, at a cost commensurate with the scientific value?
  We have discussed the cost. It would be about £3 million or £3½ million. This would be, to put it in another way, £12 million over 60 years. This is the issue upon which the House has to reach a decision.
  I have considered this with my right hon. Friends the Minister of Housing and Local Government and the Secretary of State for Education and Science and, having done so, we feel that the advice we must tender is that we should support the Bill. I do this with the greatest reluctance. Too often have we found ourselves in this kind of position. I was very pleased the other day to introduce the report of the Water Resources Board's Technical Committee on the South-East.
  I realise that in this case the advice I have to give to the House is partial and hurried because we have been working against time and all that the board has been able to do is to give the best advice it could in the time. But it is now conducting a survey of the North, and I hope to get at any rate an interim report by the end of the year. In this way, I hope that we will get far greater knowledge so that we can make a much more effective and wider choice. What the House must feel is that the difficulty here is in the narrow limitations of choice.
  Mr. Eldon Griffiths: The right hon. Gentleman has made the interesting remark that the northern committee is to report to the Board. He said that the information should be available by the end of this year. Would not that be the time to make this judgment?
  Mr. Willey: This is urgent; we cannot delay it. The board is doing its best, but I cannot say that, by the end of the year, we shall have a report comparable with that of the one on the South-East. What I am anxious to do is to get the best information I can, if possible by the end of the year. We must see that we have proper information so that, in future, we find ourselves less and less forced into making ad hoc decisions. It is for that reason that, very reluctantly in the circumstances, I have to recommend the House to reject the petition and support the Bill.
  8.47 p.m.
  Mr. Arthur Blenkinsop: I welcome the comments of my right hon. Friend the Minister of Land and Natural Resources because he has made clear the problem we face in this issue. It is also right that a voice should be heard from these benches from the North-East objecting to the Bill, because I was, frankly, concerned about the case as the hon. Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott) developed it. It seemed to me that if one accepted his argument one would be saying, as so often in the past it was said in the North-East, that so long as we supported industrial development it did not matter what else happened. I thought that this was something we had woken up to reject.
  I thought that we all now took the view that, if we were to get a healthy North-East, it must be a balanced development which took full account of the wide range of needs of the area and also the quality of life of its people, and not merely, terribly important as it is, of the industrial need. This is particularly important when we come to examine a case like this, where so many of us feel that alternatives could have been provided, at least had there been time to examine them properly.
  We are continuously faced with this kind of problem. We are quite unfairly asked to judge on an issue virtually with
  2010
  a pistol at our heads and being told, "Unless you agree, many people will be put out of work, or an important and vital and progressive industry will move out of the area". When that sort of argument is raised, it makes it almost impossible for us to reject it, however badly based it may be. Of course, I welcome enormously the news that we have some hope in future of getting a proper view of matters like this because of the work of the Water Resources Board. He has been the first to admit that the report so far available from the Water Resources Board is inadequate on any criteria which we would wish to use.
  Like my right hon. Friend, I know the area well and in past years we have walked over it together. I have also had the experience of being a member of the Nature Conservancy, under whose auspices I have stayed on the site and met many of the scientists concerned with the area. I have also had the opportunity of serving on the recent Conference on the Countryside in 1970 and I am still concerned with carrying out some of the recommendations made by people with a wide range of backgrounds, and I have been concerned with trying to give greater emphasis to the long-term scientific considerations which I hope hon. Members will not brush aside.
  Unlike some of my hon. Friends, i do not reject the proposal in the Bill because of destruction of amenity in general terms. I do not object to stretches of water. Indeed, I have welcomed the introduction of reservoirs properly designed and carefully sited in many places. I very much welcome the Derwent Reservoir which is nearing completion, and I welcome enormously the recreational opportunities which will be provided. At one time, water engineers told us that we could not make use of water which was for drinking purposes, but nowadays we are growing up and realising that we can make use of water and that, provided authorities take proper precautions, there is no danger to communities. Thank heavens the obstructionism of some water authorities, like Manchester, is a thing of the past.
  I also welcome the Tryweryn and other reservoirs which have been introduced in North Wales, although understanding the anxieties of some of my Welsh friends.

  2011
  I think that water in these areas can provide an added amenity, and I agree with my right hon. Friend about that. I do not agree with him that necessarily the reservoir in this case would be better placed as is proposed in the Bill, as against higher up the valley. I am prepared to accept the higher dam. I do not think that it will necessarily destroy the area by being in that situation. There will still be great beauties and the water itself will provide beauty. I welcome the fact that the Nature Conservancy is prepared to support proposals for a reservoir constructed higher up the valley and flooding a good part of the area on which it has been working.
  The issue, therefore, is one of time. Is it true that there is no other way of meeting the urgent demands than by having a reservoir sited as proposed? At this moment I am not satisfied that the promoters of the Bill have made their case adequately. I feel that there is a need at some time for hon. Members to take a stand against this kind of procedure. I hope that it is not unfair to I.C.I., but I suspect that at any rate there is a danger that if an application can be delayed sufficiently, there is more opporunity to get it through the House, because we are then confronted with this kind of pistol at our heads, which I deeply deplore. I hope that this kind of problem will not arise in future, because of the excellent and encouraging work of the Water Resources Board, which should help us to get a proper picture of our needs ahead. I repeat that my main anxiety, therefore, is not about the amenity problem. But I regard the scientific problem as very real and not one that can be brushed aside. Although the area involved is small, the long-term damage to the scientific interest will be real, and the House should bear this seriously in mind. Because of this, unless I can be convinced by any succeeding argument I propose to oppose the Bill.
  8.55 p.m.
  Sir David Renton: Like the hon. Member for South Shields (Mr. Blenkinsop), I have no predisposition against reservoirs as such. In fact, the largest artificial reservoir in this country is in my constituency, Graffham Water, made entirely by flooding farmland. With great respect to the Minister
  2012
  and to hon. Gentlemen on both sides of the House who have spoken, I do not think that the true issue has yet been pinpointed in the debate. I do not think that we have the facts, in the first place, in spite of 13 days in Committee and in spite of test borings having taken place—[An HON. MEMBER: "And still going on."]—and, I am told, still going on, although my hon. Friend the Member for Richmond, Yorks (Mr. Kitson) thinks that they have finished.
  Mr. Kitson: No.
  Sir D. Renton: But whether they are finished or not, we still do not know whether groutings will be necessary, and because we do not know whether groutings will be necessary we still do not know how much land surrounding the part to be flooded will have to be taken for the works. Because we do not know whether groutings will be necessary, we still do not know what the total cost will be and we still do not know when the work can begin. What a situation for Parliament to be in—trying to take a decision in circumstances like that.
  The other respect in which the issue has not been pinpointed is this: the Minister, without detailing it, said that there was a matter of urgency here. He is probably a very unhappy man tonight; he should be after the speech of his hon. Friend the Member for South Shields.
  Let us consider what the matter of urgency is. The only information that we have and can pinpoint on this question of urgency is in paragraph 6 of the statement put out on behalf of the promoters, which, summarised, comes to this: that there is a risk, not a certainty, that by 1969 an additional 25 million gallons of water of acceptable quality will be needed. By way of amplification of that we are told, or threatened, that if we get a dry year like 1949 or 1959 I.C.I. may have the serious losses mentioned. We never have more than about three months of real drought weather in a dry year, and it is worth remembering that the South and South-East of England are generally worse affected than the North-East or North-West.
  That is the nature of the risk. How shall we insure against it? That is the point that the House must decide by its vote tonight, and the question we have to decide is whether it can be reasonably

  2013
  insured against in ways which are established as feasible, and which I shall mention in detail in a moment. Or are we going to insure against it by an irrevocable act of spoliation? This is what it comes to.
  Once 770 acres of Cow Green have been flooded, they will be flooded for ever and this unique patch of vegetation of scientific value will have been lost to science forever. The Minister tells us that we cannot wait even till the autumn; we must take a decision tonight, on inadequate facts.
  Mr. Willey: I am sure the right hon. and learned Gentleman wishes to be fair. I said hat the Water Resources Board hopes to issue an interim report by the end of the year. But there will be nothing in that report to affect this decision. We have the contemporary advice of the Water Resources Board.
  Sir D. Renton: If Parliament takes a decision tonight, I hope that the Water Resources Board will certainly not try to reverse our decision. But I am suggesting that Parliament is not in a position to take a decision tonight because we have not the basic facts on which the promoters of the Bill are relying for the consent of Parliament to the works proposed. Moreover, I do not consider that the clearly feasible way of covering the accepted risk which I.C.I. has mentioned has yet been considered fully enough in this debate.
  In the short term, this risk can be covered perfectly satisfactorily. I understand that one of the witnesses before the Select Committee said that not 6 million gallons as has been mentioned but possibly even 18 million gallons could be found from the bore holes between Darlington and the sea, and that these could he linked with one another and worked into the existing water supply system of the area. There is a potential supply of 6 to 18 million gallons. There is also an easily and, I believe, fairly quickly and fairly cheaply obtained scheme at Cloud Beck which would produce another 4 million gallons.
  When we are thinking of alternatives, we have to measure the alternatives against the risk. I suggest that, rather than plunge into an irrevocable decision tonight, we should decide to meet that risk and the short-term needs by means
  2014
  of these bore holes and the scheme at Cloud Beck, and give the Water Resources Board the opportunity for sound thinking such as it has displayed this week in its excellent report on the South East Study. This will avoid Parliament nibbling at this problem, as we should be doing if we gave consent to this Measure.
  Mr. Clifford Kenyon: Has the right hon. and learned Gentleman read the account given by the director of the Water Resources Board in evidence to the Committee?
  Sir D. Renton: I have not read all the evidence before the Committee, and I have not read that particular account, but I must point out that the Water Resources Board has moved a good way in its thinking in studies of the water supply problem of the East and South-East of England.
  What I am asking—the Minister is asking it, too—is that the Water Resources Board should now have second thoughts, with the aid of its northern Committee, about the water resources of the North-East.
  Mr. Kenyon: But he went up to 1980 before the Committee.
  Sir D. Renton: What I am suggesting is in line with what the Government have asked, and all I am saying now is that we defer a decision, which would be an irrevocable one unless something is done wisely in another place, and that—
  Lieut.-Commander S. L. C. Maydon: I assure my right hon. and learned Friend that the question of alternative supplies from boreholes was very thoroughly examined in Committee. There is nothing which can be called evidence on this score, because the yield from a borehole is pure conjecture until one has bored. But, weighing the professional opinion on one side and the other, the Committee came to the conclusion—or, rather, the evidence was given to the Committee—that this was not a practical proposition.
  Sir D. Renton: Whatever element of conjecture there may be, I prefer the possibility that the boreholes will produce an answer to this problem to the total certainty that 770 acres at Cow Green will be lost for ever. That is my answer

  2015
  to my hon. Friend. I am sorry, but I must speak bluntly and frankly.
  Because of the shortage of time, I shall refrain from giving my views on the generalities of this matter. We are working ourselves into a hopeless position in which an ever-increasing population will be unable to enjoy our national heritage unless we are very careful. Tonight is a test case. Tonight we will be setting a precedent for our nation and possibly for others as well.
  I have very great sympathy with my hon. Friend the Member for Richmond Yorks, because already having one reservoir in my area I was threatened with another. That has been staved off, but I accept his difficulties over Middleton-in-Teesdale. I would like him to bear in mind that Middleton-in-Teesdale is part of a big, long-term solution and when the Water Resources Board has had further thought it may be that he can inspire them to avoid flooding even Middleton-in-Teesdale.
  Meanwhile I would ask him and other hon. Members to remember that if one floods Cow Green it will be a question not merely of losing the 17 acres, which would be flooded anyway, it would mean that the unique vegetation on the sides of the banks of the reservoir, in addition to that beneath the waters, would be altered for ever. This is for the scientific reason—a limited knowledge of biology is enough for me to understand it, and I am sure that I can explain it to the House—that when there is a reservoir there is evaporation, especially in warm weather, and we are reliably informed by scientists who gave evidence to the Committee that the evaporation will affect the vegetation and the insect life on the banks of the reservoir by the raising of the temperature by an average of 2°C. That will mean that the plant life, which is of Ice Age origin, will not survive. What my hon. Friend said has to be considered in the light of that scientific fact.
  Mr. Kitson: Is it unfair to say that the longer-term solution to this is a reservoir at Middleton-in-Teesdale. The Water Resources Board has suggested that water should be brought in from another area. This is what we all hope to see in future. Let us not suggest that the longer-term solution to this problem is a reservoir in Middleton-in-Teesdale.
  Sir D. Renton: I entirely agree with my hon. Friend, and I was trying to give him some moral support in his view. He has expressed the point much better than I have. I hope that he will take comfort from the fact that the further thoughts that the Water Resources Board are going to have may make it possible to save Middleton-in-Teesdale as well. Meanwhile, what we have to do is to decide whether Cow Green should be flooded forever, and I say that the case for it has not been made out.
  9.10 p.m.
  Mr. Ernest Armstrong: I come from the North-East, and I should like to commend previous speakers for the way in which they have dealt with this issue. It is a credit to the House that there has been such an attendance for and such great interest in a Bill of this kind. I agree with almost everything that has been said. I was particularly impressed by the contribution of my hon. Friend the Member for South Shields (Mr. Blenkinsop). However, I will disagree with him in the Division Lobby.
  I think that the real issue is fairly narrow. I deplore the presentation of the issue to Members through the post. I accept the real and genuine concern of those who have spoken tonight and who have written to me pleading that this very important and valuable area scientifically should be preserved. I could be overwhelmingly convinced by the statements which they have made and the evidence which I have had in isolation. All of us would like to leave the area as it is if we could. On the other hand, when we read about the real needs and priorities, again in isolation, the case is unanswerable. I do not regard the members of the water board as people who have promoted the Bill ruthlessly and without care or regard for the consequences. There is not the slightest doubt that great care has been taken. All of us agree on certain fundamental principles.
  I have had long conversations about this matter with my hon. Friend the Member for Bishop Auckland (Mr. Boyden) who sits on the Government Front Bench. We both know the area very well. Only three years ago the town of Middleton and the surrounding areas were described as a "travel-to-work"

  2017
  area where job prospects would decline and capital investment would be allowed only in very unusual circumstances. The outlook for the area was very grim.
  We tend to be influenced by all sorts of pressures. I have lived in the area and seen family after family, young person after young person, unable to deploy their ability and talent in the area and having to move to the South of England and the Midlands. I get as many visitors as anybody, and hardly any come from my constituency. They are people who have come down here to live. When I see the conditions of life here, the most exciting place for me in London is King's Cross, because it is from there that I escape to the lovely North-East. If this is the quality of life in London, I am not anxious that it should be transferred to the North-East—heaven forbid.
  I take issue with my hon. Friend the Member for South Shields about the quality of life. None of the social amenities will be destroyed. The beauty of the area will not be affected. One of the most delightful places in the North-East is the new Derwent reservoir and the surrounding district. I take people who come to my home to that area to show them the beauties of the district.
  Mr. Blenkinsop: I was not objecting to the proposal on amenity grounds. I was anxious about the logic of the argument of the hon. Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott), who seemed to be arguing for industry in the North-East whatever the cost.
  Mr. Armstrong: I go all the way with my hon. Friend the Member for South Shields on that matter. I am very concerned about what I call the depression complex that has lingered so long among so many of our people. When we see families forced to leave the area in order to find work, our minds tend to become concentrated.
  This is a matter of judgment and opinion. I would not dare to be dogmatic and say that the right hon. and learned Member for Huntingdonshire (Sir D. Renton), who spoke with such persuasion and deep feeling, is wrong and that I am right. I do not know. When the House divides, each of us has to make a judgment. I was impressed by both Front Bench speeches which tried to spotlight the arguments for those of us who would
  2018
  like to preserve what is there because of its value and who have a great understanding of the human problem in the area.
  I do not think that we can discount, as the right hon. Gentleman tried to, what has happened in 13 days of Committee. To say that we have not had the facts is a bit unkind. Those of us who have read the minutes of proceedings can see that it was presented and sifted very carefully. We have to make a judgment on that evidence.
  The determining factor for me is that if the Bill were defeated, industrial development on Tees-side would be impeded and delayed. I do not think that he should have industry at any price. At the same time, I know what the denial of freedom to work means to young folk. Many of us have had the experience of talking to young men and women who regard leaving school as the very mark of adulthood. When they seek employment to earn their living and it is denied to them, I cannot think of any more inhibiting human factor.
  On balance, I believe that the circumstances justify support for the Bill. I am concerned about the very easy way in which we have encroached on valuable land. It has gone on far too long, and in that context I welcome the remarks of my right hon. Friend the Minister for Land and Natural Resources, who happens to be my own Member of Parliament.
  We are presented here with a decision which must be made now. If we throw out the Bill, we shall impede very necessary industrial development in an area which needs it so much. [Interruption.] It is no good hon. Members saying "No". That is my judgment. They may have other opinions. It is because of that and knowing what it means to people in the area who have suffered all too long, that we should approve the Bill. We have heard a good deal of defence by its opponents, who choose to live a long way from the area. However, it is a very popular area. It contributes greatly to the quality of life of our people. I estimate that 99 per cent. of those who have visited the area, enjoyed the amenities and walked over it were quite unaware of its scientific value until this case came before the public and before the House. That is not to say

  2019
  that we should push aside these valuable and rare examples of flora which exist there. But, on balance, I am bound to say that I shall support the Bill.
  9.20 p.m.
  Sir John Eden: As I am sure everyone will agree, this has been a most important debate, raising questions of a kind which are becoming increasingly urgent. The conflict between the demands of our expanding industrial society and the claims of agriculture and the countryside occasionally erupt in a debate of this kind.
  I was heartened by what the Minister said about his dislike of the ad hoc solution, and about the encouragement which he gave to the work which is being carried on to try to find a more considered and comprehensive solution to these problems. I do not for a moment underestimate the importance of industrial development in the North-East. I take very much to heart what was said by those hon. Members who have spoken most feelingly on this subject. I intervene for a brief moment, however, to speak against the Bill, and in support of the Amendment.
  There are already in this area impounding reservoirs with a total capacity of about 10,000 million gallons of water. When, in 1959, Parliamentary approval was given for the last and greatest of these reservoirs, the Balderhead Reservoir in the Tees Valley, it was said that the requirements of the water board would be met until 1983. It would appear, therefore, that as the Board has had to come to Parliament and ask for further powers to extend its reservoir area in this locality, the requirements then stated were grossly underestimated.
  I recognise that this is largely due to the pace of the industrial development which has taken place there, most notably as a result of the new plant established by I.C.I. I fully recognise that there is a great need to take account of the technological advances in this organisation, and indeed also to exploit the new techniques and to develop the market outlets which are becoming available to it. As some hon. Members have said, these are some of the conflicts which each of us has to weigh up.
  2020
  I am told that if this new reservoir is built, it will satisfy the water needs for about four to ten years from the time that its construction is completed. After that, I am given to understand, further water supplies will be required for the area. We are therefore contemplating, in the time scale, a comparatively short period, albeit a most significant one, for the purposes of the industrial development and livelihood of the people in the area. But against this we are accepting, at any rate partial, and I contend substantial, destruction of plant life which has come down to us from a previous age, covering many thousands of years of the time scale.
  I believe that for such a short-term stop-gap requirement the destruction of an area of special scientific interest of this nature is more than just, in the words of my hon. Friend the Member for Richmond, Yorks (Mr. Kitson), "most unfortunate". This is more than just a case of, again to use his words, "the problem of the flora." This is a thing of importance not just to the locality, not just to the amenity, or even the scientific value of the region, but to all who wish to make further studies, from whichever country they happen to come, of a unique group of plants.
  The best description which I have been able to find of this area was given in Cmd. 7122 of July, 1947, the Report of the Wild Life Conservation Special Committee, appointed in August, 1945, of which Dr. Huxley was Chairman. It refers to this area as supporting
  "many important types of alpine and sub-alpine communities (including a well-known arctic-alpine flora and fauna not developed anywhere else in Great Britain … One site probably contains more rare plants than any other of equal size in Great Britain. This district is also of great geological and physiographical interest, including an extensive exposure of the Whin Sill and a classic region for Lower Paleozoic, Carboniferous, igneous and structural geology, and was recommended as a Conservation Area."
  A "conservation area" may be defined as
  "a tract of country the existing character of which it is desired to preserve as far as possible either for the singular beauty of its landscape or for its high scientific interest, but more usually for a combination of both."
  Mr. Kitson: If this point was of such great significance, why did the Nature Conservancy in 1964 not inform the

  2021
  Water Board of its interest in the area? It is useless to say that for years everybody has known of the tremendous scientific interest in this area when nobody objected in 1964, when the point was first raised.
  Sir J. Eden: Obviously a case might have been made earlier and stronger, but that is not a reason for destroying the area now. Surely we should not say, "Because you are late in your representations you must let us flood this vitally important beauty site". Great consideration has been given to the alternatives to the Cow Green proposal.
  It is impossible to quantify in money terms the scientific value of this area. We should consider the consequential effects of flooding even a small portion of this area upon the remainder of the area. We are talking about an area as a whole. If we alter the water table or interfere with one part of the area it is bound to have repercussions and consequential effects upon the plant life and vegetation in the other parts of the same scientific area.
  But I look further ahead. I ask that this scheme shall be deferred. I ask for delay and that use shall be made of the borehole techniques and other techniques to insure against this type of emergency, which seems to be remote. Looking further ahead. I hope we shall make a substantial advance in desalination. I know that it is expensive, but the progress being made by the Atomic Energy Authority is considerable. I am encouraged in my reflections in this matter by paragraph 9 of the submission made by the promoters, when they say:
  "The prospects of the establishment of a nuclear power station in the North-East and of the use of North Sea gas also give reasonable grounds for hoping that the desalination of sea water might become a practicable means of augmenting water supplies between 1978 and 1985."
  So originally there was to have been sufficient water in this area to meet requirements up to 1983. Industrialists are concerned about the possibility of an emergency arising in the early 'seventies. I contend that there is such a narrow gap in the time scale as not to justify the destruction of something which has existed for between 10,000 and 15,000 years.
  I agree with the attitude of the hon. Member for The Wrekin (Mr. Fowler).
  2022
  This is one of the reasons for my intervention in the debate. This same point was made in a two-volume book on Durham written by my father. I would end by quoting one extract, in which he said:
  "We must readjust our values and give regard to scientific development of Industry, not as the immediate and ultimate and only object of our existence, but as an entirely subordinate and unimportant adjunct to the true meaning and purpose of life."
  These considerations are important and vital. They are ones to which increasingly hon. Members must turn their attention. We must find some long-term solution to this abiding conflict. The Bill and the Amendment give us an opportunity to make a start. I believe that it is right to use this opportunity to make a stand on this most important question.
  9.30 p.m.
  Mr. James Tinn: Having been born and having grown up in the North-East, I share their passionate concern with the problem of unemployment from which our area has suffered so much in the past. But I hope that this does not entirely colour my attitude, nor theirs, to the very real scientific and amenity interests involved in the Bill. Because of the very real concern we have with this question of unemployment and with the diversification of industry in our area, which is very closely linked with it even in time of prosperity, I make no apology for speaking first from what some might regard as a rather narrow constituency viewpoint.
  These are the people to whom I owe my first loyalty. I am speaking in this connection not only for myself, but, by a curious quirk of Parliamentary fate, for my right hon. Friend the Member for Middlesbrough, East (Mr. Bottomley) and my hon. Friends the Members for Middlesbrough, West (Dr. Bray), Stockton-on-Tees (Mr. William Rodgers), Sedgefield (Mr. Joseph Slater) and Bishop Auckland (Mr. Boyden). It seems that the very scarcity of back-bench Members for the North-East is due to that area choosing such able Members that they are inevitably drawn into the Government and the task of representing them has fallen to the one exception to that rule.
  The water board in this area has a big problem, in that the proportion of

  2023
  water which it distributes to industry is higher than any other in the country. The demand, as has been said, arises not only from I.C.I. but considerably from steel and from various other industries. But we on this side particularly welcome the presence of I.C.I. because it has brought a badly-needed stability of employment to this area which has been, for too long, too heavily dependent upon the basic industries which have always been so particularly and savagely susceptible to recession and unemployment.
  Reference has already been made to the size of employment offered by I.C.I. and I do not intend to weary the House with further statistics. But evidence of the scale of its contribution to the national economy is given by the fact that total production which in 1965 amounted to £226 million, is expected to rise by 1970—provided this Measure goes through—to £404 million. Clearly, this also includes a tremendous contribution to our exports. Last year, direct exports totalled £54 million and it is confidently expected that, providing the necessary water is available, they will rise to £100 million by 1971.
  In addition to the direct contribution made by Tees-side industry to our exports, there is the indirect contribution which is, perhaps, best indicated by reminding the House that the total British production of terylene and nylon comes from I.C.I.'s factories on Tees-side. Remembering that, one can speculate how much the production of plastics contributes indirectly to further exports.
  This export consideration cannot be ignored. While other industries on Teesside require large amounts of water, the Bill is particularly necessitated by the needs of I.C.I. and it is essential, therefore, that I should concentrate on those. I will, first, outline the general picture—not in detail because time does not permit—and then deal with the serious allegations that have been made against I.C.I. to the effect that the company has shown a total lack of foresight in predicting its requirements and arrogance in assuming that, once stated, those requirements must be met regardless of other considerations.
  First, the general consideration. Current manufacturing today by I.C.I.
  2024
  on Tees-side requires about 25 million gallons of clean water a day, plus a further 9 million gallons a day of low-quality, unfiltered water. I.C.I., Billing-ham, uses a further 2 million gallons a day of water from the Tees Estuary. The right hon. and learned Member for Huntingdonshire (Sir D. Renton), who seemed to assume too readily that neither the water Board nor I.C.I. had sought other sources of supply, should bear in mind that this search has been going on continuously and that no avenue has been neglected.
  Sir D. Renton Sir D. Renton rose—
  Mr. Tinn: I will not give way. I have much to say and little time in which to say it. It will be seen from what I have said that I.C.I., Billingham, is using six times more water from the estuary than the other two sites of the firm. Nor can it be said that the industry is wasteful of water. By far the greater amount of fresh water is circulated many times through cooling towers before it is finally rejected.
  I come to the allegations that have been made against I.C.I. As I said, I must try to satisfy the House on two major points in this connection. First, I must try to show why I.C.I. was unable to foresee this dramatic increase in its water needs and, secondly, I must explain why this urgent demand for water arises and why we have not been able to afford to yield to the persuasions of hon. Members who wish to delay this consideration.
  Much, though not all, of the increased demand arises from the construction at Billingham of three of the world's largest single ammonia plants. This is in itself the direct consequent of the discovery and development by I.C.I. of a new ammonia synthesis which processes ammonia from oils rather than by means of the normal coal processes. It is called the naphtha steam reforming process, and was discovered and developed by I.C.I. in the period between 1960 and 1964. These dates show why the firm was unable and could not be expected, to foresee the demand. Far from being criticised on this account, the firm is to be congratulated on its enterprise and on the brains that went into this development, and also on

  2025
  the speed with which, once the development was seen to be a practical possibility, it went ahead and notified the water hoard of its needs. I should like to see the rest of Britain's industry working at a similar pace; if it did, perhaps we would not be in our present difficulties.
  The other charge, if I might summarise it—fairly, I hope—is that I.C.I. simply went ahead with developments involving millions of £s before Parliament had approved the Bill. The distinguished Chairman of the Committee that dealt with the Bill here had some doubts on this score; it was he, I think, who used the colourful phrase that I.C.I. was pointing a pistol at the head of Parliament. With all respect, I would point out that no amount of money committeed by I.C.I. to such development needs influence the position of this House by one iota. There is no pressure. The House, as always, is free and unfettered in its decision on this matter. Far from its putting a pistol to the head of Parliament, I believe that I.C.I. made a justified gamble—if that is the right word, though I doubt it—on the good sense of Parliament in realising the need, measuring up to the opportunity and passing this Bill.
  Those who are a little more cynical than I as to the readiness of Parliament to measure up to this need might wonder why I.C.I. took such an appalling risk, running into so many millions of £s. The simple and brief answer is this. By this discovery, British technology has once again given us a lead in world markets and world technology, and for once, provided Parliament will co-operate, this lead will not be squandered, but these three years—and people talk of them as though they did not matter—are absolutely vital in this connection, and a heavy responsibility will lie upon us if we fail to realise it.
  As I said at the beginning, neither I nor the other supporters of the Bill have neglected consideration of the scientific viewpoint, but we must try to get the matter in perspective. The argument is about 17 acres out of the total area. It is true, as the hon. Member for Crosby (Mr. Graham Page) said, that there will be peripheral effects due to wave erosion and spray, but they will be peripheral effects only. The hon. Gentleman re-
  2026
  ferred also to the climatic and micro-climatic effects. I do not have time available to deal with that in detail, but I would refer the hon. Gentleman to the evidence given on the fifth day of the Committee's proceedings—page 15 and the pages following—in which a distinguished climatologist expressed the opinion that atmosphere and atmospheric changes in the area adjoining the reservoir would be only minimal.
  The balance of considerations here is best summed up in the decision of the Minister peculiarly and particularly responsible for preserving scientific progress in this matter, the Secretary of State for Education and Science, who, however reluctantly, in weighing up the expert opinions tendered to him by various bodies concerned, nevertheless found himself forced reluctantly but quite definitely to support the Bill. It is a similar decision which I warmly recommend to the House tonight.
  9.46 p.m.
  Mr. Eldon Griffiths: Listening to all the speeches tonight I have been struck by the contrast between the eloquence and sincerity of speeches from the back benches on both sides and the tameness made from the two Front Benches. I quite understand their embarrassment because the Conservative Party and the Labour Party made clear in the last election that they intended to pay more attention to the natural beauties of the countrside. I am disappointed that the speaker from my Front Bench felt unable tonight to give support to those of us who are seeking to retain this area of natural beauty.
  I can equally well understand their embarrassment, because my right hon. Friends in Government in the Electricity Act, 1957, specifically required that conservation areas should be looked after in respect of their natural beauty and that the flora and fauna should be safeguarded. Equally, the Minister will remember that the Labour Government of 1945 brought in the excellent White Paper "The Conservation of Nature in England and Wales", a magnificent State document. I am sure the Minister, who will have read it, must have felt in his heart that what he said tonight departed a great distance from what was contained in that White Paper.

  2027
  This is a debate not between right and wrong but between right and right. There is first the undoubted right of I.C.I. and the local water board to seek cheap water for the purpose of industrial expansion. But there is also the right of the objectors, virtually every conservation and scientific society in the country to seek to protect a singularly lovely piece of countryside which happens also by a trick of nature to be one of the world's greatest natural laboratories of post-arctic flora.
  There has always been, and I think there always will be, a contest between those who put their main emphasis on economics without which I admit men and women cannot enjoy the beauties of the countryside, and those who put their main emphasis an aesthetic, scientific and cultural matters without which, let us admit, economics have little meaning. I found it a little difficult to choose between these two points of view on this Bill. I looked for a compromise, as one always does, but I fear that there is no compromise here. Either we throw out the Bill, in which case I.C.I. will have to look elsewhere for water, or we have the reservoir, in which case beyond any doubt this magnificent area will be blotted out forever.
  Like other hon. Members, I have had letters from constituents. I also have a constituency interest, because reservoirs are taking up more and more agricultural land in East Anglia. But before reaching any decision I lead almost all the evidence of the 13 long days which the Committee gave to this Bill. Although I found it a heavy task, I found it an extremely interesting one. I came down on the side of the evidence against the Bill because, if I.C.I. is stopped, it will suffer only inconvenience—which, although awkward, can be got over—whereas if Cow Green is destroyed, the loss will not be simply an inconvenience but will be total and irreparable.
  In effect it is a choice between a dip in I.C.I.'s profits which they would have to accept—[HON. MEMBERS: "No."]—or it is the destruction of 10,000 years of unique natural history. The naturalists' argument has been well put by my hon. Friends. I confine myself to three points. First, I want to look at the way in which
  2028
  the problem of water supplies has been handled in the Tees area. Not only here, but all over the country, I believe that we are tackling our water problems piecemeal and sometimes quite wrongly.
  As I understand it, between 1955 and 1958 a number of sites in Tees-side were investigated for another reservoir and among them was Cow Green. Cow Green was rejected by experts and, instead, a reservoir was built at Balderhead. Balder-head needed powers from Parliament. Parliament gave those powers.
  At the time, as my hon. Friend the Member for Bournemouth, West (Sir J. Eden) said, an assurance was given by the water board that the water to be taken from Balderhead would be enough to satisfy the Board's needs for 22 years, including I.C.I., including Dorman Long, and including all of the projected development at that time.
  The water board got it wrong. Balder-head was not enough for 22 years. It was not even enough for six years. Even before that reservoir was opened in October of last year, I.C.I. and Dorman Long were coming forward for more water. The evidence is quite clear that the water board has consistently underestimated the water needs of the area. Indeed, it has come to Parliament no fewer than three times in the last 12 years for more powers to build more reservoirs.
  What is more, the board acknowledges that, even if this Cow Green scheme is agreed by the House tonight, it will still have to start looking for yet another, bigger source of water in the area within the next three or four years. So, in all probability, these gentlemen will be back in the House seeking yet another Private Bill on behalf of the same water board, within five to ten years from now.
  At day 22, page 23 of the evidence, the chief engineer of the water board was asked what allowance the board was making for future industrial demands. His reply was a monument to this board's far-sightedness. He said this:
  "The allowance we are making for future industrial use is quite modest in respect of industrial demands and nothing at all for I.C.I."
  He may have known that the Government's National Plan was about to collapse and that I.C.I. therefore would not need any more water! But surely we cannot be asked to believe that I.C.I. will have no more water requirements

  2029
  after 1970. It simply does not make sense. It is not what I.C.I. itself told the Committee.
  My point is not to cast aspersions at the water board or its engineers. It is simply to underline that estimating the future needs for water is an extremely difficult task. It is a matter of guesswork. It is easy to be wrong. But against the uncertainties—one might even say the guesswork—of water projections, is the total and absolute fact that, if this reservoir scheme is permitted to go ahead, a unique and invaluable scientific area will be lost for good.
  The second point I wish to deal with is I.C.I.'s approach. I have great admiration for this magnificent firm. I am sure that all hon. Members will accept that. But I certainly hope that the firm does not tackle its usual business problems in this fashion. The firm first informed the water board that its needs would greatly increase in July, 1964. At the end of that year it said that it would want 25 million gallons a day by 1969.
  The year 1969 is a very interesting date. The same witness from I.C.I. who told the Committee this, also said that it generally takes between five and seven years to complete such a reservoir. Therefore, we are told at the end of 1964 that something which will take at least five, and probably seven years, to build must be ready by 1969. This does not leave very much time for other people's views to be taken into account, for all the surveys to be done and the geological investigations to be completed, and, above all, for Parliament to be consulted.
  Why was so little time left for consultation? I cannot avoid the impression that I.C.I. simply assumed that, if this mighty company wanted water in Cow Green or anywhere else, no power in England could stop it. If there is any doubt about this it is blown away by the fact that I.C.I., without even waiting for the surveys and before bothering about Parliament, went ahead, ordered the machinery and started the buildings which the water that it had not yet got was intended to be used in. It was not a question of "fly now, nay later" but "build now and worry about the water when it suits you".
  As a result I.C.I. got itself into a jam. On day 5, page 7, of the evidence, the
  2030
  Chairman of the Committee, having ascertained that was already putting up new works in readiness for the water for which it was still asking, asked the I.C.I. witness:
  "Suppose Parliament refused to pass the Bill. What would be the position of I.C.I.?"
  The witness replied:
  "We would be in a very difficult position indeed."
  Like the hon. Member for South Shields (Mr. Blenkinsop), the Chairman commented:
  "But are you not putting a pistol at the head of Parliament when you tell us that all this building is going on because you have come to the conclusion that you put them up and then you just get the water?"
  That is precisely what I.C.I. is doing—putting a pistol at our heads. It is no use the promoters saying, as they did before the Committee, that they assumed that they would not need Parliament's consent, that they thought that they could get permission direct from the Minister. It was their business to know that Parliamentary permission would be required.
  When a big company with an international reputation intends to spend millions on new plant, it is only prudent to its stockholders if to no one else to get all the details tied up clearly before a single shovelful of earth is moved. But I.C.I. did not do so.
  Is there an alternative? I believe that there is and that it lies in the high reservoir up the river which is known as Middleton. My hon. Friend the Member for Richmond, Yorks (Mr. Kitson) said that he would not like that because it is in his constituency and would interfere with farming. I have not time to develop the argument but, having examined the evidence carefully, I have concluded that would be the better course because it would provide water not simply for this individual undertaking of I.C.I. but for the whole generality of users in the area as the population grows over the next 10 years.
  I now wish to sum up. First, this is not a conflict of right with wrong, but a conflict of right with right. But the greater right lies with those who wish to retain a precious portion of our national heritage rather than with those who say, rightly, that they must have more water, because, with a little more expense and a good deal more ingenuity, they could obtain these supplies elsewhere.

  2031
  Secondly, there are grave doubts, based on new construction and geological evidence, as to whether the scheme proposed is structurally sound. All reservoirs leak, as all Government's leak. But it appears that this one will leak more than most.
  Thirdly, it is not proved that the promoters, I.C.I. and the local water board have done their homework right. They were wrong before and may well be wrong again.
  Fourthly, I do not like the way that I.C.I. has gone about the Bill. It has been a rushed and last minute affair, as the Minister himself mentioned. What is
  more, it is treating the House of Commons as a rubber stamp. It is for that reason more than any other that I and my hon. Friends will vote against the Bill.
  Mr. Tinn Mr. Tinn rose in his place and claimed to move, That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly, That the words proposed to be left out stand part of the Question:—
  The House divided: Ayes 112, Noes 82.

  Division No. 149.]

  AYES

  [10.0 p.m.

  Alldritt, Walter

  Gourley, Harry

  O'Malley, Brian

  Armstrong, Ernest

  Grey, Charles (Durham)

  Orme, Stanley

  Atkinson, Norman (Tottenham)

  Griffiths, Rt. Hn. James (Llanelly)

  Oswald, Thomas

  Bagier, Gordon A. T.

  Hamilton, William (Fife, W.)

  Page, Derek (King's Lynn)

  Beaney, Alan

  Harper, Joseph

  Palmer, Arthur

  Bidwell, Sydney

  Harrison, Walter (Wakefield)

  Parkyn, Brian (Bedford)

  Binns, John

  Hart, Mrs. Judith

  Pentland, Norman

  Bishop, E. S.

  Hattersley, Roy

  Perry, Ernest G. (Battersea, S.)

  Blackburn, F.

  Hazell, Bert

  Price, Christopher (Perry Barr)

  Booth, Albert

  Herbison, Rt. Hn. Margaret

  Price, Thomas (Westhoughton)

  Bottomley, Rt. Hn. Arthur

  Hiley, Joseph

  Redhead, Edward

  Boyden, James

  Howie, W.

  Rees, Merlyn

  Braddock, Mrs. E. M.

  Hoy, James

  Reynolds, G. W.

  Bray, Dr. Jeremy

  Hunter, Adam

  Richard, Ivor

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

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

  Roberts, Goronwy (Caernarvon)

  Bullus, Sir Eric

  Janner, Sir Barnett

  Rodgers, William (Stockton)

  Butler, Mrs. Joyce (Wood Green)

  Jopling, Michael

  Ross, Rt. Hn. William

  Cant, R. B.

  Kaberry, Sir Donald

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

  Carter-Jones, Lewis

  Kenyon, Clifford

  Silkin, John (Deptford)

  Conlan, Bernard

  Lawson, George

  Slater, Joseph

  Crawshaw, Richard

  Lee, Rt. Hn. Jennie (Cannock)

  Small, William

  Cronin, John

  Lever, L. M. (Ardwick)

  Spriggs, Leslie

  Crouch, David

  Lomas, Kenneth

  Steele, Thomas (Dunbartonshire, W.)

  Cullen, Mrs. Alice

  Loughlin, Charles

  Stonehouse, John

  Davies, Dr. Ernest (Stretford)

  Luard, Evan

  Symonds, J. B.

  Davies, Ednyfed Hudson (Conway)

  McBride, Nell

  Thornton, Ernest

  Doig, Peter

  McCann, John

  Tinn, James

  Eadie, Alex

  MacColl, James

  Turton, Rt. Hn. R. H.

  Edwards, Robert (Bilston)

  Mackenzie, Gregor (Rutherglen)

  Urwin, T. W.

  Elliott, R.W. (N'c'tle-upon-Tyne, N.)

  McNamara, J. Kevin

  Wainwright, Edwin (Dearne Valley)

  Errington, Sir Eric

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

  Walker, Peter (Worcester)

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

  Millan, Bruce

  Watkins, David (Consett)

  Fitch, Alan (Wigan)

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

  Whitelaw, William

  Fletcher, Ted (Darlington)

  Morris, Charles R. (Openshaw)

  Wigg, Rt. Hn. George

  Forrester, John

  Neal, Harold

  Willey, Rt. Hn. Frederick

  Fraser, John (Norwood)

  Norwood, Christopher

  Wilson, William (Coventry, S.)

  Fraser, Rt. Hn. Tom (Hamilton)

  Oakes, Gordon

  Garrett, W. E.

  Ogden, Eric

  TELLERS FOR THE AYES:

  Mr. Leadbitter and Mr. Kitson

  NOES

  Allason, James (Hemel Hempstead)

  Davies, Robert (Cambridge)

  Hill, J. E. B.

  Archer, Peter

  Doughty, Charles

  Hooley, Frank

  Astor, John

  Driberg, Tom

  Hooson, Emlyn

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

  Edwards, William (Merioneth)

  Horner, John

  Beamish, Col. Sir Tufton

  Farr, John

  Jackson, Peter M. (High Peak)

  Bennett, Sir Frederic (Torquay)

  Faulds, Andrew

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

  Berry, Hn. Anthony

  Fowler, Gerry

  Johnson, Carol (Lewisham, S.)

  Bessell, Peter

  Gardner, A. J.

  Johnston, Russell (Inverness)

  Biffen, John

  Goodhew, Victor

  Jones, Arthur (Northants, S.)

  Body, Richard

  Grant, Anthony

  Kerr, Russell (Feltham)

  Bradley, Tom

  Gray, Dr. Hugh (Yarmouth)

  Kershaw, Anthony

  Cooper-Key, Sir Neill

  Gregory, Arnold

  Kimball, Marcus

  Craddock, Sir Beresford (Spelthorne)

  Griffiths, Eldon (Bury St. Edmunds)

  Kirk, Peter

  Cunningham, Sir Knox

  Griffiths, Will (Exchange)

  Lestor, Miss Joan

  Dalkeith, Earl of

  Hawkins, Paul

  Longden, Gilbert

  Lubbock, Eric

  Renton, Rt. Hn. Sir David

  Walters, Dennis

  Mackenzie, Alasdair (Ross & Crom'ty)

  Roebuck, Roy

  Ward, Dame Irene

  Madden, Martin

  Russell, Sir Ronald

  Webster, David

  Mallalieu, E. L. (Brigg)

  Sharpies, Richard

  Wells, John (Maidstone)

  Manuel, Archie

  Shaw, Arnold (Ilford, S.)

  Wells, William (Walsall, N.)

  Marquand, David

  Smith, John

  Williams, Mrs. Shirley (Hitchin)

  Morgan, Eystan (Cardiganshire)

  Steel, David (Roxburgh)

  Wills, Sir Gerald (Bridgwater)

  Moyle, Roland

  Talbot, John E.

  Wilson, Geoffrey (Truro)

  Murton, Oscar

  Tapsell, Peter

  Winstanley, Dr. M. P.

  Neave, Airey

  Thorpe, Jeremy

  Wood, Rt. Hn. Richard

  Osborne, Sir Cyril (Louth)

  Tuck, Raphael

  Worsley, Marcus

  Parker, John (Dagenham)

  Vaughan-Morgan, Rt. Hn. Sir John

  Pym, Francis

  Wainwright, Richard (Colne Valley)

  TELLERS FOR THE NOES:

  Sir John Eden and Mr. Blenkinsop.

  Main Question put and agreed to.
  Bill, as amended, considered accordingly; to be read the Third Time.

  BUSINESS OF THE HOUSE
  Ordered, That the Proceedings on the Malawi Republic Bill [Lords], the Lesotho Independence Bill [Lords] and the Botswana Independence Bill [Lords] may be entered upon and proceeded with at this, Jay's Sitting at any hour, though opposed.—[Mr. Lawson.]
  MALAWI REPUBLIC BILL [Lords]
  Considered in Committee: reported, without Amendment; read the Third time and passed, without amendment.
  LESOTHO INDEPENDENCE BILL [Lords]
  Considered in Committee: reported, without Amendment; read the Third time and passed, without amendment.

  BOTSWANA INDEPENDENCE BILL [Lords]
  Considered in Committee
  [Sir ERIC FLETCHER in the Chair.]
  Clauses 1 to 8 ordered to stand part of the Bill.
  New Clause.—(COMMISSIONER FOR BUSHMAN AFFAIRS.)
  Not later than 30th September 1966. Her Majesty may, after consultation with the Secretary General of the United Nations, by Order in Council appoint a Commissioner for Bushman Affairs.—[Sir D. Clover.]
  Brought up, and read the First time.
  10.15 p.m.
  Sir Douglas Glover: I beg to move, That the Clause be read a Second time.
  I spoke on the Second Reading of this Bill, trying to get a fair deal for the bushmen in Bechuanaland or Botswana. I must say that the most unsatisfactory reply I have ever heard from a Minister from the other side of the Committee for a long time was the reply given to me on that occasion. I am going to bore the Committee—I think that that is the right word—by reading what the Secretary of State said.
  "The hon. Member for Ormskirk (Sir D. Glover) was concerned about the problem of the bushmen."
  I accept that very few Members understand the problems of the bushmen and might describe this as a minor problem.
  "I understand"—
  the Secretary of State said—
  "that a trained anthropologist was commissioned to consider the welfare of these people a year ago. That gentleman made a survey. A copy of his report was published last year and is now in the Library of the House."
  This was very reassuring to me, after the speech that I have made, to know that the only action the Government was taking before giving this country independence related to a report that I could read in the Library of the House. I have already read the report, as no doubt, have a great many hon. Members. The Minister went on:
  "Responsibility for the bushmen's affairs has now been placed with the portfolio of the Deputy Prime Minister, and the extent to
  2036
  which the Bechuanaland Government will be able to devote funds—"
  and I would like to draw the attention of the Committee to this—
  "especially to assist the bushmen themselves will depend upon other competing demands."—[OFFICIAL REPORT, 26th July, 1966; Vol. 732, c. 1669.]
  This is what I am asking the hon. Gentleman about tonight before we give this country its independence. I am not opposing in any way the granting of independence to Botswana. I believe that it is one of the few countries which has the sort of leadership which warrants granting it independence. I have an enormous admiration for Dr. Seretse Khama, and I hope that the hon. Gentleman will not feel that there is anything critical in what I say.
  To return to the problem of the bush-men. I do not think that I can alert the Committee to the problem of these people, because their problem is something about which most of us can have no conception. These people are looked upon in the country in which they live by the whites as being a sort of human being in which no one would take any interest and by the Bantu as sub-human. They have been driven out by the whites and the Bantu from the land that they occupied. Four hundred years ago they occupied the whole of South Africa. Now they have finished up living a precarious life on the edge of the Kalahari desert. It is one of the accidents of Nature that these poor and little people with no one to speak for them are being handed over when this country attains independence to a population the majority of whom do not think of them as human beings at all.
  I understand the problems of Her Majesty's Government, and I am not being critical. If we are going to hand these people over without making any safeguards for them, then we are handing the bushmen over to extermination. Let us make no bones about it, let us not be mealy-mouthed. Let us not speak of liberation for Botswana. If we hand this country over to independence without the safeguards which have existed—very ineffectively—during the years that we have been responsible for the country then we know perfectly well that 50,000 bushmen will probably cease to exist in the next 20 years.

  2037
  I am trying, even at this stage, to get some machinery which will protect the interests of this completely defenceless minority. They will not send delegates to the United Nations. There will not be an impassioned debate about them in the House. They will just cease to exist. All that I am asking the hon. Gentleman who is responsible for the Bill is whether, even at this stage, we can produce some machinery to protect the interests of the bushmen.
  My Amendment is the nearest Amendment you, Sir Eric, would have called as being in order. I know that the Under-Secretary of State will not mind if I say that it is not what I should have liked to propose as an Amendment. I should have liked to table an Amendment saying that Her Majesty's Government will, for many years to come, probably for the next 20 years, to provide aid to Botswana. It may be £1 million, £2 million or £3 million a year. If I were a Bantu living in poverty in Botswana, I would endeavour to make sure that nearly all the money which this country provided went to my people.
  All that I am asking in this Amendment is that before we give this country its independence we will provide out of the £3 million a year which we give towards the development of Botswana, say £25,000—and if we provide £3 million a year £25,000 is very small—for the bushmen. The Secretary-General of the United Nations should be told, "Here are the most depressed people in the world who are in a worse position even than the serfs and, probably, chattel slaves in Saudi Arabia. They are looked upon by the whites and blacks in that community as being less than human."
  Before giving this country independence, we should ensure that some person will be responsible in the years to come for their welfare. I do not suggest that this person should make them millionaires or superior to the Bantu, but he should have the responsibility of ensuring that the conditions of these people do not deteriorate but gradually improve as the standard of living of the country in which they live improves. History shows that with education and training these people are at least as intelligent as the remainder of the population. But the remainder of the population do not look upon them as having an equal status.
  2038
  This problem is far worse than the problem of the negro element in the United States and all the problems we have discussed in the House in recent years. Here is a community of people who are literally looked upon by the rest of the people in that country as not being worth making a protest to the police about if one of them is shot—and they are shot, sometimes when they steal cattle because they are starving. They are looked upon as sub-human by the whites, many of whom are Afrikaans, but they are almost entirely looked upon as sub-human by the Bantu. Their women are used by the Bantu for sexual purposes without permission, and they are a lesser breed, without the law.
  We are giving the country its independence, but, before doing so, I believe that we have a moral duty to make quite certain that we do everything in our power to protect the interests of the voiceless minority who are the bush-men on the edge of the Kalahari Desert.
  During the Second Reading of the Bill, the Secretary of State indicated that for the next five, ten or 15 years it is likely that this country will be giving £2 million or £3 million a year in aid to Botswana. All I ask is that the Parliamentary Secretary, on behalf of the Government, will accept the spirit of my Amendment and accept that, under the conditions which exist, though it would be wrong for the Government to try and appoint a Commissioner for Bushmen Affairs to look after their interests, because that would be labelled in Botswana as neocolonialism, it would not be wrong for us to find the money for the Secretary-General of the United Nations to appoint a Commissioner for Bushman Affairs to protect the interests of this voiceless minority.
  I do not wish to detain the Committee for any length of time, because I made the argument for the Bushmen the other night. Her Majesty's Government know as well as I do the problems that exist. They will not have power for much longer if they give independence to the country. I plead with them, while they still have the power, to say that we are not going to hand the country over to independence without taking on our moral duty to look after this voiceless minority, and that we will say to Botswana that, whatever the amount we give

  2039
  to its Government year by year, £20,000 or £25,000 a year will be earmarked to provide a commissioner appointed by the Secretary-General of the United Nations—I do not mind if it is in consultation with the Prime Minister of Botswana—to look after the interests of this depressed class and make quite certain that we have carried out our obligations and our moral duty to people who cannot come to this House, who cannot go to the United Nations and who are not likely to rally the Morse Committee with apartheid and suchlike.
  The bushmen are a small group of people who are voiceless. Before giving the country independence, it is the duty of this Government to protect their rights and their future. Under my Amendment, I believe that, without any great cost to the people of this country, we can do it. I plead with the hon. Gentleman, even at this late stage, if he really stands for the humanitarian things for which he has spoken in the House on many occasions, to accept the spirit of my Amendment.
  10.30 p.m.
  Mr. Eric Ogden: I rise to support the plea that the hon. Member for Ormskirk (Sir D. Glover) has put to my hon. Friend on the Front Bench.
  There are two points in his remarks which I would like to take up. One is that there is no doubt that Dr. Khama can be relied upon to have as much concern for these people as he could be expected to have in his own circumstances.
  My second point relates to the hon. Gentleman's suggested sum of £25,000. I do not think that that would be enough, I would put it much higher than that, even within a total ceiling of £3 million.
  I think that the hon. Gentleman's aims could be achieved without taking the matter to the United Nations. If we are to give this country its nationhood, its independence, and the ability to work within its own framework, knowing the people who are to be in charge of its affairs, and knowing also their limited resources, I think that we could get an undertaking from the leaders of the country that they will, within the framework of the aid that is to be given to them,
  2040
  look after these people. They may have their own proposals about helping these people, but I think that some understanding can be arrived at.
  Sir D. Glover: I thank the hon. Gentleman for giving way. I think that he has missed the point that I was making. If I may say so without disrespect, I do not think that he understands the situation. Few people in this House do. When a country which is grinding with poverty gets £3 million from this country, and when there are so many Bantu who need this aid, and when the Bantu do not regard these people as human, they will get very little help unless we do something to help them before we grant independence to the country.
  Mr. Ogden: The hon. Gentleman is a much greater authority on this subject than I am, and it is to his credit that he has raised this issue now, after the strenuous time that we have had in the House during the last few days, but I think that what he wants can be achieved within the framework of granting independence and during the negotiations which will take place between Her Majesty's Government and the new independent Government.
  The hon. Gentleman said that not many people appreciated this problem. Not many months ago the B.B.C. showed a series of films on this part of the world, and the need for educating the nation about which the hon. Gentleman has spoken is as great as ever before. I support the hon. Gentleman in his intentions, and I ask my hon. Friend to tell us how far he can go to help the bushmen, and what kind of negotiations are to take place about this in the future.
  Dame Joan Vickers: I support my hon. Friend the Member for Ormskirk (Sir D. Glover), because for a long time I have taken an interest in the bushmen of the Kalahari Desert, in particular. I originally came into contact with them when an agreement was made in my house between Seretse Khama and Tshekedi Khama, one of the greatest Africans I have known. supported by Michael Scott. It was as a result of that decision that we went to see the then Commonwealth Secretary, my right hon. Friend the Member for Kinross and West Perthshire (Sir Alec Douglas-Home), and got agreement

  2041
  that Seretse Khama could return to his country, and I think that he has proved to be a magnificent leader since.
  When one looks at a map of this country, one realises that it is bigger than France, Belgium, Holland, Denmark and Luxemburg put together, and one realises what a problem one has with only 500,000 people there. As my hon. Friend said, there is a temptation to deal with the people who are on the spot, the people in the cities, rather than with those in the Kalahari Desert.
  I understand that the constitution of independence will be provided separately by an Order in Council. I wonder, therefore, whether the hon. Gentleman could, in that Order in Council, include in a provision to protect the bushmen, because it is essential that some action is taken to this end.
  I do not know whether the hon. Gentleman saw the film which I showed in the Grand Committee Room upstairs. It was taken by an American, and I think that the hon. Gentleman would be been astonished, or perhaps horrified, as were some of my audience, by the facts. Even when one looks at the book in the Library, to which reference has been made, one is ashamed not only of this Government, but of previous ones, for the lack of action on behalf of these people. One sees their poor physique, and realises that they literally have to scratch the ground for their food. I had to stop the film, because in this country there are many animal lovers, and it showed a giraffe which I understand it took nearly four hours to kill with bows and arrows. It was a horrifying spectacle on the film, and although the American who produced it wanted it to go on to the finish. I had to stop it. This shows the extreme measures to which the bush-men have to go to get their food. When we think of the terrible famine that occurred in this country in recent months, we realise that these people are finding life even more difficult. They are nomadic, and if they want to get food they have to go to various employers who give them something to sustain them.
  About one-third of the population, not counting the bushmen, are living, on average, on 10 ounces of maize and one ounce of vegetable oil. It is better to go to prison there, because there one gets
  2042
  1½ pounds of maize, fresh vegetables and sugar each day. These are very primitive people, but we should think of them as human beings and not just specimens for anthropologists to investigate, which is what they are at the moment.
  When I was in Malaysia we had a protector for the hillmen, male and female, and this worked very satisfactorily. I suggest to the Minister that perhaps a special sum of money could be earmarked for these people. It will be difficult for the future President, unless a sum is earmarked, because he will feel forced to say to the people who are living on a famine existence at the moment, "I cannot spend this £25,000 we are getting on you, the bushmen, because we need it for the people who are working and helping to support the country in its dire need."
  I hope that the Minister will think of my suggestion, that when he considers setting up the constitution by Order in Council he should incorporate a clause safeguarding the future of the bushmen. I add my plea to that of my hon. Friend that something should be done. I put forward a petition in Uganda on behalf of one of the minority tribes providing for a referendum before we gave it independence. My suggestion was not agreed to by the then Conservative Government, but later they had a referendum and afterwards at least two people were killed in disturbances. I ask for the protection of the bushmen while we still have time. The solution put forward by my hon. Friend may not be the best one, but it is one possible solution, and I hope that it will commend itself to the House.
  10.40 p.m.
  Mr. John Farr: I support the new Clause, and I also endorse what has been said by my hon. Friend the Member for Ormskirk (Sir D. Glover) and my hon. Friend the Member for Plymouth, Devonport (Dame Joan Vickers). Unless something is done on these lines there is a possibility of the complete and utter elimination of the bushmen as a tribe, or a race, as they exist at the moment. They are a race with a very ancient culture, and I thought the response by the Secretary of State on Tuesday, to which my hon. Friend has already referred, was an exceptionally weak one.

  2043
  All he said—with some pride—was that a report had been published and that it was in the Library, as though that was a triumph in itself, and that hon. Members should wish no more than to study the report and go away satisfied. I have studied the report. I should point out that my interest is not an idle one, because I have been among the bushmen and I have land just over the border in Rhodesia. The report is an admirable and painstaking piece of work. It was commissioned in 1958, completed in 1964 and published last year.
  In the debate on Second Reading, it was suggested to the Secretary of State that a certain proportion of the aid which we are going to give in ensuing years to the new country of Botswana should be earmarked for the development and protection of the bushmen. Probably rightly, the Secretary of State said that it would be impracticable and impossible to tie strings to money in that manner, so my hon. Friend the Member for Ormskirk has made another suggestion, which I at least accept.
  I suggest that his suggestion about the appointment of a Commissioner for Bush-men's Affairs is eminently practical and one which many of us on both sides of the House would like to see adopted, as we do not want to see the bushmen deteriorate even more than they have in the past few years to the status of their closely related cousins, the Hottentot Hollands in the southern part of the continent, who have virtually ceased to exist.
  I should like to ask the Under-Secretary of State what has been done about the recommendations in the Silberbauer Report, published in 1965. Many useful and pungent suggestions are made in that report, which I am sure the hon. Gentleman has considered very carefully. One of the firmest recommendations of Mr. Silberbauer was that 15 new water bore-holes should be established in the Central Kalahari Reserve for the use of the bushmen. Has that scheme been started or completed? If not, when will a start be made on what is one of Mr. Silberbauer's most important recommendations?
  Another very striking recommendation in the report, on which I am anxious to know the progress made, is the question of a subsidy which it was recom-
  2044
  mended should be paid to stimulate the schooling and post-schooling participation in the pupil-farmer scheme for bush-men and their children. This was one of the most important of the five or six salient recommendations of the report. It would appear to cost very little to start. Has a start been made on it? If so, what sort of response has there been to this attempt to educate the bushmen? Is it proposed and has an assurance been given that this programme will continue in the fruitful years which we hope lie ahead for this new country?
  Has the experimental breeding and cattle station in the Ghanzi farm area been established for the purpose of teaching bushmen and their children the rudiments of farming, cattle culture, tilling the soil and giving them some idea of how they can best help themselves? The Minister will remember that in 1963 it was recommended to the Legislative Council that the western boundary of the Central Kalahari Reserve be moved a few miles east, thereby considerably reducing the area of land on which, for many years, the bushmen have managed to eke out a living. No action was taken on that recommendation, and one recommendation in the Silberbauer Report was that under no circumstances should the boundary be moved in that way.
  After nearly seven painstaking years in the Central Kalahari district, Mr. Silberbauer firmly recommended that the boundary should not be moved eastwards—that the territory available in the Central Kalahari to the bushmen should not be reduced in that manner—and I hope that we will be told that this matter has been raised with the new authority in Bechuanaland and that an assurance has been received from that authority.
  We have had two bites at this apple. On Second Reading we asked for the earmarking of a certain proportion of aid to go to sustaining the bushmen, and tonight my hon. Friend the Member for Ormskirk has moved the new Clause. We have also had a new suggestion from my hon. Friend the Member for Devon-port. Hon. Members will recall the deep concern which the Minister showed, when in opposition, for the rights of minorities to be protected. We therefore feel that, in making these suggestions, our seeds are falling on fruitful ground.

  2045
  If the Clause is not acceptable and if aid cannot be earmarked, as an alternative to those two suggestions I wonder if something could be done through the C.D.C., which has done a great job of work, not only for countries which still have colonial status but for many territories which have achieved independence in the Commonwealth. Could we, through the C.D.C., help the bushmen of Botswana in our general programme of activities through that organisation? Could not the C.D.C. take over the Ghanzi Farm and establish it as an experimental cattle breeding station for the benefit of the bushmen in the years of independence that lie ahead? Many people including hon. Members on both sides of the Committee, fear that the bushmen will get a raw deal. We do not want to see them relegated to the status that the Red Indians have in America.
  I conclude by wishing the new country of Botswana, under the very able leadership of Seretse Khama, the best of luck in the years that lie ahead.
  10.49 p.m.
  Mr. Richard Wood: My hon. Friend the Member for Ormskirk (Sir D. Glover) made what all hon. Members will agree was a powerful plea on behalf of the bushmen, a plea which, I am sure, has left us with a considerable feeling of unease.
  We were not greatly impressed by the assurance of the right hon. Gentleman the other night concerning the Report in the Library, because, as a comprehensive Report, it naturally points to the gaps in the past rather than giving any assurances for the future. The plea made by my hon. Friend has been supported by many hon. Members, powerfully so by the hon. Member for Liverpool, West Derby (Mr. Ogden). As my hon. Friend the Member for Ormskirk pointed out, he is not particularly wedded to the wording of the new Clause and would have chosen other wording had he been able to do so. However, he is wedded to the spirit of it in requiring from the Minister some reassurance that this problem can be satisfactorily dealt with.
  I should like the hon. Gentleman to tell us whether this question was discussed with the future rulers of Botswana either
  2046
  before or during the independence Conference, and I would plead with him, as my hon. Friends and as the hon. Member for West Derby have pleaded, to give us some reassurance. My hon. Friend the Member for Harborough (Mr. Farr) has spoken of the Minister's past espousal of the cause of minorities, and I am sure that he has not listened to this plea unmoved. We know that he will reply sympathetically, but we should like him also to reply in a way that will give real reassurance to those who have listened to this debate, none of whom has been entirely unmoved.
  10.51 p.m.
  The Under-Secretary of State for the Colonies (Mr. John Stonehouse): In his remarkable book "The Lost World of the Kalahari", Laurens van der Post said that the bushman had no champion. They have found their champion here tonight in the person of the hon. Member for Ormskirk (Sir D. Glover). I appreciate that the hon. Gentleman is anxious to use this new Clause as a peg on which to hang his case, which is not new to him, on behalf of this minority in Botswana. I respect that purpose, and I think that the whole Committee has been moved by the way in which he pursued this case.
  The Committee may not be aware that many bushmen have already been absorbed into the Botswana community, but there are three groups which can still be identified. There are some 6,000 nomadic bushmen, who live in the interior and fend for themselves. There are some 4,000 who live on the farms in the Ghanzi part of Botswana, and many of these are associated with European farms there. There are about 14,000 who live for most of the time in the villages of the Bantu tribes. I think that those who have spoken on the Clause are concerned about all three groups, and I want to deal with the points they have made.
  First of all—and I would ask the Committee to follow me in this—I think that it will be a slight on the Government of Dr. Seretse Khama and his colleagues if we begin to introduce Clauses of this character into the Bill just before Botswana obtains independence. The automatic comment on that would be: "Britain has had responsibility for 81 years—why has she not done this before? Why does she wait until the 59th minute

  2047
  of the 11th hour before introducing a provision like this? If there has been neglect of the bushmen in the past, it is the responsibility of Britain. It is no good coming at the last moment, trying to impose these conditions on a newly-independent country, when Britain has not accepted responsibility in the past."
  I think that that would be the reply we would get if we started to introduce this sort of Clause, and on that ground alone I would ask the Committee not to accept this proposal. But I appreciate that the hon. Gentleman in moving the Clause, and his hon. Friends in speaking to it, are anxious to pursue the spirit of their idea and are not wedded to this particular formula.
  There is the other point that it is not necessarily the case that the formula would survive after independence. What we want is something that will survive after independence, and be a real safeguard to the bushmen. The real safeguard is the acceptance by the other people in this newly-independent State of the fact that the bushmen are equal with them in every respect, and are entitled, as human beings, to respect and economic opportunity, as well as education, with everyone else.
  Dr. M. P. Winstanley: Surely the point is that the bushmen are not equal? They do not want to be equal. What they need, if they are to be preserved, is active and positive assistance in order to preserve themselves. If they are treated as equals they will perish and disappear.
  Mr. Stonehouse: This is a difficult problem, because many of the nomadic bushmen regard their way of life as superior to ours, and who are we to say that their way of life may not be superior to ours? They are equal in the eyes of the law and in terms of opportunity to vote. So far as concerns the constitution of the independent State of Botswana, the bushmen will be equal to everybody else. I have no doubt at all that the Government of Seretse Khama will be anxious to preserve this position, not only after independence, but for all time. I think the Committee knows Seretse Khama and knows that there has been no better man for the defence of the rights of these men.
  Sir D. Glover: I know that the hon. Gentleman approaches this matter in a sympathetic manner, but the trouble is that so little is known about these people. I know that Seretse Khama is absolutely bang on, a great progressive who will do a wonderful job for the people of Bechuanaland, but the people who have been assimilated are chattel slaves. They are not equal in the eyes of those with whom they are living. They are part of the farming community and are in fact slaves of the community.
  Mr. Stonehouse: I cannot wholly accept that. I think the Silberbauer Report, referred to by the hon. Member for Harborough (Mr. Farr), whose comments I echo—it is a remarkable document which I recommend hon. Members to read—showed that, far from being slaves, many of these bushmen were operating in a client relationship which cannot be identified with slavery as referred to by the hon. Member for Ormskirk. It is to be hoped that that relationship will improve and that the bushmen will become more and more conscious of their inherent rights as years go by. I think there is every chance that they will do so.
  There is already evidence, as a result of the elections when the bushmen participate as electors along with the others, to suggest that this shows them that they are entitled to these rights and, as a result, they are more anxious to secure the rights they should enjoy.
  Sir Frederic Bennett: I have been listening with interest to this discussion. I think I should interpret the feelings of my hon. Friends if I said that of course we accept the constitutional rights as set out, but, as has been shown in the case of Canadians and Eskimos and Red Indians and in the case of Australian Aborigines, there was a feeling of trusteeship towards these people until they were in an intellectual and social position in which they could take advantage of the rights written into the constitution. What happens in the interim is what causes worry to my hon. Friends.
  Mr. Stonehouse: I think that the words used in this debate will not go unheeded in Botswana, but I think that already Dr. Seretse Khama has recognised the importance of taking notice of

  2049
  this matter now that he has been given this responsibility. We have also to recognise that in the last few years they have had enormous problems of famine and drought. In these circumstances, everybody is sentenced to poverty of a degree that none of us in this Committee could possibly understand. We hope that as the country emerges from this poverty and backwardness, the bushmen will have equal opportunity along with everybody else to develop.
  I wish to talk about two or three points that were raised by the hon. Member for Harborough, who knows the bushmen and who made a number of suggestions. He asked about the reaction to the Silberbauer Report. At least three boreholes have been provided in the Central Kalahari game reserve. As to educational opportunity, I believe that in the areas where bushmen live together with the other tribes, they will have an opportunity for education along with the other tribes.
  I will look into the hon. Member's question about the special provision in the Ghanzi area of new facilities, although I very much doubt whether the Colonial Development Corporation could take up this idea specifically for the bushmen. It would, I think, be against the custom and the spirit of the C.D.C. that it should operate projects in a Commonwealth country for a community within a community. It would probably be inappropriate for the C.D.C. to try to differentiate between different communities or tribes within one of these countries. I am, however, sure that if the C.D.C. were to extend its enterprise, which is already considerable in Botswana—everybody knows about the abattoir at Lobatsi which has been very helpful—this would be helpful to the bushmen as well as to the other communities in Botswana.
  I should like to look with more care into the question of the boundary of the Central Kalahari game reserve before giving a categorical answer concerning the boundaries. I assure the Committee, however, that in the constitution—and this partly answers the question of the hon. Lady the Member for Plymouth, Devonport (Dame Joan Vickers)—there will be the continuing protection for the game reserve to be available to the bush-men. Other communities will be pro
  2050
  hibited from going into the game reserve. This will be provided for in the constitution, so that it will be a fairly permanent safeguard.
  As the Committee will know, the game reserve is an area in the centre of Botswana of 19,000 square miles where most of the nomadic bushmen live. They live with and off the game. They hunt only when they need the food. They are not indiscriminate in their killing of the game. It is, therefore, a game and a bushmen reserve. This area will continue to be protected for the nomadic bushmen in that part of Botswana. This, I am glad to say, has been endorsed by all the political groups who came together in 1963 to discuss the future constitution of Botswana. That will be a fairly fundamental safeguard for the nomadic bush-men.
  As to the others, we must rely on the good sense, for which we all have great respect, of the Botswana Ministers, led by Dr. Seretse Khama, to ensure that the bushmen have equal rights with the other Batswana in this new independent State. I have no doubt that we can rely on the Botswana Ministers to honour their sincere regard for the equality of all human beings, whatever tribe they may belong to, and that, whether or not they are bushmen, they will be considered, in the newly-independent State, as equal human beings with the rest.
  I do not believe that it would be appropriate for our aid to be tied with strings in the way suggested. I appreciate the object of the hon. Member for Ormskirk in putting forward his point of view but it would, I repeat, be inappropriate, a slight and an assumption of on the part of the Botswana Ministers if we were to try and tie our aid to some particular project on behalf of the bushmen in advance of that aid being allowed. I ask the Committee not to go along with the new Clause but to rely on the good sense and good will of the Botswana administration towards the bushmen.
  Mr. Farr: Will there be a representative in the Legislative Assembly of the people of the Central Kalahari Reserve?
  Mr. Stonehouse: I do not think that there will be directly, but we believe that the bushmen are and will be playing an increasing part in the political life of the

  2051
  country. They have votes like everyone else and, as they have educational opportunity, we hope that they will make their presence felt all the more. They are, in numbers, a very small community and it is better for them really that their influence should be felt in more integration in political terms with the other tribes rather than that there should be special provision for them. The Central Kalahari Game Reserve is being reserved for the bushmen and, for the nomadic bushmen, that is very good protection indeed.
  I thank all those hon. Members who have taken part in this debate but, as I have said, I am not able to accept the new Clause. However, I am sure that the words spoken tonight and the pleas that have been made will not go unheeded in Botswana and I am sure that what hon. Members are aiming at will certainly be achieved as a result of the good will that will be achieved through independence.
  11.9 p.m.
  Mr. Graham Page: I have listened patiently to the debate and hoped that we should have a far more satisfactory answer from the Under-Secretary of State. It is no answer to the pleas made by my hon. Friend the Member for Ormskirk (Sir D. Glover), that, to adopt either his new Clause or an adaptation of it, would be a slight on the new rulers of Botswana.
  I had the honour of knowing Tshekedi Khama for many years. I acted for him professionally. He was in my home on many occasions and I stayed with him in Serowe on many occasions. He was a very humane man with the welfare of his people at heart, as is Dr. Seretse Khama. I will be frank. Tshekedi Khama was a member of the great ruling class of Bechuanaland, as is Dr. Seretse Khama. The Khamas ruled the land with a strong hand and kept the peace for many years. But throughout their rule the problem of the bushmen was never solved.
  I know that this comes back on us as well, that we have some responsibility and that the problem was not solved in our time either. But two wrongs do not make a right. Now that the issue has been brought with such strength before the Committee tonight and before the House the other night by my hon.
  2052
  Friend the Member for Ormskirk, it is the responsibility of the Government to find a solution to the problem. It is not sufficient to say, "We hope that the new rulers will look after the bushmen and will find some solution." What the Under-Secretary of State was saying was that no Government in this country in the past had found a solution but that the granting of independence may find a solution, that the Government hope that it will and that we must trust the new rulers to find it. I do not think that that is sufficient now that the matter has been raised with such force.
  Some course should be taken along the lines proposed by my hon. Friend the Member for Ormskirk if not strictly in accordance with his new Clause. There are many ways in which we can do this. The offer of help, the co-operation from C.D.C. has been suggested. There are many ways, and it is a matter of choosing the best, but it is insufficient, it is criminal, to sit back now and say that we have no solution to suggest, that we must not create a slight on the new rulers, that we must just leave it to them to think it out, with no particular offer of assistance to them in thinking out their problems.
  I am sure that had Tshekedi Khama been alive now—and I have always looked on him as one of the greatest African statesmen, if not the greatest—he would have supported my hon. Friend in trying to find a solution to this problem. In those days when he was pressing for a democratic government in Bechuanaland he thought that by giving the vote and having a democratic government there these sort of problems would be solved, but they will not be solved just by themselves, without some assistance from us now that we are granting independence. I hope that the hon. Gentleman will think again about this question, because everyone who has spoken tonight has had some knowledge and connection with Botswana and has that country at heart.
  11.12 p.m.
  Sir D. Glover: The Joint Under-Secretary of State—I do not criticise him—has spoken with great sympathy, but I find his reply completely unsatisfactory. It seems to me that when we are dealing with a problem of people who cannot make their voice heard the House takes

  2053
  what I call a legalistic line. Why do we not take the same line with the people in Rhodesia? Why do we not say that the Government there are in power, and that therefore we must not interfere? This is completely illogical.
  I am not going to divide the House. I do not think that it would serve any useful purpose, for the Government's will would prevail, and it would create the wrong atmosphere in Botswana. But here we are dealing with a problem of voiceless people. If they were voiceful and were in London today with a deputation seeing the Colonial Office we should not be having this debate tonight. We are having the debate only because they are voiceless people who cannot fight for their own rights. If they could, it would be written into the Constitution that their rights would be safeguarded. I am not criticising the hon. Gentleman or his Government. I am certain that my right hon. and hon. Friends are equally responsible, and that if they were on the other side of the House they would probably be taking exactly the same line. But that is not the point.
  The hon. Gentleman talks about the Silberbauer Report. Every person who knows anything about this territory would tell one that the Silberbauer Report is the most slanted report in favour of the Government of Bechuanaland of any published in the last 20 years. It is not a true picture of these people. It brings out all the highlights of their advancement and none of their degradation. It is not a fair report.
  People to whom I have spoken have all said that it is the most slanted report they have ever read about the problem of the bushmen of the Kalahari and Bechuanaland. That is not being unfair to Seretse Khama. I believe that he is a great leader. He will do a great deal for his country. But let us be quite honest. Even with our communications and with our society, how many other hon. Members take an interest in the problems of hon. Members who come here to represent minorities in, for example, the north of Scotland or the Orkneys?
  The average annual income per head in the country is probably £10 or £15. Does the hon. Gentleman mean that Seretse Khama, the head of the Khama
  2054
  tribe, faced with grinding poverty among his own people, will have the power or the will to take, perhaps, £1 a year from each of those people to protect the bushmen? Just think of the political pressures he would face. It is not as though the rest of the Bantu in that country are earning £1,000 a year and a little bit of aid to the bushmen would be unimportant. What it means is that some Bantu will suffer from starvation so that some bushmen will not die from starvation.
  What the Under-Secretary of State has said tonight offers no solution or satisfactory answer to the problem. Once we have passed this Bill, we have no further responsibility. Every independent observer will say that the great belief of the bulk of the people of Bechuanaland, or Botswana, is that the sooner the bushmen die out the better. This is their deeply held belief. Today, we are the protecting power. This is our moment of truth. I admit that we have a deplorable record. But that is no answer. It is no good saying that because they were going to starve 10 years ago, we can be quite happy to let them starve now.
  I know our record is deplorable—I do not mind if the hon. Gentleman criticises my party or anyone else—but we are now at our moment of truth. Unless we do something to protect these people, we are condemning them to death. Let us make no bones about it. Let the House of Commons be quite clear in its mind. It is as simple as that. We are condemning them to death because the bulk of the population think that the sooner they die the better.
  Are Her Majesty's Government and the House of Commons prepared to take that responsibility on their shoulders? We can avoid it not at any great cost in money but by ensuring that there is someone with the responsibility to look after the interests of this defenceless minority—I do not suggest that they will be driving about in Rolls-Royces or anything silly like that—and to ensure that in the fabric of the nation their rights are protected. There must be someone with a voice outside their own country, at the United Nations or anywhere else, who can say that their Government are being unfair to the bushmen.

  2055
  Let us not be squeamish about the alternative, if no one has that voice. The Under-Secretary has been very kind, and I thank him for the generous tribute he paid to me at the beginning of his reply, but I want him and the House to be in no doubt. Unless he, as the representative of Her Majesty's Government, takes some steps to protect the rights of this small voiceless minority, 25 years from now we shall be able to have the Requiem Mass over their demise, for they will all be dead.
  Question put and negatived.
  Schedule agreed to.
  Bill reported, without Amendment; read the Third time, and passed without Amendment

  AGRICULTURE (SALMONELLA TYPHIMURIUM)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]
  11.20 p.m.
  Mr. Anthony Kitson: In a week when we have had the announcement of a brucellosis eradication scheme, for which many hon. Members on this side of the House have been pressing over a number of years, it is almost unfair to launch into debate about another disease which is similar in that salmonella typhimurium can affect the human being through a disease in cattle. It is probably true to say that the dangers to humans are going to be far greater unless precautions are taken immediately to counter the spread of this disease in cattle.
  Already this year we have had confirmed in the Portsmouth area—and I have established this with the public health laboratory there—the deaths of three people from salmonella typhimurium. My attention was first drawn to this problem by a series of excellent articles, written by John Field, in the Reading Evening Post. I felt it right to check the factual content of these articles and this led me to some documents upon which these articles were based and which have been produced by Dr. Anderson, who is the Director of the Central Public Health Laboratory. He
  2056
  has been doing research work on this problem for several years and in conjunction with Dr. Lewis he has produced a number of papers.
  Salmonella typhimurium is the commonest cause of food poisoning in the country. It affects about a thousand people a week, and it is an unpleasant disease which is more liable to kill the very young or very old. It would appear from medical reports that it is on the increase. It is also the commonest cause of calf death in this country. Since large numbers of calves are reared for human consumption the dangers of transmission of this disease from meat to humans is obvious. It is an accepted medical fact that bacterial resistances to any given drug is fostered by continual administration of that drug and that the use of drugs in animal husbandry over the last 10 years has increased rapidly.
  This has prompted Anderson and Lewis, in an article in the British Medical Journal, to point out that the high incidence of drug resistance in calves was due to a combination of poor hygienic conditions in animal husbandry, especially in intensive farming, transport and marketing of calves and the distribution of infected stock by dealers, and by the too free use of anti-bacterial drugs in efforts to control the resultant salmonellosis.
  Drug resistance is usually multiple and is directed against the anti-bacterial drugs commonly used in human and veterinary medicine, for example, ampicillin, chloramphenicol, neomycin, kanamycin, streptomycin, sulpholomides and tetracycline. Therefore, if a farmer has a drug resistant salmonella in his herd the drugs to which the salmonella is resistant will have no effect on anyone contracting that salmonella, that is the drug resistant one.
  There are no enforceable restrictions to stop a farmer who has a drug resistant salmonella in his herd from selling his animals and spreading the disease, and therefore the resistant organisms. There is documentary evidence that a particular salmonella has been spread by one calf dealer into nearly every county—certainly into 37 counties. Even though the technical laboratories and the public health workers know the background to this problem there are no powers to control it.

  2057
  This brings me back to the three deaths in the Portsmouth area. In a recent outbreak in Hampshire five deaths occurred, three of which were from a salmonella typhimurium infection. The strain was of the type 29, which is most commonly found in calves and certainly resistant to several antibiotics. Three of those who died were children and there were no inquests. The causes of the deaths were septicaemia in two cases and salmonella meningitis in the third. All began with an initial infection of salmonella typhimurium. Eight of those not fatally infected were very seriously ill, and detailed evidence points strongly to calves being responsible. The figures were confirmed by Dr. Payne of the Portsmouth Public Health Laboratories. He pointed out that this was an area which had been relatively free from salmonella in the past.
  I should like to draw the attention of the Parliamentary Secretary to an article which was produced by Dr. Geoghagan in The Medical Officer of Health. He is the medical officer for the Midhurst Rural District. The article said:
  "In a well documented case of food poisoning 59 people in West Sussex were hit by Salmonella Typhimurium in their milk last April—the source of the infection was a herd of calves in an intensive beef unit on the same farm as the dairy herd.
  The intensive beef unit was set up as a sideline by the dairy farmer, using very young calves bought from a dealer 100 miles away specialising in the calf trade.
  Over a dozen beef calves were housed in separate buildings some distance from the dairy herd. Within days one of the calves died and Salmonella was confirmed. The area medical officer, Dr. V. P. Geoghagan, was immediately informed though it was not yet directly his concern.
  But a matter of days later he was called in by a woman whose children, aged six and 18 months, had gastro-enteritis. Though a check on milk from the farm—which was sold unpasteurised—proved negative for Salmonella, cultures from the dead calf and sick children showed Salmonella Typhimurium of the same type—phage 29.
  The farmer was contacted but he maintained that since the beef calves and the dairy herd were separately housed the infection could not have spread.
  Inside a week five more cases were reported, even though the farmer had agreed to pasteurise all his milk while samples were tested for Salmonella. One of the five cases was a contact with the first sick children.
  By April 29 nine beef calves had died, one milking cow had died and other cows were
  2058
  showing signs of infection. Reports of infection were flowing in from local doctors and a total of 59 cases of poisoning were recorded. Many were hospital cases.
  Salmonella was eventually confirmed in the milk and an order made for the farmer to pasteurise his milk compulsorily until the infection was cleared.
  Although he wound up his beef unit the farmer's cows were not cleared by the authorities until November. Cost of the whole disastrous beef rearing operation—ten beef calves, one dairy calf, a dairy cow and six months' lost profit on milk sales plus 59 cases of poisoning, some requiring hospital treatment."
  Dr. Geoghagan's report on the outbreak went on:
  "Several lessons have been learned from the outbreak. Salmonellosis in cattle is not covered by the Diseases of Cattle Acts, so even when it is detected in a dairy herd or on a dairy farm the medical officer of health would not necessarily know about it. Indeed, there is no obligation for the Divisional Veterinary Surgeon to be informed. The most frustrating aspect of Salmonellosis in cattle is that having detected the infection and having prevented its spread to the public via milk one has no power to eradicate the disease from the herd concerned."
  These figures demonstrate the necessity for the Ministry of Agriculture to take powers immediately.
  I recognise that a Committee under Lord Netherthorpe was set up to look into the problems of the use of drugs in animal husbandry and the use of antibiotics as feed additives, and I would hope that, when the Parliamentary Secretary replies, he will indicate whether the terms of reference of that Committee would enable it to consider some of these problems. Of course, this does not detract from the necessity for the Minister to take powers to cope with the situation as we have it today.
  The Report of the Netherthorpe Committee, which was submitted to the Agriculture Research Council and the Medical Research Council in 1962, pointed out that the dangers of the use of antibiotics in animal husbandry should be watched, and rapid action should be taken by the authorities concerned with control. But it would appear to me that the Minister of Agriculture has no control.
  There is little doubt that there should be better liaison between the Ministry of Health and the Ministry of Agriculture about the problem. I have stressed

  2059
  before, when campaigning over the problem of paratyphoid B and the importation of liquid Chinese egg, the problems of brucellosis and the human infection through undulant fever and again this problem of salmonella typhimurium diseases, the necessity for a more coordinated approach to the problem between the two Departments.
  There is no doubt that the build up of drug resistant organisms, both in animals and in human beings, will increase unless a firm approach is made to the problem. Only too often before have I seen the findings of eminent research workers in these fields, when recommendations and papers have been produced, being shelved for future consideration, and the British Medical Association and the British Veterinary Association have supported the views of those doing the research that action should be taken immediately.
  I hope that the Parliamentary Secretary will have consultations, recognising the importance of the problem, to try to see if powers can be taken by the Ministry of Agriculture so that where we have known cases of salmonella typhimurium on farms, at least his "vets" can go in and clear up the situation. It is an appalling state of affairs when it is known that from one farm the disease has infected 37 counties in the country. I hope that the Parliamentary Secretary will be able to give us some assurances when he replies to the debate.
  11.33 p.m.
  The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy): In raising the point about co-operation between Departments, the hon. Member for Richmond, Yorks (Mr. Kitson) does both Departments less than justice. There is a constant interchange of opinions and views on these matters. Indeed, without going too far back, even dealing with antibiotics and the effects which they might have, it may interest the hon. Gentleman to know that, in conjunction with the Ministry of Health, a circular was issued in 1964 dealing with that very subject. It was repeated in the early part of this year, warning all our officials, veterinary officers, veterinary investigation officers and all concerned with the problem to keep a look out for it.
  2060
  Having said that, I hope that the hon. Gentleman will appreciate that we are very much aware of what is going on. Our veterinary officers will report to medical officers of health cases of salmonellosis in herds if the infection is likely to affect humans. They know that they have to do that.
  I do not want to underestimate the seriousness of the problem, but we ought not to create panic over it, because there is no evidence of any increase in the incidence of the disease caused by the organism. Recorded incidents of food poisoning from salmonella typhimurium in England and Wales amongst humans have decreased annually from 2,503 in 1961 to 1,721 in 1965. On the basis of the first five months of 1966, it looks as though there will be a further decline this year. I am sure that the hon. Gentleman will be grateful for that information. No such figures are available for the disease in animals. But reports from our veterinary investigation centres show that, in recent months, the number of cases of salmonellosis confirmed in cattle is considerably lower than for the same period of 1965. The reports also show that the proportion of cases due to salmonella typhimurium has fallen markedly.
  Salmonella typhimurium is widespread in nature. It is possible for human beings to be infected from wild animals, and particularly rodents, and from farm animals. It cannot be eradicated, because there is no known way of doing this. I regret having to say it, but that is the fact.
  Under suitable conditions, the organism can live away from the animal for a long time, and re-infection from many sources can always occur. Because we cannot take practical action to eradicate it, we have not made the disease notifiable. Carriers showing no symptoms are not uncommon, and a farmer could have the disease on his farm without knowing it. We could, therefore, be faced with the impossible position of prosecuting one farmer for failing to notify a disease which his animals have caught from a neighbour's stock, when we could not possibly take action against the neighbour who had no idea that he was in possession of infected animals.
  There is no known treatment which will eliminate carriers. Indeed, some

  2061
  carriers may result from the effective treatment of clinical disease. There is a vaccine against another salmonella, salmonella Dublin. This vaccine has been shown to reduce losses, and to cut the severity of the disease when used against salmonella typhimurium. It is, however, not completely effective.
  Antibiotics are used therapeutically, and, in contact stock, prophylactically, at levels which can be dispensed on veterinary prescription only. However, the best way to tackle this problem in cattle is for farmers to adopt measures of good husbandry and hygiene in the planning and execution of their enterprises to prevent the disease appearing.
  Gathering calves together in trucks, markets, dealers' premises and the like, increases the chances of cross-infection taking place at a time when they are most susceptible because of the stress associated with this trade and with long journeys. We must remember, however, that without the trade in calves we should have a larger number of calves sold for slaughter as "bobbies" by the farmer who bred them but did not want to rear them, instead of their going eventually to farmers, many miles away in some cases, who will rear them to add to our beef supplies. In any event, a ban on trading in calves would not arrest salmonella typhimurium.
  However, effective and fairly simple measures can be taken to lessen the risks. If a single source of calves is available, so much the better. They should have received colostrum soon after birth, they should be at least 10 days old, and they should have been vaccinated before movement. They should be exposed to as little handling, mixing and travel as is possible. Direct farm-to-farm movements are better than purchases via markets.
  Good husbandry after arrival should include warm, dry quarters and isolation in small groups away from older calves. Buildings should be planned or modified to ensure that disinfection can be thoroughly and expeditiously carried out.
  Similar precautions should be taken for other livestock. Following the 1964 Annual. Price Review veterinary study groups were set up by the National Farmers' Union, the British Veterinary Association and the Ministry's veterinary services throughout the country at
  2062
  regional and county levels to study disease problems and to advise farmers how they can be tackled. These groups have been very active in the past year on the subject of calf losses, including losses from salmonella typhimurium. The Ministry's Veterinary Investigation Service is also available to advise farmers through their veterinary surgeons on particular problems.
  I turn now to antibiotics. Some criticism has been made of their use. The problem of what is called "infective drug resistance" has been mentioned. There is no evidence based on field experience to show that this problem is in any material degree due to the use of antibiotics in the treatment of animal disease. It would not, therefore, be right to prevent veterinary surgeons from using these drugs to cure or prevent illness in animals.
  Specified antibiotics are scheduled under the Therapeutic Substances Act, 1956, and can be obtained for animal use only on the prescription of a veterinary surgeon, with one exception which I shall mention shortly. We should not curtail the right of veterinary surgeons to use their own judgment in diagnosis and treatment and to use the best methods available to them. We must appreciate that failure to treat disease by the best methods could result in a considerably increased loss in farm livestock; animals would undergo more suffering; and there would be a greater risk of spread to humans. No one would deny the great benefits to agriculture that have resulted from the use of antibiotics. We could consider restricting the use of antibiotics in animals only if there were convincing evidence that human beings would benefit. This evidence does not exist.
  I now turn to the exception to this very rigid system of control over antibiotics. Of the specified antibiotics, there are three that may be added at low levels to feed for pigs and poultry. Even so, their use for breeding stock is not allowed. Addition to feed is for the purpose of promoting the growth of the animals, and I must emphasise that this permission is limited to pigs and poultry at very low levels indeed, and is not available for calves.
  I am not aware that a connection between this practice and the development of infective drug resistance has been

  2063
  established by field experience. Nevertheless, the possibility has been brought up and is being very closely examined by a joint committee of the A.R.C. and N.R.C. I understand that this committee has reported to these two research councils. We are at the moment awaiting this report. The Ministry's Scientific Advisory Panel is also reviewing the use of antibiotics in food and agriculture. When we have the views of these two advisory bodies we will then consider the matter fully and decide whether any changes in the relevant Regulations are necessary.
  I can give the hon. Gentleman the assurance that we do not look on this matter lightly.
  Mr. Kitson: Has the Minister any idea when these reports will be available?
  Mr. Hoy: As I said, we are awaiting them. I hope that no time will be lost. I do not want to give an exact date, but we hope to receive them quickly.
  That is why I was assuring him that when we have them we will lose no time in reaching a conclusion. We do not underestimate this problem. We are grateful to him for raising the matter, because it gives us the opportunity of assuring the public that we are giving it every attention possible.
  Question put and agreed to.
  Adjourned accordingly at a quarter to Twelve o'clock.

EDUCATION AND SCIENCE
  Deaf Children, Norfolk
  Deaf Children, Norfolk
  Controlled Schools (Legislation)
  Controlled Schools (Legislation)
  Council for Scientific Policy (Sir Solly Zuckerman)
  Council for Scientific Policy (Sir Solly Zuckerman)
  National Union of Teachers (Incomes Policy)
  National Union of Teachers (Incomes Policy)
  State Schools (Religious Education)
  State Schools (Religious Education)
  Microwave Power Transmission (Research)
  Microwave Power Transmission (Research)
  Secondary and Senior Comprehensive Schools, Redbridge
  Secondary and Senior Comprehensive Schools, Redbridge
  Teachers (Salary Increases)
  Teachers (Salary Increases)
  Polytechnics and Other Colleges, Wales
  Polytechnics and Other Colleges, Wales
  Pupils, Hampshire (Free Meals and Milk)
  Pupils, Hampshire (Free Meals and Milk)
  Educational Building and Expansion Programmes
  Educational Building and Expansion Programmes
  Further Education (Advice to Students)
  Further Education (Advice to Students)
  Education Projects, Scotland (Grants)
  Education Projects, Scotland (Grants)
HOME DEPARTMENT
  Racial Discrimination (Hotels)
  Racial Discrimination (Hotels)
  Protection of Birds Act, 1954 (Eagles)
  Protection of Birds Act, 1954 (Eagles)
  Charities (Local Authority Notification of Collections)
  Charities (Local Authority Notification of Collections)
  Commonwealth Immigrants (Deportation Orders)
  Commonwealth Immigrants (Deportation Orders)
  Royal Society for the Prevention of Accidents (Grant)
  Royal Society for the Prevention of Accidents (Grant)
  Police
  Police
  Minicabs (Prosecutions)
  Minicabs (Prosecutions)
  Drugs (Prevention of Misuse) Act, 1964 (Prosecutions)
  Drugs (Prevention of Misuse) Act, 1964 (Prosecutions)
  School Crossing Patrols, Croydon (Traffic Wardens)
  School Crossing Patrols, Croydon (Traffic Wardens)
MAURITIUS
  General Election
  General Election
FIJI
  Tourist Industry
  Tourist Industry
COLONIAL TERRITORIES
  Departmental Staff
  Departmental Staff
BRITISH GUIANA
  Shipowners Liability Order, 1965
  Shipowners Liability Order, 1965
ECONOMIC AFFAIRS
  Stipendiary Magistrates, Manchester
  Stipendiary Magistrates, Manchester
  Productivity
  Productivity
  Prices and Incomes (Standstill)
  Prices and Incomes (Standstill)
  National Economic Development Council (Representations)
  National Economic Development Council (Representations)
BOARD OF TRADE
  British European Airways (Public Safety)
  British European Airways (Public Safety)
  Coastguard Station, Looe (Manning)
  Coastguard Station, Looe (Manning)
  United Kingdom-Canada Trade
  United Kingdom-Canada Trade
  Merchandise (Prices)
  Merchandise (Prices)
  Hire-Purchase Restrictions (Mobile Homes)
  Hire-Purchase Restrictions (Mobile Homes)
  Exports to Spain
  Exports to Spain
  Standard Industrial Classification
  Standard Industrial Classification
  Anglo-Soviet Trade
  Anglo-Soviet Trade
  Canextour
  Canextour
SHIPPING
  U.N. Shipping Committee (Representations)
  U.N. Shipping Committee (Representations)
  New Merchant Ships
  New Merchant Ships
NATIONAL FINANCE
  Departmental Office Space, London
  Departmental Office Space, London
  Member of Parliament's Letter (Delay)
  Member of Parliament's Letter (Delay)
  Rhodesian Railways (Zambian Copper Transit Dues)
  Rhodesian Railways (Zambian Copper Transit Dues)
  Unemployment
  Unemployment
  Expenditure Overseas
  Expenditure Overseas
  Close Companies (Dividends)
  Close Companies (Dividends)
  Export Rebates
  Export Rebates
  Overseas Travel (Credit Cards)
  Overseas Travel (Credit Cards)
  Dollar Portfolio
  Dollar Portfolio
OVERSEAS DEVELOPMENT
  South-West Africa (Mandate)
  South-West Africa (Mandate)
  Aid
  Aid
MINISTRY OF DEFENCE
  Greenwich Hospital Funds and Naval Education Allowances
  Greenwich Hospital Funds and Naval Education Allowances
  MEMBERS OF PARLIAMENT (SALARIES)
  MEMBERS OF PARLIAMENT (SALARIES)
  MINISTERS (OVERSEAS VISITS)
  MINISTERS (OVERSEAS VISITS)
AGRICULTURE, FISHERIES AND FOOD
  Subsidies (Wales and Monmouthshire)
  Subsidies (Wales and Monmouthshire)
  Foodstuffs (Price Increases)
  Foodstuffs (Price Increases)
MINISTRY OF HEALTH
  General Nursing Council (Selective Employment Tax)
  General Nursing Council (Selective Employment Tax)
REPUBLIC OF IRELAND
  Diplomatic Representation (Cost)
  Diplomatic Representation (Cost)
MINISTRY OF LABOUR
  Commonwealth Immigrants
  Commonwealth Immigrants
  Redeployment
  Redeployment
  Selective Employment Tax (Educational Charities)
  Selective Employment Tax (Educational Charities)
  Industrial Training Act, 1964 (Tribunals)
  Industrial Training Act, 1964 (Tribunals)
  Retail Price Index
  Retail Price Index
PENSIONS AND NATIONAL INSURANCE
  National Assistance (Large Families)
  National Assistance (Large Families)
  National Insurance (Industrial Injuries) Act, 1965 (Benefit Refusals)
  National Insurance (Industrial Injuries) Act, 1965 (Benefit Refusals)
PUBLIC BUILDING AND WORKS
  Embassies (Overseas Expenditure)
  Embassies (Overseas Expenditure)
SCOTLAND
  Urban Districts (Studies)
  Urban Districts (Studies)
ROADS
  Capital Projects (Hornchurch-Romford Area)
  Capital Projects (Hornchurch-Romford Area)

Preamble
The House met at two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chester
The Lord Evershed—Took the Oath.
The Lord Fraser of Allander—Took the Oath.

THE NATIONAL REFERENCE LIBRARY OF SCIENCE
2.5 p.m.
LORD IRONSIDE: My Lords, before asking Her Majesty's Government the Question standing in my name on the Order Paper, I should declare that I am a member of the British Museum Advisory Committee and of the National Reference Library of Science and Invention. I now beg leave to ask the Question.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the fact that the contents of the new National Reference Library of Science and Invention are already reaching a fair degree of organisation, they can now state what plans have been made for moving the library from its temporary and divided quarters to the proposed building on the South Bank of the Thames.]
LORD HILTON OF UPTON: My Lords, a Working Party of officials was set up by my right honourable friend early this year to determine the requirements of the National Reference Library of Science and Invention. When these have been settled, which it is hoped will be before the end of this year, detailed planning of the new building will be put in hand. The recent decision to move the Patent Office out of London has affected this scheme and necessitated a revision of plans for the building, and has led to renewed discussions with the Greater London Council over the lease of the South Bank site.
LORD IRONSIDE: My Lords, I thank the noble Lord for his Answer which is
900
no more or less than I expected. Is the noble Lord aware that the Library, in its interim quarters at Holborn and, shortly, at Bayswater, cannot be set up as a fully functioning and effective organisation? Would he direct to the attention of his right honourable friend the Minister of Education and Science the importance of getting the Library housed in one building, and also of avoiding further delays in setting up the building which might affect the development of the Library organisation?
LORD HILTON OF UPTON: My Lords, I am well aware, as is the Minister, of the difficulties at the places mentioned by the noble Lord in the first part of that supplementary question. My right honourable friend is well aware of the importance of getting a suitable site for this Library as soon as possible. I will certainly draw his attention to the points made by the noble Lord.
LORD DOUGLAS OF BARLOCH: My Lords, would my noble friend explain in what way the decision to move the Patent Office has affected this Library?
LORD HILTON OF UPTON: My Lords, I cannot, offhand, explain that in detail. I understand that there are difficulties about it. But I am quite prepared to get the information required by my noble friend and will let him have it in writing.

SELECTIVE EMPLOYMENT TAX AND THE HIGHLANDS AND ISLANDS
2.10 p.m.
THE DUKE OF ATHOLL: 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 agree with what the Vice-Chairman of the Highlands and Islands Development Board is reported to have said in Inverness on May 4, namely that the selective employment tax is "a body-blow to these regions."]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): My Lords, I would repeat what I said to the noble Lord, Lord Tweedsmuir, in this House

901
on July 13, that the Government do not accept that the selective employment tax has a damaging effect on the Highlands and Islands. It cannot therefore be a body-blow to these regions.
THE DUKE OF ATHOLL: My Lords, would the Government accept that the Highlands and Islands Development Board are doing a good job of work?
LORD HUGHES: My Lords, we not only accept that, but are very pleased with it, because that is the purpose of setting up the Board.
THE DUKE OF ATHOLL: My Lords, in that case, would the Government not agree that the people in the Highlands and Islands are more likely to know about their affairs than the people down here in Whitehall and, possibly, those in St. Andrew's Square?
LORD HUGHES: My Lords, it is not always so. The statement was made by the Deputy Chairman of the Board the day after the Budget. Since that statement was made, it has been made clear that there will be direct refunds of the tax for agricultural interests, for forestry interests and for fishery interests. These are a very important part of the economy of the Highlands. The Vice-Chairman of the Highlands and Islands Development Board did not know of these facts the day after the Budget. Incidentally, he did not claim to be speaking for the Board.
LORD WAKEFIELD OF KENDAL: My Lords, is it not further evidence of the wasteful and inefficient use of the selective employment tax that it is first of all to be collected and then paid back—meaning more and more civil servants?
LORD HUGHES: No, my Lords; on the contrary. The method adopted uses the existing machinery and enables the tax to be collected with the minimum number of civil servants.
LORD NEWTON: May I ask the noble Lord whether the last answer he gave to the noble Duke is a variant on the old theme of "the gentleman in Whitehall knows best"?
LORD HUGHES: My Lords, if the noble Lord chooses so to regard it I am not in a position to deny him that pleasure but there are occasions when the Chancellor of the Exchequer knows more
902
about his Budget intentions than even the Vice-Chairman of the Highlands and Islands Development Board.
VISCOUNT MASSEREENE AND FERRARD: My Lords, is the noble Lord aware that the Highlands and Islands Development Board laid great emphasis on the tourist industry for the Highlands? That being so, can he explain why the selective employment tax is not a body-blow to the tourist industry?
LORD HUGHES: My Lords, the statement attributed to the Vice-Chairman was not that it would be a body-blow to tourism, but a "body-blow to these regions". That was a personal opinion of the Vice-Chairman. I would remind your Lordships that when these people were appointed we stated that we were not going out of our way to get "Yes-men". It does not follow that when these people are free to state their opinions, the Government must in turn become their "Yes-men". Having said that, I would point out that the purpose of the Highlands and Islands Development Board, who are developing their task so successfully, is to seek to create in the Highlands a balanced economy with such special measures as may be necessary for the Highlands within a United Kingdom framework. Therefore, in adopting these special measures they must seek to fit them within United Kingdom taxation, which includes the selective employment tax.

LINER TRAIN FREIGHT SERVICE
2.13 p.m.
LORD CONESFORD: 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—

(1) on what date or dates they indicated to all concerned their determination that the freight liner train service shall go ahead on the basis of open terminals;

(2) from what date that service will be operated on that basis.]

THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, the Government's determination in this matter has been expressed on several

903
occasions to Parliament, by myself in this House on May 26, 1966, in another place on April 28 last year by my right honourable friend the Minister of Transport at that time, and on May 4 this year by my right honourable friend the present Minister of Transport, who has also made the same point on numerous occasions in recent months to representatives of the railways and road haulage unions and to the Chairman of the Railways Board. On the second part of the Question, I would draw the noble Lord's attention to my right honourable friend's reply, "Soon", on July 26 in another place.
LORD CONESFORD: My Lords, may I thank the noble Lord for his Answer? Does he recall that I last questioned Her Majesty's Government on this subject on March 9,1965, more than sixteen months ago, and that the Government then informed me of the importance they attached to these trains and revealed that negotiations with the trade union had already, on that date, been going on for about twelve months? In view of this, may I ask the noble Lord two questions? Do Her Majesty's Government place any time limit whatever on the obstruction of their policy by the trade union? Secondly, will they bring the conduct of the trade union in this case to the attention of the Royal Commission?
LORD CHAMPION: My Lords, everyone knows that in these matters we are dealing with human relationships and human beings, and human beings can be extremely awkward at times. This is a very delicate matter and my right honourable friend the Minister is pursuing it with determination but also, I am positive, with tact. I am sincerely hoping that the negotiations which are at this moment in progress will lead to a satisfactory outcome of this matter, which we do regard as extremely serious.
BARONESS HORSBRUGH: My Lords, does the noble Lord, Lord Champion, mean to say, or are we to understand, that until now negotiations have not been concerned with determination or tact has not been used?
LORD CHAMPION: My Lords, the noble Lady must not place such a construction upon my words.
LORD CONESFORD: My Lords, does the Minister recall that the terms
904
of reference to the Royal Commission asked them to consider the role of trade unions in accelerating the economic advance of the nation? Does he not think that the fact that these negotiations have been proceeding for over two years without success is a matter to bring to the attention of the Royal Commission?
LORD CHAMPION: My Lords, the Royal Commission had its terms of reference and is pursuing the task which was given to it. This task which it is undertaking, is extremely difficult and I am sure that all the points which the noble Lord has raised will be part of its consideration.

BORIC ACID AND FOOD ADDITIVES
2.18 p.m.
LORD DOUGLAS OF BARLOCH: 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 in what cases and to what extent the use of boric acid as a food additive is permitted.]
LORD CHAMPION: My Lords, the use of boric acid in food for sale for human consumption has been prohibited since 1925.

BUSINESS: PRICES AND INCOMES LEGISLATION
LORD SHEPHERD: My Lords, with permission, I wish to make a short Business statement. The House will be aware of the importance that the Government, and I think the nation, attach to prices and incomes within our present economic situation. The Government are therefore most anxious to obtain the passing of the Prices and Incomes Bill, now before the other place, before the Summer Recess. I am quite sure that noble Lords on my side of the House and in all other quarters of the House would be willing to sit through August to achieve this objective, but I think that special consideration should be borne for the members of the staff of the Palace of Westminster, particularly (if I may refer to

905
them) the staff in another place, where, the House may be interested to know on average, Business has not been completed before midnight during its sitting period. We must also, of course, take account of our own staff.
The Government are equally anxious that this House should have a proper opportunity to consider the legislation. We have had a number of discussions through the usual channels on a number of alternative schemes to meet what we think would be the wishes and consideration of the House. It has been agreed—and I now put it to the House—that the Government should issue a White Paper this week-end, if possible this evening, setting out the provisions of the Bill, and that this should be the basis of a debate for Wednesday, August 3. It is then hoped that the House, having had a full debate on that White Paper, would be willing to take the First and Second Readings formally when the Bill is received from the other place and then proceed into Committee. Thereby it is hoped that we shall be able to complete all the stages of that Bill on that day. That is the suggestion I put to the House, and I hope the House will agree to it.
LORD CARRINGTON: My Lords, words almost fail me. What a way to run an army! I think that a version of the Prices and Incomes Bill has been published for nine months and the Government have done absolutely nothing about it. Now they expect to get it through both Houses of Parliament in nine days. This is really an intolerable situation. Shortly we are to discuss the inability of the Government to run the economy. No wonder, if they cannot even run their Parliamentary Business. Having made the mess they have of their timetable, they are now faced with two alternatives: either that we should sit well into August, with all the inconvenience that brings to everybody, or else to treat this House with contempt by allowing it a very short time to discuss a Bill of this great magnitude.
Having said that, there is, I think, one bright ray in all this—that is, the role played by the noble Lord the Chief Whip, because he is not responsible for any of this and I know that what he has done he has done to try to lessen the contempt with which the Government are
906
treating this House. So far as that goes, I do not think we have any alternative but to accept these suggestions.
LORD SHEPHERD: My Lords, if I may, I would express my grateful thanks for the agreement of the noble Lord the Leader of the Opposition. I have never yet known words to fail him, and obviously they did not fail him on this occasion. The noble Lord referred to running an army. Sometimes I think it is easier to run an army than your Lordships' House. But there it is. We are in this difficult situation. The suggestion which I made to your Lordships is not from the Chief Whip but from the Government Bench as a whole. I say that because the noble Lord has singled me out; I should not like it to be thought that that was any sort of aspersion on my noble friends. We are all anxious to treat this House properly and to see that the House has proper opportunity of considering legislation. In view of what the noble Lord has said, I hope I can take it that the House agrees with the proposals I have just made.
THE MARQUESS OF SALISBURY: My Lords, I wonder whether I am in order to ask one question of the Government. I hope that this arrangement will not be regarded as a precedent. It is all right if we are not going to vote against the Second Reading of a Bill, but if we were going to do that, this procedure would not do at all.
LORD SHEPHERD: I have come through some difficulties on this matter in the last 24 hours, and I can assure the noble Marquess that I will see that this is not a precedent.

UNITED KINGDOM OIL PIPELINES BILL
Read 2a.

CRIMINAL LAW BILL [H.L.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, HOME OFFICE (LORD STONHAM): My Lords, I beg leave to introduce a Bill to amend the law of England and Wales by abolishing the division of crimes into felonies and misdemeanours and to amend and simplify the law in respect of matters

907
arising from or related to that division or the abolition of it; to do away (within or without England and Wales) with certain obsolete crimes; and for purposes connected therewith. I beg to move that the Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Stonham.)
On Question, Bill read 1a, and to be printed.

WHITE FISH AND HERRING SUBSIDIES (UNITED KINGDOM) SCHEME 1966
2.25 p.m.
LORD HUGHES: My Lords, I beg to move that the White Fish and Herring Subsidies (United Kingdom) Scheme 1966 be approved. On this occasion the Government have decided that since many of the provisions for white fish and herring subsidies are common to both, it would be sensible to combine the separate Schemes of past years into one. I hope that this course commends itself to your Lordships.
Before I turn to the Government's proposals, perhaps I should say a few words about the economic state of the industry. The years 1961 and 1962 were rather poor years; 1964 was for most sections of the fleet a distinctly good year, on the other hand; 1965 was a mixed year: but the inshore and herring sections on average showed a considerable improvement in profits compared to 1964. This was particularly evident in Scotland.
The distant water section of the trawler fleet showed a rise in operating profits, but the near and middle water sections did less well, and the trawler fleet as a whole showed little change in profitability compared with 1964. Total British landings of white fish rose by about 65,000 tons to 790,000 tons and, though prices were generally a little lower, increased in value by about £3·5 million to £55 million. Herring landings in the United Kingdom increased a little in weight, but by about 8 per cent, in value, to £3 million.
It is always difficult to make forecasts and I should not like to attempt this for 1966. There is, however, no sign so far of any falling off, of herring or inshore earnings, and according to the provisional information I have been given the deep-
908
sea gross earnings this year are somewhat better than for the comparable period last year. As your Lordships may know, we have recently seen a development in the herring industry with the conversion of two vessels as purse seiners. This is a form of fishing which has been successfully developed in the Scandinavian countries, and the results achieved so far by the two vessels—one English and one Scottish—suggest that it may prove a profitable method of fishing during some of our seasonal herring fisheries.
I now turn to the provisions of the Scheme, which covers all sections of white fish and herring catches. For the deep sea trawler section the Sea Fish Industry Act 1962 provides that the basic daily rates of subsidy must he reduced annually by between 7½ per cent. and 12½ per cent.
LORD CARRINGTON: My Lords, would the noble Lord forgive me for interrupting him? But I wonder whether it would help matters if I were to tell him that we on these Benches do not oppose this Order, and as there is a very long list of speakers for the principal debate, it might be convenient for the House to take it more formally.
LORD HUGHES: My Lords, I am most grateful to the noble Lord, and I hurriedly accept his offer. I beg formally to move that the Order be approved.
Moved, That the White Fish and Herring Subsidies (United Kingdom) Scheme 1966, be approved.—(Lord Hughes.)
On Question, Motion agreed to.

HOUSING (SCOTLAND) BILL [H.L.]
2.28 p.m.
Order of the Day for the Second Reading read.
LORD HUGHES: My Lords, I beg to move that this Bill be now read a second time. I think that I should now sit down, but perhaps I ought first to explain that this Bill is a purely consolidation measure and applies to Scotland only. It consolidates the general provisions of the seven Housing (Scotland) Acts, 1950 to 1965, together with provisions from various other enactments. The last consolidation of 1950

909
covered all provisions of the Housing (Scotland) Acts; the present consolidation deals only with the general and non-financial provisions. The financial provisions will be left outstanding meantime, and will be consolidated separately at a later date. It will then be possible to include in that second consolidation measure the new subsidy provisions which the Government hope to introduce shortly after the summer recess.
The consolidation will be of convenience to their Lordships and to Members of another place in providing a single general housing enactment against which to consider further legislation in this field. The consolidation will also be of great benefit to all users of the legislation, particularly to the Scottish local authorities, and I commend the Bill for your Lordships' approval.
Moved, That the Bill be now read 2a.—(Lord Hughes.)
On Question, Bill read 2a, and referred to the Joint Committee on Consolidation Bills.

THE ECONOMIC SITUATION
2.30 p.m.
Loan SHEPHERD Loan SHEPHERD rose to move, That this House takes note of the economic situation confronting this country. The noble Lord said: My Lords, last night we were confronted with the fact that fifty noble Lords wished to take part in this important debate and, if I may, I would start by expressing appreciation to the Opposition for agreeing to the change of Business for next week in order that a second day should be provided for this debate. I should also like to express appreciation to those noble Lords who agreed to speak on Monday instead of to-day.
The Government welcome this debate, and hope that it will be wide-ranging, deep and penetrating. It is perhaps a clichéto say that this nation faces grave and difficult times. I suppose that, in terms of Party political strife, for some the situation may be satisfying. I can well understand the Opposition to-day seizing the opportunity to deploy their full guns against the Government. I would not deny them that opportunity; it is their duty and their right. But if
910
this debate were to be purely in terms of a slanging match between one Party and another, and if we ignored the deep-rooted difficulties which have confronted, and continue to confront, the nation, such as those in the field of industrial investment, the standards of management, the attitude of the trade unions, and, in particular the views of our workpeople as a whole, then I believe the debate would be sterile. Equally, I think we should acknowledge the general advances that have been made. I believe it would be dangerous to underrate the difficulties, but so do I believe it would be dangerous if we were to over-rate them.
There are some who suggest radical and ruthless adjustments to our policies as a means of getting out of our difficulties. There are some noble Lords who believe we should sweep away the overseas aid that we give to our developing friends. There are others—and they are within my own Party—who believe that a radical reduction of overseas Defence expenditure would be the quickest way out of our difficulties. There are many other suggested ways; but they would all have serious effects on outside matters. Therefore, the Government, and any Government, must be limited in what they do by how it will affect overseas problems and our overseas friends.
I should like to call the attention of the House to the fact that no other country in the Free World, except the United States, has consistently poured out so much treasure and resources in the field of Defence, not only in Europe, but throughout the world. If I may, I would remind your Lordships of some figures which I gave in the Defence debate earlier this year. This nation contributed about 7 per cent. of its gross national product within the field of Defence, in comparison with Germany, last year at 5 per cent., now moving to4·5 per cent., Holland at 4·4 per cent., France at 5.4 per cent., and Sweden at 5·1 per cent. In terms of manpower, one-fifth of our scientists and technologists are involved in research and development in Defence, and 1½ million of our workpeople, out of a working population of 23 million, are involved in Defence. In terms of foreign exchange alone, from 1956 to 1965, if we exclude the purchase of arms and the sale of arms, Defence has cost us across the exchanges £1,800 million—over £500

911
million to Germany. These are very grave and heavy burdens.
No manufacturing country, certainly in Europe, is quite so dependent as we are upon the terms of world trade, and no country is quite so vulnerable to the fluctuations of commodity prices. For instance, this year the raw goods that we buy have risen in price by about 2 per cent., which will add £100 million to our import bill this year. With the pound sterling as a reserve currency, we are more at risk than perhaps most when there is a shortage of liquidity and, in particular, dollars. Certainly our own pound is very much influenced by the movement of currency due to interest rates.
Having said that, perhaps I might briefly draw your Lordships' attention to the amount of overseas aid that we have given, and continue to give, which is in the region of £202 million in the present year, through bilateral and multilateral aid agreements. These burdens have been with us, and will continue in some respects. But, if one compares the proportion of our gross national product that we have put into machinery and equipment in recent years, we compare poorly with other European countries. I would ask your Lordships to bear with me in giving these figures.
If we take total investment in machinery and equipment for manufacture between the years 1955 and 1964, France put 8·6 per cent. of its gross national product into that investment; Germany 11·9 per cent.; Italy 9·1 per cent.; Holland 12 per cent.; Belgium 8 per cent., and the United Kingdom 8·6 per cent. But it is more significant when we look at the figures for the years 1960 to 1964. Into the same form of investment France put 5·7 per cent., and Germany 7 per cent. The United Kingdom put 4·6 per cent. This is one of the reasons why the Government have consistently told the country that we must put more of our available investment into manufacturing industry. One salient factor—and I am sure the noble Lord, Lord Robbins' will agree with me here—is that our economy is so placed that it is only during a period of deflation or restriction that we have a surplus in our balance of trade. Yet when we have growth, even the most modest growth, we immediately become involved with a
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trade deficit. One need only remember the years from 1955 to 1960, and culminating in the disastrous debt of £765 million in 1964. These are some of the basic facts.
The Government first took office in October, 1964, and there were two basic decisions that had to be taken, and were taken. I will deal with them now, quite shortly. First of all, there is devaluation. I believe that most Members of this House—though not all—feel that if we were to devalue we might obtain a short-term advantage. But I understand, and the Government believe, that at the present stage if this country were to devalue, so would all the other countries throughout the world, and we should therefore be back at the present situation, except in this one respect: that there would be less faith than before in the British word as to maintaining the value of its currency.
Devaluation would be an easy way out. This step could have been taken in 1964. But in the Government's view it would be wrong to devalue when it can be avoided by putting our own House in order. I wish to say, as firmly and as strongly as I possibly can, that this Government will defend the parity of the pound with all the strength they have. May I add this? I believe that too much is written and said to-day in the Press and in the City about the possibility of devaluation. It is a free world, I know; but some of the articles which are written in the Press, and some of the voices which are heard in the City, appear to foreign countries to have some authenticity about them. I believe that this was one of the factors—though not, I agree, the major one—in the recent difficulties. We also took a further decision in regard to the balance of payments. We set out to achieve a balance of payments by the end of 1966. To achieve that we had, I think, two choices. In the first place we could have adopted the savage deflation of previous years, with a short-term gain but a long-term growth loss. But we chose, and I think rightly (and I believe most economists at the time agreed that we chose rightly) to attack the root causes of our balance-of-payments difficulties. We first of all decided to attack imports, which had risen during 1964 by 11 per cent., and to do that we used the surcharge for which we were criticised by noble Lords opposite.
In the field of exports we gave rebates and took other measures to stimulate the export trade. In order to shift resources to exports, there was a 7 per cent. bank rate, increased taxes, a ceiling on bank advances, limitation of private overseas investments, and deferment of public expenditure. It is interesting to note that in the second half of 1965 consumer spending rose by only 1 per cent. over the previous year. Yet in the field of exports we were able to move up by 6 per cent. In fact, during that period we shifted our resources from the home market into the export field. In the long term, by the use of the corporation tax, investment incentives, and industrial reorganisation (which will be coming along) the use of the "little Neddies", and the Regional Development Councils, we have sought to stimulate the long-term development. The targets were set in the National Plan which arose, if I may remind noble Lords, from the Industrial Review.
On the labour front we had the National Insurance Act, the Redundancy Payments Act, and we are developing industrial retraining. We set out, with these and other measures, to create a sense of social security which we believed was the only basis on which we could obtain the co-operation of our work-people. There was one doubt in our minds, and I expressed that doubt in the first speech I made in your Lordships' House as a Minister. That doubt was on the question of time. We needed time for all these measures to flow and work, particularly in the field of prices and incomes. We had to obtain a restraint, in spite of the tremendous pressures that had been built up during 1964. We had to try to create a system by which incomes were related to productivity.
I am now going to pay a special tribute to my right honourable friend George Brown. I know that there are some—though not in this House—who sneer at his efforts. But I have attended some of the meetings, and I doubt whether there is any man who has worked so consistently with his whole heart to get the workingmen of this country to accept the principle of the relation between prices and incomes. To go on to a factory floor and plead with the men in fields of restraint—and I have done this—is quite a different thing from going to the
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Albert Hall to speak to the Institute of Directors, where the lunch taken is perhaps comparable to the wage of one day's work. I do not intend that as a snide remark, but to indicate the type of pressure, and sometimes hostility, that George Brown and others have had to face, and will no doubt continue to face, to get this policy through.
In the field of imports, in 1965 imports were contained by about 1 per cent., both in terms of value and volume—avery marked difference from 1964 when, as your Lordships know, they rose by about 11 per cent. But during the five months of 1966 there has been a serious, and certainly disappointing, turn. Imports have risen by about 5 per cent. over the average of 1965, and this has been aggravated by the adverse terms of trade. In the field of exports, during the five years running to 1964 our exports increased by about 5 per cent. In 1965 they rose by 7 per cent., and in the first five months of 1966, just prior to the shipping strike, the rise was in the region of 6 per cent. To get this increase in perspective, and to see what a notable contribution certain noble Lords in this House have made in industry as a whole and in leading trade delegations, may I give these figures? During the last five months our exports to the sterling area rose by 4 per cent.; to the EFTA countries they rose by 14 per cent.; to the Common Market countries by 10 per cent.; to North America by 17 per cent., and to the Soviet bloc by 36 per cent. From any point of view this is a notable achievement. The Government reasoning was that exports would continue to rise at about the 1965 rate. World trade was buoyant, and our prices appeared to be no obstacle to business. There were improved export aids and incentives provided by the Board of Trade, and, as the House will know, my right honourable friend the President of the Board of Trade announced new aid and assistance in his speech last Tuesday.
We believe that it would be possible to maintain and improve our export figures. But there were two shadows—and I will deal with them shortly—in the field of shortage of labour and in increasing home pressures. One of the criticisms of the measures announced last week was that they lowered export incentives. Until I became active in your Lordships'

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House I was an exporter and manufacturer's representative selling British goods overseas. I well remember saying, "Why can't they do this, and why can't they do that, to help the export trade?" It is now a topical subject once again. The Government have made the most exhaustive examination of this problem. There was an export subsidy, a tax relief on profits and special manufacturing rebates—there are many other incentives. But one always came up against the insuperable problem—at least the Government regard it as insuperable at this stage—in that they are all contraventions of GATT and our other international undertakings, and were bound to lead to retaliation.
If I may, I will give what is a purely personal opinion but one which I think is generally accepted—namely, that in the end our export growth will depend upon higher qualities within management, a willingness to go out and sell and, above all else, a shift of our resources by curbing home demand, and a greater utilisation of existing machines. In the long term—this is what we should bear in mind—there should be a rationalisation of industries; there should be fewer cubs and more lions, and more organisations in this country capable of taking on the big industrial organisations of the Continent. Also in the field of production and productivity, investment is important. I believe—and I think those who are connected with the export trade share thisview—that there are still great opportunities, if only they would be seized. To appreciate this we have only to see the results of the Moscow Trade Fair. I think British industry, through the push of the noble Viscount, Lord Watkinson, and others, is making increased efforts in the field of exports.
In regard to Government overseas expenditure, the House will know that we undertook a Defence Review, and we set out our determination to contain defence expenditure at £2,000 million at 1964 prices. This means a cut between now and 1970 of some £400 million. The Government have announced further cuts in overseas expenditures, in which defence will play its part, of £100 million. I believe that at the end of the Far East confrontation considerable savings can be made there. In regard to Germany we have a more difficult problem. This year
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the cost of the British forces in Germany across the exchange comes to £94 million. At this critical period of NATO we have no desire to do anything that would weaken the defensive ability of the Alliance, but we have a clear duty to put right our own balance of payments. Therefore we are continuing discussions with our friends the Germans, and our Allies within NATO. My right honourable friend the Chancellor of the Exchequer has made it quite clear that unless there is some relief—perhaps that is not the right phrase; but unless our exchange costs in Europe are met by either Germany or our NATO allies we shall have to take steps to relieve ourselves of the burden.
In private investment overseas, which is a matter which has always exercised the interest of this House, in the last three years the average net outflow has been 150 million—an outward flow of £350 million and an inward flow of £200 million. In 1963 and 1964 this country was investing or lending overseas £1,400 million of unearned income. This was money that had been deposited short-term in this country and, generally, we had lent it long. Therefore we have had to put various restrictive measures on the flow of overseas capital and we believe that we shall have to continue the voluntary agreement for some time. During 1964–65 the net outflow of overseas investment was £100 million, but in the first quarter of this year there was a disappointing turn when the trend was reversed and when we found ourselves with a net deficit of £50 million. It is for this reason that we have had to put added point to containing overseas investments.
Turning to the field of private holidays, I can well understand our people wanting to go to the sunny climes, but our cost for that type of holiday has been rising consistently by £20 million a year. The Government have taken the view, with the utmost reluctance, that this will have to be curbed for the short term. Therefore we have made unpalatable cuts, but it will at least provide us with a saving of £50 million.
The balance-of-payments figure for 1964 was a deficit of £769 million, and in 1965 it was reduced to £354 million. At the end of last year we believed that the trends were such that we should be in balance by the end of 1966 or

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early in 1967. I think we should acknowledge that we did make considerable progress during 1965 and the early part of 1966.
I will now turn to the internal position. I said in a debate many months ago that we inherited a public expenditure programme well beyond the resources of this country, both in terms of money and in terms of physical resources. The Chancellor made it very clear that we should seek to contain public expenditure on average at 4¼ per cent. increase, in constant prices between now and 1969–70. In 1965 it was a little under 5 per cent. This in fact was quite an achievement, because it was well appreciated at the time that in the early days the level of public expenditure would be higher than—shall I use the phrase?—"the norm", laid down by the Chancellor. It has been necessary, because of the severe impact of public expenditure upon internal pressures, for further restraints to be imposed. We regret that this is necessary and we shall have to keep a careful watch in the future, but I am sure the House will agree that in regard to housing, schools and hospitals, and in particular the factories in the development area, these should not be affected.
In the field of investment I think a good story can still be told. At 1958 prices the investment in manufacturing in 1964 was £1,118 million. In 1965 it had risen by £95 million to £1,213 million, and in 1966 it appears that investment in running at about the same high level. For 1967 it may be at a slightly lower level. Therefore it is imperative that we do all we can to stimulate investment in the manufacturing industries.
During 1966, and particularly, in about May or June, we had three special worries. First of all, production, which had risen quite strongly during 1965, appeared to be stagnating, if that is the colloquial phrase for production. It is the Government's view that this was basically due to shortage of labour, and I will come to that point in a moment. One of the strangest things is that while production was basically stagnant during the early part of 1966 the growth of consumer demand was rising very strongly, and one would have thought that this growth would have had some effect on
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production. That has not appeared to be so and it has resulted in large increases in imports.
We do not believe that the halting of the advance of production is due to the order books. In most industries they appear to be still long. We believe that they have been held back by shortage of labour basically due to a shorter working week. In fact our workpeople are working less by 3¾ per cent., and output per head has risen only quite shallowly, by 1½ per cent. One of the disturbing things, if I may draw the House's attention to it, is that the motor car industry has had a substantial rise of employment, although output appears to be down. The chemical industry, too—and this is one of the major capital intensive industries—has had a rise in employment not commensurate with the rise in production.
In the field of labour shortage, we had a very interesting debate introduced by the noble Lord, Lord Byers, and on that occasion I indicated to the House that we had an unemployment figure of about 280,000, or 1·2 per cent. of our work-people. There appeared to be four skilled vacancies for every one unemployed. The "little Neddies" are carrying out an urgent investigation into this problem to see how we can increase productivity and, above all else, shake out some of the employment from one company to another. And the Government believe that the selective employment tax may have some effect in providing a new level.
In terms of internal demand it has never been easy to ascertain the true position. Good barometers, I understand, are the unemployment figures, the hire-purchase levels and retail sales. If one took 1965, the pressure appeared to be about right, but in 1966 all these barometers indicated very heavy pressures on our demand, and therefore we have been forced, with the utmost reluctance, to take the measures of last week. Noble Lords may well ask why we had not taken them before. But to depress demand is a difficult decision to take, particularly as figures can sometimes be at variance and challenge each other, as the noble Lord, Lord Robbins, will no doubt agree as an economist; because if you deflate unnecessarily it may well hit manufacturing capability and the field of exports.
The rise in consumption in the early part of the year was due, in the Government's view, to the fact that many purchasers, believing there would be rises in the Budget, tried to anticipate it; and we thought that there would be a falling off after the Budget. This has not taken place. In May, the number of newly registered cars had risen by 15 per cent. In June, the hire-purchase figures showed another increase, and in the same month retail sales were up by from 2½ to 3 per cent. But even then we thought that, with the impact of the selective employment tax, which would have meant £36 million per month out of our economy, we should be right in proceeding in the way indicated by the Chancellor of the Exchequer in his Budget statement to Parliament in May. Then came the disastrous shipping strike, when imports continued to flow in and exports, certainly so far as British ships were concerned, came to a dead stop; and we had the dreadful June deficit.
We believed, as I have said, that the measures that had been taken were sufficient. I think that if we had wanted to take stronger measures then, we could have taken them: I think the nation was expecting tough measures. Psychologically, from the Government's point of view, the time was ripe. But my right honourable friend the Chancellor of the Exchequer, his advisers, and of course the Government, took the view that what was done then would have been sufficient. If my memory is right, most of the economists writing at the time felt that it was not so much a question of whether we had taken sufficient out; the main question then, I think, was whether we had taken out too large an amount. That was the situation a few weeks ago. It is one that we very much regret, since it must have a serious effect upon the growth plan within the National Plan.
I have left to the last the question of prices and incomes. As the Prime Minister explained on July 20, increases in money terms have for long been outstripping the increase in national production. In 1965 we paid ourselves £1,800 million more in money incomes than in the previous year, of which about £1,300 million represented increases in wages and salaries. In the same period we earned
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only £700 million by way of increased production. As an inevitable consequence, there has been a steady rise in the general level of prices, in spite of indications that prices and incomes policy has been having some effect. Judging from Press comment on recent opinion polls, the need for a temporary standstill on prices and incomes is widely recognised throughout the country.
Although the intention can be loosely described as a twelve-months' standstill for prices and incomes, similarity of treatment of the two sides is impossible, and the Government's intention is as follows. So far as prices and charges are concerned, they will be subject to a standstill for the next twelve months, but there will have to be room for exceptions in certain circumstances. Incomes will be subject to a standstill for the first six months, which for convenience may be regarded as until the end of 1966. During this period it is intended to secure a virtually complete freeze, other than the implementation of certain existing commitments. During the second six months, that is, the first half of 1967, it is intended that severe restraint should be exercised, and that proposed increases in income should be subject to more stringent criteria than those at present in force.
The Prime Minister made it clear that the Government accepted that there were certain circumstances in which price increases might be unavoidable—for instance, as a result of the increased cost of imported materials, increased costs arising from seasonal factors, or costs imposed by the Government through taxation. In addition, there may well be other circumstances in which price increases will be justified in the national interest—for example, to prevent a firm engaged in export business from going out of business. The extent to which the Government will expect to be notified of individual cases is under discussion with the C.B.I. and was set out in the White Paper.
In the field of incomes we are faced with very great pressures. I do not propose to say anything further about it at this stage. The Government have a Bill in another place, and we shall have an opportunity of discussing it next Wednesday. I believe that by then more of the Government's views on the means of obtaining containment or freeze of incomes will be available to the House.

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I hope the House will not think that I am avoiding the issue of incomes by not going into it further now, but there are discussions taking place even this afternoon. My noble friend Lord Cooper of Stockton Heath, who will be making a maiden speech, is to speak much later than is usual for maiden speakers, but he is seeing the Prime Minister with his colleagues in the Trades Union Congress and will come here later to take part in this debate. Therefore, in these circumstances I would hope that the House would not press me to say more in this field.
At the beginning of my speech I said we should not overrate or underrate our difficulties. Clearly we are in a serious position; yet if there were a period of restraint, of consistent application by all to the task, we could well come out of it. It is strange that in war the British people will willingly accept all forms of discipline, yet in peace we seem to resent it. I believe we need to create a form of national emotion. I do not know whether it is for the Government to do it, or whether the Government is in fact capable of doing it; but we need to create a national emotion similar to that which sweeps across our football fields, no doubt under the stimulus of the Liverpool supporters, in support of England.
If in this regard we can create a similar emotion in our people, I am sure that we can sweep away many of the restrictions which apply on all sides of industry and public life, and could then have an era of co-operation from all. Some may say that that is a pious exhortation. But what is the alternative? Whilst we may have Party strife in this House, and it is a good thing that we do, I hope that men of good will will do their best to see whether we cannot get the whole resources of our nation, which are great, working once again to make this country what it could and should be.
Moved, That this House takes note of the economic situation confronting this country.—(Lord Shepherd.)
3.12 p.m.
LORD CARRINGTON: My Lords, the noble Lord, Lord Shepherd, has, as he usually does, made a lucid and disarming and amiable speech; and he has made the best of what to noble Lords opposite
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must be a most distressing occasion. He has skated with skill and delicacy over some thin ice. I shall try to be as lucid as he was, but I fear that I may not be so amiable. As I have said before, it is the duty of all sensible men of all Parties to support the Government in measures they take to defend the pound and to put the economy right, always supposing that they take the right measures. The electors, in their wisdom, decided last March that they would entrust the Party opposite with their affairs for a further period of office and, for better and for worse, the country is saddled with the Labour Party for the time being. They alone have the exact knowledge of what is happening to our economy. They alone have the power to enforce their policy; and they alone have the responsibility for doing it.
Though it is the duty of the Opposition to support sterling, it is equally the duty of the Opposition to point out where they think the Government have gone wrong, what they have done wrong, and to give some clear warnings about the future. Our duty is to the country, not to the Government. If the noble Lord, Lord Shepherd, sees me as a sort of cheer leader for the Government alone, I am afraid that he is mistaken. So I think it right, though no doubt it will be unpalatable to noble Lords opposite, to say, firmly and clearly, that in my view the present crisis is solely and entirely the fault of the Government.
It must be humiliating for noble Lords opposite to recall the events of the last eighteen months, and to remember what they are on record as saying. It has been a chapter of misjudgment and incompetence. Consider this example. The balance-of-payments considerations led Mr. Selwyn Lloyd to impose
"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."
That was said by the Chancellor of the Exchequer in November, 1965, during one of his Budgets. And so on, alternately optimistic and pessimistic, culminating in the mini-Budget of March 1 this year, when, your Lordships will remember, the Chancellor said:
"The economy is therefore reasonably well poised. The best guidance I can give the House at this stage"—

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and your Lordships will not need to be reminded that "at this stage" was just before the Election—
"is that I do not foresee the need for severe increases in taxation".
As he admits, he gambled and he failed—and that was but five months ago. For the events which have followed are fresh in our minds: the reassuring, confident speeches of the Prime Minister, followed by the sudden decision to increase the bank rate, followed by the announcement that at some unforeseen time, as yet undecided measures would be introduced. That really helped confidence! Then his departure to Moscow on an entirely unnecessary visit, and finally, the carefully prepared package of plans—not the hasty panic measures of the bad old days. Heaven help us all if we ever have hasty panic measures from Mr. Wilson! No responsible man, and certainly not Mr. Callaghan, would deliberately mislead public opinion; and I am sure what he has said, and what the Prime Minister has said, has been said in good faith. But then they have been absolutely and totally wrong. The Chancellor and the Prime Minister have not only been misinformed, they have been shown to be completely lacking in judgment and the competence to manage our affairs. Not even those who wish to place the most favourable interpretation of the Government's handling of our economic affairs in the past twenty months would say that their performance has inspired confidence amongst those of us who wish to see an expanding and prosperous Britain.
I must remind noble Lords opposite that, all along, we have been warning the Government about the economic situation. Mr. Heath, during the Election campaign, said:
"This Election is going to be fought on the economic conditions of Britain. This is the most important single issue in our campaign."
And the whole way through the Election he reiterated over and over again, as did all of us on this side of the House, his concern at the turn in the economic situation. It was a great pity that the Prime Minister shrugged off those warnings.
So we come to the stringent measures of last week. The impression has now been left abroad—and this, I think, is
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what I resent almost more than anything else—that this country is almost down and out; and, in addition, it is becoming more and more obvious that even our friends do not believe that we count in international affairs any longer. Your Lordships will have read and will have noted the article from Washington by Henry Brandon in this week's Sunday Times. We shall not count any more until we have put our house in order. It is no good the Prime Minister deluding himself that he can exert influence in Moscow or Washington or anywhere else in our present circumstances.
The noble Earl the Leader of the House reminds us from time to time that he was once chairman of a bank, and he will no doubt recall that the customer with the biggest overdraft was not his most trusted friend or his most influential adviser, although perhaps he may have been his biggest headache. But Britain is far from down and out, and when we talk of our economic problems and our balance-of-payments difficulties, as opposed to the confidence in the Government, we are speaking only of comparatively small margins of success or failure. There is a wealth of brain and initiative, and enterprise in this country, waiting to be used and encouraged. There is great resilience and strength in the British economy, and I have no doubt that with good management we can once again restore confidence and restore our own pride. I shall have more to say about that a little later on.
I come now to the measures which the Government have proposed to remedy the situation. It is almost impossible for anyone in Opposition to know whether these measures will be adequate or not—andprobably very difficult for those in Government. There can be no doubt that in the circumstances a very heavy bout of deflation was necessary, and certainly the combination of the proposals of last week with the heavy deflationary effect of the selective employment tax is going to be extremely severe. Although we do not yet know exactly what the Government propose about the wage freeze, it seems fairly clear, by their insistence on hurrying the Prices and Incomes Bill through Parliament, that some compulsion is to be put in the Bill, as Mr. Brown admitted in the House of Commons last night. But,

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in spite of the speech of the noble Lord, Lord Shepherd—and I understand his reasons—we are still uncertain as to whether the wage freeze is to be without exception or whether there are to be exceptions; whether it is to operate flexibly, as Mr. Brown said, or inflexibly, as the Prime Minister has led us to believe.
It would be unwise to discount the anger with which the postponement of agreed wage rises will be greeted by those who are disappointed and who expected an increase in their wage packet. Nor, indeed, is it yet at all clear who is going to co-operate with the Government and who is not; or which unions are going to help and which unions are not. Nor do I feel entirely confident that the Government are seriously trying to cut expenditure in the public sector. It is true that they have made large cuts in the capital programmes of the nationalised industries, though this in itself in the long run will lead to a slowing down in the development of those industries and a consequent lessening of their efficiency—industries, incidentally upon which almost all other private industry relies—but in the sector which is entirely under their control, they merely seem to have imposed what seems to be a very low cut across the board. We do not know what is to be cut, though various Departments seem to have been given targets. Those of us who have been in charge of Departments know how difficult it is to enforce that sort of cut. In a few months' time all may well be forgotten as other costs have risen and have more than engulfed the rather modest savings proposed by the Government.
However, although the Government have been imprecise in what they are going to cut, they have been very precise in the extra taxation which the private consumer has to pay. We all recollect the days of the previous Labour Government when we had even less money to take abroad than the £50 proposed now. We can also recollect the difficulties which British tourists encountered, together with the rather bad faith which grew up between the tourists and their host countries because there had to be so much scrimping and saving. On the whole, this sort of measure should if possible be avoided. For that reason I hope that this will be a temporary restriction. In-
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cidentally, thought the Prime Minister had said that very few people would be affected by this restriction since most holidays were already within the £50 limit. But the figure which the noble Lord, Lord Shepherd, gave of a saving of £50 million would seem to belie the Prime Minister's observation. Perhaps at some time that could be cleared up.
LORD SHEPHERD: My Lords, I did in fact make a mistake, and I am glad that the noble Lord, Lord Carrington, has given me the opportunity now to rectify it. The £50 million, apart from the cost of holidays, also includes restrictions and restraints on immigrants' transfers of money, which is quite a sizeable figure.
LORD CARRINGTON: I am most grateful to the noble Lord, but I should be obliged if he could split up that figure a little more. If the saving of £50 a head on the travel allowance is very small, I have grave doubts whether it is worth imposing it. Perhaps the noble Lord, or somebody who is to reply later for the Government, will be able to give us some more information. As for the surtax proposal, this is clearly a sop to the Left-wing of the Party opposite since it can have no relevance to the immediate situation.
But there is a larger doubt in my mind about these proposals, a doubt which I think is shared by a great many people both here and abroad. I was surprised, for example, that the pound has not rallied nearly as strongly as the measures taken would seem to have warranted. I believe that this is due to a lack of confidence in the Government's determination to see their measures through to the end. There have been certain pointers in that direction. There has been, for one thing, what can only be described as the opéra-bouffe performance of Mr. Brown's resignation. It seems that he wished to resign from the Government because the measures were too severe and prevented the expansion for which he had been working. He was persuaded not to resign, and now tells us that he is 105 per cent. behind the Government's proposals. I suppose the extra 5 per cent. is inflation.
Consider the effect of this on public opinion. Has Mr. Brown really given up all thoughts of trying to get his own

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way? Does he acknowledge Mr. Callaghan's judgment was right; and was there any significance in what I imagine was the inspired leak as to the future increased importance of the Department of Economic Affairs, so that in six to nine months' time expansion could be got under way again? This sort of talk raises doubts in the minds of informed people. To speak of deflation in one sentence, and the increased importance of an expansionist Department in another, is really very contradictory.
Then there are doubts about whether the Government are really serious in facing up to effects of their deflationary measures. Do not let us mince words. The Prime Minister and the Government, if they do what they say they are going to do, are deliberately going to create unemployment. But the Prime Minister still speaks in the euphemisms of redeployment of labour and of a shake-out. The more delicate his phraseology, the more obvious his political minuet, the more doubts are raised. Are these just words, or is it the firm intention of the Government to accept the consequences of what they have done?
There is still a considerable doubt about the Government's intention on the wage freeze, as I have already mentioned. Nor has the Chancellor explained the very odd report in the Financial Times last Tuesday which seems to suggest that he thought the financial measures, taken by themselves, without the wage freeze, were enough to rectify the situation. This is going to puzzle, and indeed dismay, quite a number of people in this country as well as outside. One can hardly wonder at the doubts of some of our creditors. Nor can any of us view with anything but dismay the pigheadedness of the Government in continuing the nationalisation of steel. I do not believe that most noble Lords opposite believe in it. It is one of the tablets of faith, and since most of the other tablets have either been abandoned or lie in pieces around them, they cling to this one, hoping no doubt to discover a twentieth-century Moses in the bullrushes of Smith Square clutching in his hand a substitute for Clause 4.
The consequences of steel nationalisation will be further inflation, and a period of uncertainty and disorganisation in the
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steel industry, which can benefit no one, least of all the British economy. This time, if we are going to get through this crisis, the Government have got to mean what they say and say what they mean—and they must all speak with the same voice. We cannot be told it is severe one day—severe enough for the Government to plan for unemployment of 470,000—and then be told by Mr. Jay (or so it seemed to the Parliamentary correspondent of The Times) that Mr. Jay himself did not seem any too sure that there was a crisis, that the task was not going to be too arduous; and comfortingly he dismissed the financial economies as a mere fleabite, and laughed away the fears of unemployment. The Government must be prepared to face up to the facts, and face up to the unpleasantness and hardship which their measures will no doubt bring—hardship caused, at any rate in part, by their failure to act sooner and with more resolution.
I noticed that in one of the newspapers there was a criticism that Mr. Heath, in his speech in another place on Tuesday, had made no new suggestions other than those contained in the Conservative Party Manifesto in March. I must say I find that a very strange criticism. We put forward at that time explicit proposals for remedying our economic difficulties. Alas! we have not had the chance of putting them into practice. Is it not absurd to expect some new and painless solution to be put forward every four or five months? We made some very serious and constructive proposals in our Manifesto, and I beg noble Lords opposite, if they do not believe me, to go out and buy a copy of it; indeed, I will provide them with one if they do not have one. Perhaps they could do worse than to read the speeches of Mr. Heath and Mr. Maud-ling in another place in the last two days.
The economy is 80 per cent, privately-owned and 20 per cent. nationalised. It is essential, if it is to run properly, that the private sector is given the proper encouragements and incentives; and this, we feel, has not been done by this Government in the measures which have just been announced. In our view, there must be some recasting of our taxation system whereby it will be possible for those who are working hardest and most productively in the country's interest to retain a greater proportion of what they

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earn. There is clearly a moment when taxation becomes counter-productive (using the word in its literal sense), and this must operate at all levels. It is no good adding 10 per cent. to the surtax of those very men who are the leaders of our technicians and industrialists
The Government, too, must tackle the problem of restrictive practices in industry. It will not have escaped the notice of our friends abroad that during this serious crisis there has been an unofficial dispute in the London docks about the handling of a timber cargo with new labour-saving machinery. My noble friend Lord Cones ford raised in your Lordships' House the other day another example of restrictive practices, and out of our personal experience we could all relate many other examples. We should all feel very much more encouraged if we felt that the Government were at last going to tackle these vital issues; and, indeed, the related issue of the trade unions.
When are the Royal Commission likely to report? Is it true, as I have heard it said, that it will be years before they do? As I understand it, the Trades Union Congress have not yet even put in their evidence to the Royal Commission. Surely, there is some way by which a Report from the Commission could be speeded up—perhaps by the production of an Interim Report. And what about the legal enforcement of wage agreements? Have the Government no proposals in this field? Nor have we seen any acknowledgement by the Government of the need to be more selective in applying the vast sums of money spent on the socialservices—prescriptions given to people who could well afford to pay for themselves; housing subsidies given to those who are quite well enough off to do without them. These, are but two examples of the need for re-examination, in this time of prosperity, of the basic concepts of the Beveridge Report.
What new proposals have the Government got for trying to get us into the Common Market? If that were achieved, I can think of nothing that would be more stimulating or provide more incentives for British industry and manufacturers. My Lords, these and many other measures were suggested by us at the General Election, four or five months ago. It really would pay noble Lords opposite to study them.
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I think the time has come, too, when they should consider whether it is not necessary to abolish the division of economic responsibility which exists between the Treasury and the Department of Economic Affairs; for I believe that this is one of the major causes of the Government's muddle. Mr. Brown, relying too much on his prices and incomes policy, and prices having risen less steeply than incomes, has over the past eighteen months been inflating the economy, while down Great George Street Mr. Callaghan has been fiddling, nervously and inadequately, with the valve of deflation, though at the same time trying to pretend that he is doing no such thing. The sooner the two of them get together, or one of them goes, the better it will be for the management of our affairs. They remind me of one of those barometers that I had as a child. When the pressure is low, out comes Mr. Brown shouting "Go"; but when the pressure is high, in goes Mr. Brown and out comes Mr. Callaghan shouting," Stop". My recollection of my barometer is that it was very inaccurate. Let us do away with this unnecessary and foolish division of responsibility.
My Lords, no Opposition can hope to do more than point out where things have gone wrong, and put forward in broad outline what they would have done and what they would do. But let there be no doubt: the responsibility and the power lie in the hands of the Party opposite. In their hands they have the wellbeing and the reputation of this country. If they cannot discharge that obligation, and are not competent to do so—and I do not think that they are—then they should go and make room for someone else.
3.37 p.m.
LORD GLADWYN: My Lords, I should not be intervening in this debate at all had not my noble friend Lord Byers an unbreakable engagement abroad. However, I shall do my best not to disappoint your Lordships. May I say that I have, of course, consulted Lord Byers, and I think what I have to say more or less represents his views as well, I hope, as those of the Liberal Party. I may add, as your Lordships will see from the list of speakers, that my noble friend Lord Byers has put his name

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down for the second day's debate on Monday. We must only hope that he will be back on that occasion and so be able to give your Lordships his valuable advice, based on great knowledge and experience, which I think is always very acceptable to your Lordships.
Generally speaking, the Liberal Party, while recognising that in the circumstances in which we find ourselves certain unpleasant measures are absolutely necessary—of course we recognisethat—believes that these circumstances should never have arisen, and that, having arisen, they should be dealt with in a way which would undoubtedly have been severely criticised by the Labour Party had they been carried out by Mr. Selwyn Lloyd.
We all know the old, old story which we have heard so often since the war—I forget how many times. The British economy is coasting merrily along, having just tanked up at the international filling station, when suddenly the wicked gnomes switch on a red light. The brakes scream and the vehicle shudders to a halt. The popular Deputy Prime Minister is thrown through the windscreen, but happily is not seriously hurt, though I am afraid he is obviously shaken. The driver goes off to argue with the gnomes. The passengers are told that if they want to continue with their journey they have jolly well got to tighten their belts. Meanwhile, it is agreed that there will have to be a new steering wheel before the bus is allowed to proceed; otherwise, all the passengers are in danger of being thrown into the ditch. It is all so sickeningly familiar, except that this is just about the record stop so far—by which I mean that the bus has stopped in absolutely record distance.
What really prevents the vehicle from accelerating nicely down the road along with all the other industrialised nations? The first reason is obvious, or at any rate it is obvious to us on these Benches. We have too heavy a load, and we have had too heavy a load for years. Ever since the Empire broke up we have been pretending to be a World Power, when clearly we were nothing of the sort. Billions of pounds—many of them wasted—have been spent in this vain effort during the last twenty years, more particularly East of Suez. For along time the Liberal
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Party has been pointing to this anomaly. It is to be hoped that, at long last and under the spur of sheer necessity, its advice will be accepted—though I believe, my Lords, that the Tories are now encouraging the Government to spend even more money East of Suez. Perhaps the noble Lord, Lord Carrington, would like to comment on that, but I rather think he is engaged in conversation.
LORD CARRINGTON: My Lords, I heard the noble Lord, but I did not have any comment.
LORD GLADWYN: I take it, then, that the Tories are urging the Government to spend more money East of Suez than is now being spent. That will certainly go on the record.
LORD CARRINGTON: I do not think the noble Lord should take any such thing. I never said anything of the kind. I had just made a speech lasting half an hour, and I had no comment on what the noble Lord was saying.
LORD GLADWYN: Silence is consent. The other basic cause of our difficulties is also obvious. We produce, on the average, less per head than other comparable countries. This is due partially, no doubt, to the fact that we did not have to start from scratch, like so many countries, after the last war; but more especially to the persistence of ancestral fears, dating from the terrible 'thirties, which are embodied in what are generally known as restrictive practices. In other words, our bus is over-bodied and under-engined, and the only thing which seems to work reasonably well are the famous brakes.
Last week the Prime Minister, in his Statement, seemed to put some of the blame for our grinding to a halt on a shortage of liquidity in the world's financial centres. This growing shortage of liquidity undoubtedly exists, but it has been with us for some months—many months. Its effects were something which, I believe, the Government should really have foreseen. It is hard to believe that it was the dominating factor in a sudden confidence run on sterling which forced the Government to switch over, as the Prime Minister said, from, "No further measures are required at this time; editorials saying so are wet" to apocalyptic warnings on the state of our economy, in the space of only 96 hours.

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I accept what the Prime Minister said yesterday in the other place about the vulnerability of sterling when the country is in deficit, but I really do not think he disproved the charge of a certain lack of foresight. For a number of months interest rates have been rising as a result of deliberate policy by Continental and Scandinavian banks who have felt that tight credit was needed to contain growing inflationary pressure. This has necessarily meant that our structure here of short-term interest rates, which a year ago was relatively high, is now no longer so. But the Central Bank credits, which were recently renewed, were designed to be used in just these circumstances, and their use would have sufficed to deal with this problem had not very much broader factors been at work contributing to a loss of confidence.
Now the sad truth, as we think, is that ever since November, 1964, when they took a number of very necessary measures to deal with the appalling situation passed on to them by their predecessors, the Government have failed to re-establish complete confidence in our country's ability to hold the present exchange rate. This may not have been entirely their fault, but we on these Benches, at any rate, believe that it was largely due to maladroit tactics. In the first place, in order to overcome the basic opposition to their economic policy on the part of their own Left Wing, the Government have consistently pretended that they were not trying to deflate, though at the same time they have obviously been assuring their foreign creditors that this was precisely their objective. Indeed, if they had not persuaded our foreign creditors on this point they would not have got the essential credits, the pound would have been devalued and their policy would have been in ruins.
Then there is no doubt that in November, 1964, and in July, 1965, and again recently during last week, some action was taken which could well be described—I grant that—as courageous, in the sense that it was obviously going to make the Government unpopular. But the point is that this action is only taken, as we now see, under the pressure of events, and usually after statements that no further measures are necessary or contemplated; and it therefore carries less conviction than would pre-emptive action of
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some kind. Among questionable tactics we would also maintain that the Government have staked much too much on the short-run benefit accruing from their prices and incomes policy. Unfortunately, the prices and incomes policy has not really functioned—I do not think anybody seriously maintains that it has—and some time ago the Government should have drawn a necessary conclusion. The seamen's strike was not the cause of our predicament, my Lords; it was only the last straw.
Thus, though, given the circumstances, the Government had little option to do other than what they did—and, of course, so far as what they did was necessary in order to avoid devaluation the Liberal Party is firmly behind them—we would respectfully maintain that these circumstances were to a very considerable extent of the Government's own making. As a result, in order to overcome the crisis of confidence which has now arisen the Government have quite likely been forced to take measures of deflation which may amount to what the nuclear experts refer to as "overkill". It is, indeed, quite possible to argue that now that the Government have taken some £500 million out of the economy before the selective employment tax comes into operation—which I believe will take out another £200 million or so—we could quite well get deflation upon deflation, Pelion upon Ossa, which might send unemployment soaring to quite exceptional heights before Christmas or soon after.
Even if this is believed to he an acceptable risk—and it may be—it is our belief that present retraining facilities for the unemployed—those people who will become unemployed—are totally inadequate, and that a tremendous drive should be made straight away to provide such facilities and decent pay so that people can be redirected into productive employment, preferably, of course, involving exports. Generally speaking, unemployment should not be regarded as the "stick"; it must be seen as a means of the productive deployment of manpower. Why not take Mr. Cousins away from his unproductive grumbling and put him on to this gigantic task which would be one worthy of his very considerable talents? After all, this was the great contribution to victory of his predecessor, Ernest Bevin; and, though we are not in

935
a siege economy yet, we may well, if things go on like this, be in one fairly shortly.
Moreover it is surely undeniable that any wage freeze as such is quite incompatible with a high-wage, high-efficiency system. But if the wage freeze is thought to be necessary in the deplorable circumstances in which we find ourselves, we think that two exceptions might well be made. One might be, as my noble friend Lord Byers has already suggested, to encourage a pay-roll freeze, a freeze of pay-rolls as a whole. The noble Lord's reasons for suggesting this were explained recently in a cogent letter to The Times, which no doubt many of your Lordships read. It may be that there are objections to this particular proposal, and I only wish Lord Byers were here to explain this afternoon, although no doubt when he speaks (if he does) on Monday he will be able to explain his thought much more fully to us in this regard. All I say now is that it should be taken into serious consideration.
The other alternative surely would be to welcome wage increases which are clearly and demonstrably based on higher productivity. We can see no danger in that and a good deal of advantage. I need hardly say that a dangerous situation—and here I agree with the noble Lord the Leader of the Opposition—would only be made worse by the nationalisation of steel. As I understand it, of the £540 million compensation, £140 million will be in the form of debentures and preference shares but £400 million will be in equities. Equity holders who receive Government bonds as compensation will, I think, almost certainly sell them to obtain other equities. This will no doubt give a false increase in equity prices and would surely depress gilt-edged at a time when it has had about as many knocks as it can stand. That seems to me to be an additional reason for not going ahead with the nationalisation of steel at the present time.
The Prime Minister has said that once the British people are told the facts
"their deep reserves of strength and power are brought out to the full".
But what he has not told us is what his Government's long-term policy now is. In particular, he has not said how he intends to deal with what is really the
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fundamental question—namely, that of an increase in productivity and an increase in exports.
It may be said that some of the criticisms I have been making have been destructive. What do the Liberals say should now be done in addition to the main curbs on private and public expenditure already announced? Here I think I can best echo the splendid proposals of my own Leader, Mr. Grimond. We suggest the following: massive re-training schemes involving a reform of the apprenticeship system, as I have already said here and now; the strongest possible action against all forms of restrictive practices; consideration of certain cuts in tariffs; holding down and not increasing direct taxation; some reform of the whole structure of Government involving the creation of House of Commons commissions with real power over the Administration; thorough reform and stream-lining of the Civil Service, preferably by importing a good number of "dollar a year men"; encouragement of "Fawley-type" efficiency agreements and wage contracts for considerable periods negotiated firm by firm with more pay for more work written into them; and, finally, further large economies East of Suez notably on any nuclear follies such as F.111's based on atolls in the Indian Ocean.
In short, what we want is a Government with a completely new look and certainly not one which appears to be divided as to how the economy should be run. Surely it is insensate—and here I agree again with the noble Lord the Leader of the Opposition—to have two Departments of more or less equal strength each wedded to a different brand of political philosophy. I believe that the Prime Minister has said that this strange arrangement results in "creative tension". That there is a certain tension was revealed by the proceedings in another place only yesterday; about whether it is creative, I have considerable doubt. Besides, as we see it, we are quite unlikely fully to achieve the structural changes now required in our economy so long as we are denied certain advantages enjoyed by our Continental competitors—namely, in the first place, a larger and more competitive domestic market and, in the second place, a larger and more easy labour market, bolstered, if necessary, by liberal immigration policies.

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This, of course, is one of the essential reasons why the Liberal Party has been consistently in favour of our joining the European Economic Community as soon as possible; and in the parlous circumstances in which we find ourselves it is becoming more and more clear that at least some of the so called "terms" on which the Government are now insisting as pre-conditions of our entry are about as unrealistic as a belief in fairies. Perhaps the basic trouble is that the Government find it very difficult to do anything serious about increasing productivity because they are always forced to look over their shoulder. We say, give us a Government which, owing to their being solidly based on a political philosophy that is acceptable to the great majority of the people of this country, are not under this necessity. If this should be interpreted as meaning that I feel that a new look should be taken at the Party system which has operated in this country for so long, and has now degenerated into a sort of four or five year dictatorship on the part of the inhabitant of No. 10 Downing Street with his gigantic apparatus, then I, personally, would not mind very much. Indeed I hope and believe that this may be the direction in which, consciously or unconsciously, we are now going.
Perhaps the young men and women of all Parties who are sick of venerable slogans may now get together behind the scenes and agree on really radical schemes for putting this ancient country on its legs again. You have only to strike the right note and they will come along. I just do not believe all these stories that we are decadent and down and out. The old saying remains profoundly true, that the British can never read the writing on the wall until they have their backs right up against it. Well, we can nearly read the message now, and shortly we may begin to do something about it.
3.56 p.m.
LORD KAHN: My Lords, I have by now enjoyed adequate and ample opportunity of appreciating the extraordinary kindness and friendliness to a newcomer to this House on the part of all those concerned in its activities. It is therefore with confidence that I crave your Lordships' indulgence on the occasion of my first vocal intervention in the proceedings of this House. But I would
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wish I could have made this plea on a less grave occasion. I am not one of those who deny that some measures of further restraint were called for; but when I consider the extent and character of the measures, I am inclined to wonder whether the Chancellor of the Exchequer is not unduly modest about the efficacy of all the various proposals which he had himself announced before we were told of the further measures on July 20. It is only too well known how unpredictably slow some measures of restraint can be, and yet, in the end, how obstinately dominant. The earlier steps are now working their way through the system. Your Lordships' House has to consider the totality of all the measures and not exclusively those announced on July 20.
I wish to emphasise particularly the possible effects on productive investment. In announcing measures in July, 1961, to which the noble Lord the Leader of the Opposition has already referred, the Chancellor of the Exchequer of the day, Mr. Selwyn Lloyd, stated in another place:
"It is not my intention to force a downturn of private investment in productive industry."—[OFFICIAL REPORT, Commons, Vol. 645, col. 227; 25/7/61.]
Such investment, on which the growth of the economy so much depends, had at that time, in 1961, been painfully picking up from an unduly low level. The July measures of 1961 brought about a setback to private productive investment from which, at long last, it had just about made a full recovery a short time ago, after an interval of five years. Recently productive investment in the private sector has already started tailing off. What are now the prospects six months, twelve months, hence?
It seems to me that there is room for more emphasis on the theme of redeployment and corresponding less emphasis on the theme of disinflation. What is called for is a combination of expansionist measures with measures of restraint. Admittedly, it would be harmful to stimulate some sectors of the economy when there is no labour available to enable them to respond to the stimulus. But labour is now to be released. Some of it will be taken up, with great advantage to the economy, in the production of exports and substitutes for imports, which have

939
hitherto been held back by the tightness of the labour market. But as to the rest, it is not desirable, my Lords, that the slack should, in considerable measure, be taken up in the production of capital goods for the improvement of the country's industries? The fear is that so far from the slack being fruitfully taken up in this way, the production of capital equipment for the home market will actually fall off.
This leads me on to invite your Lordships to consider the question of restraint of credit. Here, incidentally, I should mention in passing that I happen to be the director of a small bank. Answering a question addressed to him in another place on July 12, the Chancellor of the Exchequer stated:
… the present ceiling of bank advances … should remain from now until the end of March, 1967, and until further notice thereafter. I shall continue to keep the position under review, but it follows that there will be no general arrangements to offset the intended effect of the tax."—[OFFICIAL REPORT, Commons, Vol. 731 (No. 694), col. 1198.]
that is to say, the selective employment tax. If that unqualified statement is not relaxed in the light of the measures subsequently announced, it is bound to have adverse effects on the orders which industrialists will be placing for equipment to be delivered in 1967—and I am glad to see the noble Viscount, Lord Chandos, nodding his head. It would seem more natural to indicate that relaxation of credit restriction will be introduced as and when conditions permit—and indeed as and when conditions demand possibly relaxation, possibly even expansion.
Certainly it has been indicated that the Government's measures will be relaxed if relaxation is called for. Speaking in another place only two days ago, the President of the Board of Trade said:
… if these new restraints prove more than was necessary to correct the balance of payments, and unemployment increases seriously, it is quite possible to relax. In those circumstances, it would certainly be the intention of the Government to do so. Both the regulator control of indirect taxes and hire-purchase restrictions can be varied up or down at a few hours' notice, with immediate effect on the economy."—[OFFICIAL REPORT, Commons, Vol. 732 (No. 62), col. 1578.]
My Lords, my submission is that if, at long last, some release of labour from the production of consumer goods is secured, it is most desirable to exploit
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the opportunity and man up industries on the production of which the future growth of the economy depends, rather than simply revert in due course to the status quo.
I turn now to another aspect of redeployment, and in doing so I intend to go a good deal further than the noble Lord, Lord Gladwyn. From the political point of view and the psychological point of view, as well as from the economic point of view, it seems important to try to minimise the extent to which the relatively less useful kinds of activity benefit from any easing of the labour market brought about as a result of the Government's measures. This brings me to the role of the employment exchanges. What I am going to suggest involves elaboration of a hint dropped by the noble Lord, Lord Haire of Whiteabbey, in his speech during the Second Reading of the Finance Bill almost a year ago, which appears in the OFFICIAL REPORT for August 4, 1965, at column 367.
In the four weeks which ended on May 11—I am simply quoting figures for that particular period because I happen to have them available—placings made by employment exchanges amounted to 168,500 persons. Many engagements of labour, of course, took place in that same period outside the employment exchanges. The number of new engagements will be much bigger when the Government measures really begin to bite. The question is, where do considerations of public interest enter into the operations of employment exchanges? I imagine that the manager of an employment exchange does have in mind that certain employers have more than some other employers to contribute to the wellbeing of the country; but, unless I am mistaken, his dominant loyalty is to the applicant and to the would-be employer to secure a good, safe, well-paid job for the applicant, and a satisfied employer. Of course, if employment exchanges were to operate at all rigorously on the basis of national priorities, steps would have to be taken to prevent their being bypassed—in other words, to secure that, subject to exceptions, all engagements took place through or with the assent of employment exchanges.
In putting forward this indication to your Lordships' House I appreciate that

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I shall be accused of trying to invoke one form of war-time legislation, the Control of Engagement Orders. Taken by themselves—I am not harking back to any other form of war-time control of labour—that was a purely negative control. In itself it did not constitute any positive direction of labour. Even in that restricted sense, I am not arguing simply that because it was desirable and possible in the conditions of war to have that kind of legislation, that form of negative control is necessarily desirable and possible in the circumstances which rule to-day. I am relying far more on what happened in this context in the decade after the war.
The Economic Survey for 1947, issued in February of that year, dealt at considerable length with the problem of securing the redistribution of manpower, and it was admitted in the Survey that
"the Government has no direct control over the way in which manpower moves". (Cmd. 7046, para. 128.)
That was in February, 1947. Later in 1947 when, as your Lordships may recollect, the balance-of-payments position was precarious, a new Control of Engagements Order was made. This was withdrawn in March, 1950, partly under pressure from the Opposition of the day. Later, in 1951, as your Lordships will recollect, there was a change of Government, and, of course, the new Government came into office in the middle of a balance-of-payments crisis. I might, in passing, just remind your Lordships that among the measures announced on November 7, 1951, by the new Chancellor of the Exchequer—the present noble Lord, Lord Butler of Saffron Walden—were the imposition of certain import quotas and the halving of the tourist allowance from £100 to £50 (to be reduced a few months later to £25). Your Lordships will also incidentally recollect that a month later the new Prime Minister, Winston Churchill, announced that the rearmament programme could not be fulfilled and was being scaled down.
But the point I am leading up to is that, faced with the problems of rearmament, the new Conservative Government in 1952 reintroduced much the same system as the one to which I am alluding—under the name of the Notification of Vacancies Order. I am not suggesting
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that either in the period 1947 to 1950, under the Labour Government, or in 1952 and the subsequent years, under the Conservative Government, this system of negative control of manpower was administered with any remarkable vigour. What is remarkable, however, is that it was not until some time after the General Election of 1955, and after building control had been abandoned, that the Order was finally revoked by the Conservative Government of the day, in May, 1956. I will leave the matter at that.
I have dealt with the particular rather than with the general. Nevertheless, I have attempted to suggest the possibility of making a reality, as opposed to a possible mockery, of the word "redeployment". The sincere desire of the present Government to avoid the evils of the "Stop-Go" policy, if it can be called a policy, can be generally appreciated. What is now important is that the evils of "Stop-Go" should not once again be experienced as a sequel of the Government's sincere desire to avoid it.
4.12 p.m.
VISCOUNT CHANDOS: My Lords, I count it a particularly happy coincidence that I should be following the noble Lord, Lord Kahn, in your Lordships' House. He was one of our advisers when I was first President of the Board of Trade. I must say that when I took his advice I was nearly always right, and when I did not take it I was sometimes right. I am sure that your Lordships will benefit greatly from hearing from the noble Lord again, and I congratulate him warmly on his maiden speech.
Your Lordships know that I dislike making disagreeable speeches. They are utterly alien to my conciliatory nature. But in our present economic discontents everything which is true is likely to be disagreeable, and everything which is agreeable is not likely to be true. I would refer as little as possible to the past. I should like to spare noble Lords opposite, who are a little bit "punch-drunk" after the speech of my noble friend Lord Carrington. I do not want to add to their distress or to cause calls for more plaster for their wounds. I prefer to talk about the future. Of course, if I have to criticise Government policy, I hope that noble Lords will treat my remarks with indulgence.

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Figures are generally a poor guide, but I think that certain relevant figures are not in dispute. We are told that production has gone up by 3 per cent.; prices by 5 per cent.; and wages and earnings by 9 per cent. Perhaps these figures are not accurate in themselves, but they represent roughly the proportion of what has been happening. And I think that, on wages agreements already agreed, wages are going up by at least 4 per cent. during 1967. I have always been an advocate of a high-wage, high-production country. I firmly believe that wages could be higher, without much effort and without damaging our competitive power as a nation. If a comparison is made between any large efficient company in Great Britain and in the United States in the same industry and making the same product, it will be found as a rule that the American company uses 20 to 25 per cent. less labour per unit of production—and this is a conservative statement. At first sight, this would appear to be a stigma upon the efficiency of the British company, but very often, particularly in the field outside repetition goods, the costs of the British company are significantly lower than those of the American. This is because our wages and earnings are less than half the American. I think this is very sad, and a comment on modern Luddism.
A few years ago the president of a large United States industrial company showed me his wage sheet. I always remember the figure. The hourly rated labour was paid at the rate of 2·80 dollars an hour for a 40-hour week—that is, £40 a week. They are probably higher than that now. We could work towards these figures, if we could work towards the productivity of American labour. I therefore find myself in the rather uncomfortable posture of being in agreement with Mr. Cousins and Mr. Foot and their school of thought, that any long-term attempt to keep down wages is going entirely the wrong way about solving our national problem. Fortunately, I am old enough and obscure enough not to cause Mr. Cousins and Mr. Foot any great embarrassment by saying that I agree with them. But your Lordships will note that I referred to a "long-term" agreement. Where I disagree with them is about the short-term pause. What we
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have done is to freeze production and largely unfreeze wages. And noble Lords opposite are part of a Government who have produced this policy of freezing the wrong thing. This process must be reversed, to achieve the high-wages, high-production economy that we all want.
The comparison I have made between British and American companies in the same industry demonstrably proves that much of British industry is over-manned, and the corollary to that is that wages are over-cheap, in the long term. The first measure should have been, partly no doubt by taxation, to bring pressure to bear upon industry to do with less labour, first for the same production and later for more production, without any increase in the labour force. The selective employment tax is utterly misdirected—it is wholly in the wrong direction. What it does is to make an arbitrary and largely indefinable difference between productive labour and distributional and ancillary labour: a return to the distinction which it was sought to make in the early 19th century and which is now (the noble Lord Lord Kahn, as an economist, would probably confirm this) completely discredited and out of date. The selective employment tax actually gives premiums to manufacturers to take on more labour released from distribution. This is precisely what is not wanted.
Manufacturing companies in this country should not be encouraged to take on "Nippies" from Lyons' Corner House on to the production floor. It is a grave mistake to pay them premiums to do so. Manufacturing companies should rather be persuaded to look at every man and woman employed and try to reduce their numbers without affecting production. This might be achieved by a well-considered payroll tax. It might be. But the present measure, loaded as it is with uncertainty and impossible definition of what is distributional and what is primary production, is aimed at the wrong target. I refrain from saying that the tax has not been thought out in many respects. It looks as if it had been taken from some shelf, with the idea of trying this out and seeing where we got to afterwards.
My first constructive suggestion is to beg the Government to look again at this measure, and if there must be doses

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of medicine, let them be given to ameliorate the patient's condition, and not worsen it. The tax, too, is accompanied by much false argument and is another example of the new, modern maxim, "No taxation without misrepresentation."
I think that if I went very far into the reversal, the 180-degree reversal, of Government policy between the General Election and now, I should inflame the controversy—and the temperatures of noble Lords opposite. I will try not to do so. Let me say, however, that I do not charge the Government with bad faith. They would like planned expansion; they would like higher wages and higher production: but they have proved that they do not know how to get them. Instead, they have got us, unwittingly, of course, into a princely mess.
Why does the economy appear to drag in this country? In the main, it is because the incentives, particularly to the potential money-makers, have been over the years drastically reduced. A man who starts a modest business on borrowed capital (always assuming that he can borrow it; and that is how most new businesses start) and who by his energy and ingenuity builds it up, is obliged to pay out all of his company's earnings as dividends lest peradventure he should escape the surtax—and another 10 per cent. has been added on to that; that is a sensible kind of thing to do! During his active life he might pay 70 or 80 per cent. of his current earnings to the State. He may well be forced during the credit squeeze to sell his business; and if so, he will then pay about 30 per cent. capital gains tax on any profit he has made. This may have an affect on his health, and if, five years later he dies, the Inland Revenue will take the bulk of anything that is left—including the pennies that are put on the corpse's eyelids. This is a climate in which people like the late Lord Cowdray could hardly undertake the large risks which he did, and which added so strikingly to the nation's wealth and prosperity.
Generally speaking, nobody believes, I suppose, that a nation can grow rich or more prosperous on a diet of restriction. That is the diet which is now prescribed right across the board. I think the general public believe that to get higher productivity, the sovereign remedy for our discontents is that we should all work
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harder. They have a vision of Sir Paul Chambers or the noble Lord, Lord Cole, calling together the tens of thousands of workers in I.C.I. or Unilever, assembling them into Trafalgar Square, and saying: "Work harder, you boys, and we can get out of our trouble". This is an illusion, because primarily productivity is a function of capital and not of labour: the provision of more and more and faster machines, improved methods of handling materials on the shop floor, and so forth. These all involve capital expenditure. Every measure which the Government have recently taken is drying up the resources of capital. It is destroying the seed corn of industry. The noble Lord, Lord Kahn, drew attention to the great fears we have that the investment in productive industry will fall sharply and the machines will not be there in 1967.
Again, the American operative has behind the bench more than twice the electric energy available to his British counterpart. So that any measures to reduce power generation are against any possibility of achieving higher production due to higher use of electric power. There is, of course, much more to capital expenditure than the mere expenditure: there must be the organisation and management to use it, and the willingness of labour to use it. It is not because capital is lacking sometimes that these things do not happen. The liner trains are not in service not because the capital is not there but because they cannot get the operatives to use them. In some cases, inability to man the night-shift, bad labour relations or bad management prevent the capital from being put to its full use. If production is primarily the function of capital, capital must be wooed. I think Sir Halford Reddish made a happy epigram the other day, when he said that the other place had devoted a lot of time to the discussion of capital punishment, whereas they ought to have devoted more time to discussing the punishment of capital.
I have made the obvious remark that mechanisation is intended to reduce the effort of production, and that it is primarily a function of capital. If, however, harder work, in the ordinary sense of the word, is not the answer, the corollary is that trade unions and workers must change their attitudes, abolish restrictive

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practices, be more ready to dilute skilled labour with unskilled, not take fright if some workers are immediately redundant, and understand that in present conditions of brimful employment it should not be difficult to redeploy them in new industries and new production, or in some industries which are short of labour—which is the exception—and not over-manned.
As part of the solution to this problem—and this is the next thing the Government must do—we must try to strengthen the unions and the law under which they work. We should undertake two reforms: one to combat the "wild-cat" strike; and the other to see that the officers of the great unions are elected by a large and not by a small number of members. The first of these reforms can, I firmly believe, be brought about in a very simple way—and will have the effect of strengthening the unions—and evidence of methods will be given to the Royal Commission. It would take too long to recite them now. They will involve penalties on "wild-cat" strikes during the period of the conciliation procedures. The law should at the same time lay down a shorter period for the conciliation procedure than is now general. After this period of conciliation, if the settlement does not satisfy the unions, then of course the strike carries no penalties or disabilities whatever.
I advocate, also, a secret postal ballot for the election of principal officers of trade unions. Let me take, for example, the A.E.U. Members have to attend their branch meetings to vote. As a result of the ballot procedure in this union, the average national vote for the officers is 7 per cent. of the members; and the highest ever achieved, after an unprecedented Press and television coverage, reached 12·2 per cent. of the members. I do not think it too harsh to say that if this is democracy, it is an inefficient piece of democracy.
LORD WYNNE-JONES: Can the noble Lord tell us what is the percentage of the shareholders who vote for the election of directors?
VISCOUNT CHANDOS: I was not at the moment discussing directors, but you will find that as a rule (this is something
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that I am proposing) the proxies which, for instance, elect the directors of I.C.I., with which I am connected, run into some millions of votes. Each vote has a share.
LORD WYNNE-JONES: But can the noble Lord tell us what is the choice offered to the proxy votes?
VISCOUNT CHANDOS: The choice is whether they elect a chap like Lord Chandos to be a director—and I cannot Imagine anything more agreeable. I am afraid that the noble Lord is on a rather bad line here. Proxies that vote directors to the board will run into well over half the number of shareholders. What I am saying—there is nothing very terrible about it; but it is a great pity—is that officers of the A.E.U. are elected, as a rule, on a 7 per cent. vote. This is a very agreeable diversion, and I shall get some more support at the next annual general meeting. I will make a point of asking some of the shareholders to transfer their credit balances, if they have any, to the bank of which the noble Lord, Lord Kahn, is a director. The figures, I think, show without any doubt that they invite minority groups to secure control of our great unions. I confess that if I were a trade union member I should be pretty idle about attending the meetings, but I should be quite willing to vote on a secret postal ballot.
I must mention, though only cursorily (I must not keep your Lordships for too long), the great increase in the Civil Service under the present Government. In 1964, Government offices, excluding the Post Office, occupied 14 million square feet of office space in London. To-day this has risen to 15 million square feet. I am in no way charging the Civil Service with inefficiency. But day by day more and more complicated pieces of administration are put on their backs, of which the corporation tax and selective employment tax are examples. It is somewhat ironical, that when great restrictions are to be put on private office building, Government occupation in London should go up in little more than a year by a million square feet. The tower block of Vickers, a landmark in London, which is about half occupied by Vickers, provides 255,000 square feet of office space. To-day, therefore, it requires 60 Vickers towers to house the

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Government Civil Service. I really think that ought to be looked at.
These measures, the payroll tax, the reform of the law in regard to trade unions, to strengthen them and to secure more democratic types of election, and a reduction of the administrative burden, are all fairly long-term measures: and we are faced by a short-term crisis. At the end of the speech of the noble Lord, Lord Shepherd, he made some remarks about the patriotism and energy of our people, and he referred to the World Cup. If we could get a serum which was derived from the enthusiasm of the World Cup and inject it into our population, we should be out of our troubles very soon. But I think something quite simple and emotional is required in our present crisis.
When Henry V was in front of Harfleur he did not send for his staff and say, "According to my latest statistics, owing to the rate of sickness it will be difficult to find replacements during the winter months. If you turn to Hamley's Operations of War you will find that the area of the bridgehead in which we are operating is too small for the efficient deployment of our troops. If you turn to the Public Relations Office, you will find that there is a certain murmuring round the camp fire, and my conclusions about this are that the best action we could take would be to capture Harfleur." He did not say that. He said:
"Once more unto the breach dear friends, once more;
Or close the wall up with our English dead."
What I suggest is that, by voluntary agreement—please do not be shocked—we should all work thirteen full Saturdays during the next twelve months at the ordinary rate—something that everybody can understand. When I say "we", I do not mean the people on the shop-floor only. I mean the managing director, the general manager, the superintendent, the foreman, the shop steward, and perhaps even the two Houses of Parliament. Waiting until the cheers have died away about the last suggestion, let me say that I really am sincere. Here is something which would make everybody face the fact that we must take special measures. As a corollary, I would relax the law regarding entertainment on Sunday afternoons, and the customs against no races and no games on Sunday afternoons, on
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the Sundays following these thirteen Saturdays. Surely, the sacrifice of thirteen Saturdays in a national emergency is something which might be achieved by dynamic leadership. It would raise production by, perhaps, 3 per cent.; it would shorten the length of our order books; it would improve our exports and, above all, bring everybody face to face with what is really a national emergency requiring national unity. It is no good talking about the Dunkirk spirit, as the Prime Minister has, unless we can say how it can be inspired and applied.
The British workman is the most wrongly maligned person in the world. If your Lordships will forgive me for one moment, I must tell you something from my own industrial experience. In 1940 a rain of bombs fell upon the Metropolitan-Vickers Works. Forty acres of glass were destroyed, and the tool room fell into the main shop—a shambles. All through the winter of 1940 the men worked 56 to 60 hours a week, with snow round the machine tools. The British workman, when times are good, is a very awkward "cuss" to deal with—and I would not have it otherwise. But when you are up against an emergency he is superb, and this is the spirit which we want to evoke. Let us have a go, and this is my suggestion. We should say about these thirteen Saturdays:
"England expects that every man this Saturday will do his duty".
4.34 p.m.
LORD ROBBINS: My Lords, one of the privileges of rising at this stage is that I can join with the noble Viscount, Lord Chandos, in congratulating my noble friend (if I may so call him) and longtime colleague, Lord Kahn, on his maiden speech. I am sure that we must all have felt that Lord Kahn's succession to your Lordships' House was a notable acquisition to our reserves of wisdom and of debating power. In many years of professional acquaintance I have found that, whether you agree with the noble Lord or not, he always is both stimulating and provocative of useful thought.
Reverting to the immediate crisis which overhangs this discussion, the first thing I should like to say is that we are clearly not yet out of the wood. I hope and trust that the measures announced last week will convince holders of sterling that at last we are in earnest and that this will

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quell the psychological tornado which broke out some three weeks ago. But we deceive ourselves if we suppose that all that has happened is just another piece of bad luck—the seamen's strike, the world rise in interest rates, M. Pompidou's observations on British economic policy, and so on and so forth. The fact is—let us face it—that we are still in an acute position of long-term financial disequilibrium. We are not within sight of financing our overseas purchases and expenditure without running further into debt. For many months it has been becoming clearer that the prospect of balancing the account by the end of this year was illusory and that unless there was an unexpected improvement, the knowledge that this was so was bound to lead to another crisis.
I am not speaking now with hindsight. The present position was predictable. The last time we had a debate on this subject I allowed myself to say that if the inflation continued, not only would the balance continue adverse, but it would prove eventually impossible to maintain the present parity of sterling. I added:
"The inflationary forces are still strong and I doubt whether we have yet done enough to bring them under control"—[OFFICIAL REPORT, Vol. 272, col. 790; 9/2/66.]
The ultimate test, therefore, of last week's measures is not merely that they damp down the recent speculative movement but, further, that they arrest the inflation and create a situation in which the state of the balance of payments once more permits us to pay our way.
Turning to the measures themselves, I can see a good deal in detail which I could have wished otherwise. I personally greatly regret the cuts in investment and wish that more of what had to be cut had been imposed on consumption. We shall all he worse off if the development of the infrastructure of nationalised industry is held up and the process of industrial development is unduly interrupted. I share the fears of the noble Lord, Lord Kahn, in that respect. I cannot believe that consumption in general could not have sustained much more than the comparatively small increases involved by the 10 per cent. regulator. I could wish, too, that there had been some cuts in subsidies where no severe hardship would be involved. I
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shall never believe that, old-age pensioners and chronic invalids apart, the rest of us cannot afford the price of ten cigarettes when we go to collect our prescriptions.
But we are at a moment of grave national crisis, and surely it would be wrong to let objections to particular measures inhibit unequivocal support for the general policy of restricting expenditure. If I were an outside commentator, speaking to the world at large, I would express the view that last week's announcement marked a watershed in policy in this country. It marked recognition—genuine recognition at last—that you cannot run an economy of this sort, so dependent on its external connections, on the basis of creeping inflation and excess use of capacity. It marked an end of the belief that a situation of this sort can be dealt with by soft measures and loud exhortations. Although quantitative prediction in these matters is a fool's game, since we live from day to day and have to adjust our appraisals accordingly, I would venture to express the hope that the amount which it is now proposed to take out of the stream of spending should be sufficient to accomplish its purpose and produce a more solid foundation for growth and prosperity; and, whatever my reservations on the appropriateness of certain cuts, I should wish to defend that policy against its critics—to defend, that is to say, the general policy of disinflation at this time.
The first criticism that I should like to controvert is the criticism that instead of deflating we should have devalued. I welcome greatly the declaration by the noble Lord, Lord Shepherd, in this connection, expressing the firm decision of the Government not to resort to this expedient. I do not think indeed that in present circumstances this view that we should have devalued has much practical applicability. On the most cynical outlook, there is a limit to the number of undertakings recently given that one can go back on, just like that. But I know this view is held, let us face it, by some of the ablest and sincerest among us, and I think it deserves a considered answer. I do not think that the answer is only that devaluation without deflation would be dangerous. That is true indeed. But against that argument it is still open to

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the devaluationist to reply that, with his solution, the deflation need be less.
In my judgment, therefore, the true answer is an appeal to common honesty. I do not think that devaluation can be ruled out in all circumstances. The Bretton Woods Agreement specifically made provision for such adjustments in certain conditions. If there was mass unemployment on an extensive scale and no prospect of improvement without further deflation, if we were obviously in what the statutes of the International Monetary Fund call "a position of fundamental disequilibrium", then clearly these conditions would be satisfied. But I do suggest that it would be a plain breach of duty, both to our partners in the International Monetary Agreement and to our creditors—to those who have put their money here, trusting that we should keep our word—if we were to devalue now, when the level of unemployment is almost at an all-time record low for peace time and the economy is still in a state of inflationary boom. I have suggested already that it would be wildly inexpedient, having regard to the obligations which have already been entered into in the last weeks and months. But I hope I have shown that there are deeper reasons of good faith and common decency why at this time we should not contemplate such a policy.
The next criticism I would consider is that which arises from fear of unemployment. This is a fear which inspires the attitude of all sorts of serious minded people, and it is clearly one which deserves the most respectful consideration. I personally always speak on this subject with considerable trepidation and diffidence. In the inter-war period when mass unemployment actually prevailed, I was on the wrong side: I opposed measures of reflation which I now think might have eased the situation and, although I do not flatter myself that my attitude influenced action in any respect, I shall always most seriously regret having done so. But, my Lords, we are not confronted with a situation of mass unemployment. We are confronted with a position in which, in many parts of the country, the number of vacancies available vastly surpasses the number of applicants coming forward. We are far past the point at which experience shows
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that price inflation and balance-of-payments difficulties almost invariably set in. In 1939 the late Lord Keynes, whose record in this respect, in sharp contrast to mine, was utterly above suspicion, warned us that if there were 550,000 unemployed, we should be confronted with the problems of full employment in an acute form. My reference is to a turnover article in The Times in that year. And remember that half a million then was a considerably larger fraction of the working force than half a million would be now.
The fact is, in my judgment, that the use of capacity to-day as measured in terms of labour is so excessive that while it persists, unless we are willing to resort to complete regimentation and direction of the labour force, there can be little hope of redeployment of labour sufficient to meet the incessant incidence of change. It is impossible to achieve mobility with an army, almost every able-bodied member of which is already committed to action. So the necessity of adaptation to changing circumstances must involve, for those who are changing jobs, a brief period in which in the statistical sense they are not employed; and experience seems to show that this degree of adaptability is not to be secured with a use of the labour force much over 97·7 per cent. or 97·8 per cent.
Now if such a slackening of employment were only to be secured by the permanent or long-lasting unemployment of the persons thus enumerated, I would say it was indeed a position of extreme gravity. But this is not at all likely. The composition of the statistical percentage is in fact a continually changing one, over a substantial part of the field; and what is to be expected from a more moderate use of capacity is, in substantial measure, merely a lengthening for a few days or weeks of the time of transfer to a new job. If there be areas where this does not happen, if there be areas where there is a danger of human capital rotting month after month in enforced idleness, I would unhesitatingly say that that was an occasion for preventive action. But I should not think that such action would appropriately take the form of blowing up the rest of the economy or keeping it blown up in a state of inflation and international unbalance.

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A closely related criticism is that which emphasises the dangers of a chain reaction of adverse movements. The fear is often expressed that as a result of the disinflationary measures recently announced the economy may be pushed into a nose dive and that before we know where we are we shall be in a position of industrial inactivity and waste. It is sometimes said that already the signs are ominous of a falling off of activity and that in such circumstances disinflationary measures will only make things worse.
As I said earlier. I see grounds for some fear in this connection. I do not like that part of the package which acts on long-term investment. Investment which is damped down necessarily takes time to get started again, and in the interval there may be further adverse repercussions. I wish the contradiction had been more concentrated at the consumption end. But I cannot share the view that the application of the brake need necessarily involve an intolerable slowing down. I am clear that if such a danger were to show itself, there are many ways in which it could be arrested. In the inter-war period, when we used to discuss theoretically control of the trade cycle, it used to be said that the chief problem was to discover ways of initiating recovery rather than curbing the boom.
In the post-war event I think experience has proved otherwise. We now know what some of us did not realise then, that when there is real slack in the system recourse to certain fiscal measures can soon set things right without danger; the regulator can begin to act, so to speak, overnight. But we have not yet discovered painless methods of controlling inflation. I therefore hope very much that the Government will not be inhibited in carrying out their manifest duty now by fears of what may happen later on. Surely it is the dismal record of our history since the war that, again and again, when quite a slight touch on the brakes would have kept the economy stable fears of this sort have been the enemy of action. And now, when the house is blazing, surely it would be folly to desist from using the hose for fear that later on there may be floods, which can be dealt with in other ways.
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Finally, there comes fears of the effects of these measures on our long-term productivity. Here I think the position is more complicated. I certainly do not think that a reduction of the inflationary heat in the economy will be damaging to productivity per head—that is very unlikely. I do not think it need be damaging to future rates of growth; to go forward cautiously is to avoid upsetting reverses. But, as I have said, I do regret the curbs of investment. I think there is real danger here which needs watching. And let me add that I certainly think there is still much in our general economic policies which works against the improvement of productivity.
It is clear to me, for instance—to say perhaps the most unpopular thing I could say—that the present policy in regard to rents is a definite impediment to mobility; you cannot hold rents below the equilibrium point without positively creating housing shortages; and I am bound to say that, in my judgment, the selective employment tax will put a premium on labour hoarding when labour hoarding should in fact be discouraged. I completely agree with the noble Viscount, Lord Chandos, in this connection. And although all hope of resolving a crisis of this magnitude by increases of productivity alone seems to me to be grotesquely inappropriate to the immediate needs of the situation, I very much hope that the Government will review all their policies with this criterion in mind. In the long run all our positive hopes of growth depend upon this factor, and we should not let any dogmas or shibboleths stand in the way of achieving it.
I end, as I began, by emphasising that we are not yet out of the wood, even in the short period. The position is very serious and there are still many possibilities of upset. I hope, therefore, that noble Lords will not think me a prig, a Cross-Bench prig, if I say that the situation is one in which recrimination going beyond the usual Party game is not only inappropriate but positively dangerous. I do not doubt that part of the present trouble is due to delay in coping with tendencies which were daily making themselves more apparent, and to that extent responsibility must rest with the Government. But equally I do not doubt that responsibility for the

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original crisis must rest with their predecessors, who allowed unbalance to develop without taking appropriate action. From this point of view honours or dishonours are, in my judgment, pretty even.
However, speaking broadly, the pickle in which we find ourselves is the product of confused thought rather than infirmity of will. It is the intellectuals who have fostered the belief that we can have growth without discipline, stable prices with unrestrained demand, over-full employment without inflation and balance-of-payments difficulties; it is these who are ultimately blameworthy, if anyone is. And perhaps even here one may say that the motives were not dishonourable. It is not reprehensible to wish for more rapid growth, any more than it is to urge the necessity for continuity and caution. Most of us are liable to make mistakes. What is needed in our present situation is not general recrimination, but sober recognition of facts and reconciliation of our objectives with the logical possibilities of the situation.
4.57 p.m.
LORD SHAWCROSS: My Lords, it must be difficult for anyone, and certainly it is most difficult for me, to follow a speech so well informed, so important and so thoughtful as that of the noble Lord. I cannot, of course, pretend for a moment to speak with his great knowledge of economic matters, and I shall approach the subject matter of this debate, so far as I can, from a practical point of view, as one who is concerned nowadays in the management of two or three industrial or banking concerns which are very much involved in the present crisis. But there is at least one thing upon which I can follow my noble friend Lord Robbins, and that is to say that it does not seem to me that at this time mutual recrimination as to what somebody said or did not say two or three years ago is really very helpful. Nor, indeed, do I think that, facing the situation that we now have, it is very helpful to discuss what somebody did or did not do many years ago. These matters may be of great interest and no doubt of great relevance when the time comes along for an Election. What is important at this time, and what the public wants this House and another place
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to consider now, is what should now be done.
The country is obviously in a worse mess than it has ever previously been in time of peace. Except in so far as we can learn lessons from what has happened before—and there are some lessons that we can learn—I am not in the least concerned at this time with the question of who is to blame for having got us into the mess. The problem is, how are we going to get out of it? Nor perhaps is it much use to argue now, as I know some people are inclined to argue, whether the Government's very drastically deflationary policies were really necessary. They have been announced, and, erratic and uncertain though they may be, they are in train and being carried into effect. At the best they have resulted in our having bought time, and, I am afraid, bought it at a onsiderable price. The deflationary measures that have been taken, and in particular the wages and the prices freeze, are not in themselves cures for the disease. At their best they treat the symptoms.
What is the disease? It is my view that the real disease is that economically over the past several years, and not only in the lifetime of the present Government, this country has not been sufficiently expansionist in the only way it can be expansionist, namely, by boosting-up its industrial productivity. We have been riding the economy on too tight and too restrictionist a rein. We have never really given it a chance to see what it can do if it had its head.
Basically, I am bound to say that I think Mr. Cousins was right in saying that the policy for this country to pursue was one of higher earnings and higher productivity. It is true that during his twenty months as a member of the Cabinet nothing much was done to implement that policy; and it is true, no doubt, that he made the trifling error of putting the earnings cart before the productive horse. That is always a most unreliable method of equitation. But it is clear that unless we build up our output per manhour worked (at present it is below that of the United States, and far below that of France or West Germany, or, of course, Japan) and unless we reduce our labour cost per unit of output (at present it is far higher than that of the United States, with whose manufacturers we have to compete) then, whatever steps by way

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of wages freezes and other deflationary devices we may adopt now, in the end this country will become simply an impoverished terminus a quo for emigration to more prosperous and happier lands.
We can do these things. For many years on trading account, taking invisibles and visibles together, we have in fact been more than in balance; we have had a surplus. We can increase that surplus and so meet the cost of necessary Governmental expenditure overseas. Although no doubt it may be distasteful to see Her Majesty's present advisers doling out £225 million in aid overseas, while at the same time going cap-in-hand to beg from foreign bankers, I am certainly not one of those who think we should scuttle away from our friends and allies East of Suez, or cut down the foreign services of the B.B.C., or deny such aid as we can give to the developing countries which so badly require it. A great deal of Governmental expenditure overseas under the various heads that I have mentioned, and no doubt under others, is important for this country if we are to retain any kind of influence in the world, provided, of course, that we can pay for it out of our trading account. And we can pay for it out of our trading account. I hope that by an expansion of economic policy we shall move quite quickly to being able to pay for it out of our trading account.
What is it that has held us back all through these years? When this Parliament came into office twenty months ago it had tremendous opportunities. In spite of perhaps some justified scepticism about 3 per cent. mortgage rates, or some difficulty in squaring promises about still further social benefit with no further increases in taxation, it had a tremendous fund of goodwill, and not least from the professional managers and executives who are increasingly responsible nowadays for the control of our important industrial and commercial concerns. They were as aware as anyone of the latent but potential increase in our national income, which could have been brought about even without any additional capital investment. These are the people who are now being penalised by swingeing increases in taxation.
Why is it that after seventeen months, as the noble Lord said in opening this
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debate, our production is stagnant, at the exact point where it was all those months ago? The general efficiency of British manpower compares quite favourably with that in other countries abroad. I reject in the strongest terms the suggestion that was made by the noble Lord, Lord Shepherd, that the reason for this stagnation in our industrial productivity was shortage of manpower. Nobody who is really concerned outside the theoretical corridors of Whitehall believes that there is a shortage of manpower in industrial industry, as the noble Lord, Lord Shepherd, apparently believes. I know that the National Plan (which I suppose will become known now as the "National Hallucination") suggested that there was a shortage of upwards of 200,000men in industry in this country. But that is really sheer nonsense. The truth of the matter is that up and down the manufacturing industry of this country far more people are being employed than are really necessary to produce the goods that have been manufactured.
If I am asked why it is that there has been this stagnation, I say that I believe it to be due, in the main, to two factors, both of them bearing on personal incentive. It is the passive attitude of the Government towards restrictive practices; it is the negative, or even hostile, attitude of the Government towards profits or high incomes, which they enforce positively by their taxation policy. Anything above, shall I say, £3,000 in income, is regarded as almost indecent unless perhaps it is earned by somebody in Government or Parliament; and any rise in the profits of a company is regarded with suspicion.
Let me take the question of profit a little further. It is really surprising that my old colleagues, now in power again, like the Bourbons before them, seem to have forgotten nothing and to have learned nothing. At a time when, in the Soviet Union, the importance of personal incentive has been largely recognised, at a time when, in that country, they are moving towards the acceptance of profit, if I may use the words of that well-known economist, Professor Trapeznikov:
"as an index which best characterises the work of an enterprise and conforms with the interest of the national economy and of the workers,"
the doctrinaires in the Labour Party still regard the making of profit as a dirty

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word instead of, as it is, one of the main measures of the efficiency with which a business is run.
This is a trifle odd when one remembers that out of every £100 profit made by a company the Inland Revenue immediately takes £40, and if the profits are distributed to shareholders it takes something between £65 and £82 10s.; indeed, if they are distributed to surtax payers, if one takes into account this cynical and deplorable piece of retroactive legislation which is to be surcharged upon them, it takes a good deal more. But does that lead the Government to encourage companies to make profits? Nothing of the kind. Any policy to "clobber" profits still evokes prolonged cheers from the leaders of the Government who ought to know, and do know, very much better.
The fact is that, far from encouraging the making of profit or the earning of high incomes through industry, the Government, in pursuit of a rather spurious policy of egalitarianism, has become so obsessed with the distribution of the existing cake that it has neglected the splendid opportunities of increasing the size of the cake which falls to be distributed. In the process it has created a tax burden which is greater than that borne in any other country of the world. It is a burden which is stultifying to incentive in industry and to effort on the part of individuals. These taxes and the steady depreciation of money which has accompanied them—8 per cent. during the lifetime of the present Government put a very substantial premium on immediate consumption instead of on saving. Yet it is high consumption, rather than high income, which is at the root of one of our basic problems at this time. It is this fixing of attention on income, rather than on its disposal in savings and in investment, which has underlain one of the weaknesses in the Government's whole economic policy.
But it is not only that taxation is far too high in this country and is for that reason so stifling to individual and corporate effort in industry. It is the complete uncertainty and confusion of the situation. The other day a learned judge, talking not about the quantum but about the complexity of our tax system, said of it that it was such as not to be tolerated in any civilised society; and your Lordships will be glad to know
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that it is that learned judge whom my noble friend on the Woolsack has very wisely appointed to preside over the Law Reform Commission. But one must admit that the Government have not made its task any the easier.
Within fifteen months they have introduced two major upheavals in our tax system which have produced a degree of uncertainty and confusion in regard to fiscal matters which I venture to think is unequalled in any other country of the world. The 1965 Budget was the implementation of a Minority Report of three out of thirteen members of the Royal Commission. One might have thought that that fact alone would have led the Chancellor of the Exchequer to be warned of the grave practical difficulties that might attend the introduction of these measures, and at least have led him to consult with those who were going to be practically affected by them. Nothing of the kind. The Finance Bill of that year was the worst drafted, most slipshod and complicated piece of legislation that the country had ever seen. But it will not hold this pride of place long, for much worse is coming.
In the result—and this is the serious point—the time of a great many important and able people in industry (to say nothing of the ordinary taxpayer, who is completely baffled by these new laws) is being taken up with attempting to work out how particular actions on the part of their company are likely to be affected by the new tax laws which have been introduced, instead of getting on with the job of producing more for the country's economy. The Inland Revenue Department, always courteous, always helpful, always efficient, always working very hard—and in spite of having been increased in number by a thousand in the last year and doubling the overtime they are working—are completely and hopelessly bogged down. Had it not been for that, it might be that a payroll tax right across the board, or possibly an added value tax, would have been considered. And there might have been something to be said for one or other of those taxes if it had been accompanied by some relief on the direct taxation system. But, as is well known, the Inland Revenue Department were already more than preoccupied with the complications of the taxes they already had,

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and the Government had to look round for some other Department to involve in our fiscal system.
In the result, and no doubt from the same authorship, we got this new tax, this height of fatuity, the selective employment tax. The proposed administration of this alone would be appropriate perhaps to Alice through the Looking Glass. The consequence of it (and this is the serious thing, apart from the severe deflationary effect, which was possibly the only consequence that was seriously anticipated by those who introduced it) will only be to penalise services such as the banks, the insurance companies and the tourist industry, which together earn £600 million in foreign currency each year for this country, which is more than the deficit on the balance of payments, and, on the other hand, to subsidise the notorious over-employment in the one section of industry the tax is supposed to benefit. Your Lordships have already heard various critical speeches on this matter. I have not heard a single person with experience in industry who, although his firm may itself be getting some benefit from this tax, has a good word to say of it, considering its effect upon the economy as a whole.
Let me pass briefly to the other aspect of this problem of productivity which, although almost marginal, we seem incapable of solving. Why is it that in a wide range of industries in this country we have to employ two people, often three, to produce what one person can produce in some other countries overseas? I do not put the whole of the blame for this on the trade unions. Sometimes it is due to cosy, weak or complacent managements. Occasionally it is due to incompetence in management. Sometimes it is due to restrictive practices on the employers side, although as to this the machinery is working well and these practices are fast disappearing. Quite often it is due to the fact that some of our manufacturing units are too small to take advantage of the economies of scale, to invest in modern plant, numerical control systems, long production runs, and so on.
I congratulate the Government—I am glad on this gloomy day to have something on which to congratulate them—
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on having appointed a board of distinguished businessmen and bankers to run the Industrial Reconstruction Corporation, which may be able to act as a catalyst in promoting mergers and more bigness in industry. I wish the Government would establish a board to promote mergers between the innumerable trades unions, sometimes as many as 26 in a single industry, which make it so difficult for employers to reach reasonable arrangements in regard to production at their particular factories.
The trouble is that we are not manning our capital equipment efficiently: we are over-manning; or far too often we leave it idle for two-thirds of the day. Expensive capital is justifiable only if it is fully employed. I have said that this is not the fault of the trade unions. I was a little surprised last time I spoke in your Lordships' House on the subject, that when I referred to the Report of the Royal Commission on the Press and said that in that industry over a third of those employed were redundant, one noble Lord on the Opposition Benches—the head of a very important printing firm—got up and said that he would "not let me get away with that". The noble Lord is speaking later in this debate. I hope that before he does so he will read the Report of the Prices and Incomes Board on his industry, and the comments of The Times, as to the shocking state of affairs which existed—no doubt not in his particular and famous concern, but in the industry as a whole.
I have been writing and talking about this subject up and down the country since the devaluation in 1949. I shall not repeat now what I said in those speeches. But there is, perhaps, just this to be added: that the wage freeze is well calculated to make the trade unions stick even more rigidly to these practices, which were ingrained in them because of the great unemployment in the 1930s. The National Economic Development Council and the "Little Neddies" might have been expected to deal with this problem. They are some of the more important of the too numerous series of committees which nowadays absorb the time of the higher executives and trade union leaders. But, unfortunately, they seem to have lacked dynamism, urgency or effort, or at any rate effect. Now I think more is needed.

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A few months ago the Prime Minister said that the trade unions should put their rule books in the museum. He said it well. He said it a trifle late. If now the Prime Minister, together with Mr. Brown, with his immense energy, enthusiasm and sincerity, would launch a really serious campaign enlisting the support of radio, television, the newspapers and the Opposition—because this is no Party matter—to convince the ordinary people of this country of the fatuity of these restrictive practices, and of the possibility of a high productive, high earning, economy; and if he would follow that up by depriving those unions which did not put their rule books into the museum of the privileged position which they enjoy under the Trade Disputes Act, he might then overcome the disasters which have befallen the country during his Administration. If he does that, he will earn the gratitude and support of that middle sector of the community which, in the end, determines the fate of Governments.
5.23 p.m.
LORD FRANCIS-WILLIAMS: My Lords, may I say how pleased I am to be the first from these Benches to be in a position to compliment the noble Lord, Lord Kahn, on his maiden speech, which seemed to me admirable, and I am sure we all hope to hear him very often. We have already had a good number of speeches in this debate, and we are to have a great many more. We have heard the noble Lord, Lord Gladwyn, describing with his usual Liberal lucidity how we should, as I understand it, get together behind the scenes with our backs to the wall, and read the writing on it. We have had the noble Viscount, Lord Chandos, along with a good deal of other material, in what was on the whole, I thought, a more amiable speech than he often gives us, repeating his usual heartrending story of the capitalist who, taxed up to the hilt throughout his life, eventually finishes with something approaching a pauper's funeral. I was not surprised to hear him say that, in the long term, he felt a good deal of sympathy with Mr. Frank Cousins. I have long suspected that the President of the Institute of Directors and the Secretary of the Transport and General Workers' Union were cousins under their skin. Both tend to say," Let us, of course, support the
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public interest, but do not touch me or mine".
Surely, what comes out in any real consideration of this crisis is how minor the economic, rather than the financial, malady in this country is. Only 1 per cent, of our gross national product is involved between an adequate surplus and a deficit, and we have been struggling with an underlying deficit of some £300 million to £400 million, compared with a national income of £28,000 million. Really, we are poised as delicately in this financial situation as madness and genius are sometimes said to be; and indeed I sometimes think that what we have developed is a genius for financial madness.
I want to suggest to your Lordships that, although there has been some criticism of the kind of weapons which are being used in this situation, in some ways what is wrong is that we are in danger of fighting the wrong war in the wrong century. We are fighting for a position of sterling as an international currency which we inherited from the Victorian times, and which is in many ways as out of date and as seriously damaging to us as our old attempt to retain our Victorian position in international defence—with a Navy which provided a policeman for the whole world, and so on—has been.
I am not suggesting devaluation, although I was glad that the noble Lord, Lord Robbins, thought it a subject worthy of serious intellectual examination, and felt it necessary to give the case against it. I think we must avoid getting into the position, in which we have sometimes been in the past, of feeling that sterling, the exchange rate of the pound, is a kind of emotional symbol of the national greatness which never must be looked at. We abandoned the old gold standard a long time ago, but we still tend to cling to too many of its principles. Indeed, if I may adapt a very famous phrase, I suggest that we are often somewhat in danger of crucifying this nation on a cross of plate gold.
I recognise completely the importance of international trade and of international banking to this country, but I suggest—as I have suggested in this House before—that the time has come when we have to ask ourselves whether sterling can remain as an international currency, and whether, indeed, in the modern conditions of the world, any single currency,

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even the dollar, can carry the great responsibilities. Indeed, in part—and in large part—the troubles with which we are grappling at this moment come from difficulties arising with the dollar as well as with the pound. America has been trying to reduce its deficit in the international banks. Dollars have become short, and sterling has been sold to buy them. Over and over again it has been proved, as it has been proved again and again during the past thirty or forty years, that really the days, either of sterling or of any other currency required to carry the full burdens of being an instrument of international exchange, have gone. I sometimes wish that the Swiss franc would be made an instrument of international exchange. That would teach the "gnomes of Zurich" a thing or two.
There is a meeting going on at present in The Hague, as your Lordships will know, of the Group of Ten—an international study group set up by the International Monetary Fund to study monetary reform. I must say that it goes on with its meetings with no particular sign of urgency or drive. If I criticise this Labour Government, of which I am a supporter—and I do criticise it on a number of details—I criticise it particularly because, although the Prime Minister has frequently given a sort of academic nod to the problem of finding a new international currency, he has never shown any particular zest or urgency in dealing with it. But I believe that is in fact one of the most important issues with which we in this country ought to be concerning ourselves, and with which the world as a whole ought to be concerning itself.
My Lords, so long as there is this tiny balance, this continual pressure upon the pound as an international unit of exchange, in a situation where liquidity is getting less and less and where in fact the situation, in terms of the growth of international credit, is running very much, I am sorry to say, along the lines on which it ran in the late 1920s, before the 1929–31 crisis; and unless we really are prepared to apply our minds to these broad international questions of what we are going to do to get a really effective inter-
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national currency instead of sticking the responsibility upon sterling because we happened to get it in Victoria's golden reign, then we are continually going to lurch from one financial crisis to another, and the people of this country are going to be continually asked to bear fresh burdens and fresh sacrifices. This is not because they are not working hard enough, not because they are not showing enough ingenuity and inventiveness in their economic affairs, but because they are being asked to carry an international financial and exchange burden which is beyond not only their strength but the strength of any single country.
It is because I do not think there is adequate drive behind this problem that I have some criticisms of this Government, but the criticisms which I think can be legitimately made are not such as can come well from the Conservative Party. I think it can be said that in many issues this Government are thinking too much in old terms. Throughout most of this century, since the end of the First World War, we have had a continual series of crises simply because repeated Governments, mainly Conservative Governments, have failed to deal with the basic problems. The last World War was called by Sir Winston Churchill, very justly, "the unnecessary war". In many ways we are being called upon again to fight an unnecesary war in the economic field because we have refused again and again to do what was necessary to avoid such a situation from developing.
I remember the policies put in train by Sir Stafford Cripps in the late 1940s, when he, too, was grappling with such a situation and was attempting to improve our balance of trade. I remember, because I had some hand in assisting him with it, the campaign which was run in the factories and elsewhere under the general title, carried on large posters, "We work or want"—which, for this island, is one of the perpetual truths of life. I remember also the howl of criticism and contempt which went up from the Conservative side at that time. I remember all the jokes about "Stifford Crapps", and I remember all the criticisms about austerity. I remember the appeals which were made to the trade unions by Sir Stafford Cripps for a wage restraint, for an actual

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wage stoppage; and I remember the immense response, despite all the difficulties, that came from the trade unions. My noble friend Lord Williamson was one of those at the head of a great trade union who helped to make that policy possible. I remember, too, all the continual carping and criticism that went on until, at last, the Conservatives got back to power and, gradually and disastrously, we moved into the era of, "You've never had it so good", and, "I'm all right, Jack".
I believe that the basic economic situation of this country is sound. I believe that we have taken on international financial responsibilities with an exchange currency too great for us to bear. I believe, as I am sure all your Lordships believe, that it is necessary for the time being to take very substantial and grave measures to put our economy on an absolutely stable foundation in order to make it less vulnerable to attack. In such circumstances, one might have hoped and expected from the Benches opposite, and from Members of the Party opposite in another place, that kind of objective, intelligent, informed approach, critical in parts but looking at the problems as a whole, that we got in your Lordships' House to-day in that masterly speech by the noble Lord, Lord Robbins.
I was particularly touched, as I am sure many of your Lordships were, by the frank admission of Lord Robbins that in the very comparable arguments of the 1930s he was now convinced he was on the wrong side. I was glad to hear him say so, because I have long had a great admiration for him, and in those days I found myself on the other side from him. But whether one agrees with him or not, I think one must admire the approach he made. When he sought to examine what was being done by the Government to meet a situation which he declared to be of the greatest gravity, he requested, he urged, that that should be done without stirring up controversy just for the sake of it. I must say that I wish members of the Party opposite, in particular in this House, which always preserves a certain discretion in such matters, could have taken more notice of him.
I was very interested in the opening speech from the noble Lord the Leader of the Opposition, who was trying, very
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much against his nature as he told us, and I think against his better judgment, to be as unamiable as he possibly could. In what I must presume was one of these unamiable passages he suggested that Members on these Benches should read the speech of Mr. Heath in another place yesterday. Anxious as I always am to anticipate Lord Carrington's every wish, I had already done so, as I expect had most of your Lordships. I have also read the descriptions of his performance in many of the newspapers, particularly those most favourable to him. "Two-fisted Heath" proclaimed the Daily Telegraph; and it told us how he bounded forward from the opening bell throwing punches in all directions; though it was forced, a little sadly, to confess later on that some of them admittedly were wild and missed altogether—which is, as I am sure the noble Lord, Lord Carrington, would agree, no way to win a world title. Indeed, in describing the speeches of the Leader of Her Majesty's Opposition in the country throughout the last few days at a time of grave international crisis and decision, The Times newspaper said:
"This may make their flesh creep in Bexley but it is not the language of statesmanship."
It is the language of statesmanship that we have been missing so noticeably. Of course, one appreciates that Mr. Heath is anxious to acquire a reputation as "Ted the Giantkiller"; unfortunately, it is the wrong giant he picks on. The real giant of the economic problem, and particularly the financial problem, he leaves to blows flung in all directions and to windy words and empty clichés. All he is anxious to do is somehow to cut others in politics down to his own size—an understandable but, on the whole, rather impossible activity; and to try, since he naturally does not like Mr. Wilson's superiority in debate, to minimise the character, achievements and courage which the Prime Minister has shown, both in this crisis and throughout his period of office.
LORD WINDLESHAM: The noble Lord having finished that fairly extended passage, might I ask him whether he feels that in the last few minutes he has followed the advice of the noble Lord, Lord Robbins, that he urged us to take; that is, to approach this serious situation in a non-Party spirit?
LORD FRANCIS-WILLIAMS: My Lords, I was trying to do so, I thought rather well, under considerable temptation. What I was trying to do was to point out to noble Lords opposite that their Party, one with a very great history, has a great responsibility, and that it was regrettable that their leader was not, in my view, fulfilling it. I was hoping very much that he would take my advice and seek to do so better in the future. I certainly hope that he will; because it is, as I say, a considerable crisis. But it is not by any means an insurmountable one.
I have no doubt whatever that we shall get through these difficulties, as we have got through the recurring difficulties in our economic history over recent years. But unless men and women of all Parties are prepared seriously to apply themselves to the question of Britain's future international role, not only in the field of defence and in other such fields, but in this vital field of international currency and exchange, I very much doubt whether, although we shall get out of this crisis, we shall avoid toppling into another one in another three years' time. By the measures which are courageously being taken by the present Government—and these are very courageous measures, particularly for a Labour Government, which has to ask of its followers restraint and sacrifices which it must find it very difficult to do—I believe we shall get out of our difficulties. And it will be done as a result of that courage and determination, backed by the will of the people of this country. But, for Heaven's sake, having got out of it this time, let us really put our heads together and do some serious thinking about our international place in the future.
5.50 p.m.
VISCOUNT ECCLES: My Lords, for a few minutes I propose to return to the package which is the subject of the debate; but I must first add my congratulations to the noble Lord, Lord Kahn, upon his interesting maiden speech. Like him, I advised the noble Viscount, Lord Chandos, in the war, and I certainly do not think my advice was anything like so good as that of the noble Lord, Lord Kahn. In fact I think that on one or two occasions we had differing views, and his prevailed.
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However, to come to this package, I want to speak as shortly as possible, because of the number of noble Lords who wish to intervene. One must ask the question: in the circumstances will it work? It is a very severe package of restrictions, and one would normally go first to the Government Front Bench, who know all the details of our situation, and ask them to tell us frankly: do they think that this will work? But we cannot do that any more. They have answered questions of the sort wrongly over and over again. Every time we have had a Budget, or the equivalent of a Budget, the Chancellor of the Exchequer has said that the deflationary measures he was proposing would be enough to hold the economy on an even keel. Then we have had incidents like the Declaration of Intent on prices and incomes. We were told that that would work; but of course it did not work. Really, it is now very serious that we cannot ask the Government for a judgment, in which we can have any confidence, of their own measures. So we have to go outside the proper place to get this information and ask someone who has not got all the information.
My Lords, I am afraid that again the answer is that we cannot get that clear-cut view that this will work, which is what is needed, at least in the short run; and that for two quite different reasons. In the first place, as my noble friend Lord Carrington said in the admirable speech with which he opened the debate from this side of the House, we do not know how the pay freeze is to be operated. We have to take it from the noble Lord, Lord Shepherd, that we must not ask questions. We do not know how many individual unions and employers will try to operate it, whatever may be the methods to be proposed. And I am bound to say that I think that this pay freeze is central to the whole package. It will not work unless there is some not only temporary but continuous restraint on incomes.
I was glad that the noble Lord, Lord Shepherd, quoted a passage from the Statement of the Prime Minister on July 20, but I was sorry that he did not quote it all. The Prime Minister said:
"… in 1965, we paid ourselves increases in money incomes of about £1,800 million compared with the previous year. About £1,300

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million of this represented increases in wages and salaries. Over the same period we earned only £600 million by way of increased production. These trends are continuing…."—[OFFICIAL REPORT, Commons, Vol. 732, (No. 58), col. 635: 20/7/66.]
Of course, as usual, the Prime Minister will not tell the whole truth. It is the fact that the trend of increases in incomes is continuing, but there is not a continuing trend in increased production. Therefore when we consider what are the sums that have to be removed from circulation if we are not going on with weakness of sterling, pressure on prices and all the rest, we have to consider magnitudes which are far beyond what can be taken out by ordinary fiscal and monetary methods, and therefore restraint in incomes is the centre of the whole package.
I am astonished when I read apparently balanced judgments to the effect that we could get on with the package without the pay freeze. I think it was the Chancellor himself, talking at a Press conference at The Hague last Monday, who said, "I do not know whether the pay freeze will work, but it does not very much matter, because it is going to be a bonus on top of it all; we could get along without it." Now, of course, the Prime Minister has had to correct the Chancellor of the Exchequer, because everyone, at home and abroad, who studies this, knows that the magnitude of the drag on our finances is such that we cannot cure it without a change in our attitude towards incomes. Furthermore, it is no good having a standstill for two or three months with half the people concerned just waiting for the "end of term"—when "holidays" begin again, and out they break and claim all that they would have claimed before. No. This is a situation—after all, we have had it with us for a very long time—when we simply cannot afford to add sums of this magnitude to the purchasing power of the country in any year.
My Lords, there is another reason why one cannot have any view that would command attention, here or overseas, about this package. As every noble Lord has agreed, the British economy is very sick and very much in need of a good doctor. But we are in the situation that the patient does not trust the doctor; and, what is worst still, the doctor himself does not believe in his treatement. When
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we get that situation, where the patient feels that the doctor is not one who has done him or his family much good for the last 21 months, and he also knows perfectly well that the Government themselves do not believe in this kind of remedy, the chances of this package working are regrettably low. I should like to pursue this for a moment. Is there a single noble Lord in this House who can get up and say, with his hand on his heart, that the present Government have shown themselves competent managers of our economy? The answer is, of course, that there is not a single one.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, I realise that the noble Viscount is discarding the advice of the noble Lord, Lord Robbins, to be fair and dispassionate and tell the whole truth. May I say that he is embarking on a very different line of abuse? But since he says that it is so impossible to find anyone from outside who will express confidence in the Government, and since he has referred to the recent meeting at The Hague, perhaps he might have mentioned that the Ministerial Group of Ten expressed confidence in the Government's ability to put these matters through. I am frankly surprised, and rather shocked, at the failure of the noble Viscount to tell the whole truth.
VISCOUNT ECCLES: My Lords, what else could the Ministers do? They are all creditors of this Government. They have all lent them money. Do your Lordships think that creditors would be so silly as to get up and say at a public meeting, "We are not going to get our money back"?
THE EARL OF LONGFORD: Tell the truth.
VISCOUNT ECCLES: Well, my Lords, I find no noble Lord opposite who will get up and say that this Government is competent—
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD BESWICK): Do not be silly.
VISCOUNT ECCLES:—to manage the economy.
LORD BESWICK: Ridiculous!
VISCOUNT ECCLES: How can they be? Look at the promises they made at the Election about the methods by which they said they would not tackle exactly this kind of situation. Now they have gone right back. We cannot have confidence in anybody who changes his mind as quickly as present Ministers.
LORD BESWICK: Stick to the truth!
VISCOUNT ECCLES: I do not think that any noble Lords opposite—I may be wrong about this—really believe that Mr. George Brown, the Deputy Prime Minister, and quite a number of members of the Cabinet believe in the deflationary remedies, and I have a lot of sympathy with them. I think it must be very hard indeed for them to have to put their names to a policy which is the opposite of everything on which they were elected.
THE EARL OF LONGFORD: My Lords, since the noble Viscount is adopting these tactics—he apparently intends to proceed by way of rhetorical questions and then afterwards announce that no noble Lord, no member of the Cabinet present, can express confidence in the policy—may I say that he is talking absolute nonsense about the Cabinet and their views?
VISCOUNT ECCLES: My Lords, it is very interesting to believe that every single one of the members of the Cabinet, who all their lives have preached an exactly contrary doctrine, have now turned round. I did not think that even they were quite such turncoats. Well, my Lords, I had better perhaps pass to something which may not annoy noble Lords opposite quite so much.
LORD BESWICK: Something constructive.
VISCOUNT ECCLES: I think we should all agree, on both sides of the House, that for a very long time now our people have been suffering from what on the Continent they call "the English disease". When they speak of the English disease, they do not mean incompetence in financial or economic measures. They diagnose our trouble as a debilitating insistence on being paid more for less work, coupled with a financial situation in which this desire has been all too easily satisfied and, of course, most ex-
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travagantly satisfied in the last 21 months. I believe that it is this disease, these attitudes of mind, which are really crippling the economy, rather than the wrong level of investment. If we felt that our people had the right attitudes to work, then we should get investment. The other way round, it is not so easy. Therefore, for a moment or two I should like to examine the English disease.
If the Government had adopted financial and economic measures which were very different from the ones they have adopted, and if they had been consistent with each other, then the climate in which this disease has spread so fast would have been altogether healthier. I mean that if we had had the Conservative measures which Mr. Heath outlined the other night—more sensible and lower taxation, more competition, a real war on restrictive practices and, above all, more restraint in Government spending—then the climate for curing the English disease would have been altogether better. But I am bound to say that, in my humble judgment, no packages of purely financial and economic measures by themselves would cure this disease.
How did we come to catch these attitudes, "Couldn't care less" and "More pay for less work"? We have to go back to the days when food, work and homes absorbed the self-interest of the great majority of people. There was then widespread poverty, so that it was worth working hard for a few extra shillings for the family. I remember it well. Between the wars jobs were precarious, unemployment was round the corner, and the middle classes themselves had restraints—I may call them moral restraints; they were much more certain about what was right and wrong in those days. These compulsions have largely gone.
We are glad that poverty and unemployment have done. But we have put nothing in their place. We have created a vacuum. Simply to say that the people should gain economic freedom in order to do as they please is not consistent with developing a responsible attitude. And I am afraid that for a long time now the Labour Party—rightly I would say—have been entirely preoccupied by the gap between the rich and the poor. They have told their supporters up and down the country, and many of us on

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this side have been infected by this, that it was pretty easy to go on getting rises in pay every year and that it was certain that the State would take over more items in the family budget. We have not understood that if those harsh compulsions which we knew before the war are taken away, we have got to find something else to which to attach our self-interest, something outside ourselves; and no effort has been made to give us that kind of leadership.
I do not think that any noble Lord could deny that for some years now we have been living in an age of growing disorder, properly called moral disorder, and that the bad example and inconsistencies, the foolish measures, of the last 21 months have added to the cynicism of the people. This is the root of the trouble. We must somehow or other have a Government which will foster more responsible behaviour. They can do that by first getting the economic climate right, and secondly by setting an example in restraint themselves. The present Government have done neither. They have not got the climate right. The proof of that is that we have this package now. And they have refused themselves to give a proper example in restraint. One has only to look at Government expenditure. They came into office making speeches up and down the country that we were in a grave financial condition. Every Minister knew that the pound was in danger, that the balance of payments was a high priority. But what did they do? The noble Lord, Lord Shepherd, has told us that they added 5 per cent. to Government expenditure—that means, several hundreds of millions. This was a scandalous thing to do against the cries of emergency which they were uttering all over the country.
Then they flouted their own incomes policy. They gave no example of restraint. They first raised their own salaries more than anybody has done, and followed that by giving in to political pressure to meet various large claims from the public sector. Instead of giving an example of the more economic use of manpower, they now occupy one million square feet more of offices in London and the numbers of the civil service are very much larger. If the Government do not get the climate right and will not give a good example, one cannot expect the
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people to exercise restraint. It is from the top that these things must come.
What, then, is going to happen? I suppose that either the package will fail and then the Government will be forced to devalue in the worst possible circumstances, or the measures may be very deflationary and touch off a large volume of unemployment. If they did, the Government would panic. They would put the engine into reverse and the old merry-go-round would start again. Because the trouble is long term. One cannot see whether in six months or maybe a year, it is going to be any better. It is not only the people in this country who cannot see this.
My own view is that there is no cure for the economic disorder unless we first cure the moral disorder. That is not only hard to say but still harder to do, but it is no good brushing under the carpet the real reason of our present bad shape in the world. I do not think it would be any good trying to go back to some kind of middle-class morality, which served us all right in the past, when poverty and unemployment were restraints upon the great mass of the people. The present is not like the past. If we now went back to a large measure of unemployment, we should not restore the level of good morals in this country. We should probably have a revolution on our hands. The change has now to be a change throughout the whole population, and this is something we have never tried to do so far.
In the old days a child with a tricycle was much safer and much easier to teach than the grown man with his Jaguar. We have grown up now. We realise that the kind of moral standards which would make us a great country again have to be far better than anything we ever knew before, because so many millions of families—and I am very glad of it—have economic freedom, have the money and the power to do as they please, which only the rich used to have. Now the level of behaviour has got to be something quite different and this is not being tackled at all. I am bound to say that I think the Labour Party have forfeited their right, if they ever had the inclination, to give this kind of leadership. It seems to me that their fundamental doctrine is false. It is this: the mechanical rearrangement of material

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goods by itself induces people to behave better. There is no evidence in history that that has ever been the case.
I therefore appeal to my noble friends in the Party to which I have the honour to belong to come forward and give us an example of a patriotic, radical and, I must add, puritanical spirit which in history has been the only effective answer to the kind of disorder that we have round us to-day. Let us take our heads out of the economic sands and make the character of the people—not the pockets of the people, but the character—the object and the test of all our political actions. If we did that, we should soon see that the heart of the people is sound.
6.11 p.m.
THE LORD BISHOP OF SOUTHWARK: My Lords, until a few days ago I divided the country into two: the minority who understood economics, and the majority, which includes myself, who did not. I am now wondering whether there is a minority at all, with the exception of those of your Lordships who are taking part in this debate. When the crisis broke on us, I thought that the wisest course was to say nothing until I had tried to understand it. I did try, and, no doubt like many of your Lordships, I traversed acres and acres of newsprint in the Sunday papers, the Friday magazines, the Spectator, the Statesman and the Statist, and, of course, the journal of another place, Hansard, noting how even people of the same Party contradicted one another in their approval or disapproval of causes and remedies. So I came to the conclusion that everybody is baffled and gives an uncertain answer. In fact, when it comes to the nature of the economy, I felt like St. Paul on Mars Hill when he told the Athenians that, although they spent their time in nothing else but to tell or to hear some new thing, all he could find at the end of the day was an altar with the inscription, "To the Unknown God".
But perhaps a confession of ignorance is the best way forward. And a degree of ignorance there must be in economics, because, in spite of the calculations, there is always an imponderable—namely, the unpredictability of human beings. If all of us could accept this fact, we might
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together take some steps forward. And when I say "together", I am not suggesting a coalition, but a determined effort on the part of everybody to be constructive rather than to throw lobs into one another's court. "The thirteen wasted years of the Tories" or, "The two years of Labour incompetence", may appeal to those who enjoy throwing political custard pies. We on the Bishops' Bench could easily join in the fun by designating politicians of both Parties for the role of the unjust steward, who your Lordships will remember made friends of the mammon of unrighteousness by tampering with the currency and fudging a prices policy. But I doubt whether any of these things does anything to solve our problem or to save our country from the desperate situation in which it is now placed.
My Lords, it is not just thirteen years or two years. My political memories go back to the 'twenties, and we have been staggering from one economic crisis to another economic crisis for forty years, and probably more. My contention is that the sooner we call it a day, and get down to some hard thinking—the Government, Opposition and all of us—the better. I emphasise "all of us", because an insidious effect of Party abuse is to encourage the rank and file to look for scapegoats and to heap the blame on them, instead of appreciating that there is no way out of our difficulties until each one of us realises that we are personally involved and personally responsible.
Having said that, I should like to ask the Government to consider five points. First, are the Government bringing home to us, as they might, the seriousness of the position, or, for fear of making themselves unpopular, are they using the soft pedal? Time and time again "Wolf" is cried, but within a few months we seem to be going on very much as we were before, with the result that the times of crisis are treated with cynicism. The present measures may be severe, but are they sufficiently severe to give us, the general public, the psychological shock that we need? To give a small illustration, last week the Government, if they believed that a major shock is necessary, could have shaken the country by putting an additional 1s. on a packet of cigarettes and a drastic tax on betting. Perhaps there are sound economic reasons for not doing

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so. Or is it that the Government were fearful of their popularity? Or is it that the Prime Minister has a large smoking habit. Be that as it may, I believe that if the facts are stated bluntly to us, the country will respond. A smoking tax is only one of the ways of doing it.
Secondly, a democracy will oppose dictatorship, but it knows that in some circumstances there must be compulsion. After all, that applies to our domestic life. If a family finds itself on the rocks, the head of the family, to save it from bankruptcy, will say to its members, "I am sorry, but for the time being there are certain things that we have to do in order to cut our coat according to our cloth". I know that wage freezes, the suspension of strikes and the direction of labour constitute political dynamite; but may be that is better than the dynamite of inertia, half measures and pious exhortations that bring down our national home in ruins.
To give an illustration, in last night's paper I read that a gentleman who has the euphemistic title of a "Football pools concessionaire", has a weekly income during the season of £900. In the same paper, I read that another gentleman, who has the less euphemistic title of "Ticket scalper", sells 25s. seats at World Cup matches for £6; and in today's paper it is £75 for a £5 ticket. Can a country really afford touts and parasites? Would it not be to the advantage of everybody if these gentlemen were to be directed to employment that would help in our export drive? These are extreme cases, I know; but the fact is that thousands of our countrymen are in jobs—if that is the right word—that at this juncture our country simply cannot afford. For instance, is it really necessary to have an army of milkmen to deliver our milk ever day, when this is practically unknown in most other countries? I realise that the position cannot be changed overnight, but I am hoping that the Government will tell us that they have a bold, imaginative scheme for the retraining of labour, that they intend to cut out wasteful employment, and are determined to encourage us to use our manpower wisely for the common good.
Thirdly, when a domestic family is in trouble, it will cut down its commitments; it will concentrate on essentials,
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and cut out what is not absolutely necessary. I know nothing about military strategy, but to what extent can we afford to continue to police the world as we are doing? At last we appear to be doing something about defence costs in Germany. Is it too much to hope that the Government will do some hard thinking about our commitments in the Far East? Again, while in happier circumstances it may be desirable for sterling to take the strain with the dollar, may not the time have come to reform the international monetary system in the hope that we can evolve a system of international credit that will relieve the pressure on sterling? The question is not what we should like to do, had we the resources to do it, but what we can safely do with the resources at our disposal at the moment. The fact is that, as a national family, we are overstretched: we are trying to do too much.
Fourthly, has the time come to review our immigration policy? If there is a shortage of labour, should we not encourage people to come to this country, provided that we are not depriving other countries of key men, and provided that we have suitable jobs for them? I am well aware of the political difficulties and of the housing shortages, but if people are unemployed in their own countries, and if we have jobs here waiting to be done, surely common sense suggests that we should welcome them. It is foolish to say that the main hindrance to expansion in the economy is a shortage of labour if in the same breath we say to those who are anxious to work for us, "Keep out".
Fifth, and last, managerial efficiency and productivity. Here I trespass on strange ground, and I hesitate to express an opinion. Nevertheless, my job takes me into factories, firms and businesses in South London, and I have opportunities to talk to dozens of people on both sides in industry. As an onlooker I have two impressions. First, management will become more efficient if there are reasonable incentives. Time and time again I am told by managements that it is just not worth their while to make changes as it is too difficult or too expensive; or they are too heavily penalised by taxation that does little to encourage them. I am not competent to know whether they are right or wrong, but most of the men who tell me this strike me as being men of

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real integrity who, in addition to wanting a livelihood for themselves, are keen to help their country. In any case, I am sure that the time has come for both the Government and the Opposition to throw aside doctrinaire prejudices and to take a close look at the fiscal system, with a view to encouraging expansion and penalising inefficiency, overmanning, restrictive practices and economic waste.
My second impression is that the workers will do a fair day's work, and more, if they can be convinced that they can benefit from increasing prosperity. At the moment they believe, rightly or wrongly, that the dice are loaded against them; that profits are unfairly distributed in the interests of shareholders, speculators and middlemen. They may be wrong—I do not know. If so, let them have the facts to convince them. I have never doubted that increased wages must be related to productivity, and I hope that the Government will insist on this by legislation, rather than know-tow to sectional bargaining of pressure groups and industrial malcontents. But they must remember that it cuts both ways: treat the working man fairly, explain to him what is happening, take him into partnership, and in most cases he will respond.
My Lords, I put forward these suggestions in a constructive spirit and, I hope, with no Party bias: the times are too serious for that. I do not despair. Our history proves that when the occasion demands our countrymen will respond, provided they understand the issues involved. There is a verse in Scripture to the effect that when we are asked to go one mile we must be prepared to go a second. Maybe the noble Viscount, Lord Chandos, had that in mind in his speech. In any case, our present condition demands the second mile to-day, not just from the Government, not just from the Opposition, but from each one of us. In spite of the denigration, the cynicism, the self-depreciation that has disfigured our national life in recent years, I believe that the heart of the country is sound; that if the Government, with the helpful criticisms of the Opposition, give the lead, the response will be such that we shall overcome our difficulties and prove our greatness.
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I began in Athens with St. Paul, and I conclude in Athens, but some centuries earlier, with Pericles.
"I claim"
said Pericles
"that our nation is an education to the world, and that her members yield to none, man by man, for independence of spirit, many-sidedness of attainment, and complete self-reliance in limb and brain."
God grant that this may be true of Britain!
6.27 p.m.
LORD FRASER OF ALLANDER: My Lords, I rise to address your Lordships for the first time, and I do so in the knowledge that I cannot expect to uphold fully the best traditions of your Lordships' House, nor yet achieve the high standard of debate for which it is rightly respected. I hope, therefore, that I may benefit from your Lordships' customary forbearance and trust that, in turn, I may secure your indulgence at least for the comparative brevity of my remarks.
I am moved to raise one or two issues of a broad general nature by reason of the critical state of our economic affairs, and I rely on some 45 years of business experience to justify my intervening in this important debate. It is a matter of concern to me that the present financial policies, operating in what is still predominantly a private enterprise economy, should seem to deny or discourage those three prime expressions of human endeavour; incentives, competition and consequent productivity. Obviously, in present circumstances a halt had to be called to the excessive rate of inflation and to combat the imbalance of payments. Yet as one looks over the annual figures of Government revenues since the last war, and compares them with the gross national product, one sees the renewal of a most disconcerting trend at the present time. Once again, Central Government taxation is on the point of absorbing a third of the national income—a third of some £30,000 million. When so large a sector of expenditure, more than £10,000 million, is concentrated in a single authority, there must inevitably be a reduction in the degree of competition. Further, with the absorption of so high a proportion of individual and corporate income, the latitude to exercise fiscal incentives must

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be appreciably reduced. Senior management may well be worst affected, but discouragement could be widespread.
In human terms, if one takes away monetary incentives and reduces the element of competition or comparison, one inevitably diminishes the motives for individual effort. And this at a time when an upsurge of national endeavour is called for to rid us of what foreign critics call the "British sickness". I say" the element of competition or comparison. "Within the growing Welfare State the private sector proportionately contracts. In the field of education, medicine and other essential social services there now appears too small a yardstick by which to judge efficiency or, if you prefer it, productivity: we cannot say whether or not we are getting value. Additionally, as the Administration brings more of the assets of the nation under its control the element of competition still further declines.
It may well be that the next six to twelve months will provide the Government, and indeed the nation, during this essential period of restraint, with an opportunity both for reflection and for the reconsideration of our system of taxation. Over the years our present system and our economy as a whole have become too entrenched with subsidies, restrictions, controls, limitations, monopolies, and a great veneer of camouflage, so that many of its effects are contradictory and discouraging to individual effort and initiative. The vast expenditure that Governments now control is in itself inflationary, as are many of the other elements I have mentioned. They give a sense of false values. They prevent us from coming to terms with our newfound prosperity.
Whether or not our incidence of tax is the most severe in the world, I would certainly judge it as providing the greatest measure of disincentive and growing confusion. Certainly I find in business life that our tax systems and procedures hold many inconsistencies and contradictions—and here, my Lords, I must declare my interest. All my life I have been substantially connected with retail distribution and thus constantly come into contact with the broad masses of our people. One learns how readily they respond to a clear and definite lead on matters which are obviously right and
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just. But to obtain their confidence the measures proposed must be both rational and logical, and clearly understood.
In recent years, we have in retail distribution largely welcomed a number of measures (and more are in process of being considered by Parliament at the present time) for the protection and guidance of the consumer. The consumer, who represents each and every one of us, is entitled, in an age of technological advance, to such measures of help and guidance as will enable him or her to employ to the best effect an expanding purchasing power in an age of ever greater choice. Indeed, the consumer spends in established retail outlets about the same amount as the Government's current revenue—some £10,000 million a year. But the essence of this progress is in choice and selection; and this I think we all recognise. Yet in the sphere of Government expenditure the choice is being increasingly limited, as I have ventured to illustrate, and I feel we have still not moved away sufficiently from many outmoded practices and, still more inhibiting, from many outdated attitudes.
For instance, there is still the belief that there is something improper in making a profit. I was brought up in a school where the making of a loss, particularly in a public company using other people's money, was considered improper. Nor can I conceive of a society expanding and advancing whose individual corporations do not make profits proportionate to their need for new capital and for servicing the monies invested in them. That is not to say that at this time the distribution of profits should not be restrained—indeed, no prudent directors or proprietors would consider otherwise. In fact very recently some of us have reduced our dividends, although we were in a position to maintain or even, in some instances, to increase them. Upon reflection, none of us would wish to join or to serve in a concern which was making an annual financial loss. Nothing is more dispiriting to management and staff than to know that their business is running downhill. Over the past years one has seen this sense of frustration in some of our nationalised industries, as well as in certain public companies. The latter inevitably, under the pressure of the market, have had to revise and rethink their ways.

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One particular aspect of the falsity of subsidies and restrictions is especially evident at this time in the city of Glasgow, my home town. Not having served in another place, I would humbly mention that my reference to "my home town" is no reflection on the practice pursued there by maiden speakers. For more years than I can remember, the civic authority has been the principal instrument for the provision of housing, and to-day between 80 and 90 per cent. of all houses within the city boundary—and indeed those related to Glasgow overspill—are either provided municipally or by the new town development corporations. In fact the position elsewhere in Scotland is not largely different. If it were not for the fact that the number of houses required, and the number being built, was showing an increasing disparity this might not be of a critical consequence in itself.
However, the Glasgow Corporation has persisted in the practice of charging grossly uneconomic rents for many years, and now, in consequence of the rising standards imposed by national requirements in the sphere of social services for which the Corporation is responsible, increasingly larger revenue is required for local purposes. This has resulted in the revaluation of commercial property, involving in numerous cases increases in assessment of a threefold nature. Here I am personally concerned, and I am able to tell your Lordships that such rent and rates as appears likely to be required from many of these premises is such that the occupiers' total profit of recent years would be entirely absorbed and they would in fact be compelled to cease business. This is an instance where unrealistic and false housing rentals will do intolerable damage to the very people whom such reduced charges were originally, and are now mistakenly, designed to assist.
Circumstances have greatly altered, but our attitudes and many of our prejudices remain, and much to our own detriment. I do not wish to appear controversial, but I urge that while we remain basically a country whose individual characteristics respond to initiative and private enterprise, and whose spirit still reflects a sense of adventure and an inventive and pioneering attitude, we should harness
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our economic thinking to these, the best features of the British character.
Admittedly there has been much new legislation, but all change is not necessarily for the better, and in recent finance measures, such as those of investment grants, corporation tax, capital gains tax and selective employment tax, to mention but a few, I see much that is contradictory and is capable of denying our people the opportunity to seek and work out their own economic salvation. The selective employment tax, which has been a subject of prolonged debate in both Houses of Parliament, also emphasises, as did a question earlier to-day which was raised by the noble Duke, the Duke of Atholl, the tendency to contradiction in our taxation system. Certainly it will appear to be so, if judged on a regional basis, in relation to the Highlands of Scotland, and more so in the light of recent announcements of limited financial assistance for the hotel and catering industry.
The Highlands and Islands Development Board is engaged in creating an attitude of mind designed to stimulate the population to a policy of self-help and eventual regional prosperity. Some of us are concerned individually in furthering this aim in an area where there is great dependency on the service industries, an area where, given a reasonable frequency and standard of modern communications, the expansion of the tourist industry is ideally suited in both the local and the national interest. Nor does this in any way reflect upon the importance of the region's agricultural and forestry interests.
Yet this selective employment tax will bear most heavily upon the area, especially upon those prototype developments such as that which I am privileged to be connected with in the area of Aviemoor in Inverness-shire; and if this is successful, as indeed we resolutely intend it shall be, it could well be a prototype for several other such projects which would give increasing employment, both full and part time, to many hundreds of both sexes in areas of the Highlands in which it would not only be uneconomic but physically difficult to develop orthodox industry on a comparative scale.
Surely, if the nation requires that each and every one of us shall apply ourselves

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with added enthusiasm to our tasks, giving more fully of our experience or of our newly acquired skills, we must offer not only stick but carrot. We must promote the practice as well as the promise, portray example rather than exhortation. How else can we possibly expect to move out of this state of inertia, this almost static level of productivity which is at the root of most of our financial problems both at home and overseas? To-day our basic rather than our current economic problems, if not deep seated, are certainly long rooted. Noble Lords will probably agree that they began with the First World War and the gradual dispersal of our overseas assets.
I am glad, however, that we do not have in our present circumstances exactly the same conditions as I experienced as a young man for some five or six years in business on my own account. Then, in 1931, we were overwhelmed by an economic blizzard which many declared was imported from America. It is true that recent action taken by the United States authorities to strengthen their balance-of-payments position has led indirectly to the selling of sterling, but the association is not a fundamental one. The late Lord Keynes diagnosed correctly the then need to expand the economy, to invest and to cause our currency to circulate. As it was, we contracted, and the reason, as I well recall, that we drew in our horns on every side was essentially one of lack of confidence, lack of confidence abroad and not least among ourselves.
I feel sufficiently strongly to-day to say the third leg of our economic stool is productivity, with incentives and competition as the others; then in turn all three create and support the seat of confidence. I hope, therefore, that those who are presently in charge of our affairs may take such steps as will evoke a sense of confidence and so provide through their measures the circumstances that will both encourage arid enable the British people to do increasingly and actively those tasks and duties which are both the right and the responsibility of every citizen to do for himself or herself, for their families and for the nation at large.
6.45 p.m.
LORD SAINSBURY: My Lords, it is, I think, appropriate that as a fellow retailer I should be the first to congratulate the noble Lord, Lord Fraser of Allander, on his interesting, if not entirely non-controversial, speech, and I am sure I speak for both sides of the House when I say that I hope he will join in our debates frequently in the future.
It is very depressing that when we debate the economic health of the nation so often the patient is sick. The heart of the problem has been described as that of increasing productivity and of ensuring that wages rise no faster than productivity. In my opinion, unless we solve this problem the patient will remain uncured. Now that there is a chance that sterling has been given a breathing space by last week's measures, in my view it is imperative that as a nation we work for this longer-term solution. The most important condition for increasing productivity, as has been stated so frequently in our debate this afternoon, is the elimination of restrictive practices and of overmanning. According to the National Institute for Economic and Social Research, since 1960 output per man hour in manufacturing has gone up by 46 per cent. in Japan; 29 per cent. in Western Germany; 25 per cent. in France; 21 per cent. in the United States; but only 18 per cent. in the United Kingdom.
But the elimination of restrictive practices and overmanning is not something that the Government can achieve by Act of Parliament. Government can only help create the right atmosphere and conditions. Such measures as the Industrial Training Act, the Redundancy Payments Act and the recently introduced Bill to set up the Industrial Development Corporation are all steps in the right direction. But finally the elimination of restrictive practices and overmanning is something that has to be threshed out on the shop floor between the representatives of the unions and the representatives of management, and it takes time, patience and good will on both sides. And it has to be admitted that not infrequently when a productivity agreement has been arrived at by the representatives of management and the paid officials of the unions, the shop stewards will not play.

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We had an example of that only last week—and it has already been referred to by the Leader of the Opposition—in the unofficial strike at Tilbury Docks by 1,300 members of Mr. Cousins's own union, the Transport and General Workers' Union. The productivity agreement, which, in the words of the Chairman of the Port of London Authority, achieved three things, higher productivity, lower costs for the importer, and higher wages for the men, had been accepted by the unions, but rejected by the men. Once again the bogey of redundancy raised its head, and was no doubt exploited by certain disruptive elements for their own ends, although I understand that an assurance was given that in fact there would be no redundancy.
However, unfortunately, in my opinion, we are not in a position to wait for the longer-term effects of productivity agreements; it is vital to take action on the wages front as well. As the National Board for Prices and Incomes said in one of its Reports:
"Earnings and productivity should be treated as related aspects of the same problem."
How serious the earnings aspect is is well illustrated by the latest available Ministry of Labour figures, which show a 10·1 per cent. increase in hourly earnings during 1965. This has to be compared with an estimated 2 to 3 per cent. rise in productivity in the same year. The increase in earnings was partly made up of straightforward wage increases, and partly by increased overtime working, due to a reduction in the basic working week in many industries from 42 to 40 hours.
It is an interesting fact, to which the present Minister of Labour, Mr. Gunter, has on several occasions drawn attention, that while the normal basic working week has during the last twelve years or so been reduced from 48 to 44 hours, then to 42 and in many cases more recently to 40, the hours actually worked, until recently, were still only half an hour less than before the war. The obvious cause of this overtime working at overtime rates has been the shortage of labour, due partly to inefficient use. However, its wage inflationary effect has been enormous. Britain now works more overtime than any major industrial nation except France. In my opinion, most of the blame for this must surely lie with management, because so many managers
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have failed to face up to the long-term problem of the efficient use of manpower in industry. The employee is not so much concerned how his weekly take-home pay is made up, how much is due to normal working and how much to overtime; his only concern is the total, and naturally he will fight against any reduction. Because management has sheered away from this difficulty, overtime has continued to be such an undesirable feature of British industry.
In conclusion, may I refer briefly, whilst declaring an interest, to the selective employment tax, which I criticised when I spoke in your Lordships' House on May 11 in the Use of Manpower debate. One of my criticisms is that, if the analysis is right that increased productivity and more efficient use of manpower is a longer-term solution, the selective employment tax is based on the wrong assumption, because all the evidence available indicates that there is more overmanning and under-employment in productive industries than in the service industries. Furthermore, as has been made abundantly clear, the tax will lead to a large number of anomalies which it will be practically impossible to correct. A good example of this is that identical activities such as transport or maintenance will be treated in three different ways, according to who performs the function, for the purpose of levying the tax. It is this sort of thing that destroys business confidence, that leads to the view that the Government listen too much to theoretical advisers, and do not work out the practical implications of their measures.
In a mixed economy so much depends on confidence between the Government, the business community and the trade unions. It is fair to say also that if Government do not always understand business, businessmen do not always succeed in overcoming their prejudices when a Labour Government are in power. Exaggerated invective and destructive criticism are no help, from whatever quarter they come. The Opposition is in no position to throw stones, because the truth is that no Government since the end of the war have succeeded in curing our basic economic ailments. Now the times are too grave, and the time is too short, for anything but national unity.
6.58 p.m.
LORD MELCHETT: My Lords, as the first Member of your Lordships' House to speak from these Benches after the maiden speech of the noble Lord, Lord Fraser of Allander, I should like to add my congratulations to those of the noble Lord, Lord Sainsbury, on a most remarkable maiden speech. Those of your Lordships who have been here most of the afternoon will have heard the speeches of several noble Lords—I think in particular of the noble Viscount, Lord Chandos, of Lord Shaw cross and others—with wide and up-to-date experience in big industries.
I hope, not only that some of the speeches we have heard this afternoon will be widely reported, but that the Government will take real notice of the wise counsels which have been heard in your Lordships' House today. To those speeches we now add the most remarkable speech of the noble Lord, Lord Fraser of Allander, who is able to draw on a long and wide experience in industry. What he has had to say is of the greatest importance, and I hope it will be duly noted by noble Lords opposite.
I find it possibly a little easier to follow Lord Sainsbury than some of his other colleagues on that side of the House, because I found that he was in sympathy with much of the criticism and with many of the themes which have run through speeches made from this side of the House and indeed on the Cross Benches. It is important in this time of grave economic crisis that those of your Lordships who come to this House should draw on their experience in practical industry, and, where we have common points of view, that these matters are taken to heart by Ministers who are responsible for guiding the fortunes of the country.
Nearly everybody who has spoken this afternoon has looked back over the last twenty years and come to the conclusion that very little seems to have changed in the basic situation. We have a series of economic crises, an endless monotony of "Stop-Go", and an apparent inability by those in authority to analyse our basic problems and to face up to the radical changes which have got to be made in some of the basic industries and techniques which we employ in controlling our affairs. Analyses which begin to show, for instance, that the trade unions must abandon restrictive
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practices; or analyses which begin to show that the banking system has got to face up to a decimalised currency and possibly, in due course, even to a European dollar in place of the pound sterling; or analyses which mean that we must change our attitude to the commitments which we take as a leading independent military and economic Power—all these analyses tend to be swept under the carpet as soon as their awkward consequences begin to show their heads. The evidence is rearranged to support the status quo, with perhaps a little tinkering here and a little tinkering there; meanwhile the periods between the economic storms become shorter. During these periods of relative calm, we seem to get into a state almost of euphoria and complacency which has now become a matter practically of disbelief in a great part of the rest of the modern world.
If we look at the present situation, what sort of things should we in fact be doing? I suggest that we need to stop the gigantic annual losses on an uneconomic ports and railway system. We should be building modern steel milk alongside deep water, where we can import ore and coking coal from overseas. We should be increasing investment in the successful companies of this country. One hundred companies provide 50 per cent. of all our exports; indeed ten of them do 20 per cent. of the whole of the export trade. These companies are not difficult to identify, and anyone with experience in industry will see that they can only maintain and expand their export business if they have a buoyant and profitable home market. The need is for a vastly increased investment in production and in those companies and industries which are fundamental to our national life, such as the transport industries, and the large industries which carry the greatest burden of the export trade. At the same time there is a need for drastic reshaping of the old and inefficient industries. We have the skills, we have the people, and we have the capital. In addition, I suggest that we must reduce the import of things that can be adequately produced in this country.
However, instead of any of this, we find ourselves once again, with almost unbearable monotony—and this time with extremely little warning—drifting

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into a situation which demands yet another round of old-fashioned, orthodox deflation, deflation which is absolutely necessary to avert immediate financial disaster. Deflation has as its avowed intent the creation of unemployment, and for all that has been said in this debate about the under-employment of people in industry, people are still one of our scarcest and most valuable assets. Deflation also has the avowed intent of cutting back investment, with the inevitable result of further reducing the long-term prospects of pulling out of our present difficulties. And undoubtedly there will be a further reduction in the incentives for people to work. I have always believed that such policies as these are really unnecessary and are in themselves self-defeating. We can, of course, buy time and gain a temporary respite from external pressures, but only at the expense of further delaying the very projects which in the end alone can solve our long-term problems, the very projects through which eventually we shall get a basic growth in our production and wealth.
I should like to add at this point that I support everything that has been said in your Lordships' House to-day about resolutely resisting any possibility of devaluation of the pound. It is entirely unnecessary at this stage, and I should like to add my support to Her Majesty's Government, who are absolutely correct in taking this line. I hope that the speech of the noble Lord, Lord Robbins, on the subject will be carefully studied, because I think that the detailed explanations which he gave with great authority this afternoon are of great importance and should be well understood and recognised, both in this country and abroad. Devaluation is not necessary and it could do no more than give a very temporary respite. It is unnecessary mainly because we are not at the present time out of line with other industrial nations. Our export prices are competitive; our exports are buoyant; we buy our raw materials in the same markets as our main industrial competitors, and our labour, on the whole, is somewhat cheaper than that of most of our competitors. So if we devalue now, it is really an admission in advance of gross inefficiency, and an admission that we expect to remain inefficient for a long time to come.
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Furthermore, devaluation is an entirely negative move, because it would do nothing to cure the long-term basic problems facing the country. There is no alternative in the very short term to the measures for immediate deflation which the Government have taken.
However, it is the causes of the crisis and not the short-term remedies which I believe really matter. It is the long-term policies which could remove the very causes of this crisis and earlier crises which, I suggest, should be occupying the attention of the House in this debate. We seem to have developed a sort of national lethargy which makes us unwilling to face up to the extent and the rate at which the world is changing. Our economic difficulties are clearly defined and are there for everybody to see. Why, then, do we believe that a country as small as this, and with scarcely any natural resources of its own, can continue to maintain and improve its standard of living from such a small economic base and with such a limited home market, and at the same time try to police a large area of the world, provide aid on a large scale to underdeveloped countries, and find capital for a wide range of overseas investment at the same time?
As though this were not enough, we take on and cling doggedly to the role of central banker for a large area of the world, and allow our currency to be used as one of the basic reserve currencies—a role most skilfully avoided by our European competitors. I have probably said sufficient to indicate that it is not so much the short-term tactical measures which cause me concern, but the long-term economic strategy of the Government which I believe to be, in its basic concept, unworkable.
On the strategic front, the first essential for this country, in my view, is to sign the Treaty of Rome as soon as we can possibly arrange to negotiate to do so. This will be a long job, and the transitional arrangements have been estimated to engage us in discussions for, possibly, up to two years. I would urge upon Her Majesty's Government that priority should be given to preparing ourselves for entry into the European Economic Community. It is far more important than any National Plan which any Government can ever produce in this

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country. Let us produce a plan of how we can adjust our own arrangements to enter and become part of the European Economic Community.
In this process we should seek to rid ourselves of the overwhelming disadvantages of managing a major reserve currency. We should also seek to spread more evenly across the whole economy of the European Continent the burden of defending Europe, and get rid of the burden of aid, long-term credit and the policing of the underdeveloped areas of the world. This burden should be more evenly spread over the productive capacity and wealth of Europe. Only after we have joined the E.E.C. are we going to be able to achieve long-term, soundly-based economic growth. I personally cannot see how we are ever going to escape from the endless cycle, beginning with high investment and growth, leading immediately to inflation in this contained economy with all its limitations, followed soon after by pressure on the balance of payments, pressure on the exchange account, and ending once again with the situation with which we have been faced in the last few weeks.
It is not just a matter of lack of confidence in the Government. Everybody has been talking in the last fortnight or so about confidence, saying that confidence in the management of our affairs has gone, and therefore a run on the pound starts. In all the contacts I have with bankers and industrialists overseas, I think the problem goes much deeper than confidence. People are very well-informed to-day. They can often see more clearly what we are doing in this country than we can see ourselves. It is by the realisation that we are taking on a programme which, by quite a simple analysis, it is clearly impossible for us to achieve, that a change in confidence is started. Although there will be pauses and we shall get support, until we begin to reassess our whole position in the world—the commitments which we have overseas, the direction in which we are going to steer this country in the future, whether we are going to be part of a much larger economic complex—we shall never get long-term confidence in this country's ability to pull itself out of its difficulties.
There is only one other point which I should like to make, and that is that
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if the strategy is wrong the tactics are worse. If you want productivity you must have incentives for people to work and to save. This is where, by a process of adding to all the various facets of taxation, we have manoeuvred ourselves into a position where we have removed the major incentives from people, from the shop floor up to the proprietors and the investors in industry. You must hold out the prospect of a higher standard of living and higher earnings if you want to get co-operation and the extra effort which everybody knows is essential. An increase in earnings and a reduction in personal taxation, both on earnings and savings, is the very opposite of the present taxation policy.
The noble Lord, Lord Shepherd, in opening this debate earlier this afternoon, said that there was a great need for exhortation, that we had to revive the Dunkirk spirit, and that this whole nation had to pull together. He said that we had somehow to galvanise people into action. He finished by asking: What are the alternatives? I will tell the noble Lord, Lord Shepherd, and his colleagues, what the alternative is. The alternative is to provide some incentives. During the war, people could see the objective which we were aiming at, and they knew the consequences of failing to achieve the objective. To-day I am absolutely convinced that the negative approach will do nothing but slow things down and make it impossible to get co-operation. I do not believe that it is a practical proposal to go to the unions and to the masses of the working people in this country and, against the background of a wage freeze, ask them to drop restrictive practices and cooperate in the new techniques. To my mind it simply does not make sense.
Of course, everyone is now concerned with inflation, and we have to squeeze out of the economy some of the surplus consuming power, as the noble Lord, Lord Robbins, so rightly pointed out this afternoon. The place from which I should like to see the surplus consuming power taken out of the economy is the now outdated, old-fashioned subsidies of the Welfare State, which are really based on an earlier period—many of them with their origins right back in the pre-war period of the 1930s. There is no doubt that it is unnecessary and wasteful to provide free medicines for everybody, free

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visits to the doctor for everybody, subsidised rents, and subsidised uneconomic transport systems which use a vast amount of scarce national resources. It is from this part of the system that I firmly believe one has to take out the surplus money which is pushed in and which is adding to the inflationary pressures.
Certainly steps could be taken to safeguard the interests of those people who would possibly be hard hit, such as pensioners and so forth. But the vast majority of people in this country to-day, with the standard of living which we have achieved and established, can perfectly well afford to pay, and should pay, for the basic essentials of life. Savings and the cost of food should be put as a first charge on their incomes: and if we need to take additional spending power out of the hands of the public to keep consumption down, let it he taken from luxuries, betting, and all the additional items on which people spend their money after they have set enough aside for their basic needs.
I have detained your Lordships long enough. In short, I would say, loin Europe, cut overseas commitments further, he prepared to give un the sterling area as part of the negotiations for getting into Europe, stop the old-fashioned Welfare State subsidies which are based en conditions which no longer appertain in this country, and, above all, reduce taxation and provide people with incentives to work, save and invest.
7.20 p.m.
LORD COOPER OF STOCKTON HEATH: My Lords, I had not intended to make my maiden speech so soon after being introduced into the House, but as this debate is on a subject which is vital to trade unionists and which has been woven into the fabric of a trade union leader's job since the war, I felt that I might have something useful to contribute. I am accustomed to considering the state of the economy from the point of view of the jobs and earnings of the 800,000 members of my union, and I have long realised that, whatever we may achieve at the bargaining table with employers, the real value of any gain is ultimately determined by the economic situation at any particular time.
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In the post-war years we have through collective bargaining made impressive gains in money wages and other conditions—something in the order of an average of five per cent, a year. By the time price increases and the restrictions on earnings caused by the recessions of the post-war period have had their effect, the real improvement, taking one year with another, has been only about 2 to 2½ per cent.—half of that achieved at the bargaining table. It is this experience that makes sense of attempting, at least, to get what we call an incomes policy.
I could not help reacting when I heard incentives referred to, because I think it a fact—and I am not going to be controversial—that we in this country have what I often refer to as a distorted wage pattern. It is the accident of where a man lives, rather than what he is doing, that so often determines the size of his wage packet. It might be supposed that some of the highest-paid people were those who might be described as being responsive to incentives; but I am afraid that it does not work like that at all. The size of the packet is based upon the labour supply locally, and I do not myself think that either the trade unions or management are entitled to be proud of the wage situation as it is to-day after the postwar period.
Members of this House must know some of the stupid things (if I dare say this) that have been done on the part of management in order to keep their labour. During the negotiations in this post-war period which have been conducted centrally there has been, I think, a fair amount of reasonable behaviour in a situation in which the trade unions have been stronger than they have ever been in their history; but the great mischief has been done by wage drift. We know that the initiative on wages is still on the shop floor, rather than at the centre, and the great problem for us in the trade union movement is to try to bridge this gap and bring a sense of order into the situation.
When I think of how much better we could do if only we could master our own economic problems, as other noble Lords have said; and when I go abroad and meet foreign trade unionists, and we look around and see them outpacing us in their improved standards—one can see the improved living standards in France

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and Germany overtaking ours; and countries like Italy and Japan rapidly catching up on us, not to speak of the high level and the high standards in the United States and in Sweden—I am forced to the conclusion that I should not be doing my trade union job of maximising the living standards of the members I represent if I did not co-operate in the solution of problems which were causing those living standards to rise at what is, comparatively, a snail's pace. So I ask the question: how can we solve our basic economic problems?—and this is the question that is taxing everybody to-day. Of course, we all see the problem from different points of view, but I think we are all agreed that we must get the economic life of this nation into a healthy situation if we are going to contribute to a solution of those balance-of-payments problems which have caused one Government after another to introduce measures of deflation.
In the last few years—and I should like to dwell on this point—there have emerged very tentatively from both Parties endeavours to grapple with this situation, and I do not think it is without significance that both the major Parties have played a part in trying to introduce some form of machinery that might help to discover what was wrong with the state of the economy and what was wrong with industry and I have in mind particularly the "little Neddies". I sit as a member of the National Economic Development Council, so I am privileged to see the work that is being attempted there and the work that the "little Neddies" themselves are carrying out. All this, it seems to me, indicates that there is emerging a tripartite co-operation among Government, employers and unions. This means a form of partnership—not, I should say, involving the use of the stick or the carrot.
In spite of our immediate problems, I am encouraged to observe the work of the "little Neddies", because they are finding out what is at the root of many of our problems. When we talk about economic matters, we still think in terms of our imports being made up primarily of half our food requirements and our raw materials; but the fact is that we are importing altogether too many things that we are capable of manufacturing in
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this country. The figures are very disturbing indeed.
A "little Neddy" which was set up to study imported manufactures found that, in the ten years between 1954 and 1964, the value of our imports of manufactured goods trebled and that their share of the total imports doubled. The volume of imports of manufactured goods rose by 174 per cent. as against a rise of only 6 per cent. for all imports. As has been said already by one noble Lord, our export figures were very good in the early part of this year (and I hope they are going to be sustained), which rather indicates that, in spite of all the problems of wage cost, we are at least managing to hold our own, or are even beginning to improve our export position. But this improvement was far out-weighed by a considerable increase in imports, much of which was not consumer goods—and I think this is a very important point to note. They were not consumer goods: they were manufactured goods, particularly machinery. So, I think we ought to appreciate that, by pinpointing where the difficulty is arising, the "little Neddies" are doing a first-class job of work.
A host of industries have been looked at, but there is one industry which I, as a trade union officer, have always felt was one of the most efficient we have and that is the British chemical industry. Yet, when the import figures were examined, it was found that we were importing a great many chemicals which we were quite capable of producing ourselves. Here, may I repeat that the "little Neddies" are not trade union organisations: they are tripartite, comprising representatives of the Government, employers and trade unions. The "little Neddy" for the chemical industry has given itself the task (I think this gives one the measure of the problem) of endeavouring to arrange for the home manufacture of an additional £31 million worth of chemicals, which it is hoped to substitute for those at present being imported.
It is interesting, and relevant to this debate to-day, that the reason the chemical industry was not manufacturing as much as we should have hoped was its under-capacity; and the reason for this under-capacity—and we understand

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this quite well—is because, in a "Stop-Go" economy, or even in the uncertainty of to-day, there is no encouragement to manufacturers to invest. Unless a manufacturer can look forward to a fair measure of stable certainty—I do not suppose that he expects absolute certainty, but at least he must see ahead; unless he can do this, if the economy is up and down, he has no encouragement to invest. So this very fine British industry, this, on the face of it, very efficient British industry, could have been doing much more for us if it had had sufficient and adequate plant.
Another development, again on the theme of tripartite development, the cooperation of Government, trade unions and employers, was the joint Statement of Intent in December, 1964. I think that here is the clue to one important contribution towards getting the economy into a healthy state. I must say at once—because we are altogether too prone to do so—that we must not write ourselves down as a nation. British industry in many fields is as good as any industry anywhere—evenbetter. The real job is to get the standards of the best averaged over the whole of British industry. But to do this requires co-operation among all those who can make a useful contribution to healthy industry. I believe that already we have established centrally a close co-operative position between the trade unions, represented through the T.U.C., and the employers, represented through the Confederation of British Industry. In fact I must say, sitting as I do from time to time at various levels, that it is most encouraging to see the liberal outlook—if I may say that—of the leaders of British industry to-day. But I agree with the noble Lord, Lord Melchett, that this wants pushing right down to the shop floor.
This, again, is a great problem. We know our difficulties, and we know the many steps we can take to help us get out of these difficulties; but we must still get through to the shop floor, though, unfortunately, time is not on our side. I think the theme is being pushed down regionally through the "little Neddies" and through the regional machinery that is operating. But certainly the attitudes that operate centrally are still not accepted locally. This
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again is a very necessary requirement: a complete change of attitude on the part of both sides of industry towards each other. It is good centrally, but there are many misgivings, particularly at the ground level. I think that the time is past for industrial anarchy, from whatever source that may come. I believe it is in the hope of working more and more towards cohesive representation through the trade unions and through the employers, that the prospect for British industry lies.
My Lords, the present time is a most difficult one both for the leaders of British industry and for the leaders of British trade unions. I believe that the economic steps which the Government had to take were absolutely necessary; but the endeavour to operate a wage freeze is a very ambitious and a very difficult exercise to undertake. The British employers and the British trade unions have made it quite clear that they have grave doubts as to whether this can be operated; but the good feature, nevertheless, is that after great thought, and sometimes great reluctance, both the employers and the trade union movement have now offered to do their best to co-operate with the Government. I would conclude by observing—and I am not trying to be in any way controversial—that in this grave situation, where it is important that we should all endeavour to co-operate, it is a matter of regret that the politicians should play politics so much about such a serious matter.
7.35 p.m.
LORD HANKEY: My Lords, we have had a number of remarkable maiden speeches to-day, and I am very glad that I am able to congratulate the noble Lord, Lord Cooper of Stockton Heath, on what he has just said. I think it is of enormous advantage to this House that we should have the presence of men with such remarkable careers and who have such interesting experience in the new organisms which are being formed for the co-operation of both sides of industry and Government. I thought that what the noble Lord had to say about the "Little Neddies" and the work of "Neddy" itself was of great interest, and we hope he will often come here and give us the benefit of his advice. We shall always be glad to hear him.

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I share the sadness expressed on both sides of this House about the hard words and recriminations and invective which have been exchanged about the economic situation. The situation is much too serious for recrimination. Neither of the main Parties has succeeded in dealing with the real fundamentals of our economic troubles and I think it is futile for the pot to call the kettle black. We are all in this mess together and we shall certainly not get out of it separately.
I think it is really vital to learn from our experiences. As I was for five years chairman of the Committee in the O.E.C.D. in Paris which dealt with balance of payments, economic growth and economic policies generally, I hope I may be excused if I speak with some considerable detachment in this matter. It used to be thought sufficient in the United Kingdom for the Government to look after the balance of payments; the market economy would look after all the rest and a little adjustment of bank rate would then be sufficient. Well, periodic crises of growing severity led to repeated stops and our periods of prosperity grew constantly shorter. After the disastrous stop of 1962—I hope that the Government will not do anything so prolonged again—we came to the conclusion that we must have an adequate level of demand. Without an adequate level of demand it was impossible to pull our industry up or to have any adequate expansion. The Conservative Government knew quite well in 1964 that they were taking a risk. They hoped that industrial expansion would lift us off the rocks and our reserves would carry the burden meanwhile.
We are greatly indebted to the Conservative Government for founding the National Economic Development Council, and for stimulating investment and for accepting that public expenditure must be brought into the national account forecasts. But their bold, calculated risk was a complete failure, as the crisis of 1964 showed. For be it noted that industry had not expanded as much as was hoped, in spite of the development of demand.
The Labour Government added a more elaborate incomes policy; some deflation; in due course, a National Plan; the "Little Neddies"—an enormously valuable mechanism—and many other selective methods of stimulating productive
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investment, exports, mobility of labour, et cetera. But fundamentally they were doing the same thing as the Conservatives: they were preserving a relatively high level of demand in order to stimulate economic growth, and they did it, be it noted, on borrowed reserves. This policy also, I am afraid, has now failed, and we are back to square one. Why? Well, it is certainly true that without an adequate level of demand we cannot have economic growth. But our unfortunate experiences under both Parties show that the opposite is not true: we do not necessarily get growth because we allow demand to expand. Other nations may, but we do not. And why not? My Lords, there are very many factors involved, but in my view we have left this question of economic growth rather too much to the economists, because I believe that the major factor in industrial expansion is innovation: scientific, technical and industrial innovation. In British conditions we get no adequate innovation. We introduce fewer new processes and new products than other countries. We steadily lose our share of world markets. The extra demand needed to pull up our production has merely created inflation because productivity has risen so little, because production has not expanded properly and because wages and incomes have gone up more. I warmly agree with what was said by the noble Lord, Lord Cooper, in this connection.
The statistics are quite revealing. If we take 1961 as 100, the level of industrial production in the United States in 1965 was 130; in Germany it was 128; in Italy it was 134; in France it was 128; in Japan it was 170; and in the United Kingdom it was 118. We were bottom of the class among the great nations. I sympathise with Mr. Brown's disappointment. We must have economic expansion as well as balance-of-payments stability. I do not think it is impossible to have both. There was a remarkable report produced for O.E.E.C. by a group of experts under the chairmanship of the noble Lord, Lord Kahn, whose speech we heard with so much interest to-day. That has proved a new starting point for a complete study of the problem of incomes policies, and I believe that if a proper link between incomes and productivity could really be

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established, this equation could be solved. But until that is done we are not going to succeed.
If we had had industrial expansion comparable with that of other countries, the rise of wages and incomes in the United Kingdom would have been easily financed. On prices and wages, viewed by themselves, only the Americans did much better than we did. With adequate rises of productivity and production we could have had schools, universities, hospitals, motorways, defence and social services and, for all I know, we might have reduced taxes as well. We certainly could have had more incentives, on which I warmly agree with what was said by the noble Lord, Lord Melchett. But if we go on as we are there is no limit to what we are going to have to cut. Our foreign policy is undermined. Our defence policy is undermined. We go cap-in-hand to the Germans and foreign Governments and bankers—I really see no end to our humiliation. It is essential to find a cure; it is essential to solve this fundamental long-term trouble.
Obviously we must have an incomes policy, an effective incomes policy, relating increases of incomes to increases in productivity. I fully support the Government on this. But if productivity does not rise, where does this lead us? Can the Government or anyone in industry freeze incomes indefinitely? I foresee a terrible amount of economic and political trouble in, I suppose, less than a year if we have an absolutely pure freeze. Therefore we must find the means to raise productivity and to secure real innovation all over the country. I agree with all that has been said about the need for productive investment. But how can we get the new machines and the new processes and the new installations actually operating?
We spent, I think, over £1 million on the new dock at Tilbury. An agreement was made by the Transport and General Workers' Union for very much higher wages for the workers involved. But when it came to the point, there was a strike which has been settled only temporarily, and fifteen ships were held up. This is not the first disgraceful incident at Tilbury; there have been others. Then there are the liner-trains; there are the
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demarcation disputes in shipbuilding; and quarrels between the unions in the motor industry. There is the case of the Webb-offset printing. There was a firm which spent millions on a new plant which it has had to dismantle. How in this way are we to get increased productivity? I entirely agree with what was said by one noble Lord about the state of affairs in the printing industry. This country is being exploited by the fact that it is difficult for printing industries elsewhere to compete. Then there are the apprenticeship restrictions in many trades, especially building where conditions are so very difficult, and now that industry has to be restricted.
My Lords, is not the conclusion clear? We have tolerated a state of affairs in which local objectors and purely sectional interests can and do prevent any economic progress. Our great trade union leaders—and we have very great trade union leaders—have little influence in these local matters. Why is this? I believe the reason is that we have inherited and built up a system which prevents them from having adequate influence. In such conditions how can we create an efficient system of communication in industry, like the Germans, the Swedes, and other successful competitors of ours have? Can we blame management, or indeed the trade unions? I do not think we can. My Lords, the present system is at fault, because it often favours local sectional interests as opposed to the workers' national interests, craft interests rather than industrial interests, and short-term advantage rather than long-term interests. The admirable sense of loyalty of our workers is often turned to help a local trouble-maker rather than to their union, their firm or their industry.
Should we not now look at the whole system as a matter of urgency? Should we not face the necessity, the ultimate necessity, for legislation? I am told that the T.U.C. has not yet submitted any observations to Lord Donovan's Royal Commission. That Royal Commission is making a far-reaching and fundamental survey which will take about another two years. Can we let this problem wait for another two years before we formulate a reform, while at home deep dissatisfaction grows and no useful economic progress can be hoped for and while abroad our competitors steadily outflank and outclass us? My Lords, the

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members of the Royal Commission are very busy men. They cannot give nearly all their time to it. Is it wise or sensible, or fair to ourselves or our children, to delay decisions? Can the Government survive two or three years of this? Has not the wage freeze really created a new situation in which we ought to look at it again? What about the next major crisis, which may, on previous form, be only two years or so off?
I wish to urge that we should, by legislation, find a means of working round, after full consultation with the T.U.C., towards a system of industrial unions, superposed if necessary on the craft union structure. I believe that on balance none of the big unions would suffer. They should exercise and carry their proper responsibilities and should be enabled to do so. The union leaders should be enabled to exercise real leadership. There are several ways of ensuring this.
Should not industrial agreements be enforceable? I have great doubts whether at present we have the right system. Is there any other answer to many of the local trouble-makers who, regardless of agreements, refuse to work new machines and processes, organise local strikes and put their workmates out of work? I believe that our workers, and especially their wives, are really fed up with the present state of affairs. Should we not consider forming industrial courts to interpret industrial agreements? The Swedes, the Germans, even the Australians, and many others have courts of this sort. Should we perhaps insist on a ballot before a strike takes place or, at any rate, before a strike can be legal? There will, of course, always be strikes and a right to strike. Let us recognise that. But in the interests of our prosperity and future, should we perhaps consider canalising the right to strike, like the right to use firarms? Here again there are many precedents abroad and even in some industries in this country.
Only if we get the real co-operation of the trade union rank and file, as well as of the leaders, can we hope to make the redeployment of labour a reality and not a mockery. I warmly share the views of the noble Lord, Lord Kahn, on the need for that redeployment, and of the noble Viscount, Lord Chandos, and others, on the possible effects of the selective employment tax.
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Some people maintain that our industrial relations are not too bad, that in days lost per cent. of the working population the United Kingdom figures only seventh in the I.L.O. statistics. I do not think we should be deluded by this argument. Admittedly, we have good industries and bad industries. In some firms I know of, conditions could not be better. But the strikes and lost opportunities in many of our great export industries are most damaging, as any senior member of our Foreign Service can certify.
I believe that the discouragement and demoralisation of progressive management in some of our greatest industries, to which reference has been made, is very great. They invest abroad as the result, instead of here. They say rightly that it pays better. Out goes the long-term capital and know-how and the technical personnel. I do not believe that we recoup a quarter of it in invisibles, though we obviously get the profits. But others get the markets we might have supplied. If we take a national interest rather than sectional one, I do not believe this is really in our national interest.
To conclude, I urge that we urgently consider these difficult long-term questions afresh and quite impartially. I do not wish to be controversial about them. We have many old traditions in all these fields. We have invented trade unions and helped other nations to build them up, including the Germans, who have a very interesting system now. Let us take a really hard and progressive look at them. Let us be prepared to adapt these traditions to our real needs in the future.
I believe, on our past experience, that there must be a National Plan. It must include both public and private expenditure. There probably must be a Department of Economic Affairs to look after the Plan. There must be an Incomes Policy. There must be some reason to hope for higher productivity. We must identify and sweep away the obstacles to progress. Just as the Tudors stopped the Wars of the Roses, so we must face the need for Government and Parliament to restore order in our torn and disordered society. And if, out of all the present welter of trouble and despair we can create a real approach to altogether

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better industrial relations, to real confidence and co-operation between both sides of industry and Government—and we see it coming already at higher levels and it is most welcome—then the whole exercise will bring a quite new outlook to our country, such as both the noble Lords, Lord Shepherd and Lord Eccles, favour.
But this is not a task to divide our Parties and cause recrimination. It is essentially a matter for co-operation and understanding and a common approach. I think personally that the Government will have to consider doing something about it quite soon.
7.56 p.m.
LORD GRANTCHESTER: My Lords, we have had much good advice this afternoon from many distinguished economists and from leaders who have been successful in the development of great industries. I do not feel that anything I might say could add to the strength of the appeal which so many of them have made to the Government to reconsider some important aspects of their policy. I am sure that we shall never be free from troubles and problems: men have a way of solving one and creating another, and I think that there will always be room for improvement.
I feel that there has been a lack of frankness by the Ministers and of failure to speak in words which are understood. Communication, as the noble Lord, Lord Hankey, has just said, is always difficult. So, after the constructive suggestions which have been made, perhaps I may be permitted to try to unravel, to some extent, the story of the present crisis. I shall need the help of the Ministers, to whom I shall have to put a few questions. I hope that they will co-operate, because I believe that if a wider circle of men and women in the country can understand the cause of the crisis, it could be a first step to getting their co-operation in working out of it.
As the right reverend Prelate the Bishop of Southwark said, no one understands what has gone wrong; so perhaps some analysis of the principles and practices involved may help a little. We have grown so used to talking about living in a "mixed economy", as if this were a sort of privately arranged co-existence be-
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tween Conservatives and Socialists, that the great gulf between "a market economy" and "a centrally directed economy" is in danger of being overlooked. This matter cannot be dismissed just because it is controversial. I recall Professor Hayek's warning twenty years ago of the confusion that would accompany
"the creation of a system of planned economy in which the entrepreneur working for profit is replaced by a central planning authority."
I remember a Socialist friend, now in the present Government, taking me to task some years ago for saying that one control needs another control to support it, and so on ad infinitum, until everyone is in his own ordained place, working at an ordained pace for an ordained rate of wage.
There are those, like the noble Earl the Leader of the House, the noble Lord, Lord Shepherd, who spoke to us this afternoon, and other noble Lords opposite, who can make the most painful process to which we are subjected appear to be for the best in this best of all Governments. We were led to believe that the far-reaching changes, amounting to something like a social revolution, would cause us to look back, not in anger, but in gratefulness. Now something has gone wrong, and much confusion prevails, for with what elaborate window dressing the Government set out their theories! A National Plan for the first time in this country! Most people admired "the pie in the sky". And why not? For we were all to get more and more, even if it might turn out to be but more and more paper money with decreasing purchasing power. The foundations were not right, and when the unions blew and storms came in from the sea, the fine house was no longer recognisable.
For many years we in Britain have been contributing to the cost of a considerable body of expert economists and statisticians to which the noble Lord, Lord Hankey, made reference, who made a study of attempts in a number of European countries to check inflation by an incomes policy. If it is too much to say that this policy was discredited, certainly it was shown that the value of such a policy was but marginal and temporary, and that where tried it had created a great deal of ill will.
Why then did the Government make this the cornerstone of their policy? I

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have tried to find an answer to this question. It may be because the American Administration kept on reproaching us, and it was impossible to speak to anybody in Washington who was interested in this subject without hearing the reproach that they had held their price level steady for some years and that they could not understand why we could not do the same. Of course, the conditions in the two countries were quite different; and, in any case, the American Administration was not enforcing a wage freeze: and I have not heard one suggested, in spite of the new wave of inflation that the Vietnam war is beginning to start.
There is no economic motive force upon which a free society can depend other than the "profit motive" inherent in the individual, linked as it is apparently with the instinct to fight for survival. It is what enables decisions to be taken—a regulator or an engine, if you like, which draws its fuel from the expressed choices of individuals made when shopping or buying; and it is these choices that call the production tune in a true industrial democracy. The profit motive has nothing to do with morals or ethics or exploitation. It is curbed by competition. It is not original sin, as some appear to think, for it is not money, but the love of money which is the root of all evil; and we are enjoined to work hard so that we do not become a burden upon others. The profit motive is not incompatible with the conception of the "common good". But the common good must be defined by the law within which the entrepreneur operates. Kill the idea of profit, and indolence or slavery will follow. What is wrong with this Government's policy, in my view, is that it does not sufficiently recognise this elementary fact; many of the economists who have spoken to-day have said this in more technical language.
This country has problems—largely problems of adjusting our thinking and our actions to current conditions, and to freeing our enterprises from the shackles of restrictions and disincentives. What we cannot afford to do is to go on dithering, unable to face the fact that our resources at present are limited, and can only be further limited by stultification and frustration induced by unpredictable interventions by governmental authorities and by continual policy changes. This is a problem, but it does
1014
not constitute a crisis. It only becomes a crisis when the rest of the world, or a large part of it, comes to the conclusion that we are becoming paralysed and, therefore, cannot be relied upon. The Government have largely brought the present crisis upon themselves; and as the Prime Minister has been taking such a dominant role—almost a quasi-Presidential role—then he must shoulder the main blame for its creation.
It is often the little things that are fastened upon by outside observers as showing the way the wind is blowing. Almost the first act of the new Government in October, 1964, as several noble Lords have already mentioned, was to put right in one fell swoop the remuneration of elected Members of Parliament, who alone are responsible for our national expenditure. After this misfortune in example and timing, how did the same Government expect their advocacy of restraint on incomes to be taken seriously? Another early act was to abolish prescription charges, not just for those in need, which would be perfectly justifiable, but so that we could all get free medicine, in addition to free medical advice. The Government thus threw away a £50 million a year contribution towards the very heavy cost of free medicine. That, more than any other single act, I think, shocked many people in other European countries and in the United States, to whom it epitomized what they considered to be recklessness in the squandering of this country's resources. The fact that the Government have raised since taking office an additional £1,000 million by taxation to meet general Government expenditure, and had slipped in by the beginning of this year some £500* million of additional paper money, has made nothing like the same impression. But it is the flexibility in the money supply, as Ministers may call it, or the watering down or debasing of the currency, as I should call it, that made possible the 9 per cent. increase in earnings without any comparable increase in productivity, which upset the Government's calculations and made nonsense of the National Plan. The money supply will be further increased if the Government insist on proceeding
*This figure, Lord Grantchester considers, would be more correctly given as £150 million and confined to the year ended February 28, 1966. [Bank of England Report, 1966.]

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with its plan for the nationalisation of steel.
From my experience of the early postwar years, when foreign currency was limited for holiday makers to £50 (and at that time the purchasing power of £50 was greater than it is to-day), I am sure that if it were desired to find one restriction that would convince everyone in Europe of our hopeless poverty and damage the credit of this country in the eyes of the man in the street abroad, it is the new restriction imposed on spending abroad. I believe we shall lose psychologically, educationally and probably financially, by this exhibition of inward-looking thinking.
I will now come to some more involved matters. In these, as I have said, I shall have to ask for the help of the Minister who is to reply, perhaps on Monday. If I had known anyone was to reply to-night I should have said something to him before I started about these questions. But I shall have to ask for the help of one of the Ministers replying to get the facts correctly established. The first crisis of confidence broke on November 26, 1964, soon after the new Government took office. To support sterling, the Government had placed at their disposal what the noble Earl the Leader of the House, and the Prime Minister in another place, called massive credits to the tune, I think, of some 3,000 million dollars. This credit was made available through their central banks by the Governments of some ten countries working under the auspices of the International Monetary Fund. As noble Lords will recall, we were then told that these credits were an expression of the confidence being shown in Britain and in our ability to achieve our objectives which the Government declared were: first to increase exports; secondly, to review our defence expenditure; and, thirdly, to secure the transfer of more skilled manpower to increase the export effort. Exporters have achieved some success in the first objective, and have had some extra help from Government Departments. The Government are still reviewing defence expenditure. As regards the third declared objective, I have no figures, but I suspect their greatest success in the transfer field is shown in the increased numbers of employees in Government Departments.
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I shall leave the Minister to give the figures of the additional employees taken on in Government Departments since November, 1964. The noble Viscount, Lord Chandos, has told us the extra floor-space they occupy.
I do not think the Government can have drawn on the credits made available in November, 1964, to the full extent. Perhaps the Minister can tell us, when he replies, how much use we made of, how far we went in drawing on, that 3,000 million dollars. He must have the information. Then during 1965 we drew on the International Monetary Fund to the tune of 1,370 million dollars net. To get this in perspective, the drawings during 1965 of all the other members of the Fund, including some developing countries, totalled only 360 million dollars. Out of these drawings, I fancy we must have repaid the amount outstanding on the credits made available in November, 1964. I should like to know whether I am correct in assuming this. It appears also that, out of these drawings, some 300 million dollars found their way into our reserves shown at the end of 1965. I should like to know whether I am right in believing that any credits used and outstanding from the arrangements of 1964 were repaid during 1965.
Then it would be interesting to know the terms which were agreed in respect of the amounts drawn from the International Monetary Fund during 1965. The Fund, as noble Lords know, has observe certain rules and secure repayment in a comparatively short number of years. As noble Lords will also know, it is not a long-term lending institution.
We have been told, from time to time, that the Government have sold assets which they hold for dollars, and added the dollars to our reserves. I think the figures have been published, but anyway I shall not be able to do the sum I should like, so I will let this pass. So far as I understand, the swap arrangements which have been in force for some time between certain central banks have been taking place as before, for we were told that the credits provided and the drawings from the Fund were in addition to other arrangements between central banks which would continue to operate. The original idea of these swap arrangements as your Lordships will remember, was to counter the effect of so-called "hot" money which tended to be moved, other

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things being equal, to countries offering the highest return. I should like to know to what extent in each year such arrangements have operated. Has this arrangement been extended to movements other than movements of "hot" money, strictly so called, which may be considered inconvenient to the country from which they are moved.
Why I have gone into all this will now, I hope, be clear. When money is moved out of a country it may amount to a vote of no confidence in the way in which the country is conducting its affairs. When this happens, and before the rot has gone too far, any Government concerned would be wise to ask itself whether it should change its ways, or at least give an explanation, so that this does not happen. Is it not right that we should at least know what accountants call the trend and magnitude of these movements? I do not want details. The transactions of which I have spoken are in reality very simple matters. The only difficulty is the number of noughts required to-day to express the astronomical sums in which Governments operate, but if the censorship were lifted this "in-and-out" account could be expressed so simply that any man or woman used to simple bookkeeping could understand it. This is part of the process of communication which I think we need if the public is to be informed and to co-operate in the policy which any Government is putting forward.
Now perhaps we can ask what happened the week before last. Does the Prime Minister not have a simple "in-and-out" account on his desk every morning? If so, how was he taken by surprise? Of course the Prime Minister also needs a note of what resources are available, and I wonder whether the slipup could have been here. In view of the obvious confusion that has prevailed, is it too much for us to expect a truthful answer to the simple question as to how this matter of the movement of funds in and out of this country is watched by responsible Ministers?
I have been trying to reconstruct the events of the week before last, high drama and tragedy perhaps that it was. There is not much to go on. What puzzles me is that on June 13 last we were told that an additional stand-by credit of some 1,000 million dollars had been arranged. The impression made on
1018
me then was that we could all go away in the confidence that anyone who was rash enough to sell pounds would not get them back except by paying a higher price and making a loss. If any of us should need to sell a few pounds during our holidays, well that was the good luck of the buyer. So, my Lords, I ask again, what went wrong? I hope the Minister can enlighten us. The only explanation I can think of is that the funds which the Government had available for buying unwanted pounds began to look a little too depleted. This was just the possibility that we believed to be taken care of by the credits announced on June 13. I cannot help wondering whether any strings were attached to the drawing of these credits which were not fully understood.
We were all glad to know that the French were assisting us, not by joining in the group that made the bulk of the credit available but under a separate agreement, if I remember rightly, to the tune of some 300 million dollars. We know the French are careful people and on more than one occasion in international discussions on monetary policy they have made it clear that they do not like the provision of credits which can be taken up "automatically". I am wondering whether some kindly Government politely intimated that they had listened long enough to our Government protesting that they knew the right remedies for our troubles and that they intended resolutely to apply them. Did someone suggest that this time before the credits were released they required action rather than words? Was this, or something like it, the cause of the panic and the obviously unthought-out measures of last week? The one step which has been continuously pressed on the Government since the granting of the first credits in November, 1964, has been that expenditure by our Government must be cut drastically. There is no other known way—except possibly to go over to the rigid and absolute controls of Communism—of halting the inflation which too much Government expenditure has generated.
The Government try to escape having to admit their failure by putting the blame on what they call "pressure by foreign bankers". It seems to me this must be about the most unworthy taunt

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ever used by British Ministers and broadcast by the B.B.C. The creditors of this country, from which our Government have sought help, are first, friendly Governments who have lent us some of the savings of their own people. Noble Lords opposite have reminded me on more than one occasion that the Bank of England, our central bank, is firmly under their control since the Act passed when they were last in power, and that even if the Governor is still called the Governor, the controller is the Chancellor of the Exchequer. It is the same with the Governments which have lent us the money; it has been done through their central banks, but it was the responsibility of the Governments.
The other principal creditor is the International Monetary Fund, whose officials are international civil servants working under rules which we helped to draft. They are responsible to member Governments in the institution, which itself is an organ of the United Nations. So I believe it gives a completely false impression if we go about talking of "pressure from foreign bankers" as the act of those who are trying to tide us over our difficulties while we put our house in order. This is not the way to make people understand the true facts.
I can only conclude by saying that to me it seems that the Government have dissipated a surprising amount of good will which has been shown to us over the past two years, and I am sorry that I cannot see how the necessary confidence in this country can be restored so long as the present Government continue in office.
8.29 p.m.
LORD BARNBY: My Lords, this debate is rather an unusual one. For my part, after the flow of wisdom which has gone on for several hours I am now going to return to the beginning. The noble Lord, Lord Shepherd, opened this debate in his usual convincing manner, and many of us will have been almost convinced by his manner that much of the criticism we wanted to utter was incorrect. This was followed by the noble Lord, Lord Carrington, who in his urbane way and in unprovocative language applied a good castigation to the Government, and I am inclined to think that it will be felt that there was justification
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for saying that much had gone wrong with the Government's timetable. There was an indication by the noble Lord, Lord Shepherd, that with other Bills coming to this House an unusual procedure was going to be followed. I understood him to say there were precedents for it, but when the noble Marquess, Lord Salisbury, challenged him he gave an assurance that this would not be another precedent. These seem contradictory terms.
It was wise of the Government to decide to divide this debate; whether it was from compassion or fear I am not sure. I suspect that had it been compressed all into one day, opposition would almost have run out of steam. After a long membership of this House, I believe there has never before been so many speakers in an economic debate before the Summer Recess. This indicates quite a change in the composition of this House: so many more Members wishing to take part in an economic debate is quite a novelty. In the past there often have been relatively few speakers when a Finance Bill has gone through this House. The intention of this debate was to take the place of the discussion on the Finance Bill when it gets here, by enabling Members to "let off steam" on the Government Front Bench in this afternoon's discussion. There can be few subjects that have not been touched upon, and therefore anybody who speaks now does best just to pick out those points that he feels he particularly wishes to air and which otherwise he will have no opportunity to do before the Houses rises for the Recess.
The question of overseas loans, aids, grants, whatever term is used for the transfer of taxpayers' money to these overseas countries, has been referred to several times. I take this opportunity of raising a reply which was given in this House recently expressing the view that this £225 million, which seems so large an allocation, is certainly justified and the hope that it may even be increased. I cannot, in raising this matter refrain from reverting to the words of the noble Lord, Lord Beswick, in which he deplored a suggestion that
"we should get out of our own economic difficulties by imposing extra burdens on those so much less well off than we are."—[OFFICIAL REPORT, Vol. 276 (No. 39) col. 366; 19/7/66.]
That is the dickens of a philosophy! It means that when you are hard pressed

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yourself in business and somebody else does not pay what they ought to pay, or needs assistance badly, you must put yourself in a difficult position in order to help them out. That is not business. It is a poor way to run the country's affairs. I feel still, and other have pressed the same view to-day, that these loans ought all to be tied and there should be some selectivity. I think these emotional ideologies override wisdom and practicality. I would also extend this view to the United Nations Special Fund which just soaks up money.
I would appeal for the propriety of foreign private investment. The noble Lord, Lord Shepherd, told us that this was averaging, I think, £100 million a year; the figure I have seen is £94 million a year. It seems stupid to impose impediments on this investment, because the profits that arise from foreign investment contribute to the balance of payments. We were reminded recently that Government overseas expenditure in the invisible acount averaged£272 million per annum. I would refer to migrants' funds. These, it appears, are going to be impounded. Why should the remittance be limited to investment currency and not security sterling? This reminds me of the robbery on an earlier account, when we impounded a migrant's funds and then devalued and robbed him of large parts of his assets. I should have thought migration ought to be encouraged. Goodness knows! expenditure on new towns and social services is such that if a certain proportion of people continued to flow out there would be that much less strain on our resources.
There has been a tremendous emphasis on export. If the Government want more export, let them increase the encouragement by bonuses or subsidies or whatever you like to call it. I was attracted, too, by the views of the noble Lord, Lord Cooper of Stockton Heath, that imports, particularly luxuries, should be restricted. Eight and 8½ per cent. money is not going to give very much encouragement to export; it is going to make much normal overseas selling unviable. Cuts in road expenditure, delays in 'phone installations, could easily be balanced by cuts in the amounts expended on prescriptions and in housing subventions, a point on which the noble Lord, Lord Melchett, put such emphasis. The Rhodesian sanctions and aid to Zambia seem to be a luxurious dogma. Petrol introduced into Zambia
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at £1 a gallon, inflation of copper prices which are now, it seems, going to cost British industry £125 million—up £25 million or £50 million this year—seems to be another luxury and ought to be avoided. Increased costs in buying tobacco from other than African sources is going again to make a strain on the balance of payments.
The noble Lord, Lord Shaw cross, gave sufficient of a drubbing to the selective employment tax, and other speakers followed. I hope that when the Government spokesmen come to reply they will give us the information which has been asked for before: whence is to come the money for the smaller firms who depend on overdrafts to pay the selective employment tax They can lean only on their bankers, but the bankers are restricted in lending money. How is it going to be dealt with? It seems—this really has been emphasised—a crisis of confidence, and many would have thought that the best evidence to encourage restoration in sterling would be for the Government to cut their expenditure more. Further legislation, steel nationalisation, increased bureaucracy, legislation which makes more civil servants, all discourage the feeling of foreign bankers.
The Government have emphasised that they have made a great many cuts in Government expenditure. But if something like a Geddes Axe had been applied there would have been much greater respect for the prospects of sterling. Let it be remembered that it is not only the foreign bankers, but the aggregate of traders throughout the world who, by the leads and lags of sterling operations, contribute to the feeling of strength or weakness in sterling. I should have thought the dollar premium at up to about 27 per cent. for these many months would have been a strong enough warning to the Government, long before this, that other measures should be taken. The Government Front Bench must have been encouraged because so much admonition with regard to trade union restrictions has been voiced. Everyone knows that they contribute to overtime wangling, to absenteeism, and to other disruptions of industrial efficiency.
I would conclude with one startling illustration. The Chairman of a Commonwealth shipping line reports that a 1 per

1023
cent. increase in the turn-round of their ships would make a saving of £120,000 a year. If that be one illustration, goodness knows what could be done in the country as a whole. As so many speakers before me have emphasised, therein lies the possibility of increased efficiency which will contribute to the strength of sterling and of our balance of payments.
8.43 p.m.
LORD MACPHERSON OF DRUMOCHTER: My Lords, may I preface my few remarks by asking the the noble Lord, Lord Hughes, to convey to the noble Lord, Lord Shepherd, my appreciation on his most excellent arrangements for our refreshment this evening? Possibly the excellent of the arrangements explains the emptiness of the Chamber at present.
I have now listened to two debates and the current debate in this House on the economic situation, and I agree with a great deal of what has been said, particularly with the most impressive speech of the noble Lord, Lord Shawcross, who made a brilliant appraisal of the whole position. It was gratifying, too, to hear the noble Viscount, Lord Chandos, touch on the necessity for incentives, and again from the noble Lord, Lord Melchett. But are we tackling this problem on the right lines? My remarks are not directed solely at the present Government but apply equally to the past Administration: and I appeal to your Lordships to take this issue out of the orbit of Party politics. The situation is far too grave for either political Party to try to gain over the other.
I should like to quote from a paragraph of The Times of July 15, which sums up the position as I see it to-day:
"A stroll past any building site, a visit to any factory gives the real clue to the country's troubles. There are too few people doing a full day's work and this does not exclude management or many of the ancillary service industries. The present state of our industrial anarchy cannot go on. If it does, the day of reckoning will inevitably come."
With the greatest respect to the Prime Minister, it is no good appealing to people's better nature to work harder. As he must now have learned, this does not work. There are only two ways to increase productivity: the first through fear, and the second by incentives.
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Dealing with fear, people will work harder if their livelihood or way of life is threatened. I think this was shown during the last war, when the whole country, inspired by the leadership of Sir Winston Churchill, settled down to do the job in hand and worked. Productivity is usually high when there is underemployment, when there is a definite incentive to keep one's occupation. This fear caused by unemployment is not a solution anyone in this House would advocate. I hope that those days have gone never to return; and I am against a controlled economy which brings this about.
This leaves the only other alternative: incentives and payment by results. It must be borne in mind that even this remedy has been lessened by the Welfare State. I am in favour of most of the social improvements of the past twenty years or so. But in my father's time it was necessary to work hard not only to keep your employment, but to save to educate your children, in case of sickness and for your old age. To-day, even if it were possible to save, it is not so necessary as the State now looks after you if you are sick or unemployed, the State educates your children and, lastly, looks after you in your old age. These are all wonderful advances, but they all tend to reduce the necessity to save. Furthermore, if you should accumulate any funds these funds will depreciate at an alarming rate year by year due to the depreciation in the value of money. If, on the other hand, you invest your savings, which is greatly in the national interest, you are penalised by various types of taxation on unearned income.
We have to find a way of creating incentive if we are going to tackle this problem. I am suggesting incentives not only for the factory worker, but from the bottom to the top. Top management must have the incentive to remain in this country to lead our industries and businesses. In the same way, the operators and workpeople generally must have incentives to produce more. I am also suggesting incentives for companies, banks and businesses of all kinds, as the noble and so wise Lord, Lord Shawcross, says, to produce a bigger cake and thus increase the overall prosperity of this country. In

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order to implement my suggestion, I realise that it will be necessary to revise completely our present taxation system so that everyone in this country can earn more and retain this extra benefit.
It is no good encouraging (shall we say?) the South Wales miner to put in more hours and thus earn more money if the increase in his wage packet puts him into a higher taxation bracket, which of course means that he will then lose the bulk of his additional earnings. In the same way, the keen executives, inventive scientists, creative designers, have to be treated so that they do not lose all their additions in surtax.
The trade union movement must cooperate, and I am pleased to say that they are showing signs of a more realistic approach to this problem, but not enough and not soon enough. The trade unions must realise that payment by results under full employment, which we virtually have to-day, is not only in the interests of the country but in the interests of their members, who if they are prepared to work, can improve their standard of living at a much faster rate than at present. To restrict the income of any section of the community is basically wrong, if a country and its people are to prosper and to continue to expand their economy. This can only be achieved by higher wages coupled with increased productivity. This will be obtained by hard work which, in turn, will only be achieved by incentives.
I do not propose to deal with restrictive practices—words which are much bandied about. We all know that it is wrong, but very little is done to change the position. This problem must be tackled without delay together with the other archaic systems. The whole concept of freezing prices and wages and of increasing taxation is fundamentally wrong and will not solve our problems. Most people in this country dislike restraint, restrictions and Whitehall supervision. What we all desire is a chance to improve our position, which in turn can be harnessed to the solving of the country's problems.
To sum up my suggestions, a non-Party study group in conjunction with the trade unions and management should be set up to suggest ways and means of changing our taxation system and harnessing labour and management to an incentive basis. I am not suggesting
1026
a Royal Commission which will report in two years' time. This whole question is vitally urgent and must be settled, not even in months, but in weeks. An entire new approach has to be put over to the people of this country, an approach which I am sure will be welcomed by everyone who has been waiting in despair for tangible leadership, giving action and not words. There is an old proverb that says "Where there is no vision, the people perish". We have the resources, we have the skill, and I believe we have sufficient labour force not only to tackle our economic problem, but to give everyone a chance of achieving a very much higher standard of living.
8.55 p.m.
THE EARL OF PERTH: My Lords, I have done a sum, and I find that I am the twentieth speaker to-day; that there are half-a-dozen to follow me, and we have had three noteworthy maiden speeches—all on the economic ills and remedies of to-day. Then, of course, on Monday we are going to hear yet more speakers on this subject. I do not intend to be controversial, because I do not think this is the right time for controversy; but I must confess that I am tempted to be so, when I think of the folly of nationalisation of steel at the present time and the issue for this purpose of £500 million worth of bonds.
I do not know whether your Lordships realise that the measures which we have heard announced these last few days will result in about £500 million of spending being clawed back from the consumer; yet the same sum is shortly to be issued in Government credit. That must inevitably be inflationary and must lead to great consumer demand. I hope that the Government may consider whether they could not at least delay this issue; indeed, this whole affair of steel nationalisation. I know that it is wrong; many of us know that it is wrong at this time; and the "Gnomes"(whoever they may be) know that it is wrong. I leave it at that.
I intend to devote my speech, which I hope will not be very long, half to general points and half to Scotland. The first point I want to make is one which I hope is constructive, and will, I believe, be extremely popular. It is in reference to what I would call the

1027
monstrous regiment of civil servants, be they Central Government or local government. I should not like it to be thought that I am against the civil servants as such—far from it; many of them are my friends. But as a body they have a characteristic which must be ruthlessly checked; that is, that if left alone, the Civil Service grows and grows. The present Government have recently encouraged this growth, with new forms of taxes and new forms of Government administration. I know that each Department tries very hard to check its own number; I know that the Treasury, as the overall watchdog, try to do the same thing. But I also know that they have completely and utterly failed. We have heard the story of the growth in the area where they are accommodated in London at present, and we have also seen the figures showing that they are increasing every year.
What I have in mind is that a Committee should be set up to use the pruning knife on the Civil Service—I nearly said the "Geddes axe", but that perhaps is far away, and it was a pretty vicious and destructive axe. But I have more in mind the work done by the May Committee some thirty years ago. I should hope that work by such a Committee would cover both local and Central Government authorities. At the same time—and this would be most important—this Committee should be charged with the special work of trying to cut down paper work. We all know the countless forms which we have to fill in, in duplicate, in triplicate, and even more. Paper is the growth-food of the Civil Service. Furthermore, and even more serious, the private sector is compelled to fill in these forms, and the amount of labour needed to undertake this task is even greater than the number of civil servants required to deal with the papers when they are returned.
I will not try to give instances of this growth of paper work, as most of your Lordships could give your own examples; but I was impressed by what happened a little while ago in the stores of Marks and Spencer. Your Lordships may recall that they announced they were going to do away with all internal office invoicing. Many people said that this would be disastrous; that they would lose a
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lot of money, and that they would certainly get into trouble. The result was exactly the opposite. They did very well; they had no losses, and everybody rejoiced at the reduced paper work required. I am quite clear that whoever thought that one up ought to be a member of the Committee which I am proposing if the idea were to be taken up, another member of the Committee should be a professional business efficiency expert, who would be able to comment on Government machinery and the countless new jobs which have been created. I repeat that if the Government did appoint such a Committee they would be doing something which was extremely popular and would help us all to be better tempered and to get on with the productive work that we all want to get on with.
My second general suggestion arises from something which I read in the papers at the same time as the trouble in the dockyard over the new timber-loading machinery, which the noble Lord the Leader of the Opposition mentioned earlier. Your Lordships will recall that this meant using 16 rather than70 men on a particular job. I read in a paper about the experiences on the Pacific Coast of America. Many of your Lordships will recall that fifteen years ago the ports on the Pacific Coast of America were very nearly dead. For example, I remember seeing San Francisco where nothing at all happened. This was due to strikes, and the strikes were started through fear of redundancy and of modernisation.
Perhaps the leader of the strikes, and the leading cause of all the trouble, was a gentleman called Mr. Harry Bridges, whose name in those days was anathema in the country. The article I read told how all that had changed; how to-day Harry Bridges and his men are after the employers and the dock authorities, saying, "Get on with the modernisation; get on with efficiency", and everybody is prospering. The employers are benefiting; the work in the ports is done more quickly, and the workmen are making a great deal of money. My suggestion is either that we should ask Mr. Harry Bridges and one or two of his colleagues to come over and explain to the employees and employers here, their philosophy, and how they are making things work; or, alternatively, that we

1029
should send over appropriate representatives of the port authorities—and I have particularly in mind the unions; the workers as well as the employers—to see for themselves whether there is not something they can learn from this extraordinary turnaround which has taken place on the Pacific Coast.
I should now like to turn to Scotland, and first I would say that I feel very much with the noble Lord, Lord Fraser of Allander, that many of the troubles there have been caused by the policy for so long of low rents for houses. At one time an attempt was made to get this situation put right, and there has been some improvement; but I beg that this effort is pushed further and that, one way or another, the local authorities are forced to raise the rents, except, of course, for the hardship cases. There is no doubt that that policy is stultifying; that it prevents the building of new houses and causes the effects which the noble Lord, Lord Fraser of Allander, outlined.
There is another point that I want to make about Scotland. I think I have detected over the last six months or a year a change in the policy which concentrated on developing in the growth areas. Toothill said that the correct thing to do was to work on the growth areas and develop from there. This policy proved very successful, and we all know how Scotland is getting out of its ills. But recently I have detected a change. The whole of Scotland, except for Edinburgh, is a development area, and I think there is a danger that in looking at the country overall we shall lose what has been happening with the particular. As I say, I have in mind these growth areas, and I hope that the noble Lord who is to wind up this evening will be able to give us an assurance that there is no change of policy in this respect, and that the Government will concentrate particularly on encouraging where things are going slowly. Nothing succeeds like success.
Lastly, I want to turn to the selective employment tax, which many of your Lordships have already mentioned. I am not against a poll tax as such, but I am with the noble Viscount, Lord Chandos, the noble Lord, Lord Shawcross, and others, in the belief that as it is now this tax is wrongly conceived. I would rather
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have it the other way round. If I were going to give any encouragement to hoard labour, I think I would give it to the service industries, rather than to manufacturers. What I am quite clear about is that many of the manufacturers are the worst of all for hoarding labour; and hoarding labour for producing things which, in face of our present economic problems, are of no importance at all.
On the other hand, we have all read how important it is to have better selling abroad. Who sells better, or who is more important in the selling, than the merchants and those organisations whose special job is selling overseas? Yet they are all penalised. This seems to be the wrong way round, and if this is true in relation to the general position, how much more true is it in relation to Scotland? We know the difficulties of Scotland. We know the difficulties in many areas of trying to develop employment. In many areas tourism is an essential, and perhaps the only, industry in which there is real promise of greater employment. Yet we know what happens. It is condemned; the money has to be taken away from them, they have to pay the tax, and they have no relief.
I am not going to elaborate on this aspect, because other noble Lords, better qualified, are to speak on the subject. But I would ask the noble Lord, Lord Hughes, to seek from the Government that a new category of selection—that is, a geographical category—be considered and, indeed, included in the legislation. If only we could have a geographical category, which of course would include the Highlands, and perhaps some parts of Wales, then a great many of the difficulties facing Scotland would disappear. When I say that I hope there will be a geographical category, I would ask that a line be drawn in the six Highland counties which would not be asked to do anything. They would not be asked to send a return one way or the other. This would be a good example of saving unnecessary paper work, and they would simply be excluded from the whole of the legislation. Paper work would go out of the window; everybody would be happier, and the Highlands would benefit.
To conclude, my Lords, I would recall the three things on which I set particular store. First, and above all perhaps, there is the idea of a Committee—and it should

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be an outside Committee, not connected with the Government—specially charged to try to cut down the number of civil servants at the present time, particularly in relation to the new creations of Government Departments, and so forth, and to the new laws which entail form-filling. If that paper work were cut down, we should all rejoice. Secondly, I hope that earnest consideration will be given to the idea of trying to learn from the experience of the West Coast of America in regard to their ports. Lastly—and I should rejoice in this as much as in anything—I hope we may be told that the Highlands, as a new, geographical category, will be entitled to enjoy the benefits of exclusion from the selective employment tax.
9.9 p.m.
THE EARL OF CROMARTIE: My Lords, I should like to draw your Lordships' attention for a moment to the White Paper issued by Her Majesty's Government entitled, The Scottish Economy 1965/70, A Plan for Expansion, and in particular to paragraph 25, on page 8. I quote:
"An increased demand in the growing industries cannot, however, be achieved without continuing purposive and vigorous efforts by the Government and by industry in Scotland which is still going through a process of transformation and change."
My Lords, how does the selective employment tax encourage this pious note? I submit that nothing could be more discordant than this particular Hungarian Rhapsody. Again, in the same document, I would draw your Lordships' attention to paragraphs 22, 23 and 24, which indicate that, in 1964, 76 per cent. of labour in the Highlands of Scotland was engaged in services. An average proportion of only 10 per cent. is engaged in manufactures in the Highland counties compared with about one-third in Scotland as a whole. Is this not a striking index of the problem of the Highlands? This new tax will hit the Highlands and Islands disastrously, and will have a detrimental effect on the social and economic development of this, the largest area of Scotland.
How completely all this is at variance with the Government's alleged policy of developing and improving the economic position of the Highlands! As was so
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well expressed in your Lordships' House during the debate on agriculture, the farmers and farm workers have shown a shining example to many other industries when it comes to productivity and economy of labour. Yet this most productive of industries is now forced to make an interest-free loan to industries who far too often have a very poor record in this respect. Productivity and economy of labour are essential virtues in our present condition. To collect and repay this imposition will no doubt require yet further civil servants.
It might interest your Lordships to consider very briefly yet another absurdity. A thriving, progressive firm in Inverness—I refer to A. I. Welders, Ltd.—wish to expand, but to do so will subject them to this tax. It would appear that, to qualify as a manufacturing industry, office staff must not be more than 50 per cent. of the total staff in an establishment, an establishment being any part of the company's premises not split by a public road. A.. I. Welders are split by a public road, and the most suitable area to which to expand is on the opposite side of the road from the office. The firm may therefore have to reconsider this project. The same firm employ for over eight hours a week a grand old lady of 84, so the pay-roll tax will be levied and will be repayable due to the age of the woman—but by a quite different Ministry, my Lords. I think John Knox would have had to coin an even stronger phrase than "monstrous regiment" had he been referring to civil servants and not to women.
In the long and painful history of taxation, can there ever before have been a tax where less thought had been given to the unhappy but inevitable consequences? Why should farmers and many others of real worth to the country subsidise a manufacturer of sticks for lollypops? That may be an exaggeration, but it goes to describe what I mean Turning for a moment to the effects on local government so far as it applies to the Highlands, I would point out that the White Paper states that arrangements are to be made to offset the effect of the tax on local authority finances, although excluded are local authority services which are in direct competition with private enterprise. But nothing is said about direct labour departments.

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Others have stressed the quite unjustifiable burden which will be placed on the developing and catering and hotel industries, and which will be so very damaging in the Highlands where tourist trade finance is vitally important and does much to stabilise, and even increase, our dwindling population.
In certain sectors, confined to the Scottish industrial belt and England, there may be some justification for some part of this tax; but for the Highlands it is utterly destructive and makes a mockery of the Government's much published desire to halt the loss of our people from their homeland and make the Highlands and Islands a land of greater opportunity for its sons and daughters. The Government have so far refused to vary this tax in any way; but would the Minister not agree that there are areas of Britain where this tax will bear too heavily and that there is a case for regional differentiation?
9.15 p.m.
LORD BALERNO: My Lords, it is very interesting that the noble Earl, Lord Perth, should have spoken about the question of the rents of council houses. I should like to support him in what he said. I think it is a scandal of which Scotland should be thoroughly ashamed that we are such national mendicants in the matter of these low rents which are charged for council houses compared with the rest of the United Kingdom. I do not think any particular Government can be blamed for this; it is a sore which has been running for too long. I am sure the Government would have the support of all Parties if they were to take this particular bull by the horns and to insist that council house rents in Scotland be brought into line with council house rents in other parts of the United Kingdom.
From the "bull by the horns" I should like to go to the problem of the dairy cow. The dairy cow is the very basis of the agricultural economy of Scotland. Cattle represents over 50 per cent. of the total marketed agricultural output; and the production of beef in Scotland is dependent—up to 80 per cent. at any rate—on the calves that are produced from the dairy herd. There is a lot of slack that can be taken up in this respect. Imported dairy produce has increased in value considerably in recent years. Taking only the jump from 1963–
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64 to 1964–65, and taking only the dairy produce imported from Australia, New Zealand and Canada, there has been an increase from £94 million to £110 million. If a small proportion of that difference of nearly £16 million had been injected into the dairy industry of this country—only a small proportion through the medium of the Price Review—that extra amount spent on imports could have been saved. I submit to the noble Lord who is to reply that in the Price Review more consideration should be given to adequate remuneration to the dairy farmer; because without this there will not be the further expansion in Scotland, which must be primarily in livestock. We are limited in the amount of further increased production which we can get in cereals. Any further increase must come from livestock production, and it cannot come in this way unless we solve the problem of the dairy cow.
My Lords, another problem facing Scottish farmers relates to the question of their bank advances, which come to nearly £72 million. That is a greater sum than the industry earns in a year. If there is to be a squeeze on bank advances to farmers, inevitably there will be a reduction in agricultural output. I believe that the increase in the bank rate represents an additional bill to Scottish farmers of some £700,000. I welcome the statement by the Minister of Agriculture, Fisheries and Food, made in another place on July 26, that these matters would be taken into account at the next Price Review. But that often represents hope deferred, and farmers like to know a little more about what might happen at the Price Review. It would therefore be a good thing if some greater assurance could be given.
I congratulate the Government on their decision regarding brucellosis eradication. This represents an important and an enormous step forward and will lead to more efficient production, whether in respect of milk or beef. I also welcome the scheme relating to the health of pigs, which should yield substantial results. Both are long-term projects and it is a welcome thing that they should be announced at the present time when one might have expected a tendency to say that money should be saved. One is extremely grateful to the Government for having taken a decision on these matters.

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From agriculture, I wish to turn to one of the matters which affects agriculture—that is, the price of electricity. It was recently announced that the South of Scotland Electricity Board was proposing to increase its charges by 6 per cent. I understand that this increase has been deferred. It should have taken place on July 25. One hopes that the Government will make certain that these increased charges are not imposed on the nation, and particularly on the agriculture industry. There is a point about these charges to which I should like to draw the attention of the noble Lord, Lord Hughes. A rate of increase of 6 per cent. was announced by the Board, yet two examples were given in which the increase was more than 9 per cent. There are consumers who have been able to do their sums in respect of their own consumption of electricity and who say that for them the increase might be as much as 10 per cent. or 12 per cent. When a nationalised industry, or board, such as the South of Scotland Electricity Board, states that an increase is to be 6 per cent. it should make sure that the increase is not 9 per cent. or more.
My Lords, from the fuel for the farmer I should like to come to fuel of another kind which derives from a farm product, namely, Scotch whisky. In another place the information has been given that it has not been possible to estimate the revenue expected from the increase in the duty on Scotch whisky, but over all spirits the increase is expected to be about £12 million in a full year. Most of the countries to whom we export Scotch whisky base their customs duty on our own excise duty, and if we increase our duty they increase theirs, and thus the export of whisky tends to decrease. I can hardly expect the Government to look very sympathetically upon this suggestion, but it is a point to which I think their attention should be drawn.
Time is going on my Lords, and I am not going to say all that I might have said. But I notice that the Secretary of State for Scotland has said that, so far as Scotland is concerned, we are sheltered from austerity cuts, and that he sees a silver lining to the National Economic Plan. Pray God that this is so!
9.27 p.m.
LORD FERRIER: My Lords, as the last of a long line of speakers I shall be unable to restrain myself from dotting some "i's" and crossing some "t's", but as we are all looking forward to the speech of the noble Lord, Lord Hughes, I will be as brief as I possibly can. The first duty I have is to congratulate the noble Lords, Lord Fraser of Allander and Lord Cooper of Stockton Heath, the last two maiden speakers we have had in this debate, on their matter and to express the hope that we shall hear from them again.
I have little to add to the enormous amount that has been said already and will confine myself to Scottish matters. As for S.E.T., I feel inclined to emphasise what the noble Lord, Lord Shawcross, said. This is a rotten tax ab initio. We may try to urge the Government to soften the effect on the Highlands and Islands, but it is a rotten tax, if only because it will add to the enormous amount of paper work. I would add to what my noble friend Lord Cromartie said about hotels that the season in Scotland is so short, and a tax of this nature adds greatly to the cost of a business which is already handicapped not only by the short season but also by the Catering Wages Act, which limits the amount of work done by people who would gladly give more time if they were not prevented by law. I would agree with what has been said about the inequity and iniquity of low council house rents.
My noble friend Lord Perth suggested sending deputations to the Pacific Coast of America to study the working of the docks there: deputations of dockers, yes: but not of employers. This has been tried over and over again in many other industries and when the deputations have come back here, their efforts to improve efficiency and economy in operation in this country have been frustrated by the restrictive practices of labour which the employers in other parts of the world do not have to face.
As regards electricity, to which my noble friend Lord Balerno referred, I look forward to hearing that this standstill will be well established, because when we come to have a debate on the Scottish economy soon after the House reassembles, I imagine that this will be a major problem in the matters which we

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shall have to consider. As for the monstrous regiment of civil servants, I feel that one suggestion that can be made, which has not been made already, is that the Government should maintain, and increase, if they have it already, a careful job analysis in regard to the jobs done by these people. There are far too many people doing jobs which could be done by fewer. In that connection, I would refer the noble Lord, Lord Hughes, to the speech yesterday of my noble friend Lord Stonehaven in connection with agricultural housing in his part of the world.
So far as tourism is concerned, as much has been said as is necessary at this juncture. But I feel that we should keep a sense of proportion about the industrial viability of the Highlands and Islands. There is too much moonshine in suggesting that more could be done in some of the islands which are better left to concentrate on their indigenous undertakings. We must also keep a sense of proportion on the matter of emigration. The fact is that work abroad has great attractions for the Scots—abroad not only overseas, but also in England. I was myself an export for thirty years, and one must face the fact that there are more Scotsmen abroad who call themselves Scotsmen, and nothing else, than there are in Scotland to-day. Above all, let us do all we can to retain our Scottish reputation as workers.
This leads me to the main burden of my contribution. The other day I took a taxi in the City and asked to be driven to the House of Lords. "Oh Gawd!", said the taxi-driver, "you don't know what you're asking." I said, "What's wrong with that?" "Garden Party", he said. That I had forgotten. So I said: "Then, if it is all the same to you, take me to Mansion House station and I will take the Underground." "O.K.", he said, "but that gives me only five minutes to say what I want to say." I said: "What about?". He replied: "About the economic situation." He went on: "I am self-employed. This is my cab. I do a full day's work, and I tell you half the people in this country are not doing a fair day's work." Numerous noble Lords in the course of this debate have mentioned the matters which this man put most concisely. He said: "It's 'Couldn't-care-less. Over to you. Why
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should I? It's not my job. Take it or leave it.' That's why we've got in the mess."
We had a very short continuation of the conversation because I had only a short journey, but the taxi-driver cited some instances in his work in which he came across this problem of restrictive practices. We spoke of the case, which has not been mentioned to-day, of the trifling oil-rig repair which was refused by some East Coast repairer at ten minutes to five because, he said, he knocked off at five. It would have taken only twenty minutes, and I understand that the stoppage in the rig was costing £250 an hour. So my talk with the cabdriver ended, but he had voiced what many of us feel to be the basic cause of the economic situation throughout the land not only in Scotland, but in England, and everywhere else. Can nothing be done to connect an honest day's work by each individual to the welfare of the State? Too many individuals seem to believe that the Welfare State owes them a living. Yes, my Lords, I believe that somthing can be done, and the noble Viscount, Lord Eccles, touched on it in his speech. It can be done, I do believe, by re-establishing a wholesale respect for absolute integrity—integrity in everything; and this must start right at the top.
Let us all be honest with ourselves. Let us stop talking of "the Labour Government"," for instance, when as a matter of fact it is a Government of doctrinaire Socialism. Let us stop talking about "bringing industry into public ownership". It is publicly owned right now, not only by investors: every holder of a life insurance policy is a part owner of British industry. "Nationalisation" does not mean bringing into public ownership: it means bringing the people's investments under Government direction and control. Why cannot people stop using the words, "the working man", as a sort of backhanded sneer at management—a sneer at the boss? Can we not stop preaching the abolition of class with one voice, and provoking class suspicion with another? Management, certainly in my experience, does not sneer at the working man. The nation's suspicions are reserved for the trade unions, which too often frustrate management plans for efficiency. The stranglehold which some of

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them have at the very throat of productivity was exemplified by the rush of seamen to sign on for long voyages before the seamen's strike.
I also feel that there is an element of "living a lie" in this talk of redeployment, when in fact we mean unemployment. The Council of the T.U.C. may make their decision, but why do they not control their members? Let us face the fact that it is morally wrong for voters to be kept in debt to a Party by uneconomic rents for State-owned houses which should be subsidised only for the needy. Lastly, let Government, of whatever Party, remember the words:
"This above all: to thine own self be true
And it must follow as the night the day
Thou can'st not then be false to any man."
9.38 p.m.
LORD HUGHES: My Lords, your Lordships will forgive me if I start my reply to this very long day's debate by taking particularly the Scottish points. My justification for doing so is that originally my intervention in this debate was to be in the middle to reply to a purely Scottish debate, but it has not quite worked out that way. I must also say to noble Lords from Scotland that they must forgive me if part of the answer to their particular points must be deferred in a general answer to the debate, because some of the Scottish points which were made are merely aspects of the national problem, and it would be wrong to try to deal with them in isolation.
I think all Scottish noble Lords who have spoken have referred particularly to the effect of the selective employment tax in Scotland, and in particular to its effect in the crofting counties. I must say I was very much impressed by the rather unusual suggestion made by the noble Earl, Lord Perth, that the easiest way was to except the crofting counties from the legislation bringing into effect the selective employment tax. This is indeed a revolutionary suggestion, and none the worse for being that. It would, however, perhaps have been easier for me to do so if I could have found even the slightest precedent in the activities of the preceding Government. If, for instance, when they had increased the tax on whisky they had excepted the crofting counties, as the largest producer, from the effect of the tax, it would have been
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a help; if they had said, "There are so many people in the North of Scotland who are not so well to do, we will except the crofting counties from the payment of income tax", it would have been an even more useful precedent.
I am afraid, however, that if I were to go to my right honourable friend the Chancellor of the Exchequer and suggest at this particular time so revolutionary a fiscal measure I should not get very far. But it is an interesting point to keep in mind, and when perhaps in a future debate there is criticism of the extent to which the resources of the country are being used by the Highlands and Islands Development Board for the benefit of the crofting counties we can remember that the suggestion was made, quite properly, that they can get more than at first glance might be regarded as their fair share of the nation's resources.
The noble Earl, Lord Perth, also said that he detected a change of policy in regard to the Government's attitude to employment in Scotland, and in particular to the growth areas. It is correct that there is a change: a change to the extent that we do not consider that the problems of Scotland can be solved by concentrating all the development in a few selected areas. We accept the principle, of course, but in the last eighteen months we have been working on the basis that growth must be spread over a much greater area of Scotland, and in fact when we announced this policy the main criticism which came from some noble Lords, and to a very large extent from Opposition Members in another place, was that we had not carried it all the way, and the fight was not to confine it to a few growth points but to seek to apply the same benefits to Edinburgh. If we are wrong in excluding Edinburgh then we cannot be wrong in refusing to confine it to a few selected areas in Scotland, and in fact the Government have already carried the policy into operation in a way which has been welcomed in Scotland, for instance in the Border areas, where we are seeking to obviate the effect of concealed unemployment by depopulation, by extending growth activities into that whole area, and an area where we can make a direct contribution to the economy of the United Kingdom.
By finding jobs for the men in the Border territories we can provide for the

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women, for the wives and daughters, for whom the woollen industry is crying out. We have had the spectacle that here is an industry which in relation to its size makes probably a greater contribution to solving our export problems than any other in the country, yet it has been cutting back for the simple reason that the men leaving to find jobs elsewhere have taken their wives and daughters with them. Thus a really prosperous export industry has had to cut back on what it could do, or to try to set up its factories elsewhere, and it has extended into other parts of Scotland.
The noble Lord, Lord Balerno, referred, as did others, to the policy of low rents for council housing. I would remind your Lordships that earlier in the afternoon I answered a Question from the noble Duke, the Duke of Atholl, and I was asked in a supplementary question whether this meant that I was resorting to the policy that "the gentlemen in Whitehall know best". Noble Lords opposite must make up their minds which way they want it to be. The policy of central Governments, including the present one, has been that in these matters it is for the local authorities to decide and that the most the Government can do (and the present Government have done exactly the same as the previous Government) is to indicate the extent to which they think they should go further in applying more realistic rent policies, and in applying a limited measure of financial sanctions. The financial sanctions imposed by the previous Government are being operated by the present Government in Scotland, and this is not a policy in which, if we are to be realistic, we can expect any sudden and dramatic change overnight. It must be a gradual one, and it is in fact taking place.
I know the noble Lord, Lord Fraser of Allander, is no longer here; he is under doctor's orders and he was kind enough to tell me he would be leaving early. But this is a point to which he also referred, and he referred to it in the most extraordinary manner. By some process of reasoning I was quite unable to follow, he attributed to the low council rents in Glasgow the need for the revaluation of property in Glasgow which has increased substantially the valuation of office and shop property in that city,
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as elsewhere. This is absolutely nothing to do with council rents. This is a policy carried out by the previous Administration, in which, by a change of the law, they required the revaluation to take place each five years, and this happens to be the second review that has to take place under that provision. The obligation is very clearly laid on the shoulders of the assessors that they must take into consideration what are the reasonable market values of property, including housing. In many cases the assessed rent which has been placed on housing is higher than the rents which have been fixed by local authorities, so it is not the case that one particular type of property has been singled out for revaluation.
LORD BARNBY: My Lords, before the noble Lord leaves that point, could he indicate why it would be impossible to give direction, with certain appropriate guide lines as to the manner in which this subject of housing subsidy should be more properly dealt with?
LORD HUGHES: It would not be impossible if we were to accept the principle that this was a case in which the gentleman in Whitehall knows best, and I thought this was a principle to which noble Lords opposite were completely opposed. But it would appear that in housing one can have a policy of apartheid in which the decision that the gentleman in Whitehall knows best is right in this field, but wrong everywhere else. We think the people who, at the end of the day, have to carry responsibilities for housing rents are the locally elected councillors, and if the people in the area think the rents are not right they have the remedy in their own hands—change the councillors and put in councillors who will increase rents. If they do not do so, then presumably it is because they prefer those they have got, with the low rents. It is not because the people in council houses are the majority of ratepayers, because they are not.
I want to make one further Scottish reference, and then anything else I have to say on Scotland will be part of the general remarks. The noble Lord, Lord Balerno, went out of his way to compliment the Government on certain decisions which had been taken in the agriculture field. For that I am grateful. Before Lord Balerno made this remark,

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I had in an aside to my noble friend Lord Rhodes said, "You will find that the Scottish Peers will be raising subjects to which they wish to get answers, because they want to be helpful rather than seeking to make Party points". Then the noble Lord, Lord Balerno, immediately followed by not one, but two, complimentary references to the Government. I thank him for it. I am very sorry that pressure of time prevents my giving the more detailed answers to his points which I should have done if I had been replying to a purely Scottish debate. But I have been warned that not long after we return there is to be a debate on the Scottish economy. I have no doubt that there will be many opportunities for putting questions to me then and I hope I shall then be freer to answer in more detail.
I believe it would be correct to say that during this debate our major preoccupation has continued to be with the balance of payments, and I think it would be right that, in the time to which I must inevitably limit myself at this hour, I should devote most of my remarks to that subject. I think it might help us if we tried to distinguish the more fundamental and underlying aspects of our condition and the appropriate remedies from short-term and temporary afflictions and the cures appropriate to those.
Notwithstanding the admonitions against going back, I think I must ask your Lordships to cast your minds back, not in any recriminatory sense but from the point of view of looking at recent history, to the happenings over the ten years up to 1963. Over that period as a whole, cumulatively the balance of payments may not have been far out of equilibrium, if one allows for the fact that we appear to have substantial recurring receipts which are not recorded. Of course, there were rather violent fluctuations from surplus to deficit, broadly corresponding to the alternations between "Stop" and "Go" in the domestic economy.
It is difficult to see the trends through these ups and downs, but it seems clear that there was an underlying deterioration during that period. In the first five years, the balance of monetary movements was favourable by over £300 million in all. In the second five years
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it was adverse by nearly the same amount. Each period included both an upswing and a downswing in the domestic economy.
Now I turn to 1964. In that year there was superimposed on the underlying weakness the effects of too rapid an expansion of the economy during 1963. Between 1963 and 1964 the gross domestic product increased by 5½ per cent.; imports rose by 11 per cent. in volume in that period, and rising prices brought the value increase of our imports to 14 per cent. Despite a vast expansion of world trade, our exports rose by under 5 per cent. There were also heavy investments abroad, and, as is well known, and as noble Lords opposite will forgive me for repeating, the deficit on current and long-term capital transactions shot up to over £750 million.
This is the briefest and broadest account of those ten years; but I think it entitles me to make two observations that are relevant to much that has happened since. First, this evolution of the balance of payments under the previous Administration meant that the vulnerability of sterling to external pressures was enormously increased. The introduction of convertibility at the end of 1958 is a good starting point for a calculation which I wish to give to your Lordships. Our reserves have been far too small in relation to our liabilities throughout the post-war period, but from the end of 1958 to the end of 1964 the excess of our short-term liabilities over our short-term assets was swollen by over £1 billion—I think that, nowadays, is regarded as £1,000 million, in case there are any old-fashioned people who think that £1 billion is £1 million million; we are not quite so difficult as that.
Secondly, it is difficult to understand how our predecessors in office thought it would be possible to expand the economy as fast as they did and to sustain its expansion without taking any serious measures to improve the performance in the balance of payments. Even in 1962, when the economy was stagnant and unemployment nearly2 per cent., the balance of payments showed no surplus.
This leads me to the analysis of the situation made by the present Government under the policies they have put into effect, and to which they still hold. We recognised the underlying weakness and the fact that it could not be remedied

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overnight. The measures which were appropriate, and which were taken, would in many cases take time to act. The whole performance of the economy had to be jacked up to secure higher productivity and better competitiveness. The main lines of these policies are as follows: the drive against restrictive practices; improvements of labour mobility by industrial training, and the redundancy payments scheme. Noble Lords opposite asked for these things to be done. We have been doing them to an extent never before practised by our predecessors. Then there is fuller use of our resources through regional plans within the National Plan.
What I have said to my noble friends from Scotland (if I may call them that) has a bearing on this. We have sought not to confine the use of Scottish resources to a belt running across the middle of Scotland, but to bring in areas including the Borders and the Highlands. In fact, the Highlands and Islands Development Board was an instrument in the extension of those policies. Then I would mention the new investment grants and the selective employment tax. The noble Lord, Lord Carrington, called for the Government to give to the private sector the necessary encouragement. No Government have given greater encouragement to the private sector than this Government have done, through their policy of investment grants.
LORD CARRINGTON: My Lords, is the noble Lord really suggesting that they have given incentives through investment grants? They have cut them.
LORD HUGHES: I thought I was suggesting so.
LORD CARRINGTON: Well, the noble Lord is wrong.
LORD HUGHES: This is the difference between the honesty for which the noble Lord, Lord Ferrier, was asking and actual practice. When I differ from the noble Lord opposite, I am wrong. The only residue of righteousness and correctness, in the minds of noble Lords opposite, must always rest on those Benches. We believe that what we have done on these investment grants is better than has been done before, and we believe that time will show we are right.
SEVERAL NOBLE LORDS: No.
LORD CARRINGTON: Is the noble Lord really suggesting that the present Government have increased investment grants?
LORD HUGHES: Yes.
LORD DRUMALBYN: My Lords, may I ask the noble Lord this question? While it may be true that the Government are introducing investment grants, would he not say, if he wants to tell us the whole story, what the grants are replacing?
LORD HUGHES: Noble Lords opposite do not require me at this hour of night to tell them what has been done. They are as well aware of it as I am. But for the purposes of this debate it suits them to ignore the situation. The noble Lord said in an aside that we cannot get away with it. But we will get away with it, for the simple reason that, just as with our policy on the Highlands and Islands Board, which was condemned the day before it was published by the leading Scottish spokesmen as having been written by Karl Marx, it is now something which all Scots, Tories as well as Labour, think is a wonderful device. I suggest that before noble Lords are so sweeping in their allegations that we are not doing more for the private sector than has been done before, they would be well advised to wait and see the policy more fully in operation than they have yet been able to do.
LORD DRUMALBYN: What we were complaining of was that the noble Lord was talking about investment grants as if they were something new, introduced on top of everything else. This was the impression we were given. We are entitled to complain that that was the impression the noble Lord was giving.
LORD HUGHES: If I had been talking to a class of schoolchildren on elementary economics, they might have been forgiven for thinking so; but I made the perhaps unwise assumption that noble Lords opposite knew what their Government had done before and knew what we were doing. I thought that by subtracting what they had done before from what we are doing now, they would know the difference.
LORD CARRINGTON: But it is not so.
THE EARL OF PERTH: My Lords, may I make just one point? I have read the papers, and I am sure that the noble Lord, Lord Hughes, has read the papers, but I have not read of a single industrialist who has said that he is better off as a result of these investment grants.
LORD HUGHES: Perhaps if the noble Earl was comparing someone in the less fortunate areas with the areas to which he wishes the benefits to be even more widely preferential, this would be the case. But I come back to my point. Let noble Lords wait and see the policy in operation. Its effects are already being seen in Scotland, and will be seen quite definitely, just as well, in other parts of the country.
The noble Lord, Lord Carrington, made a number of points in his opening remarks to which I think I ought to refer, because, after all, a great deal of what the noble Lord said was subsequently adopted by other noble Lords on the other side, indicating the extent to which they agreed with him. He said that it was the duty of noble Lords opposite to support the Government in measures for the defence of the pound: that it was not their duty to support the Government, but it was their duty to support the pound; and in so far as the Government took the right measures they would support them. But he reserved to the Opposition, as he is perfectly entitled to do, the right to decide whether he thought the measures were right or wrong. This must inevitably be a matter of a difference of opinion.
But while noble Lords opposite appeared to be exceedingly happy when the Government's measures were being criticised (and the noble Lord, Lord Carrington, gave his full measure of criticism to all that was being done), when the noble Lord, Lord Robbins, made what I found an exceedingly helpful speech—not one which praised all that the Government did, but one which accepted in broad measure the Government's policy, though indicating dissent or disagreement with details of that policy—I looked at the faces of noble Lords opposite, and one would have thought that the noble Lord, Lord Robbins, had announced a national dis-
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aster. There was a complete difference of reaction when an objective analysis was being made of what the Government had done, as distinct from the recrimination against which the noble Lord, Lord Robbins, advised, and against which the noble Lord, Lord Shawcross, advised—although unlike Lord Robbins, Lord Shawcross then spent the next twenty minutes in full-scale recrimination of all that the Government had done since October, 1964.
I suggest to noble Lords that, if they are anxious to help the pound, they could take a leaf out of the books of their Scottish colleagues and seek to concentrate on the points which would be helpful to the country and helpful to the pound, rather than seek to make Party points. Some of the speeches in your Lordships' House (and I am not including my own) are highly regarded, and are thought of great importance not only in this country but in knowledgeable circles elsewhere. But there are many people who can be affected by debates and who are not able to distinguish between speeches such as that made by the noble Lord, Lord Robbins, and other speeches.
The noble Lord, Lord Carrington, said that the impression is left abroad that this country is down and out. I do not know with whom that impression is. It certainly is not with our principal creditor countries, because they have indicated quite clearly, for instance, at the ministerial meeting of the Group of Ten after the statement at The Hague, their support for the measures, as well as their confidence in our ability to carry them through and to put our payments position right. So the ministerial representatives of the Ten do not think that this country is down and out—and I do not see why the noble Lord, Lord Carrington, should consider that that is a subject of amusement.
The noble Lord said that, with good management, we could restore confidence; and at the finish of his speech—which, I must admit, had a much higher entertainment value than anything I could hope to emulate—he said that if the Government were not competent they should make way for those who are, the implication being that we should make way for those who, despite all that they have said in seeking to evade responsibility, have had, by all comment from people who can claim to be impartial, more of the

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responsibility for to-day's events placed on their shoulders than has been placed on those of the Government presently holding office. So that, if we have to make way for those who should do better, then the only people who could apparently hope to benefit by this—because they have not had a shot for a very long time—would be those on the rather depleted, remarkably depleted, Liberal Benches.
The noble Lord, Lord Carrington, said that there was no doubt that what was needed was a heavy measure of deflation, and I do not think it can be denied that this is what the Government have given. I was glad to hear him say that, although I was very sorry that, having said that we needed a heavy measure of deflation, he went on to criticise and, by implication, to disagree with every single measure which the Government had taken. He doubted the value of the cuts in the expenditure of the nationalised industries. He said that so much of the expansion that was necessary must rest upon these industries, which were fundamental. But your Lordships must recollect that frequently noble Lords opposite—and I do not think that the noble Lord, Lord Carrington, has ever dissented from this sort of statement—have objected, year in year out, to the amount of money that had to be found from under-the-line expenditure to finance the capital developments of the nationalised industries. Noble Lords cannot object to a Budget finding the money necessary to lend to nationalised industry, and then, in a period when we diminish the amount that can be made available to them, question the wisdom of cutting back. If it is wrong to give the money in the first instance it cannot be wrong to cut it back in the second.
LORD DRUMALBYN: My Lords, may I ask the noble Lord, as he has made certain statements here, whether he can give one single quotation to support what he has just been saying?
LORD HUGHES: Not at this hour, but if the noble Lord would like to give me sufficient time I could undertake to give him a dozen; and I will give them in the way done by the noble Lord, Lord Kahn—documented by column and date.
LORD CARRINGTON: It ought to have been done before.
LORD HUGHES: No, it is not necessary to do it at this stage. I have not made any allegation against any individual noble Lord. I have not stated what any individual Member of the Opposition said. I said "noble Lords opposite", and that I did not think the noble Lord, Lord Carrington, had ever dissented from this sort of thing. Of course, if he wishes to get up and say that he has dissented in the past from objections to expenditure on nationalised industries, I will make way for him.
He went on to say that he doubted the value of the cuts in tourist moneys, and again the faces of noble Lords opposite were a delight to watch when they were reminded of the Budget of the noble Lord, Lord Butler of Saffron Walden, when, almost immediately he got into office, he cut to this amazing figure of £50. Why should £50 be such a right figure in 1951, when there were fewer tourists going abroad and when the costs were less, and be so terribly wrong in 1966? In fact, if I remember aright, he followed up three months later by cutting it to £25. The noble Lord, Lord Carrington, doubted the value of—
LORD CARRINGTON: My Lords, I do not want to interrupt, but I did not doubt the value of it; I wondered whether it was wise to do it.
LORD HUGHES: Well, I am very sorry if I have paraphrased the noble Lord, but I doubt very much whether it is straining the English language to use the form of words I used. I know that I do not speak the English language in the same accents as every Member of your Lordships' House, but I think I understand it.
Then the noble Lord, Lord Carrington—and I thought this worth mentioning—castigated the Government and said that we must learn to speak with one voice. Coming from the Party from which on this particular subject we had talks and speeches from Mr. Macleod, Mr. Heath and Mr. Powell, for him to tell us that we ought to speak with one voice is very much a case of the pot calling the kettle black. If the advice which had been given not to indulge in recrimination had, in fact, been carried out during the whole of the debate we then could have had something which would have been helpful to our economy.

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Now I should like to say that I accept that the measures the Government have announced are deflationary or disinflationary, whichever word you prefer. The measures announced by the Prime Minister on July 20 will, in fact, reduce the demand on home resources by over £500 million, and to this must be added the effect of the selective employment tax. This is the point which I had in mind when I said to noble Lords from Scotland that the answer to some of their points must come in reply to the general debate. The effect of the selective employment tax, which is to come into operation in September, is also to give a disinflationary effect of something like a further £200 million. So what the Government have announced in July, added to the effect of the selective employment tax, entails a figure of something like £700 million a year.
As the Prime Minister indicated, the result may be that unemployment will rise to, perhaps, 1½ per cent. or 2 per cent. But in contemplating this figure we must have a sense of perspective. Unemployment in the country as a whole at the present time is quite exceptionally low. At 1·2 per cent. in the first half of the year, it was the lowest for ten years. Between 1959 and 1964, not usually considered a depressed period in our economy, the average rate of unemployment was 1·8 per cent. The Government believe that it will be possible to secure the necessary redeployment of labour on an extensive scale without a very pronounced increase in unemployment. Any idea that the bottom is going to fall out of the labour market is quite wrong, since in the first place—and I was interested in the fact that the noble Lord, Lord Robbins, touched on this point in his penetrating speech—it is a shake-out (this is the phrase the Prime Minister used, and used very properly) in which people displaced from one job find another in a labour-hungry industry, or a labour-hungry firm in an industry, within a reasonably short space of time. After all, we are still in a position where there are a tremendous number of unfilled vacancies. These people are not going to be thrown on to the scrap-heap so long as these unfilled vacancies are waiting for so many of them.
I think it is worth recalling the way in which the Government's approach to
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the problem to our overheated economy differs from that practised in the past. In the first place it is a selective approach, inasmuch as it discriminates between regions, applying the restraints in their full vigour to the congested regions of intensive labour shortage, and shielding the development areas from them so far as is possible. Secondly, the Government have not been prepared to throw the whole burden of adjustment on to the curbing of home demand, with the disadvantageous effect that this necessarily has, for example, for productive investment and the long-run rate of growth. We have not hesitated to use measures bearing directly on the balance of payments where these are appropriate. I refer, in particular, to the way in which we have used the tax system and other measures to limit the outflow of private capital, which had reached a level excessive in relation to what we could afford, and to the export rebate which is already proving a useful incentive to exporters.
My Lords, in these measures the Government have not been deterred from taking steps which are in direct conflict with the long-term objectives of a Labour Government. We recognise—just as I have indicated took place during the ten years—that progress to a higher level in our standard of living and to the maintenance of that higher level will not necessarily always be carried out in an ever rising line. There will, inevitably, be periods of less rapid expansion. There will be periods of, if I may use the phrase of, I think, the noble Lord, Lord Butler of Saffron Walden, "the plateau". This may well be the position which has to be accepted by members of Her Majesty's Government; but it must also be accepted by members of Her Majesty's Opposition, whether in this House or in another place.
We believe that in the policies which the Government have sought to carry out we have reached a reasonable balance as between all sections of the community. We believe that they will be accepted by the community, particularly as their effects are seen to work. I would remind your Lordships of what my noble friend Lord Shepherd said when initiating this debate, when he drew the attention of Members of your Lordships' House to the success which had attended the efforts of the Government by the end of 1965; when we had reached the objective which we

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had set ourselves for that year of cutting the external balance-of-payments deficit to half of the figure which we inherited.
There have been circumstances during this year to which reference has been made which have upset some of these calculations, and some of the measures which have been taken during these past ten days are the effect, or in some ways a direct result, of these more extraordinary measures. We in Her Majesty's Government will not be deflected from what is our main purpose: to give to the people of this country, through an expanded economy, a standard of living to which we think they are entitled to attain.
EARL ST. ALDWYN: My Lords, on behalf of my noble friend Lord Swinton, I beg to move that this debate be adjourned until Monday next.
Moved accordingly and, on Question, Motion agreed to.

FINANCE BILL
Brought from the Commons; read 1a and to be printed.
LIVERPOOL CORPORATION (GENERAL POWERS) BILL LEEDS CORPORATION BILL
Reported, with Amendments.
GREATER LONDON COUNCIL (GENERAL POWERS) BILL
The Queen's consent signified, and Bill reported, with Amendments.
DERBY CHURCHES (SAINT CHRISTOPHER'S, SAINT PETER'S AND SAINT PAUL'S) BILL
Returned from the Commons, with the Amendment agreed to.

BRITISH RAILWAYS BILL
Returned from the Commons, with the Amendments agreed to.
House adjourned at twenty minutes past ten o'clock.